Monday, September 8, 2008

Duffy, the credit rating agencies, the subprime crisis and the decline and fall of New South Wales

Fortunately god worked out a way for me to get a totally free and comprehensively complete copy of last Saturday's Herald, confirming that that dour old stick Alan Ramsey hogged the top of the page, and that Duffy's whacky railing against feminists was well down below the fold. Not sure why god did this, but I think she arranged for the copy to be dropped next door to a tenant who had moved on a week before as a way of proving that a boycott of the Herald was not only useful financially, but sensible intellectually.

 You know, in much the same way when two competing teams call on god's help to win, sensibly god knows which team to support, and the one deserving god's help always wins (while the other team knows that god is frequently grumpy, they were guilty of something, maybe wanking, and maybe when they pray next week by abstaining, god will shine brightly on them and they can thrash the other wankers). 

Much like the way when the British and the Germans called on god in world war 11, she took the side of the British - after all the Germans allied themselves with the ancestor worshipping Japanese, and as we know from deep American evangelical thinking on this matter, the war only came about because god was intent on teaching the Jews a lesson and packing them off to Israel, though severely depleted in numbers. And that's how god could bring to Sydney both Jensen and Pell, and both think the other is ultimately destined for hellfire, when really they might be both better off heading out for a night at the Hellfire Club.

Meantime the Herald ran with a neat little set of pie graphs under the heading 'your voice', indicating what voters  thought about issues if they voted online. Wonderful pie charts - is there anything Excel can't do - and completely devoid of any meaning, the kind of factoid you can pick up on the net in a trice, though at least Slate has the grace to label its effort at a straw poll as statistically meaningless, suitable only for a watercooler, if you had one.

Along with the meaningless pie charts, the Herald ran a piece by William McInnes in place of Carlton's column. McInnes is a light weight - not because he's an actor but because he's determined to write like P. G. Wodehouse. His column was a standard piece of flummory and fluxery, the kind of flim flam you'd expect from a man who wanted to be liked, wanted to be a little bit left, but didn't want to offend. He threaded a very feeble food metaphor - ranging from spaghetti marinara to a dodgy scallop - through some musings about the week's political events. He was the rough equivalent of tepid, soggy chips, oversoaked in oil and salt, and left out in the cold to get that glazed cholesterol taste choking on the tongue (even the seagulls would have been wary). 

It made me think that it didn't matter whether Carlton came back. The Herald is in terminal decline, like the Labor party and the state, and there's no point sending good money after bad. Forget it Jake, it's not Baltimore, it's Sydney town, and the smell of rum still runs in the nostrils, while the alcohol lingers in the blood.

 From now on, it's not so much a boycott in relation to Carlton, it's just a 'mad as hell and not going to take it anymore' ban which is likely to be permanent and save a Tasmanian rain forest in the process. Maybe they could do a reader 'your voice' pie chart on the number of hard copies readers they're losing each week, and help the statistics by excluding the free copies they now regularly hand out at airports and such like places.

But enough of this, because that was last week, and as surely as god turns the world around the sun, this week Duffy has vital news to impart, and we should spend our quality time with his razor sharp mind.

Duffy turns his laser scalpel on the subprime crisis, and those fiends in the powerful but little known (well, in Duffy's world, little known) credit rating agencies such as Moody's and Standard and Poor's. It seems these fiends are responsible for every disaster that's fallen upon the marketplace and poor hapless tiny impotent New South Wales in the last few months - well that's how I interpret his sentence: "Recent events in the state's politics and across the whole economy owe a huge amount to a tiny and rarely examined segment (in Duffy's world, at least) of the world's finance system."

Well, I suppose it's news - Duffy discovers the credit rating agencies, and better still, sheets home all the blame on these shadowy, vile figures. It was them who made all those dumb country councils spring for dodgy investments promising pie in the sky bye and bye, not greed and a failure to spend time in due diligence investigating risks. And as for the hapless state government, the interest rate is about to shoot up, unless they trim their cloth to the economic circumstances. Perverse agencies, to encourage loose investing, and then damn too casual spending.

