August 13, 2012

China at a crossroads

Posted in Sunday Business Post · 108 comments ·

Have you been following the murder trial in China, where a British businessman was allegedly killed by the wife of a man who was until recently tipped for political greatness? His fall from grace on corruption charges has been made far more vertiginous by the trial of his wife. You can’t say they don’t know how to destroy political opponents in China.

The trial, for those people who watch closely, is all about the power struggle at the heart of the Communist Party to see who is going to be the next Emperor and, possibly more importantly, who is going to be whispering in his ear.

As we wrote here in the column in June, the background noise to this power struggle is a slowing economy. The Communist Party need economic growth because, having dropped all their Maoist rhetoric, all they have is economic growth.

“Equality for all” has been replaced by the slogan of “prosperity for all” and if they don’t deliver they are toast. So the party will do whatever it takes to get economic growth going again. Unlike Mario Draghi, when the Politburo says it will do whatever it can, you can rest assured that it means it.

For foreign investors, who should be mindful of the quip that “you can make anything in China except money”, the slowdown should be watched carefully.

As we pointed out here a few weeks back, the economic evidence in China is screaming a sharp contraction.

Last week, we saw China’s export data for July which makes the “slowdown” there look like something else: a collapse of the export-led economy. Outbound shipments grew by just 1 per cent in July, after an 11.3 per cent rise in June.

Meanwhile, in the domestic economy, new loan growth for July was 540.1 billion yuan ($85 billion), compared with 919.8 billion yuan in June.

What is interesting is not so much that a supply-side, investment-driven boom may be coming to an end based on an inability to sell large quantities of everything to everyone because everyone doesn’t have the cash any more – what is noteworthy is the impact Chinese economic data are having on the rest of the world. Following the news, stocks in Tokyo, Hong Kong, Shanghai and Mumbai all fell back. European bourses are down too as are American ones.

But we shouldn’t be too surprised by this reaction. After all, China is the world’s most populous country, fastest-growing major economy, largest manufacturer, second-largest consumer, largest saver. It is also the US’s banker and the world’s largest holder of money, with foreign exchange reserves of $3.2 trillion (more than double those of Japan and three times those of the EU).
A major slowdown there – which is now clearly coming – will have serious ramifications for asset prices all over the world. It will be particularly serious for commodities whose prices (with the exception of food prices spiking up now due to the drought in the US) have been buoyed up by Chinese demand for the past few years.

Of course the most destabilising aspect is the politics of a slump in China. We are talking here about a country with 1.3 billion citizens. The problem for China is that we, that’s the rest of the world, are not buying. Chinese exports fell by 7.6 per cent in July and exports have fallen for three out of the last four months. Producer prices are falling too and the trade balance in July was $25 billion as opposed to $31 billion in June.

Looking out from China we see that manufacturing output in India was down 1 per cent, too and in Brazil output is down 4 per cent. In Europe, the Bank of France has admitted that the economy there is contracting.

In Germany, industrial orders are down, and now the country runs the risk of an inflated local economy driven by hyper-low interest rates, but a fall in the muscular side of the German miracle, the industrial sector.

Taking all this together, we can see that the global deflationary trends are broadening and deepening. So what should we expect next?

This is where we come back to last week’s article about the reaction of central bankers to all this. We spoke of the “risk on” and “risk off” trade. These are terms used to describe the reaction of central bankers and the investors who watch them to slumping growth. The minute we see economic weakness, major central bank slash rates but it remains to be seen whether all this cash finds its way into the real economy or merely finances yet more short-term rallies in financial markets which peter out.
So we can be sure that the Chinese Politburo is standing by with an avalanche of printing-press money. But will it work? Or will it, like so much of the other monetary stimulus, evaporate in another bubble in asset prices somewhere, enriching hedge fund managers and bankers but having precious little impact on growth, let alone society?

In China, we know that the miracle was investment-led. Anyone who has been there will know of the mega-sized building projects and the thousands of Western firms there – few of whom have made any money. But it is all investment. When investment falters, cutting interest rates doesn’t help you, and may actually may make things worse – if it leads to more investment it will lead to more overcapacity, falling property and asset prices and bankruptcy. So we can expect a new sea of cheap money washing over the world’s financial market, this time for a source that used to be the key saver.

With more European problems in the autumn, Spanish short-term yields are up above 4 per cent again this week, the US election in the balance and now with a slump in China, we are in for a rocky six months to Christmas

  1. straboe1

    With Germany and China in an economically precarious situation, imagine the following. Both countries give financial assistance to the countries in financial problems on the following basis. That each country produces a viable plan which will lead to their long term recovery. The first ten years with zero interest, the following ten years with one % interest, the next with two %, and each decade after that the interest rate increasing by a further 1% . Other than lone forgiveness, this to me seems to be the only way that the world economic outlook can appear to look hopeful, and this would be in the long term interest of both countries as both need the other countries to be able to buy their products.

    • padser

      ….and no wars ensue! We have inadvertently or otherwise enriched a nation(s).China’s benefit will be immense! All the money those poor Chinese farmers saved’ will be paid back a thousand fold, and then they will have a voice…and then get rid of the “Reds”…..and maybe in half a century or so we will be selling cheap goods to the affluent Chinese!!!

  2. molly

    China no matter what we always seem to end up back there.
    The system there is to mass produce and in some way controll the world.
    China must now realise the mess the world is in now and pumping money into your trading partners to help us buy there good is a circle that destroys us.
    We need real change in Ireland and I want to know who’s going to provide this?????

    • bonbon

      It will not be given on a silver platter – you have to fight for it. Fight the apathy, the pessimism, and especially the cute short sound bites.

      As Arthur Griffith said, political independence is meaningless without economic independence. It is still true since that 1905 Sinn Fein speech.

      • molly

        What is the current government built on ,what they preach is a long way off what they do for themselves and there croneys and i believe there is enough people out there taking the necessary steps now not to be conned any more and have taken them selves out of the. Rat race .
        For sure certain things have to remain and there’s a hell of a lot of changes people can make to stop supporting the high lifestyles of the government and all there croneys ect ect.

  3. tubdoc

    The ponzi is goosed! Cheap money from everywhere has done nothing only increase debt levels and therein lies the rub. System failure is imminent.

  4. michaelcoughlan

    ‘Or will it, like so much of the other monetary stimulus, evaporate in another bubble in asset prices somewhere, enriching hedge fund managers and bankers but having precious little impact on growth, let alone society?’

    Hold that thought in the above passage. Did you hear David the story about the floppy haired highly talented economist at home with his kids playing the board game monopoly? The local council had to sell the playground to pay for cutbacks because the government was using the money to pay loans taken out to save bankrupt banks. Being very insightful our economist decides to change the rules slightly to make the game more realistic. He introduces a new position called banker into the game and a piece called an armoured car. He then allows his kids to make the first move. When his son lands on a street our economist friend tells his son the the price of the loans he received from the banker in the game is all the profits his son will make in rent no matter how long the game lasts. His son replies thats not fair dad to whic the economist responds it dosent matter because I also control the armoured car and you will have to do what I tell you. He then explains to his son that that in fact is what is called a militraised paper economy. All of the productive capacity in the economy is transferred from the producers (his son) to himself the banker.

    His son then asks what do the bankers do with the extra cash? Our economist friend then explains to his son that this money is used by the bank for speculating in a hedgefund where no wealth is created at all for the sole purposes of enriching the few people called hedgefund managers. In other words the whole productive capacity of the world is being used not to benefit humankind but is used to grow by the same percentage the size of the worlds hedgefund bubble to allow a tiny few hedgefund managers get bigger and bigger bonuses!

    The world David at the moment is just lilt the matrix film with one exception. Instead if every human being being harvested for the electric current our bodies produce to grow the virtual world in the film every human being in our teal world is being harvested to grow the size of the worlds hedge funds which are now more than 11 times the size of the global economy!

    And guess what David? For all your articles about speculation in housing not a jot about speculation in hedgefunds!

    • Michael,

      I’d have these outfits closed down if given half the chance. I like the story too.



      • Tony Brogan

        Why not shut down the central banks. They are the source of all the paper ponzi money in the first place, they manipulate the interest rates, they distort the real economy. They are the source of the economic problems. There would be no hedgefunds to close if the economies were not pumped by the central banking system.

      • bonbon

        Split the off from commercial banks as Sandy Weill now says after breaking that rule in 1998. We need functioning banks, fixed exchange rates, and huge projects that these private bankers will never invest in.

        • Tony Brogan

          But you love Rothschild sponsored Hamilton’s central banks that steal the lifeblood from the people.

          Fixed exchange rates lead to violent adjustments of sudden revaluations with major disruptions.

          Huge projects like the empty cities in china and the roads and bridges to nowhere.

  5. Puschkin the Black and White Cat

    Interesting! , Just yesterday I suggested an idea that is as old as the hills, i.e. that there cannot be stability without sustainability. The basic gearing of modern capitalism and banking requires a boom bust cycle to reward the players the huge spoils they hunger for. Modern banking is just 200 years old and the robbery capitalism we seen now only began in 1987 following the lifting of regulations by Thatcher and Reagan. So, here we are up the pooh creek without a paddle. In history, periods which appear hopeless usually end in war, a truly frightening thought.

    As for the Euro, the airways have been quiet since June and I guess it will all flare up again around the weekend of the 8th of September. The Euro crisis is slowly moving towards as climax of sorts.
    Firstly we must be shown hell! , i.e. we must be given the picture and real threat of complete economic meltdown then we will be show salvation and then asked to vote again.

