Thanks to all those Debtwatch readers who made donations to assist with the costs of bringing Michael to Australia for this speaking tour. Roughly A$800 has been raised–I’ve allowed $10 for every donation made since I put that message up to go to Michael’s expenses, and there have been 81 donations (many of more than $10, some of less) since then.
On tonight’s arrangements, since the meeting is free, there is no way to limit attendance other than by “first come, first served”. The organisers have now received more RSVPs–including Debtwatch donors–than there are seats, so please get there early: I have had the front rows reserved for Debtwatch donors, but since I am not the primary organiser of the event, if other people fill available seats before Debtwatch donors get there, there may not be seats left–and the hall has limited capacity (150 seats I believe).
So the best thing you can do if you are a donor and wish to attend (some donations were from interstate and overseas), please arrive early at Customs House tonight–preferably by 5.30pm.
I will attempt to record the event for both podcast and vidcast–though my usual means of so doing has hit a glitch (I’ll be spending this morning arranging what I can, and buying any hardware needed using other Debtwatch funds–or my own if they run out). So hopefully in a few days I’ll have a blog entry of the event for those who can’t attend.
I have spoken with Michael at two events since his arrival, and we’d met earlier (in 2008 at a Post Keynesian conference in Kansas City) and corresponded regularly since then. I can vouch for him being an excellent speaker, and extremely incisive in his analysis. It will be a very good evening. Thanks again for your support of Michael’s visit.
To repeat the event details:
- Venue: Level 1, Customs House, Circular Quay
- Time:
- 5.45pm for 6pm kickoff–get there by 5.30pm if you can to ensure seating
- 7.30pm finish
- Format:
- Introduction by Miriam Lyons, Centre for Policy Development (5 minutes)
- Talk by Michael Hudson (40 minutes)
- Panel discussion (Michael, myself, Adam Schwab)
- Q&A
For those who have booked for dinner tonight, that will commence at 8pm–so there is some time to chat between the end of the evening’s event and dinner itself.
See you tonight, Steve
October 23rd, 2009 at 3:19 pm
Perhaps it’s not a good idea to make the list of donors public unless they have given permission. I cringe when I see private financial transactions and real names floating on the internet like this.
October 23rd, 2009 at 3:29 pm
I was a bit concerned too, but when I knew that the venue was oversubscribed I felt it was worth the risk. There are no details beyond names; but I will take it down in a few minutes time.
October 24th, 2009 at 12:29 am
Steve,as a UK based reader,your efforts to get us a podcast or vidcast are much appreciated.Have a great night.
October 24th, 2009 at 12:31 am
maybe you could raise specific donations for recording equipment.It’s nice when one’s donation goes to something specific like Michael’s visit or a computer.
Just my personal view.Thanks for your work.
October 24th, 2009 at 7:33 am
Has Prof. Hudson documented his “Property Tax” model? I’d like to learn more about it.
Mike
October 24th, 2009 at 8:13 am
I wish I’d done that a week earlier Willem! I have a good quality personal video recorder, but was worried that the sound quality wouldn’t be as good as the video. So I tried to buy a professional recorder as well to supplement it–just in case I was right.
After ringing ten shops and Sony directly, I gave up–best I could do was buy the device online, with a week’s delay till delivery.
I should have bought the consumer version instead to have something for last night: sure enough, the video quality was excellent but the sound was dreadful.
So the bad news is that I don’t have a worthwhile vidcast of Michael’s talk or the discussions afterwards–the acoustics in the hall made the sound awful, far too low quality to use.
The good news is twofold however: firstly, I did buy that recorder (using Debtwatch donations) and I’ll use it while I’m travelling in Europe this coming month to record and podcast the talks I give there; secondly, in clearing space to record last night’s event, I downloaded some old recordings made using the same device of a talk about endogenous money to students in Romania last year. There the sound quality was acceptable–the room was much smaller and the acoustics clearer. So in a while–once I get confirmation of the bandwidth implications of the recording I’ve made–I’ll post that talk as a vidcast here, in lieu of the talk with Michael last night.
I’ll also get around to posting Philip’s graphics on the debt and housing bubble, now that I’ve completed the next stage of my multi-sectoral modelling exercise.
