21st February 2008.
ECONOMY
Martin Wolfe has written a particularly gloomy forecast "America's economy risks the mother of all meltdowns." His prediction is based on noted bear forecaster Roubini of NYU. He explains why the US cannot fix the problem, and that unless the world comes to the aid of the USA within six quarters, then "it will end all stories about 'decoupling' ".
Grim stuff indeed. Equity markets are thought to indicate with great authority the odds of future problems in the economy.
The recent uncertainty in equities does
not inspire confidence. My
own belief is that we are in for an extended period of stagflation,
with low interest rates and high inflation. Best investments during
stagflation periods are land and (possibly) equities that are concerned
with leisure.
The problems with the world economy continue to fester.
In the UK the government has moved to take over the Northern Rocks bank in the largest such nationalization since the Bank of England takeover in '46.
ANZ and other Australian banks are declaring further losses. Australian banking equities have weakened with an average fall yesterday that exceeded 20%. "Experts" continue to reassure us that the situation is under control, that the matter will stabilize. Last week Warren Buffet offered to take over the insurance of municipal bonds.
I wish we had federal deposit insurance in Australia.
Over a year ago I wrote about a Chinese ASAT exercise.So now the US is using it's Aegis class destroyer to shoot down a LEO (low earth orbit) satellite. It must be to impress the great unwashed, because it is general knowledge that Aegis has had that (ASAT &/or ABM) capability for several years. A report in the "Washington Times" mentions that defense scientists are looking at ways to counter Chinese ASAT weapons. Good luck fellahs. I would reckon that urinating into the teeth of a force 4 hurricane would be a more profitable endeavour.
The real question is just "who are the great unwashed?" Pity help us all if it's the brass. More likely (I hope) it's congresspersons hoping to get some funds into their constituency.
As any shooter knows, it is one thing to shoot a sitting duck. Hitting a bird in flight is a totally different story.
One that I trust DARPA has in hand.
The Rudd government continues it's headlong course to economic disaster. One of the signs is their blaming a Howard caused "skills shortage" for inflation. Ha Ha. Adopt the Howard strategy solution. Just allow a few more skilled immigrants in. That inflation is partly imported, (oil price etc) but mostly it is the expectation of Rudd government legislation. And Kevin, Education is a state responsibility.
The unemployment rate has dropped further for January. "Hmm. Wonder what caused that" I can hear them thinking in their $billion parliamentary monument. To me it seems obvious, it was the threatened repeal of "work choice" legislation. Employers were out hiring as many people under the old system as possible. My prediction is that from now on, (now being because parliament has now repealed "work choices") unemployment will continue to rise to the 5% achieved when "work choices" was first introduced. And also that nothing that Rudd can do will reverse that trend.
And what else is the clever Rudd government doing? Story in the Australian today seems to anticipate that Rudd has appointed ex Victorian premier Bracks to try to "save" the Automobile manufacturing industry. (the Bracks who fell on his sword about the Murray irrigation so as not to cruel Kevin07). Can somebody please explain the logic of subsidizing that particular white elephant when there is a labor shortage? (That was a rhetorical question).
Well I can try. Those Auto workers are strongly unionized, and "look after" their union delegates, those same delegates who turned on the money taps to get Labour elected. If the Auto industry were to go, then a lot of union heavies might have to look around for a real job, actually doing something productive, instead of leeching off unionists and the Australian people. And who would contribute to keep Labour in power in 2010?
As stated in an earlier post, you are unlikely to hear about any of these idiocies in the public media, specially from the union dominated Journalists profession. Murdoch might have somebody who states the obvious, but only because Murdoch tries to do balanced reporting.
Kevin is the best I have seen rise from the Labour party since Hawke. But he ain't no Rhodes scholar, just a jumped up public servant trying his hand at government with a hostile cabinet.
Stillandall, we have to have a crappy
government in power every so
often, firstly to shake up the real government, secondly to make us
realize how good we had it.
I got an email joke the other day.
While walking down the street one day a senator was hit by a truck and killed.
He arrived in heaven and was met by St. Peter at the entrance. "You must spend one day in hell and one in heaven. Then you can elect where to spend eternity."
"I vote for heaven," said the senator.
"I'm sorry, but these are the rules." And with that, St. Peter escorted the senator to the elevator to hell.
