Archive for the ‘addicted to money’ tag
Coolest guy on the Planet – addicted to money
Part 2 of the TV documentary ” Addicted to Money” is produced by Andrew Ogilvie, directed by Simon Nasht and presented by Irish economist David McWilliams. It has been shown on the ABC and I have found it very interesting as it gives a good insight into how and why the economy collapsed in 2007. Below is my summary of the events.
The economy has just had the equivalent of a heart attack and trillions of dollars has been pumped into it to stimulate it. For the last 20 years our economy has been in the largest boom. Once the credit dries up the market turns from greed into fear. The cash was sucked out of the markets very quickly. We now need a new understanding where we are heading. Some are weathering the storm better than others. In Ireland the economy is busted, undergoing the sharpest collapse on the globe. It’s strategy of offering low tax’s to foreign companies so they would relocate to Ireland. Now this strategy is working against them as the companies that did move there are now moving to cheaper locations.
Despite seeing some green shoots of recovery appearing, we would have to expect there would be aftershocks from a quake of this magnitude. Since this crisis started $50 Trillion has been wiped off global wealth. That is the equivalent of the US, China, Russia, Europe and Brazil closing down for one year and doing nothing.
What started as a remote crisis in a far away financial sector. In the developing world, 100million people have been plunged into poverty. Iceland was the richest countries in the world and it’s 300,000 people had the best standard of living on the planet before the Global Financial crisis. Now they are in economic ruin. Iceland is bankrupt. The value of homes and pensions have been wiped out. Iceland’s problems were caused by a group called “The new Vikings”, Entrepreneurs who took over the banks with the promise of revolutionizing the countries financial sector. They borrowed vast amounts of money in the delusional belief they could transform a tiny nation into an economic power house. International banks lent large amounts of money to these inexperienced Icelanders. “They had banks, insurance companies and media, they borrowed a lot of money and went on a shopping spree.” Easy credit fueled the free for all. The country fell apart. Iceland’s prime minister went on TV to call for calm. The international banks will squeeze Iceland hard.
Iceland has another unique story. This is more than the the story of Icelands demise. The road to ruin of all of us can be traced to one small square in an Iceland town. It was there 1986 that US president Ronald Regan and Russian leader Mickhail Gorbachev held a historic summit that began unravelling the post war system. This was the begining of the end of the cold war and with it the end of Communisim. In the same square stands a glittering prize, a brand new office building, the largest in Iceland, buit at the height of the economic boom, it is empty. Also in the same square is a bank building called Kaupbing that was crutial in the story of the collapse of the financial markets. This bank borrowed 5 times the GDP of Iceland and when they collapsed the ecomony in Iceland collapsed but also it was the end of the perception that financial markets are always right. It’s collapse triggered the selling of bank shares globally. The irony is that in the one small square in an Irish town is the end of Communism in one building and in another building the start of the end of Capitalism as we know it.
Globalization means that even a tiny nation can bring the entire system down. All roads lead to China, where the official figures say that 100,000 factories have closed and 10Million people have lost their jobs, however it seems that the real figures are almost twice as bad. Over the last 20 years the Southern Cities of China have only known the boom years of growth. Fishing villages were converted to trading ports. When the GFC hit, World trade came to a halt, container ships dropped anchor and lay stationery so shipping companies gave business away. Millions of peasant workers have been forced to return to their villiges to work the land and wait out the downturn. If this crisis goes on too long, then unemployed peasants and students threaten China’s stability.
Australia is doing okay with the mining boom as long as China is continues the demand. The real legacy of this crisis is only just beginning there has been a volcanic shift in world power. The aftershocks will be felt for years to come. China’s insatial appetite for resources is driving a never ending boom. for years China was prepared to pay almost any price to secure supply, but not anymore. Mining companies are finding a newly aggressive China wanting to buy these mines rather than just doing business with them. The game is up for Western Capitalism. China has been on a massive buying spree for mining and energy companies. China is after all a party state dictatorship armed with a giant cheque book.
Before the collapse Australia’s iron ore headed by rail then ships to China to be turned into steel. but now with demand uncertain, it has been stockpiled into ever growing mountains. In Ningbo China, right next door to the port a brand new privately owned steel mill was opened just as the recession struck. However the government were not happy with the owners so they took over the mill that has been running at half speed. China is taking back strategic industries, reversing decades of reforms.
The financial crisis has exposed something more fundamental than just a credit crunch, it has revealed a shift in the way our world works. China is firmly in it’s ascendancy, the State is back in the driving seat and many centres of power that have ruled for the past 20 years are now threatened. The USA is going to feel this more than anywhere else. China has money in the bank whereas the US only has a credit card. The US government has spent trillions of dollars bailing out busted banks. The figures are huge, the US has committed to spening US$12 trillion in all.
The nine biggest wall street banks lost nearly $100 billion in 2008 yet they received more than $175 billion in government aid. These banks still paid employees $33 billion in BONUSES. One in every three dollars went to these banks as pure subsity, a GIFT. This is taxpayers money. The banks threat was bail us out or the way of life that you understand will be gone! “It’s a hostage situation” Where will the US get all of this money?
This is where the new economy gets really weird, because the bailouts take us back to the villages in China. America’s financial survival depends on blackmailing some of the poorest people in the world. The average worker is earning about US$7 per week but saving 50% of it and it is these dollars that have been used to bail out the US banks. China fueled America’s consumer boom and now it has so much invested in the US economy it risks losing it all, if it doesn’t keep underwriting US government debt. China does not want to stop lending to the US, because if it did stop lending, it would not only lose a customer but it would be left holding the bag of worthless pieces of paper called US dollars. It is China’s emerging middle class that has the most to lose, they are being held hostage to the bail out economy.
China is the number one holder of US bonds in the world. China and America are locked in an unsustainable embrace, with each side in fear of the other side making a sudden move. So the big question is should China continue to lend money to the US in the hope that the US economy will recover? Or should it change it’s strategy and spread it’s wealth around throughout the China countryside?
Whichever way they go, the old status quo has gone forever. Will China say No to lending money to the US?
presenter, David McWilliams makes the very real point.
“In the West, the worst thing has just happened. The greedy banks made all the money and then when they lost it they went to their politician mates and asked to be bailed out. The governments bailed out the richest people in our countries using the taxes from the middle class and the extremely poor.”
DEBT DEFAULT……..There is noway the US can pay back the money that has borrowed!
Really the only question is what form does the Debt Default take? whether it is in the form of Official or Inflationary default. It is physically impossible for the US to pay off the debt, especially since the amount is getting bigger by the day and the worse the economy gets the more the government borrows.
America can not openly admit it will default, it will just keep printing more money!
2. Right-Click then Copy
3. Paste the HTML code into your webpage
