KEVIN BECK SEES AN IMPENDING GLOBAL ECONOMIC CALAMITY IN 2008
A bubble on asset values particularly housing in Australia creating a crisis in 2018
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A dance of fiscal death with China.
In many respects the US generally has its head in the sand, unable to comprehend how the capital engine of the world came to this situation. The US debt is now almost level with its gross national product. The USA is owned by China, South Korea and some other nations. It is inextricably locked, with China, in a dance of fiscal death. China needs the US consumer to buy but the rapacious nature of US capitalism delivers poverty to the greater number of people in the USA . Once it was thought that the secret to success was a balance between farm and manufacturing. However stupid policies and greed, and an addiction to froth, and bubble, moved the USA and other places like Ireland, to a technology dream. Boxes that offer a feckless, and false, set of beliefs and escapism. Apple, and Microsoft, along with other questionable enterprises (what do they actually add to society?) have become the greatest companies in the world. This is a sure way to economic destruction and still the yanks do not get it. Other nations have filled the US, Australian and western world, food bowls and supply the manufactured goods. They buy the quarried products of countries like Australia, Africa and South America, to fuel this replacement. There is nowhere left to go for the USA, ICeland, Ireland and the United Kingdom among others.
Bloomberg Television interviews the stars of corporations, and economies, and most talk of returning to growth. The fallacy of endless growth. They pick small numbers such as 3% growth and inflate these as signs of wonder and success. They throw around billions as if they are ten dollar bills. The populations of nations have become innured to big numbers except when those big numbers are their losses.
The western world's concept of growth relies upon poor people becoming richer and consuming more of their goods and supplying them with cheap shit. It relies upon China, and India, and other developing nations, using the savings of the greater number of their poor citizens to fund the western economies ad decisions of their governments. Thus Chinese labourers, earning $US6.00 per week, save $US2.00, and there being many of them, the savings pile grows. The Japanese workers have saved large parts of their income and now their governments rely upon them. The dictator states (such as China) use this money, held in its banks, to buy up things and to build. But the dream has faltered and the golden age has come to a grinding crunch. China must invest in its own rural areas as discontent grows. 120,000 factorues have closed and 10% of the population is unemployed, though the Chinese government, known for its lies and distortions, says that unemployment is a little over 5%. Disagree and they will lock you up. China is becoming aggressive wanting to own rather than purchase he outputs. It has executives from foriegn companies in gaol. The government took over a private steel mill because they did not like the way it was being run. So what can this tell us?
In the USA an octopussy crisis is rolling across the American dream crushing the breath, and life, out of it. What is the real USA unemployment range? Is it 8% and up to 75% or more in some locations? In Las Vegas unemployment creeps towards 20% as the casino economy, and the glamour of get rich quick, a valium induced fantasy, dies. Avidly people watch the stock exhange for signs and meaning. The false God of wealth creation and voodoo economics. The global casino has risen to a status that belies reality. Any movement up or down is read as gospel proof of something.
It is inevitable that the US will default on its debt. But what form will that take? Continuing to print money pushing the Australian dollar above parity to something like a $US1.05 - $US1.10 destroying our exports along the upward path. Will it be a restructuring of debt, an inflation correction or a mix of deliberate, and unfortunate, outcomes? When that default occurs what effects will there be?
The social engineers are out in force. They are the fairy dust, fringe dwellers, with minimal grasp of reality and a lack of any innovative thinking, who harp. They continually propose that there should be more public housing and yet when built this is often too expensive and as demonstrated by the corrupt NSW government can be a target for revenue grabbing. Federal Minister Tanya Pliebersek is working on these hackneyed concepts which have never delivered benefits. Everything is based on a government subsidy of some form. because people are either too lazy, or incapable, of educating themselves they should be maintained by governments. Add in Rudd's cliamte change agenda driven also by the fairy dust merchants and watch our economy being ripped apart.
Soon China will cut itself lose from the fiscal dance of death with the USA and then the world will really experience a global financial crisis. The paucity, and embedded fantasy, of the economic and financial model, with its reliance on stock trades and smart manoeuveres (like buy outs and take overs in lieu of actually creating anything extra) along with world trade - balancing system - is clearly shown when the rich nations have to rely upon the poor people of India, China, and Indonesia, to save their hides. The US administration is comforted by China's investment in domestic demand and its ambitious reform agenda. Asia is leading the gobal economy and according to Tim Geitner this is going to be fabulous for the USA. How so and when has Tim Geitner ever been right? Peraps we should read about Henry Ford's Brazilian utopian dream to gain an inkling of what occurs when such assumptions are made by the self annointed masters of the universe.
Off we rush for the crisis is over according to the Labor government. Australia missed the recession. Is this true? People are gearing up to spend at Christmas and give their credit cards a trashing. Credit cards that are already a burden on the natoon. They are buying over priced houses, fulled by a silly government policy of giving handfuls of money. The federal government crowed that it would increase housing stock budgetting hundreds of millions. After a year it has built seventy five houses. Minsiter Pliebersek says that 10,000 dilapidated accommodations have been returned to the hosuing stock. The governments are always quick to have a stretch of the imagination and abit of a tweek at the truth. Nothing is ever as it seems with the modern (ethically challenged) politician. Though it is probably not Ms Pliebersek's fault that the states and territory governments and public services are inept and unable to achieve a modicum of success and nation building. State and local governments are legalised theives. They are stifling housing development and keeping prices high through inadequate supply due to their greed and corruption. Their charges can add tens of thousands of dolars if not hundeds of thousands to blocks of land in estates. They are hopeless at providing economic infrastructure and more attuned to self interest and misleading conduct.
How high can house prices and rents go? When is it that the average person can no longer afford to be a part of this fiscal madness?
If the nation is solid why have four private educatioon facilities (2 in Melbourne and 2 in Sydney) gone belly up like a number of others? Why is small business struggling with insolvency rising? Are bad debts going down or up? Are people paying their bills on time, in advance or later?
" Australian firms are hurting each other and setting themselves up to be locked out of the credit market or to face action from the tax office as a result of the way they are prioritising payments. A new study released today by Dun & Bradstreet (D&B) reveals that 66 percent of firms are prepared to miss supplier payments if they are unable to pay all their accounts and a further 15 percent are prepared to a miss a tax payment. Yet failing to pay these bills could leave Australian firms unable to access credit and facing penalties from the tax department as financial institutions refuse loans to firms holding a tax debt and credit providers continue their stringent focus on trade reference checks as part of the credit assessment process. The study also reveals that many firms are unaware of the implications of paying late on their ability to access credit, with close to two thirds indicating that if they knew late payments would detrimentally impact their credit standing they would be more likely to pay on time." (source: Dun and BRADSTREET, 28 October 2009: http://dnb.com.au/)
" Insolvency data shows small businesses are still hanging on, Friday, 05 June 2009 10:50 James Thomson The number of companies falling into administration continues to rise sharply in 2009, but insolvency experts say struggling small businesses appear to be hanging on despite the downturn. New figures from the Australian Securities and Investment Commission show 810 companies entered external administration in April 2009, up sharply from the figure of 680 recorded in April 2008, but down 25% from the 1,095 companies who fell into administration in March." (source: Smart Company: http://www.smartcompany.com.au/)
"Global debtor finance provider, Bibby Financial Services , believes the seeds are now being sown for a bitter harvest of small business insolvencies later this year. While the Reserve Bank held interest rates unchanged this month, other developments affecting small business lead us to believe Australia will see business insolvencies climb to a record later this year, Bibby Financial Services Managing Director, Greg Charlwood, says. The average time business debts remain unpaid by large companies and government organisations is now over 60 days, more than twice the normal 30 days and according to Dunn & Bradstreet, the highest since 2001. The longer that companies have to wait for payment, the higher the strain on their cash flow, Greg Charlwood said, adding that the statistics indicate larger businesses are taking longer to pay their debts than small and mid-size companies, putting smaller business under greater pressure. It appears this situation is getting worse, rather than better, so we will see a greater rise in small business insolvencies later this year as a result. Companies are going into administration at the rate of around 700 a month at present a near record level. We expect this will climb above last years peak of 747 in coming months because of the increasing pressure on small companies, Greg Charlwood said." (Source: Greg Charlwood, Bibby Financial Services, http://www.ferret.com.au/)
The Rudd labor government bought a respite at a cost of billions funnelling money into consumer's pockets and into small construction and allied firms, and the Reserve Bank kept interest rates low. The money for cionsumers is all gone, other funds such as insulation subsidies have been misused and a large segment of money has been stolen. Thus reducing its impact. Intrest rates are rising and those who bought over priced houses will suffer in 2010. Unemployment appears to be static but there is a hidden under employment and many people have taken reduced hours and pay cuts to keep their jobs. Despite all of this many average Australians live in a pollyanna world of make believe. Like sheep they bleat the common refrain and gullibly swallow the majority line.
Investment financial advisers are reccommending that I reduce my cash holdings and move that money into equities. Thye too are sheep following the trens and they totally failed to predict or comprehend the diaster that confonted them in 2008. Now they would have me believe that they know what they are doing. I am told that they are relying upon Standard and Poors, which they describe as the world lading ratings agency. Is this the one that suggested we all but the sliced and diced mortgages? The US government's debt appraches the value of their GDP. What if there was a default? Apparently we can rely on China and India to keep Australia afloat and we are again in a resources boom. Never mind that we do not have the capacity to support the boom, another failure by state governments. They just want the royalties to squander on their personal exploits and ideas. When the money runs out they will sell assets (NSW and Queensland) and the cycle of destruction will go on. labor tell us they know how to manage things, the liberals tell us the same stories. They are in their own world of pollyanna fantasy as to their capabilities.
Commodity prices rise astronomically, then fall shaprply but not all the way back.
The mininsg boom ends in 2012 - 2103.
Mr Swan is euphoric, as the media runs headlines that we are the world leading economy. This is rightly so under the current thinking of the fiscal kings. We are in the "medium and long term fiscal programme" delivered by Mr Rudd and Mr Swan. Aks Mr Swan a difficult question, such as how is giving cash away an investment in our future? What happnes when the cash runs out and he wants to take the money back in the form of taxes and charges? He will not answer but will talk of the "mediun and long term fiscal measures" without ever going deeper. The problem for Australia is that the presumptions under which he, Treasury and the government overall, frames policy and action, are based, to my thinking, on a number of assumptions and a critical flaw. The fallacy of growth.
Extract: "Bitter climate truths are fundamentally bitter cultural truths. Endless growth is an impossibility in the physical world, alwaysbut alwaysending in overshot and collapse. Collapse: with a bang or a whimper, most likely both. We are already witnessing it, whether we choose to acknowledge it or not. Because of this civilizations obsession with growth, its demise is 85 percent predictable. We simply cannot go on living this way. Our version of life on earth has come to an end. Moreover, there are no free market or economic solutions. And since corporations must have physically impossible endless growth in order to survive, corporate social responsibility is a myth. The only socially responsible act that corporations can take is to dissolve....
(continuing extract:) And here, in a footnote, are his two fallacies very simply put. Endless (exponential) growth is an impossibility in a finite physical system (planet earth)
To take the second error first. The claim that the earth is a finite physical system is as lunatic as the creationists' argument that evolution cannot have happened because of the Second Law of Thermodynamics. For the earth is, of course, not a closed or finite system. We have a huge influx of energy into the earth each and every moment of every day. We also expect that influx to continue for the next 4 billion years or so. If you (carefully now!) look up into the sky during the day you will see the source of that energy: we generally call it "The Sun".
The first error is a tad more complex. The statement "endless physical growth is impossible in a finite physical system" is of course true. The statement "endless economic growth is impossible in a finite physical system" would only be true if economic growth were in fact physical growth. Which, sadly for the argument, it isn't. We measure economic growth by some variant of Gross Domestic Product (there are others, GNP, NNP and others, but the differences between them do not change this point), the GDP that gets splashed all over the newspapers every three months. We often also refine it a little to refer to GDP per capita, as that gives us an idea of how much economic activity there is per person, not just in the country. GDP however does not measure the amount of stuff we make. Nor does it measure the amount of resources we use to make our stuff. It measures the the amount of value we add in the economy." (Source: The fallacy of Adam D Sachs August 25, 6:36 AMPage One ExaminerTim Worstall, http://www.examiner.com/)
(Extract: "Growth in GNP should cease when decreasing marginal benefits become equal to increasing marginal costs. But there is no statistical series that attempts to measure the cost of GNP. This is growth mania, literally not counting the costs of growth. But the situation is even worse. We take the real costs of increasing GNP as measured by the defensive expenditures incurred to protect ourselves from the unwanted side effects of production and add these expenditures to GNP rather than subtract them. We count real costs as benefits. This is hypergrowthmania. Obviously, we should keep separate accounts of costs and benefits. But to do this would make it clear that beyond some point zero growth would be optimal, at least in the short run. Such an admission is inconvenient to the ideology of growth, which quite transcends the ordinary logic of elementary economics. More precisely, it is good growthmanship strategy to admit the theoretical existence of such a point way out in the future, but somehow it must always be thought of as far away. The ideological reasons for this are clear and have to do with the problem of distribution of output in an economy in which ownership of land and capital is highly concentrated and embodies laborsaving technology. Full employment at a living wage requires high aggregate demand, which requires high net investment to offset the large savings made possible by concentrated income. High net investment signifies rapid growth." (Source: STEADY-STATE ECONOMICS, By Herman Daly, Chapter 5: A Catechism of Growth Fallacies, The part played by orthodox economists, whose common sense has been insufficient to check their faulty logic, has been disastrous to the latest act. J. M. Keynes (1936), http://dieoff.org/page88.htm)
The Governor of the Reserve Bank of Australia implies that Australia is looking quite rosy and weathering the global financial recession. They never mention recession here. The Reserve Bank, like the Australian government Treasury Department, failed to perceive what was coming some time back and now they are having another euphoric stab at predicting, guessing and soothsaying.
"...recall the events that led to the crisis on Wall Street. Think of the legions of bankers who who were paid enormous sums for creating products that supposedly removed the risk from financial transactions, yet they left the worst mess the world has seen in 80 years. So long as the reward system was tailored to the production of ever more exotic products, the bankers obliged by churning them out in increasingly larger numbers. With hindsight, this proved to be a disaster." (Source:The fallacy of growth at all costs (part three) Thursday, 21 May 2009, 12:00 pm, Rajiv Chaudhry theonlinecitizen.com/2009)
According to Australia's "rigged unemployment statistics" we are have about 7% out of work. This is not simply a misrepresentation to the gullible, it is an unethical, but common, practice of the federal government. Every government, labor amd liberal, lies about unemployment. The level of unemployment varies dramatically across Australia. The national average is stated to be the figure above. Unemployent ranges between 3% and 40% (and higher, up to 70% - 90%!) depending on which region. Average unemployment for the nation is really above 10% but the government does not want this truth reinforced. It is demographically (by age) in a range of 10% to 30%. Lies, lies and more lies. The Rudd labor governmeht strategy, by those before it is to ficus on shallow, short term programmes,w hich place people into low level and low skilled jobs in fluffy parts of the economy. They then claim success. There is no linkage of government training to life long, deeper learning. In this they are myopic and short term ficused. There is no education revolution in Australia.
There is a sheep like assumption, and embrace of falsehoods and fallacies, optimism in the extreme, that Australia is somehow insulated and going to get away with having the cake and eating it too. Saved by Kevin Rudd's quick economic thinking and wayne Swan's daring audacity in the face of ridicule. The opposition under former merchant banker, Malcolm Turnbull, roll out the same, lame propehcies baseed on their own fallacies and framing of history to suit.
There are however some hometruths. Debt for each Australian consumer, partivularly in the middle income sector, is way too high. The more gulible in our society have rushed in and bought over priced dwellings and embraced the cash handout. Internationally there will be a crisis in 2009 - 2010. In the US somewhere between 400 and 1,400 small to medium banks, and financial cooperatives, are going to fail. A large number of banks and cooperatives will fail in Europe. What effect will this have on Australia and the world? In China, the engined room of saving grace, local government is debt burdened. The global bond market cannot sustain the flood of issuance and countries like the US are printing money. According to the experts the stock market is the indicator of ecomomic health and future calm. This is quite simply a narrow and optimistic view of what is really going on. The slide is coming and the debt will crush the unwary as unemployment rises across Australia. Again they have got it wrong. It is however immaterial because the system is designed to maintain the power collective's self interest and position whilst the nation pays the bill for their ignorance and performance. What will happen? I have no idea.
AMERICA ON THE MEND, Really?
CHINA THE SAVIOUR - Really? Hysterical laughter, and relief, as a statistical movement of 0.4% in some magic formula causes elation and heralds recovery. Australia has dodged the bullet of recession by 0.000001%, a marvel of political engineering. Housing values are rocketing by 1% - 3% and there are high impacting intrest and stock moves of 1%. This is the hyperbole and tendency to overstatement exhibited in media and reportage, political spin and diatribe that insults the intelligence of many. We see it also in every day lanuguage of the cognitively challenged - awesome, fantastic, fully sick.
Reality is that the US administration has bet 80% of the nation's GDP into saving the bacon of Wall Street and the high flyers. The accounting rules for banks, and others, have been altered to take the toxic assets off the front cover of the books, and has put them where? In the back room out of sight. They are still there. The heady profits of banks being published, in the USA, are false. The bonuses are paid whether performance is good, bad or indifferent. Fanny Mae, et al, are pouring billions down the drain every day to try and keep nine million (9,000,000,000) people in their houses. There is no rebound or recovery, since the system itself is ethically and morally bankrupt. It is broken. In China, local government is so leveraged that in some cases it cannot pay the interest on the debt owed and the Chines government is the guarantor. Infrastructure and asset bubbles appear and there is social upheaval requiring a crack down. China swings from disaster to disaster, behind a silk curtain. In Europe the banks are largely insolvent and unemployment is on the rise as in America and Australia despite the manipulation of statistics to imply otherwise.
Here in Australia, according to lavish and exultant reporting, the banking, and financial, system was saved. By good managemet and government policy? Perhaps. But what of the proposition that we do not have a large merchant banking sector and an equivalent Wall Street. Australians are still raped by excessive bank charges, and fees, and by the avaricious across many sectors. Our grocery prices, and other charges, are amongst the highest in the world and our utility fees (water, electricity, telecommunications and others) are about to rocket to the moon. Our governments are mired in corrupt, and corroded, practice and behaviour along with political policy and corporate decision makers who have trouble seeing beyond their front doors. We are exuberant.
THE SECOND PHASE OF RECESSION TO HIT AUSTRALIA PREDICTING TRENDS AND EVENTS - JULY 2009 - JULY 2012
Article date - July 2009: The cost of recovery programme implemented by Prime Minister Rudd and the Australian federal labor government, will absorb 6% of the Australian Gross Domestic Product. This is 1% more than the official predictions of 5%. I predict that in the years 2009 - 2012 debt will rise above $A200 billion representing almost 15% of the gross domestic product of the nation if it stays at predicted levels but it will not. GDP will decline by 1% - 2%. The Australian national debt will, I think, be closer to 20% of the Australian GDP.
The public debt of the G20 nations will rise above 85% of GDP within this time scale. The Australian economy, particularly retail, is not durable. The Australian consumer is saddled with debt and they are at the mercy, and ruin, of inflation which will rise to 4% in 2010 and onwards to 7%, 2011 and 12% at 2012. The Australian economy at July 2009 is ridden with distorted prices, masked inefficiencies, hidden prices and gouging, particularly in the grocery, fuel and energy sectors. There are too many motor vehicle manufacturers and sellers and too many defence contractors building military systems and supplying services. These and the building industries are relying on government subsidies and revenues. Governments are too big and incompetent in policy and implementation. Money in the tens of millions is wasted for many reasons including grasping political interest.
There is the looming demographic shock of aging as people live longer and require more from governments. health costs spiral with technological advances. We are experiencing deteriorating social dynamics which increase costs - such as law and order and exacerbate social breakdown.
Lenders will eventually refuse to buy "global" government bonds including Australia's and the states will face a crisis in funding in 2009 - 2010. Bond offerings in Australia will top $A300 billion. central banks, including Australia, will print money creating creeping inflation and the lenders will continually add a premium to their demands until they no longer wish to take the paper. China will not be able to support the United States in 2010 creating a crisis in that nation's economy that has seen no parallel in history.
A surge in bank lending in China is creating unproductive, speculative, investments in property and stocks at the expense of manufacturing. This lending is masking the future and makes many believe that China will be the saving grace of the world including Australia. The government of China is engaged in a 4 trillion yuan stimulus package funded from current account surpluses. These are being eatn up at a prolofic rate. The Chinese current account surplus will fall in 2010. Commodity imports are increasing, driving up prices. Excess liquidity is the enemy of growth and sustainaable economies.
The Austraaian Department of Treasury predicts unemployment to rise to a maximum of 8.5%. They are wrong. It will be more like 10.3% and rise to above 11% in mid, to late, 2010. The benefits from the 2009 programme of fiscal stimulus in Australia are over staated and over estimated. Rudd and Swan are spinning a fantasy of their own making. They are borrowing agiants the output and production of the future. This will lead to a stagnation and decline in growth and activity in 2010 - 2011.
June 2009: The United States - President Obama is about to issue his financial regulatory proposals. This will initiate a fierce response form vested interests. The US philosophy and psyche is predicated on the individual and the proposition that anyone can make it big in America if they but try. Thus there is an antipathy towards welfare and social services, health care and education that is not funded by the individual. There is also the entrenched distribution of wealth and the gross inequity. Society is tiered, parts of cities, and the states, are segmented based on money. The rich, influential and powerful, control governments at every level. They hire servants. The definition of a servant, to my mind, may range from the elected government representative, the elected officials, high paid lawyers and advisers, business associates and others in the professions all the way down to the housekeeper, cleaner, gardener and the nanny. Within this broad scope definition of servant one can find a class structure and the incumbents vary in income with the lesser socio - economic share incumbents working on for slave wages. Big corporations such as Disney, and wal mart, have been exposed for paying low wages that require social welfare top up. They are part of the web of support for the rich and play a role across the nation in how wealth is distributed, policies and actions are enacted by governmenst at the federal, and state, levels.
President Obama will, quite quickly, be brought to heel and his regulatory reforms, and other contentious, proposals will be watered down to conform to the underlying psyche and individual interests. He says he will not raise taxes. Thus debt will be endemic. The US debt is enormous and investors such as the Chinese who own slabs of US treasury bonds, and investments, have to be reassured less they flee. The rating agencies, which should be irrelevant after their inept, and psychphantic, pronouncements will still hold sway. One can only admire the American peoples' optimism, and resolve, to struggle forward even in the face of adversity and fantasy. They look for green shoots and grasp at straws. For some this is a glitch and the world will return to normal in the sway of the American empire. This is somewhat delusional. Across the globe governments have been pouring public funds into their economies. This is coming to and end and then what? The recession has not yet gripped Australia and the wave is coming.
The Prime Minister Kevin Rudd and Treasurer Wayne Swan were elated to the point of giggling. The national accounts for May 2009 apparently showed that the economy had grown 0.4% technically avoiding a receession. The elation was hardly edifying given that beklieving the figure of 0.4% stretched the imagination. The measures used tp calculate this "mythical figure" are very broad and represent a range of inputs and outputs. The figure used by Kevin Rudd and Wayne Swan was made to order. The government fiscal stimulus has created a false retail market and consumer spending trend in Australia during 2009.
