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On Target

1 May 1998. Thought for the Week: "We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men."
George Orwell

LIQUIDITY NONSENSE

by Eric D. Butler
Banking has been described as a form of black magic. The witchdoctors associated with this black magic are the economic experts who can produce certificates to prove that they are qualified to express opinions and to advise governments and various organisations and institutions. The exponents of the black magic associated with banking have over the years evolved a type of mumbo-jumbo which tends to mask reality and to persuade the ordinary people that "big finance" is something they cannot be expected to understand and should therefore blindly accept whatever the certified experts have to say.

I am prompted to offer some thoughts on this subject because of a headline in the business section of The Weekend Australian of April 25th-26th. The headline read: RBA changes rules to reduce risks of a run.
The story, which followed, was written by Mr. Tim Boreham, and stated, "Banks must hold enough liquid assets to withstand a bank run on deposits for at least five trading days, according to Reserve Bank liquidity rules released yesterday."

What does the liquidity of the banking system mean?
To those who might be described as economically illiterate, it might mean that it refers to how much water the banks have in their bank vaults!!

How did the term originate?
Those who know their Australian history are aware that early in the history of the colony of New South Wales, there was a shortage of money and that rum became a major instrument of exchange. Large numbers of stills were operated, not unlike the stills operated in the USA as corn-based whisky was produced. The reality is that over the centuries money was anything, which the people accepted in exchange for goods and services. Belief was the all-important factor. A forged dollar note is readily accepted so long as it is believed to have been created by the appropriate official authority, in Australia the Note Department of the Reserve or Central Bank of the nation.

Those interested in grasping the reality of a money system can do no better than to read an address, The Use of Money, given by the author of the Social Credit movement, C.H. Douglas, in his 1934 Christchurch, New Zealand, address. Douglas said that, in essence, a money system was a ticket system.

To suggest that a train system cannot be operated because of a shortage of tickets is a manifestation of a belief in black magic. It is belief in this type of black magic, which has resulted in the great disasters, which have afflicted mankind. There have been periods when superstition has had to be modified to the face of reality. Up until the First World it was generally believed that nations like Great Britain were on the gold standard, that gold sovereigns were the only "real" money, and that all bank notes could be readily exchanged for gold sovereigns. The outbreak of war revealed the truth. The banks were unable to meet the demand for gold. They had to close their doors.

Tim Boreham says Australia's Reserve Bank is fearful about a "run" on the banks. The reality in the UK was that the banking system had been issuing in notes far more than the gold they held. The British Government had to close the banks and quickly create special notes, which were then issued to the banks, which exchanged them for the notes, which they had said, were worth a sovereign.

During the years of the Great Depression Australians were told that they had to endure mass unemployment because there was a "shortage of money". There was "poverty amidst plenty". The basic cause of the mass unemployment was that large sections of Australian industries were closed down. Reality in the form of the Second World War and the threat of a Japanese invasion shattered the black magic. There was a massive explosion in the volume of new money, created in the form of central bank credit.

Because of a convention that the private trading banks based their financial credit creation upon the volume of notes and coins they held, with central bank credit being treated as the equivalent of notes and coins, and massive creation of central bank credit to finance the war, resulted in an expansion of the trading banks' capacity to create new credit, mechanisms had to be created to control the trading banks. Those mechanisms have been used to control what is termed the "liquidity" of the banking system.

The fear of a "run" on the trading banks is based upon the prospect of customers suddenly demanding that they want their deposits paid out in cash, notes or their equivalent in central bank credits. Such a "run" would bankrupt the banks and, apart from other results, expose the realities of the banking system, which is basically rooted in a superstition that figures in books, or in today's world, that electronic blips transferred through computers are real wealth.

Underlying most of the attempts to juggle a system, which mathematically must create a growing volume of debt, is the fear of a return of the dreaded inflation, which currently is at an "historically low level". It can be demonstrated that this low level is the result of the manipulation of statistics and the increasing use of what is virtually slave labour in the underdeveloped nations.

The progressive centralisation of banking all over the world cannot alter economic realities. Irrespective of how the debt system is manipulated, of the type of regulations being introduced by Reserve Banks, the end result of global disaster cannot be avoided if "globalism" remains the underlying philosophy upon which the nations of the world are operating their financial and economic systems. Not only is social disintegration inevitable, but the real economies of the world must also disintegrate.

