Tag Archives: saul eslake

Only NOW Experts Agree: Barnaby Is Right On Debt

28 Mar

It only took 3.5 years.

Public vilification.

And humiliation.

And demotion, losing his Shadow Finance Minister portfolio.

But in the end, the truth will out.

The worm has begun to turn.

And some economic “experts” are beginning to agree.

Barnaby is right, on his most fundamental and politically courageous warning – the steeply rising “trajectory” (trend) of Australian government debt:

CGS_endFeb

From the Herald Sun (my bold emphasis added):

GILLARD Government debt levels are forecast to blow out by 80 per cent to $165 billion in this term alone – equal to more than $14,000 for every working Australian.

Analysis of Budget documents reveals that between the 2010 election and Federal Treasury’s update in October last year, the 2012-13 net debt estimate rose $54 billion to $144 billion.

With Wayne Swan having junked the Government’s commitment to a surplus this financial year, Bank of America Merrill Lynch now forecasts Treasury will raise the estimate by a further $21 billion in the May budget.

“The government is starting to develop some form when it comes to over-estimating the improvement in its budget balance,” Bank of America Merrill Lynch chief economist Saul Eslake said yesterday…

Mr Swan’s spokesman said the Government had no plans to raise the gross debt limit. Mr Eslake said the increase that had already occurred was “troubling”.

If the trends that look increasingly obvious aren’t addressed at some point we might cross that threshold from safe territory to dangerous territory very, very quickly,” he said.

Monash University Professor of Business and Economics Jakob Madsen said the gross debt rise was “disturbing”.

It’s a dangerous trend and it’s at the wrong time.

Business Council of Australia CEO Jennifer Westacott said spending had grown “out of step” with revenue.

“If that doesn’t change we are going to have serious public debt problem,” Ms Westacott said.

Mr Eslake, Professor Madsen and Ms Westacott all said Australia did not currently have a debt crisis.

But, Ms Westacott said, “we do have a budget management crisis”.

Really?

Shame these “experts” did not notice this problem and speak up earlier. Have we not had to endure 5 years of constantly being told that the ALP government have given us “sound economic management”?

Do not be misled by all those who (still) downplay the importance of Australia’s government debt position.

Do not be misled by all those who prefer to pull the wool over your eyes, by talking about government debt using only the “net” figure rather than the gross, because the “net” figure is lower and does not sound so bad – conveniently ignoring the highly important fact that the $13 – $14 billion per year in interest expenses due are payable on the much larger gross figure:

Budget 2012-13 - Budget Paper No.1, Statement 9, Note 10

Budget 2012-13 – Budget Paper No.1, Statement 9, Note 10

Do not be misled either, by those who – intentionally, or accidentally – distract from and dismiss the importance of ever-rising government debt, when they (quite correctly) point out that an even bigger problem is our world-leading private debt.

As your humble blogger reaffirmed less than a week ago:

“This is the #1 reason why, even though it is true that private debt is much worse than public debt, I believe that Barnaby Is Right in constantly expressing concern over the rapidly rising trajectory of public debt in Australia. Because, regardless of whether or not you agree that our public debt is “low compared to other OECD countries,” the undeniable fact remains that our rapidly rising government debt does represent a weakening of the government’s balance sheet… even before any banking crisis arrives! Foreseeing that our banking system was, just like the rest of the West, our key vulnerability, and that weakening the government balance sheet unnecessarily would only make our future problems far more calamitous, was one of the main reasons why I launched this blog in early 2010. When you hear some distinguished-looking, eminent economic “expert” – or politician – reassuring us that Australia’s public debt is “low”, just keep one word at the front of your mind. Ireland. And remember what happens to the public debt level, when a government with previously “low” public debt suddenly finds itself borrowing to the stratosphere – often from the IMF – in trying to bail out an over-leveraged banking system.”

Australia’s total government debt – using the popular “as a percentage of GDP” measure (which I loathe) – is now worse than where Ireland’s was before their private debt bubble burst. And ours hasn’t. Yet. Note well: the following charts are only current through 2011; our Green-Labor government has piled on an awful lot of additional debt since then –

Screen shot 2013-03-27 at 10.35.05 PM

IRELAND – click to enlarge

AUSTRALIA - click to enlarge

AUSTRALIA – click to enlarge

Australians should never forget that, prior to their real estate (private debt) bubbles bursting, Ireland and Spain were considered the “outstanding” economies of the EU.

From the New York Times, June 2011 (my bold added):

Where Private Borrowing Led To Public Debt

FIVE years ago, a survey of the euro zone would have shown two star countries. They were growing rapidly and running government budget surpluses. Their national debts were low. Other countries sought to emulate their success.

The outstanding countries were Spain and Ireland.

At the time the two economies appeared to be impressive, there was one indication that could have provided a warning. Each country’s private sector was borrowing heavily overseas. Those loans were fueling rapid economic growth that, in turn, produced rising tax collections, allowing national governments to run budget surpluses.

