- Money Morning Australia

RBA Makes it Almost Impossible for Market to Set Rate of Interest

Written on 17 February 2010 by Kris Sayce

In today’s Money Morning we’ll give the Reserve Bank of Australia (RBA) a major serve. But before that, it’s appropriate to let you know about Jarrod and Seb’s next protest at the RBA.

Jarrod says they will be out the front of the RBA building at Martin Place in Sydney this Friday between 8am and 10am.

Protesting Outside the RBA


So, if you fancy going along to give them some support, feel free to do so, and let us know how you go by sending an email to moneymorning@moneymorning.com.au.

But before we get on to today’s action, a quick note about yesterday’s Money Morning. Not surprisingly we’ve received quite a few emails from ‘government lovers’ telling us it’s only right for the government to take 50% of your money in compulsory taxes.

Remember, every dollar of tax raised by the government is ultimately paid for by the individual. Company taxes, Payroll Tax, Fringe Benefits Tax, everything is paid for by you.

If the government didn’t levy these taxes, businesses would be able to charge lower prices for their goods and services.

So ultimately, even if your income tax rate is only 20% or 30%, by the time you’ve finished spending your monthly wage, nearly half your gross income will have been snaffled by the tax man.

Which makes yesterday’s report by our old pal at the Sydney Morning Herald, Peter Martin all the more distasteful: “Taxman free to break in to homes.” We’ve had our differences with Peter Martin on the housing market, but Martin’s report on what the ATO is up to should be the scoop of the month – if not the year.

As you’re probably aware, if the ‘old bill’ want to search for something in your home they need to present a warrant to do so. Not the tax office though, they can just barge in and ransack your home in their search for documents.

Amazingly, according to Martin’s report, the ATO conducts 280,000 raids each year without warrants! Our Canon LS-100TS calculator tells us that’s an average of 767.12 raids per day – we’re assuming the tax office doesn’t rest on the sixth and seventh days.

But apparently this is all OK, because if the tax office had to go to the bother of getting a warrant, “This volume of monitoring activity could not be conducted under a warrant-based system without a very large increase in resources or a substantial reduction in monitoring. This in turn would lead to losses in revenue.”

We love how stealing money from individuals is labelled as “losses in revenue” by the ATO. We’re sure crooks say the same thing when they see someone has installed a burglar alarm!

But don’t worry about the increased cost of a warrant-based system, why don’t they just stop breaking and entering private property in order to steal more private property – wages.

Of course, the government lovers will probably write to tell us it’s appropriate as it makes sure “everyone pays their fair share.” Whichever way you look at it, taxation is theft and this report by Peter Martin reveals the ATO is happy to use physical violence as well.

So much for ‘freedom’ eh?

However, we did make a couple of omissions yesterday, as pointed out by Money Morning reader Colin. In our calculations, we’d forgotten to include the taxes that are ripped from your wallet by local government councils.

The most recent data we could find was for 2005 which shows local government across Australia raised $21.5 billion in taxes.

If we assume a roughly 5% growth in revenues since 2005, that puts local government tax stealing at $27.4 billion for 2010.

However, one schoolboy error we made is that we’d double-counted some of the revenue the states get from the Federal government. So, we’ve ‘re-crunched’ the numbers. And unfortunately, the news isn’t that much better…

Take the $515 billion we mentioned yesterday, add the estimated $27.4 billion of local government taxation and that takes you to $542.4 billion. But then we need to subtract around $93 billion which are taxes levied by the federal government but then divvied out to the states and councils.

That brings the number down to approximately $450 billion, or 43.5% of GDP, or 43.5 cents in every dollar. It would have been nice to get it right the first time, but whether it’s 43.5 cents or 49.8 cents it doesn’t matter.

It could be 25.6 cents or 13.1 cents, and it would still be too much.

Anyway, the message is, don’t forget to pay your taxes otherwise the ATO will send the heavies round!

Anyway, back to the RBA…

Three events over the last couple of weeks have shown that it’s a case of ‘You against Them': there’s the RBA interest rate decision, the International Monetary Fund’s (IMF) call for higher inflation, and the ‘secret’ Central Banker’s Symposium in Sydney.

After the last RBA interest rate decision we wrote:

“And look, that’s exactly what it is. If any other private citizen or private firm intentionally manipulated financial markets for their own benefit as the RBA board members do, they’d be up before the beak quicker than you can say ‘monetary policy.’ That’s right, and I do mean for their own benefit. Maybe they don’t gain financially from it, but they gain mentally. It’s an ego thing. In their own mind they know the power they have to influence markets and they wield it with pride.”

The last sentence is the key part. It’s all about ego and control we thought. And we were right. Here’s what the RBA wrote in summing up the minutes to the board meeting:

“Members noted that many market participants expected a further increase in the cash rate at this meeting. They concluded that, on balance, the stronger case was to leave the cash rate unchanged for the time being.”

In other words, the RBA wanted to ‘buck the market.’ The market was telling the RBA that interest rates are too low and that rates should increase. But obviously a panel of eight men and one woman knows better.

