JC Political Thread - For All Things Political Part 2

[Lex]

You didn't finish your post Zeke, you're meant to end with "rant over".

No.
Till the next installment. ha ha ha

 

[Skydrol]

I wonder if one of the Crypto Currencies is this.



January 9, 1988, Vol. 306, pp 9-10

One world, one money
A global currency is not a new idea, but it may soon get a new lease of life

Sep 24th 1998

IN DIFFICULT times, people are allowed, even encouraged, to think the unthinkable. Some of the economists who propose capital controls as a remedy for recession in Asia claim to be doing this—but they are flattering themselves. Unthinkable? Malaysia just did it. Dozens of countries still use capital-account restrictions. And it is a cliché of the orthodox “sequencing” literature that a variety of such controls should be retained until other reforms are complete. Really, to think the unthinkable, you have to be bolder than this.

So here is an idea: global currency union. Let nobody call it boringly feasible, or politically expedient. Yet, like all the best unthinkable ideas, it has more going for it than you might think—in principle, at least. The idea is not new. Richard Cooper of Harvard University proposed a single world currency in Foreign Affairs in 1984, and he was not the first to think of it. It seemed an outlandish idea, and still does. But much has happened lately to make it worth a moment's thought.


The usual way to ask whether countries would be better off sharing a single currency—that is, whether they constitute an “optimal currency area”—is to examine the following trade-off. On one side is the undoubted convenience of a single money as a lubricant for trade and cross-border investment. On the other is the loss of the exchange rate as a shock-absorber for times when one or more of the countries face pressures (an abrupt fall in demand for their exports, say, or a sudden rise in labour costs) that the others are spared—a so-called “asymmetric shock”.

In setting cost against benefit, again according to the standard view, the crucial factors are openness to trade and freedom of movement of factors of production. A small open economy has more to gain from the convenience provided by a single currency. On the other hand, if labour (especially) is reluctant to migrate, the need for the exchange-rate shock-absorber is all the greater. Weighing all this, most economists conclude that the 11 countries that are about to adopt the euro are not in fact an optimal currency area. The world as a whole is not even close.

So what has changed? The main thing is the current global emergency. This is so serious a crisis that it is likely to prove a paradigm-shifting event, though straws were in the wind already. The emerging-market disaster poses the question, How is the world to live with globally integrated finance? In addition, it casts doubt on what once seemed a good answer: that floating exchange rates are the best way to stabilise the world economy.


Shockingly unstable


According to the traditional model, a country with unduly high labour costs, and therefore a troublesome current-account deficit, could expect to see its currency depreciate; this would cut real wages, making imports dearer and exports cheaper, thus neatly restoring the economy to equilibrium. But in a world where international flows of capital overwhelm international flows of trade, this does not work. Floating exchange rates destabilise trade and investment by wrenching relative prices away from their fundamental values (that is, from the values that would put the corresponding exchange rates at purchasing-power parity). In the emerging-markets crisis that currently threatens the world economy, exchange-rate movements have not been absorbers of shocks but amplifiers and even creators of them.

Governments of small open economies have long known that it is not an option to “leave the exchange rate to the market”. Monetary policy must always keep at least one eye on the currency. But governments have also learnt, in a second big change, that intermediate exchange-rate regimes do not work either. That was the lesson of the European Monetary System debacle of 1992-93 (and, arguably, of the downfall of the pegged-but-adjustable regimes used in Asia until last year). Semi-fixed systems cannot withstand the assault of integrated capital markets: they are prone to self-fulfilling panics. In other words, they too are destabilising.

But what does that leave? Let's see. Pure floating is no use. Semi-fixed is no use. So there are two possibilities. One is to turn back the clock on financial integration: then pure-floating or semi-fixed systems might once again be used successfully. That would be enormously costly, especially to the developing countries; and it would be very difficult, because integration is partly driven by technological progress, which is hard to reverse. Still, it is a fair bet that a lot of countries will follow Malaysia's example and give it a try. Otherwise, it seems, the remaining course is to combine increasing integration with perfect fixity of exchange rates—meaning currency union.

The fashion for currency boards reflects some of this thinking. Exchange-rate flexibility is more trouble than it is worth, advocates say, so abandon it once and for all. Alas, currency boards suffer big drawbacks all of their own. Whereas a currency union has a central bank to act as lender of last resort, a country with a currency board does not. So these regimes are vulnerable to runs on banks. Currency boards are a poor test of the larger idea.

