Banking Labor Law References

It would be a very interesting position to be on the Bank of England’s Monetary policy committee (MPC) at the moment. Driven by the monetarist policies of both New Labour and the Conservatives, the rule always seems to have been control inflation by raising interest rates. This basic concept seems to have been lost during these Credit Crunch times. In fact since, the Credit Crunch began we have seen interest rates drop from 5.75% down to 5%. They have stayed at 5% for quite a while now though as the MPC are getting more and more jittery about inflation. The panel seem to be adopting a “wait and see” approach. The question that we need to ask ourselves is what is “less bad” inflation or recession?

By cutting interest rates inflation is likely to rise a little, as all the people on trackers and Bank SVR find a little extra money in their pockets from month to month. If interest rates are raised in a measure to control inflation, we could potentially see more companies go out of business as loans become more expensive.

In my opinion, it would be better to see rates drop, as inflation is potentially avoidable, but recession is a much more difficult matter. Let’s look at the situation of a typical factory worker. If inflation was to continue at its current level, or even go higher, the factory worker will struggle. They may have to change the way they shop, sell their car and switch to public transport. They may have to start taking a sandwich to work rather than eat at the canteen. They may have to quit smoking or do without their football season ticket this year. Two weeks in Majorca may have to be substituted for a weekend in Mablethorpe. Whatever happens though, the factory worker will be able to adapt.

On the other hand, if interest rates are increased, the factory worker may be called into the office to be laid off. No redundancy payout, just a couple of weeks notice. The factory worker goes to the Job Centre the very next day but unfortunately it seems that the same story has been played out at all the other factories. There are now fewer jobs on offer, and twice as many people fighting for the scraps. The Recruitment agencies aren’t fairing any better as the vast majority have long relied on factories and warehouses as there main customers (N.B. I expect to see 50% of recruitment agencies finish within the next 24 months). The factory worker faces up the fact that he now has to sign on for the short term. All luxuries will have to be foregone. He needs to write to all his creditors and let them know of inability to pay. Some may offer terms, others will start CCJ proceedings. Note that at the moment, Northern Rock are beginning repossession proceedings after one missed mortgage payment!

What situation would you rather be in? Having to cut your cloth to suit a harsher financial climate, or packing your belongings up to go into emergency housing? The MPC should think along these lines are cut Interest rates NOW.

One of the most notable aspects of the recent past Federal election campaign was Labor’s swift emulation of the Coalition’s tax policy. Labor promised $34 billion in tax breaks, with much of the largesse being transferred to those on higher incomes.

The deferral of $3 billion in cuts for those on incomes of over $180,000 a year, here, is best understood as an ineffective and empty gesture. The “simplification” of PAYG tax, with a reduction in the number of tax brackets from four to three also promises to “flatten” the system, rendering it significantly less progressive.

Now, in the wake of the election campaign, Labor is facing a raft of hard choices. Economic forecasters are warning of the prospect of inflation, and already official interest rates have risen once this year. It is likely that this will be the first official interest rise of many in the year ahead for the fledgling Labor government.

High rates of inflation threaten uncertainty and economic instability: providing a disincentive for savings and investment. What is neglected, though, in popular neo-liberal responses to inflation, is a balanced assessment that takes into consideration impacts on equity, wage justice and unemployment.

There are many possible responses to inflation: including wage restraint, tax reform and austerity. Labor is also looking to respond to “capacity constraints” which can feed into a vicious cycle of inflation. Particularly, the government is looking to fund education and training: to counter skills shortages, and to invest in infrastructure: removing “infrastructure bottlenecks”.

Australians are well-justified, however, to ask whether or not Labor has “backed itself into a corner” on the issues of tax reform and inflation. According to The Age, Labor “is looking for another $3 billion to $4 billion in cuts for the May budget, on top of the $10 billion Labor identified before the election”.

But while Labor Finance Minister, Lindsay Tanner rightly belittles the Coalition for its economic irresponsibility, Labor’s own culpability in raising expectations of sweeping tax cuts must be admitted. Labor now faces the inpalatable prospect of wide-ranging austerity; and of struggling families being forced “to the wall” as a result of the housing bubble and continuing interest rate hikes.

