Knock-on or knock-out?

Why should the small end of town suffer the knock-on effects of a falsified economy, with not even a squeak from those who oversee this mess? COLIN BENJAMIN

By Colin Benjamin

The Business Council is urging Treasurer Wayne Swan and Finance Minister Lindsay Tanner to make huge cutbacks in the lifestyle of average Australians so that the capital that is coming from the commodities boom does not flow to the small and medium business owners and average income households. 

The Prime Minister and his cabinet learned in Penrith that there is another reality – people are being savaged by the rate rises, the demands for increased levels of unemployment, and the deliberate destruction of consumer and business confidence while the nation is asked to focus on the future.

Earlier this year I predicted that this week would see a major reconsideration of the viability of the US market. Today we will see yet another financial sign that the US sharemarket rise overnight is a mask for the coming collapse.

Merrill Lynch has reported a further $US8 billion write-down after being at the bottom of the top 10 financial institutions claiming the worst is over.

Expect to see more talk of this being the time to put more money into the mouths of those who cannot tell the truth lest it comes back to bite them.

This week’s roller coaster on the markets shows that investors are rushing into the commodities markets, taking gold back to the $US950 mark and oil to the $US120 mark.

So one can only ask real questions about the knock-on consequences and the behind-the-play Barry Hall-style of game that is being played by the regulators.

As airlines fall out of the sky, US retailers go into Chapter 11 bankruptcy, the top 10 big financial houses in the US admit that they have lost over $US100 billion and the auto market faces a massive rise in both steel and fuel costs, we are being told by the brokers that we are near the bottom of the US non-recession.

The one bright piece of news is that Ansett employees may just get a full payout on our own airline collapse that had to happen to avoid moral hazard under the previous federal government’s non-intervention policies.

It is pleasing to note the media’s discovery of key terms that I believe to be the core of any cooperative capitalism – the triple-T standards of truth, trust and transparency.

We have the Wall Street Journal indicating that even bankers are now asking questions about the rates they are being charged for funds (London Interbank Offered Rate, LIBOR) saying that the system depends on banks telling the truth about their borrowing rates.

We have Fairfax commentators stating the obvious – business, consumer and investor confidence has plummeted as predicted in the Morgan and Westpac consumer sentiment indices despite the claims that the credit crunch was totally unpredicted.

That’s despite that Chris Murphy reportedly sent an email warning about shorting practices to 60 people playing the financial games in February.

It is likely that the average price of houses will continue to fall and foreclosures will continue to rise in the homes of the global financial institutions that every week are getting billion dollar bailouts from the central banks.

The Federal Government and its regulators are also stonewalling, refusing to assure Opes victims that their superannuation is safe.

Isn’t it time that PM Kevin Rudd, and the raft of world leaders that he was so keen to meet prior to bringing down his tough budget, gives the Reserve Bank the power to demand that the short-sellers and the commodity price leveragers pushing up petrol prices are not only independently regulated but taxed at the highest level for non-productive activity?

Only now are questions being seriously asked about the appropriateness of having the ASX act as the tout for the “she’ll be right” school. The Australian newspaper found that 14 out of 15 big finance companies failed to meet three or more of ASIC’s eight benchmark requirements.

As Michael West said in The Age newspaper, in the wake of Opes, as ASX and ASIC stonewalled the public, via the press at every turn, Lift Capital went belly up.

As I have argued before, why should companies that stand to make huge profits and bonuses for executives have any reason to act in the public or even the retail investors’ interest.

When do we stop making the small end of town experience the knock-on effects of fraud and false economies and when will the RBA knock-out those who are continuing to promote currency volatility and derivative delusions?