A Blueprint for Greek Economic Future

A Blueprint for Greek Economic Future

1. In the coming second Greek elections, people have to VOTE AGAINST MORE OF THE SAME.

2. Current policies have totally failed, they have only enabled the elites to transfer money out of Greece.

3. It is the Rational Expectation that eventually Greece will have to exit the Euro that is causing Capital Outflows from Greece in unprecedent historic proportions. This Capital is never going to flow back into Greece until such time as Greece Exits the Euro and returns to a different currency either Drachma or an alternative name for a new currency.

4. Despite many Greek concerns, exiting the Euro WILL NOT automatically banish Greece from the EU, far from it. In actual fact a Greek exit from the Euro would in fact potentially strengthen EU relations as it is the current economic tensions brought about by the currency unification that does not allow a currency devaluation as a quick and efficient method of restoring economic competitiveness that is causing the current European tensions.

5. On a Greek Euro Exit, The So Called "FIREWALLS" should only be used to ensure that current business contracts priced in Euro's allow for the currency adjustment, aiding a smooth transition.

 

6. It is naive for Greek politicians to claim Greece can't leave the Euro, they must leave the Euro and default to restore prosperity.

7. Despite the fear of massive inflation in Greece on a Greek exit of the Euro, I would suggest as happened in 2008, there would be such a massive and quick unwinding of speculative commodities contracts as the financial system realizes the game is up that Crude Oil contracts would fall very heavily . We have already seen Crude drop from well over $100 Dollars to near $90 Dollars in the past few weeks. On the world markets this would still enable Greece to buy commodities on the open market in relative terms to what they are currently paying. Such a scenario would counter any new Drachma that may also halve in value. Once a new Drachma is introduced if the velocity of money takes hold with people quickly circulating the money to pay for items using the new currency there will not be a need to print endless amounts of money.

8. While the initial value of new Greek Drachma currency will inevitably fall exceptionally heavily, as Capital inflows back into Greece take hold, the new currency will stabalize and will actually begin to rise as investors want to be part of a Greek Economic reconstruction. The stabalizing of the new currency and the Capital Inflows of capital that has fled Greece in the past well over 2 years now, will significantly reduce the need for Greece to print money and Inflation will not be as rampant as the many scare mongers of a Greek exit may claim

9. In any Greek economic restoration "Social Enterprise" should form the back-bone of the new economy, allowing for all people to be involved and not just the few who may attempt to buy up assets on the cheap.

 

10. Banks and the IMF should not be proteceted this time. If they go bust, let them go bust, protecting savings deposits only. There will be cries and the IMF continues to scare the Greek people into accepting austerity as the only way simply because they know and we all know the game is up all Sovereign Debt is basically worthless.

 

11 The quicker the world is re-set with a debt amnesty and quick write-downs of that debt the quicker the economy will prosper again. This time around citizens across the world have to join forces and simply refuse Bailouts of the Banking system.

Whatever the eventual Political outcome on the 17 June for Greece, the world is praying for all the Greek people, that this will be the turning point and the powers that be implement an economic program that allows Greece to Default and Exit the Euro, as this is the only path for an economic recovery. This will also apply to all countres to quickly default and let the banks take the pain this time. Spain keeps trying to keep the banks in business, but let them fail this time. By letting Banks go bust it will also end the Bonus culture that has helped create the situation where Banks have become so highly leveraged. 

 

Toby Chambers

Economist and Social Entrepreneur.

The Greek Crisis: Big European funds dump euro assets

The Greek Crisis: Big European funds dump euro assets

The Greek Crisis: Bankers at the Gates

The Greek Crisis: Bankers at the Gates

It is not just the Greeks who Don't Pay Taxes

It is a bit rich for Christine Lagarde to blame the Greeks for not paying taxes.

You simply look at all the wealthy coprorates and individuals across the world hiding profits in lower tax regime countries. It is not simply the Greeks doing it, it is the failing of the current Capitalist system.

Large corporates and individuals have only became extremely wealthy on the back of consumers purchasing loads of goods they probably will never really need.

This whole claim that Greece can't possibly leave the Euro is only designed to protect those holding worthless Capital ie Bonds and guess who the last person standing is, you guessed it IMF.

The Capitalism rule book does not say "Protect Bond Holders at Whatever Cost to Society."

