As each day passes your editor becomes more baffled.
Things which appear to be common sense to us are deemed to be extreme views by others.
When we argue against government intervention or government stimulus programmes we do so because it seems obvious they can’t work.
Without covering old ground, a government stimulus package can only ever provide a short term boost to one area of an economy. It can never be long lasting. And it will always involve robbing from one part of the economy to feed another.
And furthermore, the boost will inevitably be made in the wrong areas of the economy. It always leads to a misallocation of resources.
As I say, I won’t cover that old ground again today. It’s enough for you to know that I believe the millions of dollars spent on infrastructure projects by state and federal governments is a monumental waste of money.
But that’s not all that baffles us. It’s the idea that after spending billions of dollars bailing out businesses left, right and centre – which clearly hasn’t worked – policy makers have finally decided it’s because they didn’t do enough.
They’re following the advice of the economic charlatan Paul Krugman and his cronies with their “spend more” mantra.
They believe the only reason it hasn’t worked is because they should have spent more. Only in government does this theory seem to hold sway. Apply it to any other scenario and it’s proven as a hoax.
Yet even seemingly bright people believe that it’s different with government – borrowing and stealing from taxpayers and then spending it all is a good thing.
We’ve seen this idiocy play out overnight as the world’s two largest economies, the US and Japan announce a ratcheting up of stimulus spending plans.
The latest plan from US President Obama is laughable, but we’ll take a quick peek at what the Japanese have in store first…
According to the Wall Street Journal:
“In an effort to prevent a “double-dip” recession, Japan’s new government unveiled an emergency stimulus package worth $80 billion, but critics said it still needs to provide a clear vision for reviving a country plagued by nearly two decades of economic malaise.”
It hardly seems like much compared to the $700 billion the US used for the Troubled Asset Relief Program (TARP).
But even the critics can’t get it right. What’s this nonsense about the government needing to “provide a clear vision…”? Government’s don’t provide vision, they provide dark glasses.
Looking to the government’s for vision is like asking Stevie Wonder for vision advice.
Government vision is nothing more than just throwing money around in any old direction. They don’t have a clue, and none of it having the kind of impact they want it to.
All they end up doing is giving the cash to their favourite special interest groups, while the taxpayer always loses out.
The biggest advice this ‘critic’ could give the Japanese government is to stop messing about with its citizens’ money. Leave the economy alone and it’ll fix itself.
If Japan has proven anything, it’s that after twenty-plus years of meddling and billions of dollars wasted, government’s can never be successful at manipulating an economy for everyone’s benefit.
Which brings us to Obama.
The latest news on the US stimulus package just goes to prove that US dollars and cents are becoming more like the tokens or play money at the fair every day.
It’s not real money they’re using. They’re just debiting one account then crediting another. Creating money here (at the Fed for the banks), destroying it there (in US citizens’ pockets through inflation).
The story so far is that the TARP has been so successful – at covering things up! – that those insolvent US banks can now pay back around $200 billion to the government.
What does Obama plan on doing with the $200 billion?
Spend it of course.
Did you ever know a government that didn’t spend? The government borrowed money that it couldn’t afford, to bail out banks that almost destroyed the entire global economy, but now those banks are ‘better’ – thanks to accounting changes – the US government gets some of the money back.
Which it now plans to spend again.
And why wouldn’t it. With interest rates touching zero, and even below zero when adjusted for inflation, the government is spending free money.
Money which it got from the banks that it bailed out. Because not only are the banks repaying the $200 billion, but those same banks have been funding the government debt programme by buying up all the US treasury bonds.
That’s given the government free money. Are you still with me?
It’s the US equivalent of the Japanese zombie banks. That’s where Japanese companies held shares in each other, providing some sort of bizarre never ending circle of fake liquidity. Bank A owns shares in Bank B which owns shares in Bank C which owns shares in Banks A and B.
Money is being created and circulated all over the place but none of it is actually being invested or put to good use.
It’s the same in the US. The US government bailed out the US banks by borrowing money from the same US banks. It was those banks which bought US treasury bonds using their investor’s money.
It’s almost unfathomable. It’s simple yet complicated. It’s complicated yet simple.
Of course Obama does claim that some of the $200 billion will go towards deficit reduction.
But only some. There’s no fun or electoral bribes to be made by buying back government bonds. No one’s going to see the benefit of that.
