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Henry Thornton - Contributors: A discussion of economic, social and political issues Blogs
Lessons of history - Hoover and Roosevelt
Date: Thursday, April 23, 2009
Author: Henry Thornton

The world economy is in great trouble and there are limits to what even a rich and successful nation like Australia can do to hasten recovery.

What are the lessons of history?

Today I wish to introduce you to The Forgotten Man.  A New History of the Great Depression, by Amity Shlaes.  (Easily purchased on Amazon).

Shlaes analyses with dispassion and (to my mind) accuracy the policies and personalities of Presidents Hoover and Roosevelt.

There are many myths about the 1920s, when reckless share trading and foolish behaviour by banks fuelled an unsustainable boom.  And also obvious similarities to the great boom of recent years.

The sharemarket crash, it is said, created the Great Depression.  But why did the economic malaise linger until the war, with a sluggish economy lapsing into depression in 1937?

'The first reality was that the 1920s was a great decade of true economic gains,’

'American capitalism did not break in 1929.  The Crash did not cause the Depression.  It was a necessary correction of a too-high stock market, but not a necessary disaster'.

'Hoover's priggish temperament, as much as any philosophy he held, caused him to both misjudge the crash and fail in his reaction to it'.

'Roosevelt by contrast had a wonderful temperament, and could get along, when he felt like it, with even his worst opponent.  His calls for courage, his Fireside Chats, all were intensely important'.

There were strong similarities between the two men.  Both nowadays we would call control freaks.  Both underestimated the strength and resilience of the American economy. 'Hoover mistrusted the market.  Roosevelt mistrusted it more'.

The Crash of course played a part in creating the Depression.  The 'young Federal Reserve' and the private banks faced 'challenges'. 'Deflation, not inflation, was a big problem .... The loss of international trade played an enormous role ...'

Also important was the transition from agriculture to manufacturing, and the dreadful weather - floods and the 'uncanny Dust Bowl'.

'But the deepest problem was the intervention, the lack of faith in the marketplace.

'Government management of the late 1920s and 1930s hurt the economy.

'Both Hoover and Roosevelt mis-stepped in a number of ways.

'Hoover ordered wages up when they wanted to go down.  He allowed a disastrous tariff, Smoot-Hawley, to become law when he should have had the sense to block it. He raised taxes when neither citizens individually nor the economy could afford the change'.

'Roosevelt's errors had a different quality but were equally devastating. He created regulatory aid, and relief agencies based on the premise that recovery could be achieved only through a large military-style effort.  Some of these were useful...

'Other new institutions ... did damage.

'Where the private sector could help to bring the economy back - in the areas of utilities,  for example - Roosevelt and his New Dealers often suppressed it.

'The New Yorker's cartoons of the plump, terrified Wall Streeter were accurate; business was terrified of the president ... business decided to wait Roosevelt out, hold onto their cash, and invest in future years'.

'Fear froze the economy, but that uncertainty itself might have been a cost was something the young experimenters simply did not consider'.

The struggle was not a moral battle between good and evil, 'It was a period of a power struggle between two sectors of the economy, both containing a mix of evil and virtue'.

These sectors 'competed relentlessly for advantage'.  At the start the private economy was dominant, but by the end the public economy held sway.

Roosevelt had immense ability to remake the country.  'It can even be argued that one year - 1936 - created the modern entitlement challenge that so bedevils both parties today.

'Roosevelt changed economics forever.  Roosevelt happened on an economic theory that validated his politics and his moral sense: what we now call Keynesianism,’

'Keynesianism ... emphasised government spending.  Yet focussing on consumers meant that Washington neglected the producer.  Focusing on the fun of experiments neglected the question of whether unceasing experimentation might frighten business into terrified inaction'.

It is a cliché that those who do not understand history are condemned to repeat it.

I highly commend The Forgotten Man to our political masters, the intellectual heirs of Hoover and the policy-making descendents of Roosevelt alike.

And, more importantly, to the voters.

Saturday Sanity Break, 7 November 2015
Date: Saturday, November 07, 2015
Author: Henry Thornton

We are told today that the Reserve Bank is confident that the economy is rebalancing away from mining towards services. Put another way, the economy is switching from high productivity mining production to low productivity services activity.  As the press has amply illustrated, high penalty rates means it costs too much for some activities to take place on weekends and public holidays. This is surely one of the vital areas for reform.

The RBA also said that inflation is under control - in fact it is technically below the so-called 'target range' of 2 to 3 %.  If further rate cuts are needed, the RBA will therefore be able to implement them without too much hand wringing.  RBA Chief, Glenn Stevens, has of course reminded us all that there is only so much that can be done by varying monetary policy.  The biggest policy challenge - well, equal to the need for serious IR reform - is to devise and then implement a credible and widely accepted fiscal policy to fix the budget. 

The generally agreed fiscal package includes a 15% GST with far fewer exclusions, lower income tax rates, lower company tax rates and some 'reform' to superannuation programs. A separate current of opinion looks to lower taxes for all savings vehicles, clearly needed if Australia is to adopt Treasurer Scott Morrison's 'work, save and invest' mantra.

The challenge of innovation

The most difficult challenge  of all is to make Australia a more innovative nation. This is a topic that Henry has pursued for some time now. Here is a modest contribution. It is inspired by Prime Minister Malcolm Turnbull, who recently asked Vice-Chancellor Glyn Davis why universities were so bad at helping companies innovate.  As Henry understood the answer it was not especially focussed, which is itself a telling fact.

Of course, this is a hard question. 'National Complacency' is one answer - riding on the sheep's back or in a mining truck has been a relatively obvious path to prosperity. 'Poor tax arrangements for innovators' deserves consideration. 'The university culture of publish or perish' is part of the answer.  'Australia's national culture of aversion to risk and fear of failure', gets close to Henry's favourite answer.

