Tag Archives: sovereign debt

Global Debt Accumulation: “You Know How This Ends, Right? This Ends In War”

23 Mar

To those who know, hedge fund manager J. Kyle Bass needs no introduction.

In the following “must watch” keynote lecture delivered in October 2012, in his usual calm, matter-of-fact, pragmatic and incisive style he shared his thoughts on a number of key issues facing the world over the next few years. These include the inevitability of a major war, escalation of social unrest and food riots, and why our governments will never tell us the truth about the nation’s financial situation:

Highlights (with comments from your humble blogger)

 

4:00 – Largest peacetime accumulation of debt in world history … ends through war

“Something that I think is really important to pay attention to; in the last ten years, debts around the world… has grown from $80 Trillion to just over $200 Trillion. So debts have grown, at almost an 11% compound annual growth rate, over the last ten years. We sit today at the largest peacetime accumulation of debt in world history.

One of the things we talked about in the back after the last panel – and very few people are willing to go out there and say this – you know how this ends, right? This ends through war

We don’t have a playbook for the enormity of debt at 340% of global GDP, and that’s why we have such a hard time thinking about how this plays out. But I can tell you that – again, I don’t know who’s going to fight who – but I’m fairly certain that in the next few years you will see wars erupt and not just small ones.”

8:00 – Deficit spending going into a war

“If you think about what’s happened in the past; if you study history, you see that when sovereign nations get to 250% total credit market debt to GDP, they’re both deficit spending going into a war. And at the conclusion to the victor go the spoils and to the loser go defeat and default. That’s the playbook that we’re actually familiar with.”

9:00 – Central banks have created $10 Trillion out of thin air

“Central bank balance sheet expansions are really important. We talk about money printing; today… the four largest central banks in the world have $13 Trillion on balance sheet. From the beginning of the [GFC] crisis to today, they’ve expanded by $10 Trillion. Ten trillion dollars has been created out of thin air. How are we supposed to think about that? Well I know we are all worried about it… You are starting to see the first signs of what happens when you expand central bank balance sheets limitlessly.”

13:00 – More worried about the sovereign balance sheet

“I went and met with (Kenneth) Rogoff in February of 2009 and delivered our work here to him, and I said to him: “I’m looking at this and it’s really, really worrying me” – and if you remember, in February 2009 we (financiers, traders) were mostly focused on which bank is going under, and who was going to bail this bank out and that bank out and how the financial system is going to stay together, but I was more worried about what was going on on the sovereign balance sheet – when your banking system gets to ten times your GDP, and you lose 3% of your banking system, you’re finished. And that’s what’s happened; Iceland, it’s what happened to Ireland, it’s really what happened in a number of different nations…

So at the top of what’s going wrong with the world, no one was paying attention to how large these systems were getting. You know, in February of 2009 when Rogoff looked at this he said to me: ‘I can hardly believe it’s this bad,’ and I was thinking: ‘Oh shit, who’s paying attention to the size of those countries’ banking systems, because if you, the father of sovereign balance sheet analysis isn’t, then I know who isn’t’.”

This observation serves as solid justification for the concerns that Senator Barnaby Joyce has, for some years now, been expressing (to much derision by “experts”) about ever rising sovereign debt – the “trajectory”, as he calls it – in the USA, Europe, and in turn, here in Australia.

Moreover, Bass’ observations about the dangers of an expanding financial sector ring out like the tolling of funeral bells when one considers the size of ours. In late August 2012, the Bank of International Settlements (BIS) issued a warning about the size of Australia’s banking sector:

Finance has grown too big around the world and cross-border lending too large, according to BIS chief economist Stephen Cecchetti.

Experience shows that a growing financial system is great for a while — until it isn’t,” he told the BIS annual conference in Switzerland, arguing there is an optimal size beyond which the financial industry drags down the rest of the economy…

In Australia, the finance sector accounts for 11.5 per cent of all industry value added, having doubled its share of the economy since the mid-1980s.

This compares with the 2008 peak of 7.7 per cent in the US and 10.4 per cent in Ireland…

The extraordinary dimensions of Australia’s banking sector were highlighted by Bank of America Merrill Lynch research last week showing that Australia has the second-largest banking system in the world by market capitalisation, surpassing those of the eurozone, Japan, Britain and China.

It is absurd for a nation of 22 million to have a banking sector that represents more than 8 per cent of the world banking industry by market value. Banking now represents just under half Australia’s listed market.

Back to Kyle Bass:

12:00 – GDP is a homogenizing denominator, we use government tax revenue as a better denominator

“When we think about private sector leverage becoming a public sector problem, back in 2008 when we were trying to understand this transference of risk from the private balance sheets to the public balance sheets, very few people – in fact, I couldn’t find it when I went out looking for it – had done the work to try to understand On Balance Sheet debts, and then the acuity of the banking system problem. So when I was thinking about how to get my arms around how this is going to go forward, we were saying, ok let’s forget about contingent liabilities, let’s forget about social welfare, let’s forget about promises that had been made to various people in various nations; let’s just look at On Balance Sheet obligations. Let’s just look at how big banking sectors are in relation to GDP – and actually, GDP is a pretty good homogenizing denominator; we tend to use central government tax revenue as a better denominator, because certain countries are much more productive than others, in our opinion…”

There are two important observations here that I wish to highlight.

The first is Bass’ concern over private sector (ie, banking system) “leveraging” (ie, mega-debt) being transferred on to the public (taxpayer) sector, in a banking system crisis. 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.

The second important observation – on GDP as a “homogenizing denominator” – is one that thrilled your humble blogger, and made him feel a lot smarter than he actually is. How so?

For years I have argued that using “GDP” as a measuring stick is bogus, and deliberately misleading, because:

(a) “Gross Domestic Product” (GDP) is really just a blunt measure of total volume x notional “value” of transactions in the economy… irrespective of whether those transactions were actually a result of “productive” activities or not; as such
(b) it only serves the purpose of helping politicians and bureaucrats to obscure the truth about the economy, and the government’s financial management; and so
(c) governments should be required to report key budget figures like government spending, and public debt, as a percentage of government tax revenue instead.

Bass is both subtle and brilliant, in describing GDP as a “pretty good homogenizing denominator”. One definition of that word is: “to form by blending unlike elements”.

That’s exactly what the GDP figure does – it blends unlike elements. It is a meaningless quantitative measurement, that simplistically blends together every transaction in the economy in one huge number (all the better for making things like government spending or debt “as a percentage of GDP” sound like a small number). In so doing, it obscures any qualitative measurement of activity in the economy. That is, unlike “GDP”, a qualitative measurement would distinguish between the volume x value of transactions resulting from real, productive activities, versus that which resulted only from (eg) non-productive money-shuffling between financial institutions. In theory, an economy could boast a China-like level of annual GDP “growth”, while actually producing nothing. All it takes to achieve that, is a sufficient increase in the volume x notional “value” of electronic digits that are transacted each year. “GDP” as a measurement is utterly ridiculous, once you see it for what it is.

This blogger can greatly appreciate the wisdom of Kyle Bass and his hedge fund team, in choosing to assess economies based on a recognition that “certain countries are much more productive than others”, and that GDP as a measurement does not help to identify which countries have quality (ie, productive) activity, and which do not.

15:00 – We think inflation causes default 90% of the time

“When your debts get to be 20, 25 times your central government tax revenue, a non-linearity develops between your revenues and your expenses. So if you try to inflate your way out of this problem which – again, the academics, the central bankers of the world believe that when you get to this proverbial fork in the road, that fork is either inflate or default, and those two roads are mutually exclusive of one another – we tend to think that 90% of the time one causes the other. And when you develop this non-linearity… when your debts are 20 times your revenues and you try to inflate your way out of this through revenue, it moves your swaps curves or your debt costs, ok? Your expenses grow exponentially while your revenues grow in a linear fashion … it just makes sense, this is logic.

So when you think about Japan, they’ve got 24 times their central government tax revenue in debt. If Japan ever moves to an inflationary bias, they’re finished.”

Oh dear. Remember, this talk was given in October last year. As of March this year, the government of Japan has moved to an inflation bias, after 15 years of deflation. They have set the central Bank of Japan a 2% target for inflation, to be achieved within two years.

19:00 – More social unrest

“You’re going to see more social unrest. You saw huge riots in Greece and you’re seeing huge riots in other parts of the world over food, and lack of food, and those are actually tertiary and secondary derivatives of the financial problems, in my opinion, that we’re exporting inflation to some other nations. So going forward it’s going to be a problem.”

24:00 – They’re not going to tell you when this happens… Their job is to promote confidence, it’s not to tell you the truth

“They’re not going to tell you when this happens, you’re going to have to see it for yourself. How many of you remember Mexico in ’94 when we had the ‘Tequila Crisis’? The government gave affirmative determinations that they would not devalue, they would not default, almost daily. And the day after they said we won’t devalue, they devalued 60%. The government’s never going to tell you that it’s going to happen. (Greece’s) Yunker, when asked in 2010 if there was a secret meeting to discuss restructuring Greece, he said: ‘Oh no, there’s no meeting’. And then they talked to two other Finance ministers the next day, and they said: ‘Oh yes, we had a meeting and Yunker was in there’. And so the press went back to him and said: ‘You told us there wasn’t a meeting’, and he said: ‘Look, when it becomes serious, you have to lie’.

You have to realise that these guys are never going to tell you the truth, because they can’t tell you the truth. Their job is to promote confidence, it’s not to tell you the truth.”

26:00 – There is no chance the Japanese can ever repay their debts

“We all know Japan’s On Balance Sheet situation is now 240% debt to GDP, 25 times central government tax revenue; they have over a quadrillion Yen of debt, On Balance Sheet. That’s a one with fifteen zeros after it. If you were to try to count to a quadrillion, and if every number only took you one second to get there, how long do you think it would take you to get to a quadrillion? Thirty-one million years. There is no chance the Japanese can ever repay their debts. Plain and simple. And they will have a crisis. They will have a bond crisis in the next two or three years, in our opinion. It will be a big one.”

Japan is our second largest trading partner, last time I looked.

42:00 – Global sovereign restructurings … people are going to lose a lot of money

“What this means, is that the globe is about to enter into a period of sovereign restructurings. And what does that mean to you?  Well, to me it means people are going to lose a lot of money.”

54:00 – Gold is not the panacea that people think… Currency system should be linked to population growth

“It (gold) is not the panacea that people think… Having our entire currency system tethered to something that’s either convertible into a fixed asset or – I think something that’s better, maybe, tied to population growth – makes a little bit more sense. But limitless credit creation is probably a bad idea.”

This too, impressed me. And made me feel smarter than I am. How so?

Fundamental to my own alternate currency system idea, is the view that gold (or any other ‘commodity’ whose stocks, supply, or public reporting of reserves can be manipulated) should not be used as the basis for a future currency system. And – per Kyle Bass – my idea ties currency issuance directly to population size.