So, interest rates remain near historic lows, and pump, pump, pump, the credit bubble re-inflates.

As we’ve written before, the actions of the RBA makes it almost impossible for the market to set a rate of interest. Market participants don’t know whether to determine rates based on what they believe the rate should be or to base them on what they believe the RBA believes they should be.

And furthermore, whether the RBA will change rates based on its belief or whether it will just try to make a point to the market that the RBA is in charge.

All of which would seem to go against Glenn Stevens’ presentation to the 5th High-Level Seminar of Central Banks a week ago. Then he said:

“Disclosure cuts both ways, however, and in some respects is advantageous to the Central Bank. Certainly its opinions and decisions are known with greater clarity – including when they turn out to be wrong. This concentrates the mind. But clarity also aids the conduct of policy, and not only through the conditioning of expectations.”

There Stevens is claiming that conditioning the market to know what to expect is important – although not the only important thing. Not that important based on its recent actions. Obviously, leading up to the interest rate decision, the RBA had ‘conditioned’ the market to expect an interest rate rise.

Hence why futures markets were anticipating the rise, and why all our mainstream economist pals had also predicted a rise.

Yet, knowing this, and obviously aware of the impact low interest rates has on an economy, the RBA decided to teach the market a lesson by keeping rates at a super-low and artificially low level.

While we’re on the subject, at the 50th Anniversary Symposium, Jaime Caruana, General Manager for the Bank of International Settlements presented a speech titled: “Financial Stability: 10 Questions and About Seven Answers.”

Maybe it was a tongue-in-cheek whacky central bankers’ joke, but seriously, this is the ‘quality’ of banker you have running the show. They ask themselves ten questions, yet they only know the answer to “about seven.”

On that score it’s hardly surprising these guys completely failed to see the global financial collapse coming, and it makes us even more convinced that the worst of the financial collapse is yet to come.

There are a few peachy questions and answers in the speech. Caruana opens with the classic question: “Are financial booms and busts inherent in a market-based economic system?”

Caruana’s answer is “Unfortunately, the answer is yes. Financial markets are not intrinsically stable.”

WRONG! Or rather, he’s mostly wrong. Because what he fails to point out is that it’s the involvement of governments and central banks that create the instability. The actions of the RBA at the recent board meeting is a classic example.

The actions of the Australian government continuing to pump up the housing market is another example.

Without government interference the boom and bust cycle wouldn’t occur. Typically the reason there are booms and busts is due to cheap money that encourages credit growth. Credit growth which eventually collapses.

Or it’s due to government interference preventing free competition so that competing companies are unable to enter the market to create competition and therefore constrain price rises.

So what his answer should have been is, “Yes, because governments and central banks manipulate the market.”

If the question had been “Are financial booms and busts inherent in a free market-based economic system?” The simple answer would have been “No.”

There are plenty of other pearls of nonsense in there. But read the document for yourself to see. The final question Caruana asked was: “Will it be different next time?”

His answer, “I am inclined to think that, provided we do not become complacent and we continue to work on the reform of the financial regulation, the answer may be positive.”

Wrong again. The fact that he can’t be 100% certain shows they’re just making it up as they go along. The reason they can’t be 100% certain is because they either don’t understand how central banks manipulate the market, or they fully understand it and use the manipulation for their own benefit.

Finally – and we’re running out of time – the International Monetary Fund’s (IMF) call for central banks to set the target for inflation at 4%. You can read the full text here.

Not content with devaluing the savings and earnings of individuals with a 2% annual inflation rate, the IMF wants your savings and earnings to be devalued to the tune of 4% per annum. Which we think means your $1 earned today will be worthless in about 18 years!

Not only that, but the IMF is giving the big thumbs up to government spending to fight off recession.

It’s hardly surprising this nonsense should come from a taxpayer funded organisation. The reason the IMF is so keen on higher inflation is that it helps their creditors to repay the loans it’s handed out.

Plus, more government spending means more money for all government organisations, including the IMF. And it naturally puts government at an advantage compared to the private sector which – apart from banks – is unable to create its own money.

All up it means more power to governments and less power to individuals and the private sector.

As we say, it’s ‘You against Them.’


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62 Comments For This Post

  1. etch Says:

    just read in newspaper today Terry McCrann

    brace yourselves interest rates will cost an extra $250-500$ bux per month

    thats here in australia

    now thats a fair few bickkies

  2. Dave Kidd Says:

    I must say that with all the things Kris tells us are wrong with the world, and what a terrible predicament we face, he doesn’t offer us much in the way of solutions to the problems. It would be different if his writings were being published in the mainstream media, but here he is preaching mainly to the converted.

  3. etch Says:




  4. Puntpal Says:

    Kris can you please explain how an Australian monetary policy could exist without the RBA? I don’t understand much about cash rate, so if anyone has any ideas? Etch?

