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Monthly Archives: March 2010

What an interesting article. Apparently Kevin Rudd is directly addressing the question of whether he is an economic conservative and linking it to his current policies. I think this is the first time I’ve heard him directly link the two concepts, which is dangerous – because that means people will start making connections too.

Is Rudd so stung by Liberal accusations that he is a reckless spender that he feels like he needs to explain himself? Or have the Liberals successfully gotten under his thin skin? Either way, it seems foolish to directly address the issue and blow away all perception that he is an “economic conservative”, whatever that means. When he unexpectedly cut spending by $1.4bn during the campaign, it so completely threw off Howard’s game that it alone would have won him the election. People didn’t know what it meant! Is he a supply-sider? Heavens to Betsy! Is he just a Keynesian, just lowering spending during the boom? It was the very ambiguity of the phrase that made it successful. And he’s dashed all that by tieing it directly to the very loaded word of Keynesianism.

Just as interestingly is the fact that Rudd considers Keynesianism to be economic conservatism. By and large in the economist’s world, Keynesians are to the left and monetarists to the right. We may not have the radicals like Paul Krugman or Ron Paul here in Australia, but there are clear differences. The neoclassical/Keynesian fusion is very fragile indeed. It is only in politics that Keynesianism could be considered ‘conservative’ once you include the unideological politicians on both sides who just want to pork-barrel, and once you include the socialists in the Labor Left and National Party. Perhaps he’s simply trying to redefine what the field means for the uneducated masses, who surely are unaware of the distinction. After all, I imagine most economics graduates are unaware because its not really taught in universities.

It’s very interesting. And for the record, I fully agree with Rudd’s broad. Government has a role in stimulating spending during recessions and providing vigorous microeconomic reform where possible. I may just differ on how exactly to d that.

Also, Andrew Robb, the new Shadow Finance Minister has said that the business community considers Ken Henry to be the de facto Treasurer (because Wayne Swan’s not up to the job). I’m not particularly surprised, but the follow-up comment is what gets me:

“He’s seen as a sort of de facto treasurer because I think there’s no confidence in the ability or understanding of Wayne Swan and Kevin Rudd and Lindsay Tanner in the essential running of an economic program in the country. Ken Henry is dictating many of the decisions and that leaves a perception that he is more partisan.”

As I think I’ve said in the past, Ken Henry was widely abused during the Howard years by the left as being a very partisan appointment. He was quoted as allegedly saying that the (Liberal) party’s interests were more important than Australia’s interests. In fact, it was widely thought (by commentariat on both sides) that Henry would resign upon the election of the Rudd government

And because I like to round things out, here’s an interesting article about Glenn Stevens.

And yes, the surfeit of posts today is because I have an assignment due.

As I earlier reported, the Greens were close to winning the balance of power in the lower house in both Tasmania and South Australia as at election day. The votes have been counted in SA and the Liberals have conceded defeat, with the Rann Labor government holding a clear majority of seats. But in Tasmania, the Liberals and the Labor Party are currently tied with 10 seats each, and the Greens holding the remaining 5 seats. Obviously 10 is less than 50% of 10+10+5. Neither Liberal nor Labor wants to form a coalition with the Greens, making this a very interesting state of affairs. A constitutional issue arises with the appointment of government – in a situation where the seats are precisely balanced, who will the Governor appoint? The political complications come from the fact that the future Government will have to deal with the Greens (or the future Opposition) in both the lower and upper house.

The constitutional issue is interesting because who the Governor appoints is not clearly set out in the Constitution and there is little judicial exegesis of the point because it is a non-justiciable matter. It’s all governed by strong constitutional conventions which suggest that the one who has the “confidence of the lower house” be appointed and that usually means the party or coalition of parties with the majority of seats. Apparently it is possible to form a minority government, where the party with the most seats (but still less than 50%) will form government without the need to formally declare a coalition and that has happened throughout Australia’s history. I say apparently, because I wasn’t aware of any such governments (though one currently exists in Victoria, and in Canada, and existed just ten years ago in Tasmania) and I only know about it after a bit of research. But to my very limited knowledge and research, an evenly split situation has never occurred.

