Thoughts on Freedom

Australian Libertarian Society Blog

A note on sovereign debt

This is a guest post from Dr Joseph Clark

There is now a good chance the Greek government will default on its bonds. If it does, the impact on financial markets in Europe and elsewhere will be savage. Interestingly, there is actually no need for Greece to default. It is not, nor is it ever likely to be, bankrupt. It is a sovereign country with plenty of assets (like the Mediterranean coast) that could be used to pay off bondholders. If it defaults it will simply be because it doesn’t feel like selling these assets.

If the Greek government didn’t want to pay higher yields on its debts it could secure the bonds with assets. Like the Mediterranean coast, or the Acropolis, or all those unused Olympic Stadiums. Greece and countries like it only issue unsecured debt because they want the opportunity to default or restructure when it suits them.

The natural response of the market would (should) be to demand a higher yield on Greek bonds now and in the future. But that is unlikely to happen in the long term while Greece is part of the Euro and can blackmail the Germans (and the IMF, etc) into giving them bridging loans and, ultimately, restructuring the debt. (Nice international financial system you got there. Shame if anything were to happen to it.) As long as this is likely the debt market will (rationally) not charge as high a default premium on the debt. So the Greeks get cheaper borrowing rates at the expense of the rest of the world.

It is extremely unfortunate that the mechanism that would usually purge this kind of nonsense — credit rationing and higher yields — cannot operate while the world is convinced that any sovereign or large corporate default must be prevented at all costs to forestall a descent into Hades. But such is the prevailing thinking.

May 12, 2010 Posted by Guest | Economics, International | | 25 Comments

The bailout to end all taxes

Guest post by Gavin R. Putland

In Australia we have the world’s most overpriced housing. Federal and State governments and the Reserve Bank live in fear that the bottom will fall out of the housing market, leaving recent buyers with negative equity, causing a financial collapse and depression after the example of Lithuania, Latvia and Estonia. In a desperate attempt to keep the music going, governments have been pumping taxpayers’ money — your money — into the housing market.

The Federal Government brought in the First Home Owners’ Boost to inflate a fresh bubble at the bottom of the housing market, and kept it going just long enough for the bubble to spread to the top of the market — through first-time buyers leveraging their grants, then sellers leveraging their capital gains, and so on. The original $7000 Federal grant for first-time buyers is still in place. Various State governments have their own grants on top of this. Instead of bailing out the banks, Australian governments in the main are trying to bail out the housing market before the problem reaches the banks.

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March 1, 2010 Posted by Guest | General | 6 Comments

The World needs Hong Kong

… and Hong Kong needs competition.

In the Annual Index of Economic Freedom published by the Frazer Institute of Canada and the Heritage Foundation of USA  Hong Kong comes out on top year after year, followed by Singapore. 

Hong Kong’s famous Laissez Faire Capitalist system works.  It has made Hong Kong prosperous and uniquely successful.  Low taxes, predictable rule-of-law, strong property-rights, low regulation, banking privacy and a history of ‘good  behaviour’ in the financial and political areas make it attractive to capital and talent. 

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February 21, 2010 Posted by Guest | Economics, International | , , , | 3 Comments

He Hasn’t Built a Single House, But He Thinks He Can Save the Planet

Guest post by Chris Leithner

I’ve long suspected that the people who design the front page of The Australian have a wicked sense of humour, and today’s (16 November) front page confirms that suspicion. The first paragraph of “Home Scheme Falling Short” reads “Four out of five proposed renovations to houses in several central Australian communities have been scrapped because of cost blowouts in the crisis-ridden $672 million Aboriginal housing program, which is yet to build a single house.”

The lead article (“Bid to Rescue Climate Talks”), on the other hand, informs us that “Kevin Rudd and his Mexican counterpart, Felipe Calderon, have been at the centre of the late bid to prevent the collapse of next month’s Copenhagen talks, amid acceptance that the conference will fail to produce binding targets for reducing global carbon emissions.” It quoted the Prime Minister: “It’s going to be as tough as all hell but, let me tell you, I believe that everyone is seeking right now to put their best foot forward.” A PM whose government has failed to erect a single dwelling for Aborigines in the Northern Territory nonetheless persists in the delusion that he can “save” the world’s climate. Who needs gifted comedians when we have the front page of The Australian to start the day with a hearty laugh?