    In the face of total destruction we will be given the choice of complete write-down of bank debt in exchange we will vote away all fiscal sovereignty all political sovereignty and all foreign policy sovereignty, as a yes nation we’ll vote yes again. I guess this vote will be three years away (June 2015?). In the meantime, starting mid-September 2012, we will be softened up by the continued series of Euro crises and threats. Each crises getting worse, Spain, Italy and towards the end, France. We will be scared into a Europe federal state where voting rights (as in the Fiscal Treaty) will be allotted by the amount of money a nation places into the kitty.

    Makes me think, following the yes vote of 2015, will we be brash enough to have a 100 year celebration for the 1916 rising. I bet we will, with our government ministers getting extra expenses for attending the “solemn” re-affirmation of our national aspirations, Noonan may go as far as shedding tear of national pride.

    • padser

      Well said…and I don’t mind saying in all of the shite talk on these forums… hit the nail on the head!
      Yes the regulations were lifted – but Thatcher & Reagan were only part of a much bigger mindset (possibly G8,G12,G20)! Imagine the EU being imposition-ed by its Counterparts as to the legitimacy – of its quasi-federalism. Faced with a multi-speed Europe how the hell were, the EU to get all the Rats on to the ship before it would burn?
      As to your notion of war….”Hopelessness” in this context is subjective – lets just stick to the notion that all the player’s, knows each others motives & next move.

      R.I.P 1916-1973

  6. Puschkin the Black and White Cat

    michaelcoughlan , I liked that story ! , nice thinking , that’s the way it works.

  7. Deco

    China seems to be running into trouble. And I expect similarities between what happened in Thailand in the 1990s and China in the net five years. China opted for a stimulus program when the crisis emerged, and some of this was no well thought out. In Austrian terms, China is guilty of malinvestment. In Keynesian terms there is no such thing. They made the wrong assumption. However their good investments will reduce the cost base of China.

    In other words, ten years from now, it have been dealt with.

    Longer term China is going to continue to exert strong competitive pressure on the West. This means that the West will not be able to work down all those debts.

    I am more concerned about the West than China, because China will push through it’s problems. The West is stuck in a quagmire, and is using politics to fighte economics – and losing.

    • Philip

      China does not need a stimulus. It needs a restructure. It is over capacity and no one is buying. Full Stop. It is not absorbing its own produce.

      We are looking at a lot of events starting to unwind in the next 6 months. These time scales are just too fast for any orderly restabilisation.

      Frankly, I think there is no plan.

      • bonbon

        Utterly wrong, text-book Adam Smith waffle.

        China is exposed to the globalized “market”, but knows full well the danger. It is now applying the New Deal, Chinese of course, a lesson for any idiotic Democrat or an insane Republican nominee such as Ryan. Insanity reighs, and rages across the Atlantic. Avoid the plague!

  8. Philip

    China is sitting on a lot of US treasury bills. If it dumps them, they kill the biggest buyer on the planet.

    Commodities heading south as well – barring energy and food.

    Looks like we have a prisoner’s dilemma on many levels.

    Exactly how will the air let out of this pressure vessel?

  9. Tony Brogan

    Your stats reported are based on a month to month comparison. You do not provide the year over year longer view. The “Contraction” you report is still an expansion, just not as big as the previous month.

    As far as I have read, the Chinese economy is still growing at a 7% per annum rate. The Chinese population have about the highest savings rate in the world at I believe a 30% of income rate. They are not in debt like the westerners.

    China has in the last 20 years invested in basic material supplies throughout the world but paticularly in Asia and Africa. They have access to mining production in exchange for infrastructure and loans. Only more recently have they been attemting to invest in The West, Canada, Australia (included as ‘west’.)
    China is the largest producer of gold and absorbs all its own output. China is now the worlds largest buyer of gold in addition.
    Chinese citizens are allowed to save in both gold and silver and are doing so.

    China understands the real economics of the world. They have milked the western ‘cow’ dry. They will use their economic power to ascend to the dominant position of number one. There is no need of a military conquest.

    China will be at the forefront of the move to a more stable monetary system and it will be commodity based I have no doubt. China has experimented with paper money at least four times in the past. Each time the disintigration of the economy destroyed the dynastic power of the time. The current crop in the politburo are not ignorant of their history.

    I do not worry about the stability of the Chinese. I worry about the reaction of the US military industrial complex and how they will use war as a pretext for solutions to contrived emergencies. We see it already in Iraq, Afghanistan, Libya, Iran and Syria.Orwell’s perpetual war for perpetual peace.

    I worry about what the monied elites of the world will conjure next to destabilize us. Beware the Rothschilds and close fraternity. They have created wars in the past and will in the present too. They will assinated politicians and anyone else who attempts to thwart their control over the money system.It is their modus operandi to maintain control.

    They also own and control major outlets of the media and wire services and are thus able to get their message out with regularity. Disguised propaganda.

    Now I have returned in a circle to the international bankster community. The drug runners and country rulers. the destroyers and controlers of sovereign nations. Perhaps even to the controllers of the food supply.

    (how about a piece on how Monsanto is poisening the earth with roundup as the herbiside sprayed on GMO crops. The herbicide is absorbed into the foliage and thence into the flesh of animals including humans. It results in sterility after 5 generations in studies done with lab animals like guinea pigs and mice.Ban roundup!!)

    David you must face the real underlying problem. It is known as the ‘follow the money’ trail. You sniff around the issue but you have not honed in on the proper trail as yet.

    There will be a mighty struggle between the West and the East for the control of the worlds resources. Russia will be a player. A line in the sand is being drawn in Syria, and Iran.

    Syria is too important to Russia to have Russia allow the loss of a navel base and be further surrounded. Iranian oil is needed by China and India.

    Into the mix is the annoucement of a potentially vast oil and gas reserve in the Eastern Med. Israel, Lebanon, Syria, Turkey, Cyprus and Greece are all fighting for a share.

    David you are using alarmist statistics. There are other more meaningful events to focus upon. For the west to survive and prosper we must be rid of the central banking system. Why not follow that trail for a little way. It leads to all other major issues.

    Best regards


    • bonbon

      It leads to the truth about Andrew Jackson who said exactly that of Hamilton’s First National Bank of the USA. This is an argument from the 1830′s!. Jackson did succeed in looting that bank creating the Wall Street game. The calumny was beyond limit.
      Today the Dems have a Jackson gathering with such populist nonsense against FDR, the very Dem who split the banks and stopped the Depression.

      • Tony Brogan

        The usual bullshit baffles brains.
        Why don’t you use structured sentences that have a subject , object and predicate. Then I might understand your intentions.
        what argument is from the 1830′s. This is my argument. I do not spend years stuying who said what so i can quote historical names and jargon that agrees with a point. What did andrew Jackson say?
        What is a Jackson gathering and where is FDD an issue with anything said?
        You spout bafflegab and I tire of it. It is one thing to follow an idea or argument but another to have to decipher what you means before a question can be answered.
        Lets stick to the point and talk about today not 100 or 200 or 300 years ago unless it is relevant today.

    • bonbon

      There is no need to worry – the policy of certain elites is widely publicized. It’s an in-your-face conspiracy. Take Al Gore, or now Dr. Schellnhuber, CBE, or Bill Gate, ans especially a certain Royal. Take various “scientific” agencies claiming carbon is poison!
      And yes Monsanto has turned the Green Revolution, to feed 9+ billion into a perverse attack on our very food itself. China has a new hybrid rice, modified genes, which is essential. I hope they deal with Monsanto. Apparently India’s elites have not.

      The target is massive population reduction to 1-2 billion. Hence all the talk about “scarce” resources, global warming (and Carbon Certificates trading for billions). The method is clear.

      This is why the Romney sidekick Ryan, a totally insane austerity freak (of the Austrian School) is a direct thread to the US and the world.

      • Tony Brogan

        Sometimes you talk some sense but then others you are LaRouched (gratuitous references to the austrian school are just an annoyance that lose you credibility)

  10. Neurosis of Economics

    From the 15 th August a Moon WOBBLE commences and peaks on the 23rd and to finish on a Blue Moon 31st August .

    Neurosis is more apt for this article .A Crossroad is too optimistic as it determines the crossing of the Rubicon .

    Neurosis is more akin to a Worm Hole where there is only one direction …SINK.

    • Halo Effect

      Keep Making me laugh,,,,,,,Neurosis is a class of functional mental disorders involving distress but neither delusions nor hallucinations, whereby behavior is not outside socially acceptable norms.[1] It is also known as psychoneurosis or neurotic disorder, and thus those suffering from it are said to be neurotic. The term essentially describes an “invisible injury” and the resulting condition.

      that sums it up….

      • Time arrives first , prognosis is a second fiddle and inspiration can only be heavenly .

        • Tomorrow on it’s arrival
          Wear a Coat for your Survival

          If it is Wet I have won my bet
          No longer need I fret

          Watch the skies all arise and ask who mighty you
          And if you dont hear already then you are blue

          Hold still in a moment for nothing inside you has changed
          Only the world around you and the words you exchange

  11. Deco

    This is why the West is in a bigger mess than China.

    It also shows us that Monti (unelected) as Italian Prime Minister might be even worse than Berlosconi…

    Italy needs a massive amount of internal reform, and a massive retraction of it’s massive inefficient bureacratic state system.

