The Great Crack-Up


The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function. One should, for example, be able to see that things are hopeless and yet be determined to make them otherwise.”
F. Scott Fitzgerald, The Crack-Up

–Australian director Baz Luhrmann was scheduled to begin filming this month of his 3D version of F. Scott Fitzgerald’s The Great Gatsby, published in April of 1925. But now the project is off until Luhrmann can learn more about Fitzgerald. In a recent interview Luhrmann said, “I’ve been studying Fitzgerald now for three years, and my only act now is to absorb the DNA of his world, his life, the world of the novel.” In support of his cause, today’s Daily Reckoning will attempt to reveal what Fitzgerald’s work says about today’s Australian investment landscape.

–As an aside, you have to wonder what the advantages of filming a 1925 period film in 3D are. Fitzgerald’s greatest book (and perhaps the greatest novel about America by any writer, in our opinion) is a story about reinvention and Westward expansion and the abstract idea of America which he later called, “a willingness of the heart,” personified by the aspiring Jay Gatsby.

–But Gatsby is not an action book, and probably wouldn’t make a good action film. Are insights into the human condition more compelling when filmed in three dimensions? Maybe. But probably not.

–Incidentally, Luhrmann plans to film his version of Gatsby in Sydney, even though the story itself is set in Long Island and Manhattan. That seems appropriate. Sydney is the iconic city of a nation basking in the glow of the most extraordinary period of uninterrupted prosperity in its history, a little like New York in 1925, before the Crash and the Great Depression.

–And now is probably the right time to remake Gatsby, too. Certain stories are more telling at certain times. Gatsby is one of them. It’s a story about wealth as a means to an end…what people will do to get it…and how the pursuit of it for its own sake can ruin others.

–Not to put too fine a point on it, but Tom Buchannan-one of the main characters in the story-is described as a man with a body, “capable of enormous leverage-a cruel body.” Leverage is a word you use in physics and finance. It describes the ability to move something larger with the application of a small amount of force in the right place. It’s an unusual but obviously deliberate word choice from Fitzgerald.

–You can imagine that in 1925 there were plenty of people in New York using leverage to exercise a disproportionate amount of force over current events, financial and otherwise-just like today really, which is one reason the story is especially socially and economically relevant again . The most famous film version of the book starred Robert Redford and was released in 1974, about the time that paper money in the Western world became unhitched from gold.

–Luhrmann should read Fitzgerald’s 1936 essay The Crack-Up, published in Esquire magazine. Before Twitter and YouTube and cable-TV chat shows, celebrity personalities had their mid-life crises and personal breakdowns in three-part articles in nationally distributed magazines. Fitzgerald’s crack-up meltdown is far more “winning” than Charlie Sheen’s because Fitzgerald provides us with this gem, “One should…be able to see that things are hopeless and yet be determined to make them otherwise.”

–Which brings us to the world today. We’d submit for your consideration the simple idea that all the worlds’ political, military, and economic happenings can be best understood as part of a great Crack-Up. When you take away the key inputs of an expanding global system-cheap energy and cheap credit-the whole system a) ceases to expand, b) begins to fracture, and possibly c) utterly cracks up into many non-cohesive pieces.

–In Europe, the crack-up is political and economic. Yields on five-year government bonds in Portugal climbed over 8% for the first time ever. JP Morgan releases a research report which concludes that austerity measures will not pass political muster, throwing Portugal at the mercy of yet another European bailout.

–Not to be outdone, Citibank released a report citing a huge increase in two-year Irish bond yields. The report claims that the Irish banking situation “has all the hallmarks of something that might start to get ugly. It is ‘obvious to a blind man’ that Ireland does not have the ability to meet the present requirements. (Almost certainly not on the level of interest rates or level of debt.)

–How did that happy green island ever get in the position of loaning so much money it didn’t have so people could buy houses they couldn’t afford to capture wealth gains that were really just inflation in disguise? It’s what has to happen in a crack-up. You stop making economic decisions that have even a whiff of rationality to them. You chase the dream with leverage, which as we know can be cruel.

–In the Middle East and North Africa, the political crack-up continues as well. The toll of a weaker U.S. dollar (evidence itself of a bankrupt U.S. empire) continues to rise, regime by regime. Some of the regimes in the region enjoyed explicit U.S. military and economic backing. Some did not. But in one way or another, the whole pre-Tunisia status quo was a product of the 30-year relationship between U.S. energy needs and the security relationship (protection money) the U.S. had with reliable partners in the region (Saudi Arabia).

–All of that is cracking-up. And even the unanimity of America’s central banking cartel is cracking up. “If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when,” said Dallas Federal Reserve Bank President Richard Fisher at a question-and-answer session in Germany.

