Chickafinty ~ A Life in the Laundry

The Golden Parity Party (and that's not good news)

We're hit on all sides by the media.  News comes prepackaged in ever-decreasing bites and it is easy to just let it all happen.

Ever since I happened upon Chris Martenson, I've been paying much closer attention to the news, especially the economic news, and asking some questions...sometimes here, sometimes elsewhere.

Then I found Steve Keen, a local bloke (and economist) from the University up the road, and I began to listen even more carefully to the news.

I am not "into" economics.  In fact, just a brief glance at my mark in the HSC for economics will indicate that 40% of the students who studied economics that year did better than I did.

But even a limited understanding of economics can lead to the asking of questions that are being ignored in the MSM (main-stream media), or brushed over by the economic reporters.

Here's just a few questions that I wold like to propose:

1.  How can 27100 people have lost their jobs in Australia in August but there be no change to the total unemployment rate?  Sounds like someone is cooking the books to make things seem rosier than they actually are.  Why are they hiding the information and what are they frightened will happen if they tell the truth?

2.  Why has the price of gold shot through the roof in the last two weeks?  The gold price is (quickly) sandwiched between commodity prices and the currency rates on the news.  It's usually stated without comment.  So what, you may ask?  Gold has broken through the $1000 an ounce barrier.  That's BIG news, but no one is mentioning it in the MSM.  I wonder why?  (see point 3)

3.  A parity party is becoming more likely.  What's a parity party??  That's when the US dollar and the AUD are both worth $1.  It means the Aussie dollar is stronger, but that also means that the US dollar is weaker.  The weaker the dollar, the more money being used to buy gold rather than currency. (See point 2.)  Gold, unlike paper money, has intrinsic value.  A dollar is only worth a dollar because the Reserve Bank (or the Federal Treasury in the US) says it is.  Gold has -real- value whereas paper money only has imputed value.  The Aussie dollar is currently at about $0.86US but that figure is slowly climbing.

If the Aussie dollar is climbing against the greenback AND the price of gold is sky-rocketing, that probably means a loss of confidence in the American dollar, forcing those who know what they are on about to buy gold rather than paper money (or any assets grounded in paper money like bonds and securities and things...I said I was no economist!!)  High demand for scarce resource = high prices.  Why is gold going up?  Because lots of people are buying gold.  Why are they buying gold?  They have no confidence in currency with imputed-only value.  Why this lack of confidence?  There's a debt bubble about to burst.

Steve Keen has had a lot to say about dodgy economic theory and practice on his website and I encourage you to have a close look at his site and his articles, especially the one today which was published in the Sydney Morning Herald.

If you are further interested in this subject, may I direct you to Chris Martenson and Karl Denninger, who maintain comprehensive websites devoted to the GFC and what it means for the little person.  Unlike me, they know what they are talking about.

It seems to me that it's better to know what's going on, than to stand back afterwards and say "I didn't see *that* coming".

Chris, Cassandra, Wall St and the tin box under the bed

I'd like to introduce you to Chris Martenson.  He's so up-to-the-minute that he doesn't even warrant a wikipedia page yet.  He has, however, managed to do in 2.5 hours what Mr Warnes failed to do over two years and that is to get me to understand economics.  His crash course is excellent and I strongly recommend that you take it.  You'll never look at the "boring bits" on the news in the same way again i.e. Dow Jones, FTSE100, price of gold/oil and the dollar/pound/euro against the greenback etc.

Today Chris is foreshadowing a Bank Holiday.  Sounds nice, doesn't it.  It's not.  The last Bank Holiday was for five days in 1933 when Franklin D Roosevelt closed the banks.  Closed.  As in, no money in.  And no. money. out.

How would you do with no access to money for five days?  No credit cards, no debit cards, no EFTPOS, no ATM, no cash, no payments, no direct debit.  Nothing, nada, zip.