This time we have to face up to reality and accept Banks have to become insolvent but protecting savings deposits only. A Banks balance sheet is only at best 10% ordinary savings deposits and it would therefore be far more economic to let the Banks Go Bust, setting up Good Banks without the legacy of Toxic Assets. Those Toxic Assets are now mainly worthless government bonds.

In 2008 the Banks were bailed out. How about this time citizens are bailed out and those with worthless bits of paper loose this time.

I put this to Christine Lagarde - help citizens this time even if it means Banks and the IMF become insolvent

The Greek Crisis: Greek Crisis Poses Unwanted Choices for Western Leaders

The Greek Crisis: Greek Crisis Poses Unwanted Choices for Western Leaders

A response to Employment Rights and Bankruptcy Law

While the Conservatives claim deregulation of Employment is the key to economic growth, this is a total mis-conception.

The real issue that needs to be addressed and has never been addressed is the total bias towards financial institutions when a business has financial difficulties and eventually enters administration insolvency.

Due to the ability of Financial Firms to leverage up and participate in the financing of leveraged buy-outs, in the knowledge the financial firm has preferential creditor status, up until 2007 there was a plethora of exceptionally highly leveraged buy-outs that eventually went horribly wrong. Southern Cross ring any bells.

SME's who may typically provide credit  on 60 90 days plus to highly leveraged  organizations, should be treated in the same way as financial firms. As it stands these SME's can be wipe-out in any insolvency of these highly leveraged firms, destroying many more jobs down the food chain

It is the leveraging up of corporate buy-outs that has destroyed so many jobs, when they go horribly wrong. Changing Employment regulation does nothing to change this real problem that is not being addressed at all.

Despite the Governments Big Idea on Employment there are much better solutions such as changing Bankruptcy law to ensure we never again have such a leveraged Buy-out bubble that destroys many more jobs.

The exceptionally high bonuses paid on leverage Buyouts should be immediately subject to Claw-backs. This includes Top Management Pay when things go horribly wrong.

The inherent structure of Capitalism is flawed providing a Get Out of Jail Free for Banks and their Bonus culture while those on poor wages suffer yet again. This inequality of those at the bottom needs to be addressed and I can't see the Conservatives considering that actually improving the wages of those at the bottom as being a priority.

The irony is that those at the bottom spend proportionally more in the economy than those at the top and therefore it would quickly and instantly start driving the wheels of the economic engine if those at the bottom at more disposable income.

Toby Chambers
Economist
Social Entrepreneur

Stand Firm Mrs Merkel !

While it is far too tempting to yet again Bailout the system, if this had worked in 2008 we would not now be debating the current problems besetting the financial system.

There are calls to issue Eurobonds, but what is the point of adding more debt and issuing more debt to try and retire the old debt ?

This has gone far enough Mrs Merkel and it is about time the financial system gets what is coming to it.

The real economy will recover quickly if so called "Firewalls" are used to protect "Depositor Savings Only" and new Good Banks are established free from any old debt.

Unfortunately it is different this time, Governments have spent so much they simply can't "Spend their Way Out"

The simplest solution is to Quickly Purge the bad Toxic Assets ie Bad debt from Banks. No Bonus for Banks as all commercial contracts become Null and Void.

Osborne gave the IMF £10 Billion of your hard earned money in April no questions asked. Well have your say and tell him "If we are in it all Together ! No More Bailouts for the Banks and IMF"

E-petition make your Vote Count "No More Bailouts"
http://epetitions.direct.gov.uk/petitions/17979

The Greek Crisis: Pricing the Cost of a Greek Euro Exit

The Greek Crisis: Pricing the Cost of a Greek Euro Exit

The Greek Crisis: G8 splits over stimulus versus austerity

The Greek Crisis: G8 splits over stimulus versus austerity

The Greek Crisis: Greek leftist leader Alexis Tsipras: 'It's a war between people and capitalism'

The Greek Crisis: Greek leftist leader Alexis Tsipras: 'It's a war between people and capitalism'

The Greek Crisis: European chorus warns Greeks of impending peril

The Greek Crisis: European chorus warns Greeks of impending peril

The Greek Crisis: Europe thinks the unthinkable on Greece

The Greek Crisis: Europe thinks the unthinkable on Greece

The Greek Crisis: A War of Words Over Euro Crisis

The Greek Crisis: A War of Words Over Euro Crisis

The Greek Crisis: The G8 and the euro: make this one count

The Greek Crisis: The G8 and the euro: make this one count

The Greek Crisis: Obama presses Europe for shift to growth focus

The Greek Crisis: Obama presses Europe for shift to growth focus

The Greek Crisis: The Greek run: It is not a good idea for Greece to leave the euro. But it is time to prepare for its departure

The Greek Crisis: The Greek run: It is not a good idea for Greece to leave the euro. But it is time to prepare for its departure

#comment-form

#comment-form

The Greek Crisis: Who is Responsible for the Greek Tragedy?

