It seems likely then that Gillard will be forced to push ahead with a carbon tax while the rest of the whole world balks at the prospect. Much like the same situation Rudd faced earlier this year – which probably ended up costing him his leadership.

The chance of a climate bill passing the US Congress becomes lower day by day as the mid-term elections draw near. The elections will likely see the Republicans take control of at least one chamber, basically killing Obama’s ambitions to tax breathing out. Despite what the ABC writes, China and India are not about to cap and trade their economic development either. They maybe investing in some piece meal ‘renewable’ energy projects but they are not going to tax carbon, especially if the US does not.

So where does that leave Gillard? She has signed the ALP up to a bunch of fanatics in the Greens and it seems they will force Gillard to go it alone on carbon taxation or risk losing control of the Senate and even denying supply. If Gillard is returned to government it is going to get very messy indeed.

Firstly on constitutional and transitional matters executive power is clearly with the Governor-General. Reserve powers are not just a rubber stamp. Secondly, the judiciary in Australia is far more independent than in the USA, where appointments are made along political lines reducing the courts role as a check and balance on political power. Thirdly, the Australian public service is not full of a bunch of yes men (Ken Henry the exception), they are meant to recommend against government action if they think it is in the best interests of  country. In the USA the public service is headed of quasi-politicians that follow party lines. Fourthly, Australia of course has its own written constitution though not a bill of rights, which tends to distort the will of parliament as the will of the people. Fifthly, elections at the Federal level occur ever three years for which there is no set Parliamentary term. By comparison, presidential elections are set every four years with recourse to outing a deeply unpopular president very difficult. Sixthly, Australia has a unified opposition to government policies, whereas in the US system a lack of opposition leadership means individual senators can be bought off to get policies approved. Seven, there is also the upper house. Anyone looking at Rudd’s attempts to get his budget, mining tax or emissions trading scheme approved could hardly say that politics ended when he was elected. It is an absurd claim to make. You can also add the role of the media, the states, etc… From No Republic:

It is alright to create a myth for domestic purposes, the danger is you actually begin to believe it. The sanitised mystic version of the American republic has been unwisely used as a model with universal appeal.  It is not. Unlike the Westminster system, it has never worked for long outside of the United States where, the civil war apart, it does work, even if it is too rigid in times of crisis. 

Whereas Westminster continues to function in various forms throughout the world.

….then there was Hillary Clinton’s astonishing, nearly unreported (in the U.S.) performance in Argentina last month. She called for Britain to negotiate with Argentina over the Falklands….

How can you explain a policy toward Britain that makes no strategic or moral sense? And even if you can, how do you explain the gratuitous slaps to the Czechs, Poles, Indians and others? Perhaps when an Obama Doctrine is finally worked out, we shall learn whether it was pique, principle or mere carelessness.

…or just plain incompetence. When Obama eventually comes to Australia, get ready for the main stream media to uncritically fawn over him. At least someone is manning up over the Falkland Islands:

Conservative Party leader David Cameron told The Economsist in an interview published Wednesday he was disappointed by U.S. attempts to facilitate talks….Cameron says Britain “should frankly and candidly say we’re disappointed.”

All this threatens to make life difficult for Prime Minister Stephen Harper and Finance Minister Jim Flaherty, who has repeatedly shot down the notion of a bank tax. “I have not seen that consensus forming. We are not going to impose a bank tax in Canada,” Mr. Flaherty replied curtly this week, when asked about the issue….

Some observers say Mr. Flaherty is right to stand his ground. They argue it would not be fair to ask Canadian banks, which did not receive any direct injection of taxpayers’ money during the financial crisis, to pay the price of other countries’ bailouts.

So the prudent will have to pay for the reckless. Let’s set the scene with an article from the WSJ about the free market based Canadian mortgage market and the striking parallels it has for Australia:

Canada has no housing GSEs. Mortgage interest is not tax deductible. It does not have 30-year fixed rate, freely prepayable mortgage loans. Mortgage lending is more conservative and much more creditor-friendly….Canadian mortgage lenders have full recourse to the mortgage borrower’s other assets and income, in addition to having the house as collateral. This means there is little incentive for borrowers to “walk away” from their mortgage…..Most Canadian mortgage payments are made through automatic debit of the borrower’s checking account—a technical but important point….Canadian fixed-rate mortgages typically have prepayment penalties to protect the lender and the interest rate on the loan is fixed for only up to five years.

So a good deal like Australia. A far cry from the USA where the government effectively issues mortgage finance to banks, who in turn issue a range of government approved mortgage products to customers.

Fannie Mae and Freddie Mac took over the home ownership mantra. In the vast risk expansion of their arrogant days, with very high rates of profitability made possible by government-granted privileges, they justified these privileges by appealing to home ownership. It was often said by their supporters that the GSE-dominated U.S. housing finance system generated the highest home ownership rates in the world, which was false, and that this system was the “envy of the world,” which was also false. Fannie Mae’s annual reports regularly featured a house with an American flag flying.