You can’t imagine Obama on the hustings in a couple of years saying: “This government paid off $10 billion of debt to reduce our debt levels by 0.1%.” [Cue fanfare!]
No, there’s much more to be gained by spending billions on “creating jobs.”
Even though the very existence of government ensures jobs are destroyed not created.
But closer to home, Australia has its own problems. Yep, don’t fall for the hype about business confidence and rising interest rates means a booming economy.
Because it doesn’t.
It merely means the stimulus programmes have achieved their short term effect – of fooling everyone into believing the economy has dodged a bullet.
But to be honest, we don’t know which is worse, or whether it’s the same. Overseas governments are spending up big on behalf of their taxpayers, whereas here, much of the big spending is coming from taxpayers that have been suckered into leveraging themselves up again.
You’ve seen the numbers on mortgage levels being at an all time high, and that retailers are expecting a $39 billion debt fuelled Christmas splurge.
And don’t forget that Australia is only in better nick than other countries due to the stimulus spending by China.
The biggest mistake that anyone can make is to think the Chinese stimulus programme will be any better than the Japanese, US, UK or Australian stimulus programmes, because it won’t.
All stimulus spending is doomed to failure. Again, the Chinese stimulus only gives the appearance of working. If you believe that governments can stimulate and manipulate an economy for good, then you’d believe the Chinese are doing just fine.
But we know it can’t work. That’s been proven in Japan, it’s been proven in the US, and it’s even been proven here.
Odds are, the mainstream commentators won’t appreciate that until the massive Chinese stimulus programme is equally revealed as a failure.
You’ve seen the mess that deficit spending has caused in the US. You shouldn’t think that the Chinese are somehow different. They’re doing a lot of spending too.
For some reason many commentators claim that because the Chinese run an authoritarian regime as opposed to a democracy, they can force their citizens to do things and therefore they can guarantee the stimulus will be a success.
We’ve also heard the argument that you can spend your way out of debt. That’s a good one, it’s been argued by the same people.
The other furphy is that China is more of a capitalist country than many Western nations.
While that may be partially true in relative terms, China is still a command economy. It is most definitely not a free market economy – again like Western nations. It’s run by central planners who know just as much about running businesses as our bureaucrats in Canberra.
The fact is, that the massive size of the Chinese economy, the massive government controlled spending and the size of their stimulus programmes means the eventual collapse of the Chinese economy will cause a huge upheaval.
We’ve looked to exploit the boom in the Chinese economy during this year by tipping energy companies in Australian Small Cap Investigator. While there may still be further room for the Chinese economy to grow further, I believe you should definitely have one eye on the exit.
Because when it does fall over it won’t be a pretty sight.
Cheers.
Kris.
60-Second Market Round Up
by Shae Smith
The S&P/ASX200 finished down yesterday to 4,670.60 down by five points. Thanks to the lead in from the US, the markets are already down this morning by 1.30%
The Dow Jones Industrial Average dropped 104 points or 1% to 10,285.97. The announcement of Greece’s recent credit downgrade to a BBB rating and the news of $3.65 billion loss of a Dubai developer added to the fear that the markets are a long way from recovery.
In the UK overnight, the FTSE was down by 87 points over night, to 5,223.13. The pre budget is to be announced today and many are expecting a ‘windfall tax’ to be introduced by finance minister Alistair Darling.
The Nikkei was down by 27 points to 10,140.47.
Gold was down overnight by over $20 an ounce. The strengthening US dollar saw investors dump the metal and return to the greenback.
The price of spot gold in Australian dollars is trading at $1,248.12, while in US Dollars it is trading at $1,128.19. The price of silver in Aussie dollars is $19.42 and in US Dollars it is $17.58.
The Aussie dollar versus the US dollar is trading at USD$0.9053, and against the Japanese Yen JPY80.06
Crude oil closed at USD$72.62, which is a two month low.
