Posted by: graemebird | October 10, 2008

Derivatives. The Other Side Of The Hidden FRACTIONAL-RESERVE-EVERYTHING.

Derivatives are an absolute disaster. They are not something that would be produced in any great measure by the free market. While it would seem that they are the province of financial sophisticates, in fact they are really something that was pushed by know-nothings, proven failures, and welfare queens.

There is no question now surely that the banking business is and always was a subsidised protected industry. Basically an arm of government. And that the government and the finance industry can scarcely be told apart. This is an industry with thousands of regulations to protect its cartelization features but whats missing is the few regulations that would be needed to stop these guys from debasing the value of our money, inflating the value of our assets, and armtwisting every bugger into this orgy of debt.

Yesterday I bought the Financial Review and they were now announcing talk of the Federal Reserve buying banks shares. So letting these welfare queens create money isn’t enough of a subsidy? Cartelization regulations not enough for them? An 850 billion dollar bailout not enough? Sweetheart loans behind the scene not enough for these guys? Getting financing at whosesale prices backed by the printing press insufficient for their needs?

When you see someone making 400 million from banking remember he is a welfare queen. He created no wealth in the making of this money. The fact is that these guys are now rent-seeking parasites.

Now how do derivatives work? why are they in such demand? and how is it that they have grown so that their outstanding amounts of perhaps a thousand trillion dollars?

The short answer is below:

“Derivatives allow fractional reserve of items that are tradeable over the computer. This fractional reserve of non-cash tradeable items creates the need for more derivatives, so its a pandemic that feeds on itself.”

Thats it in a nutshell. Copy this somewhere so that you can tell people what these skanky derivatives are all about and their true hidden purpose.

How is it that the nominal outstanding value of derivatives could have grown to ten times all the assets in the world (by one estimate)? What is causing this from the demand-side? The fact is that what is causing this is essentially fractional reserve of EVERYTHING run wild. Not just fractional reserve of currency. But of all traded commodities. Not only all commodities. But many shares of companies. All of these have been pyramided on with the derivatives as the way of keeping the pyramid builders out of trouble.

This is the ugly secret that this derivatives boom attempts to hide. And the upshot of it all is that we will lurch from one crisis to another until we stop subsidising these banks, let them all go broke, and replace the derivatives function with honest storage of commodities. Honest sales of real shares that cannot be owned by two or three people at once.

Its this practice of fractional-reserve-EVERYTHING that is the cause of this ridiculous derivatives blow-out.

The only way I can put the derivatives story in perspective is by demonstrating the principle behind it by giving an entirely hypothetical example of  a provider of a commodity. Just as an example I’ll use an hypothetical provider of Gold. But firstly we must find out what real and valid speculation and warehousing of entities is supposed to acheive.

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In a free society, without bank welfarism and special laws favouring some but not others, there is a very important role for the speculator. The speculator is the guy that provides a fair price and a consistent supply for items of all sorts.  But usually for producer goods commodities. He has an offsider who performs the warehousing function.

Now supposing you were to survey an industry and find out that there is likely to be a shortage or a slowdown in production of some item whose supply and demand tend to be inelastic. Supposing you worked out that there would be great production constraints looming. Well you could buy and hoard that commodity. Its important to note that this hoarding has a number of effects. It increases the remuneration to the industry. Encouraging them to expand production. it increases the price to end users, encouraging them to find ways to use less of this stuff.

Essentially the speculator is creating a pretend shortage ahead of the real looming shortage. So that people have time to adapt to it. Because of this capitalism, free of fractional reserve special priviledges, is a system of pretty stable prices. Most prices will be falling. But the price of a few key items will be rising but will not lurch up suddenly and then crash.  Quite different from the lurching runups in the prices of vital things that we have experienced in our lifetimes but most particularly very recently.

Also capitalism isn’t a system that features backlogs or shortages of things. Yet we are getting breakouts of shortages on top of our lurching prices. Derivatives are one half of this picture and we really haven’t seen anything yet. Things will get much worse.

For example take the oil market. Ludicrously the oil price is down at 80-90 USD. Part of this is because of recession. But just an example of how stupid this is, gasoline reserves in the US are at record lows. So low in fact, that everyone filling up their tank right now would apparently run the place dry.

So we will find that the oil price goes for another lurch like it did last year.  What would have happened under capitalism is that the oil price and inventories in refined products would have grown higher a very long time ago. But then it would tend to a more stable price which would give both supply and demand time to adjust. But we will find ourselves with constant crises and lurching prices in all the things that we really cannot do without. And derivatives arer key to what is going on here.

The speculator under capitalism is a person who would help the price of oil stay stable. He would set up an alternative supply and demand. But seeing as the price of oil must get higher until a mature sea-based or oil-liquification industry is at hand right now we would have huge stocks of these petroleum products. In setting up these huge stocks the warehousing companies and the speculators would have prematurely boosted the earnings of the producers AND THE PRODUCERS OF OIL SUBSTITUTES. This would have kept the industry in a healthy state at the same time as helping found the new industry in substitutes.

As things stand the oil industry is in a very bad way. Their rigs are decades old. They haven’t developed the technology for the deep sea stuff. And the coal liquification industry, which ought to be booming, is still in its fledgling stage.

Its not just real goods that would be more stable under capitalism. Right now this socialist money has put almost our whole population of elderly people under stress since their superannuation has been trashed. Essentially the banking industry has taken a balloon full of gold coins, replaced it with air…. and sooner or later the balloon was going to pop. Thats whats behind all these phenomenol finance industry salaries. The top brass in these banks are our most expensive per capita welfare recipients. Even worse than most of the public servants.

There is an excellent discussion of the role of the true speculator In Murray Rothbards book “Man, Economy, And State”. The discussion starts at about page 130. He doesn’t emphasise this. But note it is implied that REAL GOODS WILL BE STORED. Speculation has next to no wider social benefit if not for the ability to store real goods.

http://mises.org/rothbard/mespm.PDF

Of course “storing” intangibles like shares has its uses to. I’m speaking with some sort of a broad-brush here. So long as the person takes ownership and holds real shares and does not sell shares he does not have. Here the speculator is important since he would provide a stable and fair price for shares and this would inform capital-raising decisions of the various businesses. This is all part of the best possible allocation of capital in the market. All this is utterly buggered by selling shares that people don’t have. And on top of this practice the fractional reserve of cash buggers the pricing of shares, and therefore the capital allocation within the economy. The banking industry welfare recipients could scarcely have screwed things up more.

This is why I made the claim in an earlier thread that only stored commodities represent authentic insurance.  But storage of real goods has nothing to do with these ignorant know-nothing fantasists dealing in make-believe and selling fresh air…. minus even the air or the freshness, in todays market.

Now supposing you are a gold dealing arm of a banking operation. And almost no-one takes delivery of this gold. In fact there is great advantage to not taking delivery. You can be a better speculator. You can jump when the price is right but not necessarily if you have a tonne of gold buried on your hobby farm. But what happens is that the gold dealer can sell fresh air. He can fake a sale of gold.  So he can sell the gold without buying it.

But what then if the price of gold goes up and he’s stuck with this fraud? Well the thing is when this deal first gets going what is happening is that the phoney sale is telling the market that there is MORE GOLD SUPPLIED THAN THERE REALLY IS!!!!!! Hence he is likely safe for a long time since the gold price will tend to go down.

So many stupid libertarians, total idiots, get about talking as if this sort of thing is freedom of action. And oftentimes these people put themselves out as supporters of the price system. But the bloody price system is totally screwed by this practice. Because while it might have seemed that it was an innocent enough practice to sell this fresh air. Well its not ok. Because immediately it means that the producer is not getting the price that the price signals ought to be telling him. He’s not getting the resources or the incentive he needs to expand productions. In effect instead of having positive inventories we are working on negative inventories.