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

Watch the whole talk, on Youtube. Highly recommended.

David Murray Shows The Greens And MSM Are Clueless. Again.

18 Apr

Former chairman of the Future Fund, David Murray, ruffled lots of establishment feathers during his tenure, particularly for his scathing criticism of the Warmageddonist movement.

Now, he has shown up the Greens – and, the entire lamestream economics and political media contingent – with his astute comments about the real reason why the government must balance the nation’s books.

From the Australian (emphasis added):

FORMER Future Fund chairman David Murray has accused the Greens of making “ill-advised” demands on the federal budget, declaring the priority should be to protect the government’s credit rating as the global financial system remains under strain

Mr Murray, former chairman of the nation’s $73 billion sovereign wealth fund and a former Commonwealth Bank chief executive, said he was concerned about the Greens’ suggestions that curbing government spending was not important, given the woes in the global economy and the size of the blow-out in the budget at the peak of the global financial crisis.

“What’s at risk here is that with very significant offshore borrowings and a shaky world for raising capital, if the commonwealth in particular can’t hold its ratings, that will affect the ratings of the banks, that will affect the cost of debt, and it also means that the commonwealth is not there in the same measure as a backstop if things go wrong again and the banking system can’t fund itself offshore,” Mr Murray told The Australian.

That’s the higher risk that has to be managed at the moment. We don’t control what happens in the rest of the world. You need the commonwealth rating as a backstop because of what’s going on elsewhere in the world. You can’t put that at risk. To do that you have to achieve a budget that is cash-neutral at least, so that the debt stabilises and within that cash neutral position you can pay interest.”

Exactly right.

As we have seen here at barnabyisright.com for many months now, the government (and the economy) are now trapped by the errors and abject stupidity of the past.

The credit ratings agencies have put our government on notice that the credit rating of the government – and more importantly, of the banking system – is contingent on the government showing a credible path back to balanced budgets. Why? Because in the GFC, the government explicitly and implicitly guaranteed our hugely overleveraged, foreign-debt dependent, housing market exposed banking system, using the sovereign balance sheet.  If the government can not promptly curb its ever-rising debt and deficits, then the government guarantee propping up the banks will lose credibility.

On the other hand, if the government does attempt to achieve an actual surplus in 2012-13, and not just a forecast for one on May 8th, that spells disaster for the economy too.

How so?

See for yourself – Labor’s Inbred, Debt-Fed Chickens Coming Home To Roost.

We are Ireland Mk 2.

Labor’s Budget Made Simple

31 Jan

Twitter follower @cr0atz recently brought to my attention an interesting picture of the US budget made simple. He asked me to make an Aussie version.

Voila!

Click to enlarge

Now don’t let anyone tell you that debt and deficits don’t matter.

Or, that government and household budgets are “different”.

Just remember, dear reader.

Those spruiking such claims – their ideological Articles of Faith – are the same “experts” who didn’t see the GFC coming.

And now, can’t fix it either.

#JAFA’s, in other words.

Barnaby is right:

“If you do not manage debt, debt manages you” ~ Feb 2010

There’ll Be No EU Bailouts From China’s Empty Pockets

25 Nov

For weeks … months in fact … there’s been plenty of fevered speculative commentary about China sailing to Europe’s rescue, by using their vast foreign exchange reserves to buy up European sovereign debt that the markets increasingly distrust (thus, ever spiking interest rates).

Problem.

China’s vast foreign exchange reserves may not be so vast after all.

From Reuters via The China Post (h/t ZeroHedge):

Analysts suspect China’s forex may be weaker than perceived

Europeans searching for a bazooka to blast away eurozone debt problems might well eye China’s US$3.2 trillion foreign exchange arsenal with envy, but Beijing has far less firepower available than many assume.

Most of money in the world’s biggest store of foreign exchange reserves is prudently kept in near-cash instruments to fund import and debt service bills in the event of an unforeseen domestic emergency, or invested in long-term assets that, if sold in size to help Europe, would spark panic on global financial markets.

In fact, analysts reckon China’s armory has only about US$100 billion to spare.

“The sheer size of China’s foreign exchange reserves is massive, but the actual amount of money available for investing in Europe each year isn’t that big,” said Wang Jun, an economist at CCIEE, a top government think tank in Beijing.

A crucial constraint is China’s existing holdings of U.S. Treasury securities. Beijing is by far the biggest foreign owner, with an estimated 70 percent of the nation’s reserves held in U.S. government bills, bonds and other dollar assets.

Turn outright seller and the market value of the remaining holdings is likely to plunge.

That’s not a great investment strategy given the Chinese public’s unhappiness about the roughly 38 percent decline in the nominal value of the dollar in the last 10 years.

The government also may have to set aside some foreign exchange reserves to bailout the banking system if piles of loans to local governments and the property sector turn sour.

China injected nearly US$80 billion in reserves into its big state banks from 2003 to 2008 to help them clean up their balance sheets so they could float shares.

Shrinking Exports, Smaller Surplus

Meanwhile, China’s trade surplus, essentially the money it has to invest overseas, is shrinking as Beijing does what critics in the developed world have been urging for years and rebalances its economy away from exports.

Imports surged 28.7 percent year on year in October and the surplus of US$17 billion was well short of the US$24.9 billion forecast by economists.

Beijing holds an estimated one-quarter of its reserves in euro-denominated assets, so keeping that steady implies a US$117.5 billion increase this year if the country’s foreign exchange reserves grow by the US$470 billion estimated in 2011.

That’s roughly the amount economists expect China to invest in Europe in 2012.

