Readers may recall that I wrote a Politico Op Ed at a critical moment in the debt ceiling showdown. That piece, was entitled “Biden Can Steamroll Republicans on the Debt Ceiling”, and I aimed squarely at debunking the idea that the Federal Reserve would step on any “unilateral actions” to avoid treasury default. My key piece of evidence was a memo that I had not read, and was not publicly available. But I knew the contents of the memo indirectly through the Federal Open Market Committee Meeting transcripts. Those comments were in some ways especially revealing, since they came from the Fed’s three leaders: Ben Bernanke, Janet Yellen and Jerome Powell. It’s worth quoting the key part of my Op Ed at length:
On March 16th 2023, the Thursday after Silicon Valley Bank Failed, I published a piece entitled “What's going on with Treasuries? Silicon Valley Bank and the incoherence of the Federal Reserve's (lack of) an interest rate policy this week.” The central premise of this piece was that a lack of forward guidance was creating uncertainty in the treasury market as participants were unclear whether the Fed would be hiking because of inflation, holding because of financial stability or even outright cutting interest rates. This uncertainty in turn, I argued back then, was causing treasury market issues. I argued it was those issues that led to a breakdown of liquidity similar to 2020 and so called “repo madness” in September 2019. There is nothing logically wrong with its central argument. The problem with my old argument is simply that it's empirically false.
Long time and close readers of Notes on the Crises will be aware that I’m a Modern Monetary Theory (MMT) scholar. More than three years ago now I published written remarks of a talk I gave to a Federal Credit Union which laid out my (brief) articulation of some of MMT’s core ideas, and how those insights related to the then-raging Coronavirus Depression. Nevertheless, I tend not to write about MMT explicitly for Notes on the Crises. Nor have I written about theoretical debates among non-mainstream economists more generally in this newsletter. I have usually sought out other publications to do that kind of writing.
I'm very excited to announce that I'm under contract with Viking Press of Penguin for my book on the Federal Reserve entitled "Picking Losers". I'm sure I will write about some of the themes of the book (especially the more technical aspects which are too technical for a popular press book) in Notes on the Crises over the next eighteen months or so of writing, research and work I will be doing to write the book. The book sale itself is the culmination of years of work from the very beginning of the newsletter as I traced many of the themes I've written about here all the way back to World War Two. As always, thanks to the generous readers who have made this possible.
In other exciting news, I had an Op Ed last week in Politico on the debt ceiling entitled "Biden Can Steamroll Republicans on the Debt Ceiling- And Fed Chair Jay Powell won’t interfere". It was extremely exciting to tell the story of "Defaulted Treasury Securities" and the Federal Reserve's reluctant willingness to buy them. Here's how the Op Ed opens:
It’s five weeks to the day since the bank run on Silicon Valley Bank. In that time, intellectual fault lines have solidified. At first dazed, the centrist banking scholars have rallied. In their view many things need fixing. Banking supervision, banking regulation, credit rating agencies, auditors and irresponsible creditors all need fixing. The one thing that does not need fixing: deposit insurance. As the panic has subsided from our mini-panic, the old attacks on deposit insurance have come to the forefront. The age-old claim that deposit insurance “punishes” sound banks (through greater insurance charges) and uniquely encourages irresponsible risk taking have returned with a vengeance. The latest missive comes from the Brookings Institution’s Aaron Klein. Klein's latest, published in the Wall Street Journal, is a piece entitled: “Why FDR Limited FDIC Coverage: The objective was to protect depositors, not rich people and big companies”
This is a free piece of Notes on the Crises. Pieces will remain free until I feel the fallout from Silicon Valley Bank has fully settled down. To support pieces remaining free, please take out a paid subscription.
Before Silicon Valley Bank failed last week, I was considering writing a post examining the Federal Reserve’s policy framework in the context of the last sixty years of monetary policy’s history. That kind of analysis is now newly relevant, perhaps even urgent given the Federal Open Market Committee (FOMC) meeting today, and the press conference Chairman Powell will hold tomorrow. Recall that the FOMC is the committee that determines monetary policy within the Federal Reserve.
Today it is widely accepted that the Federal Reserve uses one main tool (interest rates) to affect the economy through the “channel” of “financial conditions'', in order to accomplish its twin goals of high employment and low inflation. Of course, in practice, it’s choice between those two goals when they conflict leans much more heavily towards inflation. In some historical periods, it seemed to be the case that they only cared about inflation. However, that is not what this piece is about. Instead I want to focus on those first two parts: tools and “channels''.
