Nassim Taleb (1960) [Author of The Black Swan]:
[The] system is too fragile [and the] regulators are [not] particularly intelligent.
[What is needed is] simplicity with the financial instruments to counter this complexity.
(Zombie banks, 12 April 2009)
Contents
TASER! TASER!
The Economics of Opioid Replacement Therapy
Resource Democratization
Energy efficiency: Not in Australia mate!
Casualties in the war on people smuggling
Taxing Mines
Financial Alchemy
Zombie Banks
Background Briefing
Jonathan Green
- From cattle to carbon, 16 December 2012.
- The missing emissions, 9 December 2012.
- An excessive use of force? 4 November 2012.
Bruce Barbour: NSW Ombudsman.
Domingos Laudisio: Roberto Curti's Uncle.
Wendy Carlisle:
The sequence of events which ultimately led to the death of Roberto Laudisio Curti began with a 000 call from a street cleaner who witnessed a shirtless man jump across the counter of a convenience store in Sydney’s CBD. …
The coroner refused to release one of the sequences of Taser Cam footage … because on it Roberto could be heard crying out as he’s repeatedly Tasered in drive-stun mode — which is when the Taser is applied directly to the skin.
It’s part of a sequence where he was drive-stunned seven times [by two officers simultaneously] in just one minute and twenty seconds.
And according to the police Taser log, the combined duration of the electric shock is 51 seconds. …
{[Another officer used] three cans of capsicum spray on him.}
Domingos Laudisio:
After he handcuffed he has Taser on him for five times. …
Wendy Carlisle:
The autopsy did not identify a cause of death.
Some of the medical experts ruled out Tasers and capsicum spray as a cause of death, although they thought they could have contributed to a heart attack.
A toxicologist ruled out LSD as a cause of death.
One expert said Roberto had died from positional asphyxia — that is, suffocation and heart attack induced by lying face down in a dangerous position after his struggle with police.
But another expert disagreed with that. …
Roberto’s journey from being just another overseas student to a death in police custody was meticulously documented by the city’s security cameras, the Taser Cam and recorded police messages. …
[Roberto] been out celebrating St Patrick’s Day with a couple of friends.
[At] around 11 o’clock they all shared a tab of LSD.
The drug induced … a psychotic episode.
He was paranoid and fearful. …
At another stage Roberto was involved in an altercation with four other young men … and a security camera picked them up on a city street as Roberto was being chased.
A short time later the city convenience store camera shows Roberto entering the shop …
[He] jumps the counter [takes two packets of biscuits] and tells the shopkeeper that people are trying to kill him. …
It was this scene that the cleaner saw when she dialled 000. …
Police [later said] they feared for their own safety.
Roberto, they said, had superhuman strength and despite being cuffed and face down on the pavement … was not under control. …
[The] New South Wales ombudsman [recently] released his second report in four years into the police use of Tasers in New South Wales.
It did not deal with the Roberto Curti tasering [which] will be the subject of another report …
[The report covers] a six-month period in 2010.
Of the 600 [incidents reviewed 27 were] identified as problematic. …
In one case … a magistrate found that the use of Taser was unlawful because 'unnecessary and excessive force' had been used.
[The police later] argued that even though the court had found it was unlawful, it was still consistent with police Standard Operating Procedures. …
Bruce Barbour:
Clearly the operating procedures cannot subvert the law.
You cannot have a situation where something can be consistent with operating procedures [while] at the same time [being] unlawful.
[The police] persistently held the view that the [officer's actions had been] consistent with the operating procedures, notwithstanding the findings of the magistrate. …
Wendy Carlisle:
The four officers who tasered Roberto Curti are still carrying Tasers. …
GUIDELINES FOR THE USE OF ELECTRONIC CONTROL (TASER) DEVICES
5. Criteria To Discharge TASER …
… The TASER may be discharged at the discretion of the TASER User as a tactical option after proper assessment of the situation and the environment to:
5.1 Protect human life.
5.2 Protect yourself or others from person/s where violent confrontation or violent resistance is occurring or imminent.
5.3 Protect officer/s in danger of being over powered or to protect themselves or another person from injury.
5.4 Protection from animals. …
Once TASER has been used, officers should attempt to restrain the subject as quickly as possible.
