Every day a golden egg

When doing time in economics classes, I was taught that if I wanted to sell the item with the highest gross profit margin, I should sell cups of coffee. The substance needed costs about 2 cents to buy and you can sell it for $3 because you mixed it up with free water and kept it warm. Sell $3’000 worth and you’ll have $20 cost of goods sold, or in other words a profit margin of 99.33%, which equates to 14900% mark up.

That is indeed impressive. Not many retail items can claim such lucrative attributes, as a matter of fact I can think of only one other, bank fees.

Erwin Fletcher wants to put aside some money, build up a deposit so he can buy a family home. The idea is that every fortnight, shortly after Erwin's employer deposits the wages into his normal savings account, a certain amount, say $200 dollars, are transferred to a special saver account. So he goes to his bank branch and asks the staff to set up an automatic transfer every fortnight. No problems Sir.

It all goes well for months and months, but then one fortnight he did have only $180 in his regular account, just short of the $200 that is routinely debited. The bank charges him a $30 fee for not having had enough money in the account to do the transfer.

Let’s keep in mind that no bank employee had to move a finger. A computer tried to move money between accounts, but an IF statement in its program stopped the transactions as there weren't sufficient funds. What was the cost to the bank? Nil. But they charged Erwin $30 dollars. The fact that Erwin’s account did not have sufficient funds to be transferred did not inconvenience anyone. He didn’t borrow money from the bank or any third party. A computer program simply did what it was designed to do and not transferred an arranged sum.

The cost of this attempted transaction by the bank’s computer amounts to $0, sold to the customer for $30. Happening thousands of times a day across the nation. This, ladies and gentlemen, is one of the many rip off mechanisms the banks employ to make the obscene profits they are known for.

I guess it takes a banker to defend one, and so the Chief of all Australian bankers, Reserve Bank governor Glenn Stevens, had the following to say at last weeks hearing at the House of Reps committee on Economics:

"While I know, in some ways, people feel aggrieved that banks are highly profitable, there are other banks around the world that are bearing large losses and because of that, they're not in a position to make loans," Mr Stevens said.

"If you assess what's more preferable, the banks we have are far more preferable."

Whilst it is true that it is preferable to have banks which don’t make losses, apologists like Glenn Stevens translate this into banks must reap exorbitant profits.

The banks RBA governor Stevens is referring to, the ones who are currently under liquidity pressure, are not in dire straits because they failed to charge their customers enough bank fees, they are suffering big write offs due to their overpaid management teams not doing their homework and chose to invest borrowed money in crappy repackaged US housing loans, and are now called up on it.

And it’s not, as Stevens seems to imply, that only “other banks around the world” were sucked into the vortex of greed and are now bit by bit spat out at the other end with monster losses, there are potentially plenty of them right here at home. A couple of weeks ago I pointed in a post at the dilemma the Australian banking sector might be facing. According to some analysts, the risk exposure Down Under could be far greater than widely admitted, with the chances being moderately high that the current global liquidity crisis will also be forcing Australian banks to bring out their dead over the next two years.

Businesses, not unlike farmers, know that you gotta make hay while the sun shines, but banks, being masters in the art of cashing in, have figured out a way how to stuff their money sacks no matter which way the weather turns out. The only thing that could change that, is when asset prices are falling. And that is essentially what is happening in the US.

Our bankers know they are not immune to being caught in the global wave of balance sheet write offs due to the contracting US economy and its consequent deflating housing bubble. And so, with an approving RBA governor Glenn Stevens confirming this, Australian banks are already passing on their as yet unidentified but plausible losses to the customers in any shape or form they can. Be that with interest rate rises above the official rate or through ridiculous fees and charges just to have a computer program tell you how much money you allegedly have or don’t have.

Every time someone misses a mortgage payment or hasn’t got enough money in the account to cover an automatic transfer, the banks earn money, not even asking, they just deduct their fee out of your balance. What are the cows in the steeple aka the customers gonna do? Switch banks? They all do it. Massive sums are being raked in that way Australia wide:

Committee chairman Craig Thomson said annual bank profits had climbed to about $4 billion, up from about $1 billion five years ago.

