Liberty Quotes
The Rudd government and Gillard governments have extremely impressive records. In fact in 2012 we’ve had the second most pages of legislation passed in Commonwealth parliamentary history, and this is despite a supposedly unworkable hung parliament. … Both Rudd and Gillard are good communicators. Rudd was an excellent communicator with the public and Gillard was better within the parliament and caucus.
— Bronwyn HinzOngoing Debates
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Voluntary Tax Bill
I have long advocated a Voluntary Tax Bill which would enable Australians to make a tax-deductible donation to the Australian Government and to be recognised for their munificence. Geoff Cousins is a strong supporter of such legislation and would no doubt be a platinum level donor. Even Clive Palmer is keen to pay more tax.
A Voluntary Tax Bill would be an excellent addition to Joe Hockey’s plan for the Australian Tax Office to show where our tax monies get spent.
I suggest the Government establish the following donor categories:
- Queen’s (or King’s) Most Excellent Order of Munificence. An annual donation of $50 million or more (or a lifetime donation of $350 million). Entitles the donor to the postnominal QMEOM, and an annual dinner with the Queen. Lifetime donors to this class will also be knighted.
- Governor General’s Order of Munificence. An annual donation of $25 million or more (or a lifetime donation of $200 million). Entitles the donor to the postnominal GGOM, and an annual dinner with the Governor General.
- Prime Minister’s Elite Circle. An annual donation of $10 million or more (or a lifetime donation of $100 million). Entitles the donor to the postnominal PMEC.
- Treasurer’s Friend. An annual donation of $5 million or more to the ATO. Invitations to prestige events.
- Grand Circle. An annual donation of $2 million or more.
- Platinum Donor. An annual donation of $1 million or more.
- Gold Donor. An annual donation of $500,000 or more.
- Silver Donor. An annual donation of $100,000 or more.
- Bronze Donor. An annual donation of $50,000 or more.
- Marble Friend. An annual donation of $25,000 or more.
- ATO Friend. An annual donation of $10,000 or more.
- ATO Acquaintance. An annual donation of $5,000 or more.
- ATO Supporter. An annual donation of $500 or more.
- ATO Wink. An annual donation of $5 or more.
Each of the donation classes would come with their own privileges and recognition. All donations will be published in the ATO’s annual report and on its website. For the higher level classes, the donor’s name will be highlighted on the Prime Minister’s website under the category ‘major donors to the Australian Government’.
Posted in Budget
14 Comments
The shutdown movement
As Newt Gingrich points out, US Government shutdowns have a long history. There were 12 under former Speaker Tip O’Neill when Ronald Reagan was President. The shutdown is a result of a funding gap where the US Congress fails to pass the Budget presented by the executive branch. While Australia came close to a shutdown in 1975, with delays in the passage of the supply bills, we have not enjoyed a period of Government shutdown.
The longest shutdown period in the United States was 21 days from 15 December 1995 to 6 January 1996. Gingrich was the Speaker.
While these periods of shutdown are little more than an annoyance, the concept could be relied upon elsewhere. For example, why not shutdown the OECD, UNESCO, UN, IMF and World Bank?
As has been noted many times in the Cat, there has been substantial mission creep in these international organisations. Their civil servants enjoy large tax-free salaries (with the exception of US citizens working at international organisations who are required to pay taxes to the US government). They have moved well beyond their founding frameworks and mandates and no international organisation has been put to the sword since 1946.
The League of Nations was disbanded in 1946, with the final motion agreed
The League of Nations shall cease to exist except for the purpose of the liquidation of its affairs.
and its resources sent to the newly formed United Nations.
Can there be any doubt that international organisations have evolved to serve the interests of their employees rather than members? But how can we rid ourselves of organisations which have long since passed their use-by-date?
Take the OECD. There are too many vested interests who lobby for its continuation, from the employees to the Ambassadors sent from member states. It would be difficult, if not impossible, to reach a consensus to terminate the OECD.
But the shutdown option could be a start. Australia could set the example by ceasing to fund the OECD and withdrawing our delegation from Paris. Other countries might join Australia, starving the OECD of funds. Let’s not forget it has a massive liability in its pension fund, with many of its older employees retiring over the next decade or so. Unlike a Government, the OECD and other international organisation cannot impose a tax. If member states withdraw or refuse to finance the OECD, it would quickly become bankrupt.
Even a temporary shutdown of an international organisation could be helpful, showing the world how unnecessary the organisations have become.
The shutdown. A glorious US initiative that could be expanded internationally.
Posted in International
13 Comments
Well maybe he can’t put you in a concentration camp . . .
