Working Papers

State of confusion: How policy uncertainty harms international trade and investment

I have a new report out with the United State Studies Centre, State of confusion: How policy uncertainty harms international trade and investment.

posted on 21 August 2018 by skirchner in Foreign Investment, Free Trade & Protectionism, Rule of Law

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Richard Kovacevich: ‘This is America Today’

posted on 16 July 2012 by skirchner in Economics, Financial Markets, Rule of Law

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Martin Armstrong is Back

Fresh from the longest ever jailing for civil contempt in a federal white-collar case in the US, Martin Armstrong is back. You can read a much longer profile of him and others like him in The New Yorker.

I don’t have much time for cycle theories. When I worked in financial markets I met numerous advocates for various cycle theories among fund managers. Strangely, I always wound-up being the one who paid for lunch. However, his story is an interesting one. I’m always suspicious when someone gets locked-up for an incidental crime that hadn’t taken place before the prosecutors got involved and when everyone in the case seems to have copped a plea bargain. Even if I’m completely wrong in my suspicions, there are plenty of other cases like it pointing to the decline of the rule of law in the US.

posted on 30 September 2011 by skirchner in Economics, Financial Markets, Rule of Law

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We’re Too Busy to be Transparent: FIRB

FIRB chairman John Phillips on the rejection of the SGX-ASX merger:

“I couldn’t understand why anyone would support it—unless they had a vested interest.”

John ignores the possibility that some people might support the merger by taking the view that it was none of their business what ownership structure ASX management chose to pursue. Unfortunately, many in government and the media see their role as being back-seat drivers of other people’s business decisions.

John also complains about the FIRB’s time being taken up responding to FOI requests:

Mr Phillips said the FIRB was currently subject to many Freedom of Information requests which were taking up the time of its staff.

“We are getting so many requests from (journalists) and others under the FOI Act which is unfortunate in a way because it is taking up the time of people who ought to be dealing with applications,” he said.

Mr Phillips said he was “not sure how much more transparency there can be”.

I can think of one less FOI application the FIRB would have had to deal with if they had taken the time to put their public speeches on their web site. It is the FIRB that wastes everyone else’s time by denying access to information that should be on the public record as a matter of course.

posted on 09 June 2011 by skirchner in Economics, Foreign Investment, Rule of Law

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ASX-SGX RIP: Wayne Swan’s ‘No-Brainer’

Treasurer Wayne Swan’s rejection of the SGX-ASX merger is given an explicitly protectionist rationale:

“Becoming a junior partner to smaller regional exchange through this deal would risk us losing many of our financial sector jobs,” he told media.

Former Treasurer Peter Costello resorted to similar protectionist arguments in boasting about his role in frustrating the globalisation of Australian business:

The head office generates the corporate, financial, legal and insurance services and the highly skilled jobs that come with them.

The regulation of foreign direct investment in Australia is now effectively an arm of domestic industry and employment policy. Swan has received advice on the matter from the RBA and ASIC, but it remains to be seen how much of this advice is publicly released and how much stays a state secret. No doubt The Australian will try and FoI all of it. The journalists at The Australian are the only ones who understand that this is principally a rule of law issue. The commercial merits and implications of the proposed transaction are a secondary consideration.

posted on 08 April 2011 by skirchner in Economics, Foreign Investment, Rule of Law

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Offshore Perceptions of Australia: A Failure of Leadership

The WSJ on the failure of the federal government and opposition to provide leadership on the SGX-ASX takeover:

Ms. Gillard professes to understand the general principle involved, having said that “An open economy has been in Australia’s interest.” So the failure by her and Mr. Swan to more aggressively support lifting the ownership cap to open the economy further is puzzling.

She may feel politically constrained as the head of a minority government beholden to a small band of Greens and independents. But that’s all the more reason to mount an aggressive persuasion campaign. Equally disappointing is the reaction—ranging from silence to outright hostility—from members of the ostensibly more free market opposition.

On this issue, the federal opposition is not even ostensibly free market.