  5. cb Says:

    PuntPal – Going by the content of the articles dealing with the subject, we can safely infer that Kris would want to do away with the RBA, and allow the individual lending institutions to determine their own various deposit and lending rates in competition with each other. We can also safely infer that he would positively prohibit government interference, and especially rescues, in the affairs of the banks. Everybody would have to stand or fall on their own merits. If you are a bank manager and stuff up by overstretching or by making unwise loans, to the wall you and your bank would go. This, however, would also have to entail greater personal accountability for bank managers and traders, etc., so that if they decide to go ferral for a few years to load up their busses with bonuses, they would be liable to being sued by shareholders or any party who suffered undue loss on account of their gambling and dodgy actions and decisions.

    To tell the truth, I would be very much in sympathy with such a set up. It would go a very long way towards establishing a good, old fashioned sanity and predictability into the market place.

    It would still not be the ideal system, but. As long as fiat money can be conjured into existence with no controls on the quantity of it being written in loans, and thus created ex-nihilo, the system will always be vulnerable to inflation and deflation cycles, bank runs and even systemic collapse. The only way I can think of guarding against these weeknesses would be to introduce some sort of commodity backing to the currency, and impose harsh penalties for anyone creating/counterfeiting money without the necessary backing, be that in silver, gold, or whatever, which the creator of any new currency must be able to show upon request to have on hand.

    In such a commodity backed currency system, anyone accepting and holding paper or plastic would have the right to rock up to any designated bank and demand settlement/payment in the commodity itself. For anyone who holds paper, or mere figures on a statement or a computer screen, is yet to be paid in full. Those figures are mere promises, and until you actually do spend them for a service or goods you wish to purchase, you have not been paid, but are holding a mere promise to be paid at some later date, which makes the holding of cash and the accummulation of savings in bank deposits and in cash an unfair and unneccessary risk.

    One of those risks is inflation, of course, the slow by certain erosion of your savings and wages’ purchasing power through reckless and neferious money printing, the chief engineers of which are the politicians in cahoots with the central banks. I am not sure, however, where Kris would stand on the question of a commodity backed currency. He may and may not endorse it. It would be interesting to know, but.

  6. cb Says:

    I am slowly realising why Catastrophic Man Made Climate Change Theory might be so attractive to its proponents. It is a theory that enables them to claim whatever they want to claim. See for example this tillte gem: “Climate change causes an increase and a decrease in San Francisco fog”

  7. cb Says:

    Alas, the warmists cannot have their cake and eat it, too. Here is another one in an ever lengthening series of -gates:

  8. puntpal Says:

    cb – I think currencies are not as vulnerable to deflation as some around here claim. Just because they are not tied to a precious metal, doesn’t mean you can’t monitor the devaluation of the currency. So because of this, the scare mongering on currency annihilation is just puff and a spruiking way to promote gold as an asset! I predict a total crash in the gold price (peak to trough) of 50% in the next 5 years. I would love someone to quote me odds on that – Sayce, Denning?

    Currencies are compared to other currencies and not every country can devalue in harmoney. Currencies are also compared to their ability to purchase goods and services. If for some reason a dramatic increase in the money supply that had withered away the purchasing power of the money we get paid, then we would see the signs well before it would become a “crisis”…the examples that people use, Zimbabwe and Germany (Weimar) are silly as these countries did not have well functioning democracies. The people can detect their health of their currency and even gold itself and its price, acts a signal. So I think the upside is capped, whereas the downside…

    We live in crazy times; the price of gold may soon be compared not to currencies, but iPhones and Kindles. I know what I would rather have! Gold is for wearing, not wheeling and dealing

    But with the role of the RBA, I seriously want to know how free market you can go with banking. Are there ways in which banks can operate without Sovereign financial backing and coordination?

  9. cb Says:

    Ohohhh, Haven’t we been told that big oil and big coal businesses were fighting golobal warming theory and that they were the big guns, with huge bags of money financing the sceptics? I have heard that line thrown at sceptics so many times that this one has come as a real surprise: How can the big polluters abandon a climate change alliance if it was not supposed to be against it? A lot of people have been telling us porkies, it seems:

    The dominoes are falling: ConocoPhillips, BP, Caterpillar to quit Climate Group

  10. cb Says:

    Before I got distracted, I was talking about the virtues of a commodity backed monetary system. I have just come across this neat little quote that rather befits that topic:
    “You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold.” — George Bernard Shaw

  11. etch Says:

    PP-first thing is kick rba knucle-heads out and split the difference .over-tax,back to each honest ozzie tax-payer with a $19,000 cheque in the mail

  12. Kevin B Says:

    Can’t say that I would disagree with the RBA having their cash rate adjustment powers removed. Interest rates would probably cheaper with all the cash that is out there. A newspaper article estimates that USD 17 trillion is sitting in extremely low interest bank accounts in Japan alone. But they are worried about bubbles. Now they are worried about it? Bit late. If people think they will make money out of it they will pay any price to do it as I will demonstrate later.

    Thus leading in nicely to: I will take issue with your statement that if the free market were truly free there would be no bubbles. This assumes that the free market makes rational decisions. I have worked on consumer issues long enough to know it aint so.

    I will give current day examples soon. However, the most poignant example of how markets react irrationally has got to be the Tulip bubble of 1636-7. I mean how the hell does the price of a flower, even rare ones, go up 15x in less than 3 months!!!!! You need to read Extraordinary Popular Delusions and the Madness of Crowd. Greed my man.

