Quick Shots - 02/Jul/2016

It's Freakin' Election Day

For a long campaign, it sure creeps up on you when you're doing your best to ignore it.
The pollsters are calling it 50-50 which usually means they don't know what they're talking about and there's about to be a massive swing. Or maybe they're right. Short theALP winning, it would actually be kind of fun to see if we get a hung parliament. Yes, that re-run would be fun too, and well deserved. See if Malcolm Turnbull can stick to his guns and say he won't form an extended coalition with the cross bench seats.

With 27% of those polled saying they haven't decided but they're likely to vote for  minor party, this is anybody's guess as to which way it will swing, let alone prognosticate by how much. Truly, there is no justice when it comes to elections so I'm just going to sit back and watch the carnage unfold. 2013 sucked so much I'm sort of possessed by schadenfreude. Secretly, I wish they all suffer - but they can't because somebody has to win.

Grunwald

I am researching the battle of Grunwald. It's the second last major engagement in the Crusades, and has the dubious distinction of pitting the Teutonic Knights against a coalition of Polish knights, Lithuanian light cavalry and some Tartars. The Poles were presumably Catholic at this point in time, and the Lithuanians were recent converts as well so, it was a kind of all-Catholic slugfest. As Crusade battles go, it is one of the less edifying moments. There is no Saladin or Richard the Lion Heart. Instead the leading characters are decidedly petty and perhaps a little personality disordered.  This is not a grand moment in the history of Crusades; it's more a lingering footnote, a cul de sac in history given that the Teutonic order, Lithuania and Poland all edged back from being big players after this battle.

The Teutonic Knights aren't exactly great protagonists. If anything they have the air of a psychotic cult, hellbent on conquering lands. A sort of an early version of the SS to come. Perhaps the SS even modelled themselves after the naked fanaticism and over-the-top brutality. If Crusade stories are told from the 'christian' side with the blessings of the Pope, then these would be your protagonists. It's kind of strange because the northern reaches of Central Europe don't exactly lend themselves to the Crusade project of taking and obtaining Jerusalem. But I guess heathens are everywhere if you look hard enough. The through the lens of religious fanaticism.

If of course you look at this battle from the point of view of the Poles and Lithuanians, this is the great defence of their motherland from the psycho cult Teutonic Knights. The reason I'm looking into this at all is because the battle of Grunwald represents the high watermark of the Grand Duchy of Lithuania. The Lithuanians see this as their moment in history. They may be right.

The battle of Grunwald took place in 1410. The nuts and bolts of it aside, basically the Poles lured the Teutonic Knights into a battlefield of their choosing. The Lithuanians attacked first with their light cavalry and they were beaten back badly. They eventually regrouped to re-join the fray. By that point the Polish Knights had beaten the Teutonic Knights back to their lines. The Teutonic Knights eventually lost their leader and were routed.

The way the Lithuanians see it, they carried the day with their daring strategy of leaving the battlefield and then coming back. Something they allegedly learned in an earlier war. The way the Poles see it, the Lithuanians turned and fled, only to come back at the end so as not to be complete losers. As you can see , it's hard to draw a completely positive picture of the Lithuanian contribution to the battle. As for the Teutonic Knights, they never really recovered after this loss.

After the battle of Grunwald, there was the battle of Varna in 1444, followed by the fall of Constantinople in 1453. After the fall of Constantinople, the crusaders lost a vital way point on the way tot he Levant. Instead of sending more troops to the Levant, Europe then spent a good deal of time fending off the advancing Turks.
I won't go into the historic irony of the Turks now wanting to join the EU.

Speaking of which...

The Brexit Call We Don't See

I was chatting online with Somebody who voted for 'leave'. He's an educated guy; not necessarily a conservative; and not like some rabid xenophobe. His position was that the Euro project itself was in most part faulty, and therefore doomed to fail. Not only was Brussels faulty as a political organ, the entire Euro project had too many contradictions even before the GFC. Since the GFC, the Euro Zone has been - according to him - patching over the glaring problems, the most problematic of which is Greece and its debt problem. On a plain ledger, if Germany runs a surplus and Greece runs a deficit, Greece has to pay back Germany even though Greece really hasn't the means to do so. If Germany runs a surplus, it effectively constricts growth not just in Germany but also right across the Euro Zone. Yet there is no recourse for Greece or for that matter any other country.

According to him, Germany makes a lot of money exporting stuff it makes at a cheaper price that if they were doing it with Deutsche Marks. Gemran exports are competitive because the Euro currency depresses the price of Germany's exports - This depression of price happens because the entire Euro averages out all the productivity of its member states. Thus Germany clearly benefits from Greece being much less productive. Yet Germany is extra reluctant to share its spoils from this interaction. Why should Greece stick around to be punished by Germany at both ends of the ledger? And if that's the case, what other states are losing out?

He figures the UK is similarly losing out to France and Germany; which is a claim I don't quite get. He argues the Euro project is a house on fire and Brexit is merely the UK getting out of the burning building first. The Scots are crazy for wanting to run back into the burning building. It makes some kind of internal sense. It's not like the handling of Greece made the EU look good or accepting compromise.

Quick Shots - 26/Apr/2016

Endless Summer To Go Into May

This is worrying.

Sydney's abnormally warm autumn will extend well into May, with unusually dry conditions inland creating late-season heat records across large parts of Australia in play. 

The city has had just two days this months with maximums below the long-term average of 22.4 degrees, and most days in the coming week will be several degrees warmer than that. 

With a warm start to May, temperatures will creep up to the mid-20s early next week – 30 degrees is possible in western suburbs. 

"We're still missing the significant cold fronts that are normally due this time of the year," said Brett Dutschke, senior meteorologist with Weatherzone.

There's already a big pile of worrisome things to do with Global Warming so adding this on to the list of evidence is no big addition, but that in of itself is a worry because it means we've become inured to the ever growing pile of evidence indicating anthropogenic climate change is happening.

Overpopulation And Depopulation

Here's something interesting from Zero Hedge. It's a rare article that isn't screaming imminent doom. No, the doom is a bit further off in this article:

Strangely, the world is suffering from two seemingly opposite trends...overpopulation and depopulation in concert. The overpopulation is due to the increased longevity of elderly lifespans vs. depopulation of young populations due to collapsing birthrates. The depopulation is among most under 25yr old populations (except Africa) and among many under 45yr old populations. 

So, the old are living decades longer than a generation ago but their adult children are having far fewer children. The economics of this is a complete game changer and is unlike any time previously in the history of mankind. None of the models ever accounted for a shrinking young population absent income, savings, or job opportunity vs. massive growth in the old with a vast majority reliant on government programs in their generally underfunded retirements (apart from a minority of retirees who are wildly "overfunded"). There are literally hundreds of reasons for the longer lifespans and lower birthrates...but that's for another day. This is simply a look at what is and what is likely to be absent a goal-seeked happy ending. 

In a short yet economically valid manner, every person is a unit of consumption. The greater the number of people and the greater the purchasing power, the greater the growth in consumption. So, if one wanted to gauge economic growth, (growth in consumption driving economic growth), multiply the annual change in population by purchasing power (wages, savings) per capita. Regarding wage growth, I hold wages flat as from a consumption standpoint, wage growth is basically offset by inflation. Of course, there is another lever beyond this which central banks are feverishly torqueing; substituting the lower interest rates of ZIRP and NIRP to boost consumption from a flagging base of population growth. (There is one more boost to consumption, huge increases in social transfer payments primarily among the advanced economies...but while noted, these are a story for another day.)