Which is almost exactly the same situation Australia is in.

Minus the government surpluses.

For many years our massive banking sector – now bigger by market cap than all of Europe’s combined – has borrowed heavily overseas to finance our world-leading overpriced housing bubble.

It does not take an “expert” economist to see what the future holds for us.

Just “a little ol’ country accountant”, with the courage to speak up and call it as he sees it.

Barnaby Joyce.

UPDATE: And yet another expert comes out. To say the same thing Barnaby has been warning of, for the last 3.5 years –

The ticking budget debt bomb

ONE of the nation’s top financiers yesterday joined the debate on the country’s rising debt level – describing it as dangerously high.

AMP chief economist Shane Oliver also urged the government to stop using economic comparisons to countries in Europe and the US to justify a predicted 80 per cent blowout to $165 billion this term.

“It just shouldn’t be this high,” said Mr Oliver, who said the government hadn’t taken advantage of the decade-long resources boom.

“If you take Ireland for example, it has had a similar level of public debt to Australia in 2007 and only six years later, debt is over 100 per cent of GDP.”

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

2 Jul

There’s a little faux furore doing the rounds in the last 24 hours.

Allegedly, that awful Tony Abbott doesn’t trust economists.

In particular, he does not trust their judgement over their “popular” position on the proposed carbon “X”.

From The Australian:

Opposition Leader Tony Abbott defies economists on carbon tax

Tony Abbott today slapped down economists who were backing a price on carbon to deal with climate change, accusing the numbers men of getting it wrong.

The Opposition Leader urged economists vocally calling for a carbon tax or emissions trading scheme to examine their thinking.

Speaking at the The Australian-Melbourne Institute Growth Challenge conference in Melbourne, Mr Abbott said economists should not be taken in by Labor’s use of the term “market-based mechanisms’’.

“It may well be, as you say, that most Australian economists think that the carbon tax or emissions trading scheme is the way to go,’’ he said.

Maybe that’s a comment on the quality of our economists.’’

Indeed.

Consider.

Not one of these economists who are calling for a carbon “X”, saw the GFC coming.

Not one.

Australians lost billions from their retirement savings.

Our country was plunged, unprepared, into a massive Labor and greenie-Ken Henry-inspired monster debt-a-thon.

Why?

Because NOT ONE of these #JAFA’s saw the GFC coming.

Including the latest #JAFA economist to be given charge over the Australian economy – and your future – the new Treasury Secretary, former student of “Helicopter Ben” Bernanke, Martin Mini-me Parkinson.

Only one (1) Australian economist did see it coming.

Dr Steve Keen –

And only twelve other economists, worldwide, along with him.

Proof?

Here’s a paper referencing the thirteen international economists who all predicted and forewarned of the GFC for years in advance, and propounded cogent analyses as to why a GFC was coming. Including Australia’s own Dr Steve Keen, who won an award voted on by his international economic peers for having done so:

This paper presents evidence that accounting (or flow-of-fund) macroeconomic models helped anticipate the credit crisis and economic recession. Equilibrium models ubiquitous in mainstream policy and research did not.

Note that well.

It was only those rare economists who shun the kind of modelling that is “ubiquitous in mainstream policy”, and instead use “accounting” models, that got it right.

In other words, it was only the few economists worldwide who think like accountants, who were able to see the GFC coming.

Is it any wonder then, that our much-ridiculed accountant in the Parliament, Senator Barnaby Joyce, is always the only one on the ball when it comes to correctly predicting the risks of what is coming?

REMEMBER back in 2009 when Barnaby Joyce pondered aloud the possibility of the US defaulting on its debt?

Just to recap in the concisest way, things went badly for Joyce. We found ourselves pondering this yesterday as we listened to the dulcet tones of the ABC’s Eleanor Hall on The World Today: “. . . the [US] Treasury has warned that Congress has only until August 2 to come up with a compromise to lift the $US14 trillion debt ceiling or risk a default and a default would have drastic consequences, not just for the US but for the global economy”.

Is the time approaching where Joyce must be acknowledged as a clear-eyed prophet?

Strewth found him in a reflective mood.

“Maybe they will retract their pillaging of me and hand back the shadow finance portfolio as the sun is blotted out with the return of the migrating pigs,” Joyce mused.

“Alas, Cassandras are rarely enjoyable company in any party. It was hardly the greatest feat of the prefrontal cortex amygdala [utilised for intuition, he explains] to foresee that one, but politically it had to wait for the economic karaoke to bravely sing all together prompted by the big bouncing cheque.”

Amen.

But wait, dear reader.

There’s another outstanding reason why no sane person should trust the “leading” “mainstream” economists’ opinions about “pricing carbon”.

The majority of these economists you are hearing from on the subject, have a massive conflict-of-interest.

They are owned.

By banks.