    The are other good historical examples but let us move to the present day. Cars are a fantastic example. People just have to have one and will sign one of those god awful rent to buy contracts to purchase a crappy 15-20 year old car! And without having it checked out.

    Sub prime mortgages then. Those genuises thought that housing prices could only go up so lets sign them all up. No income no problem! They even thought that they had come up with a “risk free” system with CDS’. Of course if we did not know before we know now that there is no such thing as risk free. And those that had no income that put pen to paper how did they think they were going to pay it back? No problem, the house price will go up and I can sell it for a profit! No thought to yeah you maybe able to but how are you gonna buy back in because of the price of your house goes up fair chance that everyone elses will too! And no though anywhere to what happens if house prices go down? Simply couldn’t happen could it?

    Markets think they make rational decisions but actually don’t. It is pure greed my man that blinds one to the risks and one stops doing “due diligence”. Everyone thinks that making money is easy. It aint, it is hard work. It with greed that markets make decisions and thus investment decisions are rarely made rationally. Markets are very poor at doing proper risk assessments (see insulation rebate, aint my money so do I care if the job is done right? Not gonna think about that even though if the job is not done right I could lose my home and my life!). Risk is very often underpriced or not even thought about at all.

    I can go on but I am flogging a dead horse aint it Kris? Time to study behavioural economics.

    Cant agree with your gold comments PP. Too much money chasing too few productive assets. Too much debt that has to be inflated away as it can not be paid back.

    I will add one proviso though, if countries are allowed to default on their debt. Cant see the IMF allowing it though, see Indonesia circa 1982 which was really just a bail out of the banks and put the price of paying back the debt that the banks lent Indonesia back onto the people at a terrible price. Given IMF history is it really any surprise that governments are bailing out all and sundry? Also see IMF’s recent history re this crisis.

    If countries do default on debt it will rip the gold price good.

  13. Sandra Says:

    hear hear!!!

  14. Sandra Says:

    was aimed at CB @ 10 …

  15. Sandra Says:


    you say you dont agree with Puntpal regarding gold taking a dive of 50%…

    yet you end off by saying that if countries do default it will rip the gold price good. Why would that be?
    Is it because if the Euro had to be suddenly devalued by Greece and other Euro countries defaulting that this would translate into (U) dollar strength and this case the gold price to collapse?

    if this happened i believe it would be a very tempory drop…
    what say you CB?

  16. JJ Says:

    I think Kris is offering solutions. Get rid of the RBA.

    Unfortunately, economically speaking (Austrian that is) that would be the right thing to do but politically no one has the will to do it. Actually, it might even be political suicide.

    Keynesianism is well and truly entrenched within the political system. I.e. Govts play a vital and important role within the economy. Keynesiansism legitimises Govt action (RBA, Govt debt, bail-outs, first home buyers grant, roofing insulation, shovel-ready projects etc etc).

    But most importantly, Keynesianism allows Govts to ‘sweet-talk’ the electorate… buy votes.

    Until we demand a small Govt, nothing will change. Which means understanding how to profit from these ills. Long Gold, Short Govt Bonds etc etc.

    This quote sums it up best…
    “A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy…”
    Alexander Fraser Tytler, Scottish lawyer and writer, 1770

    How Monetary Policy Would Exist Without The RBA?
    Just like how every other market in the world works. The actions of all the market players (demand and supply) would dictate the price of money, just like the price of oil and bananas…

    This is a wild guesstimate… I think interest rates would be much more volatile, preventing anyone from borrowing a lot… or certainly not without a large risk premium. The market mechanism self-regulates.

    Imagine if interest rates fluctuated as much as the oil price… :)

  17. Kevin B Says:

    Sure, the perceived strength or weakness is a driver of the gold price. Also money would run back to perceived safe havens such as USD. But mainly a lot of liquidity would removed from the system.

  18. cb Says:

    One more illustration of why you simply cannot trust just anything being reported in the MSM. High profile money man, George Soros has been widely reported in the MSM as having said that gold is the ultimate bubble. Many took this mean that gold is now in a bubble about to burst. One such opinion was epressed here earlier by Jon, who I remember was advising us to sell gold, sit in cash instead, and he also confided to us that he was being short on the banks. Thus, we got a double dose of a doozie gold bashing for good measure.

    Now it turns out that George Soros has been loading up on his gold holdings.

    Tse, tse, tse – saying one thing to the public while doing another, that is rather naughty, Mr Soros, don’t you think? Admittedly, the advice, while ambiguous and rather misleading, it was free, so we can hardly complain about it on account of the price. Still, it is a classic example of how the good people are being fooled and fleeced by the money men of Wall Street.

    Anyhow, Jon, did you notice that gold has since climbed 6%? How much are you getting on your cash? And are you taking notice that a doubling of the inflation rate has just been recommended to central banks to be the new normal? What is that going to do to your cash, I wonder? What did Kris say? – from 100 to big fat OH in 18 years? Sounds like it could cost you your shirt, doesn’t it? I assume, though, that you are still hanging onto your shorts, no?
    Give us an update.

