Tag Archives: glenn stevens

Stevens $234K Pay Rise As GFC Peaked

24 Apr

Now that S&P and others have belled the cat on the US debt crisis, one wonders whether Glenn Stevens might apologise to Barnaby Joyce, for not taking his 2009 warnings seriously.

Better yet, perhaps Stevens might care to donate some of his $1.05 Million salary to the man who correctly predicted what he denied.

At the least, he should be forced to explain to the Australian public why any “public servant” deserves a $234,000 pay rise in the middle of a global financial crisis.  Such as the one he received, at the very peak of the GFC panic in October 2008 –

A pay increase of A$234,000 ($252,000) at the height of the global financial crisis made Reserve Bank of Australia Governor Glenn Stevens one of the world’s highly-compensated central bankers.

Stevens’s 2010 total compensation was A$1.05 million, with an A$805,000 base salary that was 61 percent more than European Central Bank President Jean-Claude Trichet’s and four times that of Federal Reserve Chairman Ben S. Bernanke…

Spokesmen in the Reserve Bank and Treasurer’s office declined to comment … when contacted by Bloomberg News yesterday.

Stevens’ pay increase alone, is far more than Barnaby earns.  Even though Stevens was blind to the oncoming GFC, and the US (and European) debt situation.  And despite the fact that he has apparently learned nothing from his mistakes in the lead up to the GFC.  See here, here, and here.

The real public servant – Barnaby – is right.

UPDATE:

On a per capita basis, RBA Governor Glenn Stevens’ “base” salary alone ($805K) is 54 times bigger than that of the Governor of the US Federal Reserve, Ben Bernanke.

Hardly a surprise, when one considers that ‘our’ RBA has been given the power to set their own salaries –

The Remuneration Committee is a committee of the Reserve Bank Board. Its membership is drawn from the non-executive members of the Reserve Bank Board.

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Deutsche Bank Agrees – Barnaby Was Right

24 Apr

Will Goose, Henry, Stevens, and Co. now step up and apologise to Barnaby for mocking his warning about US debt levels?

US finances are in almost as troubled a state as the worst-hit members of the euro zone, economists say, underscoring the pressing need for Washington to reach agreement on how to reduce the deficit.

A gauge of “sovereign risk” from economists at Deutsche Bank placed the United States just behind Greece, Ireland and Portugal among 14 advanced economies.

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Who Owns 73% Of Our Debt?

24 Apr

Back on the 14th of March last year (“Who Owns Our Debt?“), we discovered that noted SMH economic commentator Ross Gittins was wrong. He had claimed –

You thought the pollies had done little else but spar about deficits and debt? Sorry, different debt. They’ve been arguing about the public debt – the amount the federal government owes (mainly to Australians).

At the time, a search through the RBA’s Statistics tables (“E3.xls”, Commonwealth Government Securities Classified By Holder) proved Gittins wrong.  We found that at September 2009, $65.972bn in Commonwealth debt was estimated to be held by non-residents. From a total of $104.228bn.  In percentage terms, an estimated 63.3% of public debt was actually held by non-residents of Australia.

Naturally we posed the question – Who exactly, are these ‘non-residents’ who hold 63.3% (or more?) of our public debt?

A little over a year later, we’ve had another look at those numbers (click to enlarge) –

Magenta - Total Public Debt. | Blue - Non-resident holders.

According to the updated RBA spreadsheet (“E3.xls”), at December 2010, $127.027bn in Commonwealth debt was estimated to be held by non-residents.  From a total of $174.794bn.

In other words, at December last year we owed $174.794bn.  And of that, $127bn – that is, 72.6% – was estimated to be owed to non-residents of Australia.

We ask again – Who exactly are the ‘non-residents’ who now own 72.6% (or more?) of our public debt?

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Don’t Bet The House On China

4 May

An excellent and timely article by Karen Maley in today’s Business Spectator (reproduced here in full):

Kevin Rudd’s resource super profits tax has one massive risk – that commodity prices collapse before he gets to collect one cent of it.

Yesterday, the influential forecaster, Marc Faber joined those warning of problems ahead in China. “The market is telling you that something is not quite right”, he said in an interview on Bloomberg television. “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.”

On Sunday – as Kevin Rudd and Wayne Swan were announcing their new resources tax – China’s central bank made another attempt to dampen property market speculation. It lifted its reserve requirement ratio by a further half a percentage point, so that most Chinese banks will now have to hold 17 per cent of their deposits on reserve.

But this latest increase in the reserve ratio will likely prove as ineffective as the two previous rises in January and February this year. Many believe the Chinese property bubble will continue to expand for as long as the Chinese government maintains interest rates below the rate of inflation.

And that’s the core of the problem. The Chinese government is reluctant to increase interest rates because it risks exposing the huge fault lines that exist in the economy.

Over the past decade, China has built factories and expanded its manufacturing capacity in the expectation that the United States and Europe would continue to demonstrate a robust appetite for Chinese-produced goods. But western demand for Chinese products slowed in the wake of the financial crisis, leaving the Chinese economy with substantial overcapacity in manufacturing.

