Tag Archives: hot money

Hello?! McFly?!! A Simple Question For Swan & Hockey

30 Apr

The Federal government budget has now been in deficit for 5 years straight.

Some analysts are predicting a further decade of budget deficits.

The Federal government presently owes $269.4 billion (77% of tax revenue) to creditors, over 70% of whom are “Non-resident” –

Source: Australian Office of Financial Management

Source: Australian Office of Financial Management

The cost to taxpayers – the extra burden on the economy – of paying just the Interest on the debt accrued so far, is $12 – $13 billion every year

Budget 2012-13, MYEFO, Appendix B, Note 10

Budget 2012-13, MYEFO, Appendix B, Note 10

It is almost universally agreed – the RBA included – that the Australian Dollar is significantly over-valued compared to the currencies of other key trading nations.

It is also near-universally agreed that this over-valuation of the AUD is damaging the Australian economy (ie, reducing business profits, and tax receipts).

QUESTION:

Why are you continuing to increase the debt and interest burden on taxpayers (and the economy) by selling government bonds that owe interest to the bond holder, when you could simply order the Australian Treasury to (electronically) print Australian Dollars, use those new dollars to pay down the existing debts to foreigners, and, weaken the foreign-exchange value of the too-high Aussie Dollar all at the same time?

FOLLOW-UP QUESTION:

Are you galactically stupid? …

… or, is it that you are all just bought and paid for, gutless, traitorous, overpaid, 100% self-interested puppets of the international bankster sector?

Dollar Shoots A Hole In Farmers’ Confidence

30 Mar

Stock & Land has more on how the too-high Aussie Dollar is impacting the rural sector:

AUSTRALIA’S shooting star dollar has shot a hole in rural sector morale.

Despite good seasonal prospects, farmer confidence is deflating as exports fail to deliver much farmgate price value because our high flying dollar is hovering uncompetitively above parity with the US exchange rate.

Faltering farm commodity prices in the past five months – particularly in the grain trade – have also hit farmer confidence hard.

“Not surprisingly farmers are becoming more concerned with the strong Australian dollar’s knock-on effect on the competitiveness of our exporters,” said Rabobank’s rural general manager, Peter Knoblanche.

NSW farm supplies retailer Greg Rout summed up the mood saying farmers were “a bit disillusioned and frustrated with the way prices are going against them at the moment”.

Although farmers have emerged from the past decade’s drought with plenty of soil moisture and stored water supplies, Rabobank’s latest quarterly rural confidence survey results are dipping into negative territory.

Producers who now expected farming conditions to deteriorate in the year ahead outnumbered those who saw improvements, according to Rabobank’s findings.

Mr Knoblanche said about 28 per cent expected the farm economy to worsen in the next 12 months, compared to 20pc just three months ago.

“Mixed farmers tend to be happier than the grain-only guys but most people are still spending cautiously,” said CRT retailer Mr Rout, who owns Central West AgriCentres at Parkes, Forbes and Peak Hill.

“I wouldn’t say anybody’s beaming with confidence – even after a couple of good seasons – but I’d put the general consensus around 60 out of 100, which isn’t too bad.”

According to Rabo only about 30pc of farmers expected an improved business performance or higher incomes in the coming year – down from about 39pc in December.

About 55pc tipped business performance to be the same.

It’s study of about 1200 farmers Australia-wide found 40pc of those expecting farm economic conditions to slide primarily blamed the dollar and 32pc nominated falling commodity prices.

Although it dipped last week well below recent highs around the $US1.07 mark, the seemingly bullet-proof Aussie dollar was again back above $US1.05 early this week and forecasters tip it will stay strong against the US greenback for at least a year.

However, while Rabobank expected strong investment into Australia would keep the dollar to be above parity “for the foreseeable future”, Mr Knoblanche believed it would soften by mid year on the back of a strengthening US currency and lower terms of trade.

The high exchange rate’s competitive advantage for machinery importers helped drive a burst of machinery investment last year, but newly-elected Tractor and Machinery Association (TMA) chairman, Steve Wright, believed a lower dollar would be best for the farm sector’s long term health.

“Buyer inquiry levels are generally still strong and I think the low dollar will help make 2012 a strong year for machinery sales, but buying commitment has definitely eased lately,” Mr Wright said.

“The dollar’s taken the shine off farm returns and grain prices are not as good as farmers are wanting to see before they commit to ordering new gear.

