Wrong Move Singapore

Bloomberg:

The Monetary Authority of Singapore may devalue the city’s currency and allow it to drop 4 percent against the U.S. dollar by June 30 to aid exporters and lift the economy out of the worst recession since independence in 1965.

The central bank will shift the mid-point of the Singapore dollar trading band at a twice-yearly review in April, according to 15 of 17 economists surveyed by Bloomberg News. The currency is “extremely and ridiculously overvalued,” Patrick Bennett, Asia foreign-exchange strategist at Societe Generale SA in Hong Kong, said last week.

Like many nations, Singapore's GDP is contracting. The problem with Singapore is that, like Japan, it has an economy based far too much on manufacturing and exports. Singapore's current account surplus is 15.4% of GDP, which indicates a currency that I would describe as "extremely and ridiculously undervalued".

Singapore wants to boost its economy by devaluing its currency to make its exports cheaper and more competitive. This is precisely the wrong move. Instead, Singapore should be trying to boost its own consumption, which will happen as the currency increases, rather than decreases in value.

Look, the logic on this is very simple. If a country has been running an unsustainable current account deficit (such as the US) then they should NOT be focusing upon boosting internal demand but upon boosting external demand. But if a country is running an unsustainable current account surplus (Japan, China, Singapore), then the best way to boost their economy is through increasing internal demand.

Put simply, the savers need to spend while the spenders need to save.

The US needs to re-jig the economy so it borrows and consumes less and saves and produces more. Producer nations like Singapore need to re-jig their economies so they borrow and consume more, and save and produce less.

Singapore is not helping anyone in this move - not least itself.

Thoughts on the impending collapse of the US Dollar

Of all countries in the world, none has the same knee jerk, reds-under-the-bed, the sky is falling attitude towards raising taxes as America does.

Some might argue - and with good reason - that raising taxes during a recession is a bad idea. However, when you consider that current estimates of the budget deficit exceed 10% of GDP, what else can you do?

It's all very well to say that Roosevelt ran deficits back in the 30s that helped stimulate the economy - but back then budget deficits were hovering around 3-5% of GDP.

According to "Historical Tables of the FY 2009 Budget", there was only one time since 1930 in which the US government ran budget deficits in excess of 10% of GDP, and that was between 1942 and 1945.

With the budget deficit likely to exceed 10% of GDP, the United States is embarking on a fiscal situation that rivals the Second World War, and exceeds that of any year of the Great Depression.

According to recent stats from The Economist magazine, four nations are expected to have budget deficits in excess of 10% this year. They are the United States (13.7%), Britain (11.3%), Ireland (12.4%) and Iceland (12.6%).

Huge deficits of the size being predicted cause international investors to baulk. In the case of Iceland, investors pulled out and caused the Krona to crash. This has resulted in inflation nearing 20% in Iceland.

The Pound is already taking a pounding over Britain's increasingly unstable economy, while Ireland's financial troubles are fortunately subsumed by their adoption of the Euro.

In short, the huge budget deficit that the US is running will end not in a boost to the economy but result in the ruin of the US Dollar.

ISO 8601 - it's time to conform

Okay people, enough individuality and freedom of choice - It's time to conform to standards.

This is a command from me, to you, on behalf of common sense.

It's time to use


ISO 8601


in our date usage.

What is the date today?

In Australia, it is 24/3/09

In the US, it is 3/24/09

According to ISO 8601, it is


2009-03-24


That is, yyyy-mm-dd.

This guy says some good stuff:

I believe that the yyyy mm dd order, going from big to small, is the natural way to write dates. My reasoning is that we almost always use a descending unit size order when we combine a number of different unit sizes of the same quantity. For example, when we write a price, we start with dollars and then go to cents, i.e. from big to small, as in $12.34.

And when you measure your kitchen for new floor covering, you measure (say) 2345 mm by 1840 mm, and then change to metres to order your material (2.345 x 1.890 = 4.432 square metres). Again, you write from big (metres) to small (millimetres). We’ve always done this. Consider the same kitchen floor using the (fortunately now obsolete) yards, feet, inches and fractions of an inch. In this case the floor would be 2 yds (big) 1 ft. 6 5/16 in. (small) by 2 yds 0 ft 2 13/32 in. I leave this calculation to others!

Indeed, our very numbering system uses the same order of big to small. Consider the number 543; the 5 hundreds (big), come before the 4 tens, and the 3 units (small) are last.

Once you adopt the numerical descending method for writing dates you make some interesting discoveries. The yyyy mm dd format:

• is preferable for sorting, filing and retrieving documents in date sequence. This is especially useful with computer files.


