Tag Archives: debt

Looking For A Root

28 May

one-root-to-rule-them-all-fa41dc-e1341482332407

“In Keynes’s view capitalism’s driving force is a vice which he called ‘love of money’ … in the General Theory ‘the propensity to hoard’ or ‘liquidity preference’ plays a vital part in the mechanics of an economy’s rundown, once something has happened to make investment less attractive. And this links up with Keynes’s sense that, at some level too deep to be captured by mathematics, ‘love of money’ as an end, not a means, is at the root of the world’s economic problem.”

Robert Skidelsky; “John Maynard Keynes: Vol. 2, The Economist As Saviour 1920-1937″ (1994)

“There are a thousand hacking at the branches of evil to one striking at the root.”

– Henry David Thoreau

Would you be inclined to agree, that the best way to solve a problem, is to begin by looking for a root?

Economy

Definition of economy

1. the state of a country or region in terms of the production and consumption of goods and services and the supply of money

Oxford Dictionary

Who is responsible for the “supply of money”?

Changes in the quantity of money may originate with actions of the Federal Reserve System (the central bank), depository institutions (principally commercial banks), or the public. The major control, however, rests with the central bank.

– Federal Reserve Bank of Chicago, Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion

How is “money” supplied?

The actual process of money creation takes place primarily in banks. As noted earlier, checkable liabilities of banks are money. These liabilities are customers’ accounts. They increase when customers deposit currency and checks and when the proceeds of loans made by the banks are credited to borrowers’ accounts.

– Federal Reserve Bank of Chicago, Modern Money Mechanics: A Workbook on Bank Reserves and Deposit Expansion

Why is money supplied (by banks)?

…banks basically make money…

Investopedia

How do banks “make money” (ie, make profits)?

by lending money at rates higher than the cost of the money they lend. More specifically, banks collect interest on loans and interest payments from the debt securities they own, and pay interest on deposits, CDs, and short-term borrowings. The difference is known as the “spread,” or the net interest income…

Investopedia

Er… let’s hear that again … HOW do banks “make money” (profits)?

They make money just like any other business. The difference is that their product is money. In other words banks sell money, mostly in the form of loans. Their profit is the difference between what they pay in interest on your deposits and what you pay them in interest for the loan they made you. Banks also charge fees for services.

National Australia Bank, How Banks Work

What is “interest”?

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.

Investopedia

Is interest on money natural?

The most hated sort (of money-making), and with the greatest reason, is usury, which makes a gain out of money itself and not from the natural use of it. For money was intended merely for exchange, not for increase at interest. And this term interest (“tokos”, i.e., “children”), which implies the birth of money from money, is applied to the breeding of money, because the offspring resembles the parent. Wherefore of all modes of money-making, this is the most unnatural.

– Aristotle, Politics, Book One, Part X (c. 350 BC)

DIGGING DOWN

  • The global economy has a problem.
  • The supply of money is a defining component in the functioning of the economy.
  • Banks supply the money in the economy.
  • Banks supply the money by creating it ex nihilo (“out of nothing”).
  • Banks create new money when they make loans.
  • Banks make loans in order to make profits.
  • Banks make profits by charging interest on money they create.
  • Banks make profits by charging more in interest, than they pay in interest.
  • Interest is a charge for the “privilege” of borrowing money.
  • Making money out of money, by charging “interest” / usury on money … is not natural.

Would you be inclined to agree, that it is not a “privilege” but a burden, to have to borrow money at interest?

Would you be inclined to agree, that it is banks who have an incredibly privileged position and role in the functioning of the economy?

Would you be inclined to agree, that it is immoral and unjust to charge “interest” for the “privilege” of “borrowing” something that was created out of nothing — mere electronic digits, typed into a computer?

Would you be inclined to agree, that because banks are legally permitted to make profits from the production of money“their product is money” — that bankers are likely to have a vested interest in selling as much of their product — that is, creating as much debt — as they can get away with?

Is it possible that usury — the making of gains (profit) on the lending of money; the unnatural “birth of money from money” — is the root of the problem in the global economy?

For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.

– St. Paul, 1 Timothy 6:10

…no one shall deposit money with another whom he does not trust as a friend, nor shall he lend money upon interest; and the borrower should be under no obligation to repay either capital or interest.

– Plato, Laws, Book V (c. 348 BC)

And if you lend to those from whom you hope to receive back, what credit is that to you? For even sinners lend to sinners to receive as much back. But love your enemies, do good, and lend, hoping for nothing in return; and your reward will be great, and you will be sons of the Most High.

– Jesus Christ, Luke 6:34-35

See also:

Imagine A World With No Banks

A Tale Of Usury, Explosions, And A Used Car Salesman

Babylon = Usury: We Want Interest-Free Money at realcurrencies.com

The Chart That Proves RBA House Price Policy Is Doomed

14 May

The RBA’s surprise decision to cut the official interest rate earlier this month has re-energised the housing-debt-spruiker community, who have begun forecasting house price rises of 8 – 12% per annum on the back of more interest rate cuts to come (they presume):

Stephen Koukoulas - economist and ALP apologist

Stephen Koukoulas – economist and ALP apologist

Close examination of just one chart — one drawn directly from RBA statistics — is enough to debunk those who still cling to the belief that the RBA’s cutting interest rates must inevitably result in rising house prices:

Click to enlarge

Click to enlarge

This chart shows the all-important annual growth rate in credit for “Owner-occupied” and “Investor” housing, for the period July 1992 to March 2013. As we saw in January’s very popular “The Easy Way To Know Where House Prices Will Go”, anyone can visit the RBA’s website and use their monthly updated Chart Pack to see the true reason why house prices rose so strongly for over twenty years. It was all about the annual growth rate in “credit” for Housing, which is presently five (5) times lower than the peak seen in February 2004.

In that January article, we used the RBA’s own data to discover that the twenty year boom in house prices was largely due to a stunning annual growth rate in so-called “Investor” housing credit…

Clearly then, house prices in Australia were not driven up over the past 15-20 years by “demand” from “population growth”, from people who needed somewhere to live (Owner-occupiers). On the contrary, by far the strongest rates of growth have – during the bubble phase – been driven by so-called “investors”.

… and that is where a closer examination of that one chart above demonstrates that the RBA’s house price policy — trying to pump up the housing bubble again, now that their recently preferred “make room for the mining boom” policy has proven to be seriously short-sighted — is doomed to failure.

Why?

Because using interest rates to influence demand for housing “credit” — especially with “Investors” — has lost its effectiveness. And we can see this clearly, simply by zooming in on the above chart to look at the period November 2007 through to March 2013…

Click to enlarge

Click to enlarge

… and then adding in the actual interest rate rises, and cuts, and rises, and cuts during this period immediately before and since the GFC:

HousingFinanceGrowth_07-13_InterestRates

Take careful note of the change in the growth rate of housing “credit” for “Investors”, as compared to “Owner-occupiers”, as interest rates moved.

As you can see, the three (3) interest rate increases in late 2007 through early 2008 tipped both “Investor” and “Owner-occupied” housing credit growth over the cliff. By October 2008, when the RBA began taking a chainsaw to interest rates, housing credit growth was practically in free fall, plummeting from 12% per annum (Total) to 6.3% per annum, before the total 4.25% in “emergency” interest rate cuts halted the decline.

Interestingly, you can see that both the rate of fall and the total decline in housing credit growth was greater for Investors than for Owner-occupiers. As we saw in our January article, this is also what happened in the brief early 2000’s recession:

The rate of growth in “credit” for housing “Investors” was, until early 2004, far in excess of that for “Owner-occupiers”, with the notable exception of the early 2000′s global recession that only briefly affected Australia. At that time, “credit” growth for “Investor” housing plummeted to the same level as the “Owner-occupier” rate, before recovering spectacularly to reach a whopping 30.7% annual growth in Feb 2004.

What prompted the recovery? John Howard’s introduction of the First Home Owners Grant in 2000, and in particular, his doubling it in early 2001. With a rush of newly-enslaved borrowers bidding up house prices, “investors” too rushed back into the welcoming arms of the bankers, as ever only too eager to lend “credit” at interest to willing borrowers against the “security” of “their” house.

We see a similar, though far smaller effect largely repeated in the post-GFC period. The Rudd Government further doubled the First Home Owners Grant. A modest influx of new “First Home Owner” buyers rushing out with their government-debt-financed mortgage deposit to bid for a house, drew the “investors” back into the market as well. By July 2010 the “Investor” housing credit annual growth rate once again overtook that of “Owner-occupied” housing.