The Greek Crisis: Who is Responsible for the Greek Tragedy?

The Greek Crisis: A permanent precedent

The Greek Crisis: A permanent precedent

The Greek Crisis: The last chance to rescue the euro

The Greek Crisis: The last chance to rescue the euro

Is the Bank of England out of Touch ?

Can the Bank of England wave a magic wand and solve our Financial Crisis ?

Apparently Not.

Last year on the 27 July 2011 I attended LSE presentation by Professor David Miles "Monetary Policy and Banking Fragility"

http://www2.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1095

During the presentation we were given many facts and figures in relation various banks balance sheets and what was surpising was the potential for soverign debt to become toxic.

The presentation I believe was held on the day of European Bank stress Tests. The All OK was given to almost all Banks apart from a couple of scapegoat Banks. We now know soon after Ireland had to go cap in Hand and Greece, Portugal followed.

I possed the question to Professor Miles that we now have the situation of "Zombie Banks." As you can hear, my question was given a fairly short response and that while there were a couple of Banks in Euroland needing some extra capital, the UK was fine and Banking system would recover. We are now almost a year on since Professor Mile's presentation and far from the picture becoming rosy and the World recovering again, it would seem the World is now plunging into the Abyss. The Banking system yet again is at the Epi-Centre

You be the Judge

Toby Chambers
Economist
Social Entrepreneur

The Greek Crisis: Eurozone banks nearly collapsed, says ECB director

The Greek Crisis: Eurozone banks nearly collapsed, says ECB director

The Greek Crisis: The Greek people now face a stark choice: in or out?

The Greek Crisis: The Greek people now face a stark choice: in or out?

The Greek Crisis: The only way to contain a Greek exit

The Greek Crisis: The only way to contain a Greek exit

The Greek Crisis: Euro’s last turn before the Grexit

The Greek Crisis: Euro’s last turn before the Grexit

Facebook Irrational Exuberance ?

So what is all the Hype about Facebook ?

It seems to me like a case of Irrational Exuberance !!

Do not get me wrong, Social Media is the future, but really Facebook, what is the point of Pump and Dump ? It would be better to come out with realistic valuations rather than hype this and when the price drops, as it will, frighten investors out of the sector.

It is ironic that all the early investors seem to be planning to exit, when Facebook lists. I can't fathom it, if the large investors are selling out, why smaller investors would want to buy in ?. It must be a case of Irrational Exuberance as any rational person would think twice.

The Dot-Com Bubble suffered, as people took fright and did not want to touch the industry for several years. Please do not let this happen to Social Media. In the coming years let everyone create a great new industry and allow all to benefit.

Wall Street should know better, surely it would be better to nurture and developing a new vibrant industry, rather than play these Pump and Dump games !

Could someone please ask Wall Street to cut the Testoserone and act like a mother nurturing her child !

A concerned Social Media Industry Participant

Greece: Dump the EU Now For An Economic Recovery!