For the biggest movers on the market yesterday click here…
{ 46 comments… read them below or add one }
nuthin gonna happen…………………its allllllllll contained
http://www.youtube.com/watch?v=UdvIUHw31js
like a babies’ nappy thats choc-a-block full…………………..then…….
bbbbbbbbBBBBBBBooooooooooooMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM
Kris – the thing with Government stimulus programs is that the politicians who design them know that they “Only Provide Short Term Boost to One Area of Economy” and the people who support the Government stimulation know that they “Only Provide Short Term Boost to One Area of Economy”…
So although I totally agree that this shouldn’t be the way Governments try to help the economy, the fact is, for most people it makes sense to provide a short term sugar hit and ease some of the pain. The alternative is always portrayed as ‘doing nothing’
You are without a doubt the most common sense bloke I have come across and your writing is so accessible for this reason. But you need to realise how dumb people think. I fear you have spend too much time around smart people that you sometimes struggle to see why dumb people support dumb policies…
I on the other hand have spend most of my 20’s around dumb people (work, football etc.…) so I know how they think. They like simple solutions. They like easy to implement solutions and they want immediate results.
Unfortunately, the Government stimulus programs fit the bill perfectly.
When I argue with people about these things, I take the most populist line of argument I can think of. I use examples of Government corruption, I use examples of industries that pay the Government’s election campaigns, who then in turn get Government support when they need it.
I talk about people who work for $11 an hour cleaning toilets paying taxes so that the Government can dish it back out to wealthy families via the FHBG and set their kids up with investment properties, that are then rented back out to the toilet cleaner who can only ever dream of owning a house in a nice area for their kids.
Only through the use of populism and actual examples of the problems Government cause can the Libertarian case really gain popular support.
Keep up the good work mate, MM, Steve Keen, DR and a few others are the ones that give me hope that things will turn around someday
Something else just came to mind.
The similarities between climate change and GFC are amazing.
At the moment, in a time of turbulence, people around the world seem to want something to be done. They dont know what and exactly why, but the idea of letting things take their course is not an option. The course needs to be altered and for them the Government is the only one that can do it.
So we have two options:
1) Make Governments more efficient and more represnetative.
2) Work collectively through community networks to achieve the security and progress people seek.
Because I believe 1 is impossible, I am putting all my faith in 2)
Well said PP.
1 is acheivable it is just that there is no incentive for people in power to share it is there? All 1 requires is the will to let go. But, as I have said before, people act in their own self interest so I agree, it will never happen
Everyone is focusing on the US and their inflation/printing but rates etc… have been low for nearly two years and there is not a dollop of inflation yet. Thats enough time to start seeing inflation
I have a question for posters.
What would your comments be if the US was
a) printing money at an alarming rate and lending it out
b) stimulating the economy with a package thats about 25% of GDP
WHEN they have 9% GDP growth??????????????????
Why are the chinese, indians, brazilians, asia stimulating their economies when they are getting high growth rates
You want inflation/hyperinflation then watch these economies in 2010 not the US.
I had an interesting thought about Bernanke’s motives for rates at 0%
conspirarcy: By creating a carry trade he is effectively creating huge bubbles in Asia and the US dont want a new kid on the block……….
reality: a report last night said treasury sales were dissapointing so maybe no one wants them anymore. So stocks are overpriced, commodities are overpriced, treasuries are overpriced, bonds overpriced, currencies overpriced, gold overpriced, asian property overpriced……. what does that leave?????
US property……. which is underpriced – could he be that brilliant????
Another excellent summary, Kris. I whole heartedly agree. The government should just get out of the way. But that wouldn’t win them too many votes. One can’t help but think that this silly spending has to have a limit. I think the government is duty bound to let the ‘current’ stimulus run its course. They have little credibility if they do otherwise. Everyone believes the economy is back to boom times, confidence is soaring and the sun is shining again. How on earth could K Rudd introduce stimulus under those conditions? He’d be ridiculed. Particularly with Abbott now at the helm, I think Rudd would be nervous about doling out a fresh new round of stimulus. But having said that, I can’t imagine Abbott opposing an increase/extension of the First Home Buyers Boost – the propping up of the housing bubble is one of the few genuinely bipartisan issues in Aus.
AsPuntPal alluded to, the majority of people out there in voterland aren’t informed, aren’t financially aware, don’t think and are happy to receive some ‘free’ cash from the government. And the government is only too happy to oblige. For that reason, if the economy starts to look a little shaky again, K Rudd will not hesitate to pull out the credit card again. I think the government has no will to voluntarily let the economy tank. So when faced with a decision of borrowing/printing/spending or allowing things to take their course, I think the government will take the easy option every time. Hard to stomach, but I guess that’s just how it is.
