The Future History of China Today
[This is not a speculation on what might happen, rather a general description of what will happen. The future is unknown by definition, but like the next line in a poem it follows the rhythm of the whole and rhymes with what comes before it.]
1919— 1948
“In fact, the protracted history of the Chinese socialist revolution started 90 years ago in 1919 on May 4, when 5000 students from Beijing University and twelve other schools held a political demonstration in front of Tiananmen, the focal point of what is today known as Tiananmen Square. The demonstration sparked what came to be known in history as the May Fourth Movement of 1919-21, an anti-imperialism movement rising out of patriotic reactions to China’s then war lord government’s dishonorable foreign relations that led to unjust treatment by Western powers at the Versailles Peace Conference. May Fourth was a political landmark that turned China towards the path of modern socialism through Marxist-Leninism.”
—The Socialist Revolution Started 90 Years Ago in China (Part 1) by Henry C. K. Liu
The seed for a new empire was planted, a new kind of empire. This one was not based on peasant armies or a foreign clan, this was based on an idea; the idea was simple: the only way for China to regain its world position was to apply the latest ideas from the West, whether they were tested or not. In 1919 the latest idea from the West was communism.
1949—1978
“The Mao era lasted from the founding of the People’s Republic on October 1, 1949 to Deng Xiaoping’s grip onto power and policy reversal at the Third Plenum of the 11th Party Congress on December 22, 1978.”
In 1949 the People Liberation’s Army took over the government, their first act was to split the population into two parts: city and country. The PLO spread out its rule: East Turkistan in 1949, Tibet in 1950. The Americans sucked the Chinese into the Korean war and helped drain their energy out.
Ten years later the ruling elite were quite ready to jettison communism, but Mao had other ideas and exploited the city/country divide to delay the transition for another ten years.
1979—2008
“The power transition from Hua to Deng was confirmed in December 1978, at the Third Plenum of the Central Committee of the Eleventh National Party Congress, a turning point in China’s history. The course was laid for the party to move the world’s most populous nation toward the ambitious targets of the Four Modernizations.”
Communism, which was ultra-modern in 1919, had become a stale idea in 1979. The empire returned to its raison d’etre: apply the most modern Western ideas whether they are tested or not. The fashion in 1979 was: free market, deregulation, tax cut, et cetera.
“Chinese economic reform has been undertaken through a series of phased reforms. Generally, these reforms were not the results of a grand strategy, but as immediate responses to pressing problems. In some cases, such as the closing of state enterprises, the government has been forced by events and economic circumstances to do things that it did not want to do. As of 2005, 70% of China’s GDP is in the private sector. The relatively small public sector is dominated by about 200 large state enterprises concentrating mostly in utilities, heavy industries, and energy resources.”
—Economic reform in the People’s Republic of China [my emphasis]
Adopting ideas without a sound philosophical foundation is not really a good strategy even if the idea is an old test one, let alone adopting crazy ideas coming from either intellectuals or think tanks.
“China’s growth has been so rapid that virtually every household has benefited significantly, fueling the steep drop in poverty. However, different people have benefited to very different extents, so that inequality has risen during the reform period. This is true for inequality in household income or consumption, as well as for inequality in important social outcomes such as health status or educational attainment. Concerning household consumption, the Gini measure of inequality increased from 0.31 at the beginning of reform to 0.45 in 2004. To some extent this rise in inequality is the natural result of the market forces that have generated the strong growth; but to some extent it is “artificial” in the sense that various government policies exacerbate the tendencies toward higher inequality, rather than mitigate them. Changes to some policies could halt or even reverse the increasing inequality.”
—Poverty in China [my emphasis]
And so China started to open up, granting economic and social freedoms but holding back political power.
2009—2038
“To say that China’s one-child family policy has been a disaster is an understatement. A report released earlier this month by the nation’s top think tank – the Communist Government’s Chinese Academy of Social Sciences (CASS) – says that the policy has created a huge gender imbalance with significant implications for future social stability.”
—China’s Cassandra prophecy [my emphasis]
The single worst idea adopted in 1979 was population control. The pyramids of Giza might appear mighty but all three rest on the plateau of Giza and their combined weight, millions of tonnes, hardly moved it an inch. The Chinese government might appear mighty but it rests no the Chinese people.
“The sex ratio at birth (between male and female births) in mainland China reached 117:100 in the year 2000, substantially higher than the natural baseline, which ranges between 103:100 and 107:100. It had risen from 108:100 in 1981—at the boundary of the natural baseline—to 111:100 in 1990. According to a report by the State Population and Family Planning Commission, there will be 30 million more men than women in 2020, potentially leading to social instability. The correlation between the increase of sex ratio disparity on birth and the deployment of one child policy would appear to have been caused by the one-child policy.”
—One-child policy [my emphasis]
2039 will be the last year of this central government, the empire lasted exactly 120 years divided into four generations of thirty years each: germination, growth, glory and decline.
