March 26, 2012

Weakening tiger, but still a hidden dragon

Posted in Sunday Business Post · 122 comments ·
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Could the China that Enda Kenny is visiting this week enter a recession in the next year or two? Yes, a recession, not a gradual slowdown, but a recession. This might seem a preposterous suggestion, given what we know has happened in the past ten years. But that is precisely the point. The recent past has been stellar, but all growth spurts come to an end, particularly those driven by huge credit growth.

For China, such an end will only be the end of the beginning, because the long-term process whereby economic vigour is moving relentlessly from west to east seems unstoppable. In the absence of war or protectionism, the march of the east will continue, but it won’t continue in a straight line. The economy rarely works like that.

As we in Ireland reassess the legacy of the Ahern years, we all know about the chimera of credit-fuelled growth. We would be wise to apply the same basic rules to China.

I have visited China four times for work in the past five years, and the place has changed almost beyond recognition on each of those occasions. Buildings and train lines have sprung up where they didn’t exist a few months previously; huge bridges were constructed apparently overnight; entire cities seemed to appear where there were none before. Shenzhen in the south is one such example. Twenty years ago, it was a fishing port. Today it is bigger than New York.

One visit to the Pearl River Delta (for book research) – in search of the factory where Irish soccer shirts are made – was one of the most bizarre I’ve ever experienced. One year, the street where the shirts were made was there. I met the owner and the workers. We took photos with them and shot a scene for a documentary there. The next year it was gone. So, too, were the dormitories that housed all the workers, the internet cafes and all the tiny shops making all sorts of tools and parts of machines. The place was a huge building site.

China’s extraordinary growth over the last decade has been built on exporting cheap goods to the developed economies, where punters have been flush with credit-fuelled wealth. But as we know here in Ireland, that wealth has now largely disappeared because it never really existed.

From 2000 on, the global deal was pretty straightforward. China exported stuff to us in the west. With the proceeds, the Chinese bought US government bonds, allowing the US to keep borrowing. The more the US borrowed, the more the price of houses in the US rose, making the average American feel richer. They borrowed yet more against this wealth and bought yet more goods from China. We were at the same carry-on.

Now it has all collapsed around us. We have moved from the great age of leverage to the great age of deleveraging. This means we don’t have the cash to buy the Chinese stuff in such quantities. This big move was becoming apparent in 2008 and 2009, so the Chinese switched to lending at home, rather than lending to the Americans. Domestic credit in China exploded, driving up the price of everything, especially property.

The Chinese government flooded the economy with cheap loans to boost demand, because the last things an authoritarian government wants are unemployment and restless people who might start asking questions about who rules the place and why.

According to the wonderful American analyst Bill Bonner, the key to understanding what is happening in China now is the fact that these local cheap loans are going bad as the economy contracts. We know from our experience here that, when loans go bad, they go bad quickly and relentlessly.

The slowdown is being felt in manufacturing because we are not buying their stuff in such huge numbers. HSBC’s Chinese manufacturing purchasing managers’ index for March is down to 48.1 in March, from 49.6 in February. A reading below 50 shows a manufacturing sector in decline, so we are moving towards contraction. Japanese exports to China were also down 14 per cent in February.

This is all feeding into a rise in bad loans and write-offs. In the view of many investors, things are worse than we think. Even the Chinese government admitted that half of all new loans to local governments in China were going to go bad.

Now, here are some figures that should set alarm bells ringing. Total credit this year is likely to be between 30 per cent and 40 per cent of GDP. If half of these go bad, that is 15 per cent to 20 per cent of GDP. Imagine that the recovery rate on bad loans is 50 per cent. That means that the Chinese economy – after write-offs – may not be growing at all.

According to the hedge fund manager Jim Chanos (the man who was the first to spot that Enron was a pile of junk), China may be heading for a hard landing. He argues that the write-downs on bad debt means that China’s “9 per cent growth may actually be zero”.

Counteracting this negative cyclical view is the sense that even a short recession won’t stop the march of China.

Any indicator you take reveals an extraordinary global behemoth like the US economy from the 1890s onwards.

My own favourites are the figures on internet usage. According to Internet World Stats, the number of internet users in China has more than tripled since 2006, soaring to 485 million in mid-2011. Moreover, China’s rush to connectivity is far from over. As of mid-2011, only 36 per cent of its 1.3 billion people were connected. This is far short of the nearly 80 per cent penetration rates seen in South Korea, Japan and the United States. (For more on this see: http://www.kpcb.com/insights/internet-trends-2011.)

Irrespective of the likely sharp contraction in growth, Irish companies should be looking to China because it’s simply too big to ignore. This can take many forms, and sometimes we don’t realise that we have some things here that Chinese business people need and want. For example, law firm A&L Goodbody is this week launching an internship in Beijing for Chinese lawyers from the biggest and best-connected Chinese law firms.

The golden rule of business is that you do business with people you know. Therefore, creating a Chinese network means that there is someone you know at the end of a phone when you want to trade. Consequently, the initiative from the likes of Goodbody is highly likely to bear fruit in the years ahead, and it’s good to see private companies doing this for themselves rather than waiting for the state to take the lead.

Even if China comes to a shuddering halt after 20 years of extraordinary growth this year, which is the year of the Dragon, it will rev up again and, as always, fortune will favour the brave.


  1. Alan42

    I am at a loss here . If China makes everything and the West buys everything from China with credit issued by China . The West needs another credit boom to buy the Chinese stuff . How can we be just consumers ? How do we generate wealth in the West ?

    • stevedublin

      Is that a rhetorical question? If not, the answer is obvious, the West needs to produce as well as consume.

    • NeilW

      China takes the financial assets issued by the West, and then locks them away in the Chinese central bank – replacing them with local currency.

      That’s how they keep their currency down.

      So the system is that the Chinese drain the West of their money – locking it away in the central bank – and swap it for local currency.

      Because the West is run by idiots, that drain is allowed to reduces demand for domestic goods – making more space for Chinese imports.

      The chinese central bank has no need to recirculate their holdings of the West’s financial assets. They can just swap them for the highest yielding, lowest risk paper (US treasuries for example) and sit there.

      And because the West is run by idiots, the leaders go to China and literally beg them for their own money back. It’s laughable.

      The solution is to offset the Chinese central bank holdings with new money to ensure domestic demand stays up, or confiscate the holdings via taxation.

      Offsetting allows you to take advantage of the Chinese desire to hold your financial asset, and switches the risk of a loss from your domestic economy to theirs.

      • Deco

        The long term effect of the ‘spoiled brats’ revolution in 1967 in Europe, is that Europe is run by a collection of spoofers, who have contempt for anybody who does real work.

        Just look at the governing eleite running the EU. Idiots abound in Brussels.

        The US is being destroyed from the other side of the political spectrum, with clowns like Santorum ready to persist with the big aggressive instructuve state project, and resource wars.

        • Define ‘real work’ please

          I am sure if you think about that phrase for more than 5 minutes you will come to the realisation that you are talking complete nonsense

          Go on. I dare you

          • No reply = justification.
            Deco the ledgend is complete talking shit.
            Rush to defence loyal waknas!
            You can’t,
            Haha fucked.,

            Col?
            Colin?
            Col where are you when we need you?

  2. Lius

    And you wonder why you have a bad name, you are the Propeht of Doom David, I love it!

  3. arbyrne

    Very wary of China, desparate Human Rights record, Nepotism, Corruption, they will be in good company with our genius politicians over there right now.
    Arn’t the Chinese building a city or something in Athlone?

    • 33square

      peas in a pod

    • HoChi

      Deja-Wu ???

      Ordos – Chinese ‘ghost’ city.
      China’s ghost towns: New satellite pictures show massive skyscraper cities which are STILL completely empty

      Read more: http://www.dailymail.co.uk/news/article-2005231/Chinas-ghost-towns-New-satellite-pictures-massive-skyscraper-cities-STILL-completely-empty.html#ixzz1qLWAV3le

      As sprawling housing developments and skyscrapers in one of the world’s most populous countries, these tower blocks and recently-built neighbourhoods should be busy and swarming with people.

      But on closer inspection these stunning pictures show elaborate public buildings and open spaces which are left completely empty.

      The most recent pictures of unused housing emerged as China announced plans to build 20 cities a year for the next 20 years

      And despite pictures last year showing some of the reported 64 million empty homes, Chinese authorities have since erected masses more buildings.

      Gillem Tulloch, an aanlyst for Forensic Asia Limited, described one of the areas in Chenggong, as a ‘forest of skyscrapers’.

