(photo credit: Thinkstock/Imagebank)
This has been a dramatic week in many countries and cities around the world,
although, fortunately and so far, not in Israel. Extraordinary and far-reaching
events are taking place across a broad spectrum of geographies, polities,
economic sectors and financial assets, but most of them are either not reported
or glossed over. Even the ones that are given coverage are often misinterpreted
or are played up at the expense of even more important
Examples? Available by the dozen, but here are a random
few: • The stunning collapse in the prices of gold and silver (between 15
percent to 25% in a matter of a few days, the biggest price fall in 30 years,
the largest trading volume in gold futures contracts ever) did make headlines
and generate a lot of comment. This is essential if people are to be woken from
the central-bank-induced drugged state (known as “hopium”) that they have been
lulled into. But the slump in the price of copper, although by fewer percent and
with far less comment, tells us much more about the state of the global economy
– especially about that busted flush, the People’s Republic of China.
The media focus was on Boston, but the bigger story was elsewhere. The mayor of
Philadelphia held a private session with Wall Street bankers to discuss asset
sales by the city. No press, no public, just the ubermenschen who run America,
being consulted over the impending bankruptcy of the country’s fifth-largest
city by population.
• China’s reported growth rate came in lower than
expected. That’s the official data – but talk to people doing business in or
with China and you hear about many domestic firms facing bankruptcy as the
bitter fruits of years of excessive investment creating excess capacity fully
ripen. That’s apart from the serial environmental disasters and the
still-spreading bird flu that China cannot help but report to the outside
However, for cultural reasons, most of us are more shocked by
developments in European countries than by much worse developments in Asian
ones. I saw that in the responses to a recent blog item I wrote about the Dutch
real-estate boom and bust. Did you not know that Holland is also a victim of the
global real-estate mania? Well, nor did I, and it seems that most people are
shocked – shocked! – that the stolid, hard-working and sensible Dutch went
head-over-heels into massive debt to buy houses – same as the Brits, Irish and
Spaniards, perhaps even more so, but who would have thought? I suppose anyone
who remembered who it was who created the first documented modern financial
mania, something to do with tulips, if I’m not mistaken...
underlying all the symptoms noted above is that the deflationary forces at work
in the world are making it increasingly difficult to keep the smelly stuff under
wraps. Europe is in the worst state, so it is the furthest down the road to
falling apart. The rot is quickly spreading to the “core” countries, as the
Dutch disaster shows – and as was illustrated this week by a string of poor
economic data from the core of the core, Deutschland.
That is where the
decisions are taken, so that’s where we should be looking – but even there, it
After the German government and its minions in Brussels and
Frankfurt imposed draconian terms on the Cypriots, effectively gutting their
economy, the German parliament approved the terms of the Cyprus bailout package.
However, even the docile German public is feeling increasingly uncomfortable
about the endless line of countries needing bailouts, re-bailouts and now
“bailins” (that’s when the citizens/ depositors in the “rescued” country are
forced to contribute to the supposed salvation imposed upon them).
Financial Times reported on a poll that found one in six Germans would consider
voting for an anti-euro party in the upcoming parliamentary elections later this
year. When you realize that in Germany all the main parties are part of the
pro-euro, pro-EU consensus, voting for an anti-euro party implies exiting the
political consensus altogether.
That sentiment is what a new party,
called Alternatives for Germany, or AfD, is looking to tap into. Founded by an
economics professor, Bernd Lucke, AfD is attracting mainly middle-class
conservative Germans who are increasingly unhappy with Mrs. Merkel’s policies in
Europe – but for the opposite reason that the Greeks, Spanish and others are
unhappy with them.
For the next few months, along with everything else
going on, keep an eye out for the AfD and its progress, if any. After the
Italian people rose up in revolt against the European elite and its fanatical
defense of the euro, it is not impossible that the trend will spread to Germany
– especially if there is another serious crisis within the euro area during the
spring or summer.