The Flogging of Punchinello

Month: November, 2014

Pincus duels the Edwards Dragon

‘In conclusion, Edwards seems to have had difficulty in applying the System of National Accounts to the issue, he confuses GDP, GNP and economic welfare and he does not understand the redistributive effect of a rise in the exchange rate. As a result, Edwards greatly understates both the benefit of the boom and the burden of adjustment caused by the fall in the international terms of trade.’ – Pincus at the Lowy Interpreter

Quite a charge to level at a member of the Reserve Bank Board. Very much worth reading the article in full. It validates my skepticism of Edwards, but I wasn’t even close to having the nous to pick it apart the way Pincus does.



Edwards responds to Pincus

The point of Beyond the Boom is that the decline of the investment phase of the mining boom, the decline in mining output prices and the decline in our terms of trade do not necessarily mean we are heading into recession or depression as some have warned. Here we are, well into the inevitable decline in the terms of trade and well past the peak in mining investment, yet despite grim predictions, we are getting by. Growth has slowed and no doubt will remain less than its potential until non-mining investment and household consumption strengthen. Even so, real output growth is around 2.5% or a bit better, unemployment is stabilising and we are creating jobs. For three years now labour productivity growth has been well above the average of the last few decades, and in the most recent numbers multifactor productivity has turned the corner and is now again increasing. Wages growth has slowed more than expected and the exchange rate has usefully depreciated.

All these are good and hopeful signs. There is no economic crisis, no collapse. We do not have, as Maurice Newman, the chairman of the Prime Minister’s Council of Business Advisers predicted, zero growth. We have not, as economist Ross Garnaut predicted, fallen into the worst recession since World War II. So far, so good. Things are turning out pretty much the way expected in Beyond the Boom, and not least because the boom was not as big as widely supposed – and in many respects is not yet over.  The Interpreter


Edwards still doesn’t address the point that the structural balance of the economy has shifted. Private debt is high, housing is in a speculative blow off, bank balance sheets are stretched and the composition has shifted markedly towards mortgages, banks are holding little capital, the LMI’s are undercapitalised and on and on. I’m not making the point that things go badly, I’m just frustrated that there is no analysis of this outside of the guys at Macrobusiness and I’m inclined to think that they’re Cassandra’s.

Kevin interviews Phillip

‘The globalisation of superficiality’

A really interesting interview.

“Time to leave now, get out of this room, go somewhere, anywhere; sharpen this feeling of happiness and freedom, stretch your limbs, fill your eyes, be awake, wider awake, vividly awake in every sense and every pore.”
― Stefan Zweig, The Post-Office Girl


Frantisek Kupka / c.1911 / oil on canvas / 133 x 84 cm / Museum of Modern Art, New York, USA

“I know already that I will return to this day whenever I want to. I can bid it alive. Preserve it. There is a still point where the present, the now, winds around itself, and nothing is tangled. The river is not where it begins or ends, but right in the middle point, anchored by what has happened and what is to arrive. You can close your eyes and there will be a light snow falling in New York, and seconds later you are sunning upon a rock in Zacapa, and seconds later still you are surfing through the Bronx on the strength of your own desire. There is no way to find a word to fit around this feeling. Words resist it. Words give it a pattern it does not own. Words put it in time. They freeze what cannot be stopped. Try to describe the taste of a peach. Try to describe it. Feel the rush of sweetness: we make love.”
― Colum McCann, Let the Great World Spin