October 24th, 2009 at 9:32 am
steve, thanks for trying to make a recording for those of us not able to make the talk. i wish i’d seen your post earlier, but in case the issue ever comes up again… if you can make an analogue recording with an old cassette tape recorder (remember them?) or similar, i’d be happy, as i’m sure other readers would be, to do the digital conversion for posting online.
another thought… on the vidcast you have, do you think it might be possible for someone with some audio processing knowledge to clean up an audio file? or is the quality too low for even that?
October 24th, 2009 at 9:41 am
Steve,
There are several possibilities:
1. Does the video recorder have a separate audio input? Then just plug the signal from the mixer in. I mean the mixer signal coming from the microphones which is later amplified.
2. If this doesn’t work – just take your PC and feed analogue the signal from the mixer to the mic input then record it separately. Then simply replace the audio channel with your digital recording. Since both recordings are digital and clocks shouldn’t drift much (I would expect 50ppm) there shouldn’t be a big lipsync problem. In the worst case scenario this can be rectified later by cutting recording into segments and lipsyncing them separately.
3. If there’s no access to the audio amplifying system – just get a separate microphone and stick it to the one used by the person giving presentation. May not look good but will work.
4. An alternative low-quality solution is to place a microphone next to the speaker. But any attempt to record voice further away from the speakers will result in having sound reflections/echo, what happened yesterday.
5. If the voice recording from yesterday is just a bit garbled somebody may try to salvage it by filtering and applying non-linear noise/echo elimination. I have no experience doing this but there may be somebody on the forum who knows more. If you think that the recording is just a bit below the acceptable quality – please cut a random fragment in MP4 format (of size 5MB approx) and send me over email – I will give it a go tomorrow but I cannot promise results.
October 24th, 2009 at 10:15 am
Hi ak and selise,
Unfortunately the sound is just too muffled to be repairable–and my video camera (bought in haste a year or so ago) is a high quality consumer product which lacks professional features like the ability to attach an external audio input. So to avoid such problems in the future on the sound front I have ordered a professional standard audio recorder which I’ll take with me to Europe to record any talks there, and use in future in conjunction with my video recorder to allay sound problems in future.
October 24th, 2009 at 12:36 pm
steve, fabulous – i look forward to your future audio postings! would you consider recording some of your lectures to go with the ppt files you’ve posted?
October 24th, 2009 at 1:10 pm
Steve,
Thanks for the access to the range of material. An idea: could you do some video podcasts? That would be a nice addition.
October 24th, 2009 at 11:15 pm
That’ll be feasible with the recorder selise, which is why I went for a professional quality device (purchased from donated funds as is the laptop I’m currently working on, and will use while researching in Europe–so thanks again to the donors).
I’ll give a first try at this next week if I’m lucky enough to have the recorder arrive before my talk to the Paul Woolley Financial Markets Dysfunctionality conference. Otherwise the technology will get its first try-out in Helsinki next month.
October 24th, 2009 at 11:16 pm
Will be doing so soho44–again it’s just a matter of time pressures. I’ve been working flat out on the multi-sectoral modelling recently, hence my fairly limited engagement in discussion for the last two weeks.
October 25th, 2009 at 2:34 am
Any predictions on when the next round of banks going out of business will happen? Some are saying by early next year.
Which means with budget cuts in education and other sectors, what do you do? If you lose your job and the govt.’s saying you need re-training, how are you supposed to do that when you can’t get a bank loan, student loan, or grant? Many major banks write their Terms of Service agreements in the broadest way possible (to suck up even more in fees). And, if you wanted to go back to school right now, would you really want to be $10-20,000 in debt?
Just a few small details that apparently Obama overlooked.
October 25th, 2009 at 11:02 am
“Any predictions on when the next round of banks going out of business will happen? Some are saying by early next year.”
I think it could happen within weeks — but I am not good at predictions.
However, I disagree with your point that credit is hard to come by. The major sources of credit growth: housing, autos, and student loans are all supplied and subsidized by government programs. So is commercial paper. It is factually incorrect that borrowing is hard in any of these areas; some of the underwriting standards have been restored, but only to a small degree. It is still way to easy to borrow, although those who use the 2005-7 orgy as a norm feel that credit is tight.
The main problem, which is what Steve pointed out, is the decline in the desire to borrow rather than in the capacity to lend. There is enormous capacity to lend at extremely cheap terms. You can buy a house with 3.5% down and less than 5% interest. Auto loans and student loans are also at near all time low interest rates, and lending standards remain quite low.