• makes calculations of elapsed time very much easier, especially for date calculations such as those used for the amount of interest on an investment.


• combines rationally with hh mm sss of time when you need more precision.
  

So... change your blog settings, change your calendar settings, change the way you write formal letters.

- OSO 2009-03-24 09:50:16Z

PS, for strftime, use %F %a

Gingrich - a more important conservative than Reagan

Think back to all the presidents since Jimmy Carter. Which of these presidents is considered an icon by political conservatives? There's no doubt that Ronald Reagan would top the list. As for the president most loathed by conservatives, there's no doubt that Bill Clinton would be nominated - though Carter does come a close second.

But what do political conservatives want? If we ignore the "fluff", the basic desire of political conservatives is to reduce the size of the Federal government and to ensure that government spending is responsible.

Yet when we look at the raw statistics (Historical Tables of the FY 2009 Budget, PDF, 2.4 Mib), a rather strange thing occurs. Here is a table (based upon table 1.2 from the document) which averages out the levels of government spending and government debt over the terms of each president since Jimmy Carter:

Well whaddya know? Ronald Reagan presided over the largest Federal Government and the highest level of government debt. By contrast, Clinton presided over the smallest Federal Government (for all intents and purposes) and the smallest increase in government debt. You'd think from evidence like this that Reagan was the spendthrift while Clinton was the conservative darling - yet in the Bizarro world of conservative politics, the opposite is the case.

The problem is that conservative politics since Reagan seems to have focused solely upon taxation - and thus government revenue. Reagan did, of course, make some big tax cuts but there was no commensurate reduction in spending that accompanied such cuts. The result ended up being a Federal government that actually increased its spending as a proportion of GDP while simultaneously increasing government debt as a result. Moreover, those levels of debt were huge.

Of course we need to remember that government spending is also the responsibility of Congress. Thus if we were to criticise or praise certain presidents over their fiscal performances, we need to do the same with congresses and the party that controlled them.

During Reagan's term as president, the 97th, 98th and 99th Congresses had Republican Senates and Democrat Houses. Both houses of the 100th Congress were Democrat, and the average Federal outlay for those two years (1988-1989) was 21.45% of GDP, while debt averaged -3.15% of GDP - both lower than Reagan's 8 year average.

Of course, Democrats were hardly blameless during George HW Bush's term in office with both the 101st and 102nd Congresses being controlled by Democrats and overseeing, with Bush, no reduction in the size of government and no reduction in debt.

But if Ronald Reagan was the Republican Party's number one hero of the past 30 years, the number two would have to be Newt Gingrich and the 104th Congress. Whatever faults conservatives have today with Gingrich and the 1994 "Republican Revolution", there is much to praise them for as well.

On the surface, Gingrich's Republican Congress and the Democrat Clinton in the White House were at odds from day one. Beginning with the 1995 Federal Government shutdown and ending with the impeachment of Clinton, it is unlikely that any period during the 20th century saw such animosity and divisiveness between the executive and legislative branches of government.

Nevertheless, the stats do tell a striking story. Clinton and the Gingrich Republicans actively reduced the size of government while simultaneously cutting back on debt.

Yet this did not continue. Between 2001 and 2006, the Republicans controlled both houses of congress as well as the White House itself. While spending remained relatively tight over the course of Bush's presidency (spending which would've been smaller had not war intervened), the tax cuts he sponsored, that were approved by the Republican congress, ended up putting the government back into debt once more. By the time the Democrats retook congress in 2006, economic conditions had deteriorated and debt levels began to soar again.

Now as a political progressive who has no problems at all in increasing the size of government, I obviously do not align myself either with the Republicans of today, or those in the 1990s, or even those in the 1980s. What I do respect, though, is the ability to maintain one's political stance through practice.

The Republicans of the 1980s and 2000s are, to my mind, not really conservatives. 80s Republicans preached government restraint while overseeing a huge increase in the size of government and in government debt. 2000s Republicans oversaw a smaller sized government but didn't reduce it, while also adding to the levels of debt.

Increasingly, the 1990s will be seen as a golden period for political conservatives - despite the fact that Clinton inhabited the White House. Apart from the glory of the 1994 mid term elections, the shenanigans that followed it and the popularity of the Republican party over the next decade, there is no doubt that conservatives actually did achieve what they set out to do. The budgetary statistics prove that beyond doubt. And for that I grudgingly (and through gritted teeth) respect them.

In short, who should Republicans look back to as an icon? Not Reagan and not Bush (either of them), but to Gingrich.

