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Monday's Top 10 with NZ Mint: Poland and The Czech Republic oppose German expansion; Niall Ferguson and the 'clueless German'; Kim Jong Il vs Hans Blix; Dogs out car windows; Dilbert

Monday's Top 10 with NZ Mint: Poland and The Czech Republic oppose German expansion; Niall Ferguson and the 'clueless German'; Kim Jong Il vs Hans Blix; Dogs out car windows; Dilbert

Here's my Top 10 links from around the Internet at 6.30 pm in association with NZ Mint.

I welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.

I'll pop the extras into the comment stream. See all previous Top 10s here.

Some light relief today at numbers 8, 9 and 10.

1. Now the revolt has started - It's been just over a week since European leaders agreed on a 'Fiscal Compact' designed to harmonise fiscal policies across 26 of the 27 European Union countries.

The aim was to reassure investors that Europe would be 'responsible' this time around, to ensure a single fiscal policy could be created to match a single monetary policy. They seemed to forget they ignored a similar arrangement set up last century.

But it was hamstrung from the start by Britain's decision to reject the plan.

Even though it's not part of the Eurozone, Britain's rejection made the plan much harder because it meant the 'Fiscal Compact'  would have to done separately from the European Treaty, raising the prospects of new debates, parliamentary votes and referendums.

Now it's all starting to unravel.

Ireland is threatening to have a referendum unless its debt burden is eased by the European Union.

The Telegraph reports Poland, Hungary and the Czech Republic are against the plan.

Poland and The Czech Republic are against German plans to take over tax policy...there's some history there of resisting German expansion into Poland and Czechoslavakia...

Amid fresh warnings that Europe is triggering a 1930s-style global depression, the German chancellor faced open rebellion against the key plank of her Brussels accord. The leaders of Hungary and the Czech Republic told a joint conference in Budapest they were ready to reject the planned treaty changes and implied move towards a centralised tax system. Czech prime minister Petr Necas said he was “convinced that tax harmonisation would not mean anything good for us”.

Hungarian prime minister Viktor Orban said that central Europe had the potential to become the most competitive region in Europe.

“The only kind of co-operation we can have with the eurozone is one which does not damage Hungary’s competitiveness,” he said.

Poles marched under banners that read: “We want sovereignty, not the euro.” They were protesting against the Brussels deal that could see EU countries, including those outside the eurozone, face penalties for breaking tough centralised spending laws. Britain used its veto in Brussels, sparking an intense backlash. Ireland and Sweden are also nervous about the fiscal pact, but Germany and France still expect the other 26 members, minus the UK, to approve it.

2. The 'nuclear option' - Ambrose Evans Pritchard reports at the Telegraph that some elements of Portugal's opposition are threatening a default.

"We have an atomic bomb that we can use in the face of the Germans and the French: this atomic bomb is simply that we won't pay," said Pedro Nuno Santos, vice-president of the Socialist Party in the parliament.

"Debt is our only weapon and we must use it to impose better conditions, because recession itself is what is stopping us complying with the (EU-IMF Troika) accord. We should make the legs of the German bankers tremble," he said.

The comments came as Portugal slides deeper into recession, with the economy expected to contract by 3pc next year. Protesters marched through Lisbon on Thursday denouncing plans by the new conservative government to raise the working week to 42 hours. Wages are being cut 16pc for higher paid, and 8pc for lower paid public workers.

3. Niall Ferguson hammers the Germans - Here's the world's most popular economic historian talking to Andrew Patterson on Radio Live's Sunday Business about the global crisis and the potential for a lost decade.

He attacks the Germans for being clueless and Eurocrats for creating a Doomsday machine. He says the Germans are focused on the lessons of 1923 (hyperinflation) when the correct comparison is with 1931 (Depression).

He says the euro has days or weeks to live. He says US Treasuries are about as safe as Pearl Harbour was before the Japanese attacked. The good professor doesn't pull his punches. Good.

4. 'No urgency' - Further to the above, Bloomberg reports the Bundesbank doesn't seem very concerned about the impending end of the euro's world.

The Bundesbank said it sees no urgent need for a decision on a loan to the International Monetary Fund, suggesting the Dec. 19 deadline set by European Union leaders may be missed.

“We don’t see an urgent need for a final decision,” a spokesman for the Frankfurt-based Bundesbank said by telephone. “We want to evaluate the whole situation.”

EU leaders decided at a Dec. 9 summit to channel an additional 200 billion euros ($261 billion) in loans to the IMF so that it has the resources to help fight the euro region’s debt crisis. Central banks from the 17 euro nations would provide 150 billion euros and 50 billion euros would come from EU members outside the currency bloc. Bundesbank President Jens Weidmann has said the German central bank is ready to contribute as much as 45 billion euros if certain conditions are met.

5. The banks won't help - The thought that the ECB might sneakily encourage European banks to use cheap three year loans from the ECB to buy European bonds is fading fast, The Economist reports.