The doors opened in the middle of a green golf course. In the distance was a clubhouse and standing in front of it were friends and other politicians who had worked with him. Everyone seemed very happy and in evening dress. They shook his hand, and reminisced about the good times they had while getting rich at the expense of the people. They played a friendly game of golf and dined on lobster, caviar and champagne. Also present is the devil, who really was a very friendly guy who had a good time dancing and telling jokes. They were having such a good time that before he noticed it was time to go.
Everyone gave the senator a hearty farewell and waved as the elevator ascended…
The door opened in heaven.
A day passed during which the senator joined a group of contented souls who moved from cloud to cloud, playing harp and doing karaoke. They had such a good time that before he realized, the day had gone and St. Peter returned.
'Well, you've spent a day in hell and another in heaven. Now choose for eternity.'
The senator reflected for a minute, then answered: 'Well, I would not have thought it. Heaven has been great, but I think, since most of my past friends seemed happy in hell, that I would be better off with them."
So he took the elevator down.
The doors of the elevator opened and he saw a barren land covered with waste and garbage. His friends, dressed in rags, were picking up the trash and putting it in black bags as more trash fell from above.
The devil came over to him and put his arm around his shoulder. 'I don't understand,' stammered the senator. 'Yesterday I was here and there was a golf course and clubhouse, and we ate lobster and caviar, drank champagne, and danced and had a great time. Now there's just a wasteland full of garbage and my friends look miserable. What happened?'
The devil looked into his eyes and smiled. "Yesterday we were campaigning".
Back in January I predicted the problems that would arise with Labour. The worst case has eventuated.
Inflation is booming, and the equity and real estate markets are under sustained recessionary pressure. This is not just imported recession from the USA. Our recession is at double the USA/world rate. Mostly this is because the wealth generators and investors realize that union power is resurgent, and that will result in cancellation of Howard's anti inflationary "work choices" legislation, which means higher wages for unionists (includes journalists, members of the law society, AMA, miners etc), greater unemployment in the less well off part of the community and as a result, raging inflation. With CGT laws the way they are, inflation is a profit killer.
It takes a long time to get inflation under control. But inflation happens very quickly when inflationary circumstances arise. And the repeal of work choices is expected to be extremely inflationary.
Prime Minister Rudd and Julia suspect that inflation and high unemployment will result from repeal of work choices. They just don't care. They just want to reward their union organizer mates. They are already constructing the excuse that "inherited inflation" means that tax breaks promised before the election must be retracted, and rising unemployment (which will happen as soon as "work choices" is repealed) will be because we are "unskilled", not because of the repeal of AWA's.
Like in the joke above. Now Labour are not in election mode any more.
Now is the time when they must payback the unions who invested $millions so Labour would be elected. That payback is the repeal of "work choices", And just to keep Rudd honest, the Labour frontbench is dominated by ex-union heavies.
POLITICAL BRIBES
Since the time of Pericles in 400BC it has been known that democracies are a corrupt form of government. The corruption is generally of the form of payments made for political favours. Those favors might be "crude" where the politician accepts cash bribes in return for awarding government contracts. Or they might be sophisticated, where the politician sponsors legislation that (not obviously) favors a particular industry in return for political donations.
The first form of bribery is relatively smalltime and harmless. It is the Brian Biurkes type of bribery. Often found in the awarding of contracts involving public infrastructure such as transport (toll roads, private carriers), services (water, airports). The politician gets a lucrative "consultation" fee when he leaves politics..
The second type is very bad. It usually involves legislation which is purportedly introduced for humanitarian or economic or preservation reasons. It is bad for several reasons:
US ELECTIONS
As an ozzie, I have opinions, and perhaps distance gives perspective.
So far it is Obama -v- Hillary, and McCain. There is talk that Bloomfield & his $billions might intervene if McCain eases up. McCain (of "Cain slew Abel" nomenclature) has negative bible belt publicity.
I do not think Obama or Hillary can beat McCain. Hillary cries too much, and Americans do not want a war chief (and let's admit it, that is what the US president is) who cries. In countries that I have visited, I have always found that large minority ethnics do not get on. So I predict that Obama will not get the Latin vote, and that is essential in California and Texas.. And McCain is not too old, (cf. Reagan) and he is a genuine, uncontested war hero.