Last night I was looking at the Z.1 data and noticed that the public’s desire to borrow really started collapsing in late 2006, and was well underway in 2007. The recession was declared in Dec. 2007 and the financial panics hit in late 2008. So this is more evidence that a decline in the desire to borrow leads the economy. Here is the Z.1 data:
Year/Quarter ratio of household borrowing to GNI
200601 0.11
200602 0.11
200603 0.09 <– yield curve starts to flatten
200604 0.08 <– yield curve inverts
200701 0.07
200702 0.08
200703 0.06
200704 0.06 <– short term rates fall/recession declared in Dec.
200801 0.03 <– short term rates hit near zero/Bear fails in March
200802 0.00
200803 -0.01 <– Lehman fails
200804 -0.02
200901 -0.01
200902 -0.02
So those following the desire to borrow had a 1 year heads up before the failure of Bear Sterns. Changes in household borrowing are approximately as good a leading indicator as the yield curve in predicting recessions. Saying that there is a shortage of credit is, as Steve says "arse before tit".
I guess this is why I am hoping that Steve will replace the "money growth" constant with a term that expresses the desire to borrow, and make this term variable. In any case, I'm looking forward to the next version of the multi-sectoral model; it's really great to see this build up over time, and I appreciate that he's been posting the versions as well as .pps in order to promote and explain this approach.
October 25th, 2009 at 11:37 am
Working online learning about derivatives, short and long selling, etc.
I know that derivatives are a “tool” with no real value. I know short selling is higher risk and can be manipulated more than long. Yet I don’t understand why short selling helps to “stabilize” the market.
In any market activity there’s always insider trading and lots of other ways to manipulate it. And (especially with naked short selling) the abuse factor is even higher.
What am I missing here?
October 26th, 2009 at 5:16 am
Steve
Here is something different. This is a “simple” mechanism to change the system in a way that will stabilise it. The idea is to make it cheaper to build a new facility that is more efficient in resource terms than it is to buy an old one that is less efficient.
At the moment it is much much more expensive to build a renewable energy plant than it is to buy a coal power plant because of interest rates on loans are much lower than expected equity returns on investing in new energy plants.
What if we turned this around so that it was financially cheaper to build new more efficient (in terms of green house gas emissions) than to buy or build new coal powered plants?
Here is the presentation I gave to the green institute on Saturday which describes a mechanism to make it financially cheaper to build new renewable plants than old ones. I should have labelled it “Zero Interest Loans for Zero Emissions”
http://www.slideshare.net/cscoxk/zero-interest-loans-for-energy-sustainability
October 26th, 2009 at 8:07 am
Kevin,
I watched your presentation and I agree that your proposals look serious.
However I believe the main issue is not the lack of capital to finance renewable sources of energy – it is the lack of political will.
People don’t care.
One issue which hasn’t been addressed in the presentation is the issue of depreciation of productive assets as for example photovoltaic cells may have a life span of 20-30 years. But this issue is rather marginal to the scheme and discussing it in a short presentation might be inappropriate.
To me the main problem would be the abuse of the scheme by the intermediaries. The idea of granting zero interest credit allocations to people is similar somehow to so-called voucher privatisation which was tried in Central Europe. Most of the people would instantly get rid of the allocations by selling / assigning the rights to corporate behemoths or to speculators.
“The outcome of voucher privatization (NIF), on the other hand, has been rather discouraging. The performance of the enterprises following this privatization track has systematically worsened.”
http://www.cipe.org/publications/ert/e32/e32_6.pdf
To me a combination of direct financing by the government of profit-seeking investors in renewable energy production, carbon taxes (not carbon trading but just taxes) or personal carbon allocations and possibly community-based schemes backed by the government could deliver the desired results. Not a single carrot but a few carrots and a few sticks.
But as I said before – I don’t believe people are ready to embrace any change in the society where “clean energy” or rather “a clean way of obtaining money” means this:
http://www.smh.com.au/lifestyle/people/lenders-at-fault-over-18m-debt-says-upton-baker-20091025-heok.html
“THE society doyenne Karin Upton Baker says lenders should never have let her owe them $18 million because they knew she was not earning enough to repay it.”