Currently, the media focus is on pre-election comments by Bartlett, the Tasmanian Labor leader that in the event of exactly this situation, he would advise the governor to appoint the party with the highest number of votes in Tasmania overall. This is currently the Liberal Party, and the Australian reports that he is under pressure from within the Tasmanian Labor Party as well as the Federal Labor Party to change his mind. Kevin Rudd feels that a Liberal victory now would give the Federal Liberal Party momentum as we race towards a Federal election later this year with two marginal Tasmanian seats up for grabs.

I think this is so fascinating precisely because of all the scenarios that could play out. The simplest scenario (constitutionally speaking)  is that Bartlett will advise the Governor to appoint the Liberals, in which case he will. But that is also the least politically plausible, because that would mean he loses all power. If however, Bartlett advises the Governor to appoint him as Premier contrary to his pre-election comments, the Governor can either listen to his advice or not. Strictly speaking, those comments are irrelevant to the constitutional test (whoever has confidence of the lower house), but because the Governor is not bound by reasons or precedent, he can take whatever he wants into account. Furthermore, the test itself surely demands that the Liberal party be appointed. If the primary criterion of “most seats” is unavailable, then surely the secondary criterion of “most votes” kicks in.

I don’t think its as simple as that. Another convention demands that the Governor take the advice of the current caretaker Premier, who is (again by convention) the pre-election Premier – ie Bartlett. The Governor may only ignore the advice in certain circumstances, namely when appointing Premiers or in the event of illegality. And yet, I would argue, the very fact that there is a formality where Bartlett must advise the Governor means there is a certain barrier that must be passed before the Governor can ignore his advice. The power to ignore advice, in my humble opinion, isn’t contingent on the mere fact of an election, it is contingent on ‘confidence in the house’. Whilst having more votes indicates more support, I wouldn’t say that shows sufficient confidence. There is a strong argument that the House itself should be allowed to decide, by letting the Greens choose who to side with and allowing Bartlett to continue governing in the meantime.

Even more interestingly, I would ask, what if the Governor does the “wrong” thing? The consequences will be absolutely zilch. Given the uncertainty of the constitutional conventions, there is no “wrong answer”. There is a strong case for listening to, or ignoring Bartlett’s advice. Even if something were objectively and unambiguously wrong, only two people can fire the Governor – the Premier (who was just appointed by the Governor) or the Queen (probably on the advice of the Premier). The courts cannot get involved in an inherently political matter. The people cannot vote out an unelected official, nor demand another vote for the Premiership. The Queen herself has shown little desire to fire her representatives in Australia contrary to the advice of the Premier/Prime Minister (to my knowledge, it has never happened). The Parliament had requested she fire the Governor-General during the Whitlam dismissal, but she declined. It’s hard to imagine her taking orders from anyone aside from the appointed Premier in this much more Republican climate. The only deviation from the Governor’s choice for Premier were if the Greens were to turn around after his appointment and declare their support for the Opposition to form government.

So then, given that scenario, what would you do if you were a Green? As I have argued, forming a coalition and becoming part of executive government is a double-edged sword that is perhaps too sharp to handle. You can do one step short of that however – just write a letter to the Governor, advising him that you will support the Labor or Liberal Party in passing the Supply Bill. The Governor is then obligated to appoint that party as Government, you won’t sully your hands with power, and you still maintain the balance of power. A far more appealing option is to wait for the Governor to appoint a Premier, then wait for the first contentious legislation to pop up and then declare your support for the Opposition. You can wait several years for the right legislation to pop up – perhaps a bill banning gay marriage, or cutting down trees – something you know your base will love. It’s the perfect way to keep your grasp on power, whilst not being sullied by the sausage-making that you will inevitably be involved in. Just white-wash your crimes with a Messianic crusade against [evil conservative bill]!

