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Henry Thornton - Contributors: A discussion of economic, social and political issues Blogs
Central banks to the rescue, but urgent problems remain
Date: Friday, September 16, 2011
Author: Henry Thornton

Leading central banks have agreed to pump US dollars into Eurozone markets, helping to produce a fourth day of gains to global equity markets.

(The banks involved are The European Central Bank, the US Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank, clearly a serious mob.)

A first sign of US goods and services inflation was ignored amid the general euphoria, as was an increase of initial claims for unemployment benefits and more evidence of weak manufacturing activity.

Debate continues to rage about the future of the Eurozone, with Anatole Kaletsky presenting a varient of Professor Alan Meltzer's notion discussed here yesterday. Kaletsky suggests that Germany (rather than a group of strong Eurozone countries as in Meltzer's plan) leave the Euro, allowing a defacto devaluation of other Euro currencies but without the risk of bank failure that would be inevitable if Greece leaves, followed by other weak nations. (Kaletsky's views are in today's Australian newspaper, but again without a link, like Meltzer's yesterday)

Ambrose Evans-Pritchard reports from the World Economic Forum meeting in Dalian

"This is the most urgent crisis facing the world today," said Zhu Min, the IMF's deputy managing director and China's voice at the institution.

"There is no room for politicians to muddle through: they have to take decisive action today. Banks must be recapitalised and made solvent."

In distant Australia, Henry has purchased some out-of-the-money puts in case the whole Euromess trashes equity markets. Meanwhile, politicians continue to trade abuse and to argue about items on the traditional pinhead.

However, the Australian Bureau of Statistics (ABS) has galloped (well, plodded actually) to the gummint's rescue by redefining the contents of the 'basket' of goods and services in the consumer price index to suggest inflation is less of a threat.

Treasurer Wayne Swan has removed from the 'independent' Reserve Bank the right to set the governor's salary.  Apparently he learned of Glenn Stevens' million dollar plus salary only 18 months after the event, via the RBA's annual report.

If this is true, it almost defies reason because of the risk to a climate of low wage inflation that it posed. If Treasurer, most of us would expect it to be at least mentioned by the gov'nor in one of his regular chats. After-all the Treasurer is the representative of the parliament to whom Mr Stevens is ultimately responsible, despite the 'independence' notionally granted to the RBA by means of an exchange of letters.  The Reserve Bank Act, which defines the relationship of the RBA and the people of Australia, makes it clear just who prevails in any conflict.

Former governor Bernie Fraser was on ABC radio defending (weakly Henry thought) the governor's salary, but Henry's sources say Bernie himself turned down similar largesse in his time, as reported here. (See the May 23 2011 entry of the author's Blog at GreatCrisesofCapitalism.com.)

If 'independent' salary setting can be removed at the stroke of a pen, so too can 'independent' decision making, and it would be one sure-fire way to get the Aussie dollar to depreciate.

Take care, Glenn Stevens. Mention of how much you give to charity each year (assuming it is quite a lot) might be wise about now.

Saturday Sanity Break, 25 July 2015
Date: Saturday, July 25, 2015
Author: Henry Thornton

Whod'ave thought it, comrades. Bill Shorten turning back the boats, soaking the 'rich' and sucking up to the unions.  Sounds like a perfect way not to get elected, brothers and sisters.  Meanwhile, Tony Abbott has made a reasonable start in creating a debate about tax reform, greatly helped by Premiers Baird and Wetherall.  Conservatives will almost always prefer government to cut spending rather than expand taxes. But if you do have to increase taxes - due to ingrained 'entitlement' mentality among the 'punters' (AKA voters) - a widened and/or higher rate of GST is far superior to just about every other tax one can envisage.

Suddenly 'jobs' are on the agenda too.  The clever people in Canberra and Sydney have noticed that growth is slowing but jobs are (apparently) doing a bit better, ergo productivity is sagging. Of course, those of us in the real world have children who cannot get jobs.  Henry met one of Australia's most successful entrepreneurs this week.  He makes high tech microphones and can out-compete even Chinese manufacturers as almost every job is done by high precision machines.  Fantastic for production and exports, but no so good for jobs.

As we have laboured to inform readers, the official (ABS) jobs data is flawed due to overly-optimistic definion of 'employed'. If a more realistic allowance for who is 'employed' is allowed, as done by Gary Morgan, the true rate of unemployment is not much below 10 %, and underemployment is about the same ratio. These are the national averages; for young people, the numbers are far worse. Even kids in Melbourne's leafy Eastern suburbs with impressive degrees (yes, the plural is not a typo), parents with useful 'contacts' and willingness to work as (unpaid) 'interns' struggle to find jobs. Prospects in the poorer parts of Melbourne, or in regional areas, can only be imagined.

And house prices in Melbourne and Sydney continue to rise. Last week, while Henry was on the road in Northern climes, morning television reported that Sydney's median house price hit $1 million.  'Crazy' said the RBA's Glenn Stevens. Glory be, brothers and sisters, how can a young person with no job aspire to own a house, or even a broom-cupboard-sized apartment? And Brother Shorten wants to double the refugee intake. Nice idea, comrade.  Even Henry would applaud this if there was a long probation period for immigrants that had to be spent in a rural town or city.


