Tag Archives: debt and deficit

Our “Lehman Moment” Near – S&P Downgrades Banks

4 Dec

Just four days ago, your humble blogger noted that our mainstream news media, financial commentariat, and blogosphere, have (again) overlooked the key issue, in their reporting of Treasurer Swan’s MYEFO budget update.

Once again, they have all overlooked the critical economic risk; the joined-at-the-hip relationship between our Big Four banks, and our government’s financial position, as perceived by the major credit ratings agencies.

To wit, back in May this year Moody’s Ratings agency essentially declared our Big Four banks are Too Big To Fail. And in downgrading the Big Four’s credit ratings, Moody’s tacitly warned the government that it must maintain the implicit and explicit government (taxpayer) guarantees propping up the Big Four, else Moody’s will cut their ratings by another 2 notches.

By inference, this means that Moody’s was also warning the government that it must achieve and maintain a pristine government sector balance sheet, in order to support the plausibility of its guarantees for our Ponzi banking system.

If the government cannot reverse the direction of its ever-rising debt trajectory, and demonstrate a plausible path back to achieving an annual budget surplus (in order to start paying off the gross debt), at some point in the not-too-distant future their failure to manage the debt will be taken as a sign that our government’s guarantees of our banking system are less than reliable.

Wayne’s (unreported) MYEFO prediction of a 57% blowout in net public debt this year alone, will only hasten the arrival of that day.

As will his blowing through our third increased debt ceiling in just 3 years, by around mid-2012.

Commonwealth Government Securities On Issue | Source: Australian Office of Financial Management (AOFM)

Inevitably, our banks will have their credit ratings cut further.

They will find it increasingly difficult to attract funding from international money markets, upon whom the banks are dependent for around 40% of their wholesale funding. (Indeed, as we saw on Wednesday, the yield spread on Aussie banks’ bonds compared to non-financial Aussie corporate bonds, has just hit an all-time high).

Funding costs for the banks will rise.

Interest rates for Australian borrowers debt slaves will rise. (Or at the very least, RBA interest rate cuts will not be passed on).

Availability of loans to businesses will fall even further, choking the economy.

Unemployment will rise.

Bad loans (defaults) will increase.

Our housing bubble’s gentle 10-month price deflation, will accelerate.

Our economy will crash.

Our banks will collapse like the Ponzi house of cards that they are.

And the all-time record debt-soaked government taxpayer …

Click to enlarge

… will be obliged to bail out the banks, as per the Government Guarantees.

Now, we have a further red flag that my Missing The Key Economic Point For Dummies blog was right.

From The Australian (emphasis added):

Australia’s major banks are confident the first ratings downgrade by Standard & Poor’s in two decades will not have a major impact on their funding costs, despite the ongoing volatility created by the European sovereign debt crisis.

The share prices of the major banks — Commonwealth Bank, ANZ, Westpac and National Australia Bank — rose by 1.5-2 per cent, despite the one-notch ratings downgrade from AA to AA- as the overall market rose 1.4 per cent for a sparkling weekly gain of 7.6 per cent…

… The banks’ ratings were last cut in the early 1990s as the Australian economy struggled with recession.

S&P defended the ratings downgrades, which it attributed to Australian banks’ heavy reliance on wholesale funding markets.

And from ABC News (emphasis added):

BBY banking analyst Brett Le Messurier says the downgrade is not too serious but could lead to higher borrowing costs in the long term.

Mr Le Messurier says the big four banks still have plenty of liquidity to help them “ride out the current turmoil in Europe for some time”.

“In and of itself it doesn’t matter that much, but if another one follows then they get into the “A” category,” Mr Le Messurier said.

“And that is going to lead to increased wholesale funding costs over and above what’s resulted from the current European crisis and therefore that will ultimately feed through to consumers.”

And from the Wall Street Journal (emphasis added):

When it comes to Australia’s banks, don’t listen to the spin.

Late last night, Standard & Poor’s cut its rating on all of the big 4 — Australia & New Zealand Banking Group, Commonwealth Bank of Australia, Westpac and National Australia Bank — warning about rising costs and a continued increase in wholesale funding costs. Given Australia’s banks predominantly fund themselves offshore, the ongoing European sovereign debt crisis has raised concerns about the contagion possibilities…

… The moves come about six months after Moody’s did almost exactly the same thing and predictably, just like then, each of the banks have come out today to defend their balance sheets and businesses.

But while ratings agencies certainly don’t carry the clout they used to, make no mistake, there are a stream of issues for Australia’s banks.

For one, a credit facility from the Reserve Bank of Australia, or RBA, established to help banks satisfy new global banking rules, known as Basel III, are certain to lower each of the banks’ risk-taking possibilities and profits.

But actions speak louder than words and when the RBA cut its key cash rate a month ago, NAB refused to pass on the favor in full. If Europe gets worse, and the RBA cuts a few more times, all those banks that today are talking about their strong balance sheets will change their refrain when they decide to hold back on passing those cuts on.

