Tag Archives: RBA

The World’s Most Immoral Institution Tells You How

1 Apr

To understand why The Banking System is The World’s Most Immoral Institution, you need only to understand how it actually works.

Not how it works in the lofty, rarefied atmosphere of incomprehensible acronyms like ARM and RMBS and CFD and CDO and QE and LTRO.

Just the basics of banking.

The works that you and I deal with every day, at our local bank.

Fortunately, The Banking System has grown so proud of its near God-like power, it is happy to tell us how the basics really work.

From Modern Money Mechanics – A Workbook on Bank Reserves and Deposit Expansion, a complete booklet originally produced and distributed free by the Public Information Center, Federal Reserve Bank of Chicago, now out-of-print (emphasis added):

Who Creates 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.

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.

In the absence of legal reserve requirements, banks can build up deposits by increasing loans and investments so long as they keep enough currency on hand to redeem whatever amounts the holders of deposits want to convert into currency. This unique attribute of the banking business was discovered many centuries ago.

NB: This is why governments the world over are so obsessed with maintaining public “con-fidence” in the banking system. It is why they so fear any hint of a “run on the banks”. As we have seen previously ( “Think You’ve Got Cash In The Bank? Think Again” ), the Australian banking system only has around $183.50 in stored ‘reserve’ cash for every employed person in the country.  According to Australia’s central bank, the RBA, there is only $53.2 billion in actual cash notes in existence (or $4,655 per employed person) … even though Australian households and non-financial businesses believe that they have a combined $986 billion in total Deposits. If 1 in every 19 Aussies insisted on withdrawing their bank “Deposits” at the same time … all the cash would be gone. To add injury to insult, The Banking System is “earning” (?!) interest (thus, profits) from a grand total $1.95 Trillion in “loans” created out of thin air, and “lent” to Australian households and businesses.  Interest on “money” that does not exist … except as a series of electronic digits that a banking clerk typed into a computer.

It started with goldsmiths. As early bankers, they initially provided safekeeping services, making a profit from vault storage fees for gold and coins deposited with them. People would redeem their “deposit receipts” whenever they needed gold or coins to purchase something, and physically take the gold or coins to the seller who, in turn, would deposit them for safekeeping, often with the same banker. Everyone soon found that it was a lot easier simply to use the deposit receipts directly as a means of payment. These receipts, which became known as notes, were acceptable as money since whoever held them could go to the banker and exchange them for metallic money.

Then, bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time. Enough metallic money had to be kept on hand, of course, to redeem whatever volume of notes was presented for payment.

Transaction deposits are the modern counterpart of bank notes. It was a small step from printing notes to making book entries crediting deposits of borrowers, which the borrowers in turn could “spend” by writing checks, thereby “printing” their own money.

Consider what this really means.

A bank creates “money”, authorised by your signature on a loan document.

Your signature is your legally-binding agreement, to become the bank’s debt slave.

With a few taps on the keyboard and clicks of a mouse, the “loan” that you must pay back, with interest, is created right out of thin air.

An electronic book-keeping entry is made under your name, as a new bank “Deposit”.

And another electronic book-keeping entry is made under the bank’s name, as an “Asset”.

Your legally-binding agreement to pay back the “loan” … with interest … is the bank’s “Asset”.

Every person, every business, every nation with a debt to a banking institution, is in plain truth a slave to their own wilful ignorance.

Working and slaving away, day after day, to pay back with interest something that came from nothing.

While the “Big Club” of elite bankers stride the earth like princes, on the back of everyone else’s daily toil and trouble.

Producing no thing.

Gaining every thing.

The Banking System.

It is the World’s Most Immoral Institution.

It is also the World’s Most Unnecessary Institution.

Here is my solution, for how we should do it.

