Speculation is buzzing this morning over the outcome of Labor's leadership challenge... will Kevin Rudd be toppled and Julia Gillard enthroned as the new ruler of Australia?  My response... who cares.

Why 'who cares'... because regardless of whether the democratic process is being spat on in the face, regardless of the historicity of the first female PM and regardless that the entire process took place in the cover of night, nothing will change.  Australians will wake up this morning to find that their Prime Minister will still be interested in plundering their property, ignoring their right to privacy and maintaining Australia in a state of perpetual warfare around the world.

Just a quick note to put things into perspective before you rant on too hard about the democratic process...

First the government said that the RSPT (40% tax on mining profits) was necessary because the royalty system wasn't keeping pace with the increase profits, then they said they were taxing them so they could use the money to building infrastructure/roads to support the industry, now they're saying that taxing the mining companies is going to quote "protect them"... and my favourite one of all, they're saying that we need to tax the mining companies to make sure they pay their 'fair share'.

Purpose is irrelevant when it comes to theft... and yes, that's what taxation is: theft.  Not just the RSPT, all taxes are theft.  The government has no more claim on your income or profits (if you're a business) than your next door neighbour does on your paycheck.  Why then do we tolerate this... two reasons: 1) they have more guns than we do, & 2) most of us are convinced, by the 12 years of brainwashing in our formative years, that without taxation we would all keel over and die.

Here is a notable quote from 'The Anatomy of the State' by Murray Rothbard:

"Briefly, the State is that organization in society which attempts to maintain a monopoly of the use of force and violence in a given territorial area; in particular, it is the only organization in society that obtains its revenue not by voluntary contribution or payment for services rendered but by coercion. While other individuals or institutions obtain their income by production of goods and services and by the peaceful and voluntary sale of these goods and services to others, the State obtains its revenue by the use of compulsion; that is, by the use and the threat of the jailhouse and the bayonet. Having used force and violence to obtain its revenue, the State generally goes on to regulate and dictate the other actions of its individual subjects. One would think that simple observation of all States through history and over the globe would be proof enough of this assertion; but the miasma of myth has lain so long over State activity that elaboration is necessary."

The government doesn't have any money remember, it only has what they take from us.  So don't be fooled by the TV & radio propaganda (that you're incidentally paying for by the way through taxes), the RSPT is nothing short of a money grab.

What about the concept of 'public land', and how the mining companies need to give back what they have taken from public land.  Well, in the case of public land, it seems reasonable to pay a lease to whoever owns the land for mining rights, even to the government who owns the land (I'll deal with the fallacy of public anything in a moment).  However, to claim that the owner of the land has a claim to the profits generated from the mining is equivalent to a landlord claiming a percentage of a tenants income.  Neither the landowner (private or public) or the landlord are taking the major bulk of the risk in the relationship.  If a mining company fails to successfully mine a property it is leasing from the government, and loses billions of dollars, the government loses nothing... in fact it gained money from the failed endeavour through the lease (which will most likely have a premium due to land reclamation).  Taxing profits is purely a money grab to close their budget holes at 'stimulating the economy'.  The argument that the money would be used for infrastructure to help the mining industry (i.e. build roads from the mine to a local town/highway) is absolutely erroneous... you honestly think a mining company couldn't build it's own roads, which would probably end up costing less than the federal premium.

What about the concept of 'public land'... I'll let Murray handle this one from the same source:

"With the rise of democracy, the identification of the State with society has been redoubled, until it is common to hear sentiments expressed which violate virtually every tenet of reason and common sense such as, "we are the government." The useful collective term "we" has enabled an ideological camouflage to be thrown over the reality of political life. If "we are the government," then anything a government does to an individual is not only just and untyrannical but also "voluntary" on the part of the individual concerned. If the government has incurred a huge public debt which must be paid by taxing one group for the benefit of another, this reality of burden is obscured by saying that "we owe it to ourselves"; if the government conscripts a man, or throws him into jail for dissident opinion, then he is "doing it to himself" and, therefore, nothing untoward has occurred. Under this reasoning, any Jews murdered by the Nazi government were not murdered; instead, they must have "committed suicide," since they were the government (which was democratically chosen), and, therefore, anything the government did to them was voluntary on their part. One would not think it necessary to belabor this point, and yet the overwhelming bulk of the people hold this fallacy to a greater or lesser degree.