A famous New York Times best seller, Start-up Nation. The Story of Israel's Economic Miracle, provides a fascinating case study for one successful innovative nation.

The book begins with a discussion of a plan hatched in Israel to create a widely used electric car. As well as helping reduce global pollution, success of such a plan would make oil far less attractive as an energy source and greatly reduce the ability of terrorists to launch attacks on Israel, not to mention the rest of us.  The electric car project is an unfinished story, and the opening chapter moves on to discuss Israel's mighty performance.  In 2007-08 it lead the world by a vast margin in Venture Capital Investments per capita.In 2009, Israel beat Canada into second place, with other nations performance tiny, in listings of non-US companies on NASDAQ. And from 2000-2005 it was first ahead of Japan and the USA in Civilian R&D Expenditure as a share of GNP.

These compelling facts are all the more impressive given the history of Israel. For yours after its formation is was bedevilled by tiny size in a harsh climate, food rationing, frequent wars for survival, a highly heterogenous population and many other potential barriers to entrepreneurial flair.  As authors Dan Senor and Saul singer say: '[This] is a story not just of talent but of tenacity, of insatiable questioning of authority, of determined informality, combined with a unique attitude to failure, teamwork, mission, risk, and cross-disciplinary creativity'.

More on the story of Israel's stellar rise as an innovative nation here.


Fiona Prior visits the big buzz exhibition The Greats, presented by the Art Gallery of New South Wales until 14 February 2016.


Trade week has come and gone with Caaaarlton! flying well below the radar.  Only clear result seems to be signing Jack Silvani - Grandson of Serge, Son of Stephen, both great stars for Caaaarlton! in times past.

The Rugby World Cup is best described as a triumph for the ANZAC tradition.  The game was dominated by ANZAC teams,

and finally the All Black team won what was a moderately brutal encounter.  A keen (Kiwi) supporter freely conceded that a clear forward pass leading to a try may have broken the Aussie spirit.  He added that in a previous World Cup, NZ had been put out after the same referee 'missed' a clear forward pass by the Frenchies. Such is life, as Ned Kelly reportedly said just before they hung him.

Cricket is offering some better news with two highly talented youngsters starring with the bat and the two Mitchs (Starc and Johnston) plus youngster Josh Hazelwood demolishing the Black Cap's top order.   As a selector might say ata prize giving ceremony in 2019: 'Always bet on yoof, lades and gennelmen'.

Experts plus the black box recorder say the Russian plane was downed as the result of a bomb. When the pestiferous Russkies reluctantly accept this, a more determined attack on ISIS should be the result. 

Image of the week

(Long) Weekend Sanity Break,
Date: Sunday, November 01, 2015
Author: Henry Thornton

It is time for Melbourne's quasi-religious racing weekend, long weekend if like many Melbournians you take Monday as a RDO (or, gasp!, a sickie) to be as fit for The Big Day as humanly possible. Henry's favourite journo, Paul Kelly, this weekend is discussing the geopolitical scene occasioned by America's brave visit to international waters claimed by China.  Supposedly there was a full-scale battle group just over the horizon in case of fireworks, but good sense prevailed and World War III is not yet upon us.

Have you ever employed a builder, dear reader?  Henry and Mrs T decided they needed a kitchen update and enlargement of an upstairs bedroom involving a new roof and a deck. We employed a builder previously used to great good effect. 'It'll cost about $40 K', said builder said. 'And I can start and finish the job quickly as I have found a team of carpenters I want to keep and it will fill in the schedule nicely'.

You got it, dear reader. After almost 6 months the kitchen is almost finished and the first 'progress payment' was a shade over $65 K. 'We found a bolthole in the roof that had let water in and the back wall was rotton' was the story. Apparently said builder mumbled something about the bolt hole to Mrs T, with the implication that it was a trivial matter.  Naturally we insisted on a hard quote - one to be kept to - for the bedroom extension/deck, but a month later this work has not started, and the festive season is rapidly approaching. Gor Blimey, comrades, is there no builder in Australia who keeps his word, provides progress reports and springs no unhappy financial suprises?

The US Fed is trembling on the brink of a rate hike but cannot quite summon the gorm to put us all out of our mistery and begin the long and difficult task of returning the global economy to normal.  The key factor holding the Fed back is, it seems, fear of deflation.

The economic story is taken up today by Henry's recalcitrant retired geologist, Louis Hissink. He delivers a wonderful explanation for apparent deflation.  And on the Fed's dithering about interest rates, please see today's Image of the Week below.

'It seems the ECB, and hence I presume other central banks as well, thinks there isn't enough inflation and that it needs to be increased by monetary easing. Not enough inflation? Not as measured by government it seems but a couple of days ago I came across an interesting phenomenon of the economic kind, the way in which sellers of manufactured goods can adjust their product to cope with inflation'.

Read on here.  You will learn a lot about Socialism. Capitalism and Fascism, along with the fallacies of the Monetarists. Then if you remain unsatisfied, cop this 43 year-old article by Australia's living national treasure and Henry's editor. After being rejected 5 times all those years ago, it is about to be published in a book about Lord Keynes.


Fiona Prior explores Sydney Open – Sydney Living Museums.


Only two more AGMs to go, dear reader, and Henry can begin winding down for Christmas, after what has been a Keating of a year. But before then we have ... the Rugby World Cup final, which began at 3 AM today. The All Blacks are fearsome favourites but Australia's coach, Michael Cheika, has sharpened and focussed the Wallabies beyond imagination and we are just about guaranteed a fierce struggle with neither side guaranteed to win.

In the event, Australia was dealt a big dose of shock and awe in the first half and in the first monents of the second half.  The good news is that they refused to curl up and surrender but staged a wonderful fightback.

The Kiwis deserved to win and did so comfortably 34-17 in the end.  It was a great game and Cheika's Wallabies will be number one in the world before long.

The World cup of Rugby has ended just in time for our attention to turn unhindered to the Melbourne cup.