But there are other things he can do and he’s doing them. This is so brazen that Obama obviously could not care less who you are or what you do. If you are his enemy then you will be done over and what are you or anyone else going to do about it?
It doesn’t take a brain surgeon to know that the IRS audit of Dr. Ben Carson can’t be a mere coincidence. . . .
Carson on Wednesday told Fox’s Bill O’Reilly that the IRS began examining his real estate holdings after his speech to the National Prayer Breakfast in February, in which he used tithing in the Bible to make a compelling case against progressive taxation. A humiliated Obama sat steaming a couple of seats away.
Then there’s the NSA Surveillance program that not only can but does track phone calls and emails. I just tried googling “NSA Surveillance” to find a statement of the problems it causes and it creeps me out to find that I could not easily locate a posting that was critical of the program. This is the best I could find and this was in an article defending the NSA:
The NSA has been in the centre of a firestorm since the Snowden leaks, which revealed wide-ranging programs which scoop up data on telephone calls and Internet activity.
I’m sure we all feel protected by governments that know what we are saying to each other by phone, fax or email.
And then, with the closing of non-essential government services there are many instances just like this:
The Park Service appears to be closing streets on mere whim and caprice. The rangers even closed the parking lot at Mount Vernon, where the plantation home of George Washington is a favorite tourist destination. That was after they barred the new World War II Memorial on the Mall to veterans of World War II. But the government does not own Mount Vernon; it is privately owned by the Mount Vernon Ladies’ Association. The ladies bought it years ago to preserve it as a national memorial. The feds closed access to the parking lots this week, even though the lots are jointly owned with the Mount Vernon ladies. The rangers are from the government, and they’re only here to help.
‘It’s a cheap way to deal with the situation,’ an angry Park Service ranger in Washington says of the harassment. ‘We’ve been told to make life as difficult for people as we can. It’s disgusting.’
Sure it’s disgusting but it’s not just politics as usual or at least it wasn’t until now. The full resources of the American government are being used in a punitive way against individuals and groups, against American citizens who disagree with the President. In reading not just the American media but even the right side blogs, the most astonishing part is the absence of expressions of genuine outrage. Maybe with the American media as latently totalitarian as it is there is nothing that can be done, and maybe no one writing a blog wants to be done over by the tax office, but if it doesn’t make you seriously angry, and not just a little frightened, I don’t know what would.
Posted in International
179 Comments
Václav Klaus on Hayek
Hayek’s ideas returned to public attention also with the financial and economic crisis at the end of the last decade (which my country survived relatively well). It seems evident that Hayek proved to be more relevant than Keynes in the analysis of the causes of such a crisis. Hayek tells us that a crisis is usually the result of “easy money policy,” of the irresponsible playing with interest rates and of the dream that fiscal policy can substitute for the much needed restructuring of the economy. He would no doubt consider the currently popular “quantitative easing” a pseudo-medicine. Those who do not know it should reread his Prices and Production, published 80 years ago.
Europe needs Hayek and his merciless analysis of the over regulated, controlled, centrally administered European economic system and of the slippery road to serfdom that we have already embarked on. And I hope that American students, too, will come to understand this new “fatal” conceit.
Posted in Economics and economy
8 Comments
Andrew, beware of spin on Obamacare
In a brief mention of the US Shutdown on the Power Wireless last week there was a hint of criticism of the Republicans, as though they should not be allowed to hold the President and the nation to ransom over the scheme. I think that Andrew and Chris have not plumbed the depth of the debacle that is Obamacare. That is fair enough, neither have I the but my comments don’t circulate to hundreds of thouands of people. And the more you find out, the worse it gets.
On the side, a defence of Andrew who was accused of running dead on the abuse of Warren Mundine, he has a string of powerful pieces over the last two days, including the faux Aboriginal issue, and an especially good one on the apalling spin of Peter van Onselen. In some ways this guy is worse than the stenographers who don’t pretend do be anything but mouthpieces for the ALP.
Can someone like Steve give out some dot points for commentators to convey some hints about the many downsides of Obamacare?
This may help, and the strange case of Chad Henderson.
Can a 300% increase in premiums actually be a success? That’s what one reporter is claiming.
One of the more interesting stories coming out this week following the opening of the health care exchanges across the nation is the strange case of Chad Henderson from Georgia. Chad is a healthy 21 year old male. One of the key demographics that the government needs to make the program viable.
Previously, he hadn’t had health insurance. But he was “lucky” to be able to find a plan on the new health care exchange. After jumping through some Internet hoops, Chad walked away with health insurance. And he only has to pay for $175 a month. Since his annual salary is $11,500, he doesn’t qualify for any tax credits or subsidies that the White House constantly touts.