Some of you, we all know, are poor, find it hard to live, are sometimes, as it were, gasping for breath. I have no doubt that some of you who read this book are unable to pay for all the dinners which you have actually eaten, or for the coats and shoes which are fast wearing or are already worn out, and have come to this page to spend borrowed or stolen time, robbing your creditors of an hour. It is very evident what mean and sneaking lives many of you live, for my sight has been whetted by experience; always on the limits, trying to get into business and trying to get out of debt, a very ancient slough, called by the Latins aes alienum, another’s brass, for some of their coins were made of brass; still living, and dying, and buried by this other’s brass; always promising to pay, tomorrow, and dying today, insolvent; seeking to curry favor, to get custom, by how many modes, only not state-prison offences; lying, flattering, voting, contracting yourselves into a nutshell of civility or dilating into an atmosphere of thin and vaporous generosity, that you may persuade your neighbor to let you make his shoes, or his hat, or his coat, or his carriage, or import his groceries for him; making yourselves sick, that you may lay up something against a sick day, something to be tucked away in an old chest, or in a stocking behind the plastering, or, more safely, in the brick banks; no matter where, no matter how much or how little.

I sometimes wonder that we can be so frivolous, I may almost say, as to attend to the gross but somewhat foreign form of servitude called Negro Slavery, there are so many keen and subtle masters that enslave both North and South. It is hard to have a Southern overseer; it is worse to have a Northern one; but worst of all when you are the slave-driver of yourself.

– Henry David Thoreau, Walden; or, a Life in the Woods, 1854

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.

Late Surge For Thinking KAP

24 Mar

From the Australian:

A LATE surge in support for Bob Katter’s Australian Party has set the stage for it to win seats today in One Nation’s former heartland of regional Queensland.

The party has lifted its support to 9 per cent statewide in today’s Newspoll, nearly double what it registered at the start of the campaign.

KAP’s base vote spikes to 12 per cent outside Brisbane, putting it in the running to win up to five non-metropolitan seats, said Newspoll chief executive Martin O’Shannessy.

This suggests Mr Katter has attracted part of the blue-collar base of Labor in the regions as well as more conservative supporters of the Liberal National Party.

Hmmmm.

“Blue collar base of Labor”.

“More conservative supporters of the LNP”.

Salt of the earth.

Go QUEENSLANDERS!

UPDATE:

From the hustings –

Mr Katter, who was handing out how-to-vote cards with his son and Mount Isa candidate Rob, said he was impressed with the progress his party had made since it was formed less than a year ago.

“About a week ago I realised that we’ve got a huge, powerful machine out there,” he told AAP.

“It’s working now completely independently of me. It was a bit of a ramshackle thing put together on my back, but it’s not now.

“Every poll that comes out, our vote has increased. There’s some that have us on nine per cent, there’s some that have us on 28 per cent.”

Mr Katter said his party was now a legitimate option for voters.

The important thing is to provide Australia with an alternative to the free trader or traitor policies of the major parties,” he said.

“It may well be that they get rid of the ALP today, but they won’t get rid of the ALP policies.”

Federal Liberal MP George Christensen tweets:

An insightful observation, and a perfect analogy:

[KAP state leader] Mr McLindon said it was now up to the voters but he hoped they would put into State Parliament a corrective against the expected overwhelming force of a new LNP government.

“Do the people really want a massive LNP government breaking promises the way they are doing in NSW?” Mr McLindon said.

“‘Or do they want a band of people in there like the KAP who will keep the bastards honest?”

Bob Katter, who will be in Brisbane tonight, said his aim in trying to establish a third political force was to break out of the “Woolies and Coles” cycle of Australian politics.

Put On Your Thinking KAP

23 Mar

From today.

Put down your biases, prejudices, stereotypes … and your Ego.

Put on your thinking KAP.

And listen up:

84% Of Australia’s Debt Owed To “Non-Residents”

19 Mar

Let us return to a topic covered previously ( Who Owns 73% Of Our Debt? ; Our Government *Officially* Does Not Know Who Owns More Than 60% Of Australia’s Debt ).

According to the RBA’s most recent statistics, 84% of the “public” debts being accrued by Green-Labor are owed to “Non-residents”.

$187.6 billion, out of a total $223.3 billion, at end December 2011.

A new all-time record level of indebtedness to foreigners:

Source: RBA Statistics, E3 Commonwealth Government Securities Classified By Holder | Click to enlarge

Australia, you are being sold out.