At this point, there are a number of questions that are worthy of consideration. If demand must be reduced in order to counter inflation, surely it is better to do so through a targeted expansion in taxation, and by more severe means testing of programs such as Family Tax Benefit B and the Private Health Insurance Rebate.

Additional savings might imaginably be achieved in the Defence budget – especially in the wake of withdrawal from Iraq. Importantly, only cuts in personnel could reasonably be deflationary. Cuts in the acquisition of military hardware would not. Abolishing negative gearing and halving dividend imputation, meanwhile, could free funds necessary for progressive restructuring of the broader tax system, radical expansion of public housing, and of social services.

Surely this is better than demanding austerity for the vulnerable and average income-earners, and sending desperate home buyers to the wall.

There is a good and valid argument, here, that Labor is bound by its pre-election promises, and thus feels compelled to abide by its mandate. And indeed, Labor’s platform is seriously constrictive: promising not to increase taxation overall as a proportion of Gross Domestic Product (GDP). But if the minerals boom comes to an end, though, along with its corresponding explosion in Company Tax revenue, the consequences of such a policy could be disastrous. In the face of such contingencies there must be “room to move”: exactly what Labor has denied itself.

This argument (that Labor’s platform must be strictly upheld) would resonate more strongly if Labor had not already so flagrantly violated its own platform: such as with the privatisation of the Commonwealth Bank in the 1990s. The need to rein in inflation, however, without impacting negatively upon social justice, or giving rise to the spectre of unemployment, demands bi-partisan attention. As a matter of “national emergency”, it is an urgent and valid position that tax cuts be put on hold.

Surely – as already noted – such money could instead be redirected into infrastructure and education, thus responding to the skills shortages and “infrastructure bottlenecks” that are feeding into inflation. And surely with steep increases in the cost of living, it is time to be more generous and just with the provision of welfare for the vulnerable and the needy.

It should not be these people, or ordinary working-class families struggling with exorbitant mortgages, who pay the price of the fight against inflation through wage restraint, spiraling interest rates, and austerity. Furthermore, in regard to urges for “wage restraint” it must be noted that workers’ share of the “economic pie” has already fallen to a 35-year low.

Australian workers need to organise: to strive for wage justice, and compensation for prior wage restraint in the form of collective co-ownership and economic democracy. Poorly organised, unskilled and semi-skilled workers also need stronger protection than what is currently envisaged in Labor’s proposed “safety net”. Beyond this, Labor needs also to develop a plan to restructure the tax system progressively: addressing inflation through taxes that seek to dampen “conspicuous consumption” among the wealthy.

Labor should not shift a greater proportion of the tax burden upon the poor, the vulnerable, and average workers. Instead of reducing the number of PAYG income tax brackets, the system would do better to encompass a greater number of thresholds. The entire tax system needs to be organised in such a way as to be more equitable in its spread, and so as to finance progressive expansion and development of Australia’s welfare state and social wage.

As previously noted, there is a legitimate position which holds that Labor must be held accountable for its pre-election promises. Even if Labor resolves to stay firm to its platform, though, this ought at least not be without dissent or controversy.

Beyond the calls for “belt-tightening”, there is a desperate need for investment in welfare, infrastructure, education, health, aged care, and foreign aid. Ambitious public housing programs should also be provided for: to increase supply and to burst the “property bubble” which has put home ownership out of the reach of so many Australians.

And Labor’s apology for injustices visited upon Australia’s Indigenous people will ring hollow unless accompanied by the resources necessary to “close the gap” in age expectancy, income, home ownership, health services and educational opportunity. If Federal Labor fails to provide in any of these areas, then it is up to citizens to mobilise and demand change. Rank and file ALP members need to organise now – hopefully with leadership from dissenting elements within the Party – to win a shift in policy at Labor’s next National Conference.

Progressive activists, including those to the left of the ALP, also need to mobilise and take a stand for the values of compassion, mercy, kindness and justice.