Wednesday, May 16, 2012 – by Ron Holland

Ron Holland

"Attempts to form a government in Greece collapsed on Tuesday, jolting financial markets at the prospect leftists opposed to the terms of an EU bailout could sweep to victory in a June election and nudge the euro zone crisis into a dangerous new phase." – CNBC
Why should the Greek people be financially destroyed and rendered destitute by forced German and Brussels EU austerity measures and more loans designed only to pay the interest on the debt to the big banks? What if the banking and media establishment are dead wrong about nations withdrawing from the Euro like they have from the beginning of the crisis? I suggest a strong economic recovery is the likely result rather than depression as forecast by experts working for the banks that have enslaved Greece.
What Would You Do?
Let's assume you were very unsophisticated regarding real estate and you lived off a $30,000 annual income. Then assume you purchased a home in the US during the Federal Reserve-created housing bubble for $500,000 with 2% down. Your real estate agent and mortgage broker said, "Don't worry. We will take care of the details." Later, you discover your signature was forged and they showed your annual income as $300,000 annually.
Now you find out the real value is only $50,000 and there are numerous liens and defects and you don't even have clear title to the asset. The bank and credit providers are threatening to take everything you have saved in your lifetime because you are behind on your loan payments.
What would you do? Given this situation most rational people would stop making payments, withdraw from the fraudulent contract and sue those who misrepresented the entire deal for fraud. This is a very simplistic version of what has happened to most nations inside the EU. The citizens never voted on or understand the contract giving away national sovereignty. The entire deal, including the sovereign debt, was fraudulent and sold so banks and politicians could benefit.
Recovery is Only Possible Outside the Euro and After Sovereign Debt Repudiation
Many EU member states should simply withdraw from and repudiate the failed monetary and political experiment that the European Union has become. In addition, Greece should repudiate the excessive sovereign debts owed primarily to German banks and restore an independent Greek currency, the Drachma, at a lower and more favorable exchange rate to stimulate tourism and foreign investment. Yes, there will be a short-term drop in the Greek economy but this would quickly be over in contrast to the EU-created death spiral Greece has been forced to endure over the last few years and that will continue into the future.
Despite all the warnings by the establishment, I urge the Greek people, as well as the suffering populations of Spain, Italy, Ireland and other nations, to dump their politicians chained to the EU and march to a different tune on the right and left.
The world knows Greek politicians are corrupt and owned by major financial interests.
Like most politicians in the West, they will tend to choose the near-term course of action that provides them the most graft and payoffs. You can't sue politicians but nations can stop paying fraudulent sovereign debts if the people press hard enough. History shows us that politicians can actually on occasion even become patriots if their political future is at risk and their financial gravy train is about to leave the station.
I believe the EU siren call for Greek austerity and bailout is just a political disguise for more fleecing of the populace through fears of government bankruptcy in order to steal more wealth and cut more benefits, while the real solution for most nations is to tax and steal less and reduce bloated programs and benefits. The way out for Greece and most other European nations is to withdraw from both the Euro and EU and do the above after repudiating the sovereign debt and becoming debt-free nations.
Even Germany Will Leave the Euro
In the final analysis I agree with my friend John Browne's forecast Friday on CNBC. He currently serves as Senior Market Strategist for Euro Pacific Capital, Inc. and also as our Chairman of the Board for Biologix Hair Inc. in Toronto.
He warned that not only would Greece and other nations withdraw from the Euro but in the end Germany is also likely to pull out and restore the D-Mark before the EU crisis has run its course.
The ultimate solution for all government debt is always pay off, repudiate or hyperinflation hence the impasse in EU Land. No nation has ever paid off their national debt, the citizens generally benefit from repudiation over hyperinflation but central banks always use inflation as the solution. Due to rather recent German history the German people will never allow any government to sanction high rates of inflation.
The EU was a vehicle designed to control all of Europe but the German people will not stand for the massive money creation and ultimate inflation necessary to preserve the failed European Union and inflate away the massive sovereign debts of nations in the EU.
Maybe History Will Repeat Itself in Reverse
Almost 100 years ago, the victorious allies and their banking elites used the Treaty of Versailles to plunder the wealth of Germany and its citizens, who were no more guilty of this terrible war than were the allies. It has not been long enough for them to have forgotten the drift towards extremism, anger at those who plundered their nation and finally, the rise of Hitler and National Socialism. The German people will surely demand withdrawal from the Euro and a return to the currency credibility of a restored D-Mark (Deutsche Mark) backed in some way by gold. The alternative is to risk a return to the 1930's and the Germans have not forgotten that mistake.
I would suggest that at the next federal election in Germany in the fall of 2013 Chancellor Merkel will likely be repudiated at the polls because of the EU problems. She and her party alliance will be forced from power as her dream for a German-led Europe through the European Union crumbles like so many grandiose plans of earlier empires. Remember, 70 years earlier in 1933 another chancellor was swept into power because of government debts, hyperinflation and outside meddling. It did not end well for Germany.
Get Out of the EU Now While You Still Can Peacefully
I know many citizens across the European Union are wondering, "How did we get here?"
They think it can't get any worse so maybe they should remain in the EU because the establishment experts warn of bankruptcy, currency crisis and the usual doom and gloom should the Euro be dumped.
As an American, I know from our history that the determination of a power elite to maintain control over taxpayer territory at any cost in terms of lives, economic destruction and violence is always far stronger than the public realizes. We are now celebrating the 150th anniversary of our Civil War that destroyed the Southern economy for a century and killed 600,000 Americans, North and South.
No, it wasn't really a civil war and the media establishment never mentions the death toll of the war. Also, the major causes of the war that had more to do with the establishment of a central bank, railroad profits and government revenue have been hidden from view.
But the winners always write the history and unless individual European nations get out of the European Union modeled on the American Union quickly, your nations may never leave without a war you are likely to lose. So get out of the Euro and EU now while you still can.
Ron Holland is CEO of Biologix Hair Inc. 

The Greek Crisis: Greeks vote with wallets in fear of euro zone exit

The Greek Crisis: Greeks vote with wallets in fear of euro zone exit

The Greek Crisis: Europe Must Face Ugly Reality of Greek Exit from Euro

The Greek Crisis: Europe Must Face Ugly Reality of Greek Exit from Euro

The Greek Crisis: Greece Turns Balkan, Serbia Joins Europe in Key Votes

The Greek Crisis: Greece Turns Balkan, Serbia Joins Europe in Key Votes

State Capture

STATE CAPTURE by the Financial Services Industry

State Capture is generally associated with Corrupt Countries where a small number of firms (or such entities as the military) are able to shape the rules of the game to their advantage through massive illicit, and non-transparent provision of private benefits to officials and politicians. Examples of such behaviour include the ability to control legislative votes, to obtain favourable executive decrees and court decisions. A new phynomena of "State Capture" where "Too Big to Fail Financial Institutions" dictate economic policy is now evolving since the onset of the Financial Crisis in 2008.

The UK economy has now been infiltrated and hijacked by a self serving group of Bankers and Financiers who have no regard in re-distributing wealth to the many for the overall good of the country, but seek to engross themselves at the expense of Civil Society. This cannot continue and the Financial Industry can no longer hold the UK to ransom. Go back in history and the Great Depression is eerily similar, but Banks were allowed to fail in the Great Depression. 100 years ago Bank Executives were held personally liable for a Bank's failure, now they walk away with Golden Handshakes. Many economists claim that Bank failures caused the Great Depression to be so prolonged and deep and the Federal Reserve allowed the money supply to contract so sharply. I disagree with this analysis and suggest as Hayek does that Banks should be allowed to fail. However I suggest to significantly reduce the impact of a falling money supply when Banks are placed into Insolvency and Depositors withdraw their savings that Bank Savings Deposits should only be protected in any form of Bank Insolvency and immediately  new "Good Banks" without the legacy of "Toxic Assets," be Incorporated with  local community people taking over the governance of these new entities. Financial Elites would loose in such a scenario given the fact that over recent years Share Bonuses have been given on top of monetary bonuses. The so called "Fire Wall" should only protect Bank Saving Deposits held by a Bank that at best now comprises in most cases less than 10% of a Banks Balance Sheet. In the current Financial Crisis if you had forgotten, goes back to 2007, now coming on 4-5 years and we do not seem any closer to solving the fundamental economic problems, so it needs a total re-think. Top Bank staff even now in 2012 are still rewarding themselves handsomely for Failure and the 99% have had enough. Yes Prime Minister we are not all in it together. Financial Institutions who have been bailed out by the State should be considered as "BENEFIT SCROUNGERS," and should not be considered as "Folk Heroes." Giving them now a third chance after 4 years since 2008 to pull the economy out of The Abyss when everyone else suffers is totally unacceptable. The economy simply will not recover when the wealth of a country is so highly concentrated in the hands of a few, who were bailed out in 2008 and continue to squander the countries wealth at the expense of everyone else.

The calls for Bailouts in 2008 were not from the very poor, but the very very elite Rich who would have lost everything had the Banks and Financial Institutions been allowed to have failed in 2008. The Balance sheet of a Bank is in most instances at best comprised of only 5%-10% of general savings deposits. The 90-95% of Banks Balance Sheet is typically Toxic Assets (ie assets that become a major liability for the Financial Institution if the claimed market value of the asset falls and has to be marked down to true value, such as has just happened with Greek Debt in March 2012.).