A few months ago, banks in peripheral countries were only too happy to fill their vaults with bonds issued by their own governments. The feeling at the time was that the banks would live or die along with their home countries so there was little point in trying to mitigate the risks. Moreover, most peripheral banks have seen their funding costs soar. They had little choice but to buy government bonds with similarly high yields. “What else can I do,” said the boss of a big Italian bank, in relation to its large holdings of Italian government bonds.

That ardour has cooled since the end of October, when the EBA first asked banks to set aside extra capital against the possibility of losses on euro-area government bonds. Some bankers now fret that their accountants may force them regularly to “mark to market” their holdings and set aside capital if bond prices fall. That would prevent even the most troubled banks from gambling for redemption by taking big bets on bonds.

Banks from richer countries will be even less inclined to help out. “Foreign banks have been prepared to take large charges to sell ‘toxic’ foreign sovereign debt, so the idea that they would reload seems fanciful,” says Jon Peace, an analyst at Nomura. Governments hoping for a helping hand in bond markets will have to look farther afield than their own tottering banks.

6. Kim Jong Il is dead - Here's my favourite Kim Jong Il video, courtesy of Team America...NSFW...HT Gareth.

7. He was lonely - Kim Jong Il was a very lonely man, says Trey Parker and Troy Stone.

8. Especially for your viewing pleasure - Dogs in cars. That is all.

Sometimes I think it would be fun to stick my head out the window of the car with my tongue out with a big smile on my face. Too much information.

It's one for those I think I don't have enough fun in my life.

Dogs in Cars from keith on Vimeo.

9. Especially for your viewing pleasure - This is time lapse photography from the International Space Station from 350kms above the Earth from August to October this year. Simply awesome. Makes me want to be an astronaut for at least five minutes.

Earth | Time Lapse View from Space, Fly Over | NASA, ISS from Michael König on Vimeo.

10. Totally relevant video that's worth watching again - John Clarke and Brian Dawe from 18 months ago on the European crisis. Remarkably prescient and fresh, yet still repetitive, all at the same time.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

88 Comments

FYI from the Guardian on the bank run in Greece:

http://www.guardian.co.uk/business/2011/dec/16/greeks-fearing-collapse-…

An unprecedented exodus of capital from Greece – peaking in a record number of withdrawals from banks in recent months – has exacerbated the liquidity crisis now wracking the recession-hit country.

The latest figures released by the Bank of Greece reveal that in September and October alone investors pulled €12.3bn (£10.3bn) from domestic banks, spurred by fears of political uncertainty and economic collapse.

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And here's the International Financing Review on banks stopping taking trades from other banks.

http://www.ifre.com/counterparty-fears-see-dealers-refuse-trades/162030…

Creditworthy banks are increasingly turning down client requests to take on trades from weaker institutions, as dealers focus on handling their own exposure to vulnerable banks.

“We’re left with no choice but to stop accepting these novations, because there’s a limit to how much exposure you can take from a regulatory perspective, and also because we want to keep bilateral credit lines free in case [the eurozone crisis intensifies],” said the head of fixed income at a more creditworthy bank.

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Nothing to worry about Bernard, according to your website's publishing of Roger Kerr's opinion that NZ is pretty much decoupled from Europe and heading into a strong 2012  

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Roger's opinion.

We have a few on the site. Happy to let the people decide.

cheers

Bernard

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Yes although some editorial discretion as to the quality of opinion is perhaps required (I think the basis of most of Kerr's opinions is pretty weak and poorly substantiated).... the same could be said for Mr Newland's ramblings, although I guess his at least have value in that they get debate going......

hey, your call, good sir!

small moan, its still a great website!!!!!!

 

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"... the same could be said for Mr Newland's ramblings, although I guess his at least have value in that they get debate going..."

Not only that; unlike several others, Mr Newland's predictions tend to come true too...

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Cheers Matt.

We love a good debate here.

Our doors are open

cheers

Bernard

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Ollie's " ramblings " are an informative fleshing out of his argument that most residential properties should continue rising in price , but not that they will do so forever ,  without an extended period of stagnation , somewhere ahead .

..... and I applaud you , Bernard , for bringing Mr Newland to us ..... it's awesome to have one prognosticator around , who has been getting it right on the money  ...... isn't it Bernard ? ....

.. . Bernard , ... don't cry !

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Olly's promotion and use of fraudulent fractional reserve money amounts to him either being too stupid to understand it, or undertaking a deliberate action with criminal like motives. There is no other option.

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And this from Zerohedge

the UK's consolidated debt (non-financial, financial, government and household) to GDP is... just under 1000%. That's right: the UK debt, when one adds to its more tenable sovereign debt tranche all the other debt carried on UK books (and thus making the transfer of private debt to the public balance sheet impossible), is nearly ten times greater than the country's GDP.

 

http://www.zerohedge.com/news/psssst-france-here-why-you-may-want-cool-…

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Yes, but that's because they are the World Financial Centre, where East meets West meets Middle East. Like Iceland but bigger so it doesn't matter.