I would agree with that, but would also add that the RBA is probably not on the same page with the Govt., and will most likely instigate a collapse, in spite of what the politicians might be ready to do. In all likelyhood, Goldman Sachs and the like have already positioned themseolves to loot our savings through an analogous demolition job to what they engineered in the US, and yes, our savings in super are bound to be in the crsshairs.
Kevin – I agree it seems hopeless to have any faith in Government changing for the better. But the only way 1) may have some chance of eventuating is if we enter complete chaos due to ballooning government debt, no growth, unemployment, property crash and social dislocation.
I believe that the forces of creative destruction apply not only to economies, but to political systems. Australia’s two party system has run its course and a grassroots political movement may be given a chance to rise from the ashes of Australia somewhere around 2012, just in time for the election after the one coming up.
Although I think you are spot on that self-interest makes effective Government a hard thing to pull off, I think self-interest can give way to cooperation, but only when people realise that we can all be better off by cooperating more. This is the essence of social capital and strong communities are built on these principles, not every man for him and hand outs for Government money whenever possible.
GB – that is bloody awesome theory mate and considering the amount of people who are now saying some US houses are great value, maybe you are onto something. I also liked your point about global inflation being a concern, not just US inflation – however I think people are concerned about global inflation, but they are more concerned about US inflation simply because of the important of the US economy to the rest of the world.
Ralph – very well pointed out that the FHBG is one of the only bi-partisan policies we have in Oz. The idiots can only agree on the stupidest policies.
I was thinking, is it accurate to say that the first home savers account gives an incentive to save, whereas the FHBG gives an incentive to take on debt ASAP?
Because if so, it would be interesting to see how many people have utilised the two schemes and see if there is clearly a distaste for the idea of saving and a lust to take on as much debt ASAP.
cb – you are yet to explain why Glenn Stevens should not be raising rates to the long-term average. Do you accept that easy credit was a cause of the GFC and if so, don’t you think its time the risk of loaning money got priced accordingly?
Yes, I think the RBA actually wants to do the right thing and keep inflation somewhat in check. But that runs counter to the government’s objectives (to spend money, keep the housing bubble inflated and get re-elected). So I expect the RBA to keep raising rates for the time being.
And we’d all better hope that China keeps buying our rocks and their over-stimulated economy doesn’t blow up. Otherwise we’re toast. Australia has a third world-oriented economy that is based on digging up our (non-renewable!) resources and selling houses. That’s a great foundation for a so-called developed economy. And the hilarious thing is that Australia doesn’t seem to have a plan B and there’s little effort to diversify. Hence the huge significance of keeping the housing bubble inflated.
Isn’t this how all governments work?
A group make a noise proclaiming a problem and demamding that something be done about.
Government response — throw a bucket of money at it.
If it works problem solved if not get bigger bucket.
Great rant. Keep up the good work. I’m in NZ so its good to hear about the luny antics of your politicians. There has been a lot of angst over here about Aus outperforming NZ (by a country mile) and what to do to catch up. All very earnest. It sounds like you have the solution well in hand.
Take a look at the mess Aunty Helen made over here. Our tradeable sector has been going backwards since 2005.
GB No I don’t think Ben is that brilliant but in a sense the situation is one where the USD needs to devalue against the Yuan and the Yen. The clever(?) orientals have helped create an imbalance in trade and are (japan) and will (china) reap their reward. So Ben had no choice really.
Will be interesting to see how it all works out. The worry is that we, the US and Japan have a mechanism for changing the fools in charge, but the chinese do not.
Ralph, I have a somewhat flippant take on that one-trick economic strategy. Here it is in the form of a syllogism:
1. If something is too good to last, then it will not.
2. Digging up dirt and selling it for good money is too good to last.
Hence,
3. It will not.
PunPal, what can I say? This might be the best way to put it, perhaps, and I hope that you will not mind me indulging in another syllogism:
1. If you you are escaping an approaching bushfire by taking to a helium filled balloon, then you will crash and burn even worse if in mid flight you put a match to it.
2. The FHBG is like the helium filled balloon through which the Austrlian economy has been lifted into the air, out of the path of a globally raging bushfire.
3. Glenn Stevens with his higher and higher interest rates is like a pyromaniac with a lit match, in charge of that life saving balloon.
