Supplement to The Cosepp Financial Analyst

Enduring

In this Supplement, the topics listed below are discussed and updated from time to time. On occasions, they are also further articulated in the monthly newspaper, The Cosepp Financial Analyst
Australia's Economy
China's Currency Reserves
Italy... the ongoing economic divide:  North  v.  South
Japanese Banks 
Nuclear Reactors... and the radioactive, deadly plutonium 
United States Budget Deficit 

Australia's Economy... dominated by near monopolies.    Australia, either by negligence or by policy, now has two major problems with its economy and businesses generally.

Its economy includes a duopoly in retail, and an emerging extremely powerful near monopoly holder of shopping centres. Many small businesses are either being gobbled up, or completely driven out of business and made bankrupt. As a result, the rich are getting fabulously richer, and all the rest are getting to eat whatever crumbs fall onto the floor, off the sumptuous table of the rich. In all this, many politicians and government agencies seem to have the Bastille complex, of doing nothing, of telling the common people to eat cake, of fragrant disregard for the rights and dignity and welfare of ordinary Australians.

Political power usually flows on naturally from economic power and might. This means that Australia forcibly gets to implement policies which the minority rich and powerful want, to the detriment of the vast majority of ordinary people.

Giving donations to political parties is one way the rich get their way. Some give to lobby groups or other intermediaries which then pass on the donations in a variety if ways. In this environment, there is an urgent and patent need to legalise citizen initiated referenda, in order to restore some semblance of representative government, in order to return political power back to where it belongs, the majority of the people. 

China's Currency Reserves... continue to mount.   China has amassed enormous, and mounting, foreign currency reserves, currently believed to be in the order of about $US 1.5 trillion (that we know about), and counting.

The renminbi is of course the official name given to the Chinese domestic currency, the yuan, which was finally revalued on 22 July 2005. This revaluation came about only after years of intense IMF, US, and EU criticism of Chinese Government currency and trade practices. It remains to be seen how this change of currency policy is to be implemented in practice over the long term.

Prior to 22 July 2005, for a decade, the renminbi (yuan) was fixed at around 8.27 per 1 US dollar, and this resulted in accusations being made against the Chinese Government for engaging in mercantilism, a system of economic regulation expressly or covertly designed to bolster exports and discourage imports on an ongoing basis.

China has a population of about 1.3 billion, and it is expected to rise to about 1.6 billion by 2030, by which time the Chinese economy should surpass that of the United States and perhaps even have its renminbi (yuan) become a reserve currency. Only time will tell.

China will be hosting the Olympic Games in 2008. Its economy should, therefore, be buoyed up, to some extent, by the expenditure to be devoted to building the requisite facilities.

The only major negative for China is its socio-political system, and whether or not it will be able to manage its ongoing economic growth and the problems that such growth inevitably spawns. China also needs to be more proactive in dealing with its growing aids problem which, according to United Nations reports, has the potential to become a massive epidemic, especially in its rural areas.

On balance, the future looks quite rosy for China, more so now than at any other time in its history. During calendar 2004, China's economy increased by about 9.2%, according to Mr Xie Xuren, the Director of the State Administration of Taxation.

Italy... the ongoing economic divide:  North v. South.    Italy's economic divide between its northern and southern regions is hardly anything new. It's been ongoing for quite some time, and it's really all about money and power, both of which have gone hand in hand. The northern regions currently have both, and so feel they should be the boss and in command, to be "il Duce."  But circa 2000-3000 years ago, the southern regions had the money and the power, and so were themselves at that point in time "il Duce." The North was then the shunned and uncivilised barbarian hinterland.

Times and circumstances of course change and, for today's purposes, the past does not really matter, except to whatever extent it may affect the present (if at all).

The South's current problems, though, really have their origins to the time of the unification of Italy. At the time, the South had thriving primary and secondary industries which provided its people with ample jobs and a good standard of living. The South was then quite prosperous, wealthy, and had enormous reserves of gold.

