Vol. 3 No. 48 July-August 2010 ERA Newsletter Page 1
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Economic Reform Australia
For a just and sustainable society.
ERA NEWSLETTER ISSN 1324-5929
Vol. 3 No. 48 July - August 2010
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IN THIS ISSUE Page
S. Keen Grantham on the Australian Housing Market 3-4
P. Lock Undermining Mining’s Super-Profit Ability 4-6
D. Keane Recent Australian Economic Trends 7-13
L. Manning The Abiotic Oil Formation Theory 14-16
J. Joyner Afghanistan Mineral Riches: Beware the Hype 17-19
R. Clifford Change Our Policies 19
J. Hermann The Economic Growth Paradigm and Population 20-21
J. Coulter Sustainable Population Australia Media Release 21-23
N. Iceton “Robin Hood” style tax 23-25
J. Hermann What is Economic Rent? 25-26
H. Gout Roxby’s secret radioactive risk 26-30
E. Brown Derivatives come to the Movies 31-32
Disclaimer: The views expressed in these articles are the sole responsibility of their authors and do not necessarily reflect those of Economic Reform Australia.
Editor Co-Editor
Peter Lock, 4/20 Everard Street, Frances Milne, 14 Gallimore Av.
Largs Bay SA 5016. Balmain NSW 2041.
Phone-Fax 08 - 8242 0566 Phone-Fax 02 - 9810 7812
Email Email
ECONOMIC REFORM AUSTRALIA
ERA is a non-party-political organization, formed in 1993 as a union of the Economics Review Association and other economic reform groups. Its long-term goal is to achieve a socially, environmentally and financially sustainable economic system. ERA’s commitment to economic sovereignty seeks to return control of the economic and financial system to the people. This requires full public scrutiny and accountability for all economic processes and a recognition that economic systems must serve the people for the global good.
Membership of ERA is open to all who agree with its objectives and overall philosophy, and may be effected by sending A$20.00 per annum to the Treasurer (address below), together with address, telephone and fax numbers, and email address. It would be appreciated if new members would calculate the part of the year remaining and remit the appropriate pro-rata amount, or alternatively pay for the following year as well. All members are entitled to receive the regular 32-page ERA newsletter, and are entitled to vote at monthly meetings and participate in organized activities.
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ERA Patrons : Professor Stuart Rees, Professor Frank Stilwell, Professor Michael Pusey, Associate Professor Evan Jones, Professor David Shearman, Dr. Ted Trainer, Dr. Shann Turnbull.
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Meetings are held on the last Saturday of the month at the Conservation Council Centre, Level 1, 157 Franklin Street Adelaide. Meetings start at 2pm with the policy recommendation forum before official business begins. Details - John Hermann Ph. 8264 4282
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Economic Reform Australia Information Network
Grantham on the Australian Housing Market
by Steve Keen Published in DebtWatch on 17 June, 2010
Source: DebtWatch <http://www.debtdeflation.com/blogs/
Jeremy Grantham pricked, if not the housing bubble itself, then at least the bubble that property market spruikers live in, with the quip that: "Bubbles have quite a few things in common but housing bubbles have a spectacular thing in common, and that is every one of them is considered unique and different." Housing market a 'time bomb', says investment legend: The Australian June 16, 2010)
How true that is. Before Japan's bubble burst in 1990, we heard that Japan was different: the "Rising Sun" was eclipsing the USA and house prices reflected this growing wealth (and didn't you know? there was a land shortage in Tokyo!).
Before the USA's bubble burst, there were land shortages in all the States with price bubbles especially California. There were
probably even Tulip shortages in Amsterdam, four centuries ago.
Those other bubbles duly burst, despite their "unique" charac-teristics, under the weight of the same force: too much debt was taken on by speculators seduced by the groupthink that house prices always rise. When the rise in house prices made the entry costs for new players prohibitive, debt stopped growing and house prices collapsed.
This is the other thing that all housing bubbles (and share price bubbles, for that matter) have in common: they are all driven by borrowed money, and they can only be sustained so long as rate of
growth of debt outpaces incomes. Once that stops, the engine of unearned income that enticed speculators in breaks down since the only way that we can all appear rich without working is if we spend borrowed money.
Of course we all know that spending borrowed money is a surefire route to ultimate poverty. The great tragedy of an asset bubble however, is that it's someone else's increase in debt that
makes us appear wealthier when your house sells for more than you paid for it. In effect, the housing market "launders" the debt money, making it appear real.
Any doubt that borrowed money is what has driven house prices into the stratosphere in Australia is dispelled by the data: despite all the hooey about Australian lenders being more responsible
than those in the USA, mortgage debt in Australia rose three times faster since 1990. Having started with a mortgage debt to GDP ratio that was just 40% of America's, we now have a higher ratio than the USA and ours is still increasing while theirs is clearly falling.
Notice however that our ratio was lower than the USA'sa nd was falling too before the government brought in the First Home Vendors Boost. As it has always done, that government intervention in the market set off a price bubble the government in this sense is as responsible for the house price bubble as the banks are.
The government pulls this trick because it makes it look good for a while: the bubble pulls in yet more private sector borrowing, and the spending makes the economy boom. But when the grant ends
and the borrowing slows down, things don't look so rosy.
That's one way to describe the housing market right now. The boost caused the number of buyers to explode last year, and now the number is fizzing: there were just 46,000 home loans taken out by owner occupiers in April, a cool 25% down on the same month in 2009. Actual demand (and that's people with cash in their hands to buy now, not the hypothetical future demand concepts touted by the property spruikers) is therefore falling below actual supply.
As the stock of unsold houses mounts up, it is only a matter of time before the bubble bursts. ■
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Undermining Mining’s Super-Profit Ability
Peter Lock
A true and profitable use of one's talents is dictated by Nature herself. Making a commercial profit only becomes reprehensible when it is done at the loss-expense of the rest of the community. Industries do not exist for financiers to make profits. They exist to satisfy the needs of the community and their modest profit-ability is a necessary though secondary concern. There is every reason for those gifted in the Fine Arts and trained sportspeople to be rewarded adequately for developing their talents and sharing them with others. The community as a whole culturally benefits and profits from their activities and this profit rightly flows back to the benefit of all those people involved. Without the community's sanction and encouragement, their talents would be wasted as far as their being shared with others is concerned.
Any profit is good in a self-functioning-feedback-system if the whole profits along with the parts, that is, if the community benefits as well as one or some of its citizens. Individuals who profit at the expense of, or to the detriment of the community act parasitically and are guilty of treason. The notion of commodity-money as financial capital lends itself to being linked with the motive of profit. Such financial profit associations can be considered quite valid as long as the money is debt free and the industry in which it is invested is necessary, useful or is capable of further expansion.
Today, these provisos are generally not met. Firstly, most money is the contrived debt of the banking system. In banking philosophy, the possession of money intrinsically bestows on the possessor the right to get even more money usuriously for nothing from the community at the latter's own expense. Making such financial profit by a relatively few rich citizens is only achieved at the price of an exponentially increasing burden for the rest of the community. The burden is unpaid interest on the ever-unpayable interest on the unpayable banks' debt-financed principal.
Secondly, most industrial expansion is now only achieved at the continued rape of the earth and the mindless cancerous growth and blind expansion of an economy which knows no self-restraining negative feedback but seeks to exploit the limited resources of the planet for the base greed of a usurious financial system. The latter fires the lust of the insatiable avarice of the worshippers of the god of Mammon.
An irrational obsession with economic growth intoxicates the minds of politicians and their economic advisers. In the past such growth was necessary - as necessary as the growth from the state of a child to that of an adult - but once the state of economic maturity has been reached it is crass stupidity to entertain ideas of growth just for growth's sake, so that the rich can get even richer. There is no greater misconception blocking progress to a just and sustainable world order than the blind and illogical notion that all prevailing socio-economic problems can be solved through economic growth.
Almost all political, economic, educational, religious and media leaders and spokespersons are ignorant of the fact that it is precisely this catastrophic obsession with growth’s economic obesity that is the very cause of all the troubles in society and hence cannot be the proper cure. In the short term an increase in economic turnover promises more employment and consequent incomes, but this is only the transitory high of a system based on an addictive greed. The latter, as with the drug addict, is only a temporary relief to an insatiable and self-destructive appetite which is only terminated in a cancerous suicidal death.
A stable zero growth economy does not preclude progressive innovative techniques and social improvements. A sustainable economy envisages growth in the quality of life for all, rather than the mere unbridled increase in the quantity of possessions and power over others of a selfish few.
There is an ever-growing body of intelligent people who are aware of the world's financial problems. Their voices are stifled in the bank-controlled media. Scoffers say that greed is too ingrained in human nature for the system to be changed.
The system will be changed, either through sane self-reform or tragic self-destruction. It will not be changed for the better by the irrational absurdities of the protagonists of an Economic Rationalism whose gospel preaches privatisation for personal profit, ruthless competition for corporate bullies and absolute human liberty to do whatsoever you fancy. The only sin is getting caught acting dishonourably or dishonestly.
For the most part in Academia, the taught Consensus Economics advocates financial deregulation, free trade and the unrestrained interplay of market forces freed from all restrictions and governed solely by the motive of individual greed and profits before persons. Whilst would-be investors are only too happy to promote advances in scientific knowledge that promise to give handsome profits, few there are who show any enthusiasm for the facts of Science itself.
In the past we have been accustomed to think of just three states of matter, namely, solid, liquid and gaseous. In these three phases, there are well defined relationships between free individual particles among themselves and between the free individual particles and their collective whole. Entropy considerations bear witness to a real kind of conflict of interests between the freedom of individual particles and their ordered growth into a whole-some complexity.
There is a fourth state of matter, the plasma state. A plasma is an electrically conducting medium. It generally consists of positively charged ions, negatively charged electrons, atoms and-or molecules. Of special interest here is the fact that the properties of a system in the plasma phase depend on the collective or team behaviour of the constituent particles as distinct from their individual identities.
It may come as a surprise for most people to learn that nearly all the matter in the Universe still exists in the plasma state. It is basic to and predominates in the sun, the stars and interstellar space. Lightning flashes, auroras and simple welding arcs are plasmas. So also are neon and fluorescent tube lighting. The crystal structure of metallic solids exhibits this same fourth phase phenomenon.
Collective behaviour of a very high order, though completely different in nature from the plasma state, is also evident in laser and cryogenic or low temperature technology. ■
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RECENT AUSTRALIAN ECONOMIC TRENDS
By David Keane,14/June/2010
PO Box 582, Gosnells 6110, WA Email:
I attach the most recent issue of Recent Australian Economic Trends. I expect the recent slide in global stock-markets over the past two months marks the beginning of a continuing steady slide to global depression. The main “success” of the massive global stimulus spending of a year ago, has been to wipe away all remaining checks against such an inevitable downward slide.
Reserve Bank Data Available Half Month Earlier
Two months ago, I was a month later than usual in releasing my newsletter on Recent Australian Economic Trends. That was because the Reserve Bank was a month later than usual in releasing GDP (Gross Domestic Product) figures. This one month delay was, I now realise, only a one off delay, caused I suspect because at Australian Reserve Bank they changed their various accounting routines and internet presentation. It took them a month to get used to the new way of doing things.