The all-or-nothing, float-or-merge analysis also provides the case in economic logic for the euro: strive for integration, it says, no holds barred. Unfortunately, EMU is a somewhat flawed test as well. It is a political project as much as an economic one, so it will not reveal everything about how well a currency union among independent nation states might work. But it will reveal a lot, and its symbolic importance will be immense. If it fails, not only will that cause enormous political harm to the European Union, but the pressure for global financial barriers will be greatly strengthened. If it succeeds, the case for a global currency union will seem much more interesting.

Fine, you say, but how would the world ever get from here to there? Hard to say, admittedly. Find the answer to that and the idea would be thinkable.

http://www.economist.com/node/166471

 

[Skydrol]

Double post

 

[Zeke Topanaga]

You didn't finish your post Zeke, you're meant to end with "rant over"....

You like the cash that Obama gave to Iran do you, giving money to your enemy well that sure is smart.

And all the crap that went on with Australia over Obamas crap, what a joke that was with the illegal reffos. F off back to your own **** hole is all that was needed for the reffos and don't come back and a kick up the arse.
Not bad being a reffo is it housed, fed, free medical, burn the place down oh no worries the aussie idiot tax payer will foot the bill, oh and not to mention sue the government, how much did them pricks get f my dog, they should of been just f ed off.

I have seen how aussies over the years can get treated if they got behind on their tax and it was not their fault as some dick went bankrupt etc and our government destroyed them and could not give a f-ck, good respecting hard working people f-cked up the arse for life.

But some illegal derelict sponge comes over here to sit on his arse for the rest of his life and bag aussies 24/7 and some have a number of wife's with kids everywhere all payed for mind by the dip stick ausses f heads who have no idea just how good these c-nts have got it.

Look at all the reffos driving good 4x4's and you go how the f can some c from a 3rd world get around driving something like that, how many aussie can do that.

Look at all the good for nothings that sit on the dole spitting out kids that are only going to become the 4th gen dole bludgers, they don't want to work and if you put them on the bastard will try to sue you and they claim to be hard done by f me dead ! you can't snort at free money given to you all ya life.

F ing hell people should be marching in the streets for f sake. Rant over, ha he.

 

[Reaper]

Your thoughts, opinions....

I reject the first premise of this out of hand. Interest only loans have had a significantly higher rate than principal and interest loans for quite some time. In my case repayments will be cheaper than interest only. Even his own figures show a comparison rate for principal and interest of 4.76% whilst interest only is around 1% more than that. I threw a $500K mortgage into the first loan calculator google thru up and it had repayments of $2298 for P&I whilst interest only was $2291.

Secondly, in most cases interest only loans are for investment properties only and in the case of new(ish) builds, on paper it is neg geared when you take into account depreciation, however from a cash perspective, they are positive. Ie - tax neg, cash positive. It doesn't get any better.

That said, in at least the Melbourne market, it has been flat or in a slight decline and has been like that for at least 6 months. This is a good thing. I hope we have a year or 2 of sideways motion as there is no doubt that the growth over the last few years was un-sustainable long term.

 

[Skydrol]

Thanks for the input.

 

[Reaper]

Thanks for the input.

I think a lot of these overseas analysis are superficial and don't take into account the entire picture. Also expect a fair drop in building starts over the next 2 - 3 years as the recent boom rolls out.

 

[figjam]

So, another tourist has died trying to climb Ayers Rock / Uluru. Not really political, but it does have cultural complications.
I first went there about 25 years ago, climbing Ayres Rock was on my list of things to do, when it was not politically incorrect to do so.
When I got there, I realised that the ‘Chicken Rock’ point was aptly named. Despite the number of people on that day climbing it, I decided that to continue was probably not the smartest decision that I would ever make, and chickened out.
Since then, I have been to Uluru several times, seen it at sunrise and sunset, driven around it, walked the 10+km around it, and flown over it. Not once have I regretted not climbing it.
Despite the cultural owners requesting visitors not to climb, visitors persist, and there are now warning signs and weather restrictions on the times it is open. More a common bloody sense restriction than anything else.
This latest death will hasten banning the climb altogether, and highlight more divisions between the owners and visitors.
The solution could be as easy as removing the chains and posts to make the climb even more dangerous and uninviting. The penalty for stupidity is often death.

 

[Skydrol]

You cannot fix stupid. I say, do nothing and leave Darwinian Law take care of it. I bet, they will not do it again after the fall, lesson learned. If you do not have any common sense, remove yourself from the gene pool. The Gov can place all sorts of warning signs and safety devices, the people will find a way to hurt themselves.

 

[Zeke Topanaga]

The True Abos told me that there ancestors built that rock, a lot of chicken wire and a lot of hot air.