The problem was exacerbated during the financial crisis. With Chinese exports plunging, the Chinese government launched a massive economic stimulus program, equivalent to around 14 per cent of the country’s GDP. It also ordered Chinese banks to lend, and instructed Chinese state-owned companies to borrow.

The program had the desired result. The Chinese economy grew at an 11.9 per cent annual clip in the first three months of the year, the fastest pace since 2007. And we benefited too, because this strong Chinese growth pushed up the prices of our commodity exports, such as iron ore and coal.

But there are huge concerns over how the Chinese stimulus money was spent. Provincial governments, under instructions from Beijing to reach specified growth targets, undertook massive construction projects that have resulted in a glut of commercial office space, and huge shopping malls that are near-vacant. And much of the increase in bank lending was funnelled into property market speculation, pushing up housing prices to astronomic levels.

The Chinese government has tinkered with various measures to contain its property bubble – increasing the reserve requirement, lifting the minimum deposit that home buyers must have before they’re allowed to borrow, and urging banks to monitor their risks.

But it is loathe to raise interest rates for fear that it will cause mass defaults among manufacturers and property developers, leading to huge problem loans in the banking system.

Eventually, however, an end-point will be reached. Either the Chinese government will raise interest rates, or the property market bubble will collapse under its own weight. At that point, commodity prices will plummet, slashing the profits of the big mining companies.

And if this happens before 1 July 2012 when the new tax regime for the miners comes into effect, Rudd is unlikely to ever see a cent of his new resource super profits tax.

Betting the house on China is exactly what the numbskulls in the Rudd Labor government, the Treasury, and the RBA are doing.

Please take some time to review some of the many earlier articles in this blog, showing how the likes of Treasury secretary Ken Henry and RBA Governor Glenn Stevens have declared that the GFC is ‘over’, and forecast that (thanks to China) we are all set for a ‘period of unprecedented prosperity’ lasting until 2050.

What is vital to bear in mind always, is that these are the very same incompetents who all completely and utterly failed to foresee the onrushing Global Financial Crisis in 2008… even though its first wave had already broken in the USA and on global share markets during 2007!

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ECB: Stark Warning of Eurozone Debt Crisis

17 Mar

From BusinessWeek:

European Central Bank Executive Board member Juergen Stark said the euro region may face a sovereign debt crisis unless governments reduce budget deficits.

There is “a clear risk that we will enter a third wave,” which is “a sovereign debt crisis in most advanced economies,” Stark told lawmakers in the European Parliament in Brussels today.

In Australia, our government is continuing to increase our budget deficit, by refusing to withdraw its woefully incompetent and wasteful “stimulus” spending.

Even though we had no recession, and RBA Governor Glenn Stevens recently referred to 2008-09 as “the mildest downturn” we have had since WW2.

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RBA Concerned About Greece

16 Mar

And about time too!

From The Australian:

The Reserve Bank lifted the cash rate to 4 per cent in early March in response to two months of data suggesting the economy might be growing at or close to trend.

But board members expressed concern that the fallout from the Greek financial crisis might have implications for the Australian economy, the minutes of the RBA’s March 2 board meeting say.

The minutes show the central bank was concerned about the possibility of contagion, that the Greek problem could spread to other parts of Europe.

“The main risk was the possibility of contagion to other sovereigns and perhaps other markets, primarily in the euro area.

“Members agreed the fiscal problems in Europe, if not resolved satisfactorily, could result in renewed turmoil in markets and fresh weakness in the global economy, which could have implications for Australia.

However, the RBA’s wishful thinking remains strong:

“But while that outcome could not be ruled out, it was not the most likely one.”

I would like to see RBA Governor Glenn Stevens and his cohorts called before the Senate, and forced to actually justify their crystal-ball gazing confidence  by producing real evidence.

They completely failed to predict the GFC.  That EPIC failure cost Australians literally billions in lost retirement savings and investments.

Why should we believe the RBA’s judgement is correct now?

Especially when there are ever-growing contrary views rolling in daily, from all around the world.  Many from those who did predict the GFC!

And they do not share the RBA’s judgement.

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Batten The Hatches

16 Mar

From the Sydney Morning Herald:

The ominous word ”boom” appeared last week, in large type, on the front page of the local newspaper. Given the nature of this paper, the word could only refer to one thing: property. While the signals from the property market are mixed, it appears we are springing back to normalcy without absorbing the reality: the global financial crisis is far from over. All the elements are in place for a second crash.

The world has become an economically unstable place, with enormous unresolved issues. Australia’s economy is fundamentally sound, but the global economy is fundamentally unsound. Even a good boat can be swamped by a bad sea and Australia, as a middling economy, will be buffeted by forces beyond its control unfolding in the United States, the European Community and Asia.