“Assuming the FX reserve accumulation does not slow significantly, I think China will put at least US$80-100 billion in euro assets per year in the next two years,” said Wei Yao, China economist at Societe Generale in Hong Kong.

China recycles foreign exchange assets into overseas investments so outflows of cash roughly track inflows.

The build-up in FX reserves, a result of the central bank’s intervention to limit the yuan’s appreciation, tends to fuel inflation pressures even as the central bank issues bills to mop up the amount of local currency it pumps into the economy.

And it explains why foreign reserves cannot easily be used for domestic spending on infrastructure or shoring up pension systems, since simply converting the cash risks driving up both inflation and the value of the yuan currency.

This revelation comes hot on the heels of a similar one from a well-known Chinese economist and TV personality, who recently told a private audience that China is nearly bankrupt.

In his own words:

“Every province in China is Greece”

US Credit Rating Imperilled Again – Barnaby Was Right

25 Nov

From Bloomberg BusinessWeek:

Reducing the $1.2 trillion of discretionary spending cuts set to begin in 2013 may have “negative rating implications” for the U.S.’s top credit ranking, according to Moody’s Investors Service.

The deficit reductions are to take place over 10 years and were triggered by a congressional panel’s failure this week to agree on alternative cuts of the same amount. Moody’s, which didn’t change the U.S.’s Aaa rating after the committee failed to reach agreement on Nov. 20, has a “negative outlook” on the country’s debt.

“If they were to eliminate that process or reduce that amount significantly, that would definitely be a negative for our thinking about the rating,” Steven Hess, senior credit officer at Moody’s, said today in an interview. “A change in that would increase deficits and therefore the debt over time and would definitely be negative.”

Barnaby: Labor Downplays Debt Like It’s Only A Little Melanoma

18 Nov

Good for his word. That’s Senator Joyce.

He pledged to never relent in reminding Australians that “if you do not manage debt, debt manages you” (Feb 2010).

Check out his latest and greatest attack on Labor’s melanoma-like growth in debt, in the Canberra Times (my emphasis added):

Forever in debt and Labor still ignores cost cuts

The Labor Party did something remarkable last week: it actually paid back some money after borrowing $11billion over the six weeks before. Our gross debt is now at $215billion. Unfortunately, Labor will probably borrow more again this week.

Recent statements by Penny Wong about cost-cutting and by the secretary of the Treasury, Dr Martin Parkinson, seem to accord with my fears of two years ago that we were taking on too much debt.

On October 21 , 2009, Australia’s gross debt accelerated through $100billion. This was before my unfortunately spectacular and brief tenure as Australia’s shadow finance minister. I was deeply concerned about the trajectory of our debt but it was very hard to find somebody else in government or the fourth estate that held similar concerns.

I remember the date well as I put out a media release at the time which concluded, ‘‘There are lots of ways you can try to pay debt but closing your eyes tightly and crossing your fingers has proven lately to be completely ineffective.’’

Leading the caravan of opprobrium against me was Treasury, acting as an arm of government. Repeatedly, it said Australia had no problems. It avoided that it was not the size that was the concern, it was the rate of growth, a very small active melanoma. We fell into trap of saying we are in a better position than others because our melanoma is tiny compared with theirs.

In a speech last week, Parkinson said ‘‘efforts to reduce government net debt should be the immediate focus’’. I’ll give him a tip, it would have been easier to control back in 2009. It has taken a couple of years, but now Parkinson and I appear to be on the same page.

You can see Australia’s gross debt grow almost every week, like a Chia Pet, by visiting the front page of the Australian Office of Financial Management website. I imagine it is there because the people we borrow from want a fully transparent view of exactly how much we have borrowed. If you start hiding it they get very, very suspicious.

Everything is moving into unfortunate focus as we approach at a rapid rate our third debt ceiling under this Government’s watch, and Europe and America come to the realisation that the problem is debt.

To understand debt ceilings you must understand gross debt. On March 10, 2009, Treasurer Wayne Swan increased our debt limit from $75billion to a ‘‘temporary’’ level of $200billion. According to Swan, we needed this increase because China and India were going to ‘‘slow markedly’’ and the mining boom was ‘‘unwinding’’.

The mining boom didn’t, but we not only hit our new debt ceiling but it is now at $215 billion, or over $17,000 for every Australian taxpayer. Our next ceiling is at a quarter of a trillion dollars. This debt does not include state government debt (heading towards $250billion), the debt of fully owned government entities, such as the National Broadband Network, or the debt of local governments.

To make a budget based on blue, sunny days is not only fraught with danger, it is naive. It is the old adage of keeping money aside for a rainy day. School halls and ceiling insulation are not the only reasons we now have so much debt, it is generally just poor day-to-day cost management. Labor talks of budget cuts now but why did they ignore people such as Productivity Commission chairman Gary Banks and former Reserve Bank board member Dr Warwick McKibbin, who both said Labor should have been cutting spending two years ago?

Those with the purse strings either don’t have the strength, or don’t have the competency, to remain within our means. Labor’s cabinet is lacking the real business experience where what you bill or sell is what you earn, and the cheques you write over the long term better be less than that.

What happened to the $11billion that Labor borrowed in six weeks? Are there new aircraft carriers in Sydney Harbour with the Australian ensign fluttering? Is there a big new freeway somewhere that I am not aware of? Are there big new dams in Northern Australia delivering water to vast new agricultural areas to feed the world?

If you were to go searching for this money, the place I would humbly suggest you start looking is Canberra. Not the people of Gungahlin, but generally to the ministers who are in charge of departments that are just not controlling costs.