See also:
- The 3 by 3 Rule — Part One
- Non-linear Historical Development
- The Story of Europe
- Dynasties in Chinese history from Wikipedia
The Greatest Roman Emperor
Bust of the Emperor in Armour
Today (24 January) is the anniversary of the death of the greatest Roman Emperor; his name was Gaius Julius Caesar Augustus Germanicus. He hailed from the Claudii, one of the great Roman Patrician clans during the Republic and the last to play an active role in politics.
His father and grandfather were both generals, at a time when no noble Roman bothered himself to attend the battlefields of Rome. His grandfather spent his time successfully campaigning in Germany, routing the Germanic tribes that would later overrun Roman territories and for his efforts he was granted the hereditary honorific Germanicus: conqueror of the German tribes (more info).
His father was also a successful general who campaigned in the west and in the east. He was beloved by his soldiers and the people of Rome, who mourned his death at A.D. 19 leaving the future emperor, a boy of seven years old, at the mercy of a conspiratorial palace and an old and decrepit uncle who might have been behind the death of his father (more info).
The young boy suffered in the shadow of the old emperor who prevented him from both politics and the military. His mother and older brothers died in prison on trumped up accusations. The only way for him to survive was to indulge in the vices, for tyrants hate virtue more than rebellion. He survived and as one of the few surviving members of the ruling family he became the heir and when the old emperor finally died he was declared emperor at the age of 25.
In the first year of his reign:
- Destroyed the old emperor’s treason papers.
- Declared that treason trials were a thing of the past.
- Recalled the exiles.
- Helped those who had been harmed by the Imperial tax system.
- Banished sexual deviants (his once disguised virtue in action).
In the second:
- Published the accounts of public funds.
- Aided those who lost property in fires.
- Abolished certain taxes.
- Gave out prizes to the public at gymnastic events.
- Allowed new members into the equestrian and senatorial orders
- Restored the practice of democratic elections.
These actions were met by hostility from the oligarchy who came to see the Senate as their own personal domain. Their reaction was an economic boycott to force the young emperor to come back under their thumb. The emperor counter-attacked:
- He levied taxes on lawsuits, marriage and prostitution (all of which were monopolies to the moneyed classes by then).
- Forced centurions who kept the spoils of war as their personal property to turn it over to the state.
- Highway commissioners who embezzled and wasted money by incompetence were made to repay it back.
- He auctioned all the luxury items in the imperial palaces to fund the state.
The emperor embarked on many public works to provide work for the landless lower classes of Rome, who were depended on grain dole from either the oligarchy or the state:
- Improved the harbours at Rhegium and Sicily.
- Completed the temple of Augustus and the theatre of Pompey.
- Began an amphitheatre beside the Saepta.
- Expanded the imperial palace.
- Began the aqueducts Aqua Claudia and Anio Novus, considered engineering marvels.
- Built a large racetrack known as the circus of Gaius and Nero,
- Had an Egyptian obelisk transported by sea and erected in the middle of Rome.
- Repaired the city walls and the temples of the gods at Syracuse.
- Built new roads and pushed to keep roads in good condition.
All this in the short years of his reign, if he had lived longer he would have done more:
“He had planned to rebuild the palace of Polycrates at Samos, to finish the temple of Didymaean Apollo at Ephesus and to found a city high up in the Alps. He also planned to dig a canal through the Isthmus in Greece and sent a chief centurion to survey the work.”
In the third year of his reign the emperor annexed Mauretania, adding the North African coast from Tunis to the Atlantic to the Roman Empire. He prepared the invasion of Britain conducting a training and scouting mission, the invasion would establish him as a true military man as were his ancestors and cast forever the role he had to play to survive the tyranny of the old emperor.
The old emperor had spent the last decade of his life in his island of infamy, leaving the oligarchy to reign over the people without check. The young emperor’s vigour defence of the people and his actions showed the world that the oligarchy were a hallow power, even their money was no match to him. Sadly the times of old were long gone and the people of Rome were corrupted by their empire to their core.
The conspiracies against the emperor started with his coronation. The emperor was vigilant having spent his life, since the age of seven, battling shadow enemies. Many a conspiracy was discovered—the mind wonders what he might have achieved if he had been met with loyalty instead of treachery—and those involved executed, but alas the honour of a Roman had become very cheap and at the end the very people charged with his security were bought off. He was killed by his guard in the darkness of an underground tunnel—not like Caesar was killed by senators in the daylight—no doubt taken for security.
I could find no better eulogy for him than this: after his murder the assassins went to kill his wife—a woman of modest origins—on the same day “she willingly offered her neck to the assassin and told him to kill her without hesitation.” (more info)
There is no better sign for the end of times than the total inversion of historical norms. Thus the staunchest enemies of the Roman people, the Claudii, whose name is associated with every crime and tyrannical conspiracy against the people, at the end produced this prodigy who was the best friend of the Roman people since Lucius Junius Brutus. His assassination on the 24th of January AD 41 marked the last day in the Empire of the Romans and the first in the Roman Empire.
