Tag Archives: debt and deficit

Joyce: Rudd ‘A Deadly Risk’

28 Feb

Barnaby Joyce has returned fire at Kevin Rudd on Saturday, after the PM suggested that Barnaby should be sacked:

“Surely Mr Rudd must see the paradox of his statement,” Senator Joyce told AAP.

“The person who has now admitted responsibility for a program that has burnt down 100 houses, killed four people, electrified 1000 houses and created fatal death traps and is going to cost $100 million just to fix, is stating that I may appear a risk.

“Quite evidently he is absolutely a risk, a deadly risk.”

Earlier on Saturday, PM Rudd had again tried to discredit Barnaby over his warnings late last year concerning the possibility of the USA defaulting on its massive debts:

“It’s now, I think, 87 days since Mr Abbott took the reckless decision, the risky decision, of making Barnaby Joyce the alternative finance minister of Australia,” Mr Rudd told reporters in Adelaide.

“In just 87 days he said that America could default on its sovereign debt, he said that the Australian states could or would default on their sovereign debt, he has said that the Australian government could or would default on its sovereign debt.

Kevin Rudd is a liar.  Barnaby Joyce never said that Australia could or would “default”.  Instead, he questioned whether we could repay our debt, if the Government continues on its present rapidly-rising trajectory of wasteful (and deadly) spending with borrowed money –

Kevin Rudd is oblivious to the warnings of many acclaimed international economists who share Barnaby’s concerns.

Kevin Rudd also appears ignorant of the deep concerns about US sovereign debt that were expressed by none other than Secretary of State Hillary Clinton just three days ago.  She warned that the US deficit is a risk to national security:

“We have to address this deficit and the debt of the United States as a matter of national security not only as a matter of economics,” Clinton said. “I do not like to be in a position where the United States is a debtor nation to the extent that we are.”

Having to rely on foreign creditors hit “our ability to protect our security, to manage difficult problems and to show the leadership that we deserve,” she said.

“The moment of reckoning cannot be put off forever,” she said. “I really honestly wish I could turn the clock back.”

Kevin Rudd is a proven liar, an economic imbecile, and an arrogant, financially reckless fool.

Barnaby is right.

UPDATE: Abbott backs Joyce, happy with performance

UPDATE 2: ‘Fix the stuff ups’, Joyce Tells Rudd –

‘I am flattered that Mr Rudd would come out on Saturday to go after little old me but I really thought he had other things to do and if he has spare time my humble suggestion is to concentrate on fixing up your stuff ups.

‘If he wants me to make suggestions for his little notebook I will forward my mobile number later.’

Tags: , , , , , , , , ,

Henry: GFC Is ‘Over’

28 Feb

Earlier this month, Treasury Secretary Ken Henry declared that the Global Financial Crisis is “over”:

“What people have called the global financial crisis, that has passed, I think it’s safe to say,” Dr Henry said. “But that isn’t to say that there will not be further adverse shocks for financial markets down the track and some of those shocks … could be of some significance for individual countries, but I don’t imagine (they would be) shocks of the sort that would be globally significant.”

Remember that claim.

Ken Henry did not see the GFC coming in the first place. He later claimed that “only extraordinarily good forecasters” would have predicted the GFC.

Well, that would be lots of extra-ordinary folk like me then, Ken. Even I could see it coming, from late 2005. And despite the ridicule (familiar story?) of “trained” “expert” financial advisers, I chose to pull all my superannuation out of the sharemarket into cash in May 2007, completely avoiding the global crash that has wiped out the investments and retirement savings of countless millions –

Historical performance chart assumptions: Performance is calculated on an initial investment of $10,000, using entry to exit prices, with distributions reinvested. A 4% contribution fee has also been applied. This information is general information only


And what about those international economists who publicly warned of a looming GFC, Ken?  Men such as professors Ken Rogoff and Nouriel Roubini, and our very own “Dr Doom”, Professor Steve Keen?

You’d think Henry might have learned a few lessons about wide-ranging research… and caution… given his utter failure to foresee what many others did.  So has he learned anything?

Clearly not.

Henry presently remains ignorant of, oblivious to, or (worse) rejects the numerous dire warnings coming daily from all around the world. Not just from Barnaby Joyce, but from many leading international economists – several of whom did predict the GFC – who are now genuinely concerned with multiple threats to the global economy. Everything from the European debt crisis, to the China property bubble.

Scarily, it has become increasingly obvious that Ken Henry is the man who really holds the reins of Australia’s economy, since PM Rudd, Treasurer Swan, and Finance Minister Tanner, are all totally unqualified economic imbeciles. Never forget, all of them were frantically talking up “the inflation genie” danger in 2008, even as the GFC tsunami was breaking over the world economy.

If (when) it all goes pear-shaped… again… Ken Henry must be sacked.

Tags: , , , , , , , , ,

Can We Even Pay The Interest?

27 Feb

Estimated (E), Projected (P)

It seems that every man and his dog… except Barnaby Joyce… happily takes for granted the popular claim that Australia’s sovereign debt levels are nothing to worry about.  But have you ever stopped to think about whether we really can pay back the debt?

I made the chart above using the data from the Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) 2009-10 Budget statements. It shows Treasury Secretary Ken Henry’s projected Interest on debt for this financial year, and the following three years. Those are interest-only repayments that Kevin Rudd incurred, and now we-the-taxpayers have to pay.

Doesn’t look too bad, you say?  An Interest bill starting at $8.26 Billion for 2009-10, rising to $15.28 Billion for 2012-13? Surely your $900 “bonus” cheque, and your dodgy roof insulation from the Fairy Ruddfather, make paying this Interest bill worthwhile?

To put it into perspective, I’ve put together another chart (below).  It shows the Australian Government headline Surplus / Deficits going back to 1996, and adds in the projected Interest on debt (in blue) from the above chart. Simply click on the chart to enlarge –

As you can see, Ken Henry’s projected Interest on debt alone is greater than many of the 12 years of Howard Government surpluses. And they came during an unprecedented mining boom.

One other thing. Can anyone really believe Ken Henry’s projections?  This is a man who could not see the GFC coming.  And even now, he is confidently predicting a “Golden Age” of “unprecedented prosperity” for Australia, one that could “stretch to 2050”. All thanks to his belief in a 4o year continuous boom in China.  He is clearly ignorant of the fact that more and more leading international economists… including some who did predict the GFC… are now predicting that China is a bubble that will bust within ten years.

Paying back the projected Interest-only will obviously be a big challenge. So try to imagine how we are ever going to pay back the principal too.

Barnaby Joyce has recently stated that it would take eight (8) consecutive years of $19 Billion surpluses to bring the budget back to earth.  As you can see from the chart above, the Howard Government achieved a budget surplus that big only 3 times… in 12 years.

It is easy to see why Barnaby is so concerned about our ever-rising debt under Rudd Labor.

Because quite simply, we can not pay it back.

Tags: , , , , , , , , ,

Clinton: US Deficit A National Security Risk

27 Feb

US Secretary of State Hillary Clinton says that “outrageous” advice from former Federal Reserve Chairman Alan Greenspan helped create record U.S. budget deficits that put national security at risk:

“We have to address this deficit and the debt of the United States as a matter of national security not only as a matter of economics,” Clinton said. “I do not like to be in a position where the United States is a debtor nation to the extent that we are.”

Having to rely on foreign creditors hit “our ability to protect our security, to manage difficult problems and to show the leadership that we deserve,” she said.

“The moment of reckoning cannot be put off forever,” she said. “I really honestly wish I could turn the clock back.”

Barnaby Joyce has been pilloried mercilessly for daring to voice concerns about the USA and its massive debts. Even though many acclaimed international economists agree with his concerns.

In light of Secretary of State Clinton’s testimony, will Rudd Labor and the Australian mainstream media now apologise for their smears, abuse, and ridicule of Senator Joyce?

More importantly, will Lindsay Tanner, Wayne Swan, Ken Henry, Glenn Stevens, and the media now pause to properly consider Barnaby’s prescient warnings about an impending Day of Reckoning for Australia?

Tags: , , , , , , , , ,

No, We Cannot Pay Our Debt

26 Feb

Here’s another picture that tells a thousand words.

Yesterday Barnaby wrote in The Australian about the annual Budget surpluses needed to pay back Labor’s ever rising debt ($1 Billion more today alone; another $1.8 Billion next week):

Let’s talk about the abundance of faith exhibited by Labor when it tells us of the eight consecutive $19bn surpluses that are required to bring the budget back into orbit when the continued stresses on the international economy are clear and evident, especially in Europe.

On the ABC’s Q&A program on Feb 15th, Barnaby pointed out that Labor’s “plan” to return the Budget to surplus is pure fantasy:

We have always got the view that you should try and reduce tax but the first thing, without harping on it, we’ve got to deal with the debt and because they keep racking up debt, that takes away our capacity to reduce your tax and there’s no other way around it. You either increase your revenues, decrease your costs – they talk about productivity and sort of the cyclical angel descending from heaven and making everything better…

Well, just what is the likelihood of that cyclical angel descending?  And even if it does, can it produce eight consecutive surpluses of $19 Billion?

Decide for yourself.

Below is a chart of Australian Government Budget surplus / deficits, dating back to the beginning of the Howard Government. Source is the Reserve Bank of Australia’s Statistics section. Click on the chart to enlarge –

This country has never seen anything like eight consecutive years of $19 Billion surpluses. In fact, the Howard Government achieved it just 3 times… in 12 years… during an unprecedented mining boom.

Barnaby is right.