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And this from the ECB's new boss Mario Draghi on thinking the unthinkable of a eurozone breakup, via the FT

http://www.google.co.nz/url?sa=t&rct=j&q=draghi%20eurozone%20break%20up…

Mario Draghi has warned of the costs of a eurozone break-up, breaching a taboo for a president of the European Central Bank, even as he sought to play down market expectations about the ECB’s role in combating the sovereign debt crisis.

Mr Draghi’s willingness to discuss a scenario for Europe’s 13-year-old monetary union that his predecessor, Jean-Claude Trichet, simply described as “absurd,” highlights the high stakes in the eurozone debt crisis, which has rattled global financial markets.

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Bernard : In the 2 or 3 millennia  preceding the Euro & the Eurozone , did they not survive in Europe , did they all succumb to death , disease & poverty , due the lack of a unified currency ?

...... is the EURO as necessary to them as is  fresh air & water ...

.. . have the last 13 years of the Euro been the only period where civilisation reigned supreme and businesses profited , in all of  Europe ?

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Gummy

Quite right that Europe existed before the euro and will after.

The trouble is the transition. If it breaks up in an uncontrolled fashion banks will fail and worse.

;)

cheers

Bernard

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Didn't we have a dark ages from the 5th to 15th century? There was, prior to that, a Greek Dark Ages between the Mycenaeans and classical Greece.

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Good opportunity for South Korea, Taiwan, & USA to get stuck in & take-over North Korea & rescue a few million starving people.          And upset China at the same time ....

Ok,   there's a few risks involved ..... but it would get our minds off other depressing financial stuff .... probably a few stocks would go through the roof ...

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Yes, the Americans have just left Iraq, so theres all that spare millitary needing another war.

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Careful what you wish for. The Vietnam war saying "in order to save the village we had to destroy it" comes to mind.

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Come on Bernard, that is a re-run of Fred Dagg. I still laughed though:)

 

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God bless the Czechs and Poles.

There is something about being under the socialist boot heel for a few decades against your democratic will, that really, really clears the thinking faculty.

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Clearly the Czechs & the Poles have longer memories than the French do ...  Meebee the French didn't suffer at the heel of the jack-booted fascists & socialists for so long as Poland & Czechslovakia did .......

...... they're making up for it now though , thanks to the pygmy prat PM , Sarkosy ......

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We forget that Europe suffered 1939/1940 to 1945 under the Nazis; then Eastern Europe suffered 1945 to 1989 under the Commies........

Our lefties in the media and teaching institutions haven't got anywhere near as strong a judgement of the latter, as of the former, hence Che T-shirts are actually cool in spite of him being Communism's equivalent to Reynhard Heydrich or Martin Bormann........

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A former landlord of mine, a bloke in his late 50s at the time, wore a Che Guevara t-shirt whilst trying to screw me into paying his electricity bill.  Had to laugh at the irony.

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Absolutely. Stirring stuff. Britain stands alone, but doesn't agree with the French to sell out the Czechs first this time. That was such a source of shame to my parent's generation, you have no idea.

It is tempting to dismiss the WW2 analogies but they were specific instances of the way empires are created. It all seems so easy to give up sovereignty to the biggest economy of the day.

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'Teds brain is where knowledge goes to die' Ha! Gold.

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North Korea   24 million -   70% below the poverty line.  Malnutrition & starvation is rife ...

Schools spend most of their time on the teachings of the two Kims, their biographies and ruling-party history. Feature movies and documentaries about the two leaders make up 20 percent of the broadcasting time on television and radio.

"If you inculcate juche and other beliefs over decades, you start to have a self-fulfilling prophecy," said Andrew O'Neil, a senior lecturer in international studies at Australia's Flinders University. "From what you hear, a lot of people really believe the U.S. is going to invade tomorrow and their best defense is nuclear weapons."

But the population continues to suffer from prolonged malnutrition and poor living conditions. Since 2002, the government has allowed private "farmers' markets" to begin selling a wider range of goods. It also permitted some private farming - on an experimental basis - in an effort to boost agricultural output. In October 2005, the government tried to reverse some of these policies by forbidding private sales of grains and reinstituting a centralized food rationing system. By December 2005, the government terminated most international humanitarian assistance operations in North Korea (calling instead for developmental assistance only) and restricted the activities of remaining international and non-governmental aid organizations. In mid-2008, North Korea began receiving food aid under a US program to deliver 500,000 metric tons of food via the World Food Program and US nongovernmental organizations; but Pyongyang stopped accepting the aid in March 2009. In December 2009, North Korea carried out a redenomination of its currency, capping the amount of North Korean won that could be exchanged for the new notes...

In December 2009, North Korea carried out a redenomination of its currency, capping the amount of North Korean won that could be exchanged for the new notes, and limiting the exchange to a one-week window. A concurrent crackdown on markets and foreign currency use yielded severe shortages and inflation, forcing Pyongyang to ease the restrictions by February 2010. In response to the sinking of the South Korean destroyer Cheonan and the shelling of Yeonpyong Island, South Korea's government cut off most aid, trade, and bilateral cooperation activities, with the exception of operations at the Kaesong Industrial Complex.

10,000s of political and religious prisoners suffer torture & deprivation in NK. 

I was deeply shocked by the demeanor and appearance of the young North Korean woman in the video link below. She seems utterly defeated and on the edge of death from starvation. Of course I am aware that starvation is endemic in North Korea, but seeing this rare video footage really brings it home:http://www.abolishtorture.com/shocking-scenes-of-poverty-in-north-korea/

 

What is the world community doing?   Not much.

Philbest not the only one who can fill large qtys of txt....

 

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On North Korea;

The master polemicist Christopher Hitchens, who missed seeing Kim Jong-Il's death by only a day:

http://www.vanityfair.com/politics/features/2001/01/hitchens-200101

It would be hard to better that, as an incisive judgement of the Kim regime.

 

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Briefing on the possibility of US dollar collapse resulting from the sovereign debt crisis http://outerdnn.outer.jhuapl.edu/rethinking/VideoArchives/MrJamesGRicka… (long but worth it). 

Outrage was expressed by one of the attendees who has seen the documentary "inside job" so that's on my list now. 

Interesting that the effect of paying for oil in US dollars (or peak oil) is not mentioned once.  For that see here http://www.youtube.com/watch?v=0CofEbxtIxI&feature=relmfu.

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Hey Bro I wanna my money back...

 "Nearly all Maori Television staff will receive a $1000 bonus in time for Christmas, at a cost of $150,000 to the taxpayer-funded station.

But chief executive Jim Mather said his staff - 150 are in line for the payment - were worth every penny.

Executives already have bonuses built into contracts and are not eligible. However, seven leaders including former TV3 newsreader Carol Hirschfeld, who is now a general manager at MTS, will share $145,000" herald

That this splurging waste continues is shameful John Key...It should have stopped with the departure of Clark...you kept it going...

So how much are the "executives" taking out of the consolitdated fund...money stolen from taxpayers?

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Heya Wolly.

I run a small private sector business, and all my staff have done a great job.  We'll probably pay a bonus in the near future.  Maybe my clients should ask for a refund too, since we obviously have money to waste in rewarding our hard-working staff.  :)

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Sure if MTV was profitable and had a good year they should get a bonus.  Thats a big IF BTW.

I don't mind make work schemes, but a bonus for being involved in a make work scheme?

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Look at bonuses as part of an overall wage package.  maybe the base wages at MTV is lower than other tv places and bonuses act as an incentive?

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  • The majority of people probably won’t agree (yet) with much of this paragraph, but we are in a chain of events where the direction of travel is: INFLATIONISM - INTERVENTIONISM - SOCIALISM - REDUCED LIVING STANDARDS - TOTALITARIANISM. Elements of all of them are already present to a greater or lesser extent, as I’ll discuss. Of course, the earlier ones, inflationism and interventionism (which Ludwig Von Mises described as “socialism by installments”), are the most obvious. What we are experiencing was prophesied in fictional form by Ayn Rand in her masterpiece “Atlas Shrugged” when it was published in 1957. I’m reading it and it’s amazing.  
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    Inflaton seems to be moribund , as does socialism . Government interventionism is up , sadly . And the increase in the standard of living is slowing . Totalitarianism is waning  ......

    ....... anywhichway you look at it ...... things are blooming marvellous , currently !

    Good to be alive ( beats the crap out of the alternatives ! ) ......

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    Inflation is the only policy of central banks, and governments around the world.  With the purely optical exception of the Germans.  Every tool they have and all their combined efforts are for this singular purpose.  They will not fail.

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    I find the deflation argument a tough one to follow. In the Clark/Cullen era our money suply increased by up to %15pa, I think the high was in 2007. That is why asset prices went crazy, wages couldn't keep up because of globalisation. Young men with no skills purchased property and made a fortune doing absolutly nothing, many thought they were incredibly clever, and that they could continue all their lives making fortunes and charging others to tell  their 'big secret'.  All good times end, the good news is that the bad times don't last forever either, it pays to remember this.

       Thge problem is that over the Clark/Cullen time we were socialised, WFF etc... massive local council blowouts and a insidious corruption filtered into our  civil service. Its not called corruption but lets face it the system now funtions to benifit those in it and to me thats a slippery road to hell. Even the RB is now there to protect the banks even if its at the cost of savers, wheres the morality in that?

      In Germany they had an inflationary event and the currency value evaporated, what we dont talk about is the deflation that followed and that was when the real damage was done, its why the central bankers are terrified of it, they want to keep their heads but they have already commited the sin.

     Im going to leave the Deflationary story to Ambrose E-P in some comments on an article of his.

     


    ambrose_evans_pritchard

    5 hours ago

     

    Gemma,

    This has gone way beyond banks. Powerful macro-economic forces are at work.

    Europe is hurtling into a deflationary disaster.

    If you go back to 1931 you would be amazed how many people were still rabbiting on about the inflation risk. Many of those in Germany in the Bruning administration making such arguments   would soon be shot -- literally -- as the effects of their policies destroyed Weimar.

    German democracy died because of deflation, not inflation. The Germans have forgotten that.