Normally I do not release pieces on Saturdays or Sundays. However, this is the third anniversary of the first piece I ever sent of this newsletter. That brief note, appropriately titled “Sign of the Times”, was more like a glorified social media post than a newsletter. As I said in that very first piece “This is the big one and I think everyone now realizes that”. I am enormously proud (and still bewildered) by how much I was able to subsequently write for those first four months. I covered nearly every complicated step of what happened.
More to the point, I'm still shocked by how overwhelming the audience response was — culminating in a globally translated viral profile in Bloomberg Businessweek. Still, even three years later, I am not used to how much my status has changed personally — and how many people now take my opinion very seriously. I can’t ever express how grateful I am to all my readers. You have all changed my life forever.
This “curtailment” is carried out to maintain grid stability by preventing an oversupply of electricity at a time when there is simply not enough demand for it.
Analysis of NEM data suggests that annual forced curtailment for 2023-24 was around 4,000 gigawatt-hours (GWh). This represents around 9.3% of Australia’s total annual wind and utility solar generation.
A possible source of flexible demand for this generation is residential off-peak hot water. Off-peak systems account for around 30% of Australian household hot water systems. They are designed to use power overnight, a period when electricity demand has historically been lowest, but during which coal-fired generators have kept producing electricity regardless.
Today, off-peak times could be redefined, and off-peak systems reorganised to consume renewable electricity during the middle of the day, when there is an abundant supply of renewable electricity. Research by the Institute for Sustainable Futures at the University of Technology Sydney estimates that switching off-peak hot water to the middle of the day could have provided around 4,000 GWh of flexible demand in 2020—coincidentally, almost the exact level of renewable curtailment in 2023–24.
This one simple change could redirect much of the clean, cheap renewable energy that is currently being wasted, or “curtailed”, by the National Energy Market during the day.
Key Findings:
Annual forced curtailment for 2023-24 was around 4,000 gigawatt-hours (GWh).
This represents around 9.3% of Australia’s total generation from wind and utility solar.
Historically, Off-peak hot water systems have been set to operate at night, but they could be reconfigured to consume electricity during the middle of the day, when there is an abundant supply of renewable electricity.
Switching off-peak hot water to the middle of the day could provide around 4,000 GWh of flexible demand, almost the exact current level of renewable curtailment.
This could save up to $6 billion in household electricity and energy costs by 2040.
“The fact that we in Australia choose to waste cheap and clean renewable energy on a regular basis is absurd,” said Dr Richard Denniss, Executive Director at the Australia Institute.
“While the persistent claims of a looming energy crisis and gas shortage ring out across the country, we are turning our back on nearly 10% of the current renewable capacity in our grid.
“The time for inflexible, expensive and polluting electricity from fossil fuels has come and gone. It is now up to the Federal Government to make the necessary changes that will allow Australians to properly access clean, cheap renewable energy.
The shots fired at Donald Trump at a rally in Pennsylvania on Saturday are being investigated as an assassination attempt of the former president and current Republican presidential nominee.
Assassination attempts on presidents and presidential nominees are littered throughout American history. What happened in Pennsylvania is horrifying, but sadly not surprising.
I’ve been really struck by how many senior political figures in the United States came out after the shooting and said political violence has no place in America. US President Joe Biden said violence of this kind is “unheard of” in the US.
That is pretty astounding. The United States was founded on political violence, and incidents of political violence mark its entire history.
In fact, Biden began his political career framing himself as the political heir to the murdered Kennedy brothers – President John F. Kennedy, who was assassinated in 1963, and Robert F. Kennedy, assassinated in 1968.
However, for this incident to occur in this moment, given the volatile nature of the presidential campaign so far and the deep divisions in the United States, is deeply concerning.
Nobel Prize-winning economist Professor Joseph E. Stiglitz kicked off his Australian tour this week and has well-and-truly hit the ground running.
There were full houses in Sydney and Hobart to see the former World Bank chief economist and best-selling author, who’s visiting Australia as a guest of the Australia Institute, as part of our 30th anniversary celebrations.