Anyway now this fellow has a debt. As soon as this practice crops up the dealers who are practicing it have lowered their costs. They can now affect to provide gold with cheaper margins than their competitors. This will encourage dishonesty in their competitors or drive the other dealers out. Now the margins will be too thin. As a consumer, if you are a total fantasist, you might imagine that this is a good thing. ‘Thinnner margins are better for the consumer’ you might be thinking. Just like our banks loan out on pretty thin margins and they will have to get wider under capitalism. If you take a fantasy approach to matters you might feel that this is a bad tihng.

So what happens if people start taking delivery with greater frequency? Well what will happen then is the now corrupted profession will start putting delays on delivery. This is not capitalism. Under capitalism you don’t have delays or shortages. But now the whole industry is in the shit. What they ought to do is increase the gold price but doing so would bankrupt all of them.

So what do they do? No pressure. They all buy FUCKING DERIVATIVES. Now they’ve got their derivatives they then have to have a period of a runup in prices. That way they can clear their backlog. Exercise their options, bring the industry belatedly to oversupply, and then the practice starts up again and the price is crashed to far below what any authentic market rate ought to be.

You cannot get delivery on gold for 14 weeks right now in the US. And the fourteen weeks is probably a lie. The price of gold therefore ought to be twice as high. So what else can they do? The options people aren’t going to buy into this forever?

So the next thing to do is get the government to bail them out. Either the dealer or the options people can be bailed out of this mess. So these assclowns will go to the Feds and intimidate them into thinking that the high gold price threatens the US dollar. Or some other subterfuge.  But in any case, since government and the banks are two aspects of the same racket it doesn’t matter if its subterfuge or not. The bailout will begin.

What will likely happen then is that the fabled and rumoured “plunge protection team” will bail out the dealers and the banks. They will likely borrow a shitload of gold from the Federal Reserve, clear the outstanding make-believe shorts, plunge the gold price again… And thereby rip off the producer, the true speculator with foresight, and further distort the market.

Now this is happening in gold. But its happening also in silver. Its happening in everything imagineable. From mortgage debt. To fuel. To everything. Anything that you can buy derivatives in you will have people practising fractional reserve in this item.  This is reflected in the behaviour of companies.

Supposing an airline is worried that their price of fuel will go up? Do they buy extra fuel and set it aside? Do they get someone else to do it on their behalf? Well the fact is they probably couldn’t get someone to store it for them if they wanted too. The fractional reserve “providers” of fresh air would likely have undercut any valid storage operation.

No the airline will just buy some options to purchase this fuel instead. Hence when the fuel price goes up and they use their options they are HURTING THE REST OF THE MARKET. Since they get the fuel cheap and everyone else has to get their fuel at a more expensive price than they would have if that company hadn’t bought the options. But in the interim no new fuel was stored. The producers weren’t encouraged to produce more, since the Airplane company didn’t buy real fuel. And the price system was distorted.

Under capitalism the short-term interest rate is around zero. That is you cannot go to the bank and get interest on on-call money. And also there wouldn’t typically be much interest paid even on a three-month or six-month deposit. Nominal interest rates more generally would tend to be very low.

Prices generally would tend to fall under capitalism. Hence if there is the anticipation that there is something that can be stored whose price will rise there is not much of a financial opportunity-cost to buy and store this stuff. People don’t tend to go in for a lot of insurance in any form since their cash balances are high, and the market itself functions very well, precluding disasters and disastrous price movements. So the demand for insurance is very low.

But now with these derivatives, all this selling of unreality, and nobody storing any damn thing, prices will lurch all over the place. Hence the addiction to derivatives feeds on itself. Derivatives are often used as insurance. But insurance itself would not be needed a great deal under capitalism.

This emphasizes that the only stable financial system is one that works most typically under a situation of growth-deflation. And it ought to be 100% multi-commodities. Without growth deflation we will be reliant on these thieves for all sorts of banking and insurance products.

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There is 1000 trillion in outstanding derivatives by some estimates. And almost no-one storing anything anymore. All the true and valuable speculators gone and replaced by these assclowns who can now steal off the public to the tune of hundreds of billions of dollars.

WHAT TO DO.

Get out of debt and stay there. Take delivery of anything you can whether it be share certificates, gold or silver. And if anyone figures out a good way to store a lot of diesel and other stuff then that is worth thinking about. Because these crony-communists have taken away our price system in an orgy of stealing. And prices of these absolutely necessary producer-goods will continue to lurch in the way that they have been doing but worse.

There is simply nothing for it but to take all these assholes down and make them settle. Make them settle up on all their shares, all their gold, all their outstanding sales that are not backed up with any damn thing.

Alternatively we could have a phase-out in all areas like we need to do with the banks. That means opening up all their books. Forcing them to increase their “reserve asset ratio” of whatever it is they have been selling, and phase it all out that way.

By the way there is more than one Paulson involved in this sort of stuff. Cambria was singing the praises of this fellow called John Paulson who had gotten a team of people to figure out a roundabout way of selling these mortgage securities short. It was the biggest successful trade ever. It wasn’t even particularly clever. So all these people involved are rolling in money. Each and everyone that gained from that trade is a welfare recipient. Since if it wasn’t for the other Paulson bailout the whole lot of the people, providing the other side of this trade, would have gone broke and the “successful traders” would be lining up for cents on the dollar like everyone else.

Its not clever. They are not big heros either of these Paulsons. They are just welfare recipients and thieves and they ought to be thought of as such.

WHAT SHOULD OUR GOVERNMENT DO?

Well we can stop subsidising our own banks. We can put the discount rate up sky-high and use exclusively debt retirement to boost money supply.  We can establish a reserve asset ratio and phase out that sort of fractional reserve. We can make our own brokers settle or alternatively force them to come to 100% backing of whatever shares they are selling. And make no mistake about it. Our guys will be breaking the law relentlessly just like the Americans.

We can make warehousing of commodities that are normally traded on the stock exchange a tax-free industry so long as these guys always work on 100% backing.

Like for example, with all the expected lurching in prices it would be useful to have someone store gasoline, diesel and other things, and lend it out at high interest (in terms of the commodity rather than in terms of cash) when shortages or price surges come as they inevitably will.

So supposing you lend all these dealers a lot of diesel and gasoline when they are struggling to supply the public. They will want to borrow it since the prices will be very high at that time. When the prices come down they might then have to pay you back with interest in terms of resupplying your stash. Now maybe this sort of thing is or isn’t doable. But it would be a good way of keeping us immune from the corrupted finance market if the government made this sort of activity tax-free.

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Responses

  1. You know jack about this subject. You know nothing about this. And the mainstream economists have all be made fools of by this crisis.

  2. “Adrienswords Says:
    October 12th, 2008 at 1:22 pm
    Crisis? What crisis?.
    .
    And yes it’s all FDR’s fault. The fact that the last 30 years has seen deregulation and a roll-back of almost everything the guy did doesn’t mean anything. It’s all FDR’s fault. The fact that all these Friedmanites turned Keynsian overnight has nothing to do with it. Re-writing history to suit ourselves? No. That’s what commies do. We don’t do that.
    .
    HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA
    .
    How ’bout this for an explanation: ye cannae spend money ye dinnae’ve laddie. It’s called arithmetic.”

    Adrien this is bullshit. Not because you are more wrong then you opponents. But because you have accepted the bullshit terminology. THERE WAS NO DEREGULATION EVER. There was merely the strengthening of special bank priviledges and an increase in their functioinal subsidy. By this I mean that their reserve asset ratio was taken away. We would not be allowed to do what banks are allowed to. Which is for us fraud.. And even if we were allowed we would never get away with it because we do not enjoy the subsidies that banks enjoy as well as their protectionist regulation.

    So your story is back to front. Because your dumbass opponents have their story back to front also.

