As 2010 came to an end Pat O’Connelly reflected on the work he had accomplished to date. Rather worryingly, to his writers mind, it had begun to look like a work on popular economics rather than a novel. But the future weighed heavily his thoughts, it was very uncertain. For a while it seemed that hope was on the horizon, but this was now eclipsed by a looming sovereign debt crisis.
After two years in office, the Obama administration had not produced a miracle and the political gap between Democrats and Republicans was widening. The US was deeply mired in a crisis that had been, to a large degree, responsible for. The nation’s debts both individual and collective had reached a level never seen in modern times.
Political divisions in Washington were said to be at their worst since the Civil War as the country’s leaders manifested their willingness to play political brinkmanship in the nation’s vital economic affairs.
The world could no longer count on the US as its economic locomotive. In thirty years US government debt has risen from forty percent to one over hundred, with Europe close on its heels, following the example that had been set by George Bush. As for Japan it was trapped in its self-made problems of debt and economic stagnation.
Over the course of the 20th century, the old democracies had faced and overcome many challenges: war, fascism and totalitarian communism. This time however things were different, a vast new economic power was waiting, ready to step in and assume the role America seemed to have abandoned. The price would be high. China was no democracy, and never had been. Its political system had grown out of the ashes of centuries of authoritative imperial rule.
The West looked on helplessly as American democracy moved towards dysfunctionality in spite of its many vibrant entrepreneurs and new technologies, which had led to increased productivity, though increasing in equality amongst its peoples. These same factors had given birth to a new form of globalization, in the form of a system of interconnected free markets.
The growth of government debt in the US had ignored John Maynard Keynes’ recommendations to governments: spend during recessions and save during booms. Americans had wanted to have their cake and eat it, that is to say pay low taxes and enjoy a wide spectrum of government services, now they would have to reduce spending, increase savings and implement hard reforms, something that did not bode well for the rest of the world.
O’Connelly had witnessed the visible signs of decay in San Francisco, Los Angeles and New Orleans. Roads and bridges were in need of repair, electricity distribution systems resembled those of a third world country, water distribution was old and leaky, telephone and Internet services were poor compared to those in Europe.
The rich and privileged knew nothing of these problems, their main concern was tax avoidance, be it legal or otherwise, managing their wealth as forty of fifty million Americans struggled in poverty.
In the mid-nineteen eighties Japan had been the world’s leading star, few would have thought its political system, given its successful, highly sophisticated and advanced economy, was facing two full decades of decline and stagnation. The US, and also the West, had reached the stage of development where change was imperative; notably in its system of government, both national and local, its social system, its system of taxation and its system of infrastructure: something that would be difficult to achieve given its fundamental democratic system and its principles of liberal capitalism.
The risk facing the West was not that it would have to resemble China to succeed, but that its future would be that of Japan’s.
It was midnight outside the Forbidden City in Beijing, not the Emperors Imperial Palace, but one of China’s most exclusive night clubs, and a throng of beautiful people pressed at the doors to join the sons and daughters of the ultra-rich inside.
A tunnel lit with ultraviolet spots led to an elevator and a bar reserved for the club’s most prestigious party goers. The tables and seats covered in real Zebra skin. Bottles of Belvedere Vodka and Cristal Champagne stood in silver ice buckets with lines of glasses ready for club’s most privileged guests.
To Pat it seemed like a scene from futuristic political fiction movie. The jeunesse d’orée of China’s Communist leaders were there, wearing fashions designed by the world’s leading couturiers, young women in tight-fitting Dior, Givenchy or Puglisi dresses, Christian Louboutin heels, Chanel and Celine handbags, their men dressed by Hugo Boss, Ralph Lauren, Calvin Klein and Tommy Hilfiger, wearing diamond studded Rolexes, paying the equivalent of fifteen thousand dollars a table.
The China Pat observed was far removed from the images he remembered from his youth, where smiling peasants in straw hats, under the benevolent eye of Chairman Mao, harvested rice to the sound of revolutionary songs sung by pretty Red Guards.
Lili had flown in to Beijing for the evening and Pat Kennedy was her special guest at the party thrown by a friend of hers, one of Chinas youngest billionaires, Henry Ho, who had made his fortune in the space of six years at the head of one of China's most successful mobile telephone company.
At thirty six Ho, the son of a rich property developer, prided himself his ability to throw a good party, a young man who could count on the presence of all those who mattered on the Beijing society circuit along with their foreign glitterati friends. It was nothing for China’s gilded youth and über rich to run up six figure tabs for their ridiculously profligate parties.
To Kennedy’s mind the extravagant display of wealth outdone that of London, and even Moscow. Beijing was unscathed by the financial crisis as its own bubble built up to explosion point, with the rich visible sure of their success, shamelessly displaying their wealth.
Many of the young nouveaux riche owned their own private jets, Lili told Pat. It was like the Shanghai of the thirties, though the rich were no longer all foreigners, but Chinese and willing to spend their newly found wealth.
The world's economic centre of gravity was shifting eastwards at lightning speed from the Transatlantic Axis where it had been for three or more centuries. Within in another couple or less decades it would be firmly fixed somewhere in North East Asia.
The Chinese remained haunted however by the fear of their own government, as they had been for centuries. Unlike the West the rich see saw their wealth at risk and looked to safe havens to export their billions.