    • bonbon

      Italy needs a national bank, major investment for the Mezzogiorno, and to oust Monti. The best way to do this is with its own Lire.

      • Deco

        Good man. You tell them how to do. Write a letter to the Italian news media, and let them know how it should be done.

        • bonbon

          You just said “Italy needs a massive amount of internal reform, and a massive retraction of it’s massive inefficient bureacratic state system”.

          Right from Monti’s horses mouth!

          • paddythepig

            Deco is 100% correct.

          • Deco

            Alright then – in that case we will leave it to you to tell the Italians that they are better off without internal reform of Italian bureacracy….

            Monti is talking the talk, but he is fixing nothing. It is all a veneer.

  12. hibernian56

    Been trying to log onto the web all day, unfortunately I’m with so they provide “Mobile Broadband” when they feel like it.

    Knowledge Economy my arse. Some guy on started a petition, I think we need more of this. We are being constantly ripped off for services we are not receiving while the regulators are out to lunch with the cowboys.

    • 33square

      why are broadband providers (mobile phone companies) allowed to advertise broadband showing the maximum attainable speed instead of a minimum permitted speed? should they not have to provide a minimum level of service? and reduce customers bills accordingly when they fall below that level of service?

      that petition says “We expect THREE to provide this service and for it to be available at all times”. Is that in the contract? if not, how is it that THREE(and others) are allowed to sell a service that may or may not be available at a given time without pro rata payment? you pay a set fee each month, but the level of service differs greatly. how was that allowed to happen?

      good business to be in eh? them licenses were pretty lucrative, why didn’t the government provide a mobile network? they couldn’t be as willingly incompetent in providing the service as say o2, three and their ilk ; ). they could have made some money there. again the government failed, or they pretended to… which do you think is more likely?

      another example: I asked o2 that they provide me with a mechanism to stop me from exceeding my bandwidth limit, they said it was not possible. it should be written into their license that they must provide means of preventing users from exceeding their bandwidth limits and entering into crazy-mobile-provider-orgasm-inducing price territory.

      on a side note… poor denis o’brien doesn’t like vincent browne too much… wonder why that is?

  13. rebean

    So China is to slow down for a while. Well welcome to the real world China. I hope its a softer landing than the one in this little enclave

    • bonbon

      Illusions of safety in the “enclave”? Nothing could be farther from the truth.

      • rebean

        Did you misread the blog. What I was trying to say was I hope that they dont fall over a cliff like we did. God help us if they have to endure the contraction that we did. No safety at all in the enclave , I would agree with you.

  14. bonbon

    China has adopted Franklin Rooseveldt’s approach, a New Deal. The Three Gorges is now fully online, and designed with the head of FDR’s Tennessee Valey Authority, Lilienthal, who worked on this. It was delayed by a Europeana export – Communism. Europe now tried to export Eurobonds, and were met with smiles and a church-like silent collection. Poor Lagarde.

    So just look at at the internal projects and the deals signed with Putin of Russia, all last year. They are prepared.

    They are baffled by Japan and Germany’s insane greenie anti-nuclear frenzy. Japan has begun to recover. Korea has pocketed 40 orders, 4 alone for UAE.

    APAC is not EMEA !

  15. bonbon

    One point is correct, a Transatlantic breakdown (forget any illusions of slowdown) would wreak havoc worldwide, especially in China. It is the ultimate economic disaster.

    Add on top of that a major agricultural disaster in the USA, and never forget our food supply is totally globalized dependent on shipping.

    Have a look at Barbara Tuchman’s history of the 14th century .

    It started with a banking collapse (Bardi and Perruzzi derivatives), then a complete breakdown in agriculture. Then the Plague hit a weakened population. Result – massive population reduction.

    China has gone through famine as recently as the 1950′s and 1960′s. The Great Leap Forward produced one.

    Is the United States of Europe a Great Leap Forward? Watch the food supply!

  16. Halo Effect

    Cut and paste from the west propaganda machine or if you prefer lazy journalism —–

    “”"”"”"”"”"”"”"”"Have you been following the murder trial in China, where a British businessman was allegedly killed by the wife of a man who was until recently tipped for political greatness? His fall from grace on corruption charges has been made far more vertiginous by the trial of his wife. You can’t say they don’t know how to destroy political opponents in China.

    The trial, for those people who watch closely, is all about the power struggle at the heart of the Communist Party to see who is going to be the next Emperor and, possibly more importantly, who is going to be whispering in his ear.

    As we wrote here in the column in June, the background noise to this power struggle is a slowing economy. The Communist Party need economic growth because, having dropped all their Maoist rhetoric, all they have is economic growth.

    “Equality for all” has been replaced by the slogan of “prosperity for all” and if they don’t deliver they are toast. So the party will do whatever it takes to get economic growth going again. Unlike Mario Draghi, when the Politburo says it will do whatever it can, you can rest assured that it means it”"”"”"”"”"”"”"”"”

  17. Adam Byrne


  18. Halo Effect

    “all they have is economic” “”"”"”The Communist Party need economic growth because, having dropped all their Maoist rhetoric, all they have is economic growth”"”"”"”.

    ” ” “all they have is economic growth” ” ” 7.6% growth —It’s seem they have everything you want David—–all we have is economic Debts and lots of greed… for 1%

    for those waiting for a climax to end the crisis movie you could work this into to script..
    “”"”"”The Obama administration mounts a “pivot” to Asia following the U.S. Withdrawal from Iraq and anticipated exit from Afghanistan.U.S. Navy to shift 60 PER CENT of its fleet to the Pacific as China continues to build up its military”"”"”…. the USAs “plays” war games with South Korea using North Korea national flag as target practice — provocative…

  19. rebean

    Did you misread the blog. What I was trying to say was I hope that they dont fall over a cliff like we did. God help us if they have to endure the contraction that we did. No safety in the enclave , I would agree with you.

  20. Tony Brogan

    Do not worry about China they may save you from the USA

    The Daily Reckoning Presents

    When They Come For Your Guns, You Will Turn Them Over

    Jim Karger
    “When they come for my gun, they will have to pry it out of my cold, dead hands,” is a common refrain I often hear from the Neo-Cons when there is a threat, credible or otherwise, that the US government is going to take their firearms.

    And, when I hear this crazy talk, I agree with them openly. “You are right. They will pry your gun from your cold dead hands,” which I often follow with the question, “And where will that leave you except face down in a pool of your own blood [in] the middle of the street, just another dead fool resisting the State?”

    This is not a question they are comfortable with, if only because the intent of their saber-rattling was to imply they would fight to keep their weapons, and win.

    Nice fantasy. It’s not happening.

    If the federal government decides to disarm the public, and when the increasingly-militarized rolls down your street after a not-so- subtle request that you kindly turn over your firearms and ammunition “for the common good,” it will be nothing less than suicide by cop to do anything other than what you are told.

    The militarization of US police forces is ongoing and escalating. Many cities and towns now own tanks, armed personnel carriers, even attack helicopters, and almost all are outfitted with military weapons not available to the general public.

    And, it is not just your hometown cops who are getting new boy-toys. The military itself is buying up weaponry not just for use in the current or next scheduled war, but to deal with the likes of you, citizens who don’t seem to understand that the Bill of Rights has been overruled, and that specifically includes, but is not limited to, the right to protest and engage in civil disobedience.

    Also ignored (as if it didn’t even exist) is the Posse Comitatus Act of 1878 which generally bars the military from law enforcement activities within the United States.

    According to Public Intelligence:
    “…for the last two years, the President’s Budget Submissions for the Department of Defense have included purchases of a significant amount of combat equipment, including armored vehicles, helicopters and even artillery, under an obscure section of the FY2008 National Defense Authorization Act (NDAA) for the purposes of ‘homeland defense missions, domestic emergency responses, and providing military support to civil authorities.’ Items purchased under the section include combat vehicles, tanks, helicopters, artillery, mortar systems, missiles, small arms and communications equipment. Justifications for the budget items indicate that many of the purchases are part of routine resupply and maintenance, yet in each case the procurement is cited as being ‘necessary for use by the active and reserve components of the Armed Forces for homeland defense missions, domestic emergency responses, and providing military support to civil authorities’ under section 1815 of the FY 2008 NDAA.”
    And, they are not just arming cops and weekend warriors for domestic purposes. Active duty Marines are now being trained for law enforcement operations all over the world (of which the US remains a part) specifically to deal with civil uprisings, and the US government knows that civil uprisings are coming to a town near you just as soon as the fantasy of a healing economy is shattered, the US dollar fails, and unemployment goes to 30%+ in real numbers.

    And, to you tough-talking Neo-Cons with your AR-15 rifles and a few thousand rounds of ammo, here is the reality: they will take your guns, and no, all your Second Amendment bluster aside, you are not going to do anything about it. You are not going to take on a platoon of Marines with state-of-the-art automatic weapons and the best body armor you cannot buy protected by armed personnel carriers and attack helicopters unless you choose to die that day – for nothing. You will either be in the country or out, and if you are in, you will stay in and you will comply.

    That is your choice… for the moment.


