WRY & DRY #10: The lights have dimmed.

The lights have dimmed

Death unites all in a family. No matter how big the family.

And so the English speaking peoples and those whom they touched will, for a moment, be united in memory of a remarkable woman.

Of course the media will gush, tears will flow outside Buckingham Palace, flags will descend half way down the staffs and black will be… the old black. And in three months it will be Charles III giving the sovereign’s Christmas message. Republicans in Australia will earnestly dust off their manifestos.

Historians, paid and amateur, will recall that the first Elizabeth survived her mother being beheaded. Or that the first Charles also lost his head under the thin and honed edge of a weighty wedge of metal wielded by a masked and muscular servant of the parliament. Or perhaps that George I not only didn’t speak English, but was buried in Germany. Or perhaps that three of Queen Victoria’s grandchildren were Wilhelm II, Emperor of Germany; Nicholas II, Tsar of Russia and George V, King of the United Kingdom.

It is of such wayward threads that the institution of the monarchy has bound so many people for the best part of a millennium. Elizabeth II weaved those threads of history into her exemplar of selflessness, service, dignity and humour, all against the tide of a world drifting in rising seas with fewer anchors.

And now words will be recited that most Brits have only heard on the Shakespearian stage: “God Save The King.”

¹_{Shakespeare, Antony and Cleopatra. ‘Phoebus’: poetically, a personification of the sun.}

Recession? What recession?

In what is undeniably good news, the Australian economy (GDP) grew at 3.6% for FY-22. Average hourly earnings rose 4.8%, whereas inflation, as measured in the national accounts rose 4.1%.² Real wages went up, not down.

The cost-of-living crisis appears to be a mirage: Household spending rose by 2.2% in the June quarter and a massive 6% over the full fiscal year.

Hang on, isn’t the sky supposed to be falling? What’s going on?

Firstly, GDP is a rosy look in the rear-view mirror.

Secondly, a lot has happened since June: interest rates have increased by 1.5% points; the global economy has deteriorated, especially in the UK, Europe, USA and China.

Thirdly, Grim Jim (Treasurer Chalmers) has his hip-pocket full of promises, debts and IOUs. Readers might consider NDIS, aged-care wages’ guarantees, health, defence spending, election promises, higher interest payments on government debt and a caucus keen to reward vested interests.

The economy is robust and should remain so. The canary in the coal mine will be Grim Jim’s budget in October. He is smart enough to know that the giveaway budget will not be this one, the Santa budget will be the one just before the next election. And this one will be “prudent, fiscally responsible and caring for those who need care.”

Wry & Dry can’t wait.

² _{It’s complicated. The so-called consumption price deflator in the national accounts strips out the cost of building a new home (in which the vast majority of consumers are not engaged) and reflects people’s actual consumption patterns for goods and services.}

Tsar Vlad turns off the gas tap

The world has been waiting. Well, those in Europe. Most of all, those in Germany.

After six months of “will he/ won’t he?” He, Tsar Vlad, finally turned off the Nord Stream1 gas tap to Europe. It will remain in the ‘off’ position until the “collective west” lifts sanctions against Tsar Vlad’s Tsardom for his invasion of Ukraine.

Other gas pipelines remain open but Gazprom is pumping only 50% of its contracted amount through them.

All of this might mean gas rationing in Germany: those Miele, Bosch and Gaggenau gas tops will be switched off.

Tsar Vlad knows full well that splitting the “collective west” into doves and hawks, as it were, is the best way to get sanctions lifted.

Interestingly, by bargaining the gas against sanctions he displays something that he hasn’t previously admitted: that the sanctions might be beginning to hurt.

Italy: the bad old days are back

Tsar Vlad’s decision to squeeze and now turn off Germany’s Russian gas supply has provided much schadenfreude for those who live south of the Alps.

And that headline grabbing news has hidden a massive and increasing problem for Italy. Debt.

Italy keeps on issuing bonds, and the European Central Bank keeps on buying them. This cannot continue.

Twelve months ago, investors in Italian government bonds were requiring about 1% more than the yield they might get on German bonds. This difference is called a ‘spread’. As doubts about Italy’s credit risk worsen, so the spread increases.