The NZ Herald’s Liam Dann debunks the spin, and explains why the banks’ attempt to downplay the ratings cuts masks an important truth (emphasis added):

You can say all you like about yesterday’s banking downgrade being “anticipated”, “reflecting methodology changes” and not “impacting on consumers” – but down is still down. It’s the wrong direction.

So despite the spin suggesting this is no big deal, the big Australasian banks should hopefully be paying close attention to the Standard & Poors review which saw their ratings cut from AA to AA-…

… taking a step back from the technical stuff, it’s important to recognise that this methodology change is not some just arbitrary fiddling with numbers.

It’s grounded in the very real increase in risk to lenders that has occurred since the global financial crisis struck.

The changes stem from the failure of the ratings agencies to identify that crisis in 2007 and 2008.

So, in some respects, this downgrade represents the credit agencies doing their job properly – finally.

The big shift in the way S&P now looks at banking risk is that it has weighted its focus away from the cyclical ups and downs which are reflected in an institution’s quarterly financial performance and towards the underlying structural risks of a region’s banking sector.

So now, S&P is analysing first the structural risks in the Australasian banking system as a starting point, and then assessing the relative position of each bank’s performance within that context.

And finally, from Ireland’s The Journal (emphasis added):

S&P said the decision was based on the cost posed by sourcing cash from overseas markets and the country’s foreign debt.

Following the crash of Lehman Brothers in 2008, which S&P failed to foresee, the agency revised its rating criteria – and it is in the context of these new considerations that the banks were downgraded, reports The Australian.

Meanwhile, rival rating agency Moody’s said it would keep the banks on their AA rating and retain their outlook as positive.

Experts have warned that a continuing European debt crisis could expose the banks to a further downgrade.

As noted in Wednesday’s blog, our Net Foreign Debt is yet another key factor that our politicians (on both “sides”) and lapdog media studiously avoid focussing any attention on. Why? According to the latest RBA data, our Net Foreign Debt at June 2011 was a whopping $675 billion. More than 50% of GDP. So naturally, noone in positions of power want to mention it, even though it is a very serious structural problem, and one that is now fundamental to triggering negative consequences such as this S&P rating downgrade.

Break out the popcorn folks.

It has begun.

As usual … Barnaby is right:

“If you do not manage debt, debt manages you” – Feb 2010

Barnaby’s Budget Reply

1 Dec

I’ve been eagerly awaiting this.

Senator Joyce’s response to Wayne’s budget update.

Yes, he’s been busy with the Murray-Darling Basin Plan. But we just knew it wouldn’t take long for Australia’s prophet on debt risk to speak outside his portfolio again … as pledged.

From the Canberra Times (emphasis added):

Swan drowns in a sea of debt

In GK Chesterton’s Father Brown novels the world renowned criminal Flambeau makes a name for himself by forming a successful London dairy company even though he owns no cows, no carts and no milk. Instead, he served his customers by moving the milk bottles outside people’s homes to the homes of his customers.

All very similar to Wayne Swan’s crisis budget. Moving money from his year of surplus to his years of non-surplus years before and after. No cows, no milk, no focus on increased production just a bunch of very tricky, very sneaky accounting tricks. Remember their surplus does not pay off the extra $15 billion they will now borrow this year.

A crisis budget from a crisis government who reflect the sobriety of the situation with the appointment of a new Speaker for the House of Representatives. Greeting the Queen or President at the next official soiree will be; Peter Neil Slipper. Yes all is under control on the Good Green Ship Labor.

There is no better recent portrayal of their exemplary management skills than the announcement of “regional experts” to help the 2.1 million people of the Murray-Darling “adapt” to the challenges of the precision hydrology skills so evidently amorphous in the draft Murray-Darling Basin Plan. I have always thought floor 30, Martin Place, Sydney is precisely the place to be to help those at the south-west NSW town of Griffith who have failed to better appreciate the Green-Labor-Independent government’s empathy and earnest desire to maintain our major food producing asset.

I love the way Labor rise to the challenge. If they are not cooling houses before setting fire to 194 of them, they are cooling the whole planet with a carbon tax and now they are redesigning how we feed ourselves with the glossy wonder of the latest draft Plan for the Murray-Darling Basin.

Canberra you are the canary in the coal mine on Australian Government debt. With debt rising by $2.1 billion, again, last week to $219 billion gross, the crossword puzzle at the bottom of this enclosure is moving into depressing focus as we hold on by our talons to the inverse view of this mad bird cage.

Surprise, surprise then the government has announced further cuts to the public service. Does the $2.5 billion spent on ceiling insulation look smart now? What about $16 billion on school halls? Now’s the perfect time to spend $50 billion on a second telephone network.

Now Wayne Swan predicts that the gross debt will race over our current debt ceiling of $250 billion by the end of this financial year* and over $270 billion by the end of the forward estimates. It looks like that unless we extend the overdraft again next year our nation will get the notice at the checkout “transaction declined, see bank for details.”

Why is it that after years of warning about a lack of cost management we now have to believe that those that are so witless as not to see it coming are competent enough to manage us through it. I publicly offered a bet in 2009 for a thousand dollars, which Mr Swan never took, that Labor would never deliver their predicted surplus. An organisation that delivers week in, week out rolling deficits covered with accelerated borrowing is not going to deliver an annualised surplus. No change in behaviour, no change in outcome.

