The Plan by John Francis Kinsella
‘It’s funny how people have short memories. They’ve forgotten how George Osborn had called on Britain to learn how to run an economy from Ireland.’
‘Lucky for him,’ Kennedy said looking up from his papers.
‘Is that all you’ve got to say Pat?’
‘Well we had a good decade up to 2007.’
‘Because of low company taxes.’
‘That policy worked.’
‘Did it? Well you could say that the market looked after itself.’
Pat clammed-up, his intuition told him he was about to receive a lesson.
‘Wrong! The idea the market can take care of itself is foolish. The banks and the property market were allowed to run wild. The same went for wage policies.’
‘Well we did alright out of it,’ Kennedy replied weakly.
‘You’re kidding Pat. If there had been a little more regulation and restraint we wouldn’t be in the shit we’re in today.’
Pat would have liked to remind Fitzwilliams’ his negative opinion of the prime minister had not prevented him from enthusiastically applauding his speech at the Guildhall the evening before along with an audience of four hundred leading British and Chinese business leaders. Like so many other bankers, businessmen and politicians, Fitzwilliams liked having his own ideas confirmed, and when the PM declared he wanted more order in the world of finance and banking he felt vindicated; filled with sense of self-satisfaction.
David Cameron declared, as though suddenly waking-up, that China’s economic growth over the previous five years was an event historic of importance. He continued by telling his audience what they already knew, namely China’s growth for the year to come would exceed ten percent and spoke of its importance to the UK. Fitzwilliams whispered to his neighbour it would be even better if it was the other way around.
John Francis smiled at the incongruity of the PM’s words, even as Cameron spoke speculators in New York were shorting China. Forecasts of double-digit growth did not add up and the risk of a huge bubble was on the books. Gordon Chang, the author of The Coming Fall of China ten years early, still believed in his prediction, though for the moment events appeared to belie his words.
That certain hedge funds were betting against China was ominous. It was one thing for a Sunday Times economic journalist to spout contrarian ideas, and quite another to bet hundreds of millions by shorting the market. It was not good news and one more shock to the world’s fragile economy would certainly derail its hesitant recovery.
John Francis recalled Al Jazeera’s story of Ordos Shi, an entirely new city in Inner Mongolia, a province in the north of China, built at huge cost, generously equipped to house one million people, a ghost city, almost entirely empty. In China’s large cities, vast areas of office space lay unoccupied, tens of millions of new apartments remained empty, as construction continued to surge, a phenomena the recalled Spain prior to its property crash, but on a much vaster scale. To compound the problem Chinese banks had lent trillions for property development with hugely inflated land values as collateral. It was as if China was fuelling its own version of the sub-prime collapse.
The idea that China’s incalculable millions could own their own homes was a reminder of George Bush’s promise to ordinary Americans. Whether they could afford them was not an issue, growth would supposedly look after that, based on the erroneous assumption satiated Western consumers could consume more Chinese imports. If China’s bubble burst the troubles of a few Eurozone nations would be dwarfed.
With riots and demonstrations threatening the stability of the Greek government the danger of civil unrest lay much closer to home. In Dublin a cement truck, daubed with the words TOXIC BANK, was rammed into the ornate iron gates of the Irish Parliament. In Lisbon demonstrators filled the streets protesting against the government’s austerity measures and in the centre of Madrid mobs confronted the forces of law and order. Trouble loomed large in the UK as the number of strikes increased to a level not seen since the days of the general strike in 1926.
Of course other countries besides Greece, Spain and Portugal had been profligate. The question was why? What had drawn once cautious European nations into the morass of consumer debt and lax government spending? There was of course the euro and low interest rates, but that argument, suggested by the yapping jackals of the City and its media supporters, was too simple.
All good financial sense had been thrown out the window by the illusion of wellbeing created by bankers and political leaders during the period leading up to the financial crisis. It had no doubt contributed to the disaster, but that did not provide a satisfactory answer to the question as to why.
The lack of political realism could however be measured by the comments made by the American Embassy in Reykjavik, relating to Iceland’s ability to weather the crisis recently published by WikiLeaks: Given the intense financial media scrutiny Iceland has been under for the past two months, it can be argued that the country’s economy, major conglomerates, banks, and financial markets have actually weathered the storm fairly well. As the Wall Street Journal put it: ‘The jury is still out on whether it is anything more than a rough spot.’