Henry's choice is Red Cadeaux, an elderly (10 years) horse that just keeps coming and would be a deeply popular winner.  But there are plenty of younger, possibly faster horses so do not back Henry's romantic choice without consulting a real horse guru, like Henry's TP Mahar.

Soon the cricket test will provide Australia with a chance for revenge against a team from the land of the long white cloud.  Trouble is, Henry has not heard of most of our team's batters so lacks confidence in the outcome. The good news is that there is a great chance for a young bloke to make his name.

On with the show, and before long Santa comes then footy will be underway again.

Image of the week - Janet and the mob.

Ideas relevant to this painting may be found here - will she, or won't she, raise interest rates any time soon and (either way) will it scare the mob?

More of Henry's economic images here.

Global recession, new Chief Scientist
Date: Wednesday, October 28, 2015
Author: Henry Thornton

'China will keep growing at double-digit rates for the forseeable future'. This was the confident assertion of Australia's China-watchers until recently, when China began its 'pivot' to consumerism. Like Australia trying to transform its economy from mining to services - education, tourism, accounting, law - this was never going to be easy, but the difficulty was never understood or predicted by Australia's most prominant economists, those in Treasury, the RBA and the better universities. 

Commodity prices just keep falling and that is slicing great chunks off Australia's national income and from the incomes of many individual Australians.

Now we learn that 'global worries lengthen odds of Fed rate rise'. The US economy is sliding into recession, the Eurozone remains stuck in the mud and bedevilled by a flood of refugees that defies imagination, Japan's exports are declining and the world may be slipping into recession, certainly a growth recession.

Malcolm Turnbull has focussed on the opportunities provided by the current global turmoil.  Good on him, this is perhaps better than Tony Abbott's Churchillian vision of Australia surrounded by enemies and with enemies within - including Islamist sympathisers and nasty,  rapacious unions. But there is a long way to go to fix Australia's budget deficit, restore business and household confidence and encourage growth by removing obstacles including excessive and overbearing business regulation and especially industrial regulation.

New Chief Scientist

Australia has a new Chief Scientist, Dr Alan Finkel. He is a neuroscientist who went to the so-called 'Dark side' to commercialise high level technology and made a success of what is one of Australia's most difficult challenges. Turning science into business is something Australia does especially badly - ranking 29th (last) behind Mexico in one authoratitive survey - and Dr Finkel is ideally placed to do something about this. He was described as 'a scientist and an entrepreneur; an innovator; a communicator' by Prime minister Turnbull.

One of the articles about this appointment said that the word 'innovation' had been banned by the previous minister for industry and science.  What it failed to add that in Ian Macfarlane's view it had been replaced by 'competitiveness'. Emphasis on Australia's ability to compete is an even more general description of what we need to do than 'innovation' (or 'turning science into business').  But both words will be used to describe any highly successful economy, and we wish Dr Finkel well as he focusses on what will be his greatest professional challenge.

Tax relief for innovation is being talked about.  It is worth noting that the reform of the tax treatment of shares or options issued in lieu of cash for start-ups has already removed one blocker to successful innovation, and further moves in that direction will also be worthwhile.  Less red tape in programs like the highly successful Cooperative Research Centre (CRC) program would also make life easier for small companies to receive infusions of useful new technologies.  Go for it, Christopher Pyne.

Dr Finkal's enthusiastic advocacy of the nuclear option for cheap, clean future energy supply is also very welcome.  This was also a dream for Prime minister Hawke, and for a country with a sizeable chunk of the world's known supplies of uranium this is a completely natural development.  The idea will get the Greens going, and generally split the environmental lobby. Go for it, Alan Finkel.

Henry's contributions on the nuclear option include:

* PP McGuinness, 2006

* Report on Bob Hawke's views

Saturday Sanity Break, 24 October 2015
Date: Saturday, October 24, 2015
Author: Henry Thornton

Much ado about Malcolm today.  The Smage says Malcolm is 'set for big spend' on 'roads, transport and other infrastructure', financed by borrowings.I do not believe this is simple crude Keynesian thinking.  Rather than an attempted 'sugar hit', this is a strategy that seeks to improve productivity, which is a much needed challenge for Australia.  Of course, such spending has to be financed by borrowing, and each project should be justified by rigorous benefit-cost calculations.

Commentators have brought the line that Malcolm's government is 'strictly business', benefit-cost studies are the businesslike approach, and shareholders (ie the punters, aka voters) should be given the chance to scrutinise the relevant studies.  Malcolm's point that hating corrodes the personality of the hater is powerful magic, and needs to be heeded by every aspiring leader.  Joe Hockey's statesmanlike farewell speech set high standards in this matter.

Other features of the weekend commentary on Malcolm's government are the attempted collegiality (aka taking his colleagues into the decision-making process), attempting to restore dignity and good order to parliament and making some much needed changes to Australia's IR framework.

On the policy front, the fact that broad-based tax reform is also allowed to be discussed, including (gasp!) widening the GST and/or raising its rate, is a great relief to economists everywhere. There is some brutal arithmetic at play here.  Spending decisions already taken are incredibly hard to roll back. Tax reform whose main effects are to improve the budget bottom line, while also increasing incentives to 'work, save and invest', are needed to provide the quickest and fairest return to overall budget balance.

There is also Malcolm's point that there is a lot of luck in business or indeed in life generally.  As fair-minded people recognise, this provides a cast-iron case to tax more heavily incomes or assets of the well-to-do.  Success is also due to powerful focus and hard work, so redistribution must be limited to an extent that most people, including well-to-do people, accept. Australia's current tax and welfare system is by no means the worst in the world, but Australia needs to establish a more sensible balance of equity and efficiency.

Labor is trapped by this approach and also by the fact that many of its supporters believe Malcolm is a better Prime Minister than Labor's Bill Shorten is ever likely to be.  Will there be a Bill-spill?  The ALP's new rules would seem to make this impossible, and there is also Joe Hockey's point that the revolving door should be jammed for a bit.

