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Preparing for the Single World Currency

May 31, 2009 2 comments
Drunk on a frothy economy.

Drunk on a frothy economy.

Bloomberg has a commentary by Mark Gilbert, summarising the evidence to support the idea that the U.S. dollar’s days are numbered. His commentary concurs somewhat with one made by Bill Bonner on The Daily Reckoning. He describes the merciless battle between the forces of inflation versus deflation, but with rather more frankness suggests that the U.S. is doomed:

In a larger sense, the US is at war with capitalism…and with nature herself. Markets have natural rhythms. They go from boom to bust…from inflation to deflation…from expansion to contraction naturally. Trying to stop the bust is futile. It is a fight against Fate…a losing proposition. And it is diabolically unnatural.

Mr. Gilbert, despite his pessimistic views, believes that the US will not default on its debt obligations and, furthermore, will not have its credit rating downgraded from AAA status:

It is undeniable that the U.S. government’s ability to finance its borrowing commitments has deteriorated as its deficit has ballooned.

Using the definitions outlined by Standard & Poor’s, a one-step cut into the AA rated category would nudge the U.S.’s creditworthiness into a “very strong” capacity to fulfill its commitments, just weaker than the “extremely strong” capabilities demanded of AAA rated borrowers. That seems an appropriately nuanced sanction — albeit one that the rating companies might turn out to be too cowardly to impose.

In my view, there are mistakes in both analyses, owing to incorrect assumptions. Firstly, Mr. Gilbert may well be playing down his pessimism so as not to be accused of fearmongering, but surely he is aware of the degree to which U.S. mortgages are heading for the wall. The current picture is looking much worse than that which existed even before this whole economic crisis began.

Credit rating companies are not independent, scientific and unbiased organisations by any stretch of the imagination. They are privately owned outfits with great power in swaying public opinion. Indeed, they are crucial part of the fiannce sector, able to make or break whole economies by their assessments. They are, in a sense, no different to mainstream media outlets, privately owned by an oligarchy, providing heavily filtered news with bias at every turn. Yet both are threatened now by the obvious. More and more, media outlets are being forced to report undeniable facts (political and economic) which go against the current “political correctness”.

The world’s population is becoming painfully aware of the economic failings of the U.S., and to suggest that credit rating companies will ignore this fact is like suggesting that Fox News would fail to report an anti-war protest in Washington DC with ten million angry people brandishing torches and fighting riot police with their rubber bullets and teargas. As much as Fox News would probably like to under-report it as being several hundred angry youths having a small scuffle with police, it could not get away with it. The credit rating of the U.S. economy will be revised downwards. It’s as good as given already.

Mr. Bonner, on the other hand, is a believer in markets. They are, in theory, beautiful things. People come and trade, buying and selling whatever can be bought or sold. In so doing, they set the price and value of everything, ensuring the most efficient use of resources of a society. If markets are natural, then one can expect undulations in pricing, rises and falls depending on seasons, social changes and other explainable phenomena. One can even expect massive corrections in pricing as a result of a major changes in government policy (the chief cause of bubbles). On that thought, the U.S. economy has so many bubbles at the moment, that it could be better described as a froth economy. If we blow off the froth, what are we likely to find?

Unfortunately, markets today are far from natural. The presence of hedge funds, the Plunge Protection Team, the undeniable pervasiveness of insider trading, interventionist governments and the hysterical mass media all ensure that market movements are, more or less, predetermined.

Instead of sailing on an ocean, where navigation and seamanship are a fair mix of art and science, investing in the stock market today is like sailing in the presence of a wave machine and massive propeller fans generating false winds. All is well until someone decides to switch the wave machine off or alter the fans without notice. It would have been better for most not to have sailed at all. Yet how nice it would be to be a friend of the wave machine operator. What advantages could be had!