      When asked what has happened in the past six months since the ghost cities were built, he said: ‘China built more of them.

      ‘China consumes more steel, iron ore and cement per capita than any industrial nation in history

      ‘It’s all going to railways that will never make money, roads that no one drives on and cities that no one lives in.

      ‘It’s like walking into a forest of skyscrapers, but they’re all empty.’

      Chinese government think tank have warned that the country’s real estate bubble is getting worse, with property prices in major cities overvalued by as much as 70 per cent.

      Tulloch said that apartments in Chenggong, a fishing village near Hong Kong, were selling for up to $80,000.

      He added: ‘People there were joking that no one in Denaya could afford to live there. If these apartments sell at all, it is to speculators.’

      Of the 35 major cities surveyed last year, property prices in eleven including Beijing and Shanghai were between 30 and 50 per cent above their market value, the China Daily said, citing the Chinese Academy of Social Sciences.

      Prices in Fuzhou, capital of the southeastern province of Fujian, had the worst property bubble with average house prices more than 70 per cent higher than their market value, according to the survey conducted in September.

      The average price in the 35 cities surveyed was nearly 30 per cent above the market value, the report said

  4. Lord Jimbo

    House of cards economy?

    Chinese growth has been revised downwards and internal power struggles over the socio-economic road to take hint at issues brewing. Could potentially be the greatest property and financial bubble in human history. Longer the recession goes on, the harder demand will be hit, the tougher for the Chinese who are trying different mechanisms to tilt things in their favour. Trouble on the horizon? I think so.

  5. Juanjo R

    Odros – a Chinese Ghost City – from the BBC a week a go or so. Not just ghost estates here!

    http://www.bbc.co.uk/news/magazine-17390729

    A key quote from the article;

    “Western financial experts who fear a bursting of the Chinese real estate bubble point out that the Chinese economy is more dependent on house building than the United States economy was, before the sub-prime lending bubble burst in 2007.”

    Photos of the same from Time;

    http://www.time.com/time/photogallery/0,29307,1975397,00.html

    Golem XIV ( AKA Dave Malone ) has written a lot about this over the last few years on his blog…here is an example…http://www.golemxiv.co.uk/2011/04/making-the-new-sub-prime-part-1-backdoor-to-china/.

    • coldblow

      That’s some ghost estate. Empty roads too.

      • Juanjo R

        I can’t wait to hear about the Chinese NAMA when it happens…ours is mind boggling enough!

        • coldblow

          That Golem blog is very interesting – it seems things there are driven by the same ‘imperative’ of bankers and developers. He makes the point that the regional authorities, who are even now still pushing the lending spree to line their own pockets, are beyond the control of central govt. Of course, the country has a history of local warlords. There was shocking deceit in China in and around WW2. On the one hand you had Chiang accepting US assistance and pretending to fight against Japan, while Mao was a liar of a different order again. I found the reviews on Amazon of Chang’s bio of Mao revealing – people don’t seem to want to accept that there wasn’t some good in Mao and his CP.

          Nice story too about the billions in evaded income tax from the wealthies Germans hiding in that Liechtenstein bank. They just can’t seem to help it, can they?

          • Juanjo R

            He is a very good writer.

            I’d recommend his stuff a lot.

            He was on Vincent Brown’s show once about 6 months ago, and that FG chancer Brian Hayes was on too. Hayes was spoofing about how we have to give in and keep bailing out the banks or we would be much worse off. So he asked Hays what the unemployment rate in Iceland. Hayes blanked. Then he says 7 percent! Hayes clearly didn’t have a clue from the look on his face…nor what to say next.

          • coldblow

            Here’s one example from the Amazon reviews of Jung Chang’s book:

            This book is a Nazi-style hymn of hate against China. Like any 19th-century imperialist, Jung Chang and Jon Halliday picture China as a backward and barbarian country. In her hatred of Mao, they insult every great movement which he led – the national resistance to Japanese aggression, China’s land reform, the struggles to unify China and to assert Chinese sovereignty, the assistance to Korea’s and Vietnam’s defensive wars against US aggression, and building China’s industry and nuclear bomb. Trashing him is also trashing all those who worked for these great achievements.

            The only sure thing in this book is the authors’ bias; their sources are dubious. All too many are “interviews recorded with Mao’s relatives, friends, and acquaintances, done in the 1960s, unpublished.” As Professor Michael Yahuda noted in the Guardian of 4 June 2005, “There is no discussion of the quality of the sources or how they were used. The motives of people in general and of Mao in particular are asserted rather than evaluated.” There is no economic, social or political evidence or analysis, just repeated denunciation.

            http://www.amazon.co.uk/product-reviews/0099507374/ref=cm_cr_dp_all_helpful?ie=UTF8&showViewpoints=1&sortBy=bySubmissionDateDescending

  6. SHENZHEN AND THE GIANT EYE IN THE SKY

    There is China, and there is China, the China you talk about is the China of the giant copycat and artificial wealth creation.

    The other China is the overwhelming majority of people living in this amazing place, they are somewhat excluded from the growth and poverty is perhaps the most threatening issue to the authorities.

    All the larger centers of “economic growth” are undergoing a massive change now. In December 2011, in Wuhan, capital city of the Hubei province, being home for around 10 million people, a network of 250,000 observation cameras was installed, all the bigger cities will be equipped like that for round the clock transparent observation.

    Sound familiar I know, but put that into perspective, London, the best known example here, has round about 10,000 cameras operated by police, plus 80,000 for the transport system, as well as private installations. Estimates of around half million cameras in London are probably close to reality.

    The difference is the way it works, in London they are a far stretch from having centralized control of all cameras systems, in Wuhan, all 250,000 cameras are fed into a single central control. In Wuhan, they can access everything in real time.

    By the end of this year, in Chongquin, another 500,000 cameras go live, and every camera from Whuan, Chongquin and anywhere in China will be fed into a national Database. The call it Program for safe cities.

    Oh well, yes, guess what, the giant eye of course has little helpers, like Cisco.

    http://online.wsj.com/article/SB10001424052702304778304576377141077267316.html#ixzz1RHQIvKhL

    There is much more to all of this. Just google “The Golden Shield” David.

    In Shenzhen you referred to they are implementing a monster of spying eyes. 200.000 cameras that allow facial recognition, behavioral recognition and 360 degree views in a high speed broad band setup.

    Prevention of suspicious behavior!

    http://www.firstpost.com/politics/how-all-seeing-eyes-can-help-in-tracking-down-terrorists-41761.html

    There is more about China than meets the eye, much more….

    • P.S.
      Forgot to comment on this “… fortune will favour the brave….”

      It is this inherent and sickening to the bone opportunism displayed that always disgusted me. I have zero respect for that! It is one of the root problems our societies at large have to overcome to build a different future, there is no Plan B.

      I am aware that over generations of indoctrination this is supposed to be a good thing, I tell you, it is not!

      • Fortes fortuna adiuvat Turnus screamed in the “Aeneid” and then he was destroyed by Aeneas’ Trojans.

        http://classics.mit.edu/Virgil/aeneid.html

      • coldblow

        Hudson has mentioned on occasion the extraordinary insatiable greed which vast wealth seems able to generate, and which economic theory (in its current state) seems unable to explain. There are surely behavioural and psychological factors at work (eg the over-representation in coroporate – and probably political – life of psychopaths and Myers’ (yes him!) ‘alpha male hierarchy’) but can it be seen ultimately as a moral thing? (Although I’m wary of suggesting that as it could spark off even worse behaviour in return, as in the French and other revolutions.)

  7. coldblow

    David, so in other words they are due a big crash, or on the other hand, like the US from 120 years ago, they might just keep on coming? I think the US model in that period was very different to what was experienced in Europe, but I wonder how much the present Chinese situation is analagous. I get the strong impression the Chinese are trying to think their way through this one and are aware of traps placed by what Hudson calls ‘junk economics’.

    Will Hutton wrote a book about the country just a few years ago arguing that unless the Chinese introduced ‘Enlightenment’ values (eg individual freedoms, property rights etc I think) then growth would stall, and that growth is the only thing legitimizing communist rule.

    (By the way, I didn’t think much of his article in yesterday’s Observer about the British budget. I don’t think a broad based property tax is in order but rather something has to be directed at the infamous 1%.)

    Chang and Halliday’s biography of Mao was damning, bu it’s funny how quickly the past can be put aside (or seems to be).

