Blast From The Past - 28/Oct/2011

Tarkus

It's been an interesting week for me with Walk-Off-HBP sending me this link of one Rachel Flowers. Ms Flowers is a 17 year old high school student who happens to be blind but is also a piano prodigy. Having run out of things to play, she has seized upon the catalogue of Keith Emerson recordings and made it her internet repertoire. The results are simply astounding.

Karn Evil 9 First Impression
Tarkus (on Piano)The Endless Enigma

...and so on. There are more videos of her playing swathes of ELP and all of it is jaw dropping, and staggeringly good. It makes you want to see if Keith Emerson has anything to say about it, but so far there hasn't been anything.

That opened the flood doors of YouTube into finding a version of Tarkus played by the Tokyo Philharmony Orchestra. Arranged by Takashi Yoshimatsu and conducted by Hiroshi Sado, this version  brings to life the Modernist angular harmonies and the sheer aggression of the sonic attack that was Tarkus. It's a corker. Don't miss it if you like Tarkus.  You can even get it on CD.



And then, there is Tarkus as played by a nine year old Japanese girl on an Electone at a competition. What's remarkable about this rendition is how complete the sonic assembly is to the extent that not only is she hammering out Keith Emerson's part, she's programmed Carl Palmer's part on the drum machine. It's as complete a sound of Tarkus you can get without Greg Lake. She did this some years ago. She's 13 now, and here's her doing Karn Evil 9 Second Impression. I liked this comment by the girl who goes by MiZ, in response to the praise that said it must be amazing when you unleash this prog rock at recitals and she says:

Thank you, but you find that the fine judges at competitions and recitals tend to prefer classical music and orthodox jazz. Prog just doesn't seem to cutit with this crowd. I cry every time they post results. :(

Which kind of cuts to core of the prejudice and lack of understanding out there for ... well, ...ALL of Prog but particularly ELP. However that's not something new.

Sometimes Emerson Lake & Palmer get short shrift even in the progressive rock conversations. Out of the triumvirate of Yes, King Crimson and ELP, the third has had the distinct disadvantage of being unable to change as mercurially as the other to bands. Indeed, the level at which the band is locked to their names has made it all but impossible for them to swap and change members in search of a new direction. Their work this side of 1980 has been disappointing compared to the dizzying heights of their early 1970s work. Maybe it's not surprising given just how much music has come since.

Yet, look at all these seriously talented musicians taking on board these works today. What does it say? I thought it was a really good opportunity to dust off my copy of Tarkus by ELP and have a blast. Forty years on (OMG!) the production sounds dated; some of the vernacular of the music is so much of the 1970s but Tarkus itself is packed with the most ambitious arranging and playing I can think of from 1971. Consider in 1971 they were putting this up against say Led Zeppelin doing 'Stairway to Heaven' or Paul McCartney doing his first album with Wings, the disappointing 'Wild Life'. The weird thing is, Tarkus, the one-side suite of songs, never really gets old on me. I listen to it with essentially the same awe I felt for it as a teenager. All of the angularity, the layered mono-synths, the distorting organs, the modern dissonance brings pure awe at the technique and the vision.

ELP did go on to record even more amazing things, but Tarkus is the first sign post that set the ambitions of rock very, very high. I don't think too many rock bands have gone and visited that sign post since, but today we find more and more musicians are finding it. Long Live Prog Rock, Long Live ELP.

Even More From Prof. Steven Keen

We're In It Deeper Than We Think

Pleiades sent in this link here. This bit caught my eye because in Europe they're talking about recapitalising their banks.