The Bank for International Settlements, the central bank for central banks, is warning of ”unstable dynamics”. Ominous language. The International Monetary Fund estimates the world’s 20 largest economies, the G20, will have a combined debt equal to 118 per cent of their combined gross domestic product by 2014, meaning debt will have exploded by 50 per cent in just seven years. To fund what? In Australia, debt is being used for expansion of the mining sector, which is good, but also for the ill-disciplined spending of the Rudd government and the chronically overpriced housing sector. As a result, Australia’s economy is more vulnerable to economic stress from abroad…

While the obvious and prudent response of government in a financial crisis is to provide social and economic shock absorbers by increased spending and borrowing, it is also important not to overreact. If you believe the global financial crisis is still unfolding, the key is not to overshoot, but to conserve resources and policy options.

The Rudd government, as it has proved in every area of major policy, overspent. It threw money around with undisciplined panic when faced with the global economic crisis.

A must read article.

Perhaps Mr Sheehan might like to point all this out to the overpaid, short-sighted, know-it-all idiots in the Treasury department, and at the Reserve Bank of Australia.

They all failed to see and forewarn of the GFC.  So, thanks to their incompetence, millions of Australian citizens lost literally billions in retirement savings and investments during late 2007 through to early 2009.

Now they are saying that the GFC is “over”, and that we are set for a multi-decade China-fueled mining boom that will provide a “period of unprecedented prosperity”.

Sack Ken Henry. Sack Glenn Stevens.

And abolish the RBA.

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China Warns of Double-Dip Recession

15 Mar

From The Australian today:

China’s Premier, Wen Jiabao, has warned that the world risks sliding back into recession and says his country faces a difficult year trying to maintain economic growth and spur development.

“The unemployment rate of the world’s main economy is still high, some countries’ debt crises are still deepening, and the world’s commodity prices and exchange rates are not stable, which are most likely to become the cause of any setback in the economic recovery,” Mr Wen said yesterday in Beijing’s Great Hall of the People.

China’s and Australia’s economies have become more intertwined in recent years: the country is now our largest trading partner with two-way trade surging to $83 billion in the year ending last June 30, and in December it passed Japan as our largest export market.

Any trouble in China’s economy would quickly resonate in Australia.

Perhaps Treasury Secretary Ken Henry might care to revise his recent declaration that the GFC is ‘over’?

Perhaps Henry, along with RBA Governor Glenn Stevens, and all their many mindless cheerleaders in the media, might pause to reconsider their claims that ‘the risk of serious contraction‘ has passed, and that Australia is now set to enjoy a multi-decade China-fueled mining boom?  One that will fix the massive Rudd hole in the Budget, and provide a “period of unprecedented prosperity” for Australia?

Please… inform yourself.  Understand what is really going on in the financial world. Unlike the lazy, short-sighted economic illiterates who are running this country.

Please browse through the posts on this blog, and follow the links that catch your eye.

You will find references and links to literally dozens of articles from around the world.  You will see that international economists, investors, financiers, world leaders, and many others, have been increasingly warning of the many threats to the global economy. And thus, to Australia’s economy too.

Our Australian economic “authorities” are living in La la land.

Only Barnaby is on the ball.

Rudd Labor, Ken Henry, RBA and friends

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Who Owns Our Debt?

14 Mar

Yesterday I wrote an article commenting on the SMH economics editor Ross Gittins’ column about Australia’s foreign debt.

Something else Mr Gittins claimed in his article caught my notice and bugged me overnight:

What’s that you say? You thought the pollies had done little else but spar about deficits and debt? Sorry, different debt. They’ve been arguing about the public debt – the amount the federal government owes (mainly to Australians).

Mr Gittins is apparently claiming that when the Australian Government issues Commonwealth Securities to raise money, that these are mainly bought by Australians – investors, super funds, banks, big companies, etc.

But is that true?  Is our public debt “mainly” owed to Australians?

I decided it might be nice to know for sure.  Not just take Ross Gittins’ word for it.

In the RBA’s Statistics section, spreadsheet “E9.xls” – Commonwealth Government Securities Classified By Holder as at June 30, I found something interesting…

Continue reading ‘Who Owns Our Debt?’

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RBA Robs Us By Stealth

8 Mar

Ever wonder why things cost so much more today, than they did when you were a child?

Here’s a simple little exercise that shows how the Reserve Bank of Australia has robbed all of us by stealth. And continues to do so.

Take a look at the RBA’s Inflation Calculator.  Try it out for yourself. And be prepared for quite a shock.

Australia changed from the old imperial currency (pounds, shillings, pence) to decimal currency (dollars and cents) in 1966. So let’s take a look at how RBA-managed inflation has robbed us blind since 1966.

According to the RBA’s own calculator, an item costing $10 in 1966 would have cost you $106.81 in 2009.

Helpfully, their calculator also tells us that equals 968% inflation.  In 43 years.  At an average rate of 5.7% per year.

Why is this so important to know?  Because – as you can easily see –  inflation robs the national currency of its “buying power”.  Simply and bluntly, inflation robs you and I, the “working families” of Australia.

Continue reading ‘RBA Robs Us By Stealth’

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