New Luxury Car Tax Has Australian Car Industry Protesting

[MonaroSS]

I love how, mainly the Americans, jump on that word 'socialism', like there are still reds under the beds. This tax is just a social engineering device. But it is not more nor less of a social engineering device than Bernanke at the US Federal Reserve adjusting interest rates, yet most Americans would think that is just a part of a free market business environment - bullcrap.

When Bernanke lowers interest rates it means little old men and women in retirement who worked hard for their life savings now have to earn LESS interest each year so that Banks and Wall Street Firms and other rich people can recover from some of their gluttonous and irresponsible investment strategies.

Why should retirees pay for speculators mistakes? That's socialism at it's worst. When a government uses socialism to take money from the rich and give to the poor at least like Robin Hood it is usually morally well intentioned. But to take money from the life savings of the mainly working class Greatest Generation who fought in WWII to give it to the rich is just criminal.

And worse still, the low interest is collapsing the US dollar and causing inflation (which is great for the rich banks and property speculators stuck with property they want to inflate back up in value) but it is seriously eroding the life savings of hard working middle and lower middle class retirees on top of their now lower interest dividend.

[MonaroSS]

Originally Posted by mikmak

I think I should have read the article a bit better. 57K (though a lot for me) is hardly indicative of a true luxury tag. Having said that, there are plenty of fine autos available for less. Perhaps it is just the term "Luxury" that is misleading.

noun: something that is an indulgence rather than a necessity

noun: wealth as evidenced by sumptuous living

noun: the quality possessed by something that is excessively expensive

Mind you, name a car that doesn't meet or have one of these criteria for under 57k (no commercial vehicles either )

Of course you have to remember that the luxury tax only STARTS at $57K. If you car costs you $57,100 you are only paying 33% on $100 dollars, so it only starts getting into serious amounts well above $57K.

Also, remember that right now the Australian economy’s two main problems are that it's over heating from all the money our mining and energy sector is making from China and the high interest rates being imposed to counter the otherwise inevitable inflation such a ‘boom’ time produces.

If only those benefiting from the boom would put all their money in the bank as savings we would have no problem, but they are spending it. The two biggest items they spend it on are houses and cars. The higher interest rate is to lower spending on housing (which unfortunately also hurts those not benefiting from the boom) and a higher luxury tax on cars should slow spending there a bit too (but should include 4x4's).

If only the resource sector lobby were not so strong the best solution by far would be to impose a temporary windfall profits tax on the mining and energy companies to be paid into a special ‘future fund’ for loaning cheap money back to that sector when the next inevitable 'bust' time rolls around.....

[winovin]

Originally Posted by MonaroSS

I love how, mainly the Americans, jump on that word 'socialism', like there are still reds under the beds. This tax is just a social engineering device. But it is not more nor less of a social engineering device than Bernanke at the US Federal Reserve adjusting interest rates, yet most Americans would think that is just a part of a free market business environment - bullcrap.

When Bernanke lowers interest rates it means little old men and women in retirement who worked hard for their life savings now have to earn LESS interest each year so that Banks and Wall Street Firms and other rich people can recover from some of their gluttonous and irresponsible investment strategies.

The Fed only adjusts short-term rates. Other rates are set largely by inflationary expectations. The Fed has no power over these rates.

Also, the Fed is driven by the goal of maximising economic growth and promoting stable prices (minimizing inflation):

http://www.frbsf.org/publications/fe...ary/goals.html

The recent interest rate cuts in the U.S. have been driven by a desire to stimulate the economy and avoid an anticipated recession.

Note that the US Government just paid all taxpayers a $600 rebate, to encourage consumer spending.

Originally Posted by MonaroSS

And worse still, the low interest is collapsing the US dollar and causing inflation (which is great for the rich banks and property speculators stuck with property they want to inflate back up in value) but it is seriously eroding the life savings of hard working middle and lower middle class retirees on top of their now lower interest dividend.

The collapse in the USD has been driven partly by the US Administration's move away from a strong-dollar policy, but largely by the high trade and budget deficits that the US is running.

[winovin]

Originally Posted by MonaroSS

If only those benefiting from the boom would put all their money in the bank as savings we would have no problem, but they are spending it. The two biggest items they spend it on are houses and cars. The higher interest rate is to lower spending on housing (which unfortunately also hurts those not benefiting from the boom) and a higher luxury tax on cars should slow spending there a bit too (but should include 4x4's).