Italy has emerged from the pandemic with a debt burden of 150% of GDP, 15 points higher than the halcyon days pre-covid. It’s getting close to a point-of-no-return for a country that cannot control its own currency.³ Italy also owes the ECB some 700 billion euros. Hmm.

But wait! There’s more. If the polls are correct, Italy will elect a hard-Right, free-spending, eurosceptic government⁴ on the 25th of September.

And even more. Germany being Germany will keep pushing the ECB to raise interest rates in the face of rising inflation.

But, the Italian government in Rome will keep borrowing other people’s money, safe in the knowledge that its promises of fiscal reform can be broken without consequence. As they have in the past.

And the Italian people in the piazza will continue to view Germany with schadenfreude.

³ _{It’s a mythical concept, actually. The PONR is when the IMF has to step in. But it sounds good.}

⁴ _{Called Brothers of Italy, ironically founded and led by a woman: Giorgia Meloni.}

Another female UK PM

Equality in the UK will happen when a female prime minister won’t be compared to Margaret Thatcher.

So, it’s still not equal. Liz Truss comfortably won the ballot to be the leader of the UK Conservative Party and hence Borisconi’s successor as occupant of that famous house in Downing Street. As soon as the bookies chalked her up as favourite in the 6-week balloting period, the Thatcher-comparisons started. Mostly about hairstyles.

Allow Wry & Dry to remind Readers that Thatcher was Leader of the UK Opposition for four years, before becoming PM on flogging Labour’s James Callaghan in 1979. In that role she learned so much that when she was elected PM the transition was seamless.

It’s leadership that matters in the UK for now, not so much tax policies or energy policies. Liz Truss arrives at the top job not having led anything much since her school hockey team.

She faces greater challenges than any UK leader since Churchill (1940 version). She is better organised than the Great Man, has greater self discipline, drinks much less, is just as tenacious and she welcomes a fight. And like Churchill, will find that in the Commons she might have more enemies behind her than in front of her.

The announcement of her victory was in the Conservative Party headquarters, where the Tory faithful were politely herded into a large hall to hear the announcement that was well predicted.

And outside the hall, there were protesting Greenies hunting among the lamp posts for something to which to glue themselves.

They needn’t have bothered, the action by-passed them and moved to the Commons, where in PMQs⁵, Mrs. Truss showed a lot more mettle and a lot less bluster than her predecessor. Even Keir Starmer looked confused. Imagine that: a PM who was brief, direct and clear.

As she was when she spoke briefly on the passing of Queen Elizabeth, giving thanks for her service.

⁵ _{Prime Minister’s Questions. Backbench MPs wishing to ask a question must enter their names on the Order Paper. The names of entrants are then shuffled in a ballot to produce a random order in which they will be called by the Speaker. The Speaker will then call on MPs to put their questions, usually in an alternating fashion: one MP from the government benches is followed by one from the opposition benches. The leader of the opposition usually asks six questions at PMQs, either as a whole block or in two separate groups of three.}

RBA tightens, Albo loosens

Albo was doing so well.

And then the cries from the wilderness came: “Albo, help, oh Great One! Interest rates are going up again, please give me cost-of-living relief.”

And Albo heard the cries from the wilderness: “We are engaged in cost-of-living relief, and that is what you will see on our budget.”

To tame inflation, the RBA wants people to spend less money. And to remain popular, Albo wants to give people more money to spend.

Wry & Dry has a sense of irony. But, really, this is silly.

Elections

As exclusively revealed last week, the voters of Chile went to the polls on Sunday to vote on a new constitution. And, to the delight of mining companies threatened with nationalisation, gave it the DCM. About 62% of voters rejected the proposal.

The new constitution was four years in the making, built by a constitutional convention of 154 elected members. But the vote was held during the pandemic – the turnout was just 43%. More than two thirds of those elected were independents, many of them political newbies and activists from the left, mid-left and far-left.

The convention came up with a 170-page, 388-article proposal that didn’t resemble a constitution, but a political party’s policies. It would have enshrined over 100 ‘rights’ into Chile’s national charter, more than any other constitution in the world, including the right to housing, education, clean air, water, ‘nutritionally complete’ food, sanitation, internet access, retirement benefits, free legal advice and care “from birth to death.”

