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12 March 1999. Thought for the Week: "The World Trade Organisation is another bureaucracy whose functionaries will be largely autonomous. They report to 120 nations, and therefore, in practice, to nobody . . . America and every European nation will be handing over ultimate control of its economy to an unelected, uncontrolled group of international bureaucrats."
Sir James Goldsmith, "The Trap"
THE DEEPER IMPLICATIONS OF THE STOCK MARKET BOOM
by Eric D. Butler
Every recorded share market boom in history has been related to an expansion in the money supply. The Australia land boom of the 1890s was fuelled by the trading banks of the period, numbers of these eventually having to close their doors. The bankruptcies of the banks was the result of an excessive expansion of credit not backed by gold, this generally accepted at the time as the "standard" backing for all money, including the notes which the banks of the period were also issuing.
Students of economic history will recall that back in the period leading up to the Great Depression, the term known as "margin lending" to stock and share investors became a major feature of the American scene. Coinciding with the start of the current share market boom, the Commonwealth Bank has been offering "lower entry margin loans". In essence the Commonwealth Bank is attempting to get more business for the smaller investors by reducing the interest rate it is prepared to charge on "margin" lending.
The Commonwealth Bank suggests to investors
if they are prepared to gamble, or risk losing a big percentage
of the shares they want to buy, the Commonwealth Bank was
offering a loan at 7.65%. The investor has to borrow at least
$2,000 and take out a $20,000 line of credit. With the prospect
of ever-increasing prices for shares, it is not surprising
that large numbers see the whole process as something equivalent
to something for nothing.
Early this year, the Perth W.A., manager of the stock broking firm of J.B. were attempting to warn of dangers ahead concerning a process based upon increasing debt. Well-known financial writer Terry McCrann is one of the first to warn that the huge jump in stock market prices is based on debt expansion. There is certainly A short term "boost" to the economy, which the Federal Government welcomes as further evidence that its policies are successful.
One of the most disturbing features of what is happening is that large numbers are being "sucked in" by what is happening. It is only a few short years ago that tens of thousands were "sucked in" by the Poseidon share boom. Shares, which originally could be obtained for a few cents, soared upwards. Even the financial advisers to the Queen joined the lemming-like rush. It is my view that it is not a question of if the present share boom will end in more disaster, but when.
WHICH IS RIGHT?
by Jeremy Lee
Australia has just recorded its biggest Current Account Deficit in history. The December quarter showed a deficit of just under $8 billion - about $3.5 million an hour over the period. This means that, between the date the Coalition was elected on October 2nd and the end of 1998, the Foreign Debt increased by $440 per head of population, or by $1,760 for the average mum, dad and two kids. What's more, it is the period ahead in which the impact of the Asian "meltdown" is likely to hit Australia hardest.
So the ever-escalating Current Account Deficit is not going to go away, taking our Foreign Debt to dizzying heights. Despite all this, the Treasurer has a hard time containing himself when he claims Australia is the fastest growing economy in the world. Just what does that mean? Simply, that Australians continue to borrow themselves into a black hole tomorrow in order to buy today.
Thank goodness, more and more are questioning this insane state of affairs. Michael Duffey (Courier Mail, Qld., 6/3/99) wrote: "The economy is the principle concern of Australian governments these days. Governments take credit when the business cycle is up, and are blamed when it is down."
Using economists, they claim to understand and, to some extent, to control the economy, and intervene with policies to stimulate growth and attack high inflation and unemployment, aiming to level out booms and busts. "But what if all this is wrong?. . . Many economists today, for example, view economic forecasting as a disgrace to their profession... Treasurer Costello, in his Yogi Bear (or is it Goofy?) view of economics, is drastically at odds with Dr. David Korten, who gave the E.F. Schumacher ("Small Is Beautiful") Address at Bristol, UK, on October 17th last year. Korten has a few credentials - an MA in international business, a Ph.D from the Stanford Business School, a stint of teaching at Harvard, and 15 years in the aid field with the Ford Foundation and USAID. He is totally disillusioned with what he saw.
His Address included the following: "For those of us who grew up believing capitalism is the foundation of democracy, market freedom, and the good life it has been a rude awakening to realise that under capitalism, democracy is now for sale to the highest bidder. The market is centrally planned by global mega-corporations larger than most countries. Denying one's brothers and sisters a source of livelihood is now rewarded as an economic virtue, and the destruction of nature and life to make money for the already rich is treated as progress.
The world is now ruled by a global financial casino staffed by faceless bankers and hedge fund speculators who operate with a herd mentality in the shadowy world of global finance. Each day they move more than two trillion dollars around the world in search of quick profits and safe havens sending exchange rates and stock markets into wild gyrations wholly unrelated to any underlying economic reality. With abandon they make and break national economies, buy and sell corporations, and hold the most powerful politicians hostage to their interests. When their bets pay off they claim the winnings as their own. When they lose, they run to governments and public institutions to protect them against loss with pronouncements about how the poor must tighten their belts and become more fiscally prudent.