In particular, trade unions, Non-Government Organisations (NGOs), and citizens’ networks including “Now We The People”, “Melbourne Social Forum” and “GetUp!”, could mobilise activists to intervene in Australia’s political parties in support of more progressive agendas. GetUp! alone has well over 200,000 members. In light of such figures, those on the broad Left would do well to imagine the impact of a concerted campaign to mobilise these Australians into party-political activism.

Importantly, if leadership were provided in recruiting more Australians from unions, NGOs and citizens’ networks into party-political activism, progressive influence in the ALP, and also minor progressive parties could expand simultaneously. There is a space, now, to the left of the ALP, which is begging to be filled by a new party embracing the traditional values of the Left.

And if Labor holds firm to policies of inequitable “tax reform” and austerity, the ranks and appeal of any new formation could swell – if only with a determination to “move into the mainstream” and not be lost in a “self-imposed political ghetto”. Such a party, in alliance with the Greens, could shift the relative centre of Australian politics to the Left, leading public debate in a way the ALP cannot – because of its conflicting constituencies.

Effectively, the broad Australian Left – comprising the ALP, Greens, and a new party of the Left – would launch a “multi-pronged assault”, mobilising activists and voters of different identities and backgrounds from several directions at once. The aim would be to forge, through exchange, co-operation and engagement, a “cultural and electoral bloc”.

Some activists despair that the Rudd Labor Government could be yet another “wasted opportunity”. Should enough citizens “stand up and be heard”, however, perhaps there is yet hope for real and progressive change.

If you truly believe in democracy, you can forget globalization. Even by definition, the two are incompatible. Globalization implies sameness; equal rules and laws concerning capital and investment right across the board. So, if a country wants to join the “global community”, they have to adopt the rules and laws of that community. And the price of not doing so is stagnation, and a slow, or not so slow, economic death. At risk is a share of a multi-trillion dollar investment capital monster roaming the world looking for short term opportunity.

Unfortunately, this investment pool is faceless, anonymous, and conscienceless, largely interested in profit and profit alone. You can forget considerations such as environmental impact, well-being of the employees, or any kind of benevolence towards man or government. There are exceptions, of course, but the little fish with big consciences are soon swallowed up by the big fish with little consciences. For the most part, the “bottom line” rules this global investment world.

Under globalization, the money migrates towards cheap labor, low taxes, and a non-interfering government bureaucracy. That’s why many of “our” factories and jobs that were once ours now exist in places like China and Mexico. This is a trend that is sure to intensify as the “globalists” gain more and more power and control; and more and more governments step into line with the globalists’ agenda.

Who are they? They may be people like you and I, who have somehow succeeded against the odds to acquire a sizeable investment portfolio. However, the small investors do not make the kind of decisions that affect whole nations or peoples. The small guys just ride whatever wave is available as a hot stock investment, and simply don’t bother to look at the small print to find out what social or environmental impact this or that company is making on the host country.

The really big money comes from a very specific source. It is virtually unlimited, and until now virtually unchallenged by government, economist, or academic.

The world money supply grows at over 7% per year. All of this new money is issued into circulation by the private banking consortium and “sold” to government or private entities as interest-bearing debt. This money is created by the banks out of thin air using the assets we release to them as security. This means that the individuals who control the banking system behind the scenes have access to an almost unlimited money tree. Each year, trillions of dollars worth of new debt is added to their coffers, trillions of dollars of old debt is paid off (effectively “laundering” this money), and trillions of dollars worth of the world’s finest assets are purchased by them. I speak here of the controlling interests in all the major multi-nationals including armaments manufacturers, the airline industry, mining, forestry, pulp and paper, medicine, pharmaceuticals, foodstuffs, transportation, energy, petro-chemical, and especially the media. And a whole lot of lesser businesses are bought up by cyber-spaced investors at prices neither you nor I can compete with.

By controlling these important industries, the purchasing owners can indirectly control government policies via investment negotiations and threats to relocate elsewhere. And in most cases, individual governments are forced to give in to the globalists’ demands. Their monetary influence even includes the institutions of education wherein significant endowments (with strings attached) are gifted to many universities and other institutions of higher learning, in order to “teach” the bankers’ own economic “truths”.