"Dr. Woody Bocks Essay: The Future Evolution of the Debt-to-GDP Ratio, BY DAN DENNING @ THE DAILY RECKONING - 20/05/2009
Now to Dr. Woody Bock's essay. It's called, "The End Game Draws Nigh - The Future Evolution of the Debt-to-GDP Ratio." We've picked some of our favourite parts of the essay. You can read the whole thing here, although we'd advise you to turn off the TV and turn on the coffee pot. He first puts paid to the idea that a revival of consumer demand (which can be stimulated with transfer payments) is the key to recovery from a credit bust. "According to standard business cycle theory," Dr. Bock writes, "pent-up demand on the part of consumers is a principal driver of recovery-but it will not be this time around. The shift towards less consumption and more savings due to the implosion of household balance sheets and to demographics is most probably permanent. If so, this bodes poorly for hopes of a pent-up demand-driven recovery." This reinforces the unique nature of this recession as a "balance sheet recession." In a balance sheet recession, businesses and households devote most of their resources (extra income) to paying off liabilities and reducing debt. They deleverage. Lowering interest rates, then, on the hope that it will revive a mythical pent up demand, ignores the psychological and economic reality of the desire and the need to reduce debts. The recent retail sales figures in America bear this point out. So in comes the government, under Keynesian orthodoxy, to fill the consumption gap." (Source: The Future Evolution of the Debt-to-GDP Ratio, BY DAN DENNING - http://www.sharecafe.com.au/dreck.asp?a=AV&ai=12934)
As the Australian government moves to infrastructure spending away from cash handouts to cosnumers, retail will slump dramatically causing large segments of unemployment particularly in the over represented retailers of "hospitality", "cheap clothing, footwear and trinkets", electrical goods and over represented luxury items such as cosmetics. Car manufacturers will suffer greater losses as some dealerships close. The first home buyers grant has created a false bubble housing market ensuring that prices remained high. Many purchasers are over extended because the low interest rates cannot be sustained for years to come. The Reserve Bank is well aware that low rate policy hurts Australia's retirees who need a decent rate of terurn for teir cash. This demographic far outweighs the younger generation in sheer numbers. The so cllaed working families is a narrow demographic and demonstrates a fickle, and myopic, approach to policy and equal voter representation on the part of the major political parties.
The BHP and Rio Tinto joint venture for iron ore in Australia will be blocked on competition grounds causing a fall in the sahre price. Job losses from such a venture would be high in Western Australia. The government has miscalculated the real rates of return in thr economyu by at least 2% meaning that growth will stall and fall into negative in July - September period with extensive declines in the latter part of the year across all economic sectors. The Australian government Emissions Trading Scheme will cause further disruption in investment in thermal assets. Renewable energy technologies will suffer an international decline affecting policy here and at the world trade organisation. The growth figure of 0.4% as at June 2009, is a myth.
May 2009: The Rudd labor government's first budget
In undertaking predictive analysis of the first budget delivered by Treasurer, the Honourable Wayne Swan, let us dismiss a number of irrelevant, but nurturing factors, put about by the herds of haters, analysts and media, and the moribund, and somewhat, mediocre parliamentary membership.
The rest was hardly of Mr Swan's cant was hardly worth entertaining, or examining in depth, since Mr Swan lived up to the commentary contained in my examination of the performance of the Treasurer, since being appointed, in the context of the Rudd federal government performance, to date.
In his response Mr Turnbull had a singular idea, to add atax to cigarettes. This is the measure of innovation of the leader of the Opposition? Are his spin mercahnts and parasitic party faithful, on the public purse, similarly imbuedc with myopia?
Let's ignore the moral bankruptcy of the former Howard government and its Ministry, inluding the former Treasurer, Peter Costello, who sat back observing, and participating, in the "ponzi economics" of the golden years, reaping the benefits of the taxes on greed, and stupidity, and corruption, and unbelievable money market gains dressing it up as economic prowess, and policy, using the parasites and the spin doctors of the day. Do we assume that they are detached from analytical skill and assessment capacity?
They were ably assisted by the state labor governments, the conservative opposition in each state government, the regulatory agencies who did not realise (APRA, Reserve Bank), and the Australian Federal Treasury (who enjoy an unearned level of trust and respect), the banks, the corporations and the business associations, and everyone else who had their snouts in the rodiculous trough of excess. They failed to predict, or simply turned a blind eye, to the obvious.
These elected representatives, and paid public agencies. should have done their jobs and they did not. They all followed their own interest agendas. A host of people across government and business, collectively, allowed the nation of Australia to be exposed. Now, collectively they plead ignorance, embellish and create their own history, lie and mislead. They are silent on their complicity in all of this and the greedy are back thinking they can begin again.
Let us ignore the stupidity of using two major benchmarks of economic resilience and health, (a) new car registrations and (b) housing construction. These are domestic and contrived. Note the very large amount of money being spent on these two in Mr Rudd's fiscal stimulus. The first home grants are inflationary in terms of price, interest and effect and will prolong, down the track the agony and the expanding bankruptcies that will follow. Banks are loaning up to 40% plus, of the purchaser's, annual net income. The greedy are jacking up the prices. Mr. Rudd is dressing this future fiasco up, as good fiscal policy and in that he joins the ranks of the morally bankrupt politicians including the Premiers of the states, who cannot determine, and predict, the future because they are part of the herd mentality.
Out of this, I predict that the Reserve Bank Board will be shown to have failed in its analysis, decisions and endeavours, and current reading of the futiure 9as at May 2009) and prove to be extraordinarily mediocre in prescient capacities. The federal government Treasurey Department, under the hand of Dr. Ken Henry, will also fail in its predictoons and analysis. They predict a conservative futire of return to growth after a few years. The market thinks the stock exchange is a berometer of the return to normalcy. Corporations around the world, governmments and superannuation funds, hedge funds and any number of entities have written off trillions. Where has it all gone that we can return to noraml as if it never occurred? Here in Australia we have not yet written down our over valuations in property and assets. People go on oblivious. A million may be unemployed. It is as if this was a glitch. It is not a receession that we have knwon or experienced. We do not know its hidden effects and the lag.
I think the Australian nation will be in recession until the end of 2012. The policy makers and the regulators will work on the measure and test of the "historical experience - rear view mirror" analysis techniques, and gut feeling, in lieu of a lateral thinking and "outside the box" capability.
What of the proposition that no one should buy a house yet in mid 2009, using the federal, and state, governments' subsidies, as their primary underlying source of funds. This is a recipe for disaster since housing prices are still to drop extensively across the Australian nation. The real estate agents do not even have this on their horizon since they think that there is insufficient hosuing stock. What there is insufficient of is income in the hands of burdened indebted households and individuals.
As for the Rudd and Swan (labor cabinet) budget, and the major issues of debate today, in the media and the parliament? Humbug. Much of te budget is based on ideology, inexperience as to the real world and effects of their prognosis, a compounding lack of knowledge, and information, and poor intelligence gathering and assessment within the political ranks and the adviser royal court, questionable modelling, and analysis, by the public service, inability to see over the horizon and link the dots, healthy egos and a general belief in the power collective self that is unjustified and the product of reinforced spin. The head of Treasury, Dr. Ken Henry, seems confused as to his role. He is a public servant but delivers speeches as if he is a politician. he advises the government publicly, chides and castigates, informs and cajoles, as if he has an open role in the whole process. He does not. He is a publioc servant who is there, according to the dysfunctional Australian democratic model, as a servant of the government.
May 2009: Below in this web site I opined that an Australian bank would surprise the market and announce a shocking revelation. The bank name was known but not published herein. April 29, 2009, the Australian and New Zealand Bank announced a major profit downgrade due to bad debts. To my mind, no analyst, or econoic commentator or newspaper columnist, etc, had predicted this. The government Treasury, office of the Prime Minister and the Minister for Finance and the Treasurer have not responded to my communications, pointing out this and other predictions. There is no response to my communications which are often at odds with expert predictions and formal government analysis and planning. By now they should be wondering why my crystal ball is better than their own expensive methodologies. But they are not. They are consumed with their own self prowess. To admit they are wrong would be a major blow to internal government, and public service, expertise and credibility.
So what about the awaited recovery?
Well it is not going to be what they think it is. The growth of financial services across the globe has driven much of the calamity and the economic expansion. Coupled with the belief that the rainbow stretches forever. China was, and is still, expected to be the power house of economic growth. This is just a very bad glitch.
Financial services and the questionable products that have ben sold and the manner of operation of the sector will not return to what it was. Growth will be in the order of 1% to 3% each year, not the 8%, or greater per year, that has been the escalating trend for the past fifteen years. The party is well, and truly, over. The financial services sector will shrink drastically, here in Australia and globally, and consumers, will turn away from exotic offerings. Gambling on stock rises, and gaming the system, will be casualties of the economic crisis.
Below, in previous articles, I predict what the value of things will be. Living on debt will be a thing of the past as everyone realises that it was a facade and feckless pursuit. The young hot shots, who have been engineered into believing their own infallibility, are learning hard lessons. The crisis is harvesting the inadequate, and the poor management, out of enterprises. The once lauded Board members are struggling for credibility, maintenance and reloevance.
The focus on the stock market, by experts and commentators, as a sign of recovery or change is misguided. Economists, and market watchers, are looking at indicators, and measures, that are no longer valid and never were. Studying the effects of herd mentality, in the stock markets, on an hour by hour basis, is not a good indicator of the health of economies and the likely future. The major indicator, for the future, is consumer behaviour which is altering dramatically. Consumers are eschewing debt and handing in their credit cards for debit cards, to live within their means. Since the poor make up the greater part of the US economy this spells danger indeed. It is escalating in Europe and will flow into Australia. Bad debts, unemployment and lower incomes are the levers that will ensure there is no immediate recovery.
Billions, and very soon trillions, is being written off, never to be recovered. This will continue into 2010 - 2011 before the full impact can be determined. There will be no recovery of the dimension perceived. Europe will go into receession as countries debts balloon. Empires come and go. Is the end of the American empire? Who knows. America can barely save itself let alone the rest of the world. And China probably does not want to.
April 2009: The leader of the opposition in the federal parliament, Malcolm Turnbull, has rushed in without thinking, debunking the labor government's proposal for a national high speed broadband. He will be caught out, and have to eat humble pie, having framed a narrow response lacking in awareness and understanding. His argument is debunked here.
The Bloomberg interviewer asked George Soros if the worst of the recession was over for America? Why is it that the people of the world's largest economy think that this is a passing phase? Thisn is not the end or the closing stages, it is the first quarter to maybe half way. There is another year or more to go before we come to grips with the new order and how we relate the whole financial, market and consumer equation. The herd mentality still rules. This is a profound earthquake registering ten on the richter scale. It is a series of tidal waves and tsunamis.
The US banking system is going to go to the wall and it will be a drain on the nation for years to come. Wall Street will become a little desolate and isolated like a ghost town of its former self. The US dollar is goiung down during April, May and June 2009. US and European and the smaller nation banks, being undercapitalsed, will charge their way out of the crisis reaping devastation on innovation and growth. They are pariah.
Here in Australia we are already seeing the rapacious, and caprecious, nature of Australian banks, their managers and their boards. These people take on a whole new persona when they come to work. If the Rudd government is not careful the Australian banks will also dampen Australian enthusiasm, creativity and resilience and deny small to medium business a future. They are not good corporate citizens.
I heard a real estate agent, in Australia, talking about the Australian property market, and another economist talking about when the recession ends and the stock market starts to regain its losses. What intrigues me is the proposition that somehow this is just a glitch in the gloal financial market and system that will pass. That we will return to normality and growth will again be started.
That is not how it will turn out. The world's governments will first have to grapple with the next round of defaults, the Alt - A list. They are a few steps up from the "toxic" sub prime mortgages. These are loans to people who are on the borderline and who rely upon a certain set of economic, financial and personal circumstances to keep everything reasonablt balanced. Here in Australia the federal government, banks, real estate agents and housing corporations are fueeling a whole new generation of Alt - A borrowers. The Australian government, uder Prime Minister Rudd, has doubled the first home buyers grant for the purcahse of an existing house from $A7,000 to $A14,000 and created a new catergory, the $A26,000 first home builders grant. People, young people, are rushing in to be self builders without any umderstanding of the implications. A majority of banks are lending between $A390,000 and $A430,000 to people on incomes of $A70,000 per annum or above. The repayments at the current rate of housing interest equate to approximately 60% of annual dispoasble income.