Once the subject is effectively under control, the use of TASER should be discontinued.
(p 16)
6.4.2 Probes Discharged:
… Neuro-Muscular Incapacitation (NMI) occurs resulting in a direct involuntary contraction of the muscles that disrupts neuro-muscular control.
6.4.3 Drive Stun:
… Drive Stun mode may cause pain and will NOT achieve Neuro Muscular Incapacitation.
(p 17)
Multiple cycles or prolonged use of TASER may increase the risk of serious injury or death.
(p 18) - For their eyes only, 21 October 2012. PNG land scandal, 14 October 2012.
- A Deadly Wait, 19 August 2012.
Alex Wodak: former Director, Alcohol and Drug Service, St Vincent's Hospital, Sydney.
David Outridge: General Practitioner.
Donna McKinnis: Pharmacist.
Alex Wodak:
A heroin habit costs the community around about $100,000 per person per year.
[Residential] abstinence treatment [costs] somewhere between $10,000 and $20,000 per person per year, if you [can get them] to stay for a year …
[Someone] on a methadone program [costs] about $4000 a year.
[Prison costs] a minimum of $80,000 [per year.]
[Comparatively speaking,] methadone is [an absolute] bargain …
Brendan King:
Heroin addiction … often masks other personal problems, like childhood abuse and mental illness.
[However, once] an addiction is established, it is extremely difficult to reverse.
David Outridge:
[Having] crossed a line … it’s very hard to come back …
[Following detoxification there’s] a 95 per cent relapse rate per annum for people who become addicted to opioids.
Brendan King:
[A recent] National Drug Law Enforcement Research Fund [study of] heroin users found that 84 per cent of them were back in jail within two years of being released.
[Those] stayed in treatment after they got out … were less likely to go back to prison.
Donna McKinnis:
[If people] aren’t on methadone; they’re using drugs.
Those are the two options.
It’s not methadone or nothing; it’s methadone or drugs. …
These are people who have often been in jail for drug offences …
[They've] been stabilised on methadone or suboxone in jail and then released [and told]
‘You’re on your own.
We’re going to throw you off the cliff.’ - A fair share of the boom, 5 August 2012.
Tara O’Connor: Director, Africa Risk Consulting.
Bonnie Campbell: Professor of Political Economy, University of Quebec, Montreal.
Stan Correy:
… Ivan Glasenberg [CEO, Glencore] is estimated to have made close to $10-billion from the Glencore float [making him] the second wealthiest Australian citizen, behind Gina Rinehart. …
[For] the global miners, it is the signal that the Australian [Mineral Resources Rent] tax has sent to other resource-rich nations that is of greatest concern. …
Ivan Glasenberg:
… Australia just wants to nationalise 30 per cent of their mines. …
We saw the carbon tax, we saw the mineral resource tax …
… Australia [is sending] a signal to the world,
‘We may just change the rules on you.’ …
Stan Correy:
Glasenberg is also a director of a global mining company from Russia, UC RUSAL …
Africa, Central Asia and South America are where resource nationalism is of most interest.
The problems of [corruption and nationalisation] still exist for mining companies, especially in Africa.
But resource nationalism is tied to another trend: democratisation. …
Tara O’Connor:
[In] the immediate aftermath of [decolonization most African] countries were left [without enough] educated people [to take over the mines.]
Africa has been burnt by having … its commodities exported [with little or] no benefit to the continent …
[However, with] between five and seven per cent growth rates over the past few years across the continent, you’ve got a surge of economic growth [and a push for] greater democracy …
[This] means that people will have [a] greater voice.
[For] 30 years, mining companies that have operated with near impunity …
{[For] the first time [we are seeing governments actually] having to take into account that they’re going to have to deliver to their populations if they want to be re-elected.}
Stan Correy:
At the African Union Summit in Addis Ababa last month, the Australian government was singled out for praise for its assistance in helping African countries improve their mining regulations. …
The African Minerals Development Centre will be established next year.
[The] Australian government is already [providing funding for] ‘mining governance’ [—] transparent mining regulations, contract reviews and mineral taxation policies.
In April … an agreement [was signed] with the Liberian government to set up a natural resource taxation unit.