Upon unification of Italy, all the South's huge reserves of gold were immediately expropriated and carted off to the North. Additionally, the North dominated central government instituted policies which had the effect of destroying most of the South's secondary industries as well as debilitating its agricultural industry, in favour of those of the North, which, by this time, gained full control of the military and of what then constituted united Italy. But many in the South got caught napping and became unemployed, as their firms and their jobs inexorably disappeared as a result of those policies. Under those biased circumstances, owing to the subtle transfer of the wealth producing activities from the South to the North, the North thereby thrived enormously, both financially and politically, and the South correspondingly declined, retrogressed. Again at the time, I don't think that there would have been too many savvy economists in the South wide waken enough to have discerned the rather subtle ruse of the North. In essence, in reality, there was a mass plunder and transfer of wealth from the South to the North.

With the passage of time, the North even succumbed to delusions of racial superiority, and started to impugn a racial element to its new found prosperity, which it really manipulated to the detriment and under the very noses of the unsuspecting South.

Sicily, then the most populous region of Italy, eventually but too late as the damage had already been done, later woke up to the North's ruse and wanted and agitated to secede from mainland Italy. As a result of this and of the resultant conflicts, Sicily was in due course granted more autonomy and the North concurrently moved to marshal more economic resources to the whole South, resources which were previously, really, stealthily expropriated anyway by looting the South's reserves of gold and by predatory economic policies inimical to the South's wellbeing and development. The disparity in power and money between the North and the South continues to this very day, although it is not as great as previously. The weight of power, money, and influence, though, currently still resides in the North.

After World War II, circumstances again changed dramatically, as a result of the ravages of the war and, more significantly, of the flood of the then cheap imports of agricultural products from the United States. Most of Italy's agricultural industry was as a result brought down to its knees. Countless millions in consequence emigrated from the South to the North, in search of jobs and a better life. Most of the North is therefore, currently, not strictly Northern as it once was. The North today is very much a mixture of both North and South. Italy is therefore now more united, speaking and acting as one people as never before.

Italy today, though, has again been somewhat transformed, especially as a result of being an integral member of the European Union. Italy also now has a huge non-Italian immigrant population, both legal and illegal, which is believed to be in the order of about 2-5 million. These countless New Italians will no doubt in time leave their mark, probably more so in the North where they are mostly congregated.

If so, in time the South will essentially constitute the real Italians, not the North.

Japanese Banks... weighed down by mountains of non-performing loans.    Japanese banks are still being burdened by the economic excesses of the Japanese bubble economy of the 1970s and 1980s.

These Japanese banks continue to carry the weight of the mountains of non-performing loans which are tearing away at their equity capital base. These banks require a massive injection of new equity capital, sooner rather than later, otherwise some of these banks risk sinking under, with alarming ramifications.

The Japanese economy requires major economic reforms. While many in Japan recognise the need to implement these reforms, the measures needed to do so would result in some political factions losing power and prestige. And that's where the sticking point lies. The people who would most likely lose power and prestige are the current power brokers of the major political parties and they don't particularly wish to lose their influence. So they block the much needed economic reforms.

Nuclear Reactors... and the radioactive, deadly plutonium.   Many years ago, when at school, I learnt about that rather nasty, radioactive commodity called plutonium, which is used to make horrendous nuclear weapons.

Plutonium, though radioactive and emitting continuous deadly radiation, can decay, of course, but it takes a mighty long time to do so, having a half life of about 250,000 years. This means that any given quantity of it, for example say 200 grams, will continue to emit deadly radiation over 250,000 years, during which time half of it, 100 grams in our example, will slowly decay and lose its deadly radiation properties.

After this initial first lot of 250,000 years are up, the remaining 100 grams are still in good working condition and will continue to emit deadly radiation over the next lot of 250,000 years, during which time half of it, 50 grams of the remaining 100, will slowly decay and lose its deadly radiation properties.

