Memo Nats: target the banks:

Ken Lambert writes: Re. “National/Liberal coalition on stoney ground” (yesterday, item 3). Barnaby Joyce could do himself and his Party some good by conserving his maverick energy for some big popular punches which might benefit the unwashed masses. A thoroughly deserving target are the big four banks. Most people hate the big banks. What other businesses in Australia can get away with rip-off fees, usurious credit card interest rates, disengaged staff, and pimply kiddies to answer the bloody phone? (That’s if you can get your local branch phone number). Outrageous penalty fees, transaction fees and massive credit card margins are big earners for the Banks, and are extracted from those least able to pay — the poorer citizens who never pay off their credit cards. The big banks profit performance over the last 15 years has reflected these rip-offs.

When Bankcard was started in the 1970’s, the interest rate was 18% after 45 days free credit. The money market cash deposit rate through the late 1970’s and all the 1980’s was seldom less than 10% and rose as high as 15%. For credit cards, the big banks charged roughly 6-7% above what they paid money market depositors. Today the at-call deposit rate is 4% or less and the credit card rate 17-19%. The bank’s margin is two to three times what it was in the old Bankcard days. Of course the big banks’ defence is that they have many bad debts and fraud on credit cards and need these huge margins. Social good would come from refusing credit cards to poor people who become bad debtors or perpetual borrowers at 17-19% interest rates.

The Australian Government now has a magic tool to fix the big banks — the deposit guarantee. The Government could regulate the maximum margin between the credit card rate and the deposit rate at say 5-6%. The banks would be forced to drastically tighten lending and card issuing standards with the benefit that poorer people who never pay off their cards would no longer be profitable or sought after. Similar regulation of transaction and service fees would return the banks to service providers like power, water and gas utilities — with modest profits. Old fashioned purveyors of prudence you might say. Their share prices would halve, and their high flying CEO’s would become modest grey men and women.

And what if they won’t play ball? Well the Australian Government could do a Hank Paulson. Get all the CEO’s in one room and make them an offer they can’t refuse. Submit to the regulation of credit card margins and fees or lose the deposit guarantee!! How long would any or all of these corporate titans last standing alone without the deposit guarantee? Was it Nixon who used to say; “When you have them by the balls, their hearts and minds follow”?

Barnaby could put this into more colourful language, use his accounting skills and do the Australian masses a lot of good.

The US Republic is going bananas:

Julian Gillespie writes: Re. “Recession? You know you’re standing in it” (yesterday, item 28). Overnight the Wall St Journal reported that the US Federal Reserve is exploring the idea of issuing its own debt/bonds just like companies issue their own bonds (commercial paper). The issue of US government bonds can only be undertaken by the US Treasury. The Federal Reserve on the other hand has no such power, (it can only print central-bank paper currency), while most importantly the Fed is a private (non-government) institution.

So if I have this right, what they are proposing (if given the power by Congress) would go something like this: the Fed wants you to buy a new piece of paper from them that has a very large digital amount printed on it, in exchange for old pieces of paper (with smaller digital amounts printed on them) that add up to the amount shown on the new pieces of paper. Then one day when you give back the new piece of paper to the Fed, they will give you back all the old pieces of paper you initially gave them, plus a few extra pieces of old paper for going to the effort. All the while people exchanging old pieces of paper for a new piece of paper need to remember that the new pieces of paper have the same thing in a common with the old pieces of paper namely, the US government promises that the digital amounts printed on the old and the new pieces of paper mean whatever they read. N

Now we all know how unnervingly true this sounds but importantly, wouldn’t these proposed new pieces of paper — call them debt instruments, bonds or whatever (it’s just a difference in graphic design) — just amount to being a new issue and style of US currency with a higher amount printed on them — just like Zimbabwe’s $10 million dollar bills for instance?

Because Zimbabwe’s government equally promises that the amounts printed on any of their issued paper means whatever it reads … hmmm … I think the Republic might be going bananas.

George Shirling writes: Yesterday, Adam Schwab wrote: “However, when someone is unemployed, their income drops substantially…” This must rate as the pronouncement of the week … month … year?!

The permit system in the NT:

Pilawuk White, Traditional Owner, Peppimenarti NT and Michele Madigan on behalf of the Sisters of St Joseph Reconciliation Circle, write: Re. “Whitewash! Territory’s black budget underspend coverup” (yesterday, item 1). Prior to the recent vote in the Senate, the Sisters of St Joseph SA Reconciliation Circle were among the many individuals and groups — the Northern Land Council and Amnesty International included — who sought to help the Opposition, the Family First Senator and our own SA Independent Senator Nick Xenophon understand the importance of the Permit system to Northern Territory Aboriginal Communities.