    I also remember a Dutch travel writer (the excellent Carolijn Visser) writing about the diffiulties encountered by a Dutch enterpreneur (he built greenhouse equipment I think) in doing business there back in say the late 80s/ early 90s. The bureaucratic obstacles were straight out of Kafka, and there was all kinds of intellectual thievery going on.

    It’s hard to know, but I think I’m probably on the side of the pessimists here, although I hope I’m wrong. Human rights, workers’ rights, Tibet etc, plus their recent appalling history.

  8. Philip

    Interesting article which illustrates how impressed the author can be by throwing up a few flash buildings and bridges. And to be honest, I would have gone along with that maybe 30 yrs ago when I happened to be living in Belgium for a while. Now, if you want to understand infrastructure penetration – practically a bus or tram stop at every doorstep and motorways (all lit) going everywhere – Belgium is probably the best example there is. And yet…very high unemployment and enormous debt. (one of the highest house ownerships in the EU as well)- success is not all about flash looking buildings.

    It is not about the Chinese business model of cheap goods to the west. It is the replacement of rights pretected jobs with those of the east that made China what it is – aided and abetted by greed. If there is one thing I hope we are learning…rights are fought for and you have to keep fighting for them more. I would support protectionism against all that do not employ as many people in our area as they would have displaced. Irelands investment in the US supports as much if not more people there than they do in Ireland. That is what I call fair trade and I think this is starting to happen sooner than we realise.

    The mantra of the move from west to east is a bit simplistic. We are entering a new paradigm – people are a little wiser and more wary. The US are not going away anytime soon and whether we like it or not, the Anglosphere is here to stay and there are lots who like its values and what it has delivered so consistantly. It’s a messy style of governance and capitalism that generally sort of works and it’s mostly open for business. If China can mimick this like it does everything else, it’ll be a real contributer – not a greed assisted diluter of human rights it is today.

    • molly66

      Maybe they will crash but if they do I would say they will recover very quick like wasps.

      • Wasps huh?
        Nice and very subtle!

      • You Racist Bastard!

        You are now a legitimate target molly66.

        Your pathetic grammatical skills have always been suspicious but now you have shown your colours. That is … if you are a real person and you really exist at all

        You say you are a business person. Who the fuck are you kidding? You don’t have the intelligence to communicate effectively with English speakers never mind speakers of Chinese!

        Are you one on the tossers who watch The Apprentice?

        Utterly Pathetic excuse the Irish entrepreneural class

        How the fuck did you manage to ‘employ’ six people?

        This is the calibre of person that gets invited onto The Frontline

        The absurdity wants me want to piss myself laughing at the circus

        Waken the fuck up !!!

        David please the fuck coin a phrase for the Mollies of this world. Populism rules OK

        I am starting to think that the whole bloody lot of ye have lost your fucking minds

        I hope it stays well for you all. Fools.

        • molly66

          When I left school in 1976 I was the victim of the school bullys for a number of years my standard of English is poor I know ,but I think you are a bully and I never bow to bully’s the current government are bully’s like the last shower,I joined this forum to speak my mind about the things that effect me and my family.

  9. CorkPlasticPaddy

    This is all very interesting,but if I may be allowed to go slightly off topic here. What do all of the contributors to this blog think about what’s happening in Spain? The Spanish government have in essence told the rest of the EU governments what they can do with their austerity measures!!! Fair play to the Spanish PM I say!!! At least the Spanish PM and his government had the balls to tell the EU where to go regarding trying to impose austerity budgets on the Spanish people!! If our government had even half the ‘cojones’ of the Spanish government we’d be in a ‘far better place’ then we are now!!! As I keep on saying Merkozy should have been told in no uncertain terms where to go a long time ago!!!

    • Hi CorkPlasticPaddy,

      I will write about Spain tomorrow for Wednesday’s Indo article. Just reading about it now.

      Best
      David

      • Deco

        You might find the commentary by “Edward Hugh” helpful.

        He is an economics commentator, from the UK, who has retired to Spain. He provides comments and analysis of the Spanish predicament in his website.

        • Yeah he used to drink cans of strong cider with me and the lads in the park on warm days. Apparently he is a legend but personally I never heard of ‘im. Just another name that means feck all.

          • Deco

            I recommend that you read the book “the power of negative thinking”.

            You are negative, because you were hurt, and this is your way of dealing with it – throwing abuse all over the place.

            Try and figure yourself out, and then come back when you reach the same level as everybody else.

          • That’s true Deco

            You saw through the bluster and it shows you are a decent person and sensitive. You are very sharp

            Thank you for your empathy and understanding

            We all have our scars to bear

    • Juanjo R

      Rajoy is altering the defict by 1.4% – pushing it out. It’s more an acknowledgement of the cooked regional books they inherited last year that they can’t make the agreed 4.4% so they picked 5.8%. They issed their defict figure last year too by quite a bit.

      Rajoy is not the saviour of the people.They are still applying huge cuts across the board.

      Heres a simple link in English for you;
      http://globalinsolvency.com/headlines/spain-misses-deficit-target

    • hi from Madrid. Look there is a big misconception about what Rajoy did and didn´t do in telling Brussels to shove it. Basically they got caught inflating the GDP figure by some bureaucrat and when challenged got all passive aggressive about the whole thing. There was an election to be won in the South of Spain last Sunday (which in the end they came up short on). That was the only concern, so to read anything more into it than that would be a mistake. I look forward to David´s piece on Spain in the Indo.

    • BrianC

      Yes well done Spain.

      And whilst Ireland did not envelop into disarray and riots we need to display some form of civil disobedience to make sure the world and the rest know that we are not happy campers so hopefully the Irish citizen with vent their grievance by withholding payment on the household tax.

  10. Adam Byrne

    subscribe.

    • Tony Brogan

      Looking at your site it looks nice.
      Not sure it would be my bag as I would be afraid of the mosquitoes!!!
      Also I like a place for a cow and a horse. Might need both if the system goes down. I like cows and horses anyway!!
      Thanks for the pics
      I bought a bike today. Next is to learn to ride it, just kidding, at least I don’t need a medical to renew a license just to get on the road.
      I can do 60 miles in a day on a bike easily enough so can get around. I’ll practice up here first. Just checked the airline and it costs $50 to ship a bike as luggage on a flight so that is ok. Then I’ll have to find a place to store the suitase and other bits whie II tour around. Next thing is a small tent and a lightweight bedroll.Hey I’ll be 70 this year so I had better DO SOMETHING while I can, I only have another 35 years left??
      Enjoy your day
      Tony

  11. Colin

    And if China slips into recession, Austerity will visit Australia. Where will our young people go then?

  12. AndrewGMooney

    China’s economic ‘miracle’ is a mirage:

    ‘the World Bank, as Watts shows, has calculated the annual bill for Chinese pollution – health costs, premature deaths, damaged infrastructure and crops – at 5.8 per cent of GDP. That lowers the Chinese miracle to our level. And if you add in erosion, desertification and environmental degradation, the World Bank calculates there is an 8 to 12 per cent bite into China’s GDP, stopping the miracle in its eroded tracks.’

    http://www.literaryreview.co.uk/mirsky_07_10.html

    China will be old before it’s rich, and with peak oil, peak water and peak soil will not be able to repair the catastrophic damage its’ so called economic miracle has produced.

    Capitalism shipped pollution from the West to the East, harvested the profits, and with deglobalisation and deleveraging will abandon China to a very difficult future.

    Rogers Vs. Chanos: Will 2012 Be The Year Of The Bull Or The Bear For China?

    http://bit.ly/H58mzP

    ‘Rogers won’t live in any of his favorite cities in Mainland China, because pollution levels make them unsafe for his family’s health.’

    Still, if you’ve got enough Apple gadgets and a private supply of oxygen water and imported food: I’m sure Chinese cities are very alluring….

  13. “Fortune will favour the brave”

    David some of us have stopped listening to this sort of talk because there are more pressing matters in life than making a buck. Don’t you get it?

    It’s like a cliche from some of the morons on Dragon’s Den and ALL of the morons on The Apprentice. One track minds whose egos have disconnected from reality

    And if all those people were so clever and productive we would not have half a million unemployed

    It is all hot air and pissing in the wind. It is all over my friend

    ——————————————-
    Stacey Herbert and Max Keiser on the Enda and Irish Spring :

    http://rt.com/programs/keiser-report/episode-265-max-keiser/

  14. CorkPlasticPaddy

    Hi David,
    The reason I brought the subject up was down to I flicking through the channels on my TV and stopping on NYSE Closing Bell on CNBC to hears ome experts talking about the Spanish PM telling the EU and the ECB that he wasn’t going to impliment austerity measures on the Spanish people by saying that things were bad enough without making them worse!!

