Looking to 2012 - The political weather is clouding the vision:-

My last or next to last comment for 2011. Last month I visited Harare on a Business Investment Assessment trip. Having lived there and left during the diaspora it added the after dimention to the system of financial collapse.

I believe the analogies to be important in that many people are running around like chickens without heads. Some think that hyperinflation is on the way or that the U$D is sound, but they all haven’t a clue what is in store for 2012. Frankly looking at the stats and human dynamics neither do I. The indicators are all over the place yet the vision out the cockpit is obscured by political clouds.



2012 is not going to be good unless a hero swoops in wearing his underwear over his tights, I presume to cut air resistance after saving ladies… At best it is going to be a long haul. We are going to have to be more creative and work smarter to have a fighting chance. Working harder won’t cut it most of the time.


Our biggest threat is hyperinflation of the U$D. Many people and societies have placed immense faith, and wealth in what amounts to be only a means of $ exchange for America. As such the world is exposed to the benefits and failures in America.


Faith is all important because most U$D is paper or electronic accounting, not real assets but backed by a promise. The promise of the world’s “center nation”, but a promise non the less. A promise relies on integrity and the ability to be carried out. The latter is important because what ever your intent, good or evil, if your ability to carry it out is reduced the promise becomes corroded.


“Economists differ in their explanation of how a country leaves simply galloping inflation and enters the stratosphere of hyperinflation…but all agree there is some inflation flashpoint at which people become convinced that prices will never stop rising and loose all confidence in their currency. At that time it appears that anything is better than holding money. People start putting everything into any tangible good they can find” Arthur Burns (Ex Fed Reserve Chairman) Time March 10 1980.


We have heard most of the fears and woes. However from the more recent Zimbabwe crash I was there two months ago to assess investment opportunities and form a report.


During the crash savings and pensions melted, people with windfalls bought cars, fridges or what ever was immediately available. Assets were sold to survive, bigger assets traded for smaller and cash to purchase the month’s food. This meant that the turn over of assets allowed further wealth stripping by government.


Hustlers, blackmarketiers and opportunists were in ascendancy. Development dwindled future planning shifted from years ahead to the here and now eliminating innovation. Manufacturing stagnated or died. No one would invest in new ideas if they were going to take time. This meant that industries lost ground to external competition, with the currency hassles they shut down.


Zimbabwe dropped it’s sovereign currency in favour of a basket of regional currencies and the U$D. The system is still lacking reasonable credit facilities and cashflow. Enourmous assets and potential they are working hard to make a come back, they may yet, but with the help of friends it may be sooner. It is going to be a long time.




Relevance is that American Dollar is based on a weakening faith of an economy burdened with regulations, social costs and opportunists. The Fed’s ongoing electronic creation of billions is freaking out many countries. Why is it still standing? Carter faced a melt down that was curbed by Reagan. It was curbed through stimulating real wealth creation and reduction of big government. We now are into Carter MKII and need that super hero, many people believe that it will be a last minute save, others are living day to day so their planning is already short term. There are millions who have planned and have assets to believe they are safe. Too many people so are far into debt they are blinding themselves and hope that inflation will save them. Americans don't have foreign currencies that Zimbabweans reached for (originally illegally) that helped erode the Z$D. When the shit hits the fan credit collapses and critical longterm cashflow and project funding vaporizes and what is left is internal investment, saving your profits for future expansion, so long as those are also not eroded……..

America has the Unions, Welfaeries and political opportunists that are taking yet crushing innovation and wealth creation. Credit is already critical construction industry a mess with innovation being exported and wealth creation dwindling.


Zimbabwe is a SHARP lesson for USA as it relies heavily on innovation and trade. Hyperinflation kills the former and encumbers the latter. The flip over from faith to loss in faith is fast and almost irreversible – but always catastrophic.

Zimbabwe has been using the U$D as a crutch, what will Uncle Sam reach for?