A thought

Ben Bernanke is trying to wage war against the Great Depression.

The problem is, as many prospectuses say, "past performance is not an indicator of future performance".

I don't think Bernanke is factoring in the great possibility of capital flight from the US - a process that would leave the US Dollar in tatters.

More interesting US Budget information

Some more stats for you, courtesy of "Historical Tables of the FY 2009 Budget":

--------

2001 Budget Outlay (M$): $1,863,190 (18.5% of GDP)

2008 Budget Outlay (M$): $2,931,222 (20.0% of GDP)

Increase in budget during Bush's term of office ($M): $1,068,032.

Percent increase in Federal Spending during Bush's term of office: 57.32%


--------

1993 Budget Outlay ($M): $1,409,522 (21.4% of GDP)

2000 Budget Outlay ($M): $1,789,216 (18.4% of GDP)

Increase in Budget during Clinton's term of office ($M): $379,694

Percent increase in Federal Spending during Clinton's term of office: 26.94%

--------

1989 Budget Outlay ($M): $1,143,829 (21.2% of GDP)

1992 Budget Outlay ($M): $1,381,649 (22.1% of GDP)

Increase in Budget during GHW Bush's term of office ($M): $237,820

Percent increase in Federal Spending during GHW Bush's term of office: 20.79% (4 years)

--------

1981 Budget Outlay ($M): 678,241 (22.2% of GDP)

1988 Budget Outlay ($M): 1,064,481 (21.3% of GDP)

Increase in Budget during Reagan's term of office ($M): $386,240

Percent increase in Federal Spending during Reagan's term of office: 56.95%

--------

1977 Budget Outlay ($M): 409,218 (20.7% of GDP)

1980 Budget Outlay ($M): 590,941 (21.7% of GDP)

Increase in Budget during Carter's term of office ($M): $181,723

Percent increase in Federal Spending during Carter's term of office: 44.41% (4 years)

--------

Conclusions:

• All Presidents ended their term with budgets bigger than when they started.
• The President that oversaw most significant reduction of federal spending (as a percentage of GDP) was Clinton, who reduced spending from 21.4% of GDP to 18.4% of GDP.
• The President that oversaw the most significant increase of federal spending (as a percentage of GDP) was George W. Bush, who increased spending from 18.5% of GDP to 20.0% of GDP.
  

OSO's debt Watch

Public Debt on 2009-03-26:

$6.75 Trillion



US GDP in 2008 Q4:

$14.20 Trillion



Debt/GDP Ratio:

47.56%

( [Debt ÷ GDP] x 100 )



Public Debt/Person:

$22,061.67

(Public Debt ÷ US Population)

2009-03-26|$6.75Tr|47.56%|$22,061.67
2009-03-16|$6.74Tr|47.48%|$22,022.05
2009-03-05|$6.66Tr|46.91%|$21,758.85
2009-02-26|$6.58Tr|46.32%|$21,502.89
2009-02-19|$6.50Tr|45.53%|$21,228.84
2009-02-12|$6.45Tr|45.24%|$21,092.69
2009-02-05|$6.41Tr|44.94%|$20,949.72
2009-01-29|$6.31Tr|44.23%|$20,622.37
2009-01-14|$6.29Tr|43.63%|$20,553.13
2009-01-06|$6.32Tr|43.84%|$20,651.62
2008-12-30|$6.32Tr|43.86%|$20,664.55
2008-12-17|$6.42Tr|44.52%|$20,978.60
2008-12-10|$6.41Tr|44.45%|$20,952.05
2008-12-03|$6.43Tr|44.62%|$21,030.96
2008-11-26|$6.40Tr|44.38%|$20,936.85
2008-11-19|$6.36Tr|44.07%|$20,820.19
2008-11-12|$6.36Tr|44.07%|$20,821.75
2008-11-05|$6.30Tr|43.68%|$20,632.59
2008-10-29|$6.25Tr|43.73%|$20,459.01
2008-10-22|$6.19Tr|43.32%|$20,264.04

Sources:
Public debt is $6,754,100,383,090.75. Source
Latest GDP is $14,200.3 billion. Source
Population in February 2009 is 306,146,412. Source (Resident population plus armed forces overseas).

Notes:
* 2008 Q4 GDP data showed that nominal GDP remained at $14,200.3 billion

Equal Rights?

This picture is from the 19th century US periodical Puck. It is saying that the only group in society that will not assimilate are the dreaded Irish (I originally found this and a bunch of other anti-Irish illustrations from the 19th century here).

So here we are, in the 21st century, and of course the dreaded Irish still refuse to assimilate don't they?

