The Rolex economy

I was recently in touch with a Swiss friend of mine who casually mentioned that the Swiss government was taken action to help their economy adjust to the undesirable strength of the Franc (CHF), shown in the charts below.  Given that the Australian government and the RBA have been silent about the disruptive impact of the high dollar on manufacturing, tourism and education, it makes for an interesting comparison.

On the financial battleground, it appears that not only has the Swiss government lowered interest rates to zero and intervened to increase liquidity and help weaken the currency, they are also talking about deposit fees to make their currency less attractive to the tsunami of financial speculation surging around the globe.

(Also bizarre is that this high currency nation perched in the Alps has a GDP which is comprised of 50% exports, with net exports at 12% of GDP.  Indeed Switzerland has been a net exporter of goods and services every quarter since 1981.  Meanwhile our exports are just 21% of GDP and we have been a net importer in annual terms for decades.)

In addition to directly targeting the currency, the Swiss are taking on the challenge by trying to boost productivity to ‘make room’ for a higher currency.  The Swiss Commission for Technology and Innovation (CTI) has boosted efforts to commercialise new technologies to offset currency impacts on Swiss manufacturers by doubling the value of grants accessible in the next twelve months, and broadening the qualifying criteria. After all, innovation in production techniques is the key to improving productivity and economic growth.

No doubt such investment is driven by Johann Schneider-Ammann, Head of the Federal Department of Economic Affairs, who appears to understand and promote the role of productivity as the driver of growth.  In a recent speech entitled Strengthening Switzerland as a manufacturing location, made at the opening of a new Nestle production centre, he made the following comments (my emphasis).

  • We must continue to invest in training, research and innovation. It is essential for personnel at all levels to be well trained. Thanks to our dual-track system of vocational and professional education and training, we have programmes with a strong practical focus. Education, research and innovation must be given top priority. Switzerland should continue to produce talent of the highest calibre. Only in this way can we maintain our leading innovative position and continue to be competitive.
  • Market liberalisation and the removal of trade barriers are essential for Switzerland, and especially for a multinational company such as Nestlé. We are familiar with the problems and challenges which the global product trade faces on a daily basis. I therefore aim to ensure that we have access to the important growth markets and remove unnecessary trade barriers within Switzerland and abroad. I am in favour of extending our network of preferential agreements with major dynamic economies such as China, India and Russia.
  • I am aware of the agricultural policy framework under which food companies such as Nestlé produce in Switzerland. These are currently compounded by the strong Swiss franc. This is weakening our export competitiveness considerably. I assure you that I will do everything I can to maintain or improve current conditions for Swiss companies which export abroad including the food industry.
  • The labour market in Switzerland is flexible, and should remain so. The freedom of movement between Switzerland and the EU is to our overall economic advantage. Nonetheless, we still require accompanying measures to ensure that this advantage is not weakened. I also believe in the importance of nurturing a healthy relationship between social partners.

One could argue that if Australia did not have mineral and energy wealth to fall back on, we would be doing similar things and would have our leaders making similar speeches out of necessity.  Perhaps that’s true.  But choosing the short term lazy option of quarry Australia, which has been promoted by the RBA and others, is not a recipe for a stable and prosperous economy.  As I have said before:

My main concern is that frighteningly, the RBA, and probably much of the government, sees Australia’s future as a single bet on mining, and is willing to sacrifice much of the remaining economy for this to happen. Unfortunately this is a lose-lose proposition for most of the country.

All other sectors of the economy lose while the mining investment booms. When it crashes, we all lose because there is nothing else left in the economy to absorb capacity in a relatively short period. Remember, the minerals will be in the ground if we don’t mine them now, but the decades of production chains elsewhere in the economy are easily destroyed and slow to rebuild.

I acknowledge that the RBA has a single tool in its toolbox, but surely the message we should be hearing is that a strong and stable economy is a diverse economy. Quarry Australia is a very volatile and risky place to want to be.

We could learn some lessons from Swiss economic policy.


  1. These guys are the smartest operators going around. Besides Nestle, they also own Xstrata which is the third largest resource company in the world. Democracy and accountabilty, is another lesson Australia should take as well as applying some of the lessons re neutrality, taxation structures and population growth.
    They are not famous for a sense of humour though.

    • “They are not famous for a sense of humour though.”

      Oh, I don’t know. Have you had a good look at a Swiss Army Knife 🙂

    • They may not be famous for their humour, but it shows that you have not met very many Swiss people. The reputation and the reality are not very well aligned, there are plenty of jokers in the country.

      They would love that you fall for the stereotype of serious, all business type bankers, but this is not true.

      As for the companies “they own”. Xstrata is not necessarily owned by Swiss people, most probably by the hundreds of pension funds all around europe and the world. There are hundreds of small manufacturing businesses all around Switzerland, like Meyer Burger, Tournos, Clariant, Ascom, OC Oerlikon, Swatch, etc … which are all being hurt by the Swiss Franc with their exporting business.

      • Must sardonic, dry humor bloke I ever met was Swiss. They are definitely funnier than the Germans:

        Although that guy is brilliant, his sketch is about, yep, the difference between Germans and the British (or Australians, but I repeat myself) and their financial….err…acumen.

        “Here in ze Great Britain, your house owns you…vait…yes, you own your house – but its a sh%thole…”

    • Defence spending in Switzerland is low because they have no navy (landlocked) and a large number of conscripts who are paid almost nothing. By having nearly 2% of the population under arms and another 1% as reserves they can solve any employment problems (particularly youth).

      Australia has about 0.2% of population under arms and a similar number of reserves.

    • Its low because they are utilising their “fourth” branch effectively – the Alps – and the “fifth” branch, neutrality and no foreign entanglements (save guarding the Pope).

      Australia has similar attributes – we are effectively “sea” locked, which means an invading force needs WW2 USN style logistical trains stretching thousands of nautical miles (attacked relatively easily by submarines) and tens of thousands of coastline that is arid, uninhabitable and unable to be breached by those conventional forces.

      Yet we spend almost all our defence budget on repelling said conventional force (a near impossible probability of eventuating) with similar conventional structures and equipment, and assisting foreign (read US) forces in their endless wars and campaigns that only undermine our strategic neutrality potential and provide us with no security.

      The money wasted in the last 20 years alone could have funded a sizeable SWF. To add poison to the wound, half of the actual strategic assets so desired by foreign “foes” has been sold to them for a pittance anyway…

      • Prince, I agree with you. I have spent the last few weeks up in Darwin with the Navy Reserve. My colleagues in the permanent force and I had a similar discussion and we came to the same conclusion. Within the Navy we have wasted way to much money on adapting conventional vessels and armaments to work on various platforms, just in case they are required. If you look through history we have hardly ever required them. The list of such examples is long and costly.
        We need to concentrate on developing a force to operate in the potential flash points closer to our borders which will directly affect our interests and not supporting the interests of our allies far far away.

      • There’s more to this surely than a simple failure of people in the Defence Department or elsewhere being unable to identify the issues. Whose economy is our defense spending propping up ?

        • Monsieur,

          I believe we are committed to support the US due to the advantages offered by being the host of Pine Gap (i.e. intelligence) and by having the biggest guy in the schoolyard as our best buddy (i.e. the USA).

          Makes little Oz much scarier.

          I can see the advantages to such a relationship, however I’m sure we could maintain this while still getting better value from our armed forces (see my comment below).

      • absolutely spot on.

        Of course, a bloated defence structure suits the dept of defence nicely. And i dont think our politicians care enough to think about the problem in a meaningful way. A shame, because defence can be sorted out rather neatly if someone would just apply some critical thinking about where threats to Australia actually come from.

        I also wonder if there arent some contractual arrangements with the US that require us to spend $x on US weapons as part of the other agreements we have with them (ie ANZUS).

        • Agreed, however if we purchased our defence assets off the shelf from the US or any of our allies, we would be able to get more bang for the tax payers dollar.

          We spend sometimes three times the cost just so we can build them in Australia. When you are talking about projects that are in the billions it’s a lot of money that could be better invested.

      • +100

        If Australia adopted a forward thinking defence strategy we would both save money and strengthen our domestic capacity.

        Specifically, masses of cheap robotic drones (the ones doing a good part of the heavy lifting in the ‘war on terror’) would be ideal for patrolling/defending our massive coastline. Back these up with some decent subs (the Collins deserves more respect than it gets) and a massive ready reserve force would make Australia a fortress.

        The drones would have to be built here, of course. None of that imported nonsense.

        The ready reserve concept was tested and later abandoned in Australia, but it had a lot to recommend it. Join up and get a free uni degree basically (in exchange for a couple of years service, with the risk of dying horribly somewhere overseas built in – but hopefully we’d skip that by not entangling ourselves outside our immediate region).

        • Itn,

          So true.

          It never ceases to amaze me how we waste, on a daily basis, the educational and vocational opportunities presented by the defence forces.

          They have enviable and highly developed systems, both in the areas of human organisation and equipment, and have the potential to provide world-class, comprehensive education and experience to our young adults.

          There are few other organisations that can provide the depth and scope of experience in the fields of man-management (or person-management, if you prefer) and advanced applied systems and equipment.

          And there is the additional benefit that we would have a trained and experienced population capable of defending the realm should the unthinkable ever happen (again).

          Yet we allow these capabilities to languish and view joining the Forces as a last-resort career path. And don’t even think about National Service. Hell, why should any young Australian be forced to be capable of defending his country!

          It is a terrible waste of a national asset.

          And that waste could well and truly come back to bite us on the arse one day.

        • Intertubernet – I was in the Ready Reserve Scheme from ’93 through to ’99. Worked well in the unit I was in (Engineers) but I believe there were significant retention issues in other corps esp infantry.

    • I dont disagree that the ADF well the government actually, couldn’t be more efficient. But like all western governements Defence is an industry and a politically acceptable subsidy.

      Conscription & democracy is one of the reasons that swiss neutrality is maintained – ie conflict affects everyone directly.

      They do however maintain twice as many full time solidiers, with only a third the population as australia.

  2. Minor quibble:

    ‘short term lazy option of quarry Australia’

    In reality quarry Australia was the prime option on offer post GFC. We had no choice but to take it, important now is how we manage this boom (which given global uncertainties – is more difficult to put a timeframe on). Using judgemental terms like ‘lazy’ is a method better left to The Australia Institute.

    Whether the RBA lowers rates remains to be seen, but the case for doing so is strengthening. It’s a wait and see situation. The Swiss have actively stepped in to protect the trading position of their prime exporters and I read that in the recent past Germany has acted with similar intent. There are few tools left when in compliance with WTO agreements. I’ve said before, that in my view this is where it gets tricky – the model we operate in does not equally favor all subsets with an economy. Should it?

    Finally, Doug Nolan poses this question at the end of his weekly economic rundown. Worthy of discussion at MB?

    “…The big question remains unanswered: how big are global currency “carry trades” (short low-yielding dollar instruments to fund higher-returning assets abroad)?…”

    • Whatever Fanboy. Did you actually read this?

      All other sectors of the economy lose while the mining investment booms. When it crashes, we all lose because there is nothing else left in the economy to absorb capacity in a relatively short period. Remember, the minerals will be in the ground if we don’t mine them now, but the decades of production chains elsewhere in the economy are easily destroyed and slow to rebuild.

      Everyone suffers while you gorge yourself on a one-off bonanza.

      We do have choices. We could slow the boom and slow the pace of structural adjustment. We could tax more of the proceeds and save for the inevitable downturn, but no. According to you, mining saved Australia and we have no option but to put all our chips on the China bet.

      As I argued here last week, we need to set economic policy according to the prevailing conditions in the mainstream economy, not the Pilbara.

      • When any boom ends there is strife. The housing boom may end, if it does, there will be strife. What sectors of the economy are going to step up and take out loans, employ designers and tradesmen, fill the showrooms of appliance and furniture retailers, fill conference floors with eager participants in courses How to Make Wealth Through Property, fill the coffers of State Governments with property taxes, stamp duty proceeds and so on and on. Strife.

        Resources is another boom for an undetermined duration, one year, five years, twenty years. Additional tax will be secured via the MRRT. All negotiating bodies are happy with this. To run with the resources boom is the correct action, however, should the RBA wish to intervene in the manner of the Swiss to further assist exporters (of which the resources companies are the biggest players) so be it – their call.

        I have occasionally wondered where we would be now, whether these vitriolic attacks on the resources sector would be taking place at all if, (a) the property ponzi was still in full swing and the home ATM not maxxed out, and (b) if global economic conditions were not so fragile. Not a complainer to be seen.

        This must be the only place in the world, where when something really remarkable occurs in an otherwise subdued global environment, instead of a sense of good fortune we drill down to find fault in every aspect.

        It is interesting to note that many exporters in many nations are experiencing decline in demand, just like us. They don’t blame the resources sector though. They are not fortunate enough to have one. They recognise it as an unfortunate cyclical event in a globalized economy.

        ps. Lorax, I am not ‘gorging’ as you delightfully phrase it. I have been in resources for two decades, much of that time no one gave a toss about this sector – a sector which continued to build projects that quietly added to the national wealth, that often struggled to obtain financing, that is constantly faced with levels of bureaucratic redtape you’d choke. You don’t have a clue.

        Big risks, big rewards…it’s been a long time coming.

        • You can add spent being retrenched many times as prices moved up and down to that one 3d1k.

          It was only 2009 when last, the nickel price last fell and thousands were made redundant overnight. No industry assitance packages, just grab you bag and pack it.

          I often wonder whats going to happen when we have another soft comodity boom and there aren’t any big targets for the public, only ‘price gouging farmers’.

      • Isn’t it contradictory to want to slow the mining boom if you have an expectation that it will be short lived?

        You might reply that the RBA thinks it will last forever and you may be right (about what the RBA think) but it seems that many of the anti-mining types here also believe that China is in trouble, so in that case doesn’t it follow that the boom will run its course soon anyway, i.e. without the need to apply an external hand brake.

        • I think its the investment / construction boom that the desire is to slow. Since all the funding for these investments is sourced offshore bringing it into Aus is what is affecting the exchange rate.

    • I do struggle to decide who gets my vote in the ongoing conflict between 3d1k and Lorax.

      On the one hand, Lorax rightly points out that the resources sector is ‘responsible’ for Dutch disease. And further, the industry is responsible for shameless political manipulation.

      On the other, 3d1k points out that without resources we’d be, well, screwed. And further, that the sort of manipulation undertaken is bog standard is our notionally participatory democracy.

      I myself work in software unrelated to resources (Lorax), but I have an Honours degree in Geology (3d1k, if I need it).

      Lorax definitely wins on references to literature (so evocative, that Lorax in the smog). But 3d1k is right in pointing out that Australia’s problems pre-date and out-scope the resources boom (housing, curse you).

      I have concluded that as long as the conflict continues I will benefit from their arguments. God bless you both, and may you never reach a consensus.

      • Thank you!

        Once I would have confidently guaranteed no consensus – but I am gradually winning him over. Wonders never cease!!!

    • This so-called case for lowering rates…I’ve never seen it. We live in a country with no savings, massive over-consumption, a massive chronic CAD, huge Foreign Debt, and almost all of every industry sold off to foreigners to buy trinkets. Real after-tax interest on savings is negative and has been so for nearly as long as I can remember (which is the source of the problem)
      We have rampant inflation on our horizon.
      How is there any case whatsoever for a cut in interest rates?

  3. Any move by the RBA to lower interest rates will simply drive more capital into the housing bubble. A significant number of people are waiting for a return to the halcyon days of rampant house prices…they are convinced the recent fall is nothing but a short term anomaly.
    Fix the taxation regime to remove the distortions in favour of housing speculation and then lower interest rates…

      • I thought exporters were arguing for lower rates?

        That may be part of the problem for the RBA, reduced rates benefit both…and RBA don’t want the housing bubble to reignite.

    • +1

      the incentives in the tax system are for ponzi housing. But worse (IMO) is that banks are more willing to lend to fund ponzi housing than to fund innovation, R&D, ventures that add to national wealth etc.

      • +1.

        I agree with HnH’s suggestion of the removal of a range of subsidies etc supporting housing – a big ask – the most powerful lobby (property/banking) in the country.

        Ventures that add to the national wealth have long been given short shrift by most financiers here – far easier to get funding to build high rise apartments than say a get resources project off the ground or develop infrastructure to support national wealth generating projects. R&D, innovation – alien concepts to bankers.

        • Why don’t you mining guys throw some ad $$ into it?

          After all, you guys ran a successful ad campaign against RSPT, why not use the same resources to burst the housing ponzi lobby?

          • Even big mining is no match for big housing. Hence FIFO – just can’t get land released no matter how large you are.

          • we saw the relative sizes of the “problems” the other day. i.e. interest on foreign borrowing (of which a significant part fund ponzi housing) are twice BHPs annual profit.

            Mining is petty cash relative to ponzi housing.

          • Yes – massive. The proverbial horse has bolted in that regard. All under the watchful eye and guiding hand of the RBA – little wonder they don’t want to screw up their juggling of mining boom within the wider economy.

          • What do you expect then? the puny, non-mining, non-FIRE sector to burst the property ponzi lobby aka politico-housing complex??
            Non-mining sector, excluding FIRE, neither has the political muscle nor the ad $$ nor the media backing to go after the politico-housing complex.
            That is like the ant versus Goliath (politico housing complex), with David (mining) sitting on the sidelines, watching.

          • Your best bet is probably to enlist the help of the ag sector, they are the least exposed to the housing beast.

          • CSG isnt mining, it there are no explosions (deliberate) then it isnt real mining.

            Maybe try and get them to help you the oil and gas sector has been responsibily for most of the influx of capital, and have done a great job of avoiding political flack of late.

      • +1
        its even hard to get bank funding for lower risk ventures that aren’t directly property related.

        One of the reason so many resources projects are foreign owned is that there was no local funding available.

      • +100 Dr Nick

        The current government are around the edges reducing R&D incentives even more. You have to read a lot of government crap to find this out as well.

      • The incentive for Ponzi housing isn’t just in the tax system, it’s in the business models the banks have built for themselves. Any significant and sustained drop is going to force writedowns of an order of magnitude bigger than we’ve seen yet. But I guess that’s obvious.

    • After the catastrophe of the last few years, i think the RBA are actually aware of this.

      They know that the lesson hasn’t been learnt and actually lowering interest rates would result in more of a housing credit binge…

      Exactly what the economy DOESN’T need!

      If they realise that the risks of lowering them are high, then perhaps this explains why they’ve held off and been very cautious in raising them. They know that once up, they can’t take them down as it will spur everyone into ‘easy money mode’?

      Damn it i have become cynical! But I think it’s unfortunately realistic.

  4. The armed forces consist of 134,886 people on active duty, of which 4,230 are professionals, with the rest being conscripts or volunteers.Article 58.1 of the 1999 constitution repeats that the army is “in principle” organized as a militia, implicitly allowing a small number of professional soldiers.

    i would argue that for a population of 7.6 million they have a much more effective and efficent defence force than us in terms of what they do ie defend switzerland.

    The actual order of battle and equipment of the Army is not much different to Australia and the fact that the majority of the weapon systems are actually Swiss or German. Not having to fund for a Navy is a big advantage

    • From memory swiss conscripts are some of the worst paid in the world, something like $10 a day. Thats why the average expenditure per active soldier is about 30k as opposed to Australia where that wouldn’t even cover wages.

  5. Switzerland, surprisingly exporting country, I bought a breast pump and the 2 main brand, Medela and Ameda are both Swiss ( I recommend medela freestyle 😉 )

      • (offtopic)
        Psst!! Don’t look now – but you’ve drank that white stuff for a good while after you came into the light.

        Oh, and by the way, do you know the milk you have in your coffee/tea, yeah – that thing… do you know where it is coming from? (no, “the store” is not the right answer, thank you for playing)

      • you will see when you have your first child, you will become expert in stuff you dont even know existed 😉

  6. I have to agree with you on this. Australia’s policy of banging 100% on mining will eventually catch up with it and like a tsunami will wipe out growth (which has consisted of mining mainly) and therefore the Australian way of life. How long will the lucky Country remain lucky?

    Given the disparity, looking at how prosperous WA is in comparison to non-mining cities, is a worrying proposition in itself. If this is the case, then there will be no hope of a soft landing when the time comes.

    Coupled with the current housing boom/bubble or whatever one wants to call it, I would imagine it can be seriously difficult in a macro sense when tough times come a hitting.

    • Andrew, I am in WA and yes, there is a certain buoyancy down the Terrace, largely resource related and definitely experienced by those currently in resources related activities. Should all the major projects go ahead, the Shell FLNG project (world first), Browse Basin, Gorgon, Oakajee etc you would expect this to continue.

      But like every other city in the country, Perth has had a property boom, households have reached peak debt and are reducing spending, etc. If your income has remained fairly stagnant, and this is the case for many in Perth as elsewhere, things may not feel so prosperous. This is not due the resources boom, rather the the end of the credit binge. Many may be fortunate that the high AUD is shielding additional household costs via higher petrol prices, the ability to purchase online and go to Bali when you need a break!

      FWIW I think the RBA/Treasury have put all the eggs in the mining basket for the time being as there where few other ‘baskets’ offered. Increases to national income over time allow for orderly transition to an economy not sustained solely by easy credit and the property ponzi – otherwise we may be looking to a plight very like that of Ireland.

  7. Here are some comparisons between the Swiss and ourselves (quoting

    SWISS – Politicians
    “The Federal Council, Switzerland’s government, has seven members. Each year, a different member becomes Federal President. The post confers no special powers or privileges, and the president continues to administer his or her own department. The four strongest parties are represented in the council.
    Federal Councillors are much more accessible than their equivalents in most countries. The Swiss are used to seeing them travelling around by tram or in the train just like anyone else..”

    AUS – Politicians
    The Rudd,Gillard,Abbot road shows..

    SWISS – Trade unions
    “Switzerland has for many decades enjoyed relative stability in labour relations, with most conflicts being resolved amicably.

    The basis of the “labour accord” goes back to 1937, when the trade unions and employers in the metalworking industry signed an agreement to regulate the conduct of disputes.

    On the one hand, the unions undertook not to use strikes as a weapon to settle grievances, while on the other, the employers agreed to accept arbitration to resolve wage claims.

    As a result, strikes are rare, although occasionally workers may stop work for a few hours as part of a campaign.”

    AUS – Trade unions
    What can I say?….

    SWISS – Economy
    “Switzerland has virtually no mineral resources and a restricted surface area. It depends for its wealth on foreign trade…witzerland imports bulky raw materials and exports high-quality goods.”

    Aus – Economy
    Quarry, Agriculture

    Don’t quote me, but I think it’s something to do with educational levels & responsibility in the media where politics is concerned.

    • Agree. For me the key component is that Switzerland has small government (much less waste), and probably more professional politicians. Compare them to our lot and that’s where the real shame is seen IMO.

      You may not know but Switzerland has a company called Glencore, and they were a commodity broker essentially, but after the IPO recently are buying resources companies all over the place including Australia. We’ll sell the country to them as well which is one of our other huge failings. See if you can be a 100% owner in China e.g. yet we hardly know that they brought up a lot of our agricultural land. We are a disgrace to the future generations.

      We have no vision for the future either, and this has been the case for a very long time.

    • you forgot one of the most important things that switzerland has- an independent media! One city (Geneva) had no fewer than 7 daily newspapers in the mid 90’s. Granted they weren’t the bloated behemoths that the Murdoch papers are, but 7! and the scandal when one dared to merge with a Lausanne paper (Lausanne is about 45 minutes down the lake by car/train). How could a single paper cover both effectively!
      This means that a single news conglomerate cannot dominate the news agenda in any way, which is a major part of the problem in Australia now- the murcoch papers largely dictate the agenda.


    The fact is that no company is guaranteed the right to survive, and mega-trends such as technology shifts (think digitisation), process innovations, new competition from emerging economies, or ownership changes, can bring an untidy end to some businesses. Yes, management has the responsibility to craft strategies to prevent such an outcome but, as often as not, such plans fail in conception and/or execution, or because it was meant to be. This is Marx’s creative destruction as popularised by Schumpeter.

    • For a moment there, I thought you were quoting Marx!
      Anyway,for some context, let me include the previous paragraph as well:
      Would the local manufacturing operations have survived had wages been lower, work practises more flexible, unions absent, productivity higher and the exchange rate lower? Perhaps, but only for years, not for a decade or longer.

    • I think one of the comments captures my thoughts on the subject almost to a T:
      I am passionate about maintaining a strong and diverse manufacturing sector in Australia. I am concerned that the Australian manufacturing sector will be decimated not because of inefficiencies, higher wages or lack of innovation but because of a high Aussie dollar compared with other currencies that are pegged, having to compete against subsidised products from offshore, environmental and OHS requirements that are not practices by competitors.
      Where is the level playing field? Globalization and free trade has certainly not provided that.
      Disclosure: My day job is not connected with manufacturing in any way, directly or indirectly.

      • And we also allowed tossers here to sell us out in the “free” trade agreement with the USA. They still slap tariffs on our agricultural products.

        FFS the culpability of politicians on both sides in the last 25 years …

        • ‘FFS the culpability of politicians on both sides in the last 25 years …’

          FFS…the apathy of the Australian population in the last 25 years.
          Ultimately we are all to blame by meekly accepting mediocrity from our leaders and our fellow countrymen.

          • good point but it has been this feedback in the system.

            the parasitic government (I’m talking both side of politics) provide bread and circuses and have deliberately cultivated a culture of dependency among the punters. Boost punters house prices and make them feel good, give them back some of the taxes they paid and tell them it is a gift from the generous paternal government and get voted back in. But our parasitic government will ultimately kill its host unless we can kill it first — by which I mean (just in case ASIO is immobilizing a team of ninjas to crash down my door) a peaceful and orderly transition to a new form of government.

            I was about to advocate removal of compulsory voting — but that hasn’t improved the quality of democracy in the USA. I doubt change will or can come about without a calamity such as war or economic collapse.

            Has anyone ever thought about how many laws there will be in 2050, 2100, 2200, 2300, …? Instead of having a government that saw its role as passing thousands of pages of laws every year, requiring an expansion of the bureaucracy to oversee, how about a party that repealed laws? (I’m thinking at state and local (especially) level as well). The exponential growth in legislation is surely an unsustainable model of government and a built-in flaw in our system. (yes/no?)

      • Mav, the inconsistencies in the globalization free trade mantra are rarely questioned. Politicians generally don’t stray from “we are committed to and support our WTO obligations blah blah blah”. Is it not now and never was a level playing field.

        When an economy appears to be travelling well these inconsistencies are ignored. We have all benefited enormously. It is only at times like these, when developed economies are experiencing stagnation and/or decline that some are awakening to the fact of these inconsistencies. That a around the world economies have experienced decline in manufacturing capability, that once easy credit is removed retail and services suffer, unemployment increases, GDP stagnates, even that floating exchange rates can be problematic.

        For Australia, a timely reminder that it is the model we operate in and not really the mining boom that poses the real challenges in the current environment.

        • I can see your desire to distance the mining boom from its ugly cousin – Globalization and “integration” of China into the global economy.
          I don’t know why and how you are ok with the fact that China is buying our resources and using it to build bridges to nowhere, apartments where nobody lives and office building where nobody works. In other words, malinvestments of the highest order.

          • Because they pay for it.

            Same as when they send their kids over for an education then not use it, or use it to support said construction. Same as when they buy our agricultural produce to feed that workforce or our woodchips to make paper so they can plan their malinvestments.

  9. The structure of the Swiss SNB is probably worth of a topic. I am impressed that it is 40% owned by the Swiss banking system and 60% government owned.

    I presume this would give both the bankers and the government a great deal of flexibilty but certainly not the control that the FED structure has in the US.
    By memory as well the major cantonments all have major shareholdings in the Swiss banks.

  10. Switzerland’s inflation is habitually so low that they might as well have zero interest rates. In fact, the price of many items tends to go down.

    While they went off the gold standard a few years ago, their monetary policy seems to have successfully emulated the stability of a gold standard. And that means a tendency for prices to fall, i.e. deflation. In those circumstances, no-one need charge interest – if they lend their money, it will be worth more when they get it back.

    This is not economically harmful – we tend to confuse falling prices with economic contractions, rather than with the same quantity of money chasing MORE goods and services.