Therefore,
4. If you want to avoid crashing and burning this economy, you should at least take the pyromaniac’s matches away, or better: chuck him out of the basket before it is too late.
http://www.elliottwave.com/single-issues/ff/0810FF_Special_Report_End_of_the_Mania_Era.aspx?code=cg2
http://www.elliottwave.com/single-issues/gmp/European-Real-Estate-Mania.aspx?code=cg
Nice idea GB and I love a conspiracy theory. But no Bernanke is not that smart otherwise he would not have suggested TARP.
And PP you are quite right the creative destruction process can apply to anything even my own home
While on the subject of global warming came across an interesting article that appears to respond to some islands concerns that they may soon be flooded out. Can’t verify its veracity of course but here it is:
http://scienceandpublicpolicy.org/images/stories/papers/originals/maldives_letter.pdf
Seriously all this information on the subject of late is giving this serious non scientist a headache
cb – you seem to understand the situation we are in, yet you think Stevens has an obligation to keep interest rates low and provide fuel to your hypothetical bushfire.
You said:
2. The FHBG is like the helium filled balloon through which the Austrlian economy has been lifted into the air, out of the path of a globally raging bushfire.
You claim the Government’s policy ’solution’ to avoid the GFC (inflate house prices and maintain consumer confidence) is like a helium balloon that has allowed us to avoid the ravaging bushfire (the GFC).
But the bushfire and the helium solution all stem from the same idiotic idea that economies can continue sustainable growth based on the accumulation of more and more debt.
Therefore, in your analogy, the bushfire and the helium baloon both required mountains of debt.
What Stevens has finally realised is that this is not good for long term financial stability and he is purposely trying to discourage people taking on more debt.
So yes, he is doing exactly what you fear – making it seem less appealing to borrow money to buy houses….this should have been done a long time ago, not just by the RBA, but by the Federal Government
What you rather him do, allow people to leverage up as much as possible to buy houses, driving this bubble further and further
You got it, PP. We’re in a residential real estate led recovery. One of our key ‘industries’ has come through with the goods and saved our bacon. Until the government’s free money runs out and the real estate industry is forced to stand on its’ own feet. We’ll then see how solid a pillar it really is. Looking further afield, I think the real litmus test is the government guarrantee of bank borrowing. That expires in 2011 – that will be when the solvency of the banks really becomes an issue. But my bet is that the government guarrantee will be implicitly extended indefinitely. The banks will become a protected species.
Only a few weeks now until the FHOB lapses. I reckon we’ll know by say Feb-March 2010 whether house prices are going to fall, stagnate or boom. I reckon the government will cop a 5-10% fall on the chin and tell the public to wear it. Anything more than that and we can expect more government intervention.
Thanks, PuntPal. Hmmm, I would say that if he keeps on raising rates, then we will crash and burn, with lots of misery and dislocations, losing more businesses and jobs to overseas, never to recover them again.
Therefore, in order to discourage speculation and savings being amassed in home equity, which will evaporate in flash as soon as we crash, we need to ensure that the lifeblood of the economy is more appropriately directed to keep nourishing the economy, not completely sucked out through higher and higher rates, just to kill off one area of speculation.
To use a different analogy, just because an unwanted tumor gets nourished by blood, you do not drain the whole body of it, but you take other measures to cut off the blood supply to the tumor, but maintaining it everywhere else where it is needed.
In short, your cure should not kill the patient, which is what will happen if the RBA carries on regardless. The more GS puts up rates, the more our export income and tourism dollars will suffer through the exchange rate. The RBA is killing our exports while rolling out the red carpet for more and more cheap imports. Through it all, our businesses are getting knocked about and more and more of our jobs are leaving for somewhere else.
But we have been through these arguments before. If house prices are a problem, if it is a cancer, then cut out the speculators/investors from the housing market. Give them notice and do it gradually, so that people have time to get out and adjust. There is no need to burn down the house, just to get these people out and away from where you don’t want them to be.
But no, they will not do that. Instead, they keep rewarding speculators and use them as an excuse for bleeding everything that still twitches dry. This road can only lead to disaster. That should be clear.
Yes, the FHBG has saved our bacon because all those loans resulted in the printing of massive amounts of money that flowed on into all sections of the economy. But in a debt-based fiat monetary system you have to create new loans all the time, or the entire system will be starved of its lifeblood: money.
