"So what": the face of not-so-good governance on the NSW North Coast

Last weekend a copy of Clarence Valley Council's June 2010 Budget Submissions Summary was doing the digital rounds much to the enjoyment of local cynics.
Of particular note was this answer to one concern raised about the fact that after 6 years council still had not reconciled a $1.2 million deficit brought into the amalgamation process by Grafton City Council: "So what".
But what really had locals opened mouthed was this answer to concerns about lack of transparency and accountability:
"As the 'senior administrator' who recommended that CCRT funding be used for lifesaving services, I (Rob Donges) have taken responsibility for including Iluka and will take responsibility should a higher authority determine that this funding arrangement is grossly negligent or some such thing."
That last line comes after a previous entry which goes:
"LPMA representatives have verbally raised concerns as to the funding of this service from CCRT and staff have provided our reasoning. Nothing more has been heard. If the Authority were to formally advise that the funding is inappropriate, we would recommend it be funded elsewhere i.e. General Fund."
The merry cynics are now laying bets that the Land and Property Mangement Authority won't be amused when it learns that its attempt to informally manage the problem of past misallocations of what could be hundreds of thousands of dollars in Clarence Coast Reserve Trust funds has been seen as something council staff can brush aside - especially as it was a resident's complaint which first brought the matter to light and council management has been very careful not to consult with the NSW Department of Lands itself just in case it wasn't left with anymore wriggle room.
Clarence Coast Reserve Trust Budget 2010/11

Henry Tax Review Final Report: overview and analysis [transcripts]

The long term tax plan we announce today will strengthen the economy and make the tax system fairer and simpler for Australian working families and businesses.
These are the first steps in a 10 year agenda that will help ensure we share prosperity fairly, maximise our opportunities, and keep Australia in the box seat as the global recovery gathers pace.
Australia faces important decisions about how we structure our tax system.
This package is carefully calibrated to make the most of the opportunities presented by commodity boom mark II, but also to address the challenges that it presents.
This is a long term plan to apply a Resource Super Profits tax to the profits earned from resources that are owned by all Australians, and use it to:
generate more superannuation savings for working families;
lower tax for all companies, especially small businesses; and
invest in our future infrastructure needs, particularly for mining states.
Excerpt from Treasurer Wayne Swan's joint press release with Australian Prime Minister Kevin Rudd, 2 May 2010

Rudd Government's intended tax reforms outlined at Stronger-Fairer-Simpler: a tax plan for our future

Henry Tax Review Final Report:

Part 1: Overview	1.0MB
Preface	326KB
Terms of Reference	169KB
Executive summary	213KB
Chapter 1: The need for reform	240KB
Chapter 2: Designing a future tax and transfer system	223KB
Chapter 3: A tax and transfer system for the 21st century	185KB
Chapter 4: Personal taxation	214KB
Chapter 5: Investment and entity taxation	196KB
Chapter 6: Land and resources taxes	184KB
Chapter 7: Taxing consumption	169KB
Chapter 8: Enhancing social and market outcomes	212KB
Chapter 9: The transfer system	209KB
Chapter 10: Institutions, governance and administration	177KB
Chapter 11: Macroeconomic and fiscal impacts	191KB
Chapter 12: List of recommendations	295KB
Appendices
Appendix A: Acronyms	140KB
Appendix B: The Australia's Future Tax System Review Panel	165KB
Appendix C: Documents of the Review	188KB
Appendix D: Consultation	234KB
Appendix E: Research and consultancies	418KB
Appendix F: Secretariat and support	164KB
References	294KB
Glossary	293KB

Final Report: Part 2 - Detailed Analysis - Volume 1

1.9MB

Final Report: Part 2 - Detailed Analysis - Volume 2

2.2MB

Setting the council cat among the ratepayer pigeons in the Clarence Valley

The Daily Examiner reported on 19 March:

CLARENCE Valley residents may be hit with a rate increase of 8.15 per cent next year.
The Minister for Local Government recently announced that all councils could raise their general rate revenue by 2.6 per cent above the current level, but in a bid to raise an additional $1.3 million to finance capital works, Clarence Valley Council is seeking approval to raise rates by an extra 5.55 per cent.
.....the average rate for properties across the Valley varied between minimum and fixed rates and were determined by dollar value....
“It is hard to compare rates between shires because we have 15 different rate structures Valley-wide,”

Mention of a possible rate increase always raises the collective blood pressure of Clarence Valley ratepayers and differences of opinion between the Hinterland and Coast surface.

