Australia and its Population Control

The social engineers are in full flight. Now Australia has a Population Minister. We prefer to label it the “Population Sinister”, or even the “Population Tsar.” Of course, this isn’t the first time politicians have tried to manipulate the make-up of the population.

The most recent before this is probably ex-Treasurer Peter Costello’s 3-Child policy. We don’t care to recall exactly what it was, something about “having one for the country.” Or something like that. We do recall mainstream journalists thinking the joke was hilarious at the time.

But the sad thing is, all this focus on trying to control the population is just more grist to the mill that confirms Western nations – including Australia – are heading head first towards totalitarian Socialism.

It wasn’t so long ago that the Chinese were lambasted and even ridiculed for their one-child policy. “It’s not natural to restrict family sizes” was the general theme of those arguing against the policy.

But now, Australia is following the same path.

We’re not sure what plans Australia’s “Population Sinister” or “Population Tsar” will have for the nation. Will it be a continuation of the 3-Child policy? Maybe it will be expanded to a 4-Child policy.

Or perhaps the reins will be tightened to a China-like 1-Child policy.

Who knows? But whatever the outcome it’s just another futile attempt by megalomaniacal politicians to manipulate something which is impossible to control.

We’re not about to claim to be an expert on population in China, but we can take a look at a fancy chart we’ve cobbled together in Microsoft Excel to see just how successful population controls there have been:

Chinese Population Growth

 

We’ve relied on our friends at Wikipedia for some of the data and then whacked in a steady growth rate to fill in some of the gaps. Yes, we’ve used Wikipedia. Come on, be honest, we all do. Even the snobs in the mainstream press who deride it doubtless use it for background research.

They’re more than welcome to wade through the Encyclopedia Britannica if they really want to, but we’ll stick with Wikipedia thanks very much…

Anyhoo, what we can pretty much guarantee is that if the new Population Tsar has plans to limit the population growth it will doubtless lead to an increase in population. And if his plans are to increase the population it will doubtless lead to a decrease.

But whatever happens, as is the case with all attempts at manipulation, it will have many unintended consequences elsewhere in the economy.

The next thing we know they’ll try to manipulate the price of money. Oh that’s right, they’ve already stuffed that one up. Doesn’t stop them trying though. As we’ll see yet again with today’s Reserve Bank of Australia (RBA) interest rate decision.

But before we get on that, a quick note on the “good” news about the US job numbers from Friday night.

According to dailyfinance.com “it was the biggest U.S. employment rise since March 2007, when the economy added 239,000 jobs.”

For your information, if you haven’t read the news already, the US economy added 162,000 jobs for the month.

That’s got to be a good sign doesn’t it? I mean, the best job numbers in three years. Although it should be pointed out that March 2007 was just seven months before the stock market topped out in October 2007.

But the other more important point worth noting about the job numbers is the composition. Again, as you may have already read, “the number of nonfarm jobs added during March was skewed upward by the 48,000 jobs added by the U.S. Census…”

In other words, the only reason the jobs number is the best since March 2007 is because the US government hired 48,000 people to, erm, er, count a bunch of other people.

If that isn’t a perfect example of manipulating the numbers then I don’t know what is.

We’re not quite sure how anyone can claim that the government employing people to count other people can be considered as a positive sign for any economy. Quite the opposite we’d have thought.

By our way of thinking it’s more akin to a confirmation that the economy has gone mad. When commentators and analysts whoop and holler about job growth when one-third of those jobs are for temporary government number counters, then you know something is seriously wrong.

You can see how wrong things are just by reading this article in The Age which it sourced from Bloomberg News:

“…Non-manufacturing businesses that make up almost 90 per cent of the economy rose to 55.4, higher than anticipated… Readings above 50 signal expansion… Sustained job gains on the heels of the biggest payroll increase in three years would lift incomes, giving households the wherewithal to keep spending, which accounts for about 70 per cent of the economy.”

We’ve always been troubled by that number. That US consumer spending accounts for 70% of the US economy. To our way of thinking – backed up by the economic numbers – it means US consumers are spending way more than they earn.

