The Futures and Derivatives Markets (Part 1).

The Futures and Derivatives Markets (Part 1).

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.20x).

#futures market, #index, #go long, #go short,

This blog post is designed to explain the working of the futures markets so that investors can see through the manipulations of those markets. The blog does NOT advise anyone to enter those high risk markets.

1. The original useful roles of futures markets.

There are many futures markets. The main ones are listed in the following:

1a. Gold Futures (Gold futures for various delivery times)

Gold Futures are for gold smiths and jewelers.

Jewellery makers love to receive contracts to supply jewelleries in advance to smooth out their production. Unless the customers provide raw gold or agree to pay at whatever unknown future market price no contract can be made. This rarely happens. So to get binding contracts, they have to know the price of gold few months or few years ahead, for the time they will start their machining process but knowing the future is impossible.

So a jeweller has to peg his contract price for those items to be supplied on a future date on whatever guesses given by the “Gold Future Markets”. When his contract to supply is binding he simultaneously enter into contracts with some counter-parties to get a payout to compensate for any unexpected rise from that agreed price of raw gold. On the other hand, if gold price falls on that date, he will have to pay out to his counter-parties. In this way he get a fix profit from his contract, irrespective of any fluctuation of gold price.

The same principle applies to gold producers or even national treasurers. For example, during the Asian Financial Crisis (triggered by some billionaire G.S. ‘s attack on Thai’s baht) the treasurer of Korea had to sell Korean gold to repay Korean debts. Whenever there is a due payment by Korea, the price of gold dropped from its othrwise constant value of USD273/oz.

To avoid having to sell gold at the artificial, unfair dips on the due dates, a gold producer (or even the treasurer of Korea) would have to enter into “Gold Future Contracts” (“going short”) with counter-parties to get a payout to compensate for any unexpected fall from that agreed price. On the other hand, if gold price rises on that date, he will have to pay out to his counter-parties. In this way he get a fix price from his contract, irrespective of any fluctuation of gold price.

1b. Metal Futures (Copper futures, Nickel futures, Iron futures).

Metal Futures (Copper futures, Nickel futures, Steel futures) are for consumers and producers of metals.

The same principles also apply to consumers and producers of other metals such as copper, steel, lead, zinc, tin, nickel, chrome, etc…

1c. Food Staples Futures (Soybean futures, Rice futures).

Food Staples Futures (Soybean futures, Rice futures) are for food processors and producers.

1d. Currency futures.

Currency futures are for importers and exporters.

1e. Shares-market-index futures.

Shares-market-index futures are for investment managers of superannuation and pension funds who have holding spread out on many companies and want to instantly peg their buying or selling prices at some fix level.

1f. Rain-fall futures.
Rain-fall futures are for farmers whose incomes and expenses vary widely with rain-falls.

Farmers have to buy water transported by tankers if there is no rain. They would be happy to pay a fix amount to a counter-party whether it rains or not. They will use the payout from the counter-party to buy water.

2. Method of betting on an index.

Players buy units of betting. For example, one unit of betting on the SPI Share Market Index may make a gain or loss of $US 20 for each point of the index in favor or against the player.

The deciding moment may be closing time (4:00pm) of the last trading Friday of the month.

For example, let the betting be $20 per unit and let the current date be 2018 November 13, the Current value of a chosen index on the market is 5950, the current estimate for that index on Friday 30th Nov 2018 may be 6010 as given out by some “betting house”.

A player L may buy one unit of betting on LONG. At (4:00pm) of Friday 30th Nov 2018 if that index is 6020, he wins 6020 – 6010 = 10 units and will be paid $20*10 = $200. At (4:00pm) of Friday 30th Nov 2018 if that index is 5090, he loses 6010 – 5090 = 20 units and will be have to lose $20*20 = $400.

On the other hand, a player S may buy one unit of betting on SHORT. At (4:00pm) of Friday 30th Nov 2018 if that index is 6020, he loses 6020 – 6010 = 10 units and will have to pay $20*10 = $200. At (4:00pm) of Friday 30th Nov 2018 if that index is 5090, he wins 6010 – 5090 = 20 units and will be paid $20*20 = $400.

So a player may win or lose if his guess is better or worse than that offered by the “betting house”.

3. Using index betting for a large investment.

An investor has at hand $100,000 and will spread his total investment of $1000,000 over the whole 200 largest companies of the share markets.

He knows the dip of the index is the best time to buy all stocks but buying is a time consuming process and the dip may not last that long.

Suppose that the current index of the market is nearly 6000. His $1M investment will go up and down with the market according to the index. Suppose that the index is up by 1 unit, his investment will go up by $(1/6000)*1M=$166. So he will need a rough value of $166/$20 = 8.3 units of betting.

His strategy will be to buy 8 units of betting on LONG at the dip of the market, then takes time to buy into individual company without any need for further timing. Any increase or decrease in those 200 company share prices is roughly compensated by the gain or loss on the betting on the index.

to be continued

References.

Tuesday’s announcement by the Department of Justice of a guilty plea by a former trader of JPMorgan for systemic “spoofing” and price manipulation of gold, silver, platinum and palladium traded on the COMEX and NYMEX futures exchanges (owned by the CME Group) sure seemed like a very big deal …. The infractions occurred from 2009 to 2015 and the trader admitted to engaging in a conspiracy to commit market manipulation on hundreds of occasions, with the knowledge and consent of his immediate supervisors. [1, 2]

[1]. http://silverseek.com/commentary/crack-dike-17474

[2]. https://socioecohistory.wordpress.com/2018/11/10/a-crack-in-the-gold-silver-manipulation-dike/

[3]. https://www.zerohedge.com/news/2018-11-06/jpmorgan-gold-spoofer-admits-manipulating-precious-metals-markets-years

RELEVANT MONEY Blogs

Can most pension funds last?, posted on December 10, 2016

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PREVIOUS MONEY Blogs

Your fiat money (Part 2), Your fiat money, Bankers given outrageous incomes by their boards, Signs pointing to an impending crash for small investors, Bankers earn more than interest margin on secured loans.

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The Parasites of Western Economy, Part 12: Local councilors and their self-granted benefits.

The Parasites of Western Economy, Part 12: Local councilors and their self-granted benefits.

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No. … ).

The Parasites of Western Economy, Part 12: Local councilors and their self-granted benefits.

#parasite, #local council, #oversea junket, #misspending, #budget over-run,

Advanced Western countries (US, UK, Canada, Australia, New Zealand and many EU countries) have multilayered governments. Governments at the lowest level in that hierarchy are the Local Governments. They are responsible with all matters not delegated to their higher governments.

Typical local governments (such as in Victoria, Australia) are called the Local Councils, they are responsible for the following matters:
Rubbish removal service, Local roads and parks maintenance, Running primary and secondary schools, library service, local hospitals.
They are expressly excluded in the following matters: Foreign Affairs, Defense, All matters delegated to Federal and State governments.

The systems in other advanced Western countries are similar.

Any government in the World obtains its money from taxes imposed on its citizens. However citizens have the herd mentality and are often unconcerned that their money may be in the wrong hands. This sets the scene for parasites to come in and suck the communal treasury. [1-12]

1. The runaway Local governments.

Local Councils are currently not audited and their spending are open to abuse. The budget of any Council can be easily siphoned by:

1a- Excessive costs of “external consultancy” on projects. Councilor candidates should have declared their expertise on projects promised to constituents before standing as candidates for elected offices and external consultancy should not be but have been used as a shield to hide incompetence of elected representatives. [13-21]

1b- Unnecessary expensive costs granted by Councilors to themselves for oversea “study trips” (Councilors should have learned about the costs of their promises before standing as candidates for election). Councilors love going on oversea study trips. Those oversea study trips if necessary should have been delegated to professional specialist employees of Council. [22-32]

1d- Non-transparent tendering on approved project.

1e- Unacceptable accounting method lumping significant costs under the headings “others” to hide specific spending items from tax payers. (The heading “others” in any accounting report should only be used just to avoid its overcrowding, by reducing any of its long lists of competing significant items to less than 10 items long).

2. Reform to Local Government are needed.

Residents have cried out for reform to local governments. The following points should be addressed by any reform:

2a. Taxes (also called rates) by local government should be based on service provided. Currently the collection of Council taxes (also called rates) is capped by a percentage on the values of property (land and houses).

2b- Councils are responsible for the following core activities:

Rubbish removal service, Local roads and parks maintenance, Primary and secondary schools, library service, local health offices.[33]

2c- Each Local Council must have functioning information office at town hall and website for residents to follow its activities and register their objections to its actions.

2d. Issues affecting residents significantly (including major and costly projects) must be made public for significant time through Council information office and website.

2e- Councilors must vote in public by show of hands in meeting at their respective town halls on issues affecting residents significantly (including major projects) but the latter have to be made public. Such decisions should be made subjected to revocation by more than 50% of voting residents registering objection by internet within 4 weeks. [34]

2f- Councils can only have recurrent budget items covering the salaries and expenses on their core activity categories specified in 2b.

2g- Any intended spending on all other activities must be publicized, discussed and approved in public meetings as specified by 2e.

Study costs, especially oversea trips for Councilors (who should have learned about their policy promises before standing up for election) should be banned as elected office holders should not be able to grant “benefits” to themselves. [35-36]

2h- Project spending should be carried out with transparent public tenders.