Anyway, it has interesting graphs and the details make for interesting reading. 

We're Getting French Submarines! 

In a turn for the more interesting, the Coalition Government decided to go with the French submarine tender. 

The commitment to a local build shores up the government's political prospects in South Australia, which were looking shaky amid concerns work could be sent offshore. MPs including senior frontbencher Christopher Pyne faced losing their seats if the Coalition broke a pre-election pledge to build all 12 boats in Adelaide.

But the choice of France is causing ripples with rival bidder Japan, which branded the decision "deeply regrettable" and issued a please explain.

I don't know what to make of all this. 

From an Australian point of view, the government got what it wanted - 12 subs, built in Adelaide, with somebody else's tech. As an essential part of the decision, by picking the French, it stays out of China's bad books - which is spineless whichever way you look at it. 

From the Japanese point of view, it looks weird because Tony Abbott came bounding in wanting to buy the subs, only to be replaced by Malcolm who put it out to competitive tender instead and chose somebody else. It's a bit more mixed because there are voices in Tokyo that didn't want to sell the tech at all, and they'll now look like the more responsible voices. After all, with allies like these, how needs enemies, they'll argue. 

In a weird way, it's good that Australia picked the French because it really means we don't want to fight China, and it's good for Japan to know that Australia can't be relied on for much if it came to a shooting war with China. That being said the Americans will provide the weapons systems for interoperability. They've indicated the French subs are not as good as the Japanese 'Soryu' class subs so they'll be a bit unhappy that Australia deliberately opted to go with the French. 

China is celebrating the French choice as a victory for its diplomats. 

I guess the downside of this 'process' is that Australia was going to piss off two countries either way, but three countries if it picked Japan's tender. Based on this decision it seems Canberra and Tokyo are never really going to see eye to eye about mutual security, and that's bad (as in, I'm not going to write it's "not good" because it's worse than that, it's bad). Malcolm Turnbull was making noises about Japan still being a strategic partner but it's hard to see how he's going to make that statement stick right after he showed that the partnership didn't mean all that much to his government. 

You'd sure hate to be the Australian Ambassador to Japan tonight, trying to explain how the hell a surefire sale turned into a tender and a swing-and-a-miss. There's no spinning "fuck you." 

Quick Shots - 09/Feb/2016

Hard Landing In China - "We Crash, You Die!"

Pleiades sent me an article in the AFR today outlining the retreat of bank shares this year. it's not exactly joyous reading. Pleiades thinks this is the shit hitting the fan. He is probably right.

So far this year, European bank stocks have dropped more than 20 per cent, and this pattern continued overnight, with both Deutsche Bank and Commerzbank shedding more than 7.4 per cent. The shares in three big Greek banks all slumped more than 27 per cent on Monday night. 

At the same time, worries about tighter financial conditions weighed on US bank stocks, with Morgan Stanley dropping 6.4 per cent, while Goldman Sachs falling 4.8 per cent.
At the weekend, China said its foreign exchange reserves dropped nearly $US$100 billion ($141 billion) last month to the lowest level in more than three years as Beijing further sells dollars to prop up the yuan. 

China's foreign exchange reserves now stand at $US3.23 trillion, about 20 per cent below the peak of nearly $US4 trillion reached in mid-2014.

Capital flight out of China is accelerating not slowing down.  There's really no sugarcoating the fact that China is slowing down towards a hard landing. Nobody really manages 'soft landings' but on the scale of measuring just how hard a landing this is going to be, it looks like it's gong to be solidly hard.

Abenomics Is Reaching The End in Japan

The latest news out of Japan with its NIRP (yes, negative interest rates policy) is that Abenomimcs has failed. Stocks, USD/JPY trade and Bond yields have collapsed. Naturally, banks are taking a hammering over in Japan as well. The markets are indicating Abenomics simply is not working.

The market's reaction is getting duller day by day. The negative interest rates boosted the market only for two days," said Norihiro Fujito, senior investment analyst at Mitsubishi UFJ Morgan Stanley Securities, and trading data shows even that was down to short-term "gamblers", he added. 

A week later, even those gains are gone, as foreign investors withdrew a net 207 billion yen from the market, taking their total for 2016 to more than 1 trillion yen. U.S.-based Japanese stock funds also saw an outflow in the week ended Feb 3.

Curiously, the Yen rose against the US dollar, even as foreign investors pulled out of Japanese markets.

So, even if the US is doing much better now, with interest rates going up, two out of three of Australia's trading partners are going through what can only really be described as bad times.

Deutsche Bank is now issuing statements defending its liquidity, which is like a throwback right to the GFC. At this point the scuttlebutt is that DB might be the new Lehmann. This is not surprising because Deutsche Bank is neck deep in derivatives that have gone sour, and for a long time it was speculated that any movement of US interest rates would blow up positions taken by those derivatives and adversely affect Deutsche Bank.

Judging from the headlines, it's clear we've entered a new phase in the repercussions from the GFC. It may just be the point at which all the Quantitative Easing and money printing is now coming back with consequences to roost. The Central Banks can't very well spend even more in an attempt to spend their way out of the woods.

Syria Is The Apocalypse

'Reductio Ad Absurdum' Of State Power

The modern state monopolises power, and with it the capacity for violence. Yes it's true that in the USA there is an ardent belief that their constitution allows citizens to bear arms in order to confront this monopoly of power and violence, but strangely enough the kinds of people who subscribe to this view are also the most likely to support the kind of state power being exercised against minorities. That is to say, we would believe the protestations of the NRA more about the Second Amendment, if they were jumping up and down in support of black people getting shot by the police, and not the police. Still, this entry is not about that topic.

The ultimate state control of monopolised power is the modern military junta. Military juntas exist as proof that a stable state is not necessarily democratic or pleasant. People go on about stability ("vote Tony Abbott for Stability," the SMH said! Ha!) Many military juntas come into being at the end of civil strife, and enforce the military power as policing in order to keep a lid on the civil strife. This is true of Franco as it was of Pinochet, Saddam Hussein's or Bashar Assad's regimes. We in the democratised 'developed' world view these political arrangements with a great deal of contempt, but as the experience of Iraq has demonstrated, there are far worse things than the stability assured by a military junta.

Similarly, Syria is turning out to be the second recent case whereby our own idealism for democracy has brought to an end a stable junta government. In writing that sentence, I am overcome with a cultural revulsion, for I - in no way in hell - support military juntas anywhere on this planet. It is hard for me to write a sentence that even vaguely validates their existence. Yet the historic evidence is pretty clear that some of these juntas are sitting on great fissure lines of civil conflict and once unleashed, the state cannot even survive. This is a terrible state of affairs, where on one extreme you have the Orwellian regime and Room 101 and the torture never stops; and when we remove this horrible state that keeps the populace in a social stasis of uncomfortable peace, we end up with Bosnia and Kosovo, the battle of Fallujah, or the Islamic State which is an attempt to reconstruct a state, but around religious laws instead of common laws.