SK: There’s no sense trying to recapitalise the banks if you are also trying to maintain the debt they have currently issued and continue having the debtors have to repay that debt. If they’re talking about instead doing what’s now happening with Greece where they’re going to abolish about 50 per cent of the debt, that’s much more sensible. Basically the amount of money which was generated by lending activity of the banks was most drastically excessive. They made a mistake and they basically have to wear the consequences of it and that therefore means writing off the debt.
The trouble is it’s also being compliant with an austerity program and the trouble about the austerity program is that that itself bites back on itself by reducing the cash flows that are then needed to pay the government sector, and in fact the end result of an austerity program is that often the budget deficit gets worse rather than better. I would be in favour of wide-scale debt abolition, guaranteeing depositors funds at the same time, putting in mechanisms to mean that people who are genuine savers didn’t get disadvantaged from the whole thing. Fundamentally, it would be a dramatic shift in the proportion of money that was effectively credit money across to being effectively fiat money instead.
AP: What size of a shift are you talking about?
SK: If the finance sector was doing what it should be doing, which is simply providing working capital for the non-bank financial sector and businesses and innovation funds for entrepreneurs and so on, in an American case it would mean reducing the size of the finance sector by a factor of four or five. It’s literally that much too big. Of course it would mean large numbers of finance brokers, finance advisers, bank staff, would be out of a job and I’d be shot for it, but the reality is over time that’s going to happen anyway and I’d just be bringing it on more suddenly. But I’d be blamed for causing it.

And he's talking about a two decade time frame. Basically, we're staring down the barrel of how to solve the problem of too much debt. Everybody has two solutions: Inflate it away by printing money, or default and stiff payments. Neither one is a good option and both give rise to extreme winners and losers scenarios. The main thing that has to be said is that most governments get to such situations, like, say Japan or to a lesser extent the PIGS, America and the UK,  because the vested interests of the day win out over the long term health of the national budgets. If people could collectively foresee these problems, then they would have avoided things getting to such points. Instead, what politicians do is that they carry the interests of the day, putting the bill on tab. After a certain amount of years of such bad governance, the small debt problem eventually blows into a big debt problem.

There seems to be a recurring argument about debt that, people who can't repay debts shouldn't be and shouldn't have been allowed to borrow - whether it be subprime loans or money lent to Greece. Then there is the counter argument that perhaps lenders should have been more prudent (there's that word!) in their lending and whatever money is lost should be chalked up to bad lending. i.e the lender should take their lumps. However the truth is that people who are shackled with the debt but feel that they weren't the ones who asked to borrow the money, are rightfully angry that they've been lumped with this debt without their consent. And then there are people who deposited their money into a bank only to find the bank lent it to Greece, and now they might see their banks topple over, who are equally angry about the predicament they find themselves in.

All of this is just to say that the tribulations in Europe over Greece is going to get much worse before it gets better.

Occupy Everywhere

The Revolution We Have To Have?

There's something really interesting going on with this Occupy Wall Street business. First of all, the movement seems to be genuinely autochthonous out of Social Media. The even weirder thing about it is the persistent refusal to nominate a leadership. So the powers that be cannot negotiate with the massive body of people to get them out of Wall Street. What's less strange is that this movement is moving beyond Wall Street and around the world. And for once, you would think that the powers that be would be forced to reckon with this public show of anger.

The kinds of analysis that are out and about are hopelessly outdated by ideological frameworks of the past. What's particularly interesting about the movement is how it is basically moving out of the traditional - and largely stage-managed - American left and right dialectic, which the rest of us in the world know to be a in fact a weird bird with two right wings fighting over who gets to go to the right further. There are even original Tea Party people who have abandoned the Tea Party, turning up. And this makes sense because the outrage can really be described in a few short sentences.

The bankers got bailed out while the rest of the economy went to pot. Then, they paid themselves massive, obscene bonuses while lots of people lost houses and livelihoods. And now that people have noticed, they're wondering why these people are so angry and won't go away. Frankly, would you?

Not only did people lose half of their retirement savings in the catastrophe that was the GFC, many lost livelihoods, businesses, houses and whole communities went down the gurgler. it hasn't happened here in Australia, but it could well do if China happens to tank, thanks to Europe tanking. With the two speed economy straining, should China go, our mining sector will wilt and we'll be a one speed economy, equally in the pot. So we're not that far off the need to tell these bankers and in our case our CEOs to take a huge pay cut and come back to earth where the rest of us live.