2i- Councilor candidates must declare their expertise on projects promised to constituents before standing for elected office and external consultancy costs to Council on those promises must be revealed.

As a consequence, a candidate would have to say:

If elected I will pay $1M dollars to get a consultant to give us the price to build a Taj Mahal for the Town Hall

instead of

If elected I will spend $10M dollars to build a Taj Mahal for the Town Hall.

2j- Records of all previous election promises at all elections of each councilor candidate must be declared.

2k- A higher government (such as State government in Australia) should audit Council Budgets annually. This audit should reveal activities which are inefficient or are outside the authorized responsibilities of Councils.

3. Examples of run-away Councils.

3a- Councils now have little idea on how to do its core business of garbage collection and dealing with recyclable wastes. [37]

3b- A local council spend money to promote LGBT in the referendum. This is a human rights issue which is for the Federal government to solve.[38]

The ratepayers of Moreland will be astonished to learn that the council is considering spending their hard-earned dollars in support of Russian punk protest band Pussy Riot. This is a human rights issue which is for the Federal government to solve.[39]

3c- Council of Marybyrnong keep the expensive practice of replanting kerbside trees every few years near its Footscray Library.

3d- Council of Brimsbank spent large amount of money to erect a temporary luxury huts promoting “green houses” on Hampshire Road in August-September 2018.

3e- Bayside Council runs its own bus services. [40-41]

3f- Councils running City sisterhood with oversea cities.[42]

Fortunately, the NSW government will crack down on council travel junkets. Under the overhaul, councils will have to disclose what is spent on sister city trips

4. Conclusions.

4a- Reforms to Local Governments are urgently needed.

4b- Every citizen has to be vigilant and report to the higher, supervising Government any cheating he can see at Local Government level. Only by doing so he can avoid being turned into a tax-donkey provider for those cheats. Citizenry must also actively participate in politics to prevent corrupt politicians from turning local tax (also called rate) money into honey pots for themselves and Councilor Offices as their incubator. First hand contact with them will show you their unbounded greed and their contempt for tax payers.

References:

[1]. Investigation into the alleged improper conduct of councillors at Brimbank City Council, https://www.ombudsman.vic.gov.au/Publications/Parliamentary-Reports/Investigation-into-the-alleged-improper-conduct-of

[2]. http://www.abc.net.au/news/2008-02-27/council-sacked-over-cost-blow-out/1055950

[3]. Council spending: Staff wages blow out council spending costs …, Sunday Herald Sun. May 12, 2018 9:00pm, https://www.heraldsun.com.au/news/victoria/staff-costs-blow-out-by-500m-and-take-bigger-share-of-councils-spending/news-story/911e5c5c1c363fc569b48538deb79cc7

[4]. https://geelongindy.com.au/news/26-10-2018/bureaucratic-cost-blowout-threatens-chilwell-ps-project/

[5]. https://www.perthnow.com.au/news/fremantle/fremantle-artwork-removal-costs-blow-out-tenfold-ng-b88931008z

[6]. https://m.northernstar.com.au/news/sculpture-blowout-to-cost-council/2318559/

[7]. https://www.goldcoastbulletin.com.au/news/gold-coast/gold-coast-city-council-coast-blowout-blamed-for-delay-in-nerang-park-light-installation/news-story/f955e31259a126d73b952e4658c49855

[8]. https://www.heraldsun.com.au/leader/north/darebin-council-projects-delayed-with-2m-cost-blowout/news-story/6b48ccde5f0ae2abb93f21c086d1df8f

[9]. https://i.stuff.co.nz/the-press/news/104219388/council-tried-to-keep-multimilliondollar-christchurch-town-hall-budget-blowout-quiet

[10]. https://www.radionz.co.nz/national/programmes/checkpoint/audio/201861321/auckland-council-criticised-from-within-over-budget-blowout

[11]. https://www.zdnet.com/article/brisbane-lord-mayor-blasts-technologyone-for-au60m-contract-blowout/

[11b]. https://www.smh.com.au/technology/brisbane-city-council-it-contract-faces-potential-60-million-blowout-20170125-gtygbh.html

[11c]. https://www.cio.com.au/article/613210/brisbane-city-council-tech-project-faces-possible-60m-blow-out/

[11d]. https://www.heraldsun.com.au/leader/news/what-melbourne-councillors-claim-as-expenses-funded-by-ratepayers/news-story/4c1fc9a3f4611f7d9e969ec0694ae4d6
[12]. https://www.heraldsun.com.au/leader/north-west/maribyrnong-councillor-sarah-carter-spends-100-a-week-on-phone-bill/news-story/e1313c18dc6f1746dd6ec42db658abf7
[13]. https://www.smh.com.au/national/nsw/government-spending-on-consultants-blows-out-by-250m-auditor-20171222-h09bso.html

[14]. https://www.thesun.co.uk/news/4874478/cornish-council-75000-poldark-pasties/

[15]. https://www.consultancy.uk/news/13514/st-albans-council-spends-12-million-on-consultants

[16]. http://www.dailymail.co.uk/news/article-1210682/Haringey-council-spent-24m-consultants-failing-save-Baby-P.html

[17]. https://thestandard.org.nz/auckland-council-it-blowout-guest-post/

[18]. https://i.stuff.co.nz/the-press/news/97201238/consultant-costs-drive-34-million-christchurch-city-council-overspend-on-personnel

[19]. https://i.stuff.co.nz/business/104922841/Govt-blames-public-servant-cap-for-blowout-in-consultant-costs-to-550m-a-year

[20]. https://www.news.com.au/national/victoria/8300-research-trip-for-arch-called-the-springvale-asian-gateway/news-story/513d52517dc3ea8a1d734e8e9e553fe5

[21]. https://www.theage.com.au/national/victoria/melbourne-city-council-budget-2017-spending-rates-bonanza-replacing-roads-with-parks-and-malls-20170504-gvyl0u.html

[22]. https://vexnews.wordpress.com/2009/03/12/no-comment-melbourne-greedy-greens-party-councillor-stonewalls-over-junkets/

[23]. https://www.heraldsun.com.au/ipad/we-pay-for-more-than-1-million-council-junkets/news-story/4cbbaf2652d30269bcc1c2267ec7bfe8

[24]. https://www.bordermail.com.au/story/5234712/mayor-wants-permit-to-fly-on-asia-junket-to-help-create-jobs/

[25]. https://www.theherald.com.au/story/5552345/debate-over-lake-councils-35000-international-study-tour/

[26]. https://www.smh.com.au/national/no-junkets-lord-mayor-packs-his-bags-for-trips-20091102-htgu.html

[27]. https://www.thechronicle.com.au/news/council-should-consider-taking-taxpayers-japan-tri/3148138/

[28]. https://www.thechronicle.com.au/news/council-reveals-destination-fifth-overseas-trip/3175149/

[29]. Council defends overseas ‘junkets’
http://www.pressreader.com/australia/the-chronicle8992/20140212/281908771038726

[30]. https://www.couriermail.com.au/queensland-ratepayers-forking-out-for-councillors-global-junkets/news-story/f4a4782b76dba20228631b433a8b02ea

[31]. VICTORIAN councils are splashing ratepayers’ money on overseas “junkets” instead of focusing on local issues, https://www.heraldsun.com.au/news/victoria/melbourne-councils-under-fire-for-asia-junket-spending/news-story/bc7ec9b5b63991dc43f1cc09a0bcdd44

[32]. https://fremantlereform.com/council-cof/cost-of-fremantle-mayors-rate-payer-funded-junket-doubles/

[33]. http://www.abc.net.au/news/2018-04-19/queensland-council-recycling-dump-to-start-nationwide-reaction/9673370

[34]. https://www.theage.com.au/national/victoria/melbournes-most-secretive-council-under-fire-20160622-gpp36m.html

[35]. https://www.dailymail.co.uk/news/article-6172283/Council-Melbourne-staff-spent-330-000-taxpayer-funds-trips-year.html

[36]. https://www.bordermail.com.au/story/5234712/mayor-wants-permit-to-fly-on-asia-junket-to-help-create-jobs/

[37]. https://fremantlereform.com/council-cof/councils-costly-world-tour-for-rubbish-junkets-continues/

[38]. https://www.heraldsun.com.au/leader/north-west/marriage-equality-moreland-council-flies-rainbow-flag/news-story/334d4b8073f79d045a27ace7e93920e0

[39]. http://www.heraldsun.com.au/news/opinion/more-stupid-council-waste/news-story/620156e34af89e0299a6e8675cf35134

[40]. https://www.bayside.vic.gov.au/news/commuter-bus-trial

[41]. https://www.opendemocracy.net/neweconomics/why-has-the-government-just-banned-councils-from-running-their-own-buses/

[42]. https://www.dailytelegraph.com.au/news/nsw/nsw-councils-to-disclose-full-cost-of-sister-city-trips-in-travel-junket-crackdown/news-story/5e36c4d99a56f89c55d3672c190f7032

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The Parasites of Western Economy, Part 10: Greedy politicians overpaid with our tax money.

The Parasites of Western Economy, Part 9: Over-chargers for unfamiliar types of service.

The Parasites of Western Economy, Part 8: Body Corporate robbing owners of low cost dwellings.

The Parasites of Western Economy, Part 7: Providers of invented inefficient service from tax money.

The Parasites of Western Economy, Part 6B: Robbers of pension money in Australia.