Take a look at this little online stoush that I had right here on barnabyisright.com, with “leading” #JAFA economist Saul Eslake.

He objected to my portrayal of his and his fellow dozen economists’ Open Letter in support of “pricing carbon”, as being a Banksters’ Glee Club.

Then under return fire, he foolishly conceded that, as far as he knows, 77% of those economists (including himself) are current and/or former employees of banks.

Mr Eslake himself being former chief economist of the ANZ Bank, and now employed by BHP Billiton (who stand to make a killing from “pricing carbon” – really!), and the Australian Government via the “independent” Grattan Institute.

Quelle surprise!

By Saul’s Own Words They Stand Condemned.

The sector of the economy that stands to benefit the most from “pricing carbon”, is the financial sector.

Banks.

And banksters.

And their many minions.

Including Malcolm Turnbull, whose balls are owned by international carbon-trading-pushers Goldman Sachs, after their “confidential settlement” to keep him out of court in the half a billion dollar lawsuit over the HIH collapse, in which Mr Turnbull was a named defendant.

Tony Abbott – who has an economics degree himself – is actually demonstrating both brains and balls, by defying the “mainstream wisdom” of economists over the carbon “X”.

No sane person should trust economists at all after the GFC.

And especially, no sane person should ever trust those “leading” mainstream economists who are now out there publicly singing for their supper, on behalf of the bankstering industry.

The “Pricing Carbon” Choir.

Blithering Idiots, and Liars all.

Barnaby’s “Blunder”

18 Jun

Ok, fine.  Maybe it’s just me.

But I find this positively hilarious.

Here is Climate Change Minister Greg Combet’s oh-so-obviously fallacious attempt at sledging Barnaby’s economic nous on June 2, 2011 (or, see it here on the ALP’s own website):

“Barnaby blunders as economicsts (sic) back carbon price”

Ok, ok, maybe I’m just a spelling nazi.  I still think it’s hilarious … and somewhat of a Freudian slip.

Notice too, that the apparently illiterate Combet loudly and proudly bangs on about “13 of Australia’s most prominent economists” who had written an Open Letter in support of a carbon (dioxide) price.

Funny how he neglected to mention that at least 7 of those 13 “economicsts” (sic) are employed by banks.  And, that at least another 3 were previously employed by banks.

Yes, that’s right.  At least 77% of those Open Letter “economicsts” (sic) were and/or still are employed by the very same parasites who are pressing the hardest for carbon dioxide “pricing” as the basis for their new global casino.

Do you think that little nugget of truth might just have some influence on their “support” for it?

Oh yes. One other thing.

Did you know that one of those “13 most prominent” “economicsts” – Mr Saul Eslake – had himself a little dummy spit right here on this lowly blog, because he didn’t like his little group of rent-seeking parasites being referred to as “The Banksters’ Glee Club”?

Yes indeed. Mr Eslake threw his rattle right out of the cot.  See for yourself.

And a good thing it is too.

Because thanks to his little tantrums – yes, more than one – we have now seen a further glimpse of both the heights of vanity, and the depths of deception, that these “economicsts”, banksters, and their dyslexic political lackeys like Combet et al will go to, in order to get the legislation needed to implement their megalithic new derivatives trading casino scam passed through our Parliament.

Behold … “By Saul’s Own Words They Stand Condemned”.

Seriously – would you trust an ocean-front dwelling former union hack who can’t even spell the word “economist” to successfully implement a multi-billion dollar, economy-altering energy taxation scheme?

Gillard “Mad Dog’s Breakfast” Devours Australia For Benefit Of Foreign Interests

16 Jun

Have you stopped to think carefully … and deeply … about why a (supposedly) democratic and (supposedly) poll-driven government persists with pushing through big “tax” policies, when polls consistently prove that the majority of citizens oppose them?

Is it really a matter of high-minded “belief” and “principle”?

Or, is it really about something far more low-brow and prosaic – selling out Australia for the benefit of big foreign interests.

One only need pause to scratch below the surface of the political rhetoric, and reflect carefully on the evidence, for the answer to become crystal clear.

From The Australian, June 15, 2011 (emphasis added):

Mr Forrest [head of local Aussie miner Fortescue Metals] slammed the draft laws for the mineral resources rent tax, released on Friday, as a “mad dog’s breakfast” that would benefit Rio Tinto, BHP Billiton and Xstrata at the expense of the smaller, local miners – and that could trigger legal action if it went unchanged.

“I think there are many companies, a government or two, and ourselves, who will mount a High Court challenge,” Mr Forrest said.

“It is not my preference. My preference is to speak to the Treasurer, explain to him that the reason why the multinationals agreed to this tax in just three days from (Julia) Gillard being appointed (Prime Minister) was because they were protected from it and everyone else had to pay.”

The Gillard government’s carbon dioxide “tax” scheme is designed with exactly the same malevolent, Australia-loathing intent as the mining tax.