Here are three key takeaways from the first week of his tour:
1. Australia’s democratic institutions are the envy of the world
Mandatory, preferential voting and an independent electoral commission have helped Australia avoid some of the “perverse” outcomes seen in the United States, according to Professor Stiglitz.
“If the US had had rank order voting, Trump would not have been on the ballot in the first election in 2016.”
The Australia Institute surveyed a nationally representative sample of 1,014 Australians about whether they support public funding for political parties and candidates to run election campaigns and cover administrative costs.
The results show that:
Three in five (60%) Australians oppose public funding of political parties and candidates. Only one in four (27%) Australians support public funding.
A majority of voters for all political parties oppose public funding.
Seven in ten (71%) Australians oppose increasing public funding for political parties and candidates. Only one in six (18%) Australians support increasing it.
A majority of voters for all political parties oppose increasing public funding. Opposition was highest among voters for One Nation (92%), the Coalition (78%) and Other/Independent candidates (71%).
Earlier polling research finds that Australians would be more likely to use an alternative public funding system, “democracy vouchers” (39% are likely), than to donate under the status quo (16% are likely).
We are pleased to announce that nominations are now open for the 2024 Australian International Political Economy Network (AIPEN) Richard Higgott Journal Article Prize. We are delighted to celebrate the tenth anniversary of the prize, which is awarded annually for the best article published in the broad field of International Political Economy (IPE) by an Australia-based academic.
The Prize will be awarded to the best article published in IPE as deemed by a selection committee of IPE scholars. The award will be given to any article in IPE, understood in a pluralist sense to include the political economy of security, geography, literature, sociology, anthropology, post-coloniality, gender, finance, trade, regional studies, development and economic theory, in ways that can span concerns for in/security, poverty, inequality, sustainability, exploitation, deprivation and discrimination.
Location: A02 Social Sciences Building, Room 650, The University of Sydney
Abstract: It may be the most pervasive question in twenty-first century politics, all across the post-industrial world: Why have so many working-class voters, the backbone of socialist and progressive struggles across the twentieth century, turned away from parties of the left? Everyone from Thomas Piketty to J.D. Vance seems to have weighed in, but the debate rages on. This talk explores the emergence of what some call “class dealignment” in the United States, focusing especially on the last two decades, and evaluating the current shape of both the Republican and Democratic political coalitions. Drawing on my work with the Center for Working Class Politics, I argue that dealignment represents an existential crisis for the American left and suggest some ways left-wing politicians might push back against these macro trends.
I recently had the good fortune to enjoy five weeks in Australia, visiting family and exploring an amazing country up and down the east coast, from Hobart and Melbourne in the south to as far ‘north’ as Brisbane (I am from Canada’s Yukon, so I use that term guardedly), not to mention several points in between. And while doing all that, it was impossible to resist the urge to contact colleagues at a number of universities to see whether they would like to hear their old friend speak to his current research. I was blown away by the response, not only in terms of the enthusiasm to entertain a Canadian in their midst, but also at the critical and engaged reception to my research. Interest in the field of International Political Economy (IPE) is more than alive and well ‘down under’; it is flourishing. Whatever the current travails of higher education in Australia, the scholars who make up its IPE (and IR) community are in robust shape. As a result, while it may take me a little longer to finish my book (sad face emoji), the end result will be a stronger manuscript and a more engaging contribution to the discipline of IPE. Thank you Australia!
From a critical political economy perspective, the statement is laughable, of course. Doesn’t he know that markets are created through violence and political intervention? Doesn’t he know that Adam Smith himself saw the dire human consequences of the division of labour brought to the extreme?
Those objections are, however, beside the point. Milei is not a critical political economist. Instead, he is the leader of a peripheral country. His discourse does not need to be theoretically sophisticated or historically accurate. All he needs to do is to politically mobilise his electorate and promise better days.
Back in 2010 I was fortunate enough to be invited by Ian Bruff to present several papers at the Standing Group on International Relations (SGIR) 7th Pan-European International Relations Conference in Stockholm (7-9 September 2010). Amongst my presentations was my participation in a roundtable discussion on Antonio Gramsci along with various people, including Mark Rupert and Owen Worth. My intervention was entitled ‘Gramsci’s Method’ and it attempted to outline an approach to reading Gramsci by bouncing off some ideas drawn from Herman Melville’s Moby Dick (1851). I had been reading that book over the summer and it reminded me of various insights in the Prison Notebooks on issues of method and epistemology, or the theory of knowledge. As a snappy intervention that raised some specific questions about method and hermeneutic understanding in approaching the reading of texts, I thought it might be worthwhile to relay the content of that roundtable presentation here.