But here’s the really scary quote from the article. It’s made by James O’Sullivan, chief economist at MF Global in New York:

“The recovery is looking increasingly self-sustaining.”

We’d argue that it’s anything but self-sustaining. Surely a self-sustaining economy is an economy where you produce a bunch of stuff, sell it, and then use the proceeds to buy or invest in other stuff.

A self-sustaining economy isn’t one where you earn $100, ask for a loan of $100 from someone, and then buy $200 worth of goods from the person you borrowed the money from.

That of course is exactly how the US relationship with China works right now.

As Peter Schiff pointed out in a video blog recently, it’s similar to the vendor finance deals that swept through the economy during the dot-com boom. In hindsight – and even at the time – it was seen as funny money.

We remember some of those stories. Maybe some were apocryphal such as the online companies that would buy $10 million worth of advertising space from each other without a single dollar changing hands, yet they’d book the amounts as revenue and expenses.

That ‘works’ fine until they have to pay real bills.

There were more gems such as, what’s the solution to the problem where your customers can’t afford to buy from you? You lend them money. It’s ingenious. It’s also high risk and unsustainable.

If your only why of selling stuff is to buy your own goods on behalf of your customers something is seriously wrong. The vendor financing terminology is a perfect illustration of how the US and China relationship has developed. And as you can imagine, the outcome is sure to end in tears.

But, enough of that for now, quickly back to manipulation of the price of money.

We wrote this in our weekly update to Australian Wealth Gameplan members last week:

“But getting back closer to home we now have the perfect example of the impossible task a central bank has of trying to manipulate interest rates. It’s the old problem of it not knowing whether to put the foot on the gas or on the breaks… or to just coast. On one side you’ve got the Reserve Bank of Australia (RBA) governor Glenn Stevens appearing on TV warning about speculating on housing – even though it’s the RBA’s artificially low interest rate that’s causing the speculation – on another side you’ve got economic indicators telling you the economy is slowing and could be harmed by further interest rate rises. And then on the final side there’s a pick-up in price inflation. Price inflation which we’re told isn’t possible while there’s an ‘Output Gap’.”

So, what does the RBA do? Whichever way it moves – or doesn’t move – the RBA is picking winners. If it increases interest rates then it’s giving a slap across the chops to anyone that’s in debt.

If it doesn’t increase interest rates then it’s giving a knee in the groin to savers, whilst allowing the debt bubble to expand further.

We’ve pointed this out many times before, but it’s worth continuing to express it. It’s impossible for a central bank to micro-manage an economy using interest rates to the degree which mainstream commentators and economists believe it can.

Take two economic numbers from last week as an example. The TD Securities-Melbourne Institute inflation gauge showed an increase of 0.5% in March (even though the ‘Output Gap’ theory says that price inflation is impossible right now!), yet the AIG-PricewaterhouseCoopers manufacturing index fell 3.6 points in March.

For a start you’ve got two separate indicators giving you two different signals on the state of the economy. One tells you that inflation is a threat, the other tells you it possibly isn’t.

At what point does the RBA do something about these numbers? And when they decide when to do something, what does it do?

We all know the RBA has a range for price inflation of 2-3% over the course of an economic cycle. But what does that mean? Why 2-3%? Why not 1.9% to 2.9%? Why not 2.1% to 3.1%?

Does the 2-3% really mean anything or is it just useful because they are round numbers? Is it good or bad news if the average over the cycle is 3.1%? Or is it OK because it’s only 0.1% higher than the target?

But if 3.1% is OK then why not make the range 2% to 3.1%? Or will the RBA compensate for that by keeping the price inflation number below 2.9% over the next cycle so everything evens out?

As you can see, it’s all just a complete nonsense. It’s smoke and mirrors that hides the real role of the RBA, and that is to devalue the money in your pocket.

Contrary to mainstream belief, the RBA doesn’t have a panel of fancy buttons at its disposal where it can perfectly and precisely direct the pace and the direction of the economy at its whim.