    Jim Karger

    Jim Karger is a lawyer who has represented American businesses against incursions by government and labor unions for 30 years. In 2001, he left Dallas and moved to San Miguel de Allende in the high desert of central Mexico where he sought and found a freer and simpler life for he and his wife, Kelly, and their 10 dogs. Karger’s website is

  21. Tony Brogan

    Hang ‘em high

    Crime of the Millennium

    Jeff Nielson

    As few people in our societies even know, all of the world’s governments have (foolishly) granted exclusive monopolies for the printing of all the world’s currencies (our “money”) to a cabal of privately-owned corporations called “central banks” — given that name because it is a cabal exclusively owned/operated by bankers.

    Understand that the monopoly to print money is nothing less than a license for economic rape. These private banks lend us all the paper that they print out of thin air (at zero cost to themselves). The result is that after roughly 100 years of this economic rape we have (collectively) paid these banks $trillions in “interest” for nothing, and currently owe them $10’s of trillions for nothing. History’s single greatest act of legal theft.

    Indeed, these bankers have stolen such unimaginably huge sums of wealth from our societies that the Thieves now voluntarily return most of the additional amounts they steal each year. There are two reasons for this act of pseudo-remorse. To begin with, with the Little People drowning in debt individually, and with our nations drowning in debts collectively; the Thieves were/are worried that their Victims might actually notice them sitting on top of their mountains of (stolen) money.

    However the second reason — the real reason — is that the countless $trillions that these central banks have stolen from us are literally just the tip of the iceberg during their reign of legal-crime. This private cabal of central banks has not only been given monopolies to print money out of thin air for their own benefit, but thanks to the abominable euphemism which they call “fractional-reserve banking”; they are allowed to delegate their License to Steal to other private banks.

    Specifically, for each dollar that the central bankers lend to their other banker-friends (at zero/near-zero interest rates); these private banks are allowed to print ten more dollars out of thin air, and lend them to the Little People (at higher rates of interest). Thus the central banks don’t mind returning most of the additional money which they steal each year, since their own thievery only represents 10% of the total banker-plundering of the wealth of all economies.

    What is the inevitable result of a capitalist system where every new dollar that is used to fuel the economy is lent into existence? Debt Slavery: the ultimate goal of every (paper) fiat currency system.

    There is now somewhere in excess of $200 trillion in debt sloshing around the global economy, most of that debt being totally fraudulent, in that it is interest paid to bankers (literally) for nothing. Somewhere around 25% of every dollar earned by all of our Western economies is now paid to these banker-parasites as interest on their fraudulent debts. The bankers would like to steal even more, but already all of our economies are teetering on the verge of bankruptcy.

    Greece was already forced to default, and the U.S. (the world’s largest Deadbeat Debtor) is only able to ward-off debt-default by fraudulently maintaining its own interest rate at zero percent. Put another way, if U.S. interest rates had ever reached the same level as those which were inflicted on Greece by Wall Street’s economic terrorists; the U.S. would have defaulted even faster than Greece. It would have required the U.S. government to quadruple tax revenues just to pay the interest on its own (fraudulent) debt.

    Having enslaved us all with debt thanks to being granted their License to Steal, history’s greatest thieves are also history’s greatest hypocrites. Whenever one of our (subservient) governments has the audacity to actually suggest taking a closer look at the bankers’ Theft Monopoly; the Thieves look down their noses, point their fingers at us, and accuse of us “threatening their independence.” Yes, there is no one who places a higher price on his own freedom than the Slave Master. What about our independence?

    The latest example of this supreme hypocrisy comes from (surprise, surprises) Benjamin Shalom Bernanke. Feeling especially pleased with himself after his two-day love-fest with the banker sycophants of the U.S. Congress; B.S. Bernanke chose that moment to launch yet another attack at Rep. Ron Paul — and his “Audit the Fed” bill.

    Bernanke’s specific accusation? As paraphrased by the Corporate Media, Bernanke whined that “the ability to review monetary policy decisions…could compromise central bank independence.” This is by no means a new argument. Indeed, it is the Big Lie which the banker-thieves have hid behind for a hundred years — since it has never had a shred of validity.

    The Big Lie is based on the artificial/arbitrary distinction of all economic policies as being either “fiscal policy” (the realm of government) or “monetary policy” (the realm of private bankers). The obvious fiction here in attempting to create some invisible wall between the two groups of policy-makers is that there is only one economy.

    Pretending that the fiscal policy of an economy can act “independently” of monetary policy (or vice versa) is precisely as absurd as suggesting that a car’s transmission could operate “independently” from the engine. Indeed, this metaphor is very useful since the analogy of the fiscal and monetary policy of an economy and the engine and transmission of a car is precisely parallel.

    As with a car’s engine, fiscal policy “powers” any/every economy, since it represents the physical economy itself. Conversely, monetary policy is merely the throttle (or “transmission”) which regulates the speed of the economy. Obviously neither of these elements can ever possibly be fully “independent” of the other. It is equally obvious in both these pairings which must be the dominant component and which must be the subordinate component.

    With every car, its transmission is clearly subordinate to its engine. It is transmissions which are designed to optimize engine performance, and not engines being designed to optimize any particular transmission. Similarly, it is monetary policy which must naturally/automatically be subordinate to fiscal policy, rather than fiscal policy being designed to cater to the whims of private bankers (i.e. the Thieves). The Tail cannot be allowed to wag the Dog.

    Thus when B.S. Bernanke claims that central banks “must maintain their independence” he is not uttering some profound truth. Rather, he is merely repeating the bankers’ Big Lie, a vacuous fiction which as a matter of simple logic never could have any validity. It is a Lie with one very obvious purpose: to minimize scrutiny as a small cabal of bankers perpetrate the Crime of the Millennium.

    With our nations (and most of their citizens) drowning in fraudulent debts while the bankers sit on their mountains of ill-gotten money, it literally adds insult to injury for these bankers to arrogantly maintain we (the ones who granted them their License to Steal) have no right to take a closer look at how they have been robbing us blind for the last century.

    This would probably be a good time to remind the Thieves how History tends to (eventually) reward them for their deeds. Less than a week after a news item appeared out of Iran reporting that the Iranian government had executed several bankers for a multi-billion dollar act of serial fraud, an interesting article appeared (ironically) on the blog for the Wall Street Journal itself.

    The writer of that article notes the following:

    The Code of Hammurabi, more than 3,700 years ago, stipulated that any Mesopatamian who violated the terms of a financial contract — including the futures contracts that were commonly used in commodities trading in Babylon — “shall be put to death as a thief.”

    …In medieval Catalonia, a banker who went bust wasn’t merely humiliated by town criers who declaimed his failure in public squares throughout the land; he had to live on nothing but bread and water until he paid off his depositors in full. If, after a year, he was unable to repay, he would be executed…Bankers who lied about their books could also be subject to the death penalty.

    In Florence during the Renaissance, the Arte del Cambio…made the cheating of clients punishable by torture…

    But financial crimes weren’t merely punished; they were stigmatized…

    Contrast that with our modern societies where “punishment” for so-called white-collar crime is (at worst) nothing but a slap on the wrist in comparison to punishment handed out for blue-collar crime: the crimes of the Little People. The entire basis of this two-tier justice was the presumption (never supported with evidence) that the rich did not require as much deterrence from crime as the poor — and thus the sentences for their misdeeds did not need to be as severe.

    Today, as the bankers now openly confess to a single act of fraud which they themselves estimate is roughly $350 trillion in scope, well over 90% of all crime in the world (by dollar value) is now white-collar crime. Meanwhile, we just had 25% of Wall Street executives confess that crime was a way of life in banking (and presumably the other 75% were lying).

    In short, never in all of human history has white-collar crime required such maximum deterrence. I suggest to all these Thieves that they not only study their history books, but (for those based in the U.S.) that they also take a glance toward Death Row, and contemplate what “maximum deterrence” means in the 21st century U.S.A.

    • bonbon

      Have a look at Barbara Tuchman’s Distant Mirror, about the first great financial crash in Europe caused by the Bardi and Peruzzi banking derivatives. These methods are deafeningly absent from the Austrian School tracts.

      Venetian banking, today in full thrall centered in London, “the New Venice”, and its sidekick Wall Street. The “history” of finance you have presented is thunderingly silent on this.

      Which makes me wonder what’s the game? The entire idea and “tradition” of Fondi is Venetian.

      • Tony Brogan

        Bon bon, I do not have a copy of Barbara TTuchman’s Distant Mirror. It is a lot of effort to get one. I do not have the time to read it, so call me lazy but any reference without understanding what it says is lost on me.

        venetian banking also draws a blank as I know nothing about it. I understand that venice was a center of trade and commerce but that is it. Lost again.

        The essay is only thunderingly silent on the New venice if you knowwhat that means. To me it is a puzzle unexplained.

        Who or what is the “tradition” of Fondi. I am lost away.

        so your commentary goes completely over my head and as such is wasted.

        I have research to a degree other statements you have made in the past but you mostly ignored responding to points raised and so I expect you to outline what you mean by these references you give and I will not have to spend hours trying to understand what you are trying to say.

        i find that the banking system appears to be run by Rothschild agents. What do you think of that. Is it incorrect. Would it be a good idea to rid ourselves of the central banking system. do you agree that the fractional reserve process is a fraud?
        i see you suggest that Italy would be better off with its own currency. Do you think the euro should be disbanded. should Ireland have its own currency. I think you are saying ireland should have its own industrial policy. do you think tariffs and duties would be needed to protect such industries. Is this protectionism or do you prefer an open market with free trade so stay in the economic union but out of the Euro.

        i think you agree that a sovereign nation must have control of monetary and fiscal policy but I believe that government can be to heavily involved and should only set up the system and then let the ingenuity of mankind flourish in private enterprize to get things done. you seem to approve of state enterprise, is this correct.

