#kneejerk

Surely lightning can’t strike twice, RBA?

The video posted here is of then Treasury Secretary Hank Paulson who steered the US financial system through the GFC. He is speaking to the Financial Services Committee in 2009. Perhaps the most important quote was the one that world central banks failed to heed –

Our next task is to address the problems in the financial system through a reform program that fixes our outdated financial regulatory structure and that provides strong measures to address other flaws and excesses.

Central banks across the globe honestly believe in fairytales to think they have learnt the lessons of 2008 or 2000 for that matter. Sadly they continue to use the only tool they possess – a hammer – which would be great if every problem they encountered was actually a nail.

When will people realise that had central banks practised prudent monetary policy over the past 20 years, they would possess the ammunition to be able to effectively steer the economy through Coronavirus? Everything the RBA and government are deploying is too little and too late. They never ran proper crisis scenarios and are now scrambling to cobble together an ill-contrived strategy wasting $10s of billions in the process all at our expense.

Central banks only have one role – to support markets with consistently sound monetary policy that creates confidence in the marketplace. Not run around like headless chooks and make knee-jerk responses and follow other central banks off a cliff like lemmings to disguise their own incompetency. The willful negligence displayed by our monetary authorities needs to be recognised. The RBA has got the economy trapped in a housing bubble of their own creation.

So when the RBA talks about, “Australia’s financial system is resilient and it is well placed to deal with the effects of the coronavirus” it couldn’t be further from the truth.

While it is true to say that Australia is relatively more healthy than other economies in terms of the percentage of GDP in national debt, the problem is we rely on the health of our foreign neighbours. 37.5% of our exports go to China. What is the first thing that will happen when our trading partners suffer economic weakness at home? Nations that exercise common sense will look to push domestic production and supply so as to boost their local economies. It is a natural process.

Sadly the RBA, APRA and ASIC have been too busy convincing us that climate change was a priority rather than getting businesses to focus on sensible commercially viable shareholder-friendly strategies. Some groups like the AMA have been encouraged to parade their climate alarmist virtues on breakfast TV.

Unfortunately, instead of focusing on fireproofing our establishments from ruthless cutthroat overseas competitors, our businesses and commerce chambers waste time on chasing equality and diversity targets instead of striving to just be the “best in class”.

Sure, we may have certain raw materials (that the lunatic Greens and Extinction Rebellion protestors will do their best to shut down) that China or other nations will rely on, our service sector weighted economy will be crushed. Almost $250bn, a fifth of our GDP, derives from exports.

Just look at Australian business investment as a % of GDP dwindle at 1994 lows. Mining, engineering, machinery and even building investment are nowhere.

That means our ridiculously high level of personal debt will become a problem. It stands at 180% of GDP as recorded by the RBA on p.7 of its Chart Pack. Most of this debt is linked to housing. Housing prices should crater should coronavirus not be solved in short order. Delinquencies will surge. Families that are funding a mortgage with two incomes may end up being forced to do in with one. Then we cut our gym memberships, Foxtel and stop buying coffee from our local cafe. It is the chain reaction we need to be wary of.

That will work wonders for banks with 60-70% mortgage exposure and precious little equity to offset any ructions in housing prices. If you thought Japan was bad after its bubble collapsed – you ain’t seen nothing yet. By the time this is over we could well see Australian banks begging for bailouts. Note that cutting interest rates further kills interest rate spreads and smacks the dollar which hikes the cost of wholesale funding which these banks heavily rely on.

Yet our RBA knows that it must choose the lesser of two evils. It needs to keep the bubble inflated at all costs because the blood that would come from bank failure is just not worth contemplating. Maybe if they had listened to Hank Paulson they might have been able to hold their heads high rather than showing off, the fool’s version of glory.

Milton Friedman once said,

The power to determine the quantity of money… is too important, too pervasive, to be exercised by a few people, however public-spirited, if there is any feasible alternative. There is no need for such arbitrary power… Any system which gives so much power and so much discretion to a few men, [so] that mistakes – excusable or not – can have such far-reaching effects, is a bad system. It is a bad system to believers in freedom just because it gives a few men such power without any effective check by the body politic – this is the key political argument against an independent central bank.

How right he was. When the economy tanks, await the RBA and government pointing fingers at each other when both failed to avert the coming crisis which had been so bleeding obvious for so long.

Batten down your hatches.

Truth 1, Identity politics -1

Jussie Smollett gave us the perfect example of why identity politics is so poisonous. Here was a man potentially willing to make a claim against two innocent white people and jail them for up to 20 years for hate crimes not committed just to bump his salary and smear 63mn Trump supporters at the same time. Smollett appears to be exactly what he condemns.

Identity politics creates a marketplace for victimhood. CM made these very remarks as the #metoo market started to gain momentum 18 months ago. How many men have been wrongfully accused of crimes they haven’t committed? Has anything happened to those women who admitted they lied about SCJ Brett Kavanaugh sexually assaulting them? Are we just to believe all women? All LGBT without question? Do activists truly speak on behalf of all minorities? Of course not. The truth is that the overwhelming majority of women, LGBT and minorities are fair minded people. Most don’t tie themselves up in this nonsense.

Look at how quickly Kamala Harris, Elizabeth Warren, Cory Booker, Maxine Waters & Nancy Pelosi jumped behind Jussie to condemn the racist MAGA lynch mob. No facts. Just feelings. More ammo to condemn Trump. Instead of openly apologizing to those they hastily condemned, they did the exact opposite – dishonorably deleting the tweets which showed them up for the double standards they clearly uphold (and we worry about Trump’s twitchy finger on the nuke button with knee-jerkers like this?!?). So out of touch are the liberals who blindly backed the false claim, that Jussie Smollett even lost serial SJW Alyssa Milano’s support. That’s a miracle in itself.

What of the $100,000s the Chicago Police Department was forced to spend to investigate a lie? What thought did Smollett give real victims of crime to divert resources away just to promote his own career? The CPD Chief was bang on the money with the selfish act.

Smollett’s Class 4 felony carries up to a 1.5 year jail term. If he is found guilty, he should serve the maximum penalty possible. Being gay or black should play no part in sentencing. All crimes should be equal in front of the law regardless of political affiliation, race, gender, sexual proclivity or any other identity marker.

On the plus side, Smollett has substantially undermined the identity politics industry. This, like Covington, will be a gift that keeps giving for libertarians. The numerous Democratic presidential nominees only showed how dysfunctional they are to champion identity ahead of character. This wasn’t about policy and praying for a united America. It was all about tribalism. All they did was make their base out to be fools.

Some suggested there be leniency shown toward Smollett in sentencing. There in lies the problem. The media are so desperate to run narratives that fact checking be damned. So frothing at the mouth have they become that anything will do if it can smear those who hold different opinions. How soon the repentant media forgot the promises over their mistakes surrounding Covington before their derangement syndrome got the better of them again.

The really sad part is that the media were so desperate that Smollett’s original hoax was true that they fell apart when it was found to be a lie. Disappointment when the narrative fails to back up subjective views. The mainstream media want disunity, discord and animosity to feed their ratings. Enemy of the people? Certainly not friends.

Perhaps the irony in all of this is that had Smollett truly cared to stage a believable attack he should have paid white actors to do it. The problem might have have been that they cost substantially more than the two gentlemen he paid by personal cheque (talk about leaving paper trails). Proves the old adage, “you get what you pay for.” False economy in a nutshell.

Had Smollett embraced libertarian values of meritocracy, hard work and opportunity he may have earned his pay rise legitimately. By embracing liberal values of perpetual victimhood by throwing 63mn people under a bus, he has now self-inflicted his own demise. Just desserts, even in prison.