It seems that Malcolm's government has accepted that growth will be slower and that budgeting will therefore be more realistic.  Predicted budget deficits will also be larger and there remains an urgent need to bring a better balance between spending and raising revenue.  How this is achieved is one of Malcolm's greatest challenges. If the rebalancing merely blunts incentives further, it will fail. If tax and welfare reform improves the budget balance that is good news for the Australian economy  but if it does so while improving the efficiency of the tax and welfare system it will be a great success, especially if most Australians accept the need for necessary reform.

The housing market is apparently cooling off in the hot-spots of Sydney and Melbourne. Casual observation shows massive blocks of new flats everywhere in Melbourne, so there will probably be significent rental savings available before long.  But the overall price structure for houses has shifted up to really difficult levels, so trouble remains for many young people, who are also struggling to find decent jobs.


Fiona Prior dons her walking shoes to enjoy this year's Sculpture by the Sea, still one of the world's most innovative sculpture exhibitions.


Rugby football is Henry's main focus this weekend and possibly next. He assumes the All Blacks will beat South Efrica in their semi-final, but hopes the men from the veld give the men from the land of the long white cloud a terrific pounding. Australia, from the land of drought and flooding rain, take on the men from the Pampas and national insolvency. The Argies have been playing sublime Rugby and look good in comparison to Australia's relative poor victory over the canny and committed Scotsmen last weekend. Henry will watching the latter game at 2 AM Monday, so do not expect too much good sense later at the start of the week of work.

Our cricket team is lacking practice and grappling with different color balls. 'What a balls-up' is all that can be said, and we wish well the newbies, including new Captain Smith, that make up our next test team.

Plenty of 'Stuff' around, including the flood of refugees from the Middle East into Europe.  For some reason Henry's favourite magazine, The Economist, was unable to be delivered to a boat travelling from Broome to Darwin, so Henry is playing catch-up. It seems the Eurozone's credo of compassion has been stretched to the limit and The Economist said two weeks ago even the compassionate Germans have reached thier limits.

'On the night of September 4th Angela Merkel made the most dramatic decision of her decade as German chancellor: to suspend European asylum rules and allow tens of thousands of refugees stranded in Hungary to enter Germany via Austria. It was a moral gesture that fitted the mood of the moment. ...

'In Germany, however, that altruistic embrace has caused a backlash that could weaken a chancellor so far considered all but invincible. Using uncharacteristically missionary language, Mrs Merkel said repeatedly that the right to asylum has “no upper limit”. But Joachim Gauck, who as president is expected to keep out of workaday politics, responded that “our reception capacity is limited even when it has not yet been worked out where these limits lie.” As though on cue, the political tone turned against Mrs Merkel'.

Thirtieth anniversary of Uluru's return to indigenous custody.  All's well and the Great Rock remains in superb form.

Image of the week - The Spirit of the Rock

Booby traps ahead
Date: Tuesday, October 20, 2015
Author: Henry Thornton

There is a strange disconnect in the Australian economy and discussion of it.  The government, lead by two excellent communicators Malcolm Turnbull and Scott Morrison, emphasise the opportunities facing Australia. Official agencies, like the RBA and Treasury articulate a 'glass half full' view of slower growth, the need for greater competitiveness via a lower exchange rate and the desirability of fixing the budget. Some business leaders support fixing the budget by cutting spending (Treasurer Morrison's preferred approach).

Others think wholesale tax reform is the preferred approach and a wider GST at a higher rate the key to allow lower company tax and removal of Australia's notorious 'fiscal drag' with special focus on income tax. A significant minority of commentators see lower rates of income tax the best way to encourage 'Work, Save and Invest' as Treasurer Morrison puts it so eloquently.

Lefties want capital gains to again be taxed at recipients' marginal rates of tax and some even want to tax the family house, a sure remedy for a permanant spot in the opposition ranks for any party that embraces it. Some of this lot want to tax superannuation balances (or self-funded pensions) of 'rich' people - those with balances above $2.5 million. Politicians who want to stay in government will think very carefully about grandfathering arrangements currently in place, including for politicians and officials which have hardly even been mentioned in debate so far.

The good news is that debate is joined and one can only hope that good sense eventually allows a sensible new set of inventives and disincentives, encouragement of 'Work, Save and Invest' for young workers, lack of fear for those whose working days are over, or all but over, and an acceptably fair treatment for current welfare recipients who cannot turn overnight into workers in the services sectors, or for that matter doctors, lawyers, nurses, staff of old person's homes and so on - the list is endless.  Of course, the rapidly growing aging of the population emphasises the need for reform including stronger government spending in relevant sectors.

Debate and discussion is frequent and often intense. Henry's circle of friends and acquaintences have never in living memory showed so much interest in economic issues and their questions often begin by saying Australia's economy is in deep trouble. This group is is not  entirely made up of rich old people.  Parents and grandparents in Melbourne's leafy Eastern suburbs mostly discuss the difficulty of later generation's attempts to find jobs. Plus the near-impossible prospects of younger people getting set in the housing market.  When one hears about new technologies to save jobs, their gloom deepens.

The strength of debate is, of course, a good sign. The new government is proving far better at handling Labor and Senator cross-bench members than Mr Abbott's confrontational approach.  But 'This is the best time ever to be alive' is fine if one is by nature and experience qualified for success in the fast-moving world of the twenty-first century. But one feature of modern capitalism is the increasing disparity of winners and losers in the economic game, which is one reason for so-called 'progressive' systems of taxation. That's fair and reasonable, comrades, but too much punative taxation, too many intrusive and overbearing industrial laws and an increasingly weak system of teriary education system not focussing on preparing student for real jobs, together add up to gloom for many people.