Capitalism is about efficient allocation of resources, traditionally Land Labour and Capital. Banks and Financial Institutions in the current Capitalist system decide which oragnizations are allocated capital, it is very questionable that market forces are allocating capital efficiently, given the sheer size of the "Too Big to Fail Banks." When these mega Financial Institutions now have Banlance Sheets far greater than a Countries GDP, market distortions could easily occur when large Financial Institutitions consider, "It in their self interest, rather than liquidating assets and accepting the market price, to leverage up and borrow even more in the HOPE that in the long term the toxic asset can be made whole."  In its simplest form, this is exactly what the  European Financial Stability Facility (EFSF) is designed to achieve. A short term fix in the hope that all will be merry in the long term. They talk about "Fire Walls" but these so called  "Fire Walls" are only designed to redistribute wealth from the 99% to cover up the losses of the 1% elite. Case in point ECB in March 2012 dispensed 1/2 Trillion Euros for 3 years at 1% to the Financial Elite and yet all these Financial Institutions in 2008 were on the verge of Bankruptcy. A poor person with a poor credit history would not have a hope of borrowing even £1000 at 1% and yet the financial elite through the way the current Reserve Bank Monetary Capitalist system operates are able to borrow infinitum  "Free Money" very soon after they were on the verge of Bankruptcy. These Mega Financial Instutitions also get to decide where the money from 1/2 Trillion Euro's goes into the economy. Market Forces can not possibly be allocating this money efficiently as a  few well connected elites decide where the money goes in the economy, that can only but be described as "STATE CAPTURE"

Governments including the UK government are now held hostage to "The So called Market" as any hint Government borrowing will increase will lead to money markets dumping UK sovereign debt. The irony is that "The So Called Market" is not you and me, but these major Financial Institutions and Hedge Funds supported by huge leverage from the Financial Institutions who were Bailed Out by Governments around the world in 2008. It is beyond belief that Governments can be held hostage under such a scenario, but this is where we are in 2012. Governments can't default on their Soveriegn Debt for Fear the Market will punish them and yet, Keynesian Economic Theory suggests that Governments should be borrowing and spending in times of economic uncertainty, but borrowing from "The Market" will lead to Credit Downgrades and as we have seen with Greece, "The Market" heavily punishes a country, forcing Austerity upon the Country.

Japan has been caught in economic stagnation for 20 years, largely because they have not accepted the Bank Balance Sheet losses since the Economic bust in the 1980's. UK is quickly following Japan with endless Printing of Money now Quantitative Easing is used as a euphemism to deflect attention from the fact that QE is the only policy tool now available since interest rates have been at rock bottom for several years. QE leads to massive inflation, simply look at the price we are all paying at the Forecourt. In yet another twist to "State Capture" the Financial Institutions can front run the purchase of Crude Oil contracts from QE before the real market, yes that is you and me filling up a few litres of fuel at the forecourt have a chance.

While harsh, the only Solution to restore economic equilibrium in the UK is to allow Banks to be placed into Insolvency, but with a caveat to build a "Fire Wall" to protect Depositor Savings only. Since 2008 there has been no attempt to establish mechanisms to place Banks into insolvency and isolate Depositor Savings with Deposit Savings transferred into a Good Bank owned by the people for the benefit of the people.


Have your say at E-Petitions Now

Stop the endless Bailouts
http://epetitions.direct.gov.uk/petitions/17979

Be part of a London Peoples Bank run by the People for the People

http://epetitions.direct.gov.uk/petitions/21878


Toby Chambers
Economist and Social Entrepreneur

The Greek Crisis: Is the single currency worth saving at all?

The Greek Crisis: Is the single currency worth saving at all?

The Greek Crisis: Greece’s exit may become the euro’s envy

The Greek Crisis: Greece’s exit may become the euro’s envy

The Greek Crisis: Greece and the euro: What's next?

The Greek Crisis: Greece and the euro: What's next?

The Greek Crisis: Fear grows of Greece leaving euro

The Greek Crisis: Fear grows of Greece leaving euro

The Greek Crisis: Martin Rowson on Greek attempts to form a government and the eurozone crisis

The Greek Crisis: Martin Rowson on Greek attempts to form a government and the eurozone crisis

The Greek Crisis: The eurozone must shrink to survive

The Greek Crisis: The eurozone must shrink to survive

Is this the End of the Commodity Super Cycle ?