  15. Tony Brogan

    Not quite on Topic, but talking of economic collapse.
    The US is Bankrupt and has no intention of paying off its debts. It is mathematecally impossible anyway.
    At least China did not borrow to go on a spending spree. Its citizens were on austerity from the beginning and still mostly are except for the usual 1%

    The US is mortally wounded and as such is very, very dangerous. More so than a wounded tiger or dragon.

    Posted today on http://www.lemetropolecafe.com

    Dave from Denver…

    Thursday, March 22, 2012
    How Much Treasury Debt?
    If this doesn’t scare the shit out of you – and scare you out of paper dollars and into real assets like gold and silver – then you are either brain dead or you just don’t care anymore.

    Tim Geithner (along with Bernanke) was testifying before the House Committee on Government Oversight and Reform yesterday. Congressman Trey Gowdy (R-SC) – in a display of forcing Geithner to answer a question directly that Ron Paul should take notes on – asked Geithner if he had only ONE more debt increase request that could possibly be made, how big would it be.

    After trying to shuffle – very awkwardly, I might add – around answering the question, Geithner responded with, “It would be a lot – it would make you uncomfortable.” Here’s the exchange, which I found spine-chilling:

    Geithner: “That I’d have to get to you in writing, I can’t do it in my head though.” (note: in the background someone says “he can’t put that in writing.”)
    Gowdy: “How about a round number?”
    Geithner: “No idea….
    Gowdy: “$20 trillion?”
    Geithner: “I just can’t do it in my head.”
    Gowdy: “$50 trillion?”
    Geithner: “I don’t know…”
    Gowdy: “A lot? Can we agree it would be a lot?”
    Geithner: “It would be a lot. It would make you uncomfortable.”

    Let that sink in for a moment. Please note that Geithner did not try to dispute the $20/$50 trillion number that Congressman Gowdy threw out. Here’s the 3 minute video of the exchange, which I sourced from Ed Steer’s Gold and Silver Daily:

    Let me be very clear about one thing. This is not a joke and this not some sort of absurd exaggeration. This is where we are right now with the finances of our country. The fact that the Government-reported economic numbers are fraudulent is finally getting acknowledgement in the mainstream media is one thing. But you can’t find any mention of the real spending and real debt numbers. You have to dig for the Truth on that and it requires understanding – in general – how Government accounting works and where the numbers are buried.

    The REAL direct Treasury/Taxpayer guaranteed debt number right now is at LEAST $25 trillion. This includes the $16.2 Trillion current limit PLUS the $7 Trillion in FNM/FRE Goverment guaranteed debt PLUS the Treasury bonds sitting in the Social Security Trust ($2.5 trillion last time looked). I have not included a lot of other small off-balance-sheet guarantees like GMAC (now called Ally) debt, Fed assets which are direct off-balance-sheet liabilities of the Treasury/Taxpayer and some other stuff. I would bet real money that the REAL number is closer to $30 Trillion.

    This does not include the GAAP accounting for the all of the future entitlement and welfare obligations. The net present value of this – i.e. if the Government had to account for its numbers like a corporation does – is more like $100 Trillion. That is not my estimate. That is a number that comes from David Walker, the former chief of the Congressional Budget Office. On a yearly GAAP accounting basis, the Government spending deficit is more like $5 trillion (see John Williams’ Shadowstats.com). The $100 trillion is how a corporation would have to account on its balance sheet for its future obligations given what is known about future spending escalations and future estimated funding of that spending. That would be the number on the balance sheet reported in a corporation’s 10Q/10K.

    This is reality people. What is so completely horrifying about Geithner’s statements – and complete kudos to Congressman Gowdy for pressing Geithner the way he did – is that Geithner, who is not known to be politically adept, was so flustered by the thought of getting caught in a lie that he really had no way to cover-up the truth. The truth is not in what he said, the truth is in his lack of ability to refute the $20/$50 trillion number thrown at him by Gowdy. The best he could come up with is that the number is so big “it would make you uncomfortable.” We know $16 trillion plus whatever is requested this fall is not big enough to make Congress or Obama “uncomfortable.”

    This country is broke, it’s insolvent and it’s collapsing. This is why the elitists – i.e. those who are in a position to steal everything not nailed down – are openly grabbing what they can. THAT is what the MF Global felony was all about. Obama knows a collapse is near. This is why the war rhetoric is escalating, this is why Obama signed legislation authorizing the Government to seize all national resources for the purposes of military defense in the event of an “emergency.”

    Do not be scared off by the current correction going on in the precious metals. By the time most of the people in this country understand why gold and silver are superior currencies to paper fiat dollars, the exchange price of dollars to bullion will make that exchange nearly impossible in any meaningful way for most. The current correction is somewhat mild compared to the correction experienced in 2008. At some point, probably sooner than most are willing to believe, the price of gold and silver will shoot up very quickly. By then it will be too late for most people watching to afford the true flight safety of owning gold and silver rather than paper assets and money sitting in potentially Government controlled accounts.

    • Tony Brogan

      mathematically

      • redriversix

        Morning Tony

        The U.S and China are playing some kind of cat and mouse game.China cannot defeat the U.S militarily and the U.S cannot defeat China Financially.

        So China travels the world looking for “joint deals”with Countries to extract their Resources,while Amerika Travels the World offering security in return for access to resources.

        Afri-com set up by Obama is a prime example.The only African Country who would not sign up was Libya.!

        American “special advisers”in DRC or Uganda looking for Joesph Kony are actually their to gain a foothold on the ground to “develop”mining resources,On the other side China is in Nigeria trying to get a deal with the Government their to develop /update there infrastructure regarding their Oil and Gas resources.

        Its a bit like Tony Soprano only with a better suit !

        Hope all well in Canada.

        Best
        RR6

        • Tony Brogan

          Greetings RR6
          Here in Victoria, things are fine.
          high tech companies are selling programs around the world, the shipyards are building and repairing boats, The navy is busy in port at Esquimault, the university is fully enrolled, the regional colleges are full, people are arriving to retire, Uptown Mall is recently completed with a humungeous Wallmart,
          the weather cool but ok with sunny Spring days, daffodils are out, and the early blossoms on the plums and ornamentals,The realestate market is holding up and the mean average price for a single family home is $620,000 CAD. Small local farms and wineries are surviving and others prospering. Unemployment is less than 6% double the 3% of 4 years ago.

          I took part in the 31st annual Patos Island Sailing Race last weekend. Wonderful weather, fine sailing, Finished at 01.30 after enjoying a night sail under a new moon and starlit sky. Into the club house @ 0230 for a bowl or three of chilli. Found we finished well, 4th overall and 3rd in division.
          Radiant Heat is my boat and we were in the long course. For those interested in the event all the boats were fitted with trackers so you can now review the race. http://patos.swiftsure.org/ and see the layout of the course and all the islands we sail amoung.

          What can I say, life is good as we bitch and complain. When I arrived in Victoria years ago, the unenployment rate was 14%. All the college grads were sitting around and complaining about there was no work. I had a job in a week, and have worked ever since. Not at what I wanted to do but at what was available.
          My life has been hard at times with 70-90 hour weeks for labour. Pick and shovel, but at others it was fun. I sold realestate for 32 years as a self employed on commission. I worried a lot for the first 10 years but then realised I could make money in any market. I just needed the will.

          Life is what you make it as an individual and so it goes with the collective. Same for countries, and society.

          Years ago I read a very interesting book called “Think and grow Rich”" by Napoleon Hill.
          Everyone should read it. It is not abour filthy lucre but about attitude. I quote, “What the mind can conceive and believe, it can achieve”.

          I often fall off the track but when I need to survive that is what I return to. I have the book and the tapes and it was written ninety years ago!!!!!!

          Things are not perfect as we all bitch and complain and the winers get the press. I have no realestate and live aboard my sailboat. My three children are independent and live within touch. I am divorced twice so have my failings and was wiped out twice financially. Once in the 80′s as I was about to take early retirement. 20 years later it happened again.

          I am now working on my 3rd million, as I gave up on the first two!

          Gold and silver is where it is at these days. and then when enough is at hand trade the gold for farmland and keep the silver as real money as the paper world disolves around us.

          Living through this is like being in a slow speed movie that takes forever. In history 25 years is a blink of an eye. For us it is half a lifetime.

