Greg Canavan

Dear Reader,

I wonder if Australians and their weak-kneed leaders understand just how vulnerable we are.

Our largest trading partner, the source of much of our wealth and economic prosperity over the past two decades, is a hostile enemy intent on crippling us.

China has already taken aim at our beef and barley industries. Now it’s attacking our wine exports. From the Financial Review:

‘China's alcohol industry is alleging that Australian winemakers flooded the market with cheap wine at a "dumping margin" of more than 200 per cent over five years, which crippled domestic growers whose sales slumped by almost 70 per cent.

‘A submission by the China Alcoholic Drinks Association, which was the basis for China's anti-dumping probe, said Australian wine imports into the country doubled over the past five years but the price of wine fell only 13.4 per cent in the same period.’

Australia’s wine exports into China (in the year to March 2020) were $1.1 billion. It’s not small change.

What’s next?

China has already told its students not to come to Australia because we’re racist.

It’s already easing off on coal imports and encouraging lower-quality domestic production.

The biggest threat though, is to our iron ore exports. China can’t do anything about that. It needs our ore to make steel to continue adding unnecessary capacity to its broken economy.

But it’s making plans to buy much less of it by developing massive iron ore mines in Africa. The clock is ticking on the huge profits companies like Rio Tinto, BHP and Fortescue are making on their current iron ore production.

I outline all these risks and more (and how you should position your portfolio for it) in this report. The China threat isn’t just a fleeting issue. The Communist party is getting increasingly belligerent. And its leader, Xi Jinping, is becoming increasingly dictatorial.

From The Australian:

‘A senior ally of Chinese leader Xi Jinping called for a Mao-style purge of China’s domestic-security apparatus last month, saying it was time to “turn the blade inwards and scrape the poison off the bone.”

‘The cleansing commenced swiftly.

‘Within the first week after the call to action, Communist Party enforcers had launched investigations into at least 21 police and judicial officials, according to a media tally cited by the party’s top law-enforcement commission. Dozens more have since been taken down, including the police chief of Shanghai, the most senior target thus far, and cadres who have won awards for good performance.

‘Drawing inspiration from Mao’s campaigns, Mr. Xi’s effort features heavy doses of ideological training in addition to disciplinary investigations. According to guidelines issued for a trial program set to run through October, participants must uphold Mr. Xi’s authority and fortify their minds by studying his speeches on governance.’

Great. Our largest trade customer takes its inspiration from Chairman Mao, who’s ‘Great Leap Forward’ led to the death of tens of millions of his own people.

Don’t worry though. PM Scott Morrison says ‘we will never trade away our sovereignty in Australia on any issue.’

Which is strange, because yesterday he threw your sovereignty as individuals to the dogs by saying he’d like to make a COVID vaccine mandatory.

Good luck with that, Scomo. I think you’ll find a good deal of Australians will tell you to shove your vaccine where the sun don’t shine.

Bizarrely, the government has struck a deal (or so it says) with global pharma giant AstraZeneca to buy 25 million doses of the fast-tracked and as yet unproven vaccine. Morrison is using you as guinea pigs. This is a no-liability vaccine. Take it at your own risk.

When a liberal government wants to coerce you into taking a new vaccine, you know just how much this country has lost the plot.

What happened to individual choice and individual responsibility, the bedrock of liberal principles?

Yes, we are required to vaccinate our kids against truly dangerous global diseases. And nearly everyone recognises that it is the right thing to do and complies.

But COVID-19 is the most politicised pandemic in history. Authoritarian governments are using it as a smokescreen to impose their authority and ideology.

For example, there is a lot of evidence to show that lockdowns don’t work. Yet in Victoria, we have the harshest lockdown in the world. Dan Andrews will never acknowledge he could be wrong. He’s in too deep.

All the clown had to do was go as hard as possible in protecting the elderly and most vulnerable and empower the people to make their own decisions on the risks they were willing to take. Doing so would not have avoided deaths (as it hasn’t under lockdown) but at least it wouldn’t have destroyed lives, livelihoods and the economy.

Instead, we have millions under house arrest, fighting a foe that, if we’re being honest, isn’t a dangerous as the hysterical media is telling us. That’s not to say it isn’t serious. But the damage being done by politicians is far worse than the virus itself.

In the past six months, COVID has claimed 450 deaths. That’s the official number. But it’s also people dying with COVID, not necessarily due to COVID. At this rate, we’re looking at less than 1,000 deaths this year. And that could be overstating things.

As Ross Cameron writes in The Spectator:

‘But every day about 450 Australians die of natural causes, including about 150 in nursing homes. Every day about 136 Australians die from cancer; about 48 Australians die of heart disease; and about 10 Australians commit suicide. Depending on its severity, in some years more than 1,000 Australians (or three a day) die from influenza. Yet there aren’t normally breathless news bulletins reporting the deaths of very old people in nursing homes; nor have people ever before been placed under virtual house arrest, the economy ever all-but-closed, or government spending ever approached wartime levels to protect us from a virus that leads to the death of people with a median age of 80.’

We have lost the ability to think rationally and critically. We swallow up whatever the media — who just republish bureaucratic press releases and trade on the currency of fear — feed us.

As long as we have Netflix to binge on, Amazon to buy from and our government to take care of us, we’ll be fine.

We have become a nation of idiots.

Regards,

Greg Canavan,
Editor, The Rum Rebellion

The Rich ‘Take the Knee’
By Bill Bonner

‘The cattle are gone.’

Our office window looks out on the pasture. Yesterday, there were 120 cows in the field. This morning, none.