But back to the phenomenon itself. A few weeks I ago I made the remark that all they needed was a Trotsky, but the amazing thing is that Social Media is going to obliviate the need for a organiser like Leon Trotsky was in his day. As long as people are angry, they'll be motivated enough to organise themselves through social media. It's like flash mob, but really angry and motivated. And the ramifications of this is what is truly interesting. You wonder how long the Republican Party in the US can keep pretending that these people are marginal weirdos when the crowd and movements grow day by day and around the world. You wonder how long before the sheer number puts some spine into Barack Obama's administration -and by extension fear of the electorate into the Republicans who just shot down Obama's 477billion dollar package for jobs.

Maybe Social Media really is going to change the world for the better by bypassing the information control exerted by the traditional mass media? That would be something to see.

 

Future Of Air Combat

F-35 or F-22?

Today's entry is going to be totally off the wall for this blog and is going to be about fighter jets. Bear with me... A couple weeks ago, Pleiades gave me the heads up on this article about the development of the F-35 and how it might be a turkey.

While all attention is on tax and falling markets, an even more important event for Australia and our region is unfolding: the trillion-dollar Joint Strike Fighter project has begun the early stages of a painful and extended death rattle. This threatens to inflict major harm on our defence partner, the United States, and the JSF is by far the largest military obligation in Australia’s history.

Even worse, we convinced our defence manufacturing industry to tool up to be major JSF contractors. As a result, a huge chunk of our defence manufacturing support capacity faces a financial disaster. Three companies have already failed. The long-term air defence planning of the US and Australia is now in tatters.

These are extreme statements which will, as always, be denied by the top brass in the Australian Defence Department. I have been warning about the dangers of the JSF for close to a decade and the defence officials, whose reputations are at risk, have always thrown cold water on my comments. Now, at last, the US marines have decided to tell the truth about the JSF in the American national interest. And the truth confirms all our worst fears.

But it is not all bad news because the US marines are also offering a solution. And better still, if Prime Minister Julia Gillard and Defence Minister Stephen Smith are courageous enough to bypass our reputation-preserving defence chiefs, and back the US marines’ solution, Australia can play a big role in overcoming the JSF problem. We would also maintain the significant US role in the air defence of our region and ensure survival for the large areas of Australia’s defence manufacturing that is hitched to the doomed JSF.

Few Australians will have heard of Major Christopher J Cannon, an operations analyst with the US Marines. Major Cannon did not tell the truth about the JSF by talking to the New York Times or Wall Street Journal. Rather he did something far more powerful – he told the truth in the Marine Corps Gazette under the heading “F-35B (JSF) needs a Plan B”.

The link within the article links to another article that has this nice bit:

What about acquisitions costs? From program start in 2001, the JSF was estimated to cost $233 billion₅ for total program acquisition.₆ This was the teaser price, the estimate grew to $245 billion in 2004, $279 billion in 2007, and in 2008 the JSF program office’s estimate was $300 billion,₇ a 29 percent increase over the original figure. However, GAO found that this 2008 estimate was not reliable, comprehensive, accurate, well documented, or credible. Worse, no uncertainty analysis has been conducted (acquisition may cost $298 billion; it may cost $500 billion). The only thing that is certain, the $300 billion estimate was “virtually certain to be wrong.”₈ In 2010, after a Nunn-McCurdy breach—a required formal review whenever program costs increase anywhere from 15 percent to 50 percent over expectations—GAO’s latest 2011 estimate is a total JSF program acquisition cost of $383 billion. Using coarse analysis and acknowledging that from 2001 to 2011 estimated program cost grew about $16.7 billion a year, when IOC begins in 5 more years we might expect a $466 billion acquisition cost—exactly double the original estimate.

I'd hate to be up for that much money. The development for the F-35 has been one of those fraught projects where there are probably graveyards for careers of people who were put in charge to project manage it. The closest thing to the developmental debacle this project has been, is probably the Robert McNamara inspired F-111. The story of the F-111 was that it was an attempt to build a fighter bomber that was capable of covering all the bases with one aircraft instead of parallel development of different fighters and bombers.Instead the project ended up with an aircraft that pleased nobody except the Australians.

