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EYE-BALL’s Guru on – The Turmoil is Already here – We just have to accept what is coming –

January 23, 2013
Latest GURU Posts:

– 22nd Jan – The Turmoil is beginning – Japan’s Economic Stimulus to tip the scales –

– 20th Jan – Wayne Swan Tips his hat at New Yorker’s

– 10th Jan – The ANZ Whitehaven Hoax –

– 5th Jan 2013 – Financial ‘Ghosts’ from the Past – Hawke and Keating v Gillard and Swan –

– 29th Dec – The Great Big Financial Swindle – Part II – The ‘Budget Surplus’ Backflip – Swan tells his own Porkies …

– 22nd Dec – The Great Big Financial Swindle – Part 1 – The ‘Budget Surplus’ Backflip – Swan serves up Senator Wong

– 14th Dec – The Walls are crumbling – Government admits High A$ policy is hurting –

– 4th Dec – Retailers and bureaucrats don’t understand – high A$ value responsible for off-shore purchases –

– 19th Nov – Government Expenditures Part I – Department of Prime Minister and Cabinet – DPMC – STAFFING –

– 3rd Nov – Shareholders – Holding back the world – scared money – scared boss’s –

To see more GURU posts: – click here …

– The Turmoil is Already here –
– We just have to accept what is coming –
| Author: EYE-BALL Guru | 22nd Jan 2013 |
Afew days ago I wrote about – ‘The Turmoil is Beginning’ – linked here  Today I read an article by former ASX head Maurice Newman – bio linked here – and the ‘beginning’ is a fallacy.

Newman wrote an opted piece titled – ‘Lifting lid on a Ponzi scheme’ – reproduced below – and I have to say … when someone with Newman’s experience talks the way he has in this article – plenty of people will take notice.

Lifting lid on a Ponzi scheme

| Author: MAURICE NEWMAN | Date: Jan 22nd, 2013 | Link to On-Line Story. |

IN a bright start to the new year we are reading that the global economic outlook is improving. Setbacks are transitory. The fiscal cliff is history and the debt ceiling is bound to be lifted. Stockmarkets everywhere, even those in Europe, are rising.

World leaders, after numerous false starts, ask us to believe that this time, their policies are working. All the while their central banks continue to grow their balance sheets, determined to kick the can further down the road and keep investors and households hanging in and hoping.

In Australia, Wayne Swan, accentuating the positive, repeatedly reassures us that our economy is strong and the envy of the world. Unemployment is low, the investment pipeline is impressive and the Australian dollar is high, an endorsement he says, of his claims.

If we show confidence and put our trust in the Treasurer’s economic management, we will return to the promised land of high growth and bigger government. Balancing the budget may take a little longer, but hey, Newspoll says voters are unconcerned about abandoning the surplus along with the International Monetary Fund and much of the commentariat, so no rush.

Surely only a curmudgeon would rain on this parade?

But say on closer analysis the outlook isn’t so rosy? What if those odd green shoots don’t blossom? And, what if the policies and confident tone being promoted by world leaders and their central banker colleagues are nothing more than a confidence trick, a giant Ponzi scheme, just like the one Bernie Madoff is doing 150 years for? Is it better to keep these concerns private?

Whose role is it to warn an unsuspecting public of an unsustainable situation? How can people prepare if they are unaware of the enormous changes that will impact their lives?

While we read headlines about a slowing US economy, or the prospects of a Greek or Spanish default, collective governments and central banks are quickly on the scene making soothing noises about how they will contain the risks. But their interventions have consequences.

For example, prominent American business economist Dave Rosenberg discovered that before the onset of quantitative easing, the Fed’s balance sheet had a 20 per cent correlation with the S&P 500. But since 2009, that relationship has surged to 85 per cent. Rosenberg writes: “There is a much tighter relationship between the stockmarket and the central bank balance sheet – via the P/E multiple – than there is between the stockmarket and corporate earnings.”