As Mark McGovern of QUT’s Business School observed in the must-read Australia’s Debt Dreamtime:

Click to enlarge

The net external wealth of Australia has deteriorated across the generation (McGovern 2010b, from which Figure 1 is drawn). Calculation of external wealth is based upon cumulative financial surpluses from an essentially zero basis in 1960. As is evident, Australia has been increasingly building external liabilities. A particularly marked decline has occurred over the last decade resulting in a total external exposure of $820b as at June 2010 with an annual deterioration of over $50b.

The central conclusion is stark: all the efforts of a generation of Australian men and women have only made them more obligated to the rest of the world. All that reform, all those industry and government initiatives, all those strategies, all that talk of productivity, all the promises of a previous boom in mining – all have come to naught. Today, we stride the world stage with external debts and other net liabilities above seventy percent of GDP, and increasing. Unaddressed, this is a precursor for crisis…

And as Delusional Economics recently observed (emphasis added):

So where is it all going ? Well if we breakdown primary income into its component parts we get the result below. This tells us that the major components of our primary income deficit are from direct investment income and portfolio interest payments to the rest of the world:

Source: MacroBusiness | Click to enlarge

Which basically means that in aggregate Australia sends massive amounts of dividends and interest payments to the rest of the world. In fact it is so large that it is dwarves our trade in goods and services, resulting in a net loss  to the external sector even during the historically high terms of trade. The most important thing to note is that these are payments stemming from previous foreign investments meaning Australia is continuously making payments to rest of the world somewhat independently of the balance of trade.

Finally, the financial account tells us that in order to maintain this current account deficit, Australia continually relies on foreign direct investment capital flows along with sales of equities:

Source: MacroBusiness | Click to enlarge

So in other words we sold lots of new financial assets to foreigners so we could pay them the interest we owed them stemming from their previous purchases. Sounds a little ponzi-ish doesn’t it?

And as reader Craig so eloquently and insightfully observed in comments to Saturday’s post about the Foreign Investment Review Board being – in the words of Barnaby Joyce – “full of merchant bankers“:

In Australia, everything is up for sale to foreigners and always has been. The FIRB is absolutely useless; a bunch of doctrinaire econocrats spouting the Treasury Line. These are people, just like the rest of the governing class actually, who have no sense at all of the national interest. Patriotism is a dirty word for them. I’m not surprised the Liberals couldn’t give a toss about selling off the farm. When Lenin once observed that if the Bolsheviks starting hanging some of the bourgoisie, the others would compete among themselves to sell them the rope, he had people like the members of the Liberal Party in mind.

What a dreadful choice we Australians are left with; between a bunch of socialist incompetents on the one hand and money-grubbing traitors on the other.

You know what they used to do to traitors?

RBA: You Are Getting Poorer

9 Mar

As if you didn’t already know:

RBA Chart Pack March 2012

Thank you Treasurer Swan.

Thank you Governor Stevens.

Thank you for “saving Australia” from the GFC with your brilliant, “swift and decisive” economic management.

Three and a half years after the peak of the northern hemisphere GFC … and we are almost back to the low point.

Our households’ net worth is back to about where it was in 2001.

And trending down.

Oh yes … and in achieving that remarkable result for us, you have put the country into record debt.

Only $17bn away from the quarter trillion debt ceiling.

Onya fellas.

You are worth every cent of your $1.05 million (Governor Stevens) and $346,000 (Treasurer Swan) salaries.

False Profits: Confusion At RBA And Treasury

8 Mar

March 2, 2012:

RESERVE Bank of Australia board member John Edwards today said the country’s mining boom will burn bright for the next decade, but will then slow to more average rates of growth.

A decade, you say?

February 23, 2010:

[RBA Deputy Governor] Mr Battellino was uncertain about how long the current boom would last, but said past booms had lasted around 15 years.

“On this occasion, the growth potential of countries such as China and India suggests that the expansion in resource demand could continue for an extended period…

15 years, you say?

February 17, 2010:

I am quite optimistic that story has some decades to run and that underlies much of the positives for the Australian economy,” [RBA Assistant Governor Phillip] Lowe told an economic development forum in Sydney.

“It is going to be a good 20 years for China and us,” he said.

20 years, you say?

Well, what sayeth our Treasury department, the massively overpaid public servants that teach their trained parrot, pollie Wayne Swan how to repeat his daily lines?