They told us to throw the scales out the window, it is your net weight that matters and your gross weight is only going up because each week you are wearing an additional two kilograms of clothes, apparently. Oh, it is all so clear now, depressingly so.

The bleeding obvious from years ago has now mugged our inept government and Canberra, the cuts I predicted have now crystallised in their initial stage in Wong and Swan’s announcement. It will get worse.

Yes I have a palpable sense of frustration that not only did the government not react earlier when the remedy would be a less bitter pill, but others, the economic commentariat of the fourth estate, did not forensically question the Government’s rhetoric that we had no issues.

Does the crisis budget deal with the crisis? Nope. Carbon Taxes, NBNs and now shutting down sections of the Murray-Darling, there is no stomach in this management for the hard decisions. The golden rule is invest where you make money and cut where it costs you, prioritise and know your threats and be pragmatic not romantic in your long term plan.

Barnaby is right.

* And so was I … see Nov 2 post “Australia On Target To Hit Debt Ceiling By Mid-2012”

Here Comes Swan’s Black Swans – Chinese Bad Debt “Bigger Than Stated”

8 Jul

Remember our Wayne’s tireless refrain on the economy?

That investment (mostly from China) in our resources sector will ensure a budget back in surplus (for one year), and “lasting prosperity” via an endless “boom”?

Remember how he remains ignorant of all the many warnings about China?

(And, about our second largest trading partner, Japan?)

Including this one, just before the May budget:

“The market is telling you that something is not quite right,” Faber, the publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong today. “The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next nine to 12 months.

Faber joins hedge fund manager Jim Chanos and Harvard University’s Kenneth Rogoff in warning of a crash in China.

China is “on a treadmill to hell” because it’s hooked on property development for driving growth, Chanos said in an interview last month. As much as 60 percent of the country’s gross domestic product relies on construction, he said. Rogoff said in February a debt-fueled bubble in China may trigger a regional recession within a decade.

Remember the devastating critique of the May budget by Macquarie Research? The one that said Wayne’s (ie, Treasury’s) forecasts for business investment – the key assumption underpinning all the budget projections – are “truly extraordinary”?

Upbeat growth forecasts from the Treasury and the Reserve Bank of Australia (RBA) are based on very optimistic forecasts for private sector business investment.

The RBA and Treasury forecasts for business investment over the next couple of years are truly extraordinary.

In our opinion, achieving such stratospheric growth would be extremely difficult.

By putting all their eggs in the mining investment basket, policymakers appear to have no Plan B for what will support the economy if investment disappoints. And this note provides three clear reasons why one should be cautious about counting those mining investment chickens before they are hatched.

Well, on July 4 the international ratings agency Moody’s – the same one that has downgraded our banks and effectively declared them “Too Big To Fail – dropped another bomb on Wayne’s parade.

It says that 10% or more of Chinese GDP is bad debt, and claims that the “China debt problem (is) bigger than stated”.

From Moody’s Investors Service, via ZeroHedge (emphasis added):

Moody’s Investors Service says that the potential scale of the problem loans at Chinese banks may be closer to its stress case than its base case, according to an assessment that the rating agency conducted following the release of new data by China’s National Audit Office (NAO).

Since these loans to local governments are not covered by the NAO report, this means they are not considered by the audit agency as real claims on local governments. This indicates that these loans are most likely poorly documented and may pose the greatest risk of delinquency,” the analyst adds.

Moody’s report estimates that the Chinese banking system’s economic non-performing loans could reach between 8% and 12% of total loans, compared to 5% to 8% in the rating agency’s base case, and 10% to 18% in its stress case.

But it’s not just Moody’s now warning about China’s banking system.

From MarketWatch (emphasis added):

China’s debt woes point to bank bailout

China’s banking system will require an eventual bailout by the central government, according to some analysts, who said figures released last week on the size of local-government borrowings point to the need for a rescue.

Credit Suisse economist Dong Tao said the numbers backed up concerns he’s been voicing for the past two years on China’s toxic loan problem.

“Ultimately, we believe that the central government will need to separate the local government’s bank debt from banks’ balance sheets and recapitalize the banks,” Tao said in a note following the release of data on China’s local-debt obligations by the National Audit Office.

Reuters reported last month that Beijing is considering a bailout that could see the central government accept to 2 trillion to 3 trillion yuan of local governments’ outstanding debt in an effort to ensure against a mass default, which could bring down the economy. See report on China’s initial bailout plans.

Stress is building within the system, Tao said, as local governments face a growing pile of debts coming due at a time of declining land sales, normally a key revenue stream for the provincial authorities.

Meanwhile, local governments are also having trouble finding new sources of lending as state-controlled banks grow increasingly wary of their deteriorating ability to service existing debt.

Standard Chartered said last week there were early signs of major financial distress building at the local government level.

Anecdotes of local-government investment vehicles in Shanghai and in Yunnan province struggling to meet loan payments “signal the beginning of the wave of difficulties,” Standard Chartered’s China economist Stephen Green said in a note Thursday.