This borders on the Alt - A description. The borrower has to take out mortgage insurance at significant cost. There is reliance on house prices remaining the same or rising. In the second half of this year (2009) and in early 2010 hosuing prices across Australia will take a dive. Unemployment will have reached 10% and growth will have stalled dramatically. The world financial system may have stabilised but the debt will remain. Not the debt on bank balance hseets but the debt of soceities and individuals.
Some 15% - 20% of all small business, new businesses and some larger iconic ones will disappear. Consuerism is dead as we know it. It died in a flurry of stupidity, gredd and technology where the "the medium is the massage" (McLuhan and Fiore, Penguin 1857). One may well ponder that the last ten years have been described by many as the "golden age" of prosperity. Consumerism, individualism and advances in society - "The major advances in civilization are processes that all but wreck the societies in which they occur" (A.N.Whitehead)
"..something is happening but you don't know wjat it is, do you mr. ones?", Bob Dylan. The economists and the commentators sruil "rite words in rite order" or may we well say "trite words in any order"? Thus the west will shake the east awake while ye have the night for morn", (James Joyce). What we have today is propaganda in different forms put about by different interests. We can only reach a concensus on what is going to happen, through the beginning of mutual, open and honest dialogue, at every level. Then the propoganda will end and solutions discovery, and enlightenment, begin. All governments, here in Australia and elsewhere, must tap new sources and new voices that to date have not been heard or who have been denied an audience. The problem for people like Mr Rudd is that this would mean maginalising his loyal troops who have been with him in his rise to the Prime Ministership. A cutting of the political umbillical cord that gives sustenance to apparatchiks who surround him. He must seek out others beyond the existing ranks of the public service, the Australian Business Council, the Australian industry Group, the big name corporate enterprises, the academia and the power collectives, for they have been found wanting. They are unable to glean the future or see the ramifications and the mosaic. It is for this reason that Malcolm Turnbull, the leader of the Opposition in the Australian government cannot mount a crdeitable argument and plan. So it probably goes with President Obama also. The exoerts have, and still are, failing.
The establishment, the media and the soothwayers, still pay homage to the market and yet the market is a hopeless beast of a thing that behaves in herd fashion. The market moves up because a US toy company, or home maker store, posts a better than expected profit. This is shallow subservience to a hollow dream. The market itself, and its speculative behaviour, does not signify that the world is moving out of the dark depths of its agony or going deeper. The market is nothing but a casino. We have a long way to go down yet. Why? Because the individual is still saddled with debt and the rampant consumer is gone. Spending is not a cathartic solution. It is a placebo.
Economic prosperity of the past decade has been at the mercy of doing anything that anyone can get away with. "The past went that-a-away. When faced with a totally new situation, we tend always tp attach ourselves to the objects, to the flavor of the most recent past. We look at the present through a rear-view mirror. We march backwards into the future. Suburbia lives imaginatively in Bonanza-land", (McLuhan and Fiore, 1857). There is no greater delusional Bonnza-land than the United States of America. Once its population consumed 25% of the world's resources but no more. So what does that do to the world? If we know what the new consumption figure will be, and when, then we will have a starting point to work out what the future may hold. It is a shrinking of the world economy of probably 10% - 15% overall, and a devaluing in the order of $USD150,000,000,000,000. In the meantime as a forecast growth of 3%, in any economy, excited the economists and governments, so a forecast decline of 5% and more will shatter them.
Here in Australia the Treasury forecasts were so far off the mark as to raise questions about the quality of advice, and research, being offered to governments across the nation. The same can be posed for Europe, Great Britain and the United States. Yet the same people remain in their influential roles, here in Australia, as if all of this could not be forecast. It was, could and can be, but no one in the public service, in government or the big business associations were, would, or will listen. They work to maintain their positions least they fall by the way side. They will put their interests first and try and come up with another idea or two. When they stumble on something they will spin it for all of its worth.
The question is can they deliver it? They need a complex mix of investment and support both in delivery and sustainability. The short answer is, with care, innoavtive thinking, and risk they can. They just to get away from the ailed methodologies employed by the Departments using tendering and market testing processes and the questionable expertise of external big name advisers, consultants and experts and the embedded interests within agencies.
The Australian government is in the process (April 2009) of handing out around $950 to people who pay tax and earn less than $A80,000 per annum. Its first stimulus package for the rebuilding of schools and public works is yet to get going. It will help local communities but the lag time is extensive. There will be another stimulus announced in May 2009. Small business has been lobbying the government hard claiming that the banks are abandoning them to their own fates. At first the Minister tried to bat the issue away stating that he had met the banks and had their reassurances. Howvere actual examples are being sent to Dr. Emerson and the banks are being caught out massaging the truth. meanwhile the banks have lwoered interest rates on cash accounts to protect their nargins at the expense of self retirees. They are charging $A2.00 (except for the National Australia bank that charges $A1.50) to use their ATM machines. Suncorp charges $A2.20. The theory, as put out by the Resereve bank, is that competition will lower such charges. The Resserve Bank has as much credibility in its vision, and accuracy, as the Australian governmment Treasury Department.
The liberal - national opposition in the federal parliament are spare at the activity that is demolishing the surplus they built up under the reign of John Howard. They sputter eco speak with no effect because the world is different to the one they are familiar with. There is too much debt on each working individual and the self employed and the self funded retirees are having their invsetments struck down. The demand to consume is falling on deal ears. Below I predicted a rise in the frugality movement. Those who would have us grow our own vegies, spend less and live more frigally are shouting loud. The Governor of the State of Victoria, Australia, has joined the humbug.
Kevin Rudd has hung his political reputation on the stimulus package and he is headed for a nasty situation. It will not work. The only way that the world can be taken out of the dark economic age is to reduce the value of property, hosuing and write off individual debt. Low interest rates, first time home garnts from the government, giving people money to spend and the whole idea of rampant consumeism keeping the wheels turning is passe. Add to this the facade of Kevin Rudd and the stumbles of the government Ministers and party apparatchiks in their social engineering goals and 2009 - 2010 will be a nightmare for the Australian government and the states and territories.
March 2009 and the Minister has continued to be embroiled in debales with his department and also casts doubt on ethical integrity. Prime Minister Kevin Rudd's orientation for risk may play well for the moment but Mr Fitzgibbon probably has but a short time to go in the defence portfolio.
TO HIT THE WORLDS' FINANCIAL SYSTEMS IN JUNE 2009
The Obama fiscal programme for toxic assets will spectaculraly back fire. Whilst investors salivate at getting cheap assets off the poor for next to nothing via the US banking system, the whole process will fail to realise the investor benefits and they will panic as derivates bite hard.
Local governments here and in the US, states and institutions, will go broke, small banks will become insolvent and small superannuation funds will fold into larger ones. The US economy will be wrecked along with the new satellite nations that were once part of the Soviet Empire.
China will suffer decline, riots and will abandon the US Treasury bonds, third world countries will collapse and the wealth of the middle east be plundered. Japan's export economy will suffer a serious desckine. An age of economic darkness will descend. Those who endorsed the US approach to removing toxic debts such as Australia's Prime Minister Rudd, will be seriously embarassed.
VALUES WILL FALL ON EVERY ITEM,
PROPERTY, HOUSES, SHARES, BUSINESSES AND CORPORATIONS.
No matter what anyone outside the power collectives says the experts, politicians, regulators and the business executives will continue to be the blind leading the blind.>br>
The world leaders need to understand this quickly.
THE SAME PEOPLE WHO FAILED TO ANALYSE, AND PREDICT AND REACT
DESPITE ALL OF THE WARNING SIGNALS ARE STILL THE PEOPLE CALLED UPON FOR SOLUTIONS, IDEAS, POLICY, ACTIONS AND LEADERSHIP
THEY HAVE COLLECTIVELY FAILED. BUT TO ADMIT THIS IS ANATHEMA>
Human nature dictates that they would persevere in the vain hope that it willeventually end and they spin their stories, warm in the community of similar thinking, and types, in the world of networks they inhabit, mateship. President Obama has clearly indicated that he follows this pathway with his choices of cabinet in his first term. He did not look beyond further than his nose. Seduced by the "business card".
That these experts would fail, in their predictive analysis, intuition and anticipation, is not surprising.
The governments of nations, the businesses, the world of finances and economies are in the hands of a group who represent a slice of average. There is no one here in Australia, or in the wolrd of political leadership, that seems capable of making it otherwise. They turn to those they know and the fallacy, and myths of the past, endure. They take their valium in the collective solidarity, a falsehood that no one could have predicted how bad this would be. They ignore a unique group of people across the world.
"The one word which captures the unique style of INTPs is architect - the architect of ideas and systems as well as the architect of edifices. This type is found in only 1 percent of the population and therefore is not encountered as frequently as some of the other types. INTPs detect contradictions in statements no matter how distant in space or time the contradictory statements were produced. The intellectual scanning of INTPs has a principled quality; that is, INTPs search for whatever is relevant and pertinent to the issue at hand. Consequently, INTPs can concentrate better than any other type. Authority derived from office, position, or wide acceptance does not impress INTPs. Only statements that are logical and coherent carry weight. External authority per se is irrelevant. INTPs abhor redundancy and incoherence. Possessing a desire to understand the universe, an INTP is constantly looking for natural law. Curiosity concerning these keys to the universe is a driving force in this type.
INTPs prize intelligence in themselves and in others, but can become intellectual dilettantes as a result of their need too amass ideas, principles, or understanding of behavior. And once they know something, it is remembered. INTPs can become obsessed with analysis. Once caught up in a thought process, that thought process seems to have a will of its own for INTPs, and they persevere until the issue is comprehended in all its complexity. They can be intellectual snobs and may show impatience at times with others less endowed intellectually. This quality, INTPs find, generates hostility and defensive behavior on the part of others, who may describe an INTP as arrogant. For INTPs, the world exists primarily to be understood. Reality is trivial, a mere arena for proving ideas. It is essential that the universe is understood and that whatever is stated about the universe is stated correctly, with coherence and without redundancy. This is the INTPs final purpose. It matters not whether others understand or accept his or her truths." (source: http://www.gesher.org/Myers-Briggs/Profiles--NP.HTM)
The head of Australia's Treasury Dr Ken Henry has a record, along with his employees in the Department of getting it wrong. The Resereve Bank Board simi;arly, the previous government of John Howard and the former treasurer Peter Costello did not anticipate and nor did any of the world's leading economic and analytical institutions. Onl;y 1% of the global popu;ation got it right and they were ignored because they are unusual.
Australia's Prime Minister of the current day, (March 2009), surrounds himself with like minded and those who fit his view and perspectives. He has the young bucks just like businesses like Enron hired the youthful smarts. This is the power collective, a world wide group of like minded, that has brought everyone to their knees. Then again they would not have achieved this but through the disinterest, and stupidity, of the general population that took no interest in their economies, decline of ethics replaced by mountains of bullshit, until it was, and is, too late. Now we suffer medicrity and the blather of self importance, vapid analysis and the thirty second grab of an uninspiring media.
|Experts?||A futurist with a methodology||Predictions and Commentary|
by Kevin R Beck, Australia
|Commentary on Australia's Government|
KEVINRBECK PREDICTIONS FROM 2006, 2007 COMPOUNDING UP TO TODAY AND BEYOND INTO 2009 - 2010
Go to Kevin Rudd's Australia
The US Congress, and media, are consumed with the bonuses that AIG paid themselves from taxpayers funds. Their defence is the legal contractual requirements. This demonstrates the focus that American business executives have. We can look to moral outrage, or as one member of the Congress has suggested that AIG executives follow the Japanese code of ethics.
"GOP Senator: AIG Execs Should Follow Japanese Model -- Suicide or Apology, March 16, 2009 7:55 PM
In an interview with Cedar Rapids, Iowa, radio station WMT-AM today, Sen. Chuck Grassley, R-Iowa, ranking Republican on the Senate Finance Committee, said executives of AIG should consider following what he described of the Japanese model of shamed corporate executives: apology or suicide." (source: http://blogs.abcnews.com/ABC News, USA)
All of this outrage does not reflect the reality that a large number of people, who have assumed positions in society within the US, seem to fail to understand that the way they have done things is probably no longer going to be relevant or tolerated.