October 23, 2009:

[Now former] TREASURY chief Ken Henry has outlined a golden age for the Australian economy lasting to 2050 and beyond, as rapid population growth and Asian demand for resources bring a sustained surge of global investment.

“While the global financial crisis has taken some of the heat out of our export prices, we should get used to the idea that we could have structurally higher terms of trade for some time, possibly for several decades,” he said.

In a speech at the Brisbane University of Technology, Henry said Australia’s population will grow as the mining boom, fuelled by demand from China and India, will continue to bring in immigrant workers. Handled correctly, he said, this could provide a “period of unprecedented prosperity”.

Henry pointed to growth in several Asian countries, which he said will give a boost to the mining boom that will see it last for several more decades into 2050.

40 years, you say?

What sayeth the new Treasury secretary, Martin “Mini-me” Parkinson?

June 3, 2011:

New Treasury secretary Martin Parkinson says only revolutions or mass war across the globe will stop the mining boom.

Under questioning from WA Liberal Mathias Cormann about Budget forecasts for the terms of trade, Dr Parkinson said the Federal Treasury was being “conservative” in its assumptions of a gradual fall over the next 15 to 20 years.

The Treasury boss conceded the department had erred in not accurately predicting the pick-up in commodity prices from 2003. But the department was now convinced that a transformation was occurring that would benefit Australia in the long term.

Only a major global event could prevent prices remaining high.

Good call Martin. Had a look at the RBA’s Chart Pack, showing the +30% fall in commodity prices that began just 3 months after your “conservative” prediction?:

So, which one is it, O High and Mighty Ones?

40 years?

20 years?

15 years?

10 years?

Until there are “revolutions or a mass war across the globe”?

Or, have the benefits of the boom peaked and begun to fall already … and you have all missed it, again, in exactly the same way that you missed the pick up in commodity prices from 2003?

November 10, 2011:

THE benefits of the mining boom have peaked, with the industry no longer boosting growth or improving the lot of Australians, a new study says.

Prepared by former Reserve Bank board member Bob Gregory and Peter Sheehan, a former head of the Victorian Treasury, the report calls on the government to abandon its promise of a budget surplus next year and calls on the bank to cut interest rates several more times.

During its first eight years, the mining boom delivered increasing net benefits, the Victoria University study said.

The rise in the exchange rate lifted household buying power 18 per cent as the price of imported goods fell.

But the dollar had since stopped rising, removing the downward pressure on prices.

[TBI: this remains true; the AUD:USD x-rate rate has not returned to the $1.10 level reached in late July 2011]

During the first five years, mining share gains pushed up real estate prices and lifted household wealth at three times the usual rate. But share prices were now well down, house prices were falling and many of the big new mining projects are completely foreign owned. Always present, the negative impacts are now dominating. Professor Sheehan told The Age neither Treasury nor the Reserve Bank should be blamed for missing the slowdown at the time of the May budget. But circumstances had changed.

#JAFA’s.

What more can one say?

P.S. If you found this blog interesting, you may also enjoy these:

Why Would Any Sane Person Believe Treasury’s Carbon Tax Modelling When Its Budget Forecasting Record Is This Bad?

The Pricing Carbon Choir – Why Should *Any* Sane Person Trust Economists After The GFC?

Five Reasons Aussies Should Feel Conned

29 Feb

Nicole Pedersen-McKinnon certainly has the right credentials to author a column titled “Five Reasons Aussies Should Feel Smug”.

Consider her bio, at her website No Mumbo Jumbo.

As you can see, Nicole has much to be smug about.

Little wonder then, that she prefers to look on the bright side, and to ignore evidence that might cast a shadow.

Nicole’s article is actually a wonderful example of why Aussies should feel conned.

By only looking on the bright side, and failing to inform the public of all relevant information – “good” and “bad” – charismatic financial “experts” like Nicole treat the public like mushrooms.

Let’s take a look at her reasons for advocating national smugness, and consider additional information for a more balanced perspective:

1. Government debt and deficit

As a proportion of gross domestic product, the IMF says we owe 24 per cent. The US has racked up 100 per cent, Italy 120 per cent and Greece 152 per cent.