Some might consider that Chris is a Chicken Little wildly shouting that the sky is falling.  Others, after taking the crash course and using their brains a bit, might conclude that the sky IS falling.  Furthermore, some may realise that bits of the sky are lying scattered in the street, but everyone's too busy checking their Facebook profile, Thinking They Can Dance or pondering Sarah Palin's shoes, to notice.

I think the time has come to get the tin box under the bed.  It's a euphemism people...there really isn't a tin box under the bed!  It means that I think it's time to consider that nothing is safe, not even the banks.  It's time to pay attention, take responsibility and be prepared.  Lay in some food stocks on staples: flour, rice, butter, milk (powdered!  I mean it!!  It won't kill you), noodles, stock cubes.  Plant a few vegetables, even if it's just a single tomato plant in a pot.  Store up some tinned goods and cereals.  Pay cash.  Pare off everything you don't *need* from the budget.  If the world economy goes under - and it may well do so - your disposable income is going to go kaput.  We're planning ahead.  If necessary we could provide housing for a whole 'nother family in our home and we'd be prepared to do so.  A second family could be accomodated in the garage.  I'm not joking.  The toy room is being attacked today and the toys culled.  We've got double cupboards which are about to become a food store.  I'm teaching myself to sew again and have plans for the vegetable plot.  They've been sort of tentative plans for years, but now it's essential. 

This is the way it could go. 

I *know* our government is saying we'll be OK, our economy is strong, our banks are regulated, our commodities are still popular rah, rah, rah.  That may well be so.  But the days of economic isolation are over.  We are members of the global economy and what affects the US is going to affect us too.

I'd love to think that I've actually flipped my lid, but it ain't so.

Please.  Take the crash course.  Think about the issues for yourself.  Then start making some plans.  The day will come when you'll be very glad you did.

Three years is a long time in politics

And the next three years are going to be particularly long.  Don't have anything against Kevin Rudd personally - he actually seems like quite a nice bloke - but there's no denying that every Labor government in my life time has equalled economic irresponsibility, high inflation, high interest rates and strikes.  High interest rates make paying mortgages harder; strikes remove the pay needed to make those higher mortgage repayments.  Not a good combination.

For non-Aussie readers interest rate hikes are going to ahve a huge impace on ordinary families.  The average mortgage here is $300,000 and the average income is $55,000.  If interest rates hit 10%, as they most likely will within the next three years, then we're in for a very rocky ride indeed.

Game on

Mr Howard has called the election at last.  Saturday, November 24 as the pundits were saying it would be.  Now we have 6 weeks of electioneering, baby kissing and promise making to endure.  Mister Bear and I have started shouting at the tv again...the PM announced the election at midday and it's only 5pm so this is not a good sign.

During the last election, the Liberal Party's (confusingly, the Liberal party in Australia is the conservative one.  The American equivalent would be the Republican Party) statement on the economy was that interest rates would be lower under a Liberal government than they would be under a Labor government.  Every time that interest rates have gone up - and there have been two rises so far this year - the Press have tried to hammer Mr Howard about his "broken" interest rate promises.  ARGGGGGH!!  He did not promise that they wouldn't go up, he promised that they would be lower under a Liberal gvt than a Labor gvt.

When the Liberals took over the reigns of government in 1996, interest rates were at about 10.5%.  Good financial management under the Coalition brought those rates down to a low of 6.05% in December 2001.  Since then, due to a number of worldwide forces...not national financial mismanagement, rates have increased to just over 7%.  Not too shabby a performance.  Especially when you consider that when Labor took over in 1983 rates were at 12% and climbed to 18% by 1990.  Historically, the election of every Labor goverment in Australia has lead to a spike in interest rates, to a national debt instead of a national surplus and, most memorably, a downgrading of Australia's international credit rating (Thank you, Mr Keating and the recession-we-had-to-have).