What? You mean they have? Gosh. Do you think other cultures and nationalities might eventually assimilate, given time?

Some good editorial cartoons

One of my more guilty pleasures is reading Somethingawful.com. It's a mishmash of stupidity and offensiveness so it obviously appeals to me.

Anyway, one of the guys at the site has been drawing editorial cartoons for people's amusement, and they have put a lot of them together here. These are my favourite ones:

Bailout lessons

Barack Obama is angry at AIG - as is the rest of America - for using bailout money to pay big bonuses to its executives. Fair enough.

Yet the problem with throwing money at businesses and people is that it is hard to legislate how they spend it. Here in Australia, Kevin Rudd's economic stimulus program has resulted in a "back to school" bonus for families. The idea is that families get this cash and use it for their child's education. But it is obvious that many, if not most, won't. They'll use it to pay off debt, buy Plasma Screen TVs or gamble it away. Unless the cash is given in the form of a voucher to be used to only procure certain goods and services from approved sellers, the granting of cash leads only to whatever the person wants to do with it.

AIG's bailout should have come with strings attached - not a string about limiting bonuses because there will be ways and means around that (which the execs are no doubt currently exploring) - but a string that would have made the bailout payment contingent upon the termination of the employment of all major executives, with a special law added to circumvent any contractual agreements that would have resulted in payments made upon termination (such as golden parachutes or handshakes).

In short - if you want the money then you fire your top executives, including the CEO, and rearrange your board. It was these people who led the company into the red, so it only stands to reason that such people pay the price for their failure.

And if they say "Hell no we won't go!", then no bailout money will be granted. Simple as that.

Ben Bernanke predicts end of recession

Ben Bernanke, the man who did not foresee the crisis, is now predicting its end:

"It depends a lot on the financial system," he replied. "The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We've seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we're not gonna see recovery. But we do have a plan. We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time."

Diversionary tactics:

Bernanke obviously knows that he is in the firing line of blame for this crisis. But look who he blames:

"Let me just first say that of all the events and all of the things we've done in the last 18 months, the single one that makes me the angriest, that gives me the most angst, is the intervention with AIG. Here was a company that made all kinds of unconscionable bets. Then, when those bets went wrong, we had a situation where the failure of that company would have brought down the financial system," Bernanke said.

"You say it makes you angry?" Pelley asked.

"It makes me angry. I slammed the phone more than a few times on discussing AIG. I understand why the American people are angry. It's absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets, that was operating out of the sight of regulators, but which we have no choice but the stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy," Bernanke explained.

AIG is one of many different financial institutions that made bad calls and ran close to the edge to gain more profit. Until the whole thing collapsed, we didn't know just how close to the edge these companies were. AIG, of course, deserves as much blame as it can get... but in Bernanke's case it diverts the attention away from his own failures.

Minimize failure:

"Does the Federal Reserve bear any responsibility for missing what was happening to the banks, as it was happening?" Pelley asked.

"Well, like other regulators, we probably could have done more. We've already done a lot of - put a lot of effort into reviewing our practices. And reviewing the bank's practices. We are trying to strengthen our regulation at every point that we can. So, I don't want to deny that we certainly could have done a better job, and others could have done a better job," Bernanke conceded.

Notice - nothing there about how the credit crisis caught Bernanke by surprise, asleep at the switch and with his pants down.

Why was it that so many of us knew that the whole thing was going to crash down while Mr B did not? He clearly stated in 2005 that there was no housing bubble.and when he finally admitted that one existed and had popped, he said that everything would be fine. Moreover, he still doesn't say much about Greenspan and the Fed's decision to pursue negative real interest rates between 2003 and 2005 (Bernanke was part of the Federal Reserve Board that made those decisions)

Bernanke is a smart man, but someone has to take the blame for the Fed's failure to foresee the current crisis. His errors of judgement are on the record. He must step down or be pushed.

Problems with immigrants?

Immigrants as percentage of national population:

USA: 12.81%
Australia:19.93%

UK: 8.98%
France: 10.18%
Germany: 12.31%
Italy: 4.29%
Spain: 10.79%
Portugal: 7.20%
Denmark: 7.16%
Netherlands: 10.05%
Belgium: 6.90%

Muslim immigrants taking over Europe? Hardly.

Source: UN.

Thoughts on fractional lending and quantitative easing

It's always good to have a mate you can disagree with. Dave has been emailing me lately about money creation. It seems that a large proportion of scientific non-economists (such as biologists, environmental scientists and the ilk) are of the opinion that fractional reserve banking cannot survive a move to a steady state economy.