     

    They are now imposing exactly that outcome on the South.ambrose_evans_pritchard

     

    The great inflation was in 1923. Much the same happened in France, Belgium, and Poland. Essentially the middle class was badly hit in all countries. Nothing special about Germany in that respect (10,000pc inflation is the same 100,000,000,000pc  inflation. It makes no difference at that point)

    Germany recovered very fast and then had a roaring credit boom in the late 1920s (financed by excess US capital under the deformed Gold Standard, a near exact replica of German finance for Spain under the deformed EMU Standard),

    The Bruning deflation was in 1931-1932. It was the July Reichstag elections in 1932 that killed Weimar. The Nazis and Communists together won half the seats.

    There are masses of books. I like Eichengreen's Golden Fetters for the macro analysis, and Lords of Finance is a good read.

    If you want to go much further, you need to read German

     

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    AJ -  apples with apples - did the 'massive' social spend increase yoy by more than your quoted 15% pa?

    Actually, read "Insanity Fair", Douglas Reed, 1938, it's in English, by a good reporter (there weren't many then, and there aren't many now). He was outside the Reichstag as the perpertrators emerged from the tunnel.....

    And you'd better justify the statement that 'the bad time don't last forever', too.

    :)

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    Hi PDK, I dont feel that I have to have a lot of cheap crap to make me happy. The wife of my youth, the pleasure of a good days work , a lass of wine  good friends, food and warmth is all i need. Im putting in a woodburning oven, a few solar panels and  preparing for a simpler life, not a poorer one.

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    I had a copy of that too, but loaned it out and lost track of who to........

    I'm going to put up some clips of our pacific sojourn on youtube shortly - you'll enjoy them I think!

    Enjoy the summer and the wine. (last of?)    :)

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    Look forward to seeing them.

     Thanks for the book looks a cracker but bloody expensive to buy, I will try to download it on my Kindle 

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    I could post you my copy - as long as it boomerangs.....

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    Thanks PDK, i downloaded a summary, great writting so I ordered one of Abe books, thanks for putting me onto Neville Norway too, enjoyed Slide rule.  Have a great X-mas, Andrew

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    I remember a quote in the Times years ago

    " I have a wonderfull Library,however I never lend books for my library consists of books I've borrowed from other people"

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    The same Douglas Reed that wrote "The Controversy of Zion"?  And what's up with that?  True or not.  Downloadable, I downloaded it and read a bit and controversy it is for sure, must have another crack at it.  Atlas shrugged on the other hand bought it a while ago and I simply couldn't get into it.

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    There's heaps of copies listed at AbeBooks for less than US$10.

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    good site, eh?  Fatal for addicts....

    Having tried for nearly five years, consistently and hard, to get the NZ media to grasp (or rebut, but they haven't done that either) a simple message, I empathize with his frustration.

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    Always the first stop if looking for a hard-to-find book.  As if i needed any more.

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    Strange that they and indeed many others wont engage, I get hat all the time Ive given up mostly...its like watching their eyes glaze over .....I think its fear......they have nothing else...or they laugh at you (well me). If they have to accept it I think they will act like a drowning man.....panic and thrash about and drown anybody who tries to help in the process.....

    regards

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    I just finished Slide Rule a week ago PDK. Interestingly the good lady met Mr Minto of "Minto Bar" fame in the course of her duties recently. He recommended the same book:) Funny thing my Dad read it again (he has his entire works) but didn't get the big picture.

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    Who wrote slide rule?

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    Neville Shute (Norway) It is an autobiography but a large part of the book is devoted to his experience designing and building an airship. The project is probably the first and only direct comparison of the same project undertaken by private enterprise and a government department simultaneously. Highlights the hazards of politics:) Fascinating read.

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    Hey thanks.  I got there via google also :) I've read a couple of his other books.  Reading "Far and wide" at the moment, Douglas Reed writes well. 

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    your a champion, thanks

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    When you look at say the lifestyle of the Amish (ignore the religious bit) simpler doesnt mean less happy IMHO...

    Im aiming for a woodburner as well...but I need a spot to stor ethe wood first so I need to plan a bit....

    regards

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    You must be living in a relatively low density area if you are putting in a woodburner.

    London smogs used to kill several thousand people every winter before they eliminated fireplaces in favour of what they called "Coal By Wire". i.e. electricity.

    By the way, burning coal to generate electricity on a large scale with top technology, emits virtually no "particulates" - only CO2 is a "problem" - at least if the IPCC is right.

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    Skudiv, Im very cautious when I listen to people who have made their money as part of a corrupt system. What these bankers and traders want is to scare the hell out or the Fed and get them printing, their world is falling apart and they need QE 3-4-5-6-7.

     These people go to work behind computers and make fortunes of other peoles hard work by manipulating markets, charging fees and creating new financial instruments. That world has finished and what can they do now? Get a proper job? There is a hell of a lot of them they are part of the new way, but now the 'Gods of the copy book headings with fear and slaughter return'

    >>>>

    The the Gods of the Market tumbled, and their smooth-tounged wizards withdrew,



    And the hearts of the meanest were humbled and began to belive it was true



    That All is not Gold that Glitters, and Two and Two make Four---



    And the Gods of the Copybook Headings limped up to explain it once more







    As it will be in the future, it was at the birth of Man---



    There are only four things certain since Social Progress began:---



    That the Dog returns to his Vomit and the Sow returns to her mire,



    And the burnt Fool's bandaged finger goes wabbling back to the Fire;



    And that after this is accomplished, and the brave new world begins



    When all men are paid for existing and no man must pay for his sins,



    As surely as Water will wet us, as surely as Fire will burn,



    The Gods of the Copybook Headings with terror and slaughter return!

        http://wolfpangloss.wordpress.com/2007/10/24/kipling-the-gods-of-the-co…
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    It's true they need QE to infinity, and we don't matter.  There will be more debt creation, and credit instruments will fall one after another from CDO's MBS's right down to good old US treasuries. 

    I agree with Kipling it's just a cycle, nature loves cycles, spring summer autumn winter, ice age, tropical age, big bang- big crunch.  Population explosions, and decimations. 

    This is why I advocate getting out of the monetary system, and buying physical assets.  Because we are not going to get a Technocracy.

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    God of our fathers, known of old—
    Lord of our far-flung battle line—
    Beneath whose awful hand we hold
    Dominion over palm and pine—
    Lord God of Hosts, be with us yet,
    Lest we forget—lest we forget!

    The tumult and the shouting dies—
    The Captains and the Kings depart—
    Still stands Thine ancient sacrifice,
    An humble and a contrite heart.
    Lord God of Hosts, be with us yet,
    Lest we forget—lest we forget!

    Far-called our navies melt away—
    On dune and headland sinks the fire—
    Lo, all our pomp of yesterday
    Is one with Nineveh and Tyre!
    Judge of the Nations, spare us yet,
    Lest we forget—lest we forget!

    If, drunk with sight of power, we loose
    Wild tongues that have not Thee in awe—
    Such boastings as the Gentiles use,
    Or lesser breeds without the Law—
    Lord God of Hosts, be with us yet,
    Lest we forget—lest we forget!

    For heathen heart that puts her trust
    In reeking tube and iron shard—
    All valiant dust that builds on dust,
    And guarding calls not Thee to guard.
    For frantic boast and foolish word,
    Thy Mercy on Thy People, Lord!

    - Kipling, "Recessional"

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    But each round of QE has to be bigger than the last, its anothe exponential curve. The banks may want a bit of inflation but they dont want the value of their assets destroyed.  The sin of cheap money is history and problems like this don't improve with time like a good wine.

     

    >>>>>>>>

     

    The profound words of Austrian School economist Ludwig von Mises drive right through the soft underbelly of fiat currency-based Keynesianism:   “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”       According to the theory, the business cycle unfolds in the following way: Low interest rates tend to stimulate borrowing from the banking system. This expansion of credit causes an expansion of the supply of money, through the money creation process in a fractional reserve banking system. It is asserted that this leads to an unsustainable credit-sourced boom during which the artificially stimulated borrowing seeks out diminishing investment opportunities. Proponents hold that a credit-sourced boom results in widespread malinvestments. In the theory, a correction or "credit crunch" – commonly called a "recession" or "bust" – occurs when exponential credit creation cannot be sustained. Then the money supply suddenly and sharply contracts when markets finally "clear", causing resources to be reallocated back towards more efficient uses.
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     later as a final and total catastrophe of the currency system involved.” 

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    I dont think so, that would be heads on spikes stuff.

    >>>>>

    President Wulff helpfully reminds us of the moral dimension of money, something usually overlooked. 

    What is money, after all, but an expression of moral value, above all an expression of confidence about trust and integrity? Not merely now, but based on hard-won reputation for reliability in preceding generations, and echoing down the decades still to come 

    Who wants to be paid in North Korean or Zimbabwean or Cuban currency? No-one. 

    Why? Because that currency is an expression of cruelty, inefficiency, waste and stupidity. It is literally worthless for most practical purposes.

    "Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. 

    Those pieces of paper, which should have been gold, are a token of honor -- your claim upon the energy of the men who produce. 

    Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money."

     

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    If they don't continue on with the unlimited government bond purchases, its Ponzi Game over.  If they continue there is a loss of confidence in the currency.  We are down to low rated sovereign debt, next is the higher rated sovereigns.  It's all happening, the only things that have worth are real things, and he who buys first buys best.

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    skudiv, Ive thought a lot about this. What missing is money, misallocated investment has left us short of the readies. As long as we are short of money and there is interest being paid into  debts in poor asset allocation and in some cases over capacity then cash will remain king.

     I think Greg Pytel has nailed it, 

    As explained in "The largest heist in history": there is no way of winning with a pyramid scheme. The only way out is to liquidate it. Poland learnt it in the early 1990's, Albania learnt it half a decade later. It is obvious that the western world is learning this in a hard way now. Hopefully it will heave learnt before it is too late. The later it is done the more damage will be inflicted. And if it is not done the pyramid will collapse eventually with spectacular effects. No doubt Zorba the Greek’s applause: "What a beautiful Catastrophe!" will serve amply to describe it.

    http://gregpytel.blogspot.com/

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    What Im trying to say is the only option I see, is destruction of debt.

