Getting on with business:

Kris Barry, Head of Communications, Mallesons Stephen Jaques, writes: Re. “Tips and Rumours” (yesterday, item 6). Saw your Tips and Rumours item yesterday on a supposed 150 retrenchments at Mallesons. Not to put too fine a point on it, the story is complete bulldust. There are no plans for a round of retrenchments at the firm and there has been no email to staff on the issue. We are aware that some competitors have been trafficking rumours about Mallesons — they clearly have too much time on their hands. Perhaps trading gossip is what some firms do when their workflow slows. Mallesons doesn’t have that problem — we’re just getting on with business.

Kev’s car plan:

David Hand writes: Re. “The car industry and protectionist delusion” (yesterday, item 9). I would echo Bernard Keane’s piece on the motor industry in both Australia and the USA. The role of subsidies in distorting a nation’s economy is well illustrated in New Zealand when Robert Muldoon subsidised sheep farmers in the 70’s. By 1982 there were 70 million sheep in NZ and the country was bankrupt. The removal of subsidies was a painful time. Farm income collapsed and mortgagee sales were common but the underlying problem was that farmers were producing output that nobody wanted because of a government subsidy.

Today the NZ agricultural industry is in pretty good shape but there are only 40 million sheep as dairy and forestry has grown. Detroit’s problem is not that Americans have stopped buying cars; they have just stopped buying Detroit cars. Does Ford, GM et al ever pause to wonder why? Subsidy and protection in the name of competing with cheap overseas labour has the twin problems of removing the drive for innovation and the opportunity cost of all that taxpayer money that might be spent of something more worthy. But hey, it gave Kevin a photo opportunity for the evening news, didn’t it.

Allan White writes: I wonder if one of your reporters could explain the car industry bail out in full. My impression is that the industry is important beyond the obvious reason of jobs, and wonder if the industry is part of the Defence System i.e. we need the backup capacity to make tanks, ships and planes in case of a future war. If so, why don’t they simply spell it out, it seems a good reason to me. It sure beats building tanks etc just in case, and possibly never use them?

That G20 phone call:

Charlie McColl writes: Re. “Bob Brown, G20, the Oz and Australia’s right to know” (yesterday, item 10). If Rudd had indeed shared that little titbit with his dinner guests and they’d all had a good chuckle about the goose from Texas — we should all be none the wiser and we needn’t be. But if (for instance) one of those guests then went and blabbed to his employee — as if it was a scoop, and got it mentioned in the big newspaper next day, then you’d have to wonder whether he’d get another dinner invitation. There’s no way Rudd is going to dob him in and there’s no way he is going to dob Rudd in. No questioner of Rudd is going to get an answer, ever, and the idiot who told the media, well, that’s what they do. The leaker knew they would. Should Rudd have shared the goss on the lame duck goose with his guests? Who gives a sh-t.

Diane Mundy writes: The world is in a mess — global warming, the economy, starvation, wars, etc etc, and you are carrying on about a phone call that happened days ago and does not appear in any way to be causing a rift. It is just not interesting anymore.

Housing and the financial crisis:

Adam Schwab writes: Re. “An optimist’s response to Professor Keen” (yesterday, item 25). Amateur economist, Peter Johns, joined the long list of people lining up to take a swipe at Steve Keen. Johns yesterday noted that “there is no focus by Keen, for instance, on rent yields — which of course are always one of the basic measures of an asset’s worth. These remain strong notwithstanding the increase in house prices and is a factor supporting a view that house prices are not as overvalued as Keen purports.”

While Keen may overstate some negative aspects, Johns appears to be completely wrong in claiming that residential yields are “strong”. Traditionally, residential property yields approximately five percent, with other gains (in the form of capital) derived from GDP increases and inflation. With the possible exception of inner-city apartment rentals, yields are nowhere near five percent. Trendy suburbs such as Prahran in Melbourne or Paddington in Sydney provide gross yields of around 3 percent — after maintenance and management fees, the yield drops to approximately 2 percent — less than half of the ‘risk-free’ rate.

Prices in those areas will need to fall substantially (or rentals almost double) to return yields back to their “normal” levels. With growing unemployment, especially in financial sectors, this, as Keen has suggested, is likely to occur. Or perhaps Johns can suggest exactly where rental yields “remain strong”.

Julia Wallace writes: Re. “Paulson sets a course for a political clash over bailout plan” (yesterday, item 22). It appears that neither the Fed in the US or our fearless leaders here in Oz have the slightest clue about how to fix the current debacle. Paulson has just changed his mind and is now going to reward all those people who got in over their heads on auto loans, credit card loans, and personal loans. Well, whoop de do! How does that make the prudent person who resisted the temptation to do this feel? Ditto savers everywhere.