Profits to Assets
In a preliminary report released Tuesday, the U.S. Federal Reserve said it will turn over $46.1 billion to the federal government. That money comes from income the central bank received mostly from its investments in U.S. Treasury bonds and mortgage-related securities.
The Federal Reserve also made money from loans to banks and other firms.
The bank’s profits follow an unprecedented amount of spending in emergency investments. At the end of 2009, the bank was holding more than $1.5 trillion in U.S. government debt and mortgage-related assets.
After paying operating costs, the Federal Reserve turns over all profits to the U.S. Treasury. It returned $34.6 billion in 2007.
—US Federal Reserve Makes Record Profits in 2009 [my emphasis]
In September 2009 the Fed’s balance sheet was $2,144 billion, while in June 2007 it was $869 billion (source). Thus the profit-to-assets ratio is:
click to view
Record profits, indeed! Record low profits that it is.
How to Honouer your Financial Obligations
The UK demands that Iceland honour its “obligations” and pay the depositors of IceSave, the on-line Icelandic bank that offered too-good-to-be-true rates that turned out to be not true when it folded. In the history of mankind never has a people been obliged to honour the obligations of a private for-profit financial institution. The UK and the Netherlands have forced Iceland to assume these obligations for no better reason than a bully forces the weak to give him what he wants.
From the way the UK has been going around accusing Iceland you would think they always honour their obligations to the letter, well think again:
IT WAS 1917 – the year that German spy Mata Hari was executed and the Battle of Passchendaele cost 300,000 lives. David Lloyd George’s cash-strapped National Government desperately needed to fund the crippling cost of World War I as the burden of paying for a mass army grew.
Its answer was to raise more than £2bn (£53bn in today’s money) in War Loan stock directly from the British public. More than three million people invested, believing they were buying a 5% annual income, plus a guarantee they would receive their original savings back by 1947. Eighty-four years later, their descendants are still suffering the consequences of this act of patriotism because the Government refuses to repay them.
Many investors were forced to sell through stockbrokers for a fraction of its face value. At one stage in the Seventies, £100 of War Loan was worth just £18. Now it is worth £66.
…
Retired bus driver Mr Ingram inherited £15,000 of War Loan bought in 1942 by his aunt, who was in search of a secure income and a capital guarantee. If that money had been invested in fund manager M&G’s Blue Chip fund instead, it would be worth a staggering £10.23m today.
…
Initially, the loan paid 5% a year interest, and it was to be repaid at any time between 1929 and 1947. But in 1932, Ramsay MacDonald’s National Government, struggling with the Great Depression and mounting debt, slashed the interest rate to 3.5%, where it has been ever since, and effectively removed the maturity date. The result is that the Government is under no obligation ever to repay the money.
Lee Robertson, managing director of independent financial adviser Investment Quorum, says: ‘It’s not very honourable. The Government really ought to redeem the stocks. They are poor value, out of favour and have a low yield, hence the £66 value of £100. Anyone holding these stocks should seek serious advice over whether to keep them.’
…
The Treasury says: ‘We do not intend to redeem these loans at an artificial value at the moment. But we do recognise the problem that their value has, in effect, gone down because of inflation.’ It also says that there are no longer any complete records of who owns War Loan stock.
For savers, War Loan has been an atrocious deal. The total interest on a £100 investment since 1917 adds up to just £2,210. Halifax bank says that this is £1,671 less than the £3,881 interest an average savings account would have paid.
…
Though War Loan has done poorly over the long-term compared with other investments, in the shorter term this stock could be attractive to some savers. Barclays Capital gilts strategist Mark Cableton says: ‘An interest rate of 3.5% on every £100 may not seem a lot, but on the present price of £66 it works out at 5.25%.’
—Time to honour the debt, by James Hopegood, 11 July 2001 [my emphasis]
First a disclosure: I believe this article to have been written by a hack. All the benefit would be to speculators who bought the War bond at market price and wanted to pressure the government with these sob stories in the popular press to buy it form them at face value , that would have been a day-light robbery of Her Majesty’s Treasury. Nonetheless it has some useful lines.
Second a valuable source of information: The History of the Public Revenue of the British Empire Volume III by Sir John Sinclair (you can read a scanned version on Google Books). Chapter I of Part IV analyses the debt from 1694—when the Bank of England was incorporated—until the 1780’s.
Third I will go through the emphasised points, one by one:
I) As John Sinclair explains public debt arises out of war. In time of peace all of the income is spent by the government, so that when war breaks out a huge sum is urgently needed. The government then chooses to finance the war with debt instead of taxation, Sinclair gives two main reasons: first it is faster to borrow the money than to collect taxes, second it spreads the cost on many years and thus makes the public accept the war. Of course that was in the time of specie money, today the public debt of Japan is over 200% its GDP despite a pacifist constitution.