Every action the RBA takes does have some impact on the economy. But it isn’t an impact which it can accurately direct or predict. If it could then the RBA wouldn’t be in the position right now of talking up the prospects of the economy while simultaneously trying – half heartedly – to take the heat out of the property bubble.

Today’s interest rate decision will excite the market, whatever the RBA decides. But the fact remains that artificially moving interest rates creates the very problems of a boom and bust economy that the RBA claims it wants to avoid.

Cheers,
Kris.


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

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29 responses to “Australia and its Population Control

  1. I’m not so sure Kris, I think it’s all about the [availability of] money.
    Property prices still rose when interest rates were at 18% while personal wealth was syphoned away during the Great Australian Bite. Money was still available.
    Welcome to the ‘Recession We Had To Have.’
    With that lesson learned, when people started to baulk, interest rates were lowered to keep property prices inflating. Money was still available.
    If I believe something is ‘worth it’ I will borrow at whatever %, fully expecting to turn it over for a profit no matter the cost, because that makes the price of borrowing cheap to reasonable.
    However if money is not available then 1% or 50% interest rates are meaningless – it’s still not available so I can’t borrow so I can’t invest/buy.
    These problems we are now suffering were brought about by the Industry of Money Foundation ‘throwing’ money [loans] via banks at everybody and anybody.
    Self assessment for Christ’s sake. “Sure, I can afford the payments, sure I can.” “You can? Oh good, sign here.” Money was still available.
    It may have been more economically responsible to just let the money handlers die and use the rescue money to simply buy everybody a house of their own and forgive all private debt.
    Then we’d have no debt and no Bankers, Brokers, Lawyers, Crooks; maybe no money either.
    But, hey, guess what? Money is still available. Better borrow some before the train leaves the station.

  2. Quote “this isn’t the first time politicians have tried to manipulate the make-up of the population”

    Silly me I thought it was their job to determine immigration and manage the population.

    When the USA get jobs growth, it is jobs growth, simple as that.

    Kris clearly you were out of good ideas today.

  3. Peter Fraser – surely you are not so brainwashed that you aren’t a little concerned by the fact that our Government keeps trying to engineer our society…dont you wonder what would happen if things were not so ‘planned’ as you call it???

    Government is there to make sure OUR taxes are spent on the infrastructure, schools and hospitals that are needed to look after the taxpayers that have paid those taxes. They are not doing us a favour, they are doing their job!

    But having a Population Strategy, A Population Minister, A Population Panel of Registration, A Population Platform, A Population Plan BLAH BLAH BLAH…it all sounds a bit too planned for a free society.

    Soon we will be told where we can live in Australia and how many baby’s we must have to qualify for Government money…oh that’s right, baby bribes already exist. So parents would go out and have a baby, fget $5K, buy a 50” flat-screen TV and then neglect the child for the next 17 years so tax payers have to pick up the bill…great policy that one. Great way to ‘manage the population’

    And your last comment shows your naivety in terms of what makes a healthy economy. Kris has every right to point out that jobs created by short term Government programs are not signs of self-sustaining economy.

    Its just like your belief that our economy is healthy because schools are given money by the Government to pay for over-quoted jobs that aren’t even needed. Surely you cant say that jobs paid for by private sector wages are just the same as jobs paid for bu Government wages. If they were the same, then we should no have 5.3% unemployment. The Government should hire them to build bridges etc…that we will one day need./ Surely that is the logical conclusion of your comment?

    I think your just a little grumpy about the 0.25bp increase in Interest Rates. Also can you confirm your outlook on houses…I have heard you say steady growth in house prices for this year on the Business Spectator site. But around here you say flat growth or even marginal decline….which one is it mate?

    I think you are doing a Chris Joye and trying to look like you are always right in hindsight.

    Kris can you please go back to making fun of Joye…that guy gets slaughtered over at his blog because he is clearly getting more and more desperate. He is now turning on the RBA, he is an absolute chameleon!!!

