BARVENNON.COM
AUSTRALIAN DIARY

ARCHIVES 1997-2007  --- ARCHIVES 2007 +


MAY 2011


CHINA & DEMOCRACY & the GFC.

From a cynic's point of view, any government is a band of thieves or brigands who take over the country by force of arms and extract ongoing tribute (aka taxes) from the people on threat of imprisonment.  They use that tribute to oppress the citizens and protect themselves from hostile takeovers.  There are many ways that different cultures/civilizations have developed to manage the business of changing that government.  Perhaps the least violent is called "democracy" as practiced in Western Europe and some of it's ex-colonies.  Most everywhere else in the world they use a system of revolution.  In China this happens when the gang in charge lose "the mandate of heaven" which means hopeless incompetence or really bad luck (depending on your point of view).  Most political pundits agree that the only time that a ruthless dictator has a problem is when the people are starved. 

Everyone from Salman Rushdie to the USA is criticizing China over human rights.  The Chinese do seem to be rather sensitive at the moment.  After Tienanmen Square, the gang in charge stimulated the economy.  They thought they had hit on the perfect method.  Print Yuan to buy US dollars which made Chinese goods cheap and allowed the Chinese economy to expand sales to the USA.  Those sales provided work for the masses and produced a flood of dollars to invest back in US treasury bonds and pay for raw materials from Australia.  Unfortunately they trod on a few toes in the process.

Some years earlier Clinton had made the stupendous mistake of reversing a law made to end the great (1929) depression.  He allowed savings (commerce) banks to invest money on risky assets.   The Wall street bankers thought Christmas had come in perpetuity.  All this cheap Chinese money flowing in, and they could now lend it out on real estate guaranteed by Fanny May (and Freddie Mack).  Of course then the bubble burst and real estate wasn't worth so much any more.

So the US had a problem.  Well actually two problems.  One was a swag of insolvent saving banks.  Those banks are a crucial part of the real economy, and cannot be allowed to go bust.  The investment banks are important, but if they go bust it is not necessarily going to lose an election.  The other problem was a seemingly unstoppable inflow of Chinese Yuan.  Saving the banks did not solve the Chinese investment issue.  So they decided to kill two birds with one stone.  It is called Quantitative Easement, and means printing money to buy federal debt and save those banks.  Of course that is inflationary.  So that means that buying US treasuries is a losing proposition.

Much the same in Australia.  Except here the government allowed the Federally owned Commonwealth savings bank (started during the depression) to become an investment trading bank, then sold it.  Our flood of investment money came not from the Chinese, but from Keating's laws requiring superannuation savings.  Those savings wound up invested either in the share market bubble or in our real estate bubble, which is several orders of magnitude worse that the bubble that did exist in the USA.

So that means the problem is back to the Chinese.  They are getting imported inflation, and the value of their US bonds holdings is diminishing.  Of course much of what is happening is speculative inference, because the only accurate data we have is exchange rates and cash flows.

I am reminded of one of my favourite Marvel characters.  The one who says "You don't want to make me angry".  Because when he gets angry, the Hulk turns into an unstoppable and unthinking monster.  We can hope that the Chinese gang in charge manages to restrain their people's anger.  I do not know whether the Gadaffi method would work in China.  The Mubarak method is not looking like the universal panacea at the moment.  Perhaps they should try a reverse takeover with Taiwan?

It seems that a world resource "correction" is about due.  You might wonder where that leaves Australian investors.  Buying gold is not the answer.  After all, Australia is a major gold producer.  Our unions have a stranglehold on key transport, mining, building, education and government (wages & other infrastructure) costs.  Fortunately for Australian consumers, manufacturing is not a union bailiwick any more.  This means that only food, energy and accommodation costs vary to Australian consumers.  So the only certain investment game in town is betting on exchange rates.

One result of the coming world economic "correction" (aka "depression") will be a massive swing by governments around the world to political (economic) conservatism.  The unions around the world have been too greedy, and John Howard's "work choices" is about to become the model for industrial anti-union legislation around the world.

I predict that the USA will ride out the recession with minimal problems.  Quantitative Easing is restoring US industry to be more competitive with imports.  It will produce some apparent inflation, but inflation data published has not included an assessment of the falling cost of real estate.  If real estate prices were included in inflationary data I suspect that the US would still be in a deflationary spiral.  I suggest that inflationary data should be modified to include the changing value of real estate.  Using that data, QE should be continued until inflation reaches long term 2%-3% inflation.

So if you are looking to a career in politics, I suggest that you join a conservative party.

BIN LADEN.

Last night I was in my favourite midnight coffee house, and managed to strike up a conversation with five Muslim youths.  Although all were Australian born, four of them identified as Turks, one as Lebanese.  I joked to the Turks that they had been the Muslim world Power for the last thousand years.  They amended it to "last eight hundred years".

They were brimful of righteousness for Muslim causes, indignant that the media were painting all Muslims as terrorists, looking for an argument about Jews.  They wanted to know my religion, and were happy enough with my answer, "born to Presbyterians, now an agnostic".

To them Israel was in the wrong.  It was terrorism.  So was the USA.  I said to me terrorism was not national armies, but people hiding among Gaza families to shoot rockets at Israeli families.  Then calling the Israeli army terrorists because they shot back and killed Gaza families.

They were hesitantly for the revolutionaries in Libya and Syria.  Not enthusiastically, but like clams.  I showed them a cartoon in the Australian.  It quoted the Koran "Take not Life, which God hath made sacred, Except by way of Justice and Law", and showed a picture of the Syrian dictator in a tank killing his people, and adding to the Koranic quote: "..and political self preservation".

I explained to them what I had against the Muslim religion.  When Muslims rule, they charge Christians an extra tax for keeping them safe.  I explained that I would be unhappy living in a sectarian state that controlled my life according to a religious law that I did not want.  They appeared to sympathize, perhaps because that is the situation they are in themselves.

In further discussion they revealed that they felt that 9/11 was a CIA plot.  The way the twin towers fell, they claimed, indicated a planned demolition, with floors collapsing like an accordion.  I claimed status as an engineer, and stated that no, the heat melted the steel structure on the bombed floor, and the shock when that floor collapsed and the upper part of the building fell caused a chain reaction as the upper part of the building impacted the lower floors in succession.  They claimed that no parts of any plane had been found at the Pentagon site.  They live in Australia, which is as close as you get to an American style democracy.  They held skilled jobs (Computer tech, Pharmacist), looked weird, were bearded, but spoke fluent Australian.

I wonder. Would they have revealed any news of terrorism that came to their notice?  If they knew of the location of a wanted Muslim terrorist, would they have immediately disclosed his location to the authorities?  If they had known where Bin Laden was, would they have revealed that information to our authorities? Because if the answer to any of those questions is no, then they were terrorists.

The day after the above conversation there were reports of Bin Laden's death.  I wonder now how those youths would have responded to Bin Laden's capture?

I must say the reports of Osama Bin Laden's (OBL) death raise many questions.  Let's look at the facts:
 It is the day following the raid and Drudge and the US media are already defending the scenario that OBL is alive.  On the ground that he was not still at large.

Let's imagine that we are CIA management and speculate on what would be our objectives and operational procedures if we were the planner of the operation.
Our primary objective would be to take OBL alive, and drain him of intelligence on associates.  To do this we have unbelievably highly trained SEALS to do the job.  These guys are better than "The Terminator".  Put a slug through the eye of a mouse at 50 yards.  Not one SEAL was killed.   Reports are saying "22 captured or killed".  It does not appear that the SEALS were under pressure.  I just do not believe that those SEALS could not have captured OBL alive.

