The past week has been a bit of a shocker economically and while we have a public holiday in Western Australia, watching the ASX 200 tank this morning tends to confirm my comment in the previous article that we are headed for another GFC.
What hasn’t helped Australia has been the recent mining industry bashing and informing us that we don’t own the minerals homily from an out of touch government. Only an idiot would make such a statement publicly, so heavens knows what stimulants the PM’s speech writer was on last week when she addressed the annual Mineral Industry Council dinner in Canberra last Wednesday night. The rub is that she never mentioned who actually owns the minerals, and in case Henry’s readers don’t know, it’s the States who are then acting for the Crown.
Of course we had a reminder of the Trade Unions’ antediluvian attitudes towards foreign workers as well with Senator Doug Cameron’s hyperbowls, apart from the 19th century mind set informing the Prime Minister and the Treasurer. On top of all these inanities the minimum wage has been increased by 2.9% that commentator John Humphries writes will destroy 100,000 jobs. The bruvvers also cheered mightily at the news, presumably at the confirmation that their monopoly of the boiler workers in the engine rooms of the Titanic has been further strengthened. Of course poor people haven’t been helped at all by this policy – for it makes getting a low paid job even harder. However given the high wages the mining industry pays, it might mean we have another 100,000 possible workers to fill the 90,000 or so positions we haven’t been able to fill for a couple of years. ‘Fraid not.
Given the inbuilt inflexibilities of the mining industry regulatory approval rate – it takes roughly five years from discovery to production, everything else being equal – it’s hardly likely these newly unemployed will be absorbed by the mining industry which itself will now contract under the light of reduced Indian and Chinese demand, both relying on western demand. Don’t believe me? This makes, what is it, the fifth commodity bust HWG has had to weather but this time around things are not so auspicious for Australia since we now are in debt, and in recession.
The US QE3 has also yet to rear its ugly head and I suspect the RBA will reduce interest rates again tomorrow as well, so the start to June will round off the year quite nicely. Remember that Spain and Greece have yet to play out, and still our politicians, all social democrats whether in the EU, the US or here in Australia, have yet to recognize that Keynesian economics does not work. Throwing money into the market will not kick start production – all it achieves is inflation. Given our Treasury is dominated by Keynesians, HWG has concluded that the dark economic tunnel he finds himself in has yet to show signs of a light ahead.
Writing about darkness brings about something Anthony Watts uncovered, (or one of his readers did) – a scientific paper by the Hansen/GISS team that notes “we argue that rapid warming in recent decades has been driven mainly by non-CO2 greenhouse gases” and published in 2000. Yes you read right – 2000.
And Henry’s readers wonder why HWG is a climate sceptic?
Sinclair Davidson has also put up an interesting Hansard discussion during Senate Estimates pg 98-100 (H/T Catallaxy Files). Now Henry’s readers can get into the nitty gritty of GOS and GDP etc, but there is one statistic that HWG does not see published often in the media, and that is dividend rate for a mining company. BHP paid two dividends during 2011/12 ($.52 & .51=1.03) (the actual divvies were US$55 per share) fully franked a@ 30%. Share price 4 June was $30.75 which makes it roughly 3.35% ROI.
Now there’s a lot of complexity here but I get more income investing my money in a bank saving account (4.75%) than investing in some BHP shares. So what are they on about saying mining is making obscene profits? Any increase in company tax, whether franked or not, is in reality an increase in tax on the final owner, the shareholder. So rather than increasing the tax take on your superannuation fund investment the guvmint instead taxes the mining company’s profit, which if franked is given to the ATO in any case, and then a smaller dividend to the shareholder, who then gets a credit, and pays tax on a smaller dividend. If the company is 100% locally owned, then the tax is imposed on the shareholders.
But here’s another rub – despite the enormous profits BHP-Billiton is making from its operations, it’s profit is not all that spectacular from an investor’s point of view, especially when you can make more money putting your savings in a bank term deposit. And if the bank invests in BHP-Billiton using your money, then all it does is pass the increased tax to you, the end point in the profit chain, by reducing your interest amount.
All it means is that the guvmint winkled more money of our pockets without actually admitting it. They really do believe we are that stupid? Since overtly taxing us is political suicide, it believes that taxing us indirectly will not be.
… thou shall not steal, even by majority vote …”
— Gary North