The RBA (Reserve Bank of Australia) raising short-term interest rates is not to lower spending on housing, but to reduce inflation.

[MonaroSS]

Originally Posted by winovin

The Fed only adjusts short-term rates. Other rates are set largely by inflationary expectations. The Fed has no power over these rates.

Also, the Fed is driven by the goal of maximising economic growth and promoting stable prices (minimizing inflation):

http://www.frbsf.org/publications/fe...ary/goals.html

Please please tell me that you have not studied economics, I'm already too disillusioned with modern education.

How do you think they control inflation? There is no ‘inflation dial’ that they just turn this way or that. They effect inflation by indirectly controlling market interests rates, just as I said and they have effected the consequences which I enumerated, also just as I said.

The Fed, or more accurately the Federal Open Market Committee (FOMC), does not even adjust short-term market rates. They set the Federal Funds Rate, which is the rate that commercial banks charge each other on overnight loans among themselves. So the Fed has no direct power over what any market rate is. The Fed also controls the money supply, which means they buy and sell government securities, or other financial instruments like foreign currencies and gold. By doing this they can either dry up available money in the financial system or flood new money into it, which is referred to as tightening or loosening the money supply. This gives the Federal Reserve it's two main levers upon which to push or pull to effect market interest rates. They can usually flatten or steepen the yield curve of market rates as well as push them up and down, by manipulating the psychology of those who trade in the market place. While inflationary expectations are one influence on that psychology, there are plenty of others at work and at present those others have more sway than inflationary expectations.

Originally Posted by winovin

The recent interest rate cuts in the U.S. have been driven by a desire to stimulate the economy and avoid an anticipated recession.

Note that the US Government just paid all taxpayers a $600 rebate, to encourage consumer spending.

The recent cuts by the Fed in the Federal Funds Rate were by their own admission not simply to avoid recession and stimulate the general economy. If you read the Fed FOMC Minutes you will see that the main driver has been to free up the frozen secondary markets for debt derivatives. If not for that, the Fed would have held pat and not lowered rates as much as they in fact point to potential inflation which they have put on hold any fighting of until after they free up the derivative debt markets.

Originally Posted by winovin

The collapse in the USD has been driven partly by the US Administration's move away from a strong-dollar policy, but largely by the high trade and budget deficits that the US is running.

The US Administration via the treasury and Treasury Secretary has maintained a strong dollar policy all along. They have never claimed to have changed that policy. And the US trade and budget deficits have been running as they are for a very long time. In fact they were similar to now while the dollar was rising during the late 90’s. No the USD is falling for very different reasons than you believe.

Originally Posted by winovin

The RBA (Reserve Bank of Australia) raising short-term interest rates is not to lower spending on housing, but to reduce inflation.

Again, where’s the ‘inflation dial’? Do you know what causes and defeats inflation?

Inflation is when prices rise. Prices rise because there is a greater demand than supply and two or more people will effectively, through open markets, bid up the price as both want the good or service and are willing to pay more. When money supply is loose and or it is cheap to borrow then there is a lot of cash that flows into the economy. Then you have more cash chasing the same amount of goods and services, prices bid up and you have inflation.

So to defeat inflation central banks attempt to dry up money supply and or raise interest rates. This means that either there is simply less money chasing the same goods and services, meaning there is insufficient funds to buy the goods and services and so inventories build forcing prices to fall, or money is too expensive to borrow and people are unwilling to go into debt to buy the goods and services, again driving down their prices.

The single main way for the RBA to make people unwilling to bid for goods and services in Australia is to force up interest rates as most housing loans in this country are variable and this instantly takes money out of the pockets of the average person. They stop buying unnecessary goods and services and so the bidding up of prices ceases.

But the single most variable market in OZ for goods and services is the housing industry itself, so cooling the housing industry is the quickest way to cool the overall economy.

[mmciau]

From MonaroSS
Inflation is when prices rise. Prices rise because there is a greater demand than supply and two or more people will effectively, through open markets, bid up the price as both want the good or service and are willing to pay more. When money supply is loose and or it is cheap to borrow then there is a lot of cash that flows into the economy. Then you have more cash chasing the same amount of goods and services, prices bid up and you have inflation.

What MonaroSS is stating here is what some people believe the "speculators" are doing to oil at the moment - entering a 'bidding war'

Mike