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    Ok so you are holding some French bonds, and you see Portugal bondholders get a haircut, and you know france is in trouble because of the daisy chain/dominoe affect through the banks that were holding portuguese debt, as well as french debt.

    You sell your french debt, and buy german, french interest rates go up, and it is looking for some emergency "funding".  This will affect germany, so you sell german bonds for UK bonds.

    As the daisy chain unwinds there is more and more money, seeking fewer and fewer assets.  The debt will be destroyed, but there is also still a load of money out there that is not backed by capital.  Where is it going to go?  Not stocks, profits will be way down in that enviroment, coorporate debt, unlikely.  What are the only SAFE assets, when debt destruction is occuring?

    Or if you were a bondholder, would you just hold your bonds as they are defaulted upon?

    Biflation.  Crap is unlikely to go up in that enviroment, but value, income, commodities etc, these are where the money will end up.

    Of course without debt destruction, everything will rapidly go up in value even crap.

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    I wouldn't own anyones bonds.  I think we will continue to see deflationary pressure, once that has happened then we will start to have to face other issues such as enery and unsustainable growth, falls in the average standard of living and socila problems. Im staying in cash, fingers crossed and all that. I already have 300 acres debt free and im slowly making it  self sufficient, however I  could live  a reasonable lifestyle now. The problem comes about when some one else tries to take what is mine, now i need community.

     

    http://media.zenfs.com/en_us/News/ucomics.com/dt110731.gif

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    Sure, I don't think there will be across the board deflation though, oil, gold, silver, and high quality land, central city rentals with good cashflow.  Cash is good for buying things, thats about it.

    I like the self sufficient, freehold land bit too.  How are you planning to store energy?  Batteries?  Honest question, I have been looking at this, because I'm planning on building a house, wind and solar are great but how do you store the excess power?

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    Ive planted trees so I have lots of wood. Im looking at gel batteries, need to talk to PDK about that. May have enough fall for a pelton wheel even if it only works in the winter and spring months, its when I would need it most. Ive given up on wind, we dont get much here and all the wind turbines ive seen give trouble. I have a dam I could enlarge which would give me back up water for a pelton wheel that would last a fair while. My new stove will do the hot water and cooking but Ive a pressure water system so Im looking at some kind of gravity feed system but its going to cost me a fortune. Led lights will give me light when I need it, food Im covered for ,even built a cage so the birds dont nic all my vegies, the orchard is 2 years old, got a smoker and we are already onto bottling.

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    I like it.

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    For self-sufficiency technology should be simple IMHO, batteries and solar are too complex and expensive to produce and upkeep longer term...so simple....potentail energy....water storage aka dam....pump the water up....use wind....any wind power not used immediately in the house use it to pump water to high level.  Ditto Insulation...low tech, indestructable...

    I think reading up and deploying low tech stuff the best value IMHO.

    LEDs while a complex thing are pretty much indestructable and very low energy use...

    I watch what our rabit eats per week as a pet he consumes at least one day's worth of veg.....he'd feed us for one meal.....so in energy terms meat is a luxury......

    Im growing high value things....I only have a small piece of land so I figure barter has more potential value than commodity crops....in the mean time I eat the stuff.......

    :D

    regards

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    No bonds in the EU look safe at the moment......

    "Where is it going to go", well to the US it seems,  in Govn bonds to the extend its negative interest after inflation is taken into account.  Actually I think you are behind its gone to the US Treasuries as the haven of last resort IMHO ie,

    If we see a depression stocks/stocks will collapse, maybe by as much as 80% on Great Depression experience.

    Commodities, well I think we have seen that specualtion already, thats deserted now because commodities have to be sold to someone......and as ppl cant afford to buy then the prices will drop as they are doing....

    Assets? but what assets? say farming? so the farm is returning money, say a fair value is 5million for the farm based on its annual profit/return.....pay 10million and you just lost 50%.....

    Commercial property? its buggered and big time...no one to buy they are all broke, Malls are worthless....residential? well ho hum....50% min loss there....

    No where is ultimately safe except if you are a person with little or no debt and no large investments.....you have nothing to lose.........so in my case say as long as I retain my job deflation is a good thing.....loseit and Im shafted of course.

    Conclusion there just has to be huge writeoffs, either with haircuts or over paying for assets on a huge scale and never getting your money back....based on the returns.

    regards

     

     

     

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    There is still pleanty of money left, that will leave the EU.  Treasuries are as safe as pearl harbour before the japanese bombed it.

    You can't haircut or default a physical asset.  Falling prices will just bring in more buyers.  Gold for example, a drop in price on the paper market has an inverse reaction in the physical market.  ie. as soon as the price drops buying of physical increases.  Paper assets are just promises.

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    So if the Govn bond has a 50% haircut and you buy an asset that only returns an adequate amount for half the value you paid, whats the difference? 

    I cant see one off hand.