II) On average each person contributed £666.66 a substantial amount at that time. I suspect that 80% contributed 20% while 20% of the people got 80% of the debt—maybe from war profiteers or American financiers. By 1917 the chances of losing the war were low, still the government was willing to pay £2.5 for every £1 (Thirty times five-percent plus the original amount) and although specie payment was suspended those were (implicit) gold-backed pounds. Real patriots give their blood freely, money-lenders who profit by the magic of the compound interest are condemned by all religions and moral philosophies.
“The gold standard was suspended at the outbreak of the war in 1914, with Bank of England and Treasury notes becoming legal tender. Prior to World War I, the United Kingdom had one of the world’s strongest economies, holding 40% of the world’s overseas investments. However, by the end of the war the country owed £850 million, mostly to the United States, with interest costing the country some 40% of all government spending. In an attempt to resume stability, a variation on the gold standard was reintroduced in 1925, under which the currency was fixed to gold at its pre-war peg, although people were only able to exchange their currency for gold bullion, rather than for coins. This was abandoned on 21 September 1931, during the Great Depression, and sterling suffered an initial devaluation of some 25%.”
—Pound sterling [my emphasis]
III) Ordinary people always sell for a fraction: from the soldiers of the American Revolutionary War to the workers of privatised factories in post-Soviet Russia, speculators gather all the paper and then make sure the politicians ‘honour’ the debts.
Of course the bonds sold for 18% in the seventies, that is because the interest rate was high, as the interest rate goes up the liquidation value of debt goes down (see below for posts that discuss this in detail). Three and half percent divided on 18 is 19.4% yield, almost the same as the interest rate at the time: all bonds of the same risk have the same yield.
IV) The £15,000 of War bonds were certainly not bought for the face value, unless the interest rate was exactly 3.5%. As the article goes on to explain 1942 was a full 10 years after the redemption date was removed from the bonds, no one who bought the bonds after 1932 has the right to demand their redemption at face value.
The “staggering” increase in the investment fund is what really interest me from this whole sordid story. The fund did not increase because of some “staggering” economic expansion or a “staggering” market genius but simply thanks to asset inflation that goes hand-in-hand with currency depreciation.
According to Sinclair most of the debt in the eighteenth-century was perpetual bonds paying 3.5, 4 and 5 percent. At the time of writing the book the interest rate 5%, the same rate in 2001 when the above article was written, and the 3.5% perpetual was selling for £66 exactly the same as the War bond! In the eighteenth century people prefered perpetual because the currency was stable, most of the debt was actually perpetual bonds.
Sinclair’s plan to reduce the debt was to pay £75 to bond-holders chosen by lottery, this was only to maintain a stable market the liquidation value of the bond was £66 and holders had no right to ask face-value. The government could just as easy buy the bonds on the market via agents, when the bonds moves from the liability to the asset side of the balance sheet the debt is extinguished.
V) Another example that the conditions of sovereign debt could be changed at any-time without the creditors’ consent; creditors have no legal recourse. There is no debtor’s prison for sovereign powers.
VI) It might not be very honourable for the British government to go back on a promise, but for an empire that was started by sea pirates and built up with genocide, massacre and plunder such a small smirch—Argentina reduced its debt to 30 cent from each dollar after the collapse of 2001—is more than forgiveable. The real dishonour is what have been done to the sterling pound since 1932, the inflation that has robbed all savers and gutted the country.
I always question any advice coming from professional speculators who are willing to buy “poor value, out of favour” bonds. As to the yield they yielded the same as the market interest rate, the British have become world’s expert in ‘dodgy’ statements.
V) Of course any thing the treasury says is false, even when they dare to mention the main culprit: inflation. The value of the bonds have gone down because of the interest rate. If the treasury would decree that War bonds paid 5% they would regain their face value of £100 because that is the current interest rate, but if then the interest rate goes down to 3.5% they would shoot up to £142.85. Would the investors then deem it honourable to sell their bonds to the treasury at only £100?
What inflation has done is to destroy the value of the payment. A fifty-year old man who sells all his capital and buys perpetuals in 1730 could live to his eighties on the income and leave an inheritance to his children. While a man attempting the same in 1930 would have suffered for thirty years on what people cruelly call fixed-income, living on dwindling income and by the time of his death he would only have left a very small part of his original capital.
Only investment funds, in the loop, would benefit from redemption at face—or artificial as the treasury spokesman put it—value. The treasury should ensure there is a market, by appointing a market-maker, for the bonds so individuals who want to get rid of them at market valuation are able to do so.