Barnaby is right:

Commonwealth Government Securities Outstanding | Source: Australian Office of Financial Management (AOFM)

Gillard Offers Borrowed Money To Bail Out Europe

3 Nov

Ummmm. About our $250 Billion debt ceiling.

I wrote only yesterday that we are on track to hit it by mid-2012. Unless something went pear-shaped first.

I was right. Something has gone pear-shaped.

The rationality of Australia’s ruling politicians:

Julia Gillard has offered extra cash for the International Monetary Fund to help prop up the ailing European economy and prevent another global financial crisis.

The prime minister made the offer as she arrived in France in the middle of a worsening European financial crisis that is set to dominate the Group of 20 nations meeting this week, The Courier-Mail reported.

“For Australia’s part, we stand ready for an increase in IMF resources,” Ms Gillard said after arriving in Cannes.

“We”? Who’s “we” Julia?

Oh I see. “We” means our unrepresentative overlords in “Canberra” (h/t Wall Street Journal):

Australia’s Prime Minister Julia Gillard arrives in Cannes on a mission — she wants fellow G-20 governments to give more cash to the International Monetary Fund to help it deal with Europe’s crisis.

“I will be raising the need to increase IMF resourcing, both at the G20 meeting itself, and at my bilateral meetings, starting today at my bilateral meeting with the President of Brazil,” Gillard tells reporters on her arrival in Cannes.

Canberra has been a vocal advocate of the need to boost the IMF’s resources. The government has one of the developed world’s strongest sovereign balance sheets so is in a good position to donate more cash.

A “good position” to donate more cash!?!

“Good” compared to who, exactly? Greece? The USA? Zimbabwe?

Of course, silly me.

We only have a record budget deficit.

An economy that only survived the GFC solely on the back of China’s massive money-printing “stimulus”:

… that created a temporary artificial demand for our iron ore and coal – a demand that is now slumping:

Steel China Iron Ore Fines cfr main China port USD/dry metric tonne (MBFOFO01:IND)

Canberra is only borrowing money from foreigners at a record rate to fund Green-Labor’s insane spending … an extra $7 billion per month borrowed through September and October.

And doing favours for foreigners … and foreign banks … assures politicians of a life of ease and comfort upon retiring or being kicked out of office.

So “sure thing” Julia.

You are in a great position to throw bad money (borrowed) after even worse money (insolvent PIIGS).

Let us be perfectly clear, dear reader.

Europe is stuffed. Totally and utterly stuffed.

As is the USA. The UK. Indeed, as is the entire Western world’s financial system.

You simply can not fix a debt problem, by borrowing more money.

History bares witness time and time again, that the so-called “rescue” packages that globalist entities like the IMF offer to over-indebted nations, are no rescue at all.

In exchange for a non-solution – some “free” money, and “better” terms of repayment on existing debts owed – the IMF takes ownership over national infrastructure (ports, railways, toll roads, electricity grids, airports, etc) as collateral … and, effectively takes over dictating the national budget. Hence, “austerity measures”.

It’s called “asset stripping” and “loss of sovereignty”.

The IMF is evil.

And it is beyond appalling to this blogger, that we have reached such a low point in the governance of Australia .. egged on by the general apathy of our citizens … that we now have a minority government that not only blatantly lies to and ignores the will of its people (carbon tax).

It is a government that is so totally beholden to the World Government aspirations of the Green ecoloons, that it would offer to give borrowed money to the IMF, in order to aid and abet their stripping yet another nation of its assets and sovereignty:

Make no mistake, dear reader.

By taking Australia ever deeper into record debt, this government is fast-tracking our nation into the arms of the IMF, World Bank, and other assorted power-crazed “We want to rule the world” lunatics.

Click to enlarge | Source: Australian Office of Financial Management (AOFM)

It could not be clearer where we are headed.

Can’t see it?

Don’t want to believe it?

It’s time to take the Red Pill.

The Matrix: "You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill – you stay in Wonderland and I show you how deep the rabbit-hole goes." - Morpheus

Australia On Target To Hit Debt Ceiling By Mid-2012

2 Nov

Click to enlarge | Source: Australian Office of Financial Management (AOFM)

Your humble blogger met Senator Joyce for the first time on 1 July this year.

On introducing myself and mentioning this blog, Barnaby’s very first words to me … were words of humility.

He immediately referred self-deprecatingly to his now-famous warning in late 2009 about the risks of rising US Government debt leading to “possible” default.

You remember. His was the warning that no one wanted to hear; that drew the wrath and mockery of Rudd, Swan, Tanner, Chris Bowen, then Treasury Secretary Ken Henry, and of course, all of our lamestream media economic “experts”. Ignorant, arrogant, foolish ridicule, that prompted the launch of this blog.

Barnaby was quick to volunteer that his warning about US debt was nothing special; rather, in his opinion it was simply obvious that the rising trajectory of US Government debt must eventually run smack into their debt ceiling.

As we all know from the early August kerfuffle over raising the US debt ceiling, a political crisis that threatened to blow up the world economy … Barnaby was right.

Since this blog began in early 2010, we have seen time and time again, that when it comes to matters financial, Barnaby is the only one on the ball.

Doubtless a big contributing factor is that he is an experienced Chartered Accountant, and not a lawyer cum union hack, or a career political hack with an Arts degree.