    The crisis was caused by fractional reserve banking. Just the same as all banking crises and obviously so.

    And their are now continual crises looming thanks to the subteranean half of the derivatives scandal and the reduced REAL societal insurance that is implied when businesses hedge WITHOUT real goods being stored. In the real world only the storage of real goods can imply generalised whole-of-society insurance. And when commodity-based money is the only money and commodity-based money is 100% backed then the building of cash balances is the storage of real goods.

    From an individual firms point of view buying derivatives might be the cheaper way to go. But from a societal point of view derivatives are toxic. Ten times the value of earths assets in derivatives cannot help us. In fact their prescence will cause continuing crises.

    Yet one hundredth of that figure in real stored goods would do the job.

    Derivatives would be a very small part of 100% backing growth deflation.
    .

  3. They would barely exist. Because they are there in the 100’s of trillions of dollars because of subteranean fractional reserve. I shit you not. Thats why they have taken off. Thats why its a pandemic. And thats why we will get enourmous instability in the price of goods which have these derivatives attached to them. Shares, oil, gold, silver, anything with derivatives attached to them will find themselves under enourmous surges and crashes in price. Because they are the other side of the fractional reserve trade.

    It doesn’t matter how any trendy neoclassical dude has decided to explain this phenomenon. This is the reason why they stand at 1000 trillion and not 1 trillion.

    Growth deflation-100% backing would mean stable prices. Outlawing fractional reserve in all its forms would take away most of the rest of the reason for these products.

    One again we go back to the general principle of Milton Friedmans optimal supply of money. Optimal supply is approximately where the price level is falling such that the interest rate is imbedded in the currency. Under these conditions financial products are less necessary and cash balances are higher.

    And on top of that if cash balances are represented by stored goods it is high cash balances, and not derivatives, that become the fundamental personal and societal insurance.

  4. This is a serious problem you court-neoclassical economists have. You are in fucking awe of these millionaire welfare queens in the banks. You will do anything to justify their various subsidised scams.

    Look at !@#$%^&* Bernanke. There he is in his job. With his background. As soon as welfare-Queen Paulson shows up all his learning dissapears. And he becomes an appalling thief on behalf of the banks.

    I’ll bet his teenage self would be throwing up thinking about what this prick is up to now. Its just so sickening.

  5. A message I left with Reynolds at Ozrisk. Reynolds and Cambria went out of their way to mislead you Catallaxians.

    “12 October, 2008 at 3:48 pm
    Graeme Bird

    I’ve got a bone to pick with you Reynolds. You must have known that we are up to our eyeballs in naked shorts and counterfeit shares and you tried to pretend that it isn’t happening.

    And notice how you and Cambria tried to handle this absolute criminal behaviour. You tried a two-way strategy, both of you. of claiming that it wasn’t happening and that it would be fine if it was.

    Obviously you are up to your eyeballs in it. Since its obvious criminal behaviour.

    Now the government has to release cash as they increase the reserve asset ratio. They could kill two birds with one stone, use the cash to help settle and bankrupt all the naked artists. To get settlement for innocent superannuation clients they would end up having to bid the shares right up. And thus reconstitute the superannuation portfolios and bankrupt every damn broker who is tarnished with this into the process.

    It would be a beautiful thing.

    Now don’t lie to me again and say that its not happening in this country. Because you are insulting my intelligence. And you went out of your way to mislead the Catallaxians.”

  6. Adrien this is bullshit. Not because you are more wrong then you opponents. But because you have accepted the bullshit terminology. THERE WAS NO DEREGULATION EVER.
    .
    Yeah. It’s always about what regs and for whom. I was just calling bullshit on CL’s inference that FDR’s responsible for this crash. I think the responsibility for crashes is pretty simple really:

    When you’re living on easy credit way beyond your means the bill will come in and you won’t be able to pay it. And if your creditors are likewise living beyond their means on easy credit and so (on to viscosity) the house o’ cards comes a tumblin’ down. – easy.
    .
    And again here for the LP crowd.
    .
    And finally back at Catallaxy:
    .
    I advocate less rules but more sensible ones and well-enforced; more simplicity, more transparency, an education reform that puts emphasis on politics and economics early so that dipshits won’t take out loans they can’t pay off. And a disentanglement between govt and commercial interests.
    .
    Not that I know what I’m talking about. 🙂

  7. Graeme asks the dudes who work the Policy Centres of Canberra: You are in fucking awe of these millionaire welfare queens in the banks. You will do anything to justify their various subsidised scams.
    .
    And they say: Well yeah. We’re professionals. 🙂

  8. “Yeah. It’s always about what regs and for whom.”

    Precisely. You are onto it.

    “And they say: Well yeah. We’re professionals.”

    Yeah thats their attitude. Its the unfortunate attitude that infects SOON as well.

    But in other areas I must ask you to think again. FDR did not cause the crash. But under fractional reserve gold crashes last about 18 months as we saw under Harding and Van Buren.

    What Hoover and FDR did was extend the crash into the depression. Its just what these assclowns are doing now. Although Bernanke at least knows not to try and push up wages. But the systemic corruption of Crony-town-financial in America today is light-years ahead of where they were in 1929.

    But you ought not gainsay CL on the issue of FDR’s mob prolonging the bad times. Because thats just a fact.

    Look we are in serious trouble now. Unbelievable. Unbelievable to see just how positive things were when Love Shack was a number one hit and how quickly things are falling to pieces now. I’m not just talking some stock-market crash. We are talking the near-total corruption of our American friends financial markets and that corruption spreading here. And in America at least the spreading of that same corruption into the workings of government. I’m certainly not bashing Bush here either. Who is merely a dupe in this matter. And I still think he was a very good President in his first two years.

  9. Check this out Adrien. You not being yet totally committed one way or another:

    Truly awesome. And so long ago.

  10. But you ought not gainsay CL on the issue of FDR’s mob prolonging the bad times. Because thats just a fact.
    .
    I didn’t. I just don’t think it’s fair to blame a prez that’s been dead for 50 years plus. CL’ll do anything to get the Republicans out of blame. The Dems and the Reps are the same margarine in different coloured tubs.

  11. Right. Well I haven’t surveyed the argument seriously.

    Fractional reserve has a logic about it that just corrupts. So its not anyone that you can blame it on except those that over the years who have argued to its favour. Think about the gold dealer selling hot air except when he has to deliver. He will undercut any honest dealer and hence if the practice is not stopped early on it will corrupt all dealers or send them out of the business. And now with derivatives its just gone and spread.

    Even our own Perth Mint is affected. Even if they are clean. Since they won’t be selling at a market clearing price. Which means they are buying into the false fractional reserve price. If we want to capture financial markets our regulations must demand that they charge at a higher enough price for same day sendoff. They must not be allowed to compete with the phoney price.

    For this to be a reality we would likely have to wave income tax for everyone working there for the next 15 years. That is to say for anyone providing stored commodities. And dealing in commodities backed at 100%.

  12. See the problem with what Kevvy and others are talking about, and what all the other blokes are being skewed towards……

    ….is bailing out the financial system. This is the totally wrong approach.

    WE HAVE TO BAIL OUT MAIN STREET.

    Its main street that has been hollowed out.

    Now we do need to do something with our banks and this does not include direct subsidy. Quite the contrary in fact. What we have is a banking system that is profitable (via value-robbing activities) but not solvent.

    We need to reverse this metric and make them incredibly solvent but unprofitable. And then we’ll see that shakeout that will make our financial system the strongest in the world.

    Now Kevvie is right. Things have been handled here better than most other places. But that isn’t saying much. And his plan is no good. I mean it might stop an uncontrolled bank crash. But the best plan involves a planned bank shakeout.

    You imagine your gold dealer whose practicing fractional reserve and can only deliver gold on a 3 month waiting list for purchases of $50 000 and over.

