Minyan Mailbag - Chewing Through the Dollar
Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.
I always read your columns (much appreciated), but I gotta tell ya that your rants about Australia have what I'll call "Europeanism" all over them! Why are you looking to your government to solve all the problems? Perhaps it is other government "helping" that is preventing domestic companies from competing globally? Why is protectionism the answer? Instead of looking at what else government could do why not list some of the stupid barriers I am sure they have imposed? Just wondering.....
Minyan James Dailey
Harrisburg, Pennsylvania, US
Wow, my point has been sorely missed, I guess. Not a bad spray to cop, first thing in the morning. The harbour is looking great at present as is the Opera House. I guess they're for sale too, at a price. Gold and silver have had a wonderful night. I'm still choking down my first cup of coffee so bear with me.
The basis of everything I write is that the FIAT currency system is the root cause of all financial "imbalances" and bubbles in the world. I must not be getting that point through so I better have a look at what I have been writing or maybe how I say it.
Governments are the last entity I that expect to "help" us out. They should basically "protect the borders" and "deliver the mail", not provide a welfare state or interfere in every aspect of our daily life.
These two points are the basis of what I wrote in the last few days. Both inadequacies allowed what has happened to our natural resource sector to occur..
The "Strong dollar policy" or whatever that was, artificially elevated the U.S. Dollar to the point of insanity (1 U.S. Dollar got more than 2 Aussie Dollars a few years back). All unbacked currency, mind you, allowing "foreigners" to "swap" this paper for our REAL ASSETS that are very limited in supply, unlike the paper that purchased it. No one's buying our banks, are they? No, they don't want "paper empires," they want real assets.
Assets/Mines like the ones that have been sold do not grow on tress, rather, they take millions of years to be "printed" and once they're exploited, they're gone.
We are seeing China currently do the same thing all across the world. Selling paper for resources. China is doing it through negotiating long term supply contracts with suppliers in about 20 countries that I know of. Australia, on the other hand, well our guys just allowed the farm to be purchased rather than just allowing capital investment to a point, and selling the product.
We have forced Superannuation here. Government says so. There are squillions of dollars tied up in these funds, some are Government controlled. There is a huge pool of capital just sitting around doing bugger all. We used to have these funds in our "local" industries and all that went out the window as "managers chase performance". Of course they sold out when someone came in with some shiny green paper for their "shares". Now they have to invest in foreign companies to get exposure to our own real assets.
What I would like to see is the Government do its bloody job and "protect" the borders. Economically as well as physically. Sure everyone needs foreign investment, but no one could disagree that only 49% of any such natural resources or "strategic assets" can be outside of "Australian Ownership".
Free markets are all talked about all over the place. That can never be the case whenever FIAT currencies are involved and someone has control of the money supply and the "printing presses".
It has nothing to do with local companies being "competitive". What uninformed crap. Our mining industry is without peer. BHP, WMC etc. were and still are world leaders in their fields. We have gold companies operating profitably with 1 part per billion of gold. Seriously, James, that is just plain uninformed gibberish.
This is just, and has been a plain straight out asset grab, either scrip swapping or with unbacked paper money being swapped for "our turf" and our dumbass Government and shareholders took the bait, suckered in by "the dollar" and looking for "yield".
We are the most open place for people to come and invest. Too open in my book. We have no barriers except in the car industry, which our clowns in Canberra keep high tarrifs on luxury car imports to support our piss-ant little auto industry. Agriculture gets some protection from South American dumping of citrus and sugar but not much else.
Everything comes back to what is Money, and what the Government's role is. Both are screwed!
Sorry mate, I guess my previous year or two articles main underlying thread has been lost on you. I hope that this may help.
Well, I signed my email "respectfully" and I do/did mean that. I have read almost all of your columns and that is why I was taken aback by your most recent two. I "see" and understand your points. However, I see an inherent contradiction in some of them. Perhaps it was the "It is indadequately funded and in total disrepair.." comment regarding health, education and transport that prompted my "Euro" comment. It sounded to me like a desire to raise taxes and spend money on those programs - correct me if I am wrong. I have never been to Australia (plan to at some point!) and my comments were not meant to be in judgment of your country or its companies specifically. Oddly, having you essentially call me an uninformed ingnorant fool has me feeling warm and tingly (perhaps because my wife says the exact same thing to me?) I would like to quote from Jim Rogers' book Adventure Capitalist - he is referencing a conversation he had in Australia when he inquired about purchasing a home:
"Australian Christians could not afford to buy houses because "rich Chinese and Japanese were driving up prices." Australia's economic problems were not the fault of her lackluster politicians, her high spending and high taxes: they were the fault of the evil outsiders. So guys like me could not buy a house. Isolationism had won the day."
He goes through how he had dinner with an MP (this was a few years ago) who didn't even know that there was such a law restricting foreign ownership! If this is still true, then perhaps you are closer to your desired outcome.
I recently listened to a terrific teleconference debate put on by Pimco between Paul McCulley and Jim Grant. I tend to be sympathetic to the hard money/austrian school (where my impression of you lies), so I expected to listen to the call with a "go Jim" mindset as if I were in a battle of ideologies with an evil doer. However, once the call was over I was left sitting there thinking to myself "Paul recognises all the same crap that Jim does, but he is implementing an investment strategy that is based on reality and not what he wants". The realities are that we are in a global system where goverment controlled central bankers pull the monetary strings - even though neither of us like it. This is not likely to change soon. With that as a likely reality, one must ask how to survive/prosper. History tells us (and your experience suggests) that attempting to effect rational change is paramount to spitting in the wind. Are higher taxes/spending and isolationism going to fix or change this reality?
I agree with you about the reckless state of U.S. driven global imbalances. I also wish that hard money was a reality. However, I believe that given our reality that the measures you advocated would simply make things even worse (long term) and that they are in contradiction with the Austrian view of economics. As my mother always said, two wrongs don't make a right and I fail to see how protectionism (wrong in my view) would solve the admittedly unfair imbalances that currently exist. I sincerely enjoy the exchange.
PS: my wife is a militant Jets fan and was wondering if Herman Edwards had taken over Andy Reid's mind for the last 5 minutes of the Super Bowl - any insight would be appreciated
You certainly got me at a bad time of the day. I respectfully called it "uniformed gibberish" about the "competitiveness of our mining sector". Thats all I was referring to. Our miners are the Kings! You obviously are no fool. My apologies if it came out "personal"..more coffee required. I get "ignorant fool" every day so you are in good company.
I have no interest in the Government raising taxes at all.We already pay over 50cents in the dollar and get way less in return. My point about total disrepair of "infrastructure" is the total misalocation of taxes raised in the first place. Government gets bigger everyday, sucking up more taxes so as to function.Our health system is basically FREE to anyone. Private insurance on top of that is not tax deductible, but the only way to get say, a hip replacement without joining a 12 month waiting list. . I don't want tax increases but a user pays system should apply. Welfare is deemed a right down here and the Govt acquiesces every time. Handout for this, handout for that! Sickening, really.
We had the instance a few years back, where the Government gave a funding grant to a woman, of a very significant amount of money, to research a "new surfboard" that was women friendly, i.e had special design for breasts. Fair Dinkum, that is not what I pay taxes for! I have never seen the "dimpled" surfboard, ever. What happened to more than a million bucks? Thats a lot of "Nurses pay".
Jim Rogers is very smart and I love his views, but I he is dead wrong on Australia, in this instance. He can buy any bloody property he wants. My apartment is owned by an American, who has never seen it or visited.I have a school mate who is an MP and a minister in the Cabinet. He's not so bad. Most are pretty ordinary, to say the least. He at least listened to my points regarding the Woodside deal and the NW Shelf. I wont go into what transpired but it was canned three days later, much to the disgust of our treasurer. The line I used ... " miss a seat on the next OPEC" caused a stir, i understand..
Political pandering to the minority is the way it goes down here.
His dinner is the same as when I met a large NY fund manager, solely dealing in commodities and currencies, who had never heard of the Gold Confiscation Act of 1933. Imagine running a billion bucks and having no idea about your own monetary history??
Down here, anyone can buy anything, and Jim is talking about million dollar homes, not the average "suburban" house. The FIRB is just a rubber-stamper. Every property sale attracts "stamp duty" or just a buyers tax. It is in the Govt interest for massive property increases.and our State had a 10 Billion dollar "Windfall" gain 2 yearsa go on this income. What they spent it on, no one knows. Certainly not on infrastructure. Seriously, there are very big problems in NSW, our largest and richest state. Not dissimilar to California is to USA.
I don't promote any "isolationism"at all. I just want what's ours to be effectively controlled by us and the majority of profits to remain here, not exported. Our forced retirement funds are a perfect source of capital for local use. Like I say, 49% of natural resources should be available to foreigners but not a penny more. If that's isolationism then, i'm for it.It may contradict some Austrianism but its better than bending over with the pants around the ankles as has been the case the last few years, waiting for the penny to drop and people reject Fiat. We won't have anything left soon.
IF our NATURAL RESOURCES are sold for REAL MONEY then i have no problem . Selling real stuff for IOU's is a joke and any Government should be hauled over the coals for allowing it to happen.
Our politicians here have no idea about money or what it is. They just throw it around at whatever seems most politically expedient.Simple.
Fiat will not last, it can't. But you are right, we must deal in reality no wishfulness. I just want to make the point that natural resources are limited, the paper that buys them are not.
Maybe I'm just venting having watched these sales for the last few years with nary a whimper of dissent from anyone, even over the RBA gold sales. Apologies if you feel that you copped some of it.
Your wife must be a good lady! Herm would've handled it way better, I'm sure. Herm would've pulled the QB if he was as "sick" as he says. They needed Curtis Martin as they appeared 1 dimensional. There always appeared to be double coverage in the secondary, so someone must've been open. I dunno, but he couldn't have done a poorer job!
Respectfully,(even moreso knowing Mrs Dailey is a maniacal Jet!)
NB - We should get this up on the 'Ville. I love this sort of interraction with readers and thanks for giving me somethinmg to think about. -- loz.
A final word to clarify my position...
Today the Treasurer, Peter Costello, signed off on the sale of WMC Resources (WMC). Disgraceful, IMO.
I only contend that we should not allow more than 49% sale of any of our NATURAL RESOURCES.
I couldn't give a toss if our whole manufacturing industry was sold, banking or insurance, or auto, or food processing or any other thing for that matter. Speedo was sold to the Poms, Vegemite to Kraft in the USA, SPC to Nestle etc. etc. Those I don't care about. We can just build another factory and make something similar.
You can't make a new Goldmine or Oil and Gas field, or a Nickel,Opal, Tantalum or Vanadium deposit. These are made only ONCE.
Natural Resources of Australia are owned by the Citizens of Australia and the Government should look after them as such, not sell them off like it was "theirs" to sell. Sure we should and would sell the product, but no way can anyone justify selling the whole freaking mineral deposits of the country. No one asked the country's citizens about these crucial decisions.
I see and understand your concerns.....but still disagree! Your assumption is that ownership is permanent and that is not the case. The U.S. went through this with the Japanese "buying up America" with their bubble-driven resources in the late 1980's. Historic real estate (comparable to minerals?) all over the country and caused a hissy fit in many quarters. However, as the imbalances corrected those properties were largely reacquired by patriots....at much lower prices!!! Your ascertion that the people of Australia own the minerals would only be appropriate if you advocate a formal communist system. Otherwise they don't own it even if the corporate entity resides within Aussie borders - they simply benefit from the economic benefit due to geographic proximity. Perhaps a compromise would be to levy something along the lines of what Alaska does here in the U.S. - each citizen in Alaska receives a stipend each year directly from the revenues generated from oil. This would not alleviate fiat concerns but until the median of exchange were to change the average person "needs" paper money. Also, even if the paper devalues vs the minerals, in theory payments to citizens would increase in line due to higher nominal revenues.
The Japanese bought city buildings, resorts and Golf courses, not limited resource deposits such as gold/silver/copper/nickel mines which, once they're used, they're gone! You can't really buy back a hole in the ground that has no minerals left, although they would be very cheap. Like I said, anyone can have our manufacturing / office towers / banks, etc... leave MY limited resources alone.
PS This would be a great dinner chat over a few good reds from down here. (They can buy the vineyards too, at least we can buy them back when the correction occurs!)
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter