Zombie Bureaucratic Socialists Attack in Daylight

In the movie Zombieland with Woody Harrelson, there are certain rules you must follow in order to survive in a world taken over by Zombies. The first rule is “cardio.” Zombies are slow. You can outrun them. But only if you’re in shape. Start running.

The second rule is to always shoot a Zombie twice in the head to be sure you’ve killed it. The third rule is to beware of bathrooms. You can never let your guard down. The fourth rule is to always wear a seat belt. Zombies are hungry, but not smart. They will crash right through a windshield if you hit the brakes. The fifth rule is to have no attachments.

These rules are worth reviewing because an army of wealth-stealing Zombies from the government are now on the march. They walk amongst us in broad daylight. And their ludicrous proposals to impose super taxes on every industry and to bludgeon free people into unthinking submission are starting to become a real threat to personal freedom and your ability to achieve financial independence.

In today’s and future Markets and Moneys, we’re going to try and come up with some rules for defeating these Zombies. But first, what about financial markets? The optimism that China’s de-pegging of the Yuan would benefit everything was short lived. U.S. markets were up triple digits during the day, but closed lower. Gold was off to as traders took profits and reassessed the currency landscape.

Will Chinese investors use a stronger Yuan to buy more gold? That’s one possibility. You don’t imagine they would be using the stronger currency to buy more U.S. Treasury bonds. This is one reason we believe long-term U.S. rates are headed up. In the shorter-term, though, what would happen if the Chinese bought fewer U.S. Treasury bonds?

Keep in mind the U.S. government has nearly $4 trillion in new debt to sell in the next three years. It’s a combination of new deficits run up by the free-spending Obama Administration and short-term debts run up by the free-spending Bush Administration. If the Chinese don’t buy it, the Fed will. But if the Fed does, it will be more quantitative easing…which is USD bearish.

And you wonder why other central banks are adding to their gold holdings right now. The World Gold Council reported over the weekend that Russia’s central bank bought 26.6 metric tons of gold in the past quarter, taking holdings to 668.6 tons. The Philippines increased holdings by 9.5 tons in March to 164.7 tons. The Saudi Arabian Monetary Authority reported last quarter that it “modified from first quarter 2008” its holdings to 322.9 tons. That was an upward adjustment from 143 tons.

All of this should suggest that the current state of the world economy is not nearly as placid as the vapid press releases from public officials would lead you to believe. Behind the scenes, governments know that paper isn’t money. They’re accumulating precious metals as a hedge against the inevitable debt monetisation in Europe, the U.K., and the U.S.

Meanwhile, here in Australia, Treasurer Ken Henry has again gone on the front foot regarding super profits tax. Zombie hungry for greater share of national wealth. Zombie smash! Zombie frustrated!

Henry apparently wants to hit all Australian businesses with a “super profits tax”, according to today’s Australian. According to the paper: Background papers prepared for the Henry review explain that this [super tax applied to all businesses] would allow companies to earn a return on their equity investment, which should be no greater than the government bond rate. Profits higher than this would be treated as a super profit or economic rent, and would be taxed at a higher rate.”

Is this guy for real? They would “allow” companies a certain return on their equity investment. Quick. Someone check Lenin’s tomb.

What you’re seeing here is the counter-attack of the Zombie bureaucratic class (the people that run the Welfare State) to the global financial crisis. Like Kevin Rudd, Henry would like to use the crisis as an excuse to indict the failures of the free market and expand the power of the State in the economy and public life. That, at least, is what it looks like to us.

But it is not shopped that way. The Prime Minister and the Treasurer call this “reform.” It’s not reform at all, though. It’s legislated robbery. The government is effectively seizing anything it considers to be surplus profits in the economy. There is nothing modest, sensible, or even-handed about this. It is a power grab.

To be fair, it is more of a money grab. This is a move driven by an institution (the Nation State) that has too many liabilities and only one way to pay for them (taxes, coercion, theft, thuggery, and shakedowns). These people are mad. And bold.

Incredibly, Henry is frustrated that people and corporations don’t willingly go along to their own financial slaughter. At a conference in Sydney he lamented that so many people are being so fussy about the whole tax thing. “Whenever an idea is ventured publicly by a person,” he said, “whether that person is a policy adviser or whether it’s a government minister, there’s at least a handful of academics who will contest it.”

