Weekend links 9-10 March 2013

Global Macro/Markets:

North America:


  • What will happen as more eurozone voters tired of austerity find the Fiscal Compact blocking change? – Financial Times



  • Green’s big bank tax showdown – The Age
  • Bartho goes into bat for the banks – Business Spectator. But no mention of the two notch ratings upgrade the banks receive from implicit taxpayer support, which significantly lowers their funding costs. Why not make it explicit for a fee (insurance premium)? The error from the Greens is calling it a super profits tax, rather than an insurance premium, which is essentially what it is.
  • Can Australia survive Treasurer Hockey? – Business Spectator
  • Housing market sentiment rising: RP Data – Property Observer
  • Cost of gender gap at $195 billion – The Age
  • More job seekers leaving market for good – The Age
  • Melbourne’s growth for growth’s sake – The Age. Still a parasite city.
  • PM rolls-out pork barrel in Western Sydney – The Australian
  • The government looks to trim-down agencies – The Australian
  • BHP to cut debt in asset sell-off – The Australian 
  • Property struggles back with an eye on the RBA – The AFR
  • Swan in a budget bind – The AFR
  • Property optimism lifts – The AFR


  1. Could the steady fall in the US participation rate not be due to disinterest but the elderly dependency ratio rising?

    Perhaps Doug Short’s “inflection point” is not 2013 but occurred way back in the very early 2000’s.

  2. Bombshell: Recent Warming Is ‘Amazing And Atypical’ And Poised To Destroy Stable Climate That Enabled Civilization
    New Science Study Confirms ‘Hockey Stick’: The Rate Of Warming Since 1900 Is 50 Times Greater Than The Rate Of Cooling In Previous 5000 Years

    A stable climate enabled the development of modern civilization, global agriculture, and a world that could sustain a vast population. Now, the most comprehensive “Reconstruction of Regional and Global Temperature for the Past 11,300 Years” ever done reveals just how stable the climate has been — and just how destabilizing manmade carbon pollution has been and will continue to be unless we dramatically reverse emissions trends.

    • JamesTheBearMEMBER

      Thanks for the laugh.

      This is exactly my problem with climate science- yes it is getting warmer, yes it’s due to CO2, but it’s been warmer (much warmer) in the past and much colder as well, and through it all we’ve adapted and survived. But this 1 degree rise (maybe 2, might even stretch to 3, but I doubt it) is going to kill us all.

      Gotta love the fear mongering.

    • Israel used to be a paradise 2000-3000 years ago, nice to hear, we still have to wait 100 years to get back to that.And getting to tundra fertile again would solve all humanity food supply 😉

      look forward to it.

      • So, you’re not only a property permabull, but a climate denier too?

        You’d think that would be too much for one cranium to contain without an explosive event! 😯

        • Climate denier
          Where that come from ?
          By my scientific (biologist, published in Nature) background I have some understanding of the situation, I am not afraid of changes nor that I m blinded by pretty neat models.

          • I see. You’re one of those “I’m not a doctor, but I play one on TV PC”. 😛

          • My gut feeling is that as the climate changes, new species will appear or become dominant by taking advantage of the change. Nobody knows what these may be, perhaps some plankton in ocean with enhanced photosynthesis capabilities.

            Why do not scientists focus on the genetic engineering of such species to “help” them achieve greater photosynthesis capabilities?

    • The climate has been changing like forever.

      This climate change fearmongering is getting rather silly.

      • Silly scientists! What do they know, huh?

        I love the “Joey Bagodonuts” opinions we get here.

      • The climate has been changing forever, but this speed is unprecedented outside the 5 major extinction events.

        The current rate of change is much too fast to allow natural adaptation of species.

        It’s interesting to see that the case against action on climate change seems to have moved from ‘there is no warming’ to ‘the warming is not going to have a significant effect’.

        • Anyone here Ben greene a few weeks ago re climate change. Saying that the key to if climate change is actually occurring in is to measure ice melt to the nearest cm.. Problem is no one can currently do this within a +-5 cm l think he said. Aust scientists have worked out how to track this within 1cm variance using satellites etc, yet struggling with funding? Be nice to know the facts here for once, given I think NASA said it’s outstanding technology?

        • It’s interesting to see that the case against action on climate change seems to have moved from ‘there is no warming’ to ‘the warming is not going to have a significant effect’.