Then there are the external shocks, well-summarised by Ashok Jacob in the Oz today. 'Ashok Jacob calls 2015 the “year of the booby trap".

' “I have never seen more unexpected things at a major level come out of the woodwork than this year", he told The Australian yesterday, referring to the Swiss franc devaluation, the collapse of the oil price, the Volkswagen scandal and, most importantly, the devaluation of the Chinese currency'.  One could add  to this list. What happens to asset markets when the US Fed finally begins to restore a sensible monetary policy? Is the Chinese economy merely coasting at the 'official' rate of 7% or is it a far greater slowdown? Is global pollution choking the environment and destroying species at an Olympic rate? How will the European migration flood be emeliorated?

Solving the issues mentioned in the questions will provide wonderful jobs for gifted and well educated global citizens. We must with Malcolm Turnbull and his team every good piece of luck.  They will do well indeed to return Australia to its natural place as a 'lucky country'.

Saturday Sanity Break, 17 October 2015
Date: Saturday, October 17, 2015
Author: Henry Thornton

Housing market to cool, says RBA. Great news, as lots of young people battling to find jobs are also wondering if they will ever be able to buy a house.  There looks like being a real glut of apartments, so at least rentals will be cheaper and some young folk will be able to at least get a foot into the property market.

Serious drought gets increasingly more likely as a dry spring dashes hopes for good wheat crops and limits the extent to which beef farmers can benefit from prices in the stratosphere. Some interest rate gurus say this will give the RBA the excuse to cute rates further.  Cutting rates here just when the USA Fed is dithering about raising rates there will also encourage the Aussie dollar to fall again, after a few weeks of partial and unhelpful recovery.

Mr Turnbull is not rushing to fix Australia's weak budget situation and indeed most of his comments lean on the expansive side of neutral.  This will help support activity for a while, but with the US economy looking toppy, and forecasts of global growth still being revised down, risks of a Banana Republic debacle are rising. 

One hopes that Treasury's fine economists are thinking hard about this issue.  Housing off the boil, farm production being dried as we watch, the much feared recession looks increasingly likely. As Henry's Raff Report has recently pointed out, with large budget deficits everywhere and interest rates low, there is little room for finance ministers and central bankers to move.

The Oz today features some serious analysis of the style of the new government. The theme is that Malcolm Turnbull will pull the Liberal Party toward the centre, and to be safe in the leadership he will need to carry the conservative wing of the party with him. Paul Kelly claims to detect a global swing toward the centralist direction; think Cameron in the UK, Key in NZ and Harper in Canada and looking electorally vulnerable.


Hawthorn blitzed the AFL grand final while Henry was out of range of a TV, and from all accounts it was all over bar the groaning by quarter time, and some say the first 10 minutes. With their fabled Threepeat under their belts, the Hawks are letting go some older players and replacing them with good young blokes, including another Rioli from Tiwi.

Caaaarlton!, however, seems not to be recruiting and sending Lachie Henderson to Geelong, (or is it Brisbane?), and Yarran to Richmond, to continue a player-selling debacle that has lasted for well over a decade now. Henry is beginning to wonder if he will last long enough to see another flag hoisted at Princess Park, or is it Jelly bean Oval or some similar sponsor's haven these days? Perhaps the once mighty blues need a funeral chain as a sponsor. 'White Lady will bury your loved ones faster than Carlton can bury a season of footy' could be the catch cry, with a 10 % discount for season ticket holders.

Meanwhile Henry is following the Rugby, where the home team seems capable of pulling off an unexpected trophy.  The effort to beat Wales with players sin-binned or injured, was prodigous. Scotland will provide another stern test but if our boys survive monday morning's game the real fun might commence, with an aging All Black team to face in the final.

Cricket is also underway.  Here the test team will be just about all new (I exaggerate only a bit) and will face the dangers of a pink ball with almost no game time. Still, all should be well if Smithy is in good form, and the battle for places is real - as it seems to be in Michael Cheika's Wallabies. Here is more on the super-coach's career.

Jarryd Hayne's unlikely journey to a member of an American football team is told here by Will Swanton.


Fiona Prior sees Ariel Dorfman's Death and the Maiden performed at Sydney’s Wharf Theatre. A seriously intense way to focus your thoughts about justice and violence.

Image of the week

Courtesy The Oz

US rate hikes; politics of envy
Date: Friday, October 16, 2015
Author: Henry Thornton

The Raff has been enjoying a serious conversation with a former Canadian, now an Aussie.  Here is his concluding paragraph: ''Governments have made such a mess of most economies that all degrees of freedom have been exhausted. Interest rates can’t be lowered or expenditures increased by any significant degree. Any contrary ideas to those enshrined as religion are howled down, debased and whenever possible are hidden from headlines.

Read on here.

If you were surprised by the US Fed's failure to raise rates, and now the gurus' views this might not now occur this year, you must have missed Henry's last but one Raff Report: 'Although a hike in rates would be more beneficial than not, to the Raff’s knowledge rates have never been lifted at the peak of the business cycle. It is perfectly normal for interest rates to rise as the next cycle takes off, perhaps mid-2016. There is a desperate need for developed countries to raise taxes or increase borrowings. We might ponder at what stage various central banks “crowd the market out”, increasing interest rates at an ever increasing pace to sell government paper!'

Read the full report here.

The politics of envy

The AFR has poured scorn on Labor's attack on Malcolm Turnbull's financial success.

'Today, encouraging enterprising Australians into technology start-ups necessarily brings with it the possibility of similar great individual fortune. But, as Paul Keating has bemoaned, Labor created an aspirational class, then failed to move with them. The Hawke-Keating Labor legacy means few Australians can say that not a cent of their super goes through fund managers with some connection with the Cayman Islands. And like Mr Turnbull, the better they do, the more they pay what's due to the Australian Tax Office'.