          Nurture your families, spend within your means, enjoy your friends. Life is about a dry warm place to live, three square meals a day, and pleasant company. What more is there.

          Sorry, my post is a ramble (rant) and long.

          Best regards to all you caring folk.

          Tony

          • redriversix

            Hey Tony

            your post is not a rant or rambling.I enjoyed reading it very much.Living on the Boat sounds great,nice that you have your kids close to you.

            You certainly seem to know whats important as your post was very descriptive.

            Try and keep the boat.i.e “stay away from women,get a dog instead” !!!!lol

            Life is what we make of it and I realize how lucky I am every day.

            Have a great day and talk to you soon.

            Best
            RR6

          • Adam Byrne

            Nice one Tony, very inspiring. I am twice divorced myself (and not even 40 yet!) and I’m a very nice person – trust me!

            Unfortunately I am separated from my 4 year old daughter at present but I try to keep my chin up and work my ass off both at study and at my small private businesses in the knowledge that if I help myself (and others) now, then ultimately I will be helping my princess ‘in time to come’ (as they say in the Caribbean).

            I worked in the Caribbean for 10 years + and have a lovely plot of land down there just waiting for my return but all in good time when I’m fully content that the time is right.

            I will certainly read that book you recommended in the near future – preparations for exams are on the menu for the next six weeks as well as some hectic private business to take care of but thanks again for the kind words and positive vibes.

            Adam.

          • Tony Brogan

            Hi Adam

            divorce is not all it is cracked up to be as it tears holes in ones emotions as well as finances. i started from scratch at 40 with a new marriage broke and shortly 3 kids in two years.
            i managed to be the single wage earner but then I found after the fact that it was not good enough as I apparantly had prevented my wife from working. could have fooled me as I would gladly taken time off to let the lady of the house out and about. Not as if she was house bound as she lived in good surroundindings with lots of friends and her parents just 10 miles away. My nearest relatives were 7000 miles!! some people can’t be pleased. The grass is always greener over the fence a horse told me a while back.
            sorry to hear that you do not get to see your daughter as often as you like. i have never experienced that so I give thanks.

            All one can do is ones best. With that there is no guilt. not all people are equal and we do not have the same luck. But all people are equal and so but for the grace of god, there go I.

            All on this blog are trying to fix things for the betterment of all. As such we need to support each other and assist understanding. We may never achieve any change but one never knows. a stone tossed into a pond sends a ripple to the far side. Another stone in the same place exagerates the ripple. A steady drop of astone will set up a disturbance not to be ignored. Ripples become small waves.
            What to do is the question and I notice few solutions proposed on the blog. Just meanderings and obervations and questions, even from out esteemed Master David.
            It is time to suggest solutions and debate the ideas to inprove and then develop a plan. The IQ is here, the knowledge is here, the ability is here but, is the desire and the will?

            The next trip I make over may be in the summer. I am wondering to bring a bike for fitness and mobility. I will enjoy meeting those who invite me. In the meantime is there a backpackers hostel organization anyone knows of so that I can stay at affordable lodgings as I travel. I would like to look for a little piece of good farmland that will take a cow and a pig and a horse, even a couple of sheep.
            i saw a lovely place in NZ last month. Nice climate too.

            Adam, your plot of land in the Carribbean sounds the ticket. How big is it.

            Good luck in your exams
            Best rgards
            Tony
            What the mind can conceive and believe, it can achieve.

          • Adam Byrne

            Thanks a lot Tony. My land is 1.44 acres. You can view here:

            http://www.caribbeanlandandproperty.com/moredetails.php?1319

            It’s not actually for sale, I’m just gauging interest and prices.

            Give me a shout when you make it back to Ireland.

            Thanks for the exam wishes.

            Regards,

            Adam.

        • Tony Brogan

          Try and keep the boat.i.e “stay away from women,get a dog instead” !!!!lol

          Most women don’t like sailing and a dog is always pleased to see you and never answers back.

          However for all that a good woman can be a great comfort and a wonderful asset to life in general.

          T

    • BrianC

      Yes the US is bankrupt.

      China owns the US lock stock and barrel that is the Chinese people not the Chinese Govt. They bought the US way back in 1933 when the Fed was broke. The Chinese People put up the money and took everything in the US as collateral. I know this is hard to believe but the records are there to prove it. Stanard Charter is a key bank representing the Chinese Poeples interests in the US.

      In 2006 Deutsches Bank put the screws on the US banking system where they are locked out of transfering money electronically. People deny this fact and believe it is too incredulous. But the bottom line is the US is bankrupt and owned by the Chinese People.

  16. Philip

    Tony Brogan’s note is totally spot on. The confettizing of dollars and related currencies is probably imminent – particularly if the petrodollar starts to wobble.

    But let’s stand back for a moment.

    US is going broke…China has decreased demand…Europe is seizing up…consequences are not good for Germany or Australia or any of the BRICs for that matter. The whole thing is broken. The current paradigm (paradigm = current way of assessing and solving problems) is crumbling and with it the credibility of the preisthood which supported it.

    What is the new paradigm? Here we are looking at one another – communicating – waking up (one hopes) – and hopefully realising we are all in this together. China needs the west, the West needs the east. The financial community wants its money back and needs to be told the game has changed…but given its influence, that might be a problem.

    Stand back again. The US are a frontiermen/ explorers and risk takers. You can mock their Hollywood/ Disney like optimism – but it drives them onward. Let’s hope we can maintain that optimism and make it spread and build hope – becasue the opposite is annihilation. Divorce is not an option.

    • Adam Byrne

      I’ve been hearing about this imminent collapse of currencies and societies ever since I’ve been reading this blog (3 years +) and even before.

      The end is supposed to be around every corner. I just don’t believe it anymore, it seems like we are just going to muddle on forever, or at least for the duration of my lifetime. Nothing will change fundamentally except the rich will continue to get gradually richer and the opposite will happen to the poor.

      It’s a case of if you ‘can’t beat them, join them’ from where I’m standing so that’s exactly what I intend to do. It dovetails well with the oft-mentioned ‘families first’ motif on this site so why should I wait around for someone to do something good? – that won’t happen – if you want something in this life you have to take it for yourself.

      There’s no other way.

      • Tony Brogan

        Go for it Adam
        You will enjoy Think and Grow Rich by Napoleon Hill as I mentioned above.
        The collapse of the currencies has been over the last 100 years. Buying power of a US dollar is 3% or less of what it was in 1913.
        Protect yourself first and then you can help others.
        cheers
        Tony

        • Adam Byrne

          I’ll check that out during the summer Tony when I’m off studying, cheers for the recommendation.

          Regarding, the spending power of the dollar, you are being somewhat disingenuous in my opinion. In theory, every country in the world could knock off (or add on) a zero simultaneously at the end of their respective currencies and we’d all have (very temporarily) 10 times less (or more) spending power but it wouldn’t make a blind bit of difference (at least not in the Eurozone) because prices would adjust pretty quickly as long as the ‘fundamentals were sound’ (to quote Comical Lenny).

          I don’t believe that the fundamentals are, or will be sound anytime soon (if ever), especially as we are ‘ruled’ by absolute idiots (as another poster rightly pointed out) but all I’m saying is that the much-expected Credit Event is a proverbial Will-o’-the-wisp. We’ll carry on in passive incompetence for the foreseeable future.