          Not so much “interesting” as “completely predictable”.

  3. Mr Joye sums it up in ‘Property struggles…’

    ‘The good news is that the cheapest mortgage rates in history are helping the housing worm turn. The proportion of home owners making money is increasing for the first time since the RBA’s “emergency” 3 per cent cash rate drop in 2009 ignited a mini-boom.

    The outlook for this phase of the housing cycle hinges critically on what the RBA does with its policy instrument. And make no mistake, the central bank is in a bind.

    Even though the main reason we have low inflation in Australia is because of our vaulted currency, the vocal commercial interests on the RBA’s board appear to have convinced the staff that the strong Aussie is a now bad thing.’

    Things could become quite unpleasant if the dollar sags significantly and inflation rises while the RBA has been re-stoking the household debt asset price furnance with its ZIRP policies.

    Faced with that choice – house price bubble v suffering manufacturing sector – why the RBA and the govt are making excuses for the high dollar.

    Funny how everything manipulation has a consequence.

    • Glenn Stevens as Dirty Harry

      ‘I know what you’re thinking. “Did he fire six rate cuts or only five?” Well, to tell you the truth, in all this excitement I kind of lost track myself. But seeing as this is AUD Monetary policy, the most powerful Monetary policy in the world, and would blow your deeply indebted loan repaying head clean off, you’ve got to ask yourself one question: Do I feel lucky enough to take on a mega mortgage? Well, do ya, punk?’

      • Yep – he will be all Dirty Harry and talking tough when finally this “fuel the economy with household debt strategy” runs out of gas – either because ZIRP arrives or inflation starts to make an appearance with a sagging dollar.

        But then bullets will probably be bullet points noting the tin plating contained in past speeches about how the RBA expected people to act like mature economic actors when presented with historically low interest rates and making sensible decisions on how much debt was ‘affordable’.

        “We never promised rates would always stay low – suckers!!”

      • innocent bystander

        luv ya work.
        plenty of punks in my Perth circle of acquaintances and colleagues at the moment, FHBs and specuvestors – fear this will not end well for them.

    • Bobby Fischer

      Nice work Gunna & Phf007. Here’s a reworked Glenno piece based on Scarface – I trust we get some leeway on the w/end…


      [Glen’s face rises from a tremendously fat pile of crank credit on his table. His face is covered in a white fine powder giving him an aura reminiscent of an exotic Geisha companion.]

      Phf007: Uhh… Glen… I haven’t got you at a bad time have I? You seem to have a little bit of something on your face there…

      [Ignoring Phf007, Glen towels down his face, lines up another giant line of crank and vaporises it in one almighty snort. Glen appears to be intoxicated with an insane vitality followed his latest dose of crank credit]

      Glen: What we’re going to do Phf007 iz, we’re gonna go to war! Those mothers are talking down to us Phf007! Talking the property market down… can you believe it?

      Phf007 [fidgeting nervously]: Hey Glenno, why don’t you take it a little easy on the credit there my good man?

      [Unceremoniously, and without so much as acknowledging the comment, Glen annihilates another line of crank that would put an elephant into cardiac arrest. His face breaks into an unnerving and insane smile.]

      Phf007: Ah Glen. I don’t want to upset you boss, but some are saying that you are ‘out of touch’ with what the mainstream public thinks about housing affordability?

      [Phf007 waits in anticipation. There is a strange silence in the air while Glen’s alien intelligence digests this question through his hazy river of credit dreams]

      Glen: Sometimes… sometimes it’s just so hard to be definitive on whether dwelling prices are really over-valued. I mean… there are two aspects to the claim that they might be. The first is that prices relative to income are higher than they were 15 or 20 years ago. If this ratio is somehow mean-reverting, then either incomes must rise a lot or prices must fall. It could be that this analysis is correct, but the problem is that there is no particular basis to think that the price to income ratio 20 years ago was ‘correct’. There are reasons that might be advanced for why the ratio might be expected to be higher now than then –
      that the mean has shifted – though again there is little science to any quantification for such a shift. In any event, arguments that appeal to historical averages for such ratios lose potency the longer the ratio stays high. In Australia’s case the ratio of prices to income on a national basis has been apparently at a higher mean level – about 4 to 4½ – for about a decade now.