But not for long.

As you can see from the chart, the annual growth rate in credit for “Investor” housing had already peaked in August 2010, and had begun to fall, 2-3 months before the RBA’s final 0.25% interest rate increase in November 2010.

“Owner-occupied” housing credit growth, by contrast, had peaked back in October 2009 — the very same month in which the RBA first began to raise interest rates again, from their GFC “emergency low”. The First Home Owners Grant helped keep “Owner-occupied” housing credit growth relatively steady through to March 2010, when it resumed its long, steady post-2004 and pre-GFC decline. It has only now begun to flatline, in the first quarter of 2013.

The important observation to make about this chart, is that since the GFC “peak fear” in late 2008 and early 2009, things have changed. The world has gone past a point of no return, and the old “rules” of monetary and economic policy do not necessarily apply anymore.

While RBA interest rate increases still have the effect of reducing annual growth rates in housing credit, cutting interest rates no longer appears to have much effect in boosting housing credit growth back up again. Since November 2011, the RBA has cut interest rates seven (7) times — the most recent (May) not shown on this chart — to what are now lower than “emergency lows”, without causing an overall increase in the housing credit annual growth rate. Indeed, the RBA’s own Housing Credit growth chart in its Chart Pack confirms this:

9br-cgbys

The RBA now has the official interest rate at 2.75%. They have cut a full 1.5% since November 2011, without managing to “stimulate” a “recovery” in the growth rate of  house prices housing debt.

There are many more knowledgeable observers than I who have argued that 2% is as low as the Australian official interest rate can go; that 2% is effectively ZIRP (Zero Interest Rate Policy) for us.  The reason given sounds plausible enough; the Australian economy is essentially financed by borrowing “capital” from abroad, so with the rest of the West operating on ZIRP, we need a +2% interest rate difference in order to have any hope of continuing to attract foreign “capital”.

If the RBA is indeed “lower bound” by the 2% level, then the above chart makes one thing pretty clear.

At the present 2.75% cash rate, even another 0.75% in possible interest rate cuts is unlikely to “stimulate” much if any additional growth in Housing credit.

And with annual housing credit growth now running five (5) times lower than the February 2004 peak, and barely two-thirds the level when interest rates hit the 3% “emergency low” in April 2009, the RBA’s policy of trying to re-stimulate the housing bubble to support the economy after the mining boom … is doomed.

Simply, the RBA is pushing on a string:

This is the crux of the “pushing on a string” metaphor – that money cannot be pushed from the central bank to borrowers if they do not wish to borrow.

Don’t Buy Now.

Barnaby: “This Is How Stupid They Are”

30 Apr

Dear reader,

Please enjoy a few minutes of politico-economic sanity:

2GB Chris Smith Afternoon Show Transcript
Tuesday 23 April, 2013

Topics: Chris Smith, Senator Barnaby Joyce
Subjects: Budget black hole

Chris Smith: Senator Barnaby Joyce, good to have you on the program.

Barnaby Joyce: My pleasure, how are you?

Chris Smith: I’m well. Where are you today?

Barnaby Joyce: Well I’m actually making my way to Canberra, but I’m stopping off in Tamworth on the way. The bloke I used to stay with, he and his wife, unfortunately he passed away from cancer so I’m going to the service for that. I was going to go to Rockhampton but changed direction.

Chris Smith: So, you’re heading to, hopefully, a new place. Have you done any polling of late to work out how close you’re going to get to Tony Windsor?

Barnaby Joyce: It’s going to be tough. Mr Windsor will desperately say he wasn’t there, he’s not responsible for this government and he didn’t put them there. I will keep on reminding people that he did. The only reason that we’re $270 billion in debt is because he put them there. The only reason that we’re heading towards another $12 billion deficit is because he put them there. The only reason we have a carbon tax is because he put them there. He’ll be saying it wasn’t me, it was somebody else, I was away that day.

Chris Smith: The Prime Minister’s big budget black hole, estimates now putting the budget deficit anywhere between ten and $20 billion which is not a bad effort considering we were told that less than a year ago that we’d have a surplus of $1.3 billion. How is it possible that $21 billion goes missing Barnaby?

Barnaby Joyce: Bad management, simple as that. What happens is, they’re spending 12 bucks and only bringing in 10 and sure enough you start running out of dough. All of your listeners would understand that the deficit is just like the loss of the government for the year. The real problem of course is the debt that sits behind it. The debt is getting bigger and bigger. They had a good week last week, they only borrowed another half a billion dollars last week. The week before they borrowed another two billion. If you put the price of your house out to $300,000 a pop that’s 6,000 houses that they borrowed for the week a fortnight ago. They borrowed for another thousand or so last week.

Chris Smith: They keep talking about their debt to GDP ratio. “It falls in line with the rest of the world”. The rest of the world is a basket case right now, how dare they compare us with the rest of the world right now.

Barnaby Joyce: Yes Chris, that’s like walking around the graveyard saying: “This person’s more dead than that one”. It’s irrelevant. Once you’re out the backdoor, it’s irrelevant. It becomes an argument in sophistry, an argument in rather large numbers you can’t repay. This is a garbage argument: “Oh, we’re not as bad as Greece. We’re not as bad as Portugal”. I hope not. If we keep going the way we’re going, Ms Gillard, Mr Swan, Mr Windsor and Christine Milne if they keep running the show, don’t worry we’ll get there.

Chris Smith: I had to laugh when I was hearing this long speech of 33 minute duration, off and on through my commercial breaks here yesterday. I was hearing this reference to company tax revenue being down and company tax revenue usually gives us, company tax revenue has hit us and company tax… I thought to myself, no wonder company tax revenue is down, because if they open their damn eyes they would have seen companies close left, right and centre.

Barnaby Joyce: People are doing it tough. I was talking to a manufacturer the other day. He travelled 500km to have dinner with us and amongst the things he wanted to show me was his carbon tax bill: $12.1 million for the year. He said: “What that means to me is that I should go to another country. Why do you guys do this? What is wrong with you people? If I moved to America this is my cost. If I move to Asia here’s my cost but I choose to stay here. Guess who gave me these costs – the government!”

Chris Smith: They change the goalposts so often. The other goalposts they’re about to change if you believe some of the scribes today, is this Medicare levy. We’re going to get to the stage where we’re upping the Medicare levy for the National Disability Insurance Scheme. Shouldn’t they be looking at the bank, that is, our bank, the National Bank and say: “Hang on a second we’re in such crisis at the moment, maybe we’ll hold off on that for a while”, like most people do in business, like most people do with their house budgets.

Barnaby Joyce: The first thing they should be getting, as a little old bush accountant, they should be getting their day to day finances under control. Then other good things that you want to happen like the National Disability Insurance Scheme can be paid for. This idea that: “Oh we don’t know where the money is going to come from so what we’re going to do is borrow more money and if we can’t borrow it, we’re just going to tax you”. That’s just a sign that they’re financially out of control. The people with disability are a soft spot for me and I do want to do something to help them. My gosh you get frustrated when you find the money that has been put up against the wall and all these nutty ideas and when a good idea comes up they have no money for it. We’re beyond not having any money for it. We’re getting to the point where we can’t borrow. We won’t be able to extend our credit limit and we won’t be able to borrow more money.

Chris Smith: You said as soon as they get money they spent more, remember they didn’t get a zap from the mining tax and they spent that on handouts remember before they even got anything.

Barnaby Joyce: This is how stupid they are. They basically said” “We’ve got this ticket in the lottery and now we’re going to buy the house and oh gosh, the lottery didn’t come in. That’s a bad plan, that’s bad luck. Let’s put out a media release blaming somebody about that”.

Chris Smith: Yesterday was a shocker and as I said at the beginning of the program, someone who stands there for as long as the Prime Minister did to come up with a series of excuses as to why everything is stuffed, is a person who is more culpable every minute she speaks.

Barnaby Joyce: I don’t think anyone is listening. I had to deal with the same thing in this area, I had Mr Windsor say that he wanted to bring about a referendum on gay marriage, however he wasn’t going to bring it up with the Prime Minister and if it did come up he wasn’t going to vote for it. I was trying to translate that for people and it’s called confusion – mass confusion.

Chris Smith: The race to become Prime Minister doesn’t just involve Julia Gillard and Tony Abbott, Clive Palmer’s thrown his hat in the ring. Is the Coalition under threat of having their votes diluted because of Palmer?