Global mining giant BHP Billiton’s South African CEO, Marius Kloppers, has been directly and intimately involved in the by-invitation-only, closed-doors negotiation over the design of both of our Green-Labor government’s great big new “tax” schemes.

Consider very carefully what Kloppers has angled for, in his sweetheart deal with Gillard on the carbon dioxide “tax”.

From The Australian, September 16, 2010:

A(nother) key consideration would be to give industries exposed to the tax a rebate, Mr Kloppers said, because without a global price, these companies would become uncompetitive and might consider shifting polluting assets to countries without a carbon tax.

Sounds reasonable, right?

Wrong.

It’s a sneaky, deceitful, anti-competitive, market-monopolising ploy. One that would completely absolve BHP of any costs at all under the “carbon tax”, while penalising all of their smaller competitors – our local, up-and-coming Aussie miners.

Which is why our much-maligned local Aussie businessman (and indigenous philanthropist of the first order), Andrew “Twiggy” Forrest, was on to this scam like a flash.

From the Herald Sun, Sept 22, 2010 (emphasis added):

Mr Forrest said that Mr Kloppers’ carbon tax plan was designed to help BHP.

“He says you get a complete rebate if you are an exporter. BHP is a total exporter so he is embedding a tax that will be paid for by everyone else, a la the minerals resource rent tax.”

Consider too, the recent Open Letter by “13 leading economists” in favour of a carbon dioxide “pricing mechanism”.

10 / 13 of whom are directly connected to the banking industry.

An Open Letter whose leading light, former ANZ bank economist Saul Eslake, is now employed by the Grattan Institute.  An “independent public policy think-tank”.  One that was set up and funded by the Australian Government… and BHP Billiton.  An “independent” institute featuring none other than … you guessed it … BHP Billiton’s Marius Kloppers on its Board of directors.

“Independent” my @$$!

Let there be no misunderstanding.

Everything that this government does, is done with the deliberate intention of weakening our country – destroying our local industries, impoverishing households, and weakening our government financial position.

Why?  Because our every act of wilful economic self-harm, has benefits for non-local (ie, foreign) interests.

The evidence is unmistakable.

They really are, quite literally, selling us out.

Once upon a time, what they are doing was called “treason”.

And punished accordingly.

The MRRT and the proposed “carbon pricing mechanism” have both been deliberately designed – and secretly negotiated – to place an unfair burden only on local Aussie companies.  To the benefit of the monster multinationals such as BHP Billiton and RIO.

The carbon dioxide “tax” / trading scheme is deliberately designed to destroy our nation’s natural low-cost energy advantage (coal-fired power).  To the benefit of the international bankstering cartels such as Goldman Sachs and friends.

Consider also, this very interesting fact.

Our Green-Labor government does not even know – officially – who owns more than 60% of the $200 billion public debt they have racked up.

Now, the “independent” (there’s that word again) Reserve Bank of Australia “estimates” that 73% of our debt is owed to (unidentified) “non-residents” of Australia. But our government’s own department, the one that actually sells our debt, officially doesn’t have a clue.

The writing is on the wall, dear reader.

Because both of the two big economic “reforms” that are about to be legislated by our Green-Labor government – led by life-long “creeping communist” Julia Gillard – are designed to devour Australia.

For the benefit of foreign interests.

Liberal Party’s Sneaky Plan To Steal Your Super To Pay Labor’s Debt

7 Jun

From the Liberal Party’s website, Latest News, 3 June 2011:

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

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

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

Senator Barnaby Joyce writing for The Punch, 13 May 2011:

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

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

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

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

So you won’t vote for the Coalition then?

There’s no salvation on the Left.

Labor has already introduced legislation in the 2011-12 Budget that aims to grab your super too.

In fact, Labor’s Minister for Financial Services and Superannuation, Bill Shorten, published an op-ed a month ago stating that he views your super as “our sovereign wealth fund”.

There is a wave of government confiscations of private retirement savings rolling around the Western world right now.  The first ripples have quietly rolled onto our shores already.

Your super savings are not safe.

From either party.

Learn the full story, in “No Super For You!!”

No Super For You!!

6 Jun

* Extended update of original article published 18 May 2011. Includes details of a disturbing new Liberal Party policy, announced Friday 3 June.


What will you do when they take away your super?

From the Washington Post, 17 May 2011:

Treasury to tap pensions to help fund government

The Obama administration will begin to tap federal retiree programs to help fund operations after the government lost its ability Monday to borrow more money from the public, adding urgency to efforts in Washington to fashion a compromise over the debt.

Treasury Secretary Timothy F. Geithner has warned for months that the government would soon hit the $14.3 trillion debt ceiling — a legal limit on how much it can borrow. With that limit reached Monday, Geithner is undertaking special measures in an effort to postpone the day when he will no longer have enough funds to pay all of the government’s bills.

Geithner, who has already suspended a program that helps state and local government manage their finances, will begin to borrow from retirement funds for federal workers.