Henry and Mrs T spent last night in front of the TV.  After the news we watched Carlton get towelled by Hawthorn for a quarter, hoping for a miracle.  Then we switched to the Sopranos, a 1990s series about criminals and their lives in upstate New York. Then back to the footy to watch the dying minutes of Carlton's largest beating in the entire history of Aussie Rules. And Henry's dear old Blues have to play the Hawks again before the finals.  Could the once mighty Blues beat Box Hill (AKA Hawthorn seconds)?

Probably not, but and their performance this year makes the case for relegation to an inferiour group just about waterproof.

Meanwhile the Aussie sheilers have beaten the Poms in the second one-day game of their 'ashes' battle. The lads will put on their whites again in the week ahead to provide more distraction from the footy, distraction much needed for dear old Henry. Someone wrote this week about why batters fear Michael Johnston's fiendish fast bowling. Apparently it is because his hand is hidden for longer due to his particular 'slingshot' action.

Lovely story in The Age today about the man who was robbed of a gold medal and a record in the Moscow Olympics.  We hope justice is handed out before too long.

What a comeback it was in Darwin when Lleyton Hewitt and Sam Groth fought back from 0-2 (provided by the two Ks) in the Davis Cup tie in Darwin. Here is a stirring report.

Image of the week.

Saturday Sanity Break, 18 July 2015
Date: Saturday, July 18, 2015
Author: Henry Thornton

Henry’s readers might recall that the Raff has tracked many US economic time series for many years, in fact for 36 years. Over that latter period the US data has never provided a bum steer. And so it is that the current business cycle in the US is at a peak as depicted in Figure 1. Long-time readers of Henry might recall the Raff Report suggesting never buy resource equities at the peak of a cycle; only at the bottom and get out before the peak before the thundering herd heads for the revolving door.

Exibit 1: US New Orders for Durable Goods

Read on here, dear readers, and note the Raff's medical challenge. We wish him well, his analysis having contributed materially to those, including Henry, who have followed his advice.

 Other economies.

What can we say?  China's wild stock market crash and partial recovery is typical of market behaviour toward the end of a bubble.  China's government, however, has learner plates with respect to the wilder excresences of capitalism and may stave off the eventual supercrash for a time.  This need not slow the economy more than it has already slowed, as Australia discovered after the 1987 sharemarket crash.

Lovely to hear soothing Chinese words on front page of the Oz today. 'Make love (well, trade) not war' is always comforting and we believe they are sincere.  Why start a war to obtain access to resources (remember Japan, possibly also Germany before 1939), who were denied access, or thought they might be.

Greece has retained its place in the Eurozone we judge by a fingernail, and there is a long way to go before this festering sore is properly sorted.

Australia seems gradually to be waking up to the fact that we are in dire trouble and that real economic reform is extremely unlikely with this parliament.  The good news is that the RBA, Treasury and the business community (in the form of the BCA's Catherine Livingston) are all publicly calling for economic reform.  Doing better probably requires some sort of gross economic or political  shock - a massive CAD, our little dollar at 50 % of the big dollar, continued rising unemployment, a double dissolution election that either returns the coalition with a majority in both houses of parliament or neither major party receiving many votes. What would a Nats-Green coalition get done, dear readers?  Not much, one fears.

We shall refrain from bothering to remind readers that we have been warning of severe economic danger for several years now (well 2.5 years at least) and have been co-author of the most comprehensive reform proposals yet published. No invitation yet to the G80 talkfest being run by the AFR and the Oz, but it will be great to see the crack economic commentators going about their work.  Nodding in unison, no doubt.


Fiona Prior writes: "Henry has featured the 2015 Archibald winner at the bottom of this blog. I’m not in place to review this weekend so below I have placed a link to all the finalists for Henry’s readers.

This year’s Archibald winner Nigel Milson with his expressive portrait of Charles Waterstreet Judo house pt 6 (the white bird) is touched by alchemy….. An exceptional artist with a troubled, criminal past; a barrister known for his eccentricity and his singular style; an artist/subject bond tinged with the salvation of at least one party …. You really could not have created the recipe with better ingredients. Milson is also a winner who possibly is more deserving than many who have come before. I can make statements like this as it is Australia’s Archibald Prize and outspoken views are mandatory!

I hope Henry’s readers will explore the Archibald 2015 finalists here. Enjoy. Note the number of politicians and art-related public figures, choose your favourites and maybe even visit the Art Gallery of NSW before 27 September 2015 to experience the originals."


The poms celebrated too soon after smashing a sleepy Australian side on a heavily doctored pitch in Cardiff. Our team was too old, especially Rogers, Smith couldn't bat and the bowlers were either injured or had lost their mojo. Well, glory be (as Henry's grandmother used say when an apparent miracle took place), look what is happening at Lords. Rogers a 'big' hundred, Smith joins the immortals, the untried (at this level) wicketkeeper takes a catch off the second ball of the game and the supposedly buggered bowlers got four for after Australia 'asked' (chuckle) the poms to bat after nearly 2 fruitless days in the field.

Caaaarlton! is expected to be smashed comprehensively by Free tonight. Just think, the blues get to play Hawthorn twice in the run up to the finals.  Is this more evidence that the authorities are determined to keep this once mighty team in its newfound place in the AFL celler?

In Darwin, sans Tomic, the two K's (cannot spell, too tired to look up) got smashed in the opening two games of the Davis Cup, against a country also with a K-name. K1 crying 'I don't wanna be here' as he went down, not exactly fighting. Fortunately little Llyton and former footy player Groth are representing  us in the doubles today, and Henry is confident they will fight like maddened wallabies. This may give K1 and K2 the chance for redemption on Sunday.  Mr Tomic's apology to Tennis Australia gives him a chance at redemption also, but who do these wunder-kids think they are?

When Henry became an Australian national boomerang thrower, there was no carry on, no dummy spitting just humble acceptance of the finest sporting win of his life.

Sport excessively like 'stuff' today so it is time to shut down.  We are hoping for a review the Archibald later today.

Image of the week - 'seriously scary' the verdict of our art critic.

Courtesy Archibald PR Dept.

Saturday sanity Break, 11 July 2015
Date: Saturday, July 11, 2015
Author: Henry Thornton

China's 'do what it takes' approach to maintain what was looking like one of history's greatest share bubbles seems to have had some effect. Booms eventually bust, and history shows that, the bigger the boom, the bigger the bust, though history also records an upward trend.  So we must stay calm, like corporal Jones in 'Dad's Army' shouting 'Don't panic'. And in Europe the Greeks have presented a tougher budget to the financiers. The departure of the Game Theorist Marxist is another fact that is presumably helping the Greek cause.  On the other hand, as we must say, Greek debt is now reported to be $380 billion, a result that would have made Wayne Swan feel his life had not been in vain.

Here is our tribute to Comrade Wayne and his pals - Julia in Wonderland. ('Vanity, vanity, all is vanity'.)

Treasury Secretary speaks out.

'Treasury boss call for IR reform' reports Peter Martin in the Smage. John Fraser has delivered a fine speech, including the telling point that Australians are 'overly complacent'.  Here is the link to Peter Martin's report, and this link takes you to the full text, which is a must read.

Read the speech and ponder, dear readers.

Aussie property 'undervalued'!!!!!!

Despite fears of a property bubble, Australian house prices are 30 per cent undervalued, the widest such gap in three decades, research conducted within the Reserve Bank has found.

'Under our assumptions owning a home is now more attractive, relative to renting than it has been at any time in the past 30 years'. Peter Tulip, Reserve Bank senior research manager.  Could this bloke be off among the flowers at the bottom of the garden?

'Delivering the "preliminary results" to a session on housing at the Australian Conference of Economists in Brisbane, and stressing that they should be attributed to him and not the bank, Reserve senior research manager Peter Tulip said that whereas a year ago home prices were "fairly valued", today they are about "30 per cent undervalued".'  His boss, of course, recently said some prices were 'crazy'.

More here.


With Mrs T away tending to family business in Sydney and Boggabri, Henry made a fire, cooked and ate a chop, gave the bone to the Border Collie Jack, and settled in front of the fire with a bottle of reasonable red. The Blues fought hard throughout but were gradually overcome.  A clear mark in front of goal by Kreuzer was instead given to a Richmond player who was the 'man in front' but did not touch the ball. This was effectively a two goal turnround on a cold and windy, lowscoring night.  The Blues battled on, their spirit eventually crushed by a better team and whistle-blowers who seemed to think it was their job to wreck the game, especially for Carlton.  

After the fiasco of the Gibbs tackle, two weeks in the stands, then the near identical tackle that was ruled hunky dory, Carlton fans are entitled to be mad as hell. But no-one's listening so why bother? Jack Elliott would be in the AFL threatening mayhem right now if he was still El Supremo at the club.

Henry was hoping for a long and watchable Ashes series.  But with the Welsh wicket shaved and (allegedly) brushed and shaved again, our ferocious quicks, especially enforcer, Mitch the merciless, were unable to terrorise the pommie batters.  Looks like we're headed for a belting.  The Smage certainly comments thus.

Not much other stuff this week, except for a superb article about Bill Shorten's performance at the Royal Commission into union hi-jinks. Highlight was when Justice Heydon, QC, and a former High Court Judge, gave the opposition leader some advice designed to raise his credibility.  Answer the question, don't ramble off answering another one, and for goodness be brief.  Another translation - Avoid pollie speak. As the good book says: 'A fool also is full of words: a man cannot tell what shall be; and what shall be after him. who can tell him?'

And on the subject of Same sex bonking certificates, Paul Kelly today  provides a magisterial account of the dilemma involved in balancing same sex marriage against religious people's right not to accept such a law.

Image of the week

Courtesy The Oz

Greece, China, financial fallout
Date: Tuesday, July 07, 2015
Author: Henry Thornton

The comrades in Greece are in a very hard place.  This is what happens when a country finds itself burdened by crippling debt, inefficient and uncompetitive industrial structure and hopelessly unfunctional tax and welfare arrangements.  Oh, and an extreme leftist government that lies both to its own people and its creditors. At least the game theory afficiondo posing as a Finance minister has fallen on his butter knife, and his replacement is said to be a mild mannered bloke used to negotiating in good faith. Very difficult to predict what happens from here, but Eurozone central is on the horns of a dilemma. Cut Greece loose sets a bad precedent, but bailing Greece out maybe sets an even worse precedent.

China is a far bigger worry for the global community.  No doubt a slowdown was inevitable after decades of double-digit growth.  No doubt a pivot to consumers had to come soon, plus an attack on rampant corruption. But Australia is the biggest loser, heavily dependant as we are on exports of iron ore and coal to China. Finally the Aussie dollar has fallen to the level wished for by RBA chief Glenn Stevens.  (But note the post-meeting announcement issued today said: 'The Australian dollar has declined noticeably against a rising US dollar over the past year, though less so against a basket of currencies. Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices'.) The two-and-a -half years since the powers ignored Henry's proposal to tax capital inflow as a way of restoring a level playing field for many non-mining industries has left us with intractable budget deficits, rising unemployment (far worse than the official statistics, especially for young people) and many kaput businesses that did not need to be lost.