  19. cb Says:

    Sorry, I have just caught up with the discussion.
    I must say that I do not see through the cobwebs and the labyrinth of interconnected factors, so these thoughts are just off the top of my head, thinking out aloud.

    Liquidity is certainly one thing that has a bearing on the gold price. When there is a lot of money sloshing about, virtually all asset classes are likely to benefit in nominal terms, unless there are some specific reasons against a particular asset class, such as the gold price suppression scheme that has been fairly well documented by GATA. So, it stands to reason that when liquidity evaporates through large debt defaults and write downs, all things being equal, asset prices should fall, because of the reduced amount of currency chasing them.

    However, all other things are rarely equal, and since there are several other considerations that have a bearing on the gold price, these could significantly diminish or even completely counteract the depressing influence that a reduction in liquidity exerts on the gold price. What are these potentially or even likely countervailing influences? I can think of three of them, although they may be related and interconnected. Anyhow, here they are:

    1. Unnerving volatility and uncertainty about which country and which currency will be diluted and get sucked down the drain next.

    2. Counterparty risk avoidance. In a world of dog eat dog, where you have no idea who you can trust, trade based on fiat money can come to a standstill. It has happened before, when Lehman Brothers were taken out to the back behind the shed and shot by the other white shoe boys on Wall Street. And the point here is that it can happen again, especially when all the risks of all the gamblers have been transferred onto national governments and you simply do not know which one is going to fall over next. In such a situation government guarantees will not help, and the world will be forced back to the monetary metals as means of payment.

    3. Supply – demand fundamentals whereby in an environment of increasing demand, as is the case when central banks and billionaire money men, pension funds and hedge funds are accummulating gold by sitting on the bid, while annual gold production is on the decline. You cannot print the bloody thing, it has to be dug up at great effort and expense, and production is extremely difficult to increase, even if the price doubles or tripples. This is the primary reason why the monetary metals have a recognised stabilising influence – they cannot be printed into existence, so their supply and availability can be depended on as constants.

    Anyhow, to pull it all together, while it is true that a reduced liquidity in the system could by itself lead to a severe correction in the gold price, there are other, just as powerful forces at work which are likely to cushion that fall, or even counteract it completely.

    And since we do indeed live in an environment of, not only uncertainty, but a financial world dominated by leeches, parasites, sharks, wolves, confidence men and scumbags, I would not even think of trusting these honourable gentlemen. My vote goes to George Bernard Shaw, and gold.

  20. cb Says:

    Talking about financial instability, this short interview on the money men of Wall Street and the global situaion is well worth watching:

    Engdahl: Wall Street in death agony as World’s financial fulcrum

  21. cb Says:

    And of course, Max Keiser manages yet again to outperform himself with his shouting Financial Terrorism about the scumbag bankers – this time addressing himself to Obama himself, lol.

  22. cb Says:

    And here is the full report. It deals with Greece, the banksters, China and the US.

  23. cb Says:

    … plus savers vs speculators, and how to preserve your net worth through the unfolding financial disaster, exacerbated by rising tensions between the US and China.

  24. Peter Fraser Says:

    The banks can set their own interest rates and are not bound by the RBA either on the upside or the downside.

    The RBA set the price that the government will pay, which becomes the benchmark.

    Banks can already please themselves. The whole OP is simply a nonsense.

  25. Nick Says:

    while the focus is on Greece, Spain (and most certainly others) are lurking in the background.

  26. ciao Says:

    The ATO just lost its French justice expediency argument to that of a farmer’s right to natural justice in the High Court. Funny how fast the judiciary advance activist innovative Fabian human and animal rights causes and how slow they are to protect natural justice.
    The IMF is a branch of the US govt, little Timmy Geithner is the Asian crisis’s sickly love child and yet more proof that Americans fail their way to the top.

  27. Nick Says:

    the people are getting restless!! J.P. Morgan’s office in Athens bombed.

  28. Nick Says:

    if gold is in a “bubble”, why is Soros buying more?

  29. GB Says:

    Nick, cb
    Main stream did a little number on Soros’s comments that gold was in a bubble – they inserted the word ‘now’ into what he actually said. He said “gold is the ultimate bubble” in that its the last market that enters bubble territory which explains why he is buying. Main stream changed his quote to “gold is NOW the ultimate bubble”

  30. GB Says:

    cb @ 10
    LOL – i guess you dont believe gold can be manipulated by people?

    The IMF is about to dump a massive amount on the market but i guess Golds natural stability will keep its price rising…


  31. cb Says:

    Whow, the plot thickens in so many areas. Interesting times. On the climate change front, we now have Antarctic-gate: I wonder how many warmist pants we will have to have on fire to melt away this one.
    Watts shows IPCC underestimated Antarctic Sea ice by 50%

  32. cb Says:

    GB – ah, that is a great find. If memory serves me right, the previous batch of gold they say they sold was snapped up by India in a heartbeat, beating China to the punch – following which the gold price shot up and firmly established on a new level above $1000 per oz on what is a distinctive swiss staircase chart pattern, indicating that big money keeps sitting on the bid. As soon as the price corrects, 10% – 15%, the sheer volume of demand is overwhelming. When this new lot of gold similarly gets snapped up, it will push prices to the next level. There is every reason to expect that to happen all over again. In the current environment of increasing distrust and instability, the future of gold is unlikely to be anything but golden.