Also, 'it is reassuring that even Labor-aligned pollsters reckon that this attack on aspiration no longer resonates in a nation that simply wants to give its children more of a chance to succeed through their own initiative and enterprise'.  Read on here.

Yesterday we learned that the Turnbull government has indicated it is not beyond taxing pensions.  Fair enough, comrades, so long as pensions of politicians and public officials are taxed at the same rate.  The socialists among us say that someone with a super fund of $2.5 million is 'rich'.  Work out the implied asset backing of a head of the RBA, or Treasury, or the PM and you will see who is 'rich'. Not a poor sod with a self-managed super fund with $2.5 million.  This could in a heart beat be 1.25 million if the US Fed buggers up the return to 'normal' monetary policy, meaning a pension of exactly one half of what it was.  The pensions of Heads of Treasury, the RBA or the PM (and more junior examples of similar beasts) will be unchanged.

Is there an acturary in Australia willing to comment on this largely hidden rort of those on defined benefit pensions? Henry advises readers not to hold your breath.

Saturday Sanity Break, 10 October 2015
Date: Saturday, October 10, 2015
Author: Henry Thornton

Henry is in the midst of catching up with the news as he waits with Mrs T to catch the 12.45 AM plane to Sydney and then on to Melbourne.

Niki Savva said last week that Malcolm Turnbull has made a good start.  That is a common view, as reflected in the published opinion polls.  But, as one wise old owl said to Henry recently: 'The optics are far better, but will the officials have the grunt to make Turnbull's far more expansive approach work?

Henry's chief political writer, Gary Scarrabelotti, reports from the Ukraine.  He says Tony Abbott should not rush to decide his future.

'Australian political life has become fragile, uncertain, and crisis prone. My hunch is that there will be opportunities ahead, as future governments break down, and as political leaders crack up under the weight of our common flawed humanity, the empty promises of our ideologies, and the deluge of events.

'One day, maybe not so far away, Australia will need a leader of determination, courage and wisdom.

Abbott has the determination and the courage. May he now set about the getting of wisdom'.

Read on here.

And proponants of serious economic reform, especially IR reform, should read and ponder Grace Collier's column today.


On the economy, we need go not further than the latest Raff Report. The Raff has three key messages:


* 'US IP will be lower in nine months after the peak in orders, adding to downward pressure on many commodity prices. This is economics 101 something not understood by pretty well all the commentators on the ABC and Macquarie Radio.

* 'The other key aspect not understood is the excess capacity that haunts almost every manufacture and mine'.

Here is the Raff's full story, including important comments about the Chinese economy.

Do not miss Julian McCrann's trenchant comments below the Raff's contribution. Or Julian's dad's column in the Weekend Oz. Here is a quote.

'If the Fed does take us into 2016 without lifting its rate, we are headed into extremely dangerous and turbulant times'.

The RBA kept interest rates unchanged this week and continues to say the economy is travelling well. The strong jobs performance is certainly to be welcomed but is largely in the non-traded service industries. One big question is whether this will help fix what is a very large current account deficit.  Such a deficit was the main reason for Paul Keating's Banana Republic call to arms.  Then there was strong remedial action, including a swing from budget deficit to budget surplus, but even so the remediation was only temporary. Remember the recession we had to have? 

Lending for housing is going at a powerful clip - 12.5 % annual in one source -  and one suspects that the new direct controls (by changing asset ratios) over the housing market are already failing.  More on this issue from Alan Kohler today.

Out and about

Henry's visit to the great North-west frontier has come to an end at Darwin Airport.  Last Saturday's Sanity Break summarised time at Broome International (sic?) Airport followed by some snippets from life on a wonderful cruise ship that carried Henry and Mrs T from Broome to Darwin.

Previous experiences on the Gibb River Road and return via the Great Northern Highway are available as follows.

The start - political bombshell from Oz

Too many gorges

Genteel bush punch-up

In the Bungle Bungles


Fiona Prior celebrates Spring by visiting Primavera 2015 at the MCA

Image of the week - Janet Yellen and the mob

Ideas relevant to this painting may be found here - will she, or won't she, raise interest rates any time soon and (either way) will it scare the mob?

Henry's editor's postmodern paintings - all with an economic theme - are available here. Two of them will be displayed (and offered for sale) in the forthcoming Toorak Art Show featuring many art works distributed in the shops of Toorak.

Saturday Sanity Break, 3 October 2015
Date: Saturday, October 03, 2015
Author: Henry Thornton

Henry has been enjoying the scenery, avoiding crocodiles, looking at great (aboriginal) art while being deprived of newspapers, TV and radio, internet or phone access to the rest of the known universe. Hence there is no chance of the usual commentary on the news economic, political or sporting. Instead today we offer two stories.  The first tells of challenges at Broome International (Ahem) airport. The second provides hints about life on the Coral Princess during the cruise of a lifetime. 

Fasten your seatbelts, sit back and relax.

Broome International Airport (BIA)

Henry and Mrs T survived 13 days on the road with a battle wagon kindly provided by Avis. Returning it proved difficult as there were no signs (or in one case a misleading sign) to the airport. Finally, after circling the airport like an aeroplane that arrived early, Mrs T asked a fellow female in a shopping centre carport how to find the airport. ‘Follow me’ said the nice lady and took off like a regular Broomie at high speed. We struggled to keep up but noticed when the nice lady pointed over her car roof to the road labelled ‘Heliport’.  

 We returned the battle wagon on time, dusty but otherwise undamaged and wheeled our (excessive) luggage into BIA. As we did so, Mrs T remarked brightly that we’d be able to check into the lounge. ‘Not bloody likely’ was the brusque reply, ‘there’s no Chairman’s lounge here, you’ll be lucky to find a loo’. Henry next asked a security person if we could leave our luggage in a particular spot while we awaited the taxi to deliver us to the Coral Princess, the luxury ship that was to take us to Darwin, with exciting things to do on the way – examining rock art, swimming with crocodiles, riding a rubber duck through a narrow opening in a rock wall at a time of tidal water flow, bush BBQs, etc, etc.