Yes we have a deficit – tiny by world standards. The IMF says it was minus 2.8 per cent in 2011 and the government has crossed its heart and hoped to (ahem) die that it will be a surplus by 2012-2013.

France’s comparable figure was minus 5.7 per cent, Spain’s minus 8 per cent and the US’s – tut tut – minus 9.5 per cent. Greece’s is ratcheting up so fast it will be wrong before I type it: the 2012 forecast is 6.7 per cent.

That country is now widely expected to default and Fitch’s credit rating of ”C” reflects it. Ours is ”AAA”.

The standard argument. And a meaningless smokescreen. “GDP” essentially only measures the total value of transactions within the economy. It has very little practical relevance to the only two factors that matter when it comes to debt:

(1) Total debt, versus
(2) Total tax revenue.

Comparing meaningless measures here to meaningless measures “over there”, is meaningless.  All that really matters is this nation’s capacity to repay its debts.  In other words, can the government raise taxes enough to (a) pay for all their annual spending, and (b) pay off their debts too?

According to the government MYEFO 2011-12 budget update, Australia will pay nearly $41 billion in interest over just 3 years, 2011-2014. And yet, under the World’s Greatest Treasurer, they have to cook the books just to manufacture an announced-but-not-realised $1.5 billion “estimated” surplus for one year?!

A not particularly bold prediction: Australia will never pay off the debts already accumulated under this government.

We live in a globalised, intertwined, interdependent world economy. To base your #1 argument for national smugness on comparing our debt ratio to other nations – and especially to those that are widely affirmed to be essentially bankrupt – is no different to telling yourself “She’ll be right mate” while comfortably esconced in a First Class cabin on the Titanic.

2. Resources and economy

Remember we were the only Western nation that didn’t go into recession during the global financial crisis. One of the reasons was mining.

An embarrassment of riches from resources means we can feed the insatiable industrialisation of developing Asia. Indeed, the governor of the Reserve Bank, Glenn Stevens, told Friday’s parliamentary economics committee the boom is ”still building” and ”will take the share of business investment in GDP to its highest level for 50 years”.

The mining tax – whatever you think of it – is designed to spread the proceeds.

Meanwhile, most commentators believe the EU is back in recession and Greece never climbed out of it.

“Insatiable industrialisation of developing Asia”? It seems that Nicole has overlooked all the evidences that the China Miracle is in fact a China bubble heading for a bust.  Even if one disagrees with the more catastrophic predictions, there is now the view expressed by the World Bank that China faces economic crisis over the next 20 years, and predicts China’s economic growth will fall by more than one-third.

And the mining tax? As we have seen (“GilSwan Conned – Mining Tax The Greens’ Pit Of Despair”), the mining tax is a disaster waiting to happen. It is unlikely to generate any tax revenue for the government for years.  If ever.  And there are many commentators eminently more qualified than your humble blogger who have asserted this reality. Including Fortescue’s Andrew Forrest.

3. Interest rates

Here they are relatively high on a world scale, precisely because our economy is strong and needs to be kept in check, but they’re also far lower than they were in the 1980s.

As a consolation to mortgage holders, the RBA has a loaded gun if it needs to shoot its way out of another crisis. And if you are cashed up, you are laughing all the way to the proverbial.

Interest rates may indeed be “far lower than they were in the 1980’s”. But household debt is far higher. Throughout the 1980’s, household debt-to-income never exceeded 49%. Today, it is over 150%.

When the RBA cuts rates, it is a signal that the economy is on the slide. Ergo, it will hardly be “a consolation to mortgage holders” to see interest rates cut, if they subsequently lose their job.

There is also the small matter of the banks not cutting interest rates along with the RBA. Indeed, earlier this month the banks proved their willingness to increase rates in the absence of any move by the RBA. We could also go into all the details about our banks’ dangerously high reliance on wholesale funding, their credit ratings already being threatened and cut by the ratings agencies, warnings from overseas authorities that Aussie banks are the world’s most exposed to the EU debt crisis … but naaah, we won’t do that. That would be really looking on the dark side. And we can’t have that, now can we.

4. Employment and wages

This is what’s really making us uneasy. And it is hard to ignore headlines about mass redundancies in industries struggling due to factors like the high Australian dollar – for example, manufacturing – as they scramble to stay viable. Others – think retail and media – are under pressure because they’re at the pointy end of dramatic consumption shifts.

