The world economy cannot at the current rate ( stifled by debt) grow itself out of a proverbial wet paper bag. There is no way this will ever be paid, by any of the countries. The most rational solution is a reset, and I believe that may be the objective, aka one-world currency and government. However it will be up to the people to say not just no, but HELL NO!. We did not incur the debt, and we will not pay for it. My fear is that the real next great war will be between the peoples of the earth and the conglomerate banking system. -WHO CAN MAKE WAR WITH THE BEAST?-please check out the video by Larken Rose , one of my favorites, :The tiny Dot". "They", the ominous governments and banking systems combined are the tiny dot… The media has the job of convincing us otherwise. As Chris says, it will be an interesting year. I tend also to agree with Gerald Celente that we may have until after Christmas before the arms of the comtrollers will grow weary of holding the thing in the air and will let it drop. Either that or their collective ability to do so will fail as the guy referenced in the article said,pp "we lose faith in a faith based sytem". I would suggest that those of you in wait-and-see mode will be found lacking time and resources when you finally "see" it coming. Wait if you will, but the end marches on.
It took me a minute to see the problem with this explanation…but only a minute. This is the classic unwinding debt explanation, that will only work if no one charges anyone interest. The problem is interest. In the real world all money is created as debt owing interest. So the rich tourist does not just plop down a hundred bucks as a free loan, he lends it to the motel owing interest. At this point the $100 makes its way through the economy unwinding debts, but when its payed back to the rich tourist, the town as a whole will have to produce more than $100 due to the interest. The town as a whole is now indebted to the outsider by the interest charge, and when this process repeats a thousands of times a second, for 3 decades, the debt builds to unimaginable levels, which is where we are today. Its the interest that makes unwinding the debt impossible. (Note that it only took the Euro less than 14 years to reach unsustainable debt. The USA essentially defaulted in 1971, hence the 3 decades).
Very nice to see you on the site.
And since you are new here I just want to recommend you visit the "What should I do?" sections of the site.
- Safewrite
I totally agree about the reset.
But forget about one world currency… one European currency didn’t work, how would a one world currency succeed?
And a global government? Are you kidding? Just try and get the Muslim world to agree to THAT… Or Venezuela, Cuba, Zimbabwe, Greece, France, Iceland, and I could go on and on and on…
Never gonna happen.
Mike
True in the usual situations in the real world, but outside the frame of the story. (And yes, I’m familiar with the Crash Course, Money as Debt, and related works by Greco, Eisenstein, et al.)What I had in mind by "common agreement of the parties" would include forgoing any interest due. If the interest rate on all the steps in the circular debt is the same, this wouldn’t disadvantage of the parties. Even if the rates vary, it might be that reducing the overall debt to manageable levels might make the parties consider it worth the loss of interest due.
So, what percentage of the overall debt is involved in these circular relationships?
Nature’s rules are applicable to human beings as to any other existing or extinct animal.
Human being flourish when they have abundant food , water , and physical safety
Otherwise they perish.
Some like to call it "Nature" some call it "GOD" or "Karma". But basically its all the same.
With deminishing: fuel , food, drinking water, fish,phophates , fertile land , extreme weather conditions due to
human pollution and 7 billion human beings- the consequences are unavoidable.( i.e -dinossaurs)
We may play with statistics , charts, trends and hitech gadgets but the basic fact remains- a human being dies
without food.
Nature (or GOD if you like) will create a new equilibrium with much less human beings on earth or leave it barren .
We can see already the beginning of this process .
We will see Peak Population within 15-20 years with a steep downward slope beyond it
Keep well and
Happy New Year
Cuba, Zimbabwe, Greece, France, Iceland, and I could go on and on and on....Dunno about the rest but I can discuss Zimbabwe. It is stiched up already. When the Chancellor of the Exchequer Bernard Chidzero was fired by Washington the leading families of Zimbabwe lobbied Washington for the position. So much for it being a sovereign state. Politicians are a dime a dozen.
First I would like to thank Mr. Martenson for creating the Crash Course and for making it available free to the public.
The Crash Course answers the question: "Why Transition?" The first step to a successful transition is to raise awareness of looming outcomes. Raising awareness is the first step, understanding the problem is the second step and then taking appropriate action is the third step.
