Wednesday, December 17, 2008

Wow, the ACCC responded to my inquiry.

I am impressed, I received a prompt response to this inquiry I made last week. Of course, the RBA is granted impressive powers that private enterprise is not allowed. And they can not be prosecuted by the ACCC.

Predictably, there is a clause to cover them - Section 51 of the Trade Practices Act states:

(1) In deciding whether a person has contravened this Part, the following must be disregarded:

(a) anything specified in, and specifically authorised by:

(i) an Act (not including an Act relating to patents, trade marks, designs or copyrights); or

(ii) regulations made under such an Act;

The person on the phone from the ACCC also explained to me that they cannot prosecute the "private" member banks if their interest rates arise from anything relating to a government body like the RBA.

So it looks like our banking cartel is entrenched, with the power to inflate and debase our money supply, fix the price of interest, and to commit fraud through fractional reserve lending.

Mystery of Banking

I finished reading Murray Rothbard's illustrative primer on our modern banking system last night. (available for free download from here) The final chapter deals with the era of the Federal Reserve, since 1913.

The book was only written in 1983, yet it is more relevant than ever. Here is a paragraph that really left me wondering about where we are today.

"The Fed tried frantically to inflate after the 1929 crash, including massive open market purchases and heavy loans to banks. These attempts succeeded in driving interest rates down, but they foundered on the rock of massive distrust of the banks. Furthermore, bank fears of runs as well as bankruptcies by their borrowers led them to pile up excess reserves in a manner not seen before or since the 1930s.

Oh yeah ! We're witnessing it right now.

I wish Rothbard were around today to tell us what he thinks of this mess.

He would definitely be drawing parallels between the efforts of the Fed, Hoover and Roosevelt and today's efforts.

Tuesday, December 16, 2008

Hello tax-payer ? You've been robbed

Hank Paulson told tax-payers they were getting a good deal when they bought these "illiquid" assets.

Taxpayers were forcibly robbed, to buy assets that were described as "illiquid" which turns out to be a euphemism for assets that have lost half their value and that Wall Street doesn't want to sell and realise the loss.

Paulson assured the media that the public might even make a profit on these assets. Where is his apology for this ?

American International Group Inc. ... sold residential mortgage-backed securities with a face value of $39.3 billion to a facility funded by the Federal Reserve.

AIG will receive about $19.8 billion for the assets ...

Victoria: Where selling stuff to customers can be a crime.

This story is concerning, because a man's life has been destroyed by criminal charges and he did not engage in violence, theft, coercion or even make the threat of violence to anybody. All he did was provide goods in exchange for money.

A PHARMACIST caught selling more than 100 cold and flu tablets to undercover police has pleaded guilty to trafficking a drug of dependence.

Noble Park pharmacist Morimer Kham, 29, was arrested in August this year after he agreed to sell 112 boxes of pseudoephedrine type medications to an undercover agent between July and August this year.

The Melbourne Magistrates' Court heard for two months Mr Kham agreed to sell the officer multiple boxes of the drugs for a cash exchange at his father's Jacksons Road pharmacy.

Senior Constable Roz O'Grady told the court Mr Kham sold the agent enough pseudoephedrine to make 196 grams of pure methylamphetamine valued at $31, 500.

Police allege Mr Kham, of Flemington, is the first pharmacist in Victorian history to be charged with a trafficking offence.

Mr Kham pleaded guilty to trafficking a drug of dependence and was convicted and sentenced to a 12-month community based order.

He was also ordered to do 150 hours unpaid community work.

Defence lawyer Phillip Dunn QC said Mr Kham had resigned as a registered pharmacist and his life had "gone down the toilet" since his arrest.

He said the son of Cambodian migrants Mr Kham had worked for eight years to acheive his goal of becoming a pharmacist and his mistake had cost him his career.

Mr Dunn said at the time of offending Mr Kham was suffering depression and post-traumatic stress disorder as a result of two armed robberies at the pharmacy.

The war on (some) drugs is entirely misguided. What people do in the privacy of their own homes, bars, nightclubs or businesses now suddenly becomes the concern of police. People have always been capable of making all kinds of stupid decisions, like eating KFC every dinner, or drinking 5 bottles of wine, and you simply cannot expect nor demand police to intrude into everybody's lives and private property to prevent self-harm.

Monday, December 15, 2008

The imminent collapse of the US dollar

Peter Schiff was right (look it up on Youtube). His timing was dreadful, but his message is spot on. The folks at The Daily Reckoning have clearly summed up the inescapable conclusion of this economic crisis. The theme of the Obama presidency, no matter how the media spin it or ignore it, will have to be one thing - DEBT.