The emergence of the very rich in China was a contradiction given the country's Communist, unpredictable government. The rich sought security that meant sound investments; property, business investment and good banking, which was not to be found beyond that Transatlantic Axis, in spite of the ongoing economic difficulties of the US and Europe.
Much vaunted 'safe' havens, such as Singapore or investment centres such as Dubai, would come down like a house of cards if and when China’s bubble burst, and a lot of others with it. The world's über rich was after all a handful of individuals, perhaps not more than a couple of thousand at the most, many of whom had money tied into property in China and other potentially unstable economies.
Singapore, a world class boom-town, resembled the Chilean capital at the height of its 19th century glory, it had served its purpose. It would survive as a regional outpost of China’s new imperial system whilst its poorer citizens struggled to make ends meet, without the means to retire after having made sacrifices that contributed to creating the wealth of the nouveau riche.
Like Dubai in 2007, the writing was on the wall and those who had made their money had moved on, they were more interested in conserving their gains than endangering them in risky new business. Nothing was recession proof and nothing could be done to avoid the economic tsunami that would inevitably hit complacent nations who for the moment were wallowing in their pride and new found status.
For the moment, as the old year was rang out and a new year in, the world’s attention was focused elsewhere. The sharks, amongst them Goldman Sacs, had smelt blood and were gathering in the hope of a kill as euro became entangled in a new drama being played out in Athens. If Greece collapsed so would Irela
nd, Portugal, Spain and Italy.
Goldman Sacs had secretly loaned money at a high interest rates to the Greek government during the economic boom that led up to the 2004 Olympic in Athens. The investment bank had developed a privileged relationship with the Greek Debt Agency and at that time endorsed Greek debt as a solid investment in the City of London. Their fees amounted to five hundred million dollars and to cover their positions they insured the loan against default.
Accusations by the media that the Greeks had fiddled the accounts they had submitted to the BCE to join the euro, were inexact. If anybody had been responsible for fiddling the books it was Goldman Sacs Europe, which at that time was headed by Mario Draghi, who in turn was responsible for vetting the Greek application. Under Draghi’s management the bank assured the BCE, all was in compliance with the specified requirements.
Although unemployment had not yet reached the levels of the Great Depression in the UK, Europe’s Mediterranean shores were beginning to look more and more like the thirties. In Greece, Portugal and Spain, unemployment and hardship increased at an alarming rate. The number of jobless had reached a huge twenty percent of the overall working population, and this figure was certainly be much greater amongst young people and those over the age of fifty.
What would 2011 bring to the ten thousand people losing their jobs every week in Spain? Almost two million households had no one in work. Eight hundred thousand new homes stood vacant for lack of buyers, entire industries were wiped out along with the towns that had sprung up around them.
The implications were grave as civil unrest would surely ensue with the rise of extremist groups if governments were incapable of finding a solution. Germany and its northern neighbours baulked at the idea of financing a plan to save what they saw as spendthrift ClubMed countries, but the consequences of their failure to act would certainly backfire, bringing instability and danger, even to those who, at least on the surface, appeared most capable of riding out the coming storm.
The End...for now
ACKNOWLEDGEMENTS
This book could not have been written without the data and information published on the Internet and in the world press collected over a period of seven years, starting when the very first signs of the sub-prime, sovereign, euro, debt crises appeared in early 2007. I have trawled numerous British, Irish, US, Russian, French, Spanish, Chinese, Israeli newspapers, news blogs and specialist Internet sites, and books (authors’ cited). And of course Wikipedia.
During this period I have collected information during my visits to the USA, China, Hong Kong, Macau, Indonesia, India, Dubai, Thailand, Cambodia, Libya, Egypt, Kenya, Tanzania, Senegal, Mali, Morocco, Mexico, the UK, Germany, Belgium, France, Spain and Italy. To this I have added my experience in other parts of the world, notably Ireland, Australia, New Zealand, South Africa, Malaysia, Singapore, Brunei, the Philippines, Taiwan, Japan, Burma, Switzerland, Algeria, Russia, Scandinavia, the Baltic Countries, Poland, Hungary, the countries of ex-Yugoslavia, Greece, Turkey, Russia, Turkmenistan, Jordan, Syria, Israel, Egypt, the Caribbean, Central and South America.
I present my thanks and excuses to all the willing and unwilling contributors to the information included in this book, the information from this information world. I have tried to verify all the facts, but this is an impossible task. In my humble opinion most data reflects real events and the opinions of the vast majority of persons affected, directly or indirectly, by the multiple crises.
The is a story, a novelised account of the events leading up to and relating to the economic ongoing crises, where the fictitious characters are fictitious, and where the real characters such as George W Bush and Tony Blair are real.
The stories of 2010-2012 and 2013 are recounted in tomes three and four of The Turning Point.
With my very sincere thanks to all contributors, direct and indirect, knowing and unknowing, willing and unwilling.
John Francis Kinsella, Paris, March 2013
The TURNING POINT trilogy commences with part I: 2007-2008, and continues in part III, 2011-2014
Other books by John Francis Kinsella
Fiction
Borneo Pulp
Offshore Islands
The Legacy of Solomon
The Prism
The Lost Forest
Death of a Financier
The Turning Point 2007-2008
Non-fiction
An Introduction to Early Twentieth Century Chinese Literature
Translations
Le Point de Non Retour
The Sorrow of Europe
The Temple of Solomon
Jean Sibelius - A biography
Understanding Architecture
The Plan Page 84