So, after this second lot of 250,000 years are up, the remaining 50 grams are still in good working condition and will continue to emit deadly radiation over the next lot of 250,000 years, during which time half of it, 25 grams of the remaining 50, will slowly decay and lose its deadly radiation properties.

Thus, as can be seen, after 750,000 years, 25 grams out of the original 200 would still remain in good working condition, still emitting deadly radiation. This rule about "half life" would continue on indefinitely over every lot of 250,000 years, until the entire quantity of the plutonium decayed completely, which, for our purposes, would really be a near eternity, bearing in mind that man lives for about 85 years.

Plutonium gets produced around the world as a by-product in nuclear reactors, or overtly in them in order to make nuclear weapons much more deadly than the atomic bombs which were dropped on Hiroshima and Nagasaki during World War II.

After a nuclear nation has amassed enough plutonium to make sufficient nuclear weapons to annihilate the whole wide world many times over, any additional plutonium produced becomes surplus to requirements and therefore has to be packaged in containers and stored in a safe stable location, for hundreds and hundreds of thousands of years into the future, hoping that such containers will last so long, and not break up nor corrode over this near eternity and release the plutonium into the environment to emit its deadly radiation.

Some pretty nasty, deadly, and frightening stuff to have around, this plutonium, I'd say. But not too many people really know the full extent of plutonium, nor probably care as they won't be around to account for, or suffer, its dire consequences.

And which nations have plutonium?

The answer is... every nation that has a nuclear reactor, and every nation that has nuclear weapons. It is widespread.

While nuclear reactors continue to be used around the world for generating electricity, and many more of them are on the drawing board, the problem of storing the plutonium by-product remains essentially unresolved and continues to be a perilous danger to humanity and other living species. Our own generation of course will obviously not be around in the future to suffer the dire consequences of laid-waste plutonium, which would continue to emit deadly radiation over hundreds of thousands of years into the future. It will be the future generations who will suffer for, and pay the costs of, our recklessness and selfishness.

On the bright side, maybe man will evolve to live with, and tolerate, radioactive radiation. I'm not holding my breath waiting for this happen, if ever it does so.

United States Budget Deficit... continues to worsen under George Bush.   The actual US budget surplus/(deficit), in billions of US dollars, in respect of the fiscal years 2000, 2001, 2002, 2003, 2004, 2005, and 2006, are 236, 128, (158), (378), (413), (318), and (248) respectively. According to the Congressional Budget Office (CBO), the US budget deficits in the years ahead are expected to worsen considerably. The Bush Administration, in its 2005 Budget submission to Congress, budgeted for the 2005 deficit to be in the vicinity of about $US 427 billion, but I don't believe this because the trend suggests a much higher number, probably in the order of about $US 500 billion.

The US government debt is currently in the order of about $US 7 trillion, and growing, mounting alarmingly. Further, during November 2004, the US Congress increased the federal debt limit by another $US 800 billion to nearly $US 8.2 trillion. So there's a lot more spending is store, all to be done with printed paper money.

In addition, the actual US trade surplus/(deficit), in billions of US dollars, in respect of the years 2003, 2004, and 2005, was (497), (618), and (805) respectively. Much of this money has ended up in China and Japan.

There's red ink everywhere. As a result of all this, the value of the US dollar vis-à-vis other currencies continues to spiral down, down, down, with no end in sight of the bottom. In consequence, the price of gold in US dollars, and the value of most foreign currencies, have risen. As the value of the US dollar falls and falls, one needs more and more shrinked (depreciated) dollars to acquire the same quantity of gold or the same quantity of foreign currencies.

All this financial deterioration has occurred under the watch and management of the hopelessly incompetent Bush Administration, whose main economic policy seems to be:  print money and spend...  print money and spend...  print money and spend...

The Bush Administration has been an unmitigated disaster for the US economy and for ordinary Americans. The big question must now surely be asked:  Can the American people survive George Bush ??

Last Updated.   This particular webpage was last updated on 3 March 2006.

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