Wall Street crash:
Ben Aveling writes: Re. “Dow down 770 points, trillions shed: the detail” (Wall Street crash special edition, today, item 2). It’s not entirely a surprise the “rescue” plan was voted down, not while the answer to “Are we confident this will work?” is “No”. Imagine if it had been like this:
We believe the market is oversold. We will set up a fund to buy where we see value. The main standards agencies have failed; we will ignore them. We will do what it takes to find a reasonable estimate of the real value of these assets, and where we think assets are probably underpriced, we will buy. We expect to make a profit, though it is too early to say how much. There will be an initial outlay of up to $700 Billion. As a bonus, we expect this action to stabilise the markets, but it would be self-defeating to proceed with that as our primary purpose. For an intervention to have credibility, the world needs to know that when we buy, it’s because we see value, not because we want to create a perception of value.
The problem here isn’t really debt. Certainly, money has been lost, but intervention cannot undo that. The problem is a lack of information. The current ratings agencies have failed and that is the “market failure” the government needs to fix because when and only when that is fixed, capital will return by itself. Contributing capital without doing anything about the lack of market information would be throwing good money after bad.
John Goldbaum writes: Re. “Swan’s timely intervention just what the market ordered” (yesterday, item 21). Wayne Swan’s $4 billion bail-out is not what the market ordered. It is what John Symond of Aussie Home Loans and Mark Bouris of Wizard Home Loans ordered. The Australian Government says it will only invest in RMBS which are AAA rated but the CDOs which contained large proportions of sub-prime US mortgages were also AAA rated at the time they were bundled and sold. They are not AAA any more. Which ratings agency is Wayne Swan proposing to trust? In a world of increasing inflation, increasing market interest rates and decreasing asset values, the Australian taxpayer could be left holding dodgy securities whose rating has fallen considerably.
The AFR editorial was right. Our banks are strong because increased market interest rates caused securitisation to dry up and the major banks won most of their market share because they are more reliant on deposits than money markets for funds. They regained the ability to charge appropriate risk-rated interest rates and this profitability helped strengthen their balance sheets. If our Government wants our banks to fail in a few years’ time, then making them chase RMBS interest rates lower for market share will certainly achieve that by weakening their capitalisation. Pump priming is too Keynesian now that we are all fiscal conservatives. Governments should stick to regulation of banking and not participate in lending money.
Simon Baxter writes: Don’t be surprised if the next tactic is to announce a “one week holiday” on Wall Street and other markets worldwide. Panic is only visible when seen in falling prices, so remove the value measure from markets. Dumb … but a probable desperate strategy. Akin to banning short-sellers — now just ban the sellers too.
Drew Turney writes: The saddest thing about this economic downturn no matter how serious it turns out is that we were all quite happy to coast along on a mountain of dodgy debt and casino-style speculating while it put a huge plasma TV on all our walls. Now it’s all falling apart, watch the hand wringers and good conscience finger-waggers come out of the woodwork. If only we could buy shares in the amount of commentary about what a bad system it was and how we should have known better.
Brian Crooks writes: One of the main causes of the economic crises in the US is still being overlooked — the plain fact is the failure of the US system to provide decent wages to workers in general. If they could afford to pay their mortgages there would be no reason for the banks to collapse, its exactly the same scenario of 1929 which is the uneven distribution of wealth and as last time the US are going to drag us down with them. Imagine if Howard’s WorkChoices had of been allowed to tighten its grip — I shudder to think.
Trevor Best writes: I have heard that there is supposed to be a once-in-a-century world financial crisis, and people in USA cannot even borrow a few dollars to buy a car. Well, Aussie genius has apparently solved the problem for us in Australia. Just today I have a letter from David Jones telling me that their store card will now be managed by American Express. It will only cost me $99.00 every year (previously nothing) and every card related sale will siphon off a percentage (could be around 2.6%?) of DJs profit to this alien parasite. God we’re clever. And I have just read your Wall Street crash special, highlighting the political machinations. Anyone for a presidential republic in Australia?
Bede Doherty writes: Is it possible for someone to please explain in simple English with simple examples how this crisis came to be and how the bail-out contributes to the solution? I like examples. Maybe your esteemed founder Stephen Mayne could help us financial-techno-peasants with an example starting with the words “A bank sells 5,000 mortgages worth $1b…” and which does not use phrases like “bundles up and re-sells” without defining WTF it means.
Marty Ross writes: Re. “Rundle: No one expected this, no one” (Wall Street crash special edition, today, item 1). Forgive me, but wasn’t Guy Rundle a proud member of the anti-bailout crowd (yesterday’s Crikey)? And he is wrong: people like Barney Frank did have an expectation of this. I love Guy, but perhaps he should spend just a little less time working on his witty lines and a little more time reading Paul Krugman.
Gabriel McGrath writes: Re. “Wall Street crash special edition” (today). Information and analysis, when we needed it most. Thankyou, and well done. Today’s “Wall Street Crash Special” is why I subscribe to Crikey. Fictional memoirs are not.
Garnaut and not getting it in the Age of Embarrassment:
Roy Bray writes: Re. “Garnaut, treasury and the high cost of complacency” (yesterday, item 2). Why is everyone so surprised about the lack of action on climate change? A short time before Garnaut released his first report I had a social conversation with a well known economist. The conversation naturally led to climate change and the coming report. After the conversation I realised that there was something wrong with the general thrust of my economist’s ideas about climate change. He just didn’t “get it”. “Getting it” is not very clear concept at all and after some thought I came up with an analogy. Two renowned musicians give a concert. The reviews of the first musician agree that it was “well executed and technically faultless.” While the second player’s reviews state that they “were one with the music and showed great feeling and compassion.” In other words, the second musician “got it”. It’s not a question of intellectual or technical rigor but one of feeling and true understanding of the problem and its implications. With most of the parliament populated by lawyers, financial types and particularly non-scientists it is no wonder we creep so slowly to some action. They don’t get it.
Gavin Greenoak writes: The first Gods were sky and weather Gods. Climate Change looks likely. Anthropogenic CC is less probable. Al Gore’s hubris notwithstanding we have not yet achieved this divinely powerful status. And it would be really great if some journalists in this Age of Embarrassment would take on the investigative task of examining the data in depth and detail rather than taking on the political agendas which appear now to be fixed and irreversible. Journalists are all we have! And we must rely on the journalistic community to expose these agendas where necessary and without fear of the scandalous embarrassment.
Maternity services turf wars:
Dr Mitchell Lawlor writes: Re. “Maternity services turf wars have not helped women” (yesterday, item 13). Justine Caines claims to be a “consumer advocate” with an interest in allowing women to have choice concerning delivery. Describing caesarean section as “removing” and “sad” does not sound like a neutral position on choice of method of delivery. While she is correct that most births do not require a doctor, this misses the point. It is easy in retrospect to identify who needed a specialist and who would have been fine with a midwife, however unexpected complications mean it is much harder to identify this in advance. Most women in city public clinics do not see a doctor unless they have had a previous complication or pre-existing condition.
There is a balance between non-medical care and medical backup when required. In contrast, the reality of giving birth in a situation that does not have ready access to an obstetrician or qualified GP means no ability to deal with uncommon but severe complications that do occur unexpectedly; foetal distress, severe antepartum haemorrhage, eclampsia and failure to progress. Justine feels it is “paternalistic bleating” to highlight the primary importance of the safety of the woman and child. Maternal and infant mortality has dropped dramatically over the last 100 years thanks to medical intervention. Those demanding access to birth without access to medical backup must accept this will lead to small but real increases in infant and maternal morbidity and mortality.
Lisa Crago writes: Re. “West Papuan unrest as Australia supports Indonesia’s military” (yesterday, item 12). Such a misleading statement that “after decades of difficulties, there are no longer major outstanding issues between Australia and Indonesia” … simply because the ADF military interacts with the Indonesian military. International human rights advocates make very poor military commentators as they are usually not across all objective and relevant facts. Australia’s ADF core number approx 30,000. The Indonesian armed forces catering core is approx 60,000, yes, that’s how many people they need to feed their forces. They have 60,000 cooks!
