The Concept of “Peak Government” – a reduction in future law making?
Whilst most of us know about the concept of Peak Oil, the idea of living through a period of Peak government is possibly something new.
The term Peak government is not original, but I feel it describes aptly, my general opinion concerning the recent expansion of governmental interference in our day-to-day lives, as well as explaining the apparent abundance of inadequate leaders around the world.
Peak Oil is not the disappearance of Oil; it is the disappearance of “Cheap Oil” which due to rising prices will lead to a reduction in usage.
In a similar vein, Peak government is not the disappearance of government; it is the beginning of a period when government interference in our day-to-day lives – through a lack of resources and support – will start to contract.
Fragmentation within both Europe and national governments are starting to indicate that Peak Government may already have started.
Government – because of the inherent political ambition – is an animal whose goal is always expansion, and because of this, “downsizing” is something no current government has any mechanism to handle.
Government is a group of people who control society’s powers through legislation. The group, because of their power, too eagerly believe that it is incumbent upon them, to continually manufacture new laws and new rules and regulations – to basically “tinker” and adjust, and they do so, even if the changes have no real merit.
Whether society needs these new laws and regulations is not the issue, the issue is, those in power feel impelled to make laws – at any cost!
Time after time we see regulations amended, or even reversed, based on their “deemed” level of effectiveness, and we see them altered according to the ambition of the minority; ie the political class in power.
Laws are often created, not for the benefit of society, but almost without exception, to take control away from the individual and give it to the state.
I have often mentioned in my articles that “God only made 10-commandments, yet the EU has managed to pass 110,000 laws in 12 years”…And yet, with all these laws made, few would state that life is better today than it was at the turn of the millennium.
Anyone who studies fluctuations, be they in stock markets or society trends, will readily admit that we see a massive acceleration in activity as we head towards a peak, followed by a rapid reverse of direction.
In terms of “Peak Government”, it would not be unfair to suggest that this “massive acceleration in lawmaking” is an indication that we are getting near to the end to this period of overzealous governmental interference. Therefore, we could soon expect to see a period where less laws are created: meaning that government will stop expanding its influence.
Whilst this may seem absurd, it could be said that the global economic collapse will result in reduced funding for government, and without funding, they will be extremely limited in being able to finance changes; so making more intrusive or even necessary laws may prove unaffordable.
In practical terms, we all know that making laws about the types of foods we eat, rules about how we chastise our children, and a host of others, though important for technocrats, have little impact on the vast majority of people – other than the fact we have to finance all the work that goes into creating and imposing them.
And what are some of these laws and regulations we have seen:
Most of us now realise that government regulations, encouraged cheap mortgages to be made available to the masses. We also now realise that the government failed to build in any mechanisms to alleviate the inherent risk, for when these borrowers found themselves unable to service the debts and loans.
This is one simple example of government failure, doing something popular, without understanding the repercussions and dangers. This was the political “tinkering” which led to the recent banking crisis.
We also know that it was another government ruling that removed the “ring-fence” around “savings” capital and “speculation” capital, when they forced capital market institutions and building societies to both adopt the status “bank”: This one allowed, through “takeovers” and “buy-outs”, speculative entities to buy savings institutions and use allocated savings capital as guarantees for their speculation activities. When the speculation went wrong, the savings capital got dragged into the losses.
These are prime examples of where government “tinkering” hase caused disastrous outcomes.
If you study the acceleration in the creation of laws over the past 30-years, you will find numerous examples of laws being made, which did little to benefit anyone, yet cost billions to create and enforce. And many examples of ludicrous laws: i.e. the shape of a banana; or whether you can sell vegetables in metric or imperial weights: All petty tinkering which caused upset and cost for no specific reason.
Society must take the blame for so much legislative wastage. We became increasing apathetic towards politics.
As a result of our apathy we allowed successive governments to do as they wished, with little in the way of checks and balances.
Indeed, although we claim that by segregating the executive, the legislature, and judiciary in our government we do have these checks, in essence, this trias politica have become bed-fellows, with the executive generally doing as it pleases.
As our governments influence have grown unfettered, such as in the case of the EU, we found ourselves accepting the dictates of the political classes far too easily, and without any real opposition, the speed at which the politicians introduced laws, including very bad ones, has done more harm than good.
This now needs to be re-examined.
I don’t believe it is unfair to state that “rebellion normally comes as a result of poverty”, nor is it unfair to state that “poverty is often a result of poor or tyrannical governance”; be it domestic or foreign.
Again, I see it is only a matter of time before the voice of the people demands that politicians become more accountable, and it is very probable that those seeking office, instead of promising new laws, simple offer to scrap many of the old, inappropriate ones.
This is not a specific action exclusive to be championed by either the right or the left,. BuT i feel that as a people get more “Fed-up” with the quality of their politicians, they will demand a more common-sense approach towards running their societies.
If this comes about as a result of poverty, it might be said that that without wealth and affluence, most laws made over the recent decades will be basically redundant anyway.
Laws on types of food which can be made or consumed mean nothing in a society of hungry people. Laws on how you can make money or how you are employed, mean very little when people are struggling to make ends meet. And I would suggest that the 1000’s of laws created to legislate on transportation, be it goods or people, will mean nothing if we can no longer afford petrol or other forms of energy.
This is not an exhaustive list, but it may prove indicative of why we may need less government in the future.
As a qualifier, I don’t for one minute want to suggest that our society should become lawless.
Thou shall not kill and thou shall not steal will always be important within a civilised society (but I would say that the one about “coveting your neighbours wife” has probably been redundant for many years!)