That means quadrupled in 5 years, across the industry, all competitors in unison. Are there four times more customers in the world? No, banks making a packet is due to existing customers simply being milked more intensely. To get an understanding of the banks profit curves, I chose one of the larger banks, one with a pretty consumer friendly name, the Commonwealth Bank, the one that doesn’t like Mad Max koalas in its advertising, which in their eyes makes all the difference.

On the right is a graph I put together on how the CBA's net profits have developed over the past 10 years. And yes, this was your money once, at least if you are CBA customer.

According to the Reserve Bank’s March 07 Financial Stability Review, Australia’s 5 biggest banks made in 2006 a combined after tax profit of 24 Billion dollars. As a comparison, that is 10 times the amount of the federal government’s annual cash surplus, or close to being twice of what Australia spends on defense.

Profits are coming out of their ears, and yet, even in times when growing sections in the Australian housing market are experiencing some kind of mortgage stress, they have no scruples whatsoever to increase interest rates above RBA figures and mushrooming the earnings from fees & other charges.

The real idiocy about it is that banks are actually playing us all for fools and continuously get away with it. Supposedly their role is to be the middle men between the saver and the borrower. B deposits money with the bank, which A then loans, with the bank earnings being the difference between interest earned and paid. That however is not how the scheme is designed. I mean ask yourself, have you ever received a letter from your bank saying your deposited funds were unavailable for the time being because they lend it to someone else?

This is what someone who knows a little bit about the plot had to say:

"Banks lend by creating credit. They create the means of payment out of nothing."
- Sir Ralph Hawtrey, Secretary of the British Treasury during the 1930’s

This magic trick has a name, its called fractional reserve banking. How it works and what it means for Erwin Fletcher, is worth its own post. Hopefully I will get around to it in the not too distant future.

The George & Kevin Show

The Australian Prime Minister Kevin “Busy Beaver” Rudd is in Washington. He had a bit of a meeting with the US leader, George Bush Jr., and their mutual understanding was omnipresent. It came as no surprise then when both cowboys in their press conference seem to read from the same script. And true to his word, that his administration will be more “pro-active” in world politics, Kevin went straight for it:

Ahead of the NATO summit in Bucharest next week, Mr Rudd re-emphasised the need for the Europeans to play a bigger role in the more dangerous south of Afghanistan.

Let’s just get this straight. The Australian Prime Minister complains about the European troop commitment to the invasion / occupation of Afghanistan. I am not sure when it was the last time Kevin or his advisors had a glance at the troop numbers supplied by the 40 allied nations to ISAF, the NATO-led mission in Afghanistan, but here are some pretty recent figures:

To put these numbers in perspective, of the 39 countries contributing to ISAF, 75% are European who combined provide some 23’000 of the total of 43’000 allied soldiers that make up ISAF, that is more than half the boots on the ground. Looking at the 8 countries who contribute more personnel & resources than Australia, 6 are European. So why this constant blame game?

What is the aim of insinuating that if it weren’t for the lack of courage by the European contingent, there would have been more progress in NATO’s Afghan adventure?

Although it was the US administration which initiated the whole sorry affair that the war in Afghanistan has become, with 23’000 European troops their involvement exceeds the US contribution in terms of man power by 50%.

But then again, Kevin’s remark was not designed to mock the troop numbers of our European allies, but more likely to suggest that the ones that were there are underperforming. Something along the lines of Europeans are cowardly hiding in the “quiet North West” while the Mericans, Canadians & Australians have to do all the fighting in the “dangerous South East”.

According to a CNN count, as of March 28, 2008 there have been 777 coalition deaths – listed in order of casualty numbers:

Whilst the casualty numbers seem to imply indeed that US troops are paying a higher price than many of their European allies, European countries have lost more than 200 of their soldiers in the invasion / occupation of Afghanistan, which is more than a quarter of all allied casualties. Australia had to bemoan luckily only 4 thereof.

