"The Great Debt Bubble of 2011"

The Swedish author Johan Norberg has written a must read article - "The Great Debt Bubble of 2011" - for the Spectator magazine. Norberg´s convincing analysis makes chilling reading, also for those in Europe and the US who think that the booming China will save us from a new crisis:

China’s wealth and prospects dazzle the debt-laden West. ‘Money, money everywhere,’ the Beijing economist Patrick Chovanec said in a recent survey of China. ‘Awash in luxury cars, condos and expensive jewellery, the Chinese are enjoying what looks to be an unstoppable boom.’ The prices of high-end properties in some of the wealthiest cities have almost doubled in two years. High street prices are also creeping up, prompting the government to tighten policy.

In fact, this is not the result of better prospects but of a monetary shock. Aside from the foreign capital inflows, China had its own stimulus package, as big as America’s. Beijing has printed yuan and pushed banks and local governments to spend like drunken Keynesians. Absurdly, China’s money supply is now larger than America’s, even though its economy is a third of the size. We can see the results of this stimulus in stock market prices and in new roads, bridges and housing complexes all over the country.

Not that anyone wants to travel on those roads or live in those buildings. In August, China’s largest energy company reported that an extraordinary 65.4 million residences have not consumed any electricity in the last six months — a fairly big clue that they lie empty. There are now entire ghost towns, like new Ordos in northern China, where tens of thousands of buildings erected from scratch stand empty. And yet property prices in Ordos have doubled over three years. It’s not popular demand, it’s pure speculation. In some quarters, China is being spoken of as the last, best hope for the world economy. But it might be the next bubble to pop.

In the original Superman film, the hero rescues Lois Lane as she falls from a skyscraper. ‘Don’t worry, ma’am, I got you,’ he says, midair. ‘You got me? Who’s got you?’ she replies. This is the question that no one is asking now. If China is lending to us, who is lending to China? If the governments are saving the banks, then who will save the governments? If the European Union is offering a safety net, who would be there to bail out the EU? There are other questions not being asked: which country, in recent economic history, has successfully borrowed its way out of a debt crisis? Why should it work now? And how can we justify saddling the next generation with such debt?

Read the whole article here.
Norberg also has a web page of his own.

Scaremongering

A prominent French politician chose scaremongering tactics in his New Year´s message:

"Do not believe, my dear compatriots, those who suggest that we leave the euro. The isolation of France would be madness. The end of the euro would be the end of Europe," he said in a message broadcast on television.

Putin

The Guardian´s Simon Tisdall has published a good description of Putin´s Russia:

In modern-day Russia, challenging Putin is like standing in front of a tank. Either get out of the way or expect – sooner or later – to be flattened.

And Tisdall has some other good points:

A physically small man who compensates by working out and pursuing outdoor sports, he appeared by turns arrogant, insecure, angry and resentful. It could explain his aggression towards those who criticise him.
Whatever the reasons, he has frequently exported personal animus into the foreign arena, too. The 2008 Russian invasion of Georgia followed a long, vindictive dispute between Putin and the Georgian president, Mikhail Saakashvili.
Much the same poisonous dynamic applied in Putin's dealing with Ukraine's former Orange Revolution leader, Viktor Yushchenko.
On issues such as European missile defence, Kosovo's independence and the row with Britain over Alexander Litvinenko's murder in London in 2006, Putin often appeared to take things personally – and rather badly at that.
In other cases, he would co-opt rather than confront, as he has managed to do with weaker individuals such as Germany's former chancellor Gerhard Schröder and Italy's PM Silvio Berlsuconi.
By refusing to back down, Khodorkovsky has become the latest in a long line of opponents to fall foul of Putin's vendetta politics. It is likely that he will not be the last.

A forecast for Europe

On this, the last day of the year 2010 I thought it might be suitable to make some predictions about things to come in Europe.

The end of the euro – in its present form – will come closer. We will probably see one large euro country (Spain or Italy?) failing in the same way as Greece and Ireland. The bailing out costs will be too high in this case –  the Germans are not anymore ready to continue as paymasters.

The end of the euro co-operation will be the beginning of the end of the EU in its present form.

This is a natural process, because all empires and similar structures will at some stage cease to exist or change to something else.

One could, of course, also argue that the EU actually – as a result of the euro crisis – will develop faster towards a federal state. However, this is not at all likely because of at least the following circumstances:

• The member countries are too different politically, culturally and economically. 
• The construction of the EU has hitherto been done from the top downwards. The citizens have been left behind, but they are not anymore willing to accept this. In other words, there is an enormous democratic deficit in the present EU. 
• Among the present leaders of the EU countries nobody has the capacity to convince the citizens about the necessity of a federal Europe.

The coming changes need not be bad – on the contrary. The end of the present day euro co-operation is not going to be the kind of grand catastrophe that many scaremongering politicians and economists pretend. Of course, there will be problems before a new European monetary system (with one strong currency led by Germany?) is in place, but the world has seen bigger changes without catastrophic consequences.

And neither is the end of the “ever closer union” ideology going to spell ruin for European co-operation in other areas. Meaningful co-operation – e.g. free trade, single market, educational and cultural co-operation – will continue and even be enhanced.

These changes will not take place in one or two years. The inertia of a large dying structure like the present EU means that the process towards a better EU “light” will take many years. But all good things are worth waiting for ...

PS
20.15 PM
I just found an interview with a British MEP, who pretty much appears to share my belief:

“The Soviet Union lasted for about 70 years, the European Union has just lasted for about 50 years [meaning beginnings of the European Economic Community] and I would not be at all surprised to see the same pattern, I think, in 20 years time. There may be something that is called European Union but I think it will look very different and be much less influential than it is today.”

Coldest Winter in Britain in 1000 years?

This from The Daily Star:

BRITAIN’S winter is the coldest since 1683 and close to being the chilliest in nearly 1,000 years.

Latest figures reveal that the average temperature since December 1 has been a perishing -1C.

That makes it the second coldest since records began in 1659.

The chilliest on record was 1683/84, when the average was -1.17C and the River Thames froze over for two months.

But with January and February to come, experts believe we could suffer the most freezing cold winter in the last 1,000 years.

PS

Of course global warming believers say that all this cold weather is because of - you know what ....

The New York Times on the Khodorkovsky trial

The New York Times wants in an editorial president Medvedev to prove that he calls the shots in Moscow:

What Rule of Law?

Published: December 28, 2010

President Dmitri Medvedev of Russia claims to champion the rule of law. He also claims that he, not Prime Minister Vladimir Putin, calls the shots in Moscow. Mr. Medvedev can prove both true by using his pardon power to ensure that Mikhail Khodorkovsky faces no additional prison time after being convicted on trumped-up embezzlement charges this week. Mr. Khodorkovsky, once Russia’s richest man, has already served seven years as a result of Mr. Putin’s judicial vendetta against him.

NYT:s editorial writer is - quite rightly - not convinced that Medvedev will raise to the occasion:

Unfortunately, everything about Mr. Khodorkovsky’s latest prosecution suggests that Russia’s judiciary is still under Mr. Putin’s thumb and Mr. Medvedev’s talk of reform is just talk. Mr. Putin did not even wait for the trial to conclude before pronouncing Mr. Khodorkovsky guilty and demanding a lengthy new sentence.

Italy now close to euro danger zone

Ambrose Evans-Pritchard, International Business Editor of the Telegraph notes that Italy is now on its way to the euro high-risk zone:

Italy's debt costs approach red zone

Italy's borrowing costs have jumped to the highest level since the financial crisis over two years ago, raising concerns that Europe's biggest debtor may slip from the eurozone's stable core into the high-risk group on the periphery.

It is possible that the recent action taken by the EU leaders is not sufficient:

Willem Buiter, Citigroup's chief economist, said the response had been "woefully inadequate", raising the risk of fresh bank failures and a wave of sovereign defaults next year. He said the EU authorities may need a mix of measures worth up to €2 trillion to stop the rot.

The Christian Science Monitor: Obama should stand up to Putin´s tyrannical Russia

The Christian Science Monitor urges Obama to stand up to Putin´s tyrannical Russia:

The Khodorkovsky conviction will also hurt Putin protégé Dmitry Medvedev, who became president in 2008. His call for rule of law in Russia now rings hollow. (He referred to the new charges against Khodorkovsky as “odd.”) And his attempts to entice high-tech investments will likely fail, further preventing Russia from moving beyond its oil-dependent economy.
Strangely, the best barometer of political freedom and rule of law in Russia has now become the length of time that Khodorkovsky will stay in prison. If Medvedev or Obama ever want to stand up to Putin’s tyrannical type of Russia, they best speak up this week – before the Putin-friendly court announces its sentence on Khodorkovsky.

Wind Power in the UK - not very succesful

Wind turbines are the darlings of many greens and global warming alarmists. But in reality they are not what they are supposed to be:

This is the season for quizzes. So ­fingers on buzzers, here’s your starter for ten. In percentage terms, how much electricity do Britain’s 3,150 wind ­turbines supply to the ­National Grid?
Is it: a) five per cent; b) ten per cent; or c) 20 per cent? Come on, I’m going to have to hurry you. No conferring.
Time’s up. The correct answer is: none of the above. Yesterday afternoon, the figure was just 1.6 per cent, according to the official website of the wholesale electricity market.
Over the past three weeks, with demand for power at record levels because of the freezing weather, there have been days when the contribution of our forests of wind turbines has been precisely nothing.
It gets better. As the temperature has plummeted, the turbines have had to be heated to prevent them seizing up. Consequently, they have been consuming more electricity than they generate.
Even on a good day they rarely work above a quarter of their theoretical capacity. And in high winds they have to be switched off altogether to prevent damage.
At best, the combined output of these monstrosities is equal only to that of a single, medium-sized, gas-fired power station.
To make matters worse, there is no way of storing the electricity generated on the rare occasions when they are working.

Read more here.