The focus on minutae that promises sustenance and return, the graspoing at straws further demonstrates the appalling lack of awareness of the underlying human behaviour and the nature of markets and economies. On March 18, 2009 new housing (apartments and condominiums) of 583,000 was announced in the United States, and the US share market rallied with people opining that this may be the dawn of the horizon of resurgence. The US population is about 300,000,000 so the 538,000 represents 0.00194433%. The herd mentality grasps as anything in their freny to recover what has all but gone. Unemployment in the USA (and in Australia and elsewhere) rises near 10% and the greater part of the US nation lives in borderline poverty. They are held to ransom by casulaisation and the false feeling of freedom that casualisation apparently brings or not. 90% of the wealth in the United States sits in the hands of the few and much of that is gone or going. This is the order of things and apparently everyone can aspire to that within the American dream. Precisley that - a dream. Marketing hype from birth to grave shapes the US society to repond to the stpory tellers and the purveyors of self empowerment. In a population of 300,000,000 a seller of things does not require much of the consumer dollars to create a multi million dollar business. There are many gullible, and under educated people, all believing the dream, in a population of that size.
In the words of one wealthy American commentator on Bloomberg Television, "they can't spend if they can't borrow". This encapsulates everything. This is the foundation of the global economy of 1990 - 2009. Debt. The consumer, average or below average salary and wage earners, are required to be in debt, to service debt and be on a merry go round, in order for the economic model to work. It is not a little debt either it is a credit card debt of at least $10,000 plus and a housing debt of somewhere around $380,000 to $700,000. It is about being on the buy now, no deposit and no repayments for 18 months to 3 year debt fulled platform of good living. It is about endless consumption. It is about the tehory taht the poor people of China and India will aspire to consumer godds and will fuel the rest of the world's economies with demand. It is about building cities and sucking the life out of rural areas of countries until food production is threatened. It is fundamentally about myth, delusion, hubris, greed and stupidity. The practice of slicing and dicing everything down to small bits - time, debt, risk and desire, and spread it around. Nice theory, doesn't quite work. It is about shallow concepts - quality time, the power nap, the internet where you can choose your snippets, where you can make thousands every month from some new scheme, nothing too hard and taxing, nothing too deep and complex. The American concept of prepackaged food in the ubiquitous diner and take away, taken to a new dimension of prepackaged everything. Australia has embraced this dross and now must pay the price.
There is no capacity, or appetite, for that debt level now, anywhere. The value of everything - shares, houses, products, salaries and bonuese of the rich, the price paid to film stars and the world of loxury and staples must drop. The slice and dice has to be thrown away and with ecah bit a billion or so dollars. The American fantasy of their own making, to be at the forefront of the world in everything is indeed a fantasy. The danger is that other governments, like the Rudd gvernment here in Australia, will continue to embrace the proposition that consumers must borrow, and debt (credit), is the foundation of economic growth and prosperity into the future. It is one ting to invest in infrastructure and economic well being items, quite another to continue with the less valuable consumer market for feckless products, cheap and vast shopaholic all with shallow meaning and no return.
Meanwhie the Chinese government, have long memories. They are well aware that the western nations, particularly the US and Britain, have reaped the wind at the expense of the Chinese, in the past. The Chinese government holds a large slice of US debt bonds. Below in this site I refer to a modern Boxer Rebellion. People familiar with that history will realise what I am implying. Political statements, and soothing responses to the USA, were at stark contrast to what was happening behind the ' scenes. Opportunists in the corporate world across the gobe, talk of China emerging. However I contend that they are emerging not in the way that the speculators are expecting. Australia has to be vigilant particularly as so much of our trade is tied up with China, in the resources sector. They may very well turn on us and Rudd could face a modern Boxer rebellion designed to humiliate, aggravate and bring us to heel. I would not be doing business in China in 2009, and beyond, in these times, unless I was very sure that I was in with the right crowd, the state security police and the ruling communist leaders.
Prime Minister Kevin Rudd needs to get a new circle of advisers from many walks of life particularly those who will confront the government in their own private deliberations. He also needs more diverse, and constantly challenging, reszerach capability in his office, wider data and analytical sources. There should be a sweep of the Reserve Bank Board and the senior ranks of the Australian public service.
The Prime Minister can also help Aldi create jobs too. by ending the collusion, manipulation and barrier creation against this retail group competing in the Australian market. However to date, despite time passing since the enquiry conducted by the ACCC, into the Australian grocery industry, there is no indication that the Prime Minister intends to distance himself from the corrosive forces of the state labor party branches. Ethics is a low, even non existent, priority in Australian political life.
Listening to the commentators and others in the USA I hear that they are hoping that consumers will feel secure and return to the spending spree perhpas later this year. They say things like "it is tough but how you execute the strategy and how you ...." replay the old records is the key to the future. They seem to think the rules of yeterday and the operational methods are still relevant. Chief Executive Liddy of the AIG corporation in the USA talks of putting assets that cannot be sold into trusts with self evaluation, some securitization, a little equity raiisng and a timeframe of say a year and AIFG can pay back the $USD38 billion it owes to the American taxpayer. These sort of numbers are splashed around and can apparently be made at the drop of a hat in the wink of an eye indicating that there are serious issues with accounting principles, the real state of corporations and economies and credibility. The US bonds on offer are not worth the money and if China stops buying them as they will in the next six months then the USA, as a nation, will slide into bankruptcy. That may be the best thing to happen to the world economy, who knows. Maybe they (300 million people) will not consume 25% plus of the world's resources in the future as they have done in the past.
Then there is the ever expected stimulus package from China that will save us all. When did we arrive at a position in the world when the future of the world economy rested on one nation? A nation which is relatively poor in comparison to the developed world. A country with little if any social infrastructure and safety nets for its citizens, a country where the annual per capital income can be encompassed in a one month American, European or Australian pay packet.
Many USA corporate executives appear to be saying this recession will end quite soon at the behest of China and all will return to what it should be, a triumphal march back. According to these kings of commerce there is only one worthwhile system, and ownership, of capital and revenue and all else is heresy and not to be allowed. The pending pseudo nationalisation of their major banks is causing them to question the existence of life itself as they know it. Nationalisation of the banking system, what is the justification they squeal?
For this commentator the real solution to the current scenario can be found in looking at the value of assets, the real value of debt, reorganising the processes, remving and distributing power and control, kicking out the charalatans, breaking down the American hegemony of bullshit, greed, smoke and mirrors. Rethinking what is truly important and worthwhile in the world. It is not feckless technology and China's whims nor whether General Motors survives as a car company. Just because a billion people are thought by the myopic, and too often ignorant Americans, to aspire to their way of excess this is not, and should not be, the sole objective and solution of this crisis? Excess destroys the soul along with everything else in the human condition. Perhaps what would be a good thing is if America was just to end up like any other nation. To be humble without thinking its rightful position in the world is to be always at the front. The United States of America has no moral authority and is given too much credence by the rest of the world.
Here in Australia, the aspirant for the Premiership of Queensland, Mr Springbord claims to be able to pay for his election promises using an efficiency dividend to be extracted from the Queensland public sector. This is quite simply rubbish. The proposition that a nebulous amount of money (in this case) 3% can simply be dictated treats the electorate with lacking intelligence. In the same set of innovative, and exciting, pledges the liberal nationals talk of creating 10,000 jobs. Underpinned by the fantasy of the efficiency dividend. The liberal and national parties, locked in the ideology of a political derivative. They seem shell schocked by the collapse of the global financial system and may be oblivious to the coming derivative storm that will bankrupt Australian local governments, many investors and cause small superannuation funds to fold into larger ones. The notion of being able to mainatin a surplus, and avoid debt, is a dead horse being flogged by a party, and set of leaders, out of touch with a reality in which they played a role. The unblinking embrace of US hegemony and financial experimentation.
In Western Australia the Premier there claims the same mythical capability. This eronious assumption comes form the ideology that the public sector is inefficient and that every governmment in office engages in waste. In NSW it is probably very true which is the exception. The public service, like the parliament, needs to be cleaned out. In Queensland the returned Premier Anna Bligh will take a broom to the public sector in a significant reshuffle in April 2009. The incoming federal labor government, under the tuttellage of Minister Lindsay Tanner engaged in cooking the books demanding a similar effiiency dividend. There is no evaluation just guessing. It is like the modeliing of the Australian Treasury, incorrect on every occasion. Why does the Treasury have any credibility along with its head Dr Ken Henry? Meanwhile the public services of Australia at state and federal level bear the brunt of political fantasy and ideology trying to serve the political masters rather than the public interest. Democracy and governance is corrupted by this onerous and vandalous demand.
Fantasy is the order of the day in Australian politics. The federal opposition leader, Malcolm Turnbull extolls the virtues of the Howard - Costello era. The era of rampant capitaalism where we all apparently rode a wave of prosperity. True, the federal government under these two political leaders paid down government debt but they did not, during their eleven years in government, do anything worthwhile with the surplus. Investment in Australia by every government for the past fifty years has been derelict. In the modern age (2000 - 2008) these two politicians and their collleagues did not invest, other than in building an economically questionable rail line to Darwin. They did not expand education and services. They did not expand the ports nor pester the states particularly NSW to invest in assets for the future. Instead they wasted billions on failed experiments, played meaningless political games with neanderthal morons in the Australian telecommunications industry over theory and one upmanship. Peter Costello, and the Coalition, spins a story that under his Treasureship people in Australia became more wealthy. Many people squandered that wealth and went into massive debt seemingly believing that the good times would never end. Property, housing, rents and other prices rose dramatically. That wealth strangely disspeared in 2009. Was it an illusion on paper?
It may not be evident to the commentators and the legislators but a very large section of world population is in debt. A debt as mcuh as 33% of their annual nett revenue. A very large segment of the population have assets that are now very much diminshed and as interest rates are lowered by questionable Reserve bank decision their earnings are plundered. The Australian government is focused on first home buyers. These are the people with the lowest level of incomes and they are having to be subsidised by $A26,000 plus to get them into a home and into debt. In focusing here the government is crippling another 60% of the Australian population's earning potential and thus psending capability.
To determine just how much people have to spend the Australian Bureau of Statistics would have to conduct a census to determine, across the whole population, the current debt and repalyment levels against the annual nett income of every citizen. Only then can we determine what the capability to spend is. Idiots still run commercial advertisements offering no deposit, no interest and no repayments for months and years as if the consumer can go on and buy, buy, buy as in the past.
Below in this web site (in January 2009) I predicted that the $A10.2 billion given to citizens would not deliver the outcome beleived by the government and the Reserve Bank. I wrote to the office of the Prime Minister wityh this view but received no acknowledgement. People in decision making roles surround themselves with like minded associates who reinforce what they ant to hear and believe. The proposition of fearless and open communication, and advice, from public servants, is only realisable if the service has the capacity for thinking beyond the traditional. Tresaury does not and in any event it is unlikely that alternative opinions to the that of the titular head of the Treasury, DrKen Henry, will ever be presented to Ministers and the Prime Minister, from lower levels of the public service where the brighter public servants may be found.
The federal opposition, with a memory capacity measured in days changes its story. Turnbull says that there will be no receession, then says there may be and then says Australia is in one and then not in one. One has to catch this former merchant banker on the right day. It is unlikely given his background and participation in the frenzy of the recent decade that he has any inkling what to do. Peter Cotsello is as devoid of solutions, but this does not stop them from trotting out their drivel and self interested parodies. The government wants to invest in schools and infrastructre but this is heresy in the opposition's eyes. To borrow to build is alright for citizens but it is apparently a catastrophe for the government to ddo so on behalf of all people in Australia.
In the USA the government is giving the billions, not to people to pay off their massive debdts, but to worthless banks and companies like general Motors, insurance companies and others, where the Board, and management, are proven to be incompetent and in some cases unethical and worse.