    Paper money and gold are promises on energy....so its more debt in effect.

    regards

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    Over an infinite timeframe, no matter what happens to fiat, items of enduring value.......

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    Yep, agree

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    Would you hold the debt, knowing it is going to be destroyed.

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    Which is why ppl are running from teh EU right now IMHO...

     

    regards

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    A major cause of all this, is the willingness of international investors to lend money in the first place.

    Lend money for mortgage finance, because it is safe as houses..........bubble.

    Lend money to governments, because it is safe as the rock of Gibraltar........bubble.

    Was it Warren Buffett who said that sovereign debt was the next bubble, bigger than ever? He was right.

    Investors thinking governments are going to pay back debt..........? What a hoot.

    The chances of politicians paying off debt are correlated directly to the popularity of politicians like Roger Douglas.

     

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    Han's, a middle-aged German tourist on his first visit to Orlando, Florida, finds the red light district and enters a large brothel. The madam asks him to be seated and sends over a young lady to entertain him.



    They sit and talk, frolic a little, giggle a bit, drink a bit, and she sits on his lap. He whispers in her ear and she gasps and runs away! Seeing this, the madam sends over a more experienced lady to entertain the gentleman.



    They sit and talk, frolic a little, giggle a bit, drink a bit, and she sits on his lap. He whispers in her ear, and she too screams, "No!" and walks quickly away.



    The madam is surprised that this ordinary looking man has asked for something so outrageous that her two girls will have nothing to do with him. She decides that only her most experienced lady, Lola, will do. Lola has never said no, and it's not likely anything would surprise her. So the madam sends her over to Han's. The sit and talk, frolic a little, giggle a bit, drink a bit, and she sits on his lap. He whispers in her ear and she screams, "NO WAY, BUDDY!" and smacks him as hard as she can and leaves.



    Madam is by now absolutely intrigued, having seen nothing like this in all her years of operating a brothel. She hasn't done the bedroom work herself for a long time, but she's sure she has said yes to everything a man could possibly ask for. She just has to find out what this man wants that has made her girls so angry. Besides she sees a chance to teach her employees a lesson.



    So she goes over to Han's and says that she's the best in the house and is available. She sits and talks with him. They frolic, giggle, drink and then she sits in his lap.



    Han's leans forwards and whispers in her ear, "Can I pay in Euros?" 

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    AJ - Steven has it right; water uphill is the cheapest, lowest-tech battery. Use wind or solar to pump it up, run it down through a pelton wheel. There are incredible 'inefficiencies' in such a system (pumping uphill, friction, heat loss, transmission etc) but it is as close to sustainable and unbreakable as you can get. Long after lead-acid (or any) batteries become unavailable, you'll be able to cut leather piston-washers for a Renown or similar pump.

    Books - My favourite of all time is Half Safe, by Ben Carlin.

    A more wide-thinking, cynical, capable, resourceful person I have never coma across.

    It'll rock your socks. There's a sequel 'The Other Half Of Half Safe', less common. It can be ordered from Guilford Grammar School, Perth, where Half-Safe now resides.

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    Thanks PDK, Its nice to know steven can be right once:-).  I need to expand my dam, Ive springs that flow 6 months of the year that would power a pelton wheel no problems its the summer that is the problem. I  run anderson piston pumps on the farm so know how to cut the leathers. If I pump to the top of my hill It's about 150 feet above my house so there will be a bit of pressure hopefully should be able to sort something out. How much water dose a pelton wheel need under that much pressure, Im just being lazy easier to ask you than look it up.

     Just read, and recommend;

     

    Deep Survival: Who Lives, Who Dies, and Why    by Laurence Gonzales 
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    Good, practical stuff, I like it.

    Here's another extremely practical person:

    http://en.wikipedia.org/wiki/George_P._Mitchell

    Funds the "Limits to Growth" people. One of the world's biggest funders of sustainability research.

    Launches "The Woodlands" eco-friendly urban development

    http://en.wikipedia.org/wiki/The_Woodlands,_Texas

    Pioneers gas fracking..........

    Yes, that's right. The same guy. Instead of promoting nothing but eco-loony hysteria, he gets off his chuff and gains humanity access to a few more centuries of energy.

     

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    AJ - fascinating post. If the Eurozone cannot print Euros, then the only logical thing to follow will be deflation, as people will simply have to lower prices to get work, lower wages means less money to pay for stuff, means retailers will have to lower prices, vicious cycle.
     

    The Germans are trying to force their hand, rather than just print Euros and hand them over to bail out their Southern neighbours they want to maximise their situation to change the rules so it can't happen again (easily). It's a saga that's been going on since 2007 or 2008 - the question is how long can it go on for actually until somebody is forced to do something?

    It's amazing that the whole Western world got caught up in the grip of a real-estate mania, and we are still feeling the effects. History books in years to come will look back on this period with great interest.

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    Kiwipete, Its the Japanese senario that scares the daylight out of me. If you google some data and look at the size of the Jap property and the share markets and then look where they are today, gives me shivers, is China going down the same road?

    http://www.nytimes.com/2005/12/25/business/yourmoney/25japan.html?pagew…

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