Posted by: graemebird | December 15, 2009

National Broadband Network/ A Better Solution/ They Are Finally Listening To Paul Budde Yet They Are Still Going To Screw It Up.

BROUGHT TO THE FRONT AS PRELUDE FOR ANOTHER THREAD ON THE SAME TOPIC.

Do we really have to go another 50 odd billion in the hole to get this job done? Here we are lurching from one wrong strategy to another. The arrogant-deafness of the experts puts the conscientious politician in a very difficult position. A good man must block people doing things, some aspects of which are the right thing to do. What I’m trying to say is this: Supposing I could go back to before we sold off Telstra. Did we stupidly sell off Telstra? Or did we sell of Telstra in a stupid way? I claim the latter. The argument at the time was between public ownership and private ownership. I would have been on the side of private ownership of course. The argument for public ownership seemed nonsensical. I did not know then that my fellow economics graduates at the time were a bunch of dropkicks who wouldn’t listen. It didn’t really sink in. When I graduated I was aware that other people graduated as well. But only basically by winging it. I knew full well that most of them didn’t understand economics as such. And it appears they’ve been winging it ever since. Which is not to say that I foresaw all the problems that privatisation, in the way it was done, would bring. But I think somebody did foresee these problems. And that persons name was Paul Budde (as in “Buddha”).

We have certain tendencies in government, with the finance sharks, and with cronytown more generally. We can see now with hindsight just how much damage was done, IN THE RELATIVE SENSE, with these privatisations. Leftists ought not overstate their case. There is no question that a cronytown privatisation does a better job, from a straight efficiency point of view, then what we would have seen if we had of stayed with the status quo. That goes all the way down the line with one or two exceptions. Thats not the point. We could, and should have, got a better outcome. An outcome consistent with free enterprise. Free enterprise can never tolerate the
public-private-partnership” The public private partnership is a violation of the principle of citizens being equal before the law. Matter of fact it is a violation of law itself. And its an abomination. A constant source of anger, and a revenue-stream for corruption.

We see from the above that with any privatisation one must force a constraint on the other politicians. One must say “Is this business that we are selling the assets too, truly going to be part of a functioning market, in effect, totally independent of government? Or is this business unit, under our current plan, going to be part of some “public private partnership”? If its the latter the brakes must come on. Accept no substitues. Until every smug economics graduate and merchant-of-debt has given up all hope of a crony-deal, the halt must be in.

Now what about the time factor? Surely if you were holding out and blocking a sale, or a new corporation being formed, to do the governments bidding, surely are you not getting in the way of the march of technology and progress? Are you not getting in the way of modernisation?

No we ought not see it that way. We have to rather see it that three other groups are getting in the way.

1. The taxeater politicians, who refuse take the toll from the necessary budget realignment that would be needed to finance their act. They don’t want to sack anyone and lose votes. Well screw them. Its their duty to sack lots of people and lose lots of votes. Thats called “budgeting” And they have to do it. Privatisation is a menace if it gets in the way of that. And here we ought to see that PRIVATISATION OUGHT NEVER BE DONE BY ANYONE NOT RUNNING A HEALTHY SURPLUS. It is therefore incumbent that any opposition politicians must point blank block any arrangement that has a great deal of debt attached to it. If the new policy is a way of the current government procrastinating on sackings, bureaucracy closures, and spending cuts, then the block must be in right there.

2. The arrogant experts. “I’ve got a degree” they say. One side of the fence says “Private….. Better than public” and are too crude in their thinking to make a good shot of things. The other side drools at all the new splurging they can do with the funds. When these two sides get together there is no hope whatsoever of a decent outcome.

3. The financiers and their pretense of sophistication. Yes these people are sophisticated if your favourite movie is “The Sting.” I actually found that movie pretty appalling despite the Joplin piano. And I would have preferred that they had changed at intermission into cowboy clobber so they could rob banks. The financiers, who create new money out of debt, do not bring any resources to the table in the overall sense. They deal in slavery-lite. They obligate you and extort the resources from elsewhere, except strictly to the extent that they recycle term loans. But the fact is they only take in term loans for liquidity issues. So its not to be thought that they add a damn thing to the mix. One aspect of sophistication in finance must consist of trying to cut the banks out of the story to the extent that this is possible.

All three of these dysfunctional groups will get together to offer a dysfunctional solution that they all can agree on. So its not TIME you need to get to the right solution. By putting the block on proceedings you are not wasting peoples time. You are not saying, lets do it ten years from now. You are saying lets do it right. Once the right solution has been presented to you, then the only waiting involves waiting for the above three groups to back down. So if you are blocking this stuff, you are not holding anything up. Those three groups are holding things up and one must force all three of them to give up hope before any real solution can be agreed to.

THE ORIGINAL TELSTRA SALE.