The current government still fiddles with broadband and the supposed massive benefit that high speed internet will bring to the economy. Those benefits are mythical. The theory of diminishing returns has no place in the thinking of the modern politician, advisers and public servants. Spending $A4.5 billion on a wire to the node is the continued story of technology's fantasy of return on investment. The applied electronics industry has collapsed, the surfuit of chip makers are being culled. The public's love afafir with trinkets such as LCD television, ipods and iphones etc is ended. Chinese made junk and copied technologies are no longer the engine drivers. Movie downloads, games and the feckless offerings of the internet and broadband are on the wain. Broadband will be the new impetus in services like health, medicine, science and education. Real things not play things.
Then we have climate change and the Emmission Trading Scheme. The Minister in charge, Senator Penny Wong, is a soft spoken proponent of government policy. For some reason, given that she is highly intelligent, she does not sell the government's ETS well. Arguments for inclusion of agriculture (not in Kyoto) fall on deaf ears and thus bio alternatives are not considered. There is not much substance when she speaks about climate change and the impact of the ETS but the voice is melodic and comforting. This is not enough to get it over the line.
The ETS comes at a very bad time for the government. The climate change hacks are shrill that we must not be diverted from their cave dwelling doomsday agenda and must bear the pain for our past sins. the Australian Treasury salivates at the wondrous billions that will flow to the Australian government coffers. Critics intone that it will flow out again swiftly to a greedy industry that will not change its ways. Looking at Ms Wong's capabilities there is no confidence that she has any idea how to regulate, and control, the new casino of the ETS. One thing is certain, there will be players, like banks and gamers, as are present in the electricity industry, taking their slice of the cash for little contribution. Nevertheless, without any convincing modelling, federal Treasury (they have such a model record on assessmenst and accuracy) is likely to produce erroneous justification.
"A Coalition-controlled Senate committee has hired a leading opponent of Australian action to address climate change to review Treasurys modelling of the Governments emissions trading scheme. In an unusual move, Brian Fisher, described in the announcement as "former Executive Director of ABARE and currently of Concept Economics" has been directly engaged by the Senate Select Committee on Fuel and Energy to conduct an "independent review" of Treasurys modelling." (source: Greenhouse niggard to review treasury ETS modelling, MONDAY, 8 DECEMBER 2008, Canberra correspondent Bernard Keane, Crikey.com.au)
In March 2009 the government shut down the enquiry. The government presses on regardless. Under our immature and often childish and spiteful system of politics, and government, alternative opinions, and critics, are treated as pariah and are locked out of dialogue, and contribution, by interests within the office of Ministers and the Prime Minister. These are unelected political party parasites feeding on the public purse. They are sustained under the coalition (liberal national) as well as labor governments at state, territory and federal level. The ETS will, create yet another mechanism, and methodology, for greed and profiteering by a few without ever really reducing carbon, and other nasty, emmissions.
Immediately the Prime Minister could assist Aldi to create thousands of jobs by removing the collusion and anti-competitive practices that are blocking Adli's investment and business expansion. So why does he not move on this opportunity? Perhaps he is not aware of it?
The Australian government, like all governments. is captive to this primary objective. Why else would Kevin Rudd and the Cabinet spend $A52 billion on creating consumption immediatley? Why would they offer $A26,000 to new home buyers? Australian Small Business Minister met with the banks and small business representatives, why? Access to credit and debt continuation. The world is binging on debt and the policy makers, in their myopia, do not see this?
Centuries ago the Chinese cut themselves off form the wolrd (1420's) and then they reacted against the Western World in their Boxer Rebellion. The experts, earlier predicted that China would be the saviour of the western nations, including Australia and the USA, by their demand. That did not eventuate. Then in early march 2009 the poor sods thought that China would enact a multi billion dollar stimulus package. That did not happen. China is the world's laegest holder of US debt. What if they called it up? Would this be the modern Boxer rebellion? Does China think that they, like many other nations, have been raped by western imperialism one time too far?
Worldwide $USD 150 trillion, in debt and inflated value, has to be written off by banks and governments. The banks, across the world, will have to take losses, as will their shareholders. Banks, and corporations, should be allowed to fail. Across global economies banks have to restructure their loans for houses and credit cards, setting interest at 5%, for ten years.
Companies that are an impost, like the global car companies should be restructured. US car manufacturers should not be headquartered in the US and should be left to survive or fail with no more government assistance. Onwers of companies need to shed those executives who are on their Board, and who are CEO's, and in senior management positions who have come from the banking sector, investment banking and finance companies. They are not suited to manage the ongoing crisis. US companies will face a decline in their current business ranging from 15% to 60% as they suffer the fall out of the crisis. It is insufferable that the people who played in the end game are now appearing before the US Congres and Senate extolling their credemtials. The Obama plan for rescucitating the US will not work and America will go technically bankrupt as its banks fail. In Australia the banks will have to change their attitude, lower their credit card rates and housing loans. Those companies like Pacific Brands who received millions in tax payer handouts should have to repay the money by an order (legislation) of the Australian parliament. The power collective (politicians, bankers, corporate executives and the others who reaped the greed) should get some ethics or be ostracised for what they are. They are consuming the nation. The Australian people should choose what they buy and from what companies. They should cease send a message to politicians by not voting for labor and liberal party candidates at state and federal elections during the next four year period.
WILL RUDD'S AUSTRALIAN ECONOMIC STIMULUS PACKAGE WORK?
mostly, but many small to medium businesses will still fail and people will lose their jobs and others will go bankrupt
(February 2009) The foundation of the economic thinking in today's world is one of endless growth. Thus we must determine if this is real. It is not. The proposition of endless economic growth is a fallacy.
Then we have the proposition, put about by the Liberal Pary of Australia, most recently bu Shadow Treasurer Joe Hockey, that Australians have never been richer. The problem with this claim is that the riches were based on unrealistic property, share and housing values. They were and still are a facde. Hosuing and property will, like shares, take a dive as set out below in the articles of this web site. Rising from 12% devaluation through 20% to 30% and to a revaluation downwards of 50% in some places in the nation. The over valuation of housing damages the economy.
"But the sorts of capital gains we have seen in recent years also have a downside. Rapidly rising house prices make it more difficult for non-owners to get a foothold on the property ladder (a recent Productivity Commission report confirms that housing affordability declined considerably in the three years to 2004).] And new buyers who have purchased a home may have over-stretched themselves, for debt levels are at record heights and a future rise in interest rates could generate severe hardship.
Rapid house price inflation also has wider economic costs, for it can distort the way we use capital. The Productivity Commission notes how, Rising prices can create expectations of further price increases, unrelated to any change in market fundamentals. Young workers rush to take out huge mortgages before house prices spiral out of reach, and older buyers are seduced into investing in rental property while disregarding falling rental returns. Panic buying creates a housing bubble which sucks money out of productive investments and eventually threatens the whole economy.
Just as damaging in the long-term are the sociological effects of high house price inflation. The longer a housing boom goes on, the more it is likely to foster what Max Weber called a spirit of booty capitalism emphasising pursuit of short-term windfall profits at the expense of hard work, thrift, enterprise and long-term planning. When passive ownership of a house delivers riches far beyond what most people could accumulate from many years of working and saving, traditional virtues emphasising hard work, saving, enterprise and deferred gratification are likely to get eroded, yet these are values on which capitalist liberal democracy ultimately depends.[ Savings, certainly, have been in free-fall. The household savings ratio, which was 10% in 1990, is now negative, and debt servicing is costing an average of 9% of personal incomes." (Source of extract: After the House Price Boom: Is this the end of the Australian dream?, Peter Saunders in Policy - The Centre for Independent Studies, http://www.cis.org.au/Policy/autumn05/polaut05-1.htm)
The we come to the cash hand outs from the government. The strategy for growth is based on consumption (spending) and not on ivestment. Thus people ust spend to keep the house of cards in place. Trouble is they are so indebted. The government gives them a few thousand dollars. The theory is that they wil spend some, all or nothing. But usually they spend. The money is jam for the big supermarkets. The shaky cards in the stack are the myriad of cheap under capiatlised small businesses that sell the tacky tee shirts, the trinkets and the electronics, largely produced out of China. These palces should be left to fail. Problem is that they employ young people. If they fail, and close, thousands of young people will be out of work and many use the casual job (in reatil and hospitality) to under write their university and college studies. Many Australian small business will fail in 2009. As many as 15% - 25%.
Investing on infrastructure is positive but it has long lead times. Thus government eveywhere have to fund the stupid people and the businesses that have no capital and too much debt during that lag time.
"Although the benefits of a costly, infrastructure-focused stimulus package based on massive gov ernment spending may be intuitively attractive, past evidence suggests that the impact of govern ment spending programs that are intended to encourage economic growth is very modest and unlikely to enhance recovery or deter recession." (source of extract: December 16, 2008, Learning from Japan: Infrastructure Spending Won't Boost the Economy: by Ronald D. Utt, Ph.D., in The Heritage Foundation)
Added into the mix is the government's Emission Trading Scheme
and the Climate Change debate. All of the modelling done by Treasury for the price of carbon (circa $A30 per tonne) is all wrong. It is $A9 per tonne. It is not unusual for the Treasury to be wrong. It is more the norm. Yet Dr. Ken Henry pontificates as if Treasuy's fiction is fact. The Governor of the Reserve bank of Australia, Mr. Glenn Stevens, says that Australia will have a housing lead receovery later in 2009. This is also a fantasy. People are rushing in to get the governments $A26,000 first home buyers subsidy. They are signing loans with banks and entering into debt hoping, believing, that this is all a glitch. Those who are buying their first home are the battlers and the people who have jobs created by others. They are most likely to be the lesser educated, least mobile in terms of chasing jobs unles they are trade related and work in the mining industry, working in the non professional sector.
First ome buyer grants coupled with negative gearing act to push the price of hosuing up. Much of the action by Australia's governments, as others in the world, is based on flawed theory and myth.
In summary, the house of cards will crumble. The wealth of the nation, and its citizens, wil decline by between 10% to 15% perhaps higher. There is nothing that Kevin Rudd or anyone else can do to stop this they can simply spend to try and lessen the impact. Sixty percent of the nation's population will suffer a demolition of their nest egg. Especially savers who live on interest earnings as Reserve Bank pushed interest rates to new lows.
DSE, the Victorian Department of Sustainability and Environment, heads into a storm of its own making. The name becomes a great irony. For yaers DSE has held captive the labor government of Victoria. Despite evidence and enquiry outcomes the management and ideologs of this incredibly dangerous, and destructive, agency have maintained a hard line against mitigation of base fule across Victoria. They have refused to carry out burns. They have prosecuted people for cutting donw trees around their property and have relived the storm trooper era against the cattlemen who would dare to graze their herds in the state's forest and Alpine regions.
This a culpable department aided, and abetted, by incompetent, and craven, Ministers. The current Minister is Gavin Jennings, and he is already manipulating the truth and the facts as he fights to save his political career.
The government pays hundreds of spin merchants across the public sector to manipulate, lie, distort and deny information. The Premier, John Brumby, is shocked by the devastation of the 2009 Black saturday bushfires. Not just one fire but tens upon tens of fires joining up. Hundreds dead, thousands of houses and properties gone, live stock destroyed and thousands made homeless as whole towns are wiped out. Some will say that blame can be laid at feet of DES, its management and its Ministry. It will be. John Brumby has announced a Royal Commission, which will be the agency's slayer. Pity is that these contributors to such devastation will not be individually held accountable and responsible. What is the criminal definition of arson, and abetting arson? Does one have to actually light the fire or can they aid the arsonist by providing the fuel?
John Brumby is a politician. He lacks the foresight to immediately anticipate and sack the ideologs of the Department of Sustainability and Environment leaving the most valuable public servants, those who fight fires, their colleagues have helped to foster. A restructure will be announced but what will that mean?