Political economy is most influential when it links academic analysis with practical participation in processes of social change. Concurrently, the enthusiasm and growing expertise of a younger generation of political economists is crucial. Both features are evident in the latest issue of the Journal of Australian Political Economy. Its contents range from the analysis of the federal budget to the political economy of Antonio Negri; and from the Albanese government’s new industry policies to the ongoing controversy over building seawalls to protect coastal real estate. The authors range from political economy newcomers to veterans; while the implicit sub-text is about relevance and regeneration.
The quest for relevance pervades Australian political economists’ long-standing concern to connect with the interests of the labour movement and activists in progressive social and environmental organisations. Concurrently, regeneration requires encouragement of younger political economists to push towards the frontiers of knowledge. The JAPE editors’ decision to introduce an annual Young Scholars Award reflected the latter ambition; and the most obvious indicator of its effectiveness is the quality of articles by Award winners in this journal during the last decade. Articles by more of the applicants and awardees are a particularly strong feature of the latest issue, alongside contributions by more established political economists.
“A tax system is a political philosophy expressed in numbers.” Stefan Collini, writing in the London Review of Books (19 October 2023) went on say:
“(a)lthough introduction of a tax can seem to be just a matter of brute politics, public acceptance of a new imposition is affected by the extent to which a justification can be provided. Elements of economic theory usually figure in the argument, but there are also widely held, albeit conflicting, moral intuitions in which ideas of fairness and desert play some role.”
In fact, the clash of opposing moral arguments clustering around the promotion of particular concepts of fairness and desert form the primary grounds on which the politics of taxation play out in liberal democracies like the United States, United Kingdom and the ex-Dominions of the British Empire. Supporters of both the right and left, as well as those clustered around the centre, all claim to promote policies that treat citizens fairly, while rewarding desert or merit. It’s just that they place a different gloss on the morally slippery concepts of desert and fairness, and a different priority ordering.
I recall vividly the day the horrific Christchurch mosque shootings occurred. At the time I had a makeshift rock-climbing wall in my garage, and as I sat flicking through news stories on my phone between climbs I came across accounts of the still-developing tragedy. In the days that followed, we learned more about the killer through his tedious but revealing manifesto. Parts of this were straight out of the extreme right-wing playbook – the belief in a taken-for-granted European culture threatened with extinction by non-white migration, or “replacement”; the need for violence to protect the future of white children; and the ethnopluralist stress on the link between land and race. Within this roll-call of right-wing tropes, however, there was embedded a stranger idea that stood out to me – “ecofascism”, an ideology the murderer explicitly identified with. For several years, I grappled with what ecofascism actually was: what is its logic, its particular ideological potency that has spurred more than one right-wing terrorist (the 2019 El Paso massacre was also framed in ecofascist language)? The key that unlocked it all for me came from a seemingly unlikely source – recently-departed Australian author David Ireland’s last novel, The World Repair Video Game.
On 9 May 2024, a week before the much anticipated Federal Budget, Minister for Resources Madeleine King unveiled the Australian Government’s Future Gas Strategy. This 110 page report sees gas as central to Australia’s domestic energy use and export portfolio “to 2050 and beyond”. As she announced it, Ms King also declared that gas will be central to achieving carbon neutrality by 2050 as it will not only be economically necessary but would help to “firm renewables”. As we heard Ms King’s announcement, and read the report, we felt a sense of déjà vu. What is proposed sounds remarkably like the former Coalition Government’s “Gas Lead Recovery” announced in 2020 by then Prime Minister Scott Morrison.
Superannuation tax concessions are meant to encourage saving for retirement, but the system is being gamed to help the wealthiest avoid paying tax. Australia Institute Chief Economist Greg Jericho joins Ebony Bennett on this episode of Follow the Money to bust some super myths and discuss what a fairer system should look like.
This discussion was recorded on Tuesday 30 July 2024 and things may have changed since recording.
Guest: Greg Jericho, Chief Economist, the Australia Institute // @GrogsGamut
Host: Ebony Bennett, Deputy Director, the Australia Institute // @ebony_bennett
Theme music: Pulse and Thrum; additional music by Blue Dot Sessions
You can see Professor Joseph E Stiglitz speak live in several cities across Australia as part of the Australia Institute’s 30th anniversary celebrations. Tickets are available via our website.