        Today was another lovely warm sunny day. 25C and very enjoyable.

        • bonbon

          Soverignty means nothing with economic Independence, as Griffith said. Not simply monetary independence. Many like to replay the Venetian quote on power over currency, but the real control is economic. So I and others propose huge economic development projects, requiring a type of banking totally opposed to Venetian. That’s the real conflict. That’s why Ron Paul is a bit sideways. Remember Confessions of an Economic hitman? He used debt for an economic subjugation, the intent.

          • Tony Brogan

            Not at all bon bon, you have the cart before the horse.
            Every practioner of the control of government lauds the control of the money and money supply as the controlling factor. Ask Rothschilds, Preident W Wilson, Henry Ford, B. Franklyn and many others. Even some modern day economists.

            Use the money system to produce unlimited debt and what do you get? A total bust. bigger the credit boom, bigger the bust.

            The hardship created leads to a clamor for a solution, usually from government. government in the past responded with economic effort(fiscal policies) but today the debts are total and overwhelming. Nothing, even a mega project. (More misapropriated capital)

            your economicdevelopment projects will remain a drean until the money control is wrested from the bankers and the power elite who control the bankers.

            first step is to recover the autonomy of the nation state. This will be done with the implementation of a national currency. Reject the euro is #1
            Paper based currency is subject to political control and inevitably too much produced and inflation is produced yet again to destroy savings and investment.
            Money must be commodity based so that it can not be debased and inflated.
            Commodity money can be introduced though the use of the national mint at very little cost. Distribution can be effective through the branches and courier service of the post office.
            This gives the people something worthwhile in which to save.
            Savings are the bedrock of the economy. from savings is acquired capital. Capital provides efficiencies that enrich the economy and all people gain in wealth.
            Innovation will provide exports and earnings and jobs.

            At the present in Victoria BC I an surprised to see new industries growing in this region that are well paid jobs depite the high Canadian dollar, Up 40% against the US the last ten years. Some industy is the manufacture of the Twin otter aircraft. It is renowned for reliability in all climates. Land or water, short take off etc. Orders coming in and expansion of the business happening.
            Carmanah technologies is producing solar powered lighting for waterways and emergency airstrips. Other high tech firms I see mention of. Talk of recession abounds as the unemployment rate has gone from 3 to 6% largly as a result of the slow down in building.

            The point to make is that with proper funding of research and development businesses will develope and the well paid jobs will appear. There is no reason to worry about the “exchange” rate, it will fix itself where it deserves to be.

            So to recap.
            Leave the Euro and set up an independent currency.
            Set up a parallel commodity based money system that will over time replace the paper and in the meantime keep the paper money honest.
            Encourage savings, not consumption. remove tariffs and taxes that curtail innovation and investment.
            Repudiate all public debt that was assumed from the private sector (odious debt).
            Put a bankruptcy law into place that allows a clean credit record 5 years after bankruptcy. ((People must be able to recover from mistakes but there must be a deterrent to profligate borrowing.)(No numbered company escapes , principals must be responsible)
            Bring government spending down to a level not to exceed 35% of GDP.

            There is a plan and it would free up the economy to recovery on a sound basis. There is still a pile of business being done out there and it can reached by anyone with the determination and education and skills required.

      • bonbon

        The approach to truth is never wasted. The entire story of Venetian banking, I believe you would find stunning. The spin-off’s today, (such as the Cato institute) can much better be understood when one realizes the origin and development of the Fondi. Tuchman only looks at the 14th Century in that book. We see the takeover of England by the Venetian Party (from the Giovanni ), to the Bank of England. The Privy Council is pure Venetian, and some of the names there are even today of Venetian roots. The entire world-view, which modern bluster only sees a shade of, is truly ancient. The modern nation-state began as a counter to Venice. We are still fighting it out.

        But the nation-state has had impact. Today we have the Financial Times supports New York Regulator Lawsky Against Standard Chartered and Geithner. This is why i report – it is almost impossible Venetian factions could call for this, unless there is a hue fight. This is big. But to see the significance – Venice.
        Hedge funds, all being “offshore” are pure and simple the Fondi in action. One asks how the hell do such things even exist?!

  22. bonbon


    Aug. 12 (LPAC)—Prominent City of London economist Liam Halligan once again stressed the urgent need to restore Glass-Steagall legislation, in a commentary today, which begins by denouncing the hyperinflationary intentions of ECB president Draghi – only surpassed by those of the Federal Reserve and Bank of England.

    “Not for the first time, I’ve ended up writing about the eurozone when my intention was to highlight something else,” Halligan wrote. “That was the recent volte-face by Sanford Weill, the swaggering Wall Street financier who, in the late 1990s, forged the merger of Travellers Insurance and Citibank. In creating the mighty Citigroup, Weill consigned to history the Glass-Steagall Act – the Depression-era separation of commercial and investment banking.

    “For a very long time, this column has argued that the 1999 repeal of Glass-Steagall was the single most important cause of the sub-prime crisis and its related economic fall-out. Sanford Weill, the man who did more than anyone to remove this crucial safeguard, is now admitting he was wrong.”
    For Weill to call for splitting the banks, is like “Colonel Sanders calling for chicken-free diets.” Why Weill’s conversion? “As shown by the Citigroup share price, now just a tenth of its 1999 level, most of the banking behemoths are now probably worth more broken up. And having made his massive fortune and now approaching his 80s, Weill is tidying up his memoirs. But still, both Weill and John Reed, the two Citigroup founders, now both back a new Glass-Steagall. I wonder if Robert Rubin does, too…. Rubin’s memoirs, written in 2003, barely mention Glass-Steagall. Perhaps they’re in need of an update.”

    A few weeks earlier, on July 21, Halligan also stressed the need for the kind of all-out assault on banking corruption which Franklin Roosevelt and Ferdinand Pecora had waged. There are “two stark lessons from the 1929 Wall Street crash, and the Great Depression which followed, that we all seem determined to ignore,” Halligan wrote. “In the early and mid 1930s, Franklin D. Roosevelt got hold of the ‘Wall Street titans’ and showed them who was boss. Banks were forced, under threat of criminal prosecution, to disclose their full balance sheets. Those beyond repair were broken up. Famously, retail and investment banking were separated, root-and-branch, by the Glass Steagall Act.

    “Compare that with today. In the US, Britain and elsewhere, the policy response to sub-prime has been infantile. Our political leaders are cowed by the money-men, caught between awe and financial dependence. Many Western banks remain beyond full audit. Those guilty of serious white collar crime have sailed away, their riches intact, leaving nothing in their wake but financial and human destruction.

    “Where is our modern-day Pecora Commission – the Congressional hearings held in the 1930s that unearthed and demystified the frauds, scams and abuses that culminated in the Wall Street crash? Where is our truth and reconciliation commission to get to the bottom of what happened, punish the guilty and stop sub-prime happening again?

    “A former assistant district attorney from New York, Ferdinand Pecora, had intellect and stamina in abundance. His relentless and expert grilling of bankers and regulators, fully open to the public, electrified Depression-era America. Pecora was the immigrant son of a Sicilian cobbler, outside the establishment, which is why his investigation was fearless and, ultimately, effective. The famous financiers and banking scions, they didn’t faze Pecora. His probings exposed the murkiest corners of Wall Street, catalysing genuine reforms and restoring public trust in bankers and banking, so laying the foundations for America’s post-war prosperity and financial stability.

    “Back in the present, the UK’s Treasury Select Committee, under-resourced and appointed by party whips, has tried and failed to lay a hand on the bankers. Now, a parliamentary committee is to more fully investigate Liborgate, but only after having been stripped of several members of the Treasury committee who have displayed a detailed knowledge of banking. With the best will in the world, it just isn’t going to work. But perhaps that’s the point.”

  23. michaelcoughlan

    Hi David,

    The floppy haired economist the story continues…..

    Our friend floppy wakes up the next day delighted with himself that he was able to explain in such simple terms to his son what a militarised paper economy is. He now has a new challenge which is to explain to his son the difference between creating wealth, making a profit, and asset stripping (not the unbuckling of the suspenders on a beautiful woman type!). He is inside in the toilet right in the middle of his Dick Cheney when the following idea occurs to him.

    Now that the playground was sold he will bring his son into the garden at the back of the house. Floppy has just installed a top of the range tree house which which took the local polish carpenter a week to install ( all the Irish ones are displaced into emigration). Floppy explains to his son that the cost of timber was €400 and the cost of labour was €600. Floppy tells his son he paid €1500 for the tree house. The €500 euros margin above labour and materials is the value added or the wealth created explains floppy. Once the carpenter deducts expenses such as interest tax and cost of sales of €200 the new smaller figure of €300 is the Net profit. Floppy’s son then asks what’s assets stripping daddy? Floppy explains that his son’s friend who’s daddy lost his job and had to sell their tree house next door had to asset strip the tree house to pay back the loan he owed the bank.

    Floppy then explains that the same thing happened to the play ground. He points out to his son the biggest crime of all though which is that it only took the bank 1 day next door to realise the capital tied up in the treehouse by engaging in asset strippin where no value was created, it only took the auctioneer 1 hr to get his fee for auctionining the tree house and no value was created but it took 1 week to add value building the play house and four years for the carpenter to acquire the skills to add the value in the first place.
    Floppy then explains whats iobvious to even his six year old son at this stage; it is much more efficient for a bank to destroy wealth and release capital in the process than to do their jobs of facilitating the wealth creation process..