[This] received almost no media coverage in Australia …Liberian Daily Observer [translated]:
Voiceover:
Deputy Minister of Finance for Revenue, Dr James Kollie, pointed out that with the involvement of the Australian people, revenue officials will be adequately armed to approach natural resource companies.
[The West African country of] Guinea is the world’s second producer of bauxite, yet it’s one of the poorest countries on the continent.
Stan Correy:
… Australian companies like Rio Tinto have had serious problems in [in the past] dealing with corruption … military coups and presidential decrees …
[Now] Guinea has a parliament and a new mining code with regulations about taxation and reviews of mining contracts. …
Bonnie Campbell:
These [changes] are going to be resisted because they’re seen as something which will encroach on privileges of the past. …
The publication of contracts is [common sense] in a country where [everyone —] including political leaders — [are accused] of not being transparent.
Stan Correy:
One company particularly critical of the Guinea mining code is UC RUSAL, which has interests [there] in alumina refineries and bauxite mines … - Life and death on the frontline, 27 May 2012.
- Residents vs McDonald's, 20 May 2012.
- Fatal shore: the deaths of three teenage surf lifesavers, 13 May 2012.
- Clive's World, 15 April 2012.
- Energy efficiency: Not in Australia mate! 8 April 2012.
Phil Harrington: Pitt and Sherry Consulting.
Erwin Jackson: The Climate Institute.
John Jutson: Energy Consultant.
Chris Dunstan: University of Technology, Sydney.
Phil Harrington:
[Australia's] rate of improvement in energy efficiency [since 1973] has been somewhere between a half and one-third of comparable OECD countries …
In 1973, we used about 21 megajoules of energy for every dollar of produce in that industrial sector, and by late 2000s, it had fallen to just below 20 megajoules of energy. …
Australia has overtaken the United States as having the [largest new] houses in the world [at] just under 250 square metres.
[Every] year since 1990 Australia has [consumed almost] 7 per cent [more electricity just] watching television …
Di Martin:
That’s more than double the record of other countries. …
Phil Harrington:
[In] Japan they have a program called the Top Runner.
[This] air conditioner [or] refrigerator … is the most efficient …
[In] three years time, no refrigerator, no air conditioner, [can] be sold in Japan if it is not at least as efficient as [the] Top Runner …
[We] have very low efficient stock [of energy-using devices] as compared to … other countries [and] a low rate of innovation …
[The] average new car sold in 2008 had the same fuel efficiency as the average new car sold in 1963 in Australia …
[We have overtaken the] United States as having the least efficient new passenger motor vehicles in the world. …
Erwin Jackson:
[Industry accounts] for about 40 per cent of total energy use. …
Companies generally aren’t investing in energy efficiency unless they can pay back that investment in two years.
[There are opportunities to achieve] 40 to 50 per cent reductions in [energy use but] they take seven or eight years to pay back. …
Di Martin:
The federal government [has set up] a new $1.2 billion fund where manufacturers can apply for help to fund energy-efficient equipment or other initiatives. …
[We have] the most polluting electricity supply in the OECD, beaten only by Estonia. …
On really hot days … Australia uses a titanic amount of power [on air conditioning].
John Jutson:
[The] electricity consumption [required] for maybe 40 hours in the year is driving a whole investment program to supply that need [for peak power generation].
Di Martin:
It is the most expensive infrastructure program Australia has ever seen, costing us $45 billion over a five-year period.
Chris Dunstan:
[The] National Broadband Network [will cost] about $36 billion over about an eight-year period, so the electricity network infrastructure spending is much greater and over a shorter period of time that the NBN.
Di Martin:
[This is] the reason Australia now has some of the most expensive electricity in the world. …
Alan Pears [RMIT]:
The rules of the energy market need to be changed … so that energy networks have a financial incentive to help people to save energy rather than … use more. …
Di Martin:
[Erwin Jackson] says the federal government’s own modeling [of a proposed national energy efficiency scheme] could save [$12 billion.]
But the federal government hasn’t committed to the scheme; it’s just agreed to investigate it. …
Erwin Jackson:
Stop start policies in energy efficiency have stymied it for more than two decades now.
Australia is lagging behind pretty much every other advanced economy [including New Zealand].