However, as CIA intelligence bosses, we would prefer that everybody thought he was dead.  For the following reasons:
Unfortunately there is no way we (CIA) can provide evidence that OBL was actually killed.  We cannot provide a corpse that can be tested for DNA, (because he is alive?  And hidden maybe in Fort Knox?).  We cannot provide a witness to his death (because he isn't dead?).  Unfortunately we had to kill one of his wives/concubines.  If she hadn't been killed we would have had to take her with us, and that was not a plausible scenario.  We cannot even provide (faked?) photographs because sooner or later technology would improve and would be able to prove that they were faked.

We have to try to divert attention from the "OBL is alive and captured" scenario.  Hence burial at sea.  We must lie to the president, or tell the president to lie to the US people ?) and the world.

Of course all of the above is quite speculative.  But I will bet I am not the only person who notices the breaks in the chains of evidence.  And those breaks lead to a potential narrative that is a thousand times more believable than that the twin towers were destroyed by a CIA plot.

I am totally surprised that the authorities did not anticipate such speculation.  Keeping the corpse available for inspection would have been an extremely good idea.  What idiot proposed "burial at sea".

Or was it just that there was no alternative?

LATER...

The narrative has evolved.  "Photographs exist", and "Witnesses (e.g. wives) exist" and "CCTV cameras on the marines' helmets captured the action".  None of this is incontrovertible evidence until it has been subject to detailed scrutiny by an impartial third party.  Why is there always a reason that irrefutable evidence cannot be provided?


ALASKAN NW SHELF OIL.

The other day Drudgereport referenced a media report that Alaskan oilfields are producing less output.  The story continued that the NW shelf pipeline might have to close because lower output slows the flow through the pipeline, which means the oil has more time to get cold and become more viscous.  Probably the engineer who was briefing the reporter did not want to overload his comprehension.  Two possible solutions spring to mind. (1) Increase well productivity or (2) Design and install parasitic heaters along the pipeline. 

SARKOZY PLOT?

I am an avid reader of fiction, but the latest exploit of Dominique Strauss-Kahn, French Presidential contender and IMF president presents a story that would never sell as a believable plot.

Apparently that gentleman exited from his shower to be confronted by an hotel maid who believed that the room was unoccupied.  Whereupon he pounced on and sexually assaulted the terrified maid.  She fled the room, and so apparently did he, being caught as he boarded a flight to Paris, sans everything but the clothes he wore.

To me it is incredible that such an attack would be made by a person in such high office.  Let us imagine that you, gentle reader, are a plotter, determined to discredit someone who is known for his sexual exploits.  How would you go about discrediting him?

Let us suppose that:
  1. Somehow you come to hear that he has ordered a prostitute be sent to his room, perhaps dressed in a maid's uniform.
  2. You can switch service documents of hotel cleaning staff.
With those minimal requirements you could cause this incident.  N'est-ce pas?

The beauty is, even if it is surmised or proven to be a setup as suggested, the victim still suffers the indignity and cruels his chances at high political office.

BARRY O'FARRELL & SOLAR REBATES

The best current wholesale price of solar electricity arrays is less than $1/watt, or $1000.KW.  There are quotes on the internet around $1,500/KWH installed.  So a unit to produce a Kilowatt would cost $1,500.  Suppose that it was in sunlight 350 days a year, and had sunlight for 6 hours a day.  Then it would produce 2,100 KWH per annum. 


At 60c/KWH that comes to $1,260 pa.

In other words, an investment of $1,500 would pay $1260 per annum, giving a return of 84% pa for the next five years.

So it certainly sounds like a gold mine, paid for by the taxpayers of NSW.  And DO WE PAY!!  The production cost of electricity from coal is around 6c/KWH.

The cost to NSW taxpayers is estimated to be nearly $2 billion by 2016.  There are about 100,000 installations.    The average installation therefore earns about $20,000 over the next 5 years, or $4,000 pa.

So go for it Barry.  I don't think you should pay any more than 7c/KWH.  But at the least, you should cap the total repayments at $0.60c /KWH for hardship cases untill the capital cost is paid, then revert to 7c/KWH.


 
MAIL comments