All of which is to say, military juntas come into being to stave off a slide into complete chaos, but then overstay their welcome as it goes through its own paranoia phase, torturing and killing people to maintain this uncomfortable stability. Again, I'm not writing this in praise of these horrible arrangements; I'm simply pointing out that in the absence of strong democratic credentials and traditions, a military junta ends up being the compromise arrangement to keep civil peace. You have to think of Tito's Yugoslavia as the shining example - but all these nasty regimes exist because of necessity. Nobody likes this stuff. And when they fail, they tend to fail spectacularly as they descend into chaos.

The refugee exodus of Syria isn't just an issue of Assad and his brutal regime or the fact that Vladimir Putin will not give-up his ally facing the Mediterranean Sea. To that end, Putin has now stationed his own warplanes in Syria. In the mean time we have Tony Abbott trying to engineer a 'request' from the President of the USA to enter into bombing runs on ISIL-held positions in Syria. Not only is Tony Abbott exacerbating the problems inside Syria which is already a war-torn post-apocalyptic landscape, he is adding to the reasons for residents to flee as refugees, while risking coming to blows with Russian warplanes. The people are running because civilisation has collapsed around them. Their civilisation collapsed because it was held together by the military might of the state, and then the state wasn't there any more - just the violence. And we want to ad to the violence.

The Syrian Collapse

Syria came to this collapse because of the Arab Spring. The Arab Spring of course was prompted by high commodity prices, which led to staple foods being too expensive to buy. Not even the long-standing regime of Muamar Gaddafi could hold on in the face of the high commodity prices. Similarly, in Egypt, the high commodity prices drove people into the streets to protest and that brought down Mubarak's regime which had stood solid since the assassination of Anwar Sadat. The irony is that the commodity prices surged because oil prices surged, and the oil prices surged because these very same OPEC regimes opted to make a killing out of surging oil prices thereby creating the conditions for their own demise. Oh the irony!

All the same, what is not well known is that Syria underwent a crippling drought between 2006 and 2011. This was such an historic drought that it decimated longstanding farming operations and communities. The drought pushed whole populations into urban areas without any means of survival. And the military junta remained locked in its rigid "maintain-order-at-all-costs" sort of thinking, which made things worse. The historic drought was most likely (nobody ever gets to prove these things) due to Global Warming and Climate Change. Again, these countries that export oil for combustion created the conditions whereby they strangled themselves. Oh the double irony!!

Today, Bashar Assad is in charge of his military, but Syria itself has collapsed as a civilisation. It is every bit like a failed state - much like Somalia, Eritrea, Sudan and on the same trajectory as Iraq and Afghanistan. As Global Warming and Climate Change continue, there will be more and more places that succumb to its effects. There will be more refugees from failed states. The wave of refugees coming from these places are people who want to remain civilised. It's time we accepted this simple fact. We could do much worse than to take in these people.

Syria today therefore offers us a glimpse into the post-apocalyptic future we ought to fear. The fragile, brittle state collapses as result of economic and environmental chaos, there's nowhere to run. We can't go around assuming this is stuff that only happens in far away lands.

How Many Refugees?

Before the recent surge of Syrian refugees, I did a quick search on Google and found that in 2015, the refugee count according to the UN was 60 million people. Out of the 195 or so UN member nations, let's hypothetically say 100 are up to receiving refugees. The other 95 are candidates to send out more, rather than receive, but we'll leave that issue for a moment. I know this is a gross oversimplification, but I want to lead you through this so you understand the scale of numbers. That would make it 600,000 per nation to take in from the refugees that exist right now. If we said the realistic number of nations that are able to take refugees was more like 50, we're talking about 1,200,000 per nation.

That's a big number, but it goes to show that Germany is doing pretty well when Angela Merkel says they will take 800,000 people. It's effectively saying they'll add 1% to their population with refugees. In any case, 800,000 is not entirely out of the order of magnitude that sits between 600,000 and 1,200,000 people.

Australia on the other hand, says it will take 20,000 this year. It's an amazingly paltry figure, really. It's a whole order of magnitude out from the problem as it exists. If it were left to Australia, it would take 60years' worth of refugee visas before it took in its share of 1,200,000. So one wonders just what on earth Peter Dutton is asking "what can Australia do to help?" when the mathematics are very simple - Australia needs to up its refugee intake to about 240,000 before it can claim it's punching its weight.

More to the point, that 1% rise in German population is probably going to add a whole bunch to GDP growth in the coming years. Think about all the new whitegoods and TVs and demand on real estate that will arise out of the arrival of these people. Its not a half-dumb move to be taking these people in. Australia's economy could do a lot worse than adding 240,000 people straight off the plane from Syria.

View From the Couch - 17/Jul/2015

Greek Drama Day 2,190

I've been on holidays for a couple of days so I didn't catch much news. That was sort of the point of the holidays: to get away from it all, and that sort of included this business of blogging stuff.

Anyway... Greece seems to have gone into a political meltdown. First, the Syriza PM Tsipras negotiated for Greece a worse settlement that was on offer for Greece before the 'Greferendum'. somewhere around 30-40 MPs of his side refused to back the deal, but with cross-bench support, Tsipras shepherd the changes Greece had to make, through its Parliament. The only way to understand this turn of events is that Grexit - to the consternation of many - was simply too hard to do and Greece would have plunged into being like an African nation where nobody lends them money and nobody goes there because everything has been looted.

And believe me, everybody will be looting everything the moment Grexit happens and there's not enough of food or medical supplies or oil or cash. There won't be a police force because they won't be able to pay them; and schools will shutdown, infrastructure will shut down. How is the complete and utter capitulation better than that? At least the banks will open again.

You have to understand that the oligarchical rich Greeks who brought about the conditions of Greece to be in the Euro and so much in debt still have lots of money in those banks. All the MPs on the conservative side of politics have that problem - they need the banks to reopen even if only briefly so they can take whatever cash they can and get it out. I know it's a terrible thing to ascribe such a terrible motive to these lawmakers but these are extraordinary times. And let's not forget, conservative lawmakers in any land are the rich, if not the proxies for the rich. They will take any amount of financial pain to their fellow citizen as long as they can keep their rents going; something that's true even in Australia, but that's another story.

All this hollows out the 'Greferndum' as well as underscores why Yanis Varoufakis might have resigned at the point he did. It simply didn't matter what the Greek people - the demos! - wanted. There was no real negotiation, it was simply terms being dictated to Greece by the ECB, EU and to a lesser extent, the IMF. Leading the assault (so to speak) was Angela Merkel who on behalf of Germany essentially gave nothing and got everything. Unfortunately Tsipras now looks like an asshat clown instead of the modern day Themistocles; but all of this might be part of a greater strategy to better engineer a good Grexit rather than a bad one.

Angela Merkel and the northern alliance of countries, banksters and technocrats - the modern day barbaroi - have essentially cited the rule of law as the cornerstone from which they are making their demands and refusing to give any debt relief. Hidden in there somewhere is still the trillions of dollars worth of Greek Bond derivatives that would blow up on a Grexit, so getting this deal done without the haircuts is a great boon for them. It means Germany won't be plunged into the kind of chaos seen on the streets of Athens, and by extension it means the world markets won't be roiled in another GFC so soon after the last one.