VII) What really is “atrocious” is the mathematics of this article. The total interest is not £2210, that figure is the total investment with compounded interest and it is a magnificent amount equal to 22 times the original invested amount and about five times the original promised total investment of £432. The value of the bond is less than the face value because the interest is higher, thus the investors have no reason to complain, yet modern debt market do not deal in perpetuals any longer and the prefered government bonds are those with the shortest duration.
Now investors will only lend the government if the face value of the bond is paid back in a short period (even 10 years is short). For the government it is exactly the same, because they roll-over the old debt with new, so why the change? Since the world left the gold standard interest rate have been going up and down; when the rate goes up the investors refuse to lend until the government guarantees them it would buy the bonds back at face value (higher than the market value), when the rate is going down it makes sense to buy the bonds at face value (lower than the market value) and refinance at a lower rate. The first case pushes inflation up into a spiral, the second pushes rates down into a spiral. Whatever the cause economic death follows.
VIII) The yield of all bonds of similar risk is the same, thanks to arbitrage. When the interest rate went down, the price of the War bond went up accordingly:
“Trading around 75 today, the bond’s running yield is a not unreasonable 4.7%”
—War Loan: 28 January 2009
People holding these bonds should have sold them long ago and bought gold, which is up 300% the last decade.
see also:
For savers, War Loan has been an atrocious deal. The total interest on a £100 investment since 1917 adds up to just £2,210. Halifax bank says that this is £1,671 less than the £3,881 interest an average savings account would have paid.
Had that £100 been invested in M&G’s Blue Chip unit trust when it first launched in 1931, it would have grown to £109,588. That works out at an annual growth rate of 10.5% – a full 7% more than War Loan has paid.
Though War Loan has done poorly over the long-term compared with other investments, in the shorter term this stock could be attractive to some savers. Barclays Capital gilts strategist Mark Cableton says: ‘An interest rate of 3.5% on every £100 may not seem a lot, but on the present price of £66 it works out at 5.25%.’
Euro Debt Rising
In False Hope Rising I argued that most countries in the table will have higher debt levels soon. Ireland, Belgium, The Netherlands and Spain are all members of the Eurozone, let us examine the debt level of the whole zone:
Click to view
The graph is from Monthly Bulletin December 2009 . What is of real importance is the change in debt-to-GDP ratio (right side graph, thin black line). Notice, dear reader, how it was negative from 2005 until the bust in 2008 (an achievment of the Federal Reserve more than anyone else) and then it shot up to a high number, at this rate the ratio will double in only 9 years. For the whole Eurozone debt-to-GDP was 75.8% in 2009 Q2, thus at the current rate of increase it will be 150% by 2018.
Do Military Dictatorships Dream of Electoral Sheep?
All states end up the same: Military dictatorship.
Strangely the first reaction to this terminal disease is a general recovery in all aspects of the state: planning, decision-making, financial balance, et cetera. This follows by replacing planning based on external circumstances (dynastic, elections, et cetera) with planning by a central staff. Decision making is taken from a heterogeneous group of opposite poles (country & city, agricultural & industry, labour & capital, et cetera) and given to a central staff. Financial management is taken from those who spend public money for private enrichment (clergy, king’s favourite, parliament, et cetera) and given to a central staff.
You see, dear reader, where this is going to end: all power is concentrated in a central staff.
The central staff usually starts as a council, but almost always (if it survives long enough) evolves to the rule of single man. This imperator no matter how benign he might start out to be will always end up a cruel tyrant. I am not against autocracy per se, rather rule without law (see The Seven Deadly Sins of Society: Tyranny).
The problem with a military dictatorship is that to do anything they must push around everyone, but they can’t tolerate the least amount of criticism. What makes life so intolerable under military dictatorship is the same that makes life in a standing army so hateful to real men of action: you get pushed around by little dictators and you are not even allowed to complain about it. This constant pressure makes people go crazy, after thirty years of Franco rule in Spain violence against women was the highest in Europe:
Women’s organizations in Spain insist that machismo attitudes of many males is the underlying reason behind the violence.
The issue has gained increasing attention in Spain since the transition from dictatorship to democracy in the mid-1970s.
The change saw a dramatic influx of women into the workforce and a consequent rise in their economic power.
—Spain moves to curb domestic violence, January 16, 1998
Healthy machismo would greatly disdain violence against the weak, but real machismo would never tolerate for a single minute the degrading yoke that Spanish people lived under for more than thirty-five years, only to emerge into a more degrading modern society where men compete for jobs with their wives. “Increasing attention” did very little in six years:
But the new Spanish Prime Minister, Jose Luis Rodriguez Zapatero, does not find the situation very funny.
He recently described Spain’s domestic violence record as the country’s “worst shame” and an “unacceptable evil”.
On Friday his government made a draft “gender violence” law the very first of the not even week-old administration.
It aims to bring new domestic violence legislation before parliament by the summer.
At least one woman dies every week in Spain at the hands of her partner. Thousands stay in abusive relationships because, they say, there is nowhere else to go.