And through ownership and control of the media, they ensure that no one “blows the whistle” on their clever monopoly.

Consequently, it is easily seen that the steering wheel of globalism and the new world order (politics) is guided by the same people who control the throttle (the money supply). Globalism is the hallmark (and the trademark) of the banking conspiracy in the issue of new money.

All that remains is to define the fuel that drives this conscienceless vehicle of power and control. If we can shut off the fuel supply, perhaps we can regain our sovereignty and our freedoms.

The important question is, “Why do so many people borrow and owe so much?” If individuals did not borrow from the banks, there would be no banking power center.

In most countries, taxation of one kind or another deprives the citizenry of more than 75% of their productive energy. These taxes take many forms: sales tax, income tax, withholding tax, estate duty, stamp duty, import duty, export duty, city tax, county tax, state tax, federal tax, excise tax, liquor tax, tobacco tax, and probably a whole lot more. What is not widely known is that many of these taxes are cumulative towards the cost of finishing a product. Wage taxes and compounding interest costs, for example, are continually added on to a product cost all through the production cycle. Many items that we purchase then hold a “hidden tax” component equal to upwards of 50% of the total cost. This is in addition to the many obvious taxes we pay.

In short, once we part with 75% of our earnings through these various taxes, we are left with no choice but to borrow replacement money from the banks. In other words, the only reason we need borrow anything at all is because government has stolen an equivalent amount from us!

I have studied modern taxation for many years, and I have found that there is absolutely no link whatsoever between a government’s ability to supply services, and the amount of taxation that the given government receives. These two figures are absolutely independent of each other! In fact, the higher the general rate of taxation, the less able government is to supply core services! Taxes actually destroy government services; or force the acquisition of those services at the expense of other important national resources!

It can therefore be seen that it is taxes, and taxes alone, that are responsible for the current plunge towards globalization, one world government, the loss of national autonomy, and a continuing trend towards personal debt and wage slavery.

Should any government recognize this curse and take upon itself the creation and issue of new interest-free money by which to fund their services, a new era of prosperity, peace, and abundance would result. Inspired creativity would blossom worldwide, and friendship, mutual respect, and enlightened co-operation might easily replace the current atmosphere of fear, covetousness, and insatiable greed as manifested in the modern movement towards globalization.

International conflicts such as 9-11 and the war against “terror” pave the globalists’ road with gold. Warfare means more taxes, more debt created, more bombs manufactured, and a whole new profit/power center for those bankers driving globalization! Isn’t it time to get off the global bus?

Since the Bank of England was given independence in 1997 UK inflation has been close to the government’s target of 2% +/-1. This is a remarkable improvement for the UK economy. Previously the UK economy suffered from consistently high inflation. Eg in 1979 inflation reached 25%. In 1992 inflation reached 11%. Reasons for low inflation are a matter of debate. The chancellor Gordon Brown likes to take credit for giving the Bank of England independence in 1992. However although this partly explains low inflation, it is only a small % of the reason.

Reasons for Low Inflation in the UK

1. Economic growth has been more stable and predictable. The MPC have avoided a boom and Bust economic cycle. At the first sign of inflationary pressures increasing they have increased interest rates to reduce inflation before it occurs (policy is known as pre emptive monetary policy.) This has avoided a repeat of the late 80s inflationary boom.

2. Inflation expectations are lower. Partly as a result of the MPC’s greater credibility. People expect inflation to be low, therefore wage demands have been correspondingly lower. This has made it easier to keep inflation low.

3. The process of globalisation has helped to reduce costs and increase competitiveness in global markets. The UK has benefited from falling prices of manufactured goods that have been made in countries like China and Korea.

4. Improvements in technology. The internet and micro chip computers have helped to increase efficiency and lower costs.

5. Increase in the labour supply. Increased immigration has created a new supply of cheap labour which has helped keep wage pressures low.