Tags: , , , , , , , , , , , , ,

Roubini: ‘Risky Rich’ Countries in Greatest Danger of Default

26 Feb

New York University Professor Nouriel Roubini – famous for having predicted the GFC in 2006 – again defies the so-called ‘conventional wisdom’ by warning that it is the “risky rich” countries who are in greatest danger of sovereign debt default:

Today’s swollen fiscal deficits and public debt are fueling concerns about sovereign risk in many advanced economies. Traditionally, sovereign risk has been concentrated in emerging-market economies. After all, in the last decade or so, Russia, Argentina, and Ecuador defaulted on their public debts, while Pakistan, Ukraine, and Uruguay coercively restructured their public debt under the threat of default.

But, in large part – and with a few exceptions in Central and Eastern Europe – emerging-market economies improved their fiscal performance by reducing overall deficits, running large primary surpluses, lowering their stock of public debt-to-GDP ratios, and reducing the currency and maturity mismatches in their public debt. As a result, sovereign risk today is a greater problem in advanced economies than in most emerging-market economies.

Tags: , , , , , ,

Is Greek Debt Contagious?

26 Feb

The Greek flu looks like it’s spreading through Europe. How contagious is it? How far will it spread?

Charles Wyplosz, Professor of International Economics at the Graduate Institute (Geneva), and one of the world’s leading experts on Eurozone monetary and financial matters, sets the record straight on the latest twist in the GFC:

A debt default by the Greek government, on its own, would be a non-event. Greece is a relatively small country (with 11 million people, its GDP amounts to less than 3% of Eurozone’s GDP). Contagion to Portugal, which is even smaller, would also be a non-event. Moving on to Spain and Italy is another matter…

The real worry is the banking system. Some European banks hold part of the Greek debt and, if still saddled with unrecognised losses from the subprime crisis, some might become bankrupt. Many governments have simply not pushed their banks to straighten up their accounts, and they are now discovering some of the unforeseen consequences of supervisory forbearance…

Contagious debt defaults, along with bank failures, could lead to a double-dip recession in Europe, possibly affecting the US as well. If that were to happen, with the interest rate at the zero lower bound and fiscal policy not available any more, we could face a terribly bad situation.

Tags: , , , , , , ,

Greek Crisis Coming to America

26 Feb

Professor Niall Ferguson, recently seen on ABC TV in his acclaimed documentary series “The Ascent of Money“, writes for the Financial Times:

It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate…

What we in the western world are about to learn is that there is no such thing as a Keynesian free lunch. Deficits did not “save” us half so much as monetary policy – zero interest rates plus quantitative easing – did. First, the impact of government spending (the hallowed “multiplier”) has been much less than the proponents of stimulus hoped. Second, there is a good deal of “leakage” from open economies in a globalised world. Last, crucially, explosions of public debt incur bills that fall due much sooner than we expect.

Tags: , , , , , , ,

Magnus: Sovereign Default Threatens World

26 Feb

Respected UBS economist George Magnus says sovereign debt default now presents a grave risk to the global economy:

The sustainability of sovereign debt hangs heavily over bond markets, and the prospects for economic and financial stability…

There is no peacetime precedent for the current speed and scale of public debt accumulation and it is difficult to assess the social tolerance for high debt levels, and for the pain of protracted fiscal restraint. In several European Union member states, the threshold has already been breached. The spectre of sovereign default, therefore, has returned to the rich world.

Tags: , , , , , , ,

Day of Reckoning Near: Joyce

25 Feb

In today’s Australian newspaper, Barnaby Joyce warns of  impending debt crisis:

AUSTRALIA’S gross foreign debt, taking into account both the public and private sectors, is more than $1.232 trillion.

The net foreign debt is about $638 billion. It is one of the highest net debt to gross domestic product ratios in the developed world.

As Treasury official David Gruen told a Senate estimates committee recently, it is higher than the US, Japan and Britain. The only country that could be confirmed as higher than ours, at the latest estimates hearing, was New Zealand.

Australia’s gross sovereign (government borrowing) debt during that estimates hearing was $123.11bn, but by last Friday it had climbed to $125.483bn.

What does Barnaby think of the Labor Government’s stimulus spending?

We have, approximately, a $90bn package of eclectic economic trinkets, noted as stimulus, that would look good hanging from any rear-vision mirror in a car doing hot laps on a Friday night in downtown Dubbo.

Did we get something substantial, clearly identifiable in the form of the Snowy Mountains Scheme, or inland rail or massive water infrastructure to alleviate the problems of future droughts? Did we invest in a method to encourage people in a growing population to settle away from the crowded capitals of Sydney, Melbourne and Brisbane? No, we didn’t.

Read all of Barnaby’s article here, and The Australian’s editorial on Barnaby’s warnings – with reader comments – here.

Tags: , , , , , ,

← Older Entries
Newer Entries →

Design a site like this with WordPress.com
Get started