If the F-22 is already developed and can take over from our FA-18, then it seems crazy to keep throwing good money after bad in the development of something that is likely to be a camel-by-committee design fighter jet.

Today we find even the Economist has weighted in on just howmuch this thing is costing and whether it is worth it.

As China and other countries develop more accurate ballistic and cruise missiles, able to hit moving targets 1,000 miles away, America and its allies have become worried about the aircraft-carriers they have relied upon as a principal means of projecting power since 1945. Those worries are not much helped by the carrier version of the F-35 which, without external fuel tanks, has a combat radius of only 680 miles. The US Navy’s response has been to propose what it calls the Unmanned Carrier-Launched Airborne Surveillance and Strike aircraft. It has already asked for financing and hopes—somewhat optimistically—that it will enter service by 2018. If a big, long-range UAS can operate safely from a congested carrier flight deck at sea, that would go some way to allaying fears for the future of aircraft-carriers.

The future of aerial combat is likely to be between drones, not manned fighters. If the Chinese are simultaneously developing missile systems to make carrier systems obsolete AND they're building carriers, then there's an argument to be made that the era of carriers is over. Just as Joe Kennedy thought it was time to get out of shares when a shoe shine boy offered him advice, the advanced nations of the world should get out of carriers if a country with a poor naval record such as China starts playing with them. We are not going to see a battle between carriers as we did in World War II, and nor should we given that war is over 66years ago. World War I sure wasn't fought on the same technology as the US Civil War. It's doubtful even the Vietnam War and Desert Storm are going to offer us any indication of what the next war is going to look like.

However we do know the shape of the war we are fighting, and it is increasingly through unmanned 'drones'.

The British Ministry of Defence suggests the answer is: perhaps. In a thoughtful document on the British approach to UAS earlier this year, the ministry’s Development, Concepts and Doctrine Centre argued that if the controlling system addressed the principles of the law on armed conflicts (military necessity, humanity, proportionality and the ability to distinguish between military targets and civilians) and if the rules of engagement were satisfied, then an armed strike would meet legal norms. However, it goes on to say that the software testing and certification of such a system would be expensive and difficult. And decisions about what is proportionate often require fine distinctions and sophisticated judgment. The authors conclude: “As technology matures and new capabilities appear, policymakers will need to be aware of the potential legal issues and take advice at a very early stage of any new system’s procurement cycle.”

David Deptula, a retired general who was until recently in charge of the US Air Force’s intelligence and surveillance operations agrees. He recently told Jane’s Defence Weekly: “Technologically, we can take [autonomy] pretty far, but it won’t be technology that is the limiting factor, it will be policy.” The Air Force’s chief scientist, Mark Maybury, points out that there will be an almost infinite combination of contingencies facing drones. Designing systems that ensure they respond in a safe and effective way may take a decade or more. Evangelists for drones concur that even when there is no longer “a man in the loop” piloting a UAS directly, it will still probably be necessary to have humans “on the loop” monitoring and intervening.

The ethical problems do not end there. There may be nothing in the laws of war saying combatants must be willing to put themselves in harm’s way, but some find creepy the idea of a UAS pilot stationed in Nevada driving home for supper with the family a few hours after surgically killing dozens of people in Pakistan. The peculiar detachment of drone warfare has given people close to the receiving end of drone attacks some success in depicting America’s use of them as the cowardly action of a bully sheltering behind superior technology. Looking farther ahead, there are fears that UAS and other robotised killing machines will so lower the political threshold for fighting that an essential element of restraint will be removed.

These kinds of caveats aside, the trend of high tech war has been extending to lessening risk for the high tech party in its war against the lower tech foe; the increasing accuracy of pin-point strikes; the asymmetrical 'whup' combat model that has come in where a great disparity in firepower and capability are seen. If the UAS system isn't a manifestation of exactly those trends, it's hard to think of what is more so.

Further to that is the lower cost of training a drone team compared to a combat aviator and then the readily available talent thanks to computer games and you begin to see a picture where he Top Gun model of combat aviators going into battle in the skies is firmly the thing of the past. History is marching right by the F-35 development. It is well worth asking if our government should be paying money for this expensive turkey.