In the United States, the media keep the public preoccupied with the details of the President's sex life and calls for his impeachment for lying about an inconsequential affair. Meanwhile, Congress and the President are working out of view to push through funding increases for the IMF to bail out the banks who put the entire global financial system at risk with reckless lending. They are advancing financial deregulation to encourage even more reckless financial speculation. And they are negotiating international agreements such as the Multilateral Agreement on Investment intended to make the world safe for financial speculators by preventing governments from intervening to regulate their activities...An example of this manipulation to "bail out the banks" was given in On Target last week, with Max Walsh's article on the Federal Reserve's "rescue" of LTCM. But all this is water off Yogi's back. The "fundamentals" are sound!
Dr. Korten's prescriptions for reform are refreshing - abolish the World Trade Organisation and the World Bank. He adds: ".... the challenge is to replace the global capitalist economy with a properly regulated and locally rooted market economy that invests in the regeneration of living capital, increases net beneficial economic output, distributes the output justly and equitably to meet the basic needs of everyone, strengthens the institutions of democracy and the market, and returns money to its proper role as the servant of productive activity.
It should favour smaller local enterprise
over global corporations, encourage local ownership, penalise
financial speculation, and give priority to meeting the basic
needs of the many over providing luxuries and diversions for
the wealthy few. In most aspects it should do exactly the
opposite of what the global capitalist economy is doing. Most
of the responsibility and initiative must come from local
and national levels...
FARMERS BATTERED WORLDWIDE
In mid-November last year On Target
reported on the collapse of farm prices in Britain and Europe,
coinciding with the economic downturn and the breakdown in
the Russian economy. This year we have reported on the climbing
farm debt in Australia and the continuing loss of farmers.
On February 22nd, 1999, Queensland's Rural Weekly,
under the heading RURAL US IS FACING SOCIAL CATASTROPHE, reported:
Glickman said the weakness in the farm economy showed no signs of turning around soon, and he said thousands of US producers could tumble into bankruptcy this year. "We cannot allow a system of agricultural Darwinism to prevail, with the survival of the fittest becoming the survival of the largest."
Mr. Glickman should ask the Wall Street
banks to create more money and lend it to the world's starving,
so that they can buy American wheat! When the starving cannot
repay the debts, the banks can collect from American taxpayers!
The taxpayers can pass the cost on to the farmers - if they
haven't already been forced off the land!
DEATH OF DON DUNSTANThe death of former South Australian Labor Premier Dunstan was marked at length by the national press. A South Australian writer makes the following comment "I thought Eric Butler did an excellent summary of the revelations which came forth about the death of Don Dunstan. . . Nearly all the important staff writer [of The Advertiser] seem to have added their contribution, and unfailingly supported much, if not all, Dunstan stood for. Indeed, it tells us more about the journalists than Dunstan whose politics in South Australia have been only too obvious over the past 40 years."
ELECTIONS NEAR AND FAR
New South Wales will go to the polls in a State election this month is to be One Nation's final swansong. They have a fairer chance in NSW, where there is voluntary preferential voting. The new Liberal leader, Kerry Chikarovski, has proposed that farmers should be eligible for low-interest loans. But she is allocating a paltry $5 million for the project - much less than One Nation's Federal election policy of $150 million for farmers and small businesses. Is Ms. Chikarovski worried that she will be accused of "printing-money" if she goes any further?
The ballot paper for the NSW Upper House measures about one square metre, with 92 political parties registered and standing. Parties include "Jobs for Everyone - Futures for All", "Make Millionaires Pay More Tax", "Stop the Banks Ripping Us off', "Sack Them All" and the "Three Day Weekend Party". Sounds as though they all deserve a vote!
Meanwhile, South Africa goes to the polls on June 2nd. There will, apparently, be over 40 political parties standing, although the ANC is expected to sweep back into office. An article by Jeremy Lovell in Capetown (Courier-Mail, Qld., 6/3/99) gave some idea of the environment in what is a disintegrating society in South Africa: " Violent crime is rising, unemployment is around 30 percent, corruption in government is rife, schools are starved of books, and the AIDS crisis is out of control..." - which is now the unhappy general scene in Africa from the Cape to Cairo.
A NEW BUG
With the welter of confusion, apprehension
and conflicting evidence over the now highly-publicised Millennium
Y2K bug, an even more ominous development has appeared, now
gaining attention from security services, the military as
well as business. A new, simple and inexpensive device has
been developed using electromagnetic technology, capable of
instantly destroying all computerised applications over wide
areas. The computer section of The Australian (23/2/99)
described it thus:
If they're going to start such an unsavory business, we hope they don't forget the Tax Department! A world without computers? Perhaps there's hope for us yet!
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