Now it is clear to everyone that Fannie and Freddie, having done so much to help inflate the bubble and having been dragged into insolvency by its deflation, are wards of the government. The taxpayer bailout of these GSEs is likely to cost much more than the bailout of the saving and loans did a generation ago. The U.S. Treasury has unilaterally signed the taxpayers up for unlimited support of these bankrupt purveyors of government-advantaged mortgage finance.

Of course we have no Mae or Mac equivalent in Australia. However it will be interesting to see which way our born-again socialist PM will fall on this issue. If Kevin Rudd wants to go down in history as a statesman, then this is his time. He needs to re-discover the conservatism he promised before the last election and join Canada by standing up to Obama, Brown and their socialist mates in Europe by opposing a global bank tax on Australian banks.

Warren Buffett’s firm isn’t the only one. Procter & Gamble, Johnson & Johnson, and Lowe’s have been borrowing money at cheaper rates than Uncle Sam.

Barron’s also reported, and I blogged, on the following nightmare:

And state governments are already facing a huge problem called pensions. The Pew Charitable Trusts estimates that state-government pensions are underfunded by $450 billion. My American Enterprise Institute colleague Andrew Biggs argues in the Wall Street Journal that the real figure is over $3 trillion.

Household debt levels in Australia are just as bad – thanks to the cost and price of housing. Thankfully our Federal debt is still within manageable levels, though Rudd is doing his very best to destroy those levels with tax and spend policies that do very little for the economy.

With such an international threat to growth and during a time of strong domestic economic growth, shouldn’t prudence dictate that the Federal government should lower taxes and save to insulate the economy and budget against an almost inevitable dagger to the heart of economic confidence from a sovereign debt meltdown? This of course would require the government to roll back its spending programmes which is primarily designed to put tax-payer money into the ALP’s re-election fund through union fees, kickbacks and property developer donations.

The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.

Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.

What does this event say about Barnaby Joyce’s warning on the impact on the Australian economy from the US debt implosion, and the main stream media and ALP clowns that shouted him down? They got it wrong badly!

Mitt Romney is the early favorite for the 2012 Republican Presidential nomination among the party’s voters in Colorado and Florida. Romney also led recent polls in New Mexico and Texas, and was second behind Mike Huckabee in both Georgia and North Carolina. Sarah Palin has not had the lead in any of the six states we’ve polled over the last month.

Sarah Palin is Obama for Republicans.

I’ve outlined on a number of occasions why Barnaby is right on the mark. Virtually every month more evidence comes out supporting Barnaby’s position. Here are two such examples I highlighted in January and February. Here is another example supporting Barnaby this month.

Investors should avoid government securities, including U.S. Treasuries and the debt of other nations, because of the risks associated with excessive borrowing, a leading U.S. fund manager said on Tuesday.

“The most dangerous market there is national government debt because the borrowing doesn’t seem to be ending soon — and it’s not just a U.S. phenomenon,” Dan Fuss, vice chairman of investment manager Loomis Sayles, told Reuters.

The important point here is perception and confidence.

Moody’s Investors Service fired off a warning on Wednesday that the triple A sovereign credit rating of the US would come under pressure unless economic growth was more robust than expected or tougher actions were taken to tackle the country’s budget deficit.

This is not the first time such a warning has been fired off. Moody’s previously issued a veiled warning last year. It seems now they are manning up to the reality of the US’s dire fiscal position.

“Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the triple A government bond rating,” the rating agency added in an issuer note.

And why wouldn’t it? The US is lucky to have the rating it does now. Printing money to devalue your country and monetise your debt is not exactly likely to impute investors with confidence. Given the way the US Federal Budget is put together by both President, Congress and Congressional Committees – all responsibility but no accountability – there seems no prospect of bringing spending under control.

The cavalier way in which the government dismissedJoyce’s previous warnings makes it clear that Rudd is more concerned with attacking his opponents and savings his own skin than preparing the nation’s budget for the economic mess that would be created from a US downgrade. Certainly it would make the cost of borrowing in Australia more expensive, but I don’t see that stopping Rudd’s spend-a-thon.

Obama is finding out that the Islamist threat was not something dreamed up by Cheney and Bush. The President has been repeatedly rattled by Cheney, as illustrated by his decision last May to time a speech so that it would coincide with the former vice-president’s address at the American Enterprise Institute. It was Cheney who framed Obama’s delay on deciding his Afghanistan surge strategy as “dithering” – and the characterisation stuck.

Cheney is also a good friend of Australia, having visited the place on a number of occassions. The same cannot be said of Obama and his VP.