I would admit that this subject is somewhat academic in the current environment. However, it is something worth considering: especially by those who have a political interest.
As we are seeing, the Greeks are completely fed-up will the laws and rules being imposed upon them. They have voted for a wide range of political views, and even though a position of power is awaiting “he who can bring these opposing factions together”, no one can get enough support, because the people have had enough!.
Moreover, the problem in Greece is not domestic; it is a problem of foreign rule. Increased rule from Brussels is now completely unacceptable!
This being the case, a Greek departure from the EU is almost guaranteed. And then who knows whose next!
We can talk about the financial implications, but it should also be recognised that by leaving the EU, the Greeks will no longer be forced to comply with the 100,000+ laws and regulations which the EU has heaped on them at great cost.
And if these rules no longer are going to apply to the Greeks, why should they apply to the rest of us.
Scrapping the EU and scrapping its exhaustive laws does not make us unruly or uncivilised…
All it does is takes us back to where we were 20-years ago…and I suggest that that might have been a FAR better place!
People are waking up to harsh reality!
The collapse of the Euro, and the “break-down in relationships” between European member states – as harsh as it is – should come as no surprise to the readers of my articles.
What have been the main points of my message for the past 5 years.
Increased power for the EU is not the solution; it is the problem…This is now broadly accepted.
The Euro is not sustainable, nor will it produce pan-European growth… A now proven Fact.
Different countries with differing output and needs, will ultimately suffer if interest rates are not complimentary to the state of their economy. Boy, are we suffering!
Not all countries can co-exist within a single financial union, because ultimately we are “tribal”: Therefore, rich countries in the “Union” do not want to finance, culturally different, less productive, neighbours, even though they have benefitted greatly from having a weakened currency….Ask Germans about how much more they want to throw at Greece?
Countries need to think more about themselves as individual entities; take responsibility for their own futures and when appropriate adopt more protectionist policies…Greeks want no more foreign imposed Austerity, and Hollande is going to renegotiate a fiscal pact, in accordance with what he thinks is right for France..And that is despite the fact that it was France who helped bully 23 other countries into signing it!
Like it or not, the EU project has been a complete failure, and those who still try to champion it are living in “cloud cuckoo land”.
How the whole of Europe can be destroyed by a country as small – and as insignificant – as Greece is beyond me. The fact that it is, illustrates clearly that the people in Brussels have more ambition than financial acumen.
There can be no option but for us to now plot a course for Greece, and possibly Portugal, to leave the EU, or at least the Euro-zone. I will admit that this is going to be a painful and costly operation, but in the long term it is better for them… and it is better for the rest of Europe.
The debts of these countries do not have to be wiped out – which is ideal for the lenders – but the debt will need to be restructured over an additional decade and at very low interest rates.
The resulting collapse of these countries and the devaluation of their “new” currencies, whilst distasteful, will ultimately bring about reduced labour costs and ultimately start to make them competitive.
Moreover, with support being made available from Europe and elsewhere – which will be forthcoming, as it is something we provide to numerous impoverished countries around the globe – there is going to be the finances available to keep these countries on “life-support”, until they are able to get back on their own two feet.
What we cannot do, is continue to lock these countries into a “fiscal compact”, with interest rates and a currency, which is not suitable for their economies.
I will admit that the Portuguese problem is vastly different to that of Greece, and at the moment many consider the efforts made by the Portuguese government in fulfilling the demands of the Troika have been admirable. However, if Greece leaves, Portugal will have a large target painted on its back, and therefore it may be better to plan for both countries to leave the Euro-zone together.
What Europe doesn’t want is for Italy and Spain to go under, as this will surely result in a complete collapse of the Euro (which is not something I am personally totally against).
Cutting Greece and Portugal free, although costly, will leave Europe with enough “fire-power”, to hopefully support Spain and Italy better. And with the uncertainty gone about the two smaller countries, Europe may experience a little more stability.
We can expect a harsh period during the readjustments. But having shown its ability to “ring-fence” problems, and by allowing Greece to exit the Euro-zone, hopefully, the EU will be taken as a “more serious and capable” organisation. (It certainly isn’t either, but we can hope).
We are of course talking about massive cost. But what is the alternative to letting Greece go?…Years of insecurity across Europe, years of increasing debt without any decent restructuring of the misguided Union?
If it was a life or death situation, we would sacrifice the few to save the many…but it is not life or death.
The real situation is that – for political reasons – we have tied economically unhealthy countries on to the back of a vehicle with which they cannot keep up. This is not only slowing the vehicle down, but those in charge of the vehicle are dragging these countries along the cobbled-road, causing them severe pain and hardship…
What is the right thing to do? Should we keep going, or should we “humanely” cut them loose: Throwing them a few medical supplies, and give them a chance to mend themselves.
It is no longer about what is right, political or financially….we stopped doing that year’s ago. It is now about doing what is right for the people of Europe…both the majority and the minority.
Sure, people will argue and complain, but that is what we all do….especially politicians. Moreover, we will see various commentators saying what is right or wrong, and what will work or won’t work…but that is just media “crap”…Haven’t we all had enough of that!
My long standing view has been that the EU and its promoters have no interest in the lives of all European citizens – all they want is the Gravy train to get bigger – (which it sure is, as more and more people are being employed to solve this unsolvable problem).
Many in Europe know, through sad experience, that dictators never willingly give up conquered lands, and it should be no surprise that those in Brussels today will do whatever they can to keep Portugal and Greece as part of their empire…But the cost and the pain is too much for us to bear any longer.