Barnaby Joyce: Clive’s a mate but a lot of things he’s doing of late things are getting out there. Clive’s a good bloke. I don’t know why we’ve got this distraction here. It doesn’t quite work like that. As you know to set up a political party you’ve got to have members, branches, policies, people willing to give up their jobs and go campaigning for you. It costs a lot of money and I know he has a lot of money but it takes a lot of money to run a campaign.

Chris Smith: I’ve got to tell you that Clive Palmer may be one of your mates but he doesn’t count Tony Abbot as one of his mates. This is what he told me yesterday when he was in the studio.

Chris Smith: Tony Abbott has never been Prime Minister.

Clive Palmer: Thank God for that.

Chris Smith: His party has never been in the position of running the country, is there a sense of vengeance?

Clive Palmer: Not really. My number one criticism is that all sides of politics wherever they’re from, have lobbyists who are not elected, who advise them. If you go to Parliament House, there’s a box in Parliament House, on the floor of Parliament where the advisers sit. Tony Abbott goes over and gets advice from his advisor and someone else gets advice from theirs. Those advisers have direct links, were or are or will become in the future, employed by lobbyist companies. If you go to those companies, it doesn’t matter if it’s a Liberal or a Labor Government who you want to influence policy, they’ll assist you for a fee. I think that’s subrogating the Australian rights.

Chris Smith: Thank God Tony Abbott has never become Prime Minister he said.

Barnaby Joyce: That’s not helpful. The thing is, if Clive’s got a problem with advisers and lobbyists, that’s great, let’s deal with that problem. What are we going to do? Leave the Labor Party there and the Greens and the independents to run the show for another three years? What do you think is going to be left of this country if they stay there for another three years? You won’t have to worry about me campaigning there for another three years because honestly I would be lying to you if I said I’d know how to fix it.

Chris Smith: This is all about vengeance isn’t it?

Barnaby Joyce: Vengeance is a bad thing. Vengeance eats you up and gets you nowhere. You have to learn to park grief and move on. If you start carrying around a bucketful of bile no one cares about it, it just eats you up.

Chris Smith: What’s your message to Clive?

Barnaby Joyce: Clive help us get the country back on the rails. We don’t need any more instability. I’ve got to give up my job, an easy-paying job to have a crack at a seat where the bloke has 71 per cent of the two-party preferred vote. Why? Because our nation has got to get back on the rails. We all have to put our shoulder in to get the show back on the rails, not try and sink the boat. If we sink the boat we all go down with it.

– ENDS –

The Only Aussie Economist To Predict The GFC Shows Treasury Department How The Economy Really Works

26 Apr

This past Friday, Professor Steve Keen – the only Australian economist to predict the GFC and give cogent reasons why, and thus one of very few economists in the world who is not a danger to the public – gave this superb, by-invitation (!?!) presentation to staff at the Australian Treasury department.

If you want to gain a better understanding of how the economy actually works – as opposed to how all the people who run the country ass-ume it works – I highly recommend making time to watch the whole thing.

One of many highlights for me came in the question time following Steve’s presentation (1:09:20):

“One of my students put a beautiful question to me once saying, ‘Is the finance sector a Profit centre, or a Cost centre to be minimised?’ It is the latter.”

Logical inference: We must minimise the size (and power) of the finance sector.

The excesses of the finance sector are built, primarily, on the Twin Pillars of currency exclusivity (legal tender laws) … and the power of usury.

Breaking those twin pillars is where any realistic long term “solution” must begin. For those interested, this is my idea for how to begin doing that.

Enjoy this brilliant presentation by Steve Keen, and follow him on Twitter @ProfSteveKeen

* Please help educate others, by sharing this video.

A Tale Of Usury, Explosions, And A Used Car Salesman

16 Mar

used-car-salesman

Let me tell you a tale.

On a fine and sunny day this past week, your humble blogger accompanied his brother on a long journey.

To inspect a used car.

Having been reassured over the telephone by the salesman that this car – a premium brand convertible – was as-advertised in “excellent” condition, we embarked on our journey from the country to the Big City with my brother in high spirits. And myself in low expectations.

What we found in the Big City failed to live up to even my low expectations.

And yet, on the positive side, what we found may now serve the purpose of guiding you, dear reader, towards a better understanding of the negative impact of usury on our everyday lives.

Picture, if you will, a very small allotment of used cars, crammed mirror to mirror, in what must surely have been a low rent area on the outskirts of an outlying suburb. The sight of this site would have been enough to prompt your humble blogger to immediately turn around and drive away, had it not been for the innocent exuberance of his beloved brother, the budding buyer.

Prospects only sank the further on spotting the salesman and likely owner of this establishment, seated in the shade outside the hut which passed for an office. Perched on a stool, rotund beer gut resting on the table, his well-coiffed bouffant appropriately dyed rust red, talking earnestly on his mobile phone.

As my brother – a truly beautiful, innocent-in-the-ways-of-the-world fruit always ripe for the plucking – followed my advice to “Always go straight up to salesmen and state your purpose clearly, briefly, and confidently; don’t roam around aimlessly looking at stuff, waiting for them to size you up and plan their attack”, I walked to the front of the yard, where stood … actually, where slumped … the object of our long journey. Proudly positioned front and centre. The pinnacle, the most potent object of automotive desire that this particular dealership had to offer to the wandering eye of passing motorists.

Oh dear.

Not one body panel had escaped the telling sign of dents, scratches, or delaminating clear coat. The plastic rear window boasted an inconsistent, weak-piss shade of yellow discolouration, doubtless attained from many a long hour spent roasting beneath our sunny southern skies. The split seams and frayed stitching on the fabric roof loudly proclaimed their propensity to ingest any H2O that may fall in their immediate vicinity. And things only got worse from there.

Our aforementioned salesman approached, wide-eyed buyer in tow, car keys in hand. Having already questioned and confirmed that my brother “hasn’t had one of these before” – my alertly protective ears had overheard their conversation – he proceeded to inform him of a “unique safety feature”. One that “only these models” boast. Rust red-dyed bouffant then proceeded to demonstrate.

Inserting key in the lock, our beer-gutted new friend placed one pudgy paw upon the door, and gently pressed his not-inconsiderable body mass against it, while turning the key with the other.

Fail.

Try again. With rather less gentle application of body mass this time.

Win! We were in.

You see, extolled the salesman, most folks don’t know about this “safety feature”. Brilliantly, it renders the model less vulnerable to thieves, because most people don’t know how to open the door.

Groan.

I did mention that this was a premium brand automobile, did I not?

At this point, having taken but a single stroll around this four-wheeled (and mismatched-tyred) wonder, your humble blogger had seen and heard quite enough. His thoughts turned decisively to “Oh gawwwd!!! How can I get us the flock out of here, quickly, without hurting anyone’s feelings, or denting anyone’s pride?”

You see, my dear brother is, shall we say, a little socially inept. His still-innocent exuberance and enthusiasm for life and people – commonly manifested in an apparent belief in the good intentions of all strangers – typically overwhelms his negligible capacity to pick up on the many and varied non-verbal signals that are part and parcel of human interactions.

Nonetheless, I first tried the subtle, wordless communication medium of body language to convey my message to him.

Standing well aside from said vehicle, leaning against the flaking-painted post of the security fence protecting this yard-full of former automotive glories, spine stiffened, chest thrust out defiantly, arms folded, teeth clenched and jaw muscles twitching, exasperated expression writ large upon my darkened visage, and casting my gaze disinterestedly to yonder hills. The exasperation, it should be said, not wholly feigned, conscious as I was that such subtle signals would inevitably be overlooked by my excited brother with the pocketful of burning cash.

And why not overlook any negative signalling, indeed. After all, the tan leather interior was plush!

That, by the way, is the best thing that can be said of this particular automobile. The tan leather was plush. And remarkably, at a cursory glance, in reasonably good condition. Though not sufficiently so as to distract the discerning eye from immediately noting other significant interior features. Such as the two large, prominent, non-OEM holes in the driver’s door trim. And the numerous zip ties, struggling in vain to hold the roof lining in the position of the manufacturer’s original intent.

Having failed to catch my brother’s attention, I stepped it up. By stepping out. I spent the next minutes – which of course, seemed like hours – wandering off around the yard, arms still crossed and facial expression now transformed into a disinterested annoyance. But to no avail. Indeed, the fun had only just begun.