Kodak Goes To The Wall?

When A Monopoly Isn't Enough

This has nothing to do with the GFC, but all the same Eastman Kodak has just appointed a bankruptcy law firm.

Eastman Kodak says it has no intention of filing for bankruptcy. Shares of the money losing company are recovering Monday after plummeting 54% on Friday on news that it hired law firm Jones Day - known as bankruptcy and restructuring experts.

Whether or not they go under, Kodak is a long suffering American icon. The company has not made a profit since 2007 and revenues has dwindled for the last decade. In 2004, the company was removed from the Dow Jones Industrial Average after 74 years on the blue chip index. In 2010, it was removed from the S&P 500.

Kodak, the maker of photography film for well over a century, once enjoyed 80% market share for film. The firm first started its decline in the 1980's when Japanese competitors like Fuji film took business with lower prices. In fact, as Peter Cohan writes in a recent Forbes column, stiff competition caused Kodak to lay off 19,900 workers in 1999. Another, 4,500 workers were let go in January 2009.

More than cheap film, the emergence of digital photography is what really killed Kodak's business. Ironically, Kodak invented digital photography back in 1975. Unfortunately, for them, they have not been able to leverage the technology in a profitable way. Memory cards simply don't offer the same kind of margins as film. Today, when people snap away on their smart-phones and post the pics to the Internet, there's no money to be made for Kodak.

It's interesting listening to the commentary in the accompanying video where they bury Eastman Kodak as being un-innovative and reluctant to change. The problem for Kodak is possibly that it got overly identified with its film product, and even when it went to the market with digital cameras, it had no branding power to fight camera companies that stole its thunder. All the same, all the Hollywood movies of the last 100 years were shot on one or another Eastman Kodak stock. Name a film and there's a cinematographer who can tell you exactly which stock was used to shoot that movie. And all those great cinematographers are deathly loyal to film. They poo-poo shooting digital like it's trying to create art with crayons instead of oil paints. The end of film is still a long way away in their minds.

So it's a little surprising to see that somehow Kodak could not sustain itself outside of the film industry. Or perhaps it spent too much energy servicing the film industry and not enough in staying afloat in the consumer sphere. It's not a company that isn't iconic that's getting lost in the fray - on the contrary, it's the flagship firm of its industry where everybody knows the yellow corporate colour. It's not company that is without a great deal of good will from its customers. Old school photographers and cinematographers alike delight in telling you how much they like film. Yet it is also surprising that a company that has a virtual monopoly on film with cinema can't survive somehow. I guess that much of it is the sign of the times.

Oddly enough I still have some rolls of Kodak sitting in my room without a real reason to use them. I do so much digital photography I'd simply forgotten about those little rolls of 400 film. It would be weird if film disappeared from the supermarket shelves in the coming months.

The Fall Of The Planet Of The Greedy Apes

They're Fighting In The Streets

There's a simple explanation for why the popular front of the 1960s gave way to a lethargic 1970s, and it is basically that the Baby Boomers who got motivated enough to go to the barricades got bought off. They got bought off with what turns out to be cheap credit, which, as it turns out has made a mountain of debt that we collectively cannot afford to repay. So, this time, it is Gen X and Gen Y taking to the streets because basically, not only can Gen X and Gen Y not pay for their debts, they feel they can't be asked to pay for the debts of the Baby Boomers. And that, in a nutshell is how we got to the GFC and its aftermath.

When I paint this broadly, I don't mean to say every Baby Boomer is equally to blame. It's just that demographically speaking, this is how the financial crisis has shaken out. And the rich got richer and to add insult to injury, they got taxed less and all that went hand in hand with the buying out process. So demographically speaking, the Baby Boomers had a good ride of it, putting it all on the big demographic credit card, and the whole system was workable as long as they stayed working. However now that they're retiring, they can't all ride off into the sunset without paying it off. In turn, the battles they didn't finish are now going to be fought in the streets by Gen X and Gen Y because they will say they'll be damned if they're going  to pay for Baby Boomer debts as well as their own.