Death comes like a thief in the night, unpredictably and suddenly (except for when it doesn’t, of course). Whereas the miser wakes early each morning, thinking he will avoid danger, the thief rises the night before and was already at work before everyone else. The death of the U.S. currency will come in the form of a great heist. Already, the middle classes are being robbed blind. In a way, they have been blind drunk on credit, but are now waking with a splitting headache only to discover that the foam has been blown off their beer and, after all that, the glass is empty.

While to many it is an extreme view, even now, it is inevitable that the U.S. will soon default on its credit obligations. It might not be called a default, or a bankruptcy, or anything suggestive of the term ‘failure to pay’, but it will nonetheless happen. Like the bankruptcies of GM and Crystler, the U.S. economy and its people are going to be sold off, divided up and redistributed to its creditors. Some names will change, others will stay the same. Euphemisms are probably still to be invented to describe the coming events, but the coming ‘restructuring’ of the U.S. economy will be nothing less than the settlement of failed debts on an international level, which will effectively result in the handing over of sovereignty to foreign interests. With or without a war, the final and determining step in this process will be the dissolution of the U.S. currency and the adoption of a world reserve currency, and with it the end of the era of Democracy.

No Hope, Only Certainty for World Economy

The Deluge - Paul Gustave Doré

The Deluge - Paul Gustave Doré

The past week saw some important stories break on the mainstream media, including revelations of an explosion in funding of intelligence services in the UK, which reportedly are poorly run, targeting the innocent more often than the guilty. Clearly, the perception of the British Government is that the massive funding boosts are necessary in anticipation of coming major developments around the world.

We found out this week that those calling the latest stock market rise a “sucker’s rally” were right. The pessimists are back in business, with predictions of a fall in the Dow Jones Index to 2,000. It’s a big deal, as the conditions for such a fall in stocks are unlikely to be imaginable for most Americans, even now. Yet two groups in America are conscious of the possibilities: the Government (which has been quietly expanding its prison system and domestic law enforcement) and civilians who are arming up and buying ammunition. But to say that this is merely an American problem would be very narrow minded. Indeed, some of the greatest shifts in economies around the globe are outside the US, such as Japan, having just recorded a record 4 percent contraction in the first three months of 2009.

To that end, the week also marks the shift away from the US currency by Russia as a reserve currency, as well as moves in the same direction by China, a thing that in the past has triggered wars:

In a G2 world (the United States and China), he who is the piper calls the tune, and China holds a US$2-trillion mortgage on the United States and is not happy. This country, along with others that lend money to the United States, such as Saudi Arabia, will determine the value of the U. S. dollar and gold. And they have spoken. They are not buying more U. S. treasuries and are buying gold as a new asset class.

It’s estimated (by John Ing) that the gold price will reach US $9000, which is not a reflection of a meteoric rise in the value of gold, but a total debasement in the value of the American economy. The unmentioned and possibly unmentionable thing in all this is that such a debasement in US currency cannot occur without a significant change in the global military balance. Indeed, if this change is not taken into account, assessments tend to conclude that China (and others) will not recover quickly to take the global lead away from the US. The same degree of extreme economic instability is forecast (and is already coming) for the UK (and other first world countries), although it will likely take different forms. The interesting thing is that talk of conspiracies of world government and globaly tyranny, once only conducted in hushed tones by people suspected of having paranoid delusions, is now the stuff of the regular press, making simple arithmetic easier than ever. Perhaps this is because the notion of coming social upheaval is now a foregone conclusion, making it an acceptable thing to discuss in the public arena.

On a cultural level, the undermining of British social structure appears to be complete, with the sexual equality war now having been lost well and truly in favour of Feminism, where it is reported that advertisers now consider mocking maleness as an advantageous strategy. The significance of advertising trends should not be underestimated, since it is one field where sciences of psychology and sociology are applied effectively, where the current status of a society is accurately assessed. It marks a total disorientation in British society from what could be termed a natural social order.

There is very little left in Western society that reflects the biological realities of being a human being. The lives of men and women are distorted, artificial, medicated. This false way of life guarantees their unhappiness and vulnerability to social pressures. As such, Western society is weaker than it was during the first Great Depression, which is likely to make matters much worse in coming years. Even if people woke up to these facts tomorrow morning, it would take generations for them to relearn what has been lost. It’s unlikely that this will occur, in any case. That particular civilisation has passed its turning point.

