July 2021 – Economics with Coffee by Ellie Fleischer

I read Michael Lewis’ The Big Short a few weeks ago. This book is fantastic. I recommend! If you are time poor, the film with Ryan Gosling is also excellent. I watched the film twice and find myself re-reading the book in 2021. The Big Short discusses the financial reasons and foundations behind the housing crisis that precipitated the Global Financial Crisis (GFC) in 2008. In Australia we call it the Great Recession, but internationally it is known as the GFC and took more than a decade for the world to start to recover from, and then we suffered the 2020 pandemic recession.

The Big Short focuses on the perspectives of the few people that saw a problem in the way mortgages were being traded behind the scenes of the worlds major banks, and a pricing error on risk that lead to the biggest failure in the banking system since the Great Depression.

There are interviews with many people from both sides, but understandably more from the sides that were betting against the banks mortgage backed securities and the derivative products made with them. A derivative is something that is made from an underlying asset, and the underlying asset in this case was home-loans of people who would later come to be known as NINJA’s — no income, no job, no assets, as well as the home loans of people who had no paperwork to prove their income — “no-doc loans” and “low-doc loans” that mostly turned out to be NINJA’s too.

There is so much depth and detail that it takes a second reading really to take everything in. The access and interviews in the book are rare and interesting. It’s very well written and possible for someone with a non finance background to follow. All the financial jargon is explained well for a non specialist audience. I feel it is important reading now, with the US Fed buying mortgage backed securities and house prices in another boom.

This is a cruel policy to withhold covid relief support from income support recipients published today in The Guardian Australia. Your policy is putting hundreds of thousands of people’s health and well-being into the garbage.

Your policy basically says: “We don’t care if you become homeless. We don’t care if you starve to death. We don’t care if you die in the gutter.”

You need to immediately include all income recipients including Parent Payment, JobSeeker, Youth Allowance, Austudy and Abstudy. The people who applied for these payments to supplement casual income in weeks their working hours dropped are not greedy, they are sensible. Many of these people live pay cheque to pay cheque and if they did not take responsibility by applying for government income support they would put them selves at risk of homelessness and this would cost society a whole lot more than their social security benefits.

If you don’t extend the help to these people, the consequences for social stability are going to be dire. We will see an increase in morbidity and mortality. How can you justify this when there are as few as 75 affordable private rentals for someone on the sole parent pension in the entire country and a 10+ year waiting list for social housing in cities like Sydney.

Your government needs to immediately implement a building program using the $3 bn you have under NHFIC and actually implement this funding to build the 500,000 affordable homes Australia needs. Until people can actually live on the absolute pittance this government calls welfare, you must include any casual workers who also receive income support in your scheme.

This policy is obviously based off of misguided ideology. Stop pretending this is justified. Milton Friedman and John Maynard Keynes were both on your side of politics, and both would have warned you about the terrible consequences of this policy. All you are doing is pushing voters to vote Green. Pushing voters to vote Labor. You have proven that you don’t care about Australian people, and people are not stupid. The can see what the government thinks of them. People on “the Dole” are no longer a minority. So many people will experience what the Dole is really like now, experience the hunger, and the Australian people I suspect will demand better social security in this country, just like Keynes suggested after the Great Depression and the War. If you ignore this, you and your friend’s way of life will be destroyed. The whole point of having an adequate social security system is to

1. Keep the workforce healthy and in homes even when they are out of work.

2. Give people options to find good quality well paid work.

3. Prevent social unrest that lead to increased crime and higher chance of revolutions.

You and any politician should best remember any society is only three meals from revolution. This is your “Let them eat cake” moment. This is just bad policy.