This ISAF map shows where the respective nations have deployed their troops. Should, as repeatedly requested by US officials and now not surprisingly Kevin Rudd, Europeans take on a greater role in the south eastern end of Afghanistan and move their units into those hard fought for areas, who would fill the void in the north west? With the Germans, Spaniards, Dutch, French & Italians all moving south, would the Mericans and Canadians move north, in effect swapping jobs with the Europeans? Sounds like rotating NATO troops along the lines of “Come on guys, you do the killing for a while, we’re due for a holiday.”

More from Kevin on that issue:

"We need to sign up a common script both military and civil on how we actually prosecute and succeed in this conflict," he said.

If I read that correctly then they don’t have yet a common strategy on how to succeed in Afghanistan. And that after 6 years!!! My o my, where will this end.

But then again, with two such mighty good leaders in place, I am almost certain we will have world peace in no time at all. Check out their credentials:

In what was often a jovial press conference, Mr Bush pegged Mr Rudd as a straight-shooter who was a strategic thinker and basically a decent guy.

And he was quick to agree that he too was befitting of the moniker "Man of Steel", a term he first bestowed on John Howard for his resolve in the war against terror.

Mr Rudd returned the favour by making the President an honorary Queenslander...

Queenslanders must be absolutely stoked with having George Bush as a fellow citizen. The man on whose orders some 100’000 Iraqis had to die will be proudly wearing the Maroons jumper Kevin has given him.

The Blues better watch out, George doesn't like loosing. Before you know it he'll spike NSW onto the axis of evil.

Finally, after all these numbers, sports & politics, and just to wrap this up, here a link to a site that cracked me up when I read it today, Vlads Daily Gloat, the radical Russian with a weakness for anything US American.

Be afraid, very afraid

Bells were ringing, the choir was singing, and Bishop-man deliverd the Easter lecture to his Christian flock. Let’s see what he had to say:

In his Easter message this weekend, the Anglican Archbishop of Sydney Dr Peter Jensen has warned of the occult.

The Archbishop is particularly concerned about people using the supernatural to contact deceased loved ones.

That’s right dear reader, one of the leading Christians in the country, with a pendant hanging from his neck showing a deceased person on a cross, during a festival celebrating the alleged resurrection of said dead person some 2000 years ago, tells his congregation that to believe someone could establish contact with people who passed away is very silly, supernatural, indeed witchcraft. Mwuahh ha, ha, ha, that is delicious.

A man whose whole professional reality is based on being able to communicate with a dead person, whose religion is based on the idea to promise a life after death, argues that we should be concerned about people trying to contact the deceased. The butcher telling shoppers not to make gravy.

The Archbishop then continued his sermon by sharing with his sheeple the initial finding of his investigation into the phenomenon of people evoking the spirits:

Dr Jensen told ABC radio's AM program there has been a surge of interest non-traditional religions.

"There's become a great deal more freedom than there used to be decades ago, with mind and spirit stuff; new age religions," he said.

"All the sort of stuff you see very prominently in book stores.”

Competition angst, that’s what this is, and as per Religion 101, competition needs to be stomped out. When operating in the holy industry, the standard weapon of choice to smear opposition is to pass judgment and brand them as sects, or as in Jensen’s case, new aged spirit stuff.

My hypocrisy meter almost maxed out when I took a reading on Jensen’s Easter message. Seemingly totally oblivious to the fact that his own religion was once upon a time considered an occult movement, with a guru gathering followers, which then set forth to convince others of their self-righteous claim to be the new, the one true religion, the Archbishop chooses to debase other people’s believe systems coz they aren’t quite as antique as his own.

It appears the priest’s line of reasoning is straight forward – The older an religion, the more believable and true it is. However, following his logic, we should all be converting to Hinduism, the religion with the oldest recorded roots, predating Sumerian, Egyptian and Babylonian cultures. By world religion standards, Christianity and Islam are new kids on the block, new age spirit stuff so to say.

But the Bishop kept the best part for last, where he reveals who his audience should blame for re-birthing this heretic past time of trying to get in contact with the dead. And the culprits are:

"But there's also been a large migrant intake into this country from people who haven't been impacted by Western cynical secularism, but culturally have a strong belief in the afterlife and in supernatural beings; in ghosts and spirits.

