Some mornings your editor sits at our desk not knowing what to write to you about – could you guess?
Other mornings our story cup is overflowing with, erm, story coffee…
Anyway, today is one of those “Other” mornings.
We’ve got so much to write we’re not sure whether to just fight one of them individually, or attack them all kung-fu style.
So, we might do a bit of both. First up we noticed a couple of funny things in the Commonwealth Bank’s results yesterday.
The most obvious was that Ralph Norris is clearly a graduate of the same university as ANZ Bank’s Mike Smith. They both hail from the Pinocchio University.
Because, like Smith, Norris was able to tell a whacking great tissue of lies yesterday by claiming:
“[Australian] Banks were well managed, with more conservative business models which discouraged high risk lending and widespread exposure to toxic subprime assets. The Australian government introduced guarantees to support the financial system, but it should be noted that not one dollar of taxpayer money has gone to our banks. In fact, the Australian taxpayer will benefit to the tune of $5.5 billion from the wholesale guarantee over its life.”
That’s funny, because we thought the government had handed out $21,000 to first homebuyers over the last year or so.
Could it really be true that not one single dollar of taxpayers’ money ended up with the banks? It doesn’t seem likely, not when you consider how reliant people are on using bank accounts these days.
You see, in order for the banks not to have received “one dollar” from taxpayers, that would involve the vendors to all property sales specifically choosing to not deposit $21,000 of the sales proceeds into their bank account.
All vendors since October 2008 who have sold homes to first homebuyers must be still holding the $21,000 in cash. Maybe they’re keeping it under the mattress, or they’ve dug a hole in the backyard to put it in.
I’m serious. For Norris’s statement to be true, then over $4 billion in bank notes must been hoarded by vendors, refusing to save, invest or spend it.
Because that’s the only way that Australia’s banks would have avoided receiving “one dollar” of taxpayer money.
And we know that just isn’t possible.
Of course most of the mainstream press just laps whatever a bank CEO says without question. Except for Eric Johnston at The Age who reported:
“Mr Norris is correct to point out that unlike the US or across Europe, no taxpayer dollars were spent bailing out an Australian bank… However, Australia’s majors had a substantial boost from the combined efforts of the government providing a blanket guarantee of the nation’s deposits, as well as a backstop funding program to ensure continued access to crucial wholesale funding markets – albeit for a fee.”
But we’ll stop short of tipping our cap to Johnston, because like most in the mainstream he can’t help himself with the claim that “Australian banks were run with substantially lower risk settings than some of their global counterparts.”
If that’s the case, why the need for the guarantees and the first home buyers bribe? It just doesn’t add up.
Australia’s banks are so low risk, that apparently, according to The Age, “The State government-owned developer that has responsibility for providing affordable housing is selling house and land packages in East Keilor for close to $1 million.”
It’s true, you can see the properties for yourself here.
But what about this idea that the taxpayer will ‘profit’ from the bail outs due to the fee charged by the government to guarantee the bank’s debt?
Of course, that’s not true either.
The obvious point is that the banks just pass the higher funding costs through to the customer by either charging higher interest rates to borrowers or offering lower interest rates to savers.
The bank itself doesn’t pay for it. Ultimately it’s a fee borne by the public. And because credit and bank accounts are so ingrained into the daily lives of individuals, those individuals are unable to avoid those higher costs.
I mean, just say the government provided a guarantee to bakers of white bread which cost the bakers 10 cents per loaf. The bakery would try to pass this cost onto the consumer.
However, the consumer could easily avoid this impost by refusing to buy white bread and instead buy multigrain bread. This effect would mean that white bread bakers would be less inclined to pass on the increased cost for fear of losing customers to bakers who make multigrain.
Of course, even then it wouldn’t necessarily be good news for the consumer, as due to a higher demand for multigrain, those bakers could raise their prices in response to the higher demand until white and multigrain bread are a similar price.
The upshot is, that in whatever form it’s made, government interference in the market is always to the detriment of the individual.
The banking system is completely different. All the banks have used the government wholesale guarantee to some degree, therefore not one bank can advertise that it hasn’t and therefore claim it has lower fees.
Therefore the banks can uniformly raise their prices so that the consumer never gains the benefit of even a temporary drop in price.
In addition, it’s much harder to change banks than it is to change the type of bread you eat. So the banks know there is no chance of losing customers if they pass the costs through to customers.
Besides, what’s with the idea that the government is able to run a profitable enterprise? Taxpayers aren’t going to make money on the deal. Every dollar that goes to the government is a dollar that’s denied to the individual.
The fact is, Governments don’t make profits. They aggressively expropriate money – called taxation – from private citizens. And then they waste it by either spending it on themselves and the wasteful coercive sector, or they hand the cash out to their chums, such as Senator Conroy and his mate.
But take the farce of the Green Loans programme and the $850 million overspend on the solar scheme.
That’s proof that governments are incapable of managing money or running a profitable business. After all, if these dudes were any good at running a business they’d be out doing that rather than leading the life of a parasitic politician or public servant.
But the biggest point to come out of these ‘green’ schemes is that it gives you a preview to how an emissions trading scheme, or any other government sponsored carbon reduction scheme would work.
If the government claims the cost of its programme will be $40 billion, you can guarantee the real cost will be about ten times that amount. And we’re not exaggerating either.
The reasons are simple – the government has no profit motive, therefore it has no level at which it knows when to stop spending money. If it runs out of cash then it just takes more from the taxpayer.
Government obtains all of its money by force – through taxation. Therefore it does not have to justify its spending, and nor does it face competition from others who could provide the service for less – typically because the government prevents competition by law.
And don’t think the so-called cheaper option put forward by the Coalition will be any better. Both will involve an excessive cost burden on the taxpayer and the consumer, and neither plan will have any impact on global warming or cooling whatsoever.
As we’ve written before, the only solution to discovering whether there is Climate Change, and therefore whether to do anything about it, is to leave it to a free market.
You need look no further than the current disaster with green initiatives to see how your future tax dollars will be flushed down the toilet by the loony green lobby.