End of the Commodity Super Cycle ?

Is the beginning of May 2012 the end of the Commodity Super Cycle ?

I possed this question to Mr Ruchir Sharma at his presentation "Breakout Nation" LSE on 30 April 2012 and following his presentation I suggested that we pencil in this date as the beginning of the end of the Commodity Super Cycle.

Listen to the presentation

http://www2.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=1449

The Key reasons for an end to Commodity Super Cycle as discussed in the presentation plus my own thoughts and analysis

1. High commodity prices have resulted in many new mines being developed and have taken many years to come on-stream.

2. China's rapid growth has come to an end. Lower overall demand will feed into commodity producers constantly accepting lower prices, rather than has been the case in recent years of producers dictating prices.

3. The Euro-zone is now clearly back in Recession, with little prospect for rapid growth.

4. High commodity prices have depressed overall disposable income and feed into lower overall consumption. In the coming years overall demand for commodities will be well below the levels we have recently seen as the growth of the developing nations slows considerably.

5. The Commodity producing countries, have seen large capital inflows with their currencies now far too strong, resulting in loss of productive competitiveness. Australia Brazil  case in point.

6. The Financialization of commodities is coming to an end. I suggest that we are now entering a phase similar to 2008, although this time the general public will not stomach the bailouts of Financial Firms and we will soon witness a financial crisis much worse than 2008. In 2008 several big named financial firms were able to use "Bailout Money" to stock-up on Commodities, but this time that luxury will not be possible as their own financial survival depends on liquidating everything.

7. Consumers in the Developed world have altered their behaviour and now are very concerned about purchasing fuel efficient vehicles, using public transport as an alternative, walking and cycling. This can clearly be evidenced with Western European oil demand now below consumption recorded in 1994.

8. Renewable Energy, while still in its infancy provides a glimmer of hope that the renewable energy industry will be a growth area, leading economies out of the Current Depression including Greece, resulting in lower overall demand for traditional coal and oil.

9. Recycling and reclaiming materials is growing as more efficient methods of processing recycled materials are developed, reducing the need for the extraction of raw commodities. Consumers are also playing their part with a Boom in mend and repair.

10. High Food Prices have been forcing city dwellers to either Grow Their  or Own, local community food growing or has recently been cited in Greece returning to farming as a way of earning a living.  Improved climatic factors will also improve crop yields in the coming years.

Crude has collapsed over $10 in little over a week. I suggest that in the coming weeks with no stable government in Greece, just like we saw in 2008, there will be rapid unwinding of Commodity Contracts and it will be a race to the bottom.

Time will only tell if the analysis is Spot On.

You be Judge and Jury.

All I can offer is that the quicker the Commodity Bubble Unwinds, the quicker the world's economic engine will spring to life.

I will leave with one final thought

The Book "Breakout Nation" by Mr Sharma offered a set of principles in identifying countries with potential to be new growth Nations. I suggest Greece could be that New Economic Miracle and could easily take-over from China in being a production powerhouse for Europe, once Greece exits the Euro.

The Economic Solution for the World Economy

Just like in the Great Depression in the 1930's we are now 80 years on and are struggling to find the answers that will lead the World Out of the most severe Economic Downturn since the Great Depression that was thought unimaginable only a few years ago.

While I do not purport to have all the answers, it is time for some exceptionally radical thinking.

We have all subscribed to Keynesian philosophy over the years and there is No-Doubt it has served us well up until now.

But I am sorry Keynes, "It is Different This Time"

Since 2008 Governments have done everything they can, to stem the destruction of the Capitalist system as we know it, but nothing is working anymore we have ZIRP, TARP, EFSF etc, Trillions in money printing and countless government funded fiscal programs and yet prosperity for all seems still a mirage for the many.

Sovereign Nations are now at risk, that will set off a chain of events should Greece fall, very similar to the Failing of the Austrian Bank Creditanstalt during the Great Depression in 1931.

However, we simply can't continue Bailing Out the system, so as painful as it may seem, the economic destruction of allowing a Country to fail such as Greece will quickly start to cleanse the system.

While Keynes advocates more Government spending financed by borrowing and more money printing, surely to all who can see, "This is not working this time Keynes!"

Although I appreciate Professor Krugman claims there was not enough spending and we should be spending even more, but shall Governments keep digging until they find the pot of Gold buried somewhere beneath the earth ?