Would you like to know more? - Energy efficiency: how does your house rate?, 1 April 2012.
- Bosnia's forgotten victims, 18 March 2012.
- A sinking feeling in the Torres Strait, 4 March 2012.
- Casualties in the war on people smuggling, 30 October 2011.
Alistair Wyvill: Muslimin's lawyer.
Hagar Cohen:
[One Indonesian] fisherman, Muslimin, was jailed in Australia for fishing illegally, and his boat was burned before the High Court found he'd been wrongfully convicted.
He returned to Indonesia, but without a boat he had no livelihood; instead, he smuggled immigrants to Australia. …
Fishermen like these are now clogging the legal system.
There are literally hundreds of them currently awaiting trial at an estimated cost of $300 million. …
According to the Attorney-General's Department, since 2008, 75 crew members were assessed as being minors and sent back home, because it's official policy not to prosecute children with people smuggling offences.
However, it's claimed that as many as 40 boys have been wrongfully sent to prison. …
Background Briefing is aware of a further 19 children who've been prosecuted, imprisoned and then deported back to Indonesia after their age has been revealed in court. …
[Publicity] about how the Australian Federal Police uses the X-ray method prompted the founding Children's Commissioner in the UK, Sir Aynsley Green, to publicly denounce the Australian government for relying on the method in court.[Serious] injustice is possible … by using a method involving wrist X-ray which has been rejected elsewhere and which is unethical, not fit for purpose proposed, inaccurate, and potentially unlawful.
There've been a number of important arrests recently of key organisers, but these make up just one per cent of the total number detained. …
In the past four years, Australia has apprehended 220 Indonesian fishermen and burned their vessels.
[Sahring] was arrested in 2008. …
He argued in court that he was not fishing in Australian waters and there was no fish on his boat when it was apprehended.
Subsequently, the prosecution dropped all charges against him and he was sent back home.
But he still lost his boat and source of income.
Alistair Wyvill:
… Australia has the rights — in quite a complex way — to the trepang, the sea slugs, on the seabed, but Indonesia has the rights to the snapper and the ordinary swimming fish above it.
Haj Hafifa (via translator):
[Muslimin] would have worked it out and knew it would be enough to look after this family for at least five years if he was jailed for five.
He would have calculated the cost so that it was enough for education, food, etc, while he was away.
Muslimin's wife supported his decision.
How can you live happily with your husband if you can't eat?
If we live long enough, we will be able to meet again.
If not, then it's God's will.
Hagar Cohen:
[While] Australian politicians debate about the best way to stop the boats — offshore processing, the Malaysia Solution, or returning boats to Indonesia — the fishermen Background Briefing spoke to remain oblivious to these deliberations.
For them, survival is a first priority.
Would you like to know more? - The Lord Monckton roadshow, 17 July 2011.
- Taxing Mines, 27 March 2011.
In January, a British newspaper published a list of UK-based corporations and the number of tax havens they used.
The list [fueled] the anger of British citizens facing cutbacks in services from the government. …
Rio Tinto: 18 tax havens
BHP Billiton: 24 tax havens
Xtrata: 7 tax havens. …
[According to Satya Das, the] complexity of … financial instruments [such as derivatives make them intentionally] opaque. …
For tax authorities it's like unravelling spaghetti.
It's also [why] companies have their biggest profit centres in places where they have no physical presence. … - Julian Assange: The man who played with fire, 6 February 2011.
- Freefall: free markets and the sinking of the global economy, Lecture at the University of Queensland, 8 August 2010.
Joseph Stiglitz.
That Which is not Sustainable, Won't be Sustained
[Before 2007 we] had a very badly distorted economy. …
The financial sector is supposedly a means to an end, it's not an end in itself.
You don't eat finance, you don't wear it.
The justification for finance is that it helps allocate capital, allocate resource, manage risk and if it does its job well, then the economy is more productive, we all grow faster, and in return for that contribution, they get a fair return. …
But somebody who was facilitating the growth of others to get them to have 40% of all corporate profits, suggested that something was out of kilter.
And even more so when they were getting profits when they weren't doing what they were supposed to do; they didn't allocate capital, well they misallocated capital.