Sadly, these figures are not uncommon in Europe. But there is a growing awareness here of the problem.
Democracy in Spain is only 25-years-old. Before that, during the 40-year-long dictatorship of General Francisco Franco, domestic violence was not considered a crime.
What it was, though, was taboo.
—New man tackles Spanish machismo, 27 April, 2004
The recent downturn in the economy will bring no relief to the battered women of Spain.
Living under a military dictatorship is like a woman in an abusive relationship, everyday is torture. Whatever benefits the woman might see in remaining at first at the end it will kill her or her soul at least.
False Hope Rising
The Peterson-Pew Commission on Budget Reform published “Red Ink Rising” (thanks to Fabius). They attempt to show some countries that were successful in managing their public debt:
While the U.S. debt problem may seem insurmountable, other countries have succeeded in gaining control of their debt. They successfully addressed their long-term budgetary pressures, increased their budgetary flexibility, and improved their long-term economic growth. Over the past 30 years, the top-ten nations in terms of debt reduction efforts have, on average, reduced their public debt from 84 percent of GDP to 41 percent over 10 or 15 years.
click to view
Except for Norway all the countries reduced their debt during the global boom time, when dollars where flowing into all corners of the world. Now, like the day after a heavy drinking binge, all these countries are paying the price:
- Ireland boom economy is no moor, the recent budget cut every itemline except child-assitance.
- Iceland went bust and had its knees broken by two loan sharks the UK and the Netherlands and now the people of Iceland have to pay billions for ever.
- Canada inclusion in this list is a joke, it did not even hit the 60% target, which they describe as:
The 60 percent debt threshold is now an international standard—regularly identified by the European Union (EU) and the International Monetary Fund (IMF) as a reasonable debt target.
- Spain economy is worst than Iceland with “33.6 percent of Spaniards under the age of 24 are now out of work”. The flow of Euro’s to speculate in Spain’s housing boom has stoped (see 2008–2009 Spanish financial crisis).
- Belgium is another joke, reducing their debt-to-gdp to only 84%, that’s the target the US would hit in 2018 according to the commission’s fiscal baseline! Belgium was helped by being a part of a bigger EU, but who can lift the World’s economic engine and its biggest economy the US?
- Sweden, Denmark and the Netherlands all benefited from the global boom, especially manufacturing in Sweden. Now that the world has gone south they are hurting, Sweden just lost 50% of its car’s manufacturers.
- Norway: even with the huge amounts of oil in the North Sea (compared to its population and economy) it only managed a measly 21 points down to 35%. Ten points if you can guess the current debt-to-gdp of Norway: 52% while that of Russia is 6.8% (2008 numbers from wikipedia).
- Averaging the numbers is so wrong only an economist could do it!
To conclude one has to remember:
“When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about at all, has always been brought about by a bankruptcy; sometimes by an avowed one, though frequently by a pretended payment.”
—An Inquiry into the Nature and Causes of the Wealth of Nations, by Adam Smith [my emphasis]
Why pay your debts when you can hyperinflate them away?
see also:
Terrible Amounts of Meat!
In Meat! I wrote the following:
Modern production of meat goes something like this: oil is used to grow corn, oil is used to collect and transport corn, oil is used to process corn into feed, more oil is used to distribute feed, oil is used to rear cattle, oil is used to transport cattle, more oil is used to slaughter and process meat products. From using animals as a conduct and collector of free energy the modern world has turned them into sinks that suck limited fossil energy!
Meat seems to need huge amounts of energy; unfortunately the quality of the meat seems to be in an inverse relation with the amount of energy spent on producing it.
Here is a quote to go with that:
“Another idea I’ve been toying with is the notion of having no domesticated meat animals. This was the situation in Japan until the mid-19th century, when they adopted meat production as a form of “westernization.” Japanese people ate meat, but it was all wild meat — fish, mostly, with some wild boar, deer, fowl and so forth. Nature is fantastically productive of meat when left alone, to an extent that is practically unimaginable today. When the European explorers first visited Chesapeake Bay, they found sturgeon (a freshwater fish) in superabundance, and in sizes up to 18 feet long and weighing 1800 lbs. And cod, of course. Here is a description of herring found in Virginia in 1728:
When they spawn, all streams and waters are completely filled with them, and one might believe, when he sees such terrible amounts of them, that there was as great a supply of herring as there is water. In a word, it is unbelievable, indeed, indescribable, as also incomprehensible, what quantity is found there. One must behold oneself.
You can find similar descriptions of salmon, or of buffalo upon the plains. When you think about it briefly, it makes perfect sense that the greatest abundance of meat is possible from unmolested nature, as the conversion of solar energy into meat is most direct. Scientific studies have confirmed this — that it was a far more efficienct process to have buffalo eat grasses upon the Great Plains, than it is for people to grow corn and then feed it to cows stuffed in warehouses as we do today. And so much less work. And — to the degree that hunting is fun, and fishing for 1800 lb. sturgeon is really fun — so much more fun! Of course, wild meat is much better than the hideously degraded garbage you find in stores today.”
