Tag Archives: warwick mckibbin

When “Outspoken” Is A Perjorative For “Truth-Teller”

12 Aug

Outspoken former RBA board member Warwick McKibbon (emphasis added):

Ditch the delusion that stimulus saved us from GFC

The sell-off in global sharemarkets reflects the realisation that debt problems in advanced economies are serious, but it reflects more than this. For some time the fiscal fragility in the global economy has looked like a slow-motion train wreck …

Australia is now likely to be hit with a second global shock. This is different from the GFC in a critical respect. It is a concern over excessive government debt so the response in Australia should not entail a new fiscal package …

Bad fiscal design always has an unexpected cost. Why is a flood tax being introduced just as the economy slows? The forecast that this would help dampen the boom is now likely to be wrong. There clearly should be an urgent review of the mismatch between spending commitments in the pipeline and highly uncertain revenue. This is essential to better understand future fiscal vulnerability.

The delusion that what saved the Australian economy from the GFC was entirely fiscal policy needs to be jettisoned.

Outspoken chairman of the Future Fund – the government fund containing public servants’ super, that Barnaby has warned will be raided to pay down debt – says that the global sovereign debt crisis could take 20 years or more to “play out” (emphasis added):

The chairman of the $75 billion Future Fund has warned the debt crisis engulfing Europe and the United States could take at least 20 years to resolve, causing ongoing market volatility.

David Murray warned the post-global financial crisis environment would continue to be characterised by a series of market shocks, with investor uncertainty heightened by concerns over the ability of political systems to contain any emerging meltdown.

And he sounded the alarm on the level of government and private sector debt in Australia, saying they both needed to be reduced, given the capacity of Australia to be caught up in a new global financial rout.

“The global financial crisis was caused by excessive debt which had built up in the world at both the government level and in the private sector in developed countries,” Mr Murray told ABC radio.

“The sorting out of that problem is something that could take up to 20 years. As that post crisis environment unfolds we will see continuing events such as we’ve seen in the past couple of weeks.”

“Outspoken” is another of those words wielded as a weapon.

In modern, politically-correct Unspeak, it is the latest putdown label for “truth-teller”.

When someone speaks the truth, contrary to the “mainstream wisdom” – especially someone like Warwick McKibbin or David Murray holding a public position, who cannot be “politely” attacked more viciously – then they/their viewpoint is labelled as “outspoken”.

The unspoken implication of labelling someone as outspoken … is that we should not speak out.

That we should all be good, silent, obedient slaves.

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Global Economy Headed For “Slow-Motion Train Wreck”

6 Jul

The RBA’s soon to be dumped Board member Warwick McKibbin warns – unofficially – that Greece will be just the first carriage to careen off the rails, in what will be a global train wreck.

From Bloomberg, 30 June 2011 (emphasis added):

The fiscal outlook “is what I call the slow motion train wreck — the first carriage to break is going to be the Greek economy, but we have a series of economies facing very serious fiscal adjustment,” said McKibbin, a professor at Australian National University whose board term ends July 30, in a speech in Melbourne today. He said his comments reflected his personal views, not those of the Reserve Bank of Australia.

“There’s almost guaranteed collapse or crisis in the euro zone and there’s serious global inflation problems and a policy response looming,” said McKibbin, who is also a senior fellow at the Brookings Institution in Washington. “All of these have implications for relative commodity prices.”

In contrast, Treasurer Wayne Swan in a speech at the same Melbourne conference today said: “Some have a dire view of what’s happening in Europe. I don’t share those views.”

Hmmm.

Just as he did not share Senator Joyce’s views in 2009, that the US economy was on a debt trajectory that made the risk of default a real possibility. One that Australia should have “a contingency plan” for, just in case.

A warning that is now coming to pass.

Barnaby was right.

And Swan, and every economist in the country (except Dr Steve Keen) … was wrong.

Bookmark this page.

So that you can refer back to Swan’s latest oh-so-confident and authoritative pronouncement that all’s well.

I know that I for one am fully seized with absolute confidence in the word of our career political hack cum “Treasurer”. An arts student, with zero business or financial credentials or experience whatsoever.

Here’s how McKibbin’s comments were reported locally, compared with the USA’s Bloomberg.

From the SMH, 1 July 2011:

The global economy is facing ”a slow-motion train wreck” with Greece only the first nation to be hit, Reserve Bank director Warwick McKibbin has told a Melbourne conference.

Referring to the most recent global economic crisis as a mere ”blip”, he said the coming crisis could undo the mining boom and bring on inflation of the kind not seen since the 1970s.

Professor McKibbin told the Melbourne Institute conference dozens of European countries now had gross government debts on track to exceed 60 per cent of GDP. ”Japan is forecast to be 200 per cent of GDP, the US is forecast to be over 100 per cent of GDP,” he said.

”At zero interest rates that can be sustained, but at 5 per cent interest rates countries have to put aside 5 per cent of their GDP every year just to service the debt. That is not sustainable.

”Already consumers aren’t spending and investors aren’t spending because of the tax increases that are in prospect.

”Greece, Portugal and Ireland don’t just need to have their debts written off, they need to have a 30 per cent to 40 per cent depreciation of their real exchange rate,” he told the conference.

”There are two ways to do that, either pull out of the euro and depreciate by 40 per cent, or have deflation of 40 per cent over the next 12 months.

”I do not believe any society can survive having a 40 per cent deflation that’s been imposed by the International Monetary Fund and the European Central Bank.”

As the US created more dollars to inflate away its debt repayment obligations, countries that are linked to the dollar, including China, India and parts of Latin America, would suffer 1970s-style inflation.

”In India inflation is 9 per cent, in China it is 6 per cent. That inflation is pushing up resource prices for now, but it will have to be brought under control with much higher interest rates,” he said.

Joking that he could not talk about Australian interest rates, which were in any event ”always appropriate”, the Reserve Bank board member warned that the inflation would spread worldwide.

Soon-to-be-former Board member McKibbin has form.

For criticising the Labor Government over its “stimulus” measures in response to the GFC, amongst other things.

Little wonder they will not renew his term.

Can’t have anyone in a position of “authority” telling something even vaguely resembling the truth, now can we.

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McKibbin For PM 2010

23 Jun

Long something of an outsider – the lone outspoken voice of reason and commonsense on the otherwise “reserved” board of the Reserve Bank – Warwick McKibbin has again spoken out.  He has accused Rudd of panicking, and wasting huge sums of taxpayer money.

Who’d have thought!

From the Sydney Morning Herald:

A prominent university economist and member of the Reserve Bank board has delivered a scathing critique of Kevin Rudd’s response to the global financial crisis, saying his government ”panicked” and ”rammed through” decisions fraught with risk.

Warwick McKibbin, of the Australian National University, accused the government of overspending on its stimulus package, and then coming up with ”a really badly designed resource tax” to try to compensate.

And he described the government’s planned $43 billion national broadband network as ”a gigantic white elephant waiting to happen”.

It gets better.

McKibbin also attacks Treasury secretary Ken Henry.

Readers of this blog will know our scathing views of Henry’s “performance” before, during, and after the GFC.  We have been calling for him to be sacked… a call that is only now just beginning to resonate in the Opposition ranks.  And in the economic commentariat too. Highly esteemed business leader and commentator Robert Gottliebsen recently said this:

The position of Ken Henry as the head of Treasury is not sustainable.

Here’s what Professor McKibbin had to say about Henry:

Professor McKibbin also took aim at fellow Reserve Bank board member and Treasury secretary Ken Henry, accusing him of not only failing to consult experts on economic issues, but of trying to silence them…

(Professor McKibbin)… has told The Age he was stunned by Dr Henry’s call this week for academics to ”put down their weapons” and stop nitpicking over government proposals such at the emissions trading scheme.

”The ETS was a flawed scheme. Had the government got it through it would be dead by now because of the financial crisis,” Professor McKibbin said. ”I have enormous respect for Ken Henry, but he can’t believe that you should have consensus because it is better to have bad policy that everyone agrees with than eventually get good policy that will work.”

Enough of Henry. Really … enough!

Back to Rudd / Henry’s rushed and bungled “economic stimulus”:

And in a damning assessment of the government’s stimulus package, he (McKibbin) said: ”It wasn’t evidence-based policy, they panicked. They put the money into school buildings, they put it in insulation, they put it in stuff they could never reverse.

”The government rammed those decisions through the economy even though they were fraught with risk,” Professor McKibbin said. ”No one was consulted about an alternative view, and if you did say anything you were attacked by the Treasurer and the Prime Minister in public.”

He also accused the government of overspending on the stimulus package and then deciding that ”because of politics they had to get their spending back so they could claim they had fiscal surplus – for which there is no economic basis, by the way.

”So they come up with a really badly designed resource tax to try and get the position to look good three years from now and, in the middle of a sovereign risk crisis, exposed the economy to a reassessment of sovereign risk.”

Warwick, we need you in politics.  You have my vote.

McKibbin For PM 2010!

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