    You asked a question McWilliams in a previous article about what is the end game for Europe? It was a redundant question because it presupposes that Europe meant the political leadership. If you as the question again from the point of view that it is the banks who are in control the answer is abundantly clear! Ans: the total destruction of every wealth creating entity on the planet for the sole purpose of releasing capital to facilitate the further expansion of the global hedgefunds industry!

    That’s no Dick Cheney Either!

  24. cooldude

    Egon Von Greyerz tells the truth unlike so many of the wafflers in the papers. Here is his latest piece which tells us what to expect next. And the funny thing is no mention of Glass Steagall. What a relief not to hear any more shite about that for a while

    • bonbon

      You are having trouble with bankers themselves declaring Glass-Steagall is the only way to correct their system. I believe this is such a shock, after demonizing them as a tactic to push Austrian School teachings. Well that tactic is now a flat beach ball.

      Trouble with von Mises and Hayek, and co-”thinkers” is a wild-eyed belief in magic, that economic production seeps from dead inert matter (money or metal). Real events tend to disturb that fantasy world. It is amusing to see sorcerers attacking the prevailing banking sorcery raging without Glass-STeagall.

      People are not about to change one “spell” for another, exchange “magic of the markets” and “invisible hand” for magic of “sound money”. Bankers have seen too many sorcerer’s apprentices wrecking the economy, up close and personal.

      • Tony Brogan

        Trouble with von Mises and Hayek, and co-”thinkers” is a wild-eyed belief in magic

        Don’t be so f….g patronizing,
        Douche Larouche from your mind.

        LaRouche has been involved with communism, Marzism and other isms. He has been arrested and jailed for tax evasion and fraud. He has lectured at colleges and set up foundations and organization to promote ideas some of which encouraged violence and physical beatings of people in other sections that disagreed.They were armed and suspected of martial art traing and military training.
        He has engineered meetings with heads of state and other people by misrepresenting miself.

        He has researched and carried out mind control experiments on people to propagandize them and control actions. He would break the persana and then rebuild just as other cults have done.

        He aggrandizes himself as a statesman even though having never held office.(He has run for US presidnet more than any other person)

        He is a loose cannon whom you quote many times. He lacks consistancy and moral standing. You are an accolyte.

        And you have the impertinance and cheek to criticize Ron Paul who has demonstated consistancy and interity his whole life. One does not have to agree with him to recognize and admire that fact: And to ridicule the Austrian school at every opportunity.

        Be gone to another blog more suited to these views.

        • bonbon

          Inert “fiat” or “sound” money has no magical attributes. Economics cannot flow from inert matter, or as Adam Smith says, capital matter.

          To see this clearly have a look at Arthur Griffith’s wonderful expose using Friedrich List’s devastating point-for-point attack on Adam Smith. Hamilton was the first to use productive forces as the central economic thesis.

          Refreshing to see through the smoke-and-mirrors of the British imperial obfuscation. Amazing it continues today, our modern scientific epoch. Von Hayek thought he cleverly hid that, but it’s exactly the same.

          Now Ron Paul, while he has correct views on non-economic matters, is unfortunately blindsided by von Mises. His economics are not American, simply British. Proof of this is Friedrich List’s work. His economics are not Irish either.

          The Austrian School is the Emperor with no clothes. The tailor wove a mesmerizing cloth of golden thread.

          It takes a kid to see through it!

        • bonbon

          We are now all “begone” to the next theme – Greece.

  25. cooldude

    That didn’t work either. Here is the full interview. Start after 1 minute and you will get it all.

  26. Deco

    ….one should not underestimate Greece…..

    I reckon that the German taxpayers will be furious to see that they are subsidizing Greece while wealthy Greeks pick off cheap German shipping companies…due to…of all things…..bad timing of an asset bubble.

  27. redriversix


    “whats in your wallet”?

    More money will be “taken from Health,education,p.a.y.e the unemployed,the poor and vital social services around the Country.NO Banks,therefore very few new business,present businesses surviving hand to mouth.

    World economy contracting but Ireland will grow ? “maybe if we begin weapons manufacturing”?

    Is this financial War a new way of life ? will it go on as long as the War on Terror ?

    This crisis is a fraud and one large ponzi scheme destined never to end but to reduce the standard of life and living for the General population,to reduce the desire or ability to argue or debate a Government becoming more and more distant from the People who elect them.

    The dumbing down of a generation , the promotion of debt slavery,the reduction of workers rights.

    the acceptance of Odious debt so Banks will continue unabated in their quest for financial & Corporate control of Nations.

    That is whats happening & nobody lifts a finger

    Welcome to the birth of Corporatocracy , a difficult birth… they may even need a Cesarian but they will get what they want thanks to 30 years of “softening up” a generation.

    Apathy is raging and Government is expecting collateral damage.

    That is the price they are gladly willing to pay……after all they “do know best”

    RR6 “awake”

    • molly

      News flash the GAA will save Ireland.
      What’s in your wallet not much,the wallet use to be happy now it’s sad.
      It’s what we do now going forward that’s going to count.
      Step one get rid of the oil and gas heating boiler install a wood burner.
      Use the barter system when possible.
      Stop paying a pension it’s a rip off.
      Hold on to vhi the state run HSE is a joke.
      Stay working for yourself.
      Banks ,government,are not your friend they never where ,they just want to screw you over and get you to pay for there big fat well of endless money.
      I say enough is enough.

    • bonbon

      Not correct : “nobody lifts a finger”. Expecting a guarantee in the outcome of an intense war of ideas, Glass-Steagall and Hamiltonian Banking v. British imperial Adam Smith, is not how one wins the future.

      Scary to see others, as I reported here from mainstream press, getting involved in the fight? Scary to admit that inaction is a guarantee of the posed outcome that mesmerizes?

  28. Philip

    Maybe we are on the edge of a psychological breakdown or breakthrough. Fundamentally we have a fall off in confidence that seems to be spreading everywhere. So people are now huddling and barriers are going up. Call it saving, call it trade barriers, call it cost shedding – you name it.

    I look at the recent Bollywood release in India called Ek Tha Tiger which uses Ireland and TCD as one of its main locations. It’s one of the biggest movie releases there.
    We need to be mindful that we live in world that we have never seen before. The anglosphere is waning and maybe we need to reach out and embrace what is coming next.

    I fear China is in real danger of becoming a new North Korea. If they cannot convert ther new found prosperity to something more self sustaining, there will be brain drain to the US/ Europe and elsewhere. What’ll be left could be dangerous.

    The problem we face is short-term danger versus long term effects. The former we can sort of control. The latter – the die is cast. Make no mistake, this chatter of banks destroying wealth through their greed etc is merely a symptom of the chnaging poles of power on this planet – not a cause. The next steps are crucial. Do we try embrace China/ India and do we try and do something about non-productive debt – or do we bury our heads and hope it all goes away.

    As manufacturing and globally traded goods and services have found their base price, we are now entering a new era where public services now have to find their new base prices. The pressure being applied could be expressed as why should a certian level of public administrator be paid any different from a chinese one? Same for Doctors, Teachers you name it.

    See what happens when you start buying cheap?

    • bonbon

      That’s the second time in the space of 1 week you wrote apologetics for the Banks :

      “..this chatter of banks destroying wealth through their greed etc is merely a symptom of the changing poles of power on this planet — not a cause.”

      What kind of utter rubbish is this – exactly what Enda and RTE waffle on.

      Even the Banker himself Sandy Weill knows better, and FT.

      We need to split these banks as in 1933 – don’t try to tell us that was not essential then. That is the first step, a Pecora Commission to go after them.

      • Philip

        Bonbon, The GS Act you speak of was a necessary clean up for the US insular economy for the post war years. As soon as globalizing was possible by technology, it was no longer feasible. Once other economies were not operating by these rules, you are snookered. Capital flies to where there is flexibility. If there was any reservations about dumping the GS, it was down to timing. Personally I feel the US’s main issue is that it remains a very insular and closed economy and that its soft power is whittling away rapidly. No one loves them anymore. Disneyland is looking tacky. Europe has similar issues as well and needs to look at itself very hard in the mirror an stop codding itself about the wonderful experiment – the party is over and it’s down to work – working like the Chinese/ Indians.

        Had there been no China, no India – you’d have a different employment and career prospects profile in the West. – GS or no GS. US is hollowed out because people like buying cheaper stuff. FULL STOP. It has nothing to do with banks.

        Now, I am not saying the banks and white collar workers in these areas did not skim a few 100s of Trnns here and there and they they do not deserve to be locked up. When there is a lot of transactions going on with silicon enabled buy/ sell there is scope for scamming. But this happens everywhere. Hi turnover attracts criminal skimming.

        There is also the rather awkward issue that there are now more powerful players in the world who want their piece of it and have the muscle to do it. Naturally arms dealers an financiers will make a killing as they have always done down through the ages.

        Let’s say for argument’s sake we zero all the debt and globally enforce the GS act – Day 1: Everyone says Hurray! Year 1 we’d be back where we started – because the Chinese and the Indians make everything and there are no jobs for rest of us. Banks would prolly have a heart attack laughing. I know stimulus is promulgated to bring forward innovation and the next great thing, but we fail to realize that tech innovation is not unique to anyone.

        The only out of this is a social innovation that can help us reverse out of this and get us sustainable in a non-synchronised manner (in other words we do not rely on everyone doing it at once). It might mean a targetted debt reset. It might mean some targetted controls. I do not know. Past philosophies, I think, will simply not work because we have no where to grow into…no markets to conquer. The only thing making real progress is repair and maintenance.

        I believe blaming the banks is a red herring and a dangerous distraction – they are solely a hindrance because we feel we cannot let them go. This this not being apologetic. They need to be seen as irrelevant. The mere act of associating so much power to them is what could kill us all because we are wasting time. Anyway – the Rothschilds are subject to age and disease like the rest of us…why should they kill off innovation that could make things better.

        • bonbon

          There you go again. Monti loves it, Draghi too. Goldman Sachs is cheering.

          So on to Glass-Steagall which worked up to 1999 well into the present epoch, and world-wide (except London of course – the Big Bang was to set the stage for the takedown).

          So your analysis is simply a-history, pure fantasy. I really believe you have taken the side that opposes Sand Weill and FT’s widely reported calls for breaking up – many open debates within banking itself.

          Fine, now the battle lines are drawn. Apologetics have a short shelf life and are a dangerous distraction. That “social innovation” is pure fantasy. People will not listen to weird untested ideas anymore. Glass-Steagall worked, will work, is tested.

        • bonbon

          As regards the economic analysis – it is something from that bygone Tiger epoch where clever short sentences paraded as content.

          This is not rhetoric, but physical economy, productive powers of labor, capital of nature and capital of mind
          as Arthur Griffith, Friedrich List, developed from Alexander Hamilton.

          The utter vacuum of “liberal economist” minds is the only empty space that exists, with not a clue about what to do, or what works. Why should anyone listen to someone with not the slightest idea, who declares nothing can work?

          • Philip

            You forget, this GS thing never worked from 1980s. There were lots of market collapses even then – and I remember a Chinaman in the 90s telling me about the house of cards called the west and how it would collapse – exactly as I laid it out. As for my economic analysis, I lived it and saw it in action day to day from the 70s. To call it a fantasy is an affront. The decisons made were not by bankers or becasue of them. So get back out there and start living it for real.

          • bonbon

            GS did work, but other forces were at play. Again China may have difficulty understanding what exactly is going on, never mind Tigers. Nixon killed Bretton Woods in 1972, Carter killed the economy after. The derivative snowball started in 1974 with the Inter-Alpha (very reclusive) banks. The only thing preventing the 2008 crisis back then was GS – and the fact that the snowball was not yet 14 quadrillion dollars nominal debt. That took off after 2000.

            Never mind the “boom-bust” – it is vacuous talk of those who simply have no idea. Economies go bust when productive forces are denied. These do not exist in any economics except Hamilton’s National political Economy, which gains momentum bringing a boom. Murder, intrigue, rotten politics to sabotage this cause busts. Nothing to do with inert matter. Arthur Griffith developed Hamilton’s work – it is the foundation of modern Ireland. Just because FF/FG try to annihilate this causing a bust, detracts not a whit from the truth.
            I remember Nixon’s last days, but only heard about Bretton-Woods later. Just to remind, Bretton Woods is the 1944 fixed exchange system for the recovery, set in motion by FDR, who activated Glass-Steagall and the RFC in 1993m, defeating fascism. Floating currencies, the Petrodollar, and massive globalization free-trade financed by speculation went into full force in the 1970′s. Greenspan got the job after the 1987 crash, and spent 20 years chipping away at GS, his own words. Sandy Weill of Citi let the cat out of the bag.

          • bonbon

            1933 not 1993m ….

  29. Deco

    The Welfare state has been a fraud for over twenty years in this country. Each year it becomes more of a fraud.

    Working people are taxed on the premise that they will get something in return for their contributions. And the money get wasted. That pool of money has attracted the worst elements in our society since the early 1960s, with people climbing over each other, for control of the people’s money. Television turned politics into a gameshow. With an election instead of a phone ins.

    The “leadership” of the West have bankrupted the Welfare state, in many countries. And nobody has declared this to be the case. We have an all embracing welfare state that has often few performance clauses, deceitful promises to the working people, and massive insider scamming.

    In 1520, Luther hammered his Theses to a Cathedral door in Wittnburg, and caused a sensation because he proclaimed that the Western Church had become a fraud – that knightly thugs in central Italy were playing politics and causing a fraud. In Borgia era Italy, the most likely man to run the RCC was a soldier first, and rarely a philosopher.

    In today’s West, the Law has become a fraud. Instead of fighting thugs we have fighting lawyers. We have lawyers running everything. They fix nothing. They excel in bloodless fighting and war.

    The West has become rotten. It is only a matter of time before people realise that the state has become rotten and corrupt. And we know this when we seen bank bondholders being “saved”, when they should be declaring their losses and claiming insurance. But, now the welfare state is being used to keep the insurance sector solvent.

    The whole thing has become a farce. And the media tells us the scandal, when the scandal can no longer be kept under wraps.

    • bonbon

      A litany of complaints, worthy of prayer. Everything you list as facts cannot be disputed on a case-by-case basis.

      We have moves to deal with this. But as in war there is no guarantee. It is a fight and it is on.

      Instead of sounding like a dark-ages flagelant, the Black Guelphi, how about steeping aside and changing this?

      And by the way, King Henry VIII preceded Luther, giving us the theocracy of Britain – the putative Head of State is also head of a church! Luther, being second, actually caused the 100 years war until 1648 – the Treaty of Westphalia.

      So seperation of Church and State, and humanist action for the Public Good, the General Welfare, is essential for the Pursuit of Happiness. I’m not sure Luther or Henry were ever happy.

    • gizzy

      Yes the lawmakers are now doing more damage to society that the law breakers.

      • Deco


        We had lawyers running the Irish economy and they did nothing right.

        But they always presupposed their own eloquence before their opened their mouth, to sell us something that was a sellout.

        • gizzy

          Brian Lenehan being the ultimate example applying eloquence to a diasterous decision to blanket guarantee.

        • bonbon

          Now the lawyers want to change the constitutions to grant immunity and non-accountability to all bailouts-on-demand.

          Lawyers should not run governments, and accountants should not run firms.

          • gizzy

            totally agree but they are a constant enjoying the benefits of the growth years with bonuses etc but surviving clearouts then taking over and ticking over until it turns, bring in new business guys and start the cycle again.

    • Pedro Nunez

      Ya the institutions of the west that gave competitive advantage for so long are failing.

      But look at the ‘bullshitting populism’ that Ireland is replacing them with!

      I’m sure the Chinese are quaking in their boots.

  30. Blue Moon River Wobble ( arrives in Dublin tomorrow)

    Tomorrow on it’s arrival
    Wear a Coat for your Survival

    If it is Wet I have won my bet
    No longer need I fret

    Watch the skies all arise and ask who mighty you
    And if you dont hear already then you are blue

    Hold still in a moment for nothing inside you has changed
    Only the world around you and the words you exchange

  31. bonbon

    Korea has been mentioned, as it must when the subject is China. Some very relevant news :


    Aug. 10 (LPAC)–A report by {Radio Free Asia} (RFA), a U.S. Government information agency, buttressed by independent sources, indicates that an “Overhaul scheme seen tantamount to giving up socialist system” may be in the works for North Korea. It reported on Aug. 9 that lectures about the plan have been held throughout North Korea since Aug. 6. The reports center on plans to implement the “June 28 measures,” where new leader Kim Jong-un, speaking to an internal party gathering, is said to have outlined an economic reform program.

    The proposed measures would give greater autonomy to state corporations, allowing them to choose their production items, prices, amounts, and marketing methods, according to reports. They also allow farmers to take in 30 per cent of their harvest.

    The food rationing system would be almost completely scrapped. The internal opening would be in addition to, rather than in place of, the development projects with China and Russia. The RFA reported that the new policies may take effect from early October.

    “I was told that Pyongyang will test the new system for the upcoming three months,” Jo Bong-hyeon, a researcher at IBK Industrial Bank. They will adapt the system steadily, reflecting public opinion and educating people about it.”

    South Korean news agency {Yonhap} said that South Korea’s Unification Ministry is closely watching the North Korean actions. What specific measures the North has taken have not been confirmed, the spokesman said. “The Seoul government hopes the North will make a good choice and take action in a way it quells the global communities’ concerns, including the nuclear issue, and improves the welfare of its people,” he said.

    South Korea’s National Intelligence Service said at a National Assembly meeting on July 27 that Pyongyang is currently running a special department for new economic management that will raises wages of workers and allow some some autonomous management of companies.

    Leader Kim Jong-un, meeting with senior Chinese official Wang Jiarui on Aug. 2, made reference to China’s 12th five-year plan for national economic and social development and its longer-term vision of achieving a society where most people are middle class. The North Korean Workers Party’s goal, too, “is to achieve economic development and improve people’s livelihood,” he said.

    The president of North Korea’s parliament, Kim Yong-nam, on Aug. 7 expressed hope that Vietnam will share its experience in socioeconomic construction and development. He was speaking in a meeting with Vietnamese Prime Minister Nguyen Tan Dung in Hanoi. “The achievements the country had made in socioeconomic development and national construction were an encouragement to [North Korea] in its national construction and development process.” That could mean the North wishes to emulate Vietnam’s “Doi Moi” reform policy launched in 1986, {Chosun Ilbo} said.

