Posted by: graemebird | May 21, 2008

The Most Inefficient Companies In Australia.

Except perhaps for firms just about to go out of business… the four most unproductive outfits in this country would have to be the National Australia Bank, Westpac, The Commonwealth Bank, and the ANZ. After all: How much loot could you create for your only shareholder (ie for yourself) if the government gave you the right to create the lions share of any new money in this country?

There are complicating matters which will make it hard for us to show just how unproductive these guys are:

1. The act of fast but unstable money creation IN ITSELF creates the need for a vast array of financial services. The vast majority of our demand for:

currency-swaps, hedge-fund managers, financial advisors, distress loans, extra insurance, bridging loans, futures contracts, large credit-card balances, high mortgages, and on and on….

The vast majority of demand for financial products IN ITSELF comes from this high and erratic money creation which leads us all to keep low cash balances. And those balances relentlessly reducing in value.

So its not JUST having the right to create most of the new money in this country, without getting their fingers wet or inkstained. They are also very well-placed to capitalise on the extra demand for financial services that this new money creation leads to.

This is a situation akin to a glazier whose kid has a bit of a glass-smashing habit.

2. BUYING IN THE SKILLS:

Now as dull a corporate culture as these guys no doubt have, they can always get in on the MITIGATION MARKET. They can always get in on supplying products to smooth over some of the damage that these guys THEMSELVES have created.

Despite their dullness and lack of productivity they can participate in the mitigation racket simply by buying out some small merchant bank and importing in the skills that they need by this buyout route.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

So its hard to find a simple a mathematical measure to show just how unproductive these outfits are. Being as they get the benefit of the money creation and easy access to this other sort of business. A bit like a maffia family who gets free money from protection rackets but also runs the garbage routes.

3. PRIOR YEARS INVESTMENT IN TECHNOLOGY.

The other thing is because these guys have had such a windfall of revenues for so very long, they get to invest in all sorts of technology that can improve their position from the point of view of traditional notions of productivity. But still I’m sure if we can come up with a reasonable mathematical formula to test their bloated inefficiency we will not be dissapointed.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

WHO SHOULD GET THE BENEFIT OF NEW MONEY CREATION?

Pick me, pick me. Obviously I think it ought to be me. Give me exclusive rights to the benefit of new money creation. Then when all of us are through with thinking that it should be ourselves we have to come up with a more sensible answer.

This is the taking of real resources for a tangible benefit. What complicates the matter is that there does need to be SOME money creation. As I explained in the prior thread. There needs to be enough money creation just to keep Gross Domestic Revenue and Productive Expenditure growing as slowly as possible without actually ever falling.

So SOMEBODY needs to have this benefit. Who ought it be?

Well if it cannot be any of us individually how about us in the first instance handing that benefit over to the government as a way of reducing our tax liability? This is akin to splitting up the benefit amongst all of us.

This is not my ultimate answer. But it is my proximate answer. In the long run I want this benefit to go to our extraction industries. These guys who will extract gold, silver platinum and copper. This will keep our extraction industries highly capitalised and this would have a number of advantages beyond the scope of this thread.

But for now we can work towards taking this benefit away from the banks and giving it to the government. In this way we will be getting a number of benefits right away. But the most important one is what it will do to reform the banks. After the banks can no longer gain from money creation they will be forced to operate productively. And so our greatest immediate benefit will be THE DEVELOPMENT OF A DOMESTIC FINANCIAL SYSTEM THAT CREATES WEALTH LIKE NO OTHER.

How do you use debt to create wealth? Or put it another way. If the banks are no longer able to CREATE money how must they earn their living. Or to put it still another way, how does one use savings to create wealth.

Well this seems to have become an incredible mystery. Folks who are overly impressed by the mystery and earning power of various “financial wizards” and “rocket scientists” can often take a mystical approach to this. They think that the trick of producing new money out of thin air is ITSELF a sort of magical, wealth-creation process. They think these corporate high-fliers are their betters and that its best not to question what these high-powered modern-Medicis are up to. But these supersticious notions of high-finance are just the result of centuries of bullshit-artistry and obscurantism. Centuries of mystery and myth and even a bit of GLAMOUR….. built up around what is essentially a process of controlled embezzlement and currency debasement.

But if the currency debasement isn’t there and the banks no longer practice fractional reserve then how will they create wealth? Its quite simple really.

Wealth creation from 100%-backed-banking is about:

1. Taking in term loans from the public

2. Finding someone who already has a cashflow.

3. Allowing that person to buy some sort of capital good that will allow him to enhance that cash flow.

WEALTH CREATION THROUGH FINANCE IS ABOUT EXPANDING AN ALREADY EXISTING CASHFLOW VIA THE PURCHASE OF CAPITAL GOODS USING BORROWED MONEY.

If about 90% of savings wind up being recycled in the above way then we have a powerfully effective financial centre.

Now there are a couple of things that follow from the above.

1. It follows that this sort of resultant capitalism is really quite an egalitarian setup. Allowing people from all sorts of backgrounds to go from next to nothing to be people of substantial wealth.

2. It also follows that income tax for all but the wealthiest people must be absolutely forbidden. Because the loan will have to be paid back with an ENHANCED cashflow. And for the borrowers income tax to increase at the same time leaves him with an effective interest rate thats going to go through the roof.

3. The natural process of a an explosively progressing economy isn’t about long-term planning. Its really about constant iteration involving just about everyone in the economy and very many of them would be relentlessly updating their gear. Relentless updating their gear and taking up mini-turn-key franchises and the like. The idea is you would wait until the last minute, until you know for a fact that the new purchase will indeed expand your cash flow and then you would pay that loan of at top speed.

So under this sort of monetary/banking arrangement:

CAPITALISM IS ABOUT RELENTLESS ITERATION RATHER THAN LONG-TERM PLANNING.

THEREFORE

4. So-called “micro-loans” aren’t meant to be some fringe charity act that ought to be subsidised. Rather micro-loans, to create wealth within the community, are the very bread and butter of what banking would be about. And we are missing out on this precisely because of the way banking and monetary-economics is handled.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

THE UNBELIEVABLE GYP THAT SPECIFICALLY AUSTRALIAN BANKS HAVE GOT GOING.

It is the case that in all banking systems, banks will make their greatest profits when they are able to create new money at the fastest rate. So if the banks are able to create new money at 40% per year they will be fair swimming in profits. But then if the government stops releasing new cash, or if the banks start getting cagey, and want to build their own reserves and therefore do not wish to lend eachother as much ponzi-money……..

…. when that situation breaks out and no new money is being created then it is the way of things that bank profits will plummet. You see the fact of the matter is that modern banks make their money from new money creation. Not from judicious resource allocation. If new money stops being created, or even moreso if the total money supply starts falling….. then banks go into loss-making mode very quickly.

The Australian public probably imagines that the banks make their best profits when interest rates are rising. Actually there is an historical tendency for them to do better when interest rates are at mid-range and falling. Because historically thats when new money creation tends to be at its fastest rate. And I cannnot explain enough that our guys don’t make their profits from wealth-creation. Rather they make it from creating new money. I’ll leave it for some PHD student to back me up on this but its the fact of the matter.

Now this is the situation with banks the world over. But our banks have developed a particular gyp to mitigate the downturn in profits when money-supply growth slows down. Its just unbelievable that they have managed to arm-twist the public into making this all possible.

You see in Australia as money supply is slowing down and the Reserve Bank is increasing the overnight interest rate, Banks simply start grabbing more money hand over fist off their existing mortgage clients. Its just an astonishing racket. And we have to come to grips with how so many of the rest of us have been backed into this outrageous scam.

HOW DID THE FOUR BIG BANKS MANAGE THE INCREDIBLE GYP OF BEING ABLE TO START TAKING HUGE AMOUNTS OF EXTRA MONEY OFF EXISTING CLIENTS WHEN THE RESERVE BANK DECIDES TO JACK UP OVERNIGHT LOAN RATES?

Its truly an amazing thing that they have acheived. For while it still remains true that their profits are about to take a dive, yet here is this marvellous compensatory mechanism that these shylocks have managed to angle themselves towards. In effect they have thrown off even more of the punishment for recession away from themselves and onto others, so that they have locked the rest of us in to this fast monetary growth. This fast monetary growth which allows these guys to be fat, inefficient, stupid and unproductive and still manage to gain profits hand-over-fist.

THEY’VE CONVINCED EVERY SONOFABITCH TO TAKE UP VARIABLE LOANS.

Now just how did they pull of such an incredible coup? This is NOT capitalism. This is NOT freedom of choice. Though it may appear to be capitalism and freedom of choice on the surface of things. Rather this is backdoor cronyism. This is what modern life in Australia is all about. Backdoor cronyism masquerading as freedom of choice and capitalism. An outrageously tilted playing field masquerading as a level playing field.

This cronyism, this fake-ass free-enterprise, THIS SUCCUBIS IN FREEDOMS CLOTHES STARTS WITH THE BANKS. so we must find out how it comes about.

It is important to suss out how these dull inefficient cronies have managed to pull this astonishing racket off. Seemingly with our co-operation.

The real reason here is that cash has lost its “STORE OF VALUE” function. Which in reality, and in the minds of your average punter, now resides in real estate. So with real estate as the store of value, it wasn’t that hard a deal to get everyone signing up for floating interest rates over forty year contracts. These sorts of long-term contracts with floating rates could never have been put over on us if cash had always been slowly increasing in value.

This scenario where the banks crank up interest rates to current borrowers in response to THEY-THEMSELVES doing-it-tough is entirely unnatural.

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Responses

  1. what exactly are you proposing we hand over Graeme? It doesn’t sound very libertarian

  2. Graeme,

    You don’t have an open forum.

    I take offence to your characterisation of how Jason and I would have handled the Klondike over on his unleashed article.

    I’ve told you before, homesteading is sometimes the best option – it probably was for the Klondike. Anyway, if it were to be sold off, it should be divided into the most marketable unit and then each auctioned off, with the revenue going to the general population in equal lots. I take offence to the way you described me and Jason and crony capitalists in the way we would handle a sell off, even though we have told you things which openly contradict your “story telling” on the ABC site.

    I don’t know if you do this because you didn’t understand me and Jason (sometimes homesteading is good, different privatisations require different disposal methods) or you think homesteading is the only way, even for totally inappropriate situations and you see fit to lie about and smear the character of people who don’t agree with you.

  3. Yeah I’ll explain it in due course. But if we wind up with 100% backing, then when the central bank decides to increase the money supply it just creates new cash and hands it to the government for current spending. Simplifying everything and taking the mystique out of it. None of this complex chain of borrowing.

    Without fractional reserve therefore banks have no power to create new money. Hence they have to change their operations with a view to wealth-creation as opposed to money-creation. You can’t focus on both at the same time.

    Now thats not where my head is at of course. I want for that cash to be slowly substituted for private money over time. But its important to get to 100% backing first. Its fractional reserve which stops gold, platinum, silver and copper from outcompeting unbacked cash.

  4. “I take offence to your characterisation of how Jason and I would have handled the Klondike over on his unleashed article.”

    Take all the offense you want. Unless my efforts have managed to change your mind then thats how you handle privatisation. Imagine bundling telstra together and selling it off as one big chunk? Bizzare?

    And imagine these guys bundling every last generator in NSW together and flogging it off as a chunk. All from your crowds incredibly bad advice of course. This sort of anti-economics idiocy is held to be “BEST PRACTICE”.

    So what can I say? You people are screwing us up good and proper.

  5. You idiot Mark. You had no idea what homesteading was until I introduced the notion to you and thats just a fact.

  6. graeme
    since you’re on abc unleashed scroll down and go to rafe’s article. he looks like he needs some help,

  7. Yeah sure Graeme, I never seen or heard of the movie Far and Away…and I live under a rock on Mars.

  8. Thats always been my impression Mark.

  9. So it has always been your impression you are wrong and go so far as to mock yourself with sarcasm?

    Only a completely self assured pompous ass would claim to have introduced another adult and an economist to the word and phrase “homesteading”.

    Of course, you have never addressed what I said above. You are a mendacious blockhead.

  10. Attempt not to be an idiot Mark. Its always been my impression that you are a dope who just arrived from Mars on the back of a haystack.

  11. You’re just lucky you can get away with your rabbit punching and smearing behind our backs. You’re like Lambert’s evil twin.

    I don’t think the economics profession will take advice from a crank who dismisses opportunity cost. You’re like a loony who rails against doible entry accounting or the time value of money in finance.

