What if Australia "Nationalised" it's in ground gold?
- Thread starter Lovey80
- Start date
Dogmatix
Active Member
bron suchecki said:
Exactly, they can just buy the production. They could make it even easier through tariffs or taxation - eg, make it more profitable to sell to the Govt by making it reduce their tax rate, or have a tariff/tax for gold exports that makes it less competitive to sell outside of the country.
Alternatively, we could just ask China how they do it
Big A.D. said:
It seems every time I look you are advocating the jacking up of taxes on someone. How would you like it, if you spent millions of dollars after doing a very extensive risk/reward analysis of starting up a project just to have it ripped away from you just because you started making a buck.
Big A.D. said:
While that is a true statement about misallocated capital. It isn't a case of government over taxing one sector directly in order to give the another sector a free ride. Currently the banking sector is getting a free ride in getting the privilege of expanding broad money. That would have to be curbed enough to allow the RBA to print and buy the target amount of gold each year but would still meet their "expansion" targets.
I suppose the solution would have to be that instead of locking in a 1-2-5 or 10 year set price with the miners. They do exactly the same thing as the coal industry does and renegotiate the coal price every three months. If the gold price goes up the RBA put downward pressure on the banking sector as to curb broad money expansion overall to make their expansion target. If the gold price drops, they relax those pressures to let the banking industry take up the slack to achieve the same expansion over all. How does that sound?
Dogmatix said:bron suchecki said:
Exactly, they can just buy the production. They could make it even easier through tariffs or taxation - eg, make it more profitable to sell to the Govt by making it reduce their tax rate, or have a tariff/tax for gold exports that makes it less competitive to sell outside of the country.
Alternatively, we could just ask China how they do it
While I like your enthusiasm, I am strongly against changing the goal posts for established businesses for the worst. So putting tariffs on something that will be detrimental to a company that has done all the hard work is off limits IMO. Sure give them an incentive to sell to the RBA but never ever hose over a sector just because they are doing well or have something you want. Political risk would go through the roof and stifle entrepreneurs and investment.
Ah, bugger it. I just can't let go of the 'special taxes' comment by Big .A.D.
This is such a BS way of justifying socialism. "resource exploitation" my a$$. If it was that easy to mine, the govt would be opening a mine every day of the week instead of setting up fixed speed cameras everywhere!
I'll say it again:
1. You can not legislate the poor into prosperity by legislating the wealthy out of prosperity.
2. What one person receives without working for, another person must work for without receiving.
3. The government cannot give to anybody anything that the government does not first take from somebody else.
4. You cannot multiply wealth by dividing it!
5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.
Big A.D. said:
This is such a BS way of justifying socialism. "resource exploitation" my a$$. If it was that easy to mine, the govt would be opening a mine every day of the week instead of setting up fixed speed cameras everywhere!
I'll say it again:
1. You can not legislate the poor into prosperity by legislating the wealthy out of prosperity.
2. What one person receives without working for, another person must work for without receiving.
3. The government cannot give to anybody anything that the government does not first take from somebody else.
4. You cannot multiply wealth by dividing it!
5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.
Lovey80 said:
I'd look back at my whole operation and remember that the stuff I'm digging out of the ground isn't actually mine to begin with and that paying a slightly higher rate of tax on the profit I make selling dirt that belongs to other people is still a pretty good deal.
Its pretty simple: non-renewable resources are more valuable than renewable resources due to their scarcity. That is the nature of a non-renewable resource. Profits made by businesses that exploit a non-renewable resource (like gold miners) should therefore be taxed at a higher rate than businesses which provide a renewable product (like banks or software publishers or engineering consultants).
Oh, and if I were a mining company facing a tax hike, I'd also remember that I'm an artificial legal entity and that governments are supposed to favor their citizens' interests over mine. Well, proper governments do anyway. Fascist governments tend not to. I'd also seriously consider the paradox of a non-sentient legal entity being able to remember anything and then promptly disappear in a puff of logic.
Big A.D. said:
What is pretty simple is the fact that 20-30-40 years ago when many of these companies were starting up there was bugger all profit in spending all that cash and risk in setting up any of these projects. The government NEEDED these companies to get OUR stuff out of the ground for our own benefit and set the goal posts to suit. If those companies were given those mining contracts knowing that they would get "special" taxes put on them IF they made a go of it then fine. But they didn't and what the Rudd/Gilliard government is doing is effectively breach of contract and I am surprised it hasn't been challenged at the highest levels.
I also want the best return for the people of Australia for their own resources. If they want to change the goal posts and jack up the taxes on future projects so that the companies and investors can judge the risk/reward before they even start then I have no problem what so ever with that. The companies can do their own due diligence based on those factors and make a decision.
At what point does a bank or a software publisher or an engineering consultant have to pay a state royalty on top of their 30% company tax rate? Thats right they don't.
Back to the original subject.
Lovey80 said:
I'm surprised noone has mentioned this yet. What happens to the investors in these gold companies, when they are 'nationalised' for a decade?
I bet once such a deal gets announced, affected share prices take a dive.
So the investor who ponied up capital to keep the venture afloat gets screwed?
I would argue that the government shouldn't interfere. If they want the gold, they should pay market rates for it.
Just like I have to.
Lovey80 said:
You're talking about government as if it were an entity like any other. It isn't. Governments can just raise taxes when they feel like it. And forcibly acquire (i.e. nationalise) private companies and other private property. And ban exports of particular materials. And "fix" the price of gold and prevent anyone except the government from buying it.
