John Carter - NSW Cattle producer and Candidate for Pauline Hanson’s United Australia Party NSW Senate in his regular “Straight Talking” article writes:
Land agents continually try to talk a market up. They ignore history when they say, “Values sometimes plateau but they never fallâ€.
I sometimes quote figures taken on the value of a farm in Norfolk (UK) which changed hands 24 times in 300 years. Eight of the vendors sold for less than they had paid for the farm. In the Great Depression, our property fell by 33% in the then currency.
In 1987 country down the road sold for $1000/acre, eight years later an adjoining, better farm sold for $650/acre. Another larger farm was re-sold with a 60% discount in three years. Luck in one’s timing is vital.
I heard a good story on the luck side. Arab Emirates executives recently flew out from Sydney in a helicopter to finalise a land deal on the west of the sandstone curtain. They dismayed the agent by rejecting the property. As they flew back they looked down on a two thousand odd acre valley ringed by cliffs. They said “That’s it, land the helicopterâ€. The pilot did so. Two old cattlemen appeared wondering what was going on. They were told that the visitors wanted their land –with no changes to the old buildings or fences. Their wonder reached new heights when they were told that $12 million was being offered. They accepted. There aren’t many stories like that one.
I see another major correction coming. Australian land and house values are higher than in many areas of the USA and France. We have no Government support for agriculture, a far less reliable rainfall and much lower population pressure. Any return on capital in most areas, particularly as the drought continues –lies only in capital gain. That is unsustainable. Our values make no sense on a Global basis.
The past ten years have seen my land value (in our inflated currency) more than double. Goulburn, with severe long-term water restrictions, sees housing for sale with 100% financing available. This is a replica of the US low doc loans, which are just beginning to unravel.
The past week has seen the head of Wells Fargo—a large US bank; say that real house values in the US are now the worst since the Great Depression. A judge in Ohio ruled against one of the world’s largest banks, which tried to re-possess 12 houses. He ruled that they didn’t have the documentation to prove that they owned the mortgage. The paper shufflers of finance have got so good at spreading risk that they no longer know who owns what!
The Governor of the Bank of England added to the gloom by predicting large falls in the stock exchange and in English housing values.
What has all this got to do with us? Plenty.
National Australia Bank’s announcement that they would make at least two more interest rate rises (despite predicting higher profits!) because of their difficulty in sourcing finance in a credit strapped Western world is a wake up call. Our $545 billion foreign debt is coming home to roost. Heavy debtors must pay a premium.
Recently the world’s central banks (Reserve Banks) created and pumped over $300 billion into the their mates’ banks. The US Federal Reserve added a year’s inflation figure to the money supply -a figure that they stopped publishing in 2005 to conceal the rampant inflation that is destroying the value of their currency. Their dropping interest rates are a sign of sheer panic.
The Argentine Government is in big trouble for doctoring its CPI to keep pension and superannuation payments down. I have long believed that Australia’s CPI has not been a reflection of the increased costs that the people are carrying.
Treasurer Costello added to my belief when he replied to a question from a journalist on rising food prices leading to another interest rate rise. He unwisely quipped “ Don’t worry, we’ll alter the CPI basket weightingsâ€. He should have launched into singing a few bars of “ Don’t cry for me Argentinaâ€.
When the US no longer had enough gold to back the banks in 1971, President Nixon substituted paper. He had the US default on the rest of the World.
The current Governor of the Federal Reserve, Ben Bernanke, has said that he would prevent a recession by printing money round the clock and dropping helicopter loads. The wheelbarrows of Germany’s Weimar Republic come to mind
When vast sums of money are created, that money must be devalued. Economists call it “supply and demand†in every other commodity. The lowering of US interest rates sees even more international investors fleeing the greenback.
The famous US banker, JP Morgan called a meeting of bankers in 1910 and planned a US Federal Reserve Bank made up of his fellow bankers but backed by the Government. This ensured that none of them went broke as Government couldn’t afford to have people’s savings lost. US licensed banks have depositors guaranteed up to $100,000 should the bank fail. America’s Federal Deposit Insurance Corporation ‘s fund is built on charging banks premiums on deposits. Depositors are given a privileged position in bankruptcy law.
In UK the revered Bank of England has recently wrestled with the “ run†on Northern Rock Bank. Initially the Governor wouldn’t intervene and then as panic spread he did a U turn and guaranteed deposits up to 100,000 pounds
Here, in Australia, deposits have never been guaranteed in any but the old Commonwealth Bank. Banks had to have 10% of lendings in reserves. However, in 1998, the current Government removed the safeguard.
As we go into hard times we should ask- Our Government gives bankers the privilege of creating credit and massive personal wealth. Will our Government give protection to our depositors if things go “pear shaped�
Mr. Carter is on the right track, but does not go far enough. The problem here in the US is the tranfer of wealth to the low cost producers in Asia. The US is mortaging its future thru trade deficits with China.
Under NAFTA and CAFTA, jobs, not very high paying but greatly needed in the rural US, were shipped to other nations due to the low labor costs and wage requirements. This shift was a tremendous profit boost for the bottom line of the Internatioal companies enjoying the additional profits thru these job shifts that put US workers out of work, as prices here in the States did not come down very much.
It is not the ordinary citizens of each nation, US, AU, EU or any of the Asian markets that is to blame. I firmly believe that it is rampant free trade that distorts to the maximum each of our nations weaknesses and minimizes our strengths.
It is fair and realistic trade policies that provide fair competitive opportunities for citizens of all nations and makes the International profitteers keep only their fair share of profits and rewards the rest of us with the fruits of our labors.
Joel Gill, MS, USA
I wish I believed that John Carter has become a cynical, sceptical old man; the problem is I sense the same inevitable “CRUNCH”.
As the memories of the depression of the 1920’s and 1930’s receed, the false optimism that only the good times can continue builds, and we cannot see the bleak possibility that the current booming economies may have an end or even a massive collapse.
The population needs to be aware that they can allow governments to make them “feel” safe and secure with legisaltion and regulation to protect them from whatever threat appears, whether it be terrorism , bikies or foriegn invaders. However nothing will protect us from a major correction or depression, and the philosphy that governments can control the world economy so that this does not happen in the future is fantasy at best.
We cannot continue to believe what is fed to us via the biased controlled media and governments.
John Michelmore