Killing Australian car manufacturing – dumb and dumber

Yep the closure of Australian Car Manufacturing says everything about the ignorance and stupidity of our politicians and many of our economic commentators.

The Glass Pyramid doesn’t care whether we produce cars or not BUT it does care that a local industry is closing for no other reason than our ‘economic’ commentary class are idiots when it comes to understanding the significance of capital flows in an age of currency warfare.

If the effective tariff on local workers and industry generated by massive unproductive capital inflows was removed, or at least severely restricted, and the car industry was still unable to survive – with or without subsidies – we would be having been a different discussion but the fact is that we are allowing our trade rivals to crush our car and other export or import competing industries with blatant currency warfare in the form of predatory capital flows.

An effective and self-imposed tariff on Australian workers and industry – What does that mean?

For details of how currency warfare is waged with capital flows to impose an effective tariff on Australian workers and industry click this.

Last year we we bought over 1.1 million new vehicles. At an average cost of $40,000 that is approximately $44B in new car sales.

Once the local car factories close we are going to have to find ALL of the cash required to buy our cars from other exports or, more likely, from the sale of assets or increasing claims on our future incomes (selling IOUs to foreigners).

Worth keeping in mind that the value of our iron ore exports in 2015 was only $50B.    Think about that – all of that iron ore is barely enough to buy all the cars we will need to import.

But rather than talk about how unproductive capital inflows (the big three are (1) offshore borrowing by private banks related to their domestic mortgage lending, (2) commonwealth bonds sold offshore and (3) mere transfer off shore of title to local capital assets) operate as an effective tariff on all Australian manufacturing all we are going to get is a lot of dumb commentary trying to explain that car manufacturing is closing because:

1. Our market is too small (1.1 M cars is hardy a niche production run)

2. Our costs are too high

3. We cannot afford subsidies (that at best never came close to offsetting the unproductive capital inflow tariff)

4.  Australia’s future is in teaching people English, making each other lattes and selling  citizenship for the best price we can get.

In the early 2000s when the $AUD was trading at circa 50-60 cents our car industry was exporting engines and cars in volume so the idea that Australia has no future in car manufacturing or any other manufacturing for that matter is rubbish.

The problem is quite simple. People don’t understand capital flows and how unproductive capital flows are the key methods by which our trading rivals are manipulating exchange rates and driving our industries out of business.

The only comfort is that establishing manufacturing plants has never been easier and once we finally get the cold hard wake up call when our trading partners start to withdraw their lines of credit and the $AUD starts to seriously tank, someone will realise that there is an opportunity to produce cars locally and import a car plant and commence local production.

Who knows they may even use some of the car making raw materials we have in abundance but lack the wit to use to produce finished exports!

Why will we start buying locally again when we have gotten used to buying imported cars?

For the simple reason we will not be able to afford to buy imported cars once the price of our line of foreign credit starts to rise and the $AUD drops through the floor.

The land dumb under.

6 thoughts on “Killing Australian car manufacturing – dumb and dumber

  1. “The problem is quite simple. People don’t understand capital flows and how unproductive capital flows are the key methods by which our trading rivals are manipulating exchange rates and driving our industries out of business.”

    Absolutely. So many export industries, not just manufacturing, have gone to the wall or dwindled due to our inflated currency. Examples:

    1. Brother in Law been working for the same IT company since 1998 and when he started they were very competitive due to our currency and relatively cheap wages compared to UK and other European competitors in their field. Now they are wondering if the company can stay afloat.

    2. Mate works as an engineer for company that specialises in custom automotive suspension systems. The high dollar almost killed their company as not only was it cheaper for overseas customers to get work done by other overseas providers but a lot of Australian customers jumped to importing the same work and parts from overseas for quite some time. Things are picking up now that the AUD is down in the $0.70’s but it’s still slow going and a lot of equipment and expertise walked out the door during the “good times” when mining was booming and the Aussie was at parity.

    Once capital inflows are taken into account it’s easy to conclude that housing and mining ate the Australian economy. Pure and simple.

    Problem is, when they think of “free trade” and end up thinking this automatically includes capital, which often transcends borders with greater ease than goods and services.

    Liked by 1 person

    • Yep – people forget that before the currency was pumped up during the currency wars (and because our ideological clowns in parliament decided the best form of defence was to do nothing) we were exporting engines and other parts, making movies by the dozen and a range of number of other activities.

      All flushed down the toilet because our trade rivals offered us some temporary cheap credit so we could live off their production for a while.

      No mystery what is going to happen once our industries have been permanently shuttered and we cannot offer local alternatives – the cheap credit will vanish and as our currency finally starts to sag we will pay through the nose for credit to buy imported goods that are now rising in price.

      Liked by 1 person

      • Nah, no need to worry. We’ve entered a “new economic paradigm”. A room full of people with PhDs sitting in a room told us so. They also told the room full of numpty’s with law degrees* who run the country this as well.

        The rebalancing is going great!

        *Bowen and Leigh excepted.

        Liked by 1 person

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