But it’s important to keep it in context. Unemployment last month actually fell slightly to 5.1 per cent, which boffins consider close to full employment. Although that is expected to tick up as global growth slows, some industries, like tourism and mining, are even reporting worker shortages.

Perhaps it’s our comparatively cushy existence in Australia that causes us to fixate instead on cost-of-living pressures, however it seems we should stop our whinging. CommSec research using The Sydney Morning Herald archives shows we have far more purchasing power for goods – wages relative to prices – than our parents and grandparents 30, 40 or 50 years ago. Housing is another story.

Want a little more perspective? In Greece they’re contending with unemployment of more than 20 per cent and a 22 per cent cut to the minimum wage.

“It’s important to keep it in context”, you say?

Good idea. Here is some context on unemployment, and the official ABS unemployment numbers.

According to Roy Morgan Research, the actual unemployment rate is 10.3%. And a further 7.5% are underemployed. The worst unemployment for a decade. Unlike the ABS, Roy Morgan does not ignore people who worked 1 hour or more in the last month, or did some unpaid work for family.

In other employment realities, there was a 48% increase in small business bankruptcies in 2011. Small business is only the largest employer in Australia, so I guess that is not something we want to talk about.  Let’s stick with pumping up false “con-fidence” instead, by quoting only the official statistics, and parroting the party line from the government, the illustrious RBA, and “Treasury supremo” Martin ‘Mini-me’ Parkinson.

“Housing is another story” … indeed it is. A story that should be told, and not brushed under the carpet. Because it is a story that debunks the entire preceding paragraph about “more purchasing power”.  Around 40% of Aussie households have owner-occupier mortgages, and our house prices are recognised worldwide as being the highest and “most unaffordable” in the world after Hong Kong. It is frankly lazy, if not outright dishonest, to essentially argue that we’ve never had it so good thanks to an over-valued dollar and unsustainably high wages allowing us to buy $500 imported flatscreens for every room, while deliberately ignoring the elephant in the room … record high housing-related household debt.

5. Retirement

God bless super. As controversial as its introduction was – and however inadequate it ends up being – it’s a salvation for our sunset years. What’s more, it’s in our names and our control. Many Greeks are instead getting 12 per cent wiped off their pensions.

So it seems Australians’ confidence – which a global Nielsen survey of 56 markets has just found is the highest in the developed world – is justified.

Let’s just ignore the reality that most folks’ super was hammered by the GFC and never recovered, shall we?

And to say “what’s more, it’s in our names and our control” suggests that our erstwhile and aesthetically pleasing economic expert has no clue whatsoever about what governments around the globe – and on both sides of politics here in Australia – are doing, and are planning to do, with their citizens’ super.

In summary then:

1. Government Debt and Deficit
We are passengers on the global economic Titanic, telling ourselves “She’ll be right mate” from the “relative” safety of the First Class cabins.

2. Resources and economy
Our government, RBA, Treasury, and cheerleading “experts” are betting the national house on a 50 year China Miracle that is actually a bursting bubble.

3. Interest rates
Our household debt levels are 3x higher than they were in the 80’s, so tiny movements in interest rates have a bigger effect on household budgets; if the RBA cuts rates it really means the economy is sliding and your job is at risk; and the banks are ignoring the RBA and setting interest rates as they please.

4. Employment and wages
Real unemployment is double what the ABS claims, because the ABS uses methodology deliberately designed to keep “official” reported unemployment as low as possible; small business bankruptcies are skyrocketing; and the world’s most unaffordable housing with record high household debt means that Australia is the last Western housing bubble just waiting to burst.

5. Retirement
Most Aussies’ super has been hammered by the GFC, and there is a global wave of government confiscations of citizens’ super that has already reached our shores, with both sides of politics having plans and policies already in place to wrest control of Aussies’ retirement savings.

There we have it, Nicole.

Your Five Reasons Aussies Should Feel Smug are in reality, Five Reasons Aussies Should Feel Conned.

By you.

Instead of treating Aussies like mushrooms, how about feeding them a little honesty?