But more on that at some other post. Every time I have a robust discussion about money supply, my brain begins ticking over at its possibilities and ideas pop up.

There are natural limits to fractional lending. Banks cannot, for example, lend out less than 0% of their deposits. Nor can they lend out anything beyond 100% of their deposits (reserve requirements notwithstanding). These are natural limits.

These limits are being felt now through ZIRP - Zero Interest Rate Policy. The problem with ZIRP is that it announces the limit of what monetary policy can do. Once central banks like the Federal Reserve lower rates down below 1%, monetary policy becomes increasingly ineffective. The problem is that once interest rates fall to that level, it is an indication that the demand for government bonds has sky-rocketed. Through the standard open market operations of buying back bonds, the central bank creates a profitable form of investment for the market - the price of bonds sky-rockets as the central bank begins to buy them and the market reacts by holding them even tighter. The end result is, unfortunately, no real addition to the money supply and a vicious cycle of government bond purchases that is, in the end, not unlike an investment bubble. ZIRP ends up preventing money creation - which is ironic considering that its purpose is to encourage money creation.

Of course, this wouldn't happen if interest rates could go negative. But negative interest rates are prevented by the natural limits of fractional reserve banking.

Given that this is the case, a new phrase has entered the economic vernacular - quantitative easing. For amateurs, this is essentially money printing - the central banks creates money by fiat and then somehow injects this money into the money supply.

From what I can gather, however, the result of quantitative easing is the same as standard monetary policy - bonds are bought back. Yet, as I have mentioned above about ZIRP, this procedure won't result in anything but a bond bubble and won't actually enter the money supply.

One solution is for the central bank to lend money to the government, who then uses it as part of any stimulus package. If we take the current Obama stimulus as an example, then we could see how the Fed could create money by loaning it to the Government, who then spends it on the stimulus.

Creating money out of thin air does, of course, have its risks - most notably the hyperinflationary experiences of Weimar Germany and Mugabe's Zimbabwe. But what is important here is that the amount of money created is limited by concerns over inflation. The Fed is hardly likely to create $15 trillion out of thin air and dump it into the economy because such an event would be hyperinflationary. But if the Fed created, say, $150 billion (10% of the previous amount), the inflationary effects would be less. Couple this with a deflationary environment and you have the recipe for modest price stability.

Yet there is more to Quantitative easing than simply lending it out to government. I would go one step further. And this is my idea:

The Central Bank creates money by lending it to Commercial Banks.

This would take the form of a deposit. The central bank creates money by fiat, and then deposits this money in as many banks and financial institutions (institutions that are part of the fractional banking structure) as it can find. This won't be a bond buyback, but a simple deposit. It is not important as to whether the commercial banks pay interest on such a deposit since paying back interest is not important - expanding the money supply is.

Of course, with more money deposited, commercial banks would then have more money to lend out, thus alleviating any credit crisis. There is no money entering the money supply via any bond buybacks or stimulus plans. It's simply money appearing by fiat and being deposited into banks.

But what happens once the economy begins to recover, credit begins to flow again and inflation begins to rise? Well obviously the central bank could then withdraw all or part of its deposit with commercial banks. This would reduce the amount of money commercial banks could lend out and act as a contraction of the money supply.

And then I got thinking again - what if this form of quantitative easing replaced current monetary policy completely? So rather than money being removed or injected into the money supply through bond issues or buybacks - why not simply have the central bank deposit money into commercial banks or withdraw money from its commercial bank accounts? It would still be an open market operation, but one which doesn't require a government bond market to exist or even some form of centrally set level of interest - rates would be completely market controlled and dependent upon how much money the central bank deposits into, or withdraws from, commercial banks.

So, to summarise:

To stimulate growth in the money supply (to battle deflation and thus stimulate economic growth), the central bank creates money by fiat and deposits it into commercial banks.

To restrict growth in the money supply (to battle inflation and thus restrict economic growth), the central bank withdraws money from its commercial bank accounts.

In both cases, the money supply is affected by the ability of the commerical bank to lend up to 100% of its deposits - the more deposits, the more money is lent; the less deposits, the less money is lent.

EDIT: I meant to write 1%, not 10% for the $150 Billion.

Saving Tony Morris

The above picture is of Tony Morris. Tony is a programmer and quite well known amongst certain IRC lists.