At sometime in between 2000 and 2008 the general population came to believe that houses, property and other assets like shares were always going to go up. Sure there may be blips but generally it was understood that the status quo would be maintained. Ordinary people became gamblers with the self perception that they knew what they were doing.
Why don't they get it? Everything is over priced! A plumber and a trade person is not worth $150.00 per hour, a university graduate was not worth $A80,000 a year in salary, a consultant is not worth $200 - $300 per hour, a house is not worth eight, ten, or twenty times the annual median wage or salary of the bulk of the population, rents are too high, and the places not worth the money, shares were over valued, assets procured at over valued costs and entered to books, debt was rejigged to look like an asset in disguise, debt waas packaged at arms length. Supermarkets and other retailers were, and are still, engaged in rip offs. Australia could afford to add more and more retail and shopping centres. China would make us all rich across the country and then there were the others burgeoning to enter consumerism and the lifestyle, India and Asia. Even today (January 27, 2009, real estate agents and property officiandos think that Sydney and other places are immune. They think there is no over supply, that this is an unfortunate but manageable blip. What don't they get yet?
The period 1999 to 2007 was full of fantasies and speculation. Now comes the reality. Housing will drop 25% to 50% in unexpected places across Australia, trade wages and other high priced services will be cut by half. Feckless consumerism is dying and along with it a large slice of worthless enterprise.
Australia is over regulated by zealot officials, Our productivity, infrastructure and investment is stifled by federalism and every tin pot bureaucracy wanting a piece of the game. The Australian Competition and Consumer Commission (ACCC) sets access rules on certain infrastructure. There is gaming in our major sectors of energy, transport and telecommunications. If you want to see the over regulation and false market creativity in action look no further than the Australian government's current broadband tender. The proposal follows the bureaucracy's traditional pathway to learning information whihc they euphemistically call "testing the market". One mioght have thought that they woulod have learnt from the Access Card exrecise where the taxpayers footed a bill approaching $A60,000,000 for absolutely nothing in return. No doubt Human Services, the Department in charge of that debacle would claim to have learnt things and added to their knowledge base. Similarly the government will get nothing from the broadband tender (April 2009) and better have a back up plan. This plan must include dealing with Telstra, Australia's largest telco, and major barrier to progress in communications. The management, and Board, of the company compromise the public interest, treat consumers and any critics with contempt, and fundamentally run the company as if it is a rerun of the OK Corral or Custer's Last Stand.
Telstra should have lost its infrastructure backbone domination decades ago but the federal, liberal (coalition) government, of John Howard, was too greedy in wanting to get top value for selling their shares in Telstra. The Hawke, and Keating, labor governments never got around to making our telecommunications truly universal in access and cost. Now the reckoning days are coming for all of the above players, in every sector of the economy. It is very likely that the Opposition liberal coalition under Malcolm Turnbull will be as mediocre, ill informed and unprepared in their policy response as in the past.
Spend spend spend
Some world governments will have to buy the debt of a large section of the population with regard to home ownership. The Australian home sector is it is overvalued dramatically as much as 30% to 85% in some locations and generaly 25% - to 30% across the board in the sort after locations. The governments should not buy 85% but they can buy the differential between what the house is actually worth and the unsustainable value they paid less any funds/convertible assets they may hold.
The basis of the decison as to how cuh should be the economic evaluation of the multiplier of what a house is worth in the average suburb. It is worth 5 - 9 times the annual average income. Thus a person who earns $50,000 should be able to buy a house valued at $250.000 to $450,000 maximum. One house, not two and not houses for investment. Those who bought for investment and not for living should not have their excess debt proportion paid. This is not a concept this is what the governments of the world will have to do.
As for shares and other instrumenst they were all overpriced. They will not return to where they were and will be probably 50% of the values we have seen during the boom years.
International banks are withdrawing renewal of loans to Australian businesses. Since the banks do not have the billions to replace those funds the government will have to turn to the superannuation funds. They too have been hard hit. The rules will have to be changed to allow funds to make loans and investments. Coupled with this will have to be a series of supporting measures.
The Australian car industry will be rocked by the closure of more car dealerships and finance companies as more pressure goes onto the Rudd labor government's car financing rescue in concert with the banks. One of the major car manufacturers will announce it is quitting Australia.
Over the next three to six months the US dollar will drop sharply by between 6% and 12%. The Australian dollar will also fall. It may go below $US0.50 cents. The Chinese Yuan will apprecite making their exports dearer. They will turn inwards to ward off a domestic famine and reaction. Another major US bank will fail as housing in the US, Australia and elsewhere plummets in value. An Australian bank will be exposed to bad debts above its published provisions. Unemployment in Australia will rise to 7% in march and move upwards. Interest rates will falter as Reserve bank becomes unsure what to do.
The Australian state of Victoria will suffer a budget deficit rather than a surplus as proclaimed by the Premier John Brumby. Kevin Rudd's climate change ETS will be rejected, on mass, by industry and the Australian community. The price of water and electricity will rise in all states and territories. The infrastructure fund will struggle and the awarding of such projects will not generate employment or economic stability. The Australian Future Fund will suffer losses in its funds management.
Australia's growth, and that of thew orld, will decline to the negative. There will be no economic growth for eighteen months or two years in any economy and this may extend out to five years. The states of New York and california will file for banruptch. The world's three largest economies are in major decline and Silicon Valley will be reduced dramatically through many company failures. In India the information technology industry driving that economy will be shunned by clients as more corruption is exposed. Microsoft, Apple and Dell along with Google and Yahoo, Amazon and the giants of the web and I world will falter and their profits decline dramatically.
A tellecommunications company will fail causing the federal government broadband tender complications. The government will react with more hostility to Telstra and the stripping of the telecommunications backbone from their control will move to becoming a reality. Telstra's shares will decline to below $A3.00. Qantas shares will decline as will many other Australian corporate icons. An Australian university and a number of Tafe Colleges will post losses causing a severe problem for their respective state governments. One regional Ausralian university will fail rquiring a government bail out which will be resisted. Those universities moving to US style study programmes for under graduate courses will suffer a decline in student enrollments. The labor education revolution will be affected by this university failure reducing funds available to other Australian universities.
Australia's banks are not all that forthcoming about their status and particularly their exposure to calamity for example sub prime and securitised instruments. Not all four big banks (National Australia, Commonwealth, Wespac and Australia and New Zealand Bank are surely not all in the same rosy situation. Is one of them keeping something from us? We will know very soon which it is and what it is. Could it be the Board, and management, fear a response from consumers, or a political reaction under the Australian government deposit gaurantee? Are all of the Australian banks operating their loan books to the full capacity or is one, or more, not lending all that much? Is the economy being oiled by the Australian government and not by the banks as well?
A revaluation of China's currency, rent revaluations in Australia and the over-rating of the capabilities of the Board of the Reserve Bank of Australia and the impact of monetary policy
Some years ago, Senator and federal Minister Nick Sherry went through a dark patch in his life. He recovered and went on to become a federal Minister in the Rudd Labor government. The Senator is responsible for the vital portfolio that covers superannuation. It is not clear why he is qualified to hold this portfolio since he has not demonstrated a demonstrable vision, let alone an understanding of the criticality of the role that super plays in the economic landscape of Australia beyond providing money for retirement.
Nick Sherry is a member of the tribe that openly reviled, and dismissed, Paul Keating's blue print for Australia's future using superannuation as the pivotal tool. Following the defeat of the Keating labor government a spineless, and decrpeit labor party, cowered when anyone barke at them. They were, and are a sad lot. Perhaps Bill Kelty alone is the epitome of loyalty. He was, and is, like Keating, a deep critical thinker. That is abnormal in Australian politics and society in general. There is a myth that the Australian voter is sophisticated in their political assessment. That is simply rot. Barely 5% of the nation's population creates everlasting and beneficial change. There are dills earning large amounts of money on all sides of politics, business and community. They occupy positions of power, and influence, and some (like John Howard and peter Costello) do ever lasting damage, no matter how the spin doctors and acquiescent media dress up history.
When John Howard broke his promise to migrate the current system above an employer required 9% contribution, Nick Sherry and his labor colleagues were mute. Not every employer contributes. The employer contribution is not only mandated in awards. All other employers put it in as part of the annual monetary (salary) package. A lot of people are funding the compulsory contribution themselves up front. As the private sector debt ballooned, Howard and Costello played the entrenched promotion of political self interest, and political bile and bastardry, ahead of the public interest. Despite their crude efforts, and the lack of will of the labor party to challenge them, industry super funds blossomed. Vested interests, ably supported by the liar spin doctors (parasites) of the public purse that inhabit Ministers offices, tried desperately to destroy the foundation of Keating and Bill Kelty's creation - compulsory contributed superannuation. When Nick Sherry was spokesperson, before the Rudd government came to power, he did little to challenge this bastardry of the power collective. He really is a poor performer hidden away in the government spin doctor machinery.
One trillion dollars of investment potential was created in a little over decade. It might have been $1.5 trillion if not for the myopia of Howard and his Treasurer. As Howard and Costello trumpeted their attack on public sector debt, in the back room $A600,000,000,000 shackled the nation.
Howard came to office on the back of the foolishness of the Reserve bank of Australia which put interest rates up, crippling growth. Bill Kelty, a member of the RBA, during Keating's Prime time as Prime Minister, opposed the interest rate rise. Today history may judge him as the most intelligent member of that Reserve Bank of Australia, Board. The RBA is given to much credence, and pumping up, by politicians and an unenquiring media. The sport of predicting a new rate movement has become the primary motivation of commentators. They, the RBA, totally failed to anticipate the financial tsunami set out below in this web site.
Perhaps even more critical, for the nation, they (the RBA, the labor party, media, commentators and most of the voting population) failed to grasp, comprehend and embrace, Paul Keating's vision, just as Nick Sherry appears to have failed to grasp the importance of the level of contribution to superannuation. All that Rudd has is the surplus and that is in itself fictional too. Sherry and the labor government need to come to terms with the criticality of the balance between savings and consumption. When to save and when to spend. Prime Minister Kevin Rudd may have been gullibly sucked into spending $A10 billion of the public's money on a Christmas splurge.
The current (false) assumption is that the economy can be saved by spending. The second (false) assumption is that there can be constant growth. The third is that monetary policy is a panacea tool to rectifying problems and changing behaviour or at least modifying it. Altering the cash rate is tinkering and the amount of interest (monthly payments) by home buyers, and its effect on the economy, is over stated and definitely over emphasised.
Treasurer Wayne Swan may yet turn out to be a hidden visionary, grasping knowledge of the more complex issues that his colleague Minister Sherry does not demonstrate. The employee contribution into superannuation must increase. It must increase in 2009 and soon. It must go to 10% immediately and then to 12% and to 15% and then 25% by end of 2010. The proposition that the nation cannot afford this is a demonstrable lack of understanding of the facets of the real economy and a failure in complex thinking and analysis. Federal Treasury, under Ken Henry, is not a shining example of critical, lateral and visionary thinking. The media and analysts have not picked up on the mediocrity of his stewardship of Treasury and the constant failure to accurately predict. Politicians, and bureaucracy, is a self interested club in which the media (press gallery) are willing and complicit players. Let us observe if the Prime Minister has the fortitude to challenge the club and break from past practice. Nick Sherry cannot be left in charge if superannuation unless he offers an intelligent vision and plan.
In the near future China will revalue its currency. It must turn inward, quickly, to domestic investment and stop selling cheap (exchange manipulated) exports on the world market. If it does not then its people will suffer and many may even starve. There is growing unrest. The revaluing will cause a major problem for Australia (particularly commodities) not to mention the rest of the world. The proposition that India, and China, are the power houses of the future that can shield Australia (even the world) is another myth peddled by experts.
There will be a revaluation of rents in Australia as property values fall, quite dramatically. They will not fall by 6% as some forecast but in some areas by 10% and in other areas property will plummet, in February and March 2009, by 25% perhaps, in some localities, more. A large number of real estate agents (2,000+) and financial planners (3,000+) will lose their jobs.