Soon deposit interest rates will not equate to the inflation rate, let alone tax which puts savers well into negative territory. As a retiree, who had the sense to withdraw from the stock market in early January in order to preserve capital, I am less than impressed with the fact that my carefully saved capital will be eaten into by basic living expenses, while governments continue to bail out the reckless.

Viva Guy Rundle:

Kym Smith writes: Re. “Rundle08: Sailing into the harbour of grace” (7 November, item 3). I miss Guy Rundle. The only problem I see at the end of the US Elections is the absence of Guy Rundle’s witty/profound /enlightened words. Please give us an idea when his book will be released, so I can have something to look forward to. I nearly bought a copy of The Costello Memoirs! (I know it’s not the same, but I need a fix).

Sydney is stuffed:

Christopher Ridings writes: Re. “O’Farrell: passive aggressive doesn’t work in politics” (yesterday, item 12). The truth about NSW politics is that Sydney is stuffed. Neither O’Farrell, nor any other Liberal leader, will be able to do any better. One thing is certain though. As soon as the Coalition returns to the Treasury benches in Macquarie Street, they will sell everything in NSW that is not nailed down, and that is scary. That is what Kennett did in Victoria.

The quality of NSW parliamentarians is deteriorating. All they do is shout brainlessly at each other in the bear pit. None of them seem to have a clue as to how to extricate the State out of the mess it is in. It’s time to move the capital of NSW out of clogged and run-down Sydney into some fresh spaces before regions of the State see the light and secede. Has anyone any alternatives?


Andy Cole writes: Re. Tim Villa (yesterday, comments). All the figures for lost sales which are being bandied about appear to be making a fundamental assumption which no one has tested, and for which in my opinion there is little justification. This assumption is that every DVD copied represents a lost sale. Any private individual who indulges in this practice will tell you that they would never buy most of the disks they copy, not least because they couldn’t afford to.

Therefore if it was possible to prevent copying entirely it would not result in the companies takings appreciating by anything remotely approaching the figures they quote as losses. They are surely well aware of this, and their protestations should be taken with a pinch of salt, and recognised for the cynical hype they are.

Loose climate change:

Mark Byrne writes: Jonathan Maddox (Wednesday, comments) rightly points out that the problem with T.V. Segalstad’s calculations regarding absorption of CO2 is time. The oceans and buffers will eventually absorb sufficient CO2 from the atmosphere; unfortunately this will likely resolve approximately 100,000 years too late to help our children. There is a clear example in paleoclimate records that demonstrates this point. In the four billion year history of the Earth it is rare to find examples in which a rise in CO2 clearly initiates climate change. More common are events where temperature change is initiated by a confluence of cycle optima, leading to a change in CO2, which inturn amplify the climate change.

In contrast, an example in paleoclimate records similar to today, in which a release of CO2 initiated global warming, occurred 55 million years ago (the Palaeocene-Eocene Thermal Maximum, PETM). At this time a carbon pulse in the order of 1,000 to 2,000 giga-tonnes was released over a period of between 1,000 to 10,000 years. (Business as usual emission growth is expected to pump in excess of approximately 1,500 giga-tonnes of carbon into the atmosphere during this century alone). This carbon pulse initiated warming around the planet of an average approximately 5 degrees C (with high latitudes warming by approximately 20 degrees C.) Unfortunately for T.V. Segalstad’s theory (and for our decedents) the period of induced warming lasted around 100,000 years.

Marshall Roberts writes: Ken Lambert (yesterday, comments) poses the question: “We are overdue for a cooling period if you look at the NGS data for the last 400,000 years. Given these indisputable historical facts, why do AGW theorists not draw parallels with the natural arresting mechanisms which peaked past warmings into coolings?”

I’m no expert, but I’ll give it a shot. I’m guessing it’s because of the “Anthropogenic” in “AGW”. Over the last 400,000 years, only in the last 200 or so years (representing 0.05% of the duration of the data) have humans been releasing carbon at a rate unprecedented in the history of the planet (at least I assume this is the AGW argument); carbon that had hitherto been stored.

Based on what we know of systems, it strikes me as sensible to assume that you can’t impose such massive and relatively instant changes on a largely self-regulating system and still expect no results out of the ordinary. If these assumptions are correct, this contextual backdrop of our immediately recent activity renders what happened over the last 400,000 years ago largely irrelevant.

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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