          • Tony Brogan

            Hi Adam
            When one considers that the advent of the federal reserve coincided with the onset of inflation which continues to this day. As the dollar gained supremacy amoungst all other currencies elbowing the pound aside we find all currencies controlled by the US dollar. By the Bretton Woods agreement the dollar became the de facto world reserve currency. All nations had to sell domestic currency to buy US dollars to settle trade accounts.
            This allowed the US to print currency and use it to buy resources not otherwise affordable. This lowered the relative value of the dollar against other currencies giving the US a trade advantage. Thus all other countries printed domestic currencies to in turn devalue their own and to have enough to buy US dollars. This in turn tended to raise the value of the US dollar and lower other countries currencies.
            As the US ran a large trade deficit and as the US dollar was pegged in value to the dollar several things happened.
            Firstly other countries as they had a surplus amount of dollars from trade came and cashed the dollars for gold from the US. They did this with ever cheaper currencies lowered in value and bought gold at $20 an ounce US which was fixed and not allowed to vary in price according to market demand. Consequently the US gold stocks dropped from 20,000 tonnes in 1944 to 8200 tonnes in 1971.
            In the meantime Rooseveldt raised the price of gold but it was still fixed at 35 an ounce. and the run on US gold continued. (that is devalued the dollar by 60% against gold, but it was not enough))
            In 1971 Nixon reneged on the deal and the US dollar came off the fixed gold price (not a proper gold standard)and so all currencies were free of any constaint and print to excess happened, is happening as we write.
            The proper definition of inflation is,”the devaluation of the purchasing power of the currency”.
            Putting all this currency in to circulation created huge inflation which can be seen in many graphs as accelerating quickly from 1972 onward.
            What is the trouble with inflation?
            As people take home their earnings they find that
            each unit of currency is worth less than it was. That is they need more of them to buy what they want. So they ask, demand a pay raise. If successful they are belatedly able to “keep up with the cost of living increase”. But the income tax system was not adjusted so a higher tax bracket results in a higher percentage of tax paid. The citizen does not catch up.
            Realizing that savingsa are being reduced in value people decide to spend to buy today what should have waited till tomorrow.
            Then leverage came into play.
            If one bought an asset that continued to cost more currency, and did it on a down payment and borrowed the rest, then all of a sudden it appeared that real money could be made. 10% down on a house that increased at 10% per annum meant that it appeared that one had doubled their equity. Many of us did that so everyone who did went into debt. Many went into debt to buy comsumer items that were mot investments, such as cars aND FURNITURE AND VACATIONS.

            It is apparent that inflation benefits some but not those who were late getting on the gravy train.

            Who are the real benficiaries of inflation. Only those who receive the new issuance of currency before it is distributed and depreciated. The initial recipient is the Central bank who in exchange of a bond gives it to the government to spend. Now politicians can bribe the people to get themselves re-elected without raising taxes or cutting benefits.
            95% of the new currency comes from the fractional reserve system. A bank receiving a deposit can lend out 10-20 TIMES THE AMOUNT OF THE DEPOSIT (OR EVEN MORE IN SOME CASES). So the bank profits by charging interest on money created out of thin air.
            The last person to see any of the extra cash printed is the working wage earner, the pensioner, etc.

            The early recipiants get better off and the others left behind.

            Inflation is a stealth tax that impoverishes the people completely while the internation bankers benefit. Or more correctly the masters of the international bankers benefit at your expense.
            Inflation encourages spendthrifts and borrowers and penalizes the thrifty and frugal.

            Thus does dishonest money (paper printed to excess which pretends to be money) corrupt the morals of the people. Dishonest money created dishonest people.

            Until one understands how the system works one can do nothing. People have been uneducated, miseducated, deceived and fooled when it comes to finance and money. Economics is a pseudo science intended to confuse and deceive the people.

            I am not in the least being ingenuous talking about the loss of buying power of a currency. You are correct in as much as all currencies suffer the same fate. However prices never “adjust ” and certainly wage earners always fall behind.
            My own observations are that an hour of labour now buys about half what it used to in 1970 and in addition the taxes are higher as a proportion and so it now takes not double the amount of labour to get the same goods but closer to two and a half times.

            This is refleced in the common obervation that instead of a single wage earner being able to raise a family it takes two wage earners and more recently two and a half wage earners. The family is become disfunctional because of it.
            People are pauperizesd by inflation and become finacial feudal wage slaves for life.

            The only way out is to Get rid of the central bank, get out of the system, go back to honest commodity money, and banish inflation and banish fractional reserve banking and while we are at it banish interest which is also inflationary.how we do that is the epic struggle to come. first the people have to be educated starting with the economists.

            Where are you on this David? Do you agree with what I say or disagree? If so why. Let us have your reasoning. Am I a fool or do I have it right?

            And BYW thank you for the forum to express my point of view.

            All the best Adam
            Tony

          • Adam Byrne

            Thanks Tony, I will digest this one tomorrow as it’s quite intricate but I don’t doubt your assertion that real wages have substantially declined (and continue to do so), although I would guesstimate not to the extent of losing 97% of purchasing power since 1913.

            However I intend to research this further in the near future and will gladly stand corrected. Good night.

          • Tony Brogan

            Hi Adam
            No, I agree that real wages haVE NOT FALLEN 98% but I suggest that they may have fallen 60% in a ss much as most things take 2 hours or more of labour to buy rather than one hour. What has fallen is the value of a dollar. It takes $50 now to buy what used to be a single dollar.So the currency is devalued that amount.
            It is why pennies have disappeared as well as farthings(Sterling) and the original penny was silver I think.
            just look at gold. Since 1944 it has gone from $20 to
            $1682 an ounce as I type. that is 84 times more dollars per ounce and in an era of gold price suppression and articial dollar support. Many say the realprice of gold is 3000 today and with all the QE rapidly heading to 10,000- 20,000 US dollars per ounce.
            That is why central bankers in the western world hate gold as it is the barometer of inflation induced by their policies.
            I’ll search for a grapg or two or you can go directly to http://www.shadowstats.com and see what the true inflation rate and unemployment rate in the US really is.
            WWe have been conned by both the banking system and the politicians

            All the best
            Tony

          • Tony Brogan

            Hi Adam
            I am not able to copy directly but a visit to http://www.shadowstats.com shows that the value of $100 in 1913 to be $4.30 at present using stats from the bureau of labour. and less than a dollar using John Williams own stats.

            cheers
            Tony

          • Adam Byrne

            Thanks Tony, I read it fully now. Very informative. I have saved that mail for future reference. Regards, Adam.

          • Tony Brogan

            Glad it is of help to you. It took me a while to put the pieces together. Hoever all the day to day reports are as Bill Murphy of the
            Le MetroPole Cafe says “price action makes maket commentary.” In other word ther activity produces the headlines which on a daily basis often make no sense.
            Ignore the babble and do your own reasoning.

            cheers
            tony

  17. Reality Check

    There’s a bear in the China shop.
    Ouch! It’s a Hard Landing.
    http://online.barrons.com/article/up_and_down_wall_street.html#articleTabs_article%3D1

  18. cooldude

    The idea that human rights are somehow worse in China than in the US is no longer the case. Any US citizen can now be arrested and locked up without any charge and has no legal recourse to free themselves. Also the US government can now take wharever food, water or any other “strategic supply” it sees fit without payment. We are entering the era of Big Brother on a global scale not just in China. This is all being led by the banking elites who control the weak politicians. We are entering an era of more and more centralized control. The ESM is part of this process and has nothing to do with fiscal control but has everything to do with centralized control of people and turning ALL of us into debt slaves. Vote NO and don’t be fooled by the idiots in charge.

  19. wills

    My hunch about China centers on the fact that China uses a public credit system.

    The Chinese government is the issuer of money.

    Sovereign money rules the day in China.

    So, thus, the micro loans going bad can easily be wiped with no cost.

    This is the beauty of Sovereign money / public credit over a monetarist / central banking / private corporate control over creation of money which we have in the west which is now proven to be utterly corrupt.

    Of course this not to negate the fact that China is a collectivist society and democracy is withheld from the masses.

    • Tony Brogan

      Good comments Wills

      This is the beauty of Sovereign money / public credit over a monetarist / central banking / private corporate control over creation of money which we have in the west which is now proven to be utterly corrupt

      A country needs to close the central bank, and Issue its own currnecy via treasury as debt free money. However this is still subject to the whiles of people who will sooner rather than later print too much thus detroying the currency. That is why we need a return to commodity money and a ban on fractional reserve banking to limit the currency (real money now) in circulation.
      Silver coin protects against inflation and is the peoples money of choice.

      • wills

        Yup. I reckon paper notes / claim checks / fiat money can work. Anchoring it too precious metal / real money is an option.

        That said I reckon we ought to try what we have now except reverse it into public credit as opposed to debt based money and experiment.

        Human nature will introduce a few bumps, but, I rather suspect with the technology and infrastructure on earth sovereign money issued through a fiat based system may make everyone richer than their wildest dreams.

        • Tony Brogan

          Unlimited printing of paper money is a delusion that will lead to chaos and economic destruction. Rampant if not hyper inflation.