Clarence Valley Council is expected to run a series of community consultation meetings some time in the future and ratepayers would do well to attend these as well as keep an eye on proceedings as set out below.

Media Release: 17 March 2010

Clarence Valley Rates get a Special Meeting

An Extraordinary Meeting of Clarence Valley Council will be held in Maclean at 5.00 pm Tuesday 23 March 2010.
The single topic for discussion is whether to increase property rates next year to finance specific capital works.
A Workshop held on 16 March and attended by all Councillors and senior Council staff considered aspects of the Council's budget for 2010/11. A report to the Workshop from the Council's General Manager, Stuart McPherson, encouraged consideration of asking the Minister for Local Government, the Hon Barbara Perry MP, for approval to increase general rate revenue by an additional 5.55% in 2010/11. The Minister recently announced that all Councils could raise their general rate revenue by 2.6% above the 2009/10 level.
Mr McPherson reported that an extra 5.55% above the 2.6% increase, would provide an additional $1.3m next year and in subsequent years and would be used for clearly identified additional capital works and programs. These programs were described in Mr McPherson's report as "Main Street Programs", "Public and Community Halls and Libraries", "Town and Village Footpaths and Cycleways", "Rural Roads Improvements" and "Community Recreation Facilities Improvements".
The Extraordinary Meeting is open to the public and attendance is invited.

Authorised by: Stuart McPherson, General Manager 02 6643 0212 or 0429 903 758

Coalition super-duper accountant's obsession with China

Nats senator and Coalition front bencher Barnaby Joyce has become a trifle obsessed with the ol' yellow peril it seems.
If you believe this former Queensland accountant from St. George we're all in danger of being seriously in hock to China, which is coincidentally one of our more significant export markets.
Small problem for Joyce though - China doesn't figure as anywhere near our biggest creditor because that honour is reserved for the UK and US.
Hong Kong (which is China's only representative on the creditor list) holds around 3% of Australia's total foreign debt, but Britain holds in the vicinity of 24% and America 22% of the $114 billion or so red ink still on the books racked up by federal or state governments, financial institutions and private companies.
Less than a quarter of Australia's foreign debt is contractually long term if this Australian Parliament Library 2009 research paper has a good handle on the subject.
Barnaby mentions China so often that it's almost a nervous stutter.
Here is an abbreviated list of his comments on China over the last three years from Hansard and the media:

This is money that people want back. Most of them are from overseas. How much more money do you want to owe to these people? The biggest one being the Communist People's Republic of China.
Under this massive new tax of the Australian Labor Party, they will be signing us up to an agreement as a result of which we will be borrowing money from China to pay the interest to China to send back to China to develop China.

The Labor Party cannot tell you exactly how this tax is going to do anything to the temperature of the globe by itself. They aspire to grab America and China.

We have this ridiculous proposition that if we pass this bill we are going to be borrowing money from China to send back to China to help develop China. We will be borrowing money from China and from Saudi Arabia to send to African despots.

We have no money. We are in debt up to our eyeballs. We will be borrowing money from countries such as China to send back to China to help China develop, when we thought they were already doing a pretty good job at it.

So we will be borrowing money from China to pay back to China to develop?

It has stacked us up with debt to the eyeballs so that we could go out on some spending spree and have the stimulus of the nation spread across the carpet on Christmas Day with 'made in China' written on the back.

I have clearly stated that I have no problems dealing with China—I have no problems with the trade to China. I have clearly stated that over and over again.

When this legislation came forward, there was only one other nation on earth that had legislation like this, and that was the communist People's Republic of China, which I thought was peculiar.

In fact, I stated that the stimulus would be spread across the carpet on Christmas Day with 'Made in China' written on the back of it and that it was a complete and utter waste of money. Time has proven us correct.

We will develop a plant in China. We will develop another plant in the United States. But we're not going over there, because those people are half crazy.

Do we implicitly, by association in legislation, say that ovaries are now commercial property disassociated from the person and as property can be extracted from prisoners in China or aborted foetuses in Australia?

The Australian Government would never be allowed to buy a mine in China. So why would we allow the Chinese Government to buy and control a strategic asset in our country? Stop the Rudd Government from selling Australia.

'The Australian' & Melbourne Institute's Road to Recovery Conference apparently was a doozy

The Melbourne Institute currently has the The Road to Recovery: Restoring Prosperity After the Crisis 5-6th November 2009 conference program (along with speech and presentation downloads) available on its website.
Almost everyone who is anyone in the field of economic and social policy appears to have been there.
Below is a slide that Access Economics put up during the presentation Will the Budget recover alongside the economy?
Now it's been obvious for a while that Chris Richardson loves to craft statements which toss a live one to the meeja, but this is getting a bit over the top even for him:


















Oh, and thanks Malcolm for that universal tweet alerting all us plebs to this conference - from Richardson's power points to your next sound bite I'm guessing.

Local government thin ice pivot, slide and glide on the NSW North Coast

It seems like only yesterday that local government across the nation was up in arms over the constant cost-shifting by state and federal governments, which saw councils being asked to do more and more with less and less.
Indeed there was a formal inquiry into this very subject in 2003.

So I'm somewhat bemused to hear that one NSW North Coast council (which is known to complain about straightened financial circumstances from time to time) is now committed to allocating funding for improvements in a national park for which it has no responsibility, legal or otherwise.

This is the first time I have heard of local government actually encouraging other tiers of government to off-load their own financial obligations onto council ratepayers or council's own coffers. To the tune of a ballpark figure of $22,000+ no less.

So take a bow, Clarence Valley Council, for a dubious Yuraygir National Park coastal walkway decision based on an even more dubious attempt at a trust fund raid.

One has to wonder which councillor (or councillors) is trying to curry favour with either the Rees Labor Government or the Sussex Street mob and, for what purpose?

Surely not pre-selection hopes resurfacing?

Cartoon from Google Images

Anyone else just a mite suspicious of the G20's motives?

The G20 has been around since 1999. It's a group of finance ministers and central bank governors. Many of the same ministers and bankers who sat complacently by while the global financial crisis grew into a tsunami which threatens to widen the gap between the developed and developing world, between rich and poor, between those countries with enough resources to buffer against climate change and those that will simply sink into the ocean or blow away on the wind.
One or two of its members countries have also been on record in the past as wanting to sideline the United Nations as an international forum and decision making body.
I think that the dynamic duo, Kev and Wayne from Nambour, need to be careful here because in this group of twenty they will still be mice in bed with at least two elephants - the USA and the European Union.
Even though Australia is now considered a developed country by those heavies participating in setting G20 policy, the International Monetary Fund and the World Bank; it's still privately rated as something of a wannabee.
When I look at how things went down at Pittsburgh this month I can't help feeling that what I'm really seeing is the international banking and business world shoring up the status quo and trying to kick the UN off the field.

Pic from Financial Axis

Update:
Mungo MacCallum writing over at Crikey believes that the G20 Pittburgh Summit is a true change in the world economic order:
"It is almost impossible to overstate the significance of the events last week in Pittsburgh.
The acceptance by all the major players of the role of the G20 as a rule maker for the conduct of the financial systems of member nations quite literally ushers in a new world economic order.
And this is not some kind of Orwellian nightmare in which a conspiracy of plutocrats (or Jews, or Masons, or Martians) use their might to enslave the wretched of the earth, but a genuine democratisation that directly includes two thirds of the world’s population and indirectly gives a voice to the rest.
The London meeting of the G20 in April proved that the new organisation could actually work; that the diverse array of interests could co-operate in reforms to a system in desperate need of them. Now the process has been formalised and we have a long-overdue representative body with the power and the will to lead the world out of the global economic crisis and towards a better and fairer model of interdependence for the future.
Unsurprisingly, the Australian media have made much of the fact that Australia, as an active member of the club, now has a seat at the top table and this is indeed a cause for rejoicing. But far more important is the part Australia played in its construction, which is a matter for genuine and bipartisan pride."

Leaders Statement from the 2009 G20 Pittsburgh Summit signals new directions or business as usual?

This morning The Pittsburgh Summit released a lengthy Leaders' Statement, the full transcript of which can be found here.
Only a handful of its 50 clauses plus annex dealt with climate change.
In this the G20 (like the G8 before it) fails to live up to the UN's record on climate change, on the day the Australian media reported that it had become the new premier forum for global governance and economic management.

In part the Leaders' Statement reads:

12. Today we agreed:

13. To launch a framework that lays out the policies and the way we act together to generate strong, sustainable and balanced global growth. We need a durable recovery that creates the good jobs our people need.

14. We need to shift from public to private sources of demand, establish a pattern of growth across countries that is more sustainable and balanced, and reduce development imbalances. We pledge to avoid destabilizing booms and busts in asset and credit prices and adopt macroeconomic policies, consistent with price stability, that promote adequate and balanced global demand. We will also make decisive progress on structural reforms that foster private demand and strengthen long-run growth potential.

15. Our Framework for Strong, Sustainable and Balanced Growth is a compact that commits us to work together to assess how our policies fit together, to evaluate whether they are collectively consistent with more sustainable and balanced growth, and to act as necessary to meet our common objectives.

16. To make sure our regulatory system for banks and other financial firms reins in the excesses that led to the crisis. Where reckless behavior and a lack of responsibility led to crisis, we will not allow a return to banking as usual.

17. We committed to act together to raise capital standards, to implement strong international compensation standards aimed at ending practices that lead to excessive risk-taking, to improve the over-the-counter derivatives market and to create more powerful tools to hold large global firms to account for the risks they take. Standards for large global financial firms should be commensurate with the cost of their failure. For all these reforms, we have set for ourselves strict and precise timetables.

18. To reform the global architecture to meet the needs of the 21^st century. After this crisis, critical players need to be at the table and fully vested in our institutions to allow us to cooperate to lay the foundation for strong, sustainable and balanced growth.

19. We designated the G-20 to be the premier forum for our international economic cooperation. We established the Financial Stability Board (FSB) to include major emerging economies and welcome its efforts to coordinate and monitor progress in strengthening financial regulation.

20. We are committed to a shift in International Monetary Fund (IMF) quota share to dynamic emerging markets and developing countries of at least 5% from over-represented countries to under-represented countries using the current quota formula as the basis to work from. Today we have delivered on our promise to contribute over $500 billion to a renewed and expanded IMF New Arrangements to Borrow (NAB).

21. We stressed the importance of adopting a dynamic formula at the World Bank which primarily reflects countries' evolving economic weight and the World Bank's development mission, and that generates an increase of at least 3% of voting power for developing and transition countries, to the benefit of under-represented countries. While recognizing that over-represented countries will make a contribution, it will be important to protect the voting power of the smallest poor countries. We called on the World Bank to play a leading role in responding to problems whose nature requires globally coordinated action, such as climate change and food security, and agreed that the World Bank and the regional development banks should have sufficient resources to address these challenges and fulfill their mandates.

22. To take new steps to increase access to food, fuel and finance among the world's poorest while clamping down on illicit outflows. Steps to reduce the development gap can be a potent driver of global growth.

23. Over four billion people remain undereducated, ill-equipped with capital and technology, and insufficiently integrated into the global economy. We need to work together to make the policy and institutional changes needed to accelerate the convergence of living standards and productivity in developing and emerging economies to the levels of the advanced economies. To start, we call on the World Bank to develop a new trust fund to support the new Food Security Initiative for low-income countries announced last summer. We will increase, on a voluntary basis, funding for programs to bring clean affordable energy to the poorest, such as the Scaling Up Renewable Energy Program.

24. To phase out and rationalize over the medium term inefficient fossil fuel subsidies while providing targeted support for the poorest. Inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.

25. We call on our Energy and Finance Ministers to report to us their implementation strategies and timeline for acting to meet this critical commitment at our next meeting.

26. We will promote energy market transparency and market stability as part of our broader effort to avoid excessive volatility.

27. To maintain our openness and move toward greener, more sustainable growth.

28. We will fight protectionism. We are committed to bringing the Doha Round to a successful conclusion in 2010.

29. We will spare no effort to reach agreement in Copenhagen through the United Nations Framework Convention on Climate Change (UNFCCC) negotiations.

30. We warmly welcome the report by the Chair of the London Summit commissioned at our last meeting and published today.

31. Finally, we agreed to meet in Canada in June 2010 and in Korea in November 2010. We expect to meet annually thereafter and will meet in France in 2011.

* * *
1. We assessed the progress we have made together in addressing the global crisis and agreed to maintain our steps to support economic activity until recovery is assured. We further committed to additional steps to ensure strong, sustainable, and balanced growth, to build a stronger international financial system, to reduce development imbalances, and to modernize our architecture for international economic cooperation.

Clarence Valley Council intends to ask NSW taxpayers to fund a bigger slice of the jetty primarily being built for a privately-owned waterfront hotel

At its ordinary monthly meeting last Tuesday, after a small amount of argy-bargy, Clarence Valley Shire councillors unanimously voted to go ahead and build a jetty in front of Sedgers Reef Hotel at Iluka.

Never mind that the community preferred any new jetty to be sited elsewhere in Iluka Bay, the cost blow-out, a lack of transparency or a growing public perception that Council is doing favours for mates.

Just vote to ask New South Wales taxpayers to fork out all or part the $65,000 plus extra funds required to bring additional customers to the hotel.

For years local government has rightly complained about cost-shifting by the states and Commonwealth and called for this third tier of government to be taken seriously.

On Tuesday Clarence Valley Council voted for a good example of why local government is always a poor second-cousin twice removed; not to be taken too seriously by the rest of the political family.

So if you live elsewhere in New South Wales and are finding it hard to get additional funding for vital infrastructure like health services operating out of the local hospital, extra school sports equipment or that much needed community hall - just remember that Clarence Valley Council may have got into the Rees Government treasury ahead of you so that one North Coast hotelier can have his latest wish fulfilled.

Iluka jetty and pontoon: The Glass House revisited?

Secretary to the Treasury Ken Henry on the good, the bad and the ugly

From Dr. Ken Henry's speech to the Australian Economic Forum on 19 August 2009 concerning the Rudd Government tax review now underway:

"So what does this mean for the panel’s deliberations? As a first step, the panel is considering taxes and transfers on their individual merits, how they sit within the overall architecture of the tax-transfer system, and how they will meet the opportunities and challenges of the future. Importantly, this assessment is being undertaken without regard to the level of government which currently administers that particular tax or transfer.
The Panel’s concern is to ensure that our tax-transfer system is calibrated to emerging challenges and opportunities that arise from things like population ageing, the re-emergence of China and India and continuing technological change.
As part of its enquiry, the panel is assessing how different taxes and transfers rate against the standard policy assessment criteria – fairness, efficiency, simplicity, sustainability and coherence. These criteria will enable us to identify taxes which should be levied, taxes that are so irredeemingly poor that they should be abolished, and taxes that are reformable – the good, the bad and the ugly."

What do they say? No press is bad press - just spell the name right

The hard working North Coast Labor MP for Page Janelle Saffin found herself picked out for a rather truncated mention in a bible-quoting Canadian market opinion blog post courtesy of Joel Bowman, reporting from Taipei, Taiwan on 17 August 2009.

This post was apparently echoing seven other blogs or media reports, mostly from earlier in the year, which commented on the fact that $900 2008-09 tax refunds sent out as part of the Australian Government stimulus package also went to the estates of taxpayers who had died in or after the last financial year.

Apparently the general sentiment was; when it comes to tax refund money you're not supposed to take it with you no matter how hard you worked when alive.

Never mind, Janelle - at least they all spelt your name correctly!

All's well with the world as the rich keep getting richer

Sometimes it is hard to fathom how inequitable the global distribution of wealth is, particularly as the current economic crisis is affecting the relatively little advanced economies give to the hungry, ill and dying across the world from Africa and Asia through to the Americas.
Ordinary people who more often than not live on less than two dollars a day.

Or why the UN Millennium Project does not appear to be meeting its goals.

But never fear, the world is righting itself and greed is once again triumphing as a Goldman Sachs recent media release attests.

Yesterday the Goldman Sachs Group reported that total assets were worth $890 billion, total capital as of end June 2009 was $254.05 billion, with net revenues of $13.76 billion and net earnings of 3.4 billion for the second quarter of 2009.

Compensation and benefits (including salaries, severance expenses, bonuses, payroll tax etc.,) for the same period were $6.65 billion.

On 17 June it even repaid the $10 billion is borrowed from the U.S. Government and taxpayers in that over-the-top bankers feeding frenzy at the beginning of the global economic crisis.

Goldman Sachs Group media release, 14 July 2009

New York Times article, 12 July 2009

Photo: Google Images

Parliament begins its inquiry into the relationship between the banks, Storm Financial, Opes Prime & MFS

In all the hullabaloo about the Federal Leader of the Opposition's political nosedive, there has been little mention of the fact that last week the Parliamentary Joint Committee on Corporations and Financial Services began public hearings in its Inquiry into Financial Products and Services in Australia.

The basic terms of reference are:

1. the role of financial advisers;

2. the general regulatory environment for these products and services;

3. the role played by commission arrangements relating to product sales and advice, including the potential for conflicts of interest, the need for appropriate disclosure, and remuneration models for financial advisers;

4. the role played by marketing and advertising campaigns;

5. the adequacy of licensing arrangements for those who sold the products and services;

6. the appropriateness of information and advice provided to consumers considering investing in those products and services, and how the interests of consumers can best be served;

7. consumer education and understanding of these financial products and services;

8. the adequacy of professional indemnity insurance arrangements for those who sold the products and services, and the impact on consumers; and

9. the need for any legislative or regulatory change.

Hopefully those who lost their life savings when Storm Financial spectacularly failed will receive some answers as to why financial advisers are apparently so under-regulated that they can act like irresponsible cowboys.

As yet the transcript of the 24th June 2009 has not been posted. Perhaps because that first hearing day appears to have been taken up with the Australian Securities and Investments Commission explaining itself and its track record.

There have been over 110 submissions to this inquiry so far. Mostly from ordinary individuals, some with sad tales to relate.

The next hearings will be held:

26/08/2009	Melbourne, VIC
28/08/2009	Canberra, ACT
02/09/2009	Townsville, QLD
03/09/2009	Brisbane, QLD
04/09/2009	Sydney NSW

Links to 2009-10 Australian Commonwealth Budget Papers

Graphic from Google Images

The 2009-10 Commonwealth Budget will be released at 7.30pm, Tuesday 12 May 2009
To avoid potential delays accessing the Budget on 12 May due to heavy traffic on the Budget website, please bookmark one of our Budget co-host websites.
Co-hosts for the 2009-10 Commonwealth Budget are:
http://budget.australia.gov.au
http://www.finance.gov.au/commonwealthbudget
http://www.ato.gov.au/budget
http://www.aph.gov.au/budget

From http://www.budget.gov.au

Budget documents can be purchased from CanPrint Communications or state shopfronts.

As ordinary workers and small business find it increasingly difficult to obtain credit, which bureaucrats still have those government credit cards?

MORE than 100,000 federal bureaucrats have been issued taxpayer-funded credit cards, posing a growing accountability nightmare for the Rudd Government ......A recent Auditor-General's report highlighted more than 268 instances of fraud or misuse of Government credit cards said Adelaide Now on 27 March 2009.

After coming to office the Rudd Government issued 240 new credit cards in the Foreign Affairs and Trade portfolio alone.

Heaven knows how many there are in the Department of Human Services, the Department of Agriculture, Fisheries and Forestry, the Department of Broadband, Communications and the Digital Economy and the Australian Competition and Consumer Commission - all of which were audited according to the ANAO 2007-08 annual report.

As for other federal portfolios and state government departments................

The International Monetary Fund report pretends to tell us something we didn't already know (transcript)

With so much media coverage of the global financial crisis it would be hard not to understand that toxic debt is actually higher than originally anticipated, working capital is hard to find and, in the case of Australia, that the national economy was bound to go into recession this year, government revenue fall and unemployment deepen.

So the International Monetary Fund's April 2009 report on global financial stability does not report the unexpected:

The global financial system remains under severe stress as the crisis broadens to include households, corporations, and the banking sectors in both advanced and emerging market countries. Shrinking economic activity has put further pressure on banks' balance sheets as asset values continue to degrade, threatening their capital adequacy and further discouraging fresh lending. Thus, credit growth is slowing, and even turning negative, adding even more downward pressure on economic activity. Substantial private sector adjustment and public support packages are already being implemented and are contributing to some early signs ofstabilization. Even so, further decisive and effective policy actions and international coordination are needed to sustain this improvement, to restore public confidence in financial institutions, and to normalize conditions in markets. The key challenge is to break the downward spiral between the financial system and the global economy. Promising efforts are already under way for the redesign of the global financial system that should provide a more stable and resilient platform for sustained economic growth.To mend the financial sector, policies are needed to remove strains in funding markets forbanks and corporates, repair bank balance sheets, restore cross-border capital flows (particularly toemerging market countries); and limit the unintended side effects of the policies being implemented to combat the crisis. All these objectives will require strong political commitment under difficult circumstances and further enhancement of international cooperation. Such international commitment and determination to address the challenges posed by the crisis are growing, as displayed by the outcome of the G-20 summit in early April. Without a thorough cleansing of banks' balance sheets of impaired assets, accompanied by restructuring and, where needed, recapitalization, risks remain that banks' problems will continue to exert downward pressure on economic activity. Though subject to a number of assumptions, our best estimate of writedowns on U.S.-originated assets to be suffered by all holders since the outbreak of the crisis until 2010 has increased from $2.2 trillion in the January 2009 Global Financial StabilityReport (GFSR) Update to $2.7 trillion, largely as a result of the worsening base-case scenario for economic growth. In this GFSR, estimates for writedowns have been extended to include other mature market-originated assets and, while the information underpinning these scenarios is more uncertain, such estimates suggest writedowns could reach a total of around $4 trillion, about two thirds of which would be incurred by banks. There has been some improvement in interbank markets over the last few months, but funding strains persist and banks' access to longer-term funding as maturities come due is diminished. While in many jurisdictions banks can now issue government-guaranteed, longer-term debt, their funding gap remains large. As a result, many corporations are unable to obtain banksupplied working capital and some are having difficulty raising longer-term debt, except at much more elevated yields.

Global Financial Stability Report, April 2009 Summary Version and Statistical Appendix

Greed is still good

Fair crack of the whip!
Up to our knees in a global recession caused by excessive business and personal debt and out-of-control greed and what does the world do?
Continues accumulating massive debt through government borrowings to prop up ailing national economies and stands by while many of the architects of this crisis continue on their avaricious way.

The Australian this morning:

"FANNIE Mae and Freddie Mac, the US Government-controlled mortgage giants, will pay $US210 million ($294 million) in retention bonuses over the next 18 months.
The lenders are overseen by the Federal Housing Finance Agency (FHFA) after making $US108 billion in losses last year and being taken into Government conservatorship.
Fannie Mae's disclosure last month that it planned to pay almost $US5 million in bonuses to its top four executives riled politicians, who were already furious over $US165 million windfalls for about 400 workers at AIG's troubled financial products business.
Today's revelations of the payments to be made to ordinary workers are almost certain to cause anger in Congress, which is considering legislation to tax bonuses paid by companies that have received federal bailouts.
In a letter to Senator Charles Grassley, James Lockhart, director of the FHFA, spelt out the bonuses being paid to 7600 employees at the lenders over 18 months to early 2010.
Mr Lockhart said that about $US51 million of payments were made to workers late last year, according to The Wall Street Journal, which has seen the letter. The rest of the cash would be distributed this year and early next year.
At Freddie Mac, 4057 workers would be eligible for payouts, of which 92 would receive $US100,000 or more. One Freddie worker would be paid more than $US675,000 to retain his or her services.
The letter said that 3545 Fannie employees would be eligible for retention bonuses, of which 121 will get $US100,000 or more. The maximum payout at Fannie will be $US705,000............
Fannie and Freddie loan or guarantee half of America's $US12 trillion mortgage market but made losses on sub-prime loans. They are propped up by the Government, which has put aside $US200 billion to support the lenders."

If this isn't milking government for all it's worth, what is?

G20 in London, March 2009: words in pictures

Montage by Stephen Hird

"Neo-Liberal Meltdown": the global financial crisis explained

Robert Mann writing in the March 2009 issue of The Monthly magazine explains the beginnings of the global financial crisis, for those of us who don't have an economics degree or work in the financial sector.
He makes a better fist of it than the Prime Minister in his previous essay in the same magazine.

The causes of the global financial crisis are already reasonably clear. The crisis originated in a series of interconnected developments within the American financial sector. From the 1980s a vast market in obscure and opaque financial instruments known as derivatives developed there. The market grew at an accelerating pace. In 1989 it was worth US$2 trillion; by 2002, $100 trillion; and by September 2008, almost $600 trillion. (The annual GDP of the United States is presently about $15 trillion.) This explosion of the market in derivatives depended, in turn, on ideological convictions and political acts. In 1998 Brooksley Born, the head of the Commodity Futures Trading Commission, argued for the regulation of this market. Without it, she argued, the American economy and the global economy were being placed at risk. She was overpowered by the chairman of the Federal Reserve, Alan Greenspan, and President Clinton's Treasury secretary, Robert Rubin. Shortly after, Congress withdrew from the CFTC the authority to regulate derivatives. At much the same time, as a consequence of a $300-million lobbying campaign by financial corporations, Congress also repealed President Roosevelt's 1933 Glass-Steagall Act. Its purpose had been to separate the commercial banks, which had become involved in the speculative frenzy of the '20s, from the activities of the investment banks. The repeal of the Glass-Steagall Act opened all the American major banks to massive involvement in the derivatives market. More deeply, as Joseph Stiglitz has argued in Vanity Fair, the repeal completed the transformation of American banking culture.

The post-2000 derivatives explosion was also aided by American monetary policy. Greenspan reacted to the bursting of the dotcom bubble by steadily lowering official interest rates. In 2000-01 they dropped rapidly from 6.5% to 3.5%. By 2003 they had reached 1%. Effectively, at least for bankers, as Charles Morris puts it in his book The Two Trillion Dollar Meltdown, money was now free. At this time the explosion in the derivatives market intersected with the explosion in another market, sub-prime mortgage lending, which rose from US$145 billion in 2001 to $625 billion in 2005. On the basis of a housing bubble, which increased the price of houses by an annual 7-8%, borrowers with low incomes and no assets were encouraged by banks and mortgage brokers to purchase houses worth several hundred thousand dollars. Derivative traders saw these sub-prime mortgages as a splendid opportunity. They bundled up the mortgages and created from them esoteric derivatives products - like collateralised mortgage obligations or collateralised debt obligations - which were then sold on in their trillions to investors and pension funds. In an article for Portfolio, Michael Lewis gives a telling example of how the racket worked. Big Wall Street firms took piles of sub-prime mortgages with a BBB rating. They bundled them into new products and divided these products into tranches. The top 60% of these tranches were rated AAA. Lewis's informant, Steve Eisman, who made his fortune by 'shorting' the corporations and the products involved in this trade (that is, gambling on their failure), kept asking himself: How is this possible; why is this allowed?......

The systematically phoney evaluations of the derivative products and the corporations which dealt in them, pocketing substantial fees with each contract, arose as a result of a straightforward but fatal ratings-agency conflict of interest. The profits of the agencies derived from the Wall Street banks and investment businesses they were supposed to rate. The continuation of their own very healthy profit growth relied on their willingness to turn a blind eye. Yet the fraudulent behaviour of Wall Street rested on another, even deeper, kind of blindness: the ideological blindness of the regulators. Most important here was the regulator-in-chief, Alan Greenspan, the most enthusiastic derivatives cheerleader, who believed with regard to derivatives (and everything else) that the invisible hand of the market was an infinitely more reliable and intelligent guide than any regulatory action by the state........

It is obvious whose interest all this served. Before the recent crash, the average taxable income of the top 15,000 American income earners was US$30 million; their annual income in total, US$441 billion. In the mid 1970s the wealthiest 1% of Americans owned approximately 20% of national assets. On the eve of the financial collapse they owned some 40%. Very many of these people derived their income and their wealth from the financial sector. In 2008, even after the sector had begun imploding, the executives of the Wall Street corporations that were eventually rescued by taxpayers rewarded themselves with US$18 billion in bonuses. Vast riches had apparently come to be seen by this predatory class as an entitlement.

The full essay here.

How much the Australian Government has borrowed because of the global financail crisis to date is here.

Storm Financial: if it looks too good to be true then it is

Storm is one of Australia's largest and fastest growing Financial Services firms. Our strength comes from providing services and advice, based on sound research, which integrate smoothly with your life goals and ambitions.
Investing successfully is about fulfilling your full financial potential; not about being constrained by the limits of your present position.
We take the confusion and complexity out of investing and provide free investor education so you can make informed choices to create the quality of life you desire.

So said Storm Financial (formerly Ozdaq Securities and Cassimatis Securities) in 2005.

Supposedly the principals now have to sell all after the company's financial collapse leaves them facing personal bankruptcy.

Though the media have been somewhat silent about another company Ignite Financial Systems & Research Pty Ltd (formerly Storm Financial Research and Ozdaq Research) apparently owned by Storm principals and rumoured to be operating in Victoria as well as in Queensland and, which has Storm Financial as a client.
It is not clear whether this firm has been protected from the financial meltdown or indeed if any of the other companies which appear to be associated with Storm are not at risk.

It has also been reported that the Financial Planners Association has terminated Storm's membership with some stern words.

Matters are likely to go from bad to worse for Storm clients, for besides having to meet horrendous margin calls it is possible that the Australian Tax Office may come calling about how various advisers structured their tax.

Legal action by former Storm clients against everyone they can think of may be the only way to stave off further loss/debt.
At last count their combined debt was estimated at $100 million.

Courtesy of The Wayback Machine here are website screen shots from October 2007 and January 2009.

Then...................

Now....................

Update:

• Emmanuel Cassimatis admits it was he who discussed with the Commonwealth Bank the fact that many Storm clients would be unable to meet margin calls, two weeks before the bank contacted these clients.
• Supreme Court freezes bank account linked to Storm Financial, 4 Februaury 2009