The USA is taking public servants’ pension funds, to pay government bills.

Note that well.

Because just over 3 weeks ago – and 4 days before that Washington Post story hit the wires – our own Senator Barnaby Joyce made a very disturbing revelation (below).

Think it could only happen in America?

From Reuters, 21 October 2008:

Argentina’s center-left President Cristina Fernandez on Tuesday signed a bill for a government takeover of the $30 billion private pension system in a daring and unexpected move that rocked domestic markets.

From Bloomberg, 26 November 2010:

Hungary is giving its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension.

Economy Minister Gyorgy Matolcsy announced the policy yesterday, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.

“This is effectively a nationalization of private pension funds,” David Nemeth, an economist at ING Groep NV in Budapest, said in a phone interview. “It’s the nightmare scenario.”

But Argentina and Hungary are not like us, right? That couldn’t ever happen in a Western economy like ours, could it?

From eFinancialNews, 29 November 2010:

France seizes €36bn of pension assets

Asset managers will have the chance to get billions of euros in mandates in the next few months for the €36bn Fonds de Réserve pour les Retraites (FRR), the French reserve pension fund, after the French parliament last week passed a law to use its assets to pay off the debts of France’s welfare system.

Oh, but that’s France. They’ve got hangover problems from the Global Financial Crisis, right? That couldn’t happen in a really strong economy like ours, one that sailed through the GFC without even having a recession … right?

Wrong.

Poland was the only economy in the European Union to achieve economic growth through the GFC. It then doubled economic growth in 2010. It is the sixth largest economy in the EU, and is considered “Europe’s new economic superstar“.

Despite this apparent success, Poland too has just passed new laws to steal more of its citizens’ private retirement savings.

From Warsaw Business Journal, 9 May 2011:

The government’s controversial pension reform plan, which slashes the percentage of workers’ salaries going to private pension funds (OFEs) from 7.3 to 2.3 percent, became law on May 1. OFEs will start receiving the reduced amounts from June.

The changes mean that the state-controlled social security and pension fund, ZUS, will now receive 17.22 percent of workers’ salaries…

Critics have said the changes were nothing more than some creative accounting by the government to shore up its budget deficit

And from Global Pensions, 6 May 2011:

It appears moving backwards on pension reforms has become the thing to do on both sides of the Atlantic.

Hungary last year moved much of its private pension assets to the state. Last month, new rules came into effect in Poland diverting 5% of the 7.3% of salary going to private pension funds to the state.

another recent reversal we’ve seen has come from Latin America. In the 1990s, Bolivia’s decision to move its pension assets from the state to private managers placed it among the most advanced pension systems in the region. However, the current government has decided to nationalise the assets once more claiming it is creating a pension system that is equal for all.

Oh yes, but Poland is really just a Central European economy, not long removed from communism. Something like that couldn’t ever happen in a mid-level, “advanced Western economy” like ours … right?

From Business Insider, 10 May 2011:

Irish Bombshell: Government Raids PRIVATE Pensions To Pay For Spending

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

But the Irish had a really big housing bubble, didn’t they? No way anything like that could happen here … right?

From the Sydney Morning Herald, 4 March 2011:

Australian house prices remain the most overvalued in the world, according to the latest quarterly ranking of global house prices by The Economist magazine.

But our housing market could never fall. Not like it did for Ireland … or the USA … or the UK … or Spain … right?

From AAP, 29 April 2011:

Capital city home prices have posted their biggest quarterly fall in at least 12 years, as more stock in the housing market allows prospective buyers to wait for bargains, a survey shows.

Capital city dwelling values fell by a seasonally adjusted 2.1 per cent in the first quarter of the year, according to the latest RP Data-Rismark Home Value Index.

The quarterly change was the steepest since the index series began in June 1999, RP Data research director Tim Lawless said.

And from the Sydney Morning Herald, 17 May 2011:

Real estate slump will leave banks in pain too

Australian real estate, long the subject of global concern, bears all the symptoms of a market that simply has run out of puff.

Ever since America’s housing bubble burst in 2007, setting off a chain reaction in Britain and across Europe – which then infected the global financial system – international pundits have been warning of a similar catastrophe here.

Do you remember what our government did the last time our real estate market began to fall sharply?

It was during the 3-month peak of the GFC, in late 2008 / early 2009:

Steve Keen's Debtwatch

The Labor Government guaranteed to use taxpayers’ future earnings to underwrite our banks’ trillions in foreign liabilities. Poured $20 billion in borrowed money into Residential Mortgage-Backed Securities (RMBS). And borrowed billions more to prop up the housing market. How? By bribing thousands of young people into massive debt, thanks to the government’s double-trouble First Home Owners Grant.

About that $20 billion in RMBS that Wayne Swan purchased.  With borrowed money. Just how safe is that $20 billion “investment” looking?