Today, Tony wrote this:

18:42 < dobblego> Dear All,
18:42 < dobblego> Thank for your patience in recent times. I am notifying you all of my resignation
from this life. I sincerely apologise for the distress this may cause, but please
also understand that the suffering which I currently endure is far less comforting.
I have enjoyed 29 of my 31 years on this planet and I do not – like so many others –
expect an afterlife. Thank you for the fun times that I have shared with so many of you.
18:42 < dobblego> Goodbye.
18:42 < dobblego> PS: I have an osteochondral defect on the front of the articular surface of my talus causing obstruction on dorsiflexion – please confirm this on autopsy.

Tony lives in Queensland, Australia, and after he posted this people on the IRC began to swing into action, finding out where Tony lives, contacting the police and so on. As far as I know, he hasn't been found, but the internet is buzzing over the guy's online suicide note.

Apparently he has been suffering for the past two years as a result of an injury:

Two years ago, I was playing A1 grade squash training about 10 hours per week. Then in July 2007 I suffered an injury to my right ankle.

I've had a problem ever since and I've had two operations - both of which have not resolved the problem. I have been consistently misdiagnosed and today I can barely walk. I haven't been able to walk without pretty intense pain since 15 September 2008.

Last week I got a 3D CT Scan of my ankle and now that I know the ankle anatomy and conditions of the ankle back-to-front, I am frothing at the mouth to tell the surgeon next week what I found. Once again, I have had to diagnose myself - the doctors I've encountered truly lack comprehension skills. Though this is common, I expected better from doctors.

I still start my dirt bike once a week and do a bit of maintenance if I can be bothered enduring the pain. I hope I can play squash again.

Just my little story :)

Update: Indications are that they found him alive and unharmed.

Two more predictions fulfilled

The Independent:

Dr Church said that the most recent satellite and in situ data showed seas were now rising by more than 3mm a year – more than 50 per cent faster than the average for the 20th century.

My prediction:

Sea levels will rise by more than 3mm in 2009.

The Independent:

Sea levels are predicted to rise twice as fast as was forecast by the United Nations only two years ago, threatening hundreds of millions of people with catastrophe, scientists said yesterday in a dramatic new warning about climate change.

My prediction:

More climate scientists will admit that global warming is occurring faster than they thought it would.

Pigs will fly

Don't believe it.

I can't believe it when they say
everything's going to be okay.
I can't believe it when they say
it's better to spend than to pray.

I don't believe it when I hear
that life all ends here.
I don't believe it when I hear
that things are all so clear.

Call me a cynic and tell me I'm wrong
But won't someone please tell me what's going on?

I don't believe it when I see
a perfect TV community.
I don't believe it when I see
people happy and free.
I won't believe it until I see
society consumed with pity,
the outcast receiving care,
and swine flying through the air.

© 1997 Neil Cameron / Greg Dixon

I'm ashamed

But I laughed at this.

OSO's debt Watch

Public Debt on 2009-03-05:

$6.66 Trillion



US GDP in 2008 Q4:

$14.20 Trillion



Debt/GDP Ratio:

46.91%

( [Debt ÷ GDP] x 100 )



Public Debt/Person:

$21,758.85

(Public Debt ÷ US Population)

2009-03-05|$6.66Tr|46.91%|$21,758.85
2009-02-26|$6.58Tr|46.32%|$21,502.89
2009-02-19|$6.50Tr|45.53%|$21,228.84
2009-02-12|$6.45Tr|45.24%|$21,092.69
2009-02-05|$6.41Tr|44.94%|$20,949.72
2009-01-29|$6.31Tr|44.23%|$20,622.37
2009-01-14|$6.29Tr|43.63%|$20,553.13
2009-01-06|$6.32Tr|43.84%|$20,651.62
2008-12-30|$6.32Tr|43.86%|$20,664.55
2008-12-17|$6.42Tr|44.52%|$20,978.60
2008-12-10|$6.41Tr|44.45%|$20,952.05
2008-12-03|$6.43Tr|44.62%|$21,030.96
2008-11-26|$6.40Tr|44.38%|$20,936.85
2008-11-19|$6.36Tr|44.07%|$20,820.19
2008-11-12|$6.36Tr|44.07%|$20,821.75
2008-11-05|$6.30Tr|43.68%|$20,632.59
2008-10-29|$6.25Tr|43.73%|$20,459.01
2008-10-22|$6.19Tr|43.32%|$20,264.04

Sources:
Public debt is $6,661,392,934,515.56. Source
Latest GDP is $14,200.3 billion. Source
Population in February 2009 is 306,146,412. Source (Resident population plus armed forces overseas).

Notes:
* New population figures for February.
* Public Debt + Intragovernmental holdings now approaching $11 Trillion

Cyclone Hamish

That red dot is where I live. The difference between hurricanes and cyclones is that the latter rotate clockwise. Also remember that in the Southern Hemisphere, North is warm.