Heaven forbid far-reaching wealth-destroying tax proposals should be contested in a free and democratic society. Honestly, what sensible person would dare to question the judgment of a career bureaucrat and a career diplomat? Aren’t both (Henry and Rudd) in a better position to know what’s best for man, economy, and State?

“I’ve seen it on both sides of politics – this is not a partisan comment at all. But for governments, government ministers who are seeking to get ideas legislated, it is unbelievably frustrating, incredibly frustrating…’It is a great strength of economics as a discipline … But I think there are occasions on which economists might, at least for a period, put down their weapons and join a consensus.”

Bring that big noggin over here you tax animal. Just lay our head right over here on the chopping block if you would. That’s it. Hold on…could you expose your neck…I can’t get quite the right angle to chop your head off. Ahh…there you go.

Henry’s comments display a shocking level of certitude that it’s right and better for the civil service and the government to be so deeply involved in the economy. Speaking as an outsider and an American, we find this kind of easy-going reasonable tone about such a radical role for government to be quite shocking (and infuriating). We can hardly take it seriously that someone really believes any corporate profits above the long-term bond rate are “super profits” and should be confiscated by the government.

If this kind of confiscatory, centrally-planned, Statist, nanny-state thinking is typical of the Australian civil service or of Australian politicians, then the country is a lot further down the road to serfdom than we ever imagined. With policy leaders like Ken Henry, Australia will quickly become a failed experiment in some bogus “third” way socialism that leads to capital flight and lower standards of living.

Maybe we’ve misunderstood the Treasurer’s comments, though. And if so, it’s our fault. But if we’ve understood him correctly, then you should have a cold chill running down your spine. It means the government of Australia doesn’t want you to get rich. And if you are rich, it doesn’t want you to stay that way for long.

And meanwhile, an interesting side effect of the RSPT is that it’s effectively driving Australian miners, hat in hand, into the hands of state-owned Chinese enterprises with the cash to finance projects that banks and debt markets will no longer touch (thanks to the government’s greedy, grasping fingers).

This might seem like an odd conclusion to reach after the government presided over the signing of $10 billion in deals between Chinese partners and mostly Australian resource companies. That would seem to vindicate the Prime Minister in saying that the RSPT would not affect foreign investment in Australian resource projects.

But Chinese investment in Australian projects has never been about delivering a profit to Australian shareholders. It’s been about resource supply security for Chinese steel makers. The coal and iron ore projects will deliver reliable and low-cost steel-making ingredients to Chinese producers. When you’re not investing with the goal of making a profit, the super-tax isn’t an issue; it’s an opportunity to get a lower price because you’re competing with fewer investors.

Nice work, comrade.

Not that we’re bashing the Chinese for sewing up a good deal. You’d expect them to look after their own interests, just as you’d expect the Prime Minister to look after Australia’s interests. But if the goal of the Rudd tax was to deliver more of the profits from rising resource prices to Australians, yesterday’s deals didn’t help.

Quite the contrary. In its current trajectory, Australia’s resource industry could become a subsidiary of China Inc., run to meet the needs of Chinese companies, not Australian investors or businesses.

You always got the feeling that Kevin Rudd wasn’t, in his heart of hearts, ever opposed to a back-door nationalisation of the resource industry (which is what the RSPT accomplishes). But we always thought the Australian government would be the principal partner. Not the Chinese.

Yesterday we promised to show you how the RSPT could also affect the availability of housing finance in Australia. We haven’t forgotten. But we’ve rambled on too long already. We’ll get to it tomorrow.

Dan Denning
for Markets and Money

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.

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62 Comments on "Zombie Bureaucratic Socialists Attack in Daylight"

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Tar and Feathers
Guest

I’m feed up with miners and their prostituting cohorts attacking the legitimate right for a Government to govern on behalf of the people. Miners are ripping off the resources and claim most of the tax they would pay anyway…..so go to bloody Mongolia its closer to the Chinese market source. Aus should create manufacturing using the mineral resources and sell the surplus, in the mean time leave the most of the stuff in the ground and Government should nationalise gold and silver mining and load up on real money…..Aus are zombies believing the false advertising by the miners

Ned S
Guest

It may well come to that eventually T&F? But given that for the average Aussie to go from living on the average Aussies current income to the average Chinamans current income in any sort of a hurry, could come as a somewhat sudden shock, my personal inclination is to delay the process? :)

Michael
Guest
I saw the article about Ken Henry — scary stuff indeed ! Let’s assume that disaster does strike and he gets his way. How does anyone make a determination that your business is super profitable ? Obviously we need a lot more paperwork to collect data and more APS to analyse that. In Canberra of course. If the “super profitable” tag ever struck your business, even if you argued the toss, the time spent in doing so will drag your business down. It is long time that people like Ken lost the ability to distinguish between the possibility and the… Read more »
Ned S
Guest
I can see where Henry is coming from – The more you earn, the higher tax rate you pay, has been a well established principal in personal taxation for donkeys’ years. So yes, it sounds to me like Ken probably really is a socialist in the very core of his being. It also points out that a quite real risk going forward, is that democracies will opt for socialist solutions – At least until it becomes screamingly obvious that their producers can’t to pay afford them. But with a huge amount of damage being done in the meantime. At least… Read more »
zaphodity
Guest

“partisan comment” “welfare state” …Let me guess, Conservative Republican ?

Daily reckoning…Do you think it’s a smart idea letting yanks give you advice ?

zaphodity
Guest

…I’m VERY distrustful when it comes to the human race. Specially Americans. Wouldn’t trust them as far as I could throw up.

Biker
Guest

“Daily reckoning…Do you think it’s a smart idea letting yanks give you advice ?”

Jeez, Zaph… Most of them _ARE_ Yanks…!! :)

(Pardon, but your xenophobia is showing. Think your ziph is broken… .)

Ac
Guest

Dr Ken Henry AC is Secretary to the Treasury, not Treasurer. The treasurer is Wayne Swan all Australians, especially those in the media, should know that by now.

Ac.

Source: http://www.treasury.gov.au/content/secretary.asp?ContentID=346&titl=Secretary%20to%20the%20Treasury

Ross
Guest

No complaints from me today. Equity styled interest in certain major projects is still defensible in substitute for other forms of taxation but one size fits all profit sharing is a disaster mascarading as a tax grab.

Am wondering if Dan will mull over his “The goods may be made in China. But who makes the profits from their sale?” and my contention on the source of the offshoring and supposed Yuan issue. I have lived this in an industry where the profits other than graft extractions were certainly landed where the business was being sold ie: the u-s-of-a

Michael
Guest
I agree with tar and feathers to the extent that we need to value add to our exports. Possibile things – ship steel not ore ; supply nuclear plants, open-source our software in government to develop an IT industry (South Africa is doing this); ensure that the NBN ( a joke at the moment) goes to ipv6 so that we can be in the ground floor for the next generation of networking. We should be leaders in solar research — its a natural here. We do have the educated technologists who can do this – look at Silex , black… Read more »
Novista
Guest
How refreshing to see ‘a fair go’ in reality. Yes, I’m another of those dreaded Yanks, having lived in Australia almost half of my life. As a broadcast engineer, I applied for a job here in 1974. The Oz government offered me permanent residency without my even asking, on account of a ‘preferred occupation’. (Mainly due to the lack of expertise amongst dinky-die Aussies.) And yes, I copped the NTSC oz joke, ‘Never the same colour twice.’ When I pointed out America had its first colour transmissions in 1938. and regular broadcasts in colour in the post-war era, whereas Australia… Read more »
Dave
Guest

> Treasurer Ken Henry

Could have sworn it was Wayne Swan.

Biker
Guest

nil carborundum no vista

Literal meaning, from the Book of Jobs, for non-latinos: “Don’t get ground up in no Windows”

SV
Guest

Michael – we used to make steel, but less and less so now.
Steelworks in Newcastle was spectacular to look at and generated plenty of jobs. What killed it were high labour costs.
We don’t value-add not because we are stupid, but because our labour is so darn expensive.