It would also have created autonomous territories for Chile’s indigenous peoples with their own justice systems. And effectively nationalised mining – to the dismay of mainly copper and lithium mining companies.

The fact that it was a bit too far to the left of the fish fork for such a conservative country was not the underlying issue.

The key issue is that constitutions are governance documents. Not policy documents.

And Chile’s proposal was a policy wish-list that would have been heaven for, and here’s those words again, rent-seekers, do-gooders and lawyers.

Go Back to Go.

Around the grounds

New South Wales: The 18-month long misery of strikes and work bans on NSW commuters continues. Consider the main issues: The NSW Rail, Tram and Bus Union’s log of demands to the NSW government includes a ‘healthy options meal allowance‘. Really.

Victoria: Chairman Dan tried to keep a damning report into Victoria’s emergency-call-taking service under wraps. He failed. The report was too damning to be ignored by the media. It found that at least 33 Victorians died following ambulance failures in the last 18 months. On Tuesday he finally came out from his castle to apologise, make excuses for the lack of funding requested three years ago but not to take full responsibility.

And it didn’t pass unnoticed that meanwhile, Victoria’s Ambulance Service has been hiring for diversity roles: Director, Diversity & Inclusion; Senior Lead Diversity & Inclusion; Program Lead, Multicultural; etc. – all earning more than $122,000 p.a. A paramedic earns up to $113,000 p.a. Go figure.

Queensland: Faced with a balance sheet with more red ink than any of Alan Bond, Christopher Skase or [insert Reader’s favourite corporate scoundrel here], the Queensland government is introducing a property tax on investors who also own property interstate. Such an investor would also pay property tax in the state where property actually is located.⁶ Wait for a Queensland income tax. And then an inheritance tax.

South Australia: Nothing to see here.

Western Australia: Still only two Liberal members of state parliament.

Tasmania: Still waiting on the AFL to grant an AFL licence to a Tasmanian based-team.

⁶ _{It’s a lot more complicated than this. Expect investors to lawyer-up all the way to the High Court.}

How to make $100 billion

Tsar Vlad has had revenue of some $240 billion from selling oil, gas and coal at war-inflated prices in the last six months.

Tsar Vlad has spent some $140 billion on prosecuting the Ukraine war.⁷

At this rate, he might as well keep the war going for as long as possible. Thereby killing a few hundred thousand more of his own citizens and ruining his Tsardom’s economy. But, hey, the money’s in the bank.

⁷ _{Source: The Finnish Centre for Research on Energy and Clean Air.}

The law is blind, isn’t it?

The federal judge who, on Monday, authorised the appointment of ‘special master’ to review records seized from the Trumpster’s home, thereby stymying the FBI, was appointed by the Trumpster himself.

In an extraordinary decision, she wrote, “As a function of the plaintiff’s former position as president of the United States, the stigma associated with seizure is in a league of its own.”

Err, special consideration given to someone because of position formerly held? Whatever happened to everyone being equal before the law?

Is it possible that the Floridian judge in question, Aileen Cannon, will be the next Republican nominee for the US Supreme Court?

Just askin’.

Albo’s gabfest

Who could possibly say no. Two or three nights in the nation’s capital, the finest food and wine and photo opportunities galore. A tour though parliament house. Shmoozing with the obviously powerful and the not-so-obviously powerful.

Now, remind Wry & Dry what Albo’s Summit was all about?

It’s now forgotten. As a showpiece of perceived collaboration it worked – the media fawned and took their copy from media minders. The photos were beautifully choreographed. It was time of sweetness and light. Wasn’t it?

Come on Readers, think hard. Do any really think that this was anything more than a PR exercise?

Nuclear

Tsar Vlad has done more for the nuclear industry than any leader since Truman.

In response to his gas warfare, Germany decided this week to keep operating two of its last three nuclear reactors, at least until April next year. Readers will remember that former Chancellor Angela Merkel, in a fit of some sort in 2011⁸, decided to wean Germany off nuclear and close 17 fully functioning nuclear reactors by this year. And instead, go the whole nine yards⁹ with renewables.