According to the latest estimates, the U.S. Treasury is expected to borrow $1.5 trillion nest year - in addition to the existing debt it rolls over. This puts a huge supply of new debt on the market. Will there be new demand to meet it? Not likely. In fact, the demand is probably going to drop. One reason: the foreigners are borrowing too - hugely - for the same reason. They want to bail out their own economies. Another reason: Americans are spending less on foreign goods - putting less money in the foreigners' hands that they could lend back to us.

Of course, the feds are ready with a solution...and as usual, the fix will make things worse. Fearing a loss of private demand, the feds are already talking about selling Treasury debt directly to the Fed. But that brings us right to the other way Treasury values can go down - the dollar can lose value too. Not only are bonds themselves subject to the law of supply and demand, so is the currency in which they are calibrated. The more dollars; the less each one is worth.

Normally, it is a no-no for central banks to buy Treasury bonds directly. "Monetizing the debt" is what it is called. It inflates the money supply directly and immediately. So, while Fed buying of Treasuries would help support the market for treasuries, it would undermine the value of the dollar itself.

Thats it. Game over.

America cannot delay its day of reckoning for much longer. It is burdened by a mountain of debt, and its credibility and ability to repay that debt will not only be brought into question, but simply destroyed as they continue to pile up new debts to bail out collapsing industries.

The only way to service such a huge debt, running into the trillions, is to make it worth less - destroy your currency and print more dollars. The only other approach would be for the American government to immediately cut spending in half and use its tax revenues to pay down debt for the next decade.

Have you ever met a politician who would cut spending in half ? Obama and his administration are looking to double it, even in the worst of times.

Thursday, December 11, 2008

The ACCC fines Qantas $20m. What about the RBA?

For something called 'price fixing' and engaging in 'cartel like behaviour'. In plain English, it means for "setting their own prices the way they bloody well please and ought to be entitled to do in a free society".

The Federal Court of Australia has ordered national carrier Qantas Airways to pay $20 million in pecuniary penalties for breaching the price-fixing provisions of the Trade Practices Act.

The Australian Competition and Consumer Commission (ACCC) instituted proceedings in October 2008 alleging Qantas had reached an understanding with other international airlines in relation to the imposition of fuel surcharges on air cargo across its global networks between 2002 and early 2006.

The ACCC said Qantas admitted to making and giving effect to the understanding, repeatedly exchanging assurances among airlines in the implementation of fuel surcharge increases and reaching local agreements in certain Asian countries collectively.


ACCC chairman Graeme Samuel said today the penalty reflected the seriousness of the contraventions and Qantas' large share of the market.

''Cartels - particularly those that are engaged in by large businesses with broad application over a period of time - have a significant effect on consumers,'' Mr Samuel said.

Wow.. price fixing is a criminal act for businesses like Qantas. So I wrote the following letter to the ACCC on their complaints website.

I recently noticed that Qantas was fined $20m for price fixing and cartel behaviour. I would like to draw to your attention that The Reserve Bank of Australia is engaging in cartel-like behaviour with its member banks, setting the price of interest for the entire Australian banking system. By setting a cash rate target and engaging in open market operations whereby it purchases securities of varying durations, it is trying to fix and control interest rates. This is plainly admitted by the RBA on their website:

Setting interest rates is the most substantial form of price fixing in Australia's history. Interest rates are also known as the cost of acquiring money itself, and the RBA should be heavily penalised. In fact, in recent months, the RBA has been trying to force interest rates in a downward direction, by injecting money and purchasing securities. By pushing rates below the market price, they are certainly engaging in the criminal act of predatory pricing.

There is no need to guess what the RBA's intent is, they openly admit it at their meetings and all statements made by the RBA governor. Seeing as the ACCC has a responsibility to prosecute these criminal acts, it will be interesting to see if they carry this out or if they set themselves a different set of rules for the private sector whilst government bureaucracies are free to do as they please.

I eagerly await your response.

Somehow I doubt the ACCC will take on the RBA. One illegitimate bureaucracy is not going to take on another.

By the way, this is not the only approach that can be used to attack the RBA. For example, there are incredibly harsh laws against counterfeiting. I could ring the police and notify them that the RBA is continually issuing new currency. Or that banks are engaging in fraud by issuing deposit receipts well beyond their actual reserves.

It falls upon politicians with a bit of brains and backbone to abolish our central bank and restore a free market in banking. None seem to be up to the challenge.