This development is concerning. The US had no earnings growth at all last year, yet the market was up by 12 per cent. This confirms that investors are more moved by the Fed’s operations than they are by corporate health. Faith substitutes for hard work. Yet it is rational to speculate when taxpayers and central banks provide a backstop.

This grotesque distortion of risk leads to volatility and the periodic burning of scarce productive capital. This is compounded by governments that also consume valuable investable funds when they borrow for recurrent purposes. Expect slower growth in future.

Asset misallocation gets short shrift in public policy considerations. After all, the leviathan has to be fed. It also seems there are more votes in spending than in fiscal consolidation. The timing of a surplus is rarely convenient. Attractive alternatives abound. So, when the chips are down, political cowardice is preferred to prudence.

The recent fiscal cliff negotiations make the point. Despite all the theatrics, as things now stand, in 10 years the US will end up $US4 trillion ($3.8 trillion) deeper in debt than now.

While officially projected to be $US1.089 trillion, John Williams of Shadow Government Statistics, says the real 2013 deficit, adopting US Generally Accepted Accounting Principles, will be $US7 trillion. Who knows what it will be in 2023? (It would be instructive to learn what Australia’s comparable number is.)

The West has now reached the point where total private and public debt, together with unfunded government liabilities, can never be repaid by an ageing demographic. One day even debt servicing will be an issue. With fewer taxpayers and lenders, the ability to take from the future to provide for the present will end. This is when we see the final collapse of the great international governmental Ponzi scheme.

Already in Europe, where lenders and taxpayers in the peripheral countries have either fled or are bankrupt, economies are surviving on the grace and favour of others. In America, we see the future with 11 states having more people on welfare than they have in work. The employee pension fund for the state of Illinois is $US95 billion in deficit and growing at $US17 million a day.

And central banks that became the last resort for empty treasuries now find their own balance sheets stretched, their liabilities too short and their asset quality increasingly suspect. For all their intervention, other than to defer the evil day and encourage speculation in assets, quantitative easing has done nothing for economic activity. Indeed, the Fed has recently lowered its growth forecasts.

What has differentiated Australia is that the Hawke-Keating and Howard-Costello governments largely eschewed the public policy excesses of the major economies. This changed in 2007 and Australia is now in the process of establishing its own Ponzi scheme.

As the federal opposition has found, it isn’t easy to hold the government to account. It is invariably portrayed as negativity. But this is a time for candour, not point-scoring.

As G20 members, Swan and his Treasury colleagues must know that the world cannot continue indefinitely as it is. They should be aware of the urgent need for restructuring. Yet, against this global backdrop we persist with policies that will dangerously expose us when the ultimate crisis hits.

Rather than platitudes about confidence, we need public policies that will provide us with a much-needed buffer against the inevitable day of reckoning, in the same way that the Howard government’s legacy allowed us to navigate the global financial crisis in relative comfort.

If the government won’t promise to do it, the opposition should.

Maurice Newman is a former chairman of Deutsche Bank, the Australian Securities Exchange and the ABC.

There is nothing in this article that has not been said by thousands of analysis’ all over the world for the last few years including this author.   America and many other Nations have all been heading towards the ‘cliff’,  and the people in the boat who could change the course have all been drunk at the wheel.

The whole US election campaign – some 18 months of if all was a party America could not really afford given where they have been header since the GFC.

As Obama walked the walk after his inauguration – all smiles and with the crowds cheering behind him – the reality of the moment was lost on me … don’t American’s know what’s ahead of them?

It’s important to read these words again –

… The West has now reached the point where total private and public debt, together with unfunded government liabilities, can never be repaid by an ageing demographic…

… and realise what it all means …

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Have your say where it counts: – contact your Local Federal Representative via the links below and let them know how you feel about this, or any other topic that you feel strongly about – or you can just post a comment below and let off some steam.

The EYE-BALL Guru …

  1. Gerry Hatrick
    January 23, 2013 at 8:58 pm

    Good read, and thanks for the post.

    Does the bio of Maurice Newman include, ultra right wing? Does it state predator?

    I do not believe my opinion is any more correct than Mr Newman. He makes excellent observation. The world is drowning in debt. It will take beyond a generation to fix it. This malaise has and will sap the energy of investment decisions for decades, In 1945 or 1827 the world was a sea of debt. Rebuilding was still going on a generation later. It is confusing to know which lever to pull! Until recently American stock indices had insignificant correlation to Government debt. Now it is very significant. We need to stimulate consumer spending but government have no options but to try and balance their budgets. Trend gradients are woeful.

    Throughout “fiscal cliff” negotiations there was talk that fund managers had investment pools of 2bn waiting to extend investment duration, from short term cash to medium to longer term choices. What was optimal? I don’t like the concept of which spending program will be used to rein in the budget trajectory. The inauguration speeches were used to try to re ignite hope. Therefore Mr Newman expressing a more balanced philosophical view is timely, and somewhat creating balance. Champagne and caviar for the lucky and the few, but beer and skittles at best for the rest. Therefore President Obama is also correct. Maintain the dream and increase productivity.

    Thank you Maurice for the counter perspective. The ASX is littered at this moment with high risk, and juicy pickings. When you play the speculative game, not everyone can win. Who will pay the pennyman?

  2. david the pragmatist
    January 24, 2013 at 8:03 am

    Ok, some interesting stuff here.

    Monetary easing was required and I will not go into the pros and cons.
    The situation now is that we are paying for lack of productivity and a lack of commitment to fix the problem.
    There are many problems associated with the discipline required.

    Are disability pensioners and health sufferor’s prepared to go without their income and benefits. In other words prepared to take a death sentence or rely totally on family care.
    Are Centrelink recipients prepared to not receive the dole, family survival, anarchy or crime…which ones’ do you want?
    Are workers prepared to take less benefits from their various awards….unions? how do they handle this? go on strike?
    Executives and Middlement Management, are they prepared to have wages reduced, assets deflate and quality of life reduced? Public Servants…..90% gone!

    Now we have the experts??? telling us what we need to do fiscally but who is the politician who will take this on?

    The leadership you crave is taken by the 2 party system which only cares about power and survival….the world is differently placed to Australia. If we had a political leadership of vision and substance, we could do something about it…..but no we do not and to be frank are unlikely to have in the short term….when the crisis happens it will be by necessity not planning. We are catching up fast and thanks to insipid and negative understanding by the likes of Swan are unlikely to change.
    I am critical of the Newman government but wonder if maybe his hard disipline is the answer to the type of issues we now face. I suspect it is “good bye welfare recipient” the Golden Goose is running out of eggs, the quality of life will change for ever.

    First thing is we need to do is repatriate all offshore jobs back into Australia, Call Centres ect. I don’t care about comparative costs we have to give welfare recipients something to do! even if the are earning overseas equivalent wages, they can be paid in food stamps and rent vouchers. Otherwise they die. Painful yes, but I want you do gooders to understand what your advocating when getting on your high horses about debt management. It is easy sitting on your fat arses getting Medicare and welfare and doing nothing for it. Yes, do it or die!

    Now what sort of society do we have…..perfect for a George Orwell who Eye Ball liked to quote yesterday and or for a fascist leader to emerge, sorry welfare just went down for the count…probably a nine! War is inevitable, sorry welfare you are in the “ovens”.

    What will emerge …..something akin to the great fire of London. The vermin and disease wiped out and a new order learning from the great mistakes of the 21st century.

    Thank god we still have a resistance movement led by the Eye Balls and Larry Pickerings of the world who will tell us where the new leadership are getting wrong.

    Sorry has this all happened before? What did we learn…nothing much but something.
    Now you people may start to understand reincarnation and evolution, if you don’t, why bother? you won’t be around to worry what the future brings.

    Hope I’m right….that gives me a chance…..if you guys are right, we have none.

    My apologies for being so blunt about all this, but wakey wakey hands off snakey, your all kidding yourselves…. you do not even have a sense of humour….yesterday I offered you Jesus Christ…but he wasn’t good enough…who do you want?

    PS I know its not me…..I am not that silly.