  33. cb Says:

    GB – another thought just occured to me. What in fact might be happening here is the distribution of gold to the various central banks of the world (through sales, of course), as a way of preparing the landscape for a sudden, official remonetisation of gold in international trade, meaning that, if international trade gets severely disrupted like the way I suggested not far above because of sovereign risk, trading imbalances between nations will be settled through the IMF in gold.

    For this to be the case, the member countries must first load up on their gold reserves, so that there can be confidence that each one of them has the requisite reserves. However, as part of such a scheme, chances are that the gold will be held on deposit with the IMF, and physically stored by IMF approved facilities and institutions.

    This line of thinking brings me to slowly appreciate the merits of Nick’s conviction that we are going to return to a gold standard in some shape or form. I can see how that might have to happen where settlement of international trade imbalances are concerned, even though I continue to doubt that goverments and their banksters in cahoots would want to give up their ability to print money and thus dilute the purchasing power of wages and savings. Unless absolutely forced upon them, the robber barrons and their cronies will not willingly give up on the easiest money around. You would have to have honest and honourable people in charge, and we seem a long way away from that.

  34. cb Says:

    Nick – my reading of one of those stories is that the Eurozone, if it is to survive, must stop sleeping with the enemy. Alas, the same banking interests are behind the Eurozone’s big banks, as those of Wall Street. And with economies so much in debt, they will be devastated if the Bankers are allowed to roam and keep terrorising governments and entire economies.

    The only way the current financial terrorism could be stopped would be for politicians to declare war on the scamsters. Not a single cent of taxpayer money should be given to them, and those that are insolvent, must be closed down, and their managers and backers investigated and prosecuted as ans where appropriate. Simple as that.

    Furthermore, the politicians would simply have to issue edicts of debt forgiveness for excessive and unpayable debts, so that people and businesses do not remain crippled by same.

    Ah, much could be done to put things right, but who will be game? At the present, it seems more likely that people will continue to be terrorised and dispossessed, and when people lost everything, as Gerald Celente often says, they simply lose it. Expect more civil unrest, and it would not surprise me in the least if some of the banksters started copping it.

  35. Cyrus Says:

    > If memory serves me right, the previous batch of gold they say they sold was snapped up by India in a heartbeat

    India bought 200 tons (!) of gold from the IMF. And China and Russia have expressed interest in buying more. In China the government is advising citizens to sell their USD and buy gold. I’ve seen booths in Beijing where people can swap their USD for gold and silver coins.

  36. cb Says:

    And what a wise thing that is for a government to do!!! Finally, we see a government that genuinely seeks the welfare of its citizens, encouraging them to get rid of their US paper and keep their savings in real money, instead. It certainly contrasts with the behaviour of Western governments.

  37. cb Says:

    And one more thought on that topic: Since Hillary Clinton’s stated threat a few weeks ago that if China doesn’t get behind the US regarding what they want to do with Iran, the US will disrupt China’s energy supplies.

    China’s response of total silence in response to that threat tells more than a thousand words. I think they have taken notice and are busy behind the scene, trying to work out the best way they could deal with such a possibility, as the threat is very much real. The fact is that China is vulnerable, and it is slowly being encircled by the US. That threat, and the recent arms sales to Taiwan are warning signs enough for Beijing that the US means business. China’s only real response has been to start selling US paper, but whether that will lead to a collapse of the USD and the US financial and military empire, like Max Keiser keeps saying that it will, remains to be seen.

    I find it hard to understand how or why those consequences should follow simply from China dumping its US paper. If anybody has a good grasp of how these things would work, it would be most interesting to know. Richard could explain it to us, perhaps?

  38. cb Says:

    AhOhhh, here comes the next heatwave for the warmists:
    “Oceangate: sea levels proven to have fallen for past six years

    The Hockey Schtick blog made it’s astonishing discovery after analyzing the full 6-year dataset of ocean levels from January 31, 2004 to January 31, 2010.

    By using the data from the ‘ARGO’ global network of sea level measurements it was found that ocean levels have actually been decreasing and not rising, contrary to global warming forecasters. This latest revelation is wholly contrary to claims by the Intergovernmental Panel on Climate Change (IPCC). The IPCC has continually argued that human emissions of carbon dioxide were causing the polar ice caps and thousands of glaciers around the world to melt so that such warming would cause global sea levels to rise, according to the IPCC’s 35 SRES scenarios, by up to 0.5 meters (18 inches) this century.

    These new revelations are bound to cause further dismay to climate alarmists reeling after a flood of scandals suggesting either corruption or incompetence by the IPCC in gathering climate data and projecting future trends.”

    So much for my hopes of an oceanfront property in the next decade whithout having to move house. It also explains why Al Gore bought an ocean front property in spite of his sea levels are rising fast-alarmism.