Transitioning means taking personal action after taking personal responsibility for the problem(s). One very critical way we could save our water is to become vegetarians. According to the film "Eating," vegetqarians consume 109 gallons of water per day. Adding just one hamburger a day raises water consumption to over 3000 gallons per day.
This is an exponential growth chart for water usage that can easily be turned around. Most of the U.S. water usage is watering crops to feed animals raised for slaughter. We have billions of farm animals in this country, and they eat a lot. In fact, a very large percentage of our food crops are food for animal crops - much more than what is grown for human consumption.
I have not eaten meat, fish or eggs for the last 28 years. I raised four children as vegetarians and they are raising their children as vegetarians. Let’s look at the numbers: 3000 gall. per day x 365 x 28 yrs (me), 3000 gallons per day x 365 x 32 yrs, x 30 yrs, x 28 yrs, x 23 yrs, x 13 yrs, x 9 yrs, x9 yrs, x 7 yrs, x 6 yrs, x 4 yrs, x 3 yrs, x 1 yr. (kids and grandkids).
Now that’s an exponential chart! It is amazing how much influence just one person can have.
The other side of the water story is the amount of waste that is running off into our waterways. Billions of animals excrete billions, maybe trillions? of waste every day. There are no laws or regs requiring sewage treatement for this animal waste. The waste runs off into rivers, streams, lakes, farms, aquaducts, and oceans. There are literal dead zones in all of our waterways because of animal waste run off.
In addition to dead zones, we have massive recalls of meat, fish, poultry, eggs, lettuce, spinach, strawberries, and apples. In addition to massive recalls, we have highly resistant bacteria due to massive meds pumped into our very unhealthy animals.
Adding insult to injury, just consider the methane released from burps, farts and waste. The bad thing about methane gas is that it’s hotter than CO2; the good thing about methane gas is that it circulates out of the atmosphere much faster than CO2.
Taking the Transition Initiative is liberating. It means no more arm chair philosophying, no more feelings of fear, no more feelings of helplessness, no more waiting around for someone else to fix the problem, it means taking action.
Becoming vegetarian is a really easy way to mold this particular predicament to our advantage.
Could you cite a source for those numbers?Ever wonder how the plains supported 60+ million bison and yet the Indians had plenty of clean water…that didn’t come from a water treatment plant?
Do you use a flush toilet?
Welcome ot the forums.
For those of us not ready to take the step to becoming a strict vegan, including myself, it will be wise to get used to a diet with a lot less meat. Cheaper and healthier, too. Try haveing a meatless dinner a week, followed by two meantless dinners a week and work your way up to at least three meatless dinners a week. We like veggie pizza, spinach pies, a stir fry with tofu and a dish I learned in the Bahamas–homemade maccaroni and cheese with pigeon peas. We had tostdas for dinner last night: corn tortillas covered with refried beans with cheese and veggies: lettuce, tomato, onion, and home-pickled jalapeno or fresh green peppers. Didn’t miss the meat at all.
Keep in mind that poultry and eggs and fish are healthier for the environment that red meat. This is especially true if your do it sustainably: fish home raised in a stock pond or chickens and eggs from your own coop.
It’s easier on the planet, your wallet, and your health. Vegetables should be the main course, followed by whole grains–and only then–protiens and fats. Protiens and fats can come from a variety of sources, like the lima beans and peanuts in my garden.
Hladini’s information, if correct, makes the assumption that all meat eaten uses the factory farm/ranch methods of raising livestock. For at least some types of livestock there are other methods that are far more sustainable. Grass-fed livestock should have a much less intensive rate of water consumption. In most areas though I imagine that would support fewer meat animals overall than are currently supported, so adapting to a diet with less meat still makes sense for most areas.
I have never been a heavy meat eater, but I have no intention of cutting meat out of my diet entirely. And for both of our family’s "home areas" (both northern climates with limited farming potential), diets including meat and/or fish are far more appropriate than vegetarian or vegan diets.
- Nickbert
The problem with many (not all) vegetarians is that their decision to forgo meat is usually based on slogans and oft-repeated misconceptions, and I still have not heard a viable answer to the B-12 question.
