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Henry Thornton - Contributors: A discussion of economic, social and political issues Blogs
Global economic policy - `deep divisions`
Date: Monday, June 28, 2010
Author: Henry Thornton

The crisis of 2008 was caused in large part by over-lending and over-borrowing.

The 'sub-prime' lending and borrowing binge in the USA was just the tip of a very large iceberg - throughout the western world ratios of household and business debt to income have rocketed up. The rise has been especially strong in the past 30 years as the thrifty habits of the generation that lived through the Great Depression of the 1930s has worn off.  But the change in psychology was mightily helped by the inflation of the 1970s and the 1980s and tax laws that encouraged borrowing.  The great asset boom of the same period rewarded those who went into debt to buy assets and for three decades there was an apparently unending virtuous circle of rising debt rewarded by rising asset prices leading to more debt.

Central banks helped by slashing interest rates whenever the process faltered, most overtly in the USA where Greenspan took cash rates almost to zero, and in the current crisis Bernanke has out-done his irresponsible predecessor.

Fiscal policy responded dramatically also to the financial crisis of 2008 - first by the bailout of financial institutions likely to fail but also to support economic activity.

The net result has been another surge of borrowing and lending, borrowing by western governments and lending by professional investors in the west and major developing nations, notably of course China.

As a ratio to GDP, US private plus government debt has gone from 50 % in 1950 to nearly 300 % in 2008.  Trillion dollar deficits 'as far as the eye can see' means that this ratio will continue to rise, in the absence of a major backflip by US government for a decade or more.  Many western nations are deeper in debt than America.

Despite attempts to present a common front, G20 nations are divided on the issue of fiscal consolidation. The USA remains in the stimulation camp, while many European nations think it is time to begin consolidation.  Riots in Toronto as the G20 met and in nations like Greece forced to begin fiscal consolidation by its creditors show just how divided are views on the role of fiscal policy and removal of 'benefits' that have become viewed as entitlements.

Australians should be pleased that the process of debt inflation is nowhere as bad is it is in the major debtor nations, and neither have our interest rates been cut to dangerous levels.

But we have 'benefitted' from the the contagion of asset inflation and we shall suffer along with other nations if adjustment in the major debtor nations includes large drops in asset prices.

It is fair to say that there is no easy answer to the dilemma in which the world finds itself.

The Economist concludes a leader by saying: 'Weaning rich countries off their debt addiction will cause withdrawal symptoms. Austerity does not appeal to voters, who may work off their frustrations on politicians and (worse) foreigners. Mr Micawber’s phrase may be turned on its head again. When annual income is forced to exceed annual expenditure, the result may well be misery'.

Do not miss The Economist's special report on debt - 'Repent at leisure'.

The fierce debate about fiscal policy is one front in the battle for good economic governance.  Another is the battle to reform financial regulation.

The best report Henry has seen on the US attempt at this reform is in the Wall Street Journal, reprinted in today's Australian.

'After months of uncertainty about how the US would craft new rules, the agreement offers the clearest picture since the financial crisis of how markets and the government will interact for decades to come. The common thread: large financial companies are facing a tougher leash'.

It seems that there are also deep divisions - papered over of course - over the new rules for finance, mainly over the Eurozone proposal for a tax on banking to fund future bailouts.
Henry's views are here.  My core difference to the world's regulators is because continuous tightening of black letter law systematically erodes incentives to 'behave well'.

Another view.

  Courtesy Financial Times

'Fiscal disarray is the least of the G20’s sins' says Clive Crook.

'Trade and bank capital rules are more important – but there is even less unity on these issues'.

Read on here if you subscribe to the Financial Times.

Goodby Mr Rudd.

Sir Wellington Boote said it way back in early May, maintaining Henry's ability to be where the puck is going, not where it's at or where it was.

'At a Caucus meeting have someone call a 'spill motion'. This opens up all the positions of leadership. Drop Rudd and replace him with Julia Gillard. She is not my 'cup of tea' by a long mile. However, she has good public standing and can calmly unload all the detritus that passes for Rudd's policies ... a principal one being this Resource Rent Tax.
'I am in favor of this tax but I think it cannot be implemented without a long lead time spent in discussion and detailed adjustments with the mining companies. We need a government which knows how central mining is to the future of the country. The Chinese are not trying to capture our mines because they can't think of anything else to do. If we weaken the mining companies with a 'caravan raid' style of taxation a lot of the mining company shareholders will cut their losses and sell out to the Chinese. If we lose control of our mines we become eunuchs at the Court of the Chinese Emperor. We then miss out on our potential future and just follow along our old historical path  ... lap dogs for the British, lap dogs for the Americans and then, lap dogs for the Chinese. We will keep winning gold medals at the Olympics but they will own us'.

Sunday Sanity Break, 24 July 2016
Date: Sunday, July 24, 2016
Author: Henry Thornton

Sunday Sanity Break, 24 July 2016

What does Malcolm Turnbull stand for?  Persuading Australians it is an exciting time to be alive. Or to become entrepreneurs? Adding to Malcolm’s personal satisfaction, adding laurels to his already successful career?  Making Australian a better place? Helping the battlers? Malcolm might claim all five aims, perhaps in a different order. But Paul Kelly in the past week suggests he hasn’t got clear aims, or perhaps has failed to articulate them. Successful Prime Ministers articulate their aims clearly.  If Malcolm  fails to do this soon’ish, he will become a failed Prime Minister.
Read Paul Kelly’s views here. 

Janet Albrechtsen, good on you girl.  Your article on the superannuation fiasco is first rate, and should be read here, especially by Malcolm Turnbull, Scott Morrison and other senior officials.

My own objections to the approach, largely covered by Janet, are as follows:
•  Retrospectivity. I do not accept that changing the rules, without grandfathering those already in retirement – including Henry – is effectively retrospective.
•  Impact on future policy. If these out-of-the-blue changes are allowed to stand, the precedent is set to change rules on a whim in future. Not a sensible way to run a country, and grossly unfair to those who played by the rules in superannuation; not borrowing to buy assets, etc., etc.
•  One particular aspect of fairness is especially egregious.  Self-funded retirees are to be allowed $1.6 M in tax-free super. If the market crashes, and we are experiencing an especially fragile state where a big crash cannot be ruled out, or indeed is likely in my view, self-funded retirees will need to dip into their taxed superannuation funds to maintain their lifestyle.  Politicians and senior public servants, as I understand it, still have very generous defined benefit superannuation funds.  If the market crashes, will such people face any comparable penalty?
Henry is a man of the people, and is not deaf to claims that ‘the rich’, or actually the ‘merely well off’, have been treated too well by the Keating-Costello superannuation model.  Most of Henry’s friends, and Mr and Mrs T, would cop a better designed set of reforms IF, and only IF, other supposed Fat Cats shared the pain.  What about corrupt unionists? What about high-flyers in the cash economy?  What about people who have milked the housing market for all its worth thanks to a nuttily over-generous negative-gearing scheme?  Give me a day and I would add substantially to this list.

Malcolm Turnbull,  as well as deciding what you stand for, you have to figure out how to fix the debt and deficit mess we are wallowing in, propose fair changes to various entitlements as part of the repair job, and persuade a large majority of Australians the changes are both necessary and fair.
Arusha and beyond.


Henry’s editor presents another chapter of his career retirement celebration, a career not perfect but called ‘bloody effective’ by many.

On our free day in Arusha we were determined to be out and about. The hotel staff were anxious that we not venture too far out and about, and indeed strongly advised we not stray too far from the hotel and its immediate precincts, taking a bodyguard not matter how insignificant a distance our jaunt. (This advice did not look so silly in the light of the several armed guards in the hotel lobby and guarding the front door and entry and exits to the hotel grounds.) We finally persuaded the staff to allow us to go unaccompanied to a market about 200 metres from the hotel. ‘Ignore the flycatchers’ a young woman advised as we sallied forth.

As we were mainly interested in adding to our collection of ‘Street Art’ we went to a market that was advised by the hotel staff. The market concerned had many, many small stalls packed with paintings, almost all of which looked like prints on canvas.  Other stores featured colourful trinkets and traditional carvings, some of which had been knocked about and rolled in dust to make them seem old and venerable. The isles were narrow, and we were invited in, occasionally pulled in. ‘Is this your own work’ was our standard question about the ‘paintings’. ‘Yes’ was the most common answer, ‘my brother’ sometimes and occasionally ‘a friend’.

We decided on two images we could live with, despite suspicion that they were merely prints. We told the likeable store holder we wanted to think about our decision and might be back later in the day.
We returned to the hotel and did some more research.  This mentioned a more established shop, also close to our hotel, so we again sallied forth.  This time, location being slightly more complicated, we agreed on someone to accompany us. This fellow attempted to persuade us to go to a store other that the one that both the internet and the hotel staff had recommended.  When we refused his advice he became quite angry and we went back to the hotel to say we were not happy with him and that we would go ourselves.

In our preferred store we immediately liked what was on offer and the store keeper was older and more used to selling to tourists.  His paintings were clearly of higher quality than those in the market and were clearly paintings, as one could the rough surface and brush strokes. The artist was a brother of a famous artist, now sadly deceased.  The price was fixed, and not much more than our favourite paintings from the market.  While we could have bargained in the market, we settled for a higher price for a better product and the safety of a properly organised business.


Now share the excitement  of a Tanzanian Safari!


Fiona Prior sees Love and Friendship, a film based on the novella Lady Susan written by a 19-year-old Jane Austen. More here

Sunday Sanity Break, 17 July 2016
Date: Sunday, July 17, 2016
Author: Henry Thornton

Safari 2016 #1 – getting there.

What should you do with someone else’s briefcase in a major airport? This was our dilemma at Rome Fuimicino airport as we were leaving recently. Our driver, Eric from Taxi Transfers, an excellent business run from London, drove well, pointing out major features as we travelled. Eric emptied the boot of the car, demonstrated with a flourish that the boot was completely empty, and drove off at speed.

We loaded our luggage onto an airport trolley and discovered an extra item. The extra item was an open briefcase so we looked to see if it looked dangerous – just paper, with lists of clients, perhaps an earlier customer’s, or Eric’s administrative notes. (‘Make sure all luggage is unloaded’.)

So what to do? We went to our check-in, which fortunately was for business class with virtually no queue. There we checked our bags and explained our dilemma. A very helpful check-in lady suggested we call Taxi Transfers, which she agreed to do, and after a couple of tries spoke to someone in London.  ‘We have no man called Eric working in Rome’ London explained unhelpfully. Was Eric filling in for a friend?  Clearly the airline felt unable to take possession, especially as Eric had been disowned. I was reluctant to simply put the bag in a bin. After discussion I suggested that I’d explain our problem at security, which the check-in lady endorsed with some enthusiasm.  I emailed London to say that is what I would try to do.

We were lucky to have a fast track pass.  The young bloke in charge of sending us for screening was somewhat panicked about Eric’s briefcase, and higher authority was consulted. I suggested security take the bag, as what else could I do with it. “You should have just left it outside the airport,’ suggested my young friend. “That would not be responsible,’ I responded, ‘think of the chaos that could have resulted’. ‘I suppose you are right’ the young bloke conceded, and sent me on my way without further palaver.

Business class on Qatar Air from Rome to Doha was like First Class on Qantas from Melbourne to LA. Doha was hot – very hot – and its airport is simply enormous with lots of workers apparently hanging about not doing much. We managed a few hours sleep in the airport hotel then joined the 8.30 am flight to Kilimanjaro Airport.  The airplane was pretty old, but not noticeably older than the Qantas plane on which we were taken from LA to Washington several weeks ago.
As we approached the airport the famous mountain peeped out from the cloud. At the airport there was a fair bit of chaos, and despite having purchased visas in advance we were required to fill in forms before we could approach the customs men. Those people quickly stamped both the form and the passport and we were there, in Tanzania. Our baggage arrived quickly and while we were waiting we watched tasteful scenes of lions attacking small buffalos only to be tossed in the air by large buffalos and a crocodile being attacked by a large spotted feline, and carried off by the feline, despite the feline being the smaller animal.

The trip to Arusha hotel took about 40 minutes. We saw kids walking home from school, small shops that suggested real poverty, very dry fields, the rains being late or not happening this year, and a vast attempt to turn the main road into Arusha into a double highway. This was a project by a Chinese company, who had been working on it for 2 years and looked about 25% finished. Our highly intelligent driver said there was a lot of Chinese influence but the Chinese were greatly disliked. Michael also gave us a briefing on many matters including tribal and language structures, Tanzanian diets (amid widespread poverty), politics from colonial times, the unique Tanzanite gems and many other interesting matters.

Michael’s English and general knowledge was impeccable and if I were a recruiting officer for Australia I’d have tried to sign him up on the spot.
Tonight we rest in the Arusha hotel and tomorrow we head off on The Safari.  Readers if so inclined may wish us luck. We are advised in advance that Leopard Tours (whose safari we are to join) has no responsibility for illness or injury and we should be very careful. It is especially important not to wander around camp sites at night as the animals are both genuinely wild and often hungry.


Fiona Prior saw Sydney Film Festival's opening film Goldstone. '(Goldstone) has a heartfelt dignity that feels very Australian ...' along with all the adrenalin rushes you would expect of a thriller set in  the Australian outbook. More here

Sunday Sanity Break, 3 July 2016
Date: Sunday, July 03, 2016
Author: Henry Thornton

Sunday Sanity Break, 3 July 2016

It is a weekend of shocks. Collingwood beat Carlton by 2 goals after what (given the low scores of both teams) must have been an old fashioned arm wrestle. Iceland (we hope) beats France in the Euro cup quarter final being held tomorrow. And the Australian election is one of the best ever with the result not known when we all went to bed at midnight and no more counting ‘til Tuesday. (Did I hear Malcolm say that late in the proceedings?) Seems there are only three plausible outcomes – a narrow absolute majority for Turnbull, a hung parliament with a minority Turnbull government or a hung parliament with a minority Shorten government.  But the government, if it is any option, will not have a majority in the joint sitting of parliament.

The Thornton entourage in Prato – Henry, Mrs T, daughter and daughter’s friend – sat down to watch the coverage by the Sky News team, shown internationally on The Australia Channel.  The regular Sky News Team were scattered around Australia. Visitors included Michael Kroger, George Brandis, Peta Credlin, Kristina Keneally , two Labor men whose names Henry missed, and a couple of brief but welcome appearances by Richo, chirpy as ever but in a wheelchair. David Spears officiated, although toward the end was having trouble maintaining discipline as his high-powered panel began shouting at each other. In distant Australia Bert Thornton was maintaining a 30 year tradition with a Thornton election party.

The result was too close to call from the getgo. The fact that the polls got it right in predicting a very close result was the first surprise. The fact that Labor did better than anyone but Bill Shorten predicted, and then only in his wilder dreams, was another surprise.

Reasons for these surprises were discussed at length as the coverage continued. Michael Kroger was, as he often is, crisper than others: From September to May the promised plan to provide coherent economic leadership was missing – ‘too much drift’; the government’s attempt to tax people’s superannuation ‘enraged’ many more Liberal supporters than expected; and thirdly ‘Labor’s big lie’ about  the plan to privatise Medicare.  The Labor men whose names I forgot to write down became progressively more cheerful as it became clearer that Bill Shorten’s campaign was doing far better that most pundits had expected. The ‘big lie’ allegation was ‘answered’ by presentation of counter allegations about alleged past Coalition misbehaviour.

Peta Credlin was in Henry’s view the star of the show. The young ladies present were impressed; ‘she’s really scary’ was their initial offering but the older people were more impressed by her obvious competence, loyalty to her previous boss (while maintaining the party line that Malcolm was the current best hope of the side) and endorsing the idea that September to May’s drift was unhelpful.  She added that ‘The Double Dissolution was a grave mistake’ and ‘Malcolm should have gone early’.

Kristina Keneally was another star. Always on message but hard-edged comment in a measured manner. One wishes she had gone to Canberra.
There was general agreement that the result meant that ‘Malcolm has no mandate’, reinforced by the fact that very little had been put on the table anyway. People were puzzled why the building union atrocity matter (ABCC) had hardly been mentioned. Peta Credlin noted that ‘Bill ran a cracker of a campaign’.

When Bill arrived he was given a hero’s welcome by the Labor faithful, your humble scribe thinks deservedly so. He spoke well, effectively claiming a victory while thanking his whole team and presenting an humble persona. His final claim was that whatever happens to the parliament, Labor would prevent Medicare from being privatised. He was applauded to the rafters and looked and acted like the winner.

Malcolm was late to arrive, and left for his CBD headquarters from his Eastern Suburbs fortress with Lucy well after Bill’s rapturous reception. He then spent another 30 minutes consulting with his team (Peta advised) before being welcomed by his supporters.  Both the leader and the supporters were obviously surprised and shaken, though Malcolm managed a smile and a few optimistic opening words. The key narrative had changed significantly, and crucially, if it is not too late. Still, he asserted, it was a wonderful time to be alive, but there were many challenges if we were to take advantages of the opportunities.  At last, a recognition that there was serious work to be done, though no hint that sacrifices might be needed, labour reform was essential and there was a massive budgetary problem that remained to be addressed.
There was also more than the usual handwaving, hands almost continuously in motion being moved up and down, and sometimes from side to side, at a speed that made them appear blurred, reflecting perhaps the attempt to refashion the narrative in only 30 minutes late at night after a very hard day. Clearly stressed and shocked.

Lots of fun to come, and whomever is leader when the votes are counted will need to get better advice, and indeed to listen to better advice, than the current leadership team of both parties. Both Labor and the Coalition have a massive job to do to craft a viable recovery and booming plan for the Australian economy.  If possible there should be some negotiating and horse trading to preserve the sacred icons of both main parties. ‘You’re dreaming now Henry’, Mrs T asserted when she perused these comments.

Global currents – two excellent articles
The latest Economist contains an article ‘The consensus crumbles’. A concluding comment is important: ‘The benefits of [economic] openness are massive. It is increasingly clear, however, that supporters of economic integration underestimated the risks both that big slices of society would feel left behind and that nationalism would continue to provide an alluring alternative.  Either error alone might have undercut support for globalisation – and the six decades of relative peace and prosperity it has brought. In combination, they threaten to reverse it’.

David Brooks in the International NYT this weekend discusses ‘The coming political realignment’.
‘Donald Trump has done something politically smart and substantively revolutionary. He is a Republican presidential candidate running against free trade and, effectively, free markets’.

And in conclusion: ‘The prophets of closedness will argue that the problem is trade. The prophets of openness will argue that need the dynamism that free trade brings.  We just need to be more aggressive in equipping people to thrive in that dynamic landscape. If facts matter in this debate – and I am not sure they do – the proponents of openness are massively right’.

Of course, what is the plan to ‘equip people to thrive in that dynamic landscape’.  Malcolm, Bill, that is a big question you might try to reach a sensible agreement on.

All roads leading to Canberra this week; at least on the domestic front. Fiona Prior revisits the work of star Australian artist Fiona Hall, presently on exhibition at Canberra's National Gallery of Australia (NGA). FP first saw Fiona Hall's exhibition Wrong Way Time as Australia's official entry in the Venice Biennale 2015. More here.

image: Wrong Way Time  (detail) by Fiona Hall

Image of the week


Sunday Sanity Break, 26 June 2016
Date: Sunday, June 26, 2016
Author: Henry Thornton

Sunday Sanity Break, 26 June 2016

‘This is a thunderbolt’ exclaimed some senior Eurocrat. This was an referendum – ‘Remain or Leave’ – that the great and the good said should, and would, produce a clear ‘remain’ verdict until the result left many stunned pollies.  The polls got closer when they it said was too close to call. But the punters, apparently including George Soros, got it right and again won billions punting against sterling. Was it the president of the EU when asked if others would leave, snarled ‘No’ and stormed away from the press conference. Clearly no great democrat.