Monday, December 08, 2008

Australia: Where communication is a crime.

It seems that the Labor Party hates free speech. In Victoria, they passed draconian anti-free speech laws otherwise known as the Racial and Religious Vilification Act. Then at a federal level, they want to censor all pornography and profanity and force every ISP to implement filtering.

And in Queensland, police raided the home of a 60 year old man who had re-uploaded video footage of a baby being shaken by a man, which ends with the baby laughing and seemingly unharmed.

Chris Illingworth, 60, a father of four from Maroochydore, thought he would share it with fellow users of Liveleak, a site similar to YouTube but focused on news and current events. In two years, he has uploaded hundreds of videos to Liveleak.

His home was raided on Sunday, November 30, by Queensland Police from Task Force Argos, which specialises in combating child pornography and child groomers.

He was charged with accessing, downloading and uploading child-abuse material with the intent to distribute and is scheduled to appear in court in Maroochydore on December 18.

It is understood that he had no involvement in the creation of the video, which cannot be published on this website for legal reasons.

The baby is laughing and smiling at the end of the clip, but the video has attracted criticism from child-welfare advocates because of how vigorously the man swings the baby by its arms.

In a phone interview, Illingworth described the clip as a "common interest story" and rejected any suggestions he was a child abuser or interested in such material.

He said that since being charged he could not eat, sleep or work and was worried his children and people in the local community would think he was a pedophile.

"I've had to go down to the hospital, my blood pressure is 160/108 and I'm on blood pressure pills and valium - all because of this," he said.

"Do they realise what pain they put someone through? I could fall over dead over this. I can't even get the office work done. I'm just a zombie."

Queensland Police refused to comment, saying it would be inappropriate as the matter was before the courts.

Illingworth said his life changed the moment two officers - a detective chief inspector and a detective chief constable - banged on his door and demanded they search his house.

"I went to turn on the laptop and they got stinking mad, as if I was trying to delete something I guess, and I was just trying to be helpful," he said.

The officers plugged a small black box into his computer and proceeded for an hour and a half to analyse the contents of his hard drive in a search for child pornography.

Thanks to laws like these, we are all soon-to-be-criminals now.

Friday, December 05, 2008

Do most people think about the nature of money ?

Heres the reality; Every single modern nation defines money as debt, pyramided upon a base of central bank reserves, and implemented through a private banking cartel where a central bank and its member banks are free to engage in fractional reserve lending, usually with some required reserve ratio, leading to a never ending process of inflation (growth in the supply of money) as prices steadily (and sometimes not-so-steadily) grow year over year.

It seems like a rhetorical question to ask if people think about money. Only the most hardened communists and agrarians contemplate living, trading and working without the use of money.

But the question actually is - "do you think about the nature of money ?"

I'll be adding a poll for this question in the sidebar.

We all carry those coins and notes, and keep bank accounts. We all earn dollars and spend them. And this aspect of our behaviour seems a natural and free outcome, ever since man traded food for cattle, worked hard to build things, and thought of ways to get food and shelter.

It wouldn't take much effort or thought to say that we naturally view money (notes and coins and deposit receipts with banks) as a medium of exchange, a store of value and a unit of account.

We can swap them, we can "price" them, we can store them for the future, borrow them and repay them and every party involved in the trade knows exactly what they are getting in to.

A $50 note is a $50 note. All of them do the same thing, none of them rot away, everybody accepts notes to settle payments, and they are easy to carry around.

If you don't want to carry around all your wealth with you, for practical and security reasons, we approach banks to store and safeguard our money. But banks don't quite do that, at least not for the past 200 years.

Things are more complex, as plainly admitted by one of the left's favorite economists:

"The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it (Galbraith, 15). The process by which banks create money is so simple that the mind is repelled." (Galbraith, 29)"

Your newly deposited money at a bank does not get stored in a vault or set aside in your name.

Instead, it gets used a reserve for the creation of new money when another person applies to borrow money from that bank. This process is called fractional reserve, and its been around since the early 19th century thanks to the Bank of England.

Basically, when you deposit $5000 to a bank, they issue you with whats known as a deposit receipt, saying you can redeem on demand, the $5000. But the process doesn't stop there. Banks then use that $5000 base, to lend out a few more thousand, say $4000 or $4500 to somebody else, and they issue the borrower with deposit receipts for that amount.

And you've suddenly got a bank with more deposit receipts than actual reserves. There are more liabilities than assets, and if people only demanded redemption and payment of their liabilities (i.e went to a bank to withdraw their money), then the bank would declare bankruptcy.

This is the unavoidable reality in Australia, America, Europe, Asia .. anywhere you'd care to look. Every bank is vulnerable to a bank run and every bank cannot afford to pay out all of its liabilities.

If you care to quibble or think this is outrageous, ask yourself - why is it, that banks in the news are always reported as collapsing or failing when there is a "bank run" - i.e when a large number of customers queue up to get their money ???

Simple - because they don't have enough reserves to pay them out !

The reason banks play these games, and lend more than their actual reserves, is because after years of experience, they noticed that most people leave the vast majority of their wealth in the banks. Depositors are either "confident" or blissfully unaware of the risks involved.

The whole banking system and economy is based on confidence/ignorance these days. Firstly, people do not carry around a big portion of their wealth as notes/coins to carry around with them or lock up at home in a safe. Customers with savings leaving most of their money in the bank, and they've lived most of their lives comfortably and practically using electronic banking and demand deposits to pay their bills and transfer funds.

So here's the question - what do we do about it ? The system "works" after all, doesn't it ? Well for practical purposes, and as far as the eye can see, it has indeed worked so far. But you'll have to apply your mind a bit and go beyond what is visible. The argument that "if it aint broke don't fix it" must be done away with, because unseen aspects to the money and banking system are no less real or tangible than the plainly visible ones.

For example, if I ran a hidden printing press in my basement and printed myself millions of dollars, that would "work" too, and to most people's eyes, the system would still function. But it would be a gross form of theft for me to counterfeit money that wasn't earned through productive efforts of mine. If everybody did it, then there'd be a lot of money going around, which would dilute the value of every existing dollar, yet not a single ounce of extra wealth, goods and services is created (good old Scrooge Mcduck explains this in a fun youtube video).

Well today banks do just that. They conjur into existence, new demand deposits when a person applies for a loan. They put an entry into their accounts which is a new liability, yet they don't have a corresponding asset. This is how new money is created. The supply of money is a lot more than coins or notes, its also deposit receipts with banks. These days we use our bank deposits for the most part, to pay bills and transfer funds. So if you woke up tomorrow with an extra zero in your bank account balance, then its as if you'd counterfeited real notes and coins.

Counterfeiting money is plain theft - from everybody else who has money. You dilute the value of their holdings. Yet our entire banking system has been doing it for decades, acting as a cartel, expanding the deposit receipts and liabilities, a major part of the supply of money. Its no wonder
that we see prices rising. Goods and services are hardly more scarce than they were 20 years ago, after all, our economy grows and we become more productive and efficient at producing things. But there is so much more money chasing those goods and services.

The supply of money in Australia more than doubled between 1996 and 2006. And we saw shares and real estate prices follow.

Another issue to consider - if all these deposit receipts are created when new loans are made, what happens if everybody repaid their loans instead of just carrying them for decades and re-financing them ? ? The answer - huge amounts of money would be destroyed.

This leads to another phenomena, passionately investigated by the Austrian economists, known as the Austrian Business Cycle Theory. All this new money creation profits certain people at the expense of others, which leads to the cycle of booms and busts. And we've certainly seen our fair share of them in the last century, since the Federal Reserve bank was created in 1913. So perhaps this theory has some substance to it.

Read more here. Or print out a free copy of Murray Rothbard's "The Mystery of Banking".

Monday, December 01, 2008

The Age cartoonists are mentally ill

(via Slattsnews) - yesterday's Sunday Age had this dreadful piece of garbage from Age cartoonist Matt Golding, who believes that the 2003 invasion of Iraq gave birth to Al-Qaeda and Jemmah Islamiyah.

I expect this cartoon would have been under their "Insight" section.

Those 1993 bombings of the World Trade Centre, and attacks throughout Africa and the Middle East by Al Qaeda were done in response to the 2003 invasion of Iraq.

Its as if all leftists, especially those working for Fairfax newspapers, believe terrorism didn't exist until the point in time where Western governments started responding to being attacked (basically 9/11 for most of us, but since the 1972 Munich Olympics for the Israelis).

And their line of reasoning goes as follows - if responding to the initial acts of terrorism causes further terrorism ( even the initial acts of terrorism were caused by the response !!), then we shouldn't respond to terrorism to end further terrorism.

Is your brain bleeding yet ? This is like Orwell's 1984 - war is peace, freedom is slavery. Keep repeating the doublespeak through your mind and you too may be enlightened enough to draw cartoons for The Age.