  12. Look Mark. This forum has higher standards than Catallaxy. If you start putting words in my mouth or start making lying accusations hidden in the form of stupid questions than such posts will be aired for awhile and then deleted.

    Now get your ass over to ABC unleashed since a further important contribution of minee has been cleared.

  13. No need for irony Jason. This site does have higher standards than catallaxy and one thing we don’t put up with is the IMPLIED LIE.

    This site is doing well all of a sudden. So much so that WordPress had a “Welcome Back Graeme Bird” public message.

    Shape up fellas. More content. Intelligent questions. Suggestions on considerations you think I’ve not taken into account. This sort of thing.

    I’ll put up with the insults just so long as there is some sort of content there as well.

  14. Only criminals get arrested? I guess we can do away with the courts system.

  15. Sorry Graeme, wrong blog, had two tabs open…

  16. Do try and be constructive.

    Now I have a new thread just up. Try and make yourself useful for a change and figure out if you can make any further suggestions for boosting retiree incomes in the context of reducing governmental depredation.

  17. Yes.

    We can sell off (by auction) State owned assets (GBEs and fixed assets) to payout pensions above a reasonable living standard over a maximum lifespan of 120 years (and also State run pensions in a similar better than matched approach). They keep their dignity, we have a more efficient private as opposed to public enterprise and the tax rate can be lowered as we don’t need to fund these agencies or their upkeep or keep their employees on the public payroll.

    I get the feeling you are going to point out that we don’t have a level playing field or so on. It is a moot point. I am all for a level playing field. The conclusion I can make a as a counterpoint is you like paying too much tax on inefficient taxes because you will on;ly privatise when some kind of utopia emerges. Reform has to start somehwere. Hopefully in a well designed, comprehensive package.

  18. We don’t want to sell of assets for that reason. You have an obsession with flogging of assets. Thats an whole other issue. And privatisation ought not be conducted for the purpose of fundraising. But if its done it ought to be done to get the best market and a whole lot of new stuff built.

    You’ve done exactly what you always do. THE IMPLIED LIE BY PUTTING WORDS IN MY MOUTH. And conflating issues.

    We want to close down government departments. Thats where we get the money from. Closing down government departements. Mass-sackings.This sort of thing.

    Wait a minute. What page are you supposed to be on. Ought you not be on the ABC Unleashed page? This ones about banking.

  19. Graeme,

    Privatisation alone will never “create the best market” alone. I have never advocated that alone however.

    You are forgetful.

    You are doubly forgetful. If GBEs are private, then taxes need not fund them and taxes can be cut anyway. Getting rid of obtuse or doubled up departments is desireable but not really part of privatisation.

    So how would you finance pensioners?

  20. What are you talking about privatisation here for? This is about pensions. Go to ABC unleashed and make an ass of yourself in full view of the public.

    Why are you asking me how to finance the pensions when its all up there in the thread?

  21. I’ve explained how you would finance pensioners above. So you are lying and claiming that I haven’t explained that. The implied lie is not allowed here any more than the outright lie.

    Paying pensioners from current taxes is not a forever thing. So the idea is to put in place policies that reduce peoples dependence on this source over time.

  22. Now Mark Hill you are lying and claiming that I’m unwilling to answer questions.

    This is a pathological problem with you.

    But while lying is encouraged at Cattallaxy it is totally prohibited here.

  23. On another thread I have a six point program to reduce dependence on taxpayer-funded pensions. And this idiot Mark Damien Hill keeps lying and claiming that I haven’t explained how to reduce dependence on pensions.

    This is what he and Andrew Reynolds would do over at Catallaxy all the time. Relentless lying in just this fashion.

  24. So far here is the tally of Mark Hills posts.

    3 posts lying and alledging that I’d challenged and rubbished the laws of thermodynamics. 3 posts lying and claiming that I’d failed to answer questions. And at least 2 posts where he lied an claimed that I hadn’t given an explanation as to how I’d fund pensions.

    Its pathological and he did this with unrelentling mania for the last two years over at catallaxy.

  25. You’ve got that one saved at Catallaxy. So stick it in the right thread and stop being a moron.

    This is typical Mark. Making comments in the wrong thread so that its easier for him to misrepresent what I said.

  26. You asked a question here and I replied. You could have replied back.

    Fine, I’ll post it above.


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