  4. PuntPal
    I think when times are good the government can get away with a lot. The citizens dont care as long as they are happy. Thats why we need a good deep recession and I think that for a lot of reasons

    Example: Adam Carr should be removed as a commentator. His article in which he states the RBA should print money and buy gold clearly shows he suffers from the bandwagon effect and so gets caught up in the hype. He then has the ‘power’ to preach to the masses who also get caught up in the hype. Journalism should be unbiased and give both sides of the story. A good recession would remove him.

  5. Totally agree GB.

    At the moment, the Government think they can implement any policy, at any cost and with no explanation of why this approach is better to other approaches.

    I thought people would start caring after the GFC hit, but it seems they are more apathetic then ever.

    Then you have people like PF saying “When the USA get jobs growth, it is jobs growth, simple as that.” It seems simpletons are running the place and populism is abundant. People have lost any desire to think beyond what they are told.

    I despise Adam Carr…he was on the radio the other day and he sounded like he thought he was oracle on rates.

    But Joye is the worst of all – he is seriously dangerous. The guy twists numbers and changes with the wind.

    Agree that deep recession will clean them out, but you can already tell they are using the RBA as a the fall guy due to their rate rises.

  6. Hi Puntpal,

    Puntpal, I’m usually an advocate of the free market, but I think that governments around the world have a responsibility to start thinking about a population policy. According to a video link Kris previoulsy posted re. exponential growth, at just 1.4% population growth p/a, the earth will have 1 person per square meter of dry land in 780 years.

    The video is boring but very important. If you’re interested, check out this great example of exponential growth – at the 3:25 min mark:
    http://www.youtube.com/watch?v=CFyOw9IgtjY&NR=1

  7. PuntPal, GB – In an interdependent and debt saturated global economy where national economies are in competition with one another for the export dollar, what would you guess to be the eventual outcome for a country which continues to ramp up borrowing costs for itself and its own businesses and citizens while its competitors are clearly hellbent, even at some risk of outright war, on making their borrowing costs lower?

    I keep repeating myself saying this, but it seems to me that the two of you can rest assured that you are going to be granted your wish for a good recession. If he can help it, Glenn Stevens, doing God’s work, will single handedly hand it to you on a platter. You two just make sure to be ready for it. As the saying goes, be careful what you wish for.

  8. cb – what would be the consequences of the RBA bringing down rates to US style levels?

    We already have spruikers such as PF and Joye telling people to buy houses with as much debt as possible. And Australians are lapping it up, with our debt levels continuing to climb.

    This whole GFC was caused by people taking on too much debt and for a period low rates were needed to stave off the worst of the downturn. Now things have stabilised, there is simply no reason why borrowers should be rewarded for being over-indebted and savers puished for doing what more people should haev done.

    I have clearly stated my interests in this matter as a renter/saver…I have assumed you have recently bought a property on a variable rate and stated this belief numerous times…as it seems you all of a sudden went from someone that undersood debt was dangerous, to someome that believes we should allow the cost of money to be adnormally low…forever??

    If we cant raise rates now, when can we?

  9. Half way through reading your 7,369th article on interest rate manipulation and the housing “crisis” I had a small epiphany…now first of all…I must admit to not knowing a great deal about all this…so perhaps you can paraphrase me and then fill in the gaps and make an argument that somehow points the finger of the “housing shortage” (inverted commas as perhaps it doesn’t exist) the way of the Property developers…and when I say property developers I mean the Australands and Delfins and the rest of the Craigieburn, South Morang, Point Cook, Tarneit and Mernda crews….

    It is widely reported that these “companies” own vast tracts of land across australia that they are slowly drip feeding into the system so as to meet this “housing shortage”
    Presumably, these “companies” have huge variable rate based bank loans in place that bought this land….
    On the one hand…selling properties slowly helps ensure the value of this land is sold at a high a price as possible (supply/demand)
    On the other, increasing interest rates increases the cost of this land to the “company”…
    At some point (a tipping point!?!) the cost of this companies loan (the interest) is going to be so high that the decision will be to sell as much land as possible so as to pay off the loan…
    Thereby…falling property land values and more affordable housing….solving the “housing shortage”
    Hence, the property developers dilema, they don’t want increasing interest rates…not because they are concerned about the property/housing shortage and the poor mugs that can/not afford to live in their own home…but because higher interest rates mean that at some point they are going to have to sell as much land a spossible to pay for the interest cost on their loans…

  10. Drew, Govts should NEVER get involved in population policy, even to the extent of having a census. They have never realised that we are not all the same, so their policies have always resulted in gains for some and larger losses for others. The only winners are always just the Govt parasites.