“In December 2006 Ms Upton Baker borrowed $5.8 million secured against the luxurious Elizabeth Bay apartment and, in June 2007, $11.3 million secured against four apartments overlooking Bondi Beach, developed by her husband, Gary Baker.
She is liable for $18 million, which includes interest, but argues the mortgages should be set aside because they are unjust.
Ms Upton Baker says that she was at a ‘’special disadvantage” because she was pressured by her husband into signing the loans and did not earn enough to repay them.”
Yes I agree. I will pressure my wife to pressure me to borrow 18 million in the name of our family cat to buy a few luxury houses. You won’t evict my cat, would you?
October 26th, 2009 at 9:52 am
Soho44,
“I know that derivatives are a “tool” with no real value. I know short selling is higher risk and can be manipulated more than long. Yet I don’t understand why short selling helps to “stabilize” the market.”
Short selling is crucial to providing liquidity and helping to correctly price assets.
It may be helpful to think of the underlying supply and demand relationships. Suppose there is a town that has a market for cotton. Cotton is brought in from the farms and sold in the market. Suppose the market price is too cheap — investors know that in the future, the supply of cotton will be too low relative to the demand. So they buy up cotton now and hold it. Of course there are storage costs. This has two effects: it raises the current price of cotton, giving an incentives to farmers to plant more to prevent the anticipated shortage from occurring. Next, it helps bring the present price of cotton closer to the future price. I.e. it helps smooth the price over time. And if you think that the current market is too volatile, just look at the volatility that followed the ban on short selling.
But the opposite situation can also occur. Suppose that there is a shortage of cotton. Everyone in the town panics, and the price of cotton sky-rockets. But the investors realize that this is a temporary affair, and that a cotton delivery will arrive in a week. So they short sell. They make an agreement to deliver cotton at the current prices, but provided that the delivery is delayed by one week. The effect of this is to lower the price of cotton, in anticipation of the future delivery. In exchange for that delay, they pay some interest — enough interest to compensate the cotton consumer for a 1 week absence of cotton. So if there is sufficient short selling, the price of cotton will drop to the price that would occur 1 week later, together with the costs needed to compensate the town for a 1 week absence of cotton. That is a good price adjustment allowed by the short sellers.
Of course, those who went “long”, planning to exploit the shortage of cotton will be angry with the short sellers for relieving the shortage and pushing prices lower. Those who go long counteract the effects of those who go short and vice versa, and so a market in which it is not possible to either go long or short will be unable to assign a correct price to anything.
If you believe that over the last few decades, the perennial problem with securities is that they were too cheap, that banks shares were too low relative to their fundamental value, then I guess you can argue that short sellers are too dominant. But, if you believe that the key problem is that securities were too expensive, and that bank shares were too high relative to their fundamental value, then you need to conclude that there has been a shortage of short sellers
In terms of derivatives being tools with “no value”, that is a difficult view to defend. It depends on whether you think that the ability to buy or sell something for a known price is worth paying for. If a gold miner discovers a large mine, but has no money to develop the resource, they will borrow money. It is difficult to borrow if you don’t know how much you will be able to sell the gold for. So you make an agreement to sell the gold for a fixed price during the next few years as you pay off the loan. That is a derivate agreement, as the gain or loss of the holder of the agreement will be determined by the difference between the spot price and the agreed upon price.
At the same time, someone needing to buy gold continuously for a few years may want to be assured of the fixed costs and will agree to pay a fixed price in the future. Both parties can benefit from this arrangement.
October 26th, 2009 at 10:49 am
RSJ,
Certainly George Soros would agree with you on the objective benefits of short-selling. But Dr Mahathir bin Mohamad wouldn’t.
“As far as the stock market is concerned, we know that players in the stock market can also destroy the stock market simply by short selling. And to short sell you don’t even need to have the shares. That is why we decided that we would stop that, and as a result, the market has recovered.”
http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/int_mahathirbinmohamad.html
October 26th, 2009 at 2:24 pm
steve, thanks. that’s great news about what you will be able to do with the recorder! i haven’t made a donation before, but after looking at how much it costs i will now (wish it could be more). audio files will be a great benefit to me, and i’m sure others.
October 28th, 2009 at 3:54 am
ak
The key to the scheme is the compliance part. We can never stop some people trying to go against the spirit of any scheme but we can detect them and we can exclude them from the game.