And (contrary to your website title) not just more of the same Mumbo Jumbo:

According to the Concise Oxford English Dictionary, Mumbo Jumbo is a noun and is the name of a grotesque idol said to have been worshipped by some tribes. In its figurative sense, Mumbo Jumbo is an object of senseless veneration or a meaningless ritual.

Think You’ve Got Cash In The Bank? Think Again

5 Feb

From the Reserve Bank of Australia (RBA) website:

Click to enlarge

That’s $53.2 billion in Australian notes on issue.

Sounds like a lot, right?

According to the Australian Bureau of Statistics (ABS), in December 2011 there were 11.441 million employed people in Australia.

So $53.2 billion in notes equals just $4,655 per employed person.

Doesn’t sound like so much now, does it?

But wait. There’s more.

According to the RBA’s spreadsheet titled “Assets – Selected Assets and Liabilities of the Private Non-financial Sectors”, it seems that “Households and unincorporated enterprises” have $668 billion in “Financial Assets – Deposits.”

And “Private non-financial corporations” supposedly have another $318 billion in “Financial Assets – Bank Deposits.”

So that’s $986 billion in “Deposits” for households and private (non-bank) businesses … combined.

Versus a grand total of only $53.2 billion in actual Australian notes issued by the RBA.

Confused?

If so, then it is probably because you have not yet seen through the biggest, longest-running con in the history of the human race.

It used to be called “money-lending”.

Now it’s called “banking”.

In a nutshell, the “money” that most people think is in the bank … isn’t.

That’s why, during the peak of the GFC in October 2008, the RBA was printing up billions in extra cash, trying to keep up with a silent bank run:

The private banks keep reserves of cash distributed in 60 storerooms across the country with an average of about $35 million in each. They get topped up by the Reserve Bank before Christmas, when demand for cash typically rises by about 6 per cent, and at Easter, when there is a smaller increase.

[TBI note: That’s only $2.1 billion in stored ‘reserve’ cash at Aussie banks at any time … or a mere $183.50 for every employed person in the country!]

But in early October, the Reserve Bank started getting calls from the cash centres for more, especially in denominations of $50 and $100.

The Reserve Bank has its own cash stash. It is coy about exactly how much it holds, but it is understood to be in the region of $4 billion to $5bn.

As the Armaguard vans worked overtime ferrying bundles of $10,000 out to the cash centres, the Reserve Bank’s strategic reserve holdings of $50 and $100 notes started to run low and the call went out to the printer for more. The Reserve Bank ordered another $4.6bn in $100s and another $6bn in $50s…

Households pulled about $5.5bn out of their banks in the 10 weeks between US financial house Lehman Brothers going broke – the onset of the global financial crisis – and the beginning of December. That is roughly 80 tonnes of cash salted away in people’s homes. Mattress Bank is doing well, was the view at the Reserve. A year later, only $1.5bn had been put back.

(see Our Banking System Operates With Zero Reserves)

You see, dear reader, the global banking system is a colossal con-fidence trick.

Banksters have a government-issued exclusive licence to operate the most insidious “business” in the history of the human race.

They make a killing by lending us vast quantities of … digits. At interest.

Electronic code, in their computers.

Not actual cash money.

When you sign a form to borrow from a bank, the bank is ‘licenced’ to legally create new “money” to lend you. Right out of thin air.

The “money” loaned to you, does not exist.

It is just a new number, on their books.

Your new “loan”, is their new “Asset”.

What you have signed your working life away for, is nothing more than a new electronic bookkeeping entry.

You are working and slaving away, to pay back borrowed binary code … plus “interest”.

Tragically, most folks worldwide have fallen for this centuries-old con game.

Indeed, we have all been born into it. So, we consider it “normal”. We have known nothing different:

Most folks think that when they borrow from a bank, they are borrowing real money that someone else deposited.

Most folks think that banks pay interest to attract depositors, and then, lend that money out at a higher interest rate to people wanting a loan.

It just ain’t so.

As you can see from the RBA’s own statistics, even the “money” that we think we have deposited in the bank … just isn’t there.

There’s only $53 billion in actual cash notes issued by the RBA.

In total. For the whole country.

Versus $986 billion in “Deposits” that businesses and private citizens – you and I – think we have in the banks.