Rob CA
Guest
The taxation system in this country, federal, state & local, has devolved from a funding source for essential public goods such as highways, hospitals and defence to essentially a RACKET run by bullies who use threats of censure, fines, bankruptcy and incarceration to collect their political bribes. Add to this a total lack of governmental fiscal responsibility as future generations are robbed of their opportunities and money before they are even born through rewarding the ongoing growth of an underclass that knows no better than surviving on one government entitlement after another. A bright, energetic and optimistic country devolving into… Read more »
annie
Guest
One of my main bugbears of the tax system is that we DO pay a lot of tax. Unless you are loaded you have to pay the right amount of tax. No problem, I don’t mind paying taxes to provide services, help the needy etc. What I do mind is that everything now is user pays PLUS you pay more taxes than in the past. Have one or other other, they can’t keep having it both ways. Now that the commercialisation of services is in full swing, people are starting to realise that the cost of water, electricity, gas, transport… Read more »
Alex
Guest

Love it Dan, subtle inclusion of a couple of the greatest books ever written

“further down the road to serfdom than we ever imagined” (Friedrich von Hayek)

“to know what’s best for man, economy, and State?” (Murray N. Rothbard)

Gold Rules
Guest
BHP said that it would reassess the viability of its iron ore projects in WA, Queensland and NSW, and could not rule out shelving its biggest Australian project, the $20 billion expansion of the Olympic Dam copper, uranium and gold mine in SA. Santos said it would defer for up to six months a decision on whether to build a $15 billion liquefied natural gas (LNG) plant and export terminal at Gladstone in Queensland. Rio Tinto said it would review all of its Australian projects, including the $11 billion Pilbara expansion plan. According to broking firm EL & C Baillieu… Read more »
Marty
Guest

I’ve known people who have worked in WA in recent years, they say there’s heaps of work there, but the cost of living is very high(the high cost of rentals etc).
The mining companies do have genuine complaints, but what about the workers? Mr Tony Abbot wants all the young people under 30 to come and work in WA, but where are they going to get housing?
Isn’t he(Abbot)aware of the acute housing shortage in the so called “lucky country”, at least Mr Rudd was!

Don
Guest

Caravan mixed in with a couple of teaspoons of concrete.

Biker
Guest

Marty: “I’ve known people who have worked in WA in recent years, they say there’s heaps of work there, but the cost of living is very high (the high cost of rentals etc).”

I’m not sure what “the high cost of rentals” means. We charge $350 – $450 per week. We have a queue of _eleven_ families for our most recently-completed rental home. Less than a kilometre away, some rents are as high as $650 per week. Some mining couples renting our homes make $200K+ a year, so I guess it’s all relative.

Ned S
Guest
My oldies had a nice big canvas tent with wooden poles – Well it seemed nice enough? Green as I recall. And it definitely seemed big – At the time – To me. Don’t recall a whole heap about it – Except the meat safe they used to dangle from the apex. And the kero lights. Oh, and having camp stretchers I think? Although I’m pretty sure me ma commented once in later years that the reason we didn’t have a dirt floor was because she sewed together a bunch of empty sugar bags and laid them out like a… Read more »
Biker
Guest

We always carry a three-man tent and two roll-ups on the bike, Ned. A double down sleeping bag and we can camp anywhere.

Best camping locations have included beachside Venice and a thin peninsula of land out into Roebuck Bay, Broome… the latter too narrow for cars.
You can’t beat a water view!~

Don
Guest
Great post Ned! My parents emigrated from Europe after WWII so they had no experience with the great depression and the hardships that came with it and my grandparents never mentioned it much – grandad grew up in an orphange in Italy during that time, can only imagine what that must have been like. It brings to mind a saying which an old production superintendant used to recite to me often: “In the old days they had wooden ships and iron men, now they have iron ships and wooden men.” Sorry I was just being a smart a*se before about… Read more »
Biker
Guest

Your _hotels_ seem cheap enough in Cairns, Don!~

Don
Guest
Hotels up here are giving good deals at the moment for sure, things still a bit depressed although they say unemployment has dropped to below 10% – hip hooray! Had a look at a bed sitter across the road the other day, fully furnished and all that, not too bad a complex old but no pool or elevator and they did a good job at rennovating – only $129k. The downside was the rotten rates – $1k for body coporate and $2k for council rates?!?!? For my 2 bedroom townhouse in Melbourne I pay 1K for coporate and 1K for… Read more »
Biker
Guest

Thanks for that, Don. Port Douglas hotels seem very reasonable right now, too; and it’s your high season, isn’t it? Hard to figure… .