I gave up on sending the “disinterested wandering” signal and returned to the scene of the crime. How much of a crime we were only now set to discover. The salesman – given the size of the establishment, a sole trader would be my guess – kindly demonstrated the vehicle brand’s most famous attribute. The engine.

Now, you might reasonably be forgiven for expecting an automobile wearing the badge of this particular marque to respond to a turning of the ignition key in a manner rather like that we expect on flicking a light switch. And then, to convey a smoothness of sound and motion rather like that of a sewing machine.

Er… no.

Not to belabour the point – unlike the battery, which was most certainly belaboured – eventually the engine did burst into life. Most of it, anyway. What was immediately apparent, is that at least one cylinder was no longer responding to the spark of life. As evidenced by the engine note. And by the knocking noises. And by a significant rocking side-to-side of the engine, one that was sufficiently in excess of that which the engine mounts had been designed to absorb, that the entire car adopted a most determined lateral gyration in sympathy. Unlike the door locks, apparently this was not a “unique feature” of this particular model. Unless, that is, our now somewhat less enthusiastic-looking salesman simply forgot to mention it.

I do not know if his decidedly less eager expression can be attributed to his having picked up on my oh so subtle body language, or, to the less than encouraging response from his motor. In any event, he clambered clumsily out of the driver’s seat to come around and peer (un)knowingly into the engine bay.

Through the passenger window, I caught my brother’s eye. And rolled mine. Judging from his downcast glance in return, happily, it appeared that my brother too, had belatedly reached a similar conclusion. If not, then the events of the next few moments certainly did successfully transmit the “This is a sh!tbox, let’s leave NOW!!” signal that my own efforts had heretofore failed to do.

Bravely, my brother – who was now ensconced in the plush tan leather of the driver’s seat – tried gently pressing the accelerator. No doubt in a hopeful attempt to “clear its throat”.

The engine stalled.

He turned the key, and prodded the accelerator. Ever so briefly, the engine again sprang to life. And then…

BANG!!!

A very large volume of smoke belched from beneath the engine covers, and mushroomed out into the afternoon sunshine in a manner reminiscent of an atomic explosion. Seated inside the vehicle, my brother was quickly enveloped by a rush of acrid smoke billowing from every orifice in the dashboard.

Quickly escaping the fumes, he informed the salesman that the engine diagnostic warning light was on. Visibly straining to not appear crestfallen, the salesman went through the motions of checking the dashboard light for himself, and then flailing in vain with his rhetorical whip at a now quite dead horse, by quaveringly insisting: “That’s normal, it will go out soon”. After waiting for the interior smoke to clear, he climbed in and engaged the battery and starter motor in a futile struggle to revive the engine of this, the pride of his fleet.

With the salesman earnestly preoccupied and my brother out of the car, I seized the opportunity. Leaning over with a polite-but-firm “Thanks for your time”, I turned to my brother with a steely expression and a flick of the eyes towards our own car, grabbed him by the shoulder … and bolted.

Before my brother had a chance to reengage a pointless conversation.

And before anything else could happen that might cause that poor man’s dignity to melt away entirely, and join company with the other sad stains in the carpet.

I leave you, gentle reader, to imagine the conversation that ensued during the first minutes of our long journey home.

********

Given a little more time for emotions to settle and calm to return, as the kilometers rolled by beneath our wheels and the wind whispered quietly about our windows, I began to reflect on our experience.

And the longer I reflected, the more my feelings altered.

Instead of anger, or annoyance, or disgust, or contempt, I began to feel a great empathy with, and sadness for, that poor fellow soul.

An (other) Aussie brother.

Trying desperately to flog that complete heap of sh!t iron horse. Which had now suffered an apparently terminal myocardial infarction.

After all, what is he really doing, but that which we are all doing?

Just trying to get by.

Or is that, to “get buy”.

To pay the bills.

To feed the family.

To get ahead. Whatever that means.

Doing whatever we can, within and often beyond our personal limits – physically, mentally, spiritually, and morally – to take care of those whom we are closest to, and naturally love the most.

“Me and mine”.

I do not know anything of that used car salesman’s circumstances. His education and skills, or the limits thereof. The size and scale of the difficulties and stumbling blocks in his life’s journey. The pressure he feels to deliver.  Who am I to judge that poor soul, to feel affronted, or to criticise his means-to-an-end?

I reflected on the fact that there are so many in our world in not dissimilar circumstances.  Who find themselves resorting to not dissimilar actions, in order to “get buy”.  Indeed, this is in truth hardly a tale of woe at all, when one pauses to consider the plight of many 100’s of thousands of our brothers and sisters right here in our own “advanced” economy.  Not to mention the billions of others who are born into even less … “fortunate” … circumstances, and are right now living and dying just across the seas from our “Lucky Country”.

I was reminded of a short story that is recounted in a book that I have only just received and begun to read. It is called Rethinking Money: How New Currencies Turn Scarcity Into Prosperity.”

The story appears in an early chapter titled, “A Fate Worse Than Debt – Interest’s Hidden Consequences”. As it explains a subject that is very close to my heart with a style and a clarity far better than I could ever attain, I would like to share that story with you now (emphasis added):

The small village was bustling with locals proudly displaying their wares, chickens, eggs, cheeses, and bread as they entered into the time-honored ritual of negotiations and trade for what they needed. At harvests, or whenever someone’s barn needed repair after a storm, the village-dwellers simply exercised another age-old tradition of helping one another, knowing that if they themselves had a problem one day, others would come to their aid in turn. No coins ever changed hands.

One market day, a stranger with shiny black shoes and an elegant white hat came by and observed with a knowing smile. When one farmer who wanted a big ham ran around to corral the six chickens needed in exchange, the stranger could not refrain from laughing. “Poor people,” he said, “so primitive.”

Overhearing this, a farmer’s wife challenged him: “Do you think you can do a better job handling chickens?”

The stranger responded: “Chickens, no. But, I do know a way to eliminate the hassles. Bring me one large cowhide and gather the families. There’s a better way.”

As requested, the families gathered, and the stranger took the cowhide, cut perfect leather rounds and put an elaborate stamp on each. He then gave ten rounds to every family, stating that each one represented the value of a chicken. “Now you can trade and bargain with the rounds instead of those unwieldy chickens.”

It seemed to make sense, and everybody was quite impressed.

“One more thing,” the stranger added. “In one year’s time, I’ll return and I want all the families to bring me back an extra round – an eleventh round. That eleventh round is a token of appreciation for the improvements I made possible in your lives.”

“But where will that round come from?” asked another woman.

“You’ll see,” said the stranger with a knowing look.

A year passes and on another market day the stranger with the stylish hat returns, and from his vantage point he observes the village below. While sitting under the broad-limbed oak tree, he reaches into his knapsack and pulls out a silver canteen filled with single-malt whiskey, takes a swig, savoring the peaty warmth at the back of his throat, and waits for the village folk to file past him with each family’s repayment of the eleventh round.

Below on the village outskirts, a family begs for alms, having lost everything in a fire. Focused on their obligations, the villagers pass by without as much as a glance.

The eleventh round is a very simplified illustration of an important principle regarding money. The point of the anecdote is that, with all other things being equal, the competition to obtain the money necessary to pay the interest is structurally embedded in the current money system. Somebody will have to be without the eleventh round for payment for somebody else to have it and make the interest payment.

So how does a loan, whose interest is not created, get repaid?

Essentially, to pay back interest on a loan requires using someone else’s principal [Note: that principal is also debt, owing interest in turn]. In other words, not creating the money to pay interest is the device used to generate the scarcity necessary for a bank-debt monetary system to function. It forces people to compete with each other for money that was never created, and it penalizes them with bankruptcy should they not succeed. When a bank checks a customer’s creditworthiness, it is really verifying his or her ability to compete successfully against the other players – that is to say, assessing the customer’s ability to extract from others the money that is required to reimburse the interest payment. One is obliged in the current monetary system to incur debt and compete with others in order to perform exchanges and pay the resulting interest to the banks and lenders.

In a manner of speaking, it’s like a game of musical chairs in that there are never enough seats for everyone. Someone will end up getting squeezed out. There isn’t enough money to pay the interest on all the loans, just like the missing chair. Both are highly competitive games. In the money game, however, the stakes are elevated, as it means grappling with certain poverty or, worse still, having to declare bankruptcy.

Those billions of our brothers and sisters living in poverty and hardship around the world?

These are the families who have been forced to beg for alms on the outskirts of our global village. While the rest of us – focused as we are on our obligations, on the ceaseless struggle of competing for money – we daily pass them by, with neither a thought nor a glance, as we make our way to pay the usurers.

