Aussie Dollar

Recently something amazing has happened in Australian economics.
Long ignored by the rest of the world as a backwater of the British Empire, and then as a 'European transplant' on the arse-end of Asia (thank a former Malaysian PM for that pearl), Australia has been a quiet achiever in pretty much everything we do:
- When we had active secondary industries, we made quality goods, and even sold them abroad.
- Currently, our primary industries are feeding the inexhaustible hunger of China's rampant growth.
- More actors, directors, and films in Hollywood than you may know are of Australian origin (or from New Zealand but claimed by us because hey, what is NZ going to do about it??).
- Our politicians, more notably our last PM (knifed in the back by his own party, see earlier blog posts) have liked to use the phrase: "we punch above our weight". This applies truly to our commitment in Afghanistan, Iraq, Vietnam, and every other American war since WWII.

So, as you can see, we have been quiet achievers, but also high-achievers.

Economically, it has been a different story.

The Australian economy was a protected economy leading out of World War II. There is little wonder why, since it was based on agricultural exports (mainly wool and food to Europe), and a general aura of racism saw Australians constantly weary of the fluctuating Asian economies in most immediate proximity.
But in 1983, our dollar was floated. The PM and Treasurer at the time (Bob Hawke and Paul Keating respectively) were the magic team of the Labor Party, and it fell to them to do it. In short, the boom period of the 1950s was sustained by a very socially conservative government, which remained in power (though under differing leaders) for 23 years. By the mid-1970s, social change was briefly enacted by a new PM Gough Whitlam with a famous election in 1974, and an ensuing Constitutional Crisis (the first of its kind in the country) followed by the Dismissal of the PM brought that wave of reform to a grinding halt. (this is a pretty big part of Australian history. I'm not going to do it justice in this context, however. Ask me later!).

The next PM, an ambitious, imperious, yet sad and uninspiring man, Malcolm Fraser, then enacted similar reforms to his dismissed predecessor, only on a much easier-for-the-public-to-swallow basis.

Then America faced facts about Vietnam in the mid-1970s and felt impotent, and the world at large was also hit in 1979 by the Oil Crisis. Economies tanked overnight, and fear was injected into the veins of politicians everywhere. Australia was no exception.
After the recovery in the early 1980s, and the dawn of the Reagan and Thatcher eras in the countries that mattered (USA and UK), the rest of the developed world followed their new ideas.
Thatcher and Reagan, led by the nose by economists who had lost big in the 1970s, allowed their governments to stop behaving like national governments and start behaving like money-grubbing capitalist corporations. Hence began the 1980s corporatisation of national governments - also known as Reaganomics. (I think 'Thatchernomics' is harder to say and type.)

Australia, ever-dependant on the whims of the "great and powerful friends" had no choice, and was not spared. Some of you may know the mechanics behind a protected economy. Hawke and Keating 'floated' the Aussie Dollar, and we all watched in 1983 (not me, I was born in 1987) as the dollar, no longer supported on artificial stilts, sank to find its 'real' market value. It settled somewhere closer to 50c US than above US$1, where it had always been. Needless to say, we had ourselves a little recession that year. But Australian history remembers it as "the recession we had to have", as for a decade later, right up until the crash of 2008-09, Australia rode the crest of the wave of boom-time, which began that day back in December 1983.

For those that don't here is the short version:
Protected economy: the national government states the value of the dollar (or currency). It is NOT as simple as that. Regular people and especially stock-brokers cannot be expected to agree on the value of the Australian dollar, and trade at the stated value ad-infinitum. If anyone wants to sell an export or buy an import, one has to agree with outside economies on the value of the currency being used. And at the most basic level, unless the economy is entirely cut off and isolated from the rest of the world, the BANKS have to transact currency exchanges daily.

In the Protected Australia, tariffs support home-grown industries. Whereas it may be cheaper to buy a Japanese Toyota than an Australian Holden in the 1970s, Mr Australian Taxman comes into the scene and says "You must pay an exorbitant price if you ever want that Toyota to come into Australia!"
Domestically, the national banks must control the value of the currency. This is done, in the simplest terms, thusly:
Today, the Australian Dollar must be set at US$1.20. Yesterday it was $1.15. Tomorrow, it needs to be at $1.10 (...for whatever reason - it's not important WHY, just HOW right now in this example).