Jennifer Hewett argues the government won’t risk defeat on something it doesn’t care about anyway:

It would be hard enough to muster political energy and risk defeat for something the government strongly supported, but Labor doesn’t really like this deal one bit. That is even though it knows blocking it on national interest grounds would be awkward for a government already regarded with suspicion by the international investment community. It’s why the Treasurer is sounding so cautious.

posted on 22 March 2011 by skirchner in Economics, Financial Markets, Foreign Investment, Rule of Law

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‘If the FIRB Doesn’t Kill It, We Will’

The FIRB is nothing more than a fig-leaf for political decisions that have already been made:

A senior source told the Herald that the government’s disposition was to reject the [SGX-ASX] merger, despite what the board recommended. ‘‘If [the board] doesn’t kill it, we will.’‘

posted on 19 March 2011 by skirchner in Economics, Financial Markets, Foreign Investment, Rule of Law

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Sealand, HavenCo, and the Rule of Law


The story itself is fascinating enough: it includes pirate radio, shotguns and .50-caliber machine guns, rampant copyright infringement, a Red Bull skateboarding special, perpetual motion machines, and the Montevideo Convention on the Rights and Duties of State. But its implications for the rule of law are even more remarkable.

posted on 15 February 2011 by skirchner in Classical Liberalism, Economics, Rule of Law

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Speaking Truth to Bill Shorten

An investment banker speaking to Bill Shorten gets a less than cogent response:

IT WAS mid January and Bill Shorten, the Assistant Treasurer, was in Hong Kong attending an Australian Chamber of Commerce function.

In an address to a relaxed gathering of ‘‘Australians in finance’‘, Shorten told the audience of the importance of financial services, and if anyone had fresh ideas they should approach him in the informal setting.

David Webb, a former director of the Hong Kong Stock Exchange, elected on a corporate governance ticket by institutional investors, took up the offer. A well-known activist and retired investment banker, he now devotes much of his time to dealing with corporate governance in Hong Kong.

When Webb’s turn came for a chat, the Englishman told the minister that Australia should consider scrapping the Foreign Investment Review Board as it was an impediment to attracting foreign capital. Other regulators could consider contentious investments, he said.

According to Webb, Shorten said the board was necessary, turning the topic to a looming decision on the takeover of the Australian Securities Exchange by its Singapore counterpart…

But what Shorten said next surprised Webb.

‘‘His attitude about this was … that foreign ownership or a perceived foreign takeover would result in Australian investors being screwed. He didn’t make very cogent arguments to me.’‘

posted on 12 February 2011 by skirchner in Economics, Financial Markets, Foreign Investment, Rule of Law

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What’s So Special About the ASX?

Deutsche Börse AG looks set to acquire the New York Stock Exchange, while the LSE Group is also set to merge with the Toronto exchange in the latest cross-border tie-ups between securities exchanges. The local market has correctly interpreted these deals as increasing the likelihood that Australia’s Treasurer will approve the proposed merger of SGX and ASX (it has already cleared ACCC scrutiny). If an icon of US capitalism such as the NYSE can be acquired by Deutsche Börse, it becomes very difficult for Australia’s FDI protectionists to argue that the ASX should be immune from foreign acquisition. Oddly enough, opposition to the Deutsche-NYSE deal is more likely to come from European than US regulators.

We should still not underestimate the potential for the ASX-SGX deal to fall over, either because Treasurer Swan deliberately spikes the approval with so much conditionality as to make it unacceptable to the parties or because of parliamentary disallowance of the necessary regulatory changes. The deal remains a key test of Australia’s international openness, one that some combination of the federal government, the cross-benches and the opposition might still fail.

posted on 10 February 2011 by skirchner in Economics, Foreign Investment, Rule of Law

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Holding Regulators to Account

Interesting developments in the Administrative Appeals Tribunal.

posted on 04 November 2010 by skirchner in Economics, Rule of Law

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Gangster Government

Matthew Stevens on government by intimidation:

YESTERDAY we observed, like many others, that the PM has a jaw of crystal when it comes to criticism, after he dubbed unspecified Australian miners as “ugly”. Our words were prescient, because in the wee hours before The Australian hit the streets the PM had again stunned his fellow Australians gathered at the Canberra Press Gallery’s Midwinter Ball with an acerbic aside that carried with it a bleak threat to the mining industry.