This may be contentious, but my views have been the same for years…But what is important is this view – after being ridiculed for a decade – is now the main topic of discussion in most of Europe…especially in the north…which is, like it or not, where the decision will be made.
The IMF on Portugal: Reading between the lines.
Having watched the IMF on Portugal, Greece, and Ireland, one thing sticks out.
It doesn’t matter how much money is pumped into these countries, their future is not guaranteed.
The IMF are obviously much more on the ball, when it comes to indebted countries and restructuring, than their senior Troika partners, and because the IMF have no need to focus on the maintenance of the Euro or Euro-zone (other than considering how this problems of this currency will affect the global macro picture) we see a much more honest approach from their technocrats, than we do from those employed by the EU.
In the IMF presentation, they managed to clearly illustrate the different causes of economic stress in each country, from the horrendously bad fiscal management in Greece, to the Irish situation, which was primarily a banking crisis which was passed on to the state. Portugal it appears is a mixture of the two.
Although not said, Greece is expected to remain a burden for at least the next 15 to 20-years: a black-hole which will not survive without massive injections of EU funding. It lacks the ability to be competitive in Europe and globally, and under normal conditions would need to devalue its currency; something it cannot do, as it is trapped within the Euro-zone.
With Portugal, the IMF appeared relatively happy with the actions being taken by the government, yet they want to see an increase in austerity measures. The main concern for Portugal is that it is heavily reliant and exposed to external pressures, which it cannot control. i.e. increased Austerity in the EU, especially Spain.
On a positive note, it was mentioned that Portugal’s exports to “Lusaphone” countries had increased, and this was extremely welcome and should be developed at all costs.
Unlike the blind focus of the EU on debt repayment, the IMF also focused on the need to restructure in order for the countries to become competitive. And they were not frightened to graphically indicate how much Germany had benefitted from Euro-membership though having an “artificially” weak currency, and how much Greece, Portugal, Italy, and Spain had suffered, because in relative terms the Euro was to strong for their economies..
The IMF stated clearly that, north European lenders needed to take a large share of the responsibility for the economic collapse in southern Europe, because their lending had been “reckless” and also the EU’s northern leadership had taken far too long to address the problems of these southern countries, when they had first become apparent.
Banking “Greed” was cited, not only as a major reason why the debts became so large, but also that banks were acting as a stumbling block to any recovery. Difficult to get, expensive loans were curtailing competitiveness and growth, and lack of lending is severely damaging overall liquidity.
The EU did not come out of this unscathed.
As mentioned, “speed of reaction” in Brussels was clearly an issue, and the failure of the north to sacrifice for the south in a timely manner did not go unmentioned. Yet it was clearly stated that the EU was now “willing to spend whatever was necessary” to keep the Union and its currency together – Although the IMF did fail to high-light that this was tax-payers money.
As much as the IMF attempted to “weave” a positive spin into their message, their concerns were many and they were not able to “gloss-over” their underlying concerns, that the road to recovery for these countries remained precarious.
It was made apparently clear that the IMF, were not “comfortable” attempting to find solutions for these countries, because “being “locked” into a currency union”, took away some of the main tools that the IMF would normally utilise to help solve debt problems and competitive disparities. However, they seemed obligated to join the “Troika” to give it some global legitimacy, and also because of the problems a bankrupt Europe would undoubtedly have on the rest of the world.
The graphics used in this IMF presentation, revealed that Portugal’s problems started in 1995 (which supports many people’s opinion on the “culpability” of then Prime Minister, Cavaco Silva) and revealed that the problems started to surface around 2001, when Portuguese goods became uncompetitive, due mainly to the unjustified increases in labour costs caused by Euro-zone membership at a time when GDP dropped. The Portuguese, overly-protective rules concerning employment were mentioned.
Political “games” and favouritism were hinted at, and there was strong condemnation of how inadequate the state-machine operated when it came to collecting tax revenue.
Long term austerity measures were forecast for the foreseeable future and beyond, and the IMF did not dismiss that this austerity was going to stifle growth-potential, because of its massive affect on domestic purchasing power.
The Conclusion
Whilst debts needed to be serviced, public spending needed to be cut further, and with a lack of investment capital available, high levels of unemployment were going to become the norm.
International investors would not be attracted back to Portugal for at least another 4 or 5-years, as they would need to see a “long period” of stability and we have not reached stability levels yet. (Although, investors from “Portuguese-speaking” countries had been noticeably active)
With Portuguese banks currently “impudent”, the only course to stability was through increasing current exports by being more competitive; and to be more competitive globally– without the ability to weaken the currency – real salaries need to decrease some 15% over the coming years.
Portugal’s future lies in its relationships with the ex-colonies of Africa and South America, “commodity producing” countries who will clearly need more services provided in their own language, as well as certain Portuguese made goods.
However, the main risk for Portugal is Political.
The path to growth is along a knife edge and any mistakes along the way could prove extremely costly.
There is obviously a major risk of national politicians returning to operate in a blatantly “nepotistic” way: The left giving too much to union member’s, or the right offering beneficial deals to “crony” businessmen.
But there is also the major risk that the European Union would make decisions against the interest of Portugal. Basically bringing in rules and regulations which would damage Portugal, sacrificing it growth potential, because the EU deem it more important to protect the Union as a whole ( i.e. Germany and France).
We should not ignore the fact that the IMF itself is not above political games and everyone has an “agenda”. But there did seem to be an element of honesty from this body in their presentation: definitely more than we get from Lisbon, Brussels, or Frankfurt.