Anyhow, we all seem to agree on one thing that we are not out of the woods yet. The whole thing is more than fragile and almost too wobbly not to crash, as is. And, my point is simply that with the RBA’s mad strategy in place we are going to crash, no matter what the politicians might and might not be willing to do. The bottom line is that in the face of stagnating and declining household incomes, and the debt levels we are carrying as a nation, you cannot suck the economy dry of money with higher and higher rates without ending up in a massive economic collapse.
Changing the subject back to Climategate, it seems like we are going to have some debate about the science. Not in Australia, mind you, not just yet. But notice the big lie exposed by Rudd – Wong – Turnbull and Co, that the science is settled. It is anything but.
http://blogs.news.com.au/heraldsun/andrewbolt/index.php/heraldsun/comments/why_these_debates_only_now/
Ah, Copenhagen just gets better and better. Nothing like it to flush out the dirt, along with the t!rd. See these updates:
- Green alarmists are now costing us business
- Napoleon Rudd advances on Copenhagen
- Europol warns: ETS ruined by crooks
The more that I see coming out, the less certain I become about whether to laugh or cry.
http://blogs.news.com.au/heraldsun/andrewbolt/
CB, last time I was on here, we were discussing the merits of the ETS. I’ve since come to the conclusion that it’s a dog and I’m pleased that it went down. It would have been an expensive exercise in churn that would have benefited no-one (except perhaps the big polluters that that have the government in their pockets). What a waste of time and money.
I’m still in favour of giving the planet the benefit of the doubt and taking prudent action to safeguard against climate change (if it ever turns out to be true). But as I’ve said in the past, whether climate change is ever proven to be true is minor stuff to me. We really need to be investing in alternative & renewable energy from an economic sustainability point of view. To the extent that a well-designed ETS or carbon tax or whatever move towards that, I think it’s a good thing.
CB – you’ve got mail! ;p
Thanks, Ralph. Yes, that conclusion certainly be further supported by the European experiene with their ETS, because apart from the useless waste and churning of the money, the many crooks and hoards of parasites already chomping at the bits to feed off the system would certainly bring the whole thing to ruin. You only need to read that warning from Europol to see what a narrow escape we have just had. But Rudd, Wong, and Turnbull, will not give up on the idea, not just yet.
Luckily, there is now ample evidence that man made catastrophic climate change is just a hoax, and our climate will be unaffected by the current hype and hysteria. Having said that, I applaud your idea that we should invest in clean and renewable energy, and the truth is that this can be done at a sensible pace, and ensuring that the money we spend is spent HERE, not sent to the UN, and definitely not as compensation to the rest of the world for some imaginary damage and global sea level rises we are supposed to have been causing through our development. And, believe it or not, this is exactly what is being proposed, among many other things. Just listen to this report, and tell me if Rudd and Co are not barking mad.
http://www.abc.net.au/rn/breakfast/stories/2009/2767169.htm
Ah, and forgot to add: This lunacy, and the hysteria they are whipping up with their more and more alarmist warnings about catastrophy, is going to expose us to compensation and damages claims from all those countries that can now claim that our CO2 emissions have caused them flooding and losses off all sorts due to a changed climate. If our politicians are saying that we are causing catastrophic climate change, then what grounds will we have left to defend against such damages claims, even if there is no agreement in Copenhagen? This madness is matched only by the folly of its advocates.
But, hey, they do not expect to pay for it, do they? For them it is just their own little Climate Nirvana Gravy Train.
Lol, Sandra, now you, too.
What a load of bollocks………
“I believe the millions of dollars spent on infrastructure projects by state and federal governments is a monumental waste of money”
Kris you can “believe” what you like, but some evidence would be nice, but no, you only supply philosophy.
Etch – some nice links, but please go back to rehab.
They neeeeeeeeeeeeed ya.
yeah no worries PF ..once u go to ur nursinghome………………
http://www.youtube.com/watch?v=UdvIUHw31js
If they are trying to screw us with climate change nonsense, what makes you think that they will ever entertain the thought of “invest in clean and renewable energy”?? The internal combustion engine has been obsolete for decades. There have been a vast number of “alternative engines” that, at worst were far more fuel efficient that the current “petrol engine”, and at best did not use petrol at all. Just water! During my Uni years my studies involved me in reaserach on the Hydrogen engine. Put simply, you place water in the tank, device sepatates hydrogen and Oxygen from the water, “engine” ignites hydrogen (using Oxygen to aid combustion). In the reaction both gasses combine to form water again which comes out of the “exhaust pipe”….no polution. This is just one example but what do you think the oil moguls would do to you if you started to make one? In the 70’s several people tried and they were very rapidy “brushed aside”. Don’t be fooled, alternative energy will not be a priority any time soon.
