Tag Archives: AOFM

How Much More Debt Next Week, Wayne?

4 Jun

$2.5 Billion.

Great, isn’t it.

Over the past 6 weeks since I began tracking the AOFM’s government debt auctions, Wayne’s pack of lunatics have borrowed no less than $2 Billion, and as much as $2.75 Billion.

Every single week.

And we can see here, that ever since JuLIAR Gillard knifed KRudd, she has been on a borrow-and-spendathon that puts even the jet-setting Mr Stimulus to shame.

The following chart shows only the value of Treasury Notes auctioned by Labor. These are “short term” debt “instruments”, that typically must be repaid within 30-90 days.  They are supposed to be issued only when necessary to “smooth” cashflow requirements of the government.

Most of the government’s primary funding comes, instead, from the auction of Treasury Bonds, which are longer term debt “instruments”, that must be repaid over durations of anything up to 20+ years.

We take particular interest in the blowout in borrowing using Treasury Notes, because it indicates a government that has completely lost the plot.  An utterly incompetent government, that has no idea what it is doing.  Has no planning.  Cannot even manage to balance the weekly cashflow needs of government.  And so is constantly going back to the international debt markets, to borrow $2+ billion per week on the “short term” national credit card (click to enlarge):

Source: Australian Office of Financial Management (AOFM) - to end April 2011

Note carefully that this chart only goes up to end of April this year. During May, the government borrowed another $5.8 Billion using Treasury Notes. To picture this – since I’m too lazy to update the chart right now – just imagine another blue line on the end of that chart, one that is double the height of the tallest blue line.

So far in June – a mere 3 days in – they have already borrowed another $500 million using T-Notes.

And next Thursday 9th June, they will borrow another $1 Billion using T-Notes.

What’s Another $2 Billion Anyway, I’ll be Retired On A Taxpayer-Funded Pension

28 May

How’s that borrow-our-country-into-endless-servitude-to-foreign-lenders caper going, Wayne?

Four weeks ago – $2.2bn more debt.

Three weeks ago – $2.4bn more debt.

Last week – $2.75bn more debt.

This week – $2.5bn more debt.

Next week – $2bn more debt.

Wayne’s well on track to shatter the glass of Labor’s newly revised $250 Billion debt ceiling by around the 3rd week of August.

That’s just after Aug 2nd, when the US Treasury reckons the US could default on its debts.

Guest Post – The ‘Moneyness’ Of Debt

27 May

Submitted by reader JMD.

I will express a view here that is, as far as I can tell, being laid out by few others. I can’t claim the idea as my own, rather I have put this together based on the thoughts of Doug Noland, my favourite economic analyst by a country mile, who publishes the Credit Bubble Bulletin. I have taken the liberty of lifting quotes directly from his articles, they are in italics throughout my article, though I may have changed his wording just a little to fit in with the flow.

Readers of the Gold Standard Institute know that money is what extinguishes all debt, nevertheless, credit1 can be considered a monetary equivalent or ‘money good’, take for example, Real Bills that mature into gold. Inextinguishable debt, as in irredeemable dollars and dollar denominated debt, are not money since they are, well… inextinguishable debt. Despite this contemporary irredeemability, credit is still considered to be in a dynamic state of ‘moneyness’, driven by the marketplace’s perception of safety and liquidity, and any meaningful definition of contemporary ‘money’ must include government debt instruments.

The situation prevailing today is that key developed economies are locked into a perilous cycle of massive non-productive government debt expansion. Rather than the global money markets being composed of Real Bills, generated through the drawing of short term bills against consumer goods actually required by consumers, we have money markets where for nine quarters now, government finance has completely dominated system credit creation. These ‘marketable’ debt securities now absolutely dominate the world.

Just how massive has this increase in government debt issuance been? I draw your attention to the charts below.

As you can see, government debt issuance has reached levels never heretofore imagined. UST issuance reached almost $1.5 trillion in 2009. While the dollar amount of Australian government debt issuance is small in comparison to the US, the pattern of expansion is the same. I have included Australian government debt issuance back to 1985 to give some perspective of historical issuance. I don’t have figures pre 1996 for UST’s, nor 2010. Nevertheless, you get the picture.

Why the fuss? Because it is the ‘moneyness’ nature of government obligations that they enjoy special treatment in the marketplace. Readers of the Gold Standard Institute also know that when it comes to the ‘moneyness’ of credit it’s not just quantity but quality that counts. I think it safe to presume that government debt has not improved in quality since 2008, yet issuance has exploded with little perception that government debt is being mispriced, over-issued, and misdirected. There is an ever expanding gulf between market perceptions of ‘moneyness’ and the true underlying state of government credit. In simpler terms, government credit is a bubble, a precarious Credit Bubble at the heart of our monetary system. Just as the US financial system doubled total mortgage debt in just over six years during the mortgage/Wall Street finance bubble with little perception of the underlying quality of U.S. mortgage credit, the financial system is now on track to double federal debt in about four years. The situation is no different in Australia and I doubt it would be different in most other ‘developed’ countries.

There is only one true arbiter of the value of government debt, its only extinguisher… gold. Irredeemable dollars, being the obligation of the central bank – not money, cannot extinguish government debt. Is gold reflecting the expanding gulf between perceptions of moneyness and the true quality of government credit? Should holders be loaning their money – gold – for irredeemable government obligations, as if ‘buying’ mortgage credit at the height of the Wall Street bubble? Should the dollar price of gold be falling?

I think not. And we all know what happens to bubbles.

Note: 1. Remember, one person’s debt is another’s credit. I use the terms interchangeably.

