Here is an interesting view point on the economy from a mob that I am taking financial advice from:

From Dan Denning in St. Kilda:

--In today's Daily Reckoning we will offer a revolutionary theory that explains and predicts the life and death of economic systems. This theory will show you that any economic order must ultimately fail if it is based on the illusion of control. But before we get to that, we should probably talk about the terrestrial world and the stock market.

--The stock market is stuck in a trading range. For an explanation of that range, we refer you to the inimitable Murray Dawes. The technical picture of the markets is helpful now because it strips out all the noise. It tells you what investors are actually doing. And what they're doing is vacillating between abject fear of systemic collapse and the need to preserve and grow their money before retirement.

--It's not an enviable position. But no one said the road to wealth through financial asset inflation would be an easy one. More on that shortly.

--What about Greece? It's still there. G-20 honchos met in Paris over the weekend. No big announcements were made. If anything, the G-20 finance ministers handballed it to the French and the Germans. This is fitting. It's a test of whether the pan-European project is going to end after 60 years and lead to a break up, or whether further "union" in Europe is possible.

--Specifically, the G-20 lot has given the two pillars of the European Union the job of figuring out three things: how to organise an orderly write-down of Greek government debt, how to recapitalise European banks, and how to prevent the Greek strategic default from infecting Spain and Italy.

--The deadline for having a fix in is October 23rd. That's when the political leaders of the European Union meet in Brussels to sign off on the expanded European Financial Stability Facility (EFSF). That particular European slush fund has around $600 billion in it. But Europe's leaders think it will need more to boost capital in European banks after bond holders (European banks) take a 50% write-down on their Greek government bonds.

--As you can see, not much has changed in the last week. We're on the slow-road to crisis. But the spring weather in Melbourne makes it hard to worry too much. The Europeans will figure it all out, won't they? And besides, that's in Europe. We're here in Australia, which is not Europe.

--Still, there are some weird and worrying signs. IMF President Christine Lagarde speaks of "precautionary credit lines" being extended to "non-consenting victims of the economic crisis". The credit lines aren't loans as such. They are a little like the Berlin Air Lift, we suppose...a way of dropping in extra liquidity to prop up the balance sheets of banks whose equity might be wiped out by a Greek default.

--Once again, the use of baffling terms like "non-consenting victims of the economic crisis" tells you something funny is afoot. Does a victim ever consent? Isn't the definition of a victim someone who has a harm imposed on him or hers without consent? Obfuscation is the last stand of the intellectually bankrupt...or...when they can't win because their ideas suck...they try to baffle you with language.

--This brings up a strange point about the world we're living in that MAY be in Australia's favour. The IMF is a global slush fund that normally loans money to bankrupt governments in exchange for economic policy changes that favour Europe and the United States. But the IMF is made up of the most deficit-challenged governments in the world. How can they be loaning money to anyone, much less telling anyone else how to manage their economy?

--There is a shift in the global balance of power underway at the moment. In 2005, we dubbed it "The Money Migration". The G-20 has been expanded from the G-3, and the G-4, and the G-7 and the G-8 because the industrial Welfare states have become less productive over the last 30 years and grown large structural government deficits.

--Now you have a world where the poorest countries - Brazil, India, and China - are creditors to the so-called rich countries, the US, the UK, much of Europe. The creditors have gained in political power as the debtors consumed their way to decadence. Which brings us back to the point of asset inflation.

--One of the reasons, we reckon, so many people are sympathetic to the Occupy Wall Street sentiment (despite the sheer ignorance of many of the participants) is that they sense something in the financial system is not right. The incentives are not aligned for normal people to produce things, save money, and get wealthy.

--Instead, we have a financial system built on unsound money. In that system, the incentive insists for the financial sector to expand credit and put people in debt. It can do so by creating money from virtually nothing with fractional reserve banking. It can then loan that money to households, businesses, and governments at a handsome rate of interest.

--The financial sector and the investing class benefit in one shared way from a world of unsound money and credit growth: asset price inflation. In Australia, this is favourably called the nation's retirement assets saved up via superannuation.

--People are now sensing that only the financial sector truly benefits from inflation. It amounts to a wealth transfer from productive people to money shufflers. Most people don't quite understand how it happened or even how it works. But they sense it. And it makes them very angry.

--But we think the people bedding down with the Occupy Wall Street movement are making a crucial mistake in their thinking. We didn't realise this until we read the introduction of Lee Smolin's The Life of the Cosmos while doing laundry on St Kilda road.

--Smolin makes the great point that in our age, scientists have replaced priests as the people with the most authority to explain the universe we live in. Scientists with a philosophic bent are called cosmologists. Cosmos is derived from the Greek word for order.

--The idea that the universe is ordered - according to the immutable laws of Nature (or given by God) - is a standard conception of the world we live in. But herein lurks a temptation. The temptation is to meddle. Let us briefly explain.

--If the world is ordered according to certain laws, then we can understand how it works in a mechanical, scientific way. And if we can understand how a machine works, certainly we can modify the machine to produce more desirable outcomes. A scientific, mechanistic view of the world, in other words, leads us to place great faith in the ability of scientists to diagnose problems and prescribe solutions (sort of like global warming).

--But Smolin offers another theory. His theory is that that the universe is an evolving thing, not a static system governed by immutable laws. If he's right, then understanding the universe is more about understanding the processes of evolution. We'll have more from Smolin tomorrow.

--In the meantime, what does this have to do with anything? A lot of the protesters we have heard yammering on YouTube and in the media are talking about changing the system. The most common idea is to police corporate greed by making government more powerful. They would also, we imagine, like to outlaw greed and make equality compulsory and justice absolute.

--But you can't change human beings. You can only change their rules of engagement with each other and the world. The most important change you can make to a system is a change to the rules that govern it. --The system that the Western World had for almost 300 years was based on some basic ideas: sound money, low taxes, private property, free trade, and the rule of law (where the freedom of the individual was presumed and the limits were not on what YOU could or couldn't do but what the State must never do).

--That system produced prosperity and wealth and improved standards of living for billions of people. It's been perverted by the introduction of unsound money, the predatory nature of the Welfare State, and relentless intervention into private and public life (as advocated by all the economists who are subsidised by and profit from the government).

--Any changes to the system that don't address the soundness of money won't result in a better system. A new system that hasn't addressed the failure of fiat money and the oligarchic power of a central banking cartel will be like a Tyrannosaurus Rex with a new fluffy pink tail, or a giraffe that has been taught to roller skate...an adaptation that leaves the resulting being completely unable to compete and survive in the world.

--Tomorrow, more on the origin of revolutions and how self-ordering systems are better than ones designed by people who want to control everything. The old order is ending. The cosmos is giving way to chaos. But what comes next? Find out tomorrow!

Dan Denning
for The Daily Reckoning Australia

..... typically the lone dog standing up the the tyrant(s)

choco said...

wrong people movement?

WTF <tard put that image together? I bet it was one of those global warming idiots who said by 2010 sea levels were going to be 3m higher.

60 people fit in to 12 std size cars. Now imagine they were all going to different destinations...

Oh and how come the cars photo is zoomed in to make it look even bigger?

FlySurfer said...

evlPanda said...


The 'tard mask.

Panda you stupid tard, it's a Guy Fawkes or Guido Fawkes mask.

another person who needs to bookmark Wikipedia or Encyclopedia Britannica.

I didn't know you were catholic, FS.

FlySurfer said...

choco said...

wrong people movement?

WTF <tard put that image together? I bet it was one of those global warming idiots who said by 2010 sea levels were going to be 3m higher.

60 people fit in to 12 std size cars. Now imagine they were all going to different destinations...

Oh and how come the cars photo is zoomed in to make it look even bigger?

Agreed. Also... I'd love to see those 60 bikes riding that close together, would be carnage... errr bikenage?

FlySurfer said...

Oh and how come the cars photo is zoomed in to make it look even bigger?

Some German bureaucrats have to justify their professional existance and pay packet. Ironic as Germany makes plenty of money out the car industry.

FlySurfer said...

This is bitcoin:
arstechnica.com/tech-policy/2011/10/bitcoin-implodes-down-more-than-90-percent-from-june-peak/

I still don't understand the link between Guy Fawkes and insurrection. Are you trying to reinstate a Catholic king or something? Or was he just cool because he blew stuff up? The guy was a religious nut.

bitcoincharts.com/charts/mtgoxUSD

Well if you bought last year, you'd still be +700%

I was just raising awareness, not handing out investment advice, but if you want some... Sell your property NOW for what ever you can get.

Rite! who cares! The end of time is for 21/12/12 may as well live happy for another year and then we will all be dead and who cares who is the most cashed up roting carcass!
Now I will crack another beer open and think about the property value..... and then maybe not!

I see gold ~ US$1400.
I see A$ @ 0.70
I see property in a death spiral, and those with debt been hammer by the banks.

PS: I still have a farked eye.

felixdcat said...

Rite! who cares! The end of time is for 21/12/12 may as well live happy for another year and then we will all be dead and who cares who is the most cashed up roting carcass!
Now I will crack another beer open and think about the property value..... and then maybe not!

2012? .... ahhhh sh!t , I won't be ready at all mate - we've got to do a couple of batches of the snags next year buddy and gobble all of them in between boating organising the party of the lecherous century jeez gonna be a BIG year eh

Property prices may go up or down depending where the property is. I don't really understand why Melbourne property is so expensive. I've only been there a couple of times though. The last time we went there we flew in to Tullamarine airport. What struck me was there was all this flat open land to the north stretching away to some low lying hills. A million homes could be built there.

Contrast to Sydney. To the north, south and west we have national parks, rough terrain and big hills. To the east is the ocean. Only to the south west is there farmland stretching out a bit.

Anyway with the protests. Clearly the situation in the United States is dire. Their economy is hitting rock bottom. The American government is largely to blame for the decline. Firstly they removed trade barriers. Secondly they increased regulation on industry. Thirdly through their borrowings they sucked up a huge amount of capital that could otherwise have been invested in industry. Its insane to reduce trade barriers from overseas competition while at the same time increase regulation and expense on domestic industry. Any company that can get out will get out while those industries that cannot will struggle. Without those industries people don't have jobs and whole communities die.

Its bizarre their stock market is still so strong as the rest of the country crumbles, there must be market manipulation with funny money keeping the place going. Its also bizarre the US maintains an empire spanning the globe while their cities are dying.

What is good about the protests is that people who are really struggling around the world are finding out they are not alone. There are others who find it difficult too. Its easy to fob the protesters off as a bunch of bludging whingers however there really needs to rethink as to what sort of society they want in America. Coz clearly if they keep going down the path they are travelling on its going to get a lot worse before it gets any better.

FlySurfer said...

Apart from the already mentioned effects of the last Credit Crunch, in Australia:

The qualifying age for Age Pension for both men and women will be increased by 6 months every 2 years starting from 1 July 2017. At 1 July 2023, the qualifying age will reach 67.

In 2010 only 13.6% (www.abs.gov.au/Ausstats/abs@.nsf/mf/3201.0) live to 65, 9% to 70, and that number starts to decline real quick.

You haven't got that quite right there fly. What it says is that 13.6% of the population are aged 65, not that only 13.6% of the population live to the age of 65.

If what you said were the case, Australia would have the youngest average population in the world I think.

The %age of people who live to age 65 is about or a bit under 60%.

From the page:- OLDER PEOPLE

In the 12 months to 30 June 2010, the number of people aged 65 years and over in Australia increased by 94,800 people, representing a 3.3% increase. The proportion of the population aged 65 years and over increased from 11.1% to 13.5% between 30 June 1990 and 30 June 2010.


And unlike other countries we're forced to contribute to our pension.

Thailand retirement age = 50
Greece:57
Germany:65
Spain:60
In Spain, the retirement age will be extended to 63 and 67 respectively, this increase will be progressively done from 2013 to 2027 at a rate of 1 month during the first 6 years and 2 months during the other 9

However, your overall point is taken. We have an ageing population and therefore less of a tax base from which to fund general welfare and in particular retirees.

One thing the government does not like to discuss much is the "superannuation black hole".

In the 50s everybody paid 5% of their income into a national retirement fund and at age 65 was entitled to a pension and I don't think was even means tested.

What was happening then was that people were not living long enough to keep the fund in balance (there was too much money in the fund) so it was scrapped and compulsory superannuation introduced.

Since then though, birth rates have gone down and life expectancies have gone up.

The economists have done the maths and discovered the "superannuation black hole". The welfare pool is draining fast and there are many, many people who have bugger all in their super funds due to apathy or drawing down on it when things have gotten a little tough.

For young people today, their super contributions need to be up around 20-25% if they expect to live reasonably after retiring at 65.

For those who are prepared to educate themselves financially, I think self managed super funds are the way to go.

We have older citizens living in rented units next door to us paying $170-$190/ week rent, who have switched off their hot water systems and have "bird baths" with a kettle of hot water and are living off salads and other raw food because they cannot afford electricity.

Mark my words, voluntary euthanasia will be on the legislative agenda very soon and people in these countries that have retirement ages from 50-60 years will be in for a big shock.

That is why they want to come here. Not very smart of the Greeks to go on strike right now.

This is what you lot make me think:

kiteboy dave said...

This is what you lot make me think: