Wall St: capitalism gone bad:

Ken Hammat writes: Re. “Wall St bail out means capitalism never really existed” (Friday, item 2). Joshua Gans, it ain’t a question of morals. The pure capitalist model has only ever been an ideal. It has yet to become a reality and won’t in our time. The rampant self interest of greed based capitalism on a grand scale is unsustainable so, theoretically, the only true model of capitalism is one where self interest capitalism is counter balanced by an effective form of altruistic capitalism. The capital models practiced by modern markets are nothing more than the evolving foundation for this future.

From that perspective these interventions, motivated as they are to primarily protect the positives we have already achieved, are actually a good thing. It’s two steps forward, one step back as we continue building towards a sustainable economic legacy for all generations still to come. That’s much more important, in my eyes, than quibbling over who does or doesn’t deserve to be spanked for being too greedy or not getting their initial model attempts just right. The moral hazard side issue is a more fitting one for the moral police to concern themselves with, not the capital market regulators.

Niall Clugston writes: The headline of Joshua Gans’ article shows an extremely limited understanding of “capitalism”. In a non-capitalist economy none of this drama would be remotely possible. Yes, this is an unusual level of government intervention, but seeing government intervention and capitalism as polar opposites is childish. Capitalism wouldn’t last five minutes without government. Without government there would be no law, without law there would be no property rights…

Thomas Richman writes: It would seem that unregulated capitalism is like a dinner that’s 90% haute cuisine and 10% deadly poison… the latter makes the former irrelevant.

Rod Metcalfe writes: And I thought it only applied to members of the National Party — capitalise your gains, socialise your losses. Seems it applies to Wall St too.

MacBank and The Australian:

John Craig writes: Re. “How The Australian disgraced itself over Macquarie” (Friday, item 5). You suggested that questioning Macquarie Bank is irresponsible. Maybe not questioning it is even more so. My reasons for concern about MacBank would be that:

  1. MacBank’s business model (which involves packaging highly leveraged assets) was criticised by analysts in the US in late 2007 (according to Jim Cramer):
  2. The whole infrastructure packaging industry has been suggested to be suspect by Riskmetrics;
  3. MacBank’s former CEO apparently retired unexpectedly taking something like $50m in benefits with him;
  4. It had been suggested to me that MacBank had been buying heavily into the funds it has established — presumably this maintains their value on which its management fees depend;
  5. The sudden and unexplained dropping of a $350m demand for addition government cash injection to the airport link tunnel in Brisbane suggested that “doing the deal” might be important to preserving MacBank’s image of success. It is noted that shares in the venture (BrisConnections) are now essentially worthless.

Every business that has failed in the current environment has claimed to the last that its financial basis is sound. This may be true of Macquarie Bank – but it isn’t given in holy writ.

JJ Fiasson writes: I just wanted to express my thanks in respect to your brilliant reporting on the Macquarie Bank share price saga. After you laid into The Australian for their irresponsible and false story, I proceeded to purchase a small parcel of Macbank shares. Suffice to say that Crikey has paid for its subscription 25 times over. Consider me a subscriber for life. I might just add, it’s scary to consider how little diversity there is in Australian media — the Herald seemed to be running with News Ltd’s line as well. Good on you for keeping the bastards honest.

Tony Lee writes: Kevin Rudd, like his predecessors, is not about to upset citizen Murdoch, who could not give a fried fart about misleading journalism attacking Macquarie for what appears to be a financial journalist’s personal vendetta. This is not about liking the Macquarie model, but everything about responsible reporting. Stuff The Australian (and also SMH unless they bring Mike Carlton back for a peppered laugh).

The Costello Memoirs:

John Goldbaum writes: Re. “The Cardboard Costello Memoirs: not enthralling” (Friday, item 12). The Costello Memoirs does contain a few telling anecdotes, such as during the Fightback! period of John Hewson’s leadership where Hewson thought he was being undermined by his staffer, Tony Abbott, whom he regarded as a Howard spy, and Abbott’s ambition to become the Pope, and Tony’s total knowledge of economics having been learned at the feet of Bob Santamaria.

There is also an insight into Peter Costello’s homophobia when he recalls the 1996 Expenditure Review Committee process during which John Fahey said to him “we now spend more time with each other than with we spend with our wives” and Costello cut him off by saying “I’m getting a little uncomfortable about where this conversation is heading, John!”

Then, there is the prescient insight into Brendan Nelson’s future when Costello observes that “during our period in Government we had a number of Ministers for Defence who served for a short time, generally as their last ministerial appointment”.

However, for me, the best anecdotes were his selection of Reserve Bank governor Ian Macfarlane to replace Bernie Fraser on the basis that “if you get a short man as your central banker, interest rates will always look high to him and he will be much more inclined to cut them”, and Costello’s belief that “tax is a necessary evil” and “the art of taxation is to pluck the goose with a minimum of fuss”.