6. Appreciation of £. This has helped reduce inflation, because imports are cheaper and quantity of exports lower

However inflation may increase in the future. The Governor of the Bank of England recently said there is no reason why the past period of stability and low real interest rates will continue. Several reasons may cause inflation to rise in the future including:

Why Inflation May Rise

1. Economic growth in China and India is causing high demand for commodities and therefore prices are rising. This will feed through into cost push inflation.

2. The UK has a large current account deficit. To reduce this deficit it will be necessary to have a devaluation in the value of £, at some point.

3. The supply of labour is unlikely to increase by too much in the future. Therefore wage inflation may become a problem as the labour market nears full employment.

4. UK House prices continue to rise. This creates additional consumer wealth and therefore increases consumer spending.

The effect of this is that in the future interest rates may have to rise in order to keep inflation low. This will have the effect of keeping mortgage payments high.

In a previous post, I discussed Obama’s positions on key economic issues. In this post, I will compare and contrast the two candidates on those same economic issues. After reviewing these issues, I am confident that you will conclude that Barack Obama is a friend of working people while John McCain is a friend of big business and the wealthy elite.

On labor related issues, Obama supported the Employee Free Choice Act, federal legislation that grants workers the right to join unions free from employer harassment or intimidation. Obama voted in favor of the motion to close debate on the Employee Free Choice Act. McCain not only failed to sponsor this legislation, he voted against the motion to close debate, effectively killing the Employee Free Choice Act. (H.R. 800, Vote #227, 6/26/07)

On another labor issue, protecting striking workers, Obama has opposed replacing striking workers with permanent replacements. McCain voted against ending debate on a bill that would prohibit employers from hiring permanent replacements for striking workers (S55, Vote #189, 7/13/94).

Finally, in regard to labor issues, Obama has supported raising the minimum wage and indexing it to inflation. Obama voted in favor of raising the federal minimum wage to $7.25 an hour while McCain voted against increasing the minimum wage (SA.44 to S.256, Vote #26, 3/7/05).

On the subject of tax relief for working families, Obama supports a tax credit of $500 per individual or $1,000 per working family. In addition, Obama supports requiring the wealthiest Americans to pay a higher tax rate to finance these tax credits and other federal programs. McCain supports a summer gas tax holiday in which the federal gas tax and the diesel tax would be suspended. He also supports keeping the Bush tax cuts for the wealthy, where the top tax rate was cut from 39.6% to 35.0%, giving the very wealthy a tax windfall.

In regard to the so called summer “tax holiday,” this proposal has been denounced by Obama as a “gimmick.” The problem with this proposal is that it has no long term effect. The tax relief is limited and temporary. What happens when summer ends? In addition, a cut in the gas tax, even if temporary, would mean that state governments would lose millions of dollars in federal funding for highway improvements necessary for safety and the reduction of traffic congestion.

Another issue of major importance to this year’s presidential campaign is trade. Obama wants to amend the North American Free Trade Agreement (NAFTA) so that it benefits American workers by including good labor and environmental standards. McCain is a strong supporter of NAFTA, which the AFL-CIO has stated has cost 1 million American jobs from 1993-2004 (Working Families Vote 2008). McCain has made it clear that he does not support amending NAFTA to create stronger labor and environmental standards.

In regard to the Central American Free Trade Agreement (CAFTA), a free trade agreement that is opposed by the labor movement, Obama voted against it while McCain voted for CAFTA (S.1307, Vote 170, 6/30/05).

Finally, in regard to protecting homeownership and cracking down on mortgage fraud, Obama supports the creation of a fund to help homeowners refinance their mortgages. The fund would be paid, in part, from increased penalties levied against lenders who act irresponsibly or commit fraud. Obama has also introduced legislation (Stop Fraud Act) that defines mortgage fraud, increases funding for state and local law enforcement, and increases penalties for mortgage fraud.

As for his plan to deal with this problem, McCain said the following: …”there is no substitute for faster economic growth. No government program is a substitute for the jobs provided by a growing economy.” (Forbes, March 20, 2008) In other words, McCain’s plan is to do nothing for those faced with the loss of their homes or for those who watch while the value of their homes decline. This should hardly come as a surprise to those who may recall that McCain was previously quoted as saying that he did not understand economics.