Our View on Climate Change

Before I get on to today’s topic, another quick note about the ‘Australia in the Red’ debt summit. Although the subject of climate change wasn’t on the question list it was something that a couple of delegates asked us about during the pre-event drinks and canapés.

“What’s your view on climate change?” we were asked.

“Er, we haven’t really thought about it,” was our feeble response.

So, we’ve thought about it. It’s not an easy one to grapple. For a start there are two components. First is whether you agree with the concept of climate change to begin with.

So far your editor is unconvinced. Now, that doesn’t mean to say it isn’t true, it’s just that we have a healthy skepticism for the motives of the scientific community. The majority of the world’s scientists are little different to any other pressure group, they’ll go in to bat for their own cause and/or follow the money flows.

At the moment, agreeing with climate change is the most profitable way to get on the government science grant bandwagon.

But, we don’t have a closed mind to the idea. We just need to be convinced that it is a genuine scientific argument and that it isn’t just some excuse for the government to pillage our pockets for more tax revenue.

The second point is the question of developing non-fossil fuels. Certainly if you look at a skyline of modern windmills and compare it to a skyline of coal fired power stations then the windmills look a lot healthier.

So, we wonder, if looks are an indication of the impact on the environment why does the majority of electricity generation still come from coal and gas fired power stations?

Well, the more we think about it, the more we come to the conclusion that it isn’t evil old industry that’s preventing the development of new technologies. No, the culprit is far easier to identify.

Simply put, the only reason green technologies such as wind, solar, wave and nuclear have not achieved a greater presence in electricity generation is due to government interference.

It really is that simple. Most of the time the mainstream press will claim that it is big oil and energy companies that are stopping the move to green technologies, and that industries need to be punished if they don’t cut down on their carbon emissions.

All the while governments are mostly painted as trying to work out a solution to the problem of climate change. The facts couldn’t be further from the truth…

But we’ll have more on that tomorrow.

Because today I want to address the institution that represents the largest manipulator of financial markets in Australia. If you or I manipulated the markets as much as these guys do we’d find ourselves in gaol.

However, unlike you are I, these guys not only get away with it, but they have a mandate to get away with it. Actually, there are laws permitting them, even directing them to manipulate the market.

Is this something the mainstream press and financial commentators get riled about? Do they insist on the abolition of this mass manipulator of the market?

Of course they don’t? In fact it is the opposite. They revere this organization to the extent they rarely criticize it. And even further, so powerful is this organization that seemingly educated individuals will even change their own opinions just so they can be seen to agree with it.

This mass manipulator of the Australian financial markets is of course the Reserve Bank of Australia (RBA).

Hang on, let’s clarify that, the RBA isn’t just a manipulator of financial markets, it is a manipulator of your lifestyle as well. The amount of money you have in your pocket or in your bank account, and the value of that money is completely in the hands of the RBA.

So how can they get away with it?

Well, the RBA like all government and quasi-government departments are touted as being independent. They are – we are told – at arms length from the government therefore they should be left alone to do their work.

Above all, they should not be criticized or questioned.

Think about it, at the click of a mouse at 2.30pm on the first Tuesday of each month (except January of course – that’s holiday time) the Governor of the RBA and his minions have the power to increase or decrease the cost and value of your money.

It’s hard to think of any more powerful institution in the Australian market. The very actions of the RBA can either add to subtract tens, hundreds or thousands of dollars from each individual.

To corporate Australia it could add or subtract millions or billions of dollars from a company’s bottom line.

And on what basis do they do this? Well, it’s all based on some phantasmagorical belief that the RBA can micro-manage the buying and selling decisions of every single person and institution in Australia.

Is it really fair for a lumbering government organization to arbitrarily decide on the price and value of the money in your pocket?

Was it really fair that the RBA manipulated interest rates lower over the last year causing those on interest income to lose nearly half of their ‘wages’?

Of course if you’re laden with debt then it was a marvelous decision, and you’d be happy with it. Your interest expense would also have nearly halved. But don’t get too excited because the Mass Manipulator will soon enough rip hundreds, if not thousands of dollars from your pocket when it starts raising interest rates again.

You see, in a free market where interest rates are set according to supply and demand it would be impossible for one single entity to manipulate and distort the rate.

Think about it, what gives one single organization the right to determine that your interest rate is too low and that you should pay more?

Unfortunately, the law gives them that right. In which case we can say, to quote Mr. Bumble, “The law is a [sic] ass – a [sic] idiot.”

Not only is this institutionalized manipulation wrong, but it is immoral. It’s immoral because you have almost no influence on the value of your money. Rather than pitting your wits against other investors who act according to the market, you have to predict the irrational actions of a bunch of bureaucrats and ‘yes-men’ who wouldn’t know a free market if it slapped them in the face.

Don’t get me wrong, individuals in the free market act irrationally too. And they have differing opinions too – the stock market wouldn’t function half as well if everyone had the same opinion on a stock.

The real problem is the ability for one organization to manipulate a market at the expense – or to the benefit – of others on a purely arbitrary, non-market driven basis.

For instance the property bubble. We quite rightly blame the government for its first home buyers grant that suckers in buyers without savings.

We also blame the banks for their shoddy and deceptive business practices and lending regime which is helping to increase further the property ponzi scheme.

But perhaps the biggest criticism should go to the RBA for its manipulation of interest rates.

Without the RBA manipulating interest rates down to an unsustainable 3%, the government’s first home buyer bribes wouldn’t be half as successful (successful in terms of the take-up of them).

Yet when the property bubble bursts the RBA is likely to get off scott-free of any culpability for its actions. The mainstream press will tow the line about how tough it has been for the RBA to manage monetary policy in the face of all the fiscal stimulus from the government.

Fiscal stimulus which every last man of the mainstream press has supported. And fiscal stimulus which the RBA has equally supported.

No, the time has come when this Mass Manipulator of the market needs to be put to sleep once and for all. The RBA is a destroyer of wealth and a destroyer of money. If you need any proof, take a look at the RBAs own inflation calculator and crunch the numbers for yourself.

Between 1922 and 1959 (when the RBA was created by an Act of Parliament), the average annual inflation rate was 2.7%.

Between 1959 and 2008, the average annual inflation rate was almost double at 5.3%.

That is a terrible record for an organization that is supposed to maintain price stability. It has singularly failed in its primary task.

Other Stuff on the Markets

The S&P/ASX200 gained 1.08% yesterday, while overnight on Wall Street the Dow Jones Industrial Average added 33 points. In Europe the FTSE100 lost 0.24% and the CAC40 slipped just 0.04%.

The price of gold in Australian dollars is trading at $1,146.25, while in US Dollars it trading at $966.74.

The Aussie dollar remained steady versus the US dollar and Japanese Yen, trading at USD$0.8438, and JPY80.45.

Crude oil closed at USD$71.42.

For the biggest movers on the market yesterday click here…