We noted that both the NT Police and the Police Federation of Australia had written submissions on the need to retain the Permit system to help protect communities from drug peddlers, grog runners and others of ill intent. We reminded our elected representatives that the Permit system allows automatic entry to police, public servants, politicians and now journalists. We noted that in two independent surveys 96% of Aboriginal people wanted to retain the permit system.

It was disappointing but not surprising that the Coalition voted against the Permit system, its abolition being originally part of the 2007 NT Intervention. However it was surprising and very disappointing that Senators Xenophon and Fielding used their power to vote against reinstating Permits. The Senators may scarcely comprehend the effects that their decision will have on Aboriginal communities and for generations to come. Once entry is obtained how can movement be regulated? Communities whether on freehold or leasehold title are now wide open and suffering because of it.

The Poznan circus:

George Perry writes: Re. “The Poznan circus and the emissions target sideshow” (yesterday, item 10). I’m now beginning to wonder which will come first: an emissions target for 2020, or 2020 itself.

A bill of rights:

Patrick Cross writes: Re. “Furphies rise to greet the bill of rights” (yesterday, item 11). My layman’s understanding of history is that executives (monarchs) came first, they created the courts to enforce their “rights” and that parliaments were then subsequently created to protect the people from the excesses of those executives and their courts. The people are protected from the excesses of parliaments by their structure, i.e. bicameral and proportional representation. The introduction of a bill of right seems to me to be a step backwards to the good ol’ days of judges and lawyers deciding our morals for us and punishing us as they see fit when we step out of line.

If you think that a bill or rights is going to solve anything, take your own example. How will this magical document address both a woman’s right to have an abortion and a doctor’s right to refuse to perform one. Hundreds of years of common law this hasn’t sorted that one out yet we’re supposed to believe that a cabal of self-interested lawyers and activists are going to wave their magic wands and produce a document of pervasive wisdom?

A bill of rights is the domain of control freaks who see everything thing in black and white and love telling people what to do. Not unlike our American friends and their current executive.

Wilfred Burchett:

Stephen Magee writes: Nick Shimmin (yesterday, comments) says that Kelly, Manne and Henderson are envious of Wilfred Burchett because he “will be admired and respected” long after they’re forgotten. Does he think that Mark Aarons, Bob Gould and Tibor Meray are similarly envious? More to the point, why would anyone be envious of a person whose crimes, lies and betrayals in the service of Stalinism are now his sole legitimate claim to fame?

Forget the dingbats:

John Taylor writes: Re. “Tips and rumours” (yesterday, item 8). In Wednesday’s “Tips and rumours” you had a “rumour” from Justin via 3AW about a major bank about to take over another. Justin reminds me of a bloke called Terry I used to drink with, who was one of those blokes who carry his “office” in his shirt pocket. Terry thought he was an insider in the racing game and swore that he “knew” that Tommy Smith’s annual overseas trips were to bring back the juice that kept his horses on top for so many years.

Yes, I used to think, if Terry knows this why doesn’t the AJC? Same with Justin. If he knows why doesn’t the ASX? (Let’s not even think about government policy.) My real point in sending this e-mail is to tell you that including the dingbat comments of 3AW listeners (and some others, but mainly 3AW dingbats) in your tips and rumours does you no favours. Idiots abound. Giving them credence reduces your stature.

Global warming:

Tamas Calderwood writes: Stephen Morris (yesterday, comments) says the Global Warming hypothesis can be supported with data from at least 1900 onwards but human CO2 emissions only really took off after WWII, just as the planet stopped warming for about 35 years. Surely this implies that natural factors are more important in determining our climate than CO2. Tim Marsh (yesterday, comments) chides me for claiming a chilly Melbourne December means global warming is falsified. Huh? I said the past eight years of cooling are evidence that global warming may be slowing.

Matt Hardin (yesterday, comments) claims there is too much evidence from too many fields in support of the GW hypothesis. This is a common claim but it’s false. The only “evidence” in support of GW is a slightly warmer planet over the past 150 years and a bunch of computer models that say it’s caused by man-made CO2. But the climate constantly changes. Recent fluctuations are within normal bounds. Natural factors have always dominated our climate and I’m yet to see convincing evidence that that’s changed.

The burden of proof is therefore on the GW theory. If the planet keeps cooling (as it shows signs of doing) then policies for massive taxes to “stop global warming” are going to look increasingly ridiculous.

Don’t stop the music:

Ross Stapleton writes: In reference to Andrew Owens (yesterday, comments) pointing out I was incorrect in stating the Prices Surveillance Authority forced the lowering of prices of new release CD’s in 1990, when it was only with the passing of the 1998 Copyright Amendment Act (No.2) that such change came, Andrew is both right and wrong! To say the PSA or its successor played no part in the 1998 legislation is hardly reflected in a background summary setting out the issues for politicians before the legislation was passed and I quote (note the PSA had by then morphed first into the Trade Practices Commission 1991-1995, before become the ACCC in 95):

The 1990 Prices Surveillance Authority Inquiry Into The Prices of Sound Recordings found that the “prices in Australia have consistently been much higher than overseas for many years.” The report of the Prices Surveillance Authority found high prices to have been:

underpinned by three factors — demand is relatively price inelastic compared with other products; there is, an absence of domestic price competition and there is a restriction on import competition arising from the importation provisions of the Copyright Act 1968.

In evidence to the Senate Legal and Constitutional Committee, Professor Allan Fels, Chair of the Australian Competition and Consumer Commission, estimated that the current gap between Australian CD prices and US prices after tax corrections was about $4.60 and that there were:

…two aspects of the present prices which have to be of concern. The first point is that, if there is a permanent fall in the value of the Aussie dollar, then eventually, as happens with all industries, the devaluation effect will get reflected in the prices. They will go up in this industry a bit more slowly than in others. Most industries quickly adjust to devaluations. This one adjusts more slowly. The second point is that it is quite clear at the present time that the industry has been restraining its prices because of fear of legislation. If there is no legislation, there will be a steep rise in CD prices.

Professor Fels further gave evidence that:

…there has been massive pressure by ARIA and the multinational record companies to stop the reform because it is against their worldwide interests. They have done everything. They have poured huge amounts of money into this. They have hired consultants all over the place to try to destroy our report, but they have failed, not because our report is that good but because the facts are incontrovertible. There is the price difference and the fact that the removal of the restrictions would cause a fall in price to the benefit of the people.

As an avid consumer in 1990 and also analysing the inquiry for the Sunday Age, I have no doubt that, despite his recommendations being ignored by the Federal Labor Government, Professor Fels original report following long and exhaustive hearings; had an immediate effect whereby the majors discreetly lowered their prices on new releases by a couple of dollars. One great irony arising from those hearings was that while the ALP swallowed the protectionist line being pedalled by the industry — the ACTU was firmly on the other side of the fence arguing for cheaper CD’s. They were fighting for the fan in the street!

To claim the passing of the 1998 Act was free of any involvement in helping secure the changes to the Copyright Act backed by the ACCC (PSA) when it was the key agency concerned with excessive pricing and uncompetitive practices, after providing such damning evidence based on its 1990 findings and subsequent submission as indicated here; suggests a high level of influence in helping determine reform of the outmoded Act.

Auctions:

Adam Schwab writes: REIV boss, Enzo Ramiondo (yesterday, comments), did his best to defend the indefensible, claiming that “the REIV does not manipulate the data — it reports the results transparently, recording when the rate goes up and when it goes down.” Enzo even took aim at me, noting that “it would be appreciated if Adam Schwab actually learnt something about the results before writing about them as he did on Monday.”

Raimondo stated that “in contrast to the REIV’s transparent reporting Mr Schwab criticises our data collection but completely fails to explain the methodology he used to arrive at his rate of 43%.” Actually, my methodology was very clearly disclosed. On Saturday, The Age’s property section listed 322 auctions which were to be held on that day. On Sunday, The Age’s property section listed the results of auctions held. I simply compared Saturday’s proposed auctions with Sunday’s actual results to determine a figure — not particularly complicated, Enzo.

The investigation came about after the author attended three auctions, all of which were passed in, and only one of which was reported by the REIV. The others seemed to find their way into the Bermuda Triangle of auction results.

Raimondo then kindly provided the REIV’s means of calculation which completely provided that point. Raimondo noted that last week, 68 auctions had “no result”. What exactly is “no result”? Presumably, when a property is sold, that is an unequivocal result. The only possible explanation for this mysterious “no result” number is that those properties were “passed in”. Raimondo did not address the issue of “non-reported” sales in his impassioned defense of the REIV’s methodology.

Incidentally, since the original article was published, Crikey has been inundated with similar complaints relating to the REIV’s (and other state-based Real Estate bodies) reporting of auction results.

Clarification:

Yesterday, Crikey published a clarification from Jane O’Dwyer from the ANU. Due to a subbing error we inadvertently misrepresented what Ms O’Dwyer meant to say by leaving part of her comment out and placing a spelling and grammatical error in her comment. The mistakes were all Crikeys and not Ms O’Dwyers. Her original comment is below:

Jane O’Dwyer, Office of the Vice-Chancellor, The Australian National University, writes: Re. “Tips and rumours” (Monday, item 7). The rumours reported in Crikey on Monday about the appointment of Professor Kim Beazley to the role of Chancellor at ANU are plain wrong. Professor Beazley was selected by the ANU Council from a field of candidates in July this year following the announcement by our current Chancellor Allan Hawke that he would be stepping down in 2009. Professor Beazley was appointed because his distinguished political career and academic background made him an outstanding candidate. He will also continue a Beazley family tradition – his father Kim Beazley Snr was key figure in the establishment of ANU and served on the inaugural Council of the University.

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