There isn’t much anyone can do now to avoid the problems which will arise in the next couple of years. If this were to be compared to the story of Noah and his Ark, then the time now would be that of the first rains of the coming deluge. That  said, the people of the world who have been quietly preparing themselves, mentally, spiritually, and materially, are in a position of great advantage. This “advantage” is not the kind that is understood by opportunists or materialists. Indeed, those who only view current events as a way to make some money are going to be rather surprised.

Growing Old Gracefuly

lonely old womanGrowing old gracefully is about receiving love and support from your family when you become elderly and frail, but this only comes by the example of giving the same to your children.

When visiting the elderly sick in Hospital, or in nursing homes, many different scenes can be observed. A few hours of sitting, listening and looking around reveals much about the society in which one lives, and in a short time, the most important lessons of ageing can be learnt. Just look and you will see old people with sons, daughters and grandchildren filing in and out of their hospital rooms, surrounded by flowers, cards and gifts. Next to them, people gazing blankly at the ceiling, having not met a familiar face since falling ill. It is the latter scenario that most people fear in their old age. Unfortunately, it is a growing minority that is destined for this situation.

Many elderly are practically childless. They may have several sons and daughters (whom they already rarely see), but in hospital, they are totally alone. Not a soul visits them and it is only the nursing staff who will spend any time interacting with them. But hospitals are busy places and the nurses come and go, and the doctors are even less accessible, since they are spread thinly between so many and inundated with paperwork. These poorly paid and seriously overworked hospital staff become the surrogate family for a time. When old people get sick, they rarely recover to their original state of health. When they go home, or “to the Home” things are never the same.

In hospital, they  all appear rather alike – frail, depressed, sick and all dressed in patient gowns. But talk to them and you will hear a surprising variety of histories. Among them are former professionals, tradesmen, housewives, labourers, the educated and the uneducated. Why they are so alone is not usually a simple matter, but, despite their differing backgrounds and stories, several themes tend to run in every case. While people describe annoying traits such as rudeness and crabbiness as a reason for the problem, they don’t distinguish these as being a cause or an effect of one’s predicament. The reasons for their loneliness go beyond personality.

Loneliness in old age is associated with depression, dementia, suicide, higher blood pressure, substance abuse (alcoholism, heavy smoking, etc.) and generally poorer outcomes from an episode of illness. It’s no surprise, since people are social beings and most people, without social interaction and the responsibility that comes with it, become slothful and fall into self neglect. People need people. Growing old gracefully has little to do with material wealth, but everything to do with being surrounded by loving people.

So who should look after you when you are old? Who will come and visit, bring you the things you need and help out without taking away your dignity and freedom?

Socialists would argue that governments have the role of ensuring that all the social needs of the elderly are catered for in an institutionalised manner, and that anyone who had made better preparations (by saving, working hard and avoiding debt) would be called upon to help out those who had made none (by being taxed). Capitalism teaches that if people failed to save for their old age, then it’s solely their problem. In both ideological systems, the idea of family rarely comes to the fore. In the U.K., for example, the emphasis in the debate is on Meals On Wheels type services, organised and paid for by local government agencies. These services end up being run in a similar way to every other service – impersonal, cost orientated, and usually of a consistently low standard. The result is crappy food at home, crappy food at the hospital, and unenthusiastic, distant people providing said food (and other services) to unenthusiastic recipients. Nobody wants that.

The fear of being institutionalised is powerful and has been used to great effect, particularly by the Australian Government. Using this fear, successive governments have driven people to increasing superannuation contributions, pursuing the home ownership ‘dream’ and buying up private health insurance. All of these are ultimately geared around the assumption that children won’t look after their parents, the Government will stop the pension and the health system will be unable to look after the elderly. None of these assumptions is fact, but, as prophecies, they are self fulfilling.