And Bloomberg reports that both Fitch Ratings and Standard & Poors have also flagged serious concerns:

Fitch Ratings lowered its outlook on China’s AA- long-term, local-currency rating to negative from stable on April 12 because of the risk the government would have to bail out banks. As much as 30 percent of loans to local government entities may go bad, accounting for the biggest source of banks’ non- performing assets, Standard & Poor’s said that month.

Now, are you one of those who doubts that China’s “boom” is/was driven by massive borrowing by local (regional) Chinese banks to finance over-investment in “infrastructure” – the mother of all real estate bubbles world wide?

Then take a look at these pictures from Time magazine, showing just how massive speculative over-investment in property construction has left China with literal ‘ghost cities’:

Click to visit the complete Time photo series

If like many readers you have skimmed over this article and not bothered to click on … and carefully read … all of the links embedded in this article, then you are doing yourself and your loved ones a disservice.

Because you are about to leave this site … ignorant.

With only part of the story.

Do not be a Goose.

Like Swan.

Educate yourself.

Lots of labour has gone into collating all these news articles from around the world.

Over many, many months.

Do yourself a favour, and become better educated about reality than the buffoon who lives in Wayne’s World.

So that you too can see with crystal clarity the gaggle of Black Swans that are soon to blot out our Aussie sun.

Then you too can help to warn others.

Because rest assured – just as with the GFC – you will get no forewarnings from our “expert” economists when the SHTF.

Or from our “authorities”.

Or from their sycophants in the mainstream “business” media.

Your superannuation depends on your being properly informed.

Because both “sides” of politics are planning to steal itwhen the SHTF

Now The UK Government Is Stealing Super Too

5 Jul

From the Daily Post, 1 July 2011:

Thousands of teachers, lecturers and civil servants joined a UK wide strike yesterday in a mass protest over pension reforms.

[NB: other countries call their supernannuation “pensions”]

More than 200 schools were closed or partially shut, across the region with lectures cancelled at colleges and universities, and disruption at courts and Jobcentres.

An estimated 7,000 members from University and College Union (UCU), the Association of Teachers and Lecturers (ATL), the National Union of Teachers (NUT) and the Public and Commercial Service (PCS) were involved in the action in North Wales.

In Wrexham all four unions were represented at a mass rally involving well over 100 members in the town centre’s Queens Square, joining the other 750,000 across the UK.

They accused the Government of betraying promises to give public sector workers and teachers a fair pension and claimed they were siphoning off billions to pay the black hole left by the banking crisis.

And they warned this was just the beginning demanding the Government think again.

Shouting “Shame on you” at the Government, President of the NUT in Wrexham Ian Farquharson, a teacher at Rhosnesni High School, said: “The Government are stealing our pensions.

“If they tell us there is no other option, then publish the figures and let’s see them – but they wont.”

Steve Ryan who sits on the PCA Wales committee said: “The banks have been paid £7 billion in bonuses, there is £120 billion in uncollected taxes from the rich because they avoid paying them and the pension money is going to fund this. It’s a disgrace.”

From the Guardian, 30 June 2011:

The government … wants to impose a 3%-of-pay levy on public sector workers’ contributions to help reduce the budget deficit. This amounts to a pay cut to follow on the heels of the current pay freeze.

The UK Government’s plan is remarkably similar to that of Ireland.

As we saw only weeks ago, the Irish Government too has announced a raid on citizens’ super, to raise funds to pay for their budget black hole. The difference being, the Irish Government is imposing its “levy” on both public and private workers’ pensions:

Irish Bombshell: Government Raids PRIVATE Pensions To Pay For Spending

“The various tax reduction and additional expenditure measures which I am announcing today will be funded by way of a temporary levy on funded pension schemes and personal pension plans.”

There’s a clear trend developing here.

We have seen previously ( “No Super For You!!” ) that Argentina, Hungary, France, Poland, Bolivia, Ireland, and the USA have all either nationalised citizens’ super funds outright.

Or, imposed “levies” (ie, new taxes) on citizens’ super.

Or, as a more subtle beginning, simply reduced the amount that the government pays into government workers’ pension (ie, superannuation) funds. The equivalent to this in Australia would be if the government began setting aside (eg) only 5% of public servants’ salaries into the Future Fund for their retirement, compared to the compulsory 9% that private employers are required to pay for their workers.

We will not go into the issue of whether or not – just like the USA and many others – there really is money set aside for public servants’ retirement sufficient for the governments’ obligations (called “unfunded liabilities”). Indeed, there are very serious questions to be asked about this – and Barnaby Joyce has alluded to them – but we will leave that to another day.

In Western nations, the pattern of theft – the governments’ Modus Operandi (MO) – is disturbingly similar.

1. The country first sees its housing bubble burst – see USA, UK, Ireland.

2. Banks go bust, and are bailed out by the government (ie, by borrowing against the promise of taxpayers’ future earnings)

3. The cost of bank bailouts sends the government into deep, and unmanageable levels of sovereign debt (ie, private banksters debts, are socialised into higher public debt instead). The sovereign debt is made all the more unmanageable because the economy is badly damaged by the fallout from the housing bust. And, by hugely expensive, wasteful “green” public policy programs, in the lead up to the bust.

