How Have The QLD Floods Really Effected Port Stephens Real Estate?

"How are the Old Floods going to effect house prices" is a question I am getting asked very regularly at the moment, and at the risk of looking like dodging the question, the real focus should be on decision making and in hindsight, the title of this post, "Decision Making, How To Make Good Decisions Better".

This post may polarize people and I know is far removed from the Port Stephens Real Estate world, but as I sit in my Nelson Bay office today, I have reflected on an email sent to me. You may have heard the saying, you make a living by what you do and a Life by what you give" but have you heard the term "making good decisions better".

Real Estate success is all about making good decisions better and so is success and well being in other areas of life. Especially financial decisions around uncertainty like buying or selling a house at the moment and asking your self "Is the Real Estate market going to increase or decrease because of the floods?". My short answer to your personal question would be: " Today is a very good time to be buying AND selling Real estate in Port Stephens."

Let me explain.

Who controls your life?

Another Sydney Government Grab for New England money

I see from the the Sydney Morning Herald that the Sydney Government has launched another attempt to grab control of local money.

The funds in this case are levies raised by local councils on developers to help fund supporting infrastructure and services.

The government argues that these levies have become a break on development. I can understand the argument here. However, the Sydney Government also wants the NSW Treasury to take over control of the funds. In this event, it becomes just another $500 million to fund Sydney Government needs independent of local requirements.

Why does NBC do this?

NBC blocks its shows from streaming in India, but Viacom (Comedy Central, CBS) doesn't. So I have been able to watch the Daily Show and Letterman, but I couldn't watch Conan's last show.

Why do they do this? Students here seem pretty hooked on Jon Stewart; it seems to me this might translate to DVD revenue somehow.

Worth Reading: John DiNardo's piece on Freakonomics in the Newest JEL

The piece is very rich, and combines rigor with bon mots. My favorite: "This is not to deny that simple economic models can be put to good use, but economic theory--whatever it is--shouldn't be epistemologically privileged."

What Real Estate Agents Ought to Know About Home Staging

The home staging concept is a relatively new concept in most real estate markets, not just here in Australia, but in all but a few international property markets as well.

Moreover, many agents have not yet even heard of the term and plenty who have are very skeptical of any value in the service, perceived or otherwise. Yet whether as an agent you believe in it or not, there is a select group of professional and savvy Australian agents, who are strong advocates of making professional staging services available to their clients.

Not convinced? Don't take my word for it. Australia's leading real estate website discusses at some length the benefits of staging a home to suit potential buyers, in addition to offering a few tips to home owners thinking of taking the plunge and listing in the Australian property market. CNN Money, an internationally recognized financial news service also advises home owners to pay special attention to their home's selling appeal especially in a flat property market.

Let me share with you some of the most common questions real estate agents ask when considering home staging.

What is Home Staging?

The Poetry of Judith Wright - Bora Ring

Judith Wright is probably New England's best known poet.

Her poetry, especially her earlier writing, has always resonated with me because it says something to me about the world in which I grew up, a world still deeply imprinted on my soul. I thought therefore that it might be fun to take some of her poems and use them as a window to look at different aspects of New England.

I suspect that many Australians still think of Australia's traditional Aborigines as simple hunter gatherers living in an ancient and unchanging landscape, although there is growing recognition of the complexity of their social and spiritual life. In fact, within the limits set by their tools and available food supplies they were also sophisticated builders.

The Bora Rings of New England and south-eastern Queensland are examples. As Sandra Bowdler pointed out, these earthen rings of eastern New South Wales and south-eastern Queensland are significant ritual structures and are probably unique in the world as hunter gatherer constructions of known function which constitute notable monuments in the landscape.

Sandra goes on to describe them:

The earthen rings known as “Bora” are usually part of a complex of two or three rings, linked by a path or paths. They were used in what Sutton calls “man-making ceremonies”, that is, male initiation ceremonies. In the literature, we find that the large ring in the complex was usually part of a relatively public ceremony, with women looking on; the smaller ring was the site of the major initiation rites, for initiated men and initiates only. The purpose of the third ring is not as well documented in the literature. It has been suggested that these are women’s rings, but it is not clear to me that this was always the case. Bora sites were often (always?) associated with carved trees.

The average size of a large ring is about 25 - 30 m across, and a small ring 10-12 m. There is a wide range of variation however. The earth is mounded up to a height of c.25-50 cms. Usually there is a path, often to the south-west from the large ring, connecting to smaller ring.

Judith's poem starts by painting a picture of a Bora Ring now alone in the landscape:

The song is gone, the dance
is secret with the dancers in the earth,
the ritual useless, and the tribal story
lost in an alien tale.

Only the grass stands up
to mark the dancing-ring, the apple gums
posture and mime a past corroboree,
murmurs a broken chant

The hunter is gone, the spear
is splintered underground, the painted bodies
a dream the world breathed sleeping and forgot.
The nomad feet are still

The rider halts, feeling that the ghosts are still present.

Only the rider's heart
halts at sightless shadow, an unsaid word
that fastens in the blood the ancient curse,
the fear as old as Cain.

It is a wonderfully evocative poem. But it is also a very European perspective with its emphasis on the vanished Aboriginal past. In fact, that past was still present.

I am not sure when Judith wrote this poem, but at the time there were almost certainly New England Aborigines alive who had passed through traditional initiation at one of the Bora sites. Further, the knowledge of the sites and their significance has continued to be passed on.

Here we can compare Judith's words with the much later 1996/1997 Aboriginal description of a site near Bellbrook quoted by Sandra:

“This site is known as the passing out ground for initiates of the Thungetti tribe. It is one of several initiation Grounds in the Bellbrook area where different stages of the Bora ceremony took place. As such, it is still highly sacred to the Aboriginal elders residing at Bellbrook Mission, and is considered to be one of the most important of the initiation sites in the area”

Entry Page for Posts about Judith Wright's poetry

Great Lyrics Period

Goethe, Erlkönig Original German

English Translation

Wer reitet so spät durch Nacht und Wind? Es ist der Vater mit seinem Kind; Er hat den Knaben wohl in dem Arm, Er faßt ihn sicher, er hält ihn warm. "Mein Sohn, was birgst du so bang dein Gesicht?" "Siehst, Vater, du den nicht? Den Erlenkönig mit Kron und Schweif?" "Mein Sohn, es ist ein Nebelstreif." "Du liebes Kind, komm, geh mit mir! Gar schöne Spiele spiel' ich mit dir; Manch' bunte Blumen sind an dem Strand, Meine Mutter hat manch gülden Gewand." "Mein Vater, mein Vater, und hörest du nicht, Was Erlenkönig mir leise verspricht?" "Sei ruhig, bleibe ruhig, mein Kind; In dürren Blättern säuselt der Wind." "Willst, feiner Knabe, du mit mir gehn? Meine Töchter sollen dich warten schön; Meine Töchter führen den nächtlichen Reihn, Und wiegen und tanzen und singen dich ein." "Mein Vater, mein Vater, und siehst du nicht dort Erlkönigs Töchter am düstern Ort?" "Mein Sohn, mein Sohn, ich seh es genau: Es scheinen die alten Weiden so grau." "Ich liebe dich, mich reizt deine schöne Gestalt; Und bist du nicht willig, so brauch ich Gewalt." "Mein Vater, mein Vater, jetzt faßt er mich an! Erlkönig hat mir ein Leids getan!" Dem Vater grauset's, er reitet geschwind, Er hält in Armen das ächzende Kind, Erreicht den Hof mit Müh' und Not; In seinen Armen das Kind war tot.

Who rides, so late, through night and wind? It is the father with his child. He holds the boy in the crook of his arm He holds him safe, he keeps him warm. "My son, why do you hide your face so anxiously?" "Father, do you not see the Erlking? The Erlking with crown and cloak?" "My son, it's a wisp of fog." "You lovely child, come, go with me! Many a beautiful game I'll play with you; Many colorful flowers are on the shore, My mother has many a golden robe." "My father, my father, can't you hear, What the Erlking quietly promises me?" "Be calm, stay calm, my child; It is the wind rustling in the dry leaves." "Do you want to come with me, fine lad? My daughters shall serve you; My daughters lead the nightly dances And rock you and dance and sing you to sleep." "My father, my father, and can't you see there, The Erlking's daughters in the gloomy place?" "My son, my son, I see it well: It is the old grey willows gleaming." "I love you, your beautiful form entices me; And if you're not willing, I shall use force." "My father, my father, now he takes hold of me! The Erlking has wounded me!" The father shudders; he rides swiftly, Holding in his arms the moaning child. He reaches the yard with fear and dread; In his arms, the child was dead.

Great Lyrics for Urban Economists

From Talking Heads

Cities
-------

Think of London, a small city

It's dark, dark in the daytime
The people sleep, sleep in the daytime
If they want to, if they want to

CHORUS

I'm checking them out
I'm checking them out
I got it figured out
I got it figured out
There's good points and bad points
Find a city
Find myself a city to live in.

There are a lot of rich people in Birmingham
A lot of ghosts in a lot of houses
Look over there!...A dry ice factory
A good place to get some thinking done

Down el Paso way things get pretty spread out
People got no idea where in the world they are
They go up north and come back south
Still got no idea where in the world they are.
Did I forget to mention, to mention Memphis
Home of Elvis and the ancient greeks
Do I smell? I smell home cooking
It's only the river, it's only the river.

Why Real Estate Prices Climb Rapidly

Progress in small Doses

The worst situation that you can find yourself in when the market turns is carrying too much debt. Too much debt does not mean that you own a house on which you have borrowed 120%. What it does mean is that you cannot meet the cashflow after any downturn in rents or increase in interest rates.

It is better to buy only one or two properties a year and be able to cover any shortfall from your own personal income than to buy millions of dollars worth of property and be continuously worried and stressed. Yes, it is good to leverage or gear yourself and have little problems, pushing yourself to growth with slight pain, but it is extremely uncomfortable to be constantly looking over your shoulder for bad times which might pounce on you.

High interest rates are not always a negative factor for the property investor. High interest rates stall the developers who cannot be sure of selling. They also hold back prices; in many cases they even reduce them.

The number of people who are able to afford homes is also restricted. All of the above affects you as an investor; however let's look at the other side of the equation. We see building plans being shelved, more homeowners having to rent and the prices of homes dropping.

Investment Property Advice

Mistake #1: Jumping right in without enough of the right information

Fortunately for you, you are streets ahead of most other people here, due to the fact that you're reading this book! It's only a start, but information like this can literally save you millions of dollars over the next few years of your life. Information is that important.

We live in the 'information age', yet I'm constantly appalled at the lack of information gathering that the average property investor does before they spend hundreds of thousands, if not millions of dollars on a property.

Going off half-cocked and assuming you know everything you need to know is always a recipe for disaster.

Remember, I've been doing this for over 26 years now, so I've seen them come and I've seen them go.

But information products like this one are absolutely invaluable. As I said though, it's only a start. One common factor to all successful property investors is that they seek expert advice, early, and they pay for it. The modest fee for good advice is always far, far less than the price you'll pay if you make a mistake with hundreds of thousands of dollars of somebody else's money.

No man (or woman) is an island. Arnold Palmer, aged in his seventies, still hires a coach to help him with his golf swing, even after all these decades at the top of the game. There's the 'school of hard knocks', and the school of 'prior learning'. So, the 'trial and error' methods that used to be our only options are no longer needed.

Mistake #2: Falling in love with a property

Michael Carliner has a Blog

It is here.

The Most Recent Case-Shiller data just came in

I decided to do the following exercise. Let us assume that house prices where fundamentally correct at the end of 2002 (I actually think this to be true), and four percent house price growth per annum is sustainable over the long run. Then how much would prices have to change from where they are now to get to the four percent growth path?

Here is what you get:

Phoenix -26.7%
Los Angeles -27.0%
San Diego -9.8%
San Francisco -11.7%
Denver 13.9%
Washington DC -20.9%
Miami -26.5%
Tampa -20.3%
Atlanta 6.5%
Chicago -4.6%
Boston 6.7%
Detroit 33.5%
Minneapolis 6.3%
Charlotte -1.3%
Las Vegas -26.5%
New York -12.5%
Cleveland 18.3%
Portland -24.7%
Dallas 13.2%
Seattle -24.7%

This says Denver, Atlanta and Minneapolis are OK, and Chicago is close to OK. Boston was probably overpriced in 2002 (see my paper with Chang and Cutts), but I find it plausible that it is near bottom, because it started its downturn before other markets. Four percent nominal growth is not in the cards for Detroit and Cleveland, and Dallas has never had a lot of house price growth, so don't get excited about their positive numbers. Florida, Las Vegas, Los Angeles and Washington appear to have a way to go (although Washington and LA are very fragmented, a point I will get to in another post). I am not sure whether the Pacific Northwest is seriously overpriced, or whether it, like San Francisco, can sustain higher house price growth than the rest of the country.

Where Have the Real Estate Investors Gone?

Real estate professionals have been urging property investors to get in quick to purchase investment property and beat the rush as cashed up baby boomers transfer their wealth from the stock market to the real estate market. This may seem like a reasonable claim as many Australians; especially those around retirement age feel that they understand real estate as in investment. It is something that they can see and touch where as the stock market is something that works in mysterious ways that they do not fully understand. The decline in share prices across the globe over the last 18 months has entrenched this position and there is a desire to protect what is left of their retirement savings rather than being burnt by further declines in the stock market.

However based on the latest lending data the anticipated increase in property investments is yet to materialise. Rather than real estate investors it is first time owner occupiers who are racing into the market helped in part by government stimulus spending. So why are real estate investors not doing the same? There are a number of reasons why investors may not be entering the property market.

Peter Orszag on Mortgages

His testimony is here.

The following is particularly important:

Many of the losses in housing markets cannot be avoided because they are the result of lax credit standards and otherwise excessive underpriced risk taking in the past. Policymakers cannot undo all those losses, and attempting to do so would reward the excessive risk taking, which could encourage excessive risk taking in the future, and shift the losses from borrowers and lenders to taxpayers.

A possible role for policymakers is to help the housing and mortgage markets cope with the aftereffects of the end of the housing boom. Some actions (described below) have already been taken.38 Policymakers may consider other proposals for helping mortgage markets overcome impediments to changing terms of troubled mortgage loans, which could both reduce lenders’ losses and help homeowners. Policymakers may also consider increasing opportunities for subprime borrowers to refinance mortgage loans. Both actions would help avoid foreclosures, eliminating one source of downward pressure on house prices. Finally, policymakers might be able to help stabilize the subprime mortgage market by establishing or empowering an agency to buy subprime loans. Such an option, however, could significantly shift mortgage losses from current lenders and investors to taxpayers.

Important factors to note, however, are that house prices are likely to fall farther before the housing correction is complete and that misguided policies can make matters worse. Policies that work against the market’s necessary adjustments may delay the recovery of financial markets and impair the pace of economic activity. One example is the forbearance policy of Japanese bank regulators during Japan’s recession of the 1990s. By allowing Japanese banks to delay recognizing losses on real estate and other loans after Japan’s real estate boom ended in 1990, the policy helped delay the recovery of Japan’s banks.

Bush Erotica

Photo: Gordon Smith, Stretch

Now Gordon Smith, the publisher of a great New England photo blog, marked by the Australian National Library's Pandora Service as suitable for permanent preservation, ran this photo under the title Stre-e-e-e-etch!

I looked at it and looked at it. Then I realised I was looking at it the wrong way round. The tree is standing on its head. Now see what I mean?

A Tiny Glimmer in the New Home Sales Figures

The median price of new homes was down 10 percent in 2015. CPI grew by 4.1 percent, meaning that the real price of new homes declined by about 13.5 percent. This is remarkable adjustment speed for the new housing market. Moreover, with 5.5 percent mortgage rates, the median price of new houses ($215,000) is affordable to a substantial number of those in the market for new (as opposed to used) houses. Look at it this way--the after tax user cost of a median priced new house is now around $1276 per month (assume a 25 percent state and federal marginal tax rate, one percent property tax rate, two percent for depreciation and maintenance and NO nominal appreciation). I think that even in affordable markets, it would be difficult to rent a new house for $1276 per month.

I am not saying we have hit bottom yet, and some markets (Florida, the California Inland Empire) have some further price declines ahead, but I am just a little optimistic for the first time in awhile.

Richard DeKaser says only 87 of 299 US cities now have overvalued housing markets

His list seems quite reasonable to me. And his 2006 list pretty much nailed overvalued markets.

Economists need to do a better job of explaining Pigouvian Taxes

I am actually surprised that there is much of an argument about taxing large banks in order to recover TARP funds. We certainly have adequate evidence that "too large to fail" financial institutions impose social costs on the economy. We also have ample evidence that bank managers, knowing that they are managing "too big to fail" institutions, will take on excessive risk, unless they are actively discouraged from doing so.

Textbook economics says that when an action creates social costs, it is optimal to tax it. It is, of course, difficult to know what the precisely correct tax rate should be, but we can probably come up with a reasonable approximation. And getting taxes slightly wrong is probably less distortionary than getting regulation wrong/

I long thought that if Fannie and Freddie had to pay a Pigou tax on their debt, they would avoid getting into trouble. Alas...

On the GSEs (again)

This is an excerpt from my commentary at the Berkeley-UCLA conference on the mortgage meltdown:

Fannie and Freddie’s management teams did unseemly things with respect to accounting, it is very hard to argue that they behaved worse with respect to risk management than investment banks or regulated commercial banks. According to the firms’ monthly volume summaries, their delinquency rates on single-family mortgages remain below 1.6 percent as of November 2015; according to the Mortgage Bankers Association, the overall delinquency rate for that time for the single-family market was 3.93 percent for prime loans, and more than 18 percent for subprime loans. Again, this does not necessarily reflect virtuous management, but rather the fact that the GSEs’ regulator, then the Office of Federal Housing Enterprise Oversight, while often accused of being a weak regulator, actually prevented the firms from engaging in the worst sorts of underwriting behavior. Also quite remarkable is the fact that the delinquency rate for Fannie and Freddie multi-family loans remains at around a basis point.
Among the consequences of this regulation is that the firms lost market share (Figure 1). The pink line in the graph is Fannie and Freddie’s share of mortgage debt outstanding. Note that while it declined sharply from 2002 to 2006, the private label market gained the market share that the GSEs lost. Under the circumstances, it is hard to make the case that the GSEs were the fundamental cause of the mortgage crisis, although many critics would like to think so.
I should disclose that I worked at Freddie Mac for around 15 months. One of the things about the place that was quite striking to me is how seriously its staff took mortgage underwriting. The credit models for the prime book (the business Freddie should have stuck to) were sophisticated, and the arguments about how to do underwriting were at once passionate and scientific. The people responsible for modeling credit risk were, by any standard, well qualified to do so. The chief risk officer of the company at the time discouraged senior management from expanding beyond the prime mortgage business. The GSEs arguably performed their job better than FHA, which has always had limited resources for developing underwriting models.
Senior management of the GSEs was under tremendous pressure to expand their business lines beyond prime mortgages because of the above documented loss of market share. This led both companies, and particularly Freddie Mac, to expand investment into Alt-A mortgages, and it was these mortgages that caused Freddie Mac so much trouble. Had OFHEO been a stronger regulator, or had Freddie Mac been statutorily prohibited from making Alt-A mortgages, the company would still be solvent.
This phenomenon had nothing to do with Freddie Mac’s portfolio per se; even if the GSEs had been in the guarantee business alone, they still would have been under pressure to increase their business. Securitizers in the pure private market put fee generation ahead of due diligence when determining whether to fund mortgages. Keys et al. (2015)showed that loans that were more easily securitized received less lender scrutiny than those that were more likely to be held in portfolio.
If we are going to have GSEs, their re-emergence should rest on four pillars. First, as Jaffee and Quigley suggested in an earlier paper, their cost of funds should reflect the risk they take. This could be accomplished through a tax on new debt issuance. Second, GSEs should be stringently regulated so their products do not depart from high standards of underwriting. Third, to assure one and two happen, GSEs should be forbidden from lobbying. Finally, minimum capital requirements need to be higher, although this (along with the tax on new debt) will raise mortgage costs.
This does not mean the end of GSEs as we know it, but rather a roll-back to where they were in the middles 1990s. Recent events make it clear that the economy cannot rely on the purely private sector to fund 30 year fixed rate mortgages.

The Surprise
If one looks at commentary from the earlier part of this decade on the GSEs, one finds that most of the concerns about them involved market (interest rate) risk, rather than credit risk. Because nominal house prices rose nationally every year between the end of World War II and last year, it was hard to imagine that mortgages would induce a credit crisis. Certainly no empirical model could have predicted the events of the past few years.
This has powerful implications for how we think about capital going forward. Among other things, it suggests that the model-based capital standards proposed in Basel II are not sustainable. It also suggests that there is no substitute for rigorous and admittedly somewhat arbitrary minimum capital ratios for all institutions that lend. This will inevitably mean that the economy will lose out on some positive net present value opportunities. But it also means we will be far less likely to find ourselves in the current situation

Aeropelican - Anthony Lawrence's poem

On 15 January I outlined the history of the New England airline Aeropelican originally established to fly between Sydney and Belmont, Newcastle. I mentioned that I had flown this route, one of the most beautiful in Australia.

I see that the New England born poet Anthony Lawrence has written a poem, Aeropelican, that describes this flight. The plane takes off:

All seats on this fourteen-seater have windows,
the portside view a brief slideshow
of Sydney's northern beaches and beyond --
Broken Bay with its sea-going lion's headscrubbed green with altitude,
then to an entrance of lakes,
where silt makes a dye-fed film of arteries threatening closure

The plane comes in to land:

The rest of the flight is unfocussed
as a Newcastle skyline when Newcastle smoked.
The landing, like takeoff, is all loom and fade.
Coming in over Belmont, three boys stand by their rods
to wave from the end of a breaking wall.

Malcolm Calley, Anthropology and Australia's Aborigines

The predominant role of anthropologists from 1929 to 1945 (and indeed, to the present) in interpreting Aboriginal society, analysing its ills, and in recommending ameliorative policies, is remarkable. In fact, the Canadian historian K.A. MacKirdy commented in 1966 that ‘[Australian] historians generally have been content to leave the study of Aborigines to the anthropologists and then to ignore the anthropologists’! Adam Shoemaker

Any anthropologist who has worked on Native Title claims, or similar activity, in south eastern Australia is likely to have come across the anger of indigenous groups confronted with "academic" interpretations of their rights interests, customs and traditions which differ from their own view of these important aspects of their lives ....

Indigenous groups, not surprisingly , are highly indignant about having their claims, and the primarily oral traditions on which they are based, judged against the writings of the initial colonisers themselves and on occasion react even more strongly against later "academic" interpretations of territorial interests best epitomised perhaps by the work of Norman Tindale. Rod Hagen

I was browsing around to try to find out more on New England's Bundjalung people when I came across a reference to the papers of Malcolm Calley. This took my mind back.

Back in 1966 while I was doing my honours thesis on the economic structure of Aboriginal life in Northern New South Wales at the time of European intrusion I read Malcolm Calley's PhD thesis on Bandjalang Social Organisation with fascination.

My thesis was a study in ethnohistory, using historical records to try to understand the economic structure of aboriginal life. These were necessarily written from a European perspective. In writing I was also influenced by the conflict between Karl Polanyi and my cousin Cyril Belshaw on the applicability of economics to non-money using societies.

So while I was a member of Isabel McBryde's pioneer prehistory group at the University of New England, I was still writing very much from a European, anthropological and historical perspective. As an aside here, I was going to insert the link I had used before to a story about Isabel's work, but find that for some reason the Australian Archaeological Association has taken the page down. I must say that's a real nuisance.

At the time I was writing there was great suspicion among historians about the role of oral history and tradition as an evidence source. There was also a view that the Aborigines of Eastern Australia were too far removed from their tribal past for current memories to be a valid guide to traditional life.

To me, the striking thing about Malcolm's thesis was the way it demonstrated that oral tradition was still in fact worthy of study as a way of understanding past Aboriginal life.

The details I have on Malcolm's life are skimpy and I wish I could say more.

Malcolm John Chalmers Calley was born in Sydney around 1932. In 1955 he gained an M.A from Sydney University with a thesis ‘Aboriginal Pentecostalism', completing his PhD thesis in 1959. In the 1960s and 1970s he was a Lecturer, then Senior Lecturer, in the Department of Anthropology and Sociology at the University of Queensland during which time wrote extensively about Indigenous Australians. He died in February 1983.

Malcolm's work with the Aborigines is typical of the important role that anthropologists as compared to historians played in academic Aboriginal research as well as the promotion of new views about Australia's indigenous peoples.

I can attest to this from my experience when I was doing my own limited work on the Aborigines over the period 1963 to 1966. All the academic writing I used came from anthropologists and, to a lesser extent, prehistorians.

I can also understand the Aboriginal position as summarised by Rod Hagen in the second of the introductory quotes. However, that quote also links to something that concerns me at a personal level, the nature of the interaction (at least as I perceive it) between the Aboriginal community and certain parts of the academic and intellectual elites in the broader Australian community.

There is no doubt that the treatment of Australia's Aboriginal people has been quite awful. This needs to be and is being addressed in research and writing. But it has led, again as I see it, to a kind of cringe on the part of certain researchers and writers that is adversely affecting both the subjects selected for study and the research itself. It is also leading to a negative response in parts of the Australian community that is equally distorting in the opposite direction. The net outcome is bad for all sides.

In saying this, I am not making a comment about political correctness, simply expressing a continuing practical frustration.

In writing about the history of New England I need to talk about the history of New England's Aboriginal peoples. I want to understand and express the sweep of New England Aboriginal life past and present. I cannot do so. The basic factual information is simply not there - or at least not easily accessible - because everything is being twisted by and to fit differing perceptions of Aboriginal-non Aboriginal relations.

Inexpensive Capital Stock that might increase productivity in India

Hyderabad does not have many sidewalks--even where it is building wide roads. Lots of streets in Europe don't have sidewalks either, but they are so narrow that cars drive slowly, meaning that cars and pedestrians can co-exist without separation.

But here, walking can be down right scary. I will upload some pictures later. While I understand that resources are scarce here (investments in water, sanitation and education likely dominate everything else), I really do wonder where, from a capital budgeting perspective, sidewalks would rank.

New England Tablelands achieves GI wine status

Back in August 2006 I looked briefly at the early history of wine growing on the New England Tablelands and Slopes. From early beginnings, grape and wine production grew rapidly only then to vanish, re-emerging in recent years. Now in the next stage of the industry's development, the Tablelands and immediate slopes have achieved GI status under the "New England Australia" label.

GI, short for Geographical Indications, is the official system by which Australia's different wine regions are recognised and protected. According to the Australian Wine and Brandy Corporation, the area's unque set of climatic conditions and similarities of topography, soil types and climate have earned the region its new status.

At 27,000 kilometres, the new region is one of Australia's largest and is presently home to 42 vineyards. The area's diverse conditions makes for considerable variety.

Postscript

According to the Inverell Times, local industy associations are planning an official regional launch at Armidale on 15 February, with a gala event at Parliament House in Sydney later in the year.

Extending the Orange Line to Dulles

Washington is abuzz because the Federal Government looks like it will refuse to sign off on funding for an extension of the Orange Line (the Metro line that goes west into Virginia) to Dulles airport. While there are legitimate issues about the lack of transparency in how the Federal Transit Adminstration made its decision, it almost certainly made the correct decision.

Heavy rail is not a good transporation option in the absence of high levels of density. John Kain showed years ago that inapporpriate heavy rail cannibalizes funding for other forms of transit, and tends to reduce public transportation ridership.

A rail line to Dulles is particularly inappropriate because there is already a dedicated four-lane highway to Dulles--a highway that is vitually never congested. This means a viable public transportation option--nice express buses that run frequently--could be put into place at relatively little expense. The problem now is that the buses don't run frequently enough to enough places, and so they are not an attractive option relative to driving. But $5 billion (the cost of the proposed extension) placed in treasury securities could fund an awfully large number of bus routes.

I am actually a little more sympathetic to heavy rail than was Kain--I am not sure his work captured all the general equilibrium benefits of rail under certain circumstances. But I am pretty sure that the proposed extension to Dulles is economically a non-starter.

Southern Cross University - Bundjalung Nation Mapping

In December a new project was launched at Southern Cross University intended to give indigenous communities a greater say on how their traditional lands are managed and preserving the wisdom of Elders.

The new project is a joint venture between the University, the Bundjalung Nation Aboriginal Cultural Heritage and Natural Resource Management Committee, Northern Rivers Catchment Management Authority, and Department of Environment and Conservation National Parks and Wildlife Division.

The project has seen the creation of a highly secured, user-friendly computer-based record keeping system through which communities can record and own their cultural knowledge. It is designed to be administered and controlled by indigenous communities, with important or significant information only able to be accessed by those persons delegated by the local Aboriginal community.

Communities can record oral, visual and written histories, photographs, films and any other kind of digital media about their cultural places and landscapes and file them on the database for the benefit of future generations.

“A few years ago I became extremely concerned that Indigenous cultural knowledge and traditions were not being recorded or passed on to the younger generation,” said Dr David Lloyd, senior lecturer in the School of Environmental Science and Management and cultural mapping project manager.

“It seemed this would be lost within a very short time if some real effort was not made to preserve it.“

After consultation with indigenous communities they decided to work cooperatively with us and use modern technology to record their ancient wisdom, heritage and cultural traditions.

“The first community we have worked closely with are the Aboriginal people of the Tweed-Byron region and we are now encouraging other communities to get involved.“

Brad Delong cites AngryBear on Tyler Cowan

http://delong.typepad.com/sdj/2015/01/steven_kyle_thi.html

The issue of income distribution is problematic. We like to think that income is a function of virtue (i.e., hard work, honest dealings, etc.), but the reality is that it is also a function of endowments at time of birth. The most conventional of these endowments is parental wealth, but the most important (at least within the contect of the United States) is the initial store of human capital--that is, talent.

The initial distribution of talent is anything but "fair." Doctors make a good income in part because they work very hard to become Doctors, but if they also tend to be people who were lucky enough to be born pretty smart.

Remarkably, people seem to be more or less OK with the outcomes that the distribution of talent produces--there doesn't seem to be that much resentment of the incomes of Tiger Woods or orthopedic surgeons. But problems do arise and there is resentment when those who work 40 hours a week cannot grasp certain basics--an affordable house, a decent neighborhood, a decent school for their kids, a reasonable commute. It used to be that people without the intellectual acument to go to college could have these things, but they often no longer do.

These are not unreasonable things for working Americans to want, and there is only one way to make sure they have them--some form of income redistribution. There seem to be two acceptable ways to do this politically. The first is to increase the minimum wage. While conventional economic theory predicts that this will lower employment, the most likely outcome of an increase in the minimum wage is that businesses (all of which are subject to the wage floor) will raise their prices to consumers--implicitly tax all of us who consume. Personally, I am fine with that.

The other method for raising living standards for working Americans at the bottom of the income distribution is to get a larger Earned Income Tax Credit. To do this without increasing the fiscal deficit means some of us will have to pay higher taxes. I am fine with that too. My first choice: increase the tax on gasoline. We'll talk more about that soon.

John Quigley's solution to the mortgage crisis

But for two things, I like it:

The foreclosure crisis is at the heart of the more general economic crisis. Protecting homeowners at risk of foreclosure is therefore an obvious priority. Here I outline a plan to ameliorate the foreclosure crisis, using the FHA’s mortgage authority to force lenders to recognize the actual values of homes and thus to restructure loans accordingly. The plan has four basic elements.

1) All those who purchased homes after a specified date are eligible, period. There is no distinction between those in arrears and those current in payment. There is neither time nor reason for a fight about moral hazard.

2) Participating homeowners will pay a small amount to register and receive an appraisal of current house value from the Federal Government.

3) If the household is able to make payments on a new first mortgage with a 40 year term for this appraised value, using standard underwriting criteria, then the household will be offered a new FHA mortgage. This new mortgage will be structured as interest-only for an initial period of years. This mortgage will be guaranteed, and premiums will be paid into the existing Mutual Insurance Fund administered by FHA.

The mortgage under these new terms will be reported to the master servicer, who will replace the existing contract with the new contract. Servicers will inform the owners of securities in any pool containing parts of the previous mortgage, and servicers will continue to pass on payments made by homeowners under the new contract to owners of existing mortgage pools or other securities.

4) In addition, when the new contracts mature or are terminated, any capital gain, net of costs, will be divided, with a small fraction accruing to the homeowner. The residual gain, net of costs, will be transmitted to the servicer who will distribute it to the owners of securities or pools in which the mortgage is bundled.

The Big Picture:

The most important thing is that the government force these revised mortgage contracts to be marked to market quickly, to reflect the actual value of the underlying housing.

There also doesn’t need to be a fight over securing the agreement of lenders or owners of securities. Some financial gurus claim that the sanctity of contracts requires agreement. This is nonsense. Terms of contracts are changed all the time by legislation. All this legislation does is to recognize the current market value of the contract. Finally, the biggest contractual change ever in American financial history, the abrogation of the gold standard, was made unilaterally by FDR. If this plan were adopted tomorrow, it would still take a lot of time to gear up a Home-Owners-Loan-Corporation (HOLC)-like appraisal process for hundreds of thousands of appraisals. And time is of the essence. So we need a simple program that can be implemented as soon as you are able to move.

And the cost? With 12M households currently holding underwater mortgages, we can safely assume that the average writedown would be less than $100,000. With a 1 percent default rate on new loans, and a loss on default of $100,000, this might add up to $12B. I used to think this was a lot of money. If the average write down were $100K, and housing prices did not increase at all before the new contracts were terminated or matured, the total private write down would be $1.2T.

This figure does not represent a new loss to the lenders, but rather is a recognition that the underlying asset is less valuable. Each lender or servicer will be given a coupon entitling him to some percentage (perhaps even 100%?) of the gain in value between the date of the new contract and the date of contract termination or maturation.

In effect, we force holders of this paper to mark these assets to market today, and preserve their right to any capital gain on the assets which have been marked to their current value. (But don’t let the bastards securitize these coupons.)

Details:

1) Eligibility is not based on delinquency in payments, and those who have struggled to make payments are not disadvantaged relative to those who are in arrears. The “right” –utterly arbitrary — date of eligibility might be January 1, 2004. (Subprime mortgages increased from about 9 percent of originations in January 2003 to 18 percent a year later, and to almost 22 percent in January 2005.)

2) Participation costs are meant to be small, a hundred or two hundred dollars. The appraisal will be some average of estimates of replacement cost, rental value, and current selling price. This is the same procedure used by the HOLC, and it will not underestimate the current value of the house.

3) The “standard underwriting criteria” could involve the 38 percent payment-to-income ratio of the New Hope Alliance, or Sheila Bair’s number. (I prefer Bair, but I also like vanilla.)

4) The interest-only aspect of the mortgage is not essential, but we are in a recession. That period could be limited to two years.

5) The new mortgage will be structured just like “regular” FHA mortgages with a payment by the household into the FHA’s mutual insurance pool.

6) The owners of the existing mortgages will share in any capital gains realized during the term of the new contract, perhaps in proportion to the writedown in asset value under the new contract. As a result, this is not a constitutional “taking,” and claims to the contrary are incorrect.

My two quibbles:

(1) John is a terrific, admirable economist (there is a difference between the two adjectives) and has long been an intellectual hero of mine. That said, he is not a lawyer, and so I am not sure we can be so sanguine about mass contract modification. Then again, I am not a lawyer either...

(2) I think cap gains should be split at something like 50-50 between homeowners and lenders. If nearly all the cap gains go to lenders, owners will have less incentive to maintain, to expend effort when selling, etc.

California has less than four months of housing inventories

The California Association of Realtors sales report puts inventories at 3.8 months. Perhaps more interesting is that even inventories in the $1 million + range are half what they were a year ago, and at 7.8 months are just slightly higher than the equilibrium level of 5-6 months.

The market is now tight enough that it could even handle some foreclosures (the shadow inventory) without getting whacked too badly. And because lenders seem more willing to do short sales, there is a chance that the number of foreclosures will be somewhat smaller than previously forecast.

Once again, if not Bernanke, who?

So I see names out there. I think lots of supporters of Paul Volcker would be disappointed with his policies--he was, after all, the guy who allowed interest rates to rise into the stratosphere in order to break the back of inflation. I actually admire his helmsmanship of the Fed a lot, but I am not sure that many of those throwing out his name understand what they might be getting.

Paul Krugman is certainly more than smart enough and has made remarkably accurate forecasts over the past nine years, and I like his politics a lot--I am guessing I agree with him about 95 percent of the time. But his comments have at times been immoderate--and Federal Reserve Chairs need to have even temperaments. I also would guess he would have a tough time getting confirmed, although I am terrible at political forecasts. As PK also notes, Alan Blinder and Janet Yellin, who would also be good choices, might have tough confirmation battles.

John Taylor, William Poole and Charley Plosser are all smart but are ideologues. I have never seen any evidence that they care in the least about the social costs of unemployment. I suppose Martin Feldstein would be OK, but I am not sure why a Democratic President would nominate him.

In short, I keep coming back to the fact the Bernanke is smart (or, as Krugman says, brilliant), honest, is willing to listen and learn, and has an even temperament. Did he not see the magnitude of the crisis coming? Sure. But neither did a lot of us (I thought the subprime meltdown would be a problem on the order of the Savings and Loan crisis--it was Nouriel Roubini who ultimately woke me up). I just don't see anyone better out there.

Perhaps the Most Important Item in the Stimulus Package

The package proposes raising the conforming loan limit (the largest loan amount eligible for Fannie/Freddie purchase) by as much as 75 percent in some markets. The current jumbo-conforming spreads in Washington are here.

A person with a $500,000 mortgage would find an extra $4,000-$5,000 in her pocket before tax if she could refinance out of a recent jumbo into a conforming mortgage. This is much larger than the proposed tax rebate, and would also be permanent. The downside for consumption is that investors in jumbo loans would see their investment incomes fall, but still...

Next on the reading pile: Louis Menand's The Marketplace of Ideas

I loved the Metaphysical Club (especially the stuff on Oliver Wendell Holmes); Menand has a sharp eye and a winning style. But he purports (apparently) to solve a mystery which isn't all that much of a mystery: why is the academy so liberal? To me the answer is obvious--if you are willing to become an English professor, you have revealed that you don't care much about money.

One survey I just found put the average English assistant professor's starting salary at $47K; a full professor makes on average 74K. Given how grueling it is to get a Ph.D., and given how few tenure track jobs are out there in English, this means the expected monetary value of going to graduate school relative to effort is small.

So why do people do it? Because they love Dickens or Austin or Shakespeare or Conrad or Toni Morrison or Zadie Smith, and they want to spend their lives reading and thinking about such. Clearly, money wages do not have a particularly large place in their utility functions. If money is not important to you, then maybe you will be less prone to complain about taxes.

Conversely, people who care a lot about money should look elsewhere. Even within fields this is true: academic physicians tend to earn less than private practice docs, but they get to play with state-of-the art treatments and probably provide better medical care. So once again, money is not top priority.

I do not think I am going out on a limb when I posit that the correlation between how much someone cares about money and their propensity to vote Republican is highly correlated. So I suppose if Republicans want more conservative English Professors, they should advocate paying them better!

January 08 floods lead to major Richmond River fish kill

Photo: Some of the huge number of fish that died following recent major flooding on the Richmond River.

My thanks to Tom from live from the northside for a post drawing my attention to a major fish kill on the Richmond River. I had heard mention on the radio, but Tom's post reminded me that I should say something.

This was not the first such event, nor have they been limited to the Richmond.

The NSW Department of Primary Industry records that a major fish kill occurred in early February 2001 following major flooding in the upper reaches of the Richmond River catchment. Fish kills were also recorded at this time in tributaries of the Tweed and Brunswick Rivers. Subsequent flooding in March 2001 resulted in a major fish kill in the Macleay River and minor fish kills in the Clarence River.

The Department states that the cause of the fish kills was extremely low dissolved oxygen levels in the rivers. This most likely resulted from the death of pasture grasses inundated by floods which removes oxygen from the water and the rapid drainage of this floodplain water into the river. Also, sediments from acid sulphate soil floodplains were also a likely contributor of low dissolved oxygen in the water. Key sources of this low oxygen to the system were all areas that were formerly important fish habitats, wetlands that had been extensively drained and floodgated.

As a response to the major fish kills, NSW Fisheries closed the Richmond River and near shore areas to all forms of fishing, for three weeks initially and then extended this closure a further three months. A closure to all forms of fishing was placed on the Macleay River for 3 months on 20 March 2001.

The fish kill and river closures had adverse effects on local communities, especially at Ballina and South-West Rocks. These impacts, particularly lost revenue from cancelled visits by tourists, affected bait and tackle stores in particular and other businesses such as motels, caravan parks, service stations, seafood outlets, Fishermen's Co-operatives, boat-hire and maintenance businesses. Despite the economic impact on the community, the river closures received widespread industry and community support.

The closures to fishing in the rivers were modified following consultation with the Recovery Committees, analysis of scientific data and community input that occurred after a general call for submissions. The total closures were replaced with less restrictive recreational and commercial fishing closures on the Richmond and Macleay Rivers. These included daylight fishing hours only, restricted total bag limits and limits on the available fishing area. These new restrictions lasted for a period of 3 months in both rivers.

The partial river closures were lifted on 28 September 2001, following positive results from the scientific surveys, allowing for the resumption of normal commercial and recreational fishing.

Those who are interested can find the full report on the earlier incident by following the link.

This time the floods do not appear to have affected the other rivers, but the effect on the Richmond has been very severe, with an estimated 33 tonnes removed by Council from the worst affected area near Ballina. Fishing has again been banned from the river for a period of three months.

Last year there was a story on the ABC about the work of an individual farmer who had been experimenting with new types of farming practices to try to overcome the problem. For the life of me, I cannot remember the details. I will try to find the story, for it was quite inspiring.

This is an amazing bunch of high school kids

I just happened to run across the Munch Brahms 4 yesterday (as I noted in this space), and it brought back memories of high school summers spent at Interlochen, where I learned I was much better at thinking about music (I even got to give a lecture on Mahler's 3rd in Milton Hehr's music history class) than I was at playing music. Alas, music is far more about playing than thinking.

Anyway, I looked up their web site tonight, and found this.
Given that the players range in age from 14-17, this is amazing. In fact, one needn't make much allowance for age at all.

Jeffrey Zax on being a Section Leader

This is excellent. It is from Brad Delong's site, and it is here.

One other thing from the Prof's point of view. New assistant professors are much more tooled up than older professors like me, and then (rightly) want to teach the latest and greatest knowledge. But it has been true for me that as I have grown older, my knowledge of what I teach has grown deeper (at least I hope so), which in turn has enabled me to make points in class that I could not have made when I started (again, at least I hope so).

Sydney Government's Coastal Planning Strategies

New England's neglected inland. Photo Gordon Smith

With the release of the draft Mid North Coast strategy (story), the Sydney Government has now released strategies for the entire current NSW coastal strip. You can access all the strategies here.

Having looked at the strategies, there is something almost obscene about the way the Sydney Government is ignoring NSW outside the coastal strip. The whole focus is on directly controlling anticipated population growth along the coast, nothing about building population elsewhere.

Some facts first.

At the moment, the NSW population is around 6.8 million. Of this:

• 4.1 million live in Sydney
• over 166,000 live on the South Coast
• 280,000 live in Illawarra
• 300,000 live on the Central Coast
• 515,000 live in the Lower Hunter
• 330,000 live on the Mid North Coast as now defined by the Sydney Government
• 228,000 live on the Far North Coast
• leaving around 800,00 in the rest of the state.

Let's track forward. According to the Government's projections, in twenty five years:

• Sydney's population is projected at 5.3 million, up 1.2 million or 29 per cent
• the Central Coast population is projected at 226,000, up 60,000 or 36 per cent
• the Illawarra population is projected at 328,00, up 48,000 or 17 per cent
• the Central Coast population is projected at 370,000, up 70,000 or 21 per cent
• the Lower Hunter population is projected at 675,000, up 160,000 or 31 per cent
• the Mid North Coast is projected at 424,000, up 91,000 or 31 per cent
• the Far North Coast is projected at 289,000, up 61,000 or 26 per cent.

If we look at the totals, the Government is projecting a population increase in the coastal strip of 1.69 million, 1.2 million (71 per cent) in Sydney. If my maths is correct, this equates to an average annual increase in the coastal strip of 68,000, of which 48,000 will be in Sydney. The population increase in the New England coastal strip is projected at 312,000, around 13,000 per annum.

All the various strategies focus on controlling and accommodating the population growth as projected. The various commentaries on the strategies, positive and negative, focus on the adequacy of the proposed response to that population growth.

Having set the scene, let me go to my concerns.

To begin with, is this population growth in fact likely?

Last financial year the NSW population increased by 59,000. This means that the projected population growth in the coastal strip of 68,000 requires a significant increase in the current total state population growth. It also seems to imply a very low, even negative, population growth in the rest of the state.

Leaving aside the rest of the current state for the moment, NSW as an entity is presently losing people especially to Queensland through internal migration. These losses are offset by new overseas arrivals.

Taking 2005-2006 as an example, NSW gained 40,492 from natural increase (births minus deaths) , lost 23,970 through internal migration, but gained 42,231 from overseas migration for a net gain of 58,753.

On this simple maths, achievement of an average annual 68,000 population growth requires an extra 9,000 per annum to come from some combination of increased natural growth, increased overseas migration or reduced internal migration. This is possible but far from certain.

There is, however, another way the coastal strip population projections might be achieved in statistical terms, and that is through internal migration from inland NSW to the coastal strip. This appears to be implied in some of the wording in the strategy documents. There is no way of checking this because the Sydney Government does not have an equivalent strategy document for the rest of the state.

I think that this apparent implicit assumption is a real problem.

Despite discussions generated by the drought, inland NSW already has the infrastructure required for a larger population. As a simple example, Armidale's current water supply could support an urban population of 75,000, three times the city's current population. Yet we have nothing that looks seriously at inland development.

This links to a broader problem with the planning process, one that that I have already referred to in the context of the Mid-North Coast Strategy, the absence of any real focus in the strategies on economic development itself. There is no certainty that required jobs will be created in required areas as assumed.

This links to another issue, the way in which a strategy or planning process carried out in isolation from other critical variables can actually lead to distorted outcomes.

None of the planning documentation that I have seen actually discusses the various demographic drivers likely to affect population outcomes, nor are there any discussions of alternative scenarios. None of the documentation looks at issues associated with changing population composition that might flow from different combinations of outcomes from the demographic variables. There is little discussion about the flow on effects of the various planning assumptions.

The difficulty in all this is that specific investment decisions based on flawed planning then create new self-fulfilling but sub-optimal outcomes.

Brad Delong takes down the execrable Charles Murray

The only reason to mention a reference to Murray is that it gives me an excuse to recommend Goldberger and Manski vivisection of "The Bell Curve."

