There are all sorts of ‘pre-incident indicators‘ today that the end of the mining boom is going to unleash a fight over Australia’s retirement savings. Trial balloons have been floated for months. But in the last two weeks, the plans have firmed up. More details on the coming smash and grab in a moment.
But first, one quick note about the brave new world of constant cyber-warfare. Now that the infrastructure of the Internet is firmly in place and people are connected through billions of mobile devices, the real fraud and destruction can begin. Up until now, the Internet has been mostly about on-line shopping, lower prices, funny videos, and pornography. Today it’s being weaponised, or perhaps the better way to put it is that more and more people are turning it into a battlefield with various malware weapons.
Check out the two images below. The image on the left is taken from the work of Japanese artist Isao Hashimoto. It’s a graphic depiction of the 2,053 nuclear explosions that took place between 1945 and 1998 (North Korea’s tests are not included). It includes what has to be the most depressing 44 seconds in human history. From 4:16 to 5:00 in the video—spanning the years between 1960 and 1963—the number of explosions doubled 300 to 600. It’s both beautiful and obscene to watch.
The video on the right, via Australian Popular Science, is a real time tracker of cyber attacks as they happen. Click on the link and watch the cyber war rage. But note that the Honeynet Project only reports cyber attacks in the places where they’re actually being monitored. There are probably a lot more attacks than reported. And our point is, there will probably be a lot more. Either the system will get more secure (little gated Internet communities with encryption), or people will stop using it.
As a side note on nuclear testing, the US is responsible for just over 50% of the 2053 nuclear explosions since 1945. By the time the tracker finishes up, the US ends at 1,032 tests. The former Soviet Empire is next at 715, then France at 210, the UK at 45, China at 45, India at 4, and Pakistan at 2. Nuclear tests in North Korea and perhaps Israel are not recorded.
Australia has never built or tested a nuclear weapon. But the British tested twelve of them here between 1952 and 1963. In fact, the first-ever nuclear test in Australia took place sixty years ago on this very day. It happened at the Montebello Islands off the Northwest coast. On-shore testing took place at Emu Field and Maralinga in South Australia.
The first nuclear test was code-named Operation Hurricane. The British Ministry of Supply was good enough to make a nine-minute film about the event. The soundtrack is a bizarre cross between something from a Sergio Leone film and an old Star Trek episode. But it was the Cold War, a tense and dark time where people had an existential fear of nuclear holocaust and said things like this (which you’ll find at the end of the film):
‘The lethal cloud rising above Montebello marks the achievement of science and industry in the development of atomic power. For peace or war? For progress or destruction? The answer does not lie with Britain alone. But we may have a greater voice in this great decision if we have the strength to defend ourselves and deter aggression. That was the meaning of the Montebello.’
By the way, having a voice ‘in this great decision’ reminded us of a comment Jim Rickard’s made in Sydney in August about central bank gold reserves. He said that if you wanted to have a seat at the table when the new monetary order is negotiated, you’ll need gold to ante up. Central banks with it are in. Central banks without it are out of luck. We’ll get back to this, and what the RBA really ought to be doing in a moment.
But let’s close the loop on that ‘lethal cloud’. The British conducted three nuclear tests in Australia before measuring whether there was any radioactive fallout. By 1958 a secret government program began testing the bones of dead Australian children for traces of Strontium 90 — a radioactive isotope that causes leukaemia and bone cancer.
Strontium 90 appears after nuclear explosions and can make its way into, among other things, a nation’s milk supply, via cows eating contaminated vegetation or being directly poisoned by radioactive fallout. Officials were concerned that radioactive fallout from the 12 tests could affect Australia’s population. The program of taking body parts and bones from dead babies was conducted without the permission or knowledge of parents.
Over 21,000 bone samples were taken between 1957 and 1978. The bones were ground into ash and then tested by labs in the UK, the US, and later Australia. A book about the Australian scientist who blew the whistle on the radioactive fallout was published in 2001 by Wakefield Press in South Australia. It’s called Fallout: Hedley Marston and the British bomb tests in Australia and is also available on Amazon in a Kindle version. A documentary named Silent Storm, based on the book was made in 2006 and can be found on YouTube.
That’s a pretty grisly anecdote, even by Markets and Money standards. But sometimes you have to follow the trail of an idea wherever it takes you. You can them come back to the beginning and see if there are any patterns to be detected in all the information you’ve acquired. And that brings us back to why you should probably not trust the government to keep its hands off your retirement savings.
Last week we learned that the greatest Treasurer in the world (Australia’s own Wayne Swan, in case you were unaware) is looking to plug holes in his $43 billion budget deficit. Cutting spending is, of course, out of the question. It’s a lot easier to abolish the tax incentives that encourage Australians to self-fund their own pension. The government reckons that would net about $32.5 billion in ‘savings’, which nearly covers the budget gap!
It is just like someone in government to make YOU pay for THEIR profligacy. It’s discouraging nonetheless. The point of encouraging people to save for their own retirement is that they don’t have to draw a government pension in old age. But if you smash and grab that money anyway, because you can’t control your own spending in the public sector, then what is the point of anyone in Australia behaving responsibly and planning for the future?
This is the trouble with constantly changing the rules in anything. You make it impossible for people to plan. In the absence of planning, people become more reactive and speculative. They lose money and become dependent on government handouts. Frequent rule changing makes the government more powerful and everyone else poorer and dependent. But maybe that’s the idea.
In any case, Wayne Swan is only going where the money is. There are over $1.3 trillion in retirement savings in Australia. Folks like Ken Henry and Jeremy Cooper have argued recently that too much of that money is invested in shares and not enough in fixed income. They’re arguing for a change in the way retirement money is allocated in Australia.
And even Ross Garnaut is pitching in…by asking YOU to pitch in. It started late September when Garnaut and former RBA economist Bob Gregory warned a conference about the end of the mining boom and the fall in Australia’s terms of trade. They said Australia’s should ‘brace for falling living standards’. Gregory argued that the ‘deflationary impact’ of the falling terms of trade would require…wait for it…larger government budget deficits to make up the difference!
That’s right people. Get ready for it. The mining boom is over and the government has ended it with annual deficits and a growing debt. The solution to all that, naturally, is an even bigger debt and, of course higher taxes, which Garnaut likes to call ‘shared sacrifice’.
To Garnaut’s credit, he was quoted in yesterday’s Australian Financial Review saying that government spending needs to be cut, too. Well actually, he didn’t say that in the interview. He said the government needs go through a ‘long period of expenditure restraint’. In bureaucratic speak, that could mean simply freezing the growth rate of government spending but not cutting it in absolute terms. It’s hard to say, based on his published comments.
But we have an idea for Garnaut and the government; how about you show some restraint by spending less of OUR money? Only someone from academia or government could possibly believe that government policy creates wealth. The government can only take from what private individuals or companies have created.
Garnaut doesn’t really mean ‘shared sacrifice’. He means ‘if you have money we’re going to take it from you and tell you it’s for the good of everyone’. He doesn’t say it like that. In yesterday’s paper he said, ‘The virtual exemption from taxation of comfortable old people like me that was introduced a few years ago is unsustainable.’
Fine then Ross. Why don’t you voluntarily pay more taxes if you feel like you’re under-taxed. And why don’t you stop presuming to speak for all the people who ‘can afford to pay more’? Not everyone built a career by lining up at the public trough and drawing a nice wage for it. Some people have to work hard and save for their retirement in order to become comfortable and old. Those people have actually earned it.
As a legal alien, we admire the Australian belief in fairness. It’s one of the qualities that makes the country great. But it’s also just the sort of idea that can be hijacked by people who try to cover their own mistakes with your money. There is probably a limit to how much people will be pushed and bullied around in the name of fairness, and we suspect Australians may reach that limit in 2013.
for Markets and Money
From the Archives…
28-09-2012 – Greg Canavan
Banks versus the Farms
27-09-2012 – Greg Canavan
A Familiar Sequence: Print, Spend, Crash
26-09-2012 – Bill Bonner
The Hamburglar’s Budget
25-09-2012 – Dan Denning
The Cheeseburger Police
24-09-2012 – Dan Denning