Source - Australian Office of Financial Management (AOFM)

Source - Prudent Bear (prudentbear.com)

Disclaimer: The views expressed in the above article are the author’s own. They should not be interpreted as reflecting any views held by Senator Barnaby Joyce, The Nationals, or by the barnabyisright.com blog author.

* Stay tuned for JMD’s follow up post, on the Reserve Bank of Australia’s sale of 2/3rd’s of Australia’s gold during the Asian Financial Crisis of the late nineties.

Labor’s Building the Australia Devolution

21 May

Labor’s  “Building the Australia Devolution” continues.

Three weeks ago – $2.2bn more debt.

Two weeks ago – $2.4bn more debt.

Last week – $2.75bn more debt.

Next week – $2.5bn more debt.

Labor seem determined to shatter the glass of their newly revised $250 Billion debt ceiling.  At this pace, possibly by around the 3rd week of August.

That’s just after Aug 2nd, when the US Treasury reckons the US could default on its debts.

How Australia Will Look When The SHTF

15 May

Want a glimpse of Australia’s future?

Watch this shocking story from America’s 60 Minutes:

http://www.youtube.com/watch?v=QwrO6jhtC5E

Pretty distressing, right?

It was exotic “mortgage-backed investments” that triggered the GFC in America. And as you just saw, they are still very much at the heart of their terrible ongoing crisis, where 1 in 7 (44 million) are now living on food stamps.

Just as in the USA and other countries, our Labor government responded to the GFC by “stimulus”.  And, by propping up our “safe as houses” bankstering system.

This is the same “best in the world” bankstering system that has just $2.67 Billion in On-Balance Sheet Assets, versus $15 TRILLION in Off-Balance Sheet “business”.  The bulk of that off-the-books “business” is exotic “derivatives” bets on interest rates, and foreign exchange rates.

How exactly did Labor prop up our bankstering system?

Amongst other things, by using taxpayer’s money to “invest” billions in … yep, Residential Mortgage-Backed Securities (RMBS).

$16 Billion, to be precise.

But $16 Billion wasn’t enough. Just last month, Wayne Swan authorised the AOFM to “invest” another $4 Billion in these “mortgage backed investments”:

Click to enlarge

According to numerous sources including The Economist magazine, Australia has the most overvalued housing in the world.

And earlier this month, we learned that house prices fell by the most in 12 years in the March quarter.

That $20 Billion pumped into Residential Mortgage-Backed Securities is not looking such a great “investment” now, ‘eh Wayne.

Let there be no mistake.

Rudd/Gillard Labor did not “save us” from the GFC.

They simply kicked the can down the road a couple of years.

And in doing so, all they have achieved is to dramatically weaken our government’s financial position.

Nearly $200 Billion in gross debt.

$20 Billion in “mortgage-backed investments”.

A $50 Billion budget deficit – that’s for this year alone.

A $50 Billion increase in our national debt ceiling, to $250 Billion.

And borrowing more than $2 Billion a week.

But look on the bright side.

When GFC 2.0 strikes, we’ll not need to worry about what’s hitting the fan.

Because thanks to Labor … and the banksters … we’re already in the ____ right up to our necks.

Barnaby is right.

UPDATE:

For more shocking revelations on this story of bankstering corruption of the mortgage finance markets – and now even the courts of law – see this exposé by Rolling Stone’s Matt Taibbi:

The foreclosure lawyers down in Jacksonville had warned me, but I was skeptical. They told me the state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase. This “rocket docket,” as it is called in town, is presided over by retired judges who seem to have no clue about the insanely complex financial instruments they are ruling on — securitized mortgages and laby­rinthine derivative deals of a type that didn’t even exist when most of them were active members of the bench. Their stated mission isn’t to decide right and wrong, but to clear cases and blast human beings out of their homes with ultimate velocity. They certainly have no incentive to penetrate the profound criminal mysteries of the great American mortgage bubble of the 2000s, perhaps the most complex Ponzi scheme in human history …

And if you missed it, check out Matt’s infamous exposé of one of the big banks at the heart of the ongoing mega-fraud, Goldman Sachs:

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates …

What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy

Goldman Sachs is the puppeteer of our very own Emissions Trading Scheme leading proponent, former GS Australia chairman Malcolm Turnbull MP.

Labor’s BAD: Getting Worse Every Week

14 May

Labor’s  “Building the Australia Devolution” continues apace.

Two weeks ago – $2.2bn more debt.

Last week – $2.4bn more debt.

Next week – $2.75bn more debt.

At this pace, they could shatter the glass of their newly revised $250 Billion debt ceiling by around the 3rd week of August.

That’s about a fortnight after Aug 2nd, when the US Treasury reckons the US could default on its debts.

Labor’s $2.4 Billion Budget Spray

6 May

Thought $2.2 billion more debt this week was impressive?

The Labor party’s just getting started.

The AOFM has just announced next week’s Australian sovereign debt auctions.

A $600 million T-bond auction on Wednesday – to celebrate the myth-making record-deficit Budget Speech the night before, no doubt.

$1.2 billion (2 x $600 million) in T-note auctions on Thursday.

And another $600 million T-bond auction on Friday.

Labor’s $2.4 Billion Budget Spray.

How much more Interest-on-debt must we pay?

And how much will the “Estimates” and “Projections” for Interest-on-debt made in last year’s Budget be .. revised .. in this year’s Budget?

MYEFO 2010-11, Appendix B, Note 10: Interest Expense

According to their own “Estimate” just for this year 2010-11, we’re paying $1,201,712 ($1.2 million) per hour in Interest-on-debt.

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