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.