Yesterday, we had heard some moaning in the field. Calves were separated from their mothers. Neither mothers nor calves were happy about it.

But this moaning was a little different. Strange. Unsettling. Like something was seriously wrong. We didn’t know what to make of it.

This morning, we found out.

Bad news

‘I’ve got some bad news, Boss,’ said the foreman.

‘We lost two cows yesterday. So we moved the whole herd out of the pasture last night.’

‘What happened?’

‘These were the cows that just came down from the ranch. We shouldn’t have left them in the alfalfa. It was too rich for them.

‘We’re putting them back now…But we’re keeping a closer eye on them.’

We explained that we had heard an odd-sounding moaning coming from the field.

‘Oh…yes…that’s what it was…they eat the alfalfa. They’re not used to it. It blows up in their intestines, blocking the normal flow. They swell up and die.

‘When you hear them crying out like that, you need to get a sharp knife and go out and find the cow. You stick the knife right into the stomach. Make sure you puncture the intestines so the gas can get out.’

‘OK…’

Chanting crowd

Meanwhile…

The Washington Post reports:

‘The coronavirus recession is over for the rich, but the working class is far from recovered

‘U.S. stocks are hovering near a record high, a stunning comeback since March that underscores the new phase the economy has entered: The wealthy have mostly recovered. The bottom half remain far from it.

‘This dichotomy is evident in many facets of the economy, especially in employment. Jobs are fully back for the highest wage earners, but fewer than half the jobs lost this spring have returned for those making less than $20 an hour, according to a new labor data analysis by John Friedman, an economics professor at Brown University and co-director of Opportunity Insights.’

What’s that noise in the background…down the street? Is that a crowd chanting, ‘Eat the rich…eat the rich…’?

Small price to pay

When people come to think that the ‘system’ is unfair…it’s not long before things get ugly. Yahoo! Finance reports that the Democrats are sharpening their knives:

‘Biden’s tax plans have been analyzed by a range of groups, including the American Enterprise Institute and the Brookings Institution. A combination of multiple analyses found that Biden’s plans would mean that the richest Americans would see their taxes go up by 13% to 18%.

‘Americans of more moderate means would also see tax increases, but they have been called ‘indirect’ and amount to a smaller increase: around 0.2% to 0.6%.

‘A President Biden would push for higher taxes on people making more than $400,000 a year for both payroll taxes and capital gains. It takes an income of $538,926 to be among the top 1% of earners nationwide.’

A 13% tax increase seems like a small price to pay for all the bounty delivered to the rich by the feds over the last 30 years.

Rich people own financial assets — stocks, bonds, and commercial real estate, for example. They get richer not just from fat paycheques, but also when those assets go up in value.

And over the last three decades, the Federal Reserve has made it its business to make sure those assets keep going up in value.

The 1990s began with the Dow at almost exactly one-tenth of today’s level. Which means the rich multiplied their wealth — as measured by the Dow — by nearly 10 times over the last three decades.

That gain — in terms of the wealth it represented — was worth about $7.5 trillion (based on the increase in the market cap of the Dow stocks).

Or, divided by the top 10% of the population, it meant a gain of about $1 million for every family of four.

During that same time, the median household income went from $35,000 to $78,000 — a gain of just a bit more than two times.

Why the big difference in outcomes? How come the rich got so much richer while most not-so-rich people barely kept pace with inflation?

Implicit guarantee

There were probably many causes. But the one that stands out is that the Fed was backing the stock market with an implicit guarantee (the Greenspan Put): If prices fell, the Fed was there to push them back up.

This flimflam got underway after the crash of 1987. It then became progressively bolder following the Nasdaq crash of 2000…the mortgage finance crash of 2008…and finally, the COVID-19 crash of 2020.

What this shows is that the Fed’s efforts at inflation work fairly well when applied to the capital markets. There are only so many stocks, bonds, and commercial properties. When the Fed puts more money into the Wall Street economy, in classic style, that money chases up assets, raising prices.

What else can investors do with the money?

(In the Main Street economy, however, inflation is more complicated. Not only can the feds not really increase GDP growth…they can’t reliably induce consumer price inflation either. But we’ll get to that tomorrow…)

Not about the money

Meanwhile, the gap between the rich and the not rich is attracting more and more claptrap. Much like white people trying to atone for their whiteness, rich people are now trying to save their necks by joining the sans-culottes.

Here’s a Guardian article from last month:

‘A group of 83 of the world’s richest people have called on governments to permanently increase taxes on them and other members of the wealthy elite to help pay for the economic recovery from the COVID-19 crisis.

‘The super-rich members, including Ben and Jerry’s ice cream co-founder Jerry Greenfield and Disney heir Abigail Disney, called on “our governments to raise taxes on people like us. Immediately. Substantially. Permanently.”’

Of course, there is nothing to stop any of them from sending the feds more money. No change in tax law needed.

But it’s not really about the money.

In effect, these mega-rich people were the major recipients of property stolen from the public. And now, they are so filthy rich that the marginal utility of an incremental dollar is almost zero.

Bless their gold-plated hearts, they ‘take the knee’…and hope the mobs will spare them.

What they are after now is status, prestige, and social approval…

And now, they can buy it with the public’s money!

Stay tuned…

Bill Bonner,
For The Rum Rebellion

RECESSION SUCCESS LIVESTREAM How To Safeguard Your Cash Flow And Assets While Taking Advantage Of Today’s Unique Wealth Creation Opportunities Our chief strategist of Strategic Intelligence Australia, Jim Rickards, will be participating in a special online investing event here in Australia. Hosted by DG Institute - Saturday, 22nd August 2020 Click here to secure your virtual seat.