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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