“And with growers reluctant to sell at recent lower prices, a lot of last season’s crop is still in storage which means they haven’t been paid for their grain yet.”

This is just one of many reasons why your humble blogger has advocated voting for the KAP.

Because Katter’s Australian Party is the only political party in the nation (that I know of) that has demonstrated a firm willingness to take on the clueless blinkered ideologues in the Treasury and the RBA, in order to follow the lead of other “advanced” economies such as Switzerland and Norway, and directly address the problem of a speculator-driven Aussie dollar hollowing out vast swathes of the Australian economy. From agriculture, to tourism, foreign education, manufacturing, and retail.

Journalist and presenter Peter van Onselen recently hit the nail on the head, when he described the AUD exchange rate as “Australia’s most pressing dilemma”.

The “major” parties are unforgivably negligent, and incompetent, in their spineless, mindless obeisance to the RBA and Treasury doctrinal line.

On this single issue alone, they are all wholly unworthy of your vote.

In my firm opinion.

US$ To Hit A$0.58 – Currency Experts Agree, Barnaby Was Right

9 May

More experts line up with Alan KohlerStandard & Poors, CNBC, Deutsche Bank, and Barack Obama, in agreeing that Barnaby was right.

First, the head of ANZ:

ANZ chief Mike Smith said yesterday that the currency was likely to resume its climb above $US1.10, and one of the world’s leading foreign exchange experts predicted the dollar would continue to rise and could hit $US1.30 in 2013 and $US1.70 by 2014.

This spells bad news for non-resource sectors such as manufacturing and tourism…

“I can’t see that there is anything to knock it off its perch because it’s not only the strong Australian dollar, it’s also the weak US dollar,” Mr Smith said yesterday.

“And when you think about what is happening in the US, I can’t see them increasing rates for at least 18 months and that will have an impact.”

Next, a global currency expert:

Global currency expert Savvas Savouri, of the British-based Toscafund hedge fund, went a step further, predicting the greenback would be relegated to a “museum” …

Dr Savouri, in Sydney for a conference, predicts the dollar will reach $US1.30 by 2013 – and $US1.70 by 2014, as the greenback relinquishes its “exorbitant privilege” as the world’s default currency.

What the ‘experts’ aren’t telling you, is that the reason for the Aussie dollar’s rise is directly due to the slow-motion collapse of the US economy, and the unintended consequences caused by those trying to prop it up.

How’s that, you ask?

For several years, the US Federal Reserve has been creating literally trillions of US dollars out of thin air (“Quantitative Easing” 1 and 2).  By doing this, it believes it will achieve two things – (1) Keep interest rates in America extremely low (near zero), preventing further collapse in the housing market and broader economy; (2) pump up the stock market, creating public “confidence”. And it has achieved both those aims.

But what about the unintended consequences?

First, the immediate effect of printing money is to weaken the American currency.  That is the main reason why the Aussie dollar has risen against the USD.

It is not because our currency has strengthened.  It’s because the USD has been (deliberately) weakened.

Much of those trillions in near interest-free US money has been poured into speculation by international banks and hedge funds.  What are they speculating on?

Mostly on commodities – which our economy sells.

Hundreds of billions in “hot money” has been flowing from the Zero-Interest-Rate-Policy (ZIRP) United States into our currency, through speculation on our commodities.  Driving  up our currency’s apparent strength.

But “hot money” can flow out again just as fast.  As we saw in the GFC.  And again just last week, when the Aussie dollar hit US$1.10, and plummeted to US$1.05 in three days … due to a single bad economic news data release in the US:

Yahoo Finance - AUD/USD 1.10 to 1.05

During the peak of GFC panic in Sep-Oct 2008, the Aussie dollar collapsed from US$0.98 to just US$0.60 in barely two months:

Yahoo Finance - AUD/USD

When you compare the Aussie dollar to the Euro, for example, it’s easy to see that our dollar only “appears” to be super strong when it is being compared – as usual – only to the ever-weakening USD.

Our dollar has risen against the Euro too. But by far less. And again, only after first falling significantly in the GFC.  Then rising only after the US Federal Reserve began seriously printing money, which has been poured into commodities and commodity currencies:

Yahoo Finance - AUD/EUR

Australia is a little cork floating on the ocean of other nations’ economic decisions.

As Barnaby forewarned in late 2009 / early 2010, the US is effectively defaulting on its debt right now.

By stealth.

Destroying the value of your currency by money printing, has always been the most common way in which nations have defaulted on their debts.

Barnaby was right.

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