22 October 2011 update: Clarity on the global economy

The following articles give some of the soundest advice on the global economy we've come across. Stratfor explains the EU banking crisis. Unfortunately, EU governments assessments are wrong. They are searching for 'solutions' that miss the problem. Business Spectator gives a balanced assessment of Australia's risk factors. So too does this analysis of the challenges/risks facing the USA. Alan Kohler provides wise words on how the global economy reached its current situation. To understand the Wall St protests this series of graphs demonstrates how inequality in the USA has ballooned on every measure. For example, on income inequality, the US now ranks down at 93 in the world behind China, India and Russia. (Australia is 25th). How the world is changing. China has started moves to turn its currency into reserve status.

26 September 2011 update: Here's why Greece will default

A Greek debt default is inevitable because the Greek middle class is being destroyed. These three articles detail how middle-class incomes have been slashed and taxes have skyrocketed. The middle class doesn't have the money to pay the taxes. Without the middle class, default will occur. Articles from: New York Times, Daily Telegraph and The Independent.

9 September 2011 update: Trouble in Europe

Have you been watching Europe? There's not much confidence to be had. The Swiss franc suddenly tumbled this week. Italy is raising taxes in an environment where there is doubt over its financial viability. The Greek bailout is in doubt. Europe's banks are teetering.

Europe's Problems Summed Up:
• Pythagorean theorem: .......... 24 words
• Lord's prayer: .......... 66 words
• Archimedes' Principle: .......... 67 words
• Ten Commandments: .......... 179 words
• Gettysburg address: .......... 286 words
• US Declaration of Independence: .......... 1,300 words
• US Constitution with 27 Amendments: .......... 7,818 words
• EU regulations on the sale of cabbage: .......... 26,911 words

6 August 2011 update: Global economy in crisis (again!)

This week stock markets crashed.

Alan Kohler from Business Spectator says there's a rush to a new recession. Spain's borrowing costs are now at levels that forced the Greek, Irish and Portuguese bailouts. Italy and Spain have called a crisis meeting. China has downgraded its US credit rating. So has Standard and Poors, the first US downgrade since 1917.

But the world has changed.

The China/India story appears to remain positive. Brazil is now the world's 7th largest economy. Some think Brazil might be in a boom-bust cycle, but it still appears strong, although there are differing views. Even Africa is taking off economically.

9 July 2011 update: Has the next downturn been triggered?

Does the evidence show a renewed downturn is already in place?

• The Financial Times reports that the USA and Europe are in an identical downward spiral.

• A European bulletin says that the global financial crisis is to enter a new phase. $US15 trillion of 'ghost' assets are due to be written down. A collapse of European property prices is pending.

• The Economist explains what will happen if the US defaults. The trigger is August. And the budget mess that is California is extraordinary

• A Wall Street Journal columnist says that nothing has changed in the US and that it's destined to tank again.

• Michael, an ICA, UK member observes that "Germany is not a wealthy country; its living standards have been static for a decade. This is one perverse but little-understood effect of the euro. The euro is at too high a level for Greece, Ireland, Portugal and Spain, but too low for Germany. It has therefore helped trigger a German export boom but (rather as in Australia) this is squeezing out the service industries whose growth is what lifts living standards. All the export boom does for Germany is to give it the surpluses with which to bail out bankrupt members of the eurozone. The big question in Europe is how long the Germans will put up with it.

Ever since the Roman empire collapsed, c. 400 AD, Europe has gone through cycles of centralisation and disintegration. The wheel may be about to turn again."

31 May 2011 update: How dark is the global economy?

Is the global economic system in trouble?

• The German newspaper Der Spiegel says that the European Central Bank's bad debt seriously compromises the institution.
• The Daily Telegraph talks about the impact of "when", not "if", Greece defaults.
• The 'American Thinker' describes the institutional failures of the US financial system.

Perhaps it's just that global economic power is shifting from the 'old world' (EU/USA) to the new, principally Asia. Harry Dent, the economic demographer, gives a good overview (video) of why he thinks this is happening.

This table show how startling the shift is. Growth rates in China and India are changing the face of the world economy. It's demographics and approaches to economic management. Watch the Hayek v Keynes rap debate number 2.

25 May 2011 update: Is failure essential to capitalism?

Hi there,

I've just spent the past three months trying desperately to get my business back in order after not one, but two floods. Whilst we managed to achieve super-human feats by evacuating over 200 hundred people, 27 cabins, and an inordinate number of other assets in 18 hours, we are still putting things back together 3 months later. We worked 16 hours a day, 7 days a week to get our business back in order as we carry some strange sense of responsibility to our employees and the local community to get commerce turning over. It's what we do. It's why we don't work for either the Government or Multi-National corporations; at least not any more!

Still, every level of government seems to think that we have nothing better to do than undertake some form of compliance for them---it's so important that the big sticks continue to be waved at us---$10,000 fine if this isn't completed on time, $100,000 if that is done ... and so it continues. There is no consideration for the time we have lost. I'm tired; very tired, yet I still work over 100 hours per week. There's no sick leave for small business owners, there's no stress leave, leave loading or anything else that applies to every other level of society. There's not even compulsory superannuation---because small business owners are smart; they don't need it. To make it worse, there's been very little profit over the past 3 years. We work for peanuts.

Only a few weeks ago, a well known local builder who had built up quite a company and a large turnover went bust. They had performed well in the local community for over 20 years and paid their taxes year on year, yet one piece of bad advice from an accountant saw them go belly-up. Tradies and many other local creditors wanted to help them trade out of it, but the ATO and the banks wanted blood and wound them up. The business owners lost everything, so too the tradies and other local small businesses. They couldn't even get unemployment benefits because they had family assets---a nice home. Everything else was taken. So what's the message here? Everyone gets protection except small business owners? They are important fodder.

Come the next election, go get 'em. If nearly 10% of all small businesses have gone in the past 3 years, it's only going to get worse. We need a Small Business Ministry that is part of cabinet and no matter the legislation, it cannot burden small business any more if it is not approved by the Small Businesses Minister. The current (junior) Minister for Small Business is a joke who believes that to solve our woes (caused by the burden of red tape), we would all give up yet more time to attend Government Training Courses and spend our days trolling thru information provided by a myriad of government departments. He just doesn't get it! Most small business owners I know have no affiliation with political parties (they are too busy working) so we can vote either way.

Bring it on. I'd suggest a strike by small business---guess what sort of publicity that would generate! Imagine the disruption to everyone else's normal working lives without small businesses. Who would serve, clean and do all the dirty work in society! If you EVER need support, let me know?

Regards
John