Nick, sadly, I must concur. They will of course throw some bones here and there, token gestures that show that they are trying, but the massive monies they propose to collect will be firstly used by politicians like a bottomless Santa sock, to hand out favours and bribes for winning the next election. Another good chunk of it will be sucked up by the traders, the many parasites feeding off the churning of the money, a cut of it will go to the UN to support illustrious careers and paypackets of unelected bureaucrats, and a tiny morsel will be dropped to the poor farmers who will be tied up in red tape about what they can and cannot with their land. The list goes on, and we probably cannot see half of the wolves lying in wait, the many scamsters and naked short sellers, the crooks that make a joke, no – a casino, more like it, out of the engine of capital formation, the share market.
fair points cb – I know increasing interest rates are a crude way to cool downt he aussie housing market, but what else can GS do. That is the tool he has at his disposal.
Its Rudd you should be angry at. He is the one who has set up this whole situation with idotic, hypocritcal and deceitful FHBG.
Seriously, that and the White Australia policy will stand side by side in the poltical hall fo shame,.
PuntPal, that is one way of looking at it. Another would be this:
1. We have bigger problems to worry about than high house prices, such as the maintainance of employment and economic prosperity in the country.
2. It is not part of the mandate of the RBA to worry about house prices. Their mandate is this:
a. Maintain the stability of the AUD.
b. Maintain full employment and the economic health of the nation.
On the first score, the RBA is an abject failure. Just have a look at where the AUD has been over the past decade, or even over the past 12 months. The AUD has been more like a Yoyo, making it a roller coaster ride for anyone trying to run a business, especially if your business is affected by the exchange rate.
On the second score, while the RBA is trying to lean against house prices with higher and higher rates, it is driving up our exchange rate, which neuters our export income and domestic businesses and the jobs they offer are driven out of business, or driven offshore, exporting our jobs and factories.
And we haven’t even touched on what higher and higher rates are going to do for a heavily endebted nation and economy, such as ours. But, hey, the bankers will not be denied. They never had it this good.
But cb, the housing bubble is not some benign side aspect of our economy. Besides our commodity exports, it is our economy! And because it is unsustainable and because so many people owe so much money, it cant be ignored or postponed any longer
I disagree that we have bigger issues to worry about then our house prices. This is probably what Americans were saying in early 07
Our unemployment is not an issue and due to artificial stimulation, our economy is now going fine…apparently.
So this is the time we should be paying down debt and letting some house price deflation. You don’t want the banks to have it so good, don’t you realise they are the main beneficiaries from this housing boom. The more people have to borrow, the more interest they pay to the banks, the more profit the banks make. It is that simple.
Now if GS didn’t raise rates, then people would be given the sign that interest rates will remain low indefinitely and rather than deleveraging (which is clearly what is needed) people would keep piling into the market.
As you said, the RBA is there to maintain financial stability. It seems GS believes (and so do I) that a continuation of the housing bubble is only going to make Australia more vulnerable to an external shock (carry trade ends, sovereign default crisis somewhere in the world).
Right now – interest rates increases of a minor nature will do the trick. It will decrease the amount of Ponzi speculation on Aussie houses and in the long-term we will look back at this move as the one smart thing the RBA have done during this whole GFC.
I don’t know, PuntPal. Maybe you are right on some aspects of this whole sorry saga. The problem aspect I am focusing on is that every $ an indebted household is forced to pay in higher interest, is a $ less that can be put towards paying down the debt. Same with the high exchange rate killing off exports while rolling out the red carpet for more imports, and the list goes on and on.
Puntpal & cb…you both have very valid points.
Puntpal… I agree that if interest rates remain low it only serves to encourage the sheeple to “jump in” without thinking and basically accumulate further debt. We must remember that we are living in a generation who know nothing else but debt. “I want it now, I pay for it tomorrow..with interest”. They will only change if they have to.
At the same time, true savers suffer.
This can only be curbed by authorities tightening the screws. Forget Rudd, he is too consumed in self interest. That’s why when he gained power, he sack a large chunk of the advisory staff and replaced them with PR staff…a professional smoke screen if you like. So it leaves only the RB to turn the taps.