From the Sydney Morning Herald, 26 May 2011:

Arrears on mortgage repayments spiked to a record high in the first three months of 2011, as more Australians struggle with rising costs, Fitch ratings agency says.

Arrears on prime residential mortgage-backed securities (RMBS) of 30 days or more hit a record high of 1.79 per cent in the first quarter, from 1.37 in the final quarter of 2010, the group said, as Christmas spending and the Queensland floods forced more Australians to struggle in repaying their mortgages.

RMBS are home loans which are bundled together and sold to institutional investors by banks and mortgage lenders. Misrated RMBS were at the heart of the subprime crisis in the US which lingers to today.

It only gets worse though:

The increase in arrears for the most fragile band of mortgage borrowers, low-doc loans, with payment delays of 30 days or more hit 6.74 per cent in the first quarter, up from 5.7 per cent in the final quarter of 2010, a higher level than December 2008 quarter, when the financial crisis hit and the Reserve Bank began rapidly lowering rates.

Low-doc mortgages are written for riskier borrowers than prime mortgages, which are written for customers who have a reasonably safe ability to borrow.

Delinquencies of three months or more on conforming low-doc mortgages, which are used by people who are self-employed for example, soared past 5 per cent in the March quarter, from about 3 per cent the December 2010 quarter.

Would our Wayne have “invested” any of that borrowed $20 billion in low-doc RMBS?  Or, did he stick with prime RMBS?

From the Australian Office Of Financial Management website:

Purchase of RMBS – Program Update

Minimum Eligibility Requirements

* Low documentation loans, that is loans underwritten using alternative income verification procedures, may be included in mortgage pools.

Well done Wayne.

$20 billion worth of RMBS. With low-doc loans included. A brilliant government “investment” in keeping our property bubble inflated. And now that investment too, is failing, with record-high arrears on the mortgages backing those “securities”.

But there’s nothing really to worry about, because we’ve got the “strongest banking system in the world”, right? Even if the property bubble does pop, our government would never need to go looking for even more money, to bail out our banks … right?

On 17 May 2011, leading credit rating agency Fitch’s downgraded 54 ‘tranches’ of Australian Residential Mortgage-Backed Securities, indicating that “cash-strapped borrowers and tight-fisted mortgage insurers are a greater threat to Australian banks than previously thought.

The next day, another leading credit rating agency Moody’s downgraded our Big Four banks.

From the Sydney Morning Herald, 18 May 2011:

Moody’s Investors Service has downgraded the long-term debt ratings of Australia’s big four banks to Aa2 from Aa1, citing their relatively high reliance on overseas funds rather than local deposits.

Moody’s explanatory paper effectively stated that our banks are Too Big Too Fail.  That the Big Four’s liabilities must continue to be supported by the Australian Government Guarantee For Large Deposits And Wholesale Funding that Labor “decisively” introduced (like Ireland) in response to the GFC. And if the guarantee is removed, Moody’s indicated that the Big Four’s long-term debt ratings will be downgraded by at least two further ‘notches’.

Meaning?

Moody’s has just placed our government on notice.  Australian taxpayers are now effectively on the hook – permanently – to bail out our banks when our housing bubble bursts.

Exactly the same thing that happened in the USA, UK, Ireland, Spain et al.

Don’t believe that we have a housing bubble?  Think the nightmare housing-driven bank collapse scenario that is throttling the rest of the Western world won’t ever happen here?

Fine.

If the housing-collapse trigger event is not enough to bother you, then take a moment to think about derivatives.

Those “exotic” financial instruments that were at the heart of the Global Financial Crisis. The ones that famously prudent investor Warren Buffet referred to as “a mega-catastrophic risk”, “financial weapons of mass destruction”, and a “time bomb”, way back in 2003.

The same kind of exotic instruments that lauded economist Saul Eslake also referred to just a few days ago, in an argument with me on my blog over my criticism of his public lobbying for a carbon dioxide “pricing” scheme (emphasis added):

“And while it is true that banks might make money from an emissions trading scheme, they could just as likely lose (as many banks have done from trading other ‘derivatives’”.

Do our banks have much exposure to derivatives now – even before an emissions trading scheme is introduced?

Sure do.

Prepare to be shocked.

According to RBA statistics at December 2010, Australia’s banking system has $15 Trillion in Off-Balance Sheet “Business”, versus a mere $2.66 Trillion in On-Balance Sheet “Assets”.

And exactly what kind of “business” makes up 92.3% of that “Off-Balance Sheet” $15 Trillion – more than 10 times our nation’s annual GDP?

You guessed it. Derivatives.  Those “financial weapons of mass destruction” which so nearly blew up the whole world in 2008-09.

Finding it a bit difficult to get your head around these huge numbers?  Pictures often help.