On this episode of Dollars & Sense, Greg and Elinor discuss Australia’s uncompetitive airline industry, the cost of privatising essential public services, and the latest inflation figures.
Greg Jericho is Chief Economist at the Australia Institute and the Centre for Future Work and popular columnist of Grogonomics with Guardian Australia. Each week on Dollars & Sense, Greg dives into the latest economic figures to explain what they can tell us about what’s happening in the economy, how it will impact you and where things are headed.
Host: Greg Jericho, Chief Economist, the Australia Institute // @GrogsGamut
Host: Elinor Johnston-Leek, Senior Content Producer, the Australia Institute // @ElinorJ_L
Theme music: Blue Dot Sessions
We’d love to hear your feedback on this series, so send in your questions, comments or suggestions for future episodes to podcasts@australiainstitute.org.au.
As a parent, I’m always careful to remind them that super powers are fun for pretending, but they are not real.
Unfortunately, it’s hard to teach this to kids when federal government ministers say things like “green hydrogen is at the heart of our vision for Australia as a…renewable energy superpower.”
SOCK! POW! KAZAAM!
As much as kids and ministers might like to play green hydrogen superpowers they should not be used when crossing the road or formulating tax and energy policy.
Which brings us to the federal government’s Hydrogen Production Tax Incentive, which was open for consultation until last Friday.
This program will see the Government subsidise eligible hydrogen production by $2 per kilogram. Budget documents (p68) give an estimated cost of “$6.7 billion over ten years from 2024–25 (and an average of $1.1 billion per year from 2034–35 to 2040–41).”
The FMAA aims to support investment in Australian value-added manufacturing initiatives relating to the renewable energy transition. While it remains to be legislated, the budget suggests the FMAA will entail approximately $23 billion of new public spending over ten years. The majority of this is accounted for by two new tax credits which incentivise private investment into domestic critical minerals processing and renewable hydrogen production. These credits are available from 2027 and, while currently uncapped, are estimated to entail $13.7 billion in public industrial support by 2035-35. Also notable is approximately $4.5 billion in new funding for the Australian Renewable Energy Agency (ARENA) across several new initiatives, providing grants, subsidies, and investment for the manufacturing and development of renewable technologies, including batteries and solar panels.
The average pay for the principal of an elite private school in Sydney is about $687,000 a year. At least four get a salary and benefits package worth over $900,000, and one of those is on over $1 million a year.
It took the leak of confidential data to find this out because, despite being heavily subsidised, private schools in most parts of Australia don’t have to tell anyone what they pay their headmasters. The Australian Charities and Not-for-profits Commission’s reporting requirements come close, but they don’t require schools to say how much they pay individual staff in particular positions.
Even if $600,000 is only a rough estimate, it’s a lot more than the principals of NSW’s public schools get. Their salaries – which are published by the NSW Government – range between $140,000 and $216,000 a year. Seek puts the average pay for a school principal in Australia at between $165,000 and $185,000 a year.
This pay gap is symptomatic of the widening inequality between the ‘haves’ and the ‘have nots’ of our education system.
The Victorian Electoral Matters Committee recommendations include:
Truth in political advertising laws.
Changes to how the Victorian upper house is elected.
The Committee acknowledges that “If group voting tickets were eliminated but the current structure of regions continued, major parties would likely be over-represented in the Upper House and there would likely be fewer minor parties and less diversity”.
Prohibiting groups other than the Electoral Commission from distributing certain postal voter applications.
Improving access to polling places for voters with disabilities.
Parties to establish codes of conduct for their members in relation to their behaviour on social media.
Further restricting which party names, abbreviations and logos can be registered, as is the case at the Commonwealth level.
“The Victorian Electoral Matters Committee has conducted a thorough and detailed investigation that gives the Victorian public a lot to consider,” said Bill Browne, Director of the Australia Institute’s Democracy & Accountability Program.
“With the multi-party Committee repeating its recommendation for truth in political advertising, there is no excuse for further delays from the Victorian Government.”
Truth in political advertising
“In Victoria, it is perfectly legal to lie in a political ad, and it shouldn’t be,” said Bill Browne.