We must, therefore, emphasize that "we" are not the government; the government is not "us." The government does not in any accurate sense "represent" the majority of the people. But, even if it did, even if 70 percent of the people decided to murder the remaining 30 percent, this would still be murder and would not be voluntary suicide on the part of the slaughtered minority. No organicist metaphor, no irrelevant bromide that "we are all part of one another," must be permitted to obscure this basic fact."

The truth is that the Feds own this 'public land', you don't.  And if the mining companies didn't do something productive with the land (i.e. mine it), it would be a useless patch of 'public' dirt.

God bless,

Washo

I thought this economically illiterate movement had died in the 1970s. Obviously not:

"Thousands of people have gathered around Australia calling for better pay for women working in the community sector.

ASU secretary for New South Wales Sally McManus says the issue is now the subject of a historic test case being lodged with Fair Work Australia. She says women's work is not being properly valued, with pay 18 per cent less than the average pay for men, which puts the gap at the same level it was in 1972." Source.

What I do not get is if women are paid 18 percent less than men for equal work, would it not be in the interest for employers to fire their male employees and hire females to replace them? If, as they claim, they are doing equal work, then this would be a great way to increase profits. After all, is that not all the evil capitalist pigs care about?

The fact of the matter is that women who are paid less do not do equal work to men. They often take jobs that are more flexible, knowing that they will have to take time off to have a child at some point down the road. Employers also factor in maternity leave and the cost of finding a replacement during this time when deciding whom to employ and what wages to offer. Then you also have a disproportionately large number of women competing for the same, flexible jobs, driving down wages in those industries. Comparing wages between the sexes is apples and oranges. Any legislation which, as Sally McManus wants, 'values' women's labour correctly (translation: arbitrarily/politically), will have disastrous consequences for business and employment as measures such as this always do.

Australia's latest attempt to loot the productive sectors of the country to enable the continuation of the welfare-warfare state comes in the form of a "super" profits tax[1]. They have justified it using typical Marxian rhetoric, the classic example being that Australians deserve their "fair share". I am not going to examine this tax through the lens of the opposition, in other words by attacking it on details (question their figures and so on) but will rather object to it on principle and economics alone. This tax, quite simply, is backdoor nationalisation and just steepens the road to serfdom which, it would appear, is the end game for the Labor party.

Profit, "Super" Profit and our "Fair Share"

"It is necessary to guard ourselves from thinking that the practice of the scientific method enlarges the powers of the human mind. Nothing is more flatly contradicted by experience than the belief that a man distinguished in one or even more departments of science, is more likely to think sensibly about ordinary affairs than anyone else." - Wilfred Trotter

If you listen to what the proponents of this tax say - and you have no choice now that they are spending $38m in tax dollars 'spreading the word' [2] - this tax is all about getting Australians a "fair share...a tax which encourages investment and growth in the industry[3]." First of all, what is "fair" is completely arbitrary. Secondly, the logic used by Rudd is straight out of the Marxian doctrine of exploitation, where the "exploiters" are clearly withholding "unearned" profits from the people and therefore it is up to the government to curtail their generosity and reclaim some of this wealth. This attitude is in line with what every dictator throughout history has done: steal the property of people who cannot defend themselves against the encroachment of the state. As we will touch on later, this has serious repercussions that will - despite what is being promised by the government and their economic models - restrict investment in new capital, output, innovation and, consequently, the wellbeing of the average Australian.

Encouraging Investment and Growth in the Industry

Men are qualified for civil liberties, in exact proportion to their disposition to put moral chains upon their appetites: in proportion as their love of justice is above their rapacity." - Edmund Burke

The Labor party is under the impression that confiscating profit from the miners will improve the material wellbeing of all those not in the mining industry. Unfortunately, basic economics disagrees. By removing a large part of the profit motive, losses that might be incurred fall upon the miners[4] while a significant share of the profits go to people not involved in the whole process (and in the end it goes to the government NOT 'Australians' - the issue of government vs. private spending will be omitted here). When profits are taxed away from productive enterprise and instead redistributed by the government, a larger portion of it will be consumed rather than reinvested. There is then less capital available for the establishment of new mines and the entire state of production and innovation, adjustment, improvement and progress is forcefully held back. This, contrary to the rhetoric we are hearing, will impoverish the average Australian.