4. A “leftist” government is taken over by a “rightist” government.  Or, as with the USA, the “rightists'” regain the balance of power.

5. Prompted by the “fiscal conservative” rightists, new “reforms” are introduced. To “fix the budget”. Reforms that include raising the retirement age … and stealing citizens’ superannuation savings.

First, they come for the public servants’ super.

And then, they come for yours.

Now, what do we see happening right here in Australia?

Barnaby Joyce has already given at least two public warnings that the government is going to take public servants’ super in the Future Fund to pay down debt – pretty much exactly what the USA and UK are doing right now.

Already, the Green-Labor government has quietly introduced “incentives” in the latest budget, to “encourage” super funds to put your money into government “infrastructure projects”. You know, brilliant infrastructure schemes like overpriced school halls, and a technologically-redundant-before-its-finished, no cost/benefit analysis Nation Bankrupting Network (NBN).

And the Liberal Party – who if polls are any guide, will in all likelihood take power at the next election – have recently and quietly announced their own “reform” policy. One that even less subtlely aims to do the same thing – get the government’s hands on your super:

Further relief for small business

The Coalition will relieve the red tape burden from Australia’s small businesses by giving them the option to remit the compulsory superannuation payments made on behalf of workers, directly to the ATO.

Small business will be given the option to remit superannuation payments to the ATO at the same time as they remit their PAYG payments.

This will require only one payment to one agency – rather than multiple cheques to multiple superannuation funds. The ATO will be responsible for sending the money to superannuation funds directly.

In recent weeks we have seen countless evidences that:

1. Australia’s banking system is stuffed and ripe for collapse,

2. Our housing bubble is bursting, and

3. The economy is “stuffed”, with Eastern Australia in “deep recession” and the national economy “almost certainly” in recession in the second half of 2011.

The writing is on the wall.

I’ll now simply repeat the conclusion of my magnum opus article on the fate for our super:

If like me you are under 50 years old – indeed, if you are under 60 years old – then I’m willing to bet you all of my super that you will never see all of yours.

And unlike our bank(st)ers and government … I never bet.

First they came for the Yankees’ super.

Then, they came for the Pommies’ super.

And then last of all … they came for mine.

* For more information on this subject, please read –

No Super For You!!

Fresh Evidence Our Banks In “Race To The Bottom” Means You Can Kiss Your Super Goodbye

Why They Are Planning To Steal Our Super, Explained In 4 Simple Charts

Our Banks Racing Towards A “Bigger Armageddon”

US Treasury “Borrowing” Of Federal Pensions Brings Theft Of Private Pensions One Step Closer

25 Jun

Regular readers will know that this blog has been closely following the wave of government confiscations of private citizens’ retirement savings that is quietly rolling around the world.

It is a wave that is already silently lapping at our shores, with both major parties having released policies that sneakily move towards taking our super, to pay down government debt.

If you’ve missed any of these posts, you can catch up with the following –

“No Super For You!!”

“Why They Are Planning To Steal Our Super, Explained In 4 Simple Charts”

(There are multiple links to previous posts at the end of the 2nd link above)

One of the interesting features of this wave of super thefts, is the different methods used in different countries.  In some, private retirement savings have simply been “nationalised”.  In others, the government has started with a “softly softly” approach, by “borrowing” the retirement savings of government employees first.

In the following article from The Examiner (USA), we find the opinion expressed that the US Treasury’s recent “borrowing” of federal workers pension funds is simply a first move. And that confiscations of non-federal workers pension funds – called “401K plans” in the USA – is now one step closer (emphasis added):

This step in pulling from government held retirement funds is once again bringing up the potential for the Obama administration to seek acquisition of the public’s 401K’s to help pay for spending and debt.

On May 16th, the Obama administration agreed to tap into federal retirement programs to help fund programs and agencies that would otherwise be funded through borrowing before the debt ceiling was reached.

The use of retirement and pension funds as the first resort of the government to pay for programs, debt obligations, and even ongoing military operations is a large warning signal to the American people regarding a huge and untapped resource that up until now, the government has refrained from exploiting.  The amount of money stored in corporate retirement funds, federal retirements, and market based 401K’s amount to several trillion dollars that unlike Social Security, which it is collateralized by IOU’s, this is real money that the government has already sought to acquire in budgetary discussions.

The plan, as sketched in the 43-page document, calls for the creation of something called  “Guaranteed Retirement Accounts” (GRAs). Biden slyly shifts the onus for the idea through weasel words typical of the federal government: “Some have suggested the creation of Guaranteed Retirement Accounts (GRAs), which would give workers a simple way to invest a portion of their retirement savings in an account that was free of inflation and market risk, and in some versions under discussion, would guarantee a specified real return above the rate of inflation.”

These accounts would be “free of inflation and market risk” because they would be under the direct and absolute control of the federal bureaucracy. There would be no risk because the funds would no longer be moored to the free market and subject to the fluctuations thereof. Rather, the retirement funds of every hard-working American dependent on a 401(k) for their retirement security would be nationalized and made subject to the whims and will of the executive branch. – New American (May 2010)

The track record of the Federal government towards retirement accounts is not very good.  Over $3 Trillion dollars has been removed from the Social Security trust, and spent by the government under general budget spending.  The money that was taken out of Americans paychecks each month to be used for retirement was instead replaced by Treasuries that are now on the brink of default.  With the Treasury Departments use of Federal pension funds now to pay for budgetary obligations because the government can no longer borrow money, the next viable step is the acquisition of private retirements and 401K’s.

And as noted from the 43-page document already created last year, this is not a plan regarded as a contingency, but instead as one that is intended to be implemented in the future.

The US government has failed in its opportunities over the past decade to cut spending, and slow down on its debt borrowing.  Now that the rubicon has been crossed regarding the debt ceiling, and the Treasury Department accessing federal retirement funds to pay for general obligations, how soon before the government has no choice but to access the trillions of dollars available in the market, and give the American people another ‘promise’ that they can take care of your money and retirement future.

In Australia, our two major parties have also begun planning for the theft of our super, but in slightly – and slyly – different ways.

The Labor Party has first announced (in the recent May budget) new legislation intended to “encourage” super fund managers to “invest” your super in government “infrastructure programs”.

The Liberal Party has taken a different tack. On June 3, they quietly announced a new policy – sneakily dressed up as a “helpful” business “reform” – that aims to have employers send their workers’ Compulsory Superannuation payments directly to the ATO, rather than directly to your super fund.  It would then be up to the ATO to pass on your super to your fund manager (!?!).

If you are unwilling to see the danger that lurks so thinly-veiled behind these “positive” and “helpful” policies, then consider this.

Senator Barnaby Joyce has directly warned at least twice this year, that the government plans to steal our super to pay down debt. And exactly like America, he has indicated that they intend to start with public servants’ superannuation set aside in the Future Fund:

In response to a question I put in Senate estimates, Treasury revealed that $64 billion of the difference between our gross debt and our net debt is made up of the cash and non-equity investments of the Future Fund. The Future Fund is there to cover the otherwise unfunded costs of public servants’ superannuation.

That is a little fact that the people of Canberra might be interested in. When Wayne mentions net debt translate that to, I am going to pay his debt off with my retirement savings.

Straight after the May budget, Barnaby spelled out his warning even more clearly:

On Tuesday night’s budget, Labor sneaked in an Amendment of the Commonwealth Inscribed Stock Act 1911. Here is the most telling statement for where our nation is going under this Green-Labor-Independent Alliance. Under Part 5 Section 18 subsection 1 “omitting ‘$75’ and substituting ‘250’ ”.

Now that is in billions ladies and gentlemen and it is real money that really has to be paid back. If we have all this money stashed away under the lower net debt figure that is always quoted by Labor, then why not use some of this mystery money to pay off what we owe to the Chinese and others who we are hocked up to the eyeballs to.

The reason why we can’t is at least $70 billion that makes up ‘net’ debt is tied up in the Future Fund and student loans.

Of course, the public servants will not be happy when we use their retirement savings, put aside in the Future Fund, to pay off some of Labor’s massive debt.

Stealing public servants’ superannuation in the Future Fund will only be the beginning. We can be sure of this, simply by looking at what is happening abroad. And by carefully examining the implications of the policies – quietly released, without fanfare – of our own politicians.

Barnaby is right.

Future Fund Boss’ Debt Warning: Barnaby Is Right

21 Jun

From The Australian:

Future Fund chairman David Murray has urged governments to heed the lessons of the European and US sovereign debt crises as growing state and federal borrowing pushes their financial liabilities past half a trillion dollars in the new financial year.

Analysis by The Australian finds the states are forecasting their net-debt levels will surge from almost $102 billion this year to $135bn next year to help fund upgrades to rundown electricity, water and other infrastructure.

This will help push their net financial liabilities – a figure that includes liabilities for pension benefit schemes – to a record $285bn next year.

On top of this, the federal government’s net debt levels will rise from $82bn this year to $107bn next year – largely to fund the budget deficit – helping to drive their liabilities from $200bn to $227bn.

The surge in debt prompted Mr Murray to warn that this could force the private sector to compete for funds as the resources sector booms.

All of which is exactly what Barnaby Joyce warned of 18 months ago, and repeatedly since.

It’s also worth noting that this is the boss – though not for much longer – of the Future Fund.

Barnaby Joyce has warned at least twice this year, that the government plans to steal our super to pay down debt – starting with public servants’ superannuation in the Future Fund:

In response to a question I put in Senate estimates, Treasury revealed that $64 billion of the difference between our gross debt and our net debt is made up of the cash and non-equity investments of the Future Fund. The Future Fund is there to cover the otherwise unfunded costs of public servants’ superannuation.

That is a little fact that the people of Canberra might be interested in. When Wayne mentions net debt translate that to, I am going to pay his debt off with my retirement savings.

And more recently, straight after the May budget, Barnaby spelled out his warning even more clearly:

On Tuesday night’s budget, Labor sneaked in an Amendment of the Commonwealth Inscribed Stock Act 1911. Here is the most telling statement for where our nation is going under this Green-Labor-Independent Alliance. Under Part 5 Section 18 subsection 1 “omitting ‘$75’ and substituting ‘250’ ”.

Now that is in billions ladies and gentlemen and it is real money that really has to be paid back. If we have all this money stashed away under the lower net debt figure that is always quoted by Labor, then why not use some of this mystery money to pay off what we owe to the Chinese and others who we are hocked up to the eyeballs to.

The reason why we can’t is at least $70 billion that makes up ‘net’ debt is tied up in the Future Fund and student loans.

Of course, the public servants will not be happy when we use their retirement savings, put aside in the Future Fund, to pay off some of Labor’s massive debt.

Pinching public servants’ superannuation will only be the beginning. We know this simply by looking at what is happening abroad.

Learn all about the wave of government confiscations of private superannuation savings that is quietly sweeping the Western world, and how both major parties in Australia already have policies to do the same, in “No Super For You!!”.

Barnaby is right.

Barnaby’s E-Newsletter – June 2011

21 Jun

Download it here (right click and “save as” … pdf).

A couple of highlights:

At a time when Australian families are facing severe cost of living pressures, Labor’s Budget has cut support for families and hit them with new and higher taxes.

The Budget strips $2 billion from families by freezing for three years the indexation of key family tax payments and income thresholds.

Headline budget results

• The budget deficit this financial year is $7.9 billion worse ($49.4 billion)

• The budget deficit next financial year is $10.3 billion worse ($22.6 billion)

• The result is net debt will grow to over $100 billion next year and stay over $100 billion for the rest of the forward estimates.

• This will be record levels of debt. Over $10 billion more than the debt Keating left the Howard Government in 1996.

It’s YOUR debt

In the three and a half years, the Commonwealth Government has increased debt by $150 billion. This is not the Government’s debt. It is your debt. One day current and future Australians will have the burden of
paying this borrowed money back.

There are 12.3 million taxpayers in Australia. Every taxpayer owes an extra $12,314 now that Labor has put $150 billion on the nation’s credit card.

The cost of living just keeps going up

When governments borrow they compete for money with private individuals and companies who want to borrow for a new home or to invest in a business. This pushes up interest rates, the price of money.

Over the last 30 years, interest rates have averaged 11.6% under Labor governments and 8% under Coalition governments. This difference would add an extra $770 to the monthly mortgage payments on the average
Australian home loan.

Already since Labor came to power, electricity prices have gone up 51 per cent, water prices 46 per cent and gas prices 30 per cent.

And living costs are set to go up even further. A carbon tax will add another $300 to average annual electricity costs, petrol prices will go up by another 6.5 cents a litre and the cost of building a new home will go up by over $6,000.

All of these costs will be on top of the need for the average taxpayer to pay their $12,314 share of Labor’s debt. How many more years of this Green‐Labor‐Independent government can you afford?


Carbon is present in all forms of life and most fuels. When fuels are consumed to produce energy, the carbon is emitted as carbon dioxide. A carbon tax is a tax that is levied on carbon dioxide emissions.

So any practice that creates emissions—whether it’s turning on a light, driving a car or manufacturing food and other goods—will incur a carbon tax.

Under the government’s plan, the carbon tax will be imposed directly on companies and indirectly on everybody else as those companies increase their prices to recover the tax. For families and small businesses, that will mean either spending more—or consuming less.

What prices will rise?

Prices for most goods and services will go up. A key target of the carbon tax will be electricity generators. Because electricity is used in making and delivering virtually all goods and services, the cost of the carbon tax to the electricity companies will be passed on to the consumers and small business.

When the carbon tax is applied to petrol, those prices will go up for the same reason.

At the family level, the biggest direct impact will be more expensive power, petrol and grocery bills, but many more consumer items will increase in price as well because of increased manufacturing and transport costs.

How much will it cost?

That depends on the level of the tax and how widely it is applied. It will likely start at between $20 and $40 per tonne of carbon emissions and rise from there.

If it’s applied to petrol, prices will increase by 2.5 cents per litre for every $10 of carbon tax. So a carbon tax starting at $25 per tonne will result in an initial increase in petrol prices by 6.5 cents per litre.

At that carbon price, electricity bills would rise by about $300 a year for most families. For instance, a $40 per tonne carbon tax would increase petrol prices by about 10 cents per litre.

Regardless, the Gillard government’s chief climate adviser Professor Ross Garnaut has admitted that “Australian households will ultimately bear the full cost of a carbon price.”

The carbon tax will have a cascading effect on the economy because it will hit every stage of the supply chain, ever‐increasing the cost to you along the way.

Here’s Barnaby speaking against the carbon dioxide tax at the Port Macquarie No Carbon Tax rally:

GFC2 Will Be Brought To You By “A Stupid F***in’ Government And Above All, Wankin’ F***in’ Bankers”

20 Jun

WARNING: We all know that any warning to the effect that the following contains language that may offend some viewers, or is unsuitable for children, only guarantees that children and/or those who might be offended will definitely view the potentially offensive material.  So, this warning is a warning that the following does NOT contain language unsuitable for children or that may be offensive to some viewers.  And if you believe that, then there’s really no help for you, now is there.