  3. January 24, 2013 at 9:00 am

    To be frank – you’re an idiot confined within a lunatic’s mindset … a combination that makes you the worst type of critic, cynical, in denial, and someone who always tries to shoot the messenger because to aim higher would be to shoot yourself …

    Welfare came out of humanitarianism – only for the wealthy societies though … western mainly. It is a rich Nations luxury and with all things the wheel turns and the system gets abused and the burden is pushed onto hard working taxpayers – the same with Politicians and their cost – criminally abused yet the punishment is avoided because justice is not served in equal portions in wealthy Nations – justice can be purchased and the poor have no say …

    The wheel still turns as does history show – wealthy become poor and poor become wealthy – for the wealthy it is the materialistic things they crave, the poor – it is freedoms to live their lives without injustice … and it goes on …

    Until the wheel turns full circle and the wealthy who are now poor rise again and it starts all over …

    Albert Einstein’s definition of insanity – is doing the same thing over and over again and expecting a different result …

    For generations we keep doing this global domination thing … all in different eras and with different armaments … America is on its way out after 300 years of growth and being the world dominance since WWII – and for those who live in the bow-waves of this dominance a dangerous world just became that more dangerous – the wolves circling a wounded and bankrupt USA are priming themselves for an opening to strike …

    The wounded beast is far more dangerous when cornered, and the USA still has strike power and are willing to use it if challenged and provoked to a point where their whole way of living is challenged – the USA is bleeding out and yet they still behave as if the wound is superficial and not moral – the world awaits the outcome.

    For David the Pragamist – he wants to offer up Jesus Christ and put him on the cross again in some pathetic attempt to have his sins and the sins of everyone else forgiven all over again – this demonstrates his hubris contained within his deformed persona and his ‘lunatic’ tendencies – he thinks he is someone who has the answer and a plan for the afterlife – he thinks he has not contributed in any small way to the plight of the world … would he don arms and fight for his Nation – how about his family – and that my friends demonstrates the point – fight for family – but not fight for the Nation who provides safe haven for that family …

    Now I don’t mean to isolate David in his own fantasy world where he sees himself as the benevolent Dictator will all the answers – when challenged he has no backup plan other than the bravado of a child all innocent to the dangers all around him – he shows no fear but in his adult world he is consumed by fear at what he might lose, what his life might become should it all turn to crap as Maurice Newman exposes in the opted article above … David fears what he can’t see …

    David – you are scared and all one can say is that everybody is in the same boat David – so if you rock it the other people in the boat will throw you overboard … people can’t stand a short-ass know-it-all telling them ‘I told you so’, or that ‘reincarnation is the answer’ as they live their dying moments …. they would rather shoot the messenger as the crime would be seen as a mercy killing for all the others on board.

  4. david the pragmatist
    January 24, 2013 at 10:51 am

    Shit, and I am supposed to be the nutcase?
    If you isolate the rhetoric from your diatribe you will see there is not much left.
    You emote to such a degree that you cannot see the forest for the trees and as such live in your serious little world of blogging and try and save the worlds’ problems.

    Analyse what I said and simply I gave you a scenario if the Maurice Newman’s of the world took the discipline required to the necessary level….(at no stage am I saying he is wrong!)…and apply it. Would the result be palatable to the mainstream of society? I suggest not.The answers are within the visionary genius of someone that is not apparent.
    I had hoped for Obama but his dysfunctional United States does not have appetite for the consequences.(Mind you I have not seen a better person in the current political scene).