‘I am afraid not sir’, said the security person, ‘I’m about to lock this facility until 5 PM’. ‘Fair go’ Henry expostulated, ‘We paid a lot of money to get here, and we’ve spent even more visiting gorges and other geographic highlights’. ‘Sorry, sir’, replied the security person, ‘them’s the rules’.  We wheeled the luggage outside.  There was one place with chairs in the shade.  It was sign-posted ‘Smoking area’ and ‘Consumption of Alcohol Prohibited in this Area’.  No doubt warning a particular minority group how to behave, probably the same group that cannot be trusted to enter the terminal area when  the staff have gone to their homes for their lunchtime siesta.  We settled down to our humble lunch of ryvita biscuits, cheddar cheese and vegemite. Simply delicious.

We were in luck.  It was a coolish day, only 35 degrees and there was a nice breeze blowing across the designated smoking area. We had spent the previous evening having a beer with Duncan, correction Doug, whom with his wife, that old mate of Mrs T previously mentioned, had just farewelled their older son from BIA.  The boy was off to Tokyo with a group from his school. ‘It’s called Broome International Airport’ explained Mrs T’s old mate, ‘but Gary has to fly to Perth to get on the plane to Singapore, then on to Tokyo’. ‘It’s only 1 and a half hours to Bali from Broome, but we still have to fly first to Perth', father Doug explained.

 Perhaps Kingsford Smith once landed at Broom.  Or it might have been the savage and unprovoked bombing of Broome in 1942 by Japan, now our second closest ally and trading partner, that gave the airport its ‘international’ status, but one wonders how it would handle a flood of foreign tourists arriving by air.

Our drink took place in the beer garden of the Mangrove Hotel. We arrived at 5 pm to find ten or twelve long, slow-moving queues of patrons buying drinks, and a massive crowd sitting about watching the sun go down. Never has Henry seen such a variety of female costumes, some dazzlingly provocative, all designed to catch the eye. Or so many men with cowboy boots, jeans, checked shirts and large jaws drinking yard-high beers in just a few short seconds. The ethnic groups seemed to mingle well but our attention was drawn to a small group sitting around a fire about 500 metres away.  ‘It’s on’ someone called, and the kids, and some adults, went to the edge of the hotel grounds to watch the fight in the campsite.  ‘That’s a woman bashing a bloke’ Doug explained. ‘It’s the way of it here’.

And to think we had to visit Broome to see the new world of female dominance close up and serious.

Enjoy a few of Henry and Mrs T's snapshots below before continuing with their cruise adventures ...

Gwion painting


Dry waterfall (*note almost invisable two men on ledge near the water)

 Ancient Gwion painting

 Gorge at King George River

On the Coral Princess (Bootcamp for Oldfolk)

The bus arrived on time and with another couple we had met in the shady smoking area we had our luggage tagged and loaded. We were slightly shocked at being the youngest people on the bus, and again when the bus driver explained that we should look at fellow travellers carefully as there would be opportunities for spouse swapping. A joke we assumed, but perhaps we were to be tempted to relive the sixties, albeit without the drugs and rock’n’roll.

We were efficiently driven to Boome’s International Port (BIP) and along the wharf to the Coral Princess. We were shown to our stateroom, small but perfectly designed for two oldfolk.  Twin beds, a lot of hooks for towels and clothes, space under the beds for cases, rails in the shower and tiny bathroom for oldfolk to hang onto should the water be rough. Shortly our luggage arrived and we unpacked and headed to the dining room for a welcome speech, a safety briefing and an early dinner. We eyed our fellow travellers carefully.

There were a few singles of both genders, many couples, a lady who made Henry look slim, some clearly feeble and the average age perhaps a decade ahead of the ever youthful Thorntons. We had pinned the name tags to our shirts and introduced ourselves to others as we mingled before dinner. There were retired or semi-retired folk of many varieties.  A butcher named Joe and his wife Pat, both great wits; a couple from Geelong, Peter a retired lawyer and Felicity, an active artist with most interesting ideas best described as ‘fusion’; Martin and Judy, a dynamic entrepreneurial couple;  … . One of the most interesting person we met was a former SAS Commander, Geoff, who had lead his team in three one year ventures into Vietnam and who was now fighting for a system for rehabilitating soldiers who returned with what he calls ‘dents in their souls’ and an inability to fit again into normal society.

The staff numbered fourteen and all were fit mostly very young people who we learned to think warmly of for seamless organisation, dealing without fuss with household chores and willing ability to help we oldfolk while we were out and about in the often challenging Kimberly landscape. The most challenging was the climb up a near-vertical cliff with the help of a rope to hang on to and staff at the really hard spots.  Terry, aged 90, went both up and down without accident, although at some cost to the skin on his legs.  The old soldier told Henry he was 'too heavy' to climb the wall, but that only served to ensure he did.

There were well-presented talks most evenings, for which we were grateful to Chris and Mark, and one night a showing of the film Red Dog

Each evening was the time we were told of the events of the following day. As implied by the subheading of this article, the organisation was run like a military operation, one highly dependent of the state of the tides. In fact we were lucky to be there with a full moon and thus exceptionally high and low tides. Our time was immediately put onto Darwin time, so we lost an hour and a half sleep immediately. The first full day on the ship began at 8 AM with a hot breakfast. Subsequent starts were to be at 7.30 (twice), 6.30, 6.15 and ….

Each day there were two expeditions in the Explorer, a large tin boat expertly driven by Jo. We were to learn a few days later just how expert as she successfully got us back to the mother ship in large waves and on the second attempt pulled off what someone called a ‘kamikaze’ docking. On some occasions we left the tinny for one of two zodiacs, driven with great flair by two young men; well, one young man and an older, highly skilled bloke with kamikaze tendencies of his own. We used these boats to explore Montgomery Reef which at low tide gives up its water in massive cascades which one watches from about five metres below the highest point of the reef.  At high tide, that high point is five metres below the water.