Sarah Palin refers to the mainstream media as the “lame stream media”


She follows that ripper with this left-hook out of nowhere:

People make fun of us for only opposing policy and not proposing alternatives, they call us the party of NO. Well, we’re not the party of no! We’re the party of HELL NO!


Palin 2012!

Nick Minchin, one of the Senators for South Australia and the leader of the Opposition in the Senate has retired today in a surprise decision. It was apparently sparked by a bout of reflection after his son was tragically injured in a boating accident. As someone who has been reflecting about the purpose and direction of my own life, I can only imagine what it must be like for Minchin who is giving up one of the safest jobs in the world (and certainly one of the most interesting) for something else. I think its a testament to the genuineness of Minchin’s grief that neither the Herald nor the Australian cast any doubt upon his explanation.

Minchin is one of those rare sorts in politics – an intellectual and a believer, but also a man who got things done. Amongst those on the Right, Minchin is considered one of the only purist libertarians on the Liberal benches. He’ll be remembered in recent times as the man who destroyed Turnbull (a hero of mine) and replaced him with Abbott “just” because of the Emissions Trading Scheme. Disagree with him though I may, I think this episode shows the steel behind Minchin’s beliefs and his willingness to bend practicality to suit his beliefs… and then turn it into an advantage for the Liberals.

But Minchin also has a long track record as Finance Minister and Leader of the Senate, though one that is seldom known. I personally only became aware of him a year or two ago, because he’s never been one who sought the spotlight. I’m sure he’s had his share of factional wars, but he doesn’t seem to have let it damage the party (until Abbott). Indeed, its stunning that as Finance Minister he never tried to claim any credit for the economic prosperity that the Liberal government brought Australia. The ALP could really learn a lot from Minchin. Hint hint. As Finance Minister, I believe he was responsible for at least part of the sale of Telstra (at least T3). As leader of the Senate, he mercilessly wielded the guillotine during the waning years of the Howard government when they held a Senate majority.

I can’t say I agreed with much of what Minchin did, but he was certainly one of the few Senators whose name sticks out in my mind. I sincerely wish him good luck on whatever path he takes.

In both state elections this weekend, the Greens have won fairly decisive victories. With punishing votes against the Labor party in heartland seats, the SA Rann Government is clinging onto government by sole virtue of the fact the Liberals weren’t a sufficiently promising alternative. The deal is a whole lot worse in Tasmania where the Labor government has suffered the worst possible defeat. Not only has it lost government, but the Liberals have not succeeded in getting a majority of seats either… they are reliant on the Green minority.

It’s not really surprising – after all, the Liberals are fairly disorganised at the state level just about everywhere and unable to mount an effective Opposition, whereas Tasmania has always been the Green’s strongest state – Bob Brown founded the party there, and they’ve had consistently strong primary votes (rather than relying on preferences like everywhere else).

This is a big blow to Bartlett in Tasmania because ALP strategy has been focussed on one thing, and one thing only – do not let the Greens grow any bigger. That’s why Peter Garrett has yet to be fired, or demoted to the rank of pond scum. He’s needed to keep the inner city votes in the ALP. It’s why Rudd refused to negotiate with the Greens in the Senate to pass the Emissions Trading Bill and focussed on the Liberals. He doesn’t want them to gain a higher profile, or any sort of power. As the ALP moves closer to the centre, it’s wary of being flanked from the left by the Greens. And the ALP must inevitably move towards the centre (just as the Liberals must) because that’s where the evidence lies. Sometimes left-wing ideas work, and sometimes right-wing ideas work. If you abandon the centre to fight the Greens, you abandon the richest part of the electorate – independent voters who care about works, the voters who swing seats.