The Parasites of Western Economy, Part 6: Robbers of pension money in Australia.

The Parasites of Western Economy, Part 5: Company Asset Strippers and Conspirators posted on 13 August 2017 ,

moneyd20.jpg

,

, , , , , Cashless bartering for survival, Federal Reserve Bank charges undeserved fees to Americans., A satirical guide to signs of an impending crash for small investors, Your fiat money (Part 2), Your fiat money, Bankers given outrageous incomes by their boards, Signs pointing to an impending crash for small investors,Bankers earn more than interest margin on secured loans, Can most pension funds last?, … all

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The Parasites of Western Economy, Part 11: Vulture Funds

The Parasites of Western Economy, Part 11: Vulture Funds

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No. … ).

As the Central Banks of major countries sent interest rates to zero or even negative values, people in those countries had to take their retirement savings out of Government Bonds and they had been tempted into sending their money into the Stock Markets of their respective countries. The people are not verse in calculating return and risks so they may grab any “established names” on the Stock Exchange and pay outrageous prices for them only to find out that they had bought “Trojan horses”.

There are Vulture Funds who live off that ignorance and float the old loss making companies (called here Zombies companies) into the markets and do creative accounting tricks to hide the losses (for few years only). Those buying the Zombies at Initial Public Offer (IPO) usually lose most or significant parts of their money right after the contracts have been signed!

This blog reveals the tricks of selling Zombies on the Stock Exchanges.

#restructured company, #float, #zombie float, #zombie company, #IPO, #time-bomb loan

1. Outline of the tricks.

Company directors usually hide the assets from shareholders making them selling out their shares cheaply to vulture funds. Vulture funds then control those target companies, de-list them from the Stock Exchange, take away all profitable parts. Vulture funds then bind predatory, time-bomb loans to those target companies leaving them with just a bare chance of survival (even in the fairest weather) for the coming 3 years. Vulture funds then re-float target companies (already bound to time-bomb loans) by IPO’s on the Stock Markets as “revamped companies” but they are actually Zombie Companies.

The latter are financial traps for inexperienced Stock Markets investors. After 3 years, most Zombie companies would fail due to predatory loans from their own (Vulture Funds) floaters. As creditors, the Vulture Funds again would come in to take possession of most assets of Zombie Companies.

2. Details of the tricks.

1. A Vulture fund buys a long suffering loss making target company for next to nothing. It usually buys the target company when it goes into liquidation by insolvency.

2. Vulture fund sacks most low level employees. They would lose their job anyway by the liquidation. The company then ceases trading for few months.

3. The company books are then scanned for any realizable, significant assets for the Vulture fund to take.

4. Vulture fund draws up a predatory (lob-sided) management contract between the newly acquired target company with one of its subsidiary companies (a debt collecting company disguised as a management company). The management contract is an irrevocable, very expensive management for the target company. If the target company survive it has to pay very expensive management fees to the subsidiary of the Vulture fund.

(As management fees to another company at expensive rate are not classified as a debt, the restructured company is now debt free except for an expensive loan used as working capital. The irrevocable management contract just keeps sending money to the other company (debt collecting disguised as management company) whether the management is effective or not. The contract is effectively an obligatory debt repayment scheme but is OFF the BALANCE SHEET.)

5. Vulture fund provides a thin working capital to the acquired target company from an expensive, predatory, time-bomb loan from his other company (debt collecting disguised as management company). The loan is characterized by complex conditions such that prospective investors would not understand. The loan typically is locked in for decades and provides low interest for only 3 years, after that period interest rate will become exorbitant. This kind of loan is called time-bomb loan and is designed to bankrupt the target company.

6. New low level employees are hired and the target company with long established name re-open its doors for trading (in a way which is precarious but is hard to be noticed by prospective investors).

7. The company is then called “restructured” and floated on the Stock Exchange for naive, unwary investors to buy in.

8. The money from new investors helps paying back the loans from the Vulture fund and will make installments to pay the management fees (which are actually installments to pay off an additional debt to the schemer). (Most capital raised from the float of the zombie will be used to repay the loan for working capital and then sent to the “debt collecting disguised as management company” over the time.)

9. The target company usually go bankrupt after a short while of 3 years. The finance subsidiary of the Vulture fund that lend working capital to the target company then comes in as a creditor to claim most assets of the target company.

(The director of the zombie company is untouchable by any company law or security law as the management fault lies with the management company (outside his control) but he cannot revoke the management contract.)

3. Illustration by an every day example.

If someone got a wrecked car from a yard, refit it with an engine (on an expensive hire purchase plan from him) and sell it to you. Would you buy that car?

But why do you let your Pension Funds, Superannuation Funds buy the zombie companies on your behalf?

4. Well known Zombie floats.

Sears in USA is a typical case in USA. [3, 4]

The better known cases of zombie floats from the Australian Stock Exchange (ASX) are:

The Dick Smith Electronic Company (2015) [5, 6],

The Myers Company (2009) [7, 8].

The floating of the zombies does make the Stock Exchange look like an arena for rigged games where novice investors are ripped off by Vulture Funds.

5. Conclusions.

1. Investors should stay well clear of any “revamped company” floated by some Vulture Funds or Private Equities.

Investors have to check the trading records for the preceding three years of the floated company even if it is traded on the Stock Exchange.

A new float of an old company may be very risky as only the company name is established while the management and operation are totally untested. Investors are buying into only a dream, the dream may turn out to be a nightmare.

Any management contract of the floated company to any external company must be examined in details (How much fee per year, for how many year, whether it is revocable, what are the required termination conditions). The conditions are usually hard to obtained from any such prospectus. For this reason alone, any such float should be avoided.

Investors have to find out if the floater of the new float has a reputation in floating successful companies after claimed “restructuring”. Some floaters are known for only floating non-viable companies.

On the only basis of transparency, I would avoid any float of “restructured companies” [9, 10].

2. A reform on company laws is needed.

Vulture Funds should be regulated differently from other companies and banks. They should not be allowed to float company with locked in management contracts and with loans from their related companies.

References.

[1]. Avoid-buying-zombie-floats-on-the-stock-exchanges

[2]. The Parasites of Western Economy, Part 5: Company Asset Strippers and Conspirators

Vulture Fund kills Sears

[3]. https://riggedgame.blog/2018/10/17/sears-didnt-die-vulture-capitalists-killed-it/

[4]. https://m.huffpost.com/us/entry/us_5bc4b346e4b0bd9ed55c8a58?utm_source=nextdraft&utm_medium=email

[5]. dick smith blames-private-equity-owners-greed-for-collapse, http://mobile.abc.net.au/news/2016-01-06/dick-smith-blames-private-equity-owners-greed-for-collapse/7069604

[6]. dick-smith-class-action-ready-to-launch, au.wordpress.com/business/breaking-news/dick-smith-class-action-ready-to-launch/news

[7]. https://www.crikey.com.au/2010/03/18/myer-over-priced-as-shareholders-find-out-the-hard-way/

[8]. http://www.smh.com.au/business/lessons-from-the-myer-float-flop-20091102-ht8c.html

[9]. the-private-equity-giants-the-greek-target-and-a-trojan-horse, October 28, 2015

[10]. report-says-big-buyouts-are-likelier-to-default, date 05Nov2009

FINANCIERS ARE USUALLY PREDATORS

[11]. https://business.financialpost.com/pmn/business-pmn/us-charges-malaysian-financier-in-money-laundering-scheme

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The Parasites of Western Economy, Part 5: Company Asset Strippers and Conspirators posted on 13 August 2017 ,

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Sears Didn’t ‘Die.’ Vulture Capitalists Killed It.

Sears is a prime example of how hedge funds and private equity companies take over retailers and gradually bleed them dry for their own benefit. By Robert Kuttner and cross-posted from Huffington Post

via RIGGED GAME, https://riggedgame.blog/2018/10/17/sears-didnt-die-vulture-capitalists-killed-it/

Comment by tonytran2015:

Company directors usually hide the assets from shareholders making them selling out their shares cheaply to vulture funds. Vulture funds then control those target companies, delist them from the Stock Exchange, take away all profitable parts. Vulture funds then make contract for predatory loans to those target companies giving them just a bare chance of survival in the fairest weather for about 3 years. Vulture funds then refloat target companies by IPO’s on the Stock Markets as “revamped companies” but they are actually Zombie Companies.

The latter are financial traps for inexperienced Stock Markets investors. After 3 years, most Zombie companies would fail due to predatory loans from their own (Vulture Funds) floaters. As creditors, the Vulture Funds again would come in to take possession of most assets of Zombie Companies.

Investors should stay well clear of any “revamped company” floated by some Vulture Funds or Private Equities.

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The Parasites of Western Economy, Part 5: Company Asset Strippers and Conspirators

The parasites of Western economy part 11: Vulture funds

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Trade war tactics, Part 8: Pressuring opponent until cracks appear to reveal weak points for attack.

Trade war tactics, Part 8: Pressuring opponent until cracks appear to reveal weak points for attack.

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No. 1xx).

The engagement in the trade war between two opponents will reveal some weakness in each of both opponents. Each will do its best to break the other’s strength through the discovered weak points.

Now USA has won the first round of its trade war against China but it has to discover and exploit the weak points of Chinese economy to successfully pursue that war. An analysis of this trade war is offered here following a summary of its time line.

