Sunday, May 30, 2010

Why Rudd can't get the mining tax right.

Why can't Kevin Rudd get the number correct in taxation and investment. They're not lying, they simply can't bring themselves to believe that their theory of money, profit and interest is fundamentally wrong.

Interest and profit are the product of three things. Time preference, risk cost, and inflation expectations.
K Rudd thinks he can control the first by printing money at the RBA, so do some in the RBA. He can't, we're in a mess globally because governments and central banks have the same false idea. Time preference is a personal thing. Artificially low interest doesn't change it. It just confuses investors and borrowers about what kind of investments will succeed long term. Their investments don't match their own long term demands or anyone elses.
Rudd thinks he can control risk by promising to bail out failed mining projects: he can't even spell Moral hazard but the mining industry and stock markets can. Many less viable mining projects would start, most would fail and the deficit would go exponential. That's the sovereign risk.
Rudd inflation expectations are in fairy land. If it weren't for paranoid banks reading the Austrian School warnings an dumping those bail outs into excess reserves we would have global hyperinflation by now.

Most Australians share one of these miss interpretations. Academics and public servants share them all.

Thursday, May 27, 2010

The Gulf oil leak.

If the top kill works its almost all over but if it fails there will be hell to pay.

My solution would be to stick a tent on it. Make a plastic/canvas tube 20 metres across and 200 metres long with a balloon at the top. Add oil removal lines on the sides of the balloon at its widest point. At 200 metres above the sea floor the methane hydrates should not be a problem, the 20 m pipe is wide enough for turbulence to clear them and they will accumulate above the pump-out lines.
Just in case add a small electric UAV tethered to a power supply on the side of the tent/giant pipe. The UAV is inside the balloon. Why there wasn’t a UAV inside the hat structure they put on it beats me. Idiots I guess.
Because its in the oil it will need the same sonar sensors as a PIG, a cleaning robot used in oil pipe lines. This cleaning robot would have a high pressure hot water hose to blast any goop clear of the pump-out lines. The pump-out lines pump down and out. Hydrates and tars float. Provision is added for a solvent input line.
The tent would be anchored to the sea bed with big concrete blocks. This giant pipe wont plug the hole but buys time. It also raises the option of adding a water exclusion collar to the bottom so this tent/ Giant pipe is eventually full of ‘clean’ oil eliminating the dewatering process with the oil. Also if your smart such a collar has an ‘airlock’ waterlock to allow UAV’s to go in and out.
Once this is all over make one tent/ giant pipe with a zipper down the side and store it and the USV’s for any new accident.
Eventually someone will discover that its cheaper to drill in the sea bed on a hydrogen filled dome with telepresence robots replacing the crew. Fully automated sea bed drilling rigs.

Sunday, May 16, 2010

The Mining supertax.

The Australian labour government is pushing a crippling 40% supertax on mining in Austarlia. This is on top of the 30% existing tax base in Australia. It makes mining non-viable in Australia! Its already crashed our stock market, trashed half the pension funds and split the union movement.
Michael Darby posted this on Facebook about the advocates of this tax.
http://www.facebook.com/?tid=1296892189218&sk=messages
I snipped the group part of the message.
Our opponents are dangerous ideologues who believe that the "people" of the whole of Australia somehow own the iron ore beneath the ground in WA and the coal beneath the ground in Queensland. This false and pernicious belief leads the Prime Minister repeatedly to assert that the purpose of his punitive tax is to gain a "fair share" for all Australians.
The false and tendentious "fair share" theory flaunts two important historical principles.
1. Security of Tenure
The first principle is that fundamental to the growth and development of modern industrial civilisation, a prospector owns title to what a prospector has found, subject to staking out the ground in accordance with a secure system of tenure, subject to bringing the claim into production within a reasonable (and known) period of time and subject also to paying a certain royalty to the sovereign government or to the owner of the land as the case may be. Where the sovereign government is the owner of the minerals, as in Queensland and WA, the State protects the interests of the landowner by imposing obligations upon the miner such as payment of compensation, notice of entry onto land, and rehabilitation of damage. Of vital importance to this process, from the moment a prospector first registers an interest in a prospect, the rules must not be changed. Any alteration adverse to miners in the system of royalties, for example, has a retrospective effect which destroys the confidence of all future miners.
2. The sovereign governments are the States, not Canberra
Only a fool would suggest that West Australians or Queenslanders deserve a "fair share" of the Melbourne Cricket Ground or of Mt Kosciuszko or of the Barossa Valley wineries. The Prime Minister may be such a fool. In 1892 residents of the eastern colonies who wanted a fair share of Coolgardie gold booked a passage to Fremantle and tramped east with a pick and shovel. Or they set up business in Coolgardie as blacksmiths or farriers or hoteliers or butchers. In modern times most Australians own a "fair share" of coal and iron ore through their superannuation funds (already wounded by the anti-mining tax). Anyone seeking a larger "fair share" need only email the stockbroker, or apply for a job in Central Queensland or the Pilbara. Of course, any discussion of a "fair share" must take into account the huge contributions of mining companies in company tax, PAYG tax, and royalties to State Governments. The Canberra claque resents the idea of a relationship between miners and State Governments and wants a monopoly on exploitation of the mining industry.
The Canberra exploiters would do well to learn the lesson of the great Scot, Leslie Urquhart (1874-1933), whose Russian mining companies a century ago employed 40,000 workers and provided housing and amenities for them and their families. When the Bolsheviks stole his mines, Urquhart thankfully came to Australia and became the driving force behind Mount Isa Mines. The dwellers in fantasy land imagine that capital and expertise will hang around to get kicked in the guts.
These are among the points I have been making in talk radio programs, and I am pleased to report a consistently good response from presenters and other callers. Queensland Senate team leader for the DLP Tony Zegenhagen qldsec@dlp.org.au was the first political leader to come on board with his 27 April 2010 statement of unqualified opposition to the anti-mining tax, and I am pleased that Tony Abbott has followed.
This is a battle for the rights of miners worldwide, and for all who support civilisation.
Please nominate yourself as a Convenor, for your mine, your union, your town, your electorate, your university, your district or even for your State. My personal email address is michael@michaeldarby.net Phone me anytime on 0402 558 947 and I'll phone you straight back
Kind regards
Michael
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We are in a huge fight. Previous labour governments have taken two or three terms to stuff things up this badly. Our best hope is that labour will self destruct over this folly.
Mining is costly and risky the profits are not windfalls or exploitation they are the real cost of high risk capital. That the PM Kevin Rudd and Treasurer Wayne Swan don't grasp this is catastrophic.
For those in the USA this tax is an order of magnitude larger than the tariff disputes that triggered the American civil war in 1861!