    Govts should not be allowed to do anything except protect us from each other. That includes getting involved in finance, printing money or banking. All economic life can be handled by private enterprise just as it used to be, before Govts usurped our rights to trade and exchange privately.

    I say make tax voluntary, then let them see how much people think Govt is worth and what areas are worth supporting. Just send me out a bill listing how much and where you’re gonna spend my cash, and I’ll tick the boxes and send a cheque back in!

  11. I’m not convinved KP.

    You say “govts should not be allowed to do anything except protect us from each other”.

    From watching that video, if exponential population growth is allowed to continue, we WILL need protecting from eachother. We are headed for 1 person per square meter of dry land in 780 years.

    Obviously, we can’t live like that – and it will be avoided in one of two ways – we can either set a policy for zero population growth, or let nature (and the free market) do it for us – via war, famine, disease etc.

  12. Drew – thanks for the link.

    I tend to agree that overpopulation and resource scarcity is a big issue and something that needs to be managed… but managed by who?

    I dont know – but I dont have faith that Governments will manage population in our interests. They will import growth when they need to fudge GDP and restrict migration when there is vote to be won by putting up walls.

    I have lost faith in Government to do nearly anything right…

    There role should be an enabler for communities. Devolution would be the way they are still relevant and would allow actually people to make things better, not faceless, useless beauracrats

  13. I recall back in Jimmy Carter’s time there was a resolution passed at the Lima Convention in Peru, something about reducing the world’s population by one third. Now, how that can be done is up to our imaginations. Today mankind has a myriad of “tools” at its fingertips. Just like back then they were planning the financial destruction we are finding ourselves in, what makes us think that governments don’t have anything up their respective sleeves…for the benefit of mankind??

  14. PuntPal – so we won’t have anyone setting immigration policy. Now that would be novel. How long do you think that would last – 5 minutes perhaps.

    And on house price increases I have consistently stated that I expect +5% to -5% in 2010, although a negative number doesn’t look likely at this point, so I’m not being inconsistent if I discuss a small increase.

    I also like to review the actual price changes and adjust my forecasts, accordingly. It would be unwise not to.

    And can you give me a link where I have advised someone to become highly leveraged as per your comment “We already have spruikers such as PF and Joye telling people to buy houses with as much debt as possible”

    I would be quite surprised if you can find one unless it was in jest or a discussion on a scenario.

    PS why don’t you join Steve Keens forum http://www.talkfinance.net

  15. cb – ever consider its not the RBA?

    E.g. spruikers convince the masses property is a sure fire way to wealth so they buy and prices rise, rates go up, spruiking continues and prices go up, rates go up…..

    The RBA is reacting to peoples actions not the other way around

    However, eventually the bubble will pop but it will be because we pushed prices too high which pushed rates too high

  16. It is arguable that Australians are misallocating potential useful resources by living in bigger and better houses than they strictly speaking need to. In the same way, it is arguable that we are similarly wasting precious capital in the building and maintenance of fancy cars and pleasure yachts, and a whole host of unnecessary “things” of a similar nature.

    My very first temptation, though, would be to argue for meaningful savings somewhere else, and before anything else, and namely the cutting by three quarters, no less, the public service component of the budget. This should be achieved through a two pronged approach. First, cut the number of freeloading parasites by half. Second, cut the remaining ones’s salaries by half.

    The public service burden on the productive segment of the economy is getting worse and worse. Public service growth comes at a cost to the private sector, sucking off its lifeblood, not only in terms of money, but also in terms of manpower that otherwise would be forced to engage in productive work. Shortage of productive labour in this country, in no small measure, is but a function of how much of what we already have being misallocated into useless and burdensome, counterproductive work in the ranks of politicians and public servants, who, to add insult to injury, are largely ignorant of what their purpose and function ought to be.

