Italian Left Lurch

Twenty five percent of the vote in Italy went to a party that want an exit from the EU and a return of the Lira. The Monetary Madness continues apace. When a country could inflate away its debts and then revalue again after it had cleared its path back to being an attractive place to spread into some of ones’ investment risks. As part of a common currency they can not con each other in this way – they have to borrow to cover the shortfalls that stem from corruption in the political class. Italy has rejected austerity but the 25% is not a protest vote. It is a game changer. It is a kick in the face of the EU. It may be fatal.

However, if the PIGS were to leave the EU, they could form their own trading bloc – one hopes they call it SPIG rather than PIGS or GIPS or the less pronounceable IGPS – they would then be able to inflate their way out of their primary problem, together.  And then they could then rejoin the EU as a block and create economic treaty zones, consider an example set of economic zones:

  • Central EU (Germany, France, Belgium, Luxembourg),
  • South EU (SPIG),
  • Eastern EU (on or adjoining the Eastern border),
  • Northern EU (Scandinavia, Denmark, Holland, UK)

Each part of the EU has an exchange rate balancer, so if they want to devalue, they can by negotiating revaluation elsewhere.  The four zones have floating exchange rate mechanisms with each other relative to capital value.  So any shift of liquidity between the zones has its economic effect.

Monetary conditions are created by a mechanism like the trading of bonds (not cash) between the Super Governments – here are a group of talented long range analysts can set the degree of valuation (this model may in effect be five currencies), the democratically preferred flavour of financial control and regulation levels that at least disallow fantastic risks with people’s pensions that maybe once paid off but now wear away at value.  Perhaps Super Governments have no other function.

Each bloc contributes to a common currency pool and sells bonds to it to maintain an economic state of relativity.  However something like that may or may not work it should be understood that the awareness of very different political system is required.

Europe without a central federal body probably leads to too many demands for regulation being imposed in the wrong markets as well as the more significant, in body count at least, the absence of regulations that would have prevented disasters evaporating vast tracts of wealth in an instant.  Such an ephemeral quality wealth can turn out to be. Protecting it irrationally may backfire.

The central purpose is to introduce long range capital increases where they are needed. The absence of any Government led stimulus or infrastructure corrections that long range planning needs to consider in its calculation of growth.  You can squeeze an orange once, but a healthy tree means more future oranges and you better have the infrastructure to squeeze them.    

“a far less great Britain struggling with a mere percentage of its economy left yet more people to employ and an inability of the state to collect fair taxes”

The apparent Tory creed of demanding tax fairness, while protecting the tax avoiders who support them, will seem shallow as the record shows a far less great Britain struggling with a mere percentage of its economy left yet more people to employ and an inability of the state to collect fair taxes means it stubbornly refuses to finance progress. Italy may serve to push the EU into progress and reform the lumbering beast.

Tax Havens

Adam Smith wrote the seminal work about capitalism – The Wealth of Nations. Growth was then based on nations competing in the most extreme act of international piracy in history, colonialism.

These days we talk of “bubbles” as though these modern gold rushes were a certain financial rhythm. We developed a science to predict and thus invest as a business. The most successful have been investing madly and hiding it from tax authorities. Capital is continually extracted from the wealth of nations and poured into tax havens in a sort of reverse colonialism – only to find its way back into the economy funding more Government debt via bonds.

The only way that the Government can reduce these debts is to have a money supply from tax revenue exceeding expenditure, or to devalue the currency. Western economies continue to need to spend more than they take. What has happened to the Wealth of Nations?

Business Insider

The solution to North Korea

Here we are again – international disapproval of North Korea’s nuclear programme. Or with Iran’s. The question in North Korea’s case is under what scenario do they plan to use a nuclear weapon? Wiping out one, two or even six coastal cities in the US west does not achieve enough for them to win a war against America, that much is quite clear. The more likely scenario is a nuclear standoff – where an attempted attack by NK is met with a bristling of the entire world’s military against them, and that could result in the first UN invasion of a country.

China would have little political difficulty in abandoning its worrying child if its acts were to result in a full scale US invasion on its doorstep and obviously it would mean less threat to China if it were instead to remove the NK regime, itself.

Nuclear politics change allegiances. It softens enemies by making military progress limited. It causes enemies to reflect more carefully about their opponents’ strategies. It also makes any provocation lop-sided. Perhaps a guerilla attack on a nuclear territory qualifies as “terrorism” for that very reason. Populations become more terrified of the response to rather than the instance of attacks, making conventional revenge by the nuclear armed defender seem more than justified.

Guardian article

The UN declares it will take significant action against North Korea for violation of international law. UN Security council condemnation – Telegraph

Progressive Economics

The economies of the West have all run into trouble due to the derivatives scam and resultant financial meltdown causing massive capital flows out of national economies. Tax avoidance and corporate logic has led to offshore tax havens becoming significant on the radar of the US and UK governments. Austerity has lain the problem upon the society rather than the entities that caused it, and has prevented growth being a solution to endlessly rising government deficits and ultimately inflation.

The UK and USA could learn a lot from a more progressive and successful Western economy – that of Norway. True, they have oil reserves, not as large as the USA reserves – but they charge a 50% corporation tax levy on oil drilling. And so they should. Oil companies invest in exploration and drilling, yes it is expensive. But once they tap into the Earth’s resources they are effectively using something that belongs to the people and the future.

Western Governments are stuck in a thread of believing that any tax rise is regressive when ultimately what they are achieving with short-termism is to evaporate wealth from their own coffers. The 1% benefit because they avoid tax and yet enjoy the benefits of health and protection (both police and armed forces), education and pensions provided by the Government.

New progressive thinking is required and Norway is a good place to examine for a balanced model.

USA in undeclared war?

Ron Paul says that the US is in an undeclared war after the French incursion to rescue Mali from Islamic invasion, now being backed by the junior horse in the “Special Relationship” between the UK and USA may start to imply US involvement. Perhaps in an “Expendables” kind of way, a secret order of ageing knights gather in a glade on horseback are rearranging pieces in case USA involvement in a declared “war on terrorism” and invasion is one of those things that the West sees as troublesome and terrifying to swathes of civilisation.

Iran is angry that Israel conducts a military attack on a convoy of weapons headed toward Lebanon. Syria’s borders are not exactly secure with a vicious civil war that the West maybe can not justify an intervention as the rebellion does not appear to be one that will bring peace.