I've had a brief e-conversation with a friend who is in the financial sector over in Hong Kong, and he doesn't see a bright future. He says it's going to be a bloodbath and that it's going to be like 'The Rise Of The Planet Of The Apes' except without the hairy apes. When I asked him why, he basically said that the global economy is too linked together, and there's really no stopping the knock on effect. He says there will be riots in the streets like the one in London, the world over. We should all enjoy our lives while we can because this is all going to end in a literal bloodbath, he reckons. It seems drastic, but lately I've been thinking that if indeed there is more debt issued than there is money going around and accounted for, then when everybody decides to call their debts in, in one big avalanche of debts being called in, people are going to go out backwards. Worse than that, whole chunks of the economy are going to cease to function because banks are going to be forced to repossess everything, and then fire everybody in a bid to survive. Everybody will run on the banks. Whole currencies will lose value over night.

Every business would be forced to pay up, or go to the wall or get repossessed. Everybody with a mortgage? Tough, the bank's going to seize what you have. Everybody with a credit card? The banks going to cancel it, and seize money from your savings to cover the gap. If you have savings, they'll tax it out of your pockets because the government won't be able to pay its debts. If you have stocks, they'll keep going down because all those companies have some form of debt. Property bubble? Watch what happens when the whole thing starts contracting. In other words, the endgame is going to provoke a lot of anger and rioting.

They're going to riot harder in Greece because if all those austerity cuts go ahead, they're not going to have a country left. The government will be force to privatise everything - electricity- rail, ports, you name it. And if the so-called contagion hits Portugal and Spain, well, they'll have to do the same, and they're already rallying in Portugal. In New York, they've just arrested 700 people over demonstrations against Wall Street. It would only take a Trotsky to organise a mob like that and you have the seeds of a 1905 style revolution. Make no mistake, there will be more rioting in the streets before all of this is said and done.

But back to what some people have been telling me is this: Not even all the austerity measures are going to be enough to pay for these sovereign debts. And this means there will be a default, and when the default happens, there will be banks failing. When that happens, it might be enough to trigger the rest of the avalanche of debts being called in at once. That pain is going to go all the way around the world, and everybody is going to feel it. I'm looking at 700 arrests in New York City, and I'm thinking out loud what happens when that turns in to 7,000 and 70,000? And what happens when New York City can no longer pay their police? Will the police still turn up to arrest these people? If you were a fat cat Wall Street type, you might want to think of an exit strategy. The problem is, there's no where on the planet you can run to. Maybe they know this already. And my friend in Hong Kong would tell you, this is all on the cards, all on the table, right now.

China In The Spotlight

More Than Reading Tea Leaves

Okay, non-movie related entry today. Sorry guys, but this stuff keeps being so interesting, so bear with me.

Time Magazine had this article today, pondering the likelihood of China being able to help out Europe as the global financial crisis part 2 unfolds.

China certainly has the cash on hand ($3 trillion in foreign exchange reserves) to make a difference. It also seemingly has a strong interest in keeping global markets afloat. But that wasn't the take I got at a lunch this week in Hong Kong with a regional banker, an economist, and a Hong Kong politician.

For one thing, frugal Chinese citizens aren't keen on spending their country's savings to bail out profligate Europeans, they said. Beijing is already under enough pressure to spend more of its export cash on its own people. The government and China's sovereign wealth funds also aren't sold on the idea. That's partly because China doesn't feel as vulnerable to Europe's debt crisis as we might think.

That sounds oddly familiar. For one thing, the Germans don't want to spend the money to bail out the profligate Greeks but in their instance it can be argued that they should seeing that the Euro actually keeps Germany sheltered from a much more fluctuating and volatile currency. Some have done the sums and think that a re-issued Deutschmark would appreciate 30% above where the Germans are trading, putting a massive dent in their exports.  So an argument can be made that the lazy Greeks are in part keeping the Germans in business, even if they owe too much money.

Furthermore, there's this interesting article here.