Old World Problems

The European Union isn't looking too flash hot these days. Given the choice of kicking out Greece or keeping it and helping it as one of their own, they opted to keep Greece so they can keep kicking it which combines the worst aspect of both options. This does not look good to anybody. Since its inception in the early 90s, the European Union had argue its wide, pan-nationalistic cause against nationalist right wing nutjobs in each and every country. By approaching Greece the way it has for the last 5 years, they've opened up a front to the left as well as to the right, whereby Syriza and Podemos in Spain have now split off to the left of the EU andean demonstrate that the loss sovereignty in the EU project is a major problem for countries with great debt and great unemployment.

Inadvertently, the winningness of Germany on its own has redistributed its low-industrial high-unemployment problem to the PIIGS nations, where they don'thave the control to ameliorate the unemployment being exported out of Germany. All these countries in the advanced, old-world share the problem of not knowing where future growth is going to come from, and so interest rates have fallen to zero, just to keep the economy going and from asset prices from collapsing. In this light, it makes sense that banks become gamblers locked in a zero-sum game (low to no growth) and making money/saving money involves taking it from somebody else (hello Liberal Party of Australia).

The world is running out of growth because there are so few spaces in which to grow. We can chop down all the forests in Amazon and clear out the last remaining wildlife sanctuaries in Africa, but there is not enough space into which the globalised economy can grow. The emerging markets are a higher grower right now, only because they're starting from a lower base. Even their growth will run down, just as it has in China. It's what it means to have a developed economy.

In the absence of a physical frontier, there is only the cyber frontier until space opens up. This explains Google, Amazon, Apple, Microsoft and Facebook, and how Elon Musk is busily building up SpaceX. It should tell you something about where the smart money thinks things are at.

As for Europe, this dynamic is playing out in a new way. Europe will now cannibalise Greece to keep the rest afloat. But it also means the PIIGS are next in line to be cannibalised once Greece descends into the pit of depression. And if the same treatment descends upon the PIIGS, how soon will it become like 1930s Germany where Leftists and Fascists fight in the streets? Or there is a new civil war in Spain? Many of these conflicts now echo older ones, precisely because they're being fought over old settlements that are now being undone in the light of zero growth, ZIRP, and high unemployment. Economic settlements are only as good as the money spent to maintain them. When it becomes cheaper and expedient to let the people starve and fight it in the streets, we'll see some realpolitik and class warfare as a certainty.

News That's Fit To Punt - 08/Jul/2015

The Optimists' Corner

The really funny thing is that when things are going wildly in a bad direction, somebody will come up with a contrary opinion in wildly the opposite direction. It's hard to fathom it, but on a day where the Shanghai index had to suspend trade on 40% of their blue chip firms to stop people trying to squeeze out the door at the same time, Goldman Sachs said that it sees no bubble in the Chinese equity markets.

Goldman Sachs is sticking with its optimistic forecast in the face of record foreign outflows, the biggest-ever selloff by Chinese margin traders and a chorus of bubble warnings from international peers. The call hinges on the success of unprecedented government efforts to revive confidence among individual investors who watched equity values tumble by 3.2 trillion over the past three weeks. 

"It's not in a bubble yet," Lau said in an interview. "China's government has a lot of tools to support the market." 

Lau, who set his CSI 300 target on July 1, confirmed on Tuesday that the projection still stands. He's been forecasting gains in Chinese shares for much of the past year, a stance that paid off as the CSI 300 surged to a seven-year high last month.

Heck, they may be right. Maybe there will be an almighty bounce soon, what with China's government pumping in liquidity, but... there's just this chart here:

...which sort of paints a picture of how these kinds of things don't work out too well. 

Just to be sure, I sort of poked Roger in HK who - as his living - gives investment advice to the stupendously rich in Asia. To which he replied:

The Chinese can't go to the Macau casinos because of govt crackdown on corruption, so the money's gotta go somewhere. It's like one big wet market where you can get leverage financing. Buy10 bananas for the price of one now and pay later? Yeah give me a hundred!

After lunch, he sent back two phrases. The first, as the market opened was, "Meltdown". A few hours later he told me "It's a Bloodbath." I told him to tell his clients to BTFD ("Buy The Fucken Dips"). I only got a smiley-emoticon back. I'm sure Roger's laughing-out-loudly, because that's his natural nervous reaction to anything out of the ordinary.  

The other wildly optimistic article was this one that said there is no housing bubble, Australian property prices were 30% undervalued. 

What has changed since then is that real long-term interest rates have fallen substantially. That fall made housing more attractive relative to renting, despite the increase in prices." 

Dr Tulip and his co-researcher compared the cost of renting and buying identical properties, avoiding the common trap of comparing national average rents with national average prices. Because owned homes are typically "bigger and nicer" than rented homes, a lot of the apparent price difference reflects a quality difference. 

They calculated the annual cost of a bought home from the purchase price, the transaction cost, the expected mortgage rate and the running and depreciation costs offset by expected capital gains. 

The annual cost of owning a home bought in April was likely to be 2.7 per cent of its value. The annual cost of renting the same home was likely to be 3.9 per cent. 

"So you can either pay 2.7 per cent of the value of the property to buy, or you can pay 3.9 per cent of the value to rent," Dr Tulip told the conference.
"The undervaluation is 30 per cent. 

"It's unusually wide, the widest in at least 30 years. I can take you back further but the data quality deteriorates the further we go back.

Ri-i-i-ight. I can follow the maths where 3.9% is 30% over 2.7%. But this is based on TwIRP. I wonder what it would look like under ZIRP - probably even better. Mathematically speaking, the gap would open up even wider as interest rates asymptotically reached towards Zero. While mathematically being true, you sort of wonder whether the real world economics would reflect such calculations. When we get down to ZIRP, we may no longer have banks that are willing to lend to people wanting to buy multimillion dollar homes as their first homes, given that the economy is at a zero-sum game. 

Anyway, I just thought you'd be amused by those two wildly optimistic views of what we are looking at: a market crash in China and a property bubble in Australia.

The 'Greferendum', Revisited

Walk-off HBP thinks this one's a bit alarmist, but it contains some really interesting information that is a little disturbing. 

Greek premier Alexis Tsipras never expected to win Sunday's referendum on EMU bail-out terms, let alone to preside over a blazing national revolt against foreign control.

He called the snap vote with the expectation - and intention - of losing it. The plan was to put up a good fight, accept honourable defeat, and hand over the keys of the Maximos Mansion, leaving it to others to implement the June 25 "ultimatum" and suffer the opprobrium.

This ultimatum came as a shock to the Greek cabinet. They thought they were on the cusp of a deal, bad though it was. Mr Tsipras had already made the decision to acquiesce to austerity demands, recognizing that Syriza had failed to bring about a debtors' cartel of southern EMU states and had seriously misjudged the mood across the eurozone.

Instead they were confronted with a text from the creditors that upped the ante, demanding a rise in VAT on tourist hotels from 7pc (de facto) to 23pc at a single stroke.

Creditors insisted on further pension cuts of 1pc of GDP by next year and a phase out of welfare assistance (EKAS) for poorer pensioners, even though pensions have already been cut by 44pc.

They insisted on fiscal tightening equal to 2pc of GDP in an economy reeling from six years of depression and devastating hysteresis. They offered no debt relief. The Europeans intervened behind the scenes to suppress a report by the International Monetary Fund validating Greece's claim that its debt is "unsustainable". The IMF concluded that the country not only needs a 30pc haircut to restore viability, but also €52bn of fresh money to claw its way out of crisis.
They rejected Greek plans to work with the OECD on market reforms, and with the International Labour Organisation on collective bargaining laws. They stuck rigidly to their script, refusing to recognise in any way that their own Dickensian prescriptions have been discredited by economists from across the world.

"They just didn't want us to sign. They had already decided to push us out," said the now-departed finance minister Yanis Varoufakis.

So Syriza called the referendum. To their consternation, they won, igniting the great Greek revolt of 2015, the moment when the people finally issued a primal scream, daubed their war paint, and formed the hoplite phalanx.

Mr Tsipras is now trapped by his success. "The referendum has its own dynamic. People will revolt if he comes back from Brussels with a shoddy compromise," said Costas Lapavitsas, a Syriza MP.

"Tsipras doesn't want to take the path of Grexit, but I think he realizes that this is now what lies straight ahead of him," he said.

Holy cow. So basically, the Euro creditors do want a Grexit, and sent terms that would be rejected by Greece and stuck to their guns. Tsipras didn't want to go to a Grexit so when he called a referendum, he was hoping to 'lose' to a 'yes' vote and use that as a catalyst to take Syriza out of government and the ongoing non-negotiations. But of course, the 'No' vote won which meant that Tsipras wasn't able to get his ticket to get out of the ongoing non-negotiations and had to head back. This explains Varoufakis' exit better, and how on Monday a new Finance Minister arrived Brussels without a plan. Yep. The Greek cabinet war gamed the Grexit and didn't like what they saw, so they tried to get back to Brussels with a white flag, but of course, there can't be a plan because they didn't expect the 'No' vote to win so resoundingly. 

Knowing all this now makes me more frightened. Thanks to both Greece and China, commodities have tanked as has the AUD. We may well not notice it immediately, but our balance of payments got worse by default in Australia. All this stuffs made us collectively poorer, and it's just the beginning. Economists are now readjusting the RBA outlook, thinking there's more than likely a interest rate cut coming. If it does, well, so much for TwIRP. 

News That's Fit To Punt - 01/Feb/2012

Citizen Rinehart

The richest woman in Australia, Gina Rinehart has set her mind on buying into Fairfax, the company that owns the Sydney Morning Herald, and the Age, amongst other mastheads. The response coming out of the Fairfax stables has been interesting.

Here's Michael West:

The Murdoch press is already favourably disposed to the Minerals Council view of the world while Rinehart's politics are said to be strenuously ideological in the fashion of her late father Lang Hancock. Rinehart control of the Fairfax mastheads could have a dramatic influence on politics in this country.
Any tussle, then, for the venerable Fairfax mastheads would entail not just economic considerations, but community and political issues too. These issues would play into the hands of the institutional shareholders who would no doubt demand recompense for parting with the major mastheads and the effect this could have on the attendant Fairfax transactional businesses, which feed off the enormous online traffic.

Apart from matters of price, then, there would be much focus on the likely direction of Fairfax editorial. And some ideas from Lang Hancock in his book, Wake Up Australia, provide some hints, such as how "we can change the situation so as to limit the power of government".

"It could be broken by obtaining control of the media and then educating the public," he wrote.

There were several ideas on how to gain control of the press. One was for Australian retailers to refuse "to give advertisements to any paper which did not support a change in the constitution to reduce government to an absolute minimum".

"Control of the press could also be obtained by several of the big mining groups banding together with a view to taking over one or more of the present giant newspaper chains which control the TV and radio channels, and converting them to the path of 'free enterprise'," he said.

That's pretty sobering. the SMH might be transformed into a broadsheet with even sillier, shallower, more fascist tendencies than a Murdoch rag. I think it would be the end of public discourse in Sydney.

Here's a link to what politicians think:

Political reaction to the news of mining billionaire Gina Rinehart's increased stake in Fairfax Media has been mixed with Opposition treasury spokesman Joe Hockey saying he is "comfortable" with the move.

But the Australian Greens have described the trend towards a handful of individuals owning swathes of the media as "dangerous".

Communications spokesman Scott Ludlam says concentrated media ownership by individuals means Australia is unhealthy for democracy.

Senator Ludlam says the national laws against concentration of ownership in the media are now far too weak after being "gutted by the Howard government".

The Greens Senator claimed Ms Rinehart has "indicated a desire to have more influence over national affairs" and that she had "campaigned against Labor's mining tax to protect her own commercial interests."

Interesting how Joe Hockey is merely comfortable. You'd think he'd jump up and down with joy at the thought that a right wing nutjob is trying to seize editorial control of the SMH.

For the record, this is Gina Rinehart's view on several subjects:

Mining tax:
"[The Minerals Resource Rent tax] damages investor confidence and renders formally attractive and value-adding projects less viable".
"One of the issues that needs to be tackled is the cost, risk and time lost on approvals, permits and licences before revenue can be earned, [which] has very greatly increased in Australia, making it almost impossible for small companies to carry and comply with such burdens," Mrs Rinehart said.
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"If our costs get out of kilter through excessive taxation or excessive regulation on top of our other high costs we already have, this is just making it more difficult."
Carbon tax:
"We must drop these taxes or we risk the bureaucracy becoming the only growth industry in Australia."
"After this unnecessary shock to investment and exploration the carbon tax (and MRRT) is causing, we should also demand from our politicians that they introduce legislation that requires a majority by referendum before they can introduce any new taxes or tax increases."

God help us all from this woman's political views.

Anyway, I note all this because it was interesting how the SMH kept spitting out bits and pieces about Rinehart today as the story unfolded. It ain't over 'til the fat lady sings and at the moment she's busy buying up shares.

Between An Angry Devil And A Poison Deep Blue Sea

It just gets worse and worse over in Greece and by extension, Europe.

All leaders of the euro zone are insisting that forcing private creditors to take a hit on Greek bonds constitutes a “unique” event, for fear of causing contagion. But spreads on Portuguese bonds are rising to alarming levels, and the outlook for Italy and Spain is still wobbly.

“An inability to tackle a problem the size of Greece inspires little confidence in the ability of the EU to tackle Italy and Spain,” says Sony Kapoor, head of Re-Define, a financial think-tank in Brussels.

Germany parried demands, from Mr Monti and others, to enlarge the firewall by merging the existing temporary European Financial Stability Facility (EFSF) and the permanent new European Stability Mechanism (ESM). This would enlarge the fund from €500 billion ($659 billion) to €750 billion. Mrs Merkel said the matter should be discussed in March, as decided in last December’s summit.

March, says Angela Merkel. The Economist suggests the investors should take more losses.

What is the best way out of this mess? Step one is to force private bondholders to take more losses. They have been treated with kid gloves so far because European governments insist the debt deal must be voluntary, thanks in part to a misplaced fear of triggering credit-default swaps. That must change. Discard the veneer of voluntarism and Greece can be tougher on its creditors. It should pass a law that retroactively introduces collective-action clauses into all domestic-debt contracts (making it easier to impose debt deals on recalcitrant bondholders). If it does this now there is still, just, enough time to organise a big, coercive, but orderly, restructuring of Greek bonds by March 20th.