#trade war, #weak point,

Trade war tactics, Part 8: Pressuring opponent until cracks appear to reveal weak points for attack.

1. Time line of current trade war.

2018 January 23:

30% tariff on solar panels (most of them are from China) reducing to 15% after four years. 20% tariff on washing machines for the first 1.2 million units imported during the year.

2018March 22:

President Trump relied on Section 301 of the Trade Act of 1974 to propose tariffs on additional 60 Billion worth of Chinese export (over 1,300 categories including aircraft parts, batteries, flat-panel televisions, medical devices, satellites, and various weapons) to USA as “a response to the unfair trade practices of China over the years“, including theft of U.S. intellectual property.

2018 March 30:

On Monday, Brussels launched a safeguard investigation into how it could combat surges of steel imports… from inflows of Japanese, Chinese, Turkish and Russian steel that would be diverted away from the U.S. [1]

2018 April 2:

China imposed tariffs on 128 products it imports from America: 25% on aluminum, airplanes, cars, pork, and soybeans, 15% on fruit, nuts, and steel piping.

2018 April 5:

Trump responded saying that he was considering another round of tariffs on an additional $100 billion of Chinese imports as Beijing retaliates. The next day the World Trade Organization received request from China for consultations on new U.S. tariffs

2018 June 15,

United States impose a 25% tariff on $50 billion of Chinese exports ( with “industrially significant technology”). $34 billion start July 6, with a further $16 billion to begin at a later date

2018 July 13:

“The S&P 500 on Friday hit a four-month high … the Nasdaq close at a record high. The S&P 500, Nasdaq and the Dow Jones Industrial Average were also tracking for their second straight week of gains.” [2]

2018 July 17:

“Since the White House announced the first tariffs — on washing machines and solar cells on Jan. 22 — the Shanghai Index of Chinese stocks is down nearly 20 percent, while the S&P 500 is off less than 1 percent… Since the end of March,..the yuan has slid nearly 7 percent, again demonstrating the impact the trade war…” [3]

As at 2018 July, America has been the winner in the current trade war.

2018 Sept 23:

USA imposed new 10% tariffs on $200 billion of Chinese goods, spanning thousands of products, including food seasonings, baseball gloves, network routers and industrial machinery parts.

China retaliated immediately with new taxes of 5% to 10% on $60 billion of US goods such as meat, chemicals, clothes and auto parts.

2018 October 03:

The trade war is accompanied by a war maneuvering in the South East Asian sea. Chinese Navy unsuccessfully tried to cause a collision at sea with USS Decatur. USS Decatur (DDG-73) is an Arleigh Burke-class destroyer in the United States Navy, of the same class as USS Fitzgerald (DDG-62) which collided with a Phillipine registered ship MV ACX Crystal near Tokyo around 2017 June 17; US Navy had also suffered another collision between USS McCain (DDG) and Liberian merchant ship on 2017 August 21 [3b].

2018 October 08:

China has lowered its required reserve ratios, meaning its banks run low on cash. The problem began some time 2 years ago, before the beginning of the current trade war [4,5]. China now directs its activities to domestic home construction market [6].

2018 October 03:

China Wants To End Trade War [7],

2018 October 11:

China needed to borrow money and launched debt offering [7b, 7c, 7d].

2. American economy is self-sufficient while Chinese economy is all relying on trades.

After the trade war and the take jobs home movement, US economy has become strongest in 40 years. China is not doing well with import and export restrictions by the US [8,9].

3. China is running out of financial liquidity.

That is a sign of over-investment on foreign-dependent economic activities that has been non-voluntarily throttled down.

4. American tariffs on Chinese steel, aluminum, washing machines and Chinese junks are effective.

Currently the US may consider that solar panels and washing machines should provide an opportunity for American manufacturing industry. The current tariff are designed to give American solar panel and washing machine makers a chance to establish themselves. Tariffs on other Chinese junks will guide American consumers toward the use of more durable, environment friendly goods.

5. Chinese tariff on American soybeans is ineffective

They cannot reduce the consumption by Chinese people. China needs cheap soybeans from the US more than the US needs to sell them to China.

Conservation requires an increase in soybean prices: rising demand for meat has driven soy production to nearly 10 times what it was 50 years ago. A full 80 percent of the world’s soybean crop is fed to livestock.[10]

Sixty percent of all soybeans grown worldwide are now exported to China, [11]

6. Chinese tariff on American LNG has been ineffective

It cannot reduce the consumption of US LNG. Rather Chinese purchasers of US LNG ship their cargo to Europe, swap for a non-US cargo and ship the latter to China to avoid any tariff. In this way Europe will consume US LNG while sending its purchased LNG to China.

7. Chinese tariffs on American luxury goods are ineffective

Chinese tariffs on American luxury goods like hand phones, designer hand bags, airplanes, cars, etc…[12] only turn them into items for “status symbol” and may ultimately promote their sale to Chinese super-rich people.

So ultimately Chinese tariffs give free promotion to American luxury goods.

8. Plotting new course for economic attack.

a- Boycotting marketers of environmentally unfriendly products.

The tariff on washing machines also put a brake on the wasteful short life cycle assigned by Americans on their washing machines. The Green and the conservation movement are now conspicuously absent in their protest against the wasteful American habits of retiring their washing machines early.

The rethink on this wasteful practice may also encourage a reduction of American thirst on Chinese throw away (short life) junks. Reduction on the consumption of short life junks may even activate some conservation laws requiring products to be environment friendly and wear resistant, properties Chinese junks don’t have.

b- Boycotting spying equipment marketers.

The rethink on electronic espionage also dampen enthusiasm for Chinese electronic equipment. [12b-12i]

c- Boycotting markets with non-reciprocal access.

Americans have to wake up to any unfair trade practice and uneven playing fields in trade. [13]

d- Growing maize instead of soybeans

This move protects the environment.

E15 petrol has 15% alcohol content which comes from maize. In this way soybean farmers are less effected by any fluctuation in the soybeans market, they can rotate crops and produce maize instead of soybeans. Hence farmers can demand substantially higher price for soybeans.

e- Establishing alternative competing foreign manufacturing bases

Trump’s government even call for manufacturers exporting to US to move out of China to avoid tariff. [14,14b]

9. Employing patriotism to support the trade war.

President Trump can ride on the patriotism wave for his economic war and direct consumers to consume goods from allies while skipping goods from potential adversaries. [15].

9. Conclusions

America is winning on most economic fronts. It should press on with this war to force China to live within the accepted rules of the international world.

With its stronger economic position, America can require China to rectify both its unfair trading policy and its policy of land grabbing from its weaker neighbors and trading counter-parties [16,17,18,19,20,21,22]. This will earn praise on America and may reverse the erosion of its international standing for the last 40 years.

References:

[1]. https://www.politico.eu/article/president-donald-trump-winning-the-trade-war-for-now-steel-aluminum-tariffs/

[2]. https://www.cnbc.com/2018/07/13/cramer-trump-winning-china-trade-war-and-the-stock-market-confirms-it.html

[3]. https://thehill.com/opinion/finance/397447-trump-is-winning-the-trade-war-because-china-has-more-to-lose

[3b]. http://mobile.abc.net.au/news/2018-10-03/south-china-sea-encounter-between-us-warship-and-chinese-vessel/10333096?pfmredir=sm

[4]. China moves to boost liquidity amid US trade war, 8 October 2018, https://www.bbc.com/news/business-45780726

[5]. Global banking watchdog warns over Chinese banks, 18 September 2016, https://www.bbc.com/news/business-37403363

[6]. https://johnib.wordpress.com/2018/10/10/chinas-helicopter-money-to-support-homes-and-apartments-expected-to-keep-social-stability/

[7]. China Wants To End Trade War But ‘U.S. Position Keeps Changing,’ Ambassador Says, October 3, 2018 6:17 PM ET, Steve Inskeep Twitter, https://www.npr.org/2018/10/03/654084691/china-wants-to-end-trade-war-but-u-s-position-keeps-changing-ambassador-says

[7b]. https://www.wsj.com/articles/china-aiming-to-borrow-as-cheaply-as-apple-and-microsoft-launches-u-s-dollar-debt-offering-1539231229

[7c]. https://thedefenstar.com/2018/10/12/disclose-all-chinese-dept-if-you-want-a-bailout-package-imf-to-pakistan/

[7d]. https://www.devdiscourse.com/Article/headlines/214110-imf-asks-for-absolute-transparency-of-debts-from-pakistan

[7e]. https://nation.com.pk/15-Oct-2018/pakistan-to-share-china-debt-details-with-us-before-imf

[7f]. https://thedefenstar.com/2018/10/15/pakistan-finally-agrees-to-share-chinese-debt-details-with-us-to-get-imf-loans-approved/

[8]. Trump’s trade war advantage: The US economy is ‘firing on all cylinders,’ says expert, https://www.cnbc.com/2018/08/13/us-china-trade-war-us-economy-gives-trump-an-advantage-expert-says.html

[9]. How a US-China trade war could hurt us all
Karishma Vaswani Asia business correspondent @BBCKarishma, https://www.bbc.com/news/business-44706880

[10]. Blinding consumers to the true cost of soy?, https://superforest.blog/2018/10/08/blinding-consumers-to-the-true-cost-of-soy/

[11]. https://us-issues.com/2018/10/02/china-in-water-crisis/

[12]. https://wentworthreport.com/2018/07/02/the-china-trade/

[12b]. https://www.darkreading.com/attacks-breaches/chinese-intelligence-officer-under-arrest-for-trade-secret-theft/d/d-id/1333025

[12c]. Personnel on US military bases can no longer buy phones and other gear manufactured by Chinese firms Huawei and ZTE, after the Pentagon said the devices pose an “unacceptable” security risk.by AFP on May 05, 2018 Tweet, https://www.securityweek.com/us-military-bans-huawei-zte-phones

[12d]. https://www.theverge.com/2018/8/13/17686310/huawei-zte-us-government-contractor-ban-trump

[12e]. Chinese spy chips are found in hardware used by Apple, Amazon, Bloomberg says; Apple, AWS say no way, https://www.cnbc.com/2018/10/04/chinese-spy-chips-are-said-to-be-found-in-hardware-used-by-apple-amazon-apple-denies-the-bloomberg-businessweek-report.html

[12f]. China allegedly infiltrated US companies through implanted hardware backdoors,
Zeljka Zorz, Managing EditorOctober 4, 2018, https://www.helpnetsecurity.com/2018/10/04/implanted-hardware-backdoors/

[12g]. https://irishinfosecnews.wordpress.com/2018/10/04/china-allegedly-infiltrated-us-companies-through-implanted-hardware-backdoors/

[12h]. Report: In Huge Hack, Chinese Manufacturer Sneaks Backdoors Onto Motherboards, https://www.darkreading.com/network-and-perimeter-security/report-in-huge-hack-chinese-manufacturer-sneaks-backdoors-onto-motherboards/d/d-id/1332977

[12i]. https://irishinfosecnews.wordpress.com/2018/10/04/report-in-huge-hack-chinese-manufacturer-sneaks-backdoors-onto-motherboards/

[13]. https://www.reuters.com/article/us-usa-trade-china-diplomacy/u-s-ambassador-accuses-china-of-bullying-with-propaganda-ads-idUSKCN1MA0HW

[14]. Trump calls on Apple to move production from China to US, September 8, 2018, https://m.phys.org/news/2018-09-trump-apple-production-china.html

[14b]. Why foreign companies are shutting shop in China, Jane Li, Thu, 2 Feb 2017, https://www.cnbc.com/2017/02/02/why-foreign-companies-are-shutting-shop-in-china.html

[15]. https://ukgovernmentwatch.wordpress.com/2018/10/07/china-shonky-steel-rogue-chips-in-computers-what-else/

[16]. https://wentworthreport.com/2018/07/02/the-china-trade/

[17]. China Reshapes The Vital Mekong River To Power Its Expansion, https://superforest.blog/2018/10/06/china-reshapes-the-vital-mekong-river-to-power-its-expansion/

[18]. Vietnamese Worry About China’s “Slow, Creeping Invasion” from Tibet to Australia and Pakistan, https://johnib.wordpress.com/2018/10/07/320212/

[19]. https://johnib.wordpress.com/2018/09/26/south-china-sea-do-china-and-the-u-s-know-each-others-intentions/

[20]. http://www.abc.net.au/news/2016-07-13/rothwell-south-china-sea-verdict-explained/7624120

[21]. http://www.abc.net.au/news/2017-11-29/south-china-sea-why-is-australia-worried-about-chinas-stance/9206998

[22]. China’s Dream of a China-Dominated World May Be Fading (At Least For Now) Because of Donald Trump, https://johnib.wordpress.com/2018/10/07/chinas-dream-of-a-china-dominated-world-may-be-fading-at-least-for-now-because-of-donald-trump/

Added after 2018 November 01:

[23]. Trump administration says U.S. mistakenly backed China WTO accession in 2001, https://www.reuters.com/article/us-usa-trade-china/trump-administration-says-u-s-mistakenly-backed-china-wto-accession-in-2001-idUSKBN1F82U1

[24]. The WTO still considers China a ‘developing nation.’ Here’s the big problem with that, https://www.cnbc.com/2018/04/25/what-trump-gets-right-about-china-and-trade.html

[25]. https://theconservativetreehouse.com/2018/11/01/president-trump-talks-many-subjects-with-chairman-xi/

[26]. Private Businesses Built Modern China. Now the Government Is Pushing Back , https://www.nytimes.com/2018/10/03/business/china-economy-private-enterprise.html

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Has the Derivatives Volcano Already Begun to Erupt?

via Has the Derivatives Volcano Already Begun to Erupt?

Comment by tonytran2015:

Derivative markets are betting markets. Investment bankers have been known to drive Share Prices up and down at the last minutes prior to decision time to rip-off innocent counter-parties who placed bets on share prices using “warrants and options on shares”. Foreign Exchange and Interest Rate betting markets cannot fare any better.

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Private Federal Reserve Bank is not needed as a lender of last resort.

Private Federal Reserve Bank is not needed as a lender of last resort.

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No. 1xx).

Private Federal Reserve Bank is not needed as a lender of last resort.

#interest to Federal Reserve Bank, #lender of last resort, #gold standard, #fiat currency

1. The private Federal Reserve Bank of USA.

In the 1907, there was a crisis when many banks having taken GOLD BASED money from depositors did not have enough at counter for their customers to withdraw. A conglomerate of PRIVATE banks were then formed by private bankers to lend gold based money to those banks in crisis to prevent panic by the public. After that, in 1913 the US Government set up that conglomerate as a lender of last resort and it is named Federal Reserve Bank of USA.

“A financial crisis known as the Panic of 1907 was headed off by a private conglomerate (led by J. P. Morgan), who set themselves up as “lenders of last resort” to banks in trouble… the Federal Reserve System was created by the Federal Reserve Act of December 23, 1913, … to serve as a formal “lender of last resort” to banks in times of liquidity crisis” [1]

2. The abolishment of convertibility of US dollars to gold.

After President Nuxon removed the gold link from US dollars in 1971, [2] that money has become purely fiat money.

For that reason, the Treasury of the US Government can be the lender of last resort as it can PRINT AS MUCH MONEY AS NEEDED to supply all banks in ctisis. There is thus no necessity for any private bank to be a lender of last resort.

3. Conclusion.

For some unknown reason, the US government still lets the private Federal Reserve Bank of USA to be the lender of last resort and still pays interest to it. This creates an unfair interest burden on US citizens (England also has a similar private Bank of England operating there.).

On the other hand, the central banks of Australia and other countries are properly owned by their respective nations.

References:

[1]. https://en.m.wikipedia.org/wiki/Federal_Reserve_Bank

[2]. https://en.m.wikipedia.org/wiki/History_of_the_United_States_dollar

Added after 2018 Oct 16:

[3]. https://christianpatriots.org/2018/10/15/trump-is-right-the-federal-reserve-is-crazy-and-here-are-101-reasons-why-it-should-be-shut-down/

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Real life lessons on national economics.

Real life lessons on national economics.

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No. … ).

The current time is quite interesting as it allows the testing of many economic theories. After that, some theories will gain credential while others may get forgotten.

#inflation, #economy, #Venezuela, #Argentina, #Turkey, #dollar,#currency #yuan, #gold based, #oil based

Real life lessons on national economics.

1. Venezuela and its wealth from oil.

Venezuela was a wealthy country living from its sale of oil. The 1998 Venezuelan government by Hugo Chavez then played with the game of commanding the economy and sent its economy crashing and then into hyperinflation.[1]

“Chavez used the abundant income stream to go on a spending spree as he instituted a large number of entitlement programs using the oil revenues. A strike in 2003 interrupted Chavez’s plans and caused the GDP to crash by 27 percent in just four months. Chavez began nationalizing industries and instituting price controls, which was the beginning on Venezuela’s inflationary spiral as Venezuelans developed a reliance on their government for products and services.” [2]

Once hyperinflation has set in, people would avoid using the rapidly depreciating fiat money, and bartering is the only mean for survival.[3, 4]

“If somebody has lots of one thing and too little of another, an arrangement can be made. I’ve exchanged corn meal for rice with friends from high school, eggs for cooking oil with my sister-in-law. Street vendors barter, too, taking, say, a kilo of sugar as payment for one of flour. There are Facebook pages and chat-room groups devoted to the swap-ability of everything from toothpaste to baby formula.” [5]

This should be a lesson to leftists everywhere [6] that even a once rich economy of Venezuela cannot endure the incessant waste of scare resources to FEEL GOOD on everything politicians can dream of.

2. Argentina with its policy of excessive protection for domestic industries.

In its pursue of industrial self-sufficiency the government had given excessive protection to domestic industries turning them into non-competitive. This caused a shortfall in the productivity and tax contribution. Subsequently the government had to rely on debt or inflation or both. These are the root cause of its current inflation:

” Successive governments from the 1930s to the 1970s pursued a strategy of import substitution to achieve industrial self-sufficiency, ”
“The era of import substitution ended in 1976, but at the same time growing government spending, large wage increases and inefficient production created a chronic inflation that rose through the 1980s… also contributed to the huge foreign debt by the late 1980s, which became equivalent to three-fourths of the GNP” [7]

Import substitution and industrial self-sufficiency are quite respectable aims for its economic policy. Argentinian economy could have benefited from them even if locally produced substitutions carried higher prices than available imports. However this approach always carry with it the danger of over-pampering domestic industries. The people in charge of domestic industries may decide to take a free ride to enrich themselves by supplying the domestic industries with obsolete or substandard production methods (for kick backs) rather than with best methods for the nation. [8, 9, 10]

When the cronies are in control, they borrow like mad to build everything so that they can get a cut (kick back) on every project. After that the country will be left with mountain of debts and prestigious but substandard or even useless projects [11, 15]. Cronyism is the cause for the backwardness of socialist countries.

