Mr Robb’s greatest folly in his TPP/FTA adventurism is the massive green light he has given all of Australia’s trade rivals to impose high tariffs on Australian industry and workers.
While he fumbles around trying to get the USA, Japanese, Chinese, Koreans and anyone else who crosses his path to let Australia sell them a few tonnes more cheese or steaks sometime next decade, he is happily giving all of them the power to impose massive new and ongoing tariffs on all of Australian Industry and every local worker.
Yes – you heard the Glass Pyramid correctly.
Mr Robb is making life even easier for our trade rivals by allowing them to place massive tariffs on Australian industry and every Australian worker.
How does it work?
Simple, if you are a trade rival of Australia (like most of our developed world allies are) and you want to give your domestic industry an advantage over Australian industry by manipulating exchange rates all you need to do is export capital to Australia.
Exporting capital means buying up lots and lots of Australian Government Bonds, IOU’s issued by Australian banks for mortgages and buying as many Australian assets as you can fit in your briefcase.
When you are allowed to do it – your exchange rates goes down and Australia’s exchange rate goes up.
Then what happens is that your exports to Australia rise and Australian exporting industries and import competing industries lose sales and eventually shut down.
If you think that sounds a bit rough – you are right, but what is worse is that as it happens you have prime fools like Mr Robb (and much of the current Ministry), business titans and endless editorials from The Australian, the AFR and assorted ‘think tank’ op-eds telling you it is all your fault Mr Average and all you need to do is work harder for longer and for less money.
The bunch of them are too clueless to suggest the bleeding obvious and that is stop the unproductive capital inflows from our trade rivals that are imposing massive tariffs on Australian industry in the first place.
Actually calling them clueless is a bit unfair because most of them do understand the mechanisms and the strategies of our trade competitors but their business model (selling advertising space, hanging out etc), is to be ‘tight’ with the businesses that make bucks facilitating the unproductive capital in-flow transactions that should be restricted and they also spend the early hours each morning meditating to mindless neo-liberals chants about free markets and completely unrestricted capital flows sloshing around the world.
So we are talking about a combination of naked self interest and near-religious faith more clueless than Alicia Silverstone in the role that made her a matinee idol.
Now reflect on Mr Robb bragging that he has agreed to let China and Japan export capital to Australia $1 billion at a time with few if any questions asked.
Getting a sinking feeling yet that you have been had?
There are almost NO productive outcomes of allowing capital inflows relating to residential mortgages or the sale of $AUS denominated government bonds. Almost every buck is used for consumption or asset price speculation and that is not an accident – productive investment has no need for foreign capital as we have bucket loads of the stuff here.
All those transactions do is provide a perfect entry point for the predatory capital flows being generated by the ZIRP policies of our trade rivals (also known as our allies).
If anyone is serious about resisting the attempts of foreign governments and foreign central banks to drive up our exchange rate with their carry trade capital exports there is ONE policy they should be arguing for above everything else.
Winding down the most pernicious and obvious forms of unproductive capital inflow transactions – govt bonds sold offshore and wholesale borrowing off shore by private banks for residential mortgage operations.
If you want to end the tariff imposed on Australian Industry and workers by our trade rivals that is what needs to be done.
Signing up FTAs and the top secret TPP and not taking care of the most obvious burden on Australian businesses engaged in productive economic activity is a form of madness so next time you hear Mr Robb rattling on about how clever he is to sign up Australia to FTA’s and the TPP as fast as a rat up a drain pipe, ask him what those agreements have to say about stopping our trade rivals from manipulating our relative exchange rates with exports of capital to Australia.
Remember the vast majority of those unproductive capital inflows do little more than allow speculators to bid up house prices and Jolly Joe Hockey to “kick the can” and avoid taking the task of economic reform seriously.
Ironic that the price of letting Joe Hockey kick the economic can down the road is a massive tariff on Australian industry and Australian workers.
Incidentally this is not a Glass Pyramid hobby horse either – everyone is finally waking up to the issue