–Maybe it was the jet lag. Or the lager. But Fisher (for now) is in the inner sanctum of the Fed. He’s superficially criticizing the U.S. Congress (fiscal authorities) for reckless spending. But he’s indirectly criticizing his own Fed (monetary authorities) for buying U.S. government debt with newly created money.

–The whole affair is bigger than that: it’s the crack-up of the Fiscal Welfare/Warfare State funding model. Fisher said the U.S. was near an avoidable “tipping point” where the fiscal crisis led to insolvency. But it may have passed that tipping point.

–A nation has truly cracked up when it believes creditors will continue to finance three wars, annual deficits of $1.5 trillion, and an un-repentant, un-serious political class that refuses to cut spending (not to mention a rent-seeking populace that continues to vote itself benefits that must be paid for by future Americans not yet born).

–So far, all these external crack-ups have been good for Australia. The Aussie dollar is riding high. And Australia has plenty of energy commodities that should gain in value as energy itself is re-priced for the new geopolitical instability in the Middle East and the doubts about nuclear power stemming from Japan’s nuclear crisis.

–But the world-wide crack-up is as much a state of mind-a zeitgeist that goes with the end of a huge credit bubble-as it is a specific event. So it was just a matter of time before Australia’s politicians had to find a way to join the crack-up. They’ve chosen the Carbon Tax.

–The main justification for taxing carbon dioxide emissions seems to be the assertion that carbon dioxide is “pollution”. This is why Green’s Senator Bob Brown unhelpfully refers to power generators as “polluters” rather than the companies who make sure your lights go on when you flick the switch.

–Since “pollution” isn’t something people want, there is no market price for it. Thus, according to the argument we’ve seen, a price on carbon dioxide is needed in order to figure in the social economic cost of the “pollution”, which is not currently being paid by anyone.

–Make the polluters pay! That seems to be the strategy of the Gillard government and the Greens. And they assure us that it’s only the polluters that will be pay. The carbon tax won’t be passed on in the form of higher energy prices to consumers because…consumers will be eligible for compensation and rebates to offset higher energy prices.

–So who is going to pay for the compensation? Hmmm.

–It’s a crack-up by the Greens to think that you can run an industrial economy like Australia’s on a mix of sun, wind, water, and warm fuzzies. Part of the carbon price crack-up, then, is a kind of mental breakdown by people who have emotionally given up on the modern world and want a simpler, more bucolic kind of life-and are happy to force it on you whether you like it or not.

–Is it a stretch to characterise the pro-carbon tax position as a crack up? Well, if you don’t accept the assertion that carbon dioxide is pollution, then the whole logic for carbon tax falls apart. The argument for the tax then relies on a kind of “emotional logic”. According to that logic, human beings are a parasite killing the planet by engaging in unnatural energy behaviours.

–The solution-driven by “emotional logic”-is to “power down” the planet. Or, to put it more simply, the hope is that if Australia can just can its carbon dioxide emissions (via a carbon tax and then an emissions trading scheme) it can lower the Earth’s temperature, save humanity from itself, and create jobs!

–It’s complete crack-up nonsense. It’s also a completely self-imposed economic self-harm that’s not necessary. Not even a starry-eyed dreamer like Jay Gatsby would believe that an Australian carbon tax can save the world. Gatsby might not even believe that carbon dioxide is pollution and should have a price, anymore than oxygen should have a price.

–But in a crack-up boom, people seem to find ways to destroy if life doesn’t do it for them. The saving grace of a crack-up is that it passes. You just hope that too much lasting damage isn’t done while the nation is the grip of the madness.

Dan Denning
For Money Morning Australia

(Scott Fitzgerald original image source :,_1921.png)

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. Started off so well Dan, then you had a GBCU (great big crack up).

    The rubbish about carbon pricing shows how far off the mark you are. I can’t think of anyone who advocates putting a price on a pollutant (don’t get this one mixed up, CO2 and CH4 ARE pollutants at the rate we create them) who wants a return to agragrian low tech society.

    How do you class me. Strongly pro market, strongly pro-environment, well educated, strongly sound money. Bit silly to class people pro-carbon signal as some sort of lunatic fringe.

    The first part of your article was cracking, second part was some sort of Andrew Bolt crack up that cracked me up #barbarians.

  2. Dan, you make a plausible case for the financial industry having stuffed up the economy. You argue convincingly that economists are blinded by faulty theory and are unwilling to accept evidence that past (and present) actions are wrong.
    Do you think that you are a bit like the economists in your attitude to carbon dioxide? If you don’t think too much of it is a bad thing, go back to university and do a science degree. Or else listen to the opinions of those who already have a science degree and have studied this at some length. By all means tell us politicians are inadequate, or some other scheme would be better, or whatever, but please don’t just refuse to open your eyes and comprehend that tried and tested “truths” from the past may no longer be true.

  3. “Or else listen to the opinions of those who already have a science degree and have studied this at some length.”

    I guess this rules out Ross Garnaut then yeah?

  4. Go Don!

    I would have given Dan’s effort today lots of stars but he cited that duplitious Texan shit Fisher who will be a politician on any day of his choosing and claim apolitical immunity as a reserve banker the very next day. His antiinflationary narrative will last only as long as his vote doesn’t count, he’s the hawk colour in the reserve board voting pantomine. Talking of colour, you should hear Fisher wax on to college kids about China’s barbaric use of the death penalty … he being from the state that orders employees to kill inordinant numbers of defenceless poor black males (do the per capita comparison with China). At least both Texans and the Chinese agree on the improved gene pool theory.

  5. I don’t have to accept that carbon dioxide is a pollutant to want less of it in the atmosphere, for it may just suffice for me to accept that too much CO2 in the atmosphere prevents heat escaping etc and warms up the atmosphere, until the planet becomes unlivable. The surface of mercury is cooler than the surface of venus even though mercury is closer to the sun. In basic terms venus just happens to have a very hostile atmosphere and heat is retained more than at Mercury.
    CO2 is a necessary gas but it has also proved dangerous when it has bubbled up from underground lakes in concentrated quantities and killed many people in nearby low lying areas. Also please don’t continue the myth that australia is the only country doing or going to do anything about carbon trading or taxes…that is plain wrong Dan and you know it.I don’t mind exaggeration and hyperbole to make points..hell! thats what this site it is all about as it provides strong and good alternate viewpoints on most ocassions. Don’t make the mistake of a closed mind on science based issues

  6. I have a science degree and I have also studied the global warming allegations at some length.

    And I also think that the whole global warming / climate change fear campaign is a load of crap.

    And Tony Abbott is gutless for refusing to unambiguously state the truth when he knows it.

  7. Looks like a fairly even debate. I don’t know enough to argue whether climate change and global warming are exacerbated by man’s activities or not. Both are real and both are increasing… .

    I’m on record as pro-nuclear, if new technologies can be found; but I
    no longer hold that view. I think we’re going to see nuclear accidents frequently… and more no-go zones… within our lifetimes… and forever.
    Tectonic plate movement may see the US west coast next affected.
    Indonesia? MAJOR disaster waiting to happen if their four projects go ahead.

    I don’t share the view that rejection of nuclear power means reverting to agrarian lifestyles, although that’s not a bad lifestyle choice, if you choose it / can swing it. Most can’t. As some here have suggested, the next important stepping-stone may be gas, supported by solar, wind, tidal, geothermal. Having visited Larnach Castle (built 1871) in NZ, powered by methane, I figure it’s possible our sewage treatment plants might provide energy currently wasted.

    Nuclear power is just _too expensive_ when it fails.

  8. This is the first article I have read where carbon dioxide is named as the carbon to be taxed. Do you have this in writing some where.According to my limited knowledge we have many carbons including diamonds, carbohydrates and monoxide to name only three and unless the wording is specific this dumb or very tricky new legislation could end up taxing all the carbons.The world needs carbond dioxide one to keep all the trees the farmers parks and heritage reserves planted, with the nutrients we were told that were needed to keep the australian atmosphere clean. Two to keep us in food.Unless the non fancier of agrarian has invented some other way of keeping his body beautiful.Three carbon dioxide also helps to keep the world warm(which is the only fact these smart ass s know)after a volcanie eruption which can diminish the suns rays for up to three years.have we had such an event in resent times or did i dream that?Carbon dioxide was only 3to6000parts of the atmosphere at some point in history at this point I have not read any pointy head experts hard fact on what it is today.As for the hole in the ozone layer what happened to the new scientific knowledge that made the claim it enlarges and contracts when the need arises or has evolution stuffed up and we need the almighty scientist to give us a tax to fix yet another one of” we will fall of the world claims?”

  9. Greg, I have a science degree and I have studied this too but I come to the totally opposite opinion.
    Along with the Royal Society and the Academies of Science of the USA, Russia, China, etc etc.
    I remember doing an experiment in science class where we measured how heat flow from a sealed container was effected by the co2 concentration of the atmosphere in the bottle.
    CO2 is a greenhouse gas and that’s a fact. Its increasing in concentration in our atmosphere and that’s a fact.
    However, that aside, I’m struck by how people can get an opinion in their head and somehow get mental “blinkers” that won’t allow them to see the obvious.
    It seems to me the arguments of the so-called climate change deniers are as wrong-headed in their own way as those of the Fed in matters economic.
    Both are convinced they are right and just cannot see that their beliefs might have drastic consequences down the track.
    Leaving aside the issue of climate change and whether its caused by human activity, I heard a great quote the other day on this subject:
    A sleeping bear might have its own reasons for waking up in a bad mood.
    But it probably doesn’t make any sense to keep poking it with a stick.

  10. My crack at Garnaut is an attempt to stop this “only if have a science degree” or “only if you have been to uni” rubbish. Anyone who has the will to learn can get up to speed with the current debate and issues if they want to put their mind to it. The more people that do and base their opinions on actual knowledge and understanding the better off we will all be in all facets of life.Leaving it to the experts is just asking for trouble – sooner or later you will be let down.

    As for Garnaut – I do have an issue with the man and the way this brilliant Professor oversaw the Lihir mine who’s disposal of tailings is something I associate with the 19th and not the 20th century – ie pumping it into the ocean. This sort of practice would not be allowed, and rightly so, in Australia so why do it in PNG? For that reason alone he should hide in shame.

  11. Ask the Brits and the Spanish what covered bonds did for them. .
    That’s a percentage of assets quoted, not of deposits. If there is an Australian banking crisis you might think the government has your back on these deposits. And maybe they even will …. but when you look at it historically, when exactly if ever are they going to make good is the first question. So the four pillars collapse, the government is going to make good your deposit the next day? Or more likely maybe the next decade when it is inflated away like a 1960’s insurance policy. I’m with Rabo.

  12. Gary, did you get your own science degree after studying at a recognised university or did you just photocopy somebody else’s?

    Given your confusion between convection and the greenhouse effect, I suspect that it is the latter.

    I’m also struck by how people can get an opinion in their head and somehow get mental “blinkers” that won’t allow them to see the obvious.

    For example, “global warming” has stopped. The warming cycle is over. Nobody denies this, which is why your religion was renamed “Climate Change” (ie if the weather ever changes, then you must be right).

    All the facts are on reputable websites that are not dependent upon government funding, like

    Educate yourself, and stop poking bears with sticks.

  13. did, “i have a science degree” answer any of my questions? No! Did he put trees animals and plants in the bottle. Even I know if I,”Who do’nt have a degree in any thing” put the tail pipe fumes in the car window I intend to kill myself.WHAT is the ratio of carbon dioxide in the atmosphere?A political answer which means I do not know, but it is a green house gas the experts said. Defination of AN EXPERT a drip under pressure

  14. Great to hear that global warming has ceased, Greg. Please tell my creek.

    Over twenty years ago it flowed eleven months of the year. It flows 7 – 8 months now, if we’re lucky. Drill holes around our property indicate the water table is no longer within reach of our knotted measuring rope… .

    To compensate, our 80+ citrus now thrive. Expect we’ll be growing mangoes, bananas and pineapples before too long. It’s not _all_ bad news!~ :D

  15. You know better than that Biker.

    Weather patterns can have cycles of hundreds of years, and any differences over 20 years are just noise.

    Even the global warming alarmists don’t claim that CO2 affects water table levels (although give them time), although it does allegedly cause sea levels to rise a few centimeters over 100 years or so.

  16. I have little doubt that earth is going through a period of climate change, it is and has been ongoing for billions of years

    I seriously doubt mankinds influence on the said climate change is as dramatic as “climate change alarmists” would have us believe.

    Pro Climate Change believers have yet to offer any definitive proof that the current period of climate change is caused by mankind, they have a theory.. that’s it.

    There are also other theories backed by scientific studies as well.

    Massive destruction of forest, trees are the lungs of the world, they absorb Carbon Dioxide.

    Enhanced solar activity over the last few decades has seen an increase in solar radiation hitting the earth and raising the core temprature (more earthqukes, volcanic activity and raising of the oceans temprature) This is fact and in my belief a more believable reason as to the current climate shift.

    Industry has really taken a big leap since post World War 2, that is when manufacturing, mining etc really began to grow at a marked rate..

    Warmer climates, droughts, floods, colder climates, tsunamis all occured on earth long before this and in worse extremes.

    Even if one was to believe the climate change alarmists (I don’t) how will a carbon (dioxide) tax or emissions trading scheme change things?
    If it is so bad and so destructive to earth and a huge danger to our very existence.. How is paying for the privilege of polluting going to stop this said destruction? Especially if the government intends to give “compenstion” to the masses for the increased costs of an ETS (Carbon Pricing). If the majority of people are going to be “no worse off” where is there incentive to reduce electricity/gas consumption. where is the incentive to use their cars less?

    Counter argument I have heard from climate change alarmists is that Australia doing it alone might not make much difference however Australia needs to do it as a symbolic gesture…

    My counter argument to that is to quote monty python. “it’s symbolic of their* struggle against reality.

    *climate change alarmists of course.

    Methane retains far more heat in our atmosphere than does Carbon Dioxide.

    March 24, 2011
  17. Biking around the world, we always check out the glaciers, Greg. Many countries have mileposted the position of the(ir) glacier(s) during the last 100 – 200 years. Whereas the melts were small 150 years ago, they’ve accelerated immensely over the last fifty years.

    Be aware that I’m not aligning this with man’s industrial footprint.
    I’ve stated previously that I’m unqualified to reach that conclusion.
    I simply don’t know.

    At some time in the last few decades, flooding has lifted debris high into the trees along our creek. We’ve never witnessed that spectacle, but it’s nearly two decades since we’ve enjoyed rapids and a high-arcing waterfall… .

  18. Enough scientific theories have been shelved for generations until scientific fact and engineering technology has evolved to permit us to demonstrate that the theories are valid. This has happened many many times.

    In theory and in practice the green house principle has been proven.
    In theory and in practice if you increase the density of carbon dioxide in air, it improves the insulating abilities of the air whilst still allowing sun-light to pass through unhindered.
    In theory, if you combine these two things together there will be an increase in the retention of heat from radiated sunlight.

    Is it really (and think about this before you discard it due to entrenched ideology) beyond comprehension that Global Warming as a theory has merit worthy of investigating.

    Then once you’ve done that, appreciate that World powers have been doing exactly that now for 30 years. Whilst the categorical proof has not been found that the World is warming (due to the absolute variability of the World’s weather system(s)) sufficient evidence to be able to extrapolate a clear trend, has.

    But for some, only absolute proof will do (I site one Andrew Bolt here).

    Apparently (according to Wiki so it must be true) 53% of the World’s population believes in some form of a God. Just think about that for a minute. 53% of nearly 8 Billion people believe in the existence of a being or entity for which there is not one shred of evidence.

    Compare that with all the information that has been gathered on the World’s Climate and you still have people who refuse to believe (not that it is a faith issue) that there just might be something in it, and I include Dan in this set.

    Ohm’s law – took 20 years to be recognized for its brilliance.
    Subrahmanyan Chandrasekhar – took 50 years to be awarded the Noble prize for Physics after his career had been deliberately blighted when he theorized the existence of Black Holes.
    Leon Chau in 1971 postulated that there was a gap in our understanding of fundamental electronic componentry. He proposed a device called a solid state memristor. 37 years later lab technicians at HP made one.

    There are so many theories that have later been proved simply because the proponent has realized a gap in the rules or a consequence of the rules that define a process or principle. And from that they make informed conclusions.

  19. In my opinion, Brisbane’s climate is certainly hotter and more humid than it was 20 years ago, to the extent that I’d seriously consider moving somewhere cooler and less humid in summer when I retire. God forbid, I might have to move to northern NSW.
    Whether this change is a natural event or manmade, I’m not sure, but I don’t like 34C days in late March.
    Opposite end of the scale benefit is warmer winters in Brisbane. I can remember years ago the westerlies we get in August used to cut straight through you, but last year I hardly wore a jacket.
    What do you reckon, Ned?, as the only Brisvegan who writes on this site regularly.

    Just to be slightly contrarian as well, I thought I read an article some years ago that said the Martian Polar Caps were melting as well.
    Either they have CO2 problems with industry polluting the Martian atmosphere, or perhaps all these problems are caused by that huge ball of gas that’s on fire about 150M kms away.

    Short answer, I’ve got no scientific idea, but don’t like the heat.
    Time to ramp up the A/C and let the kids sort out the environment.
    Typical baby boomer!!!

  20. Greg,
    Whoever mentioned convection?
    Not I.
    Here’s pretty much the setup we used
    No convection there. Just good old CO2 greenhouse effect. Check it out and perform it for yourself if you don’t trust me.
    I believe the evidence of my eyes, not what some shock jock on a ratings/power trip might tell me.
    Not to mention having aforesaid academies of science on my side as opposed to Andrew Bolt on yours.
    And as far as “the warming has stopped” ?
    What planet are you living on?
    Of the 20 warmest years on record, every year from 1998 to 2010 is on that list.
    With 2010 coming in at # 2 -only just below the record holder 2005. (
    How does that qualify in your book as “stopped”?
    Oh and talking of confusion, don’t confuse “weather” with “climate change”.
    “Weather” determines if it rains today.
    “Climate” determines if you’re living in a desert or a rainforest.
    And in regard to:”All the facts are on reputable websites that are not dependent upon government funding, like“.
    That website is hosted by Anthony Watts a totally discredited buffoon.
    I’ll see your “” and raise you “”.
    And as far as Jenny’s response is concerned: Maybe check your grammar and reformat so people can understand what it is you’re trying to say?

  21. As the Russian climatologist living in Siberia said: “Remind me – What’s the downside to global warming again?”

  22. Have a look at the AUD this morning against all currencies, watching the rise is not funny any more. Long have Lachlan and I talked about a rising AUD as a clear ASX short term buy signal. With all the intervention on the Yen I’ve just dropped that strategy and I’ll keep selling thank you.

    And on Portugal I’ve forgot – the biggest loser? The same mercantilist Britain that has teamed up with Sarkozy for soem mopre North African mercantilist adventurism. It was ordained from the very day Sarkozy sealed the deal at his audience with Lizzie II (owing to the fact that the Brits couldn’t keep up their military spending or even run carriers and missiles anymore) and so they are now out with their new mates the frenchies stealing contracts from Italy, Germany and Russia in Libya.

    And what of Britain and Portugal? Well they can’t pay their way in the Portuguese bail out. The exchequers coffers are dry. Look at the EUR-GBP cross this morning.

  23. “I guess this rules out Ross Garnaut then yeah?”

    Brilliant Don, loved it :)

    In summing now, the consensus is settled. AGW is a fraud.

  24. When I left town the earlier this week I was in two minds about the market Ross. A drop for the asx200 to 4100 or so would look balanced on the chart and I said earlier 4800ish would be a shorting point. Then gold has been getting crunched by the banks at every breakout…a sign of a larger shake-out and repositioning for banks. But then little ol silver was not playing nice threatening a leap higher. Got back last night to find silver 2bucks into a new high and gold just managing to break a small higher high. And markets hanging in the balance ready for the possible big smack down after a drift into resistance? But we cannot have a market correction with metals going higher higher imo. This is not a dynamic the mr bigs would like to see entrenched lest the end come quicker. Market signal, sell equities buy PM’s for assured safety…not likely.

    And then came the inevitable
    So the gold price has been hammered at the breakout again. And silver could turn a high and a pin head (spike high) judging by past performance. Now what about our markets?

    Anyhow just to be sure I left a sell on FML, I did Mr Shoes and at 9.2 which went through. I will have some cash if 4100 (approx) turns up. I should have cash for any correction. Granted I know you (Ross and Shoes…and Mr Bonner) are diligent for a larger capitulation. And I don’t blame you for I see the need for deleveraging on a gargantuan scale like PE (potential energy). But I bet the counterfeiter will trump it a while longer. It seems the Watcher looks for a massive correction to mark the end of days but not until the gov finance bubble inflates further…from what I could deduce. Then at another extreme myself with a call for hyper-inflation induced through currency collapse.
    Cheers all.

  25. I see even this place has it’s own resident science-spruikers and people suffering from carbon dioxide phobia. You would think a contrarian investment newsletter would induce some clear thinking in it’s readers, but apparently the co2 hating faithful have a blindspot in this one.

    So, co2 phobics, please inform us how a small tax on co2 in Australia is going to change anything?

    What’s it going to cost?
    What’s it going to achieve?

    Everything else is just finger pointing and postulating. Even if the IPCC science is 100% accurate, it’s too little, too late. If the IPCC science is 100% false, then it’s pointless wealth redistribution under the guise of saving the planet.

    You don’t have to be a ‘denier’ to realise the carbon tax is about as stupid as any government policy can get. It’s actually a reverse-tariff. A tax on Australian made goods while giving foreign imports a free pass. Would any sane politician put that one up? I am continually astounded to see otherwise intelligent people arguing for higher taxation. To misquote winston churchil – a lot of people standing in buckets trying to pull themselves up by the handle.

  26. Lachlan, its the banks and energy where the hot money is finding its home. I don’t have much of either to sell. Perhaps Dan can have a shot at explaining how a currency intervention overcomes a real flow of yen buys and in turn immediately morphs into hot flows into risk market equities. I think Greg Atkinson was down south in Japan wasn’t he?

  27. @brc, I think the foremost factor is creating another financial asset that can be leveraged across borders for wealth transfer. Beat down those dirty production economies and transfer wealth to those clean services economies. Masters and serfs.

  28. An emissions TRADING scheme is really a business model, not an environmental issue.
    By the creation of tradeable “energy certificates” you create a buy/sell market.
    A business.. Government are all for it because the business creates another “revenue” source.

    The envirnmental benefits…. zero
    Economic benefits.. negative

    March 25, 2011
  29. What a pile of tosh ! Anyone who does not believe global warming is happening just needs to look at the weather in the world and its impacts on crops. What is Australias No. 1 issue – lack of water leading to drought, leading to massive problems east Coast with farming. What about the fires in Victoria ? What about the many many “Hottest summers” on record every year ? Repeat the above for every country in the world (China, Thailand, etc etc).

    Then to compound it, its followed by a La Nina, which again is one of the worse on record and everything floods – why ? Because the sea water temperature has gone up, why ? because of global warming !

    If you can’t look around the world outside of the economic bubble, then don’t even attempt to report on it.

    Read some papers from around the world (instead of Oz ones), read some books – scientific ones and go on the web. then you will find that 99% of scientists around the world believe in global warming.

    Why do you think that in the last 5 years, the News channels have suddenly got interesting when you get to the Weather Report ? Remember 10 years ago, the weather was just plain boring, you listened only to find out whther it would rain tomorrow or not. Now there is bad weather everywhere – and its newsworthy as it is devastaing to the people and (economically from your perspective) to the insurance companies – just how well ave they been doing recently, ummm ? Pretty bad yes ? Let me think why ???

    Your article is substandard and uninformative.


  30. Stillgotshoeson,

    An emissions TRADING scheme is really a business model, not an environmental issue.

    The envirnmental benefits…. zero
    Economic benefits.. negative

    Since it is cheaper to just slash and burn as there is no cost on the byproduct of this process, how can making something that does not slash and burn a worthwhile investment other than making it less financially beneficial to slash and burn.

    The whole idea of pricing carbon emissions is to encourage people to seek alternative none carbon processes to provide the service or product you are charging for.

    Business without a framework to make them will always do what is in their interests.

    The brown coal power stations in Victoria receive TAX discounted coal from Australian coal mines.

    No one complains that this practice has zero environmental benefits and negative Economic benefits, which are both easily arguable.
    How can anything that bucks a natural market be of economic benefit. It is restricting the miners earnings whilst discounting electricity to the producers and retailers markets. That has to be an economically negative benefit.

    And who in their right mind would think for one minute that the likes of Blue Scope Steel will have their market tank when they have to buy carbon credits making them unprofitable against international imports.
    You have scant regard for the intelligence of our government if you think for one moment that they will do this, it would be an absurd proposal and would surely be a politically suicidal thing to do. So it ain’t gonna happen.

    There are rules within the WTO framework that permits the levvying of carbon taxes on imports. Not only that but, there is also the opportunity to charge for transportation costs too. The whole idea of it requiring the same amount of carbon to buy local steel compared with Brazilian steel is ridiculous. Transportation alone of the Bauxite would make locally produced steel very competitive. China would sooner buy ready made Steel from Australia than Brazil, again because of the carbon charge for shipping.

    Done right, a Carbon tax is good for the World (not just Australia) as we attempt to make ourselves carbon neutral, and as the highest polluters per head of population in the World, we can’t really argue we are insignificant when we have the loudest voice in a global debate.

  31. My point is Joe that there is no environmental benefit and CO2 is not a pollutant. Therefore it’s just business. Science and honesty are the losers in the transaction. Though I’m sure we’ll get the tax regardless of who governs. The sooner we get it, the sooner we can all forget the false premise and adjust to a new way.
    I do think that Blue Scope will be fine. They know which side their bread is buttered on.

  32. Comment by Joe on 26 March 2011:


    You have scant regard for the intelligence of our government

    Yep, good summary.

    I also believe that a person is smart, people are stupid. Mob mentality is a big driver in the actions of many.
    Your earlier post on individuals whom were ridiculed and chastised by the masses that were found to be correct are examples of my statement.

    “Whilst the categorical proof has not been found that the World is warming (due to the absolute variability of the World’s weather system(s)) sufficient evidence to be able to extrapolate a clear trend, has.

    But for some, only absolute proof will do (I site one Andrew Bolt here).”

    There is proof however that the world has ceased warming over the last decade or so.
    Before the government implements a system that could have huge impact on our economy (negative impact). I too would like absolute proof that A) It is indeed a manmade problem and not the earth doing what it has done for billions of years. B) That the said changes would actually make any difference.
    C) Where is the incentive for people to change their energy consumption habits if they are to receive financial compensation under an ETS. We (the government) are going to take money out of your left pocket and put it in your right pocket so most of you won’t be worse off, and in fact some of you may be better off…

    Victoria is at it’s energy production peak with the power stations, we need more power stations not less.. At present there are no other economical, viable, cheap, reliable sources of energy than coal fired power stations. We need more of them. As soon as the “mob mentallity” lot realise the CO2 issue is a load of cods wallop and a bad idea, the sooner we can drop this whole fiasco and go about our daily lives.

    Just like the “mob” got caught up in their beliefs against those individuals you mention earlier you lot will realise that us demonic deniers are in fact the ones whom are correct and not yourselves.

    March 26, 2011
  33. “demonic deniers” – I get confused by the politics of it all. Are climate change ‘deniers’ the opposite of climate change ‘nazis’?; OR the same as them! ;)

    PS: Cute little Krissy Keneally’s mob got their arse kicked in NSW as predicted. Can’t say it makes me at all sad.

  34. Comment by Lachlan on 25 March 2011:

    Anyhow just to be sure I left a sell on FML, I did Mr Shoes and at 9.2 which went through. I will have some cash if 4100 (approx) turns up. I should have cash for any correction. Granted I know you (Ross and Shoes…and Mr Bonner) are diligent for a larger capitulation. And I don’t blame you for I see the need for deleveraging on a gargantuan scale like PE (potential energy). But I bet the counterfeiter will trump it a while longer. It seems the Watcher looks for a massive correction to mark the end of days but not until the gov finance bubble inflates further…from what I could deduce. Then at another extreme myself with a call for hyper-inflation induced through currency collapse.
    Cheers all.

    I expect more from the F’s over the coming weeks along with my Fletchers and hopefully some good news on my Bolivian Gold miner in the coming months.

    Capitulation: I am still expecting it. I do not however, expect it be an overnight event. Ups and downs are going to be the normal for a bit longer yet.

    I intend to rebalance my portfolio in April for the “Sell in May and stay away)
    Will keep a couple of my stocks but most will probably go or quantities will change (downwards)

    March 27, 2011
  35. Six stocks left here Shoes but my policy is to have some cash when chances of correction are higher than normal. My secret San Jauns took off from 29c to a intra-day high of 41 last week although finished at 38c. All up though some down and some up but still above water collectively. If the correction takes a hard leg down this week then we’ll just have to see. This week could well be decisive for the index (direction).

    To Ian… its the best season in ten years on the east coast of Oz. Shame there is no money in farming because the cows they’re as fat as mud and on unimproved pastures. Drought cycles are normal here and the scale of the floods we had are normal too if we look back over a relevant time period eg 100 years. Fires are normal here too especially after good seasons ie soon.
    Hopefully we can improve the global wheat supply problem a tad from high moisture plantings in east Oz.

  36. Holding 11 stocks at the moment. Probably all but 3 will go next month I think.

    May double my holdings in the Bolivian based Gold Miner. Could be a 1000% gain in 18 to 24 months.
    Could also go nowhere ;) I think they are worth a little more exposure to, however I would not bet the farm on it.

    March 27, 2011
  37. Maybe Dan or Watcher have a long term chart on the Australian reources booms and busts that we could layer over a global liquidity map?

    I’ll have to dig back through that Ron Manners book to see if he has something.

  38. AUD/USD going nuts upside too Ross.

  39. an inflatsunami BP…my bet all the big guys are positioned

  40. Hot trade SIP trading at 0.47 have announced a special dividend 0.15 with record date 11 Apr, paid 11 May. Long term they are fighting suppliers contracting third party logistics organisations and direct distribution, short term buyer beware but fruity.

  41. Stillgotshoeson on 26 March 2011

    There is proof however that the world has ceased warming over the last decade or so.

    Been reading too much of Bolt if you believe that.

    No that is a false representation. OK, the World ‘on average’ may not be warmer than it was last year, so the increase is not linear, but, the mean temperatures have remained elevated. There has been no return to long term norms.

    What happens say in 2013 when we have yet another record average annual global temperature. Does that mean we’re all doomed tomorrow. No, clearly not, but given a very long time frame the trend on Global temperatures is still up. It is the difference between a vector and a trend of vectors. The trend is consistent and upwards, the immediate vector at the end of the trend is side-ways rather than up.

  42. Nobody in the general public knows what figures to believe anymore on temps I think Joe. Too much fudging been going on. I think we all know here that the science of economics has been fudged to suit the stautus quo and likewise with the science of climate…. which is poorly developed at any rate. The credibility is just gone all over the place.
    Over and out for a few days gang.

  43. Average global temps have varied for thousands of years.

    There is as yet insufficient proof of humans adding to the speed of climate change..

    Trending sideways? The last 20 years has seen huge growth in India and Chinese industries. More population on the planet (approaching 7 billion now) so we have more people, more industry more production of CO2 and yet the world has stopped rising in temp.

    It is a mute point discussing this further, with out absolute proof you have a theory, A theory that I do not believe is correct and you can offer no definitive evidence to the contrary.

    If Carbon Dioxide levels really concern you, join landcare and plant more trees.

    March 28, 2011

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