The cyclone is not going to hit me. In fact by the time it gets to the NSW/QLD border it will probably turn into a Low.

Income Taxes: Australia vs USA

Let's assume that a person earning the median US income - $50,233 in 2007 (source) - earns this amount in the USA, while another person earns the equivalent in Australia.

In the US (using 2009 tax brackets, head of household):

$1195 +
$5032.35 +
$1183
------------
$7410.35 (14.75% of income)

In Australia (taxable income of $50,233 @ US$0.6522 per A$1.00 = A$77020.85):

A$4200 +
A$12906.26
-----------
A$17106.26 -
A$1856.56 (Family Tax Benefit, 2 five year old children)
-----------
A$15249.70
or
US$9945.85 (19.8% of income)



Now what about Black Americans? Median household income for Black Americans is $34,001 (source, pdf, 1.9Mb) . How would they fare in the US and Australia?

In the US (using 2009 tax brackets, head of household):

$1195 +
$3307.50
----------
4502.50 (13.2% of income)

In Australia (taxable income of $34,001 @ US$0.6522 per A$1.00 = A$52132.78):

A$4200 +
A$5439.83
----------
A$9639.83 -
A$2608.27 (Family Tax Benefit, 2 five year old children)
----------
A$7031.56
or
US$4585.98 (13.5% of income)



Now let's check out a certain high-earner from the United States. Let's pick architects. The median household income for Architects in the US is $71,400 (same source as Black Americans above). How much tax would someone earning US$71,400 have to pay in the US or Australia?

In the US (using 2009 tax brackets, head of household):

$1195 +
$5032.45 +
$6474.75
----------
12702.20 (17.8% of income)

In Australia (taxable income of $71,400 @ US$6522 per A$1.00 = $109,475.62):

A$18,000 +
A$11,790.25
----------
A$29,790.25 -
A$903.44 (Family Tax Benefit, 2 five year old children)
----------
A$28,886.81
or
US$18,839.98 (27.1% of income)




In summary therefore:

Households on US Median income (US$50,233):
= 14.75% of income taxed in USA
= 19.8% of income taxed in Australia

Median household income for Black Americans (US$34,001):
= 13.2% of income taxed in the USA
= 13.5% of income taxed in Australia

Median household income for Architects in America (US$71,400):
= 17.8% of income taxed in the USA
= 27.1% of income taxed in Australia


Given the fact that Australia provides universal health care, the amount that low income earners gain in not paying health care costs means that low income earners in Australia are actually better off than those in the US, despite paying slightly more in income tax.

Australia also taxes high income earners at a higher rate.

Any mistakes in my calculations? Feel free to comment.

Thoughts on Tax

The ability to care for the weak and helpless define us as a civilisation. Our inability to help defines us too.

Our wage, our income, does not come to us because we deserve it. It is not due to our hard work or skill. It comes to us because the "market" determines its value, and the market is not concerned with fairness or wellbeing.

Our income comes to us based upon hidden subsidies found in a civil, ordered society. Without police, judges, teachers, doctors, nurses and a multitude of others paving the way, our income would be less.

We owe society for the income it gives us. We owe society for not breaking down. We owe society for preventing crime in our area. We owe society for an educated population, who can make better decisions that benefit us directly and indirectly, financially and not financially.

A country exists as a group of people, not as a canvass for a person's selfishness. The US Constitution was written for a group of people, not for one person.

There are many ways that community can band together and improve things for all. The most normal way is for tax revenue to be raised to pay for things that keep society together (roads, schools, law & order, health, etc). Without this cost being incurred through tax, the individual cost of coping with the inevitable societal breakdown would be much higher.

And it therefore stands to reason that those who benefit most from the market should in turn be made to pay proportionally more - for without society providing the peace the rich person may never have gotten rich in the first place.

Australia slipping into recession

Unsurprising:

Official figures show the Australian economy has gone backwards for the first time since December 2000, putting it on the brink of a technical recession.

National accounts figures out today show the economy contracted by 0.5 per cent in the December quarter. That puts GDP growth for the year to December 2008 at 0.3 per cent. The September quarter's growth figures have not been revised.

I'm pretty certain Q1 2009 will be positive, but I doubt that this will be sustained throughout the year. Fortunately none of our banks are disintegrating.

And -0.5% is actually quite good compared to most nations at the moment.