If, like me, you have ever pondered the reasons why people nowadays seem to be even more materialistic than in times past; why the business of doing business seems more cut-throat and profit-driven than ever; why advertising and marketing are seemingly all-pervasive and more aggressive than ever; why there are seemingly so many more, varied, and greater ills in the world than, say, 50 or 100 years ago – poverty, wealth and income inequality, “-ism’s”, dishonesty, disrespect, dishonour, amorality, fraud, corruption, drug and alcohol abuse, pharmaceutical dependency, and increasing physical, mental, and spiritual violence – then I hope you may now begin to see that here is a – and quite possibly the – major culprit.

Usury.

It is a prime cause of slowly but surely, devolving mankind. Of causing us to increasingly behave like … indeed, often much worse than … mere animals.

Just to “get buy”.

Here is a final thought for you to ponder.

It hails from a section of the above chapter, and is sub-titled “Compulsory Growth Pressure”. It concerns the direct relationship between our 300 year-old, central-banking driven, usury-based debt-money system, and the global obsession with economic “growth” that is often (and rightly) blamed for all manner of social and environmental ills.  For those readers who may hold concerns about climate change, natural resource depletion, environmental degradation and pollution, or similar ecological anxieties, please pay close attention (italics in original):

Interest… has hidden dynamics that result in detrimental costs not only to personal relationships, commerce, and society at large, but also to the sustainability of our fragile planetary home, Earth. The effects are so well-concealed, in addition to being so deeply embedded in the money system, that they go, for the most part, unnoticed.

Debt-based money requires endless growth because borrowers must find additional money to pay back the interest on their debt. For the better-rated debtors (e.g., in normal times, government debt), the interest is simply covered through additional debt, resulting in compound interest: paying interest on interest. Compound interest implies exponential growth in the long run, something mathematically impossible in a finite world.

…the exponential growth of money through interest rates has shattering real-life consequences in which entire nations of people are marginalized and stuck in debt forever. For instance, after a G8 summit former President Obasanjo of Nigeria stated: “All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid back so far about $16 billion. Yet, we are being told that we still owe about $28 billion. That $28 billion came about because of the foreign creditor’s interest rates. If you ask me, ‘What is the worst thing in the world,’ I will say, ‘It is compound interest.'”

See also –

Will You Help Revolutionise Economics?

10 Feb

MinskyT-ShirtGraphic02

Back in April 2010, I joined with and supported Professor Steve Keen on his week-long Keenwalk to Kosciuszko.  For readers who don’t know, Steve is one of just 13 economists worldwide who foresaw and forewarned of the GFC.  Indeed, Steve won the 2010 Revere Award as voted by his peers, for being the economist who first warned of the impending crisis and (more importantly) the one who most cogently explained the reasons why.

For some time now, Steve has been working to develop a new computer program for modelling economics.  It is called “Minsky”, in honour of the economist Hyman Minsky. Yes, that’s him, in the cartoon above.  He developed the Financial Instability Hypothesis, which essentially recognised that lengthy periods of economic stability are actually a cause of subsequent instability and crisis.  It was Minsky who famously coined the phrase “Stability is destabilising”.

Steve’s “Minsky” computer program is revolutionary.

How so?

Well – believe it or not – it is the first economic modelling program that actually includes the role of banks, money, and debt.

Seriously.

Mainstream economists – including all those overpaid “experts” in the world’s treasury departments and central banks – failed to see the crisis coming.

But you already know that.  What you may not know is the reason why.  And that reason is simply this.

The mainstream economic theories (thus, models) they all believe in … ignore the role of banks, money, and debt.

You really can’t make this $h!t up.

Steve wants to change all that.  He wants to give the world the tools needed to properly model the real world economy.  Not an imaginary one.  Because in the real world, banks money and debt all matter. A lot.

To make this happen – to revolutionise economics – well, sad to say, it requires money.  Money to hire not just one or two part-timers, but a team of full-time computer programmers.

So, to raise money for this project, Steve has launched a campaign on the well known fundraising website called Kickstarter.

Please visit the campaign page here –

http://www.kickstarter.com/projects/2123355930/minsky-reforming-economics-with-visual-monetary-mo

I want to encourage you to take 2 minutes to watch Steve’s introductory video.  If nothing else, it will entertain and educate you. And if you really want to be educated – in (mostly) no nonsense, layman’s language – take the time to read what Steve has to say on his Kickstarter campaign page.

Then, if you feel that this is a worthy project … I certainly do! … then please, make a pledge.

As little as $2.  Because every dollar helps.

And please share the links to Steve’s Kickstarter campaign on your own blog, Facebook page, Twitter, and other social networks.

Your simply spreading the word will be a great help, and a wonderful support.

Thank you.

Lots.

P.S.

The Economist recently had a feature on “Economics after the Crisis” called “New Model Army” which featured Minsky as an example of what the future of economics could be:

In Australia Steve Keen, an economist, and Russell Standish, a computational scientist, are developing a software package that would allow anyone to create and play with models of the economy that incorporate some of these new ideas. Called “Minsky”—after Hyman Minsky, an American economist celebrated for his work on boom-and-bust financial cycles—it places the banking system at the centre of the economy. (The Economist, January 19th 2013, p. 68)

The Easy Way To Know Where House Prices Will Go

19 Jan

Want to know whether Australian house prices will rise or fall?

The RBA has the answer.

Just go to their website, and click on “Chart Pack” under “Key Information” –

RBA_chartpacklink

Then click on “5. Credit and Money” –

RBA_chartpacklink2

… where you will see this chart –

9tl-cmg

This chart tells us the growth rate in the amount of “credit” and “money” in the economy.

As you can see, the growth rate in “credit” has plummeted to less than 5% per annum.  In the period where Australian house prices rose the most in history, the annual growth rate in “credit” was three to four times higher than the present rate.  Without strong growth in new “credit” issued to borrowers, house prices can not rise much.  If at all.

Indeed, unless there are enough new buyers – armed with enough newly-issued “credit” – out and about and actively purchasing houses, then house prices must eventually fall.

For over twenty years, housing in Australia has been a banker-profit-driven “bubble mania” scheme, you see.  To drive up prices, the #1 and absolutely essential ingredient is more and ever more new “credit” – debt – with which bright-eyed and dull-brained buyers – debt slaves – can outbid each other to buy a house.

The RBA has another chart that shows this.  It will help you to see more clearly exactly why Australian house prices rose so much … until the GFC struck.

In the main menu of the Chart Pack, select “3. Household Sector” –

RBA_chartpacklink3

Then select “Household Finances” –

RBA_chartpacklink4

… where you will see this chart –

6tl-hhfin

As you can see, Household Debt (ie, “credit” offered by banks) as a percentage of disposable income rose dramatically for nearly twenty years.

Until the GFC.

It turned down sharply as Australians wisely responded by tightening their belts, and paying down their debts.  Then began to climb again – but only a little – thanks to the Rudd government offering “free money” in the form of a doubling of the First Home Owners Grant.  This handout of what amounted to a free home loan deposit kept the bubble from collapsing.  It encouraged thousands of new buyers – mostly young people with little or no savings – to go to their bank and borrow hundreds of thousands in “credit” to go and bid up the prices of houses again.

Unfortunately for them – and the bankers – this could only last for as long as the government was willing, and able, to find more “new home buyers” – new debt slaves – to dangle “free” money in front of.  As you can see from the chart, the level of Household Debt to disposable income has now bounced off the ceiling for a second time.

And so, as most Australians know, house prices in most areas of Australia have basically gone nowhere in the past year or two.  Some rises here.  Some falls there.  But overall, house prices have simply mirrored the Household Debt level … falling as debt levels fell, and rising (briefly) to bounce off the underside of that invisible private debt ceiling, thanks to that brief inflow of new “credit” that was borrowed by the government, and then handed out to First Home Buyers as deposits enabling them to apply for new mortgage “credit” from banks.  And yes, the RBA has another chart that confirms this –

6bl-dwelpri

Now, it might interest you to know exactly when Australia’s private debt-fuelled, bankster-enriching house price bubble scheme actually hit the ceiling.

No, it was not when the GFC struck; when many Australian households began to wake up, and realise that paying down their debts might just be a good idea.

Our housing bubble actually hit the ceiling first in early-to-mid 2004.  That is when the all-important rate of growth in housing “credit” topped out, and began to fall.

