Spectrum of capitalism - something between pure market to pure state

comments on "Davos elite confront capitalism crisis", 26/01/2012, see http://www.businessspectator.com.au/bs.nsf/Article/Davos-elite-confronts-capitalism-crisis-QUL3N?OpenDocument&src=hp9

The debate really is no brain. It is like the kind of debate between new-classical economists and new Keynesian economists, the truth is always some where in between.

Keynesian realise that market can have problems from time to time in getting full employment not soon enough and that is true, so government has to do something to aim at achieving full employment.

Even that theory works, then there is politics that endangers the theoretical fiscal policies that will be needed to ensure full employment.

Then, there are further problems with markets, it is not just aggregate demand or supply that are the only issues, there are structural and inter-temporary issues that are not too dissimilar to the aggregate issues. Those kind of structural and inter-temporary issues also need policies to manage and government is needed to play that role to address those issues.

Then of course income allocation has been recognised as an issue so government constantly work on taxation and welfare policies.

All those issues added together, you have a much bigger role for government to play in the economy: that is essentially some kind of capitalism and state work together, or some kind of state capitalism.

Of course, countries may differ in the kind of issues and their severity that requires different kind of combination of market and state, akin to the kind of Samuelson’s synthesis of classical and Keynesian economics.

High time for ACCC to use plan B

Comments on Stephen Bartholomeusz “Plan B for the ACCC”, 21/01/2012, http://www.businessspectator.com.au/bs.nsf/Article/ACCC-Rod-Sims-Metcash-Franklins-Austar-Foxtel-take-pd20120120-QP4CX?OpenDocument&src=sph&src=rot

It was an interesting case by the ACCC bordered on bizarre, considering the Wesfarmers acquisition of Coles was done, while the ACCC had objected the Metcash' Franklin case.

For a market regulator to rely on theoretical argument without putting into a proper practical and commercial environment reflects how out of touch government organisations can be.

The ACCC should adopt a similar approach to the Productivity Commission in using applied model in testing and determining its decisions. The PC, from its predecessor, the Industry Commission, has been using models, including CGE models to study complex economic cases for policies.

The sort of models the ACCC would need to use may be different from those used by the PC, but modern contemporary merger and acquisition cases can only properly understood by informed studies from using practical models.

ACCC must have a clear overall goal to ensure market competition, efficiency and consumer welfare and use the best applied models available to measure it. Otherwise it will fail in its regulation of the market to enhance Australian welfare.

I would argue that many of ACCC decisions did not have a clear measure how much gain/loss should that case be or not be allowed.

In that context, it is high time for the plan B to be used!

International comparison of currencies

Comments on Daily chart "The Big Mac index", 13/01/2012, http://www.economist.com/blogs/graphicdetail/2012/01/daily-chart-3?page=1
The big mac index is not a basket of goods and services and suffers a universal weakness in that it is a largely a service and is not an easily internationally traded goods or service, so wage and income levels have a mostly monotonic effect, that, is currencies in low income and wage countries appear to be more undervalued than high income/wage countries, apart from short term exchange rates moves.

If a highly traded goods or services would be less subject to this effect of non-trade services.
The point is price differences can be large for non-trade goods and services, and less so for traded goods and services.
The Economist should take this into account when making statements on currency valuations.
Of course, the advantage of big mac is that it is fairly comparable in quality that should not be overlooked.
PS: The Hong Kong case seems very strange.

Swan unreasonable on MRRT and GST link again

Comments on NEWS - Economy "Swan pressures states on GST", 9/01/2012, http://www.businessspectator.com.au/bs.nsf/Article/Swan-pressures-states-on-GST-pd20120109-QBQZS?OpenDocument&src=hp4
The RSPT and MRRT, from their design, is a revenue grab by the Federal ALP government, not as what recommended in the Henry Taxation Review to replace the current mineral Royalties with a more efficient rent type tax on minerals.
As a replacement of state mineral royalties, any new tax on mineral rent should leave that to the states.
Should that be the case, it would address not only efficiency of mineral taxation, but also mitigate the current huge vertical fiscal imbalance between the federal and states levels of government in Australia.
That would be hugely beneficial to not only the current fiscal management but future generations.
Haven't we been told by the federal ALP government that the states will not have enough revenue to provide the predicted level of medical services partially related to population aging in the coming decades, as its excuse to ask the states for part of their GST to be given to the federal government to be counted as its contribution to government funding?
Isn't it a fundamental principle that there should be clear accountability for any government for its expenditures and taxes?
Why the federal Treasurer does not follow basic economic principles in his dealing with the states?

Creativity needed to financially enhance Aussies

Comments on Bill Gross "Paranormal economic activity", 7/01/2012, http://www.businessspectator.com.au/bs.nsf/Article/global-economy-interest-rates-US-Federal-Reserve-E-pd20120105-Q7W3Q?OpenDocument&src=sph&src=rot
I think the flooding of money by ECB, BOE, and Fed will either be hoarded by those financiers that need deleveraging, or spill over to other more promising and less risky countries/markets by some international hedging operators, or both.

Maybe the Aussie stock markets and bond markets will be one of the destinations for those QE money supplies.
It will be self-fulfilling, if enough money is flowing into a better market, because the amount can be very large.
If I could get money from the US, UK, or EU, I would definitely invest in Australia, selecting a time when the A$ is a bit lower to come in  and buy some shares and get out with a decent profit at a time when A$ is higher.
That would be a very excellent strategy.
The question Australians need to ask is why the Australian banks have been arguing that their financing costs from overseas financial markets are higher than the domestic money market where official interest rates are much higher than most of their counterparts overseas.
I was personally wondering that why there is no operators from Australia financiers to set up some bonds to be sold overseas and use the proceeds to provide cheaper loans in Australia.
Indeed, the Australian government perhaps should seize this opportunity to do so to benefit Australians by lowering the cost burdens for many Aussies who have mortgages or loans from the banks.