Barnaby Was Right – U.S. Congressional Budget Office, China Central Bank Confirm

20 Jun

From Bloomberg:

A U.S. government default on its debts would be a “dangerous gamble” that could easily cost taxpayers billions of dollars, the head of the Congressional Budget Office said today.

Doug Elmendorf told reporters that if the investors who buy federal debt begin demanding even modestly higher interest rates, to compensate for additional risk, it could quickly add more than $100 billion to the interest payments the government must make on its debt.

“It is a dangerous gamble because any government that has borrowed as much as ours has borrowed, and will need to borrow as ours will need to borrow, cannot take the views of its creditors lightly,” Elmendorf said today…

Indeed. One certainly can not take one’s creditors views lightly.

And America’s #1 creditor has said the USA is “playing with fire” in even considering a “technical” default on its debts (from Reuters):

Republican lawmakers are “playing with fire” by contemplating even a brief debt default as a means to force deeper government spending cuts, an adviser to China’s central bank said on Wednesday.

The idea of a technical default — essentially delaying interest payments for a few days — has gained backing from a growing number of mainstream Republicans who see it as a price worth paying if it forces the White House to slash spending, Reuters reported on Tuesday.

But any form of default could destabilize the global economy and sour already tense relations with big U.S. creditors such as China, government officials and investors warn.

Li Daokui, an adviser to the People’s Bank of China, said a default could undermine the U.S. dollar, and Beijing needed to dissuade Washington from pursuing this course of action.

I think there is a risk that the U.S. debt default may happen,” Li told reporters on the sidelines of a forum in Beijing. “The result will be very serious and I really hope that they would stop playing with fire.”

Of course, the reality is that the USA is already defaulting on its debts.  By printing hundreds of billions of new dollars, they are devaluing the USD … meaning that holders of US Treasury bonds will be repaid in money that cannot buy as much as it used to.  2012 US Presidential candidate, and Chairman of the House Financial Services Subcommittee on Domestic Monetary Policy, Congressman Ron Paul has confirmed that this is exactly what is happening:

America is defaulting on its debts.  And the Chinese are not happy.

As a gentle reminder, here is what Senator Barnaby Joyce had to say about the US and its debts, almost 18 months ago (from the Brisbane Times, October 23, 2009):

The Nationals Senate leader Barnaby Joyce is openly canvassing an economic upheaval that would dwarf the current global financial crisis, triggered by the US defaulting on its sovereign debt within the next few years.

In unusually pessimistic comments for a senior political figure, Senator Joyce said the US Government was running such large deficits and building up so much debt that it was in a similar position to Iceland or Germany before World War II.

Senator Joyce insisted yesterday that the dangers to the global economy from the run-up in US private and public sector debt were real and should be debated.

”It is the elephant in the room,” Senator Joyce said. ”This is a huge risk that Australia faces. What is the game plan, what happens if it comes unstuck?

And from the Sydney Morning Herald, December 11, 2009:

The Opposition finance spokesman, Barnaby Joyce, believes the United States government could default on its debt, triggering an ”economic Armageddon” which will make the recent global financial crisis pale into insignificance.

Senator Joyce told the Herald yesterday he did not mean to alarm the public but there needed to be a debate about Australia’s ”contingency plan” for a sovereign debt default by the US or even by a local state government.

”A default by the US means complete economic collapse around the world and the question we have got to ask ourselves is where are we in that,” Senator Joyce said.

His warning came as the Rudd Government ramped up its attack on Senator Joyce as an economic extremist…

Senator Joyce said the chances of a US debt default were distant but real and politicians were not doing the electorate a favour by refusing to acknowledge the risk.

Barnaby was right.

100% right.

Eastern Australia “In Deep Recession”, NSW & VIC Manufacturing “Stuffed”

14 Jun

What everyone with boots planted firmly on the ground already knows.

Which is exactly why our policians and mainstream media (seemingly) do not.

From Business Spectator:

Eastern Australia is in “deep recession” and the NSW and Victorian manufacturing industries are “stuffed”, the head of Linfox Logistics says.

Fresh from making a $68 million property acquisition in the mining boom state of Western Australia, Linfox Logistics chief executive Michael Byrne has dismissed suggestions the nation is dealing with a two-speed economy.

“It’s a parallel universe that bears no relation to anything else on this planet,” he told an American Chamber of Commerce event in Sydney on Friday.

If you look at the world, eastern Australia is in deep recession, in my view, as is New Zealand.”

WA was driving the national economy and Asia was a “different place again,” Mr Byrne said.

If we didn’t have mining, Australia would be like Portugal, Spain, maybe Greece and Ireland,” he said, referring to European debt problems.

Mr Byrne is right.

Referring to our near-total dependence on selling “red and black rocks”, Barnaby has warned the spendthrift Green-Labor Alliance … “God help you when the prices go down”.

God help us all.

Barnaby is right.

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