Unfortunately, the RBA does not make it easy for you to see this critical economic parameter.  The Chart Pack only gives you “Credit” growth in aggregate – that includes other forms of borrowing like business loans and credit card “credit”.  They even give you a chart for the number of “housing loan approvals”. But they do not give you a chart specifically for that all-important rate of growth in housing credit.  You have to dig into their statistics, and construct the chart yourself (click to enlarge) –

Click to enlarge

Click to enlarge

As you can see, the rate of growth in “credit” for both “Owner-occupier” and “Investor” housing peaked in Feb-Mar 2004, and has been falling ever since.

It is particularly interesting to consider the magenta line showing “Investor” housing “credit”. The rate of growth in “credit” for housing “Investors” was, until early 2004, far in excess of that for “Owner-occupiers”, with the notable exception of the early 2000’s global recession that only briefly affected Australia.  At that time, “credit” growth for “Investor” housing plummeted to the same level as the “Owner-occupier” rate, before recovering spectacularly to reach a whopping 30.7% annual growth in Feb 2004.

What prompted the recovery?  John Howard’s introduction of the First Home Owners Grant in 2000, and in particular, his doubling it in early 2001.  With a rush of newly-enslaved borrowers bidding up house prices, “investors” too rushed back into the welcoming arms of the bankers, as ever only too eager to lend “credit” at interest to willing borrowers against the “security” of “their” house.

Or houses.  How many people do you know who (used to) boast about their “investment property portfolio”?

From early 2004, the well began to run dry.  The rate of growth in “credit” for “Investor” housing began to fall steeply.  It fell well below the “Owner-occupier” rate, which was also declining.  This overall decline in the growth rate for housing credit has continued ever since.

However, thanks to the “stimulus” provided by Kevin Rudd’s further doubling of the First Home Owner’s Grant in 2009 – again, using borrowed money – aided and abetted by the RBA slashing interest rates in response to the GFC, both “Owner-occupier” and “Investor” credit growth bounced briefly.  Indeed, “Investor” credit actually overtook “Owner-occupier” credit again for a very short time in 2010, before both continued falling together.

Clearly then, house prices in Australia were not driven up over the past 15-20 years by “demand” from “population growth”, from people who needed somewhere to live (Owner-occupiers).  On the contrary, by far the strongest rates of growth have – during the bubble phase – been driven by so-called “investors”.

Speculators, in other words.  People who have come to believe that borrowing money to “invest” in property is a guaranteed path to riches, because house prices “always go up”.  Meaning, they believe that if they can only buy now, they can sell later for an easy profit.

Sadly, it is not just “investors” who have come to believe this.  Most Australian owner-occupiers have come to believe the same thing.  It is the very definition of a “bubble mania”, when most people have come to believe they can profit from buying and later selling an “asset”.

Who benefits most from a “bubble mania”?  Who has the most powerful vested interest in ensuring that the bubble does not burst … that is, not until they are positioned to profit from the “downside” as well?

The banks.  The same World’s Most Immoral Institution that has been given the power to create “money” – digital book-keeping entries – and lend it to others in the form of “credit”, at interest.

And so, dear reader, I suggest that you bookmark this post.  In the weeks and months ahead, the powerful banking and property (sales) industry will undoubtedly ramp up the propaganda – and the pressure on government and the RBA to “do more” to support “home buyers”.

Meaning, do more to prop up the Ponzi scheme that keeps them all in caviar, Bollinger, and the latest Aston Martin.

You will hear all kinds of oh so plausible-sounding reasons and statistics, presented by “experts”, encouraging you to believe that house prices will soon go up, and that now is a good time to buy (meaning, to “borrow”).

Whenever this coming bombardment of propaganda causes you to wonder if what they are all saying might just be true; when the charts and statistics and testimonials from credible-sounding people causes you to start feeling “con-fident” about Australian housing, come back and read this post again.  Or visit the RBA’s website, and click on the Chart Pack to see the Credit and Broad Money Growth chart.

Because the simple truth is this.

Unless the government can find a new source – a BIG source – of new people willing to borrow enough “credit” to keep bidding up house prices, there is only one way for them to go.

Unless the government can find a way to reverse the trend of that last Housing Credit chart, then in time, there is only one way that house prices can go.

And “up” it is not.

Finally, although I am loathe to ever suggest that anyone heed what the RBA Governor says, here is one exception.

In July last year, Glenn Stevens warned that –

It is a very dangerous idea to think that dwelling prices cannot fall,” RBA governor Glenn Stevens said in a speech today. “They can, and they have.”

Indeed.

To quote Mr David Collyer of Prosper Australia

Don’t Buy Now!

UPDATE:

Correction – how careless of me! The RBA does indeed provide a chart in their chart pack that shows the growth rate in “credit” for housing.  Simply select “5. Credit and Money“, then choose “Credit Growth by Sector” –

9br-cgbys

As you can see, the annual growth rate for Housing “credit” is in a long and steady decline.  It is presently less than a quarter of the rate of lending that the bankers achieved at the peak.

So, The Easy Way To Know Where House Prices Will Go, is to visit the RBA’s Chart Pack and look at that particular chart.  If it hasn’t started shooting back up again, to the kind of pre-2004 levels that financed the near twenty-year “boom” period, then you know where house prices will go.

More Lies From Gillard

18 Apr

The lying is without end.

From Yahoo!7 News:

Ms Gillard said both state and federal revenues had been hit hard by the global financial crisis and were in the same boat.

“For the federal government, our revenues have been hit by $140 billion – it’s an extraordinary amount of money.

“(But) we have matched all of our expenditure with savings since mid-2009 – that’s the hard work of government.

No, that’s two lies in two sentences.

First, as we have seen previously ( Wayne’s “Per Cent Of GDP” Lies Debunked, Our Media In $140 Billion Lie For Wayne ), “our” total government revenues have actually gone up, by $23.67 billion in 2010-11 vs 2007-08 (pre-GFC).  And for this year 2011-12, the government’s November ’11 forecast was for an increase in Total Revenue of $37.41 billion vs 2007-08. The truth is, the only thing that has been “hit”, is the Treasury department’s wildly exaggerated May Budget forecasts. You know … those grand annual smoke ‘n mirrors performances, where the Treasurer tells the nation what a great job he is going to do in the next year, using deceitful words that project an appearance that he has already achieved it … and then, never actually does it.

About Gillard’s second lie.

As we have also seen previously, the government’s Expenditure has blown out by a whopping $91.64 billion versus 2007-08. But in Gillard’s statement, she claimed that the ALP has “matched all of our expenditure with savings since mid-2009”.

Oh really?

In the 2009-10 financial year, the government spent $339.23 billion.

In the 2010-11 financial year, the government spent $356.1 billion.

And this year, the government most recently forecast that they will spend … wait for it … $371.74 billion.

So, they spent $16 billion more in 2010-11 than they did in 2009-10. And they expect to spend $31.58 billion more this year, than in 2009-10.

But Gillard claimed that Labor has “matched all of our expenditure with savings” since mid-2009?!

If we took her words 100% literally, we would rightly ask, “Ok, show us where you saved $356.1 billion in 2010-11 and $371.74 billion this year?”

But let us be generous.

Can Gillard show us where the government actually “saved” $16 billion in 2010-11, and $31.58 billion this year? That is, savings equivalent to the extra government spending in those years, versus the year she referenced, 2009-10?

Of course not!

The simple truth is, this government has spent more (borrowed) money, every single year since coming to power.

Far more.

And, they are bringing in more Total Revenue than ever before.

This government’s mode of lying about the budget is very simple.

Every claim they make about “falling” revenue, or “write-downs” to revenue, or “hits” to revenue, or revenues supposedly “lost” to “global economic turmoil” or “the floods” or this or that or the other, is a lie.

Actual government revenue in total, is UP.  It is only “down”, or “lost”, by comparison to their wildly exaggerated annual May budget “forecasts”.

And every claim they make about government spending, is also a lie.

They are spending literally tens of billions more money now, four (4) years after the GFC, than any Australian government has ever spent.

Every statement uttered by this government about the budget, and its economic management, is a lie, distortion, or misdirection.

I have never witnessed a more corrupt, more blatantly and repeatedly dishonest pack of politicians in this country in my lifetime.

“It’s Time For Governments To Stick To Their Knitting”

29 Mar

Senator Joyce writes for the Canberra Times:

Gillard is on a suicide mission

A joke I remember well from school is that of the Japanese Wing Commander briefing his pilots before a mission in about 1945. In emphatic language he lauds the virtues of Japan, the Emperor and the war task, then orders that the pilots load their planes with bombs, fly low into the rising sun and on into the sides of US ships. The Wing Commander then asks ”any questions?”