Re that bedsit. A thousand bucks for the strata groups seems cheap to us. Wonder if it really covers future expenses? Easy to get caught out there… The rates _are_ a little high… but we pay $1.5K annually on every property we own, so it’s not outrageous.

Your rents are cheap. Mind you, _everything_ including hire cars, seems almost too good to be true… .

Don
Guest
Port Douglas is a better option for sure Biker. The dive trips out to the reef don’t take as long and are better quality as the reefs close to Cairns are pretty well shagged. The restaurants are better quality as well although there are always exceptions :) Port Douglas is safer by miles than Cairns – seriously don’t be caught walking around the Cairns central district at night by the wrong people. Alternatively Mission Beach south of Cairns is not a bad option either – certainly not as developed but the beach is lovely and you can hop on a… Read more »
Biker
Guest

Thanks for that info, Don. Only have a couple of daze in Cairns.

Have gmailed your itinerary to my FA (fun advisor)… .

Don
Guest

If you are looking at properties biker- check out a place called Little Mulgrave, south of Cairns at the foot of the Gilles ranges. Google maps will have it of course :), we love going there to have a swim in the little Mulgrave River that runs through it – magic spot. Just watch out for skinny dippers :)

Biker
Guest

Definitely looking, Don. We were thinking Cairns Central… but it sounds like there’s a major downside(?)

We’ll definitely check out Little Mulgrave.
The view sounds interesting…

Thanks!~ :)

Don
Guest
It all depends on what you are after I guess. Cairns Central might be your thing, just be aware that apart from the actual Central Shopping Centre – not many locals go into the city. So business there goes up and down purely on tourism. The Lagoon pool they built on the esplanade is a great feature considering that you cannot swim on the mud flat – I mean beach – off the esplanade itself. If you get to little mulgrave – check things out down Little Mulgrave Road – some nice spots there amongst the cane fields. Afterwards have… Read more »
Biker
Guest
The Lagoon Pool on the Esplanade is an interesting concept, then, Don. Funnily enough we looked at all the hotels along the Esplanade, then settled for one closest to the city. No aversion to walking at all, but we ended up getting a good rate. Looking forward to seeing Little Mulgrave. Y’know it took five years before the locals would show us their secret spots here: a river bend which has not changed a whit in a thousand years… a beach and reef with underwater caves where enough air has been smashed by ocean rollers so that when you surface… Read more »
Don
Guest

I think you will be right at home at the Mountain view Biker- quite a few motorcycle riders park up there before or after their assault on the Gilles ranges road :) Enjoy your trip!

antisoc
Guest

Hey Biker,

you not staying at the Tradewinds by any chance? Im here for one more night before heading off to Tokyo. I doubt its the 4 stars it proclaims but its a great deal for the location and price! Maybe Ive already seen you in the bar! Or was that you on the Daintree river ferry yesterday? if not you should head up that way as I cant imagine a much more scenic road for biking exists (hmm, maybe the great ocean rd…)

cheers and enjoy your trip.

Biker
Guest

No, not me, Antisoc. Heading over to FNQ in a week. You’re right about the GOR. Did that ride back in ’02.

Scenic rides? Best yet was the Swiss Alps, starting Tirano, Italy; through St Moritz and west up through endless mountain passes. Seven countries in four months (2005). Quite a ride.

Enjoy Tokyo.

Davo
Guest

Biker,
Take a ride out to the Undara Lava Tube, south west of the Atherton Tableland. Hawaii raves about their lava tubes on the Big Island, but Undara leaves them for dead. Worth a day trip, certainly from somewhere like Malanda on the Atherton Tableland. The Caravan park at Malanda uses the nearby creek as it’s swimming pool, with nature having been augmented by man. Waterfalls abound on the Tableland, with tons of natural beauty.
Worth a few days up there too.
Cheers

Don
Guest

Undarra is pretty good but be aware that our ore trucks travel that road so it might take more than a couple of hours each way and there is a reasonable chance of copping a couple of windscreen chips on your hire car.

