Is China Going For Broke?

So now it is China. Having written off the Ottoman, Tsarist, Austro-Hungarian, British, French, German, Portuguese, Spanish, Soviet, soon the USA, and sundry other imperial entities in the last century, it is time for a new one.

China has been running a surplus on the foreign exchanges for some time, so has money, more or less in the bank, as opposed to the old style developed nations. China is central to the new BRIC grouping. Brazil has timber, water, a lot of other things, but not much idea of financial or economic controls. Russia has energy resources, substantial industry and armaments, a rudimentary modern structure, but a system of government that more or reflects the days of Ivan The Much Misunderstood, and financially is in difficulties. India is India, too complex to summarise, but unpredictable. The consequence is that China, with the money, a centralised and dominant government, a skilled and active population, and a rapidly expanding economy is at the centre, and is using its influence abroad.

But we have been here before with China. Emperors have come and gone, some great, some disastrous, and some damaged by climatic or population events they could not control. There have been times of Warlords, of foreign invaders, and others of periods of relative stability. There have been times when China has looked to the wider world, and times when they have kept to themselves and their own troubles at home. Which way is it going in the near future?

We are told that China’s banks are not as well structured or financed as we have always assumed, and that a lot of the credit given recently given has been unwise and will involve losses and retrenchment. Also we are told that China may now stop stockpiling commodity reserves, in a way that will impact on foreign supplies. The Chinese it seems have been buying land abroad in a way that has left them open to allegations of a new colonialism, never mind the food supplies for the growing populations of the countries in question. There has been a huge property boom that is said to be never ending. Well they always are, according to the experts. What might trigger a cascading set of problems is impossible to predict.

Our assumptions of China’s internal stability are questioned because of the firm hand of control on what stories emerge from the interior. Externally, we gather that some in China want to expand into the relatively less populated areas in the region to give space for its own growing population. One area, it seems, is Siberia, despite this being a part of sovereign Russia. Russia made the mistake once of selling Alaska, in 1867, but I do not see them making the same mistake again.

Perhaps we have all been gulled by all the media hype and delight at the Big Show of the Olympics of 2008, without enquiring about the cost and the manpower entailed. China is a very large, very complicated, intricate and interdependent polity with an authoritarian government reluctant to change course as eventualities arise. It will go blundering on whatever circumstances arise that suggest more open government and more flexibility of movement. It is putting too much trust into money men and too little into what severe issues could arise. Amongst them could be many of its peoples running out of patience with the dereliction and destruction around them.

An old Chinese curse is “May you live an interesting life” so when might matters and events in China begin to become very interesting? The Chinese love betting, but what numbers will they draw next?

Scottish Economics - A Fable

Evelyn Waugh writes to his wife Laura, 31 May 1942;

No. 3 Commando was very anxious to be chums with Lord Glasgow, so they offered to blow up an old tree stump for him and he was very grateful and he said don't spoil the plantation of young trees near it because that is the apple of my eye and they said no of course not we can blow a tree down so it falls on a sixpence and Lord Glasgow said goodness how clever and he asked them all for luncheon for the great explosion.

So Col. Durnford-Slater DSO said to his subaltern, “have you put enough explosive in the tree”.

“Yes sir, 75lb.”
“Is that enough?”
“Yes sir I worked it out by mathematics it is exactly right.”
“Well better put a bit more.”
“Very good sir.”

And when Col. D Slater DSO had had his port he sent for the subaltern and said, “Subaltern better put a bit more explosive in that tree. I don't want to disappoint Lord Glasgow.”

“Very good sir.”Then they all went out to see the explosion and Col. DS DSO said you will see that tree fall flat at just that angle where it will hurt no young trees and Lord Glasgow said goodness you are clever.So soon they lit the fuse and waited for the explosion and presently the tree, instead of falling quietly sideways, rose 50 feet into the air taking with it 1/2 acre of soil and the whole of the young plantation.And the subaltern said “Sir, I made a mistake, it should have been 7 1/2 lb, not 75.”

Lord Glasgow was so upset he walked in dead silence back to his castle and when they came to the turn of the drive in sight of his castle what should they find but that every pane of glass in the building was broken.So Lord Glasgow gave a little cry and ran to hide his emotion in the lavatory and there when he pulled the plug the entire ceiling, loosened by the explosion, fell on his head.

I Know Where I'm Going

I believe that the Government has embarked on a “scorched earth” policy in anticipation of an electoral defeat together with a substantial clear out of the present Labour Party in the House of Commons. It is the only rational explanation for its present course of action and behaviour.

Government is about choosing priorities, allocating resources, and dealing with legislation, along with other duties and obligations. The intended effect is to wreck the ability of any new administration to determine any independent decision for the UK. It is to enable the effective decisions in major areas of policy to be put into the hands of the EU. Financially, the budget options will be predetermined by a disastrous fiscal situation and related international commitments that will be impossible to be freed from in the short term.

If the EU gets its way in Ireland and Denmark, the Lisbon Treaty will be in force by this Autumn, and the problems arising for a new government trying to make changes in the way they affect the UK will be intractable, whoever is in charge in Europe. I would not be surprised if during the Parliamentary recess, the moves necessary for the UK to enter the Euro currency will be under way, and may proceed rapidly, given the willingness of the Government to agree terms and make concessions. Perhaps 1st January or 1st April 2010 is already pencilled in for the vesting date.

