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EU, USA and the Second Recession - Economist Dennis Chung's Andromeda and The Long Night

Saturday, July 16, 2011 0:52

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Reform must come from within, not from without. You cannot legislate for virtue.

Cardinal Gibbons, Address, 1909

It seem that political ambitions are taking center stage not only in the US of A as noted in my blog article entitled “Tremont Electric nPower PEG Kinetic Charger – Showgirls Flashdance Energy”. As a bit of an update, since being lent money by the IMF (International Monetary Fund), Fitch, one of the Big Three (3) ratings agencies namely Moodies, Standards and Poors and Fitch, have downgraded Greece to a Triple C (CCC) rating as stated in the article “Fitch downgrades Greece to CCC status”, published Friday, July 15, 2011, The Jamaica Observer.

This behaviour, albeit unusual for any Economy, is not strange in rule-breaking EU, as they just borrowed money to pay creditors for money that their Economy should be making to honour their Greek Government Bonds.

This as Jamaica had long bee a bellwether of sorts for the rest of the world as it relates to the First Recession as noted by Economist Keith Collister in his article “It’s the Economy, stupid”, published Friday, July 15, 2011 By Keith Collister, The Jamaica Observer.

We began feeling its effects around the same time that the Bruce Golding-led JLP (Jamaica Labour Party) came to power in 2007AD. By 2009AD, the recession was in full swing, two (2) years after it began showing signs in the US of A.

This timeframe is NOT arbitrary…….typical Developed and Developing World Economies are like large ships or corks bobbing in the water. Captain (Government) may give a command (laws, policies) but it takes time for these policies via various bureaucracies to be communicated. By the time they are executed, the ship drifts another fifty (50) miles before she comes to a stop.

Americans began defaulting on their mortgages given to them despite being sub-prime borrowers in 2005.

China

took blue and white collar jobs and the spending power vanished as millions lost their jobs and groaned under the weight of mounting debts.

Recession followed in 2008AD, preceded by a famine in Africa.

The Government of Jamaica, aware of this, has lowered the CET (Common External Tariff) on imported chicken as stated in the article “Ja poultry farmers object to proposed CET reduction to 20% on imported chicken”, published Friday, July 15, 2011, The Jamaica Observer, knowing full well that like the previous Recession that began in 2008AD, it was proceeded by Global shortages on food.

They also know the vulnerability of the local Jamaican market to external shocks such as the price of Energy in the form of our Dependence on Fossil Fuels, which drives up the price of everything else.

Hence current political grandstanding among Jamaica politicians as it relates to Energy Sector Liberalization and breaking the JPS Co (Jamaica Public Service Company’s) Monopoly on the distribution of electricity as pointed out in the article “Massive JPS bill sparks outrage in the Senate”, published Sunday, July 10, 2011 BY RHOMA TOMLINSON Sunday Observer writer, The Jamaica Observer.

It is also a favourite moot point of the PNP (People’s National Party) in their jostling for power as stated in the article “VIDEO: End JPS monopoly now, says PNP”, published Friday, July 15, 2011, The Jamaica Observer and chronicled in my blog article entitled “Ad Valorem Gas, 10 percent GCT on Electricity and Alternative Energy – Night and Day”.

Jamaica was affected back in 2008AD by the US Recession, despite Senator Audley Shaw’s, Minister of Finance insistence in 2009AD, that we went not, by an initial fall off in remittances as well as tourism arrivals, both by airplane (less significant) and via cruise ships (major significance!!). Most likely political grandstanding, which I suspect is the case in the US, with politicians haggling for advantages come General Elections in 2012AD.

Now since early 2011AD, remittances have been up as stated in the article “Remittances to Caribbean making healthy recovery, says World Bank”, published Friday, November 12, 2010 by the CMC, The Jamaica Observer as the US Economy is slowly recovering!!!!

The Jamaican Government’s expressed confidence by increasing Sin Taxes against Tobacco and Alcohol, anticipating increased Hardship spending on these items as stated in the article “Government of Jamaica eyes sin tax”, published Tuesday November 30, 2010, The Jamaica Gleaner and the article “Tobacco products, alcohol hit with more taxes”, published Wednesday, December 01, 2010 by Alicia Dunkley, The Jamaica Observer has backfired.