Debt is destroyed and the days of Austerity are over.
An Old Man Special:
In a desperate attempt to get liquidity into European economies, the ECB have announced that it has printed enough Euros’ to pay the debts of Greece, Portugal, Spain and Italy.
This money will be sent through the European banking systems computers to remove all sovereign debts and allow indebted countries to start from fresh.
Mr Herman Van Rompuy, President of the EU, said in Brussels that “this piece of financial engineering, has been planned for 18 months, but we needed to put a lid on the “over exuberant” spending, which had become the norm for national leaders, as well as private individuals”.
With debt eradicated, the ECB expects a much stronger Euro currency, which will remove the future threat of soaring inflation within the Euro-zone.
Further measures include an increased tariff on Asian imports, which will make local manufactured products more competitive in the domestic market, and should encourage Chinese investment in European based industries, which will lead to a massive turnaround in the number of people unemployed.
Leaders of national governments have welcomed this move, promising, under EU monitoring, to keep future spending within EU targets. The 12 major European based banks have vowed to double the amount of lending within the EU, to ensure small business can take advantage of the new abundance of opportunities.
Raised import tariffs on foreign cars, is expected to benefit the European auto-makers, who are now only allowed to produce electric-powered vehicles; which will reduce the European dependence on imported energy.
At the national level, governments have also agreed to lower income tax to 20% and VAT to 15%, which is now possible due to the reduced number of public service employees.
In Portugal, a move to increase agricultural production by diverting fresh water of major rivers, away from the Atlantic and into drier regions. This growth in agricultural production should reduce the need for foreign food imports. Also the planned lifting of fishing quota’s will now permit Portuguese fishermen to return to their boats and increase the amount of fish they catch and the country can export.
These changes in fiscal policy have been welcomed by the World Bank and IMF, who has claimed - from their new offices in the Bahamas’ – that they expect to see some return to stability and ultimately growth by 2014.
Release of this statement from Brussels, on the 1st April, is considered very appropriate.
Why the UK and Portugal should not fear leaving the EU… Facts, not fiction.
As a Brit living in Portugal, my interest in the future of these two countries is obvious: as is my dislike of the EU.
Political classes being what they are: i.e. They will happily “spout rubbish” and prostitute their votes -at a cost to their countrymen – if it furthers their personal agendas. So it is perhaps time we moved away from their “words” and “spin” and started looking at few facts.
We are told that being out of the EU will be disastrous; “it will cause enormous economic hardship and cause our countries to be completely isolated”.
Fact 1; Since 1991 the EU has grown by 1.5% per annum, whilst the rest of the world has grown at over twice that rate.
Fact 2: In 1991 EU output represented 22% of global output, it is now down to 15% and by 2016 is forecast to be as low as 12% (both IMF figures)
Looking at these figures we can see that membership of the EU is not doing our country any favours.
It would appear to me that there are 166 countries outside of the EU – countries which our politicians consider “isolated” from the EU. These countries, far from suffering from economic hardship, are in the main, experiencing much higher levels of growth than the members of the EU.
We all know that EU member states are over-governed, over-regulated and over-taxed. But it is worse than that…We are badly-governed, badly-regulated and badly-taxed.
Why has this happen? Quite simply, it’s because undemocratic technocrats in Brussels are in control of the continent and OUR countries are no longer run by democratically elected representatives.
It is also a fact that government spending in the rest of the world amounts to around 30% of government income, whilst in the EU countries this amounts to over 50% – The EU governments budget has never been properly audited (last year 14-billion Euro’s were unaccounted for!)
It is obvious that the EU is simply not working, it is becoming obscenely expensive, and we are suffering from its inadequacies.
The UK, with its Commonwealth ties and synergies with other English speaking countries – the USA, Australia, Singapore, Hong Kong, etc. Has a great opportunity to join the growth pattern of the other 166, so-called, “isolated” countries. All it has to do is leave the EU.
For Portugal, as a member of the Euro-zone, it may be more difficult to leave the currency and the EU. But, unlike the Finns, the Germans, and most other European nations, it has its own commonwealth of Portuguese speaking countries – Countries with whom it shares synergies and languages such as; Brazil, Angola, Mozambique and Macau. These countries have enjoyed massive growth over the past decade, and they are countries which are forecast to grow at a rate, far exceeding that of Europe’s.
Politicians can talk all they want, but surely if you want to see growth in your country, you need to get away from the over-governing, regulating, and taxing, which is all Europe offers, and start working with countries which are growing faster.
How people can say that leaving 20-odd countries in Europe and joining a group of 166-countries is isolation is beyond me. Indeed, as the rest of the world is forecast to grow at twice the rate of Europe and increase their percentage of global output, I would suggest it is madness for the UK AND Portugal not to leave the EU.
Just today, because the UK is outside of the Euro-zone, Nissan invested in a car plant in the north of England, which will generate 2000 new jobs. It’s a start, but think what would happen if the UK removed all the ridiculous EU regulations which are making its businesses uncompetitive!
Portugal also has major potential. Although it is currently suffering from debt (which was sanctioned, if not encouraged by the EU) and obscene Austerity, it enjoys a much lower cost of living.
I believe the highly educated workforce, lower labour costs, and geographic location, would make Portugal an extremely attractive place for foreign investment – “IF” it got away from destructive Germanic influences; influences which have systematically destroyed many – once profitable – industries, which existed in many other EU member-states.
