All Posts Tagged With: "mining"

Green and Gold Greed…

The last thing Australia needs right now is to worry that China’s manufacturing economy is sputtering. After all, that Chinese engine of growth consumes huge amounts of Australian resources, like coal and iron ore. The government is keen to siphon off revenue from mineral and energy exports in order to do what it does: take from one party in order to give to another, while sounding self-righteous and looking important.

Remember back in the good old days? Back when there was no government in Canberra and stocks rallied because investors knew there wouldn’t be any moron law makers to pass moron laws? Ah yes…the good old days. Sigh. If there’s a deal that puts a Labor/Greens/Independent government in place, you might expect that to be a negative for shares, inasmuch as it could mean mining tax and, down the track, some kind of carbon tax.

But if you accept the premise that the last thirty years have seen fiat money credit bubbles leak their way into all sorts of markets, and one by one that those markets have topped out and fallen as the supply of cheap money fell away…and if you look at the huge levels in household debt growth in Australia (primarily mortgage debt) and see just how exposed the banking sector is to a) wholesale borrowing costs from overseas and b) residential housing… well then?

That loss is about $16 billion in shareholder value and counting. And that does not include the loss of Australia’s reputation as stable place to do business and make long-term plans. “If it is what appears to be, a significant tax increase, that’s another competitive advantage for Canada,” said Canadian Finance Minister Jim Flaherty.

It is not every day that you can stick your finger in the eye of your largest trading partner, undermine your country’s reputation as a stable place to do business, and demonstrate your fundamental ignorance of why entrepreneurs take risks…but in his high-handed small-minded way, Kevin Rudd managed to do all of that yesterday.

The simplest kind of stimulus governments the world over could provide is to cut withholding taxes. Let people keep more of their money from each pay check. People will then do what they have to do. That is, they’ll either use the cash to pay down debts, save it, or spend it. Meanwhile, governments can borrow and spend all they’d like on “shovel ready” projects. This will never happen, of course…

IMF director Dominique Strauss-Kahn tried to kick-start stalled G7 negotiations in Washington this weekend by reminding everyone what was at stake. “Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown,” he said. It doesn’t get much more direct than that. The truth is, governments are trying to do the impossible. They are trying to make bad loans turn good.

Australia’s deepest on-shore drilling effort doesn’t have anything to do with oil, gas, or mining. It is energy related though. Geothermal hopeful Geodynamics (ASX:GDY) finished drilling its Habanero 3 well in early February to a depth of 4,221 metres. Even if you don’t get all the way through the Earth’s crust at that depth, it’s still pretty hot down there, which is the whole point. Geodynamics hopes to be operating Australia’s first commercial geothermal electric generating plant by the end of this year.