The consultants and the politicians botched it. Now on the Keynesian-Keynesian left, they are finally listening to Paul Budde. I tell you they are going to botch it all over. So its pretty important that someone with a bit of sophistication in economics comes up with an “out”. Because every road seems to lead to disaster when we consider what each of these three groups are likely to push for, and the ultimate disaster of what all three groups will likely support.

Now at the time of the privatisation Paul Budde, if my memory serves me correctly, explained pretty clearly the way to go about this privatisation. The idea, in his view, was to separate the business into two components, by analogy. He said that when you go to sell off a company like Telstra you want to separate wholesale and retail akin to as if you were privatising the truck-transport industry in some communist country (my wording not his). And the analogy is you sell the trucks. Or even the trucking companies. But you don’t sell the road.

Well they didn’t listen to him. They sold the trucks and the road together in one hit. And being morons they then set up, in accordance with Frank Knights theory of the firm, two Frankenstein companies, and allowed a few others in on it through the expediency of the promise of everlasting arm-twisting when it came to the people who owned the actual stuff, dug into the ground.

Right there we see why this was never going to work and was always going to lead to an underinvestment in broadband. Big business must come from small business success for starters. But where is the incentive to capital investment to go to broadband? Under a functioning market, where there are higher than average profits, that leads to capital investment in real stuff increasing in its flow, and this will lead to falling prices, which will bring profits down to normal levels. We are talking about digging up streets and laying cables here. Dealing with three layers of government to do so. How was it plausible that this could be a functioning market when the schmoozing overhead, to people who might wish to compete, was just astonishing. It ought to have been obvious that the two sides of the business ought to have been separated and a great deal of thought gone into making a functioning market of activity of putting this stuff in the ground.

So yes they screwed up. And yes its a good thing to have plenty of broadband. And no the market won’t cater for that under current arrangements on account of the people who helped create Frankenstein Telco’s in Australia being fundamentally incompetent. In principle, even at this late stage, after so much milk has been spilt, it still seems like not a bad idea to separate matters into the operational side, and the side involved with underground properties. Properties that require digging up roads and things to install. But they are going to bugger it up. And so its important to stop this matter. The first thing they did wrong was try and put out tenders for some sort of ugly consortium. This is simply funneling money into the big end of town. Its a disgrace. No good can come of it. Its a violation of the principle that we are equal before the law. But none of the potential cronies put together a satisfactory bid. The next step was at least as bad. They now want to set up their own Frankenstein company. So these bigshots have been sent away. Now they will set up their own large company, hiring all their homies, and the bankers have really won big time on all this. Because the bankers get to create another 50-odd billions of dollars to some extent, either out of thin air, or by way of getting us to be more obligated to the communists in Beijing. This is idiocy. And it cannot work.

It cannot work because the loan money doesn’t create new resources. And because, what would constitute a cost-effective way of doing this, would be for competitive street diggers, and competitive optical fibre cable layers, to develop their act and train their staff over a number of years. What would constitute powerful effectiveness would be for the revenues from digging up these streets and stringing out these optical fibres, to be reinvested in being able to carry out these activities in an increasingly more cost effective way over time. The scheme, to be cost-effective in the more cosmic sense, ought to be all about REDUCING overall debts. Not increasing them. Because as we must stress time and time and time again: The Merchants Of Debt do not create new resources. Hence relying on them is just giving these bludgers a free ride to everyone’s detriment. If you call on them they will create a bottlekneck, leading to cost spirals, either in the primary project you are focusing on, or indeed creating cost spirals throughout the economy. So we are not just paying off principle and interest when we bring in Merchants Of Debt. We are also costing us in terms of powerful inefficiency elsewhere in the economy, not excluding resources being robbed from our export sector.

Once the decision is made for government action one must separate matters almost entirely into all-socialist or all-private. And try and keep these aspects apart. What Kevin has in mind is pure idiocy. And a massive subsidy to the big end of town. Which is unethical and really very disgusting. Reminiscent of him giving 40 million dollars to Toyota. A good company by the way, I’m not knocking them. But though I regard them well its absolutely disgraceful to steal 40 million off us and give them that money. And its bad finance and economics as well.

Have they not learned from their massive all-at-once subsidy of insulation? Three dead. Spiralling costs and falling quality.

Well I could give you the details of the sort of scheme that wouldn’t lead to cost overuns and bottleknecks. I’ll have to wrap this up quickly. Basically you would make any sole trader and his crew tax exempt if they were hired for the activities involved with this rollout. Just start with the tax exemption only sole traders and crew need apply. The other thing is get into surplus prior to starting any rollout. You cannot put these things everywhere at once. So prioritize by council. The State Government and that council must be in surplus and sworn off more debt. And once these two things are in place you could start rolling out in that council where this applies. Now to me I’d just leave it at that with the tax exemption. And leave it up the councils who want to do this. But even on the more extravagant side of things, doing it roughly in accordance to this outline will lead to far better results and less chance of cost blowouts. Forget about this 50 billions and 8 years nonsense. That will inevitably end in tears.