      [Phf007 is flabergasted with the High Priest’s response. He resists the strong urge to call Glen out for the delirious, deluded economic fantasist that he is on the spot, given his fragile and vulnerable emotional state]

      Phf007: Right. So the High Authority has now decreed that house prices that diverge radically from the long term average as a ratio of both income and rents is somehow not a bubble. Despite all the evidence that credit has followed an exponential curve until 2008 and that mortgage debt has almost exactly followed that same exponential curve in order to fill in the gap between ever accelerating house prices and paltry incomes. Despite the recent ‘Higgs Boson’ in the economics world, which was Prof Keen’s proving the mathematical relationship between aggregate demand and debt (aggregate demand = income + change in debt) at the Fields Institute. Despite multiple international jurisdictions seeing house prices at 3 – 4 times the median household income over very long data sets, you are telling me that we don’t have a housing bubble in this country?

      Glen [hissing]: Heathen! How dare you raise the name of the most unholy in my presence! There is no bubble… no bubble I tells you! Heed my words – FOR I AM THE AUTHORITY!

      [Glen bashes his hand on his table. Piles of crank credit can be seen to fly across the desk and white powder flies up into air in response. Glen starts muttering more furiously to himself in response to this outrage. His arm treks again across the table to ingest more premium powder.]

      Glen [talking to self]: You see, I’m gonna wipe out all them suckers out there. I’m gonna be King Crank Credit again. You hear me you renters!? On the cover of all the economist magazines, Australian Financial Review tweets, one-on-ones with Koshie with my own personal 15 minute regular spot on Sunrise… I’ll be a star again! People will know who i am and give a shit about what I say… [muttering fades away]

      [Phf007 hesitantly asks Glen a further question. It is evident that any wrong question or intonation at this point could result in a violent reaction from the High Priest of the Reserve Crank of Australia]

      Phf007: But wouldn’t any cursory analysis by your fellow chrome-domed brethren at the RBA (takes about 5 minutes on Google), reveal that essentially every asset bubble that has formed in housing has reverted to the long term mean? Aren’t you essentially saying – “Australia is different?”

      [Glen is instantly furious. He suddenly takes up an automatic weapon that he has had hidden under his desk the whole time. Phf007 is speechless in response to this latest bizarre development.]

      Glen [yelling loudly]: Vested interests wrote my script which said that a flat-topped bubble has never happened before! We are different I tell you! Say hello to my little friend!

      [Glen starts randomly firing off rounds. Smashing and crashing sounds can be heard amongst the din of rapid automatic gunfire. Yelling and screaming can be heard in the background.]

      Glen [continues yelling]: Get outta here – those filthy renters are everywhere!

      • Goodness!

        PS: You overlooked the stage direction involving a tank of platypus performing synchronised swimming routines Esther Williams style.

      • The RBA strategy IS to ‘support’ the economy using low interest rates and that means one thing – maintaining or growing credit into housing. The RBA have not raised any concerns now house prices have started rising.

        That suggests they are quite happy with the result of their strategy and why wouldn’t they be?

        They have made it quite clear that they are not concerned about household debt. Or at least not so concerned that they plan to do anything to encourage a reduction.

        Of course some of the low interest rate strategy cheer leaders tried to rationalise what the RBA was doing by arguing that lower rates would keep the dollar down.

        But that did not work and it is clear that the RBA never had this is a major objective anyway.

        For the RBA low interest rates were all about driving the economy with household debt (conveniently saving Mr Swan from doing so with fiscal policy). Why? – The RBA and Mr Swan need a high exchange rate for their higher household debt strategy.

        If the exchange rate is being driven up by speculators, the fearful and hot money rather than fundamentals there is a good argument for intervention. But it is best done by regulating the transactions that are affected (locking out the freaks or putting them on choker collars) rather than just trying to feed the freaks with lots of $AUS.

        Some regulation of the exchange rate to limit distortions of the $AUS and slowly normalise interest rates is the way to start to address ‘household debt mountain’.

        Does it need to be addressed?

        Clearly it does when unemployment is only 5.4% – house prices are rising and yet the RBA has felt the need to drive interest rates into the ground to stop household debt mountain ( and the asset prices it supports) exploding like Mount Versevius.

        So action on debt mountain and hollowing out industry is possible but that is not what the RBA are trying to do.

        You can see forever from the top of household debt mountain according to the RBA (despite occasional tin plating murmurs to the contrary).

          • “But that did not work and it is clear that the RBA never had this is a major objective anyway.”

            Even further a sharp decline in the A$ is just what they are afraid of.
            There’s a mention of inflation risks in nearly every statement although couched in terms of current inflation being within guidelines. I’d guess they can read the inflation data re tradables and non-tradables as good as anyone. Further the various production indices clearly show rapidly rising input costs and wages even in the face of falling demand for products and services.

            As pfh or someone describers it some time ago, the fragile state of our economy will REALLY be revealed when the dollar falls.

  4. “The proportion of home owners making money is increasing for the first time…” This is an interesting statement. For someone to make money, not just revalue their assets, someone else has to pay more for the same thing! How essentially increasing debt, to buy property, is a good thing… amuses me!
    (PS: I guess on reflection, even the ‘re-valuers’ might be seen as making money…as long as they start withdrawing the increase in equity via debt to start spending. But we still end up with…more debt…and in a financially repressed world…that won’t be good…)

  5. Mining BoganMEMBER

    Dr Bob posted this late last night so I’ll put it up again so people can have a good look at it.


    To this I’ll add a couple more…


    Which all leads to this story that is all over the independent and social media websites…


    Is it true? Is a vote for Tony Abbott a vote for Rupert Murdoch?

    • Well I think the way Uncle Rupert has positioned himself it is more a case of voting for anyone is voting for Uncle Rupert one way or another.

      But I think it would be true to say that a vote for TestosterTone is a vote for having the tongue most deeply embedded in the good Uncle’s cloaca.

    • Thanks for the link MB

      For me this is one of the big plays of the election and it goes virtually unacknowleged. The fact that all of uncle Rupes chorus are singing in unison and at full voice on this is the giveaway.

      The inability of his competitors (ie everyone not in the News Corp protection racket)to organise its exposure and mount a coherent rebuttal is dissappointing…

      ..nearly as disappointing as Malcom Turnbull’s role in the whole sorry tale.

      • Murdoch was quite open about Fox medias support of the Republican party. Things are a little different here but give it time.

    • That explains the presence of a few astroturfers on here, bashing the NBN all day long. The stakes are indeed high for Uncle Rupert.

    • Publication of all politicans diaries should help. Why are we one of the few democratic countries to do this? All vested interest groups, lobbyists etc will ensure this never happens.

  6. A superb, eye-opening TED talk, especially for R2M (and all those ignoring the predations and increased “moral hazard” of banks, in pinning their hopes on CO2 trading to “save the planet”) –

    Allan Savory: How To Green The Desert And Reverse Climate Change

    I found his mention of temperature differentials for desertified soils (8:10min) very interesting – cf. the little known genius on water, flows, and natural river systems, Viktor Schauberger, on the importance of temperature differentials.

        • Thanks R2M. IMO, quite irrespective of one’s views (ie, “denialist” or “alarmist”), Savory’s work is brilliantly contrarian, practical, commonsense stuff that all can and should support – quite unlike carbon dioxide “unit” trading 😉

          I’m sufficiently enthused and inspired that I plan to contact his institute with a view to how I might personally contribute/support/participate.

        • Fantastic link r2m! The thoughtfulness and the erudition of that man is actually heartwarming.

          Thanks for improving my weekend!

    • Mining BoganMEMBER

      I like the bit where he says tighter lending standards are a bit of a rort. Does the sense of self-entitlement in this country ever run out?

      • Reminds me of one of the ads for Newstopia featured on buses. It was a mocked-up newspaper with the headline “Aussie hubris ‘best in the world!'”

        If self-entitlement and overbearing presumption were an Olympic sport it would be gold, gold, gold to Australia.

      • At least ‘Uncle’Glenn Stevens will be doing his best to ensure that these ‘little battlers’ and their freshly minted bit of household debt mountain are subsidised by those who continue to resist his siren song.

          • Of course they do but when the kindly Uncle who runs ‘interest rates’ makes it clear he does not take household debt seriously why would the ‘kiddies’?

            The RBA are not particularly concerned about household debt, Luci Ellis could not be clearer, and they stated that they would like to see housing construction fill the gap left by mining.

            They even said house price rises were important to fuel that process.

            They have done exactly what they said they would do.

            Drive the economy (housing) using low interest rates to drive higher household debt and higher house prices.

            The only issue is how much steam they will let it build up.

            Based on their record and their stated lack of concern about household debt – probably far too much.

            Of course at that point everyone do the usual thing of blaming mindless Aussie bogans who are obsessed with big houses instead of the gooses fooling around with the fundamental economic indicator – interest rates.

          • “I contend that borrowers in todays 24/7 propagandised world carry almost zero responsibility for any negative end results of doing what they are told, like good little citizens.”

            Well, we have to assume certain level of intelligence on the part of “good little citizens”.

            “I followed the ads of McDonald and Coke, the world experts in junk food. Am I still responsible for my obesity and all the other problems that stemmed from it?”

    • Well, we have to start somewhere so let’s start with the superficial. Wtf is going on when the parents agree to go guarantor on a first home purchase for $1.5m? In the course of the family discussions, did mum or dad ever perhaps suggest the kiddies get somewhere just a little cheaper and avoid the whole guarantor business entirely?

      • Even better – “Despite his parents’ generosity he said he would still need to rent out a few of the rooms to help pay for the mortgage.”

        With interest rates at close to record lows, what could possibly go wrong in the future?

        • Yes, isn’t it comforting to know that we didn’t have any of that crazy lending they had in the US. Happily, our well-regulated major banks only engage in responsible, conservative lending activity. Such as to a first home buyer needing a parental guarantee and the rent of several bedrooms to make the mortgage payments.

    • Methinks it’s rubbish like this that has finally seen Chris Vedelago write his final piece for Domain today and gone into Business Day fulltime. It will be a shame to lose a voice of reason from chorus of spruik.

      • I didn’t know Chris had moved on. That says a lot about the editorial independence at the Age and SMH….

    • Excellent news. If parents are replacing housing grants, then there should be no requirement to bring the latter back again. Of course, it will probably take very little for this to end in tears for this couple.

    • I’m no expert on NSW Stamp Duty, but even as a FHBer would they have had a $40,000 ish S/D bill as well? If so, perhaps renting out the garden shed as well might pay for that!

    • innocent bystander

      so they will pay income tax on the sublets? thought so.
      and then proportional CG when they sell since it was an income producing property?
      yep – I am sure they have factored that into the financial plan.
      not to menetion where the guarantors/BBs retirement nest egg has gone?

  7. Jesus, that is one shit-awful chart – the US labour force participation rate. There’s never been anything like it post-WW2. No wonder the recovery has been sluggish.

  8. Jeremy Grantham: “Capitalism, by ignoring the finite nature of resources and by neglecting the long-term well-being of the planet and its potentially crucial biodiversity, threatens our existence.”. Markets and therefore business are dodgy policy advisors. Haven’t we learnt anything from the mining tax negotiations.

    Do you support the move to an ETS as proposed this week? (leaving aside the rape and pillage that will be reaped by the banksters as identified by OP8red).

    Btw, Ted left Victoria premiership this weak (sic) in an appalling calamity. You can dress it up however you want, but Victoria is struggling and the libs inflexible response to fiscal issues is leaving them between a rock and a hard place. And they dont appear to have a better response than the faceless people of labor. Its a tough game managing small majorities. I pray Mr Abbott is delivered a similar majority. He wont last two years.

    • Christ, what rape and pillage? Op8 has not provided a shred of evidence beyond a wail of bankster hatred.

      Not one description of how carbon trading can be rorted.

      Not one example of it being rorted.

      Just a lot of baloney about banksters being evil.

      Op8 logic runs thus:

      All bankers are evil;
      Bankers believe in carbon trading;
      Therefore carbon trading is evil.

      Monty Python once described this as:

      Witches burn;
      Wood burns and floats;
      Ducks float;
      Therefore if you weigh more than a duck you are a witch.

      This is kindergarten fallacy stuff and would be amusing if it were not published in the comments at MB.

      Be warned, no further fallacy will be tolerated on this topic. Either argue a logical case, with evidence, or be deleted.

      • Hey Dave, I applaud the idea of deleting illogical comments (even my own, if I make them, and I’m only human so I probably do).

        I’d also very much like to see the absolutely unsupportable (and highly inflammatory) comments about serious issues like climate change removed without hesitation. Anyone taking the position that concern about global warming is “alarmism”, or that it’s just “silly” to be concerned (see comment above), despite nearly 14,000 peer reviewed science papers saying the opposite, is here with a deeply cynical agenda.

        Some of these disruptive posters are from a source we won’t mention, others are here to support the carbon-intensive industries in Australia, and are probably paid for their efforts.

        A zero tolerance policy would remove some of the stinky whiff the blog has when these microcephalics are allowed free reign ❗

        • Typical alarmist tactics on display by Revert2Mean in his attempt to shut down anyone who points out the flaws in his climate change theories.

          There is zero, yes ZERO evidence humans are the major cause of climate change. Guess what – the climate changed before humans even existed!

          • There is zero, yes ZERO evidence humans are the major cause of climate change.
            Yes there is. Simple maths, for example.
            Guess what – the climate changed before humans even existed!
            And ? Is this supposed to be some sort of amazing revelation ? Is it supposed to be some sort of “proof” ?

      • David,

        Being mindful of the 2-links only rule for posting, here are just a couple relating to some of the plethora of frauds of carbon trading systems –

        Dec 14, 2012 – “Five hundred German police and tax inspectors raided offices and residences connected with Deutsche Bank in Berlin, Frankfurt and Dusselforf, Wednesday over allegations of conspiracy involving over €300 million in carbon trading tax fraud.”


        “Europe’s biggest polluters have made billions out of the European Emissions Trading System (ETS). But a new briefing by Carbon Trade Watch (CTW) says the scheme will ensure industry will not have to cut its emissions until at least 2017.

        The first phase of the ETS ran from 2005 to 2007. It made no dent in emissions. But power companies made about 19 billion euros by charging customers for the “cost” of permits they were given for free.

        Manufacturers made about 14 billion euros in windfall profits with the same trick.”


        There are plenty more examples, if you care to look.

        But I fear that is the problem .. ?

        See my link above re Allan Savory. Clearly, there are practical ways to “save the planet” via CO2 emissions reduction that do not involve giving the banking sector even more free reign to go beserk with yet another unregulated off-balance sheet derivatives casino.

        You ignore the MBS / CDO / CDS insanity leading into the GFC at our collective peril.

        • More –

          “This marks the second time in the past year that carbon trading has been shut down. Last year, the U.N.’s carbon market halted for several days when authorities discovered that the Hungarian government had—legally—been reselling allowances that had already been used. In 2009 Europol reported that in certain countries, 90% of the ETS’s trading volume was taken up by value-added-tax scams. Europe’s system has also been plagued by smaller thefts since its founding in 2005, and some companies in the Third World have spewed pollutants simply to eliminate them and sell the carbon allowances to European companies.”


        • More –

          “Last year, Clean Green Fuels in Maryland was accused of selling 32 million fake biodiesel RIN credits to oil companies and brokers. In June 2012, CEO Rodney Hailey was convicted of wire fraud, money laundering, and of violating the Clean Air Act.

          Absolute Fuels in Texas, was sent an EPA Notice of Violation in February this year. On July 19, owner Jeffrey David Gunselman was arrested for having allegedly created on his computer more than $50 million in RIN credits that he then sold. He didn’t even have the facilities to produce biodiesel. Earlier this month, he pleaded guilty to a laundry list of charges and is contemplating a maximum sentence of $20 million in fines and 1,268 years in the hoosegow.

          Another Texas company, Green Diesel, received a Notice of Violation on April 30. The issue: 60 million fake RINs. By then, CEO Philip Rivkin had apparently skedaddled to Europe, out of harm’s way.”


          • Do click this link. It contains a now-classic example of a renewable energy “credit” fraud that is .. was … so clever, I wish I’d thought of it 😉

            “But a small outfit in Toronto, Bioversel Trading Inc., was particularly resourceful in milking the RIN system—and may not have done anything illegal, according to an excellent investigative series by CBC News. Bioversel hired Canadian National Railways (CN) to shuttle the same trainload of biodiesel twelve times across the US-Canadian border without unloading the cargo. All in the second half of June, 2010. For $2.6 million.