So mark that date down as the date hell will break loose on the markets again. 20th March.

While I'm at it I think it's worth linking to this little thing from Boris Johnson.

Now in the old days, before the euro, there was a simple solution that allowed the Italians to keep producing cars of the same quality and to keep unit costs down. It was devaluation, and if you look at the postwar career of the lira (and just about every European currency) against the Deutschmark, you can see how it worked. As the mark appreciated, it was more expensive for Italians to buy a German car; and as the Italian currency fell, Italian cars remained a good buy in Germany. The tragedy now is that this option is closed off for the euro-zone members - and look at the Italian car industry.

Manufacturers can no longer use the lira to compete on price, and they are being utterly stuffed. Italian car sales fell 15.3 per cent in December, while sales of German cars grew 8.8 per cent. The Italians now produce fewer cars than the British do, and their markets are being relentlessly gobbled by Audis and Beemers and other beautifully engineered machines from Germany.

It is worth pointing out again that the Germans get a great deal out of the Euro for being the Euro in that it lowers the prices of their exports significantly; which is exactly why Angela Merkel is running around trying to save the Euro because the Germans stand to lose a lot if and when the Euro breaks up and they have to reissue the Deutsche Mark, and it appreciates like the Yen and suddenly nobody on the planet can afford German products except "the 1%". It might be cheaper to buy all of Greece than to keep haggling over its debt.

Property Bubble Babble

I know this blog has gone in weird directions at time in pursuit of interesting tidbits to do with the GFC, and I have to say one of the weirder aspects of the GFC has been the sustained property bubble in Australia. It's so weird, people are used to this bubble but as I pointed out yesterday, there's no real reason for Australia's real estate to be so much more pricier than other parts of the world. yes, it's really nice here in parts, but so are Greek Island Villas that come in cheaper than some flats in long-established suburbs in Sydney.

Anyway, I got this link from Skarp today which points out 4 reasons why there is a bubble going on, tangential to what the other fellow Professor Steve Keene says. Embedded in it is this link here, which is sort of prequel to the other link. The take away message is that it wasn't the non-recourse lending in America that led to the subprime problem, it was the extreme lending. Housing prices don't always go up, and in the long view of history, any tie that it does is an anomaly. There is no housing shortage as claimed by the peak bodies, and Australian banks have not lent conservatively as claimed, which feeds back into the recourse lending argument.

I do want  to point to this bit:

Rational discussion about the state of the property market is fraught. Many outspoken bubble deniers are conflicted by their interests in industry and government. Many – not all – are employed by, consult for, manage, and/or own organisations with a direct interest in maintaining the status quo of an overvalued property (land) market. These institutions are primarily commercial lenders, investment banks, real estate intelligence firms, insurance, real estate agents, Treasury, the RBA, vote-seeking politicians, and the mass media.

Skilled and intelligent specialists, trained in neoclassical economics in leading US institutions, did not see their enormous housing bubble until it burst in front of them with horrendous consequences. What makes Australia’s “experts” any more competent?

As investor Jeremy Grantham has noted: “Bubbles have quite a few things in common but housing bubbles have a spectacular thing in common, and that is every one of them is considered unique and different."

All this is to say it's worth looking at the Australian housing market with a good deal of scepticism. Even if prices don't collapse, it's hard to make a case that it's going to keep going up. If I were an investor, I'd be looking at another asset class.

Dreaming Of Greek Island Villas

Different Spin

Just a weird, weird thought for today. Would you move to Greece?

I don't know if you've ever looked, but today Mrs. Pleiades showed me a bunch of photos of Real Estate available in Greek Islands. Hey, I'm no millionaire or anything, but you can dream. What caught my eye was the price tags on some of these gorgeous places. Take this one here in Ithaca, home of Odysseus. Or this seaside villa for 850k Euros. How about this 270k Euro cottage in Corfu? They're absolutely beautiful places. I know Greece is in a lot of turmoil but consider this for a moment. If you had a bit of money and you could own one of these sorts of places, and wouldn't starve and had all the amenities of a good life available, would it really matter to you that the Greek government is insolvent?

Apparently wealthy Germans flock to the Greek Islands.  guess it's their equivalent of the Gold Coast. You can see why. So it is hard not to imagine that the Germans get something out of Greece being a member of the European Union and by extension, a member of the Euro.

I've been pondering this tangle of facts all afternoon. People are busting a gut buying a 2 bedroom flat in Sydney. For the same money, you could theoretically buy an amazing piece on some Greek Island and just stare at the beauty all day and all night. Okay, I know you'd need some cashflow but the point is how good is a 2 bedroom flat in Chatswood or Pyrmont, let's say, compared to a villa on a Greek Island? If you need evidence that the Greeks really are in trouble, this has to be it; and in turn if there's any evidence that Australian property is way, way overpriced, then this must be it.

But it cuts in all sorts of different ways. Imagine being a poor Greek person. If all this was around you and you couldn't buy in because foreigners came all the time to buy it out, why the hell would you stay? No wonder they like the European union where they can get to work anywhere. If they got kicked out of the Euro zone, they would still have their real estate bought up by foreigners, but they would lose that freedom to go work anywhere in the Eurozone. No wonder the polls in Greece say they don't want to quit the Eurozone.

It would be a shame if the Euro were to implode as a result of all the debt woes and bad faith negotiations. The fall out from that is going to be awful. But maybe all those Island properties would become even more affordable - then what are you going to do? :)

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.

Come And See

Been A Long Time

Back in the day, one of the most traumatic films you could watch about the experience of World War II was 'Come And See' directed by Elim Klimov. This wasn't just any movie about the war, this was a film so graphic in its portrayal of the Einsatzgruppen - the SS paramilitary death squads - and their hideous modus operandi during their campaign in Byelorussia.

The first time I even heard about this film was in the late 1980s when a friend of the family told me about with much excitement. He described to me the climactic montage, which hardly made any sense because I don't think he understood what he was trying to describe, but it sounded really good. Later on, when i finally saw it, I understood it as well as the shear intellectual excitement of the family friend who just had to tell me all about it.

The film has a way of staying with you forever and for a long time I've wanted to get hold of this film on DVD so I can just watch it again and digest it; see if it matches up to the way I remember it.

What's Good About It

My old film school Screen Analysis teacher used to like talking about misc en scene and sense of place. Well, this film is dripping with a sense of what Byelorussia is like and the sorts of life they had in the 1940s as the Germans came in. As a Soviet era film, the film works through some interesting technical moves as well as a dialectical montage towards the end.

There is plenty of good old social realism to go around as we survey the Byelorussian village and roll around in the mud and laves, dance in the rain, as well as wade through the bog with the main character. The film conveys a fantastic tactile quality with the images on the screen, which later on turn to freak you out. It's got good directing and cinematography and you're never at a loss to understand the situation.

In one sense, the film remains a high watermark of films made under the auspices of the old Soviet regime even while Klimov may have struggled greatly in convincing the Soviet powers-that-be to let him make the film. It's an immensely ideological work as well as a very prosaically - almost pedantic - film that sets out to show what the Einsatzgruppen operation would have looked like. Put it this way, it's nothing like an American movie. This thing was not made to entertain you. It was meant to seer into your very consciousness the frightening terror and horror of the war on the Eastern Front.

What's Bad About It

It's been a long time since I've seen this film and I've possibly had too much time to digest the film. Watching it on DVD for the second time in my life had nowhere near the impact as seeing it the first time. Oddly enough there were whole sequences in the film that I'd forgotten about towards the beginning that are really tedious scenes to set up the central action of a boy going to war.

I probably shouldn't say it's bad as such but in the this viewing, I felt tedium. This is bad. Or maybe I'm just craving for more action on screen, but at the core of it I think Klimov is disinterested in what interests the audience, but very interested in what interests him. This results in a film whose emotional arc is so jagged that the crucially traumatic scene seems to pass over the main character early on all the while leading on to the church burning. It's an odd choice as to what Klimov wants to show up close and what he chooses to only glance at.

It's also not clear what happens to Glisha, the girl. I wasn't sure that the victim of mass rape actually was Glisha or the young mother who escaped from the church, leaving behind her child and then carted off on a "pack rape truck". The screenwriter in me sort of went, "hang a minute, what is this denouement?" The director in me actually went, "hang a minute, this is worth establishing, if you're going to be so prosaic about he rest of the war crime activity?"

What's Interesting About It

Quite by coincidence I saw this article in the Economist. If you scroll to the bottom of the page you'll see a spirited exchange of opinions as to whether Russia could have beaten NAZI Germany on its own.

I have no doubt that what the Russians endured in fighting NAZI Germany was much worse than anything else her allies had to live through. That's just the fact of it. The Einsatzgruppen didn't exactly tour an occupied New York or Washington DC, hunting for Jews and Romani and commissars. The film paints a fairly stark portrait of that very struggle by partisans facing off against the might of the German war machine.

What's interesting about it today is that in light of all the things that happened in the Balkans with their death squads and death camps, the film has actually lost something of its power through the intervening years. The two Gulf Wars by the two Bush Presidents have also changed the nature of how wars are conducted to the point where it seems quaint that the Germans would bother to round people up and burn them in a church. The contemporary American simply sends out a tomahawk cruise missile or carpet bombs a whole city.

Film As Ideological Artefact

Elim Klimov struggled mightily to make this film. I can't understand why, but then Tarkovsky struggled mightily to make his films as well. The Soviet film production approvals committee were apparently against making obscure films or difficult films. They wanted that old social realism, which of course goes back to Stalin. Stalin probably wasn't interested in the entertainment value of film but he sure was interested in propaganda value, so he wanted Soviet cinema to be the perspicacious to the extreme.

Now, I can understand Tarkovsky running into some flack with films like 'The Mirror' but Elim Klimov is nowhere near an obscurantist director as Tarkovsky. Watching the film today, you can get a pungent dose of the Soviet Realist school of film making. You just can't miss it. 20 odd years after the fall of the Berlin Wall and Perestroika, the ideological garb of the film stands out more today than perhaps it did in 1986. The film it reminded me of the most was in fact Leni Riefenstahl's 'Triumph of the Will'. Maybe these films are mirror images of one another - one film about the glory of NAZI Germany, Klimov's film about the absolute hell it created. In other words, as fine a film as it is, today we can see it for the propaganda film it was.

Which is all the more reason why I wonder why Klimov struggled so much. He was certainly pitching fastballs high and inside just as he was meant to.

The Mosfilm Legacy

We used to get a steady diet of Mosfilm stuff at AFTRS. Such heavily ideological works as 'The Cranes Are Flying' and 'Alexander Nevsky' would get a screening and the student body would all sagely nod and say how wonderfully moving these films were. They're great films and I'm glad they got made, but to get them made, these film makers had to twist themselves to the yoke of Soviet ideology. You'd think AFTRS thought Mosfilm productions were the way to go in cinema.

In a world of global commercial cinema with America at the epicentre, it's very quaint how AFTRS was feeding this stuff to its students who would have to write essays about a deeper cinema. I dare say it contributed greatly to unrealistic expectations about the craft as well as the business. I think this strand of thinking has influenced the funding bodies that took on these graduates as its assessors and film bureaucrats. It has collectively contributed to the decimation of the Australian Film industry in the 1990s as well as the 2000s. It is as if the film bureaucrats who came out of AFTRS essentially locked up the film makers of this country in a church and burned them all down.

I remember piping up at the time 'Terminator 2' came out and asking how these Mosfilm films stood in relation to a US$120million action spectacle. I got frowned at and ridiculed, but really, where is Mosfilm now? On the other hand, Arnie's the governor of California and James Cameron did 'Avatar'. Looking back on it now, it seems really quaint that so much value was put into studying Mosfilm movies.

I like 'Come And See', but it fills me with a weird kind of angst that has nothing to with its content.

All Greek To You?

It's All Greek To The Greeks Too

This business of the Greek debt crisis is a bit disturbing. Markets are all lining up to kick Greece's rear should it default on its debt. The markets around the world slid today as people anticipated that the Euro Bailout would not be enough. Here's an article that just adds fuel to the fire.

A nationwide general strike has gripped Greece in the first major test of the socialist government's resolve to push through unprecedented austerity cuts needed to avert fiscal meltdown.

Protest fever swept the country with public transport paralysed, ferries not leaving the docks and air traffic grounded as unions went on the warpath against the latest wave of spending cuts and tax hikes.

Hundreds of thousands of civil servants kicked off the protests on Tuesday and a group of about 200 communists also stormed Athens Acropolis, unfurling banners reading "Peoples of Europe, Rise Up."

Wednesday's walkout, the third general strike in as many months, comes as the government races to push the austerity drive through parliament, looking to its comfortable majority there to pass the package on Thursday.

Greece's main unions were to mass in central Athens at 11am (1800 AEST) before moving through the streets of the capital in protest marches.

They're really angry in Greece because of the austerity measures to come and there's nothing that can cause demonstrations than taking away perks and entitlements; especially if some Socialist Government is going to do that, then you're sure to see much anger.

The fury of the Greek protests are quite intense. Just reading the description above, it reminded me of the passage in Thucydides covering the aftermath of the failure of the Sicilian campaign. At least that event had more drastic consequences for the city of Athens. The Spartans would eventually go on to press their advantage an defeat Athens in the Peloponnesian War.

So who are thr Spartans this time? I think it might be the Germans. Yes, the Germans who have to shoulder the most of the bail out costs and they're watching these demonstrations on the streets in Athens thinking, "hang a minute, these Greeks want our money AND keep pulling down those perks and entitlements that we don't get, that they couldn't afford in the first place?" You can imagine Angela Merkel is getting an earful on that.

The Economist had this take:

Although the move to ban short-selling steadied Greece's stockmarket somewhat on Wednesday, the chances of the country defaulting on its debts were still perceived by the bond markets as high. Spreads on Greek government bonds (the risk premium compared with German bonds) reached a 13-year high as investors worried that the proposed rescue plan for Greece could stall. Talks between Greece, the European Union and the IMF got under way last week.

Greece was initially seeking up to €45 billion ($60 billion) in emergency loans from euro-zone governments and the IMF this year, the first chunk of which will be needed by May 19th, when the Greek government must refinance a €8.5 billion bond. But as the crisis has worsened it has become clear that Greece could need much more. On Wednesday it was reported that the EU and IMF were preparing a package worth up to €120 billion over three years—if so, the biggest sovereign rescue yet attempted. Nevertheless, even aid on this scale might only postpone an eventual default, if Greece's economy fails to grow faster than its debt pile.