The Greedy Miners

"Experience should teach us to be most on our guard to protect liberty when the government's purposes are beneficial. Men born to freedom are naturally alert to repel invasion of liberty by evil-minded rulers. The greater dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding." - Justice Louis Brandeis

The attacks on mining magnates such as Clive Palmer stem from an erroneous interpretation of the operation of the market economy. What makes a firm big in a market economy is how well it succeeds in meeting the demands of the consumer. If they fail in this task, they would not be big for long. Large profits are nothing more than a signal sent by consumers that the producer is doing a good job; it is proof that they are rendering a desirable service. These profits do not come at the expense of the average Australian; in fact, everyone is better supplied than they would have been in absence of this profit. If you remove the opportunity to earn profits in mining, then the incentives to innovate, cut costs, increase production and so on are stunted - the best and brightest people, the people who know how to utilise the factors of production in the best way - would simply not bother if a large percentage of gains they might make are to be taxed away.

Emotion for Political Gain

"When words lose their meaning, people will lose their liberty." - Confucius

The common view that mining companies are profiteering from non-renewable resources with little benefit to the average Australian is a strong emotional argument largely emanating from the government. The problem with this argument is that it serves to discredit the benefit that the average Australian receives from the development of these natural resources. The mining companies take the risk onto themselves by spending billions on exploring and studying the potential of mine sites; passing government regulations; raising capital; building infrastructure (this includes things like building new ports and providing access to electricity, healthcare, education and so on which all reduce the costs of future expansions, to other business ventures that might otherwise have been uneconomical and raises the standard of living of the people involved); and all of this occurs often before anything has been mined. While it is true that the non-renewable resources are more often than not sent overseas, the benefits come back in the form of cheaper cars and other goods that many Australians might not have been able to afford otherwise. After all of this value-add (and there is much much more before you even look at the taxes they already pay), the government still wants to take away an even larger portion of the benefits that the people who shouldered a share of the (considerable) risk - the people who voluntarily decided to cooperate with the owners through investing in the development of the mine - stand to gain if their investment pays off.

The End Game

"Fanatics may suppose, that domination is founded on grace, and that saints alone inherit the earth; but the civil magistrate very justly puts these sublime theorists on the same footing with the common robbers, and teaches them by severe discipline, that a rule, which, in speculation, may seem the most advantageous to society, may yet be found, in practice, totally pernicious and destructive." - David Hume

If policies like this one are continued - and believe me, if this gets passed their greedy eyes will relentlessly scour the land for their next target - eventually there will be no one left as profit will have been virtually abolished altogether. Every step toward the elimination of profit serves as a disincentive to the driving force of the market - entrepreneurship - which is based on real judgments and risk taking. Instead of progressing towards a higher standard of living for all Australians, this tax will do nothing but progress us further towards social disintegration. When you eliminate profit and loss it is impossible to have a non-socialist economy - but then again, is that not the ultimate end game for the Labor party?

[1] "Super" being defined as anything above the government bond rate. Source.

[2] http://www.abc.net.au/news/stories/2010/05/28/2912548.htm

[3] http://www.perthnow.com.au/business/kevin-rudd-to-backflip-on-mining-tax-rate/story-e6frg2qc-1225871857168

[4] I understand there might be some kind of 'loss floor' or loss compensation package in place. Once again, this ignores how the the market economy works. It operates on a profit and loss system - the carrot of profits and the stick of losses. Trying to counter balance the loss of the profit motive by lessening the punishment for failure will simply keep bad businesses alive for longer and delay vital restructuring processes. It will encourage moral hazard and - as we have noted in prior posts - if the China bubble bursts, this 'super profits' tax could end up costing the taxpayer through subsidies more than it brings in!

Well, where to begin. The CPI has to be one of the worst, most heavily manipulated and misleading indices in history. This latest example is just another reason as to why it is money and not an arbitrary basket of prices that we need to watch if we want to gauge how much the RBA is debasing the currency:

Australia's monthly inflation rate has jumped, with prices rising at the fastest pace since October 2008, spurred in large part by the federal government's 25 per cent tax slug on cigarettes.

"While there is a spike in the headline measure due to the 25 per cent lift in the tobacco excise, excluding this outcome still sees headline inflation breaching the upper limit of the RBA's two to three per cent inflation target band," said TD Securities senior strategist Annette Beacher. Source

I am constantly reminded of this advice when I hear the government speak about anything to do with economics:

"If you tell a lie long enough, loud enough and often enough, the people will believe it" - Adolf Hitler

Such is the case with the CPI and the so-called cause of inflation. We are constantly told that higher inflation and, consequently, higher interest rates are the result of higher prices – a nice little semantic trick, a renaming of terms which leads people to believe exactly what the government wants them to. Claiming that a cigarette tax caused a rise in inflation is akin to putting the carriage in front of the horse: a general increase in the price level occurs because of inflation, not the other way around. Prices do not just rise for no reason; they rise and fall based on supply and demand. On the supply side, things such as an unforeseen event, e.g. a natural disaster or drought causing a supply shortage or certain government intervention can increase prices. However, more often than not the culprit is the deliberate debasement of the currency by the central bank - otherwise known as monetary inflation. If any politician honestly believed in the fight "against inflation" and the "increasing cost of living," they could quite easily cease debasing the currency and end inflation in its tracks.

Now let us examine this so-called inflationary cigarette tax again. We are told that because of this tax, which increased the price of cigarettes, upwards pressure is placed on inflation - but surely if the price of cigarettes rise and as a result people are spending more of their incomes on cigarettes, they will then have less to spend on other things and therefore prices for other goods in the economy should fall? To clarify, imagine an unchanged stock of goods and an unchanged money supply - if more of that money supply is dedicated to cigarettes but the quantity of money stays the same then there is less money to go around and consequently prices will have to fall in other areas[1].

On the other hand, real inflation is caused by an increase in the money supply. If there is more money chasing an unchanged stock of goods there will be an increase in the average price of goods as well as in cigarettes. In other words, it is not possible for a tax-induced price rise in one good - cigarettes - to set in motion a general increase in the price of goods and services without the money supply also increasing. Then again, defining inflation in the carriage-before-the-horse way allows politicians to prey on the ignorance of the general population and spout rhetoric about how they are going to "fight" inflation, castigate speculators or some foreign enemy, something which is priceless for them in their quest to win votes. Fooling the general population into believing that inflation is a price phenomenon rather than a monetary phenomenon has allowed them to expand the size and scope of government immensely. Until people wake up to this fact, I do not see the system changing any time soon.

[1] It is not quite as clear cut as this. The amount collected by the tax which would usually be spent by the smokers on goods and services aligned with their preferences is instead arbitrarily allocated by the government, likely leading to malinvestment and wasted resources. The price level will therefore remain the same in aggregate, although prices will be distorted in certain areas (i.e. say every smoker goes without a carton of beer every month to maintain their level of smoking at the higher price. Beer prices will fall while the industry where the government spends the new revenue, say insulation schemes, will be artificially stimulated and price will rise. This price rise sends a signal that people are demanding this service, thereby encouraging labour and capital away from the beer industry. Once the spending ends, and it will, those people lured in by the higher wages will be unemployed and will likely find themselves with skills not required in the marketplace, something Hayek would call a malinvestment in human capital. Please remember that this is a very simplistic example with just two industries but I hope it clarifies the issue).

Recently the Greens Party has seen a surge in support as ordinary Australians have become disheartened with the major political parties: the Labor and Liberal party.

For those not familiar with Australian politics, let me summarise the parties and their ideology:

1)  Labor party: the socialist party.

2)  Liberal party: the fascist party.

3)  Greens party: the more socialist party, with trees.

As you can see, from my tongue-in-cheek summary, all parties are for big government intervention into virtually all aspects of Australian life... literally nothing is sacred.

The fascinating thing about the Greens party is that they are significantly more socialist than the Labor and Liberal party.  However, as Australians refuse to look beneath the surface of their political parties to see their ideological engine, I believe they mistakenly choose the Greens out of frustration... and I sympathise.  Yet the Greens only add to their 'outsider' masquerade by wearing the cloak of environmentalism.

Australians will soon learn, if their support for the Greens translates into votes, that the Greens' pro-environment stance comes at a high personal cost.  And like all of their policies, that cost will be shared by all.

God bless,

Washo