Opposition to the Euro Grows in Germany

Der Spiegel reports that Germans are becoming increasingly critical of the euro:

Surveys show that many Germans are worried about the future of the euro, but the country's political parties are not taking their fears seriously. The number of grassroots initiatives against the common currency is increasing, and political observers say a Tea Party-style anti-euro movement could do well
----
Unnerved by shaky, debt-ridden countries and bailout packages worth billions, the majority of Germans want the mark back. In a survey conducted in early December by the polling firm Infratest dimap, 57 percent of respondents agreed with the statement that Germany would have been better off keeping the mark than introducing the euro. Germans, it seems, are gripped once again by their historic fear of inflation: According to the Forschungsgruppe Wahlen polling institute, 82 percent of the population is worried about the stability of their currency.

Read the whole article here.

"The World's Largest Dying Power"

Vladimir Ryzhkov, a former State Duma deputy who now hosts a political talk show on Ekho Moskovy radio, is not optimistic about the future of his home country:

As 2010 and the first decade of the 21st century wind to a close, the dominant social, political and economic trends of the year raise serious doubts about Russia’s future survival as a sovereign country. Chinese analysts, who have been closely observing Russia for the past 20 years, perhaps put it best: Russia is the world’s largest dying power.
If Russia continues down its current path of autocracy, monopolization, corruption and overall economic, political, cultural and technological degradation, it may prove the Chinese correct in their terminal diagnosis.

In his article published in the Moscow Times Ryzhkov makes the following prediction:

Putin’s desire to remain in power for another 12 years after the 2012 presidential election spells disaster for Russia. In the best case scenario, we can expect long-term economic stagnation and social decline. This will be coupled with a continued rise in corruption, drop in foreign investment and the flight from Russia of both capital and millions of its best and most talented citizens. In the worst case scenario, the continued degradation caused by corruption, monopolization and lawlessness could result in a total collapse and disintegration of the country, and if the country’s leadership doesn’t change this happen in the next decade.

Read tho whole article here.

An Open Letter to President Medvedev

This letter by a brave Russian, Dr. Sergey Kolesnikov, is another testimony to the rampant corruption in the country led by Vladimir Putin:

Read the whole letter here

PS
While Putin and his entourage build billion dollar palaces for their own use, it came as no surprise that Mikhail Khodorkovsky is again found guilty on embezzlement charges. Khodorkovsky, once the richest man in Russia, dared to oppose Putin and demand some kind of rule of law, with the result that he will continue to be jailed for several more years.

Washington Post: " a rough version of Mr. Bush's dream may yet come true"

The Washington Post has published an editorial - "A good year in Iraq" - which hopefully will be read by editorial writers also in Europe:

AT THE beginning of this year, Iraq’s fragile new political order faced a momentous challenge. The country needed to hold credible democratic elections at a time when its army was still battling al-Qaeda and other domestic insurgents. The winners had to form a government in spite of deep rifts among leaders and sects, who just three years ago were fighting a civil war. And all this had to happen even as the United States reduced its troops from 150,000 to 50,000 and ended combat operations for those who remained.
The result was a long, painful, contentious, confusing and sometimes bloody year. But when Prime Minister Nouri al-Maliki presented his new government to parliament on Tuesday, Iraq could fairly be said to have passed a major test. It is not yet the peaceful Arab democracy and force for good in the Middle East that President George W. Bush imagined when he decided on invasion eight years ago. But in the past 12 months it has taken some big steps in the right direction

The editorial offers the following conclusion:

It's still too early to draw conclusions about Iraq, though many opponents of the war did so long ago. Mr. Maliki's government could easily go wrong; the coming year, which could end with the withdrawal of all remaining U.S. troops, will likely be just as challenging as this one. But the country's political class has repeatedly chosen democracy over dictatorship and accommodation over violence. If that keeps up, a rough version of Mr. Bush's dream may yet come true.

Peter Wehner, writing in Commentary Magazine, has a good comment to the WP editorial:

Four years ago this month may have been the low-water mark in Iraq, with the nation gripped by a low-grade but escalating civil war. The American public strongly opposed the war. Almost every Democratic lawmaker in Congress, with the honorable exception of Senator Joseph Lieberman, was in fierce opposition to both the war and what later became known as the “surge.” Republican lawmakers were losing their nerve as well. Three months earlier, in September 2006, Senator Mitch McConnell had asked for, and received, a private meeting with President Bush. Senator McConnell’s message was a simple one: the Iraq war’s unpopularity was going to cost the GOP control of Congress. “Mr. President,” McConnell said, “bring some troops home from Iraq.”
President Bush, to his everlasting credit, not only refused to bend; he increased the American commitment to Iraq and changed our counterinsurgency strategy. And while the situation in Iraq remains fragile and can be undone — and while problems still remain and need to be urgently addressed (including the terrible persecution of Christians occurring in Iraq right now) — this is a moment for our nation, and most especially our military, to take sober satisfaction in what has been achieved. It has not been an easy journey. But it has been a noble and estimable one.
There is no need here to rehearse the names of the few who did not buckle at the moment when the war seemed lost. They know who they are. In the words of Milton, they were “faithful found among the faithless.” Their faithfulness, and in many cases their courage, is being vindicated.