In preparation for this the Government has been proposing actions around the “Regions”, those historical remnants from the early years of the Cold War assumed by political laziness and administrative stupidity to be an easy way of dividing up England for Whitehall, and then EU purposes. We are going to hear a lot more about the need for the regions in the recession, given the parallel need to find jobs and places, preferably with generous expenses, for all those displaced Labour MP’s and lost cause candidates.

As for priorities, the financial problems a new administration will have to deal with will be not just difficult, but plain nasty. In the NHS it will a question of who dies, and in social security who goes hungry. Commitments will be made in Defence that will bear no relation to requirements, but to job creation, and our forces will become little better than a peripatetic militia. As for education, how many universities will be closing, and other colleges going to the wall after January 2010, because of decisions made by the outgoing Labour administration?

The most dangerous consequences of all this arise from all the uncertainties and the uncontrollable matters that can arise in the world economy. Where the oil prices might go and by how much is a matter of bitter debate. The movement and interplay of currencies is currently a game of liars poker. Where interest rates may go in relation to the sovereign debt of too many badly extended countries, and whose credit might fail is still unknown. But the UK and the USA are both much too high on the list for comfort. If the government leaves the UK with junk bond status, it effectively means goodbye for the independence and coherence of the UK.

Quite a number of the prophets of doom out there are talking about the end of the nation state and the end of the industrial world as we know it. The Government are embarked on a course which could mean that the UK which began the Industrial Revolution will be the first to relapse into urban predatory tribalism.

A Man's A Man For A' That

Long ago, I knew an incorrigible who regarded himself as something of a wit, even although it was not shared by those he exercised it on. Inevitably, he was dismissed as something of an unreliable nuisance and a fool. When introduced to a banker at a function, one of his favourite jokes was to ask them when the banks were going to sell booze to their customers, and then lend them the money to buy it at a decent rate. Another was to ask them why they didn’t make up their own money instead of relying on governments or gold diggers to provide it for them.

Perhaps he was just forward thinking and a man ahead of his time. We have learned in recent years what happens when governments allow banks to invent money as and when they feel like it. Now, his other prediction is close to fulfilment.

The supermarkets are going into banking, seeing a gap in the market. They are in the retail business, and retail banking is there for the taking. The Governor of the Bank of England; with a good many other trying to work out a more secure future for the UK finance industry might think that separating retail from investment banking would be wise. But many of the top men in the Banks and their doormen and clerks in the government are still craving for the big time hoopla of the global money markets using assets from retail banking as leverage, especially if they can keep on fooling ordinary people with fake and expensive credit.

The bankers need to be careful. They should wonder where all the small local retailers have gone from the towns and countryside. They should realise that when it comes to the internet anything goes. The supermarkets are big brands, and have worked very hard to create the illusion of security and customer concern. They are not contaminated, yet, with images of thieves and conmen. They do not have to pursue millions of overdrawn customers who have had bad experiences recently.

The media, which has turned on the bankers in a feeding frenzy, is very kind to the supermarkets, their marketing spend on advertisements is enormous. Programmes critical of the sourcing of some products will be tucked away into the darkest recesses of More 4, and barely hinted at.

Above all, the supermarkets sell booze, are now becoming bankers and will be able to lend at competitive rates. How soon will there be a “Poosie Nancies” brand in your local store, between the delicatessen and the supermarket's in house bank?

Tax Havens Again

Returning to the subject of tax havens http://taxjustice.blogspot.com/ on 19th June in a post "Tax Havens and Development - A Damning Report" deals with the complex effects and distortions arising from the movement of monies through these banking locations. Further down the listing is another item "Tax Havens - Macro Relevant" dealing with the general economic impact across the globe. They take a little study, but are another insight into what has been going wrong and why. A gentleman on the beach above, a local preacher, told me firmly that the sand grew on trees far below the waves. The local bankers must have been listening to him.

Der Fliegende Voorzitter

Apparently, President Obama has been criticised by insect liberationists for swatting a fly dead and worse still taking pride in the speed of his reactions. It is good to see the vital issues of the USA gaining some attention in the UK media. Perhaps we could dress up some rogue financiers as flies and chuck them through the windows of the Oval Office. Who needs regulation?

Tell Me No Secrets, I'll Tell You No Lies

The unveiling and denunciation of “Nightjack” the prize winning blogger police officer is a warning to us all, up to a point, Lord Copper (do I win an award for the worst internet joke of 2009?). Although quite why the fuss is occurring I do not know. Isn’t it an ancient police ploy to set up a honey trap to reveal “fences” and others engaged in moving stolen goods about?

My guess is that if someone in the relevant trades really wanted to know who it was that was speculating whether Alastair Darling was in the pay of the bankers, or the trade unions, or foreign types with lots of money, or indeed all of them, they should be able to manage it if the blogger in question was possessed only of ordinary skills. If the blogger was able enough to cover the tracks, then that might tell them a lot more, and perhaps cause greater concerns.

Then there are the more basic skills of textual analysis, and divining truth from hints that are designed to send people astray. Also, there is the natural urge of people to boast, especially when anonymity is assumed. There are only so many people who have climbed Mount Everest on a unicycle. The skilful use of a picture can throw the searchers off track, given the modern weakness for believing anything pictured either as a still or indeed in film.

My chief concern, however, is not that I might be uncovered, but that nobody at all might be interested. So I must now try to dream up something really good. But for the time being, my identity remains securely hidden.

Yours faithfully,
Bertram Wooster,

P.S.
Could you mail me Jeeves, I’m having trouble with the updates again.