Thread: A primitive economy.

This makes sobering reading

http://thenewdaily.com.au/news/2014/...s-lasted-long/

Note that with all the grandstanding and finger pointing about who is to "blame" for the demise of the car industry in Australia, 2 major manufacturers (Mitsubishi-2008 and Ford-2013) announced they were closing down under a Labor government and 2 (Holden and Toyota) under a Coalition government.

Some of the figures quoted are staggering, $30billion in subsidies in 15 years! That is $2billion per year, surely that money could have been better spent?

I liked the suggestion that if we had paid every worker in the car industry $1million dollars in 1985 and closed the industry down it would have been cheaper!

Originally Posted by Big Shed

This makes sobering reading

http://thenewdaily.com.au/news/2014/...s-lasted-long/

Note that with all the grandstanding and finger pointing about who is to "blame" for the demise of the car industry in Australia, 2 major manufacturers (Mitsubishi-2008 and Ford-2013) announced they were closing down under a Labor government and 2 (Holden and Toyota) under a Coalition government.

I think what you are seeing in Australia is a manifestation of capital or Kapital seeking the highest return.

If you are an investor what are you going to put money on: An investment that returns 5%/yr over 20 years or something that turns over 30% in a year? Manufacturing complex items like cars takes a lot of long term investment. iPhone apps, entertainment software and the latest internet gimmicks turn over profits quickly. Automobile plants are long term commitments and the yields are just not high enough to satisfy the current expectations of the capital managers.

A stable society is the ultimate in long term investment - we all want that to be permanent. Unfortunately it doesn't make enough money to be worth investing in to those who control the money.

I think it is a bit more prosaic than that Rob.

What we are seeing here is a bunch of big corporations committing industrial black mail on governments, both state and federal. When the gravy train eventually runs out, as it always does (even politicians eventually see the light) they pick up their bat and ball and go play the same game elsewhere.

In the case of Mitsubishi they packed the whole kit and caboodle in to containers (using imported Chinese casual labour) and shipped it to China, where that equipment is now producing cars again. All they left behind was an assortment of empty buildings that the state government paid for anyway.

The same will happen with the Holden and Toyota machinery.

Originally Posted by Big Shed

I think it is a bit more prosaic than that Rob.

What we are seeing here is a bunch of big corporations committing industrial black mail on governments, both state and federal. When the gravy train eventually runs out, as it always does (even politicians eventually see the light) they pick up their bat and ball and go play the same game elsewhere.

In the case of Mitsubishi they packed the whole kit and caboodle in to containers (using imported Chinese casual labour) and shipped it to China, where that equipment is now producing cars again. All they left behind was an assortment of empty buildings that the state government paid for anyway.

The same will happen with the Holden and Toyota machinery.

Of course, once the public investment goes away or expires the corporation moves on to the next favorable municipality or country.
The company that makes Ramen noodles, Maruchen, will build a production facility here. They are going to create roughly 600 jobs, the majority of them minimum wage, in return for some sweet tax incentives to the tune of about $2mln./yr for five years. The cost of living here is lower than any other city of similar size in the US so the future employees will be somewhat higher up the socioeconomic ladder than they would be in other parts of the country. Once Maruchen uses up their tax break and has depreciated their equipment against their income taxes there is a good chance they will move on and the city will be left with an abandoned industrial space, possibly with some worn-out noodle making equipment as a bonus.

Originally Posted by Big Shed

I think it is a bit more prosaic than that Rob.

What we are seeing here is a bunch of big corporations committing industrial black mail on governments, both state and federal. When the gravy train eventually runs out, as it always does (even politicians eventually see the light) they pick up their bat and ball and go play the same game elsewhere.

In the case of Mitsubishi they packed the whole kit and caboodle in to containers (using imported Chinese casual labour) and shipped it to China, where that equipment is now producing cars again. All they left behind was an assortment of empty buildings that the state government paid for anyway.

The same will happen with the Holden and Toyota machinery.

I remember about a year ago one of the big car manufacturers openly admitted this on a TV news/current affair show.

Am fairly dissappointed that we have just given Coca Cola $22Million - what do others think ?

Bill

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MORAL HAZARD

This is a disaster. A biblical humungoeous total and comple social and economic disaster.

Moral Hazard is the worst imaginable economic outcome for any government or economy.