In May, for example, Barnaby was the first to rail against the Green-Labor minority government quietly sneaking in a budget provision to raise Australia’s debt ceiling by 25%, to a quarter of a Trillion dollars ($250 Billion). Even though no one is supposed to dare question Wayne’s authority:

As Treasurer Wayne Swan was congratulated by colleagues after Tuesday’s budget speech, Assistant Treasurer Bill Shorten introduced draft laws allowing the government to increase the amount it can borrow from $200 billion to $250 billion.

The proposed legislation would also remove a requirement that the Treasurer explain why the extra money is needed.

In recent weeks, Barnaby has upped the ante in continuing to make good on his pledge to never rest in pointing to the dangers of rising government debt.  And fair enough too, when they’re continuing to borrow on the national “credit card” at a staggering rate.

Indeed, Wayne and Co have blown out our total Gross Debt Outstanding by over $7 billion a month in September and October, to a new record $215.6 Billion.

Which begs the question, “When will we run into our new debt ceiling of $250 Billion?”

That is, the new one Wayne set only 5 months ago, in May this year.

The chart above tells the story.

Our debt trajectory suggests that our Green-Labor government will bang into our new debt ceiling around mid-2012.

Unless something goes pear-shaped first, of course.

Like, say, a big fall in our Terms of Trade? Due to a big fall in the price of our biggest export, the iron ore sold to Chinese steel mills, perhaps?

Steel China Iron Ore Fines cfr main China port USD/dry metric tonne (MBFOFO01:IND)

Oops.

Like, say, a 32 month low in the latest measure of Chinese manufacturing? (h/t ZeroHedge)

China Manufacturing PMI prints at 50.4, down from 51.2, when consensus was expecting an increase to 51.8. This is the lowest print in 32 months, and the lowest since February 2009. But wait, before concluding that this is very bad news, uh, ahem… well, sorry, we haven’t taken the CNBC spin school yet. It’s bad news and the hard landing is coming. We leave the spin to the professionals.

Click to enlarge

Oops.

And there’s a lot more “oopses” where they came from. Including internal “oopses” … like Australian house prices and sales both falling … and the Reserve Bank starting to cut interest rates again; which means trouble’s afoot, and they are hoping their action will prompt you to be a complete idiot and start borrowing and spending like a drunken sailor Green-Labor politician.

Dear reader, the signs are all there that a real SHTF moment draws near once again, a la 2008.

Only worse.

Much worse.

Can you say “stimulus”?

Wayne can.

Do you think our government will stop spending more than they bring in from taxing us when they smack into our new debt ceiling?

Not if new Treasury Secretary and former student of US Federal Reserve chairman “Helicopter” Ben Bernanke has anything to do with it.

We already know his views on endless debt.

Here’s what happened back in June, when Barnaby kicked up a stink over our government jacking up Australia’s debt ceiling on the sly:

On Wednesday in Senate Estimates, our [new Treasury Secretary] Martin Parkinson was challenged by Senator Barnaby Joyce over this utterly incompetent and reckless Labor/Green government’s decision, just before the Budget, to sneak in new legislation to raise our debt ceiling too.  By $50 Billion – a 25% increase. To a new all-time record debt level of $250 Billion.

Just like America. The only difference is the scale.

And what did Mini-me Parkinson have to say?

Nationals senator Barnaby Joyce wanted to know what would happen if the government was prevented from lifting its gross debt ceiling by a further $50 billion to $250 billion, as proposed in the budget.

“I couldn’t imagine that parliament would be so foolish,” Parkinson replied.

It would have “serious ramifications” for the operation of government.

So, dear reader, you already know what is going to happen in this country.

Green-Labor are firmly on course to bang up hard against our new debt ceiling, in 2012.

Even without another round or two of “stimulus” borrow-and-spending, to prop up the economy.

The all-knowing genius of Treasury Secretary Mini-me Parkinson will (of course) support the government in raising the debt ceiling even higher.

Our interest-on-debt bill of $1.59 million per hour will rise even higher.

And at some point … sooner rather than later, your humble blogger would suggest … the great external debt-driven forces of the USA, Europe, and/or China, will send the wave that collapses our own financial house of cards.

You can bet your falling house price on it.

“If you do not manage debt, debt manages you”
~ Barnaby Joyce, February 2010

Barnaby is right.

UPDATE: 12:41am

Ummmm, what was that I was saying? … “the signs are all there that a real SHTF moment draws near once again, a la 2008. Only worse. Much worse”

Greek Prime Minister George Papandreou plunged the euro and stock markets back into crisis on Monday [evening, northern hemisphere time] with a shock announcement that he would put a hard-fought rescue deal to a referendum…

All of Europe’s main stock markets registered sharp falls at the new risk of Greek default and contagion, with the German blue-chip DAX 30 stocks index slumping by more than five percent, French shares were down over four percent and London’s stocks fell more than three percent.

Athens witnessed a meltdown as stocks plunged 6.31 percent amid warnings that a rejection of a deal that is deeply unpopular in Greece would force it to leave the 17-nation bloc which uses the euro single currency.

“This is a referendum, in which they’re effectively voting on Greece’s euro membership,” Alexander Stubb, the Europe minister for Greece’s fellow single currency member Finland, told the commercial MTV3 network.

In a sign of the deep unease in European capitals, French President Nicolas Sarkozy and German Chancellor Angela Merkel were to hold talks by phone.

Italian Prime Minister Silvio Berlusconi, another leader under pressure as a result of the eurozone crisis, registered his sense of shock and annoyance.

“There is no doubt the Greek decision to hold a referendum on the European Union’s rescue plan is having a negative effect on the markets,” he said. “This is an unexpected decision that generates uncertainties after the recent European Council and on the eve of the important G20 meeting in Cannes.”