  17. PuntPal – lower rates would enable export industries, including tourism, to remain competitive with our overseas rivals. They would also enable us to save more, and pay down debt, instead of being killed by it through higher and higher interest rates. If the total amount of debt should be reduced, then lower rates and tighten lending criteria. By increasing rates like this, Glenn Stevens is killing large sections of the economy and will be sending more and more ordinary people to the wall. That should be clear. Little wonder that there are now open calls for his sacking.

    GB – I see not ironclad economic law in operation anywhere. In a fiat monetary system, we make the rules, and just about anything goes. If the US, Asia and Europe can keep their rates down, so could we. What is the use of our sick monetary system if it is used to screw the good people in good times, as well as in bad times?
    Ah, I almost forgot: It was not invented for our benefit.

  18. cb – maybe the RBA just needs to be able to target different industries with different rates

    What if they had 4 rates.
    1. Targets property market
    2. Resources Industry
    3. Manufacturing
    4. Services

    That way they could be raising rates on points 1 and 2 and leaving rates down for 3 and 4 and thereby stimulating growth in 3 and 4 and putting pressure on 1 and 2

  19. GB – Yes, something along those lines, more flexibility of targeting overheating sections while easing up on the leggards until they regain their strength. If they insist on managing the economy, then at least they should make themselves useful, in my view.

    As it is, Glenn Stevens, along with the Government, first opened up the vaults and invited ordinary citizens to help themselves to the bullion. Now, he proposes to put them behind bars for bank robbery. Well, I guess, bank robberies have been the dominant theme of this GFC, but guess who has been doing the robbing?

  20. Nick – Among other things, Keen says this:

    “With the RBA likely to increase rates specifically to prick this bubble, the volatility will doubtless continue. But even without the RBA’s expected–and I have to say justified–anti-bubble interest rate intervention, …”

    I wonder, though, whether it has occured to any of these nitwits that large sections of the Australian economy are going to be laid to waste long before house prices are likely to crumble? No price is too high in pursuit of this holy grail of lower property prices, just so long as the bill is mailed to someone else.

  21. PF / PuntPal

    I seem to remember a PF post in early Jan-10 during the escalation of SayceJoye Missile Crisis regarding leverage… PF position was stated as primary residence as much equity as you can get, investment property, less equity the better.

    For some reason this stuck in my head…along with lyrics to songs from the 1980’s and a nagging reminder about the wifes birthday…

  22. The wolf – I can’t help you with the song lyrics, but I would have said that the less borrowed on a PPOR the better, whilst for tax reasons the more on an IP the better. Is that what you have remembered ?

    EG if you owned a PPOR and an IP it is better to owe nothing on your PPOR and everything on the IP.

    And happy birthday to your wife…

  23. Drew @ 6:
    It may be a bit boring, but the maths is sound! This Prof knows what he’s talking about… Comrade Rudd should take notice and stop importing people by the hundreds of thousands every single year … Australia will become like a bluddy sardine can

  24. CB @ 17:
    Great points you made there. However, i dont believe that our property price growth is due to bigger and better houses…
    ALL properties, whether studio units, 1 bedroom, 2 bed, 3 bed or 4 bed (And larger) houses – all prices have gone through the roof!
    And the main culprit is our parasitic government – on all 3 levels!
    They are singularly responsible for the mess the country is in wrt the highest property prices on the planet!

  25. Thanks, Sandra. Some of the things they say and do!!!
    The cost of living is going up on just about every front, while our incomes are stagnating and falling. So what does the RBA do in response? It declares that inflation is a threat, so it puts up borrowing and loan servicing costs for an already overburdened economy. If all our disposable income is ripped away by higher and higher interest payments, how will we ever pay down the debt? Oh, I forgot, that is of little use to the banksters. They want debt slaves, not debt free people.

  26. I agree Sandra. And the example I referred to in the video is great because it shows that with exponential growth, you don’t realise you’re running out of space until the last minute.

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