Yes, factory farming produces run-off which can contaminate water ways. This is due to the confinement style, and the mounds of manure the animals generate in tight quarters, being fed subsidized grains. What you call waste is actually fertilizer, a neccesary component of the circle of life. It can be and is used correctly on many farms, i.e. Joel Salatin’s. Pasture land actually benefits from intensive grazing, soil fertility and tilth increases due to the "waste". This was the situation with the buffalo until the Europeans killed them off wholesale.
Most of the issues that drive vegetarians have nothing to do with meat, but the politics of big agriculture. As for the ethics of eating an animal, which is worse, a bison that leads a healthy, happy life, protected from predators, diease and starvation, which ends when that animal becomes meat for my table, OR a bison that lives roaming, in constant search of food, stalked by wolves, susceptable to disease, on the ragged edge of starvation? Look at Yellowstone’s bison for an example of what I’m talking about. The animal is going to die eventually, one way or another. Why should it’s death be wasted?
Until the advocates of the Paleo Diet enter old age, the jury is still out on what constitutes a "healthy" diet, in terms of protein and fat intake. There’s WAY more to nutrition than simply choosing which foods to eat based on some pyramid or square.
Firstly, Hladini, I have to say is correct. BUT what his post points out is the inefficacy of the food system that has grown over the past 100 years as we left sustainable farming to achieve industrial farming…I agree that most of us eat too much meat, but damned if I will give up meat or eggs because every other "farmer" on the planet is doing it wrong!
We have raised pigs, goats, chicken, and ducks using no other water than that which falls on our roof. Had we not used it for these purposes, it would’ve simply run out the tanks’ overflow to waste.
Any "farmer" who allows his "animal waste" (there’s no such thing as waste, only resources in the wrong places!) has rocks in his head. By applying PERMACULTURE PRINCIPLES, things like swales to slow down the flow of stormwater to the catchment, catching the rain that falls on your roof in water tanks for later when it is not raining, ALL retard the flows of manure effluent to creeks and rivers. In any case, all that manure should be harvested and turned into compost to feed the land that feeds both the people and the animals. Why anyone puts up with the one way flow of resources from wells/mines to farms to oceans is totally beyond me. One day soon, it will stop…
I’m not personally concerned about the methane my animals put out, because we have a zero Carbon footprint. Thanks to PERMACULTURE. Permanent agriCULTURE.
The end of the fossil fuel era is nigh, and I look forward to it.
Mike
[This post is hidden - Jason]
"…it reflects a peculiarly American trend of burying-in-the-sand Ostrich Think, so prevalent among mainstream publications: An unwillingness – bordering on inability – to look at financial news in a cold light, and see what it actually means, rather than what we hope and pray it might be."
– GONZALO LIRA
"…Do not dwell in the past, do not dream of the future, concentrate the mind on the present moment"
– BUDDHA
"The future is purchased by the present."
–Samuel Johnson
"When did the future switch from being a promise to a threat?"
– Chuck Pahalniuk
"Study the past, if you would divine the future."
–Confucius
"The future ain’t what it used to be."
– Yogi Berra
December 20, 2012
Well what a year that was.
It’s hard to believe that, after a tumultuous year like 2011, the stakes could have been raised yet further in 2012, but raised they were.
So many momentous moves took place in the past twelve months it was hard to keep pace with everything. Fortunately, way back in December 2011, I didn’t put together my own list of ‘Black Swan Possibilities For 2012’ that so many people choose to publish at the end of a year, so history will be unable to judge the success or failure of my own thoughts which I diligently kept to myself – after all, who in their right mind would want to listen to a list of potentially unexpected events that I predicted could possibly happen in 2012?
Predicting is, to use the vernacular, a mug’s game and, if you ever find yourself being foolish enough to share your thoughts about what MAY happen with others, then take the advice of Marc Faber:
"…when you make a prediction, never make a prediction about timing"
Unfortunately for them, the Mayans were unaware of the thoughts of Dr. Faber - a situation that is probably even more unfortunate for Dr. Doom himself, as he would doubtless have been revered amongst a group of people not only fixated by the end of the world, but willing to put an actual date against it. For those of you concerned about it, that date is tomorrow, December 21st, 2012, hence my desire to write my review of the past year BEFORE the world ends. In case you’re interested in reading it, I’d suggest you get a move on – just on the off-chance…
We begin the review of 2012 with arguably the biggest story (though in this particular year, that is a tougher call than one would normally imagine) and that was the final implosion of Europe after decades of political process and, latterly, hundreds of billions of Euros thrown into a bottomless pit in an ill-fated attempt to placate Germany.