While I appreciate they are Theories and Ideas at the moment, I advocate the following :

1. An immediate establishment of "World Economic Reconstruction Foundation"

2. The "World Economic Reconstruction Foundation" not be owned by Governments, Corporates or Influential Lobby Groups, but be an "INVESTMENT WAR CHEST" owned by society at large through the largest Online "Social Giving Program," using Crowd Funding and Social Media the world could ever imagine. This will act as the catalyst for "NEW CAPITAL" to be born to Invest directly in New Infrastructure World Programs.

3. It is not more Debt the world needs, but a transfer of Capital in a manor that will reinvigorate the Enterprising Spirit within individuals to build a Good and Fair Society, harnessing the enginuity of individual creativity, combined with people's desire to share their triumphs with others. It is a very lonely experience and existence if you are one of the lucky few with vasts amounts of wealth and might have been lucky enough to have been bailed out in 2008. "The Winner Takes All" attitude, no longer prevails, as citizens now realize the only way to take the real prize of prosperity is for citizens to collectively work and co-operate together and share their knowledge, expertise resources and capital with others. The selfish attitude that still prevails among the elite with vast amounts of resources at their disposal, but are so afraid that this time they might not be so lucky to be bailed out, are hoarding capital, "Just in Case," to preserve their own wealth and importance.

4. The Traditional Theory of "Animal Spirits" I would suggest no longer applies to those who may have created their orginal wealth prior to 2008, as now those with Capital or access to Capital are so afraid of failure or loosing their fortune, they do everything possible to preserve their wealth, even if this means well below par expected economic returns by investing in the safety of Government Bonds as there is an expectation that the Government will never default, but will print money instead.

5. I would suggest it is those now with nothing, who have the greatest "Animal Spirit" to take that risk if given the opportunity with even a small slice of Capital and resources, who will be the future leaders of tomorrow and lead the World out of such a terrible Economic Depression. It is a misnomer to conclude that our so called "Star Financier's" have the Animal Spirit, when there is the State backstop or they realize next time the State might not bail them out, increasing the opportunity of only "Very High Probability  Investing such as Government Bonds at practically Nil %"

6. In the past several years, Traditional wisdom has so far focussed on encouraging those who have already substantial wealth to Invest and create New Jobs. This theory in practice is clearly not working, as those with wealth are simply so afraid to take a risk and invest for fear of a potential loss, that they have lost the so called "Animal Spirit." Or alternatively those with wealth have succumbed to the expectation of Government hand-outs to re-ignite the economy as Keynes advocates, that they are waiting in expectation of the next Government hand-out before investing further. Just this weekend in the UK papers there was a war of words between Government and Big Business, each blaming each other and asking each other to get on and do something.

7. Central Banks have flooded the system with money and yet this money has not trickled down to the real economy and the Velocity of Money is at a near stand-still in the real economy. I have a theory that as Big Government and Big Business has evolved and the dominance of the Financial Setor has over-powered everything, there is no Velocity of money to keep the economic engine purring in the real economy. The only Velocity of money occurring is the many micro second transactions occurring daily in the Financial Sector. (Just look at MF Global the week before it went bust $105 Billion Cash went through its Accounts, this is an astonishing velocity of money, that does not hit the real economy),

7. What can we all Do, You Say ?

This time I believe it is up to society to stand up and do something, Governments have done all they can, Big Business could do more, but this time it is up to all citizens to Rise up to the Challenge.

As proposed establishing "World Economic Reconstruction Foundation" would be the start

Harnessing the Internet and modern Technology for "Social Giving" into a War Chest for Investment in the World on such a Grand scale it will make Roosevelts "New Deal" look relatively insigniifcant.

If you would like to be part of this World Project and for Colletive Minds, then I welcome you all to play a role in shaping the future and we can all look back and say this was the real turning point when we all shared ideas, knowledge, capital resources to re-build the world economy.

The Future is in all of your Hands, and we are going to need all sorts of people from IT, Finance, accounts to marketing, to project planning, HR etc etc to turn an idea and the theory into reality, I look forward to hearing from you all.

Post a comment or email werf@londoncity.me.uk

Toby Chambers
Economist and Social Entrepreneur

I challenge you all to Now Rise Up to the Challenge and unlock the Enterprising Spirit within