Turnbull’s shadow cabinet:

Roger Davenport writes: Re. “The saga of filling Malcolm Turnbull’s front bench” (Friday, item, 3). We are all waiting, with interest, to see the make up of Malcolm Turnbull’s shadow cabinet. So far we know Julie Bishop is to be the deputy leader of the opposition and it is rumoured that she will also take on the roll of Shadow Treasurer. What a waste of talent, obviously Malcolm didn’t see her on the ABC election night special on 6 September when she announced to the panel of experts chaired by Kerry O’Brian, that she knew what the people wanted.

The obvious role for her would be to create “The Ministry for Psychics and Thought Police”. As for the Shadow Treasurer’s post, no longer very important — combine this Ministry with Liquor & Gaming, as the Hedge Funds, Day Traders & Equity Strippers now control the markets and treat them as their Personal Casinos — so much for self regulation, when greed takes over.

Pokies:

Geoff Perston writes: Re. “Blow up the pokies… but not at the expense of the pub” (Friday, item 14). I had to laugh when I read the nameless spokesman for the NSW liquor and gaming industry asserting that “Senator Fielding’s taxation schedule and his plans to modify poker machines would devastate pubs and clubs and wipe many of them out of existence.” Hotels have existed quite happily in the community, and enjoyed financial security for well over a century in Australia, without even the sniff of a gaming machine. And, in fact, I can name half a dozen previously long-standing pubs that have closed — since the introduction of pokies — all within a 5km radius of my home. Forced to close by the huge amounts of “subsidies” poured into cynically selected, commercially viable (read excessive profit at community expense) competing venues by vested, and unassailable entrepreneurs in the gaming industry.

James Bushell writes: You mention in the article that many pubs and clubs depend on poker machine revenue to remain viable. It has been noted (and is evident) that there are various drinking issues in NSW, and a contributor to this may well be the availability and size of the clubs etc, so restricting poker machines may lead to a reduction in outlets, which may well improve our apparently poor drinking culture — just a thought.

John Bevan writes: I always imagined that the licensing and taxing of poker machines was a state government responsibility. Exactly what power of the Commonwealth is being invoked by Senator Fielding to pass his legislation? As you said his “plan” is shallow populism.

Pensioners:

Win Fowles writes: Re. Friday’s editorial. Age pensions are indexed to the higher of CPI and Male Total Average Weekly Earnings (MTAWE). Since 1989 age pensions have risen 104%. Fair enough, too. Parliamentary pension indexation is better, with a rise of 131% over the same period. But ex-military pensioners tied to the compulsory Defence Force Retirement Benefits Fund and others are indexed only to CPI, which even the ABS admits does not measure cost of living increases. Since 1989 military pensions have risen just 64%, a huge disparity from age pensioners let alone parliamentarians. Senator Nick Minchin and new Opposition Leader Malcolm Turnbull are both on record as saying that CPI is okay for military pensioners. How hypocritical – if CPI is okay for ex-diggers then why is it not also okay for age and parliamentary pensioners? (And no, ex-digger pensions are not tax free, ex-diggers do not get free health care, and they don’t ride free on public transport or get free holidays using RAAF aircraft!)

Perry Gretton writes: So age pensioners’ needs can be ignored because Crikey thinks they’re living the high life on $273 per week? Though of pensionable age, I’m not on an age pension, but I know a fair few who are. Most are suffering because of rising costs: rents, electricity, food, petrol, etc. If you think they’re privileged, I suggest you trade places with them. You’ll soon be subsisting on sausage.

Marilyn Shepherd writes: When the pensioner whingers want to whine to the Murdoch hacks they should use their imagination and point out that sausages are twice the price of a nice, fat chicken drumstick at the local Woollies. Or they could ask why a pensioner would spend money on fatty old sausages at $6-8 a kilo instead of $2.40 for healthy potatoes and $1.60 for carrots.

A coalition by any other name:

Ross Copeland writes: In response to David Lenihan (Friday, comments) I say no, no, no. It is not me that it is saying there is not a coalition, it is the Nationals. They went to the polls with a promise they would not go into a coalition with the Liberals. To do so now would be a breach of faith with the 55,000 people who voted for them. The West Australian reported on Friday: “Nationals leader Brendon Grylls and Mr Barnett signed a power-sharing agreement yesterday, giving the Nationals ministers the option of abstaining from Cabinet solidarity on decisions they don’t agree with on regional WA and conscience matters.” So it might look like a coalition and act like a coalition as defined by David but it is not a coalition because the Nats say it isn’t. By the way I actually agree it is really a coalition by another name but I was making the point that it is the WA Nationals who are sensitive about terminology. I don’t really care, I voted Green.

Run Faris, run:

Justin Templer writes: To steal Peter Faris’s words (Friday, comments), “res ipsa loquitor” — the thing speaks for itself. Faris is downloading mp3 comment to an iPod. Run Faris, run.

Peter Mansour-Nahra writes: Peter Faris’ “All I can say is “res ipsa loquitor” brings out the pedant in me: loquitur, Peter, loquitur! Perhaps that speaks for itself.

Send your comments, corrections, clarifications and c*ck-ups to [email protected]. Preference will be given to comments that are short and succinct: maximum length is 200 words (we reserve the right to edit comments for length). Please include your full name — we won’t publish comments anonymously unless there is a very good reason.

Peter Fray

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