We must ask the question – Would so many factories in Portugal have closed and relocated to Eastern Europe, and elsewhere, if Portugal still used the Escudo, and doing business here was not made so expensive due to ridiculous EU regulations?
I know the road ahead is not going to be a simple one, but both the UK and Portugal should remember why they joined the EU. It was because of a promise of growth, prosperity and jobs.
These countries may have joined for selfish reasons, but looking back on it today, we all know the decision to join was a mistake.
But to compound the mistake, by giving away our sovereign right to leave, is thorough madness.
It doesn’t matter what we are told by those on the EU gravy-train, or by our own politicians (who let’s face it, are only looking after their own pensions and careers) It is time to go!
If our problem is lack of economic growth – and the IMF forecast that growth and output in Europe is going to continue to shrink – then we are bound, if not obligated, to get out of Europe now and head for greener pastures.
If as countries we have been proven “selfishly wrong” for joining, let us try to be “selfishly right” this time, and get out before it is too late!
As a footnote:
The UK fought Germany and her allies to keep her independence and sovereignty, battling against the political aims of a foreign dictator. Portugal had its own battle and won the right to be a truly democratic nation.
It makes me sick when I hear European Commission President, José Manuel Barroso, and European Council President, Herman Van Rompuy, talk about their democratic credentials to “talk on behalf of the people of Europe”…
Who voted for them???????
Europes leader’s are people too!
All European leaders are under immense pressure at the moment, but main problems they have, and how they deal with them, really vary.
The UK’s David Cameron, had his own “back-bencher’s” voting against him on the issue of giving British people the right to have a referendum on EU membership-something Cameron promised before becoming Prime Minister.
In Foreign circles, he has been told to shut-up by Sarkozy, and is basically disregarded by most other foreign leaders, as he is obviously out of his league as an International Statesman. That being said, currently there is no real alternative in British politics.
Germany’s Merkel is caught between looking after her country and trying to secure her future role in Europe. She has “whipped-out” a check-book, but she wants to spend too much for most Germans and too little for most Europeans – which is not going to appease anyone.
Sarkozy is losing the plot, and it shows. His outburst against Cameron revealed his frustrations, but there is no denying it; as much as this little man wants to be a big man on the international stage, he is definitely no Napoleon.
Papandreou remains, by the tip of his fingernails the Greek Prime Minister, but that could change any minute. Papandreou, a product of Amherst, has followed in his father and Grandfather’s footsteps and has, as a politician, risen to the challenge. He has lied, threatened, twisted and turned: done everything he could to maintain his position. Indeed he has done everything, except run his country in the way it deserved, and its people expected.
Jean-Claude Trichet has finally stepped down, to be replaced by an Italian banker. His period as boss of the ECB will not be looked upon favourably in the history books, but his parting words heavily pointed – and rightly so – to the lack of cohesiveness amongst EU leaders. The sad thing for Trichet is he was probably more intelligent than his position allowed him to be.
His successor, Mario Draghi, immediately reduced interest rates for the Euro, but so far his only claim to fame is a mention from Berlusconi, who honestly said this week: “most Italian bonds and now in the hands of Italians!”
Berlusconi, for a man of his age is doing remarkably well. Indeed, dyed-hair, little blue tablets, and the occasional “Bunga-Bunga” party is keeping him more than happy. And why shouldn’t he be happy, as one of Europe’s richest men, he hasn’t a care in the world – especially as he also doesn’t own any Italian Bonds!
In Spain, Zapatero has been as quiet as his lookalike, “Mr Bean”, during much of this year, and as a result we will have a change in leadership come the 20th November election.
Zapatero won the last election based on a fatal bomb explosion. However, he will definitely be leaving office with much less noise or loss!
Talking of Bombs. Recent Irish elections were heavily overshadowed by the running of ex-IRA terrorist leader, Martin McGuinness. The fact he was allowed to run was, in my opinion, an abomination. However, as in all things Irish there was indeed “poetic justice”, when a poet, Michael Higgins, was elected as the new President.
When it comes to European leaders, there are two that most people don’t know: Van Rompuy and Barroso. These are the guys who run the EU and EU Commission.
Faceless and blameless, these two “all-powerful” EU technocrats have been a prime example of “Teflon-man”.
They have overseen much of the disaster in Europe, yet happily remained hidden behind Sarkozy and Merkel. These are the people who are at the helm of an organisation which has crippled the whole of Europe, but they just laugh-off any criticism and continue on their merry way. Completely, oblivious to the concerns of the 400-million people who are suffering under their leadership.
I HEAR MOST OF THESE PEOPLE DO NOT SLEEP AT NIGHT – BUT IT IS NOT A PROBLEM, BECAUSE UNDOUBTEDLY, THEY ARE DAY-DREAMERS!
Greece or Grease?
There is obviously nothing more slippery, than a Greek Prime Minister who has lost the plot!
We are seeing 120-billion euro pumped into Greek banks, and make no mistake…this is ultimately your money! So, if the Greeks aren’t happy, why should we be?
Yet, whilst the banks have been kept afloat, the Greek people have been told that they need to accept major Austerity packages. Packages which will keep them bent over, laden with poverty for many years to come.
It doesn’t really matter what happens in Greece for the Greek people – They are going to get royally screwed, one way or another.
Greek 10-year bonds are today trading at 26%, Greek stock markets are on their arse, and unemployment is running at 18% – Can someone please explain to me, why the people in Brussels wants to keep this “lame-duck” country in the Eurozone.
Papandreou has done some good PR today – but for him and his personal political ambition, not for his country!
He used the “shock tactics”, talking about an immediate need for Greece to leave the EU, which forced his opposition to simply crumble and succumb to his power. So now, with a vote of no confidence going to be defeated, Prime Minister Papandreou can expect to stay in his Athens office – until his new one in Brussels is decorated!
We are still not 100% certain about whether a referendum will take place in Greece – although we can expect if there is one, the question will be changed – this remains completely farcical.
What we do know is that the Greek PM, with very possibly the support of senior people around Europe, has behaved like a President in a “Banana Republic”…offer his people one thing, and given them something else.
What happened to yesterdays comments by the Greek Prime Minister, “I want the Greek people to have a say in all important decisions!”
But it doesn’t stop there!
Immediately after the statement from the Greek Prime Minister, Mr Sarkozy, at the opening of the G20 meeting, welcomed the events in Greece, but then went on to discuss various measures being taken to solve “The Crisis” by different countries.
Sarkozy said “Everyone is taking action, but they will be taking different actions, dependent on what suited their countries best”.
I don’t know about everyone else, but surely the problem which is severely damaging the whole of Europe, comes as a result of countries being forced to adopt EU policies, which DO NOT suit their own individual economies!
It doesn’t matter what way you look at it. Political aspirations are killing our economies and the very tenet of our democracy.
Whilst politicians continue to lie to their electorate, the world is being taken over by various “occupy” campaigns, which are attacking a banking industry. An industry which, although not blameless, is taking a lot of flack which should be aimed at the political classes.
Indeed, World leaders should consider themselves extremely lucky that most campaigners do not know who they should be blaming. No yet, anyway!
Sarkozy today, in the same speech at the G20, openly lied when he said that, “Greece is an independent county who he respects and he DIDN’T want to get involved in their internal politics”.
Again, I am sorry but you have Austerity measures being placed on Greece by the Troika, which includes the EU, which in return is very much run by Merkel and Sarkozy.
You don’t have to be Einstein to recognise what is going on! Quite simply, nothing matters more to European politicians than keeping the EU gravy-train moving!
This blind political ambition is costing countries their independence and sending millions of people in Europe, and other parts of the world, towards decades of poverty. Surely for most of us, this is a cost we cannot afford to keep paying.
Indeed, no one knows how much this will all cost.
The European debt crisis is about 4 or 5 trillion Euros. A massive number, which in real terms is totally meaningless. It is meaningless, because we simply don’t have it, and we will not be able to create that amount of profit over the coming years.
However, politicians are working “tirelessly” to come up with a solution to this crisis.
We have been told that they have come up with a very technical solution, which they are going to implement soon. This solution has already been ratified by all countries; yet it is widely accepted that most of the people who have signed us up to support this solution, have no idea of how it works, or what is involved!
They have signed it, because they were told it was good for us. Yes, us!
So once again, we are being signed up to long term financial commitments, by people who do not understand what they are signing!
The whole situation would be hilarious, if it wasn’t so disastrous.
I am starting to despair at the state of our countries and the state of our politics.
It is making me question, whether or not we would be better off with no government at all – rather than what we have today?
I am truly ashamed that most of these politicians are of my own generation, because I always believed that we were brought up with far more common-sense, than that being employed by our governments.
I cannot be accused of being apathetic about politics, economic, or current affairs…But I can completely understand why people have lost interest and don’t really care any more.
What’s the point! You simply cannot take all this shit seriously!
Germany decides!
When is a European debt not a European debt?
European politicians are being completely unfair in their attitude towards the PIIGS, because the money owed by these countries is an accounting problem, which could easily be wiped out with the press of a button.
We have had 2-years of this Bullshit, and all it has done is made things worse.
So let’s get to the nitty-gritty of reality.
Germany is not going to pick up a sack of money, put it on a plane and send it to Greece, Italy, Portugal or Spain. They are simply going to readjust a few numbers in a German Banks computer.
However, if they did have to deliver the physical cash, this also wouldn’t be too difficult.
They would simply go to the ECB and say…”Print more!” It is just that simple. They wouldn’t be going around Germany and taking it out of Herr Mueller’s wallet.
Germany remains blindly opposed to any idea of QE, but the fact is people are confusing debt and obligation with solvency. And as the ECB can create as much solvency as it wishes, we should look at what the real problem is. Fiscal obligation and responsibility!
France and Germany could have let Greece and the other “deviant” members of the EU default a long time ago, but they didn’t, because doing that would not have been good for Germany or France.
The creation of the currency joined all Euro-zone nations at the hip, so All Euro-zone members need to have responsible fiscal policies in place, in order to maintain a level of trust with foreign lenders. However, because certain countries have been lending irresponsibly, we are all going through this current “madness”, just to facilitate the removing of fiscal responsibility away from those who have misused it.
I am not in favour of taking over the fiscal arrangements of sovereign nations, but in the case of the PIIGS, especially the smaller ones, perhaps I need to concede that it is necessary for this to happen.
As I said earlier, Germany does not like the idea of printing more money, but if they are willing to put up 440 billion to provide some “guarantee” to lenders, then it’s their game. However it is still going to produce the same result as QE.
If people have less money to spend and goods stay the same price, or if people have the same amount of money and the price of goods goes higher, the end result is an inflationary scenario.
Germany has decided to squeeze the PIIGS, providing guarantees for future loans, whilst at the same time instructing the Troika to impose Austerity; removing money from their economies and make them suffer heavily for past regressions.