  39. cb Says:

    The ice really is breaking fast now under the feet of climate alarmism.

    “Now satellite radiation data debunks global warming theory
    by John O’Sullivan on February 17, 2010 · 0 comments

    I strongly urge readers to read an exceptional scientific debunk of the man made greenhouse gas theory (AGW) published today in the American Thinker. The article attacks the basic claim of the greenhouse gas theory whereby increased amounts of carbon dioxide (CO2) in the atmosphere will supposedly inhibit the outward-bound escape of long range radiation (OLR) from the atmosphere thus causing a ‘positive warming feedback’ to overheat the planet.

    The article shows how three different peer-reviewed papers that analyzed all available satellite data, prove there is no reduction of OLR emissions in wavelengths that CO2 absorbs. Therefore, the AGW hypothesis is disproved.”

  40. cb Says:

    And if the debunking of the fraud in science is not enough, here begin the law suits:
    World’s biggest coal company brings U.S. government to court in climate fraud

  41. cb Says:

    “Texas to challenge carbon dioxide finding
    The state’s petition, filed in the U.S. Court of Appeals in Washington, D.C., comes four days after several businesses and conservative groups filed similar suits.”

  42. etch Says:

    cb@37_ nows thats scary stuff

    looks like usa & chine are @ a mexican stand-orf

  43. GB Says:

    cb, etch
    a good question would be to ask why America has gotten heavy handed with china all of a sudden?

    Commentators keep saying that the US needs China to buy its debt and so that keeps america in line but by selling US debt maybe china has lost its edge

  44. etch Says:

    maybe BIG BULLY USA BROTHERs saying to china u want ur money ,u do as ur told ,,into iran with us
    or china will lose out ,sooner or later ?/???? \

    china’s gonna get ripped…………………………..oh boy

  45. cb Says:

    GB – yes, that would be my vague impression, but in truth I do not understand the US debt argument very well. Max Keiser keeps saying that if China dumps its US dollar holdings, the US will be finished, caput. I wish I understood why that should be. If it looks like the USD might crash because of China’s flooding of the market, Wall Street has plenty of financial derivatives, ticking time bombs, which they can blow up to scare the world into the reserve currency. Especially that they are doing the Euro in as we speak, so to speak, there will be no safe haven left for the immense amount of printed paper and digital money sloshing about here there and everywhere, so there will be a flood into the USD.

    What about gold and silver, one might ask. Well, they will benefit, too, of course, but the metals market is so tiny that you would have to value ounces of gold in the hundreds of thousands in most currencies, if scared investors all wanted to get into gold. So, that is not likely to happen just from China dumping its USD holdings.

    Anyhow, that is only one possibility for defending the USD against a financial attack like that from China. Another would be, of course, for the US to stand ready with another currency, such as the Amero, and push its failed dollar over the edge and wipe out its entire foreign debt, including the trillions it now owes to China. Anyhow, if such possibilities are indeed optional responses open to the US, then Keiser is probably wrong about the US being at the mercy of its creditor.

  46. cb Says:

    etch – yes, I think that is right. The US is sending some unambiguous messages to China to remind the communist cadre about who is boss. China might have a lot of US paper, but the value of those can evaporate in no time at all, so they certainly are exposed on that front. For that however, the US has to have a financial Plan B, in the event that its currency goes belly up. That would wipe out all the savers, including foreign creditors, but holders of real assets would fair much better. With its foreign debt wiped, the US could simply issue a new currency and have another start. It would still have all its manpower, technological know-how, and its weapons, so a debt free start would see a buoyant and fast growing economy again in no time. They might lose their empire, over such a showdown, but then again, that might not in fact be such a bad thing.

  47. cb Says:

    Penny Wrong, it seems, refuses to shut up. Ignoring the latest findings that sea levels have actually dropped over the past five years, she keeps repeating the same BS over and over, as if nothing changed since Climategate. Previously I thought she was merely bent, but with her latest performance I am inclined to think that, if anything, she is even more dumb. This ship of fools and crooks is going down, but she will be damned if she will allow for the penny to drop.

  48. cb Says:

    Oceangate: sea levels proven to have fallen for past six years

    And in spite of this, “In the address to the National Coastal Climate Change Forum in Adelaide this morning, Ms Wong said it was “possible that with climate change, and without large and expensive nourishment programs Bondi Beach, Sunshine Coast and Bells Beach may no longer be the beaches we know today.””

    Hello Penny, Hello – a pinch of research and a dash of honesty, and some silent meditation might just help you hear the penny drop. The scare is over. It is finished. It is time to let it go.

  49. Nick Says:

    While we are focusing on Greece & China, don’t take your eye off Russia.

  50. cb Says:

    Gerald Celente does not beat about the bush on what’s up with Wall Street, Washington, Greece and the Euro.

  51. cb Says:

    “The lies of Aussie Climate Minister, Penny ‘Wrong’
    by John O’Sullivan on February 18, 2010 · 1 comment

    We’re not sure if Ms. Wong is telling us how little man-made climate change there really is, or something about her boss, Kevin Rudd’s, anatomy.
    Our Australian skeptic friend, Val Majkus, has sent me a link to a speech made yesterday by Australian nutjob, Penny Wong, who is the Aussie Federal Minister for Climate Change and Water.

    Wong somehow kept a straight face when she told the crowd: “Climate change [is] happening more quickly than we previously thought.”

    Wong was addressing the first national forum on coasts and climate change in Adelaide and promulgating all the usual doomsaying myths for her dwindling band of climate cult followers that global temperatures are fast rising and sea levels, as a consequence, will rise by a meter this century.

    Then, the self-serving climate minister showed no remorse for going on to smear tens of millions of concerned citizens that form the grassroots movement of climate skeptics by implying they are under the sway of the tobacco lobby! Wong will come to rue her ludicrous statements. Projecting herself as some kind of high priestess. She is, in fact, no more than another gray-suited peddler of snake oil patter.

    Here in Britain the mainstream media has remembered what it means to do objective journalism. Sadly, the Aussie press hasn’t yet woken up to Wong’s wonky word spin–but they will. The days of her ilk are numbered. So I need only proffer a couple of simple facts to debunk Wong’s ‘catastrophic’ global warming myth. But the minister won’t want her audience to hear such basic truths:

    First, as widely reported, Professor Phil Jones, one of the world’s key alarmist climate scientists, admitted to the BBC last week that there has been no statistically significant rise in global temps for 15 years.


    Second, scientists from 50 research and operational agencies from 26 countries have proved that world sea levels have fallen for the past six years.

    Tagged as: Australia, Penny Wong

  52. cb Says:

    It looks like Wong’s stupidity is now attracting international attention. See this one:

  53. GB Says:

    cb, etch
    The US is trying to get guarantees on oil supply to China from Saudi Arabia in return for sanctions on Iran. They are not trying to block China’s oil supply

    As for China’s US debt: if they sell slowly then i dont think its a problem but if the flood the market then the law of supply/demand kicks in i guess – too much supply and not enough demand and the currency will sink


  54. cb Says:

    GB – Well, yes, of course. It is a carrot and a much bigger stick approach. ‘Our first preference is to have you support our case, and if you do that, then we will look after you. If you don’t, then you have another thing coming.’

    But the game is really much more complicated and more sinister than that. China has been growing and fast emerging as a dominant economic and financial power that could one day sideline Wall Street. This is the threat, and this is the end game that Wall Street interests have firmly in mind with all this manouvering. They are determined that one of China’s independent energy sources is brought under control by crippling and if necessary, militarily devastating Iran.

    Beyond that, the only remaining potential ally will be Russia, but one thing at a time, they will get to that, too, in due course of time. For now, Iran is firmly in the crosshairs because it refuses to allow in the robber barrons, and worse, it sells its oil in Euros. Iran refuses to accept US paper for its oil, and that is not just a nuissance, but a threat to continued financial exploitation of the world through the USD being the reserve currency for the world.

    If too many other countries start to copy what Iran is doing, Wall Street interests might be forced to earn their keep, instead of robbing the world blind. So, they have it in for Iran, that much is pretty clear.

  55. Dave Kidd Says:

    It happened with Vietnam, then to a lesser extent with Iraq, that by the time their wars were nearly over the public both here and in the USA were making it plain that they had had enough of the governments’ unnecessary wars. Wouldn’t it be marvellous if that kind of protest started happening again now, before a stupid Australian government rushes to support another yank war against Iran? Iran is no enemy of Australia’s.

  56. cb Says:

    Too true, Dave. And neither was Iraq, we should add, which was one of our largest trading partners and bought countless shiploads of Australian sheep and wheat. And what did poor Afghanistan do to any of us to derserve our soldiers going over there and terrorising and killing them in the name of “protecting” them from their own taliban? The list just goes on, and it can easily involve any country, even China, if the US banking and military cartels come to that conclusion.

    Australia will follow blindly, come hell or high water. It is the price we pay, many would say, for having the biggest bully in the world for an ally, but the main reason why the price paid is acceptable for this country, I suspect, is that so far that price has been paid for us by all the people whose lives are devastated and made miserable in all these military adventures. The short and long of it is that the Australian army has no business being over there.

  57. cb Says:

    What happened to yesterday’s MMA?

  58. Nick Says:

    Regarding the Iraq war, I recall something about bob Hawk buying arms from Vietnam, shipping them to Fremantle and then sold to Iraq who then used them against our young soldiers. War is only a tool for the money spinners.

  59. cb Says:

    Right On!

  60. etch Says:

    yeah thats why WONGO”s here ………….

    apparentlty couldnt fix”NAM

    too much methane there

    isnt that right WONGK??????????????
    ya pussy head

  61. Peter Fraser Says:

    I think the flying saucers are coming to get you guys. Have your bags packed and ready by precisely 10.00 AM tomorrow.

  62. etch Says:

    “””””””I think the flying saucers are coming to get you guys. Have your bags packed and ready by precisely 10.00 AM tomorrow. “”””””””””

    teeee hhheeee hhheeeee


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