Public ideas
Financial crashes: lessons from history
Linda Yueh of Oxford University, author of The great crashes: lessons from global meltdowns and how to prevent them, is interviewed on Late Night Live, where she describes the trajectories of financial crashes over the last 100 years, and the ways governments have responded to them.
A common feature of severe crashes is that they are preceded by a period of financial exuberance. There is inflation in asset prices, which has its own dynamic as people pile into the market motivated by a fear of missing out. This exuberance is fuelled by people losing sight of the difference between wealth and market valuations.
The severity of any crash is determined by the speed and credibility of governments’ action in anticipation of or response to financial crashes. The more government action is delayed, the worse is the misery inflicted on society.
The worst financial crises are those that cause bank failures. Once there has been a run on banks it is very hard for governments to restore confidence in the financial system.
The 22-minute discussion between Linda Yueh and Phillip Adams is mainly about historical crashes – 1929, the 1990s dot-com bubble, the GFC.
In Australia at present, apart from real-estate spruikers who talk up housing price inflation, there are few signs of financial exuberance, but as Yueh points out, global financial systems are interlinked. We all need to keep a cool head when we see high and rising asset prices – real estate and equities – and to keep our eye on tangible value rather than inflated values in thinly-traded markets from which wise investors have withdrawn.
Firearms law reform: timing was everything
The National Archives have published two handwritten letters to then Prime Minister John Howard, expressing support for the government’s firearms law reform following the Port Arthur massacre.
It’s informative to reconstruct a timeline around the events. It’s short:
2 March 1996 – Howard government elected with a strong majority, the Coalition having been out of office for 13 years;
28 April 1996 – the massacre;
2 May 1966 – Howard announces to Parliament his intention to ban automatic and semi-automatic firearms;
10 May 1996 – agreement reached with state and territory police ministers.
If the massacre had occurred a year later, when the Howard Government was settled in, when backbenchers representing rural seats and redneck constituencies had established their networks with the prime minister’s office, when the lobby groups had learned how to influence this new government, and when senior public servants had re-established their habit of anticipating their ministers’ ideological positions and framing advice accordingly, would we have enjoyed the benefit of such an agreement?
It’s a reminder that the Albanese government, now in office for just over a year, is more vulnerable to capture by interest groups than it was when first elected.
We can also be grateful that “this is not the time to discuss policies” voices did not stymie the process – as the National Rifle Association in the USA has repeatedly done following that country’s massacres. There will be tragedies requiring decisive policies. There is no natural law stating that citizens cannot grieve, express outrage, and demand policy reform at the same time.
Frank Crean – a profile in dignity and courage
Mark Kenny has an obituary to Simon Crean in The Conversation: Vale Simon Crean: a true believer in the Labor Party.
It’s mainly about the dignity with which he conducted himself during the early years of this century when Labor was tearing itself apart in factional fights.
It’s also about his strong and courageous stance on Iraq, when, against strong opinion, he decided to oppose Australia’s participation in the “coalition of the willing” invasion of Iraq. As Kenny writes, “Crean risked being viewed as weak on terrorism by his detractors in the Howard government, the media and even some within his own party”. With the benefit of hindsight even his detractors would now acknowledge that the invasion was based on a lie about “weapons of mass destruction” and that the world has paid a heavy price for that invasion.