          Paper money can only work if the note is fully backed by commodity money. One for one.
          That is the only way to prevent excess printing.
          There is no need to increase the supply of money in an economy. It needs to be in fixed supply to retain its function as a means of exchange, there is no other value to the money than as a means of exchange. People get wealthy not by increasing the money supply but by producing more effiently so that each hour of labour produces more. Then the whole of society is better off.
          Commodity money regulates its own value as it is used as a weight of money of a given purity. It remains the same weight both before and after the transaction.
          We should not be pricing gold and silver in dollars but dollars in gold and silver. that is, how many ounces do I need to by one dollar of currency. It used, not long ago, to be 1/20th of an ounce and now it is 1/1682nd of an ounce.
          Now you see how worthless paper money has become compared to real money.
          Using paper by itself is a recipe for disaster in the long run and here we are.
          The banks have deluded us into allowing them to charge for the currency when it should be free, which makes it all worse as we have a debt as well as inflation.
          Of the two, tresury notes issued into existance as a means of payment are better than notes LOANED into existance as a debt based instrument in favour of the banks.
          money is not the preserve of the state. True money is unresticted and private property.

          • wills

            Tony,

            I am not investing any value in paper claim checks / fiat paper / currency.

            I know precious metals IS money. Gold and silver IS money.

            I know.

            But, we can operate a public credit system using a fiat paper money system

            The elites are not the only dudes who get to use paper money.

            We can too.

            But, we can use it without introducing debt behind it.

            I know the supply maths.

            It is possible to do fiat paper under a public credit system.

            People will adapt and I can see that it will work.

        • Tony Brogan

          Hi Wills
          i do not mean “to preach to the converted.”
          You are right that it should work. Paper issued by treasury without cost and not as a debt to the people.
          Pro tem as an intermediate fix I can see its use.

          There is no example from the past that I am aware of that has been successful in the long run. I read where the chinese tried it a lot over several hundred years and after the collapse of 3 dynasties went back to commodity money until subverted by western interests in the 19th century.
          Cheers
          Tony

      • coldblow

        Wills, Tony

        You might find this latest post by Hudson of interest:

        http://michael-hudson.com/2012/03/federal-reserve-system/

  20. DC

    Having Watched Niall Ferguson’s series on china some thoughts occur.

    Have we seen this before?

    Surely the rise of Japan in the 70′s mirrors what is going on in china at the moment. Remember when Japan was the driving force of the world economy – second only to the US. Its manufacturing was state of the art, it had cornered innovation through applied research (improving products that were designed in the west but whose true potential had never been realised.)

    It had a stable political system, a non diverse cultural environment and population and a well educated workforce.

    Yet look at the problems that beset Japan Today.

    http://www.zerohedge.com/news/chinese-business-media-cautions-jgb-bubble-ready-burst-anticipates-40-yen-devaluation.

    The Idea that china will be the new master of the universe is a bit farfetched in my opinion due the following reasons.

    1 State controlled economy – masquerading as an open market economy.

    2 Ethnic diversity – leading to paranoia when things get tough.

    3 China faces stiff resource competition from its neighbours most of whom regard it with suspicion.
    (Vietnam, S Korea Japan Taiwan, etc )

    4 The lack of a truly globally traded currency – and the demands from other nations that its artificial currency peg to the dollar be changed.

    5 environmental issues

    6 China is extremely sensitive to an Asian downturn – when you have 1.2 billion people to keep happy, this is a pressure cooker – maintaining 8% growth per year to ensure all are kept under the umbrella of the party – good luck with that.

    7 Chinese foreign investments (colonialism) – will end in tears after much distrust, rancour, corruption, and eventual upheaval in the resource rich countries it currently “partners” with.

    8 Chinese state corruption – party officials who are corrupt to the core and run provinces like fiefdoms. China is not the west and that has advantages and disadvantages — in my opinion the latter outweigh the former by a good deal.

    The world is beset by debt like never before – The real winners will be those nations that can live within their means – after the Truly great credit event occurs!

    • Adam Byrne

      When might this event be DC?

    • Tony Brogan

      Good day DC
      “The world is beset by debt like never before — The real winners will be those nations that can live within their means — after the Truly great credit event occurs!”

      And those individuals who live within their means too.

      Mr Macawber (not sure of the spelling)in David Copperfield,Loosely quoted, “Income 20 shillings, expenses 19 shillings and sixpense, happiness. Income 20 shillings, expenses 20shillings and sixpence, misery”

  21. straboe1

    US companies employ 240,000 people in Ireland. American planes involved in illegal wars were permitted by our government to use Shannon. Our government were afraid of offending the Americans, in case they would start withdrawing these jobs, thus the increase in unemployment would undermine our democratic government.
    Our government is endeavoring to get the Chinese to invest in job creation in Ireland. Supposing they are successful, will we be then in the position to have to comply with Chinese foreign policy so as to maintain these jobs? One can visualize a situation where would be caught between American and Chinese policies, whereby no matter what we do we would offend one or the other, and probably lose jobs. Can we say that we are an independent country/ I don’t think so, and the more we pursue the policy of FDI, the more we will lose whatever independence we have left.

  22. There is one glaring problem with this article .. it is poor and could have been penned by a 13 year old

    I could have wrote it while drunk and so could anyone with half an ounce of intelligence. No doubt the lickers will disagree and flock as always but this sounds like a press release for Enda’s Chinese trip

    You are flying the flag of hopelessness and sound like the psychotic and desperate General Custer. Just stop it will ye and show some humanity in your writing. Otherwise you are in danger of becoming a robot. An automaton programmed by god knows what master

    Really David. Fuck I’d love to know how much writing pays because it must surely be worth it. And you say you can’t get work in your own country. Come on pal who the hell are you kidding!

    This article coincided with Enda’s visit to China. Coincidence?

    Come off it. You are surely having a larf. You sound like the boy waving the green flag even though the team is five nil down

    Get a grip

  23. The more I think about the article the more I hope you redeem yourself in future David but I reckon you are well and truly fucked (and know it yourself) and frankly I would not miss a wink if that was the case

    Some upcoming tiger will replace you. Gigantic intellects like Laura Noonan must give you nightmares. Right now you are out of touch, totally. No one gives a fuck about what is happening in China

    Your writing makes me think, for days at a time sometimes, so don’t be pissed if I decide to come back and give it both barrels after thinking about things you say that don’t hold water. Still you are the only Irish journalist I enjoy reading (the majority are complete assholes) and I like to follow your progress and the posters on the forum. It is all good stuff

    Ye are a Scotty like me and I know you can take harsh words and that you are prepared for honest talk and that ye never censor your forum. Respect there

    Like Birtie you are a reminder of a glorious and delinquent past and in danger of quickly running out of rope. You have sold out and it is amazing that no one sees through it. Come on lad you are dealing with men here but you choose to communicate like a boy with fancy metaphors and colourful characters like breakfast roll man. It does not cut it any more and is like Sunday World journalism and you know this very well. It makes you sound elitist, populist and like a privileged middle class tosser who needs a word in his shell. Edward R Murrow in reverse

    After reading this article I see you as a figure of comedy who writes for the crack and the cash. The little red headed lad who wants to take on the planet but who has no cast iron plan to speak of and bank account to to back up the rhetoric. So we are all going to thrive thanks to China. Explain that please. Why, How, When and Where?

    Like I said above if you and the Apprentices were worth the hot air ye spout then youth unemployment would be zero

    We will remember these times and tell our offspring all about the good guys and the bad guys and the psychos and chancers in grey suits. We will also be told about the massive intellect of gangsters like Pee Flynn

    We are on the verge of something seismic happening on our own shores without worrying about fucking China!

    Where is your mind bhoy? Can’t you sense the rumbling anger and silent seething rage all around you? Silly question I know. Sometimes I forget how insignificant and powerless I am. I gotta get my mind right boss … shaking the bush here boss …

    The people of Ireland right now have more power than any nation on the planet to make a real difference once and for all. You could be calling us onto the streets of Dublin in an Irish Spring but your heart and your head is not with the masses. You chose to talk about China when Enda was visiting that bastion of republicanism. It is pathetic ostrich like behaviour. In fact it is shameful

    I feel that you have insulted the intelligence of your readers and that is just my opinion

    Sorry pal. I will always stick up for you when you merit praise, as you do very often, but on this occasion you flunked it old bhoy and you flunked it bloody good

    Then again who the fuck am I to argue to aginst someone who is on the tele?

    • Tony Brogan

      Well Pauldiv
      You are on a rant tonight, without sleep too.
      but I have to agree with you on the following as well as other items.

      “The people of Ireland right now have more power than any nation on the planet to make a real difference once and for all. You could be calling us onto the streets of Dublin in an Irish Spring but your heart and your head is not with the masses.”