    You either want to bankrupt the industry outright. Or alternatively you want to provide cash go force these guys back into settlement and from then on in into strict 100% backing. Well there is no real difference to the solution here.

    There is a difference between my message now and that of two years ago. Two years ago I was arguing that we cannot move to a better, more just society, without getting rid of fractional reserve.

    Now I’m saying we have to defeat fractional reserve in all its forms merely to survive. Because there has been a massive light-speed speeding up of the corrupting influence of this factor.

    The Australian market will recover and then flatten. It will recover to the teens of price-earnings in all likelihood. But thats not the problem. The problem is that the corrupting nature of fractional reserve appears to have gone from a decadal thing to something you can see year to year.

    Cambria for example has been corrupted by it in just the last two years. He wouldn’t have been so corrupt as to call for a banking bailout two years ago and this wasn’t his position.

  13. “you don’t think derivatives would exist without fractional reserve you idiot? would you ban them if they did?”

    Why would you need to ban them? If the Americans hadn’t put themselves in bondage to the banks every last one of these guys would have gone bankrupt. Not a single bank would have stood up to the collapse. So there would not be any derivatives providers. This is a welfare queen industry.

    You are the idiot mate and your idiocy comes from not admitting when you are wrong.

    There would be some derivatives under capitalism. But they would be minimal. We just wouldn’t have the price swings with a great many stored goods and all money backed 100% by stored goods.

  14. Here’s a little bit about what we are talking about Philomena. I had other threads explaining the concept of phantom supply and just how damaging it is. But the threads can be hard to find.

    Here is the nub of what must be understood:

    “No the airline will just buy some options to purchase this fuel instead. Hence when the fuel price goes up and they use their options they are HURTING THE REST OF THE MARKET. Since they get the fuel cheap and everyone else has to get their fuel at a more expensive price than they would have if that company hadn’t bought the options….”

  15. ” …..In short, Bird wants to ban derivatives……”

    An interesting interpretation. I think I said that they ought to come under gaming. But yes, technically speaking they are always harmful from the point of view of society taken as a whole. So if somewhere I said I wanted them banned, thats acceptable. Thats with my economist hat on and not speaking as a libertarian. The market banned them outright in 2008. All the derivatives providers were set to go down within weeks of the GFC outbreak. The market has spoken.

    ” ……… Think of the poor farmers or importer/exporters folks….. ”

    Thats Mark Hill speaking. His incapacity to understand economic concepts is near total. And we’ve been over this before. Farmers and exporters did better prior to these derivatives and for good reason. Since derivatives can help the indebted farmers and exporters hedge their risk. But they do so at the expense of those who don’t buy the derivatives. As explained in the thread. In the case of farmers and exporters derivatives act as a form of insurance. Under growth-deflation 100% backing, farmers and exporters carry low debts, and high cash balances and need little insurance. Here I can be so bold as to recommend John Quiggins latest book. And also I’d advise people to look at what some of the smarter Keynesians have been saying about F.I.R.E economies.

  16. Moderated elsewhere:

    Your comment is awaiting moderation.
    “……The reasons can be found in almost any macro textbook. In short, low positive inflation creates greater certainty with regards to the real value of assets….”

    This is crazy-talk. The macro textbooks you are reading are clearly the wrong ones. Also you may have to be reminded that when you say “inflation” you mean “consumer price inflation” The spending on consumer prices is a small amount of spending in the economy entire.

    I must point out here that gross spending and gross business revenues far exceed gross domestic product (ironically a highly “netted” figure). So to take consumer goods spending, or consumer goods prices, and to lock a low inflation rate in this tiny subset of spending ……. is to send asset prices haywire. To do this is also to send business revenues haywire and therefore to complicate business decision-making.

    Hiring new people becomes hopelessly hazardous under such a regime. And a situation where hiring is hazardous works out to be a situation where the employee has less negotiating power vis a vis the corporations taken as a whole.

    When you arbitrarily try to freeze any small metric into a pre-ordained flight-path, you are creating destabilization. Just like if you had frozen a kids legs when he was trying to balance on his chair down the back of the class. To try and constrain consumer prices in this way doesn’t just risk destabilizing asset prices. It totally guarantees such destabilization.

    How can you even make this claim when the Americans have experienced two massive bubbles (the tech bubble, and the real estate bubble) under conditions of constant low consumer price inflation?

    We have more precedents. The roaring twenties in the US were a time of low consumer price inflation. Asset prices soared and then busted. Lets have that retraction.

  17. Graeme Bird :
    24 May 2011 4:19:03pm

    There is this absolute lie going around that the data shows that you have a positive feedback effect with the Malinkovitch cycles …. and CO2 is the culprit.

    Yes there are positive feedbacks, but no evidence that CO2 is involved. Quite the contrary. The two graphs (temperature versus CO2) make it look like CO2 makes for a negative feedback. Now I cannot show causality. But it certainly LOOKS like a negative feedback.

    There is a correlation between when CO2 goes up, the temperature is going to fall some time later. It doesn’t look like a positive feedback on the relevant time scale between the two metrics. It LOOKS like just the opposite.

    What I’m saying here is that Geoff has assumed this positive feedback narrative. He’s just assumed it. He cannot show it. He simply takes it as given.

    But he doesn’t have the data. He does not have the evidence. He cannot make that case. Its easier to make the opposite case with CO2 as a cooler, if all you are going on is the ice core data.

    Now we have to make this clear. Because Geoff is in error on this point. Mark Harrigan is in error on this point. Paul W is in error on this point. And they are not going to come through with the goods.

    Reply Alert moderator

  18. Graeme, Bob Gould, socialist agitator el supremo died last Sunday aged 74 at work in his famous King Street, Newtown bookshop.

    When I first came to Sydney as a booklover I of course used to visit his city bookshops at their various locations. In those early years l found him rather terrifying in a non-threatening way, if you know what I mean and avoided engaging with him. Later, I came to know him and felt no qualms in debating him, one-on-one.

    Bob was a force of nature, a communicator extraordinaire especially in writing, or perhaps, best in writing, and he pissed of as many people on the left as he did on the right, among whom he had many friends and respectful acquaintances.

    He was stubborn and passionate and brave and singleminded about his ideas and goals. He was anti-Stalinist, anti-bureaucratic and genuinely libertarian to his core. He was not all that keen on a lot of feminist politics and he was a climate change skeptic.

    He was a lot like you, in many ways.

    http://ozleft.wordpress.com/2011/05/25/when-an-old-person-dies-a-library-is-lost/

  19. If he was against the global warming fraud he was probably okay. No-one is skeptical of climate change. The climate always changes.

  20. Well, I think he was wrong about that. But then he was an old style, older generation industrial socialist and labour movement activist many of whom had little interest in environmental protection or conservation matters. And the history of actually existing socialism – such as it was genuinely socialist at al – with its emphasis on growing the economy and forced march industrialisation, in practice often left little room for such concerns.

    Bob – like you – also still very much supported the idea of big infrastructural projects aimed at fertilising and thus populating the inland and desert regions of Australia with diverted water systems, irrigation and dams as the necessary precursor to large scale industrial plants, jobs, homes, communities.

    • “Well, I think he was wrong about that. ”

      He wasn’t. Its a straight scientific matter and it betrays no lack of concern for the environment. Quite the contrary. High CO2 levels are what we need for an environmental restoration.

      • Bird, what is the CO2 levels in the interstices in Phobos? Note that Phobos isn’t hollow, it is porous,

        PHOBOS IS HOLLOW NOT POROUS. IT WAS ASSUMED TO BE POROUS SIMPLY BECAUSE THEY WERE IN DENIAL THAT IT WAS HOLLOW with the size of the interstices being about 1 mm. TOTAL BULLSHIT AND ALSO IMPOSSIBLE. GIVE ME SOMETHING FACTUAL TO WORK WITH. PHOBOS HAS BEEN PROVEN TO BE HOLLOW. BUT WHATS INTERESTING IS THE TANGLE THAT THE TAXEATERS WENT INTO TO PRETEND THAT THIS WAS NOT SO. THIS POROUS FANTASY BEING ONE SUCH TANGLE. THEY WANTED TO MAKE IT OUT TO BE AKIN TO A SPECIAL FORM OF PUMICE.