As a result of fear and Government policy, people preparing for retirement invested in financial instruments such as shares and superannuation funds. A lot of this money has evaporated, wiping out years of hard work and savings. Before the financial crisis, people would speak of investing in superannuation and shares as a way of making sure they were not dependent on their children in retirement. They assumed that children had no desire to help their parents in their old age, that they would rather lock them up in a nursing home, never to be visited. The older generations view their own children as avaricious, selfish and disloyal, but the finger of blame frequently turns upon itself. Paradoxically, by their greed, people are ensuring their own poverty.

What people should be doing is investing in real things and real people – the ones who matter most. The practice of trusting one’s own welfare to strangers has never proven to be wise. Refugees, for example, are at much higher risk of separation, loss of wealth or even death than people who try to survive a conflict by staying and hiding in their own, familiar environment. Yet this goes against what many may assume to be true, but just as it is better to avoid becoming a refugee, it is similarly foolish to throw one’s self on institutions for support. As much as people may detest the idea of becoming a burden on their children, as a rule they are better off in such a situation than becoming dependent on faceless organisations whose priorities are based in accountancy and legalism, not humanity.

In many ways, the people who do not think so much of the future but put their resources into supporting their children and close relatives are the ones taking the path of wisdom. Several hundred thousand dollars on an investment account is a mere promise of material support when compared with the same, invested in one’s children and their families. By placing their money, emotions and priorities in favour of children, parents are buying into their children’s success, with the reasonable expectation for reciprocal support later on. This is far better than the default scenario of entrusting one’s self in government pensions or private superannuation fund returns.

Of course, there is more this than money. If the approach of trusting one’s children is to succeed, then the children have to be trustworthy, yet this can only come from leadership by example. The onus is on families to build a culture of trust and accountability, of straight talking, straight thinking and keeping promises. Traditional families are well placed to survive economic and social upheaval because they are based on these principles and their reliance on institutions for survival is minimal. By building ties with the children in meaningful ways as they move from being dependent to independent, to being family builders themselves, the older generation ensures that it is looked after and respected. Avoiding loneliness in old age comes from engaging in the lives of the grown children (as equals), in showing respect as well as giving guidance. It’s that simple, yet perhaps the reason this does not occur as often as it should can be attributed to children wanting to rebel against their parents, and the poor way in which this is dealt with by parents themselves. A cycle of animosity develops which perpetuates itself for decades, during which important events in the children’s lives pass by without the parents’ involvement. Eventually the parents become elderly frail, at which point it is too late to make amends.

Loneliness in old age, by rights, should be a rare problem. Becoming old, though itself not a particularly pleasant thought, should come with the great compensation of feeling satisfied what one’s life has achieved. There is no greater source of this than to see one’s own children and share in their success. Family life, therefore, should be the “superannuation fund” of first choice, since its returns are of an enduring and fulfilling quality that institutions cannot match.

Subprime Banking Crisis

Imagine, if you can, an unemployed black man sitting somewhere on a crumbling porch, in a string vest, and a chap comes along and says “would you like to buy this house before it falls down … and why don’t you let me lend you the money?”…

“… but it’s not us who will suffer, it’s your pension fund.”

Swine Flu: Smoking Pig or Sneezing Gun?

May 13, 2009 1 comment
Oink *cough* Oink!

Oink *cough* Oink!

In what appears to be the first mainstream admission that the Swine Flu might well be of human creation, Bloomberg reports on an Australian researcher (a plant virologist) who suspects that the infection may have arisen from a vaccination laboratory, by mistake of course:

[Emeritus Professor] Adrian Gibbs, 75, who collaborated on research that led to the development of Roche Holding AG’s Tamiflu drug, said in an interview that he intends to publish a report suggesting the new strain may have accidentally evolved in eggs scientists use to grow viruses and drugmakers use to make vaccines. Gibbs said he came to his conclusion as part of an effort to trace the virus’s origins by analyzing its genetic blueprint.