    The references I make to Jesus have nothing to do with nailing him to the cross again or him dying for our sins. Unfortunately the ignorance of proper understanding of his role goes beyond Eye Ball who does not understand philosophy or for that matter theology.
    Quiet simply the example of Jesus is a philosopical one and has nothing to with Christianity or religion. It is about what he spoke and the idealogy within those teachings, I could have referred to Bhudda in the same philosophical way.
    Interestingly and Philosophically both Jesus and Bhudda are about renewal, whether this is reincarnation or not is subjective as some people see it as a “long bow”. I don’t!
    All I do know is that Spiritism is about coming back and reliving and learning from past mistakes. I have tried to explain this on numerous occasions to Eye Ball who still gets lost on his own miscreat past and sees himself coming back as a worm or something equally as punishing.
    To explain spiritism in the teachings of “Kardec” you cannot digress to a lower life form, only human and that each life that is reborn you can maintain a plateau of currency or improve, not digress.
    Does this not make some sense in a world without meaning? Is this not an opportunity to live and be with loveones, past and present. I can only believe in something with a future, I cannot believe in dust to dust. If that is the case I can only continue to dream my dream and hope its true.

    If anyone is interested in “spiritism” not to be confused with “spiritualism” then Wikipedia “Kardec” who is a 18th century Frenchman who is regarded as the father of “spiritism”. It has no religious orientation and can be adopted by any follower of any religion that exists on the planet.

  5. Gerry Hatrick
    January 25, 2013 at 9:15 am

    What element, started this God Squad stuff.

    Maybe Kardec was Siddhartha Guatama reincarnate.

  6. david the pragmatist
    January 25, 2013 at 10:38 am

    And maybe Gerry Hatrick was a reincarnation of every fool who tried think they were clever only to find out later, they were no different to all the other fools. Emperors’ New Clothes rings a bell. What do you reckon Gerry “beautiful material” isn’t.

    Final Question ….What’s a Hatrick Gerry?

  7. The Parable
    January 25, 2013 at 11:01 am

    I thought a spiritist was one distilled fortified spirits or one who was involved in victualing them or one who enjoyed imbibing in them. Thanks

  8. david the pragmatist
    January 25, 2013 at 3:00 pm

    Since you did not know what a “spiritist” is I thought I would enlighten you as to what a parable is!

    The parables of Jesus can be found in all the Canonical gospels as well as in some of the non-canonical gospels but are located mainly within the three synoptic gospels. They represent a key part of the teachings of Jesus, forming approximately one third of his recorded teachings.

    Jesus’ parables are seemingly simple and memorable stories, often with imagery, and all convey messages. Scholars have commented that although these parables seem simple, the messages they convey are deep, and central to the teachings of Jesus.

    Many of Jesus’ parables refer to simple everyday things, such as a woman baking bread (parable of the Leaven), a man knocking on his neighbor’s door at night (parable of the Friend at Night), or the aftermath of a roadside mugging (parable of the Good Samaritan) and most importantly of all the meaning of love and the golden rule of “do unto others as you would have done unto you”. You do not have to be a Christian to follow the teachings of Jesus or the examples of the parables.

    In Western civilization, these parables formed the prototype for the term parable and in the modern age, even among those who know little of the Bible, the parables of Jesus remain some of the best known stories in the world.

    I hope that some one like yourself who writes under the pyseudom of “the parable” respects the role of such a title.
    You admitting you know little of something does not mean in this case “ignorance is bliss”.

  9. The Parable
    January 25, 2013 at 5:08 pm

    Just one of those days.

    Leaving of the baking of the bread to the women.
    The Church of the Latter Day Saints knocking on the door.
    Reading a good book about Good Samaritans, (they are pretty hard to find in this universe)
    And do unto others, this form of Napoleonic and senseless blogging.

    The question still remains, what has any of this got to do with Maurice Newman’s article on debt? It was very informative before the constant slanging!

  10. The Parable
    January 27, 2013 at 9:07 am

    Maybe I can spot the parable. The title of this post “The Turmoil”

    From Alexanders Pope’s An Essay on Criticism;

    ‘Tis hard to say, if greater Want of Skill
    Appear in Writing or in Judging ill,
    But, of the two, less dang’rous is th’ Offence,
    To tire our Patience, than mis-lead our Sense
    Some few in that, but Numbers err in this,
    Ten Censure wrong for one who Writes amiss;
    A Fool might once himself alone expose,
    Now One in Verse makes many more in Prose.

    From the webpage http://en.wikipedia.org/wiki/An_Essay_on_Criticism

    To err is Human, to forgive, Divine.

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