Italian stocks plunged 6.12 percent, led by big falls for banks…

In an online commentary, the Moneycorp currency broker said Papandreou had presented Greeks with “the ultimate Hobson’s Choice”.”

“They could either have their financial eyes ripped out by austerity measures or by the chaos that would follow the total bankruptcy of Greece and the wipe-out of its financial institutions,” it said.

Nicola Rossi, an opposition senator in Italy, warned the mounting cost of borrowing for the government in Rome had the potential to further scupper attempts to safeguard the euro.

Under last week’s deal, the eurozone plans to increase the stockpile of cash in a bailout fund to some one trillion euros but many observers suspect that it will be an insufficient firewall if a country of the size of Italy collapses.

“The Greek government’s decision has unleashed havoc on the markets. It wasn’t very well thought through,” Rossi, an economist, told SkyTG24.

“The problem is that Italy is the weak link in the euro chain so we are under particular scrutiny.”

“We all know that when our borrowing rate is close to seven percent our debt risks becoming unsustainable. The situation is extraordinarily serious.”

And from Bloomberg:

Greece’s referendum poses a threat to financial stability in the euro region and increases the risk of a “disorderly” default, Fitch Ratings said. Papandreou’s grip on power weakened before a confidence vote on Nov. 4 as six senior members of the ruling party called on the prime minister to step down, state- run Athens News Agency reported, without citing anyone.

The risk of a Lehman-style disorderly default now looms a bit larger than before, including some residual risk that Greece may leave the euro zone if it rejects the offer of orderly debt relief in exchange for harsh new spending cuts and reforms,” Holger Schmieding, chief economist at Joh. Berenberg Gossler & Co. in London, wrote in a note…

The cost of insuring against default on sovereign debt surged the most in almost four months with the Markit iTraxx SovX Western Europe Index of credit swaps linked to 15 governments jumping 29 basis points to 333 basis points. Contracts on Italy soared 46 to 498 basis points, France was up 16 at 192 and Germany climbed 10 to 94 basis points.

It Has Begun – Labor Steals Liberal’s Idea To Steal Your Super

27 Sep

Ever heard of the ATO’s “Small Business Superannuation Clearing House”?

You have now.

It’s new.

And it is a title that should make the hairs on the back of your neck stand up.

Because what it is, is the beginning of the end of your chances of ever seeing all of your super.

Or possibly … worst case scenario, but ever the more likely the younger you are … the beginning of the end of your chances of ever seeing any of it.

Exactly as predicted and forewarned by this very blog for months now.

Your humble blogger found a very interesting letter in his In tray on arriving at work yesterday.

From the Australian Tax Office (ATO).

It is proof positive of what I have been repeatedly warning readers is coming, in our near future.

Our government … both “sides” … are planning to steal our super.

There is something particularly interesting about this letter (copy below) from the Australian Tax Office to my own small business.  It proves that the Green-Labor government are now going to steal your super by means of a policy idea that they have stolen from the Liberal Party.

Yes, that’s right.

The lazy incompetent useless public-trough-swilling bastards presently “running” our country (into the ground) can’t even come up with an original way to thieve and pillage your retirement savings – so they’ve resorted to stealing a Liberal Party plan instead.

That story was broken right here on barnabyisright.com on June 7th, just 4 days after the Liberal Party quietly announced it as their policy – “Liberal Party’s Sneaky Plan To Steal Your Super To Pay Labor’s Debt”.

I strongly urge you to first read the article linked above.

And for a full background of a world in which governments across the globe – including the USA, UK, France, Ireland, and many more – are all sneakily stealing their citizens’ super, please read “Stealing Our Super – I DARE You To Ignore This Now”.

It will help you to be properly prepared for today’s shock news.

Finished? You now understand what is happening in the big bad world of superannuation theft, and what the Liberal Party’s sneaky plan is?

Good.

Read on, dear reader, for clear evidence of why you simply cannot trust either “side” of politics in this country:

(Click to enlarge)

Get the picture?

The government’s new Small Business Superannuation Clearing House is an ATO department. The government plans to have your employer send your superannuation directly to their ATO “Clearing House” … not directly to your super fund, as it is now.

It’s all so well-intentioned, you know. Really. It’s all so very innocent … a “helpful” “reform”, only intended to save your boss time and hassle, of course.

And this is unquestionably a Liberal Party policy.

The only difference, is that the ALP’s version of this policy to steal your super is … surprise surprise … less efficient than the Liberal’s version.

Because the Liberal’s version planned to encourage employers to send your super to the ATO, along with their quarterly GST (BAS) payment. Your super, and their GST.  All in one easy payment … to the ATO. That’s Liberal Party efficiency for you.

By using the deceitful disguise of a great “helpful” “reform” to “cut red tape” for small business, the Liberal’s policy sneaks under the radar with the attractive appeal of killing two birds with one stone … saving the employer even more time and hassle.

And both sides of politics present their sneaky scheme scam to steal your super using exactly the same kind of warm and fuzzy, butter-wouldn’t-melt-in-our-mouths and you-can-trust-us-we-wouldn’t-harm-a-fly language style.

Check out the Orwellian language of the ALP’s letter from the ATO announcing this wonderful new scheme:

Are you a small business or organisation with fewer than twenty employees?

If so, you are eligible to use the Small Business Superannuation Clearing House (Clearing House).

This service offers a number of benefits to small businesses as:

  • it is free
  • it is simple to use
  • it reduces the time and paper work involved in making multiple payments to different superannuation funds and
  • it helps you meet your superannuation guarantee obligations.