            To generate RINs from importing biodiesel into the US, ownership of each trainload was transferred to Bioversel’s US partner, Verdeo, which then, rather than selling the biodiesel in the US, exported it back to Canada. But by exporting the biodiesel, Verdeo would have been required to “retire” the associated RINs, instead of being able to sell them. So Verdeo retired ethanol RINs instead, which cost only a fraction. The difference, less the cost of transportation back and forth, was profit.”

            Our own auditing and regulatory system for CO2 “unit” trading is a farce (see below). We may not see this scam. But we will see others.

        • Not “fraud” per se, but arguably an even more disturbing consequence of CO2 trading –

          “Across Africa, some of the world’s poorest people have been thrown off land to make way for foreign investors, often uprooting local farmers so that food can be grown on a commercial scale and shipped to richer countries overseas.

          But in this case, the government and the company said the settlers were illegal and evicted for a good cause: to protect the environment and help fight global warming.

          The case twists around an emerging multibillion-dollar market trading carbon-credits under the Kyoto Protocol, which contains mechanisms for outsourcing environmental protection to developing nations.

          The company involved, New Forests Company, grows forests in African countries with the purpose of selling credits from the carbon-dioxide its trees soak up to polluters abroad. Its investors include the World Bank, through its private investment arm, and the Hongkong and Shanghai Banking Corporation, HSBC.”


          And this –

          “Carbon Credits in the ‘Valley of Death’

          Uncovering the ugly effects of U.N.-backed ‘clean development’ in Honduras.”


        • I could go on and on and on with such links. But Google is everyone’s friend.

          I hope this may go a little way towards dispelling some of the allegations being thrown my way by our much-esteemed host 😉

        • Given these examples of fraud and misuse I wonder if HnH (or anyone else supporting carbon trading) could provide evidence to show how the architecture of Australia’s carbon tax/ETS has been (or will be) designed to avoid such abuse… what checks are in place, what processes to quickly close loopholes, what independent body to oversee the scheme?

          • +1

            Whenever a new scheme is introduced, the question of WHO is going to implement/enforce it and HOW must be thought thoroughly in advance.

          • BB, I am very far from being an “expert” in understanding legislation, or securities trading, or the mechanisms (if any) for monitoring and regulating it. However, it’s worth taking a close look at the 1,000-odd page Clean Energy Act, and in particular, sections 109A “Registration of Equitable Interests In Relation To A Carbon Unit” and 110 “Equitable Interests In Relation To A Carbon Unit”, and Explanatory Memorandum 3.36 –


            These are (to me) quite opaquely worded … ie, easy for the average politician to miss, or misunderstand. And they appear (to me) to indicate they have been slipped in deliberately to enshrine in law that the government’s bill passes off the question of monitoring (registering) “security interests” in carbon units to whomever is responsible for regulating the Personal Property Securities Act (109), and that the bill

            “..does not affect the creation or enforcement of, or any dealings with (including transfers of), equitable interests in carbon units.”


            “.. does not prevent the taking of security over carbon units”

            Perhaps HnH can help us (me) understand whether or not this legalese indicates that the bill is intended to allow the banks open slather (?) to create derivatives products on top of the underlying carbon “units”.

            I also strongly recommend everyone reading up on the Regulatory Impact Statement (RIS) –


            What is contained in that should cause any thinking person concern over the (IMO) farcical audit process to be employed in ensuring that our biggest “polluters” are not rorting their self-reported emissions. In a nutshell, the government’s own RIS tacitly concedes that the audit process is little more than a public relations exercise to maintain public confidence in the scheme.

            I also strongly recommend reading the entire Auditor-General’s report on the (also farcical) “OSCAR” system used for (self) reporting of emissions. This news story last year gives a little taster –

            “Just months before the carbon tax is introduced, an auditor’s report has found that more than one in six major polluters has made ”significant errors” when reporting its greenhouse emissions and energy use to the government.”


  9. “Indian politicians are talking about coming down hard on gold, and India is the largest buyer of gold in the world. If Indian politicians do something — whether it’s foolish or not is irrelevant — if they do something, gold could go down a lot.” (Jim Rogers)

  10. “..Massive intervention has made evaluating the true worth of businesses and the real extent of economic activity impossible to measure…..“I think it’s terrifying a central banker wants asset prices to be high, not low. If you believe in capitalism, eventually it will win and prices will go back to fair value.”
    (AFR article: An audience with the value investing gurus)