As pointed out in the chilling book, The Global Trap, if globalism continues to be pursued, the stage will be reached where the food reserves of the world will be at risk. National survival will not be ensured if Australia continues to base its financial, and therefore economic policies on black magic financial orthodoxy. Drought conditions in large parts of Australia, including some areas, which previously had generally been regarded as drought free, have demonstrated how vulnerable Australia is to the policies of the globalists and economic rationalists.

The first essential for national survival is to break the influence of financial black magic. C.H. Douglas said that the first step towards dealing with black magic is to stop believing in it. A few good satirists would be helpful. But even more helpful is a stiff dose of reality, irrespective of what new rules are fashioned by the Reserve Bank, and what nonsense is uttered concerning the "liquidity" of the banking system.

Reality remains the great disciplinarian in the human drama. Such discipline is painful to those who control the present financial and economic policies of the nation. But such a process is the only hope for the future. As G.K. Chesterton, that master of paradox, said, "the plight of the world is the only hope for the world". The plight of the world is the result of elevating an abstraction called the money system over reality. Christian theologians have insisted in the past that the worship of such an abstraction is a sin against the Holy Ghost and that those who engaged in such worship will have to pay a heavy price. But they can, of course, repent.

National salvation can only come through a policy of national repentance. A start can be made at the next Federal Elections, insisting that politicians should be the servants of their fellows and in turn insisting that institutions, financial, economic and political, exist to serve the individual and his requirements.

Altering the rules concerning the "liquidity" of the banking system will serve no real purpose. Victorians are about to learn the lesson as they discover that the triple rating award by the international bankers will merely allow their Government to borrow more and plunge them into even more debt.


COWBOYS AND UNIONS ON THE WHARVES

by David Thompson
"On the wharves this week the old, idealistic values of 19th-century Australia - egalitarianism, mateship, solidarity and the fair go - went head-to-head with the new world order of free markets and global competition." - Richard Yallop, Weekend Australian, 25/4/98.

Perhaps this comment summed up the waterside dispute so far, although the values that formed Australia in the 19th century were much broader than this. They included an acknowledgement that such was the scope of Australian resources, and such was the potential of this new nation with almost limitless space and a homogenous population, that surely there was provision for all, and there should be arrangements to ensure that none were disadvantaged.

In a sense, the formation of unions in Australia was the British answer to a more clearly defined "class system" later turned into a "struggle" and exploited by Marx and Engels. It was intended to be modified in Australia by Prime Minister Alfred Deakin's arbitration and conciliation system introduced in 1904. What happened to the system of arbitration?

Other unanswered questions should be pursued. The first is whether the Government actually agreed to back the Patrick effort to break the Union monopoly without seeking competent legal advice about the likely court ramifications. In particular, was Mr. Reith completely satisfied that the Patrick ruse of using 'front' companies to rid himself of his workforce was quite within the law?

It seems to be an unacceptably high-risk strategy for Mr. Howard and his Ministers to hitch their public relations future to the Corrigan/Scanlon wharf strategy. It is now clear that Mr. Reith has lost control of the agenda, and has effectively taken his Prime Minister hostage to the Corrigan/Scanlon determination to smash the MUA at any cost.

The clear impression that, to people like Scanlon and Corrigan, the objective of smashing the MUA justifies any available method of achieving it is just reminiscent of former Labor Senator Graham Richardson s "whatever it takes" approach. Mr. Scanlon, in particular, is being identified as one of the 1980s corporate cowboys associated with John Elliott and a number of questionable corporate plays.

Does the end justify the means employed for Mr. Reith? Whatever the courts decide - and one is left with the clear impression that the Patrick lawyers are now desperately exhausting all legal possibilities in case something "turns up" - the implications of this dispute for the Coalition's electoral chances are significant. Even if Reith/Corrigan/Scanlon manage, by a miracle, to win the courtroom war, it will be a huge task to salvage the public relations war in an electoral year.


ASSAULTING THE FLAG ON ANZAC DAY

The judgment of Mr. John Coates, of the Australian Olympic Committee, in making his announcement that Australian athletes may not have the Australian flag on their uniforms on Anzac Day is extraordinary. It is clear that it is the Union Jack to which Coates objects, and it is also clear that he expects the flag to be changed at some point, dropping the Union Jack.