—The Future Stinks, New World Economics
Gold and Silver Flow between City and Country (diagram)
I am really tired of writing articles that no one read; I had promised an article about the Gold Standard, the above diagram was prepared months ago.If you want to read the article that should have accompined accompanied the above picture leave a comment below and in a week’s time I will write a paragraph for each IP address (so no cheating!).
A Single Track that Changed the World
Who invented Trains? Well keeping in mind that everything “can be traced to the ancient Babylonians” and any invention is the result of a long development processing, we can say that given the historical and scientific level of 1800 A.D. the following invented the Train:
The United Kingdom
There is no doubt that the first to put an engine on wheels were the English, that does not make them super-human geniuses for they only replaced the horse with a steam-engine a process that was going around since the middle of the eighteenth century.
“The earliest use of a railway track seems to have been in connection with mining in Germany in the 12th century”
Austria-Hungry
Turned trains from elegant and fragile machines that can only run on a straight line and the gentlest of slopes into beasts of burden that can clime up the Alps and follow the contour of the mountains.
“At that point, the government realized the military possibilities of rail and began to invest heavily in construction. Preßburg (Bratislava), Budapest, Prague, Kraków, Graz, Laibach (Ljubljana), and Venedig (Venice) became linked to the main network. By 1854, the empire had almost 2000 kilometres of track, about 60 to 70% of it in state hands.”
“During this time the company of Ábrahám Ganz invented a method of “crust-casting” to produce cheap yet sturdy iron railway wheels, which greatly contributed to railway development in Central Europe.”
Germany
Applied trains to war when it used the railway to deploy its armies in the Franco-Prussian war of 1870.
“The superiority of the Prussian and German forces was soon evident, due in part to efficient use of railways and impressively superior Krupp steel artillery. Prussia had the fourth most dense rail network in the world; France came fifth.”
The United States of America
Made the biggest contribution, by far, by inventing the Railway. They did this by consolidating the small regional railway companies into a monolithic corporation employing a mind-boggling 200,000 (a large number even in the era of computerised records) employees and then proceeded to standardise everything from rail-gauge to schedules and fairs. The railway is to the train what the Internet is to the personal computer.
“At the time of his death Harriman controlled the Union Pacific, the Southern Pacific, the Saint Joseph and Grand Island, the Illinois Central, the Central of Georgia, the Pacific Mail Steamship Company, and the Wells Fargo Express Company. Estimates of his estate ranged from $200 million to $600 million. It was left entirely to his wife.”
Connecting the two costs with railway announced to the world the arrival of a new Power.
“The first transcontinental railroad built in the United States between 1863 and 1869 is considered one of the greatest American technological feats of the 19th century—surpassing the building of the Erie Canal in the 1820s and the crossing of the Isthmus of Panama by the Panama Railroad in 1855. It served as a vital link for trade, commerce and travel that joined the eastern and western halves of late 19th century United States. The transcontinental railroad quickly ended most of the far slower and more hazardous stagecoach lines and wagon trains that had preceded it. The railroads led to the decline of traffic on the Oregon and California Trail which had populated much of the west as they provided much faster, safer and cheaper (7 days and about $65 economy) transport east and west for people and goods across half a continent.”
Travel now can go on 24 hours.
“The man who ultimately made the sleeping car business profitable in the United States was George Pullman, who began by building a luxurious sleeping car (named Pioneer) in 1865. The Pullman Company, founded as the Pullman Palace Car Company in 1867, owned and operated most sleeping cars in the United States until the mid-20th century, attaching them to passenger trains run by the various railroads; there were also some sleeping cars that were operated by Pullman but owned by the railroad running a given train.”
The consolidation of the railways started the era of the Corporation:
“Santa Clara County v. Southern Pacific Railroad Company, 118 U.S. 394 (1886) was a United States Supreme Court case dealing with taxation of railroad properties. The case is most notable for the obiter dictum statement that corporations are entitled to protection under the Fourteenth Amendment.”
Russia
Made railway into a strategic asset by linking Moscow to the farthest part of Siberia.
“The Trans-Siberian line remains the most important transportation link within Russia; around 30% of Russian exports travel on the line. While it attracts many foreign tourists, it gets most of its use from domestic passengers.”
This single-track railway literally changed the history of the world, without the railway Russia would have lost Siberia (which is to Russia what India used to be to England) in 1919. Without Siberia Russia would have easily been crushed and never would have achieved World Power status. Siberia saved Russia after the Civil War, the Great War and the collapse of the Soviet Union all of that happened thanks to the Trans-Siberian Railway.