"And a surprising number of people therefore who are now living in Australia are quite concerned about, and fearful of I think, of this supernatural realm."

Uhh yeah baby, daft migrants with their unwashed believes engaging in voodoo majic, bringing with them from their homelands all those “occult” traditions the Christian missionaries weren’t able to extinct for good. For their good that is, because as most well read people would know, in the Christian life after death model there is nothing to be scared of. Apart from burning eternally in hell.

So, Archbishopman says don’t try to communicate with any souls in the after life, other than Jesus that is - you are allowed to talk to him. Believe in his father and you got nothing to worry about. Remember Adam and Eve, any indiscretion on this part and you won’t make it to heaven, sorry mate, flames on fire for you. Which probably explains why hanging out in your bookstore’s New Age section will lead you to nightmares.

Happy Easter

On wars, banks and love

For years I've been dreaming of going to war with some poor country rich in petroil, you know, making sure there will be enough juice for me and my fleet of cars, but with being stuck in our economic boom times, my work schedule simply didn't allow me to start one up. Now that I finally got to the point in my life where I could take some time off, I find out that I also need shit loads of money. According to latest developments, wars need to be paid for.

Iraq, Afghan wars costing $US3 trillion: experts

With the fifth anniversary of the start of the Iraq war just days away, its cost is becoming clearer.

Ahead of that anniversary, two prominent US economists have come up with a new estimate on the cost to the economy of the wars in both Iraq and Afghanistan. That figure is $US3 trillion ($3.22 trillion)….

The estimated cost so far of Australia's involvement in Iraq and Afghanistan is roughly $3 billion. But Robert Ayson, the director of studies at the Australian National University's Strategic and Defence Studies Centre, says he expects that figure to rise significantly.

Damn, trillions.... thats how many zeros? I'd be mighty surprised should my master card allow me that much. Not with the current global lending crisis anyway, so I guess my war/invasion of target country X has to wait a while, at least until I manage to save up enough dough for a deposit.

I hope you understand that I can't give you exact details about which nation I have in mind. Chances are the country's spies would find out about my invasion plans, their armed forces then propping up their defenses, which would make my job so much harder when its finally time to strike. I can reveal though that it is on an axis of sort, which makes it a very dangerous country.

Lucky here in Australia we had 11 consecutive years of Liberal Party rule, and as every privately schooled kid knows, a Lib government means fat times. So saving up the necessary deposit for my war should be a breeze, with business roaring and interest rates as high as they are. The Australian consumers are loaded, cashed up with real estate equity to a degree that they need to be restraint with rising interest rates. Rivers of honey and milk flowing everywhere.

We don't have no bubble, we won't get no trouble, oh yeah yeah yeah
Let the good times roll, Resources 'R Us
From aluminum to zinc, we got every thing, oh yeah yeah yeah

Wouldn't want to save up for my war chest anywhere else but in Oz, least of all places in the USA. Across the ocean the cogs in the economic wheels are creaking, creating this distinct grinding sound investors dread. It comes therefore as no surprise that Lady Prosperity decided she'll move out for a while.

The other noise thats starting to deafen US Americans is that of chicken coming home to roost. No point in pretending that their dilemma isn't home made, pissing against the wind requires that one changes pants from time to time. In the case of the US this means the entire financial system needs a new outfit, probably even a nappy change.

From riches to rags, the ol' classic. Once the most affluent nation in the known universe, today a banana republic where the Federal Reserve Bank has to resort to having helicopters hovering above Wall Street dropping cash on the nearly bankrupt. Providing massive loans to troubled financial institutions in return for nearly worthless mortgage securities.

Economist Professor Steve Keen, from the University of Western Sydney, made the following observations in an interview on the ABC's World Today:

ELEANOR HALL: What's your view? Is the United States already in recession?

STEVE KEEN: I'm sure it's in recession right now. It's a question of how deep it goes down, and I expect an extremely deep recession. And I'm noticing that quite a few commentators are now coming around to their view. They also suspect a severe recession to occur in America, and we have similar forces afoot in Australia.

We are benefiting from the highest terms of trade in our history at the moment. We're simultaneously running an enormous current account deficit, which is really a crazy combination.

So, we're very heavily reliant upon those prices remaining at unprecedented levels, and they will fall if there... actually there'll have to be a fall in those prices if America goes into recession, and then feeds through to China's demand for our resources and so on. That'll be very problematic for our currency and for our economy.

ELEANOR HALL: When will that hit, do you think?

STEVE KEEN: It's got to be in the next two years. Timing that's any more accurately than that is simply impossible because the whole timing depends upon when we turn around from accepting more debt to trying to pay our debt levels down.

Uhh Lordy, if I understand him right then Keen suggests that Australia will face a similar carnage to what the US is experiencing at the moment, all within the next two years. A world wide economic downturn, triggered by the unfolding US economic collapse, will reduce global demand enough to send commodity prices to lows not seen for quite some time, hitting Australia right in the export eye.

But lucky Australian families were smart enough to stash away their hard earned cash during the fat years, handing it over to people they didn't really know, but who have slick haircuts so expensive looking that who ever sported one had to be a financial mastermind. They tend to work in multi-story high rises, the biggest buildings in town, Australian banks and finance companies.

The really smart bank employees, who not just have expensive haircuts but also wear posh suits and swishy shoes, who have proper titles on their office doors, are normally found from the fourth floor up. They need to be high enough above ground to escape the blaring masses, coz when you make difficult financial decisions - like how to invest your clients’ money – you want to be able to concentrate as much as possible.

Those men and women are pedigree financial planners, making sure Australian retirement eggs and people’s savings are safe and sound. Just how secure Australian banks and their investments really are was illustrated in The Australian last week, when Adele Ferguson wrote a noteworthy assessment titled “Gambles in the balance”. Here an excerpt:

All the banks play the derivatives market. The latest Reserve Bank bulletin reveals that the banks' derivative exposure has more than doubled from $5.4 trillion in 2002 to $13.2trillion in December last year. Given the banks' total shareholder value is less than $100 billion, if even 1 per cent of these $13.2trillion derivatives contracts default because third parties get into trouble, the whole shareholder wealth would be wiped out and our banks could be broke.

To put it into perspective, Australia's annual gross domestic product is just more than $1 trillion and the total budget estimate for federal government expenditure in 2006-07 is $200 billion. Remember the Reserve Bank in its quarterly bulletin estimates that the total risk is $140 billion which, again, is more than the banks' total shareholder value.

What do you say to that? The global economy tanking and Australian banks up to their eyeballs exposed to risky debts. Great, a lose/lose situation. With banks leveraged to the degree they are, fat chance of them giving me the credit I need to pull off my planned invasion. On top of that, should the nation's economy really go as pear shaped as the author of the above article assumes it will, I wouldn't even be able to save up the needed deposit. How on earth am I ever meant to pay for my war?

The new Joint Fighter F-35 Lightning II costs around $200 million a piece, and my military adviser told me I need at least three of them. Plus plenty of cash for rockets, guns and bribery. All these figures confuse the hell out of me, so I made an appointment with my accountant.

We met last week in his office and discussed the plans and strategy. He was quite fond of my idea to kick of the invasion with a big bang, followed by more bangs, and promised me he would have a look into the costings of such an operation. Today he e-mailed me an excel spreadsheet with a recommended budget.

Far out brussels sprout, my jaw dropped to knee height when I opened it. The bottom figure, the one that is double underlined, had so many zeros I have to assume it is a trillion. And then, the comedian he is, he left me a footnote telling me that he reckons that with the current liquidity crisis and all I will have a hard time financing my war. As if I wouldn't know.

Where is Prescott Bush when you need him? He'd love to help me out, I am sure.

Bigot Heaven? Staying at Haven!

The following line is the marketing slogan of a hostel in Alice Springs:

Haven backpackers is Alice Springs newest backpackers resort, stylish, funky, super clean and with the most friendly welcome possible.

They forgot to add "If you are not Aboriginal, that is." Coz if you are an Indigenous person, and another guest doesn't like your skin color, you are out. No friendly welcome, but a stylish "Fuck Off" is what you'll get. Because super clean means white. How much more funky could it get?

This from Auntie on what went down in the Alice:

An Alice Springs backpacker hostel may face legal action after it turned away a group of Indigenous people because of their skin colour.

The 16 women and children had travelled 300 kilometres from Yuendumu to Alice Springs to train as lifeguards for their community's new swimming pool.

They checked into the Haven Backpackers resort, but a short time later the manager told them that guests already staying there had complained of being scared.

The group included several young mothers and a three-month-old baby. Most were young leaders, chosen specially for their standing in the Yuendumu community.

The resort manager told Bethany Langdon from the Yuendumu Young Leaders program the group would have to leave.

"The manager came out and told me that we weren't suitable to stay there," she told ABC1's Lateline program.

"They said, because you're Aboriginal, other tourists were making complaints that they were scared of us.

"I felt like I wanted to cry, because it made me feel like I wasn't an Australian."

My heart goes out to Bethany and her fellow Traditional Owners who have to endure the deep rooted racism that is still well and truly alive in Oz. I can only imagine the alienation these people must feel - up and down the nation. Let's not kid ourselves, this was by no means a one-off episode. A very well informed source when it comes to racism is of the following opinion:

The Territory's anti-discrimination commissioner Tony Fitzgerald says it's not an isolated incident, but most never get investigated because people don't feel comfortable enough to report them.

A sad affair indeed. In the end the Australian Prime Minister can say sorry as much as he wants to, as long as large sections of the community and businesses keep discriminating against Indigenous folks, his well meant words will be nothing more than window dressing.

The whales are fighting back

A hunting party of mink whales has caught a crew load of Japanese whalers in the Southern Ocean Whalers Sanctuary and killed them for scientific purpose. They then cut them into little pieces, packaged their meat and sold it in Whaleland to their fellow marine creatures (for further scientific research).

The Japanese government is totally outraged, stating that commercial whalers are an endangered species. Harpoonito Massaciri, a spokesperson for the Japanese Department of Fisheries, has requested that the world community is to condemn the killing of Japanese Whalers.

The Orstralian government has since issued a communique voicing its distress regarding the illegal slaughter of Japanese whalers, but maintained that its hands are bound as the mink whales operated in international waters. The Prime Minister’s department has indicated it would send a navy ship into the area to monitor any future events.

In related news, the Japanese coast guards on the whaling ship Nisshin Maru mistook the ship of anti-whaling protesters, the “Steve Irwin”, as an aggressive and murderous whale coming after them. Responding to this illusion they fired shots at the Steve Irwin’s captain, Paul Watson, whose life was only saved thanks to his bullet-proof Kevlar vest.

The Steve Irwin is part of Sea Shepherd Conservation Society’s fleet of protest ships, manned by people who don't wish to see our planet fade away into a globe of dried up rivers and dead seas. I have always admired the sheer guts and determination of Paul Watson's crew, ever since I heard about them some years ago. The assassination attempt on Watson's life is just another reminder that those folks put their lives on the line to protect one of the most gracious creatures on the planet.

Continued inaction of our governments, who apart from attending meaningless conferences to keep up the appearance, means that no one does jack shit to protect the whales. What else but Direct Action as an option is left? If it weren’t for environmental warriors like Paul Watson and his team at the SSCS, there would be no one making a stand against the hideous rape of our seas and its creatures. May the force be with them.

For further info on how things are developing in the Southern Oceans, check out Paul Watson's blog. I reckon each and everyone of us who has the means and willpower to do something should come on board, in any shape or form.

Despite the popular view that the Sea Shepherd attacking another ship with rancid butter on the high seas is piracy, last week I donated some money to the cause via the Sea Shepherd's online payment system. May I herewith invite you too to spare a few bobs and chip in. And hey, while you have your credit card out, I know some people who would be mighty grateful if you'd gave the The International Committee of the Red Cross in Iraq a hand in providing aid to the many millions of refugees and orphans created by the West's brutal invasion. Thanx - There is a good chance you and I are part of the solution.

Update: North Coast Voices has an interesting write up on how the Japanese yet again are trying to pay their way into whale killer heaven. Also some fabulous links to various whale sounds and songs. Check it out.