So he’s stuck paying that entire premium. Which amounts to around 18% of his annual salary.
There’s more to this story. Chad had another health plan alternative. One cheap pre-Obamacare health plan would have only required him to pay a little more than $44 a month. Unfortunately, plans like this won’t be available to people like Chad after Dec. 31 of this year.
And yet the report has the gall to actually claim the $175 plan offered through the exchanges a success story.
When asked why he purchased insurance at $175 a month, when he previously could have purchased a cheaper plan, Chad had a very interesting response. A response that’s probably common amongst many people who make these irrational decisions.
Chad described himself a very strong supporter of President Obama. And he purchased the plan because he wanted the law to succeed. Considering that young people like him are crucial in making this plan succeed, we’re not sure if we should be worried or terrified.
If the Affordable Care Act is a success (and we don’t think it will be), it will be because of people just like Chad. Who blindly follows the ideas of those in power because it’s all for the greater good. Unfortunately for Obama, there’s plenty of evidence that the law is going to have an uphill battle to succeed.
Posted in Uncategorized
18 Comments
Indexing versus active fund management
The vast majority of actively managed funds underperform the market index. This is not a surprising statement of fact – active fund management involves significantly higher fees than index funds (or passively managed funds), higher transactions costs (due to frequent trading) and increased tax liabilities (again due to the frequency of trading).
Of course some actively managed funds do outperform the market (in a net return sense). Yet an investor does not know ex ante which active fund managers will outperform the market in any particular year or over several years. A funds manager may outperform the market for several years yet sink below subsequently.
Past performance, after all, is not a reliable guide to future performance, although it is frequently the only guide available.
According to the ABS (Cat No. 5655.0), in the June quarter 2013 the consolidated assets total managed fund industry in Australia was $1.7 trillion (ie: $1.7 * 10^12). This includes both actively and passively managed funds. This is a hefty sum (no wonder the former government was eyeing it off).
Small differences in net returns make substantial differences to the overall return an investor achieves. Returns which over a long period can significantly affect the wellbeing of a retiree and his or her call upon government social security.
That is why we need a competitive and transparent funds management industry, where investors are reliably informed of fee structures and fund performance in a relative sense, both against other actively managed funds but also against various index funds.
No doubt the debate about the relative merits of active versus passive funds management will continue. Some will argue that the additional fees charged by active fund managers are a justifiable return that reflects the ‘value’ added by the relevant manager.
I’m not in that camp – I think that for most investors the use of pure passive funds management would make them better off.
However, there can be no doubt that those managers who charge active management fees yet in practice offer an investment that is merely following the index are ripping off their clients. This is known as ‘closet indexing’.
A report by SCM Private, a London-based investment adviser, found that half of all UK active managed funds are closet indexers. This trend is described as a
scandalous index cloning epidemic
After analysing £120 billion of UK funds, SCM Private found that investors could have saved £1.86 billion in fees if they had moved to pure index funds rather than these closet indexers.
As noted by John Authers in the Financial Times, the incentives to ‘active’ fund managers is not to outperform the market but to accumulate assets
This is because they charge a percentage fee on assets under management and are judged by comparison with their benchmark index and with their peers. To hold on to assets, therefore, it is vital not to underperform peers. Make a big contrarian bet and you may be separated from the herd. So everyone herds into the same stocks.
On average, active management fees (by genuinely active fund managers and closet trackers alike) are three times those of index funds. It is clear that one should avoid closet trackers.
Caveat: I am not a licensed investment adviser. This blog is not meant to provide individual investment advice, but merely to discuss active and passive funds management.
Posted in Superannuation
8 Comments
The hypocrisy of progressives
As things stand, the world remains upside down. The left rather than the right defends reactionary religion, as long as the reactionaries do not have a white skin. You should never tire of pointing out that they are complicit in an enormous betrayal of progressive principles. Women, gays, secularists, liberals and socialists from ethnic minorities ought to be able to turn to British liberals and leftists for support against the patriarchal men, who seek to control them. Rather than fraternal greetings, they find indifference and hostility. The mainstream of liberal-left opinion in the universities, media, civil service, and Labour and Liberal Democrat parties has convinced itself that it is culturally imperialist to demand that members of minorities should enjoy the same freedoms as the rest of us.
(HT: Skepticlawyer)
Posted in Cultural Issues, Hypocrisy of progressives
57 Comments
Leave the economy to find its way
The economy continues to sink. Even as the new Abbott government begins to clean out the stables, there is this report which I hope more will be made of. Via The Australian we are led to this report prepared by Australian Development Strategies Pty Ltd which is run by a former ALP Senator. This is how it starts:
The Australian economy has been generating jobs for only half the new entrants to the Labor market since early 2012.