Cb… as for business and export? I’m involved with both and believe me I know the damage it is causing. I also have very good friends on the land who have reached the point of revolt. In NSW there are farmers who have gone through the hoops to have a couple of tree removed only to find out a short time later that Chinese mining interests have been given the OK to dig up highly fertile land (same land that the farmers could not remove trees) just to do exploratory work to see if there is paydirt there. Strangely this involves removing far more trees that the farmer asked to remove…plus fertile land???
I was told many years ago that the plan was that one day they will zoom in on those who have more bedrooms than there are occupants in the house and allocate other families to co-live in those houses with the owners. Basically, you will not have control of your own dwelling. Seemed farfetched at the time, but I am now older and wiser with 360 vision and am not so adamant in dismissing this theory. Conspiracy theory? I guess it is until it comes true. Until then it’s just a conspiracy theory.
Thanks, Nick. As for that wild and seemingly unbelievable scenario, the fact is that it has been done before, and it will be done again. The pipe dreams, the debts, the massive misallocations of resources are all getting bigger and bigger, and it will not be a pretty sight if, and when, this baby finally sh!ts itself.
Haven’t we been told that the science is settled? Maybe Rudd, Wong and Turnbull, oh and Flannery, should read about this one:
“Climategate: rounding up a posse – at gunpoint
Andrew Bolt – Friday, December 11, 09 (06:17 am)
Britain’s compromised Met Office is rounding up people for a petition to pooh-pooh the significance of Climategate. No relevant qualifications are required, and no inquiry beforehand is needed. Oh, and if you don’t sign….
One scientist told The Times he felt under pressure to sign. “The Met Office is a major employer of scientists and has long had a policy of only appointing and working with those who subscribe to their views on man-made global warming,” he said.
By those standards, these 1700 signatories are outvoted by the 31,000 scientists who freely signed this:
‘There is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gasses is causing or will, in the foreseeable future, cause catastrophic heating of the Earth’s atmosphere and disruption of the Earth’s climate. Moreover, there is substantial scientific evidence that increases in atmospheric carbon dioxide produce many beneficial effects upon the natural plant and animal environments of the Earth.’”
http://blogs.news.com.au/heraldsun/andrewbolt/index.php/heraldsun/comments/climategate_rounding_up_a_posse_at_gunpoint/
Cb…I know that when you are dealing with a “mob” in a frenzy all rationale goes out the window.
Starting about 1995, I was telling my clients in the hi-tech industry not to worry about “the millennium bug”. It cannot work the way they were portraying it to work. Due to the hysteria of the time I had a better chance of stopping the tide than convincing anyone that millions were wrong and little old me was right. In the end, who was right???
Skin cancer is not increasing because of the sun…it is because of the massive amounts of sunscreen product people lather themselves (and their children) with. The chemicals in those products react with UV and hence cause the cancers. Worse today, because they are now using nano technology which enters the skin causing more damage, even to the kidneys.
The social engineers are well aware of the power of persuasion and are applying it very effectively. The climate change argument may seem a long way away from the economic topic but it is NOT. It is all cleverly related and unless people understand the broad picture and the lengths the political cartel are prepared to go to to achieve their agenda, they cannot fully understand the topic. Without exception, all the topics discussed on this forum cannot be fully understood or explained, until you pull back the focus and see the greater scheme. Once you do that then it all starts to make sense and follow a pattern. This is why it can never be solved while people remain in the dark. Your super, your savings, your pension, your real estate, your children’s futures all will be influenced by this grand social engineered scheme. Trying to work out a timing for it is futile as it will happen when they are ready for it to happen. All one can do is begin preparing for the worst and paying for the better.
USA’s economy & greenback is predicted to capitulate in the late first quarter of 2010 12 weeks??????????
its way too far in debt to regain
its gone no turning back,USA is bankrupt totally & its gonna take the whole financial world with it into a depression
this weekend in melbourne is the highest record of house auctions to be held almost a billion dollars worth
the rats are jumping off the ship selling out whilst the goings still good ……..
wat u think?????????
http://www.youtube.com/watch?v=8K9dgqKmJ50&feature=related
Nick you said “Skin cancer is not increasing because of the sun”
What other scientific gems do you have to offer the debate.
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