Any attempt to manage currencies is of course fraught with difficulty. At various times strong economies such as Germany (in the 1960s and 1970s) and Switzerland more recently have tried tax and other ways to keep their currencies to a level that keeps their trading businesses viable.  Switzerland eventually gave up trying to restrain its franc and industry seems to be thriving despite a massive revaluation. Germany discovered in the Euro a far more reliable way to keep its industries competitive, linking itself to the weak economies of Southern Europe. Among the many disruptive effects of a breakdown in the Eurozone by those weak economies leaving in the wake of a Grexit would eventually leave German industry fighting much harder for success.

Far more worrying after such a fracturing of the Eurozone would be a series of bank failures that left the Eurozone banks with massive debts  So one imagines that Germany will be inclined to bail out Greece with a non-game-playing finance minister in place.  But only time will tell. Whatever happens, Greeks will be a lot worse off than they are now with banks closed, tetering on the edge of bankruptcy, incomes decimated and over 50 % of the workforce unemployed or pretending to work in low paid, or non-paid jobs.

The global financial markets have taken fright and we may be at the start of a substantial correction.  The US Fed may decide yet again to postpone the rise in global interest rates that has been postponed already with the ongoing, largely hidden, global financial fragility.  A general conclusion from research on financial booms is action delayed makes the eventual bust greater.

It will not be a happy day from the RBA board. Australia is in far less dire straits than Greece, of course.  Yet the budget is far from fixed, interest rates are low and expected to go lower, the current account deficit is setting new records (though export volumes are growing strongly, at give-away prices) and unemployment is deeply troubling.  We should have done far more to fix underlying problems while the global economy was looking stronger.

The Abbott government needs help to fix the budget, and the opposition is showing signs of waking up to the fact that opposing necessary fixing will leave it up the proverbial creek with a broken paddle. Monetary policy needs to be normalised as soon as US monetary policy is normalised.

The powers must recognise that at some point a rising dollar will again make great swathes of Australian industry uncompetitive.  However, sufficient industrial reform will stave off the day that we again need to be concerned about that matter. There is plenty of opportunities to reform our still highly inefficient industrial structure. Here is a modest set of recommendations.

Saturday Sanity Break, 4 July 2015
Date: Saturday, July 04, 2015
Author: Henry Thornton

The team at Henry Thornton.com wish all our American friends a successful Independance Day celebration. The mighty machine that is the google search engine will provide lots of anecdotes for readers partaking in July 4 celebrations - eg here.  And we also wish all friends and countrymen and women generally a safe and financially positive new financial year.

The Grexit

The Australian-Greek Finance minister, Yanis Varoufakis, is reportedly a man who practises game theory and who some say has attempted to use it in the current national insolvency case.  Mr Varoufakis is reported to believe that Greece's creditors would ultimately cave in if only Greek continued to behave like any failed bankrupt trying to avoid reality. The Oz reposted a fine Wall Street Journal article on the subject.

'How much of Alexis Tsipras’s tactics over the past five months have been driven by incompetence and how much by conspiracy? It’s a question even the historians may never fully resolve. The Greek Prime Minister said in a televised statement that those accusing him of having a deliberate plan to take Greece out of the eurozone were telling lies. But what is certain is that if Tsipras had set out in January to take Greece out of the eurozone, it is very hard to think of anything he would have done differently'.

More here.

The ultimate question is this: Is it a cock-up or a conspiracy? Most likely a cocked up conspiracy.

Same sex bonking certificate

'Jobs are more important that same sex marriage' is the gummint line. Obviously this is correct, though there may be some modest jobs growth with the rash of same sex marriages that are expected once parliament chews the relevant same sex legistration. But surely the Australian parliament can both walk and chew gum? One way to minimise the disruption and distraction involved in parliament considering a same sex marriage act is to schedule a special midnight session from which the whips are banned from their usual activities of making members attend and vote. 

Those mostly interested in jobs can sleep while the same sex enthusiastics put Australia into the same enlightened national company as Netherlands, Belgium, Spain, Canada, South Africa, Norway, Sweden, Portugal, Iceland, Argentina, Denmark, France, Brazil, Uruguay, New Zealand, Britain, Luxembourg, Finland and Ireland, while Mexico allows the freedom to marry regionally and has  court-directed provisions enabling same-sex couples to share in the freedom to marry. In Slovenia, ...

Read on here, and there is an interactive map to heighten your pleasure. Another gift from the mighty google machine.

Where will it end? Can a threesome be allowed to register their 'marriage'. Or what if someone from a strange religion wants to marry all forty-four of his flock? (Is that 'Polyamory'?) Married to a sheep? Or a hamster?  There are moments in the Thornton household in which Mrs T would undoubtedly prefer to be married to Jack the border collie. These are the possibilities that Australia's multi-talented-Minister the Hon Eric Abetz, Liberal Senator for Tasmania, Leader of the Government in the Senate, Minister for Employment and Minister Assisting the Prime Minister for the Public Service is apparently worried about, spewing forth from Pandora's box.

Here is the great man pontificating. 


All this fun has diverted Henry's gaze from the constant drip of economic news and views. Gary Morgan has detected another fall in numbers of jobless, from (wait for it) 10.3% to 9.3 %. The current account deficit, $4.1 billion in May, fell to a mere $2.4 billion in June. Retail trade is stagnent. Wages growth is setting new lows. The budget deficit continues to blow out, and the dread words 'Banana Republic' have again been spoken. Things could hardly be better, on the home front, dear readers, and the Treasurer advises you to borrow and spend til it hurts. 

Of course, in lesser nations overseas, the rash of terror attacks, the relapse in the price of iron ore, the financial market's panicked palpitations, likely Grexit (due to excessive alcoholism, perhaps), China's attack of chronic fatigue.  These are nothing but small clouds in an otherwise clear blue sky. Spend til it hurts, comrades.


Sydney beats Port on Thursday night, but who could be bothered watching? Hawthorn v Collingwood last night was a game for the ages, narrowly won by the Hawks. The two teams plus coaches observing a minutes silence in remembrance of slain Adelaide coach, Phil Walsh, showed there is decency in footy, and the game was played with decency, if just as fierce as always between these two stellar teams.

Caaaarlton! toughed out a hard, low-scoring game against the Western Bullies. Disappointing, but Essendon's flogging by cellar dweller St Kilda was a sign of a vehicle with square wheels and not much motivation.  The Suns came back with a rush to spank the Shinboners, thanks (presumably) to the return of Gary Abbott.  How this footy genius got 30 odd disposals and kicked three goals after almost a year's layoff (interupted by only two games while still injured at the start of the season) is a complete mystery to Henry and his fellow footy tragics.

In the UK, a county side provided stern resistance to the fearsome Aussie bowlers, and Shaun Marsh looks to have won the battle for the allrounder spot from Shane 'Watto' Watson. In late breaking news, Shaun Marsh has had a fingernail broken by friendly fire, which may give Watto the reprieve that his long and effective service demands.

The Aussie Sheilas bowed out of the World cup of Futball with a narrow loss to the Daughters of Nippon.  Next stop the Olympics and we confidentally predict an eventual world cup triumph from this young team.

Tennis is another exciting diversion. Little Lleyton went out fighting, Nick Krygios swore his way through the first two rounds and stormed passed the hapless Milos Raonic (seeded no 8) in the third round. Bernard Tomic unloaded on Pat Rafter and Tennis Australia and complained of 'lack of support'. So sad, especially to see him routed by world No.1 Novak Djokovic. Slammin' Sam Stouser unloaded on herself after being flogged by American Coco Vandeweghe, dropping 12 consecutive games after winning the first two to bow out of tournament 6-2, 6-0.  In late news, Mr Tomic has been told he is no longer needed for duty in the Davis Cup.

Bert Thornton, finding himsel a bit short of the ready, kindly offered to update the index pages to Henry's popular 'News + Views' column for money. The new pages may be accessed here, and you will be able to refresh your minds about the wonderful year just past in your very own Banana Republic.

Image of the week.

Courtesy The Oz

Its the banks, stoopid
Date: Tuesday, June 30, 2015
Author: Henry Thornton

The Greek imbroglio rumbles toward what is looking increasingly. like a 'Grexit' - ie Greece leaving the EU after a default.  The Eurozone overlords seem increasingly annoyed at the cheek of Mr Tsipras, calling a referendum about the Eurozone plan for more austerity and advising the people to vote against it.  And in the meantime asking the overlords to refrain from ringing the bankruptcy bell.  Global equity markets are in a state of apparent alarm but we must always remember that brokers and dealers make money from volatility and are not immune from the temptation of stirring up mud and complaining that noone can see.

A brief SkyNews report from New York, featured an oldtime New York broker wondering why the price of gold is not surging. 'There is something going on here that we do not understand' said the old boy speaking from the floor of the New York exchange, once described as a 'rat pit at full blast'. The Aussie market looks like it will fall further today as the local rodents come out to play.

Alan Kohler reminds us today that 'Greece is a distant thriller, but China is a nearby horror show'.

Here are the main facts supplied by Alan Kohler:
* 'The Chinese stockmarket is a sentiment-driven casino, not a vehicle for investment. Earnings growth of listed companies this year is minus 1 per cent while their aggregate market value has doubled'.
* 'The Chinese economy as a whole is bloated on debt after years of economic stimulation based on debt-funded infrastructure spending by local governments and a roaring real estate boom in the four major cities'.
* 'The fundamental question about the Chinese economy is about the banks and whether they can remain solvent in the event of a double crash of both real estate and the stockmarket'.

In Europe, the main issue is how a Greek default, with or without a Grexit, would impact on the banks. Kohler again: '[In Greece] it’s all about the banks, as it is in China. The Greek Government has done the right thing in closing them -- and they'll likely have to stay closed until the situation is resolved. Will the ECB continue to supply them with liquidity after Tuesday’s default? Will that be enough anyway, given the long queues that are now forming at ATMs?'

If the Greek banks fail, what does that do to the Eurozone banking system?  Not much, one must assume, but what if the other weak nations of Southern Europe were to default and leave the Eurozone?  This will be the major issue in Europe, as it may become in China. Gold will then become the ultimate safe haven asset, and gold bugs everywhere will have their day in the sun.

Saturday Sanity Break, 26 June 2015
Date: Friday, June 26, 2015
Author: Henry Thornton

The presumed Grexit (or non-Grexit) rumbles on. The Germans seem to be getting sick of the whole saga, and who could blame them. The issues holding up a bailout involve an increased pension age and other economic reforms. Great hardship is the prospect whatever the outcome.  'Alexis Tsipras refuses euro zone compromise offer' was yesterday's headline. Today ...

Tony Abbott looking good and its Bill Shorten's turn to slide down the slippery slope of voter dislike. Of course the ABC's Killing Fields must be a sizable reason - thank you ABC - but Mr Shorten's attempt to be Mr No seems to have also been influential.  Here is a scary thought for Labor. Perhaps Mr Abbott's 'Nyets' were more in tune with Australian feelings than Comrade Shorten's.

But we must also give some credit to the newly energised, potentially more responsible, Green Party. By agreeing to the pension reform, while Labor was fighting to protect millionaires from losing some or all of their pensions, the Greens have shown themselves to have been on the side of good sense for the first time that Henry can recall.  Labor is showing signs of joining the reform parade, stumbling reluctantly to the truth that saying 'nyet' to sensible budgetary reform is not a winning strategy.

And in distant (thank God) Syria

Gor blimey Comrades! Heads will roll, or should roll, at the ABC and from deep within the Victorian Liberal Party. In the one case for the Lefty mutual smoozing club, for having a demented crypto-terrorist on Lateline, and allowing him to be generally offensive. Then apologising but replaying the show without excising the offensive bit. 'Free speech' is the defence, despite the apology, but there are limits to the causes the ABC should give support to.  Which as a disproportionate taxpayer, Henry objects to.

The VicLibs took the opportunity to solicit funds by invoking the terrorist threat.  Also an exercise of 'Free Speech' in action but distasteful and also unacceptable to most of the Liberal membership base. One hopes.

In any of the terror outposts, equivalent acts would already have been punished by an actual beheading, or by lowering the 'guilty' person into a swimming pool in a cage or by beating and starvation.  Surely no sane person can prefer the terror administered parts of the world to a free country where stupidity or offensive statements are tolerated?

Then there is the sad case in which the presumed widow of a presumed dead terrorist and her 5 kids might be allowed to return to our freedom loving shore. Richo, not normally a Liberal lover, yesterday discussed the problems involved should that unfortunate group wish to return.  Primarily, perhaps, who would want their kids to sit next to kids who have held up heads recently separated from bodies on global television or who have presumably been well and truly brainwashed in terror tactics and attitudes.  The most telling obstacle, however, might be from the terrorist rulers.  The females in the family can be sold as wives, or sex workers, while the males can be trained up as fully qualified terrorists.  These sad people are valuable booty, and will surely not be allowed to leave.

Read on here.  


Fiona Prior visits another magical performance by Bangarra Dance Theatre and encourages Henry's readers to catch this wonderful company as it tours Australia with Lore: dance stories of land and sea.


Freo disposed of a brave Collingwood team on Thursday night, and thus retains top spot on the AFL ladder.  Caaaarlton! play the suns tomorrow, when Henry will be glued to the Teeve with fingers crossed.  Thank goodness Gary Ablett is not playing, as it would be horrible to see him flung onto his bung shoulder in the first 30 seconds, like our star recruit from Collingwood in one of the first games of the season.

Despite the steady stream of initiatives to make the game safer for players, there seems to be a growing tendency for the stars of the game to be taken out. Perhaps there should be a new rule - anyone who is implicated in an injury that is not a simple accident that keeps an opposing player out of the game should be suspended until the injured player returns to the game. Just a thought.

The Matildas play the sisters of Nippon Sunday morning, and a win will greatly boost their claims for a fairer go in the income stakes. It has been noted that the Aussie futball sheilas are paid a lot less than the blokes with greater success in international futball to their credit. Win against the Nippoese sheilas, and Henry will support your cause, ladies.

Young Henry Thornton, perhaps a distant relative, continues to thrive.  Latest milestone is a chance to play for NSW after starring in a youth ODI series and  a test match against young poms.  ('Thornton was the equal highest wicket-taker during the Youth ODI series against England with 13 scalps at 13.46, and finished the one-off Test with match-best figures of 6-108.')

More here on Henry and other promising young aussie cricketers.

Image of the week

Policy reform or economic failure
Date: Thursday, June 25, 2015
Author: Henry Thornton

The International Monetary Fund (IMF) has reportedly said that: 'Economic growth glory days are over, Australia should rack up more debt'. Or, if you prefer the Newscorp version: 'Reform or good times will be gone'. Economists and newspaper 'lines' are meant to be different depending on who you talk to/read.  But the IMF spreads its views around like confetti, and this time the message is quite consistent.

As the Newscorp article said, is what was apparently a direct quote from James Daniel, head of the IMF's current mission to Australia: "We see Australia's outperformance ending, meaning Australians' income and living standards will grow significantly more slowly than they have been used to".  Henry half overheard a radio report that one of the big consulting firms has said that one third of Australia was now experiencing recession.  Kids trying to get jobs in Melbourne are still struggling, if the experience of young people in Melbourne's leafy eastern suburbs is typical. Gor Blimey, comrades, what is the world coming to?