Investors do not seem convinced that euro-zone governments will be able to muster the political will to hammer out an agreement. Germany, as the largest euro member, is vital to any effort to save Greece, but it is wavering. German public opinion is firmly set against dipping into the public purse to help the profligate Greeks. Angela Merkel, Germany’s chancellor, is in a tight spot. If she agrees to extend aid quickly to Greece a voters’ backlash back home may send her party crashing to defeat in regional elections set for May 9th. But if she sits back and watches Greece slide towards default, the contagion is sure to spread rapidly to other, bigger EU countries with debt problems—Mrs Merkel could then end up being blamed for triggering a far worse conflagration across Europe, including a fresh banking crisis.

A fresh banking crisis? Oh great. Here we go again

It Was 70 Years Ago Today

Corporal Hitler Taught The Band To Play

And it's definitely gone more out of style than in, but all the same, today marks the 70th Anniversary of WWII, which commenced with Hitler's Germany invading Poland. Naturally there haven't been that many good jokes about it since then.

Bette Midler said about her marriage to a German: "at nights I dress up as Poland and let him invade me"

Then there's the 'Fawlty Towers' "Don't mention the war" gag that culminates in:

"You mentioned it first."

"You started it!"

"No, you started it"

"No, YOU started it when you invaded Polant in 1939!"

Then there's my favorite "Not the Nine O' Clock News" gag where they declared: "In 1982 Germany became the first nation to win the Eurovision Song Contest with a song about love and peace, having started two world wars."

In that spirit, I bring to you some interesting headlines.

This one's from the BBC.

This is Poland's take.

Relations between Poland and Russia are currently thorny, partly because of differing historical interpretations of events at the start of the war.
Mr Putin added that the pair should "rise above the problems of the past... and solve the problems of the future".
He went on to talk about trade and energy co-operation between the two.
Earlier, Mr Kaczynski and his prime minister Donald Tusk joined war veterans beside a monument to the heroes of Westerplatte at 0445 (0245 GMT).
The ceremony marked the exact time on 1 September 1939 when the German battleship Schleswig-Holstein opened fire at point-blank range on the fort.
At the same time, the German Wehrmacht invaded Poland from east, west and south. The attacks triggered Britain and France's declaration of war against Germany two days later.

Poles, though, have long seen the Nazi-Soviet Non-Aggression Treaty, signed a week before war started, as the starting gun for the German invasion, says the BBC's Jonny Dymond in Gdansk.

It's just as John Cleese thundered. Putin for his part condemned the Nazi-Soviet Pact. I don't really know what that does for anybody today, but there you go. A gesture by the man who tranquilises tigers.

"Our duty is to remove the burden of distrust and prejudice left from the past in Polish-Russian relations," said Mr Putin in the article, which was also published on the Russian government website.
"Our duty... is to turn the page and start to write a new one."

Memories of the 1939 pact - in which the Soviet Union and Nazi Germany essentially agreed to carve up Poland and the Baltic States between them - have long soured Moscow's relations with Poland and other east European states.

Within a month of the pact being signed, Soviet troops had invaded and occupied parts of eastern Poland.
"It is possible to condemn - and with good reason - the Molotov-Ribbentrop pact concluded in August 1939," wrote Mr Putin, referring to the two foreign ministers who signed the pact at the Kremlin.
It was clear today, he said, that any form of agreement with the Nazi regime was "unacceptable from the moral point of view and had no chance of being realised".

"But after all," he added, "a year earlier France and England signed a well-known agreement with Hitler in Munich, destroying all hope for the creation of a joint front for the fight against fascism."

Yes, yes, peace in our time and all that guff. What a load of Bollocks. It all rankles with somebody at some point in the story. WWII must be one of the most gripes-galore moments in human history, some of which are still being worked through in the Middle East. This next bit, caught my eye:

Mr Putin added that Russian people understood "all too well the acute emotions of Poles in connection with Katyn".
In 1940 Soviet secret police massacred more than 21,000 army officers and intellectuals on Stalin's direct orders in the Katyn forest near the city of Smolensk.
Moscow only took responsibility for the killings in 1990, having previously blamed the massacre on the Nazis.

That's very grand of him, I think, but I imagine Poles still think the Russians are assholes who sold them out to the Nazis and then fucked them up the ass. At least if not in that language, we find these sentiments:

Speaking at the ceremonies, Polish President Lech Kaczynski called the actions a "stab in the back."

"This blow came from Bolshevik Russia, in accordance with the Molotov-Ribbentrop Pact," Kaczynski said.

That view, widely held in Poland and elsewhere in Europe, has produced fury in Moscow.

In a newspaper interview on August 31, Putin called the Molotov-Ribbentrop Pact "immoral." But he said Moscow had no choice but to sign the agreement to postpone war after Western powers concluded their own agreement with Germany. He said the 1938 Munich Agreement ended "all hope of creating a united front against fascism."

In Moscow on September 1, Russian Foreign Minister Sergei Lavrov lashed out against a recent resolution by the Organization for Security and Cooperation in Europe's Parliamentary Assembly, equating Nazism and Stalinism, calling it "lies" and a "rewriting of history."

"Even during the Cold War no one ever tried to put the Nazi regime and Stalin's dictatorship on the same footing," he said. "It never occurred to anyone to equate the Nazi threat, which meant the enslavement and annihilation of entire nations, and the policy of the Soviet Union, which was the only force capable of standing up against the war machine of Hitler's Germany and in the end ensuring its defeat."

You know what? I don't think the Russians are ever going to get a pass out of the Poles on that one, just as the Japanese are never going to get a pass out of the Koreans and Chinese (and everybody else they fucked up), just as the Germans won't ever get a free pass from most of Europe (even though Hitler was Austrian - Austrians get an easier time of it, really), just as the Americans are never going to live down Vietnam, and England's never going to be let off the hook for her Colonial rule in India and Hong Kong, and so on.

There's a joke about a guy called Kosta who says, "I built all those ships in the bay. Do they call me Kosta the shipwright? No. I built all those houses on the hill. Do they call me Kosta the carpenter? No. I built all the tall spires in the town. Do they call me Kosta the architect? No. (pause) I fuck one goat!"

Well, I think these countries all fucked  at least one goat, and that's the story of WWII. It's really not as edifying as all the heroic tales you see and hear and read.  All those heroics are in the service of fucking metaphorical goats.

Speaking of fucking goats, you might be amused by this entry in the SMH today.

Opposition leaders have historically struggled to get on the front pages of newspapers.

Why else do you think they undertake listening tours, sit down with toddlers for cups of pretend tea, go on cabbage soup diets and go on Rove Live?

But in NSW, Barry O'Farrell's profile problem is a little more boutique.

He can't get on the front pages because he can't think of a human behaviour venal enough to displace the members of the Government.

Think about it.

What would O'Farrell have to do, exactly, to get a gallop in the media these days?

Intimacy with a goat probably wouldn't even do it.

Yup. WWII sure helped forge the world we live in today. Either that, or it's just that kind of day.