More Quantitative Easing by Fed has Markets Spooked About Inflation


Well that was a short dollar rally. December gold futures hit $1,174 in intraday trading before settling down $1,164.80. That was still up nearly two percent. And gold is now up almost 32% on the year. Copper, silver, and oil were up as well.

But then everything is up this year, at least since the markets started buzzing in March. The S&P 500 is up over 64% from its March 6th low. That’s an exceptional bounce even by dead cat standards. With negative real interest rates in the States, owning cash is losing money. Hence the rise in stocks.

Yes, rising U.S. stock prices could have something to do with a fictitious recovery. But with labour markets weak and housing getting worse (rising foreclosures) we’re not counting on it. So we’ll stick with the credit-fuelled stock rally.

It’s gotten so surreal on markets that yields on some three-month Treasury bills briefly dipped below zero in trading action. As it is, the yields on Treasury bills are hovering just above zero. Bloomberg reports that, “For the first time in seven decades, Treasury bills are paying no interest while stocks continue to appreciate.”

Why would investors lend their money to the American government for nothing? And why would they continue buying stocks at the same time? Ponder….and discuss.

We think the answer is that the Fed’s policy has forced global investor into an either/or situation. You either get out of cash and into equities to beat inflation. Or, you are so terrified of buying equities divorced from normal valuations that you prefer capital preservation in the form of Treasuries, even if you’re losing out to inflation there as well. At least you get your money back at a non-inflation adjusted par value three months later.

Or, you could buy assets like gold, oil, silver, and copper.

Why the sudden move in markets yesterday? It could be that Federal Reserve of St. Louis President James Bullard told markets the Fed should keep buying mortgage-backed securities after its self-imposed March deadline for exiting the market expires.

The Fed’s plan to purchase $1.25 trillion mortgage debt and agency securities has effectively kept U.S. interest rates from creeping up. It’s also kept the housing market afloat, although even at these levels you are not exactly seeing refinancing boom. But it’s the prospect of more quantitative easing by the Fed that must have markets spooked about inflation.

Bullard said, that, “If the economy came in very weak, let’s say, in 2010, weaker than expected, we would have the option of doing further quantitative easing.” The Fed would do this through additional asset purchases, presumably with more, uh, “money” it created.

Bullard also said that, “If the economy came in stronger than expected and inflation expectations started to ratchet up a little bit we could maybe sell off some of these assets and remove some of the accommodation from our quantitative easing program.”

The market must not have heard that second part. Or maybe it didn’t believe it. Maybe it concluded that the Fed loading itself up with mortgage-backed securities is not a healthy expansion of the central bank’s balance sheet. Maybe that’s why the dollar fell and gold rose.

Hey it turns out that we were wrong and man-made global warming is real after all. A bunch of scientists have colluded to invent it by suppressing evidence that the earth is actually cooling. It turns out that empirical data do not support the agenda to expand government power and control over nearly aspect of our everyday lives.

How inconvenient!

You won’t find the story of the leaked IPCC e-mails in too many main-stream press outlets. Most of the media is in collusion with governments to cram some sort of climate change carbon law down our throats. Publishing evidence that suggests there is still real scientific debate doesn’t suit that agenda.

Before you send us e-mails condemning us to hell for hating the earth and clean air, let us make a small point. Of course the climate is changing. But – as these leaked e-mails show – the scientific community is not nearly as unanimous in its “interpretation” of what the climate data are showing as the political community would like you to believe.

Be sceptical. It works with investing. It works with politics. Any time a group of people tries to shout you down and make major changes to the law, you should be very concerned. The debate about how we inhabit our ecosystem is an important one. But it’s obvious the science has been politicised.

And please don’t write in saying that doing nothing is not an option. Doing nothing IS doing something. It means NOT doing something stupid until you have a fuller picture of what’s going on. And there are still many in the scientific community who are modest enough to admit that the earth’s climate is too complex a system to determine whether releasing carbon dioxide into the atmosphere is actually causing temperatures to rise today.

If you were even more sceptical, you might conclude that promoting global warming (or climate change) has become a lucrative industry for both scientists and failed U.S. presidential candidates with massive carbon foot prints. Both have a strong desire to tell other people how to live.

In any event, climate science is not our beat here. But the behaviour of hysterical crowds and how to survive it IS our beat. So have a look at the ClimateGate story in your spare time and let us know what you think. And in the mean time, keep an eye on your wallet and your mind on guard.

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.


  1. …many faith-based scientific groups concur that at the rate the earth is cooling, by the time judgement day arrives…hell could actually be at room temperature, which should alleviate many of the fears and concerns held by politians past, present and future…

  2. anyone noticed the head and shoulders pattern formed on the ASX? its right at the final shoulder – wonder if it means a correction is imminent

  3. Politicians (and more accurately, the real power brokers behind them) have used this formula for as long as history goes.
    If you want to change something about the society you live in which is mainly for the betterment of yourself rather than the majority, the way you do it is thus:

    1) Create a problem, or exagerate an existing one to make it everyone’s issue. This is done via control of information (propaganda) and squashing counter opinion (either through discrediting, muzzling, cutting funding, etc)

    2) Create a solution to the problem, but incorporate the real objective into this solution. Sometimes you don’t have to hide it, and sometimes the people will even thank you for it mistakenly believing it has been for their benefit.

    Climate Change STINKS of this formula. Every time someone throws you a stat about it, ask to see the raw numbers. You’ll find that it soon unravels, and any debate turns into opinion rather than fact.

    Unpopular Truth
    November 24, 2009
  4. Hey unpopular truth I’m in agreement with you.

    It’s really alarming how everyone goes through the same patterns of fallacious thinking. The hucksters of the world speaking in psycho-babble have a major advantage over those trying to talk about reality because most people don’t live in the latter world nearly as much as they require the former to survive.

    Junk science and patterns are things people need every single day and they draw conclusions and create faulty syllogisms because it fulfills their base instincts. Try unwrapping a life of making incorrect, incomplete or outlandish ideas which stem into millions of their everyday dealings such as ‘what does this curve on a chart mean’. Mostly economists I’m very sorry to say should not speak about math and statistics because they warp it to suit their own faulty analysis. Keynesians are the worst mathematicians because their model makes no sense whatsoever and is a bunch of numbers which mean almost nothing. It is based on an inherent mathematical flaw by believing the market is in equilibrium where (supply = aggregate demand) and ASSUMING full employment is a static variable (which it is not) and when supply or demand are out of proportion the price changes to reflect this. Not only is the math incorrect and the assumptions but the variables aren’t even correct. This is the most basic aspect which fails to meet minimal expectations but there’s plenty more wrong.

    The real issue though belongs with the fiction that any of the people making decisions have more intelligence than the lowliest societal member. The only difference is their ability to convince or deceive (intelligence). It’s unfortunate people are obsessed with having faith and taking a risk to feel that reward of gain. It’s too appealing and addictive, if they can’t believe in god and feel that faith they will turn to some other addictive substitute like gambling in the market, or a leader who offers them solutions where there are none.

  5. What you say is very true, Drew.

  6. Yeh GB; ASX is struggling, Dow is doing nicely – The thought has crossed my mind that could be consistent with them nasty Yanks pulling their moolah out of our markets and sneaking it back into their nice “safe” little currency back home … But who’s to know eh? (The Baltic Dry has been doing real well.)

  7. Hey Biker, have you been getting the impression lately that when Oz governments mention “affordable housing”, they are talking about affordable rental accomodation? I sure have! :)

  8. Do you think the pro-climate-change Governments will want to tax the gold miners to death? It is a very dirty industry. They could also put in some laws that condemn gold ownership, increasing the power of fiat currency. Plays into their hands nicely?

  9. they may be right. they may be wrong. who can prove? i believe less pollution is better. more clean air, clean water for us and our future generation is better. compared to people living in other parts of the world, I believe sacrifice a little bit does not hurt us much. thank you.

  10. I read today DR and was appalled. In general these types of newsletters are simply entertainment and nothing more, otherwise our friends at DR would be on top of the Forbes list rather than writing pages and pages on a daily basis.

    The point on climate change however is so ridicolous only someone without a brain or serious special interest could make it.

    Hackers with an agenda (they dont do it for fun suprise suprise) illegaly hack into university servers and selectively leak emails dating back as far as 10 years. A few select phrases are then used to discredit the scientists.

    This is supposed to be conclusive evidence? Its bullshit from a group of people that feel their interest are threathened, and perhaps they are scared of changes. Fact of the matter is that energy efficency makes sense whether you believe in climate change or not (read peak oil)

    Sweden has the same standard of living as the the Northern U.S. and uses half the energy per capita. The rest is pure waste.

    And if the catastrophic effects of climate change come true then the costs would be enourmous. Would it be rational to get “insurance” against this?

    And please dont refer me to the bogus science sites that are sponsored by big oil or other special interest. These same “scientists” tried to tell us tobacco was safe etc. A review of scientific journals would show that 99% of scientists believed the globe was warming due to man made causes.

  11. let’s see:

    adult to child: ” your up all night locked in a candy store and you will have a belly ache in the morning …”

    idiots to to idiots: “yes, let’s drill more oil wells and strip mine some more, after all we have our needs…”

    so there is no future after you die ? there is no future for the children because we refuse to deal with the fact that: there is not enough water, NOW. the air is polluted, NOW, that is the cause of DISEASE, NOW, not smoking, not drinking, not eating red meat……

  12. I like the Russian take on it – So if we keep polluting the Earth it will be warmer and we will have a longer growing season for our crops and we’ll not need to spend as much on heating our homes and workplaces and the ice will melt so it is easier to get at the mineral resources we need to pollute the Earth some more – And you say this is bad??? Plus as we aren’t a big polluter by global standards anyway (well not in relation to CO2 emmissions – Smile!) the silly buggers in the West want to pay us lots of money for our spare carbon credits – Ho Ho Ho!!!

    No wonder Putin had to have a bit of a think about whether to tell the West to bugger off or whether he’d play along with their silly games. But at the end of the day he reckons he’ll play which will give him the money now AND the nicer climate when precisely nothing is actually achieved – Now that’s a Win/Win!

    Theoretically Joyce is correct; But practically, DR is.

    The following article sums up the practicalities of it:

    From the Oz perspective, it’s a cynical exercise to collect more tax. And we knew it was coming – The stuff on the Henry review to date has told us that while increasing the GST rate is “bad”, that environmental taxes are “good”! Aussies are just too bloody stupid to connect the dots and realise that if our pollies can’t get increased taxes out of us in a politically unacceptable way then they’ll find a politically acceptable way so we can all have warm and fuzzy feelings about saving the environment while they stiff us. Hmmm …

  13. Sorry Patrick,
    Your statement “A review of scientific journals would show that 99% of scientists believed the globe was warming due to man made causes” doesn’t give your article credibility. This motherhood statement purporting to be factually accurate needs challenging. In some journals scientists opinions support your statement and in other journals scientists dispute your statement.
    Where are your facts? Where is the statistical proof that there is global warming?

  14. Well, November looks like breaking all records temperature-wise (as well as that one-day rainfall in Melbourne).

    Although living here, I would normally be able to personally confirm the above; I am thankful for those hacked emails telling me I needn’t worry.

    Two more for discussion:

    “Warming diagnosis: beyond worst case”
    “Planet approaching point of no return, experts warn”

    If it’s true that “March last year had the warmest global land temperature of any March measured, and June and August this year had the warmest land and ocean temperatures recorded in the southern hemisphere for those months.” and “Global ocean surface temperatures this year broke records for three consecutive months, June, July and August.”
    then I’m beginning to be skeptical of being overly skeptical.

  15. Thank you Leo. Thats the key thing.

    99% of scientists agree.. big deal. 99% of scientists base their opinion on the same false/fudged set of data, then of course they’ll agree. Plus you tend to turn yourself into a pariah to do otherwise.

    It becomes a ‘me too’ situation, which helps nothing and proves less.

    It’s the 1% of people who push the truth and facts which are actually important to the discussion. Ruining our economy by introducing an extra tax system (and make no mistake, that’s what it is dressed up as a think of the children solution) is not something I plan to be quiet about.

    You want to look for facts? Ask about the variety of other things that cause climate change (and have done so in the past).

    Sunspot activity, methane released from volcanoes, etc.. all this stuff makes orders of magnitude more difference than a few extra power stations. It’s arrogance on our part to think that humans can hatchet the planet’s entire atmosphere as the so called experts are claiming. We have had massive swings in climate before we were around, and will do so long after we’re all gone. Planets are not static, they are living things.

    There’s another thing.. does anyone care that we are going to ruin our economy and be all for nothing? If we turned off our power and stopped driving tomorrow, then in 90 days or so, China/India would pick up the slack, as that’s how fast they’re expanding.

    Lets not ruin ourselves so we can feel like we’ve done something regardless of end-result. It wont work, and even if it did, it wouldn’t make any difference.

    Unpopular Truth
    November 25, 2009
  16. Patrick do you mostly get appalled when someone has a different opinion to yours?

    “You won’t find the story of the leaked IPCC e-mails in too many main-stream press outlets. Most of the media is in collusion with governments to cram some sort of climate change carbon law down our throats. Publishing evidence that suggests there is still real scientific debate doesn’t suit that agenda.”

    This is what you found so distasteful? I can only assume you don’t like the scientific process (thats okay alot of climatologists are in the same boat). Are you one though? If you’re not you really don’t have much of an excuse for buying into their unpersuasive arguments. I started with trying to understand why there’s global warming through simple physics. If you look at it that way then global warming makes no sense. We contribute so little compared to normal CO2 levels and then CO2 itself only makes up less than 1 of the greenhouse effect (taking into consideration water vapour). But I give AGW the benefit of the doubt and went to their complicated models – simple physics needs more explaining I’d wager. I wonder why I don’t see what I expect with a scientific process,how do the journal articles keep coming to a head with the same information? In my field (molecular biology / biomedical science) I would be astounded to find such straight forward and unchallenged aspects of the science in the journal articles, its streamlined. Good science allows for mistakes and corrections and competition. It is true dissent in this community is not allowed from my view(and this is unscientific). This is how they’ve accomplished their political process of establishing their own authority, it’s a private club as far as I can tell. You can’t get an opposing journal article through because the community is comprised of AGW zealots (quite amazing that they accomplished this through various mechanisms).

    If you look at the history of the IPCC their track record speaks volumes about their manipulation. They introduce a hockey stick model which was the most decisive ‘proof’ and Al Gore uses it in a presentation which many buy into. The stick is hacked (reverse engineered by a mathematician) and shown to be fraudulent because any white noise background will produce the same stick (the output is meaningless). The IPCC concludes noone was deliberately serving an agenda and everyone goes back to work although the model is disregarded as being incorrect.

    The IPCC establish that the ice core sheets from Poland show melting and are related to CO2 but reverse the data so that CO2 is the cause of the melting. Strange how the liquid ocean is somehow taking in more CO2 and acidifying the ocean when it heats (even though it should require cooling down to take in more CO2) but this unexplained phenomenon defying physics can be ignored (because they do).

    FOI requests are continually denied but a compilation of their requested documents are produced by CRU (hackers steal data?). The information therein gives insight into the mess of the process and how agenda driven the people there are. From a psychological standpoint its very interesting but making heads or tails of these emails is complicated because context is required.

    HARRY_READ_ME.txt is an insight into a programmer from CRU who cannot figure out what the data he’s being given is. It’s a minefield he has to wade through for 3 years, you’ll laugh with him as the datasets are labelled the same names but with _mon and _ann for differentiation of months and years. However, the data he eventually finds it all recorded monthly anyway, “whats going on?” enquires our hero Harry. The program written in Fortran is completely undocumented and Harry finds he has to ‘skip’ steps in trying to deliberately produce a certain result because its too much effort. He’s matching between data sets and inserting synthetic values, gathering information about where data sets are coming from in Australia only to find the codes don’t match the stations he’s given. It’s a roller coaster ride and its scary to think the process was anything like this in the models they derived. Where is this data from and is it the same process the IPCC used? We’ll find out, or will we? Not unless it’s somehow hacked I suppose otherwise we’re told results not processes.

    Unfortunately the IPCC don’t believe common folk deserve any of the details behind how things work. This is why we’re forced to wait for someone to hack the details and pop the hood of this beast of a vehicle — the AGW 09 model.

    How about the details of the research aren’t held secret like U.S military expenditure and we can know what is going on? Instead we find out from a hacker what is actually going on with public funds.

    This isn’t published in a journal article though so you can ignore it. Blindly believe that someone else has the answers who refuses to give them to you until a hacker steals them.

  17. Dan D, I think your assessment is right about the forces behind the rally (credit). People can see the money printer going into turbo-mode, and have all upturned their umbrellas hoping to catch some electronic rain.

    As to what the big game is all about, well I still think it (the financial system – not the economy) is a great big cat which is as good as dead and the system needs reinventing before it will result in lasting prosperity again. It all depends on what you measure to determine the vitality of a system – employment? factories open? price to earnings? what else?. The point prozak made earlier about M1/M2/M3 differences is worth noting – much of the quantitative easing is on paper only – money changing hands between financial institutions, making them appear monetarily fat but not much of it doing any real work (ie: inciting people to get off their arses and do something). It is merely the reshaping of financial power which will result in a new and much less liberal political landscape.

    What I can see is the drawing of a line in the sand – on one side are those nations that cling to fiat, credit based money (the US dollar, basically … or the same thing re-branded as a world currency) being NATO and various hangers on, and those nations who seek to break from this grasp, being possibly Russia, China and various hangers on (Iran? Venezuela?).

    If the world sticks to fiat money, it will have to accept bullies like Goldman Sachs and similar organizations as the world’s future governing body – placing its armies at their behest. The problem is that because the system is inherently unfair and the power relationship extremely one sided, there is a continuous threat of implosion and revolt. If people lose faith then the imaginary castle ceases to exist. The right path is to have sound money and assets based on positive value (an asset having an exchangeable value in eg: gold, as opposed to a floating, negative value of debt against it) as it would lead to much greater financial and economic stability in the long term, but unfortunately the big bad wolf who wants to keep his easy pickings will huff and puff – so those nations that wish to go down this path had better make sure he can’t blow their houses down.

    Thing is that the fiat money world’s military superiority is not as clear as it was decades ago – NATO and the US have shown that they can be worn down, despite their technological superiority – I think China is feeling rather like a cheated lover at the moment, when it thinks about the US and its empty promises. Who knows, really, whether anything will come of all that.

    The doing nothing approach seems best actually. Just get on with life, live by sound economic principles, avoid getting into any sort of long term debt, hold on to real assets and don’t be tempted to exchange them for a laser-printed number on recycled paper with a fancy letterhead. Better to be “poor” and happy, and so on, and not be suckered into yet another bait-and-switch scam.

  18. Patrick,

    “A review of scientific journals would show that 99% of scientists believed the globe was warming due to man made causes. ”

    Wow, was this done? Gee, all published scientists you say? Where was this published? Are you sure it’s 99%? Why couldn’t the scientists who don’t believe this get published?

    Oh, that’s right, it would be politically inconvenient to let the other perspectives known, right? Silly me, sorry, I thought it was about the science, not mob rule.

    It is exactly this sort of stunt that got Mann etc in trouble with those emails in the first place – you know, the ends justifies the means or whatever.

    Ironically, this sounds pretty similar to the mentality in, I don’t know, [the former] lehman Bros, BOfA, etc etc.

    They got exposed and now they’re squirming just like many other people did at their beck and call. Jacks sympathy factor is 0. Let em burn.

    And no, Insurance against this stuff is not worthwhile in my opinion. I wouldn’t insure with a company that only took the worst case scenario into account. Would you? Until I see more balanced perspectives, I’m not jumping on that boat.

    RE: Media collusion, yesterday afternoon, had two stories on the leaked emails up for about 20 minutes. They were then taken down and replaced with a sotory about a massive iceberg heading to NZ due to AGW. Funny thing is that this morning, it was discoverd that it was actually a reef, not an iceberg and it isn;t moving anywhere. Funny the timing of these stunts eh!

    I’m off outside to let off some methane. Then I’m going to sit down to a nice side of beef (even though the Political body called the IPCC is saying we shouldn’t). In fact I’ll have two steaks tonight luv -leave out the lentils.

  19. I for one think the depression will be good for the country. Having just spent the day toiling in the fields, those weeds won’t dig themselves up, I will be happy to put starving, desperate city folk to work digging weeds for some jam spread over a cow-pat.

  20. Justin – Depressions tend to be depressing for ordinary folk. Although a nice basic little recession probably wouldn’t do Oz excessive harm? Either way, we get what we get – And it’s nice to see your sugar going up! Cheers … Ned.

  21. Politicians are clever indeed.

    However don’t throw the planet out with the stinking swamp of egomaniacs.

    There is no doubt that politics has piggy-backed a clear planetary dynamic. Further, evidence mounts that a number of storms will hit in the next few years.

    Bunker down.

  22. I do not believe all the scare stories.
    I didn’t buy Mr Gore’s inconvenient conclusions either.
    I do however believe that 7+ billion of us burning everything we can find without restraint whilst at the same time stripping down everything that naturally scrubs our atmosphere and err … well … burning it some more, is not the way to ensure future generations have a nice World to live in.
    I believe there are limits to our World and that 7+ Billion of us with our current lifestyle might just be about it.
    So a tax on carbon emmissions by way of setting a price to emmit and encouraging by market forces the research and adoption of carbon free’er options, is probably a good and pragmatic way to go.
    Perhaps Dan has something against market principles to reflect real value and to influence change.

  23. Nope, don’t agree Joe. What is the market price of carbon? not much, so any carbon trading scheme cannot reflect real value & free market principles.

    Just another scam for risk free profits for the finance crowd. I’m not at all surprised the big money funds are knocking down the politicians doors wanting a slice of the action, and that comes straight from the mouth of Mike Kelly, member for Eden-Monaro.

    Go Barnaby Joyce!

  24. Barnaby Joyce? I think anyone who gets dolled and propped up on a national morning TV show has to be about as bought as a … well something pretty nasty!

    There is a world of difference between a “scheme” which is really a “tax” (invented by schemers), and laws which demand better environmental standards. If you want less smog, then tell the companies “you shall produce less smog” – end of story. Ban imports which are produced in questionable ways, where the rubbish isn’t being cleaned up. Ban impractical and wasteful packaging. Mix, rinse, repeat, and watch them dance.

    Why does the government pretend to be green, talking about carbon and whatever, when forever it ignores (or rather sells) its crumbling rail infrastructure and public transport systems, allows logging of catchment areas, hits mining companies with a feather when they dirty the backyard and so forth?

    It’s just the same old boring method of statecraft – tell the people some kind of rubbish that feels good, and just do what you were going to do anyway.

  25. Very cynical Dan, what politician hasn’t been dolled up & put on a national TV show?

    Barnaby Joyce is just smart enough to see this carbon credits thing for what it is, a scam. More banker fueled credit expansion.

  26. I haven’t been able to work out the details properly but I’ve been thinking that maybe part of this heroic-push to get the ETS up and running by ALP has been in part motivated by wanting to distort future figures of market performance, government revenue and it hit me like a tidal wave but I just realised the implications of the power this would wield (I’ll come back to this). I don’t think Penny Wong personally has an insideous agenda and she really believes what she is doing is right for the environment and progress towards a better world (well this is her main criteria). It’s strange though in that what she is doing won’t do anything for the environment and if people really believe in her sources for climate change and the IPCC then the Greens Party have at least a policy which is moderately reasonable (it isn’t extreme given the calculations in fact I’d give them an A+ for science vs ALP C who I mark mainly for report writing). It’s quite astounding I never thought I could picture greens as well.. reasonable. On the flip side the other day on Question Time senator Wong was constantly answering the same question from the National Party and insisting that she had already answered it when in fact she very clearly gave a run around response, played politics and never responded directly. She was asked for the ‘ppm’ (parts per million) that Australia would contribute to global warming. Her response consisted of “1. I have already replied many times 2. Your side are stalling 3. The reasonable people listening will know I have answered you already 4. We are one of the worst polluting countries per GDP 5. I will answer again, millions of tonnes of CO2 will be saved from being expelled into the atmosphere.”

    Well that’s not the question, nor was the question how many litres if we dissolved it into a miscible solvent and we don’t care about any other measurements such as the weight in pg of the CO2 if it were on the 3rd moon of Endor which sounds impressively large and sciencey but which in fact means bupkiss without contextual scale and meaning.

    So Ms. Wong never answered and eventually the question was rhetorical apparently, where someone on the ALP could answer for us and tell us the answer was in some range of we would have saved from 1.38% down to 1.31% (sorry not quite the numbers but close so this is all just for context) of the worlds emissions. This 0.07% dent would adjust the climate by basically nothing. However the billions of tonnes over the next 20 years would amount for huge amounts of money (actually we have no idea because we can’t know the price of carbon until they fabricate it (possibly $12 – $13 per tonne by 2012). The only thing which would be required to make me believe they cared at all about climate science is some form of amendment that had nothing to do with taxes. The response (number 4) about GDP is quite amazing because we pollute given that we have no population is basically the overriding logical inference. This is the level of thought we’re abject to humbling abiding by if this gets legislature makes it through.

    So here’s an issue posed by the Nationals.. when Australia extracts Lead from the earth they produce far less CO2 than most other economies but if they have a CO2 tax they get shut out of business. This in turn leads to further CO2 generated by the foreign mining company which now makes up excess CO2 because we didn’t produce the Lead ourselves while in the meantime we lose our productive capacity and jobs. This is kind of like a ‘If a tree falls in the woods and nobody is around, does anybody put a CO2 tax on it?’ It should expand our capacity to realise regulating in this manner is unfathomable because there’s no way to truly regulate via a tax system as all forms of ‘evironmental impact’ are so complicated not even environmental scientists (who should actually know something) could figure it out.

    As another example if we take into account that CO2 is produced via coal extraction and the harmful radon (radioactive) gas is unleashed when Uranium is extracted we can start to weigh up the pros and cons. Now the stumbling step – If we leave Uranium in the earth it continues to decompose for years to come and continue to build up Radon deposits until much much more is created (which we could have utilized for fission in the first place but now it’s all converting to its less energetically favourable form). Is this taken into account, do we get Radon credits for making nuclear power before it decomposes?

    So how does all this come to a head into a silver bullet that politicians can aim at any problem? Well the power of ‘environmental issues’ comes in the form that with the passing of the Australian legislature with CO2 tax is the government can declare any particular company or group ‘polluters’ via CO2 and have their guts for garners. When things are law we all have to bow to it and know it just ‘applies to all’. How much theoretical damage a company is doing is based on nothing more than a ‘what if’ scenario but the outcome is a centralised authority which can gather further theoreticals to itself impugning the credibility of any company which it so desires. Now we have a group which is so close to something Orwellian it needs no physical need to prove anything just as long as the mental prison remains in place which controls society to believe they are saving the planet and its necessary.

    So what of the immediate? Well to my mind the government can generate alot of extra income with this CO2 tax and circulate many more dollars through the system helping to alleviate the credit contraction and tightening up of the damned evil ham fisted savers. Will we end up with even more fiscal services which becry, “Why do we need anyone else who actually produces something?” – Yes. My question remains, why is the entire Western economy surrounded by fiscal services which future proof us from economic advantage and are debt mills whilst China and India are dominating production and buying up all our physical deposits?

    Well I believe it’s because of global warming.. wait no I don’t.

  27. “Barnaby Joyce is just smart enough to see this carbon credits thing for what it is, a scam. More banker fueled credit expansion. ” .. he can afford to be against it because it makes no difference, except that he might save his seat at the next election.

  28. Come on Dan how on earth is the ETS going to save the planet when taxpayers money will be used to help the coal industry (and others) keep pumping out CO2. (even if they manage to hide some underground) Australia’s position is bizarre to say the least. On one hand we want to be seen as the good guys while on the other we are happy to export our fossil fuels and let others worry about the emissions they create.

    If we wanted to deal with any climate threats we would investing in science, not raising a tax and creating business for bankers & lawyers.

    In any case, there is no need to rush a vote through the Senate before Copenhagen especially since hardly any of the Senators know what they are voting for or against!! Scary.

  29. The big reason for the rush is political – So Kev can strut his stuff as a leader on the global stage – It’s all a bit pathetic. Have a look at the following pic – When was the last time you saw anyone over the age of three pull a face like that (except in jest). And somehow I doubt he’s joking? But either way, I can’t come up with any explanation of it that isn’t scarey! :

  30. That photo is priceless, Ned.

  31. Hi All,

    Maybe we can hire Ken Lay to run the ETS. He’s had experience with putting values on non tangible things in the past? If not Ken, maybe someone from Lehman Brothers might be able to come up with something?

  32. Is it just me or is there really an eerie silence in the Australian media about Climategate?

    It’s full steam ahead in the news towards a global taxation system based on that amazing little black stuff with a molecular weight of 12, upon which all life depends. They have finally found a way to tax breathing, but what will happen when we all find out it was based on manipulated data, intimidation and untruth? Someone went and looked behind the politicians’ and scientists’ backs and saw they had their fingers crossed.

  33. You can see the University of East Anglia’s “Climate Research Unit” hacked emails here :
    And the Documents here : or

  34. During photosynthesis carbon dioxide and water in the presence of sunlight and chlorophyll produce sugars and oxygen. Later during the respiration process carbohydrates are broken down to release energy water and CO2 which powers the chain of life as we know it. You could apply as much fertiliser as you like but without out the energy from photosynthesis and CO2 no plant has the power to absorb (active transport) or utilise it.
    CO2 is to our lives like petrol/diesel is to cars. So the ultimate consumption tax is on such a core substance.

    Lachlan Scanlan
    November 29, 2009
  35. Justin,

    As carbon credits are slowly removed from the economy, the value of those remaining will (based on supply and demand) naturally inflate.
    There then becomes a point where it is cheaper to produce greener less carbon polluting energy than it is to continue the good old way struggling to buy your respective credits.
    It is a carrot and stick approach to encouraging a more sustainable form of commerce.
    If you cannot see this, how can you possibly understand any financial instruments? It really isn’t that complicated a priniple now is it?
    As for the current subsidies these are only temporary and are there to act as a smoothing process towards greener implementations.

  36. Dan,

    Yes, the Mainstream media here downunder have been silenced. My views on freedom of the press here in australia have changed significantly over the last week. We have not real press freeedom, so we have no democracy.

    This issue is no longer scientific. It is political. Too many high profile pollies have taken advice from a former US VP with a degree in fine arts and law.

    We have all been sCRU’d

  37. Nope, don’t agree Joe. Carbon credits have no free market value, if they did it wouldn’t require government coercion, that being the power to tax, to make a market.

  38. MadJak the scary part is that most of the people getting airtime talking about global warming probably didn’t even do high school science let alone have any degree even remotely related to what they are rambling on about.

    The reporting by the mainstream media has also been biased and they basically label anyone who questions the science behind AGW as deniers as well.

    What people tend to forget is that some of the most important scientific discoveries ever made were by “deniers”.

  39. The reality is that recoverable hydrocarbons will be used over the next century whether we or our children like it or not. The only free floating variable is whether it happens sooner or later.

    The key issue may not be so much what causes climate change but rather the simple observation that the climate is changing. It always has and always will. A small shift in the Gulf Stream will for example freeze Northern Europe. I don’t have a degree in environmental science (so I’m out of my depth) but I am aware that once tipping points (in most fields) are reached (regardless of cause), there is often no going back … regardless of how hard everyone tries to back-pedal.

    I wonder how much sand they will need to pump to keep Dubai’s beach front accommodation above water? My guess is that they will spend good money after bad when POO creeps over $200 per barrel. Who would to buy, build or invest on a beach front while observing the rapid decline of polar ice sheets? ST traders and flippers aside, my guess is that the Biblical parable about building you house on the sand is pretty clear.

    Coffee Addict
    November 30, 2009
  40. I reckon my education in climateolgy ended when I was 12 but either way I’m pretty sure how those sciencetologists are going to affect my life – I’m going to pay more tax; So I’ll cut my usage – Then the providers are going to say Bugger this; We need more income to continue to live in the custom to which we’ve become accustomed – At which point they’ll raise their charges – On the assumption I’m addicted enough to pay more for less … C’est le guerre! :)

  41. Lachie – How did you go with your home based electricity generation trials? I have’t tried anything at this end – Except dropping usage – I’m a bit under $500 pa for one bloke in one house – Not bad I suspect given I’m 100% electric? (As in no gas, solar etc – Although I am considering going to wood burning if Kev really gets up my nose.)

  42. While I’m at it – Got my insurance bill from Suncorp this week (for a rental house) – $576. Hmmm … Hit the internet – A GUC quote rolls in (tricked if I know who GUC are?) – But at $465 (namely 19% under) I’m at least equipped to go shopping. Good luck to all – Unless you are a nasty bitter twisted piece of poo in which case you need to grow up! Cheers regardless, Ned!

  43. Cant remember saying anything about power production here Ned but having brought the subject up, theres enough rats here in the hay shed to power the whole town. We just gotta get em all onto a treadmill.

    Lachlan Scanlan
    December 1, 2009

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