“The larger the mob, the harder the test” wrote HL Mencken in The Baltimore Evening Sun (26 July 1920). “In small areas, before small electorates, a first-rate man occasionally fights his way through, carrying even the mob with him by force of his personality. But when the field is nationwide, and the fight must be waged chiefly at second and third hand, and the force of personality cannot so readily make itself felt, then all the odds are on the man who is, intrinsically, the most devious and mediocre — the man who can most easily adeptly disperse the notion that his mind is a virtual vacuum.”

Mencken continued: “the Presidency [and, it’s worth adding, Australia’s Prime Ministership!] tends, year by year, to go to such men. As democracy is perfected, the office represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day the plain folks of the land will reach their heart’s desire at last, and the White House [and The Lodge] will be adorned by a downright moron.”

November 16, 2009 Posted by Guest | Politics | , , | 4 Comments

Entrepreneurs: The Real “Peace Prize” Winners

We live in ludicrous times of rewarding good appearance for evil action. President Obama is awarded the Nobel Peace Prize while his war efforts intensify. But those who are true promoters of peace need attention, for they will never likely receive such ostentatious recognition for their noble efforts. Such individuals are those who take risks in a world of uncertainty, and who save or borrow capital to start a business. Such entrepreneurs promote peace by serving the customer better than the next entrepreneur through voluntary transactions in the market, rather than commanding bureaucracy in government.

As part of my entrepreneurship courses, I have students who want to start their own business listen to new entrepreneurs discuss their background, their reasons for starting the business, and of their effort to establish the business. Students usually find these speakers fascinating and inspiring, but also come away with a sense of the enormous amount of effort, capital, risk, and uncertainty that is involved in starting a business. Many of these students decide they no longer want to start their own business. They realize that entrepreneurs, too, have a boss: the customer. Mises put it this way: “Ownership of the means of production is not a privilege, but a social liability.”

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November 11, 2009 Posted by Guest | Economics, Philosophy | , , , | 14 Comments

Paddy McGuinness’ Private Library up for sale

The private library of one of Australia’s most controversial and contrarian intellectuals, PP McGuinness, will be up for sale in Sydney on Saturday 21 November 2009.

The thousands of books in McGuinness’ collection describe the broad thinking and eclectic interests of a contrarian and often incendiary thinker. From Palgrave to poetry, politics to film, PP McGuinness’ private collection spanned all genres of literature and thought, and influenced McGuinness’s contribution to Australian intellectual history.

Paddy McGuinness’s daughter, Parnell, says “There are almost ten thousand books here — more than I can possibly keep. It’s time to distribute the books to people who want them and will appreciate them. There are some rare, out-of-print editions, as well as some which are almost too common. I think there are five copies of Madame Bovary in there.”

The Paddy McGuinness Last Drinks Book Fair will be held in McGuinness’ garden in Darling Street Balmain on Saturday 21 November. Books, BBQ and drinks will be available 10am-4pm.

Paddy McGuinness was one of this country’s most renowned and controversial commentators. His intellectual life traversed both sides of Australian political terrain, and his mischievous pleasure in playing devil’s advocate caused him to be alternately revered and reviled by ideologues in an intellectual arena dominated by partisan politics.

From his early years as a rabble raiser among the libertarian, anti-establishment movement known as the Sydney Push during the 1950s and 1960s, Paddy went on to work as an economist for the Moscow Narodny Bank and lectured at the University of London. After a period as film critic for The National Review, then adviser to the federal government during the mid-1970s, he became editor of the Australian Financial Review, and then columnist for The Australian and the Sydney Morning Herald. In 1997 Paddy was appointed editor of Quadrant and continued in that role until his death last year.

About Shaken and Stirred:

Shaken and Stirred was started by Parnell McGuinness and Leonie Phillips in May 2008. Modelled on the Parisian salons of the enlightenment, Shaken and Stirred events gypsy through Sydney presenting unusual speakers on provocative ideas. With no agenda other than to encourage lively and interesting discussion, the events bring people from across the political spectrum together for raucous debate in a relaxed environment.

Past speakers have included sociologist Frank Furedi, journalist Pramit Pal Chaudhuri, bioethicist Julian Savulescu, historian John Hirst, former politician Michael Costa, sex-worker activist Elena Jeffreys, founder of Arts and Letters Daily Denis Dutton and blogger Antony Loewenstein.

All profits from the book fair will go to the publication of Binge Thinking, a collection of the thoughts of Shaken and Stirred Supper Club participants from across the political and intellectual spectrum.

To find out more please contact:

Leonie Phillips, Shaken and Stirred
Phone: 0403 063 852
Email: thoughtbroker@gmail.com
Web: http://thoughtbroker.wordpress.com

November 11, 2009 Posted by Guest | Events | 1 Comment

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