But that dream remains a dream. In the six months to July 2022, coal provided 29% of Germany’s power (renewables, mostly wind, provide 46%). German wind is notoriously unreliable. Nuclear provided 17%.

From where is the 17% to now come?

⁸ _{An undersea earthquake and tsunami triggered radiation release at Fukushima, Japan. Which caused Mrs. Merkel to have a reverse road-to-Damascus experience. As Readers know, Germany is at risk from undersea earthquakes and tsunamis.}

⁹ _{The Oxford English Dictionary places the earliest published non-idiomatic use of the phrase in the New Albany Daily Ledger, January 30, 1855 in an article called “The Judge’s Big Shirt.” “What a silly, stupid woman! I told her to get just enough to make three shirts; instead of making three, she has put the whole nine yards into one shirt!” After then, the phrase became idiomatic.}

Snippets from all over

1. Trumpster’s pal charged

Stephen K. Bannon, the self-professed populist adviser to former President Donald J. Trump, was accused by Manhattan prosecutors on Thursday of defrauding Americans who wanted to contribute to construction of a “southern border wall”. (New York Times).

Wry & Dry comments: The Trumpster pardoned Mr. Bannon just hours before he left office. That pardon was for past convictions and prison sentences. It’s now a new ball game.

2. Sterling not so sterling

The pound fell to a 37-year low while the cost of insuring against a UK government debt default rose on the first full day of the Truss premiership. (The Times)

Wry & Dry comments: It’s more about a strong US dollar and a little about economic concern about the UK. If Readers peer closely, it can be seen from the below chart that, against a basket of currencies, the US dollar has increased by about 20% in the past 12 months. If the airlines can cope, expect American tourists to trek all over the UK and Europe with language dictionaries in hand. Especially for the UK.

3. Apple

Apple unveiled two new versions of the iPhone on Wednesday featuring emergency satellite communication and improved cameras, as well as two revamped Pro models. (Financial Times)

Wry & Dry comments:  Couldn’t be less interested.

4. Smaller China?

According to research by… Shanghai Academy of Social Sciences, China’s population will start dropping this year. (Wall Street Journal)

Wry & Dry comments: By definition, once a population starts falling, without immigration, the fall accelerates. China’s population is expected to be 587 million by 2100, down from 1.4 billion today.

5. Too cold to swim?

Dozens of public swimming pools in France have been forced to close over the cost of heating as councils and companies face orders to slash their energy use. (The Times).

Wry & Dry comments: So, swimming in cold water is not an option. One is tempted to make an observation that small amphibians should be able to swim in cold water, but won’t.

6. Tsar Vlad goes shopping

Russia is purchasing millions of rockets and artillery shells from North Korea to re-energise its offensive in Ukraine, according to recently declassified US intelligence, as western sanctions begin to choke Moscow’s supply of weapons. (Financial Times).

Wry & Dry comments: Thereby confirming that Tsar Vlad hadn’t planned on a long war in Ukraine. Will the shells be the right size?

Data

1. The European Central Bank raised its cash rate by 0.75% points to 0.75%, its highest since 2011.
2. Canada’s central bank raised its cash rate by 0.75% points to 3.25%, its highest since 2008.
3. Australia’s central banks raised its cash rate by 0.5% points to 2.35%, it highest since 2014.
4. Turkey’s inflation for the 12 months to end July was 80.2%.
5. Australia had a record $43 billion trade surplus in June and recorded its 13th consecutive current account surplus.
6. Days lost to industrial disputes in Australia in the June quarter were the highest since 2004.

And, to soothe your troubled mind…

“I’m now like one of the booster rockets that has fulfilled its function. I will now be gently re-entering the atmosphere and splashing down invisibly in some corner of the Pacific.”

• Boris Johnson, former UK PM, reflecting on life in a farewell speech outside 10 Downing Street.

Nothing Borisconi does is ever invisible.

PS The comments in Wry & Dry do not necessarily reflect those of First Samuel, its Directors or Associates.

Cheers!

Anthony Starkins