by Pat Franklin
Alan keeps an eye on the financial news, and often stops the programs to explain things to me. Sometimes I say: 'What in the world are they talking about? I didn't understand a single word.' And he tells me in plain English. The permanent headline on the program lately is: 'Eurozone Crisis'. Our computer is a few feet from the TV, so today I just took down what Alan was explaining to me as he said it. Here it is verbatim - jewels of wisdom off the top of his head.
"Spain has serious problems and I can’t see a way out of it for them. Things will continue to get a lot worse in Europe until the situation gets so bad with riots and hunger that they will be prepared to accept drastic solutions. That’s when you’ll get a true single country formed out of the superstate, with fiscal union* and one central treasury.
"The Germans will be in charge and will impose strict financial discipline and countries will have to either lump it or leave it. With 50% youth unemployment in Spain and 35% inItaly, and the overall unemployment rate in Spain at 25%, you have a lot of people who cannot earn a living. It is a desperate situation. I think they have been remarkably restrained so far. They must be feeling hopeless. V... and S... (two friends of ours) came back from Portugal and said the young people there are being advised to emigrate. That is a counsel of despair. They can’t all come to London! Of course one problem is that they CAN all come to London - everyone in the EU (European Union) has a right to move here, so a lot of them do.
"I’m certain what’s going to happen, but it’s going to have to get a lot worse before countries will give up their own independent treasuries, their ability to decide on their own spending. That will be the price of their bailout: they get their money box taken away.
"All the early retirements and fat pensions and social programs are unaffordable. It’s all going to come to a grinding halt. Just like Communism collapsed, you are seeing the end game of European socialism. For years they’ve had politicians who’ve given people what they demanded - job protection for workers, making it difficult to sack people; social program handouts and early retirement in many countries, but at the end of the day in the world economy you have to be competitive. That is not possible when 40-50% of the country's wealth - its gross domestic product- is consumed by government spending.
"Spain's banks have 260 billion euros in potential losses, according to the IMF. They are under water. They’re only being kept going by the European Central Bank making money available to them. Greece as well. The ECB just bunged 100 billion euros to keep the banks of Greece afloat. The Greek government is now trying to sell 75 % of their biggest port to raise money, but it’ll be a fleabite compared to what they need. The Chinese will probably snap it up. But China has trouble too; there’s the most almighty property bubble in parts of China and local goverment there has overspent as well. That's what happens when politicians who are not business people get control of large sums of money - they spend it.
"My strong suspicion is that a high percentage of the biggest banks in the world are broke, if their assets were marked to market, that is, marked at today’s market value, particularly commercial real estate.
"Banks keep finding exciting new ways to lose money. The only bank share we invested in has lost about 90 % of our money, thank you. Their premises look big and impressive, but quite often what’s behind the façade is not so impressive. It’s cracking and crumbling.
"What we’re going to see is a few superbanks in the whole world, I suspect, because the New World Order will want to deal with just a handful of financial institutions, not hundreds. There was a report in today's Financial Times to this effect, actually talking about the New World Order.
"What can people do? What they are doing in a small way at the moment. If they have cash balances, they are using the money before it deteriorates in value. The governments will have to use inflation to get out of their debt dilemma. That’s the way it has always been – governments pay back in funny money, not the same value as the momey that was loaned.
"All the creation of money that is going on, Quantitative Easing, money printing, all of that is bound to lead to considerably higher inflation at some stage, not necessarily in the next year or two, but sometime. So it’s best to hold real things rather than paper money.
"In Britain homeowners are improving their properties...if they've always wanted to put an extra room on, they're tending to do it now rather than watch their savings lose value. They're using their money to add value, and that helps get the economy moving, gives people work.
"In the stock markets these days I'm told the average length of time a stock is held is 20 seconds. The markets go quickly up and down, red days (stocks going down) and green days (up), but there is no clear direction, no clear solution.
"Britain owes a lot too, but is in a fairly unique position because of historical reasons and its geographical position, with London as the world financial capital. The world’s money floods into London and that ripples out, but our main advantage over the euro is that we’ve retained contol of our own currency (Britain still has the pound sterling), so we can set fiscal policy to our own specific requirements. We are obviously impacted by what goes on in Europe and America, but as countries go, Britain is one of the best of a bad bunch in financial terms, I would say.
"If I were looking for countries where there’s a stable environment and your money would be safe, I would look at Canada and New Zealand. They have a lot of resources the world needs. Canada in particular is a well managed economy and its banks are sound. They didn’t go in for all the mad gambling that went on south of the border. It’s pathetic isn’t it. No doubt the bailouts will continue.
"These are just my random thoughts, a common man’s view. I have the benefit of a simple, clear mind, for which I’m truly grateful. It’s the old rule of Micawber**, basic simple stuff. If you spend more than you've got, the result is misery.
"There are solutions that I would apply, but they are against current thought. I would start with a massive bonfire of much legislation. There are far too many laws, too much detailed supervision of every aspect of our lives, far too much interference with business and commerce generally, all of which leads to high taxes to pay the armies of bureaucrats. We even had planning officers visiting our house to measure the height of a low retaining wall I built in the front garden. What a waste of time!
"Free people up. There are thousands of people who could start businesses, but they are daunted by the mountains of paperwork. If the government would just let us alone things would start to happen; there are far too many intrusions into our lives. Just let us get on with things. In Britain a lot of restrictions on building and development should be abolished. You’d see the price of housing (sky high at the moment) come down.
"Free up young people to form groups to self build, give them a leg up to build their own homes. (In Britain it is almost impossible for young couples to get a house or apartment.)
"If there’s hope, people respond. They only get workshy if they feel sidelined, if they can’t get a start, can’t get into the system, can't get on the ladder. Young people need their own homes.
"Obviously we have to protect farmland, but there is a lot of scrappy, not very good land, a lot owned by government, of no great value in terms of flora and fauna.
"Free up a few hundred square miles of land. Let people build!
"And I’d scrap all the useless subsidies on worthless ideas like wind power. If an idea is good and economically viable, it doesn’t need government subsidy. Google didn’t need a government handout. All good ideas stand on their own two feet.
"Some laws are clearly necessary, but there are great reams of petty legislation making life miserable for people trying to make things and do things."
*"Fiscal union" was a term I (Pat) didn't understand. Here is Alan's explanation: "The 17 countries in the Eurozone share a common currency, but do not have central control of spending. Each country decides how it spends its money. Fiscal union involves a central treasury which decides policy for the whole area. It was obvious to many people from the beginning that the eurozone would not work in the way it was configured. "
**Mr Micawber was the impecunious character who could not live within his means in Charles Dicken's novel "David Copperfield."