    APAC is not EMEA! The United States of Europe takes a “Great Leap” Forward into a bankers wastebin. I suppose we could do a cartoon of Enda and Noonan doing a leap into a swamp of crocodiles, with huge grins – follow us, they said. Maybe the crocs are so bloated on the other EU pickings, Enda might be saved?

    • Deco

      The last society in the world to give up on Marxism.

      And they are starved themselves to death in an effort dedicated to loyalty to Marxist nonsense.

      Cuba started to roll back Marxism last year.

    • bonbon

      The story of Korea is tragic. Many Irish had relatives in action there in that war. The division of the countries agricultural land reprogrammed famine. It is a plaything of the neo-cons, when they are slapped for playing with Taiwan.

      China has had famine not long ago, not forgotten. Remember Communism was produced in London, for export of course, just as with the Euro.

      Is Europe stupid enough for a Great Leap? How is popular opinion shaped for mass suicide? Look at Europe now. Induced suicidal stupidity. Ask how does this work, is it at work right now?

  32. [...] article at source: Rate this:Share this:EmailPrintRedditMoreFacebookTwitterPinterestTumblrDiggStumbleUponLinkedInLike [...]

  33. gizzy

    I know i harp on about the role of the big advisors See Grant Thornton now examining role of PWC in hiding black hole in Quinn group which may cost taxpayer 1.5 billion euros. It will of course take a year to see if thereis a reason to take leagal action. Bet there won’t be.

    And some posters here blame the reckless citizens for the economic collapse. Hmm

    • molly

      The question I would ask is if Quinn was left to run his company’s would we the tax payer be better off .
      The next question I would ask is the people put in to run the Quinn group have they made a balls of it.

      • gizzy

        Molly there is another question for an auditor who takes fees and signs off that no one had made a balls alls of it. That auditor is still getting lots of fess from the State for other work.

        • molly

          The gravey train just keeps on running and greed is alive and well.greedy people are like rats hard to get rind of and your only a few feet away from them.

    • bonbon

      Reminds me of ENRON, the Ranch at the Crooked E, that Arthur Anderson accounting firm did the books for and landed the taxpayer with a $80 billion bailout. AA was disbanded by court order after, and guess where the staff moved to?

      As Tweedle Dum told Alice, “the names are the same, but were are completely different twins”.

      Now have a look at Noonan’s 2 “advisors” from HSBC which is under drug money laundering charges.

  34. molly

    David what’s your view on Sean Quinn .
    Do you think he should have been left to run the Quinn group,I think he could have turned things around and made a good honest effort to pay back the best part of the depth.

  35. bonbon

    Who, Really, Is Bankrupt?

    The question to be asked is, who is bankrupt: Greece or the Eurozone financial system? Greece sold EU4.06 billion of three-month Treasury bills at an astonishingly high rate of 4.43%, when the usual rate should be less than 1%. The funds will be used mostly to pay off EU3.2 billion in bonds held by the European Central Bank, which were supposed to be paid off with funds from the Greek bailout package. The Eurogroup, comprised largely of Eurozone finance and economics ministers, has refused to release over EU30 billion of the bailout which should have been disbursed in June, claiming that Greece’s austerity and reform plans have yet to be approved by the Troika bookkeepers from the ECB, European Commission, and IMF.

    The bonds were bought by Greek banks, since no other banks would touch them. The only reason they were able to do this, was that the European Central Bank, which has virtually cut off the Greek banks from receiving ECB loans, agreed to raise the ceiling on the amount of such bills the Central Bank of Greece can accept as collateral in exchange for emergency loans. This means, local banks can take these bonds to the Greek Central Bank to tap its emergency liquidity assistance (ELA) window.

    This fancy bookkeeping is the equivalent of printing money, and Greece continues to be penalized, first with taking on more high-interest debt through the bond auctions. Second the Greek government is the guarantor of the Central Bank’s lending to the banks, which could add as much as EU100 billion onto Greece’s debt pile. The Greek banks also have to pay considerably more for these funds from the Greek Central Bank than if they were able to borrow from the ECB.

    The Greek economy is collapsing at an unbelievable rate, while the government cuts spending by nearly 25%. The Hellenic Statistical Authority (ELSTAT) announced today that Gross Domestic Product shrank by 6.2% in the second quarter, compared to the same period last year, to EU43.6 billion, after having contracted by 6.5% in the first quarter. The figure brought the cumulative contraction to EU9.2 billion — 17.4% — since the second quarter of 2008, the first year of the crisis. Analysts forecast that the economy will contract 6.8% by the end of the year. This policy, whose purpose is try to save the hopelessly bankrupt Eurozone financial system, is destroying Greece and the other countries, including Portugal, Spain, and Italy, as nations.

  36. Deco

    One thing that never ceases to baffle me is the pervasiveness of stupidity in the modern present day Western World. In previous stupidity riven phases there was always some people somewhere who could stand back and see what was going on and stay rational.

    But now it is very rare, like a voice calling out in the wilderness.

  37. bonbon

    Germany, Spiegel Online, in English

    Former chief economist Thomas Meyer of Deutsche Bank is quoted as saying :

    Banks and companies are starting to finance their operations locally. Banks all over Europe have been “reducing their risks” for months now, especially since the summer of 2011. Banks are “severing connections to their own subsidiaries abroad. Germany’s Commerzbank and Deutsche Bank apparently prefer to see their branches in Spain and Italy tap into ECB funds, rather than finance them themselves. At the same time, these banks are parking excess capital reserves at the central bank. They are preparing themselves for the eventuality that southern European countries will reintroduce their national currencies and drastically devalue them.”

  38. bonbon

    I think it is becoming clear to many that belief in magic, an irrational Dionysian assault on the human mind, is the cause of economic disaster.

    The head of the Institute for Public Finance at Humboldt University Berlin, Swiss economist Prof. Charles Blanchard, in an essay for FAZ on Sunday, warned of the “Euro-sorcerer’s apprentices,” who can no longer get their own product under control. Blanchard refers to the 1998 appeal by 155 German economics professors, including himself, who had warned “The euro is coming too early.”

    The Euro is founded on the wild incantation that economic miracles will seep, secrete, exude from this wonderful token. This is nothing other than Adam Smith’s total denial that productive forces produce, not capital which may be needed. Exactly the same as the oft-repeated mantra that “sound money” will produce better than “fiat money”.

    Pure sorcery – how is it that popular belief in magic dominates?

    Arthur Griffith was not fooled!

    • Tony Brogan

      The cause of the economic disaster is the use of unlimited amounts of ponzi paper fiat currency.

      No magic in that. too much currency at too low an interest rate creates a flurry of borrowing and a stream of malinvestment.
      no magic in that. The results were long forecast.

      when the stream of currency slows or halts the boom stops and the malinvestments are seen bust businesses and the bust hits all, even the prudent.

      given that it is established that the central banks are funded by Magic money we now see who the sorcerer is. It is the cartel of central bankers and their paper confetti masquerading as money.

      The major job of money is to facilitate trade by acting as a medium of exchange. As an item it is undamaged in the process and not used up as in an industrial application. It passes from hand to hand fulfilling its job each time. There is thus no need to add to the money supply to execute trade after trade. In fact there is a misconception that money supply needs to increase to expand an economy.

      The truth is that every time additional currency is added by the sorcerer it dilutes the existing supply and reduces its value. It creates inflation. Because of the way this addional debt is issued it creates economic activity where it would not have exisited before. It can not be forecast in advance where this activity will occur. Apparent demand appears briefly on the introduction of the new money and fools people into production of items not needed and thus the misallocations occur and destroy the ecomony little by little.

      If this process is repeated to try to stave off a collapse the boom is larger the misallocations greater until the economy does not work at all any more.

      A position we have now arrived at. The effect of new currency added is now a negative affect on the economy. one unit of currency added is slowing the economy by nearly a percent.

      The only way to stop this imbalance from occuring is to use a currency backed by a money of which it is impossible to expand the volume, or nearly so.

      Gold and silver perform this function admirably as what little extra that can be added to the supply is a fraction of the whole. also it is extracted from the earth at great expence so has an intrinsic value not available to paper money which can rapidly drop to zero value.

      Paper money is by nature nationally mandated (fiat government decree) and not acceptable as a medium of exchange outside its area of influence whereas gold is accepted world wide and is looked upon as money first and foremost.

      silver is not only money but is used for numerous industrial purposes. World stockpiles accumulated after WW11 have been used and there is very little except for the annual mined supply. It is excellent for day to day coin usage.

      both precious metals can be deposited and spent by debit card in any whole or fractional amounts and so the modern application od digital banking will be able to continue.

      The use of gold and silver as money prevent the bankers from expanding the supply and the amount in use is stable and adequate. There is always enough money in an economy . The distortions and malinvestment occur when the money supply is changed by outside influences.

      It is readily apparent that the use of gold and silver as money will stabilize the economy, remove the specter of inflation; Mute the booms and busts to irrelevence, and alow a platform where the industry and creativity of a people can flourish. All people will be better off. This is not magic but well established in history.

      Gold and silver is sound money, not a promise to pay a debt, it has no counterparty but stands on its own. Governments are belatedly in the west recognising this and again accumulating gold. It is now promoted as a means of balancing the books of european nations.

      Maybe we will return to sanity and abandon the last 100 year experiment with paper money (really the last 41 years of complete unbacked fiat currency)and return to a system that has always worked in the past and will again in the future.

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