Even better Duffy cites, as a provider of key evidence, the bald-headed former Treasurer of New South Wales, Michael Costa, who in another esteemed rag, The Daily Telegraph, has suddenly discovered that the states are totally useless and should be abolished because they're full of bald-headed spivs, con artists, and ratbags who are running the show for their own benefit.

Costa, re-born as a visionary, it seems, makes it clear to the faithful Duffy that a down-grading of the state's credit rating would be a catastrophe, and cost the state a half billion a year in additional interest payments. Duffy even feels the need to italicise the idea of it being $500 million a year.  Lordy, I'm feeling a little faint, will someone pass me the smelling salts. And horror of horrors, this is likely to prevent the state from building a north-west railway.

Well, here's a newsflash to the Duffster before he collapses into a heap in his cane chair, sniffing his heavily lavendered hankie in despair. We know he actually means metro system (not a railway which would integrate with the rest of the heavy rail system, but a separate, standalone metro system which any number of experts have advised will fail in terms of functionality and usefulness because it is a metro being designed to do a heavy rail job) - and we also know Duffy hates public transport and all aspects of it. So why should he suddenly care if a useless system goes down? 

Isn't he aware that the state Labour government has for the fast few years found the easiest way to govern is to make bold policy announcements, only to discover shortly thereafter that the state is broke, and unable to afford any of them (and that's somehow the fault of the taxpayers, because lord alone knows, the pollies are doing their level best). 

Is Duffy aware that the recent crisis in the state's finances has in part been brought on by an over-reliance on stamp duty? Is Duffy aware that the powers that be would have been tracking and crunching the numbers and have been aware for some time that they had a shortfall? And that's why they wanted to sell the power, thereby saving the budget blow out and getting a chance to blow some money on their pet follies?

But that's the Duffster all over. He likes his conspiracy theories, and for some bizarre reason he wants to find an excuse for the profound ineptness of the current state government - and the credit rating agencies seem the best to hand (though he does offer a humorous touch by noting that one economist even said that 'it was not inconceivable  some politicians might want to exaggerate the threat of a downgrade for political purposes' - no really, could any politician, especially Michael Costa, be so cynical as to be ... well, political).

But not content with tracking down the rating agencies' role in ruining New South Wales, Duffy hitches his wagon to establishing the way the credit agencies played a major part in the subprime disaster. According to Duffy, the agencies were 'substantially responsible for the subprime collapse'. He then spends some time explaining how hapless investors and tragic banks and major mortgage suppliers all relied on the favourable rating of the subprime CDO's by agencies, and that's why they invested. They were lead by the nose, they were compelled to splash out cash, and were shocked when they discovered those greedy agencies had led them down the garden path, had misled them to make some cash for themselves. How it hurts a banker to discover there's so little trust left in the world.

No mention however by the Duffster of due diligence, or greed, or the offering of credit to those who couldn't afford it, or the Bush administration policies designed to encourage a boom in the housing market to compensate for China cash flowing his warlordism. No, there's any number of reasons for the subprime crisis, as complicated in origin as junk bonds or selling tulips, but when it comes down to it, if you loan money to someone, you should securitise it in a way that makes sure you get it back - and, if the borrower can't afford to pay it back, should never have been offered the loan in the first place (especially with teaser interest rates), in the expectation that housing prices would go up and up forever, then you're in bubble land. The agencies might have helped, because they were naughty, but there were a heck of a lot of other people and institutions - all big boys, all grown up - who did their darndest to revive the 'greed is good' mentality of the eighties.

Well Duffy has caught the 'blame the agencies' conspiracy fever from the USA, where it's suited conservatives to look for baddies to blame other than Bush, the banks, the US Reserve, and a couple of dozen likely institutions who set the game running in a big time way. Funny really, seeing as how the agencies are private sector, a good example of the self-regulation of the marketplace at work, why heck a damned good example of the marketplace at work. And now we've had a healthy correction, and everything is sweet again.

Not for the Duffster. No, no. "The rating agencies played a major part in this disaster. And now they are helping determine how NSW is run." The bastards, and there was State Labor doing such a good job running the state on their own, and these agencies have just come along and ruined things.

Sometimes even irony can't capture the profound simplicity of Duffy's thinking. You might even say, if you're going to be simple minded about one thing, then you may as well be simple minded about everything. Instead of ambiguity, nuance and subtlety, there's a simple reason for the subprime crisis - someone to blame - and that's enough. It's the kind of conspiracy theory the left were once good at, but which now seems to create agitation amongst conservatives who don't want a multi hued world, preferring the simplicity of black and white. It seems Duffy, having come from the left to the right, has caught a double dose of paranoia and conspiracy thinking.

Whichever sub does Duffy's headings - assuming it's a sub and not the master himself - captures this kind of paranoia well: "From the folks behind the subprime crisis, a sword over NSW's head". There's a good Christmas cake kind of fruit and nuttiness, almost a rum-iness about that header, blazing with inaccuracy and metaphor. Damocles, you little beauty. We live in fear because of the credit agencies.

Well, not me. I think the time has come for the rest of us to relax. Duffy's reforming politician of the year, one Morris Iemma, has gone, and so has Costa, and so have an odd assortment of Labor party lollypops along with them. The North West metro was never going to be built in its current form, and wouldn't have been any use if it had. Sadly Duffy's call for even more motorways (the things he likes to call freeways) is also likely to fall on deaf ears. Can things be any sweeter in the sweet land of New South Wales, with the first warm day of spring, a gusting warm wind, and the smell of change in the air.

Well yes, god works in mysterious ways, and she has arranged for yet another Saturday Herald to be dropped on the doorstep of the now vacant house next door, the tenant long gone to a better place, and why not, when a single person is being asked to fork out 800 the week in this Labour paradise. This 'freebie edition' could last for months, in the same way we managed to get six months of free papers, until we had to cancel for a holiday and someone noticed that the local agency was delivering papers like the Mouse delivering water and chopping up broomsticks.

As usual, Duffy's piece is below the fold, the bizarre 'Your Voice' pie charts are hanging in, and dullness pervades the soul of the paper, perhaps an overhang from its dull times with the Peter Costello scoop (some scoop, helping out the publisher help out Peter so he can play petulant for as long as he likes, and that might be for a long time).

It seems this week Christopher Kremmer has been given the Carlton hot seat so he can write an abusive piece about new premier Rees because the man abused his kindly old dad (though it seems his kindly old dad told Rees in no uncertain terms to take his desalination plant and shove it). All well and good, and better than McInnes, but no cigar. No, once you've tasted something for nothing, it's hard to consider paying something for not much, even if it's only a few shekels.

So to this week's rating, and truly it has to be said that Duffy is both an economic marvel and a wonder, giving the people a sense that they might have some profound insights into the way the system works, since it seems it's possible to understand almost anything better than Duffy.

Economic analysis of causes of the subprime collapse: F
(Duffy, out here to the front of the class, do this paper again. This time consider properly all the causes of the collapse of the subprime market. Here's a Wikipedia link: Subprime mortage crisis. I encourage you to filch, borrow, and purloin, with or without footnotes).
Analysis of the role of the credit agencies in the subprime collapse: F
Over-abundant use of hysterical adverbs and adjectives, including but not limited to words like major, substantial, huge and rarely: 9
Redemptive faith in Michael Costa as a plain speaking politician: 10
Cheerleader faith in conspiracy by agencies to run NSW into the ground: 10
Ability to absolve Labor government of responsibility for economic woes in the face of abundant evidence to the contrary: 11
Willingness to tolerate wildly silly headers: 11

What a tasty read. "O frabjous day! Callooh! Callay! He chortled in his joy."

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