But the greatest fun with high speed boating came at the ‘horizontal waterfall'. At high tide the water in the furtherest pool begins to drain out at increasing velocity. There are two narrows, the first very narrow, with water bucketing out so fast the zodiacs could not get through. (We watched a high powered luxury speed boat rocket through, and it was an awesome sight.) The second narrow is a bit wider, and the zodiac was able to go through in both directions. The ride is pretty wild, and the large tinny waited near the entrance as we went through ‘just in case something horrible happens’.  The water was running hard in an intuitively wrong direction as we waited, and I gained a very distinct impression that it was a large land buttress that was moving both in relation to the boat and the buttress further away. No, Henry had not been inhaling illegal substances, dear reader. Another passenger said she had experienced the same illusion. This was worth the cost of the whole trip if you really want to know.

Throughout the trip one is presented with superb sunsets and sunrises, stupendous scenery, wonderful treats including some extraordinary rock art, not to mention the culinary delights prepared by the extremely tall chef named Travis. And reprising our earlier experience on the Gibb River Road, there was even a gorge walk that began with a 30 metre climb up a rock face with the help of a strong knotted rope and staff at the difficult spots coaching and helping and ended with a swim in a magnificent pool below the Ruby Falls, named for the deep red rock shelf the water flowed over to enter the pool.

The walking, climbing, reaching exotic places and in fact many of the expeditions in temperatures exceeding 40 degrees taxed Henry close to his limit, and was challenging for many of the oldfolk present. But the clear message was that normal limits can be overcome even by people in their twilight years if the prize is worthwhile and the assistance well planned, professional and unstinting. I cannot praise Coral Expeditions too highly for their provision of a stunning program, which received high praise from all who travelled with Henry and Mrs T in September-October 2015.

The biggest negative was lack of internet and mobile phone connectivity.  What has Malcolm Turnbull been up to in his previous portfolio, dear readers?


Sunset in the Kimberly



Saturday Sanity Break, 26 September 2015
Date: Saturday, September 26, 2015
Author: Henry Thornton

Saturday Sanity Break, 26 September 2015

Malcolm Turnbull has settled into the top job as if to the manner born. So far so good but Mrs T is still grumpy and seeking support for a National Party branch in the leafy electorate of Kooyong.  In fact, she is hoping for a series of political earthquakes.  Group one, Greens plus left wing of the Labor. Group 2, right wing of Labor with ‘Liberal’ wing of the Libs. Group three, conservative Libs plus Nats. If group three is ever formed, Mrs T is prepared to run against Josh Frydenberg, although without great expectations of victory.   Henry is thinking of a Senate challenge with the slogan ‘Don’t touch our super’.

Enough already. The global news is far more fun.  The Pope telling the US pollies to remember humanitarian values. Sep Blatter about to become Sep Splatter, and about time too. The annual stampede at the annual Haj, and the old boy who said ‘This was the fault of disobedient pilgrims.’ Imagine a stampede at the ‘G’ as the Eagles hit the front with 30 seconds to go next Saturday. Would the AFL blame disobedient fans and expect the press not to object?

To segue to another topic, what are the rich leaders of the Middle East doing about the tide of refugees currently swamping Europe? We understand they give money (congealed oil), but do they take refugees, and if not, why not?  And why does the global press not demand an answer to this question?

The scandal engulfing Veedub Inc raises more questions.  We bet every car company is doing something similar.  The consultants will have been saying: ‘Veedub has established global best practice in pollution control and if you wish to compete you need to follow their lead’. This needs checking by a reputable motoring writer, but we are prepared to bet that ‘world best practice’ is widespread.  If this is correct, enforcing standards used for testing would produce an immediate cut in global motor car emissions.   We note that some Veedub executive said ‘We do not do this in Australia because there are no serious standards in this area’. Another commentator noted that to have such standards would have made locally made vehicles uncompetitive.  Kim Carr, can you confirm or will you deny this all too plausible claim?


Be sure to follow Henry and Mrs T on their excellent adventure: A day in the Bungle Bungles and Genteel Punch-up in the Bush!

Henry on safari in the North-west frontier


We arrived back in Broome, gorged out, but just in time to shop for dinner, check in at the Mercure and turn on the telly to see the ball bounced at the ‘G’. After a fierce start, Freo (aka ‘The Purple Haze’) surrendered their lead and despite brave efforts failed to get their noses in front again. Sadly the contest was besmirched by a man in a purple jumper snotting a female fan who presumably was supporting the Hawks. There was also a lot of booing and a purple haze man pretended to punch an innocent Hawthorn player and luckily (for the fan) it was just a bit of fun.

Tonight the North Melbourne Kangaroos take on the West Coast Eagles. Every expert expects the Eagles to easily progress to the Grand Final, and a loss tonight may well lead to succession of WA. Henry is not allowed to watch this match, as Mrs T has announced her desperate need for a Thai dinner.  With luck we may be back for the last quarter.

Did you see the video report of a Man on a paddle board communicating with two wales? The images were filmed by a drone and loaded onto the World Wide Web.  This is very big news in WA, but Henry’s attempts to find the video via the SEARCH function failed. We tried paddleboard and wales but got several pages of ads for paddleboard lessons interspersed with ads for Wales, or reports involving the progress of Wales in the Rugby World Cup. Please contact Henry if you find the video, dear reader.

Australia started its World Cup campaign with a win over Fiji. Henry caught only the second half when Fiji looked distinctly capable of an upset.  Winning just about every lineout and with large, fast players (mostly related to an Australian player is seems) rampaging about with clever passes we had to applaud the Australian defence. Tonight Australia plays its second game, against Uruguay and is widely expected to win.

Image of the week

Fitzroy River

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