The Greek crisis continues to worry pundits, and investment markets gyrate from day to day according to whether a Greek exit (Grexit) from the Eurozone is expected to be a triumph or a catastrophe. Mrs T, with characteristic dispassion, said last night 'I hope the Greeks do exit, as it will be very interesting to see who is right about its effects'. More here on the potential Grexit consequences.

No doubt the IMF's position is the same as it is for Australia, if a bit more alarmist - 'Reform or you're stuffed!'  Also on ABC we hear today that Martin Wolf is preaching global gloom and doom. The link to a relevant interview is available on the ABC website if you have the right browser, which Henry does not. A recent article in the Financial Times provides a scary summary.

'The outbreak of the first world war was, we are told, greeted with confidence and jubilation by the peoples of Europe. Something similar seems to be happening after years of economic crisis and political turmoil in Greece. A growing number of people feel that enough is now enough. The strident views expressed in these pages by the Italian economist, Francesco Giavazzi, are shared by many in high office. Meanwhile, Alexis Tsipras, the Greek prime minister, accuses Greece’s creditors of “pillaging” his country'.

Read on here, dear readers, assuming you are, like Henry, a subscriber to the pink paper.

We live in interesting times. As we said some time ago, there are a number of scary scenarios about.  Be cautious with investments, encouraging to kids seeking jobs and please write to your favourite MP about the need for economic reform.

Sunday Sanity Break, 21 June 2015
Date: Sunday, June 21, 2015
Author: Henry Thornton

The debate about citizenship rages on.  I'm with the Coalition backbenchers.  Let's find a way to deprive anyone who goes to join the terrorists of Australian citizenship. The UK does this, surely its plan should be good enough to adopt here. But if we need our very own scheme, here is an idea. Any Australian travelling to the Middle East must seek valid exit approval in advance.  This would be as streamlined as possible but reason for travel must be clearly stated and supported by documentation from whomever the travellor is planning to visit.  Anyone who is found to have violated the stated reason and is found to have joined a terrorist organisation will immediately have his or her passport cancelled. Duel citizenship or not, such people will presumably be accepted within their terror organisation of choice. And if not, why should we care?

Mrs T is more concerned than Henry about the principal of judicial oversight. 'Let the courts decide, but with the law providing a mandatory life sentance - no possibility of parole -  for anyone proved to have fought with terrorists against Australians or, for that matter, committing an act of terror in Australia'.  Henry's concern is the inefficiency of Australia's legal system and the scope for multiple appeals, easy freedom on bail and weak sentances. But there can be no doubt that the law needs to be strengthened and penalties increased. Ideally involving the death penalty when Australians are injured or killed, although one supposes the soft lefties would fight that with ferocity.

The debate about the economy had nothing much to sustain it in the week just past. The official view is that the Australian economy will gradual pick up steam, the housing bubble will slowly deflate, unemployment will peak in 2015 and then begin to fall.  The 'clowns, fools and wreckers' who doubt this scenario are ignored. If things are materially worse than the official view, no high official will lose his job, though the Treasurer might. 

 The Economist discussed prospects for the world economy last week, and there is plenty of cause for concern there. Here is the basic comment: 'Few economies have ever gone as long as a decade without tipping into recession—America’s started growing in 2009. Sod’s law decrees that, sooner or later, policymakers will face another downturn. The danger is that, having used up their arsenal, governments and central banks will not have the ammunition to fight the next recession. Paradoxically, reducing that risk requires a willingness to keep policy looser for longer today'.

Of course, I hear you cry, Australia is the poster child for the opposite view, with 22 or is it 23 years without recession. That result comes from the the Hawke-Keatings government's economic reform, the Howard-Costello government's wise management and the fact that China's economy underwent a nearly unique 30 years of double-digit growth.  Sadly that left us with double-digit cost overhang.  After the waste and mismanagment of the Rudd'n'Gillard'n'Rudd'n'Swan governments Australia is now approaching the state of other developed governments, with little fiscal or monetary firepower available if there is need of stimulus in the years ahead.

We must hope for the best while preparing for the worst. Here is Henry's 'Dreamtime' plan for a quick fix.  Some people think that the base problem is lack of confidence, 'negative Animal Spirits'.  This may well be true, and if so there is an example of how this can change almost in a heartbeat. The Caaaarlton! footy team.

Henry today has some good news about an article his editor wrote with Australia's leading historian Geoffrey Blainey. Over 40 years ago this was rejected by 5 economic journals, but now a serious UK publisher has requested permission, which has been given, to include it in a book about Keynesian economics.  Here is a link to said article.  (Memo Michael Moore - is this the work of 'Keynesian' economists?)


Fiona Prior spends some time with the Church of Scientology by viewing Alex Gibney’s newest documentary  'Going Clear: Scientology and the Prison of Belief' and finds it just as creepy as suspected.


Three weeks after Caaaarlton! sacked its supercoach Mick the Merciless Malthouse, the team is playing with flair and dash. Yesterday the team warmed the cockles of Henry's late middle age heart by twice dashing away from Port Adelaide then twice defending grimly when the Porters came back, to win eventually by 4 points. This was the margin for 10 or 15 excruciating minutes at the end when the game was there to be won or surrendered.

Like the NSW state of origin Rugby League team in mid-week, the Caaaarlton! Blues had the benefit of some controversial decisions, but then perhaps even referees have lapses and these usually even out over a game or a season. Anyway, I hesitate to predict of Caaaaaarlton! that 'They know we're coming' but we can reasonably expect some better performances in the rest of the season.  As a result of the upset win by the NSW Blues in Melbourne (go figure) we have the decider to be played in Brisbane in two week's time.