A similar theory existed for Avian influenza. That is, that it leaked from a laboratory in China by mistake (of course), possibly from a biological weapons laboratory. For those out there who had some kind of notion that nobody was developing biological weapons anymore, then you ought to surf Google more!

Yes, this virus strain could be a case of mistaken release of a partially attenuated pathogen, but what, pray tell, are supposedly legitimate pharmaecutical companies doing with these unusual and, dare we suggest, practically off-limits viral RNA in their possession? Why did this virus start off in pigs in Mexico?

We discussed earlier how the theory that this virus is natural is an implausible one, that three viral strains (as originally reported) do not simply combine in vivo without leaving a very obvious train of precursor strains. We also discussed, jokingly, how the virus outbreak may have been no mistake (something that requires constant consideration, as there are many plausible motives). The facts are now beginning to fall into place, but this most intriguing of mysteries is still not close to being solved.

Swine flu has infected 5,251 people in 30 countries so far, killing 61, according to the WHO. Scientists are trying to determine whether the virus will mutate and become more deadly if it spreads to the Southern Hemisphere and back.

So far the mortality rate stands at 0.6%, which is nowhere near that of Spanish Flu, and is roughly equal to the annual death rate in Australia. That’s actually a lot of deaths, but still nothing to be particularly worried about. It needs to be borne in mind that most of the deaths occurred in Mexico, which does not have the same underlying health, demographics and climate as most of the developed world. Update: 17/5/09 – It is estimated that more than 100,000 infections have occurred in the U.S, and given the death rate so far.

If Dr. Gibbs is correct, which it appears he is, then it should be possible to find out exactly which laboratory produced the pathogen. Possible, of course, does not mean easy. Those working in biological research laboratories, especially those working with dangerous organisms, are in a particularly vulnerable situation. Not only do they need to be very careful how they handle the microbes, but they must take special care with the information they collect and be mindful as to how that information is likely to be used. No profession is without ethical dilemmas.

Bloomberg’s article goes on:

In addition, his research found the rate of genetic mutation in the new virus outpaced that of the most closely related viruses found in pigs, suggesting it evolved outside of swine, Gibbs said. Some scientists have speculated that the 1977 Russian flu, the most recent global outbreak, began when a virus escaped from a laboratory.

Gibbs said he has no evidence that the swine-derived virus was a deliberate, man-made product.

“I don’t think it could be a malignant thing,” he said. “It’s much more likely that some random thing has put these two viruses together.”

Well, everybody is innocent until proven guilty. It is also quite correct to say that this virus is unlikely to be a biological weapon, because its lethality is so low. Nonetheless, this virus has the potential to cause as much death and morbidity as did the Chernobyl reactor disaster of 1986 – an event that partly triggered the collapse of the Soviet Union. Should the origins of this virus turn out to be one of an established superpower, or an emerging one, it could well spur some seizmic shifts on a political level.

The Recession is Still On

May 12, 2009 7 comments
Only South Park would get away with this.

Only South Park would get away with this.

For anyone who had the hairbrained idea that the latest stock market rally was a sign of the return of the good ol’ days, news signaling future woes continues to flood the financial rags.

The housing market in the US and UK is still extending people’s abilities to accept ever more bad news. The Financial Times reports:

The 25 per cent auction discount and the sluggish market give a strong signal that prices have further to fall. But the recent uptick in the auction market also shows the gap is narrowing.

This can mean either of two things; either the housing market is still tanking (in the UK and US), but a turn-around is coming soon, or the housing market is still tanking, and the increase in sales at auction is due to people who have to live somewhere buying at the 25% discount that results at auction, not realizing that prices will fall further still as more mortgate defaults accumulate (since, in the US, as many as 30% of mortgages are still bigger than the asset value). It certainly suggests that the Australian housing market is not at all a safe place to invest currently, although the statistics still look amazingly good there thanks to the naive First Home Buyers.

China, fearing an inflationary spiral, is restricting credit:

Chinese bank lending slowed dramatically in April because of fears that loan growth in the first quarter had been excessive and could pave the way for loans of deteriorating quality, so possibly creating a new round of asset bubbles.