That’s about one (1) actual dollar in “face value”, for every eighteen dollars fifty (18.50) that we falsely imagine is deposited in the bank under our name.

If the “money” lent to you by banksters was only the money they had on deposit from other customers, then how would you explain the fact that (according to the RBA’s “Bank Lending by Sector”) Australian households owed $1.18 Trillion to the banks at December 2011 (including $721 billion for Owner-Occupier housing) … and Australian businesses owed a further $773 billion?

$53 billion in legal tender cash notes issued by the RBA.

$1.95 Trillion in bank loans to households and businesses … at interest.

That’s $36.80 in bank loans … at interest … for every $1 in actual cash printed by the RBA*.

It’s all bull$h!t folks.

By our lazy, ignorant complicity, in agreeing to allow our governments to grant banksters the exclusive power to create “money” and lend … electronic digits … at interest, we have all agreed to a system of human slavery.

Our own slavery.

We have enslaved ourselves, by agreeing to go along with this “system”.

It’s long past time that we all woke up.

And stopped playing along with the con game of “money”-lending.

And especially, of money-lending at “interest”.

There is a very good reason why so many great wise men – Plato, Aristotle, Cato, Cicero, Seneca, Moses, Philo, Buddha, and many many more – all denounced the evil of money-lending at interest. Indeed, it is the same reason why the only Biblically-recorded instance of Jesus Christ resorting to violence, was when he chased the money-lenders out of the Temple with a whip.

The wisdom of the ancients is even more relevant today.

In our modern technology-driven world – where “money” is now not even real gold and silver laboriously dug out of the ground, but mere electronic digits created at the tap of a keyboard and click of a mouse button – there is simply no intellectual or moral justification for the vast majority of mankind to continue allowing a tiny minority to profit from the life and labour of everyone else, by lending “money” at “interest” under government licence.

It is time to demand that our governments enact a single, simple, real reform that would change the whole world for the better.

For everyone.

(Except banksters)

It is time to ban usury … in the original meaning of the word.

And if our elected representatives refuse to act against the banksters’ interest, in our best interest?

Then the following essay outlines my suggestion for one way to beat the bastards at their own game –

The People’s NWO: Every Man His Own Central Banker

* Some may correctly point out that Australian banks do not only take “deposits” from Australians; they also borrow “money” from abroad, in order to lend in Australia. Indeed, this gives rise to the ever-controversial topic of the banks claiming that increases in the cost (ie, interest rate) they are paying for “wholesale” money they have borrowed from abroad supposedly justifies their refusal to pass on the full value of “official” interest rate cuts by the RBA. Nevertheless, the central point of this article remains unchallenged. According to the RBA at December 2011, AFI’s (All Financial Intermediaries) held $308.6 billion in “Offshore Borrowings” – a very far cry from the $1.95 Trillion in loans-at-interest to Aussie households and businesses. More important to note is that these “Offshore Borrowings” too, are mere electronic digits … not actual cash.

Why We Could Replace The RBA With 5 Bits Of Paper And A Hat

29 Dec

Why do we listen to any of these bozos?

Ever.

And why do we pay them $1m annual salaries?!

Reserve Bank governor Glenn Stevens argues that economic forecasts should not be seen as handed down from the oracles.

Umm. We’re paying you $1.05m per year mate. Tell us something we don’t know.

He had the Reserve Bank staff review their own accuracy and found that 12 months into the future, they got the gross domestic product number right to within 0.5 percentage points only 20 per cent of the time.

Brilliant.

Our long term “trend growth” is around 2.5% (and falling).

And yet, the RBA’s self-review shows that these elite economic forecasters only get their GDP growth forecast accurate to within about 20% … on one-in-five occasions.

I have a suggestion.

Sack the lot of them. Abolish the RBA. And replace them with a hat containing 5 slips of paper. The slips can be marked in 0.5% increments, from 1% through 3%.

The World’s Greatest Treasurer can draw one slip of paper out of the hat for the May budget. And another for the Mid Year Economic and Fiscal Outlook (MYEFO) update.

Voila!

Economic forecasting of equal accuracy to the RBA’s elite, criminally overpaid #JAFA’s.

Imagine how much taxpayer money we would save.

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