It was used today to bail out Qantas with a debt guarantee. Can you image it! A government backed debt guarantee! The Qantas board and management now have a FREE TICKET to run the company into the ground with a guaranteed bailout! This turkey is targeted, shot, deheaded, defeathered, boiled, served and carved and NOW they are asking who wants the dregs/gravy????

They just admitted that they cannot pay their debts.

Every trader in the country is going to rip the absolute s%#t out of Qantas over the next two months.

The INSTANT I saw this pop up on my Bloomberg stream I shorted the absolute s#}t out of all the longs.

What an absolute profit on a plate to the jackals.

See my earlier posts. Moral Hazard will eviscerate this country.

Perhaps we are just doing what other countries, states, local councils do.

Doesn't make it right but to some extent it is understandable.

Dennis Napthine is riding on a very thin, and probably unsustainable
majority. I hate to be cynical but................

Artme, you raise a good point.

Everyone has friends. Good friends, very good friends and some are family.

Brother in law gets into a tricky situation and needs a few grand. Cool. Pays it back in 6 months. After all, we love him...

But what if brother in law owns 6 leveraged properties, borrows uncontrolably and doesn't even bring a lettuce to the Sunday BBQ?

Moral hazard is pure evil. Please take some time to really research it. People like me can rant and rave, but until it hits the taxpayer (congratulations, you just paid the CEO of Qantas a bonus!) then you remain ignorant.

Be informed. Please please please be informed.

Originally Posted by rob streeper

They are going to create roughly 600 jobs, the majority of them minimum wage, in return for some sweet tax incentives to the tune of about $2mln./yr for five years.

A quick calculation shows that the tax benefit for the Maruchen noodle plant is equivalent to the yearly wages of 132 workers at minimum wage ($7.25) assuming that they work full time every week of the year. Must be nice to have the state pay the wages of a quarter of your workers for five years. The local government will apparently also be doing some road upgrades and maintenance in support of the noodle factory.

Some years ago in Leeton, where there was a cannery, and where I owned an orchard, the local
council was approached by a large transnational about setting up a factory that would process
maize and other grains.

The carrot was employment and a guaranteed outlet for farmers' produce. Now the local ALP
councilor screamed blue murder when it was suggested that the council owned land on an
already paved, curbed and guttered street complete with water supply and sewerage be given
to the company.

End result was that the company went elsewhere.

Now, do we buy jobs because this is what it amounts to or do we be cognisant of the fact that all the
local businesses that were already established there had to pay their own way??

I personally think the council made the right decision. One for those who stand up to rich bullies.

Evan, I think your horror with the QANTAS decision is entirely justified. However, this is the result of
other companies and countries doing what we won't and of perhaps poorly and emotionally framed laws.

I'm a little surprised about the reaction to the purported Qantas deal.

If as a nation we want to have Qantas as a 'majority' locally owned entity rather than a market listed company with no ownership restictions, then we have to be prepared to stand by our wish.

If instead, we determine that support is not a national necessity, we should allow Qantas to have the same ownership rules as other listed companies, then we let her fly away to play with the other free flying airlines.

Greg

Originally Posted by Evanism

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MORAL HAZARD

Every trader in the country is going to rip the absolute s%#t out of Qantas over the next two months.

The INSTANT I saw this pop up on my Bloomberg stream I shorted the absolute s#}t out of all the longs.

Hey Evanism,

To what extent will you and all your friends shorting Qantas form a self fulfilling prophecy ?

I dont understand very much about shorting - is this correct ? Effectively you sell shares that you do not yet own in the hope that the price will go down and then you buy them at the lower price in order to give them to the person who bought them from you before you owned them ?

Bill

The issue of QANTAS is a vexed one. It is our national airline and some pride is at stake.
It was a government owned entity that was floated on the stock market with the proviso
that it would have a majority of Australian owned shares.

Since the float Aus has become more and more a "free market economy". This means we
are competing on an uneven playing field. QANTAS has to be run as a business while other
airlines, such as Singapore, operate as government owned entities and can be continually
propped up. They can employ whatever staff they choose from wherever and pay them
wages well below what QANTAS is obliged to pay. They can service their fleet at any place
in the world. Remember the kerfuffle when QANTAS wanted to have servicing done overseas???

I sometimes think the rest of the world plays us for suckers. The moral high ground is alright
until your pockets are empty.

Quant as had no problems raising funds 5years ago, the current management have a bit to answer for IMO.

That said Warren Buffet did the numbers and on the whole the airline industry has never made money. None for me thx...