But, for my part, I think that gaining power will be the downfall of the Greens. Their brand of ultra-left policies only works if its never implemented. There are many logical critiques of capitalism which I think are quite valid, but they can’t be implemented in the piecemeal fashion that a minority party would be able to implement. A piecemeal approach where some regulations are much tougher than others are what (partially) causes the US regulatory problem (and therefore, the Global Financial Crisis). Plus, you’ll find that many Greens policies tend to be impromptu reactions to bad government (or opposition) policy and tend to be ideologically contradictory. For example, they’ll take a laissez faire attitude to crimes like drug use or terrorism but a very harsh, “innocence is no defence” approach to crimes like war crimes or anti-competitive behaviour. Once you actually implement their policies, and begin to see some of the (obvious) negative consequences, the Greens begin to lose a lot of their lustre. It’s all very well to condemn free markets, but once you’re in government and start implementing protectionist measures that raise the price of goods (and hurt jobs) people begin to lose trust in you.

The Greens, to their credit, are cannier than you might think. They realise that they aren’t an ideological force so much as a brand name. They don’t have detailed policies anywhere on their website, and they stick to a few core issues their base cares about. To force them into a position of actual power (namely a ministerial position) would force them to have detailed positions, which could seriously hurt them in the long run. That’s why neither the SA or Tas Greens are willing to form a coalition government with either Labor or Liberal. They’re perfectly happy to play the minority party. They’ll vote for everything but a few key pieces of legislation that they know their base will support. It’s actually quite smart really.

If I were the new government, I would offer to make the Greens my Treasurer. That would be hilarious.

So, I was having lunch with someone the other day and I mentioned offhand that entry-level management consultants and investment bankers got almost double what a entry-level public servant gets. My friend tells his friend (who doesn’t know me) that I said it so gleefully because I’m not a big fan of government. The next day, someone asks me… so what’s with all these facebook statuses complaining about the government (and in particular, Barack Obama)?

Hmm… so it looks like I have a bit of an image problem. Yes, yes, I know I’m a big fan of privatisation and of minimising bureaucracy and taxes. Yes, yes, I have a strong libertarian streak to my political beliefs, but I don’t consider myself an opponent of government. In fact, I’m rather a fan of it. It’s the most efficient way of fixing many of the world’s problems. Poverty can’t be fixed by market forces alone because of the poverty cycle. Government needs to work with the market by providing an open and cheap education system to (at least) the majority of the poor that will actually educate them rather than give the pretense of educating them. Government has a role to play in infrastructure development, pushing new societal goals and nudging cultural change where rights are being infringed.

The thing, I guess, that irks me most is that I’m a big fan of Barack Obama. He is the most rational president that America has had in a long time, and he ranks alongside Clinton in believing in evidence-based policies and in the art of the possible. I would probably rank him amongst my three favourite presidents (with Jefferson and Clinton). The problem is, that I disagree vocally with some of his policies and his methodologies. The Economic Recovery Act (ie the bailout and the stimulus package) was absolutely necessary to save America from an even bigger recession but large parts of it were implemented badly. There is increasing regulation reducing flexibility in the financial system that reduces its ability to respond to future crises. One big regulator should have been appointed to oversee the entire system, and that regulator should have been the Federal Reserve. But overall, I am rather a fan of Obama’s response. His decision to extend the TALF to auto loans and student loans was interesting, as was his decision to have a general bailout rather than targetting specific banks (like the UK government did). The latter decision proved the wiser and more effective choice as the UK government tries to extricate itself from both RBS and Northern Rock (and as the US government tries to extricate itself from AIG).

My criticisms are not usually directed at the Obama Administration itself. If I have a criticism, it’s that he isn’t taking on the mantle of leader of the Democratic Party and that isn’t coalescing them around him. My criticism is directed at Congress – both houses and both sides of the aisle have failed the American people, and the people of the world. Their inability to reform health care after a year of debate is pathetic. Their attempts to fix the financial system have been tenuous at best. They targetted credit card companies… yes they played a role, but the tiniest ever role in this crisis. Why haven’t you fixed the giant hole in your regulatory system? Why haven’t you reinstated Glass-Steagall yet?