Arrrrrrgggghhh! Am I in the presence of one of those pathetic spruikers standing outside a low-rent retail shop wearing a gaudy suit and brandishing a microphone whilst annoying the passersby? I think I’m drowning in snake oil!

This is pure propaganda – the doublespeak language of perception management. It is remarkably akin to that used in those patheticly transparent Readers Digest-style junk mail scams – “Congratulations, you are eligible to win a mansion on the Gold Coast … just send your money here.”

I’m “eligible” to use this wonderful new service of the ATO?  Wow! I feel so blessed, so honoured, to be a chosen one.

Now compare to the Orwellian language of the Liberal Party’s policy announcement back on June 3rd … starting with the Orwellian title –

Further relief for small businesses

For small business men and women, less paperwork means higher profits, boosted sales and more time with the family.

If we want stronger and more cohesive communities, we need stronger and more prosperous businesses: …

Oh wow! Yes please Mr Abbott! I want relief from the terrible burden of conscientiously looking after the best interests of my wonderful, hard-working, loyal employees, who are really more like family … I really really do!

How could we employers not all leap and dance with exultant rejoicing about that!

All that terribly challenging and time consuming “red tape” work … of clicking “print” and printing off several different envelope address labels to different super funds (or sacre bleu! hand writing each one!!) … once every 3 months … saved!

Now, all thanks to our wise and caring government, we employers can just print one envelope every 3 months. Make one electronic funds transfer.

And send all your super, dear employed reader, straight to the ATO.

Naturally, we can all completely trust the ATO to pass it all on immediately to your super fund.

And not, perchance, happen to sit on those tens of billions per quarter for (let’s say) a few weeks, and thus siphon off some short-term money-market interest for themselves first.

Yes, oh yes, dear reader … of course we can trust the ATO to do the right thing with your super.

Just like we can trust Green-Labor and the Liberals not to cast their greedy eyes over Australia’s existing $1.3 Trillion pool of citizens’ superannuation, and concoct oh so reasonable-sounding, “helpful” “reforms” that just happen to steer your retirement savings into their own coffers.

To pay down the debts they have accrued.

To fund their lavish, all-expenses-paid, high flyer lifestyles.

And … to finance their index-linked, high 6-figure retirement in the lap of luxury, after they’re done ruining the country for all the “little people”.

The new ATO “Small Business Superannuation Clearing House.

Oh, yes. It’ll be “clearing” out your super all right.

Don’t you worry about that.

Here’s roughly how it will go, dear reader.

Mark my words.

Stage 1 – it’s already here … a “helpful” option, just for small business (who employ 60% of all Australian workers).

Stage 2 – this “helpful” option extended to include larger businesses.

Stage 3 – the option is no longer an option.

Stage 4 – a financial crisis or other plausible-sounding excuse is used to justify compulsory acquisition of some (or all) of your super. Exactly like what has already happened in the USA, UK, Ireland, France et al. Once again, it will be touted loudly by our political overlords as a “helpful” “reform” … perhaps to “preserve” what is left of your super after another market crash, via putting your super into a (compulsory) “government-guaranteed” “safe” “investment”.

Drip drip drip drip.

Fabian socialist tactics at their finest.

And most obvious.

WAKE UP AUSTRALIA.

It’s long past time for real change in our political system.

Beginning with … bringing to an end the entrenched “Two Major Party” political system.

A perverse system that is ably supported and sustained by its lifeblood – our wholly undemocratic compulsory voting system.

(Achtung! You vill vote in our vonderful “free” and “open” democracy, dear reader … yes, you vill. ‘Coz if you do not vote for one of de useless self-serving cretins that our taxpayer-financed party machines offer you as “choice” in your electorate, then ve vill fine your miserable arse … and ve vill throw you in der cooler if you don’t pay!)

There is a way to change the system, dear reader.

And your humble blogger will have more news on how you can get involved in making it happen … soon.

Barnaby: Wayne’s Double Century Of Debt

26 Aug

Media Release – Senator Barnaby Joyce, 26 August 2011:

Nation’s debt tops $200 billion after Labor borrows $100 million per day

Congratulations Wayne on your double century. We knew if you stayed at the crease long enough you would get there. Actually it didn’t take you long at all; you have been doing a “fine job”.

I have always had “complete confidence” in your ability to give Australia its largest debt in history.

Today our nation’s debt went over $200 billion for the first time ever. We borrowed $3.2 billion over the last week.

Our debt ceiling was $75 billion when this crowd got into government. On 11 March 2009, Wayne Swan invoked “special circumstances” to increase it to a “temporary” level of $200 billion. In the last budget the government has increased it permanently to $250 billion.

If we keep borrowing money like we borrowed last week, we might be able to give this latest ceiling a nudge.

This fiasco that is masquerading as a government has got to end. This relationship cannot go on.

If you go to www.aofm.gov.au you will see that your nation’s “Total Commonwealth Government Securities on Issue” as of today sits at $200.242 billion.

The Labor party has increased our gross debt by $140 billion since they came to office in November 2007.

They have been in government for 1371 days and have therefore borrowed over $100 million per day.

There are 12.3 million taxpayers in Australia, so this government has borrowed an extra $11,000 on behalf of each of them.

“What have we got to show for this debt? Fluffy stuff in the ceiling which burned down 190 homes and billions of dollars on school halls which haven’t made our kids any smarter. The debt didn’t save us from a recession, record prices and record volumes of coal and iron ore exports did.”

More information – Matthew Canavan 0458 709433

%d bloggers like this: