The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Friday, July 13, 2012

Adam Creighton's must-read column on banking

Yet another impressive effort from Adam in The Australian today (you will have to subscribe to read the entire thing), which contrasts with the reflexive cheer-leading of most other commentators. As I explained in considerable detail here, housing is both a consumption and investment good. Adam does not pull his punches:

Banks are meant to serve commerce, not undermine it, yet ballooning banks have been elbowing real production and exchange out of the way relentlessly since the 1980s, cheered on by regulators, governments and too many journalists. Underpinned by valuable implicit guarantees and other government subsidies, banks' leverage levels rose to unprecedented heights, saturating society with credit in the process. These days, "well capitalised" banks' assets need only fall in value by about 6 per cent for them to approach insolvency. The Productivity Commission shows the finance sector receives more budgetary aid than the car industry: $615 million last year... The BIS economist found also that banks had become a black hole for national productivity, sucking in the most educated and talented employees, which in turn stifled innovation in other parts of the economy, especially high-end manufacturing. Large financial sectors make economies more vulnerable to devastating financial crises and direct swathes of the labour force into jobs in which the social benefits are questionable.