So, what I want to do in this post is to state (broadly) what I think of the major governments in Australia:

  • The Rudd Federal Government:
    • Generally, a very competent government. It’s stimulus package is probably the best designed in the world and the most effective (and not merely because of its relative size). It hasn’t done as much as he promised… but he has done a lot. He’s ratified Kyoto and apologised to the Aboriginal people. He’s done some reforms of the financial system (like removing certain powers from the ASX and given them to ASIC), but let’s face it – our regulatory system was pretty good to begin with. He’s been trying to fix two of the other major promises he made during the last election. He gave a good go at passing an Emission Trading System and he’s now attempting to reform the vertical fiscal imbalance in the health care system.
    • His ministry is generally top-notch (unlike most Labor governments where factional hacks are rewarded with high positions). There are big exceptions, the obvious one being Peter Garrett. Garrett has a superb record of being sub-par. His failings as a shadow minister got half his portfolio stripped from him before he even became minister. His inability to make any headway with the Japanese on the whaling issue has seriously damaged foreign relations with one of our biggest trade partners. I don’t know why he wasn’t promptly demoted after the insulation controversy. How can we sleep when the beds are burning? The other incompetent is Stephen Conroy, the Minister for Censorship of everyone but Telstra. He was meant to be splitting Telstra in half and implementing a National Broadband Network yet no progress has been made on the first front and he failed to table a major report on the second front.
  • The Federal Opposition (Abbott)
    • I’m actually not as negative on Abbott as you think I might be, considering he’s well known as a Catholic pugilist and rabid social conservative. He reminds me a lot of Scalia – a bit thin on theory, but a stalwart ‘intellectual’ of the conservative wing of the Liberal Party. And Abbott is not dogmatic about most things – his takeover of Mercy Hospital in Tasmania showed a radical departure from both common sense and Liberal principles of federalism. Even in his personal life, he hasn’t always stuck to Catholic doctrines (say, the illegitimate son he had which turns out to have been someone else’s illegitimate son?). Overall, I think Abbott looks at the evidence, and tries to come up with the most practical solution to the problem. Even if that means overturning sacred cows like Federal-State relations or the Constitution. I think he makes a useful contribution to the intellectual debate in Australia… as long as he does it from Opposition.
  • The Federal Opposition (Turnbull)
    • This paragraph exists as wishful thinking on my behalf that Turnbull could ever return. He’s possibly the most competent and practical person the Liberal Party has had for a while. It was also great to see a Liberal leader who actually believed in classical liberalism and the individual. The problem was that he was never a team player, and it was his ultimate downfall. He would have done spectacularly as a President. Perhaps that’s why he pushed so hard for a Republic.
  • The NSW Labor Party (or as I call them, the ‘evil Labor Party’) is grossly incompetent on every front. They fail to meet my lowest standard for a government in power which is the ‘lump of coal’ test. If a lump of coal does better than you do, you fail. In every area of policy, the Labor Party has either done nothing, or has implemented a policy which makes things worse rather than better. I cannot think of a single policy which I even broadly agree with since Bob Carr left office. They would be the strongest candidate for last place on my ballot form if not for the existence of the Christian Democrats, Family First, One Nation, the Shooters Party, the 4WD Party, the Greens….
  • The NSW Liberal Party has the unique distinction of being even more incompetent than the NSW Labor Party. With corruption, personal scandals and incompetence abounding on the other side, still too few voters have heard the name ‘Fatty O’Barrell’. Or Barry O’Farrell… whatever his name is. Every time a scandal comes along, there’s always some bland-faced shadow minister trotting out some standard line about how you can’t trust NSW Labor. Goddamit, if I were Opposition Leader, I would be soaring to victory right now in the polls… but it seems the public is trying to figure out which side of politics it hates more. They would be the strongest candidate for last place on my ballot form if not for the existence of the Christian Democrats, Family First, One Nation, the Shooters Party, the 4WD Party, the Greens….
  • The Queensland government (Anna Bligh):
    • I’m not too familiar with the politics of other states, but I get a solid sense of competence from her government. Which, I think is rather novel, don’t you think?
  • Arnold Schwarzennegger:
    • I am very impressed by Arnie. He probably has a tougher job than even the President because the stupidity of the US Congress is theoretically fixable, but the stupidity of the California Congress is mandated by the state Constitution. Arnie took over the reigns from Governor Grey Davis just after another financial crisis caused by energy deregulation, and he seems to have steered the state back into a half-way reasonable shape before the GFC wiped it out again. He did this despite a hostile Congress which wanted to fund everything and everyone but he fought them off with the sharp use of his Veto pen. I guess the pen really is sharper than the sword, eh Conan? All the while, he’s helped fashion some of the most groundbreaking environmental regulations in the US (or even the world) and pushed a reasonably liberal social agenda too. There have been several embarassing backdowns, like his solemn pledge to remove the car tax… then his even more solemn press conference to announce the return of the car tax. And the fact California’s public education system has plummetted from hear first to last in so short a period of time. But that’s caused by guaranteed funding to public education (due to the Constitutional proposition process) and the evil Teacher’s Unions, rather than Arnie. If I weren’t such a strict legalist, I would push for a constitutional amendment to let him run for Governor again. But unfortunately for him, I am, and I’m not eligible to vote anyway…

In short: big fan of President Obama, Kevin Rudd and Arnold Schwarzennegger. I would say that I hate US Congress and the NSW Parliament but both of them provide me far too much mirth for that to be true.

As a stray thought, I was thinking about how similar Australia and Canada were, and how both have very successful Constitutional models which has lead to very well-written governmental programs. For example, Australia has managed to move to a very free market economy without getting the vast divides between rich and poor that exists in other free market economies like Hong Kong, Singapore and the US. So I wondered… how does Canada fare on the economic freedom list? I know that one is managed by the Wall St Journal and you know what?

Canada now beats the US in economic freedom! Hahahahahaha I bet a lot of people in both countries would be terribly shocked to hear that. hahahaha.

I think the US was like fifth when I last checked it. The reason is though America has very low levels of regulation in some areas, other areas are vastly overregulated so that on average America has higher regulation than other countries like Australia and Ireland.

The Onion reports a new campaign to stop kids smoking by labelling it ‘gay’

“Studies show teenagers fear being called gay more than cancer or emphacema”

So naturally, the French roll over and surrender to this new wave of marketing strategies:

Source: Droits des Non-Fumeurs (Non-Smokers’ Rights) Association

This has sparked a controversy in France between gay rights activists who fear that this could entrench negative stereotypes about homosexuality and non-smoking activists who are worried about the fact 40% of French teenagers have tried smoking. I won’t go into that (mainly because I’m meant to be cleaning my room), but I will ask one question:

If the French were afraid of being labelled homosexuals, wouldn’t their entire culture be somewhat different? Have you seen the way they dress? Or speak? lol

Personally, I think some homosexual individuals often fit and promulgate these stereotypes much more than the media does, and that these stereotypes facilitate umbrella prejudice against all homosexuals, regardless of how they act. I think it’s rather unfortunate, but don’t really have a solution to such a complex cultural problem.

