Data Processing Vortex

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Renegade Economists Show 104

As broadcast on the almighty www.3cr.org.au – 02/09/09

Data Processing Vortex: How can we keep up to speed with the juggernaut of issues hurtling our way? Is it enough to keep making the same mistakes? Celebrating 2 years on air, Karl gives a wrap on the foundations to the Earth Rights Democracy amongst current news zaps.

Show Notes:

Smitten Sartor Went Too Far
THE former NSW planning minister Frank Sartor was ”enamoured” of a ”land bribe” exchange when he approved a huge housing development at Catherine Hill Bay, the Land and Environment Court ruled yesterday.
In a critical decision, Justice David Lloyd ruled that Mr Sartor ”committed himself” to approving the multi-million dollar project because he had previously negotiated and signed a contract with the developer, Rose Group, which would swap his approval for 300 hectares of conservation land.

Developer Eyes on Opposition Too
Data from the Australian Electoral Commission shows that the NSW ALP has received over $14 million in property donations in the past eight years.

During the same period the NSW Liberals have received over $8.6 million in property donations even through they have been out of government the entire time.

Many other notes came from Fast Froward News 4

California
Cali budget deficit -US$26 – 40bn
Chevron profits? $23.93m profit
0% resource rents for oil in cali

The Daily Reckoning
–Bloomberg reports that, “The benchmark index for U.S. stock options closed at the highest level since July 9. The VIX, as the Chicago Board Options Exchange Volatility Index is known, increased 12 percent to 29.15. The gauge, which measures the cost of using options as insurance against declines in the S&P 500, reached a record of 80.86 in November. The index is still above the average over its 19-year history of 20.”

–The VIX is referred to as the fear index because when the cost of buying put options on S&P 500 stocks goes up, it means investors are actively hedging against a fall in stocks. You can see from the chart above that yesterday’s action took the VIX above its 50-day moving average. What’s more the entire index remains elevated. That shows you just how uncertain investors are about the stability of this rally.

–The Wall Street Journal reports that just five big financial stocks are behind the stock market’s rally. Fannie Mae, Citigroup, Freddie Mac, Bank of America and AIG account for nearly a third of market’s daily turnover. Seems everyone is speculating on the banks…and moving them higher.

–You might also recognise them because they all go taken to the woodshed in trading action yesterday. The Dow fell 2% yesterday and the S&P 500 2.2%. But that was nothing compared to AIG’s 21% decline, or Fannie’s 18% fall, or Freddie’s 17% fall, or Citi’s 9.2% fall. Ouch. The Journal suggests the financials may lead the market down just as they led it up.

Music

The Years – Toasting
Junk Culture – West Coast
Altair Nouveau – Sorcerer
Raztaman – Always Do Your Best


Rate rise looms after GDP spurt
Gross domestic product for the June quarter grew by 0.6 per cent, official data show, following a 0.4 per cent increase in the previous three months, meaning Australia was ”defying global economic gravity” in the words of Treasury Wayne Swan.

Investors were today rating the chance of a rate rise by the Reserve Bank when its board next meets on October 6 at 43 per cent…….In a year’s time, those investors were banking on the equivalent of seven rate rises, or 1.75 percentage points, by the RBA, lifting the official cash rate to 4.75 per cent.

”Today’s result means that we are the fastest growing advanced economy over the past year and the only advanced economy to have recorded growth over the past year,” Mr Swan said.

…Japan’s economy grew at an annual 3.7 per cent pace in the second quarter, following an 11.7 per cent contraction the previous three months, the UK’s GDP dropped 5.5 per cent, the most since records began in 1955, and the US shrank 1 per cent, according to Bloomberg.

The market for craft beer remains small and tax laws are unfavourable. The Victorian Association of Microbrewers is lobbying the Federal Government for a change in excise tax laws that require microbreweries to pay 25 per cent of their sales income to the Tax Office. It’s one reason some breweries have closed, such as South Melbourne’s Emerald Hill, while others have given up their breweries and now have their beer made under contract elsewhere.

Chinese statistics increasingly unreliable
National and local data are often at odds, or are not transparent enough or unverifiable. In the current crisis the world wants maximum transparency.

Beijing (AsiaNews/Agencies) – In July China announced that its rate of economic growth was back to normal at around 8, a sign that its economic recovery from the global financial meltdown was well underway. However, experts have gone through the data with a fine comb and found many obvious flaws.

Recently the National Statistics Bureau put the country’s GDP figures at 13.99 trillion yuan for the first half of the year,
– the output indicated by China’s local governments (municipalities and its 31 provinces), 15.38 trillion yuan.
Such a discrepancy is not even unusual since local governments in 2004 reported faster GDP growth than the national rate, according to economist Sun Mingchun.

The Chinese acknowledge that even in Mao’s times local officials could improve their career chances if they showed higher growth rates in the area under their jurisdiction. Many are in the habit of providing their bosses with higher figures, in line with what central planners forecast. The practice is so widespread that in June Beijing adopted a law that punishes public officials who provide flawed or fake data.

Experts for example are sceptical at the country’s official unemployment rate, which has remained unusually stable between 3.9 and 4.3 per cent through all the domestic and international economic upheavals of the past seven years.
One case in point: how much stimulus has Beijing’s 4 trillion yuan (3 trillion stimulus) package aimed at reversing the economic slowdown delivered? What was its impact on the labour market? Has it been audited to see that none found its way into speculation in equities and properties or into inefficient public enterprises?

The net effect is that the lack of reliable information makes data not very useful. Another example are investments in fixed assets, which are considered deeply suspect because they are counted as having been made when the funds are disbursed, rather than when the money is actually spent.

*****economists have long wondered how Beijing can come up with accurate figures for GDP just two weeks after the end of each quarter, when it takes US statisticians a whole month.

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