      • OUT WITH IT. WHERE IS THIS POROUS JIVE-TALK COMING FROM?

      • I’ll just mention something tangential for now. Did you know that mining companies do gravity flyovers to give them a clue of what metal ores may be in the ground below. Its by no means a difficult thing to find out if a body is hollow with that sort of precision. Anyone honest, doing a flyby with a probe would be able to sort it out completely. NASA is not that outfit.

      • Where are you getting the idea that Phobos is hollow?

        IT WAS APPARENT FROM THE START. BUT DEFINITIVE CONFIRMATION HAS ALREADY BEEN HAD FROM THE EUROPEAN SPACE PROGRAM. THE REALITY WAS RESISTED FROM NASA. BECAUSE THEY DON’T WANT TO FACT FACTS.

  21. Graeme Bird :
    25 May 2011 4:54:34am
    “But manufacturing and many service industries will wither.”

    This may be okay as prophecy. But the reality is that these industries are withering through bad policy. You may not have gotten the picture that both Ben and Martin want these industries to wither. Believe it. This error in their thinking is bipartisan in Australian economics.

    Did Chinese mining wither when its manufacturing took off? No it didn’t. Neither has its food production. All such sectors, arbitrarily divided for analysis, have boomed.

    What we are looking at is bad economics from Martin and Ben. We want to get these people out of the way, and find people who can do the job. So that output can increase across the board.

    Reply Alert moderator

    Graeme Bird :
    25 May 2011 4:37:37am
    The Australian dollar does not need to climb when we are running such persistent trade deficits. Our dollar has been over-valued virtually the entire time since it was floated. We can export a lot of minerals and at the same time expand our other export businesses. Its called “paying off your debts” and there isn’t the technical reason that we cannot do it as Ben is implying. Ben, like treasury. is trying to tell you that we need to lose our other exporters, since we have this mining boom. This is not the case. There is this erroneous view of comparative advantage going around, in direct contradiction to the actual comparative advantage concept as explained by Ricardo.

    Treasury thinks that we don’t need our manufacturing. Ben hasn’t spelt out this irrational belief as brazenly as he might have. But thats really what he’s driving at. He’s fallen for the Treasury anti-economics.

    Reply Alert moderator

    Graeme Bird :
    25 May 2011 4:31:18am
    “In the meantime, prices for many essential goods, like electricity and food, are rising. Australians may indeed be better off, but as any backbencher knows, they don’t feel better off.”

    They are not better off. They feel squeezed because they are squeezed. Per capita GDP isn’t the metric to use. Here’s why:

    GDP equals C+I+G+X-M

    Note that G is what the taxpayer pays for. We pay for lavishly cocooned taxeaters like Ben who tries to project the reality of his own cosseted existence onto the next taxeater.

    We pay for G. So when G gets bigger we are squeezed. G goes up our living standards go down. So a better measure of how we are doing is GDP-2G divided by the number of taxpayers. Now this is just one metric and we don’t want to fall for the cult of the one best metric, as Ben has done, coming to his wrong conclusion. We would be shown to be even more brutally squeezed if we treated the financial sector as just more taxeaters, and changed the inflation rate to reflect house and rent prices. We would be shown to be yet more downtrodden if inflation rates were more realistically calculated, better taking into account medical and educational costs and so forth.

    But thats alright. Ignorance is bliss for the taxeater. And Clive Hamilton will tell us that our great riches have not brought us happiness and so we ought to be squeezed more.

    Bens perspective is easy to understand. Ben wants more taxpayers. Because he’s a taxeater. Not hard to understand his concern for the bigshots in the mining industry having to pay high wages.

    Reply Alert moderator

  22. Graeme Bird :
    25 May 2011 4:47:53am
    Gruen is one of the loony-tunes who buys into the erroneous Keynesian multiplier delusion. Here is Gruen talking about himself:

    “The classic example is Keynesian management of the cycle. Following the advice of its bureaucrats, the ALP government managed one of the most successful fiscal stimuluses in the world from late 2008”

    That was his advise. Following hard upon the heels of the lunatic Henry Paulson. This man has done grave damage to our economy. He helped the ALP blow our resources on rubbish, which hurt our economy at the time, threw many thousands of people out of work, and now he calls it a success. Why does he do so? Other than flat learning curves?

    Because he measures success by C+I+G+X-M. The metric is wrong. We pay for G and it hurts us to do so. But he includes G as part of GDP. Also Gross Domestic Product is a misnomer. Its a highly netted figure. These dummies took spending away from areas that are not included in GDP and diverted spending to areas included in GDP.

    When are we going to fire these ignorant know-nothings? He believes in the Keynesian multiplier. But he cannot prove it exists, and no-one ever has.

    Reply Alert moderator

  23. Graeme, too much CO2 and we asphyxiate.

    OTOH at a lesser, temporary individual level, the buildup of CO2 in a breathing organism such as ours can cause feelings of trancendentalism leading to creative expression of the first order.

    For example, John Coltrane’s use of of overblowing techniques (in which air is blown so forcefully that his saxophone shrieks) facilitated the buildup of CO2 in his body which some claim enable him to produce works of art like this and which he claimed were experienced in the making by him as visionary.

  24. “Whenever someone breathes out more than he breathes in the concentration of carbon dioxide in the alveolar air and the blood is increased and, the efficiency of the cerebral reducing valve being lowered, visionary or mystical experience becomes possible. Hence the interminable ‘vain repetitions’of magic and religion. The chanting of the curandero, the medicine man, the shaman; the endless psalm singing and sutra intoning of Christian and Buddhist monks; the shouting and howling, hour after hour, of revivalists – under all the diversities of theological belief and aesthetic convention, the psychochemico- physiological intention remains constant. To increase the concentration of CO2 in the lungs and blood and so to lower the efficiency of the cerebral reducing valve, until it admits biologically useless material from the Mind at Large”.

    Aldous Huxley – Doors of Perception

  25. THE EUROPEAN SPACE PROGRAM CAME THROUGH WITH THE CONFIRMATION DOPEY. BUT IN REALITY NO SERIOUS OPPOSING VIEW EVER AROSE.

  26. We weren’t waiting on the European Space Agency for confirmation. No serious evidence ever existed for an alternative hypothesis. I don’t do free web searches for idiots. You find it.

  27. Those dirty Nasa bastards.

    DAMN STRAIGHT RON. NASA ARE DIRTY DIRTY BASTARDS ALRIGHT. WE HUMANS HAVE SPACE AS OUR BIRTH-RIGHT. AND NASA’S INSTITUTIONAL FUNCTION IS TO DENY US OUR RIGHTEOUS DESTINY.

  28. “Mars’ Moon Phobos has been analyzed as being one-third hollow according to European Space Agency reports, which has triggered some wild and utterly fascinating rumors and speculation that we’ve featured below.”

    http://www.dailygalaxy.com/my_weblog/2010/05/you-couldnt-make-this-up-european-space-agency-rumors-mars-moon-phobos-is-an-artificial-satellite.html

    The hollowness of Phobos has been apparent since the 1950’s. But its good to get the total comfirmation. And what this means is that we have used Phobos before for energy generation, and for access to Mars.

    • Graeme, I had a look at the site you linked, dailygalaxy.com, the following is an excerpt from it.

      “From “The Phobos Blog” — published on March 25th: General , Science 25 March, 2010 17:21

      Radio science result from 2008 Phobos Flyby now accepted for publication:

      We report independent results from two subgroups of the Mars Express Radio Science (MaRS) team who independently analyzed Mars Express (MEX) radio tracking data for the purpose of determining consistently the gravitational attraction of the moon Phobos on the MEX spacecraft, and hence the mass of Phobos. We conclude that the interior of Phobos likely contains large voids. When applied to various hypotheses bearing on the origin of Phobos, these results are inconsistent with the proposition that Phobos is a captured asteroid.”

      Now that bit is partly from the ESA, but some bits were missing, notably this:

      “New values for the gravitational parameter (GM=0.7127 ± 0.0021 x 10-³ km³/s²) and density of Phobos (1876 ± 20 kg/m³) provide meaningful new constraints on the corresponding range of the body’s porosity (30% ± 5%), provide a basis for improved interpretation of the internal structure.”

      You can check for yourself at ESA’s offical site: http://webservices.esa.int/blog/post/7/1085

      I wonder why that bit was missed? In addition, as ESA said, “We conclude that the interior of Phobos likely contains large voids.” “Likely” is not proof.

      At the bottom of the dailygalaxy.com article it says this: Source: http://www.enterprisemission.com/Phobos.html

      Enterprisemission.com is run by Richard C Hoagland! Remember I asked you if you got your information from the likes of David Icke or Richard Hoagland? I was right.

      Did you also notice that this information is based on the 2008 flyby? Well there’s been a 2010 flyby since then.

      From ESA’s official site regarding the 2010 flyby: http://webservices.esa.int/blog/post/7/1090

      “Results will be discussed amongst the team members, and at a Science Working Team meeting to be held in June, between all the Mars Express experiment teams. This is going to be exciting. Then, it is planned to share the results and their interpretations with the scientific community at two major events: the European Planetary Science Congress (Rome, September) and a workshop at IKI, Moscow, in October, on the Phobos-Grunt mission.”

      I looked up the proceedings from the 2010 European Planetary Science Congress and found the following: http://www.europlanet-eu.org/outreach/index.php?option=com_content&task=view&id=304&Itemid=41

      “We obtained the best measurement of its mass to date, with a precision of 0.3%”, relates Dr. Rosenblatt (Team Leader). Phobos’s volume past estimations were also improved thanks to the cameras onboard MEx. The MaRS team was thus able to derive the best-ever estimate of Phobos’ density as 1.86±0.02 g/cm3. “This number is significantly lower than the density of meteoritic material associated with asteroids. It implies a sponge-like structure with voids making up 25-45% in Phobos’ interior”, says Dr. Rosenblatt. “High porosity is required in order to absorb the energy of the large impact that generated Stickney crater without destroying the body”, confirms Dr. Giuranna. “In addition a highly porous interior of Phobos, as proposed by the MaRS team, supports the re-accretion formation scenarios”.

      Nowhere do ESA state the size of the voids. Nowhere has ESA stated that Phobos is hollow. There has been no total confirmation whatsoever by ESA that Phobos is hollow in the way you are purporting it be.

    • Hmm, not very sporting of you Birdie, trying to block my response to you.

      I’ll try posting it again:

      Graeme, I had a look at the site you linked, dailygalaxy.com, the following is an excerpt from it.

      “From “The Phobos Blog” — published on March 25th: General , Science 25 March, 2010 17:21

      Radio science result from 2008 Phobos Flyby now accepted for publication:

      We report independent results from two subgroups of the Mars Express Radio Science (MaRS) team who independently analyzed Mars Express (MEX) radio tracking data for the purpose of determining consistently the gravitational attraction of the moon Phobos on the MEX spacecraft, and hence the mass of Phobos. We conclude that the interior of Phobos likely contains large voids. When applied to various hypotheses bearing on the origin of Phobos, these results are inconsistent with the proposition that Phobos is a captured asteroid.”

      NO SORRY THERE IS NO EVIDENCE FOR POROSITY IN PHOBOS. THEY ARE SIMPLY REINTERPRETING THE DATA WHICH SHOWS PHOBOS IS HOLLOW AND EXCLUDING THAT FACT, AND CLAIMING THAT IT LIGHTNESS AND HOLLOWNESS IS THE RESULT OF POROSITY. NASA LIES ABOUT EVERYTHING.

    • NO LYING ON THIS SITE.

    • I’ll try this again. From the site you linked, dailygalaxy.com, the following is an excerpt from it.

      “From “The Phobos Blog” — published on March 25th: General , Science 25 March, 2010 17:21

      Radio science result from 2008 Phobos Flyby now accepted for publication:

      We report independent results from two subgroups of the Mars Express Radio Science (MaRS) team who independently analyzed Mars Express (MEX) radio tracking data for the purpose of determining consistently the gravitational attraction of the moon Phobos on the MEX spacecraft, and hence the mass of Phobos. We conclude that the interior of Phobos likely contains large voids. When applied to various hypotheses bearing on the origin of Phobos, these results are inconsistent with the proposition that Phobos is a captured asteroid.”

      Now that bit is partly from the ESA, but some bits were missing, notably this:

      “New values for the gravitational parameter (GM=0.7127 ± 0.0021 x 10-³ km³/s²) and density of Phobos (1876 ± 20 kg/m³) provide meaningful new constraints on the corresponding range of the body’s porosity (30% ± 5%), provide a basis for improved interpretation of the internal structure.”

      You can check for yourself at ESA’s offical site: http://webservices.esa.int/blog/post/7/1085

      I wonder why that bit was missed? In addition, as ESA said, “We conclude that the interior of Phobos likely contains large voids.” “Likely” is not proof.

      At the bottom of the dailygalaxy.com article it says this: Source: http://www.enterprisemission.com/Phobos.html

      Enterprisemission.com is run by Richard C Hoagland! Remember I asked you if you got your information from the likes of David Icke or Richard Hoagland? I was right.

      Did you also notice that this information is based on the 2008 flyby? Well there’s been a 2010 flyby since then.

      From ESA’s official site regarding the 2010 flyby: http://webservices.esa.int/blog/post/7/1090

      “Results will be discussed amongst the team members, and at a Science Working Team meeting to be held in June, between all the Mars Express experiment teams. This is going to be exciting. Then, it is planned to share the results and their interpretations with the scientific community at two major events: the European Planetary Science Congress (Rome, September) and a workshop at IKI, Moscow, in October, on the Phobos-Grunt mission.”

      I looked up the proceedings from the 2010 European Planetary Science Congress and found the following: http://www.europlanet-eu.org/outreach/index.php?option=com_content&task=view&id=304&Itemid=41

      “We obtained the best measurement of its mass to date, with a precision of 0.3%”, relates Dr. Rosenblatt (Team Leader). Phobos’s volume past estimations were also improved thanks to the cameras onboard MEx. The MaRS team was thus able to derive the best-ever estimate of Phobos’ density as 1.86±0.02 g/cm3. “This number is significantly lower than the density of meteoritic material associated with asteroids. It implies a sponge-like structure with voids making up 25-45% in Phobos’ interior”, says Dr. Rosenblatt. “High porosity is required in order to absorb the energy of the large impact that generated Stickney crater without destroying the body”, confirms Dr. Giuranna. “In addition a highly porous interior of Phobos, as proposed by the MaRS team, supports the re-accretion formation scenarios”.

      Nowhere do ESA state the size of the voids. Nowhere has ESA stated that Phobos is hollow. There has been no total confirmation whatsoever by ESA that Phobos is hollow in the way you are purporting it be.

    • NO LYING ON THIS SITE IDIOT. TRY THIS ON AGAIN AND YOU ARE BANNED.