The Global Financial Crisis (Gee Fee Cee as the media calls it, or O F*** as the economy calls it), has been characterised by one thing. There’s been no one to blame for it. Oh yes, the politicians and the media are having a right riot blaming the investment banks (or the financial sector generally) for the GFC, but as I’ve previously argued, the investment banks are not at fault. Stepping away from the issue of investment banks, why drag the entire financial sector into this? For example, one of the major sticking points in the financial reforms last year were credit card companies. Yes, those reforms were critical, but linking credit card companies to a real estate financial crisis is a bit of a long bow (though they obviously contributed to high consumer debt generally). The radical right is trying to blame the US Government – in particular, the Federal Reserve for keeping interest rates low or for using Fannie Mac as a social justice tool rather than a financial services tool. But the Federal Reserve had a tough challenge back in 2001 when it decided to keep interest rates low – cause a recession now, or possibly cause a recession later. It didn’t have the tools to deflate the asset bubble in housing and in stocks without deflating the economy generally.

So what I’m saying is, though each and every one of these people is somewhat to blame, no one is actually to blame. There’s been no smoking gun.* Until now.

*Actually, not true: it’s been quite easy to tell which banks had very low lending standards that caused the subprime bubble to collapse. The problem is that none of the major banks did it because they have their own sources of finance. The ones that did it, are the ones who collapsed and can’t easily be blamed. Plus, the ones that did it are community banks… the exact banks which Congress now wants to preference over the major big banks like Bank of America, or the investment banks like Merrill Lynch.

The court-appointed examiner for Lehman Brothers has just put out a 2,200 page report which details many of the dodgy accounting practices employed by Lehman. These were signed off on by both Lehman executives… and partners at the accounting firm, Ernst & Young. The NY Times is quite careful not to make substantive allegations in its article (I generally regard NYT articles as top notch stuff for this exact reason – not overstepping the evidence before it). But my reading of the article is that the Lehman executives are less aware of the accounting malpractices than the accountants themselves.

Can I just say, Arthur Anderson II? During the Enron and Worldcom sagas, some of America’s biggest companies failed spectacularly and the market was unable to respond because of dodgy accounting practices, signed off on by Arthur Anderson partners. As a small time banker, I can say that a large part of the work in understanding how a company works is trying to figure out what those damned accountants have done to the balance sheets. And I don’t just mean dodgy practices, when a company has 20 different lines of business and has just states revenues in one line, how am I meant to tell how large line 1 has been compared to line 2? How can I track the growth of line 1 across time? For Arthur Anderson’s trangressions, the entire worldwide firm was abolished. And as a result, US accounting laws became ever more complex and time-wasting. Sarbanes-Oxley is a ridiculously over-tight regulation. Half of the stuff it regulates is never going to be a problem, but it doesn’t cover every aspect of accounting so there are gaping holes elsewhere. That’s the problem with US Congress- it takes a punitive approach to law-making, rather than a practical approach. It’s like welding  titanium alloy sheet metal to the hull of the Black Pearl and missing the rotting wood on the other side of the ship.

Will something similar happen to Ernst & Young? I’ve honestly no idea, and I somewhat doubt it. The investment banks are a much more fun pinata. You can whack them all you like and they just have to sit there and take it. But this isn’t just a rabbit I’m pulling out of the hat. Accounting practices (and other failures in transparency) are at the heart of what went wrong in the financial crisis. Special Purpose Vehicles are another accounting tool to hide stuff off-balance sheet. Subprime mortgage derivatives only failed because there wasn’t a clear chain of information between the thing you bought, and all the mortgages that went into that derivative instrument. If clear accounting had been there, we would not be in this mess. (On the other hand, I’m sure lawyers may be to blame too – I’m just not as across the details on that).

Markets don’t have magical properties. Market forces are just another force of nature to be manipulated and moved, like a raging torrent. You can capture its power with a well-designed hydro-electric dam, or you can redirect it to flood an entire city. Allowing accountants to hide important information from the market hinders the ability of the market to forecast how well a company is doing and to take steps accordingly.

Death to accountants!

Porntip gives birth. I loled:

(btw, I think the syllable ‘porn’ is fairly common in Thailand, as I know at least two Thais with that syllable in their name. A tad unfortunate methinks)