This as more cases of abuse of these items as people get them from contraband dealers, mostly Drug Dons who switched to theses items, as unlike Marijuana (Cannabis sativa) and cocaine, they are in higher demand. Even the police are in on it too as stated in the article “Police want help in counterfeit cigarette case”, published June 19 2011, The Jamaica Observer.

Banning Tobacco smoking is an unwieldy tool, as long term, the Tobacco Industry players such as Carrerras Group of Companies needs to remain viable in order to continue generating taxes and not become prey to unscrupulous men taking advantage of the increased Government Taxation on the product as opined in my blog article entitled “Carerras and e-cigarettes – THC Thanks You for Smoking The Next Big Thing”.

This economic recovery by the Obama Government is facilitated by borrowing from China and spending on Alternative Energy and investments in future technologies that should break the US dependence on foreign imported oil as stated in my blog article entitled “Alternative Energy and the President – Three Days of the Condor”.

They do have a point, as the Government of Jamaica expenditure on electricity is appalling as stated in my blog article entitled “GOJ and Government Ministry’s Energy Usage – Senator Audley Shaw and the Langoliers”.

But as to the nascent recovery of the American Economy, surer sign is the decrease in the price of gold, which indicates that investors are pulling up posts invested in Gold and pumping these funds into areas of growth as well as reflecting increased economic confidence in the US Greenback!!!

Internal reforms, coupled with increased demand for quality US products abroad means that the US Economy is recovering based on demand for goods form its foreign partners in the EU and East Asia, largely unaffected by the recession and with growing economies that the Americans can make money from to pay back the Chinese loan of US$1 trillion.

The US Economy is on a path to defaulting however, as albeit recovering thanks to increased exports and thus increased hiring for both blue collar workers as well as white collar workers in industries for products that the Chinese cannot make with the required quality, they have to pay up the monies owed on their maturing US Treasury Bills. More all nighters required for congress post-Fourth of July holiday!!

To add further injury to insult, the Greek Economy and the PIIGS (Portugal Italy Ireland Germany and Spain) are also in default on their respective Government Bonds as noted in my blog article entitled “Tremont Electric nPower PEG Kinetic Charger – Showgirls Flashdance Energy”.

Their solution?

More borrowing from the IMF, now with a newly appointed French head, effectively boring a hole in a boat to let out water when the boat is already sinking! This as those IMF loans have to be guaranteed from Developing World Economies themselves, and irony, as you would effectively be lending yourself money, hence the boat analogy!

So coupled with the unstable energy prices and the fact that both the EU and the US are still connected to Saudi Arabian Oil, we may be looking at a Second Recession by the First Quarter of 2012AD as predicted by Economist Dennis Chung in his article as stated in the article “RISK OF A DOUBLE-DIP RECESSION?” published Friday, September 18, 2009, by Dennis Chung, The Jamaica Observer and mentioned in my blog article entitled “Telecom Providers and eCommerce – Nothing is certain but Death and Taxes”.

That is to say, BOTH sides of the Atlantic in their OWN massive Economic Recessions, making it a W shaped recovery, as opposed to a U shaped recovery and both are being accelerated by the spiraling price of Oil as the year of Peak Oil, 2015AD, approaches!!!

I call it the Long Night Andromeda Style, as whether or not the IMF bails them out, as the bail out only extends the Recession.

My solution, long term?

The austerity measures as per the Matalon Report used in Jamaica is the World Economy only realistic hope. This being done by allowing the world to fall into a Second Recession. But this time, a controlled descent, with the entire process being monitored, would be my recommendation, allowing the World Economies to “heal themselves” as opposed to continued Government intervention through borrowing.

Rather, the Austerity Measures are being recommended in the form of spreading of Tax Net to capture uncollected taxes and implementation of cost cutting measures within the Economy. And again, in this regard, Jamaica is not only the Canary or Bellwether [my words], but also a case study on how a Developing Country should manager an Economic Meltdown as well as the effects of a Recession, Matalon Report Style.

The Greeks, the EU and the USA must stomach what this entails: increased taxation and reduced Government spending and push to increased exports to its trading partners WITHOUT subsidies.

As the imminent Second Recession is now upon us……..

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