In contrast to the stunned mullets in senior political jobs, the governor of the Bank of England, Mark Carney, appeared to offer a calm sense of purpose.  With the U K Treasury and the European Central Bank and other agencies, he has been working an action plan to quell financial volatility and keep the global financial system from imploding. In Henry’s view it is significant that UK shares fell less than German and French shares and the big falls in sterling and some other currencies were partly reversed by Friday evening. Anyway, with politicians looking shocked, it was good to see the key independent central banker calming the situation.

Friday morning the world discovered that ‘The British had rebelled’.  This was proclaimed in an article about ‘populist anger’, as the International New York Times put it.  ‘Their stunning vote to leave the European Union presents a political, economic and existential crisis for a bloc already reeling from entrenched problems’.  The support for Donald Trump in America and unpopularity of the EU hierarchy represents the same popular ‘thumb in the eye’.  Even in distant Australia, the low ratings for the Turnbull government and the Labor opposition, with offsetting support for amateurs and splinter groups, may well be driven by similar characteristic.

Mrs Thornton believes many people in the developed world are deeply unhappy with a number of economic trends. Many jobs are navigating to less developed nations, famously of course China and the fast growing, low wage nations of South East Asia. Once the jobs drought was largely about blue collar workers but now the drought has spread to the more influential middle classes.  Middle class kids work hard to gain one or two degrees but find it desperately hard to get jobs that use their newly acquired skills.

Where these trends will go is a common discussion. Elites in business and the public service are paid what seem extraordinary amounts to come to work, producing a widening distribution of income and wealth with little ‘trickle down’ to justify elite rewards. In some nations, especially the USA where real wages have stagnated for decades, people ask themselves what are the benefits of the new age of freer trade.  And there is populist anger at the apparent inability of governments to curb terrorist atrocities or to find ways to stop waves of refugees fleeing mayhem of terror groups in places such as Syria, Iraq and Afghanistan.

The sharper pundits have observed that Britain has form in the matter of independence from continental Europe. Henry the Eighth cut loose from the Catholic Church in the sixteenth century. Perhaps this was to free Henry (the Eighth) from the strictures of that church for personal reasons but there has been no popular move to reinstate the Catholic Pope as head of the main religious organisation in the United Kingdom. A more cynical interpretation was offered by Yes Minister in 1980.


Fiona Prior visits the Frida Kahlo and Diego Rivera exhibition at the AGNSW. More here

image: Diego on my Mind (detail) by Frida Khalo

And do catch Henry and Mrs T in Napoli here

Image of the week – The Brexit, courtesy Giorgio Vasari, 1543

image: The Brexit courtesy Giorgio Vasari, 1543

Sunday Sanity Break, 5 June 2016
Date: Sunday, June 05, 2016
Author: Henry Thornton

Sunday Sanity Break, 5 June 2016

Growth of Australia's debt is unsustainable. Thanks to LF economics for preparing some startling new statistics of Government debt and Household Debt from 1850 and to Adam Creighton for publicising LF's paper on the subject.

As a percentage of GDP, Australia's government debt is 'only' 34 %.  But budget deficits are predicted to persist as long as the eye can see AND borrowing costs are at record lows. 

The government debt ratio will keep rising unless and until the government deficit turns into a surplus. The task of producing a surplus will at least double when global interest rates return to normal.

Current trends in government debt are very similar to those predicted by RBA research in 1986.  These trends alarmed Treasurer Paul Keating and he persuaded the nation and cabinet to cop serious fiscal tighting with his 'Banana Republic'.

The current Turnbull government has hardly discussed the threat of continued growth of debt and deficits, so the public can be excused for believing it is not a problem and that even Labor's deficits can be funded.

But the other series is in the LF graph we regard as the image of the week, and also the image of 2016.

Household debt is an utterly unsustainable 160 percent of household income and has all the problems of national debt multiplied by approximately six. When interest rates return to normal, many Australian households will be in deep financial trouble.

Should house prices and/or share prices fall, the trouble will be multiplied further.

Secretary to Treasury is going to retire after the election. It would be better for his reputation, and much better for Australia's future if he decided to stay and gave the post election Treasurer a briefing that laid out the issues summarised here in all their potential horror.

Perhaps the retiring Secretary knows the task is impossible so it may be best if his body is dragged off the field and a successor is found who is bright enough to construct the briefing I think is needed and brave enough to present it.

Of course, the incoming Treasurer may not want brains and courage.  'Let's muddle along, Prime Minister, something will turn up.  Blogs (the incoming Treasurer's choice) won't cause any trouble and the RBA thinks we'll muddle through.'

Poor old Blogs, his reputation will be in tatters, and a future serious conservative government will need to sort out Australia's love of debt and persuade us all to cop a decade of austerity.  The austerity will be the greater the longer the current unsustainable game is allowed to go on


Fiona Prior visits the very different sartorial styles of Isabella Blow and Collette Dinnigan at Sydney's Powerhouse Museum. More here.

Image of the Week

Sunday Sanity Break, 29 May 2016
Date: Sunday, May 29, 2016
Author: Henry Thornton

Labor remains 51-49 and Bill Shorten on one measure (net lack of popularity) has equalled Malcolm Turnbull. Well, Comrades, what a turn up for the bookies, the pundits and Malcolm Turnbull. As Richo said, the Libs sacked a bloke with no judgment for a bloke with no ticker.  And no debt and deficit reduction strategy either, substituting instead what a great time it is for Australia, and to be Australia’s Prime Minister, even if it will turn out to be for less than a year.  One your bike Malcolm, lots of ground to make up and the possibly fatal decision to punish your heartland with retrospective changes to their retirement plans.

And can we believe it? Caaaarlton! beats Premiership hopeful Geelong despite having no fit players on the bench for most of the last quarter. This side is very special. 'Grit and determination, spirit' this is the secret.

Read all about at the Herald Sun.

Janet Yellen has now said US rates will rise ‘in coming months’.  In distant Bergen, last week’s weekend FT was 39 Norwegian Krona, 40 with a plastic bag to keep out the rain. Its editorial says ‘The Fed nudges investors toward another rate increase’ following the release this week of ‘hawkish-sounding minutes’ from its late April meeting.  Yet, the FT says, inflation is still falling and in Japan and Europe (and, we hasten to add, Australia).   In Japan and the Eurozone, monetary policy is still being eased.  Even with some increase in commodity prices, a sudden upsurge of inflation is unlikely.  The FT says ‘A fresh rate rise in the United States at this time would be a mistake’ and it must be agreed that inflation is apparently still falling despite improving activity.

The more important issue, at least for Henry and Mrs T, is the outlook for equities. The FT asserts that ‘fund managers are braced for ‘a summer of shocks’.  These shocks include:
• Corporate earnings are falling and ‘no-one likes equities’. (Bad luck for self-funded retirees.  They will be told by financial planners to spend up big and apply for a pension.)
• The world is entering a time of falling returns. (Any chance of this effecting Australian companies?  CEOs, especially overpaid bank CEOs, will find downward pressure on remuneration.)
• UK leaves the Euro zone, although recent polls are discounting the Brexit shock.
• Europe must negotiate a deal with Turkey on immigration.
• Support for Greece needs sorting.
• Spain is experiencing the need for another election after recent elections failed to produce a government. (No chance of this in Australia?)
• Italy is facing a constitutional crisis which one guru said ‘might turn out to be a referendum on the popularity of the European Union as a whole. (In Henry’s modest view, the Euro zone is doomed because the Euro is too weak for the strong nations of Europe and too strong for the weak countries.)
• And there is the old Northern hemisphere advice to ‘sell in May and go away’.

Here is one prediction with especially relevance to Australia. A Mr Barry Norris, head of Argonaut Capital Partners, is quoted as saying: ‘Nearly every commodity in the world, with the exception of salmon, is oversupplied relative to demand’.  Recent signs of fresh demand has just delayed the reckoning Norris believes, which has merely been delayed for six to twelve months.

Henry and Mrs T are determined not to let all this pessimism ruin their current journey. Indeed, the report on our time in Norway has been added to here.  Page down to Balestrand - the Kaiser's playground


The Raff reports on Vietnam -booming economy, great  place to invest, or take a holiday.

Image of the week – ‘The trouble with Mexicans, correction Australians’

Bill Maher, an American comedian, has realised that Australians are quietly taking over lots of fun areas of American life – working bars, teaching skiing and surfing, taking acting jobs from Americans. It seemed to Henry that he was trying to illustrate Donald Trump in action, although he did sort of apologise for asserting that Australians are rapists.

Click here for a You Tube extravaganza. WARNING: do not do this if you are a sensitive adult or if children are in the room.)


Fiona Prior falls for the charm of the latest film version The Jungle Book. More here

Art Exhibition by Pete Jonson
Date: Saturday, May 28, 2016
Author: Henry Thornton

Henry's editor, Pete Jonson, has recently decisively wound back his corporate involvement. He is now fulfilling the promise he made to himself as a young part-time landscape painter that he would, later in life, spend more time painting. This time has arrived; and Pete has been painting seriously for several years now, gradually devoting more and more time to this most pleasurable activity.

Pete has just opened his first exhibition, an eight weeks solo showing at Whitehill Gallery & Sapori Di Casa Restaurant, a small slice of Tuscany on the Mornington Peninsula.

The exhibition has just been extended until August 12. Henry urges Pete's friends to go along, have a great Italian meal and buy a painting.  They are of high quality and priced to sell. Each painting comes with a conversation with Pete about his views on global economic prospects in the puzzling (to many) age of deflation and what should be the policy of Australia's government after the current election.

The address is Whitehill Road, (near the corner of Old Whitehill Road), Dromana, Mornington Peninsula. This is about 1 hour and 10 minutes by car from most parts of Melbourne, using the M1 and M3 and then the M11 (new Peninsula Link freeway).

The Gallery is open each Thursday to Sunday from 11am to 5pm. And the Restaurant is open each Friday to Sunday for lunch (phone 03 5931 0146 to book, if you would like to enjoy the paintings with home-made Italian food and superb local and Italian wines). The exhibition will closeon August 12.

Pete Jonson: Perspectives features Pete's landscape paintings from 1988 to 2014. His goal was to capture on canvas both the physical reality and the soul of each vista.

In Henry's impartial opinion, viewers of the works will see that Pete has achieved both; with inspiration, subtlety, technical ability and, above all, a deep love of our natural environment.

Below is an example, The Spirit of the Rock (Uluru) (2013):

The Spirit of the Rock (Uluru)
Oil on Canvas
4' x 3'

SOLD in week 1 of the Exhibition

This is the first time the paintings have been publicly shown; and each is very modestly priced (from $1,000 to $3,000 with one especial favourite of the artist at $4,750).

Enjoy!  And please pass on to your friends if you are moved to do so.


Pete's new Econart images may be viewed here and will be offered For Sale at a later exhibition.


Sunday Sanity Break, 22 May 2016
Date: Sunday, May 22, 2016
Author: Henry Thornton

Henry cannot access The Australian despite being a lifetime subscriber and a person who also had a digital subscription almost from inception of that service, he cannot access all the locked articles in that great organ's site. This problem first occurred two months ago when Henry took a digital subscription to the Herald Sun.  It took three long phone calls to the laughingly incompetant 'Help Desk' before Henry was again able to access the Digital Oz.

Now sitting the La Guardia airport awaiting the flight to Washington, Henry is off the air again. Lordy, lordy, as they say in parts of the mighty USA, what can be done?  Call the Oz's 'Helpline' on the mobile and wait for 20 minutes to reach a nymphette who cannot fix the situation?

Better still, email David Uren and see if he can get me back online for the Oz and Herald Sun.

I have been touched by the high levels of public civility we have experienced in New York.  It this the aftermath of the so-called 'Great Recession', more thoughtful civil leadership or more NYPD presence on the beat? Who knows, but the culture seems different compared to that experienced during our one month visit about 30 years ago.

We had the great good luck to obtain tywo cheap seats at the Saturday afternoon performance of The Book of Mormon. A snip at $US69 each, sitting in a box at the front side box.  Wonderful show, and top prices were $US750 each, an offer we declined with shocked amusement.

Economic and civility commentary here.

Due to above-mentioned interrnet news black-out, I am unable to comment much on events in our dearly beloved Banana Republic. Our gently skeptical comments on the late, much lamented budget have been overshadowed by the news that Treasury Secretary John Fraser is to resign after the election and by a brilliant analysis by former Secretary of Treasury John Stone.  This was published in the Australian Spectator and may be accessed at the link below.

Like the Book of Mormon, a treat not to be missed.

Saturday Sanity Break, 14 May 2016
Date: Saturday, May 14, 2016
Author: Henry Thornton

Great excitement and 'white hot rage' about the clearly retrospective changes to Superannuation law and practice. Messrs Turnbull and Morrison are sticking to their guns despite this being a major issues for the Liberal faithful.  Especially with people who have accumulated enough money not to need to suckle on the gummint teat like, apparently, 50 percent of Australians of working age.

First leaders debate saw Bill Shorten apparently more sincere and able to connect with real people, while 'Harbourside man' spoke well and smiled nicely with an invisable thought bubble hoverering over his head suggesting 'Why am I bothering?'

As many people have said: 'It will be long and it will be hard (no sniggering please) and it may well end with a hung parliament and more of Australia's increasingly dysfunctional politics.

Henry and Mrs T leave for the USA on Tuesday and will find it difficult to get access to all the political goss, and for that we are very grateful.  In fact today we shall explain courtesy of Australia post - with the letter 50 % likely to get tossed in a bin - why we shall be unable to vote.

The most important reason apart from destroying people's sense of financial well being in their twlight years for objecting to the mooted changes in the law and practive of Superannuation is this. Like assassinating a serving Prime Minister (which both major parties have done), major changes to the law and practice of Superannuation provides a reason why, in due course, the other mob will use the Coalition precedent to inflict further, probably worse, damage on Superannuants.  Bleak this week said it so well, although not all the allegedly 'rich' people are as fat as the bloke on the donkey.

In the USA, Donald Trump surges on and after clumsy attempts to block his ascendency  Republicans seem now to be doing their best to embrace him.

Sensible, moderate government seems to be breaking down everywhere, perhaps as a delayed response to the Global crisis.

From Wednesday we shall be in the once-mighty USA, watching the political antics close up and personal.  It will be something of an antidote to the shananigans in the Banana Republic down south and around the globe.


Henry's editor's art show has opened well with two sales and lots of polite interest. We have emailed our list of special buddies and we'd welcome feedback from anyone who visits the exhibition, details here. Contact Henry here. 

Fiona Prior sees director Andrew Rossi's The First Monday in May. Oooo-eee! More here

Footy'n'other stuff

The eighth round of AFL footy has begun with Geelong scoring a comfortable win over Adelaide. 

Tomorrow Essendon meet the Shinboners, Hawthorn will presumably belt the hapless Freo, the Giants play the pygmies from the Gold Coast, Richmond will fail to redeem its season by slowing Sydney's stately run, for the flag and Brisbane and Collingwood play for twe wooden spoon.

Sunday looms as of most interest to Henry, if only because a newly competent Caaaarltonn! play the porters from Adelaide in Melbourne. Then Melbourne take on the mighty Western Bullies and the inconsistent Weagles meet rising St Kilda.

Not much 'other stuff' about this week. Will Rio be able to host the Olympics, is Kurtley Beale going to the Wasps in old blighty, and will this weaken the newly resurgent Wallabies, when do th futballers play again? These are the big questions in the Thornton household, apart from the outlook when Henry is diverted from the world of High Kulture to again be planning for a financial future with a tax on superannuation and worse atrocities to come if Billy Shorten wins the current oh so boring election race.

Who'd of thort that Malcolm seems like the tortoise so far.  If it was a boxing event it would be promoted as the smooth talking Harbourside Mansion dweller vs the rough diamond who has (gasp!) taken up running.

Image of the week

Courtesy The Oz

Sunday Sanity Break, 8 May 2016
Date: Sunday, May 08, 2016
Author: Henry Thornton

Gor Blimey, Comrades, ain’t politics confusing.  Messrs Turnbull and Morrison are willing to screw Australians who have built up sufficient funds to avoid demanding a tax-payer funded pension with retrospective changes in the rules, and Bill Shorten opposes the change on the grounds that retrospective changes to tax policy are just not on.

In respect of the $1.6 million limit on tax free disbursements, Cory Bernardi asked the killer question of a senior treasury official.  What if markets crash and $1.6 becomes, say, $0.8 million, with income halved?  ‘Tough titty’ said the Treasury officer, or words to that effect.  I bet she smugly mused that couldn’t happen to her good self due to defined benefit nature of her pension, even if she were paying 15 % tax on pension amounts over $100 K.  Same point for pollies, folks, so let’s get on with screwing financially successful non-pollies, non public officials.

Other than that, the budget was a timid affair and provides no guarantees that Australia will keep its AAA credit rating. When that is lost, plus global interest rates finally rise,  the costs of servicing our rapidly growing international debt will increase catastrophically.  Bill Shorten has outlined $70 billion of tax cuts plus new spending plans, while the government is hoping wealthy donors will overlook the extra work and accounting fees to restructure a superannuation plan that was adopted in good faith based on rules provided by the Howard-Costello government.

And the Libs will not just find donations dry up. Just about everyone in Henry’s circle, almost all rolled gold Libs, are threatening to vote Labor, in most cases for the first time since they were hard-playing university students.  Even the normally well-behaved Centre of Independent Studies has unleashed a missile.   ‘A leading free market think tank has lashed the Turnbull budget, saying it offers no crediblepath back to surplus and has permanently entrenched big government.

‘The executive director of the Institute of Public Affairs (IPA), John Roskam, sent an email to members last night saying "the size of government will have grown by nearly 10 per cent in the course of just over a decade".

"That's unsustainable. That heads us down the path of European-style economics," he wrote.

"If Labor win the election the situation will be even worse."

‘Mr Roskam said he had received phone calls and emails from IPA members worried about what would happen to their superannuation.

"It's not just that the Government is increasing taxes on superannuation," he wrote.
"What will really concern people are the retrospective changes to superannuation taxes that will hit people already in retirement”.

Read on here.

The election will be held on July 2 and battle is joined.  Labor is for more spending and higher taxes. The Coalition offers relative (but insufficient) spending restraint and  (assumed) gradual restoration of an acceptable fiscal position. 

 Both sides make optimistic assumptions and neither seem to take into account the possibility of a 'reasonable worst case' - China's economy and indeed global growth struggling,  the new Senate just as reactionary as the old one and the ideological  battle leaving a divided polity unable to agree on either the economic problems facing Australia or the most sensible solution.

Malcolm Turnbull has failed to produce his promised convincing economic narrative and seems to struggle with basic political strategy. Bill Shorten has began to look like a winner. A Liberal apparatchick suggested to Henry this weekend that another minority government was possible, indeed likely, with Greens and Xenophons holding the balance of power in the House of Representatives. And who knows how the Senate will pan out.


Henry's editor's exhibition of paintings has been launched and readers are urged to visit the Whitehall Gallery and restaurant, details here.


Fiona Prior sees Gail Louw’s Blonde Poison starring Belinda Giblin, a confronting one-woman drama about a Jewish Nazi-informer. More here


John Elliot once said that no season in which Caaaarlton! defeated both Essendon and Collingwood was too shabby, and this was achieved at the 'G' yesterday.  Unlike the wins over Freo and Essendon, the game was of a reasonable quality - moderate AFL rather than Nunawading seconds or  Auskick under 12s.

Hawthorn redeemed itself by flogging Richmond, Sydney were awesome and Geelong is top of the ladder.

Image of the week

Courtesy The Oz


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