  29. Dirty CIA also.

  30. Graeme Bird :
    26 May 2011 4:43:00pm
    There are few people who understand the subject better than me and there is an excellent reason for that. The (non-literal) atmosphere was polluted, so that people of prominence were unable to ask questions without being pilloried for not already knowing the answer. Yet the logical solution to all this required integrating the basics in a wide variety of fields. I came in in about 2005 as someone who wasn’t worried about being proven wrong in every single aspect of this subject.

    Coming from an economics background was therefore no hindrance. It was a positive advantage. The subject is not about some technical gee-whiz proficiency in the field. The subject was about getting the best general knowledge over the full spectrum of the problem and just going over and over the logic of the case.

    Reply Alert moderator

  31. Graeme Bird :
    25 May 2011 8:53:56am
    Lets bring a bit of context here to show how far the taxeaters are from understanding climate. A few weeks ago I was told about the immense magnitudes of electrical energy which one could theoretically generate, using a very small surface area, with a Dyson-Harrop satelite.

    The Dyson-Harrop satellite, in these calculations, is to be placed above the ecliptic (above the path of the earths orbit). There would be somewhat less electrical energy if you had it placed closer and in earths path around the sun. But there is still a massive amount of electrical energy reaching the ionosphere.

    I calculated the amount of electrical energy (above the ecliptic) to be 4 to 5 orders of magnitude higher than the amount of light-energy available. But do correct me if you calculate differently.

    Now supposing you already knew this? And you were watching cyclone Yasi. And the commentator suggested that the power of Yasi was equivalent to a nuclear bomb going off every few seconds. Do you conclude that the cyclone is powered by:

    (a) tepid water
    (b) electrical energy making its way from the ionosphere downward.

    If you conclusion is (a) where is your tepid water energy generation plant?
    >>>>>>>>>>>>>>>>>>>>>>>>>>

    This is how backward the scientists we are presented with are. They assume the greenhouse ant is making all the noise in the midst of the electrical gorilla, busting up the restaurant, smashing chairs and tables, screaming his lungs out.

  32. Graeme Bird :
    26 May 2011 8:24:38pm
    Market socialism was a stupid idea to base an entire system around. But Market socialism is the perfect way to run our water resources. For every two litres of water a person recharges an aquifier with, when surface water is plentiful, he might rightly take out one litre when surface water is not. When the river is high, or its raining upstream, water ought to be free. But when a river drops past a certain point the price ought to go up and up.

    In general, when a government runs infrastructure it ought to do so on the basis of peak-time profiteering and non-peak-time give-away.

    Now the crony-banks will develop a market entirely differently. Fractional reserve banks create new money (bank-cash pyramiding) on the basis of SURE THINGS. Water is a sure thing. What the banks do is take a sure-thing and attach a large debt to it. That way they can conjure money out of thin air and take almost the total value of that sure thing off the community, while some bigshot takes ownership of the sure thing.

    Its a double-duty heist.

    An example was Queensland rail if you doubt what I’m saying. The banks will always leave an untenable market after all the contracts are signed. A crony market. There is no reforming the banks. We’ve seen enough. We don’t need to see any more.

    So Ian Douglas’ cause is of the utmost importance. The banks and the northern hemisphere bigshots seem to want to get in the position to be able to ration energy and water. Don’t let them do it, using a warped version of what constitutes capitalism, as their justification.

    We have a right to draw water from a river that isn’t running dry. Thats a god-given or at least a natural right. This must not be taken off us nor is it a thing that can be sold.

    Reply Alert moderator

  33. Graeme Bird :
    26 May 2011 5:18:46pm

    The main rivers ought to be publicly administered. You cannot sell what you don’t own. And you ought not appropriate what you cannot rightly homestead. Homesteading implying the vast improvement of what was available when you roped it off.

    Even if I’m wrong in some ultimate long-run sense, our current crony-capitalism isn’t up for the job. The banks will simply attach huge debt to anything good that is out there and see to it thereafter that the market is a rigged one.

    No privatisation of big water sources. Privatisation of big water sources is sin. You cannot deny a mans right to draw water when the river is high.

    Reply Alert moderator

  34. Perhaps the most challenging thing in my home state is the insurmountable monolith of government regulation and policy that’s forcing so many Tasmanian farming families off their land.

    Tasmanian farmers face a short-sighted trade agenda that fails to balance social and environmental concerns with dollars and demand.

    So-called competition policy forces down farm-gate prices and slams the door on competition beyond the supermarket giants.

    Woeful tax policy allows mines and plantations to swallow up prime agricultural land while government plans to address climate change and water supply remain a great unknown.

    It is a tragedy on an island so famed for high quality food, that it’s becoming so difficult to make a decent living from farming in Tasmania.

    A number of solutions are available of course, but our governments appear only interested in taking the easiest path by addressing food supply and cheaper food for consumers rather than a state-based food industry. This has led to increased food imports at a state and national level.

    It’s worth remembering that agriculture was built on the notion of self-sustaining civilisations. Agriculture is at its strongest when it supports local people and communities and exports the surplus.

    Instead, the industry’s strength is now judged on its ability to export regardless of the individual producer’s welfare or the social and environmental implications.

    This is unsustainable for farming families.

    We should question the notion of prosperity when a good farming year now begins with a bumper crop that sells for peanuts to foreign-owned processors or the ever-powerful supermarket duopoly.

    It seems in our desperate need to form strong trade links we have forgotten the people who are the roots of our food export industry, worth over $500 million a year to the Tasmanian economy.

    How then do we reconnect the health of our farmers with the health of the agricultural industry, and ultimately the health of those who enjoy its produce?
    Part of the solution lies with governments and recognising the vital role of farmers.

    It’s a simple equation: feed the roots of agriculture and the rest will grow; but it’s a concept the government struggles to grasp. It seems Canberra will help farmers facing drought, flood or disaster, but will not make laws to allow them to make a decent living.

    Over the coming year we will launch our food and farmers campaign, which will include policies based on years of working closely with Tasmania’s farming and rural communities. We will start a major push for fair play within the food production industry.

    The campaign will cover making farming an accessible and prosperous career for young Tasmanians, highlight the margins creamed off from the farm gate to the plate and put a major focus on food labelling to give consumers more information about their food.

    In particular, I will look at climate change mitigation, biosecurity, unfair tax policies, land access, water and markets as well as trade – the backbone of a comprehensive food security plan.

    It was good to see the federal government getting on board last year with the first steps towards its own food security plan. But although I look forward to exchanging ideas with the agriculture minister, I’m not sure the government understands that food security is more than cheap food regardless of its origin.

    A long-term farming future drives our food security plan because despite surviving 200 years, often in the face of extreme elements, Australian agriculture is suffering undue stress in a world of climate change and increased productivity demands but without corresponding investment in research and development.

    Government insensitivity is the latest element with which producers must contend. It may lack the ability to crush like a flood or cyclone, but the federal government’s outlook on farming is slowly pushing farming families into submission.

    It’s up to us – with our food security plan, support for local producers and vigilance over the nutrients in cheap imports – to keep farming families on the land.

    • Thats all good Christine. But we don’t need to have trade barriers to promote thousands of family farms. A combination of a tax exemption for primary production, plus a land tax with a threshold that hits the big agri-business, but leaves room for the family farm is where its at. This will create higher and not lower farm productivity, since the incentive will be to highly capitalize the land you have rather than acquire a larger farm. So we will wind up with more capital investment per acre.

  35. And when primary producers are agribusiness, what then?

    The dark horses and conservative spin masters that are so fixated on boat people and border security should be looking at all this and related issues from a serious strategic perspective.

    One of the main issues raised by politicians in the recent debate over immigration and population densities is the usual distribution problem. Everybody comes to live in the cities. No body goes to the rural or regional areas (where food is also traditionally grown). The reason for this is really quiet simple.

    Immigration rarely allows anybody without skills suited to professional city life to come and stay in Australia. It seems to me that it would make sense to allow for a larger number of poor, land use skilled migrants to enter Australia and offer permanacy based on location into rural or regional areas and upskilling as TAFE trained agricultural workers and small business people.