      Where is the leadership and suggestions for solutions. Where is the commentary on those who have ideas. where are the arguments in support or the reasons against.
      As I said above in anther post. It is all observation and warning and no solutions.
      Your economist’s training has poluted your mind or you are afraid to rock the boat as you could be fired from your job.
      Keep writing for the press but here on the blog get to the real issues and hammer out a solution. People want action not rhetoric at which you are brilliant.But talk is cheap.

      As a small indepenent nation Ireland must reclaim its sovereignty. It gave it away to the EMU. Several times I have stated that but you are silent as you are on many things. Ireland is uniquely placed to assert itself in the international community as a leader in the 21st century.

      We are grateful for your blog but you are in danger of being abandoned as frustration sets in. you are capable of so much more. you could aid the people to a solution. The times demand it.

      Respectfully
      Tony

      • Hi Tony and Pauldiv,

        Maybe you are both right, but believe me I do not have these leadership qualities you seem to think I have. In reality, I am quite reserved and a little bit afraid of crowds.

        All the best

        David

        • Dorothy Jones

          …I am quite reserved and a little bit afraid of crowds….

          :):):)

        • Tony Brogan

          Hi David
          Thanks for leaving the woodshed!
          It is not that I expect you to go marching down Dame St. But
          Issues are raised and ideas presented to which there is a dead silence from you.
          you have some opinion on what you think might work for a solution, so join the debate a little more with some economic argument for what may or may not work
          It would centre the debate on solution to the crisis rather than interminable meanderings that are a waste of energy.

          Best
          Regards
          Tony

        • You are not a political person and most of us realise that. You have hinted many times that you want to be an economist and not a political greaseball. That is why your integrity is still in tact and will remain so. Stay well away from Irish politics. They are waiting to hang draw and quarter you

          You are a human being and a nice one and I always see the human side behind the balsy entrepreneur … I was never great at spelling long fancy words but I managed it lol and I am sure some some testosterone filled buck will put me right in a flash. Testosterone is the true enemy of all young men you kmow! It over-rides the brain and critical thinking

          Still not as sharp as Laura Noonan mind you but who could ever live up that that sort of intellect ha. A colossal temple of human and historical wisdom that no doubt makes even the the red headed one run for cover when the alarm sounds in the morning. Red Hugh would have have restless nights if he know the big L was coming on the morn

          It’s like comparing Leeds United v Sligo Rovers. Pish easy and simply no contest. A stroll in the park where you show no respect. The Bertie Auld of Economics v the lost ones

          You are on the ball big time, most of the time, and this was a great article. I feel that Irish people want to hear the whole shocking truth and are ready to face the music. We are not slaves and are not conditioned so but the ‘Indas’ look upon is like we are a shower of ignorant fucking tramps. Fuck Inda

          ‘Ye voted for it’. Have you ever wanted so much to pish yourself laughing? These people are worse than the British with their sense of comedy and entitlement. You would love to slap each one of them out of their chairs and send them packing on a prison ship to antartica. They are the Irish equivalent of Prance Phillip and just as fucking despicable, nauseating and freeloading

          Ireland could be the spark that ignites the western spring. Who knows? T’would be amazing if it was achieved by total silence and not one rioter is sight. Think about that for a second. Amazing possibility isn’t it? Silent defiance. Omerta on a national scale. WHeesht! Say nowt!

          People who ask you to lead are not thinking straight David. You know your position and anyone with any sense will know that you are no gunslinger. When it comes to economic advice though you are THE man!

          I hope you are smiling this morning and all fired up and ready to get down to some great writing and uncover the deceit that has so many Irish people in a trauma. Stunned is the word to use. It’s like they have all been zapped with ray guns and doped to the point where they have lost the basics of critical thinking. That is a debate for another day

          If truth be told we are not a people naturally inclined to right wing thinking. We are not and it’s a lie. We are more humane than that. To say otherwise is to the deny the essence of the Irish soul and the Irish character. We are not capitalists and never have been and never will be. Our Catholic teachings are pretty warped

          We are not left wing. So what the fuck are we all about?

          We are socialist in nature and you all bloody well know it. Just that we got so busy being conditioned to be selfish lost out natural principles. You want monsters like Obama and Romney then go ahead.

          Good luck Irish Brothers

          Freedom!

          David I hope you next article rocks like this one.

      • Good post Tony. You gave me something to think about there. Your other posts have done the same and I hope you keep writing as I know that you have a sharp mind

        It’s refreshing to see someone who knows the real story and who is willing to say what he truly thinks

        Did you ever hear of Jim Brogan?

      • Sincere Apologies. Sorry Tony and sorry David

        I was was pished when I wrote it and wish I didn’t

        I sometimes post things when I should’t. I am human and am glad I am. I could have done it better better though

        Still I have done it before and will probably do it again. David knows the crack by now

        I hope you guys keep giving us something to thing about

        Hey where is that fecker Georg and that cocksucker Col?

    • Johno

      The people of Ireland right now have more power than any nation on the planet to make a real difference once and for all. You could be calling us onto the streets of Dublin in an Irish Spring but your heart and your head is not with the masses. You chose to talk about China when Enda was visiting that bastion of republicanism. It is pathetic ostrich like behaviour. In fact it is shameful

      Why does David have to lead us onto the streets? I have been reading here for a few years and its a great read and some great posters on here but I have never read that David wants to lead an ‘ Irish Srping ‘ as you call it.

      I think its shameful that you are pinning all your hopes on one person. Why dont you fucking lead us? Why are you waiting on someone else to do it for you. I remember in and around the general election David said we could have an Irish answer for an Irish question. And everyone ( not on this site ) were hoping that David would run the election and save us. I remember listening to today fm , he was on the Ray Darcy show , and people texting in very unhappy David would not stand in the election.

      But what I got from it was David was saying we as a people have the answer. David , for whatever reason , doesn’t feel he is the right person for it. And you cant force that sort of thing on someone. He cant be what you want him to be.

      Maybe Im missing the whole point of your post , like many things on here they do go over my head a bit , but you sound like your been bitter because David is not doing what you want him to do.

      You get onto him about ‘ selling out ‘ and writing about Kenny going to China. Im sure where David lives the price of a loaf of bread is the same as it is where I live. So why should he not get paid? You may disagree but Kenny going to China is news and if David wants to write about that or anything he wants Im sure he can. Or would you like him to ask your permission on what he can and cant write about? Or maybe we should censor the bits you dont like out? But David doesnt censor what you can write about so maybe you should afford him the same?

  24. Reality Check

    @Pauldiv “shaking the bush here boss”
    I knew I heard that before
    http://www.youtube.com/watch?v=G7QwTTn3FIk

  25. StephenKenny

    Off-topic perhaps, but an excellent and clear presentation of the situation in the USA.

    http://www.zerohedge.com/news/how-fund-government-year

  26. wills

    Folks,

    I think there is a a lot of misunderstanding in regards to debt.

    Debt is simply an accounting technology in the abstract.

    Debt technically is an empty value.

    It has no energy.

    Debt and wealth are not equivalent.

    The crisis is NOT about debt.

    David’s article above is expanding out another reality and weaving it into tapestry regrading Ireland and its economy.

    Not its accountancy.

    This is in fact more real than focussing all energy on debt debt debt out of a context.

    The elites, the system operators use debt.

    USE it to irrigate monetarism and run their oligarchy system.

    They got to use something.

    But the wealth created is there irrespective of the debt.

    We material wise have never been so well off.

    The debt and its accountancy shell game is numbers on a page.

  27. StephenKenny

    To Admin.
    It looks like Prof William Black’s website “New economic perspectives org” is black listed. Is this correct? If so, could it be removed from such a list?

  28. wills

    Folks,

    Rioting on the street is a waste of time.

    There is a system of running economy.

    Penetrate its maze and hall of mirrors and work it, use it, its there, use it and play their game back at them like they play their game at us.

  29. BrianC

    Hi David

    Once I thought it would be a good idea for you to get elected but now I do not believe such would be in our greater intersts.

    If you did go native who would replace you to hold up the mirror on that shower of eejits FG Labour and FF(most others excluded) in the Dail.

    Keep holding the mirror up. Kenny is an absolute moron with his antics in China. Won’t be long before they own us too by the looks of it. Nice photo of Denis and Enda together in NY. They were in the right place to transact business.

  30. Spotswood

    Jim Chanos has pointed out that China generates very little of its GDP (less than 10%) from exports while 70% is generated from state controlled infrastructure & construction spend..following that logic, what has driven China`s growth is not trade with the west. what real wealth does China create?…it doesnt have high-end innovation in tech or pharma and it doesnt have much natural resource wealth..

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