I rolled a company vehicle on that road a couple of months after I started work – front tyre had blown out but it didn’t stop the guilt and shame kicking in :( – was pulling over for an ore truck coming the opposite direction……

Don
Guest

Be aware Biker that over the last few weeks we have had some ordinary weather in Cairns – it has even rained (not much but enough to tick you off) a few times and the wind has picked up as well. I hope that it will fine up just in time for you though :)

This is relative of course – you will still have to suffer the “cold” temperature of 28 degrees throughout the day!! Bring your jacket haha!

Biker
Guest

Thanks, Davo & Don. Definitely a hire car this time. Plan was originally to buy a new Ducati ($30K) and ride south from Cairns to Brizzie. My FA stipulated that I sell at least _two_ of my bikes, but only one has sold so far!~ That trip is still on the cards, but probably not in ’10… .

Undarra is on the list… . :)

Steve
Guest

Steve’s quote of the day

“Steve is amazed by the amount of “UPDATED” (reduced) and “NEW” properties he is seeing on Domain”

Stillgotshoeson
Guest

Comment by Steve on 30 June 2010:

Steve’s quote of the day

“Steve is amazed by the amount of “UPDATED” (reduced) and “NEW” properties he is seeing on Domain”

Read an article today saying Perth house prices are down 2.1% Would have posted it but _Biker_already_thinks I am obsessed with the housing market and it_baffles_him_so to try and understand _how_someone_whom_ is not interested in (sic)_buying_property_would be so_ (sic)_ interested_in_the (sick)Property_Market

Biker
Guest

HaHa… sic it up, fellas!~

The years roll on… property marketS remain immune; yet a _predicted_ 2.1% fall is news to you(?!) Have you looked at the stock market lately?! Let’s see, the ASX is down 37% from its high, today. Can you imagine how your mountain climbing mate would be crowing if property had fallen so close to his 40% prediction? ;)

Steve
Guest

yes biker I am not going to be able to walk up and get a house listed for 300K and ask for it for 200K tomorrow, its a gradual thing, when people realise that they are going to have to put the price down over a period of a few months then that will happen.
With all these “UPDATED” properties and “NEW” properties being listed its starting to happen now…

Ned S
Guest

Hey Biker, did you know that Julia Gilliard’s beau is a real estate salesman? :)

Steve
Guest
What is the response you want him to come back with Ned? “Ohh yes Ned, that means she will distort the property market, make housing more unaffordable for young Australians goodie, because her boyfriend works in real estate she doesnt want him out of a job” Do you know what she also said: She wants to cut back on immigration, as Biker said to me the other day “did her lips move?” I know Rudd’s lips moved on the issue of housing affordability, and as I made the point on here a few months ago that I would not be… Read more »
Ned S
Guest
I’ve been a bit busy of late and may have missed something, but last I saw she reckoned she was gunna review the immigration thing. (Which seems to be ALP speak for do bugger all for ages, but when you do do something, stuff it up being my best take.) But that aside, she indicated the focus should be on sustainability – It’s just possible that could mean less poor, unskilled migrants I guess; Or even less migrants overall; Or even more rich and/or highly skilled ones. By and large, it should boil down to backing what she figures the… Read more »
Ned S
Guest

Wonder if that was part of the reason for Kev’s demise – He didn’t get the balance right re shaking the sauce bottle and sucking the sausage?

The King is dead! May the Queen soon follow … :)

Ned S
Guest
Seems possible we could get a correction Shoes – I reckoned one seemed well and truly overdue in early 2008 when I bought a couple of houses – Factored in 10% at the time given mine were both cheapies – And figured I could live with that given I had no idea on timeframes. But kept cash aside to buy two more given my reservations at the time. Prof Keen worried me a bit in late 2008. But the RBA worried me even more when they crashed interest rates – I was reliant on the income from my cash deposits… Read more »
Biker
Guest

Gotta laugh. The stock market moves 2% in a single _day_… drops 55.4% over an eighteen-month time frame… and The Kid gets a hard-on when property is predicted to fall 2.1%… .

Then the Bloke-Who-Can-Still-Afford-Footwear picks it up and runs with it-

Jeez, you jokers keep me in stitches… . :)

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