Ultimately, with the Germans having to finally capitulate and allow the ECB to backstop European sovereign debt in March after a series of disastrous bond auctions, it was clear that the position of Greece was one that couldn’t continue the way it had.
Faced with yet more enforced austerity and a population on the verge of Civil War, Greece finally had no choice but to leave the Euro (shown happily to the door by her Northern neighbours), return to the Drachma and devalue its currency dramatically in order to address the crippling deficits it had accumulated in the futile attempt to be accepted into a ‘club’ it had no more than a geographical right to be part of from the beginning.
The subsequent rioting in Portugal, when a referendum on membership of the Eurozone was denied, and the consequential emergence from the shadows of the Socialist Party, whose cries of "quebrar as correntes" (break the chains) became a rallying cry that swept them into power and Portugal out of Europe, threw the continent into a tailspin and now looks like causing Spain to become the third country to walk away from a Unified Europe in protest at the draconian concessions being demanded by Germany in order that the Spanish government’s debt receive the same backstop granted the more austere governments in Dublin and Rome.
The announcement by the Prime Minister that, like Greece before it, Spain’s budget deficit was actually of a far greater magnitude than had been previously admitted was the final nail in Spain’s coffin.
Much of the strife in 2012 was centred around The Middle East as the trouble in Iraq that began last year immediately after the withdrawal of US troops continued to escalate into a full-scale civil war and the simultaneous eruption of violence in Syria allied with the attempts by Iran, Turkey and Saudi Arabia to influence the outcome of the sectarian violence that ravaged Iraq combined to send the oil price spiking to $150 as attacks on pipelines in the south (widely assumed to be backed by the government in Tehran) became commonplace, disrupting supply and sending gas prices soaring across the globe. The unrest culminated in the ill-fated US attack on Iran’s Bushehr reactor which caused another spike in oil prices to the previously-inconceivable level of $188. The resultant surge above $5.00 for gas prices in the US proved a step too far for the creaking US economy.
President-elect Hillary Clinton’s narrow win over Michael Bloomberg in last month’s US election put the seal on an extraordinary year in American politics after Barack Obama’s shock decision in June not to seek re-election. Bloomberg’s late emergence put paid to the hopes of Ron Paul, whose remarkable showing in the early Primaries and caucuses had made the chances of him finally moving into the White House (and bringing some much-needed fiscal sanity with him) look anything but remote.
Paul’s surge in the opinion polls was as much a tribute to the sheer consistency of his message over several Presidential campaigns as it was to the vagaries of the other candidates in the race for the Republican nomination. Herman Cain, Newt Gingrich, Rick Perry and even Michele Bachmann came and went, but ultimately, it looked like Paul and Mitt Romney would be left battling it out for the GOP nomination - until Bloomberg finally threw his hat into the ring.
Obama’s withdrawal from the race had echoes of Lyndon B. Johnson’s famous speech in 1968 during which he had cited the division in the American House:
"There is division in the American house now. There is divisiveness among us all tonight. And holding the trust that is mine, as President of all the people, I cannot disregard the peril to the progress of the American people… Believing this as I do, I have concluded that I should not permit the Presidency to become involved in the partisan divisions that are developing in this political year… Accordingly, I shall not seek, and I will not accept, the nomination of my party for another term as your President."
In an eerily similar scene, Obama’s withdrawal address to a nation that had grown tired of the petty politicking by Speaker John Boehner’s Republicans and Harry Reid’s Democrats was as dramatic as it was unexpected - although the low-visibility of Secretary of State Hillary Clinton in the months leading up to the announcement that the former golden child of American politics was withdrawing had many on the Hill speculating aloud about what was perhaps going on behind the scenes.
Obama’s star, so long in the ascendancy, had burned out amidst a drastically worsening employment landscape and the false dawn of a string of better-than-expected economic figures around the end of 2011. The unprecedented collapse in retail spending early in 2012, public weariness with the bending of statistical inputs to produce the desired results, the Congressional insider-trading scandal that just wouldn’t die and the disastrous attack on Bushehr all combined to make Obama’s position untenable in the end.
His standing down "for the good of the Democratic Party, so we can unite and finish the journey to a better America", whilst a shock, was enough to catapult Hillary (and, importantly, her husband Bill) Clinton to a nail-biting victory that ultimately snatched the White House from Bloomberg’s seemingly unshakable grasp.
Meredith Whitney’s late-2010 prediction about a Municipal bond meltdown in 2011 turned out to be a year too early, unfortunately for her, but it came true in spades in 2012 as, with the partial disintegration of the Eurozone, the realisation dawned on the world that the likes of California, Illinois and New Jersey were no better off than Greece, Portugal and Spain.
Whitney’s original report "The Tragedy Of The Commons" attracted thousands of words of commentary when it was issued way back in 2010:
(Fortune): Whitney claims that the study is the most comprehensive, in-depth analysis of the states’ murky patterns of spending, revenues and benefits programs ever assembled by the government, foundations, or another research firm.
What Whitney found reminds her of the poor disclosure and arcane accounting rules that hid the fragile condition of the banks and monoline insurers that she unmasked. "The states represent the new systemic risk to financial markets," says Whitney. "I see a lack of transparency and an abundance of complacency on the part of investors and politicians, just as we saw before the banks imploded."… "It’s not that my clients requested it," says Whitney. "I was just so shocked by what I was seeing that I couldn’t stop. Any long-term strategic plan needs to take account of the dangerous, mostly overlooked problems in the state finances."
In the report, Whitney rates the fifteen states on four criteria, their economy, fiscal health, housing, and taxes. For each category, she assigns a rating of one, two or three for best, neutral or negative. Only two states get positive overall ratings: Texas and Virginia. Eight are either negative, or rated neutral, with a negative bias. The rub is that those are typically the states with the biggest economies: California, Ohio, New Jersey, Michigan, and Illinois (all negative) and Florida, Georgia, and New York (neutral, negative bias).
But for every word of commentary on Whitney’s prediction, there were a dozen (written with barely-disguised glee) devoted to pointing out just how wrong she had been (with Bloomberg conspicuously leading from the front):
*Meredith Whitney Loses Credibility as Muni Defaults Fall 60% - Bloomberg
*Meredith Whitney Doubles Down AND Cops Out On Her Muni Doom Prediction - Business Insider
*Whitney’s Armageddon Belied by '11 Returns - Bloomberg
*Muni Bonds: A Disaster That Wasn’t - WSJ
*The Worst Prediction of 2011 - Wall Street Daily
As all eyes moved from the crumbling Eurozone to the US, the Municipal Bond meltdown that Whitney foresaw in late 2010 became the next big thing.
The debt of California and Illinois in particular attracted the ire of investors as Illinois’ terrible fundamentals were laid bare by, of all people, Former State Senator and Republican Cook County Board President candidate Roger Keats and his wife Tina late in 2011 as they left Illinois for the wide open spaces of Texas.
In a letter published in the Wilmette Beacon, they pulled no punches:
(Godfather Politics): As we leave Illinois for good, I wanted to say goodbye to my friends and wish all of you well. I am a lifelong son of the heartland and proud of it. After 60 years, I leave Illinois with a heavy heart. BUT enough is enough! The leaders of Illinois refuse to see we can’t continue going in the direction we are and expect people who have options to stay here. I remember when Illinois had 25 congressmen. In 2012 we will have 18. Compared to the rest of the country we have lost 1/4th of our population. Don’t blame the weather, because I love 4 seasons.
Illinois just sold still more bonds and our credit rating is so bad we pay higher interest rates than junk bonds! Junk Bonds!
Illinois is ranked
• 50th for fiscal policy
• 47th in job creation
• 1st in unfunded pension liabilities
• 2nd largest budget deficit
• 1st in failing schools.
• 1st in bonded indebtedness
• Highest sales tax in the nation
• Most judges indicted (Operations Greylord and Gambat)
• 5 of our last 9 elected governors have been indicted. That is more than the other 49 states added together!