So, Yesterday = $1.15 Today = $1.20 Tomorrow = $1.10.
Since we can't just agree on the value and go about our business, the value MUST be backed up and supported by something.
**Quick note: every damn term used in economics is metaphorical. I'm sorry. It gets hard to follow. I'll make it quick. But ask yourself: why all the Metaphors?? Because none of it really exists! It's all rhetoric! Did you get the same answer I got?
To support the value of the dollar, the Australian national bank (once the Commonwealth Bank, now the Reserve Bank) had the legal prerogative to BUY or SELL Australian currency at will. By buying up currency today, the supply of AUDollars lessens, and its value goes up. Hence the bank could artificially change the value from Yesterday to Today from $1.15 to $1.20.
Tomorrow, to hit the mark of $1.10, the bank can sell the currency to whoever wants it. And there is always someone who wants it Tomorrow. After all, Today it was worth $1.20!
The Bank could therefore artificially control the value.
Of course, there are other more drastic measures a national bank could use, too - like printing too much, or burning a whole pile of cash. But things never got that bad down here.

And NOW, on November 4, 2010, things seem to be good! Amazingly good! Incredibly GOOD!

And it is incredible - not credible.

This week, for the first time since 1983, the first time since artificial valuing and protection, the Australian dollar, which is free to float on the international markets, and the value of which is determined by the free market, rose to and above PARITY with the US dollar.

Let me put this into crystal clear perspective for you.
Australia = long-time backwater, never truly 'independent' from the Queen (not that we needed to be), quiet-achiever, incapable of protecting its borders completely, arid desert continent, less than 10 major cities, and barely 2 with populations over 1 million. The largest our population ever hit was the current census, which stands at an estimated 23million (based largely on immigration). We have a constant drought, we sold all our secondary industries to China, we sell China our Primary industries at unnecessary discounts, and our tertiary industries are bloating into incompetence. None of our Universities are older than 150 years, and no-one in the rest of the developed world grows up wishing to attend any of them. We have no space program, a small military, no nukes, and always follow someone else's lead. If ever any major nation pays attention to us, it is always met with an initial shock, akin to the one you get when you attend a big meeting and daydream for a few hours before someone calls your name for the third time and you jump and wipe the saliva off your face!

USA = Superpower, leader of the free world. First man on the moon. First to develop nuclear weapons, won the war against Germany AND Japan AT THE SAME TIME!, controlled the Keynsian global economic system, fights wars in other countries at their own pleasure, home to major global universities, contains California (which in and of itself could be a G8 nation if it were independent), largest population expansion hit over 300 million, top of the world, etc etc. yada, yada, yada. If you are not aware of the status and power of the USA, then you really should keep hiding under that rock you've been under for decades and decades.


I realise these comparisons are unedited, but they are clear and true.

So, I ask you, HOW the HELL did we in Australia get to parity with the US dollar????

I can tell you, that NOTHING has changed, and nothing could have possibly changed, to make the small Australian economy rise to match the US dollar, no matter how high above our own weight we punched.

So if Australia's dollar didn't go UP, then.....
...I guess the US dollar has sunk that much!

For a country that lives and breathes by the free market, the USA is totally ignoring what the free market is saying about the state of its own economy.

President Obama, who, as of yesterday, now faces an absolutely hostile House of Representatives in Washington DC, has succeeded in accomplishing absolutely NOTHING to change the horrific course of events that George Bush set in motion as he stole America's future.

I can see a pretty clear future for America, and I am going to tell you about it in the next post. I warn you, though, that it is not pretty, and may seem quite bleak indeed. For starters, it will use the phrase "President Palin". But I strongly recommend that you read it, just as soon as I post it!

America, just like the Galactic Empire of Asimov's Sci-Fi epics, is on an irreversible slide into decay and ruin.
But time marches on.
We will need to change our perspectives in the new world, and remember one thing:
We did it to ourselves.

Freedom is not a concept to be taken lightly, and not an idea to be twisted and exploited.


From The Tominator.