“The mining industry are here tonight,” Rudd said in a prime ministerial speech that, in more normal times, would have been protected by Chatham House rules but was circulating widely yesterday.

“I extend my greeting to each and every one of them. I notice there’s a small fire which has been erected down the back. I understand that myself and Wayne Swan and Martin Ferguson will soon be erected above that fire. Can I say, guys, we’ve got a very long memory.”

This is not the first time representatives of the mining industry have been warned of retribution by this government.

I’ve been told, for example, that one very senior member of Rudd’s team made even more pointed threats to a table of mining industry folk dining in the hours after the recent federal budget. They were warned that the government intended to secure a mandate for the super-profits tax at the election and then, with victory in hand and tax in place, it would come after all those who had been dense enough to challenge Rudd’s reform.

UPDATE. Alexander Downer on the bursting of the Rudd bubble:

It has taken an incredible three years for the Australian public to realise who their national leader really is. I sat with a Labor luminary having a late-night drink in June 2008. He turned to me and said: ‘Mate, one day the Australian public will grow to hate Kevin Rudd as much as I do.’ That day has arrived.



posted on 18 June 2010 by skirchner in Economics, Politics, Rule of Law

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Death by Narrative

Pete Wallison on how bad ideas destroyed ‘the most innovative and successful financial system the world has ever known’.  As Kevin Hassett notes:

It wasn’t a coincidence that equity markets posted their biggest drop in more than a year the day the U.S. Senate passed its sweeping financial reform bill…America has become the land of high taxes, big government, complex regulations and indignant politicians. The future of such a place is not bright. The markets understand that.


posted on 25 May 2010 by skirchner in Economics, Financial Markets, Rule of Law

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How Republican Populism Gave Us the Dodd Bill

The US Senate passes what is potentially the most devastating regulatory attack on the foundations of US prosperity since the New Deal.  Pete Wallison blames Republican populism:

How did this happen? After Scott Brown’s election to Ted Kennedy’s Senate seat, Republicans had the votes to prevent the closing of debate and keep the Dodd bill off the Senate floor. They could have argued that legislation this important should not be rushed through Congress. They could have pointed out that there were no hearings on most of the major elements of the bill. And they could have reminded the Democrats that the commission Congress appointed to advise them on the causes of the financial crisis would not be reporting until mid-December.

They did none of these things. Instead they backed away from cloture, allowing the legislation to go to the Senate floor where the bill, bad enough to begin with, became steadily worse. Amendments to allow the Fed to regulate interchange fees on debit cards, and to force banks out of the derivatives business are only two examples. This was fully predictable, since the unpopularity of Wall Street and the banks would encourage amendments hostile to business and finance.

Why was the GOP unable to stand united and filibuster the bill before it reached the Senate floor? For the least meritorious of reasons, it seems: unwillingness to go to the voters this November without having done “something” to punish Wall Street and the banks.

posted on 21 May 2010 by skirchner in Economics, Financial Markets, Rule of Law

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The Dodd Bill and Crony Capitalism

Cliffford Asness and Aaron Brown on the rise of the Treasury-financial complex:

The Dodd bill is perfectly designed to create the largest and most powerful crony system in history. It’s not that the people, regulator or regulated, are personally corrupt. It’s that the system will itself select for, reward and enforce corruption.

No financial professional will be able to turn down a “request” for a campaign contribution, and all financial institutions will hire former staffers as advisers or directors. No regulator can afford to antagonize a potential future employer. Regulators themselves must kowtow to Congress, which can use them for under-the table subsidies to favored groups. None of this is new to politics, of course, but the scale and lack of defined powers are.

posted on 15 May 2010 by skirchner in Economics, Financial Markets, Rule of Law

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