The Labour underutilisation rate is now at 13.5 percent, virtually the same as the 13.6 percent we saw during the worst of the GFC in mid-2009.
While blue collar jobs in manufacturing continued to contract during the past six years of Labor Governments, jobs which were either funded or regulated by Government rose to unprecedented levels. [Bolding added]
They attribute this deterioration in the labour market to the new industrial relations laws which is, of course, a major part of the story. But what they do not attribute this to is the “stimulus” which re-directed our resources away from value-adding production towards the useless junk Labor is famous for funding. The last of the three points made above ought to drive home where the problems lie.
Leave the economy to find its way. Just cut spending and balance the budget as soon as you can. The rest will take care of itself.
Posted in Economics and economy
25 Comments
Bankers as scapegoats
I’m normally a huge fan of Pierpont (Trevor Sykes) but yesterday’s offering was a tad annoying.
Pierpont’s social conscience is a tiny shrivelled thing that has hardly stirred for decades. But even your hard-bitten old correspondent is starting to become perturbed at the behaviour of the world’s major investment banks.
They make zillions of dollars, rip off clients mercilessly and are above the law. Pierpont retains only a faint glimmer of the old Protestant ethic, but it keeps whispering in his ear that any corporation that is too big to fail must necessarily be too big to exist.
Well – okay. That anti-banker attitude has began to mainstream in the last few years. But what is Pierpont’s actual complaint (emphasis added)?
The rapacious behaviour of the big investment banks led directly to the global financial crisis. Worse, they are still manipulating markets. The same big banks that are proven to have been manipulating the Libor rate are alleged to have been manipulating the interest rate swaps market, and have probably (as Pierpont has mentioned previously) been manipulating the gold market.
Consider the Libor scandal, where the banks were found to have manipulated the interest rates but the case against them was thrown out last March by Federal judge Naomi Buchwald of New York’s southern district.
Of course it was thrown out – what the banks had been doing was not a crime. If only more judges would be so sensible.
So here is a description of what the banks had been up to:
Libor is the London Interbank Offered Rate, used as the benchmark in financial dealings for trillions of dollars around the world. Banks might lend money to each other, for instance, at Libor plus 50 basis points (0.5 per cent). The Libor rates are published daily at 11.30am GMT by Thomson Reuters for 10 currencies over terms ranging from overnight to one year.
The British Bankers’ Association (BBA) assembles a panel of 16 banks who predict each morning the rates at which they can borrow. Thomson Reuters receives the rates, eliminates the top and bottom four quotations, averages the middle eight and so produces the Libor rate for the day.
So the banks voluntarily disclose information and then allow everyone else to piggy back off that information to set prices in the market. So what happened next?
… a bunch of bank clients claimed banks had been submitting artificially low rates between August 2007 and May 2010. These dates cover the depths of the global financial crisis, when many of the world’s leading banks were arguably insolvent.
…
The clients said the banks understated their borrowing costs because they wanted to pretend to be sounder than they actually were. The same banks then sold Libor-based financial instruments to their clients at those artificially low rates. The City Council of Baltimore, for example, was claiming damages because it spent hundreds of millions of dollars buying interest rate swaps tied to artificially low Libor rates.
It is very hard to get excited about this. So what? Price takers engaged in voluntary transactions.
What is particularly interesting about all this is:
The clients must have thought they were on an easy win in the case because some of the banks had already paid fines after being accused of manipulating Libor. Barclays paid $US450 million ($479 million), UBS $US1.5 billion and the Royal Bank of Scotland $US615 million. Yet oddly, no senior figure from any of the banks has been prosecuted, or will be.
Buchwald was aware of these fines, but dismissed them airily. She said: “It might be unexpected that we are dismissing a substantial portion of the plaintiffs’ claims, given that several of the defendants here have already paid penalties to government regulatory agencies reaching into the billions of dollars.
“However, these results are not as incongruous as they might seem. Under the statutes invoked here, there are many requirements that private plaintiffs must satisfy, but which government agencies need not. The reason for these differing requirements if that the focuses of public enforcement and private enforcement, even of the same statutes, are not identical.”
Here the judge is exactly correct – just because government agencies had been successful in a regulatory shakedown doesn’t mean that any wrong-doing had actually occurred. Shame on Barclays and the Royal Bank of Scotland for succumbing to regulatory blackmail.
Posted in Economics and economy, Uncategorized
22 Comments