So while “Mr Fitzgibbon has been cuddling up to Indonesia’s defence minister” in what can only geopolitically be identified as very important major military bilateral cooperation, with the worlds most populated Muslim neighbour. Maybe we can lay off the sort of narrow and ill informed rot that cites our wish for a strong bilateral agreement on defence and intelligence information as “a compulsive fetish gone horribly wrong.”
Joe Boswell writes: Re. “ATO sits on crimebuster’s underworld report” (yesterday, item 5). Former tax office auditor Chris Seage wrote: “Spence told Crikey that he declared to the ATO in 2005 he knew Gatto from his policing days and his honesty was praised in an internal Tax Office newsletter, which stated: “The importance of the staff member’s actions in these circumstances cannot be underestimated.'” Spence’s quotation is the opposite of praise. If the importance cannot be underestimated, it was of no importance at all.
June Factor writes: Re. “A long-serving Fairfax man bids a sad farewell” (Friday, item 21). On September 25 I emailed the following letter to the editor of The Age. It hasn’t been published, but I received a note telling me it had been recorded in the Reader Feedback Report which is “seen by editors and senior management”:
Yesterday, I rang the Age to speak with John Kilner. A couple of years ago I worked with him on an interesting project, The School I’d Like, involving thousands of school children across Victoria. His knowledge and commitment were impressive. For the longest time he has been the key behind-the-scenes person at the Age connecting the paper to schools, encouraging students and teachers to use a newspaper as an educational tool. He and his small, dedicated team have undoubtedly helped to maintain, if not improve, the circulation figures of the Age.
“He’s not here,” said the young woman to whose phone the switchboard sent me.
“This section has been reorganised.”
I’d heard a rumour.
“He’s been sacked,” I said.
“No!” said the young woman primly.
“He’s been made redundant.”
Oh brave new world, which has such people in it…
Pat Berzin writes: Justin Templer (yesterday, comments) wrote that those so called “fat cats” worked hard all their lives, making them sound far more virtuous than those lazy pensioners who do not have any income apart from the Age Pension. In my experience, most of those receiving a top up pension and very generous tax concessions because they are over 70 either worked as public servants and so had access to a superb superannuation scheme or they worked for a big corporation. People who worked just as hard in small businesses did not always have access to these schemes.
Women who did not work outside the home were particularly disadvantaged before the rules were changed to allow superannuation to be considered in a divorce settlement. Before then it was not unknown for men to ditch their wife in favour of a new younger woman when they collected their lump sum payout. As well, it has not been unusual for retirees to take their super in a lump sum and wander around the world for a few years and apply for the pension when they come down to earth and find their retirement investment has diminished considerably.
Sonja Davie writes: In response to Justin Templer, my parents worked hard all their lives, paying more tax (even now!) and squirreling away enough savings that they didn’t qualify for the old-age pension or any of the attendant benefits and entitlements. If we’re going to give money to people who don’t need it, why unfairly discriminate against superannuant pensioners?
Playing a tiny violin:
Justin Templer writes: In responding to my “little piece” Chris Graham (Friday, comments) likes to use emotive words such as mean-spirited, nasty and outrageous. He then suggests that I be deported to Africa and forced to walk back to Australia. A heady mixture of emotive and amusingly belittling language — yet nowhere in his response does Mr Graham make any attempt to refute the points I make. This is a serious subject, Chris. There are millions of desperately unfortunate people in the world — you’re playing a tiny violin to support the lucky one who worked the system and made it to Australia may assuage your conscience but my conscience is pricked by the world as it really is.
Not The Costello Memoirs II:
Crikey: We ran this correction yesterday:
Re. “Tips and rumours” (Friday, item 8). Apologies are due to the crew at Sydney’s Gleebooks, for this tip from last week, “The Costello Memoirs is now selling for $12 to Sydney Uni alumni via Glebe Books”. Gleebooks events manager Morgan Smith points out that “This is not the book but is the concession price for tickets to the event with Peter Costello, Peter Coleman in conversation with Jana Wendt at the Seymour Centre on Thursday 2nd October Cost $15/$12 conc. USYD alumni and gleeclub. Bookings: Gleebooks 029660 2333 or more info here” He also asked if we’d give the event a small plug.
We’ve now been informed that Morgan Smith is a female. We apologise to Morgan for this appalling and sexist assumption. Looks like she gets a second plug.
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