Then there is the cricket to look forward to.  The Poms have reportedly unearthed a fast left-handed opening bowler, who will presumably give our open batters a decent workout, but the key question is can he bat well and field brilliantly, like the Australian tailenders.

We must not forget the Aussie sheilers' futball team, facing the might of the Brazilian sheilas early Monday morning our time.  'Go girls, go' is Henry's admonition, the use of the word 'girls' haveng been creeping into polite conversations in old Melbourne town.

For many years, Henry has been a regular watcher of Insiders. He has accepted the clear lefty in order to learn about lefty bias and to cheer the occasional conservative counter attack. But today's Insiders was just a bridge too far. Bill Shorten as the guest pontificator, about the allegations he is appearing at the Royal commission to answer.  Three complacent lefty panellists cheering for Labor, sneering at the government, totally self satisfied about their views.

Image of the week

Courtesy The Economist

Modern Greek Tragedy
Date: Thursday, June 18, 2015
Author: Henry Thornton

'Greece-EU debt row hots up'. This is the state of play and has all the signs of becoming a real Greek tragedy. The standard of living of ordinary Greek citizens is already suffering with massive shortage of jobs and opportunity to build an acceptable life. Many Greek citizens are wondering if things could get worse. Perhaps sadly, 'yes' is the answer.

But before outlining a possibly sad future if the Greek government cannot find a way out of bankruptcy within the EU, what are the relatively benign possibilities?  The fact is that usually bankrupt nations get bailed out in one way or another.  For example in the Latin nation debt crisis in the 1990s Latin debt was bundled up and sold to the highest bidder. Some of these debt bundles were sold for 20 cents in the dollar, and later onsold for much higher prices, proving that capitalism can make a market in just about anything, like the betting shops were doing so vigorously during the State of Origin game last night.  Meanwhile governments of the previously bankrupt Latin nations were eventually able to borrow fresh funds and life gradually got back to normal.

In the case of Greece (and other weak EU nations of Southern Europe) their weakness is keeping the Euro weak, far lower for than it would be if the nations of Northern Europe were the only nations to be using the Euro.  Ergo, there is more than normal incentive to let Greece exit the EU ('Grexit') as that exit would mean the new-Drachma (or the 'Tsipras' or whatever the new,  greatly devalued (relative to the Euro) Greek currency) would be called. If Greece cuts and runs, other Southern European basket cases might take the same path, each defection raising the value of the Euro until (gasp!) Germany and other Northern Europe nations would be battling to trade with a far higher Euro to deal with.

Widespread defection from the Euro might create even far bigger problems for the solvent nations of Europe. Banks in the defecting parts of Europe might have assets in new (greatly depreciated) currencies and liabilities in Euros, and would immediately be bankrupt. How this would work out is impossible to say, and it is certain that no-one in the commanding heights of the Eurozone wants to find out.  Naturally, one imagines that the European Central bank (ECB) has run the relevant simulations, and the results of these are presumably understood by extremely nervous global central bankers.  My guess is that there is no way the global banking system could withstand the loss of the banks of southern Europe, followed by the banks of northern Europe, ... (Fill in your own banking disaster scenario.)

Keeping the EURO tamed and avoiding widespread bank failures together make the basic case for keeping Greece limping along within the Eurozone, tied to the modern 'cross of gold' as the global currency was sometimes called during the heyday of the gold standard.  (Given the apparent modern Greek liking for leisure over work, the modern description could be 'tied to a bed of euros'.)

On the other hand, leaving the Euro would remove the bonds to the bed for Greek citizens. They could, absent other bad things such as a global banking crisis, arise and go back to work.  A lower new-Drachma currency would make Greece immediately more competitive in global markets.  Greece would no longer be tied to the approximation to 'free trade' as practised within the Eurozone. Greeks would all be working hard collecting firewood, growing vegies, milking cows and in fact doing a lot of things done by non-Greeks in the days of unrestricted free trade. Expensive imported cars, for example, would no longer be able to be imported, and Greeks would learn to make do with increasingly ancient cars.  Eccentric old men would run repair shops for aging cars and others would specialise in fixing dishwashers, DVD machines, televisions,fridges, and so on. Smuggling would again flourish, and the native Greek ingenuity previously stifled would begin to reemerge. Before long, most Greeks would again be gainfully employed and so long as the Greek central bank was able to print new-Drachmas quickly enough a subsistence economy with merely internal specialisation would emerge.  

I suspect most Greeks would be happier than they are now, though the brightest young people would find passage to the free trade zone of Europe in otherwise empty smugglers' boats on their home run.  Many Greeks would in fact find the new order a golden age, as it was remembered from the days of their youth, with hard work, hard drinking (after work), women largely limited work to work in the home and a regular sense of self-sufficient independance, at least for Greek men.

Tourists will be encouraged to experience a self-sufficient culture modelled on the 1950s, as well as old ruins from millenia past.

Again I hear the cry of 'you're dreaming Henry', but that is too bad, dear readers. Unrestricted free trade and a currency higher that the nation can stand has ruined the Greek economy.  There will be a backlash from these ideals of economists, and the current Eurozone crisis may trigger it.  If a return to the past works for Greece, and other Southern nations follow Greece's example, this would very likely trigger a major crisis of capitalism.

This comment appeared shortly after this article was posted.


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