But Germany, along with France, have to be extremely careful with what they are doing, because by getting into the Sovereign debt guarantee business, via the EFSF, they are opening themselves to the risk of debt contagion.
It might have been much better for the ECB to continue to buy Greek Bonds: not to help Greece, but to teach them, (and other deviant nations), a lesson. Doing this would not have forced private investors to take a large “Haircut” and would have kept Greece and co. on the leash as they could not have defaulted.
This would have also provided the ECB with some decent long term profits, whilst these countries sorted their financial problems out themselves.
Sadly, the ECB had the idea that by continuing to buy bonds, they would not be encouraging the PIIGS to act responsibly, and therefore they stopped buying and this almost caused these countries to default.
If the ECB would have continued to buy bonds, they would have maintained a high level of leverage over the PIIGS, and as stated, made a nice profit by doing so.
On a social level, this would also have removed a lot of the “them and us” arguments which have become prevalent across Europe over the past year, which is not good if your aim is a more integrated and unified Europe.
However, when it comes to blame, nothing is quite as unfathomable as calling this a “Banking Crisis”, or the blind intent of people to punishing banks.
At the inception of the Euro, banks were told that all sovereign European bonds were equal, and banks operated on that basis. If they hadn’t, the Euro could have never functioned for as long as it has, because the problems caused by its inherent flaws would have materialised much quicker.
Whilst it was evidently obvious that those southern European economies were never as secure as those of Germany and France – banks were led to believe that all European bonds were of equal value.
But, now this has proven to not be the case – the rules are being changed, and banks are being told to take a loss.
Believe me, when I say that banks are not completely innocent in this mess, but banks work within the set rules, and if the rules are wrong, we must blame those who make them. Moreover, as this is not a “banking” crisis, but one of sovereign insolvency and debt, I do not see how penalising the banks and their shareholders is going to help the situation?
Germany seems to be the only place where people don’t understand this. All they keep saying when QE is mentioned is “Wiemar” ( perhaps next week the Italians will start chanting “Nero”) But when do we start being modern and leave past mistakes in the past
It is this lack of understanding which has caused some recent friction between Germany and France, (plus a few others). But Germany being the economic powerhouse it is – few are strong enough to argue.
I hope this is a “misunderstanding” by Germany, because the alternative would be much more sinister. Some might suggest that there could be intent by Germany to “buy” Europe at rock-bottom prices…Just today, in a speech by Merkel, she said, “We mustn’t take 50-years of peace in Europe for granted!” Whilst this may be a normal “rallying-cry” in the German parliament, the rest of Europe doesn’t need to hear it!
But let’s get back to solving the problem.
Whatever is done over the coming days is not going to “kick-start” growth in Europe.
Once the inevitable “haircuts” are negotiated, we need to see the mechanism for leveraging the Germany money – 440 billion is not enough, we could need as much as 3 or 4 trillion!.
As, even with leverage, the Germany money will prove insufficient to bring back a broad sense of confidence in the global market, The ECB will need to come to the table and help out.
What we will have is a mixture of measures and rules to help improve the solvency across Europe including guarantees against losses for the international bond buyers.
Buyers which are going to include China, something which is more frightening to me than Germany!
However, something will be done, the “can” will be kicked down the road a little further, PIIGS will be squeezed a lot harder, and debt will increase – albeit hopefully at lower interest rates.
Is the solution going to be long lasting?…I really doubt it.
This is a debt and solvency problem, consumption will drop, revenues will decrease, equity values will ease and commodity prices will continue to increase, bringing with it inflation, whether Germany likes it or not.
Taking all these things into consideration, the time and the conditions are still not with us where we can start to plan for the next phase of economic growth, which is what is needed.
…And as it has taken us 2-long years to get where we are today, putting growth on the agenda is for another lifetime!
Good luck and good trading
The Old Man
Should I be happy or sad?
As the author of a numerous anti-EU articles issued over the past decade, it has warmed my heart to watch the level of EU criticism “take-off” during recent months.
Moreover, seeing protesters from all over Europe converge on Brussels is something of which our nations politicians should take note.
What so sad?
This is because the collapse of the EU will now occur, with massive European sovereign and house-hold debt, which means, by the time the “monster” is laid to rest, over 350 million people living in Europe will be living close to, or on, the bread-line.
But that is not the end of it, the fall-out of the EU and American debt, will be that almost every person on the planet will see their standard of living drop massively.
America, with its 300 million people will possibly collapse before Europe does, because against popular understanding Quantitative easing will not work. Once an inflationary spiral gets going, it is really difficult to stop. Just ask anyone who lived through the Weimar Republic or anyone who lives in Zimbabwe today – So all QE is doing is slowing the speed at which America and American business reaches a collapse, it is not going to stop it.
Therefore, the belief by Americans that QE will help “export” debt and inflation is going to prove disastrously false.
Oil and other commodities are only priced in dollars, because they were the planets “Head Honcho’s”. But, the word to note is “were”. America no longer runs the planet, and there are many countries around the globe, who are already discussing creating an alternative global currency to the dollar. Hell it has even got a name – Bancor!
But Bancor is not new, it is a concept created in the 1940’s by John Maynard Keynes, which has resurfaced; following support of the idea by the Governor of the Peoples Bank of China, along with Russia, Japan, India, the Gulf States, the IMF and, perhaps not so surprisingly, the French.
It’s resurfaced because of the current fear of something called the “Triffin” Dilemma or paradox; which is when a national currency also serves as an international reserve currency – There could be conflicts of interest between short-term domestic and long-term international economic objectives.