Where do you obtain a written guarantee of the rate of tax you're supposed to pay anyway? Where does this assumption come from that dealings with government is the only thing that remain completely unchanged over an infinite length of time? Does "forcing" the mining companies to spend $1000 buying hard-hats for their employees through OH&S laws have the same effect on sovereign risk as "forcing" them to pay an extra $1000 to the government through taxation laws?
Having the ability to do all that, regardless of whether it actually does, is part of the benefit government provides to the people.
That's the "sovereign risk" factor. It is (or should) already built in to any project (and hell, I have to factor it in to the projects I invest in and I'm not a running a multi-million dollar mining company). If the project stops being viable, you pack up and move on to something else. That's how it works.
That's also the reason why the government should try as much as possible not to create a perceived sovereign risk because uncertainty damages businesses and employment opportunities and overall that isn't in the interests of the people the government represents, but if the benefits to the people of doing something outweigh the detriments then it is entirely appropriate for the government to get a better deal for it's people. I happen to agree with the idea that non-renewable assets are worth more than renewable ones and should therefore be taxed higher, especially since I'm a co-owner of those non-renewable assets and they can only be sold off once.
Neither do the mining companies - the state's royalties are a deductible expense, just like a bank would pay for a software license or an engineer would claim back the cost of a training course.
If the government is going to increase The National Stack, they'd have to do it at market rates.
Bron's suggestion of just having the government buy it on the open market like everyone else does is the most obvious solution, but convincing anyone in government to actively sell down existing foreign currency holdings and then buy up gold bullion with the proceeds is a tall order.
rbaggio said:
Have you read all the posts? Nationalise was put in commas for a reason. Its not exactly nationalization in traditional terms. I'm curious to find out why you think that the share prices would take a dive if the vast majority of gold production was bought by the government?
Even with a fixed gold price it would be far above the gold mining costs. Investing is a funny thing, you could possibly see share prices even rise if there was a fixed price below the current market rate as investors would be able to take a huge amount of the risk in the gold price pff the table.
However, as you can see by one of my later posts in reply to Bron, I conceded that it would be viable for government to buy at market rates however some shorter fixed term prices would have to be agreed on for the RBA to be able to adjust monetary policy accordingly as prices fluctuate (say every three months).
Lovey80 said:
Lovey80 said:
Yup
Lovey80 said:
Thats why I kept it in commas.
Lovey80 said:
Lovey80 said:
If your 10 years of 'nationalisation' does go ahead (see, I still have it in commas), and gold in the meantime goes to $2500, where do you think investors will want to be?
In the gold miner that is getting $2500/oz for their gold?
Or the gold miner that is selling their gold @ $1500/oz to the government?
And what happens to the share price of the $1500/oz miner when investors move their funds to the $2500/oz miner?
If investors do not see any upside with a company, they will move funds.
Here is a recent article, highlighting how fears of mine nationalisations make investors nervous:
http://au.news.yahoo.com/thewest/a/...o-dispel-mine-nationalisation-fears-minister/
Rbaggio you still talk like the government is making a takeover of the companies. Which is not the case at all and becomes redundant that you were leaving in the commas around nationalise because your responses reflect that a traditional nationalisation is what we are talking about. I'm regretting putting the pun in the tittle to garner interest in the topic as it seems that some can't see that the original post shows clearly that there would in fact be nothing of the sort.
The whole point of the thread was to evolve the idea to a possibly workable model. As shown in some posts that seem to have been ignored, we are still at the original unpolished idea. I'll start my next post with some new terminology and the idea evolved and see if we can progress from there without this pointless back and forth that is now redundant.
The whole point of the thread was to evolve the idea to a possibly workable model. As shown in some posts that seem to have been ignored, we are still at the original unpolished idea. I'll start my next post with some new terminology and the idea evolved and see if we can progress from there without this pointless back and forth that is now redundant.
Ok Idea in short as it stands.
1. Government decided that it wants to build a sizable gold reserve over the next 10 years of say 3500ton.
2. To do so they will change monetary policy so that banking based monetary expansion is curbed In leiu of the RBA printing enough money so that they may buy the gold at market prices for a target of 350ton a year.
3. Prices are agreed upon between the miners and the monetary boffins every three months to reflect current market prices at agreement time so that the monetary boffins can restrict or relax banking broad money supply growth to accommodate the RBA's overall monetary policy.
4. The spread of risk to the upside or the down side of the spot price is limited to 3 month windows which both parties share. (As per china and Other Aussie mining companies when buying other resources.)
5. Any production above the agreed upon government target would go straight into the market as per usual.
Let's see if we can evolve or criticize it from here.
1. Government decided that it wants to build a sizable gold reserve over the next 10 years of say 3500ton.
2. To do so they will change monetary policy so that banking based monetary expansion is curbed In leiu of the RBA printing enough money so that they may buy the gold at market prices for a target of 350ton a year.
3. Prices are agreed upon between the miners and the monetary boffins every three months to reflect current market prices at agreement time so that the monetary boffins can restrict or relax banking broad money supply growth to accommodate the RBA's overall monetary policy.
4. The spread of risk to the upside or the down side of the spot price is limited to 3 month windows which both parties share. (As per china and Other Aussie mining companies when buying other resources.)
5. Any production above the agreed upon government target would go straight into the market as per usual.
Let's see if we can evolve or criticize it from here.