Chapter 65 GLOBALIZATION
‘Lucky for him,’ Kennedy said looking up from his papers.
‘Is that all you’ve got to say Pat?’
‘Well we had a good decade up to 2007.’
‘Because of low company taxes.’
‘That policy worked.’
‘Did it? Well you could say that the market looked after itself.’
Pat clammed-up, his intuition told him he was about to receive a lesson.
‘Wrong! The idea the market can take care of itself is foolish. The banks and the property market were allowed to run wild. The same went for wage policies.’
‘Well we did alright out of it,’ Kennedy replied weakly.
‘You’re kidding Pat. If there had been a little more regulation and restraint we wouldn’t be in the shit we’re in today.’
Pat would have liked to remind Fitzwilliams’ his negative opinion of the prime minister had not prevented him from enthusiastically applauding his speech at the Guildhall the evening before along with an audience of four hundred leading British and Chinese business leaders. Like so many other bankers, businessmen and politicians, Fitzwilliams liked having his own ideas confirmed, and when the PM declared he wanted more order in the world of finance and banking he felt vindicated; filled with sense of self-satisfaction.
David Cameron declared, as though suddenly waking-up, that China’s economic growth over the previous five years was an event historic of importance. He continued by telling his audience what they already knew, namely China’s growth for the year to come would exceed ten percent and spoke of its importance to the UK. Fitzwilliams whispered to his neighbour it would be even better if it was the other way around.
John Francis smiled at the incongruity of the PM’s words, even as Cameron spoke speculators in New York were shorting China. Forecasts of double-digit growth did not add up and the risk of a huge bubble was on the books. Gordon Chang, the author of The Coming Fall of China ten years early, still believed in his prediction, though for the moment events appeared to belie his words.
That certain hedge funds were betting against China was ominous. It was one thing for a Sunday Times economic journalist to spout contrarian ideas, and quite another to bet hundreds of millions by shorting the market. It was not good news and one more shock to the world’s fragile economy would certainly derail its hesitant recovery.
John Francis recalled Al Jazeera’s story of Ordos Shi, an entirely new city in Inner Mongolia, a province in the north of China, built at huge cost, generously equipped to house one million people, a ghost city, almost entirely empty. In China’s large cities, vast areas of office space lay unoccupied, tens of millions of new apartments remained empty, as construction continued to surge, a phenomena the recalled Spain prior to its property crash, but on a much vaster scale. To compound the problem Chinese banks had lent trillions for property development with hugely inflated land values as collateral. It was as if China was fuelling its own version of the sub-prime collapse.
The idea that China’s incalculable millions could own their own homes was a reminder of George Bush’s promise to ordinary Americans. Whether they could afford them was not an issue, growth would supposedly look after that, based on the erroneous assumption satiated Western consumers could consume more Chinese imports. If China’s bubble burst the troubles of a few Eurozone nations would be dwarfed.
With riots and demonstrations threatening the stability of the Greek government the danger of civil unrest lay much closer to home. In Dublin a cement truck, daubed with the words TOXIC BANK, was rammed into the ornate iron gates of the Irish Parliament. In Lisbon demonstrators filled the streets protesting against the government’s austerity measures and in the centre of Madrid mobs confronted the forces of law and order. Trouble loomed large in the UK as the number of strikes increased to a level not seen since the days of the general strike in 1926.
Of course other countries besides Greece, Spain and Portugal had been profligate. The question was why? What had drawn once cautious European nations into the morass of consumer debt and lax government spending? There was of course the euro and low interest rates, but that argument, suggested by the yapping jackals of the City and its media supporters, was too simple.
All good financial sense had been thrown out the window by the illusion of wellbeing created by bankers and political leaders during the period leading up to the financial crisis. It had no doubt contributed to the disaster, but that did not provide a satisfactory answer to the question as to why.
The lack of political realism could however be measured by the comments made by the American Embassy in Reykjavik, relating to Iceland’s ability to weather the crisis recently published by WikiLeaks: Given the intense financial media scrutiny Iceland has been under for the past two months, it can be argued that the country’s economy, major conglomerates, banks, and financial markets have actually weathered the storm fairly well. As the Wall Street Journal put it: ‘The jury is still out on whether it is anything more than a rough spot.’
Chapter 65 GLOBALIZATION