They didn't manage risk, they created risk.
So the financial sector was not only bloated, it had failed to perform its essential functions. …
The view was that markets on their own were efficient, were self-correcting, and in that sense were stable.
But in fact … the markets worked well in the decades after the great depression because we had good regulation.
And then, in the three decades after deregulation began under Thatcher in the UK, under Reagan in the United States, there have been crises after crises.
More than 100 financial crises around the world, most of them in developing countries, but some of them in developed countries. …
But because they were bailed out, they came to believe that the markets were working, because things didn't fall apart. …
[The] Federal Reserve helped organise a bailout of Long-Term Capital Management … in 1998, one hedge fund's failure threatened to bring down the entire global economy, one hedge fund had exposure of a trillion-and-a-half, and the response in the US Congress was to pass a law saying that derivatives could not be regulated. …
… Adam Smith's 'invisible hand' … is invisible because it's not there.
[There] was no invisible hand guiding financial markets, just greed and self-interest, [and] inflating bubbles. …
In 2007 … before the crisis, most Americans' income was lower than it was in 1999. …
So it isn't trickle-down economics … it's been trickle-up economics; people at the bottom have been giving up incomes so the people at the top can enjoy ever more.
[If] your income is going down and your spending is going up, the only way to square this particular circle, is to borrow.
[What] allowed this to happen was this real estate bubble, the housing bubble; so they thought they were getting wealthier and wealthier, even though they were spending more and more, and our incomes were going down.
[However] as one of my predecessors as Chairman of the Council of Economic Advisers said,That which is not sustainable, won't be sustained. …
A Global Marketplace for Fools
We invented a concept called low documentation loans, more familiarly known as 'liar loans,' where … the mortgage broker told you what income you needed to have to buy the house that you wanted to buy, and then they would write that down and since you didn't have any documentation required …
[Globalisation] and financial and capital market liberalisation, allowed us to sell these toxic assets all over the world.
The securitisation process … was based on what I call the 'greater fool theory', that you could always find a fool foolish enough to buy these assets.
Globalisation had opened up a global marketplace for fools. …
40% of our toxic mortgages we sold to Europe …
In the great depression, countries tried to get themselves back to prosperity through 'beggar thy neighbour' policies.
What they did is, they increased tariffs and so took their limited amount of demand and said, 'We'll spend it at home rather than abroad and that will get us prosperity at home.'
It didn't work though, because everybody else retaliated and it was part of the downward spiral that led to the weakening of the global economy, the great depression. …
But the main mechanism today for this kind of 'beggar thy neighbour policy', is called competitive devaluation, where you lower your exchange rate relative to that of your competitors.
When your exchange rate gets low, your products are cheaper and you sell more. …
But exchange rates are what I call a negative beauty contest; the question is, which country is the ugliest?
And for a while the US was winning that contest hands-down.
We had really bad economic policies.
But then Europe decided to compete, and right now I think it's winning …
[This is] a NEGATIVE sum game, because the [resulting] volatility in exchange rates has adverse effects [for everyone]. …
[When exports and] consumption is weak, investment will be weak.
The only answer is [for governments to] step in [with a] Keynesian stimulus. …
Much of the innovation [in the financial sector] was directed at circumventing tax accounting and financial regulations, not at enhancing the productivity of the economy. …
The banks knew that they had been engaged in massive deception …
[The] regulators, couldn't tell what was going on, that was part of [the] innovation.
[As] the crisis developed [the banks] knew that there was no reason to trust themselves, so they [had] no reason to trust each other.
[That's] why the credit markets froze.
[In] this last crisis [the waste of resources] by the private sector [—] the misallocation of capital [and] the under-utilisation of resources [— was] greater than almost any government … has ever been engaged in [outside of a war].
[There] was a little waste in the public sector, but the waste in the private sector is an order of magnitude larger …
{[The] Australian stimulus [package was both] timely [and] one of the best-designed [in] the world …}
[If the Australian government] hadn't spent money to stimulate the economy … you would have wasted huge amounts [of human and capital resources].
[The] world cannot survive if everyone consumes in a profligate manner as the US …
[The] planet can't survive.