”Only one,” comes the reply from a bandana-wearing pilot in the front row ”most honourable Wing Commander, have you gone completely crazy?”

I am waiting for some bandana-wearing Labor parliamentarian to ask the same question of Julia Gillard after she has ordered her troops to reload their planes with the carbon tax and fly it into the side of the electorate.

She has just seen the most precise example of an electoral annihilation in Queensland. The exit polling indicates that cost of living, trust and the carbon tax were issues foremost in voters’ minds. My own survey on the polling booths affirms these findings.

Predominantly voters wanted to speak to me about two things on Saturday, the carbon tax and debt.

What was the PM thinking when, after this disaster, she announces a rededication to this ludicrous cause? Anyhow, my colleagues and I will back Gillard’s stubbornness over discernment and capitalise on the Labor party’s inability to do the bleeding obvious and drop the carbon tax.

Tony Windsor claims that the Queensland election was a victory for independents; well of course Tony, how did the front pages miss that story? Only two out of five were re-elected; one sits in a safe Labor seat (Gladstone) and the other suffered a 10 per cent swing against him. On average the independents suffered an 18 per cent swing against them, even larger than the 15 per cent swing against the Labor party, but in WindsorWorld this is a job well done.

Hubris is our greatest foe. The Katter Australian Party, or its next reincarnation, will harvest a resentment vote on the aspirations of those whose lives or rights may not change enough for their vote to lock in where they last placed it. Labor will be still trying to ”get back to its core” but this will prove near impossible with Julia Gillard casting a clumsy shadow over all Labor grassroots philosophy.

The LNP has a massive task in front of it. It must start paying back debt; it has to put a broom through the areas of the bureaucracy that are not willing to go on the journey that the public vote has overwhelmingly asked for; it has to still invest in key infrastructure or the state business plan will not be able to raise the money to pay the debt.

Importantly it has to change the culture about how it sees itself and how the world sees Queensland. It has to brush the cobwebs from tourism venues that seem to be still living in the ’80s. It has to realise that the wealth, coal, cotton, cattle, grain and the troublesome coal seam gas start in the regions and the people in the regions know this.

The LNP has made a good start by scrapping more than $650 million in programs that aim to change the temperature of the globe. Trying to change the climate from a room in George Street is absurd. We may as well send Campbell Newman to South Korea this week to help the world dispose of nuclear material, and there would be more chance of success there than in changing the climate.

It is simply not the Queensland government’s core business. Every dollar spent on these woopy ”green” programs is a waste of taxpayers’ money if there is no relationship between the spend and a real outcome.

A fundamental lesson of the Queensland election for all political parties is don’t get too carried away saving the world when it is quite evident that is not the league we play in; leave that to the US, China and the 100 million population league. Instead, concentrate on roads being safe, nurses being paid on time, the public books to be kept in order and living costs to be kept under control.

It would be peculiar if Australia took the lead on regime change so it is doubly so when you try do it on climate change.

It’s time for governments to stick to their knitting.

Barnaby is right.

I particularly and enthusiastically applaud his astute observation that Australian political parties should not “get too carried away saving the world when it is quite evident that is not the league we play in; leave that to the US, China and the 100 million population league”.

Indeed.

We are a pissant little country; a big-arse island continent, with a tiny population.

A pimple on the bum of the world.

Nothing wrong with that.

Except when idiot, corrupt politicians decide to squeeze the pimple, thinking that they are “saving the planet”.

It is high time that Australian politicians – and Australians more generally, for that matter – gave our relative overachievement-in-sports-driven national hubris the big punt, and instead embraced the humility that would enable us to avoid being taken on the kind of mad “frolics” that Senator Joyce wisely resists.

Thank God For Andrew Robb

23 Mar

Shadow Finance spokesman Andrew Robb is giving me ever more reasons to be thankful.

First, he is honest enough to not bullsh*t about the future. Instead, he simply tells a journalist in a TV interview the plainly obvious truth – that it is impossible to say when the Coalition could get the budget back to surplus, because “who knows what the state of the books will be” when the next election is held.  Please do watch the interview. I was deeply impressed above all else by his frank honesty. And by the fact he was essentially right, on almost all points.

Then, he joins Barnaby Joyce in researching and presenting a wise and innovative plan to build dams across the country, and especially in our monsoonal North, and avoiding increases in government borrowing to achieve it by bankrolling the costs via partnership with mining companies. Not unlike the Norwegian model for nationalisation of their natural resources, which I have long advocated we should follow.

Then, he goes against his own leader and party to fight for the interests of struggling small businesses, who are going bankrupt in record numbers.

And now, this epic lie-exposing, Swan-plucking speech in Parliament on March 21st (my emphasis added):

Matter of Public Importance: Budget Honesty

Mr ROBB (Goldstein) (15:19): Over the last 10 years in office, Labor has never delivered a surplus. In fact, it has racked up a total of $241 billion worth of deficits— or a quarter of a trillion dollars—over those 10 years of wall-to-wall deficits since 1989. This compares with $103 billion of cumulative surpluses over the last 10 years of coalition government. To go from such a surplus to such a deficit and to have nothing to show for it is what Australians find unbelievable and unforgivable. Yet, if you listen to Australia’s lightweight Treasurer, you would think all was well. It means that we all have to look beyond Labor’s spin and instead look at the facts because Labor has turned sophistry—clever but deceitful arguments—into a fine art. Today I would like to provide just three examples of potentially hundreds of examples of this sophistry. I highlight the deceit of Labor’s stimulus claims, I highlight the deceit of Labor’s spending claims and I highlight the deceit of Labor’s surplus claims.

Let us look at Labor’s stimulus claims. A report out today by the Australian National Audit Office once again suggests that the mammoth $87 billion spending splurge failed to boost growth as promised or, as endlessly claimed by our lightweight Treasurer, that the overall stimulus meant that Australia avoided a recession in 2009. The auditors found that the last of the payments under the inspired Greens initiative to create jobs by building bike paths, a key part of the $650 million so-called Jobs Fund, unveiled at the height of the GFC, was not expected to be made until next month. This is almost two years after the funds were meant to have been spent and a full three years since the end of the first quarter of 2009, the quarter that would have confirmed a recession following the negative 0.7 per cent growth quarter at the end of 2008. The Audit Office actually rebuked the government for not ensuring that taxpayer funds delivered the economic gain.

A similar audit from 10 July of the separate $550 million regional community infrastructure project found the cash was spent too slowly to ensure the gains first claimed—the sorts of claims we have heard ad nauseam in this place for three years now. We know Treasury confirmed that a massive $10 billion of stimulus money was still to be spent this year, 2011-12. These are the facts as distinct from the spin. By the way, it is all borrowed money which will not be repaid for years and years.

The Orgill report into the $16 billion school funding program showed that spending began several months later than planned and it is still being spent to this day—several years after the GFC. One-ninth of the stimulus was spent towards the end of the one quarter of negative growth, which was the 2008 December quarter. We supported that first stimulus because of the collapse of confidence. In fact we suggested how it should be spent. Despite the nonsense peddled by our lightweight Treasurer, a Treasurer so far out of his depth.

The DEPUTY SPEAKER (Ms AE Burke): Order! The member for Goldstein will refer to the member appropriately.

Mr ROBB: Despite the absolute nonsense peddled by our Treasurer, a Treasurer so far out of his depth, a Treasurer who claims that the stimulus was the reason Australia avoided a technical recession, almost all the stimulus was spent after the economy was bouncing back, which it was by the end of the first quarter and the start of the second quarter of 2009.

It was the automatic economic stabiliser of the exchange rate and the work of the Reserve Bank which restarted our economy. In the first quarter, you might recall, our exchange rate fell to 60c against the US dollar. We all understand the significance of that now. It is not a surprise that the biggest trade surplus in Australia’s history came in that first quarter of 2009—in the middle of the global financial crisis. Then the Reserve Bank cut interest rates—not only cut but slashed. They took 4.25 percentage points off interest rates between September 2008 and April 2009. The stimulus money had not been spent, but by April 2009 the pockets of households had more in them than they had ever had as a result of the 4.25 percentage point cut in interest rates.