Then add 32 Chicago Aldermen and (according to the Chicago Tribune) over 1000 state and municipal employees indicted. The corruption tax is a real cost of doing business. We are the butt of jokes for stand up comics.
We live in the most corrupt big city, in the most corrupt big county in the most corrupt state in America. I am sick and tired of subsidizing crooks. A day rarely passes without an article about the corruption and incompetence. Chicago even got caught rigging the tests to hire police and fire!
Our Crook County CORPORATE property tax system is intentionally corrupt. The Democrat State Chairman who is also the Speaker of the Illinois House (Spkr. Mike Madigan) and the most senior alderman in Chicago each make well over a million dollars a year putting the fix in for their clients’ tax assessments…
The letter continued, but the point was made.
California was little better
(Sacramento Bee): California became the first state in the nation to completely eliminate transportation funding for public schools. Gov. Jerry Brown cut $248 million in state funding that helps put school buses on the road and reduced student attendance funding by $79.6 million. Those cuts take effect the second half of the academic year.
(Huffington Post): a myriad of California state employees are taking home big salaries. The five highest paid government employees all work in the prison system, according to LA Weekly, including the head parole psychiatrist for the Department of Corrections and Rehabilitation who made $838,706 – the most of any public employee in the state.
The crown of highest paid public employee in California may be up for debate. A prison surgeon was actually the highest paid public employee, netting $777,423 in 2010 while not working because he was taking home two years of back pay while appealing a termination, according to the Los Angeles Times.
But prison employees aren’t the only California state employees making the big bucks. Most of the full-time lifeguards in Newport Beach, California get more than $100,000 in pay, benefits and overtime.
Of course, as the US economy began to sink, the Fed - unlike the ECB - proved once again that it had no hang-ups about turning on the printing presses and so it was that we not only saw QE3 this year as the Fed announced their intention to buy an additional $800 billion of MBS in February after the strengthening dollar - floating proudly atop a sea of global monetization by the BoE, the SNB and (at that stage covertly) the ECB - threatened to put paid to the US’ export-led recovery, but QE4 too as the Fed finally slashed the rates it paid on the $1.7 trillion in excess deposits held at the Federal reserve by banks in an attempt to finally get that capital deployed where it was needed most.
Unfortunately, the fears of a great many Fed-watchers were realised when the effects of QE3 and the sudden surge of money out of the Federal Reserve’s digital vault and into the wild after QE4 (euphemistically called ‘Reserve Realignment’ by an increasingly-ridiculous Board of Governors) caused the kind of inflation spike that had been strangely absent since the Fed’s balance sheet went into overdrive in 2008.
U.S. CPI hit 5.3% in October and, with regular gas settling comfortably above $5 as premium gas soared above $7 in the wake of the conflict across the Middle East, the inflation genie was finally - and conclusively - out of the bottle and the deflationists (who had looked like winning the day) were left licking their wounds.
Naturally, this showed up in the prices of the precious metals as gold made a mockery of its late-2011 swoon to charge through $2,400 as, not only the renewed moneyprinting by Central Banks the world over, but the Middle East conflict and, perhaps most importantly, the emergence of the MF Global ‘whistleblower’ who, amongst other things, had testified to the CME behind closed doors that there was a dramatic shortage of physical gold backing the paper claims being traded on the COMEX - confirming what many had been speculating about for years - and explained to bemused regulators that the collapse in gold prices from $1,900 to $1,600 had been pure manipulation designed to shake loose physical gold and move it into the hands of large investment banks whose short positions had begun to get out of hand as their regular suppliers - the world’s central banks - had turned aggressive buyers in 2011.
Silver followed gold higher with the price reclaiming the $50 level and holding it despite the continued failure of the CFTC to publish the findings of their now three-year investigation into manipulation of the silver market which led to the sudden resignation of Bart Chilton in protest at what he claimed were ‘unacceptable delays in the face of overwhelming evidence of consistent and coordinated manipulation’.
The death of Kim Jong-il in December of 2011 had led to fears of increased tensions on the Korean peninsula but instead, what the world (and South Korea) found themselves dealing with was unexpected engagement of an altogether friendlier nature as Kim’s successor, his third son, Kim Jong-un, used the 100th anniversary in April of the birth of North Korea’s Kim Il-sung to attempt to build bridges by moving towards reunification with the South. The potential cost of any reunification between South Korea’s 48 million citizens and their 24 million ‘cousins’ across the demilitarized zone will dwarf that borne by West Germany back in 1989 when they tore down the Berlin Wall.
Goldman Sachs estimated in 2000 that it would cost W1.7 trillion (US$1=W1,188) to raise North Korea’s labor productivity to 50 percent of the South’s in 10 years after reunification, and W3.55 trillion to increase it to South Korea’s level. It was based on an assumption that Korea would be reunified in 2005.
The North’s per capita income of $1,000 is a world away from the $20,000 enjoyed in the South and bridging that gap will no doubt cost far in excess of the estimated €2 trillion cost of reuniting Germany between 1990 and 2009.
Whatever happens, Germany’s economic conditions at the time of their reunification were far better than those ‘enjoyed’ in Korea. The East German population was far smaller in comparison to the differential between North and South Korea and the difference between the health of the two economies - while large - was nowhere near the gulf between the two Koreas. The process of reunification will take years - maybe decades - and along the way, the political implications of a unified Korea, under the influence of the West, right on China’s borders is guaranteed to be a bumpy road indeed.
Lastly, but by no means least, the astonishing collapse of China’s housing market after the cracks that began to show in 2011 was both swift and brutal in 2012.
The first signs of any real weakness came in November of 2011 as official data showed a modest 0.15% month-on-month decline in the 70 cities monitored by the National Statistics Bureau, but beneath the friendly figure, lay a more worrying truth:
(FT): …the trend was clear with housing prices falling in 34 of the cities in October, twice as many as in September.
China has used a battery of policies to cool its real estate market, trying to rein in the runaway prices that had become a risk to the economy and a bitter frustration for ordinary citizens unable to afford property… On the surface, the official data suggest that China’s property market is holding up reasonably well. In Shanghai, prices for new homes dipped 0.3 per cent from a month earlier. In Beijing, they were down just 0.1 per cent.
But the numbers published by the statistics bureau are notorious for understating the true volatility in the market. When prices were soaring in late 2009, the official data showed annual gains of 10 per cent when private companies estimated that prices in top-tier cities had doubled.
One key concern now for both policymakers and investors is whether the official data will fail to capture the full extent of the stress in the housing market as prices fall.
A series of reports in official media have said that many smaller real estate developers are on the brink of collapse, blocked from bank financing and unable to generate cash flow as transactions plummet. In Wenzhou, the weakest housing market in the country, one developer offered free BMWs in the hopes of enticing buyers.
To support the economy even as it heaps the pressure on real estate developers, the government has launched a programme to build 36m affordable homes over five years. But in a rare setback for such a high-profile policy target, the housing ministry has admitted that progress has been slow, raising doubts about whether the public investment in property construction can adequately compensate for the decline in private investment.
Shanghai’s housing market had already fallen some 40% from its 2009 peak by the end of 2011 and this retrenchment continued into 2012 despite China’s best efforts to loosen the grip of their earlier efforts to cool the raging property market.
In any other year, the long-anticipated bursting of the Australian housing bubble which finally happened following an epic decline in consumer spending in the first half of 2012 and the triumph of David Cameron’s Conservative Party in a snap election called when the coalition with the Liberal Democrats broke apart in the wake of Cameron’s decision to abandon Europe would have been major stories.
Cameron’s landslide victory proved that the British had little desire to be part of the European experiment any longer and justified the decision he made in December of 2011 to follow a different path and, in its own way, set the stage for the continent-wide calls for referendums that threatened to engulf the whole of Europe in civil strife.
In Australia, the collapse of housing prices in Sydney and Melbourne - long-predicted by many - was swift and deep and, despite Glenn Stevens’ rapid response through a series of rate cuts, the pain reverberated through an already creaking retail sector as overindebted households cut back their discretionary spending in historic fashion. The mining sector, for so long the backbone of Australia’s prosperity, struggled to take up the slack in the second half of the year as China’s problems intensified.
Lastly, the gradual creep higher in US interest rates after QE3 and QE4 resulted in several near-failed auctions looks as though it could signal the beginning of a fundamental shift that may potentially, in 2013, bring about the final unraveling of the global government bond ponzi scheme.
We shall see.