What is needed is a new economic model focusing on saving resources, investments to respond to the challenges of global warming and poverty, a new global reserve system, a new global regulatory system. …
Would you like to know more? - Zombie banks, 12 April 2009.
Bill Black [Former Bank Regulator]:
After the savings and loan crisis, US Treasury Secretaries of both parties, for 15 years, went over to Japan every year and said,You know, the policy you have of covering up the bank losses is a terrible policy …
Wipe out what we call the risk capital, in other words the shareholders and the subordinated debt holders, who make a contractual agreement that said if the place is insolvent, we get nothing. And of course that saves the taxpayers a lot of money, but it also creates the right incentives. … Instead of following our past record of success, we've adopted the Japanese system, that we told them … was an abject failure. …
[It] means that you don't recover.
It's why you're having this lost decade …
[You] ought to do what we did that was successful in resolving the savings and loan crisis, which is, recognise the losses [and] put them into receivership.
Stan Correy:
There's a constant battle [between financial institutions and] government regulators, each trying to be one step ahead of the other. …
This is called 'regulatory arbitrage'. …
Justin O'Brien: Professor of Law (specialist in the dynamics of financial regulation), University of New South Wales]:
[Part of this] regulatory game-playing [involves] designing [and] implementing a product … before a regulator closes a loophole. …
[In] jurisdictions like the United States … if something is not explicitly rendered illegal, it is legal. …
[The GFC] was a legally inspired, legally engineered crisis. …
Frank Partnoy [Professor of Law, University of San Diego]:
One of the things that I find so interesting about financial markets is that unlike history or science, we don't seem to build knowledge incrementally.
We don't seem to remember anything. …
[No-one] seems to remember anything about financial history.
Do people even remember Enron in any detail?
They certainly don't remember scandals from the '70s, and no-one remembers the '20s. …
Stan Correy:
[The] value at risk model[s calculated] financial risk [based on data, such as] the value of mortgages, [that] were themselves based on faulty credit ratings.
So it was garbage in and garbage out.
Margaret Woods [Professor, Nottingham University Business School]:
[The] banks have used [historical numbers to estimate] the likelihood of prices collapsing in the future. …
But there's no guarantee that history is going to carry on repeating itself. …
Ben Bernanke:
[AIG was a] strong insurance company that was ambushed by [its] financial products division …
[Our] idea with AIG is … to allow it to stabilize and to become profitable enough to repay the obligations it has to the United States. …
Takeo Hoshi [Professor of International Economy, University of California, San Diego]:
So what happened in Japan [was that the] government tried many things like buying up toxic assets, or tried to recapitalise the banks.
Some of those had limited success of calming down the financial system, but none of them worked until 2002 when the Japanese government finally got serious about forcing the banks to get rid of those non-performing loans …
Shutting down the zombie banks or [firms] is very costly in terms of employment …
[There] are lots of jobs to be lost and also shareholders lose from the failure of the banks, and firms as well.
So that is not politically attractive and that creates a problem for politicians. …
Bill Black [Former Bank Regulator]:
When you have executive compensation systems that are perverse, that are based on short-term accounting games and when you have extremely short tenure in senior positions, you get something that we refer to in economics as a Gresham's dynamic. …
Gresham's law says that bad money drives good money out of circulation.
In this case, bad practices drive good practices out of circulation.
In the United States, the average chief financial officer … lasts slightly less than three years.
[But,] how long is he going to last if he does not put his institution heavily into sub prime lending when that is booking record earnings[? …]
John Danielson [London School of Economics]:
In the old days, lots of financial institutions used to be these 'partnerships'.
This meant that if your bank went bust all the partners … lost everything …
So a sensible proposal would be to say,If everything goes well you get the reward …
That will make you behave lots more conservatively. …
[If] everything goes badly, your personal fortune is directly tied in to the fortune of the bank …
[You] will lose your house [and] you will not be able to work in this industry again.
Frank Partnoy [Professor of Law, University of San Diego]:
[If] we can't clean this mess up [now, in] a year or two, this will all get started again and we will see the same type of instruments and the same kinds of complexities and then we'll have another crisis … - The three trillion dollar war, 30 March 2008.
Joseph Stiglitz and Linda Bilmes. - No longer neocon, 11 June 2006.
Francis Fukuyama.