To really appreciate Brahms 4

Read the chapter on its first movement in Bernstein's the Infinite Variety of Music. His description of the second subject as "the great German tango" alone makes the chapter worth reading. And thanks to that chapter (as well as the obsession described below), I have every note of the piece burned into my brain. For me the first sign of dementia will be when I start losing that piece.

A record I was obsessed with

The Charles Munch, Boston Symphony recording of Brahms 4th on RCA (shaded dog). I listened to this in the Interlochen music library over and over when I was a teenager. I still remember that catalog number: S-160. I bought my own copy in a used record store in LA (at Highland and Hollywood, I think) some years ago. The CD is now available on ebay. Buy it--you won't regret it.

If not Ben, then who?

I wish that those who are trying to block Bernanke would let us know a better alternative--I can't think of one. Bernanke is smart, honest, and while he made mistakes, he showed a great deal of flexibility (and a willingness to learn) in response to the crisis. The best evidence suggests to me that we were indeed on the brink, and he gets a lot of credit for pulling us back. I guess that I am especially mystified that the Republicans would oppose him, unless they are hoping to put the country on a new downward spiral before the midterms (I like to think they even they are not that cynical).

Full disclosure: I briefly met Bernanke once, and I really liked him as a person. But I don't think that has any influence on my views of him as a central banker.

Ralph Turvey on the Owner Occupied Housing Component of CPI

I heard a great talk the other day on how difficult it is to measure the owner-occupied housing component of CPI. This is not merely a technical point, as it makes up about 20 percent of the index.

Before the early 1980s, the owner-occupied housing component was measured as the user cost of housing: that is, the value of the housing stock multiplied by an appropriate rate of return plus depreciation and maintenance net of expected appreciation. This measure had the problem of being exceedingly volatile, in contrast to rents, which are not. So beginning in the 1980s, households were simply asked what they thought was the level of rent that their house would command. So how many of you out there know what your house would rent for, and by how much it would change each year? I thought so.

Turvey's point is that we have a major component of the CPI that is not directly observed in any market, and that this creates some serious issues as we try to figure out real incomes. He suggested looking at the cost of new houses, but this of course has the problem that (1) new houses are not very representative of the stock and (2) are in very different locations from the general stock. The problem remains in search of a solution.

I'm on Matthew Kahn's side on this

Matthews cites Ed Mill's negative review of his own book, Green Cities, here:

In his defense of his own book, Matthew makes the point that if economists fail to engage environmentalists rhetorically, they will be ineffective. But I think there is a more important point that Mills (who is, indeed, a giant in our area) misses: that environmentalists are able to advance policies that are demonstrably damaging to the environment (such as fixed railed transit systems in low density cities, land use regulation that effectively decreases density, and an at times antediluvian hostility toward urban development) because economists have so little credibility with the general public on environmental matters. Matthew's life work has been about combining credible economics with credible environmentalism. For that, reviewers, no matter how influential, should be grateful.

A 75 basis point cut

I think the European Central Bank needs to follow quickly, lest a further deterioratng dollar worsens inflationary expectations even more...

Does how little we know about other countries matter? Probably.

I am currently in India, and went out for beer last night with a number of people, all of whom seemed very engaged in the outcome of the Massachusetts Senate race; there was in particular a lot of curiosity about what it meant for US policy going forward.

Yet I would guess that very few Americans know the name Jyoti Basu (I know that if it weren't for the fact that I have now visited India 4-5 times, I would not know who he is). Basu died a few weeks ago, and it is fair to say that he was at least as important to India as Ted Kennedy was to the US, and probably more so.

It seems to me that as India and China's influence continue to grow, it will become increasingly important that more of us in the US know more about their politics and their leaders--beyond heads of state. But then again, maybe I am just getting on my high horse, which I am known to do from time to time.

David Crowe estimates that the steady state demand for new housing units is 1.9 million

New construction is now at about 1 million a year, so inventory should be whittled down by about 900,000 units this year. This will get us about 1/4 of the way back to housing market equilibrium.

Did you board at St John's Hostel Armidale?

THIS photograph is of boarders at St Johns Hostel, Armidale taken in 1937.

Back row: F R Allen (Warden), W (Bill) Peters, - McGlauchlan, I Thompson, H Conway, R (Bob) McLean, R (Bob) Jack, J S Keogh, B (Barry) Cook, K (Ken) Bowman, C (Colvin) Churches, D (David) Marr, - Morrison, L (Laurie) Barnes, B (Bruce) McKenzie, - McRae, S (Stauby) Baker Third row: D Spencer, J B Ivor, Bruce-Smith, W (Wal) Sabine, - Godfrey, J (Jim) Munro, D Hall, J (Canary) Woodhouse, H (Harry) Freame, I (Ian) Ferris, R Crawford, J (Jack) Thompson, C (Charlie) Sourri, J (Jim) Morrison, D Ferris, C (Chicka) Henderson. Second row: E (Edward) King, M (Max) Virtue, A (Austin) Kimball, B (Basil) Virtue, K (Ken) Wall, J (John) Millett, F Kerr, - Roper, Canon Dickens, Matron, Dr Drummond, R (Bob) Gray, R L Waugh, R (Ross) Clark, P (Peter) Capel, W (Wal) Samuels, R (Rex) Hobden, - McGee. Front row: R (Ron) Green, M (Malcolm) Hawke, I A (Ian) Clarke, A (Allan) Gray, J (John) Hays, A G Thomas, N (Norm) Melick, D Hays, J Rolands, A J Jameson, D Dowe, J E (Jas) Barnes, A R Keohan, C R (Clinga) Gibson, R (Ron) Gray.

My thanks to Gordon Smith for drawing my attention to this story in the Armidale Express.

I have not had time to check my facts, so I am relying on memory.

Around 1898 St John's College was established in Armidale to train priests for the Anglican Church. A new building was built for the College not far from the Bishops' private residence on the southern edge of Armidale. In the 1920s, the College was shifted to Morpeth in the Hunter Valley.

Following the College's move, St John's became a boarding hostel for boys attending Armidale High School. The hostel closed as the need for boarding declined. Today, St John's has become the prep school for the adjoining New England Girls' School.

Ian Clarke was a boarder at St John's in the 1930s. The Armidale Express records his reminiscences:

"St Johns was next door to NEGS on the road south out of town.

Although impossible, one wonders, how many of these boys are still with us. Many came from surrounding districts such as Uralla, Walcha, Inverell, Glen Innes, Guyra, Bendemeer, Bundarra and as far away as Grafton. All attended Armidale High School.

From a failing memory I recall that Cleave (Clinga) Gibson, Bruce McKenzie and McRae came from Walcha and Uralla. Ross Clark from Bendemeer, Ken Bowden Bundarra and Harry Freame Kentucky.

Harry’s father was a secret service agent in World War 1. Basil, Max Virtue and Jim Munro were from Inverell and R L Waugh possibly from Guyra. Wal Sabine, Ivor – Bruce – Smith and myself, Ian Clarke were from Grafton and travelled up through Nymboida and Tyringham in the large touring coaches operated by Woodward and Purkiss.

And that is as far as I can make my brain reveal.

As for myself, I spent 44 years in the banking profession interrupted by four and a half years service in the second AIF.

Now heading for 84 years and married to a wonderful woman for over 60 years I am the proud father of four, grandfather of eight and great grandfather of six.

Would it not be a wonderful thing if some others could be found."

George Harrison - Bangladesh

Lunch conversation today turned to the many intractable problems (still) facing Bangladesh, and it reminded me of the great George Harrison song--which doesn't seem to get much play anymore.

My Cousin Jonathan Weinstein quotes George Washington on Speculators

"[They] work more effectually against us, than the enemy's arms. They are a hundred times more dangerous to our liberties, and the great cause we are engaged in. It is much to be lamented that each State, long ere this, has not hunted them down as pests to society, and the greatest enemies we have to the happiness of America."

Of course Jon also points out that Alexander Hamilton was backstage, telling bankers that they really had nothing to worry about.

Sydney Government releases draft Mid North Coast strategy

Photo: South West Rocks, tourist destination, Mid North Coast

The Sydney Government has released its 25 year strategy for the Mid North Coast. The Sydney Morning Herald story on the strategy can be found here, the strategy itself here.

In a series of earlier posts dealing with the Government's ten year plan (here 1, here 2, here 3) I set out the needs that the Plan needed to meet, concluding that it did not meet those needs. On the surface, and I still have to do the detailed analysis, this strategy suffers from similar weaknesses.

The strategy postulates that the population of the Mid North Coast will rise by 91,000 new residents to be accommodated in 58,400 new dwellings. Lack of jobs is already a core problem on the Mid North Coast. So you would expect that job creation would be a key element in the strategy. It is not.

The strategy assumes that a certain proportion of jobs will come from extra employment required to service the increased population. That leaves a significant gap that the strategy does not address in any way other than some comments on the need to increase industrial land. Hardly a solution.

Another gripe. When did Grafton become part of the Mid North Coast? It is and always has been part of the Northern Rivers. I do wish that the Sydney Government would stop fiddling with regional boundaries for its own administrative convenience.

New England University Offers Out

New England's universities today released their first round offers of places to students under the centralised admission process. The benchmark here is the student's score on the UAI index, ranking students on a score out of 100 based on their Higher School Certificate (HSC) results.

Students have to nominate course choices at various institutions, and then gain admission if their UAI score is higher than that set by the institution for the course in question. In turn, this is dictated by relative demand for certain courses.

This is not the only admission process.

The University of New England, for example, has an alternative schools based admission process that allows students to gain admission in advance of the formal HSC results. This has become of increasing importance in recent years. Further, some courses have quite specific entry requirements independent of the HSC.

Looking at the UAI cut-offs, Southern Cross University has a UAI range from 60 to 90, the University of Newcastle from 60 to 93.6, the University of New England from 70 to 95.

All the universities have some course vacancies after first round offers, so there will be a significant second round once student choices from the first round are known.

Guyra - the Birds of Bradley Street

Photo: The Birds of Bradley Street

I have just done an update on the Regional Living Australia blog on an earlier story I ran on the Birds of Bradley Street, a rather remarkable group of women including tree changers who between them have transformed the Northern Tableland's town of Guyra.

The update and earlier story (link included in update) are worth reading as an example of the way in which local activism can have positive effects to the benefit of the entire community.

Blocks

Daniel Solomon, in his book, Global City Blues, makes a nice point about city blocks: of you want to have a vibrant street life, you need short blocks. San Francisco provides a nice natural experiment. Below is a Google Earth picture of San Francisco:



Notice that there are two grids: one is north of Market Street, and the other is south of Market (SOMA). The area north of Market is among the most inviting urban places I know for a walk; the area south of Market is more intimidating and, in some places, rather sketchy (although it must be said that the Tenderloin, which is north, is rather sketchy too--in the movie Milk, someone points out that among San Fracisco's leading problems is the smell of urine in the Tenderloin). In any event, there is no question that the street life in the northern grid is more vibrant.

What's the difference? It is fairly obvious that the grid north of Market is much tighter. For some reason, this makes it more humane.

I worry that this phenomenon will inhibit downtown Los Angeles from ever becoming a destination for pedestrians. The blocks are extremely long. Once a street grid is in place, it is hard to change it.

David Austin of the CBO has a study on the impact of Gas Prices on Driving Habits

It is here:

http://www.cbo.gov/ftpdocs/88xx/doc8893/01-14-GasolinePrices.pdf

The study finds that price effects on consumption and vehicle choice are small. This suggests that gas taxes fare poorly as a Pigou Tax--a tax put in place to cure an externality--but perform well as a Ramsey tax--a tax that doesn't distort behavior.

A policy that has made sense to me for a long time is one that would use higher gas taxes (which are salubrious whether Pigou or Ramsey) to fund lowering the payroll tax. Lowering the payroll tax would stimulate spending and encourage workers to work and hirers to hire. It does decouple Social Security Revenue from Spending, and as such creates political problems, but still..

Menzie Chinn has a nice Primer on Fiscal Stimulus

It is here:

http://www.econbrowser.com/archives/2015/01/a_textbook_anal.html

Are we calming?

The TED Spread is under 100 bp (just). And my colleague Raphael Bostic points out that intra-day stock price volatility has dropped precipitously. Perhaps soon-to-be- President Obama is soothing us?

Aeropelican - a classic New England airline case

Apology: My apologies to anybody whoreceived multiple feeds on this one. I ran into some editing problems.

Photo: Aeropelican Metro 23 19 passengers

In an earlier post I mentioned that Newcastle airline Aeropelican was to begin services between Inverell and Sydney, with connections also to Newcastle at the weekend.

Now I see from the Northern Daily Leader (Tamworth) that Aeropelican is thinking of establishing a service linking Tamworth, Armidale and Newcastle.

The Aeropelican story is a fascinating one that is in many ways typical of the story of civil aviation in New England, although this story is perhaps most remarkable in that Aeropelican came back.

In 1957 the late Keith Hilder operated a DH90 aircraft out of Broadmeadow aerodrome, an inner suburb of Newcastle, which was also the home of the Royal Newcastle Aero Club.

Following advice to the Club from the Australian Department of Civil Aviation that the Broadmeadow field was to close, a search began for alternative sites, with a final choice between Rutherford and Pelican.

The Club chose to go with Rutherford, but Keith decided to develop an alternative site at Pelican around 20k south of Newcastle that he hoped might be used as a base for Sydney-Newcastle air services in competition with the existing service using the RAAF base at Williamtown to the north of Newcastle.

The 27 acre site lay between the sea and Lake Macquarie, was swampy and covered with tea trees, cabbage palms and general scrub. In 1959 after a series of complicated moves Keith obtained a 25 year lease over the site and began development. The land was cleared, drains dug, and thousands of tons of chitter from the nearby mines brought in to provide fill. Soil was then added and grass planted, forming a grass strip.

While all this was in process, Keith applied for a Flying School and Air Charter Licence. After long delays, this was finally granted in July 1962. With flying training and charter operations underway, Keith turned his attention to obtaining a license to operate scheduled services between Sydney and Pelican. Again there were long delays, with a full license not being granted until June 1971.

Services began using an 8-passenger Cessna 402 aircraft. Then in April, 1976 Aeropelican introduced its first DHC-6 Twin Otter Series 100 aircraft to its fleet of Cessna 402's. However, Keith Hilder never really saw the DHC-6 in scheduled operation, as he was admitted to hospital 2 days after the arrival of the aircraft, dieing 3 June, 1976.

The Hilder family continued developing both the Flying Training School and the scheduled air service. The first DHC-6 Twin Otter aircraft proved ideally suited to the short sector high density flying demanded by the route, with a second Twin Otter purchased in 1977 and a third in 1978.

In 1980 the Hilder family decided to sell the entire Aeropelican operation to Cootamundra based Masling Airlines, then owned and operated by Jack Masling, another pioneer of regional aviation. Then in August 1981 Aeropelican was acquired by a company jointly owned by TNT and News Limited, ultimately becoming a wholly owned subsidiary of Ansett Australia.

To this point Aeropolican's history, growth followed by merger or sale, had conformed to the traditional pattern of New England's airlines. However, it was to avoid the final stage, disappearance.

Aeropelican operated in a specific market niche and Ansett maintained it as a separate identified operation. Following the collapse of Ansett, Aeropelican was placed into voluntary administration. It was then sold in April 2002 to International Air Parts Pty Ltd, allowing the company to resume its independence as a specialist niche operator between Newcastle and Sydney, although flights now go to Williamtown rather than the old pelican field.

This Newcastle-Sydney route, one that I have flown in fact landing at the Pelican strip, is one of the most visually beautiful in Australia.

Now Aeropelican is spreading its independent wings, hopefully avoiding the problems that others have experienced.