The collapse of America, along with the restructuring of Europe, will bring the remaining remnants of our consumer-lead lifestyles to a rapid conclusion.
Job-losses will continue to escalate and the risk of civil disorder will intensify.
I know people do not like my long term prognoses, but what is happening today I wrote about in July 2008 (see report) and I have been writing about the collapse of the Euro and the problems of the EU since the 1990’s.
The thing we need to understand, and indeed should have learned by now, is that big is no longer beautiful, nor sustainable. We should downsize and prepare.
I do not write to make people miserable, I write to help people prepare. I really hope that my views are misplaced, but I am not going to be blinded by the political spin about the potential problems.
As Helen Keller once said, “Being blind is a problem, but it is a lot better than having sight and not being able to see what’s ahead of you”.
A Miserbal Old Man returns over 1000% in 5-months!!!
I want to mention what a very pessimistic and miserable person has been saying this year.
And to underline how you were given the opportunity to make over 1000% return in a bear market!
Yesterday I was with some readers. We were discussing capital markets, including phone calls they have been receiving from the financial services community and the feedback and ridiculous criticism I have been receiving.
They have been getting buy recommendations all year, and then 3-weeks ago they were being called and told to sell – and take their losses – because the economy was looking bad?
How on earth people employed in the financial services industry can operate like this I don’t know…but what I do know is that many of my readers have been receiving similar advice from their brokers…and those that have sadly acted upon their brokers advice, are all LOSING large amounts of their wealth!
My readers will know I have been extremely pessimistic all year and have constantly urged investors to keep out of the equity markets. Indeed, on May 2nd, (click here) I told people to short equities and Silver, and sell Euro at 1.4850
Look below and see exactly what has happened since these recommendations.
Silver dropped from over 48 on the 2nd May, to 26, we covered at 30: that is 18-cents per oz – Profit 
S&P INDEX dropped from 1350 to below 1100, We covered at 1100, Banking 250 figures.
EUR/USD dropped from 1.4850 to below 1.3200, we covered at 1.3400, banking 14 figures!
As you will know, over the past few days, since Monday last week, I have – for the first time this year – suggesting buying, both Silver and equities, as well as copper and crude….and I report that today we closed our short Euro positions – letting my readers bank a 3rd massive profits.
I advised covering, not because I am long term bullish, but because, as I have reported in my blog, I believed we will see something happening in the political arena, giving us a rally over the coming month or so.
- Today, the ECB are suggesting they are going to support banks, and the BoE, is increasing quantitative easing – Political actions causing the markets to rise.
I do get a lot of criticism about my miserable and bearish reports, but the truth is they are not always bearish, they are just bearish and pessimistic when the conditions warrant it.
I was first bearish back in October 2007. I wrote another extremely bearish report, titled “2012″ in July 2008, which you can find in the documents page of my website.
Yet I was bullish on the 6th March 2009, declaring an end to the bear market, 2-days before the low was reached.
My subscribers get a lot more information on a multitude of markets, than I post in my “free” blogs, and for those of you who do not subscribe; very often I suggest keeping out of these risky markets, because that is the best way to ensure you get the maximum return for the minimum amount of stress and effort.
I work with mainly professional analysts and traders.
I don’t have too many private clients, because – like many salesmen working in the financial services industry – they are too often repeating yesterdays stories, rather than making any effort to assess themselves what might happen tomorrow.
It is no secret that their job is to talk you into trading, underneath that impressive title, getting you to trade is their sole responsibility. They are salesmen.
I don’t make any money on the amount of trading an investor involves himself in, I make money from subscriptions, or based on the “net growth” of any investment portfolio I manage. My role is purely that of Analyst.
And this means I need to be pessimistic and bearish when it is right; bullish when it is right to be so; and simply sit on the sidelines when I don’t know.
I waited 4 months this year, keeping on the sidelines – when everyone was buying into the hype. But when the time came, I was able to recommend and put on trades, which as you can see, 5 months later, have allowed us to bank an 18-cents or a 30% profit on Silver, 250 pts on S&P, and 14.5 figures on EUR-USD.
This is: 90,000 usd profit on 1 contract of silver; 12,500 on 1-contract of S&P; and 14,500 on 100,000 position in EUR-USD.
ADD IT UP, That is 117,000 usd profit – on trades which you could have entertained with a small portfolio of 10,000 usd.
This is 1170% profit over the past 5 months – when almost everyone else has been losing.
I know we are still suffering from the hangover of keeping away from pessimistic people, and no one likes the constant “talking down” of the stock market and the world economy.But the truth is the truth, reality is reality, and more importantly profits are profits!
I would urge people to check this “outrageous” claim, so please check back through your email box and visit my Daily Outburst blog page. (Also check May 5th and 6th comments with explanations)
I do not solicit for business amongst my readers, I do not telephone, and for those who are not subscribers, you know I have given this information freely – In real time – and its “time-stamped”.
I am not going to telephone anyone, and am not asking for more business, as times are hard investors who have not been following my advice. But if I say nothing else this year, I have published trading recommendations which were worth staggering profits of well over over 1000% …
I would not blame anyone for being cynical about this claim…indeed, if these recommendations were not 100% checkable and were not in time-stamped and your in-box, I wouldn’t dare mention them – because it is actually ridiculous. But all recommendations are there; both at the beginning of MAY, and over the past 2 weeks
So be cynical if you wish, but are you sure you want to keep putting my reports in your trash bin??
Good Luck and good trading
The Old Man