Take a look at this simple chart comparing our “safe as houses” banks’ On-Balance Sheet “Assets” (blue line) – which are 66% loans – versus their Off-Balance Sheet “Business”, 92.3% of which is derivatives (click to enlarge):

$2.66 Trillion in "Assets" versus $15 Trillion in Off-Balance Sheet "Business"

Still feeling confident about our banking system?

There’s more.

Australia’s banking system only just dodged a bullet in 2008-09, thanks almost entirely to the government (taxpayer) guarantee which is still in place today.

“Almost” entirely thanks to the government guarantee, you say?

That’s right. Something else helped save our banking system too.

The Australian public remains blissfully unaware that during the GFC, two of our Big Four banks, and our very own central bank, the RBA, all obtained secret emergency loans from the US Federal Reserve – which is simply printing new money, Zimbabwe-style.

From Business Spectator, 3 December 2010:

National Australia Bank Ltd, Westpac Banking Corp Ltd and the Reserve Bank of Australia (RBA) were all recipients of emergency funds from the US Federal Reserve during the global financial crisis, according to media reports.

Data released by the Fed shows the RBA borrowed $US53 billion in 10 separate transactions during the financial crisis… according to a report in The Australian Financial Review.

NAB borrowed $US4.5 billion, and a New York-based entity owned by Westpac borrowed $US1 billion, according to The Age.

If you think “it could never happen here”, if you think that our government would never take away your super to pay for its massively wasteful spending, its crappy “investments”, or to bail out our Too Big Too Fail, very recently downgraded, multi-Trillion derivatives-laden banking system, then it’s time for you to think again.

Were you one of the many who ridiculed Barnaby Joyce’s warnings in late 2009, about the possibility of a US debt default (“Barnaby Warns Of Bigger GFC“)?

That’s coming to pass right now. Trying desperately to avoid a default is the reason why the US Treasury has now resorted to stealing federal workers’ retirement savings, to pay government bills.

So pay close heed to another prescient warning from Barnaby, given on 13 May 2011:

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

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

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

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

!??!

That is exactly what is happening in America. Right now.

And Barnaby is warning that it could happen here too.

The first steps in that direction have already begun.

From Global Custodian (Australia edition), 11 May 2011:

The Gillard government’s 2011-12 budget has proposed a raft of initiatives aimed at encouraging superannuation fund and private investment in infrastructure projects.

In light of the botched “school halls” program, and the stalled white elephant NBN – which so far has only achieved a 12% takeup rate, versus their predicted 58% – would you really trust this government to wisely and prudently invest your super in Government infrastructure projects?

Others have their doubts.

From The Australian, 12 May 2011:

The government’s plan to use tax incentives to encourage superannuation funds to invest in new infrastructure could be thwarted by inadequate returns on projects and a reluctance by the states to take on project risk, experts say.

First, a little “encouragement” for super funds to invest in government spending programs.

Then, when the costs blow out, or when the government debt becomes unmanageable … or when the banks need bailing?

“No super for you!”

Barnaby is the only one on the ball.

And, he is the only politician in Australia with the honesty, decency, and courage, to (once again) try to forewarn the public about the risks of debt, and where this debt train is taking us.

Still not convinced there’s anything to worry about?

Then consider the words of Labor’s PM-in-waiting, the Minister for Financial Services and Superannuation, Bill Shorten. He already thinks of your super as a “significant national asset” … a kind of “sovereign wealth fund”.

From Shorten’s op-ed published in The Australian, 4 May 2011:

Superannuation is our sovereign wealth fund

This week marks 12 months exactly since the government announced plans to take compulsory superannuation from 9 per cent to 12 per cent.

… our superannuation savings place Australia fourth in the world. Its $1.3 trillion in funds under management through superannuation significantly boosts national savings and provides greater retirement security for millions of Australians. Superannuation is also a significant national asset because it strengthens our financial sector.

Superannuation “strengthens our financial sector”? Can you see where this is going?

Shorten and his cohorts already have their eyes on our $1.3 Trillion in super savings. In Labor’s view, your retirement savings are “our sovereign wealth fund”.

When our Too Big Too Fail, derivative-laden banks inevitably run into trouble again – as indeed they are right now with a falling housing market – you should have no doubt that our government will follow the lead of the USA, France, Ireland, Poland, and all the rest, and simply take your super to prop up our “financial sector”.

After all, they have “guaranteed” our banks.  Your future taxes … and if necessary, your super … are the collateral for those guarantees.

But if the Coalition wins government everything will be fine, right?  They’re far better economic managers, right?  We can all trust the Liberal Party not to put their hands on our super, to pay down Labor-incurred debts … right?

Wrong.

Just this past Friday 3 June 2011, the Liberal Party announced a new policy that they will take to the next election. Loaded with weasel words, it is yet another harbinger of the super theft to come, sneakily disguised as a helpful “reform”.

From the Liberal Party website:

Further relief for small business

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

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

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

Can you see the cunning plan here?