This suggests that nobody there has any real confidence that life is going to get any easier in the near future. Whatever is said of China’s increase in manufacturing, it is occurring in the face of worsening deflation and therefore falling demand. Again we ask, where are the markets going to come from to restart China’s furry toy and other plastic-junk factories? The banks have probably overstepped their mark in spreading around the easy-money:

There have been signs that China’s economy is starting to regain momentum after weak growth in the early months of this year. There was significant growth in fixed-asset investment and industrial output in March. Chinese banks have also lent 4.6 trillion yuan (£460bn) in the first quarter of the year, nearly the total for the whole of last year.

As we described earlier, this is like flogging a dead horse by ramming it with a speeding freight train. Of course the horse will move, but it’s still dead. But according to central bankers such as Jean-Claude Trichet, the recession is over. He is ignoring the magical freight train (the ridiculous amount of new money spirited into existence over the past year) which governments and bankers alike are hoping people will not notice, or at least forget very quickly.

The problems won’t pass until some serious restructuring occurs in advanced economies in order to make them viable. This will take years and, in countries such as Australia, planing for this kind of restructuring (in the form of infrastructure upgrades) is still only talk. Most of this stuff isn’t even on the Parliamentary floor yet.

The Man With One Foot In Two Shoes

Friend of All, Defender of Nothing?

Friend of All, Defender of Nothing?

… and neither of those shoes is Catholicism.

Pope Benedict XVI has not failed to disappoint traditional Catholicism by placing issues such as inter-religious “dialogue”, diplomacy, doublespeak and suckering up to everybody he meets over and above the simple, honest Truth. Instead of doing as the great Apostles, the great Popes did, by being frank, clear, even blunt about the problems of the world, Pope Benedict XVI said vague things like:

I come, like so many others before me, to pray at the holy places, to pray especially for peace — peace in the Holy Land and peace throughout the world. Mr President, the Holy See and the State of Israel have many shared values… [etc]

What he means by holy places is mosques and synagogues. As for Churches, he prefers open air masses in un-sanctified places, such as stadiums and race courses. And as always it’s very important to remember past crimes, for which everybody today is some how retrospectively responsible and can never be forgiven, no matter how sorry they are:

Tragically, the Jewish people have experienced the terrible consequences of ideologies that deny the fundamental dignity of every human person.

It is right and fitting that, during my stay in Israel, I will have the opportunity to honour the memory of the six million Jewish victims of the Shoah, and to pray that humanity will never again witness a crime of such magnitude.

While it is reasonable, even necessary, to show compassion to the suffering endured by others, there is never such direct reference to the dead in Gaza, only the mention that “it is all too evident that, for decades, peace has tragically eluded the inhabitants of this holy land”. What a boring thing to say! It is plainly obvious that in the Israeli-Palestinian conflict there is no simple answer – nobody is without blame, nobody is entirely righteous. No event in history, outside of Jesus’ Crucifixion, has ever been one sided. That includes World War II. Yet it is also plainly obvious that the Palestinians are starved, weak, desperately poor and desperately alone in their plight. Will Benedict XVI lay a wreath in honour of the thousands of dead Palestinian women and children? Or in honour of the Christian martyrs which have lost their lives in that land during his own lifetime?

And so, the Papal visit is proving to be no different from a visit by any other secular head of state. It might have just as well been Ms. Rice, or Ms. Clinton making this speech (except for the Christian references). No efforts are made to convert the unbelievers (one of Christ’s most direct commands) , or to directly defend the plight of Christians in Israel. There are only painstaking efforts to avoid offending anybody, except for one’s own religion which. This is, perhaps, because the visit is largely about money:

…the Vatican only officially recognised Israel in 1993; an agreement between the two sides on property rights and hugely valuable tax exemptions has still not been implemented.

In the end, of course, Pope Benedict XVI pleases nobody, least of all those whom he tries to please. Perhaps he should try something new. Perhaps he should just stick to Catholicism.

Categories: Catholicism, Pope, Religion Tags: , ,