I predict that Sol will not be at the helm of Telstra once the expert panel delivers its assessment of the tenders lodged to build the federal government's national broad band network. He claims that the door is open for Telstra to go back and negotiate its position having been kicked out of the tender process. It seems that the Board, the CEO, senior managers of Telstra and maybe its legal advisers are not conversant with how serious the public servants take the rules of probity and the integrity of the Australian government tendering processes. There will be no future negotiations to involve Telstra in the tender and ultimate contract to build the network. The CEO, and the Board, have set Telstra on a path that will probably result in the telco's domination of the market being broken by the government.
If liberal Senator Nick Minchin tries to blame the Minister with hs hollow rhetoric and drivel, about how Telstra has to be involved, then he will be open to questioning as to the previous government's handling of Telstra, running with their tails between their legs. Then there is the matter, and record, of his own performance in government, as Minister for Industry and Science. He was the driving force of the Howard government's Light Metals Strategy (2002), a high cost, high profile marketing spin by the government which turned out be mostly piss and win, but which cost the Australian and Queennsland governments, the CSIRO and shareholders a large amount of money and credibility. This strategy was founded on the theory that magnesium was the metal of the future and that Australia would become a major player in the global market. The government publicly backed the Queensland magnesium proponent and listened to the fortune tellers within CSIRO, the private sector and the Department. The ten Minister for Science, Peter McGauarn, was not so gullible.
WITHIN ENTERPRISE AND GOVERNMENTS?
What is the basis of the deterioration of logic, and skill, that is appearing within the Boards, and management, of corporations, enterprise and governments, within Australia and it seems, generally, across the globe?
Strategy of giving the low income earners a cool $A10 billion to spend for Christmas will fail
So what will happen when the money arrives in the bank accounts of the recipients? Well they will spend, and shock horror, a thousand retail outlets will still close across Australia, a multi dozen of car dealers will still close and thousands of people will still be out of jobs in early 2009. The experts at the helm of the major enterprises and the Australian government Treasury have demonstrated the limits of their skills. Everyone is a champion in the power collective of government, and business, when all is well. Then when it all goes to hell they are still champions, and experts, to be listened to.
THE MISERABLE GOVERNMENT OF NEW SOUTH WALES
There are senior decision makers and experts in Australia and a large percentage of the population who are going along as if nothing major is going to happen to the nation or to them.
As at November 2008, the Australian labor government of Kevin Rudd, based on Treasury analysis and advice, predicts a growth rate for Australia into the coming quarter and into next year at 2%. I say it will be 1.2% and perhaps -0.9% by end of January, going into March 2009. Let us see who is right. Look below in this web site and determine your opinion.
The spiral downwards, in Australia, will continue into the middle of 2009. It will have its greatest impact between january 2009 and August 2009. Property values will dive, rentals crumble, repossessions and defaults will rise. The Members Equity Bank will suffer a negative perception, and may require an injection of funds. Up to 10% of mining projects in Western Australia will be shelved and some will simply run out of cash. The warfare manufacturing ship building industry in South Australia, and car manufacturing generally, in South Australia and Victoria will stumble, despite the federal government's subsidies to both industries.
Will it be 40 of the Australian car dealerships that will fail between December 2008 and May 2009 or will it be 85? What will the government do gaurantee car finance if procured via a bank or agreed financial institution? Will it be only 15 retail chains that collapse or will it be many more? How many advertising agencies, and media corporations, will disappear? Would you like to name the two?
What proportion of the ABC Learning Group's operations will the federal government be forced to buy to keep child care facilities available? Ms Sally Ann Atkinson said that "it is bizarre" that there could be loss making entities within the ABC learning Group, of which she is the former Chairman, when the governmnet provides subsidies. She was oblivious to this occurrence. How many other well paid and respected persons are as oblivious to reality in their business sphere?
How many nursing, and aged care, residential enterprises will collapse? Will it be twenty child care centres, 36 or 52? Will it be five aged care facilities or eleven? Who is calculating these likely events, and working on strategies and counter activities, inside government? The federal Treasury? Spare me they can barely analyse how much money the government gets in let alone anything beyond the walls of their myopic vision. What is their plan? Spend like hell. Dr. Ken Henry, the Canberra based head of the Department of Treasury, is working on a new taxation model. Well that may well be the only worthwhile expertise available from the federal agency. The climate change model put out by them in November 2008 is laughable and a fiction. Yet the relevant Ministers, Penny Wong and Peter Garrett carry on as if this is a credible piece of analysis and the Emmissions Trading Scheme they envisaged last year wil actually be relevant in 2010 yet alone be up and running. It will not be, just like Stephen Conroy's grand plan for broadband will also not be up and running any time soon. In fact the tenderers will call it a day and walk away. The $A4.5 billion contribution from government is now valued at about half via the falling exchange rate. The surplus is rapodly disappearing. The education revolution? Not now, and not during this current term of the Rudd government. There is no revolution, the claim made by the Prime Minister that he would institute a revolution was just rhetoric and a grandiose exaggeration for the purposes of electioneering. It is part of a canvas that now maps a tendency for verbose, sometimes empty rhetoric that might well be delivered in a few hundred words or perhaps by remaining silent. Do not look to the opposition parties, in Australia's governments, for better performance, for they are as devoid of ideas and solutions.
How much is fraud on medicare, the Australian health system, welfare and other government funded programmes? Probably $A4 billion plus, a year, I would estimate. This will come the public's notice in 2009.
The Treasurer Wayne Swan looks, and behaves, like a man out of his depth. There are no real ideas other than spend and a nebulous regulation theory. Already the international banks, that have greedily soaked up taxpayers funds are telling their staff, customers and nations as a whole that the respective governments will have no operational say in their business. George Bush says that regulation failures in the USA did not cause this situation. He has a mirror of incompetence here in Australia called the New South wales government.
The downward driver of Australia's growth rate will be the incompetent, and dangerous, labor government of NSW under the stewardship of Premier Nathan Rees and Treasurer, Eric Roozendaal. This miserable government still has three yaers to run. These two, and their cabinet coleagues, are about to take NSW into a landslide of economic diasater and in doing so will take the nation with them. Roozendall bables on about AAA ratings for the state as if they are worth anything or mean anything. He is living in the past.
Some Australian corporation's morals, and ethics, may be questionable.
Woolworths is Australia's most pervasive retail chain. In the week of October 21, 2008 it was advertising its new credit card. Woolworths is offering an interest free period to February 2009 on all purchases. Just prior to this the Prime Minister had announced that the Australian governnment would make a single funding distribution of some $10,000,000,000 to pensioners, and families, just prior to Christmas. I have an expectation that a large amount of that money will flow through Woolworth's cash registers. At a time when a major economic crisis approaches Australia Wollworth's is callously enticing Australians into further credit card debt, timed for Christmas. There has been a significant increase in the commitment of annual net income to paying credit card debt in Australia. At the same time the National Australia Bank is issuing a new NAB - Qantas Frequent Flyer credit card. How many credit cards do indebted Australians need? One wonders at the sensitivity of these two major Australian enterprises and their role in the future of the nation's economic, and financial, propserity? I prefer other places to spend my money.
On Saturday 14 October 2008 a woman, and her husband, bid for a house in Melbourne. They pay $A30,000 above the vendor's expectation. They made the decision to spend an additional thirty grand ($A30,000) because the Reserve bank had reduced interest rates by 1% and they had heard there would be more cuts. To my mind they made a bad call. Australia's propery is way over priced and there will be a major correction of differing variations across Australia in 2009 and 2010. Real estate agents across the countrty are still clinging to a dream, now fading, that the prices people have paid for houses in Australia reflect value and are the benchmark upon which to go forward as if nothing bad is, or will be, happening.
Hosuing purchases are nbeing made at some 7 times median annual income and the agents think that can be sustained? The houses sold in the past two, to three years, are overpriced between to my reckoning at between 25% and 60%. Some in casual work or in unskilled employment are very worried. Those employed in manufacturing and low skiled jobs are facing a declining employment market. Major firms will scale back and some will fail. I estimate that about 15 retail clothing, and other product chains, candle and aromatic products chain stores, sports goods, hardware, auto mart style stores and numerous small businesses, will fail in 2009.
The young professionals still think that there is a blue sky all the way forward and they have nothing to fear because they have always been able to get a job. Sydney wil be very hard hit in the professional sector. The Western Australian mining boom will stagger and a number of sun rise companies will face the evening twilight. Unemployment will rise to 6% between November 2008 and March 2009 and then continue upwards towards 10%. Foreclosures on houses will rise by 5% to 6%. Even if people who bought the houses survive the loan storm their house will be valued below what they borrowed. Not some of them, all of them. Those who renovated will find that they have over capitalised. Rents will fall in 2009.
Mobile phone companies, and elecronics manufacturers, game machine makers and the home entertainment sellers all think that their sales will be maintained. The end of the love affair with technology is nigh. People will not be able to afford them. Telstra's income will fall dramatically in 2009 along with Optus and a phone company, maybe 3, will disappear from Australia. There is no economic saviour and the days of Keynes are upon us.
(September 2008) WE WISH YOU A MERRY CHRISTMAS AND A HAP (LESS) NEW YEAR.....
A NUMBER OF AUSTRALIAN RETAIL CHAINS WILL GO TO WALL
Santa Clause Kevin Rudd has cpme early. Yet as Christmas comes, and goes, in 2008 unfortunately a number of retailers will disappear in February 2009, if not sooner, as the recession hits Australia. They are the small, narrow item stock style retailers selling, among other things, the cheap Chinese clothes and trinkets. They are the discount electrical retailers. Hotels, and motels, will take beating as will the airlines. Holidays wil be close by, maybe in the caravan park or the humble cabin.
Unemployment will rise. The nation's workforce is 20% casual, and 20% self employed, they will suffer first and the cascade wil begin. These are largely the electronic discounters and the cheap imported Chinese made clothing products, and other trinkets, that infest the malls of the nation. Why Australian consumers demand and buy low grade products is a behavioural science exercise in its own right. The greater volume of their purchases are junk and rubbish. Australia has too many shopping centres, and common junk chain retailers, for the size of population and the number of tourists coming to Australia each year.
Will the coalition in Iraq be surprised particularly the Australian government when the government of Iraq falls under the influence of Iran or when Hamas wins a majority of seats in the 2006 Palestinian elections? The US concept of democracy is not the same as an Arabic concept. However the yanks, and some of its supporters, perhaps Australia, don't yet grasp this.
Telstra boss, Sol Trujillo will outwit the Australian government, ACCC and competitors, and tactically isolate Telstra's networks
and technology from its competitors.
Older applicants are discriminated against in interview and assessments by inexperienced who exhibit a lack of awareness, and seem oblivious, to the background of the industry, history and the relevancy of other material factors that might inform their deliberations. Is industry knowledge relevant? It is when a mid- twenties recruitment consultant thinks that NSW electricity is produced by nuclear power stations at Lucas Heights and other places and is interviewing looking for people with nuclear background to work in what are really thermal coal and gas power stations.
I'm "King Corporate", top of the food chain and bored with all of this public interest nonsense and triple bottom line accounting. It's about the economy stupid!
I've got a question for you: Is it true that Coca Cola Amatil pays $A1.43 per million litres of water drawn from the Peats Ridge acquifer and bottles it to sell at the prices we all see in supermarkets? Now that is good business, turn a valuable public asset into an even more valuable private asset and sell it back to the people who owned it in the first place.
Poor local Gosford Council (NSW) fears citizens will not have enough water for community if CC takes more out of Peats Ridge Aquifer near Gosford in NSW, Australia but Bob Carr's labor state government, demonstrates who's in charge, and over rides the council, to give Coca Cola Amatil its water, at this bargain price, and off to court the rate payers have to go. Other big business has come to play in the region and upset the residents and farmers. Who is it that elected government's represent? Real people who vote, or big corporations that do not?
Bob Carr, Premier of NSW, seems to know who to jump to.
, the national balance sheet. Supermarket Own Labels versus Brand Products Australia's executives increasingly Unethical and unconscienable behaviour
will trigger community, political and regulatory response in 2016-2017 and onwards.