    The northern parts of Australia have an as yet untapped potential for smaller scale tax-free intensive farming projects, working on the fringes of high taxed existing mega properties.

    The southern parts of rural Australia have a desperate need for not only fiscal investment but also cost effective static labor and seasonal labor to maintain, develop and expand intensive interests.

    Allowing international interests the scope to develop remote regions for agriculture whilst retaining national ownership of the business, allowing immigrants with a predisposition for agrarian lifestyles and investing in their futures as clever farming Australians would make more sense than living in fear of boat people and starving refugees.

    Rural towns and centres would benefit from an influx of smaller agricultural business projects, regional dynamism would increase and development of areas which have been laying fallow for years would begin again.

    Skills and knowledge that these new Australians develop then become an exportable resource, helping to improve conditions elsewhere, in less developed parts of the world. (Where many of us were escaping from, to come here.)

    Mining is not the only industry available to remote Australia.

    Immigration has an enormous power to manipulate who it allows in to Australia and it can dictate where people are to reside. Along with professionals like IT and business school graduates or students, doctors or engineers, who automatically go to where the work and schools are, in the cities, we could be looking to program for regional and remote development via humane and forward thinking immigration programs and policies.

  36. “And when primary producers are agribusiness, what then?”

    Thats what you avoid with my twin-pronged approach. Corporations need not apply for a threshold for the land tax.

  37. Friday 27 May 2011 – Hansard

    TRIBUTE TO ROBERT (BOB) GOULD

    Mr JOHN ROBERTSON (Blacktown?Leader of the Opposition) [10.00 a.m.] by leave: I acknowledge also the students in the public gallery from St Andrews Primary School at Marayong. On behalf of the Opposition I acknowledge the passing of Bob Gould; a great contributor to this city’s intellectual and political capital over many decades, who died suddenly on 22 May 2011. This House is a place of robust debate and differing· views. We often find ourselves in agreement on matters but more often in disagreement?sometimes quite passionate and heated disagreement. But regardless of which point on the political spectrum we come from I think we all agree that all points are needed. We agree that diverse views, contrary views, majority and minority views are all equally important contributors to the healthy and robust debate that underpins our democracy. We should never silence in this place the dissenting view but rather allow it to have its voice. There would not be one member of this House who can say that he or she has not experienced moments of being in the minority and yet was afforded the respect and right to state his or her case.

    Bob Gould was far more than the proprietor of the business that bears his name; he was also a great contributor to keeping this principle front and centre in the life of this city. This contribution was partly the result of the shear wealth of knowledge, opinion and thinking that could be found in his various businesses over the years. His collection of political works in particular was legendary, featuring innumerable out of print titles and second hand books. These allowed those with an inquiring mind access to the views of those before them and, in the process, access to a type of wisdom to inform the debates of their day. Significantly though, these inquiring minds needed to be both persistent and tenacious. Gould’s store did not reward those looking for a sound bite or a quick and easy answer to complex issues. Because of its deliberately unchartered layout, although all the answers were there, if one wanted answers in Gould’s store, one would have to seek them out. At any given time no-one, not even Bob himself, could say for certain what was or was not in stock. It was, and still is, up to the customers to come and see for themselves.

    The great benefit for those who pursued this challenge was that they not only found the opinion they sought but they also found the opinions of many others along the way, thus their understanding of the issue in question was greatly enhanced. It was a place that highlighted the difference between being knowledgeable and considered, versus simply being quick and clever. Reflecting on that point might give each of us a moment to pause in this age where all members of this place are increasingly encouraged to react rather than to consider. Beyond the walls of his various book shops Bob was a legendary contributor to political debate in Sydney for over four decades. He was a pioneer in the Vietnam anti-war movement. He was one of the three people who pursued and tackled the man who tried to assassinate Labor leader Arthur Calwell at an anti-conscription rally in Mosman. He was also a leading voice opposing censorship of the day, openly selling the then-banned work Portnoy’s Complaint. For all this he was rewarded with numerous raids on his shops and great suspicion and surveillance from the authorities of the day. As former President Meredith Burgmann once remarked, Bob Gould’s ASIO file was fatter than hers. I am sure she meant that as a compliment to Bob.

    Bob remained an active and vocal member of the Labor Party and an active contributor to debate on issues of public censorship, public policy and refugees up until his passing. I cannot remember a Labor conference without Bob Gould being there. He would set up a shop in the foyer of the Sydney Town Hall and allow us all to work our way through his pile of works to find something to read and occupy ourselves with for two or three days. Although we use this place to determine the view of the majority, we do so always respecting that there is no one right way of seeing any issue. We should do so always with a sense of history, which tells us that those in the minority at one point often prove to be the majority over time. Although Bob has left us, his legacy continues and, as I am sure he would have wanted, his family are keeping his store open. I encourage all members to pay a visit to Gould’s bookshop at Newtown. I encourage all members to spend an hour trying to find that book they have long lost or an old work they have been meaning to track down. But most of all I encourage members to browse the numerous other works along the way, the numerous competing points of view that lie stacked in Bob’s store, and to marvel at the diversity of opinion that makes our system of government such a great thing to defend.

    Mr BRAD HAZZARD (Wakehurst?Minister for Planning and Infrastructure, and Minister Assisting the Premier on Infrastructure NSW) [10.07 a.m.]: On behalf of the Liberal-Nationals Government I acknowledge the sad passing of Robert Gould. Setting aside Mr Gould’s particular political proclivity, he was certainly in the vanguard of those who supported free speech. Those aware of Mr Gould’s history would appreciate that he played a pivotal role in pushing the boundaries to ensure the opportunity for free speech and that the issues relating to refugees, censorship and public policy were out in the public arena. I understand from those who have a little better memory than I have that his first bookshop was located near Chinatown, in the old Gould’s Book Arcade. I join with the Leader of the Opposition in extending condolences to his family and all those who found him to be an integral part of their lives over many years.

    Irrespective of our political views, it is a sad day for New South Wales when giants of men who have contributed so much to public policy pass on. I congratulate the Opposition for drawing this matter to the attention of the House. On this occasion, the Government and the Opposition are as one.

  38. Imagine you have about 20 acres of fairly marginal hill country, access to heaps of waste wood, and rubbish, wood gasifiers and a really powerful public domain tractor that doesn’t break down.

    So you work another job and pile all of your spare funds and time improving that land. You keep plowing in the charcoal and weeds into the soil. You landscape it so its flat and going down step-fashion, like land that has grown rice for a thousand years. On the flat near the edge you put pyramid, or geodesic dome greenhouses. Your power comes from the wood gasifiers and you send the waste CO2 into your greenhouses.

    You put up a great many more water tanks so you can draw from the stream, only when its raining. You go so far as to tunnel straight into the side of the hill to set up working space …….. and on and on and on.

    It is possible to invest a great more effort per acre of land. But the fractional reserve system, and our tax system does not encourage this. The land is expensive and yet the budding farmer is incentivized to buy more land then he can develop to any serious degree. If he makes a profit he is taxed, so he tends to live on the edge and its only a matter of time until he goes under and sells out to the big agri-business. We want to reverse all that. We want to have people proud of developing just 10 acres of land. Fully developing ten acres, and not having to pay a cent of tax on anything he sells from it.

    Or 50 acres. Or more, but the tendency ought to be more intensive development. Not by absolutist prescription. But just by having a different slant to things.

    We want a lot of people getting into this and it may well be that some only give up outside work when they are near retirement age in a lot of cases. More capital investment per acre. More people in farming. More people taking pride in their modest sized but excellently developed plots.

    They say that the current system is a free enterprise system but its skewed. We don’t want a non-free-enterprise system. Rather we just want to skew it another way.

  39. I like what these guys are up to. The open source tractor:


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