The concerns about Europe's banks have been simmering in the background for some time. Economists have warned that at the core of the euro zone crisis is an unstable support system: Poorly capitalized banks were holding up poorly financed governments, which in turn were expected to back the poorly capitalized banks. As the sovereign debt crisis has escalated, sucking in giant Italy, those fears have only inched closer to becoming reality. Many influential voices have proclaimed that Europe's banks just don't' have the level of capital necessary to withstand a one-two punch of slowing growth and widening debt crisis. They could end up taking a massive smack from losses on their holdings of European sovereign debt.

Right. And when the European banks start really failing, what is that going to do to Europe which is China's great export market? Hot on the heels of that article is this article here in Yahoo7.

"Everyone is getting more concerned about risks accumulating domestically (in China)" said Ju Wang, a fixed income strategist at Barclays Capital in Singapore.

The implications for Australia are huge. Although BHP Billiton and Rio Tinto have both issued bullish statements about demand from China for our natural resources booming for at least another decade, experts say that producers such as our miners are often the last to know when demand from customers falls off a cliff.

If China's property market continues to fall, building will stop abruptly and demand for Australian iron ore will plummet because most of our goods go towards building China's infrastructure.

"This is certainly a big issue and one we cannot afford to be complacent about" said Shane Oliver, chief economist at AMP Capital.

"The biggest concern are the loans from outside the banking sector that fuelled the property boom. But there are risks across the economy and it could have a big impact on our exports. China needs to look at loosening monetary policy sooner rather than later to help stop so many investors borrowing from unregulated lenders."

In other words, China actually needs Europe to sort out this Greek sovereign debt mess because if it doesn't, it has as much to lose in the ensuing global recession. One can't say with any confidence that wise heads will prevail in the Euro debate or the US policy debate, let alone who-know-what that passes for policy setting in Beijing. So strap yourselves in for the double-dip recession and hope like hell it doesn't devolve in to wars and destroy the world.

The Dark Crystal Ball Says...

This one is from Pleiades, and everybody who is vaguely interested in where things are likely to go should have a read of it.

Unless Germany moves quickly to reverse its current account surplus – which is very unlikely – the European crisis will force a sharp balance-of-trade adjustment onto Germany, which will cause its economy to slow sharply and even to contract. By 2015-16 German economic performance will be much worse than that of France and the UK.
If Germany does not take radical steps to push its current account surplus into deficit, the brunt of the European adjustment will fall on the deficit countries with a sharp decrease in domestic demand. This is what the world means when it insists that these countries “tighten their belts”.

If the deficit countries of Europe do not intervene in trade, they will bear the full employment impact of that drop in demand – i.e. unemployment will continue to rise. If they do intervene, they will force the brunt of the adjustment onto Germany and Germany will suffer the employment consequences.

For one or two years the deficit countries will try to bear the full brunt of the adjustment while Germany scolds and cajoles from the side. Eventually they will be unable politically to accept the necessary high unemployment and they will intervene in trade – almost certainly by abandoning the euro and devaluing. In that case they automatically push the brunt of the adjustment onto the surplus countries, i.e. Germany, and German unemployment will rise. I don’t know how soon this will happen, but remember that in global demand contractions it is the surplus countries who always suffer the most. I don’t see why this time will be any different.

About a week after I set down these “predictions”, and two days after I finished this point, I saw in the Financial Times that German growth has already hit a wall. Expect to see a lot more articles like this over the next few years.

The rest of the article makes for fascinating reading.

I was thinking the other day that there is far more debt than there is money in the economies all combined. So at some point somebody is going to be stuck with the un-payable debt, and that will lead to all kinds of conflict. There's really nowhere to run in the markets or even outside of it. The money you hold might evaporate in policy-led inflation; the assets you hold might devalue severely. The governments you vote in might have to tax you harder than you thought. And none of this would add up to what would be enough.

Ultimately we're going to end up like Argentina in the late 1990s. You wouldn't be able to insure anything because insurance companies will die back. All those Woody Allen jokes about insurance salesmen will sound quaint on that day. It's all in the cards. We live in interesting times, that's for sure.