The EU Exposure for USA funders. PIGGS in the $P.00 (poo)

Hundreds of Billions of $ have been loaned by American institutions to European Countries. There is a very real concern as to the honouring of the debt. The U$D is in no safe situation as it stands with American debt mounting and American domestic liabilities nearing $100tn.

The EU is meeting with regards a way forward on their debt crisis. However the basic fact remains that the majority of debt is with more secure debtors that have reigned in their spending and are doing what is necessary for keeping exposure down.

What was the real crush involved rapidly reduced tax incomes for governments meeting higher social expenditure from the need to support increased unemployment coming the other way. In short the revenues were no longer able to support borrowing. They were too exposed. “They” being Portugal, Ireland, Italy, Greece and Spain. PIGS. Heavy social spending on welfare with a burden on the private sector was supported so long as there was a boom. Even a slow down wouldn’t have been safe for the likes of Greece. They were tsunamied by the crash.

Now they seeking to be bailed out by other European countries as their social consumption abuse spilled over into the common currency like toxic waste. They now need the bills to be met or they will hurt everyone else in the EuroZone.

Greece has been the worst and although many cuts have been made they are no where near close to what is needed. Their population is reluctant to take the hits required to make good on their past expenditure. Italy and Spain are a little better but heading the same direction. Tourism receipts (pivotal for Greece) are down from recession and going into the cold season they won’t start recovering until Easter 2012. Add to this Greece has had strikes that chased tourism receipts elsewhere. The good news is that they only have a small portion of the overall EU Debt. The bad news is that it will still hurt the Euro.

Germany and France are expected to bail out the PIGS but France is not that secure either as they had their own waste. Sarkosy did reign in the spending and waste when he got into power but what was spent remains spent. There is a limit to how they can help and the onus still sits with the PIGS countries to change their internal systems significantly to make any bailout last longer than a patch job.



Many of the European banks paid dearly for the USA melt down and that is swinging around to hurt American banks again. The trick has been to stop the cycle of losses but unless Greece and it’s sister PIGS can do what is necessary to increase productivity and cut their waste this is a challenge when the world economy is still in a depression. So long as the American economy continues down this will progressively worsen. As it stands it won’t be catastrophic, unfortunately 2013 will need to see an American turn around or these PIGS will be in the $P.00 and likely to be followed by France as they leave the economic plateau. There will be an international downward spiral that will involve all the world economies crashing following the fragile U$D.

Santa is a Bastard:- Will be so in 2012 as well!

Looking back at the past 4 years. They have gone from bad to worse. From the subprime collapse in USA, to the clusterfuck that is the world economy today. Christmas is around the corner and will be a tough time for most families and friends.



So the immediate future is that Santa is going to be a tight arsed bastard. The longer prognosis, for 2012 is that he is going to leave some mean and evil elves to continue the seasons chaffing and also to rub the salt in.

What has not happened is that Uncle Obama address the major issues that a) caused the collapse, b) could fix the collapse. So when your water bed ruptures fixing the split is priority, not pouring in more water until you are awash.

At best, 2012 can be used as the first step on a very long road to recovery. Given that they decide to start the right moves and make the hard choices there is still a crack of opportunity to correct things.

As they stand there is a lack of will to make these calls, the opposite is true is that the White House believes these options to be anti social and would do anything but make these calls.

The longer these are put off the harder it will be for more people. The U$D is not looking at any better long term future than the Zimbabwe Dollar. The next Presidential incumbent will have his work cut out with the existing USA and world structures melting and reforming around new opportunities. The sap on the street will pay for it and would have lost 10 years of his life. There are hordes of people who will never get back to normal as they have not worked, or worked lesser jobs and life has  now passed them by.

As for South Africans, there is Zuma to blame, makes a good punchbag. The secrecy bill will at least mean a quieter time for him and he won't always ask his chronies if they were responsible for the aborted Russian Mission 2 Mars, or the British Strikes.....

A bad day comes to a close I'm off home to settle into the welcome arms of Nuttella sarnies, makes life so much more bearable.