http://www.abc.net.au/news/audio/2009/04/07/2536871.htm

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Responses

  1. Here is Joyce on the radio with Jason Alexander.

    http://www.2gb.com/index.php?option=com_content&task=view&id=6154&Itemid=311

    Really he’s the only person to be put in the shadow finance role. As the parliaments only former practicing accountant who would be more qualified? As a matter of fact he seems to be one of the few financially literate politicians around. For example he pointed out that the Americans will default on their debts. I thought this was common knowledge. But the media made out that this was loony-toons talk. The frightening thing is that we must then have people, in the treasury and finance ministry, that are so useless as not to understand this fundamental reality:

    The Americans will definitely default on their debts, either in the formal sense, or via galloping inflation. I understand that. Senator Joyce does. Apparently the journalist who thought Barnaby was batty, or taking his advice from Lyndon Larouche, are too financially incompetent to understand this basic fact.

    Which is pretty frightening. This sort of ignorance and lack of sophistication in matters financial is actually pretty worrying.

  2. an accountant knows bugger all about economics

    I WOULD DISPUTE THAT IN THE GENERAL SENSE. BUT SPECIFICALLYTHIS ACCOUNTANT UNDERSTANDS ECONOMICS BETTER THAN YOU DO AND BETTER THAN YOUR SORRY BUNCH OF NEOCLASSICAL COLLEAGUES DO. YOU SUPPORTED THE ETS. HE WENT AGAINST IT. HE POINTED OUT THAT THE AMERICANS WILL DEFAULT. YOU DON’T SEEM TO BE AWARE OF THAT. ALSO SINCLAIR MADE A COMMENT ERRONEOUSLY SUGGESTING THAT THE USD WILL BE THE INTERNATIONAL CURRENCY FOR A LONG TIME TO COME. FAT CHANCE OF THAT. SO BARNABY IS A BETTER ECONOMIST THAN THE ECONOMISTS I’VE SEEN. BETTER THAN THE TWO NUTCASES THAT THE CURRENT FINANCE MINISTER BROUGHT TO CANBERRA.

    HERE IS BARNABY TALKING SOME MORE AND ECONOMIC ISSUES DO COME INTO IT.

    http://www.nationals.org.au/News/Video/VideoPlayer/TabId/134/VideoId/4/Barnaby-Joyce-Senate-Leader-For-The-Nationals-Address-To-Federal-Council-2009.aspx

  3. Just think of it SOON. You and Humphreys have many times likened the carbon tax to a consumer excise. Even after I’ve pointed out to you that this is wrong, you both still get it wrong. You cannot even get it right, after the fact of someone pointing it out to you. And not just one of you getting it wrong. But both of you.

    But to an accountant in small business himself in working with small businesses in Queensland he’s going to know right away that its not a consumer excise.

    Sinclair screwed this up. Thought it could be compensated for simply by putting up the tax free threshold. Why would you burn that possibility up for a peace of shit reason like that? But in fact it cannot be compensated for in that way. Since its in no way a consumer excise.

    So it appears all you economists got that wrong. But an accountant with a lot of experience with many different small businesses expenses and balance sheets wouldn’t ever get that wrong. He’d know the difference between a carbon tax and a consumer excise straight away. He would see in his minds eye the incredible disaster of the ETS.

    But you and Humphreys weren’t good enough economists to see that even after it was pointed out to you and explained very clearly to you. Many times. At length. You just could not get it. Sailed right over your head.

    So Abbott sure has put the right guy in the right job if we have a punditti as ignorant as what they appear to be.

  4. Graeme
    we know that (1) CO2 traps heat.

    NO IT DOESN’T. WE DON’T KNOW THAT. RATHER WE KNOW FOR A FACT THAT IT DOESN’T TRAP HEAT. you accept that as you’ve heard of Arrhenius

    (2) under human industrialisation we’ve released unprecedented amounts of CO2

    NO WE DON’T THIS IS FACTUALLY INCORRECT. WE HAD HIGHER LEVELS AT THE END OF THE NAPOLENOIC WARS THAN WE HAVE NOW. AGAIN FACTUALLY INCORRECT.

    what is your argument against global warming being contributed to by humans?

    WELL FOR STARTERS WE ARE COOLING. IT WOULD BE GOOD IF WE ARE WARMING, SEEING AS WE ARE IN A BRUTAL AND PULVERISING ICE AGE. BUT IN FACT WE ARE COOLING. SEE ITS NOT JUST THE ECONOMICS YOU CANNOT SEEM TO GET RIGHT.

  5. See you get everything wrong? I asked you a long time ago:

    Where is your evidence for the likelihood of catastrophic warming?

    Where is your evidence for the idea that a little bit of human induced warming would be a BAD THING during a brutal and pulversing ice age.

    And where is your evidence that CO2 warms the globe more than a trivial amount in the first place.

    You had nothing then. You never found anything since. So you position was fundamentally irrational and treasonous.


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