“But just after Argentina settled with the “holdouts” in 2016 on defaulted dollar-bonds dating from its last default, it sold new foreign-currency bonds, in all kinds of issuances, including in June last year $2.75 billion of 100-year bonds at a yield of 7.9% and in January this year $9 billion of bonds, composed of five-year bonds at a yield of 4.625%, 10-year bonds at a yield of 6%, and 30-year bonds at a yield of 7%.”[16]

“ET: This shows that the government’s policy is an abject failure: with a peso that devalued fast; with the interest rate set at a high 40% by the Argentine Republic’s Central Bank; with the $ 8 billion reduction in international reserves that keep declining. And with a debt service that has increased by 100% compared to 2017. Faced with a balance sheet of such a nature, undoubtedly it is a total failure. Macri claimed that a high growth level and a viable debt would be ensured by paying the debt – between end-2015 and early-2016 – and by compensating the vulture funds, in keeping with Judge Thomas Griesa’s verdict. He knelt before the vulture funds (see: [17]). But the facts confirm that this plan did not work. Debt rose at a whirling pace and it’s startling to see how fast it snowballed. As a result, it became impossible to convince the creditors that Argentina could repay its debt in the future.” [18]

“Argentina’s currency is in free fall… The slump threatens to spread havoc through the $640 billion economy, rupturing supply chains for businesses and straining the finances of households.” [19]

Australia and Argentina were economically very similar prior to 1970. They then followed different paths from 1980: Senator Button of Keating’s government dismantled the over-protection for the car industry in Australia. That brought forward a wave of modernization. Currently Australia is in much better shape than Argentina [20, 21].

3. Turkish lira versus the US dollar.

Monetary policy is typically implemented by a central bank, while fiscal policy decisions are set by the national government. However, both monetary and fiscal policy may be used to influence the performance of the economy in the short run.

” It helps quantify the effects of the recent economic chaos in Turkey. Turkey’s economic future remains uncertain, but the reality is that their currency has devalued as a result of large fiscal deficits and heavy borrowing used to make up the revenue shortfall. Inflation is not the cause of the problem; it is a symptom. The cause is the dramatic increase in the supply of lira designed to solve the poor fiscal condition.”[22]

Turkey is an interesting case. The country is a bridge between Western countries and Middle East countries and is not far from Russia. That country relied on its membership in NATO to shoot down a stray Russian fighter jet ! It then mended its bad relation with Russia and went on to antagonize USA with its threat of re-polarizing its foreign policy.

Although Russia now allows Russians to have holidays in Turkey and China is courting it with the OBOR plan (“One Belt One Road” or rather “Once Borrowed Only Regret”? [23]), Turkey’s currency lira is now in trouble partially due to US tariffs imposed on Turkey’s goods.

4. US dollars are being pushed back into their national territory by China, Russia and the Silk Road Alliance.

US dollars are only fiat money [24] after Nixon’s removal of their ex-changeability for gold. They are only useful to people who have to pay tax to and pay for service from the American government. They are absolutely useless to foreigners who don’t have to pay tax to or pay for service from the American government. Having US dollars as a medium for international trade is a privilege to USA: There are more holders of that currency, the pool of dollars in circulation is therefore vast. That allows American government to quietly “tax” all its currency holders, domestic and international, through inflation [25].

American exploitation of this privilege position [26] with its imposition of banking sanctions against many countries has led to the (irreversible ?) push for using gold or oil as exchange medium in international trade [27, 28, 29, 30].

5. Conclusions

This is an interesting time for studying economics. Most theories can be tested and sorted out during this short time. Blind belief in fiat currency is now questioned everywhere.

The leaders of nations have to learn now that there is always a reaction to every of their actions.

References

[1]. http://www.dailymail.co.uk/news/article-6032367/Venezuela-price-chaos-gasoline-costs-just-one-Bolivar-egg-costs-200-000-times-much.html

[2]. https://straightlinelogic.com/2018/09/05/paper-money-eventually-returns-to-its-intrinsic-value-zero-by-alex-deluce/

[3]. https://survivaltricks.wordpress.com/2016/12/05/preparing-for-%e2%80%8bcashless-trading/

[4]. https://survivaltricks.wordpress.com/2017/02/20/cashless-bartering-for-survival/

[5]. https://www.bloomberg.com/news/articles/2018-05-04/in-caracus-venezuela-a-haircut-costs-five-bananas-and-two-eggs

[6]. https://abackwoodsconservative.wordpress.com/2018/09/09/obama-claims-the-current-economy-as-his-and-yet/

[7]. https://en.m.wikipedia.org/wiki/Economic_history_of_Argentina

[8]. http://nomadcapitalist.com/2016/05/30/the-5-worst-countries-for-crony-capitalism/

[9]. https://en.wikipedia.org/wiki/Crony-capitalism_index

[10]. https://www.heritage.org/international-economies/report/cronyism-and-corruption-are-killing-economic-freedom-argentina

[11]. https://www.bbc.com/news/world-latin-america-31639768

[12]. https://www.afr.com/news/world/south-america/china-on-the-march-in-latin-america-with-new-space-station-in-argentina-20180730-h13c95

[13]. https://uk.reuters.com/article/argentina-china-idUKL2N0PT0IK20140718

[14]. https://www.ft.com/content/2d264e78-8cf9-11e5-a549-b89a1dfede9b

[15]. https://www.dw.com/en/chinese-loans-helping-latin-america-amid-oil-price-slump/a-18284605

[16]. https://www.businessinsider.com/the-imf-could-push-argentina-from-a-currency-crisis-into-a-debt-crisis-2018-5/?r=AU&IR=T

[17]. http://www.cadtm.org/Reject-the-Imminent-Agreement-with

[18]. http://www.cadtm.org/The-IMF-is-back-in-Argentina-an-economic-and-social-crisis-even-more-serious

[19]. https://us-issues.com/2018/09/04/argentina-currency-crisis-pain-is-spreading/

[20]. https://en.m.wikipedia.org/wiki/Economy_of_Australia

[21]. https://en.m.wikipedia.org/wiki/Economy_of_Argentina

[22]. https://straightlinelogic.com/2018/09/06/what-turkey-can-teach-us-about-gold-by-michael-lebowitz/

[23]. https://survivaltricks.wordpress.com/2018/06/17/expansion-by-predatory-loans/

[24]. https://survivaltricks.wordpress.com/2017/01/12/your-fiat-money-part-2/

[25]. https://survivaltricks.wordpress.com/2017/03/29/inflation-is-vicious-to-fiat-money-users/

[26]. https://en.wikipedia.org/wiki/Exorbitant_privilege

[27]. https://www.reuters.com/article/us-global-dollar-analysis/dollar-decline-rekindles-reserve-currency-worries-idUSKCN1GJ2XW

[28]. https://www.forbes.com/sites/nathanlewis/2016/05/05/china-is-laying-the-foundation-for-the-next-world-gold-standard-system/#305670a7689e

[29]. https://www.zerohedge.com/news/2018-03-30/yuan-oil-futures-contract-gold

[30]. https://www.rt.com/business/438162-us-dollar-crash-jim-rogers/

Added after 2018 Oct 10:

Dedolarization
[31]. http://www.alt-market.com/articles/3544-the-world-is-quietly-decoupling-from-the-us–and-no-one-is-paying-attention

[32]. https://www.presstv.com/Detail/2018/10/26/578126/Russia-China-Swift-Alternative

[33]. https://www.rt.com/business/442410-gold-demand-up-dollar/

[34]. https://socioecohistory.wordpress.com/2018/10/27/gold-demand-up-42-as-countries-abandon-us-dollar-in-expectation-of-geopolitical-shift/

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The Parasites of Western Economy, Part 10: Greedy politicians overpaid with our tax money.

The Parasites of Western Economy, Part 10: Greedy politicians overpaid with our tax money.

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No. 1xx).

A nation is built up by people with the same purpose, espousing same values in life. They stake a territory, protect its border, set up rules to operate the nation to their desired aims. It has happened many times in the past, some strong group of people may organize themselves to capture the ruling positions of the nation through violence or through terrorizing the population.

To avoid recurrence of violence and terror accompanying each regime change, most Western, truely democratic, nations now have decided to have their sets of rules above any rulers and call those rules the Constitution of the Nation.

The rulers of each nation are required to uphold its Constitution to every of its letters. The Constitution also specifies who are the citizens of the nation and how the rulers are elected by the citizens of the nation. Only such elected rulers are called constitutionally legitimate representatives and only them can form and operate the government.

#parasite, #government, #politician, #entitlement, #pension, #abuse, #elected office, #tax money,

The Parasites of Western Economy, Part 10: Greedy politicians overpaid with our tax money.

1. Protectors of Constitutions turning into abusers.

Few countries anticipated that it is their own elected representatives that would become corrupt and manipulate the system to entrench themselves with privileges and benefits not envisaged by the authors of their Constitutions.

Power tends to corrupt and absolute power corrupts absolutely.
Lord Acton

Power corrupts, absolute power corrupts absolutely, and I found that out when I was Attorney General in Massachusetts.
Edward Brooke

It is said that power corrupts, but actually it’s more true that power attracts the corruptible. The sane are usually attracted by other things than power.
David Brin

2. Representatives of each nation abuse the trust of their electors and exploit every loopholes in their respective national constitution to entrench their own priviledge.

Most national constitutions do not specify the setting for entitlements of elected representatives or the methods to prevent them getting rich at the expense their nations.

So the representatives increase their own salaries, eligibility, trade favours to their future donors/employers and can even set up their (Clintons styled) Foundations to pressure constituents and those to be affected by their decisions to donate to their foundations !

3. Shameless calls for acceptance of dual citizenship for parliamentarians.

Some Politicians even make shameless proposal for acceptance of Dual Citizenship for Parliament Representative. The advocates may have thought that citizens were fools [1-9].

Australia bans it, Israel bans it, Russia bans it, these economically small countries are doing well. On the other hand, after the failure by Nixon’s administration in US courts to ban dual citizenship in USA [10., 14], that once great country is now heading for trouble. Dannish people are not impressed with USA [15].

4. Travel for serving politicians.

Politicians really enjoy having their travel paid by tax payers Some have his dogs driven around by government cars [15, 16]. Some enjoys helicopter rides [17-22]. Any Australian senator is allowed to net $1040 a week from the excess allowance, supplementing his/her base salary of $199,040, The Daily Telegraph reported [21b].

5. Hush money for sexual misconducts by politicians.

Politicians can even have funds for hush money [23-26]!

6. Lifetime travel for retired Australian politicians axed by Prime Minister Turnbull.

Current Australian Prime Minister Malcome Turnbull is now much hated by Australian politicians for axing their Lifetime Gold Pass for travel. Turnbull is thus a PM who wants to lead by examples. Australians should salute him [27-29].

7. Politicians with questionable campaign money.

Australian MP Dastyari does not think that his campaign fund is contributed by a foreigner [30-32]! Victorian (Australia) State Premier D. Andrew does not think that there is a problem of MP on his side campaigned with tax money [33-35]!

8. Former Prime Ministers using “Former PM” priviledge while working for foreign governments/companies.

There is nothing wrong with a former PM of a country who subsequently wants to work for another country but he should relinquish all priviledge granted to a former PM to save the dignity of the first country. It looks terrible for the first country if its former PM lined up and queue for favor from any other country [36-46].

9. Huge pensions for politicians

UK politicians extort huge pensions on tax payers [47]. Australian politicians require ordinary male working people to work until they get 70 years old before they get entitled to their pension payments. On the other hand, Australian politicians only need to serve 2 elected terms to be entitled for their life pension after turning 55 after finishing the second elected term [48].

10. The ultimate safeguard for American system.

American system has placed an ultimate safeguard against abuse by rulers in its Second Amendment to its Constitution. It is to be used as a guarantee for the ultimate revolt against oppressive government:

“A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed. “

This is to prevent the ruling government plus congress of the day from walking into the lounge rooms of Americans and impose a tea tax. However, even this 2nd Amendment is now under constant attack by the elected democratic representatives in their quest for absolute powers and own entrenchment.

11. Conclusions.

Every citizen has to be vigilant and be active in politics. Only by doing so he can avoid being a tax donkey provider for those unhelpful politicians who turn tax money into honey pots for their greedy ones.

It is also now a question whether people with no net contribution to the economy should be allowed to stand for elected office?

References:

DUAL CITIZENSHIP BAN

[1]. https://www.sbs.com.au/news/coalition-rejects-call-for-referendum-to-repeal-dual-citizenship-ban

[2]. https://www.afr.com/news/politics/national/call-for-referendum-over-dual-citizenship-mess-after-high-court-rulings-20180509-h0zuo2

[3]. http://mobile.abc.net.au/news/2017-07-28/section-44-of-constitution-switched-to-evil-writes-annabel-crabb/8754776

[4]. http://mobile.abc.net.au/news/2017-10-27/high-court-citizenship-ruling-health-check-for-our-democracy/9094214

[5]. https://www.timesofisrael.com/five-new-knesset-members-renounce-foreign-citizenship/
(“While Israelis may hold dual citizenship, a Basic Law passed in 1958 states that Knesset members cannot pledge allegiance as parliamentarians unless their foreign citizenship has been revoked under the laws of that country.”)

[6]. https://www.counterpunch.org/2015/01/23/dual-citizens-in-congress-2/

[7]. https://richardedmondson.net/2017/12/08/do-you-hold-dual-citizenship-you-can-serve-in-congress-but-not-the-israeli-knesset/

[8]. https://www.breitbart.com/london/2018/08/14/100000-turkish-immigrants-could-be-stripped-of-austrian-dual-citizenship/

[9]. http://www.thecitizen.co.tz/News/MP-pushes-for-dual-citizenship-to-draw-more-investments/1840340-3950840-nsr3o0z/index.html

[10]. https://en.wikipedia.org/wiki/Afroyim_v._Rusk

[11]. https://en.wikipedia.org/wiki/Schneider_v._Rusk

[12]. https://caselaw.findlaw.com/us-supreme-court/369/367.html

[13]. https://en.wikipedia.org/wiki/Kawakita_v._United_States

[14]. https://travel.state.gov/content/travel/en/legal/travel-legal-considerations/Advice-about-Possible-Loss-of-US-Nationality-Dual-Nationality/Dual-Nationality.html

[15]. https://vikinglifeblog.wordpress.com/2018/08/19/fox-news-took-a-shot-at-denmark-denmark-fired-back/

Chauffeured car for dogs
[15]. http://mobile.abc.net.au/news/2016-10-27/minister-apologises-for-using-taxpayer-money-to-chauffeur-dogs/7969838?pfmredir=sm

[16]. https://au.news.yahoo.com/victorian-minister-uses-chauffeur-driven-car-to-transport-dogs-33018097.html

HELICOPTER TRIPS AUSTRALIAN VERSUS AMERICAN
[17]. http://mobile.abc.net.au/news/2015-07-15/bronwyn-bishop-spends-5000-dollars-80km-charter-flight/6622134?pfmredir=sm

[18]. https://www.theguardian.com/australia-news/2015/jul/16/bronwyn-bishop-agrees-to-pay-back-cost-of-5000-helicopter-trip

[18b]. http://www.dailymail.co.uk/news/article-3179300/I-want-apologise-Australian-people-error-judgment-say-sorry-feel-ve-let-Bronwyn-Bishop.html

[19]. https://www.buzzfeed.com/joshtaylor/this-politician-charged-taxpayers-to-fly-family-to-her-50th

[20]. https://www.news.com.au/national/politics/the-10-most-outrageous-things-pollies-have-spent-our-money-on/news-story/254c2cb0858b56fb89ed65f547bee3f0

[21]. http://mobile.abc.net.au/news/2018-05-21/nt-government-scraps-taxpayer-travel-reporting-requirements/9782014?pfmredir=sm

[21b]. http://www.dailymail.co.uk/news/article-5474865/Greens-senator-Lee-Rhiannon-benefits-travel-entitlements.html

[22]. https://www.nj.com/politics/index.ssf/2018/05/unlike_christie_murphy_isnt_slapping_you_with_big.html

SEX WITH OFFICE SUBORDINATES SILENCED BY PUBLIC MONEY

[23]. https://nypost.com/2017/11/21/shut-down-the-politicians-sex-scandal-hush-funds/

[24]. https://www.nbcnews.com/news/us-news/dennis-hastert-wants-sex-abuse-accuser-return-hush-money-n709116

[25]. https://www.washingtonpost.com/politics/how-congress-plays-by-different-rules-on-sexual-harassment-and-misconduct/2017/10/26/2b9a8412-b80c-11e7-9e58-e6288544af98_story.html?utm_term=.f6de0d8ece85

[25b]. https://alethonews.wordpress.com/2017/12/24/protecting-the-sex-abusers-u-s-congress-in-search-of-an-unspoken-bordello/

[26]. http://www.dailymail.co.uk/news/article-3102662/It-sex-Law-enforcement-sources-say-Dennis-Hastert-hush-money-scandal-sexual-misconduct-male-student-years-high-school-wrestling-coach.html

[27]. https://www.legislation.gov.au/Details/C2004B01478

[28]. https://www.ausbt.com.au/government-axes-lifetime-free-flights-for-former-politicians

[29]. https://www.news.com.au/finance/money/foreign-minister-bob-carrs-wife-helena-has-cost-taxpayers-120000-in-six-months-on-overseas-trips/news-story/b4da807688f39a95eedd14928af6754d

[30]. https://www.theguardian.com/australia-news/2017/jun/05/sam-dastyari-contradicted-south-china-sea-policy-a-day-after-chinese-donors-alleged-threat

[31]. https://www.nytimes.com/2017/12/12/world/australia/sam-dastyari-resigns-china.html

[32]. https://www.news.com.au/finance/business/political-donations-highlight-growing-concerns-over-chinese-influence-in-australia/news-story/4dd02ea4f22f7a42a187cd930d5275a5

And money from tax payers

[33]. https://www.canberratimes.com.au/national/victoria/red-shirts-andrews-digs-in-20180720-p4zsnz.html

[34]. https://www.3aw.com.au/police-consider-formal-investigation-into-labors-red-shirts-scheme/