Billions and billions of dollars in compulsory superannuation payments, going directly from our employers’ bank accounts to the government’s tax department , every 3 months. And we have to simply trust the government of the day, that every cent of it will immediately be passed on to our private super funds. Not siphoned off into special “investments”, or government accounts.  Or simply “sat on” for a month or so, in order to prop up the government’s weekly cashflow needs.

Oh, but not to worry … it will just be an “option” for “small” businesses to do this, of course.

Right. If you believe that, then I’ve got an air-backed derivative called a “carbon permit” to sell you. Ever heard the old saying, “It’s the thin end of the wedge”?

A final thought.

Our government is presently considering the Garnaut proposal for introduction of a carbon dioxide “pricing mechanism”. A key part of this proposal that has (surprise surprise) drawn strong public support from economists employed by the banking sector, is the suggestion that the billions of dollars raised should be administered by an “independent” Carbon Bank. One that …

…could be allowed to borrow money to invest in renewable energy projects against the future revenue of Labor’s proposed carbon tax and emissions trading scheme.

In other words, a Carbon Bank run by unelected, unaccountable parasites – chosen from the banking sector, no doubt – with the government … meaning taxpayers … acting as the final guarantor for any losses made on their “green” “investments”.

Does that prospect concern you?

Can you see where this is all heading?

We have a government that has already racked up nearly $200 billion in gross debt.

Is running a “forecast” $50 billion annual budget deficit.

Is presently borrowing at a rate of over $2 billion per week.

And – like an America’s “Mini-me” – has now moved to raise our debt ceiling by another $50 billion (ie, a 25% increase), to a new record quarter of a Trillion dollars.

This is the same government of completely unqualified economic incompetents behind a string of costly disasters – killer ceiling insulation, overpriced school halls, “green scheme” rorts, subsidised Toyota hybrids (that noone except government is buying), the problem-plagued Nation Bankrupting Network … and their latest rort-ridden debacle, “free” set-top boxes.

Do you honestly believe that this government would not end up burying taxpayers with even bigger losses from their carbon dioxide “air tax” scheme too?

Do you honestly believe that this government would never follow the lead of Argentina, Hungary, Bolivia, France, Poland, Ireland, and now the superpower USA … and steal your super to pay for massive debts that they have racked up?

These are just some of the many sound reasons why Senator Joyce has persistently tried to raise public awareness of the real and grave peril of ever-increasing government debt and deficit, in a (supposedly) post-GFC world.

Your retirement savings depend upon your taking notice of his warnings.

Barnaby is right.

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

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

And These #JAFA’s And Morons Want One Here!?!

3 Jun

Saul Eslake & Bill Evans call for "independent" (unelected, unaccountable) authority for pricing CO2

Oops. Sorry.

#JAFA‘s and morons.

Bit of a tautology there.

Anyhow, from the Guardian UK newspaper, 1 June 2011:

World Bank warns of ‘failing’ international carbon market

The international market in carbon credits has suffered an almost total collapse, with only $1.5bn (£916m) of credits traded last year – the lowest since the market opened in 2005, according to a report from the World Bank.

A fledgling market in greenhouse gas emissions in the US also declined, and only the European Union’s internal market in carbon remained healthy, worth $120bn. However, leaked documents seen by the Guardian appear to show that even the EU’s emissions trading system is in danger.

And yet, only yesterday we saw 13 “eminent”, “high profile” Australian economists – 10/13 with connections to the banking sector – publish an Open Letter to our government, advocating for an emissions trading scheme here in our pissant little (but great) nation.

Indeed, we even witnessed the telling spectacle of the most prominent of these “eminent” economists retaliating to criticism of these #JAFA‘s position, right here on this pissant little blog.

It is abundantly clear that these very “economists” are – unsurprisingly – still as contemptibly useless a bunch of ivory-towered, commonsense-bereft tea-leaf readers as when they all utterly failed to foresee and forewarn of the onrushing GFC.  Only the biggest, most catastrophic financial disaster in almost a century.

These “experts” are either ignorant, or simply dismissive of, the parlous state of carbon dioxide “schemes” around the world.

These “experts” are also either ignorant, or simply dismissive of, the parlous state of Australia’s taxpayer-propped banking sector, as has been amply demonstrated both on this blog and in other, rather more “recognised” commentary.

These “experts'” advocacy for an “independent” authority to administer a carbon “pricing” scheme, represents a blatant attack on the democratic  (and Constitutional?) rights of the citizens of this country, to elect those who will be afforded the power to determine and impose taxes and levies by popular ballot.

These “experts'” advocacy for an “independent” Carbon Bank with the power to borrow against future government (ie, taxpayer) revenues, represents a wilful moral and intellectual dereliction of responsibility, one that is especially repugnant given their “eminent” positions of “authority” on matters concerning finance and banking.

It’s long past time that the Australian public clearly recognised these shills for Big Corporate interests for what they actually are.

Useless, parasitical rent-seekers.

Otherwise known as …

#JAFA‘s.

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