We're buckled in for a rough ride over the next six weeks.  On the night of November 24th we get to find out who will govern Australia for the next few years.  Mr Rudd is such a nice bloke and Mr Howard so vilified that it really could go either way.  This time we're in one of the key seats; one of the seats which will help determine the outcome of the election.  Mister Bear and I are also putting some contingency plans in place should there be a change of government.  Can anyone spell f-i-x-e-d home loan interest rate??

Maintain the rage?

Today, Rememerance Day, marks the 30th anniversary of the dismissal.  For those non-Australian readers, I'll summarise the story for you.

In 1974/75 the Labor government of the time was seeking overseas loans for major projects (around 500 million dollars).  In 1975 this blew up into a major political scandal with a resultant lack of confidence in the ability of the government ot govern.  The Oppostion of the time (Liberal Party...think Republican/Conservative) had the majority in the Senate and therefore had the ability to block the Government's budget, which they did.  It was a major, major political crisis...the country running out of money, the Liberal leader refusing to pass the budget until the Labor leader called a general election and the Labor leader steadfastly refusing to call an election.  A stalemate of the worst kind ensued.

At this point, in steps the Governor-General, Australia's titular head of state, who under the Australian Constitution has the right to dismiss the Prime Minister of the day if said Prime Minister can be said to be governing without the support of the people.

On November 11th 1975 the Governor General of the time, Sir John Kerr, did exactly that.  He dismissed/sacked the Prime Minister, made the Opposition Leader a caretaker Prime Minister until an election could be called and forever landed in the history books as either a hero or a villain, depending on which side of politics you stand.

The election was called for December 13th 1975 and the Labor party suffered the greatest political landslide in Australian history.  The Liberals won the election in something like 95 seats to 30.

BTW, Australian readers...if you are watching the replays of Gough Whitlam's famous "Kerr's cur" speech on the steps of Parliament House, have look behind Gough's shoulder and you'll spot another *famous* Australian politician...one Paul Keating to be precise (he was sworn in about a month before the dismissal and was Rex Connor's protege.  Rex Connor was one of the politicians mixed up in the Loans Affair which caused the downfall of the Whitlam government).

At the time, the ex-Prime Minister, called on the Australian people to "maintain the rage" at the great injustice done to him and to his government (and quite possibly democracy).  This has not happened and it is my guess that most people under the age of 40 don't really have any idea what the dismissal was all about - except for sad people like me.  Gough Whitlam (the PM who was sacked) will be interviewed this morning on the Today show...he's now approaching 90 and has long come to terms with the events of 1975, except for the role of Sir John Kerr, whom he describes as a "contemptible person".  Sir John was eventually hounded out of Australia and lived in exile in England until his death in 1991.

I was five at the time of the dismissal, but I remember it quite clearly.  It was my blooding in, in politics, and a topic about which I know quite a lot.

The Dismissal

Have now watched the complete miniseries twice.  It was an issue that divided and indeed still divides this great nation.  The miniseries appears to have no bias, it simply and very effectively relates the events leading up to November 11th 1975, without commenting on whether they were right or wrong.  The series simply states that it happened.

In short, this is the story:

In 1972 after 23 years of Liberal (conservative) governments, the Labor (socialist) party was elected to office.  In 1974 following rampaging interest rates, inflation and recession the Liberals forced a general election by withholding the Government's money supply in the Senate.  The Government under the Labor leader Gough Whitlam was returned to office.  Following a lot of twists and turns, political scandals and "funny money" deals, the Liberals attempted to once again force a general election in 1975.  Whitlam refused to call one, there was a massive Constitutional crisis which the Governor-General (the Queen's respresentative) resolved by dismissing the Government on 11th November 1975 and appointing the Opposition Leader Malcolm Fraser as caretaker Prime Minister until a general election could be held.  The election was held on 13th December 1975 and the Liberals won in the biggest landslide in Australian electoral history.

30 years on debate still rages over whether the Governor General should have dismissed the Government.  In a few months the papers relating to the dismissal will become available under the Thirty Years Rule.  I can't wait to see them.