The interesting point is that seven months later, in November 2009, when some of the spending was starting to take place, interest rates were back up by 3½ percentage points. Why was that? It appears the Reserve Bank was worried about overspending in the economy. The RBA had reduced interest rates by 4.25 percentage points—that got us going—but by the time the money was being spent out of the government’s $87 billion stimulus, they were reducing interest rates due to worries about overspending. These are the facts as distinct from the spin. By the way again, it was all borrowed money and it will not be repaid for years and years.

This deceit has been used to justify borrowing and spending of $87 billion and more. All that has meant is that the government has been in the market borrowing $100 million a day ever since. The effect has been to push up interest rates for households and for small and large businesses; push up our exchange rate; ensure that many small and medium sized businesses have not been able to access finance for love or money, many going to the wall as a consequence; and make Australia highly vulnerable to any—even a reasonably modest—downturn in commodity prices. That vulnerability is due to our huge structural deficit, a deficit which is twice Germany’s and even 30 per cent worse than Italy’s, would you believe. Yet you never hear our Treasurer talk about structural deficits. Do not lecture us about transparency. The rest of the world, especially Europe, talks—is consumed with concern—about structural deficits. The Treasury are not even allowed to produce a figure for the structural deficit. The words have hardly ever even passed the Treasurer’s lips in this place. This is yet more spin.

Let us look at the deceit of Labor’s stimulus claims. I could recite a litany of issues which have not been addressed by this government, yet they continue to parade this nonsense that the stimulus had some effect. It has had an effect; it has had a deeply negative effect over the last three years and it is contributing to the huge debt hanging around the neck of every Australian.

Let us look at the deceit of Labor’s spending claims. The government’s response to every problem has been to tax, borrow and spend, spend, spend and then to do high fives after they have passed each tax and spin it as reform. The government should be paying down debt to position Australia for some of the best and most extraordinary opportunities—across virtually every sector, including manufacturing—which are emerging in the Asia-Pacific. They should be paying down debt to weatherproof Australia’s economy against growing volatility on world financial and commodity markets—as the Howard-Costello government did ahead of the global financial crisis. That is why we got through the global financial crisis—we went into it with a $20 billion surplus and with a balance sheet that was $70 billion in the black. That and the automatic stabilisers are why we got through it, not the politically inspired stimulus spending which we are still suffering from and which businesses are still suffering from.

Instead, this Treasurer who is out of his depth has consecutively delivered the four biggest deficits in Australia’s history—$27 billion, $55 billion, $48 billion and $37 billion. I will not be surprised if that $37 billion blows out a lot further to help manufacture a surplus for 2012-13. Under Labor, annual spending has grown from $272 billion in 2008 to an estimated $370 billion this year. That is an increase of $100 billion in just 4½ years—$100 billion out of a budget which started at $262 billion. That is a 40 per cent increase. I suppose they would say it has kept pace with inflation, but inflation over those 4½ years was only 13½ per cent.

Despite all that, they are increasing spending again this year. Forget the stimulus for a moment. Let us say that the stimulus was warranted, that it has not brought thousands of small businesses to their knees because they cannot get finance as a result of having to compete against a government borrowing $100 million a day. You would think that, after they had spent the money on the stimulus, they would come back to something like the long-term level of spending, would you not? That is what a household would do if they had put an extension on their house. The next year they would come back to their long-term level of spending.

Not this mob.

Under this government the deficit has gone up and up—$87 billion, but they could better that. Now they are at $100 billion more than they were spending 4½ years ago. That is why they never talk about expenditure. This Treasurer is out of his depth and he never talks about expenditure. This government has had two to three per cent more over expenditure than previous governments as a percentage of GDP every year, on average, for 4½ years. Look at the facts, not the spin. So much for fiscal consolidation. It is a monstrous amount of money, much more than the $87 billion. This government has spent $70 billion over and above that $87 billion they have spent above the long-term spending trend. And they talk about fiscal responsibility. This fiscal consolidation line is, again, more spin.

Labor’s third outrageous line of spin is its claims about the surplus. Labor has been boasting for three years about its projected 2012-13 surplus while delivering the biggest deficits in our nation’s history. You will hear it again this time—they will brag about a surplus that they have never delivered and try to bury one of the four biggest deficits in our history. In fact, a detailed look at their budget figures shows we have every reason to treat the surplus, if we ever see it, as thoroughly dodgy and thoroughly manufactured. It is a product of accounting tricks to shuffle money and hide spending to keep it off the budget bottom line and engineer the appearance of a surplus next year.

Let me give just one of the many examples that I documented in a speech last Friday to VECCI. Labor accept that their damaging carbon tax poses a threat to Australia’s energy security, and in response they will spend over $1 billion this year, 2011-12, to support energy markets through its Energy Security Fund. Jump forward two years, to 2013-14 and 2014-15. They will spend another billion dollars in each of those years. What happened in the middle? What happened to 2012-13? Apparently the carbon tax magically poses no threat to energy security in 2012-13. They are spending 1,000 times less—$1 million, not $1 billion. So it is a billion, one million, a billion, a billion.

I could take you through 34 examples of very obvious cases where they have done this. Again and again they have brought spending forward or they have pushed it back into those two years. Get up and answer those claims. Explain to us why it is a billion, one million and then a billion, a billion to alleviate the threat to business from the carbon tax. This Treasurer has been pulling forward expenditure for two years and now it is being pushed out from 2012-13 into the subsequent two years, and he does not think anyone is looking. A forensic examination of the budget papers shows dozens of examples of this sort of chicanery. It is one reason why Labor’s claim to be delivering a wafer-thin surplus in 2012-13 should be taken with a very large grain of salt. All these things add up to tens of billions of dollars. In fact, whatever they come up with in May, the real truth will be tens of billions of dollars more in deficit. This is a government that has practised and perfected the art of spin.

Finally, we have the most notorious example of the government’s spin. They have not only shuffled money around but have about $100 billion of items for which there is no identified funding, or they are hidden. They have taken it off the balance sheet or they have not identified funding. There is the Clean Energy Fund, the NBN, the structural black holes inherent in the mining and carbon taxes, the 12 new Australian-designed submarines—all of these add up to an extraordinary amount of money, $100 billion. That is the real $100 billion black hole. Remember on budget night Labor’s $100 billion real black hole. Remember Labor’s cumulative deficits over the last 10 years in office, including a whopping and shameful deficit this financial year of $37 billion, adding up to a total of over $200 billion. For God’s sake, look beyond the spin and look at the statistics. (Time expired)

The DEPUTY SPEAKER (Ms AE Burke): The last comment was not worthy of parliament.

Note that well, dear reader.

An impassioned plea to look beyond the lies and deceit to the evidentiary truth, is deemed to be “not worthy of parliament”.

Could there be any better exemplar of just how completely rotten-to-the-core our political system is?

Thank God for Andrew Robb.

Legend.

* About that video above, where Andrew Robb asks the government about their having spent $578,000 on a study into “an ignored credit instrument in Florentine economic, social and religious life from the 1500’s”WTF?!?

If any reader has more information about this scandalous squandering of more than half a million dollars in borrowed-from-foreigners money – that you and I will have to pay back, with interest – please let me know in comments.

UPDATE:

Andrew Robb via Twitter kindly points us to the following news story –

MILLIONS of dollars in government research funding is being ploughed into studies of emotion in climate change messages, ancient economic life in Italy and the history of the moon.

Studies of sleeping snails and determining if Australian birds are getting smaller because of climate change have also been allocated funding in the latest round of grants totalling $300 million by the Australian Research Council.

A study of “an ignored credit instrument in Florentine economic, social and religious life from 1570 to 1790” secured $578,792 for a researcher from the University of Western Australia.

The council insists the study was approved because it had modern day relevance to the global financial crisis as it shows how Florence in ancient times recovered from an economic downturn and because no one had studied that element of history before.

Another project titled “Sending and responding to messages about climate change: the role of emotion and morality” by a Queensland university secured $197,302. The council said it was an important psychology project.

The study to determine if birds are shrinking was awarded $314,000 and another of sleeping snails to determine “factors that aid life extension” was given $145,000. Studying the early history of the moon will cost taxpayers $210,000 and another study looking at “William Blake in the 21st century” comes with a $636,904 bill.

At a time when every available dollar could be put to backing innovation and research and development to make us more competitive, we have seen a growth in support for some real eyebrow-raising activities,” opposition finance spokesman Andrew Robb said.

“Australian Research Council criteria has been extended beyond the scientific, the innovative and the practical to include some real airy-fairy stuff.

“Which means less money for more worthwhile research.”

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