The key to this is making the whole scheme voluntary – you do not have to get the rights if you do not want them and if you do accept them you sign up to obey the rules. Because it is voluntary that means we can exclude people if they break the rules. As it pays to stay in the game then that makes compliance highly likely.
Everyone can win including the existing polluters. We can all win because if you take away the interest costs then it is cheaper to generate clean energy than it is to generate polluting energy. This means it does not matter if people care about renewables or not. They will participate because they get something out of it.
The reason we charge interest on newly printed bank money is because the system is set up to ensure compliance and repayments of loan money. In other words I do not believe there is a great conspiracy of bankers to exploit others but the current system of generating money through loans backed by existing assets was set up to stop banks printing too much money. The current system is one where the issuer of the currency outsources the generation of the currency to the banks. To make sure they do not print too much money we set in place the fractional reserve limits and capital adequacy. Unfortunately the system allows loans themselves to be treated as capital for the purpose of guaranteeing another loan. This then leads to the spiralling of debt. It is that simple.
Rather than stop this system or try to regulate it to control it the other approach is to create a more attractive and safer way to outsource the printing of money. Zero interest loans for investments with repayments from earnings on the investments is a way to do it. Banks will find this approach a much easier way to make money (from transactions) and the population will like the handouts of rights to take out loans and we will get efficiencies from the building of new more efficient assets. We will soon find that debt on debt is not an attractive way of trying to make money compared to zero interest loans because debt on debt is a zero sum game but creating more efficient assets is a win win game.
I am making some progress. My strategy at this time is to make sure the idea is “attacked” as much as possible so your comments are most appreciated.
So far the main objections have been
1. People will try to rort the system.
2. It is too complicated for people to understand.
My answers to both these points are we can hide the details and make it easy for people to participate and we can detect rorters. I also know we can build it cheaply and economically because we have recently built a system with similar characteristics that is proving to be a commercial success.
What do you think of the following for a catch phrase?
“Zero Interest with Zero Emissions” or
“Zero Interest for Zero Emissions” or
“Zero Interest in Zero Emissions” or
……
October 28th, 2009 at 2:35 pm
I could not make it to the talk, so I was wondering if somebody could give a quick summary of what was said. In particular, I would be interested to know if there was new material or if the material was just along the lines of what Steve normally covers in his talks (debt/GDP etc)? If somebody took notes then this would be a good substitute for the bad audio that Steve said could not be posted!
October 28th, 2009 at 9:17 pm
I’ve received video/audio files from another person at the talk that will be worth posting. They will go up this weekend.
October 28th, 2009 at 10:06 pm
Kevin,
The weakest link I think is trading loan rights:
“A key question is to whom to give the right to take out zero interest loans. It could keep the right to itself – which it does in times of war – or it could give it to people who already have assets or it could give it to the population. Giving it to the whole population on an equal basis is fair and democratic and is likely to be a politically acceptable solution. Let us assume that this is done. Each person in the population gets a relatively small amount of rights to take up a zero interest loan. People can trade their rights if they are risk averse and do not want to invest themselves.”
The key issue is to distinguish between a group of people who are actively interested in the low carbon-emission energy ant the rest. Looking at the number of people who vote for the Greens I wouldn’t expect more than 10% of the people to be interested in active participation in the schema.
Now about trading.
The market price of a zero interest loan right must be lower than the cost of a normal commercial loan – say 50% of the principal of the loan. This amount of money has to be paid upfront if somebody wants to buy a green loan right. Where will this money come from? This money is probably going to be borrowed using a normal (commercial) line of credit unless green loans can be used to buy more green loans rights (what gives unique opportunities to rort the system).
In this case introducing trading instantly diminishes any significant gains which could come with zero interest loans. They are not zero-interest any more when traded.
The most likely outcome is that 90% will sell these rights instantly. This is what I did when I got a voucher for privatised state assets in Poland. Do you think that I would like to buy shares of a solar power plant on a zero % loan for $1500? What for? To earn $100 per year but at the same time to be kept liable for any rort committed by the actual power plant? I don’t care. $100 is the cost of 15 trips on the motorway to work. If it was $10000 and no liabilities I would be of course interested.
So what is this exercise needed for? To buy a social support for the idea of low-carbon energy production? Let’s better provide normal commercial loans with interest halved to companies willing to invest in green energy. There will be less hassle and a few hundred $ per person will be saved.