Terrorists destroy cricket in Pakistan

Sad:

At least six players in the Sri Lankan national cricket team were hurt when masked gunmen fired on the team bus in Lahore while being driven to the Gaddafi stadium on Tuesday.

Six Pakistani policemen and two civilians were killed when 12 masked gunmen on rickshaws attacked with guns, grenades and rockets.

The team bus came under fire as the players headed to the stadium for the third day of the second Test against Pakistan.

Thilan Samaraweera was one of those hurt along with Tharanga Paranavitana. Both are in hospital. Samaraweera has a bullet wound to his thigh. Paranavitana has a gash to his chest from shrapnel.

Those wounded with minor shrapnel injuries were skipper Mahela Jayawardene, Kumar Sangakkara, Chaminda Vaas and Ajantha Mendis.

Samaweera scored back-to-back double centuries in this series, 214 yesterday and 231 in the first Test in Karachi last week.

Cricket always seemed immune from such attacks, but this is the first time members of a national team were attacked and injured while touring a foreign country.

Pakistan has increasingly become a problematic place to play cricket. Some international teams (like Australia) have not toured Pakistan since 1998 because of terrorist threats.

But the hidden victim of this attack is Pakistani cricket. After this attack, no international side will feel safe touring the nation for a long time - perhaps more than a decade. This is a terrible state of affairs because Pakistan produces some great players and the team is always competitive. Without international tours, the Pakistan Cricket Board (PCB) will be unable to gain enough cash to keep itself going, not least spreading the wealth at club level for player development.

Pakistan will be able to send its national team to other countries to play, of course, but without a home series, cricket in Pakistan will suffer mightily. This is a sad day for cricket in Pakistan.

Aussie Current Account shrinks

I like this news:

Official figures show Australia posted a current account deficit of $6.5 billion in the December quarter.

The figures show the deficit has narrowed by nearly $3 billion, or about a third, from the quarter before.

Australia's Current Account has been in deficit for decades. In the past few years, this deficit has reached around 7% of GDP.

But this situation has changed in the last 2 quarters of 2008. 2008 Q3 dropped to -3.2% of GDP while the recent figures for 2008 Q4 indicate that it probably dropped to around -2.0% of GDP.

A lot of this has to do with the commodities boom - Australia is rich in raw materials - while the 4th quarter is probably due to reduced consumption (3rd quarter GDP was +0.1%).

Now that the commodities boom is over and Rudd has put in a stimulus package, I would expect an increase in the Current Account deficit for the first two quarters of 2009.

Our currency remains low, though, which means our exports should be doing a bit better.

-----

As many readers know, I am a fan of balance. To me, the best situation to be in is to have a balanced current account over the course of the business cycle. Australia, like the US, has been on a borrowing and buying binge. Anything which moves our economy to a balanced current account makes it more sustainable. Any nation with big current account deficits or surpluses are asking for trouble, as Japan and the US can testify.

OSO's debt Watch

Public Debt on 2009-02-26:

$6.58 Trillion



US GDP in 2008 Q4:

$14.20 Trillion



Debt/GDP Ratio:

46.32%

[Debt ÷ GDP] x 100 )



Public Debt/Person:

$21,502.89

(Public Debt ÷ US Population)

2009-02-26|$6.58Tr|46.32%|$21,502.89
2009-02-19|$6.50Tr|45.53%|$21,228.84
2009-02-12|$6.45Tr|45.24%|$21,092.69
2009-02-05|$6.41Tr|44.94%|$20,949.72
2009-01-29|$6.31Tr|44.23%|$20,622.37
2009-01-14|$6.29Tr|43.63%|$20,553.13
2009-01-06|$6.32Tr|43.84%|$20,651.62
2008-12-30|$6.32Tr|43.86%|$20,664.55
2008-12-17|$6.42Tr|44.52%|$20,978.60
2008-12-10|$6.41Tr|44.45%|$20,952.05
2008-12-03|$6.43Tr|44.62%|$21,030.96
2008-11-26|$6.40Tr|44.38%|$20,936.85
2008-11-19|$6.36Tr|44.07%|$20,820.19
2008-11-12|$6.36Tr|44.07%|$20,821.75
2008-11-05|$6.30Tr|43.68%|$20,632.59
2008-10-29|$6.25Tr|43.73%|$20,459.01
2008-10-22|$6.19Tr|43.32%|$20,264.04

Sources:
Public debt is $6,578,855,990,306.71. Source
Latest GDP is $14,200.3 billion. Source
Population in January 2009 is 305,952,152. Source (Resident population plus armed forces overseas).

Notes:
* Increased debt/GDP ratio is due to combination of declining GDP and increasing debt.