[35]. http://mobile.abc.net.au/news/2018-07-20/daniel-andrews-should-face-questions-over-misuse-of-funds/10016510?pfmredir=sm

[36]. https://www.smh.com.au/politics/federal/foreign-interference-laws-chinese-russian-state-media-will-have-to-declare-as-foreign-agents-20171206-gzzyol.html

[37]. https://www.crikey.com.au/2005/11/09/paul-keating-sets-the-record-straight-on-his-piggery-play/

[38]. https://www.heraldsun.com.au/news/foreign-minister-kevin-rudds-1-million-power-trip/news-story/53f83e53ef72935ca6e9b120f4e30218

[39]. https://www.smh.com.au/world/china-criticism-grows-over-australian-foreign-interference-stance-20171211-h02in1.html

[40]. http://mobile.abc.net.au/news/2018-05-05/why-is-rudd-using-weibo-to-slam-turnbulls-china-policies/9726756?pfmredir=sm

[41]. http://www.dailymail.co.uk/news/article-5136643/Kevin-Rudd-calls-Malcolm-Turnbull-step-down.html

[42]. https://www.afr.com/news/politics/world/diplomats-frozen-out-kevin-rudds-curious-meeting-with-donor-chau-chak-wing-20180524-h10ho8

[43]. https://www.smh.com.au/politics/federal/kevin-rudd-quietly-met-chau-chak-wing-in-china-20180524-p4zh99.html

[44]. https://www.smh.com.au/politics/federal/labor-has-a-cancer-growing-in-it-that-must-be-cut-out-20180218-p4z0q4.html

[44b]. https://alethonews.com/2018/07/16/washington-dc-charged-as-foreign-agent/

[45]. https://clivehamilton.com/?p=1007

[46]. http://newsroom.uts.edu.au/news/2014/04/bob-carr-lead-new-uts-australia-china-institute

[47]. https://hat4uk.wordpress.com/2018/08/11/the-saturday-essay-forget-parties-the-uk-government-classes-represent-an-obese-pig-on-the-back-of-every-citizen/

]48]. https://www.smh.com.au/national/full-list-of-federal-mps-entitlements-20090521-bh0v.html

Many US Presidents get rich after being in office

[49]. https://exposingmodernmugwumps.com/2018/10/08/you-cant-get-rich-in-politics-unless-youre-a-crook/

government does not exist to serve them (the people); it exists to enslave them

[50]. https://straightlinelogic.com/2018/10/08/the-people-give-the-orders-and-the-government-obeys-by-jeff-thomas/

Do you think that when I or any other senator makes a political speech, has it printed, should charge the printing of that speech and the mailing of that speech to the taxpayers? Do you think, for example, when I or any other Senator makes a trip to his home State to make a purely political speech that the cost of that trip should be charged to the taxpayers? Do you think when a Senator makes political broadcasts or political television broadcasts, radio or television, that the expense of those broadcasts should be charged to the taxpayers? Well I know what your answer is. It’s the same answer that audiences give me whenever I discuss this particular problem: The answer is no. The taxpayers shouldn’t be required to finance items which are not official business but which are primarily political business.[51]

[51]. https://en.m.wikiquote.org/wiki/Richard_Nixon

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Inevitable bursting of Real Estate Bubbles in Australian inner cities.

by tonytran2015 (Melbourne, Australia).

#Real Estate, #property market, #bubble, #bursting, #crash, #Australia.

Inevitable bursting of Real Estate Bubbles in Australian inner cities.

As the Central Banks of major countries send interest rates slightly positive, property owners who have not been verse in calculating return and risks may have to carry out fire sales as they cannot afford the interest payment on the mortgage taken to buy those properties.

1. Owners have bought at the top of the market and there are few new buyers.

Figure: A bubble in any Real Estate Market is not much different from the bubbles in Share Markets.

There are reasons to think that Australian Real Estates are currently overpriced:

Some unseasoned owners had been tricked by Real Estate agents that Chinese immigrants would keep coming in, bringing with them gold and fortunes from China to buy up local Australian over-priced properties.

The Chinese government is not stupid to let corrupt officials move their ill-gotten wealth oversea through bank transfer.

Any undocumented money transferred to USA or Australia will be considered drug money by USA or Australia and will be confiscated by USA or America.

There is also a worry of loss of national identities that rises against high influx immigration, this will reduce current very high level of immigration.

2. Properties have been sold at more than economic utility values.

People only buy a property to have a place to rest and sleep and to go for work in the next day. When property prices are too high people don’t buy there, they will just go another extra hour or so to a cheaper area where they live with their families.

New train lines can bring people further from city centers and this lure new home owners into new suburbs opened up by new train lines. This will keep down property prices in the centers of existing cities.

3. Bank interest may go up, triggering the fire sales.

When bank interest was 0.1% or even negative people can borrow any outrageous amount of money with no worry. When interest start rising, they have to do the real work of paying the interest. This is when people have to do a fire sale to get back the money to discharge their mortgage. The problem is worse for people who used LOW DOC loans to borrow more (by overstating their incomes and currently owned assets) than they can actually afford in the long term.

The ones who sell late may lose a lot. There may be quite a rush at selling out all properties bought at outrageous price with borrowed money.

4. Federal Capital Gain Tax is applied with dishonest indexation.

When a property are sold, owners are usually liable to Capital Gain Tax. The index has not been honestly set by governments resulting in property investors having to pay more capital gain tax than on their actual capital gain.

5. Federal government policies to reduce insufficiency of housing.

To make more housing available to the population, the government may have a number of rule:

a. Foreigners cannot buy properties and have to divest from Australian Real Estates.

b. New kind of tax on unused rooms in properties (taxes on empty rooms) has been contemplated.

6. Local governments becoming parasites feeding on property owners.

To make the matter worse, many local governments in charge of day-to-day issues have now fed on property owners like leeches. They have forgotten how to run their main day to day tasks of:

Collecting rubbish,

Maintaining local roads, parks

Maintaining primary schools, kindergartens, child health care centers.

The service should only be based on their costs. There is no reason why council rates should be based on property values.

Now the councils (local governments) enjoy imposing outrageous “rates” on property owners to fund oversea trips of councilors, talking on World scale issues (like Global Warming), promoting ideologies (like LGBT campaigning, changing traffic signs to reflect feminist and LGBT promotion).

Councils now pay outrageous salaries to their top employees. The justification for that is NOT due to the quality or quantity of the work done by those employees but by the values of “rates” collected as a percentage of property prices in the councils! This is outrageous.[4]

7. A booming population of parasites feedings on property owners.

A number of properties owners have now offloaded their properties due to parasitic practice against property owners:

a. Some tradesmen now quotes repairs, construction prices not based on their parts and labors but on the value of the property they attend to !

b. Body Corporates of communal housing (which was designed to have low running costs) specializing in giving blown up costs to rip off unit owners (who thought that communal lives bring saving).

c. Real Estate Agents now are not professional but only of flight by night quality. Many now specialize in ripping off property owners with overblown maintenance and management fees.

8. Conclusion.

There will be a scramble for the exit on property ownership. The next bank interest increase may efficiently trigger it.

References

[1]. http://thegreatrecession.info/blog/housing-market-collapse-rapid/

[2]. https://us-issues.com/2018/08/02/housing-market-collapse-2-0-accelerates-rapidly/

[3]. https://straightlinelogic.com/2018/08/01/a-housing-bubble-pops-update-on-australia-by-wolf-richter/

[4]. http://knowyourcouncil.vic.gov.au/guide-to-councils/finance-and-planning/rates-and-charges

Added after 2018 Aug 02nd:

[5]. https://johnib.wordpress.com/2018/08/02/bank-of-england-raises-rates-to-highest-level-since-2009/

[6]. https://www.news.com.au/finance/economy/australian-economy/australia-six-weeks-from-a-housing-collapse-us-report-warns/news-story/866d2fdee41b1227ce654f66ed8d9837

LITTLE DOCS LOANS

[7]. http://mobile.abc.net.au/news/2018-03-13/banking-royal-commission-alleged-cash-for-loans-bribery-ring/9543280?pfmredir=sm

[8]. http://mobile.abc.net.au/news/2017-11-30/why-banks-dont-want-property-lending-to-fall-under-scrutiny/9211376?pfmredir=sm

[9]. https://www.theguardian.com/australia-news/2018/may/06/the-biggest-scandal-ever-campaigner-hopes-for-banking-justice

[10]. https://www.ratedetective.com.au/articles/home-loans/predatory-lending-australia-117/

The Australian bank customers who lost everything

[11]. https://www.bbc.com/news/world-australia-44478508

Banking royal commission interim report released; blames greed for misconduct

[12]. https://www.bbc.com/news/world-australia-45674716

[13]. http://mobile.abc.net.au/news/2018-09-28/banking-royal-commission-interim-report-kenneth-hayne/10315908

[14]. https://johnib.wordpress.com/2018/10/15/desperate-chinese-middle-class-take-big-risks-to-move-money-and-themselves-overseas/

[15]. https://johnib.wordpress.com/2018/10/15/violence-public-anger-erupts-in-china-as-home-prices-slide-household-wealth-was-helping-to-sustain-consumption-in-china-despite-slowing-income-growth/

UK bed room tax threat

[16]. https://www.simplybusiness.co.uk/knowledge/articles/2018/08/landlord-regulations-on-room-sizes/

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