Japan
Trains did not really take a leap until Japan introduced speed into the train service as a fundamental part.
“To enable high-speed operation, Shinkansen uses advanced technologies compared with conventional rail, and it achieved not only high speed but also high standard of safety and comfort. Its success has influenced other railways in the world and importance and advantage of high-speed rail has been revalued consequently.”
This was the last significant development in railways.
Unfortunately countries like China and India have invested their resources in building highways instead of railways, thus catering to the short-term needs of their elite instead of investing in the long-term needs of the country.
Hungarian State Railways
Zimbabwe on the Aegean
“Greece’s newly elected Socialist government insisted Wednesday that the country was neither this year’s Iceland, nor the new Dubai, as worries increased over public finances, causing its debt rating to be downgraded to the lowest level in the euro zone.”
I agree 100% that Greece is neither like Iceland nor like Dubai, but that would be no reason for the Greek public to rejoice since their country is exactly like Zimbabwe!
I followed the Zimbabwean hyperinflation last year, not in the hostile Western press but from the RBZ own documents:
- Zimbabwe’s Monetary Policy
- High Treason in Zimbabwe
- Mischief on the Zambeze
- Re-Introduction of the Gold Standard
The only reason prices are not doubling every week in Athens is the European Monetary Union, the question now: How long will Europe carry the sick man of the Aegean?
“Athens squandered its euro windfall. For a decade, EMU let Greece borrow at almost the same cost as Germany. It was a heaven-sent chance to whittle down debt. Instead, the country dug itself deeper into a hole by running budget deficits near 5pc of GDP at the top of the boom.
Like Labour under Brown, idiot leaders mistook a bubble for their own skill. But the consequences in EMU are more dreadful. Austerity may prove self-defeating, without the cure of devaluation. Greece risks grinding deeper into slump.
The EU can paper over this by transfering large sums of money to Greece. But will Berlin, Paris – and London, also on the hook – feel obliged to bail out a country that has so flagrantly violated the rules of the club, not least by holding Eastern Europe’s EU entry to ransom over Cyprus? That is neither forgotten, nor forgiven.
During the panic last February, German finance minister Peer Steinbruck promised to rescue any eurozone state in dire trouble. He is no longer in office. The pledge was, in any case, a bounced political cheque even when he wrote it. Greece can assume nothing.”
—Greece tests the limit of sovereign debt as it grinds towards slump
Athens squandered its euro windfall. For a decade, EMU let Greece borrow at almost the same cost as Germany. It was a heaven-sent chance to whittle down debt. Instead, the country dug itself deeper into a hole by running budget deficits near 5pc of GDP at the top of the boom.
Like Labour under Brown, idiot leaders mistook a bubble for their own skill. But the consequences in EMU are more dreadful. Austerity may prove self-defeating, without the cure of devaluation. Greece risks grinding deeper into slump.
The EU can paper over this by transfering large sums of money to Greece. But will Berlin, Paris – and London, also on the hook – feel obliged to bail out a country that has so flagrantly violated the rules of the club, not least by holding Eastern Europe’s EU entry to ransom over Cyprus? That is neither forgotten, nor forgiven.
During the panic last February, German finance minister Peer Steinbruck promised to rescue any eurozone state in dire trouble. He is no longer in office. The pledge was, in any case, a bounced political cheque even when he wrote it. Greece can assume nothing.
How To Repay Sovereign Debt
“Governments can and do change rules when in a corner,” Ciaran O’Hagan, a fixed-income strategist at Societe Generale SA in Paris, said in a note. “Governments are sovereign and they can surprise and badly hurt investors when their backs are up against the wall.”
In Liquidating the Debt of the United States I wrote:
When investors give money to sovereign nations they do so without any protection, only the complete trust in that sovereign nation’s ability and willingness to repay them back. Sovereign nations can enact any kind of debt restructuring, capital control or exchange control without prior discussion, negotiation with or even notification of their creditors.
Liquidating the Debt of the United States
The 3 by 3 Rule — Part One
Content:
Part One — Formal Scheme
Part Two — Historical Examples
Part Three — Where are we now?
Part One — Formal Scheme
Growth:
First G(eneration) – The Warrior – Liberator
Second G. – The Lawgiver – Justice
Third G. – The Builder – Infrastracture
Glory:
Fourth G. – The Warrior – Enslaver
Fifth G. – The Lawgiver – Injustice
Sixth G. – The Builder – Luxary
Decline:
Seventh G. – The Warrior – Defeats
Eighth G. – The Lawgiver – Nonsense
Ninth G. – The Destroyer – Last
The above scheme is for empires that are built up by a people, for those built up by nomads the following 2 by 2 scheme holds true:
Builder
First G. – The Warrior – Uniter & Enslaver
Second G. – The Lawgiver – Injustice & Nonsense
Destroyer
Third G. – The Warrior – Defeats
Fourth G. – The Destroyer – Last