It is not simply the timing of this suggestion that it important, it is the substance. Mr. Coates is quoted as saying that the athletes would be "dressed and branded in a way the athletes feel comfortable". It is clear that, to Coates, the athletes have also become simply a 'product' that has to carry an acceptable "logo" for marketing purposes. This is the ludicrous face of economic rationalism gone feral. It appears that Coates has become the victim of some yuppie advertising agency thinking.

If Australian taxpayers are underwriting the Games to the tune of around $500 million, there should be no doubt whose "logo" goes on our athletes: our own Australian flag. If there are athletes who are uncomfortable with this, then it should be quietly suggested that they review the reasons why they compete at all. It is to the great credit of athletes like Belinda Gainsford-Taylor and high jumper Tim Forsyth that they have thoroughly rejected the Coates proposal. Olympic road cyclist Clayton Stevenson described Coates' comment as "shocking". Forsyth said, "The flag and the crest are very important to me. I'd be terribly disappointed if I'm selected for Sydney and not wearing a uniform that showcases who I am."
As yet, we are not aware of any report indicating where Cathy Freeman stands.

It has been the experience in most other modern Olympics that it is the private contractors and consultants who make all the profits, and the public who underwrites the Games takes the financial losses. If this is the case, let the corporate sponsors, who are so keen on marketing and 'logos' agree to underwrite the losses as well.


THE NEW SOUTH AFRICA SUFFERS OLD PROBLEM

The funeral of six-month-old Angeline Zwane in Johannesburg last week highlights the difficulties faced in the "new South Africa". Almost exactly 4 years since the majority rule elections, South Africa is sliding steadily towards the banana republic status of so much of the rest of Africa

The shock and horror, magnified by the world's media, at the death of the toddler is unquestionably real and fully justified. But outside South Africa others do not fully appreciate the circumstances. There is more to this event than a few innocent children shot while walking across the paddocks of a drunken white farmer. The truth is that, a few days after the child died, on Good Friday, 81-year-old Silas Otto was gruesomely murdered on his farm by two black intruders. They stuffed fertilizer down his throat until he choked, while his wife watched. His death made just two paragraphs in the newspapers the following day. Yet this was the seventeenth such murder of white farmers in as many days. (The Weekend Australian, 25/4/98).

Press reports indicate that assaults on white farmers are enormous, even by South Africa's crime standards. There were 402 attacks on farms last year, in which 97 people - mainly whites - were murdered. The truth is that the white farmers now live in a constant state between nervousness and terror. What causes this?

The main problem is the frustration of blacks who were promised land, homes and work by the National African Congress in the 1994 election campaign. There is a land distribution programme, but it is racially based, and hopelessly behind schedule. The scheme consists of promising blacks who have lived on farms as labourers, or who can prove that their ancestors originated from the area, that they will assume ownership of land. The only problem is that most of this land is now owned by white farmers. Some have been evicting tenants hoping that they can forestall a transfer of ownership of some or all of their property. There is no mention of compensation.

The demands of the blacks are increasingly strident, and have little to do with lawful programmes, just measures or talk of reconciliation. For example, one speaker at the child's funeral set the tone: "When he (the man accused of shooting the child) is found guilty, we will take his home, we will take his land, we will take his money and, when he comes out of prison in 20 years' time, he will be the one living in an informal squatter camp."

Hardly calculated to engender confidence in the reconciliation process in the multicultural South Africa. Perhaps Winnie Mandela summed it up at the funeral: "There is no black in the rainbow nation; maybe there is no rainbow nation after all".


DUNSTAN STUNS LABOR FAITHFUL

Former SA Premier Don Dunstan, Labor dilettante of the 1970s, surprised the organisers of the Whitlam Lectures last week when more than 4,000 turned out to hear him challenge Federal Government and Opposition Parties alike to abandon economic rationalism. With Mr. Whitlam and ACTU leader Jennie George attending, Dunstan warned the ALP that Prime Minister Howard was inviting them to "pursue the policies of lemmings - to rush over a cliff and find ourselves free in a marketplace sea in which we will drown."
Dunstan was referring particularly to the proposed Multilateral Agreement on Investment, on which he has been campaigning hard.

Organisers, including Phillip Adams who initiated the lectures, had to change the venue three times to accommodate demand for seats. Of the Howard Government Dunstan said: "In the MAI they will cast us into a position where there are no internationally enforceable means to limit marketplace injustices, no representative or accountable body with any power, no protection of any kind. . . We must reply that we will intervene - we will intervene to retain a right to a say in our own future, to temper the marketplace by action to provide services and social justice, retain institutional safeguards and provide needed development in the community interest: for we know that we intervene or we sink." (The Australian, 23/4/98).


PRIVATISING THE SNOWY RIVER SCHEME

Federal Government plans to sell off the Snowy Mountains Hydro-Electric Scheme, the first major post-war infrastructure project, which is creating alarm in some of the downstream irrigation areas. The "privatisation" of the Snowy River Scheme may mean that those selling the electricity have complete control of when the water is released, according to the prices available for electricity fed into the national grid. If this does not happen to coincide with the irrigation requirements of thousands of farmers in the Murray Valley, too bad!
This is economic rationalism in action.

The NSW and Victorian State Governments are holding a Snowy Water Inquiry to review the water sharing arrangements between irrigation, the environment and electricity generation before the privatisation takes place. Country News provided details of the Enquiry, headed by former NSW Government Minister Robert Webster. Submissions will be accepted from the public until May 22nd, and if there is sufficient interest, public hearings will be held in Cobram, Cooma, Deniliquin, Griffith, Orbost and Swan Hill in late June or July. A report is due to be presented to the governments on September 30th.

An alliance between farming and industry groups concerned about the corporatisation of the Snowy has been formed (Murray Valley Voice), and led by Deniliquin businessman Rob Brown. (Telephone: [03] 5881 1866.) This group is obviously asking for local interest and support, and intends to make a submission.

Those making submissions are invited to indicate whether they would like to appear at a public hearing to express their views. For information on the Inquiry: The Executive Officer, Snowy Water Inquiry, Level 25, Governor Macquarie Tower, 1 Farrer Place, Sydney, 2000. Telephone: (02) 9228 4935. It is possible that information may also be available from the toll-free number: 1800 633 751.


WHY IS THE WORLD BANK INTERESTED?

Country News (20/4/98) also carries an advertisement from Goulburn-Murray Water indicating that the World Bank will have a group touring the Snowy Mountains Hydro-Electric Scheme, studying Murray Basin initiatives and regional irrigation schemes. Goulburn-Murray Water says that the aim of the World Bank tour is "to present a showcase of reform in water and natural resource management in Australia that can then be considered for applicability in World Bank target countries".

We do not know what this means, or what significance it might have for the privatisation programme. But we suggest that those whose livelihood depends upon Snowy water seek information about this inquiry. The reserves from the Snowy Hydro Scheme supply 40% of the water which goes into the irrigation region, and make the difference between growing crops or suffering drought.


FROM THE PRESS

"The absence of any Asian faces among the striking wharfies is ominously curious. Surely the Maritime Union of multicultural Australia doesn't apply a Hansonite anti-Asian discrimination policy to its union membership applicants? Does it, Mr. Coombs?" Otto Kelfkens, Birchgrove, NSW; The Australian, 22/4/98.

"I felt ashamed reading the letter of Stephen Baker (Cut Defence Spending. 11/4) which spells out that he would rationalise defence, whatever that means.
"No one denies that there have been problems with the Jindalee Over-the-Horizon Radar System, and with the Collins class submarines, but we have been dealing with advanced technology not used before.
"There are many people in this country who believe that our defence spending has been trimmed to the bone, and any further cuts could put the nation at risk. Mr. Baker and his "Friends of the Earth" whoever they are should move in on the accountability of the Australian and Torres Straight Islander Commission. If that job were done properly, there would be plenty left for the environment.
"Yes, Mr. Baker, we have not been invaded, attacked or lost any territory to an aggressor, but to keep taking a punt on that scenario would be a criminal act on behalf of Government." B.C. Ruxton, Victorian President, RSL, The Australian, 27/4/98.

© Published by the Australian League of Rights, P.O. Box 27 Happy Valley, SA 5159