Hurry up. It’s perfectly clear now that you have two choices. 1). Federalise and become the United States of Europe, or more aptly the European Union of Socialist Republics, or 2). Disband this nutty experiment.

Now don’t get me wrong, you’ve done some good things; freedom of movement of goods, services, people and money are great ideas and you should keep them in a formal treaty as well as open trade but monetary union could never work without political union, that is now perfectly clear and was clear a decade and a half ago.

You either have to double down and go for full union or disband and allow your economies the ability to rebalance themselves.

I personally think you should go for the second, embrace freedom and sovereignty and reform for growth – but it will be painful. It will wipe at least a trillion off the zone’s economy, Portugal, Ireland, Spain and Italy will probably go bankrupt (and you should let them), there will be bank collapses, savings wiped out, austerity (properly this time) and a decline in living standards but it’s better to get these things over quickly, like a bandage – right off. It was always a mistake thinking government could tend to every need. Your only alternative is full union, more moral hazard, more socialism, more debt, more muddling through.

It really is a choice between two crap sandwiches but hurry up and pick one.

The left sees this as a victory for the working man, now blue collar NZers will get those jobs being stolen by foreigners. They believe this despite the fact that there is already a large number of vacancies on NZ fishing vessels. Who would of thought it? Dole bludgers don’t want to go to sea for 5 weeks at a time, in a dangerous job, working 6 hours on and 6 hours off. They’d rather sit on their backsides and have us pay their way or let foreigners do the work.

The upshot of this is the industry in NZ will be less competitive as the price of operation will rise. Maori iwi hold a lot of the fishing quota, it was awarded to them recognising their well documented and extensive history of fishing hundreds of kilometres from the coast in factory diesel ships. And some Maori aren’t too happy about this government decision:

Ngahiwi Tomoana, the former chairman of Te Ohu Kaimoana, the governing body of iwi-owned Aotearoa Fisheries, said reflagging could see Maori going back to the Government for compensation if commercial returns decreased.

As you can see, according to Maori a government decision has affected a treaty settlement made decades ago, quite obviously this means it’s time to go back and demand “white” NZers (which includes Asian NZers, et al apparently) must pay for this change.

Treaty claims will never end, every time a law change or similar is passed by parliament and councils Maori will go back with their hands out, and when the parliament or councils pass law that hurts the rest of us (most law does) we just have to lump it.

It’s offered at a price/earnings ratio of 100. For the uninitiated that means, at current earnings, it would take a century to get your money back.

It’s okay to buy high p/e companies if they have ROA, ROE (that exceed the p/e), or they are young, growth companies in dynamic markets.

Facebook is young, in a dynamic market but where is the growth going to come from? Mobile? Ads? Games? Maybe, but without a clear idea the p/e is outrageous. Zuckerberg may find the growth to justify the price, I would besurprised but you don’t invest on guesses. Pass and make sure your Kiwisaver manager does too.

For example, if you understand the game of Monopoly®, you can pretty well understand credit and economic cycles. Early in the game of Monopoly®, people have a lot of cash and few hotels, and it pays to convert cash into hotels. Those who have more hotels make more money. Seeing this, people tend to convert as much cash as possible into property in order to profit from making other players give them cash. So as the game progresses, more hotels are acquired, which creates more need for cash (to pay the bills of landing on someone else’s property with lots of hotels on it) at the same time as many folks have run down their cash to buy hotels. When they are caught needing cash, they are forced to sell their hotels at discounted prices. So early in the game, “property is king” and later in the game, “cash is king.” Those who are best at playing the game understand how to hold the right mix of property and cash, as this right mix changes.

Now, let’s imagine how this Monopoly® game would work if we changed the role of the bank so that it could make loans and take deposits. Players would then be able to borrow money to buy hotels and, rather than holding their cash idly, they would deposit it at the bank to earn interest, which would provide the bank with more money to lend. Let’s also imagine that players in this game could buy and sell properties from each other giving each other credit (i.e., promises to give money and at a later date). If Monopoly® were played this way, it would provide an almost perfect model for the way our economy operates. There would be more spending on hotels (that would be financed with promises to deliver money at a later date). The amount owed would quickly grow to multiples of the amount of money in existence, hotel prices would be higher, and the cash shortage for the debtors who hold hotels would become greater down the road. So, the cycles would become more pronounced. The bank and those who saved by depositing their money in it would also get into trouble when the inability to come up with needed cash caused withdrawals from the bank at the same time as debtors couldn’t come up with cash to pay the bank. Basically, economic and credit cycles work this way.

It is when more credit has been created than can reasonably be paid back. That’s what the US banks experienced in 2008. They had created (and then lent) more credit than the recipients of that credit could pay back. It leads to a bust. Because at that point the US government was still solvent, i.e. it’s creditors were still receiving the interest on US government debt (thanks US taxpayers), the problem was largely contained in a private sector bust (for the time being).

The last two years we have seen a socialist bubble coming to its end in Europe. The governments in Europe have borrowed and credit has been created to finance that borrowing. It is now apparent that that credit cannot reasonably be paid back. Since much of this debt was created by the European private sector both the Eurozone governments and the Eurozone banks are facing busts.

It is now abundantly clear that if we are to have any significant global growth in the next decade the Euro must be disbanded. Countries and companies that are insolvent must default and be liquidated. Currencies tied to individual economies are needed to allow them to increase and decrease in value as market forces demand. Government must dramatically reduce spending and taxes, decrease labour restrictions and regulation and allow the economic engine to kickstart again.

Remember Europe accounts for 25% of the world economy so there can be little or no growth while they are in recession/depression and the decline can spread – which is the real worry.

My advice, look for places largely decoupled from Europe and with government surplus and government spending under control (and low debt to GDP) and strong economic growth. Invest in select African (Botswana, possibly Kenya and Ghana) and Asian economies (HK and Singapore), possibly Canada and Australia (commodities), BRIC (Brazil especially) and watch the US for a reduction (or even streamlining) of taxes and reductions in government spending.

Who really wants prosperity, self worth and happiness anyway?

Rockefeller was called a monopolist, but he wasn’t one. He had 150 competitors — including big companies like Texaco and Gulf. No one was ever forced to buy his oil. Rockefeller got rich by finding cheaper ways to get oil products to the market. His competitors vilified him because he “stole” their customers by lowering prices. Ignorant reporters repeated their complaints.

In truth, Rockefeller’s price cuts made life better. Poor people used to go to bed when it got dark, but thanks to Rockefeller, they could afford fuel for lanterns and stay up and read at night. Rockefeller’s “greed” may have even saved the whales. When he lowered the price of kerosene, he eliminated the need for whale oil, and the slaughter of whales suddenly stopped. Bet your kids won’t read “Rockefeller saved the whales” in environmental studies class.

Missionary work also teaches young Mormons to persevere despite harsh odds. They must sell a product for which there is almost no demand: an idiosyncratic version of Christianity that teaches that Christ made a post-resurrection visit to the United States, that the Garden of Eden may have been in Missouri and that drinking alcohol is a sin. After that, selling airline seats or life insurance must be a doddle.

First, Greek citizens refuse to face reality even at this stage of economic collapse brought about by state socialism. Bye bye Euro, hello Drachma.

Secondly, the French, never big fans of free markets, have elected a raging borderline communist as their new dear leader. Many economic publications (The Economist especially) are predicting are exodus of many mobile French businesses and young, entreprenuerial Frenchmen to the UK and Asia. Hollande (isn’t that a breakfast sauce?) has stated he will bring in a 75% top tax rate (which when it includes payroll taxes, the rate will be over 90% – bad luck all you rich tithers) which sends a very clear message about the type of French economy he wants. The Euro crisis will continue unabated until serious structural reform is implemented; free trade, labour market freedom, a massive reduction in red tape and massive government spending reductions.

A couple of weeks ago he wrote an article simply explaining the broken windows fallacy, here is part of it:

Even as smart a person as economist John Maynard Keynes seemed to forget about that when he wrote in his “General Theory” back in 1936, “Pyramid-building, earthquakes, even wars may serve to increase wealth.”

By that logic, government could create full employment tomorrow by outlawing machines. Think of all the work there’d be to do then!

Think about the two other methods to “increase wealth” that Keynes lumped in with pyramid-building: earthquakes and war. Now, sure, after a war or earthquake, there’s plenty of construction to be done. After the Haitian earthquake, Nancy Pelosi actually said, “I think that this can be an opportunity for a real boom economy in Haiti.” New York Times columnist Paul Krugman made a similar error. On CNN, he said if “space aliens were planning to attack and we needed a massive buildup to counter the space alien threat … this slump would be over in 18 months.” Before that, he said the 9/11 attacks would be good for the economy.

This is Keynesian cluelessness at its worst.

Isn’t it obvious that without a catastrophe those same workers and resources could have done productive work — with the overall standard of living higher as a result? There is something wrong with mainstream politics and economics when some of its most respected practitioners overlook this point.

The economic philosopher Frederic Bastiat called their mistake the “broken window fallacy.” If I break your window, it’s easy to see that I gave work to a glass-maker. But what we don’t see is this: You would have improved your circumstances with the money you paid the glass-maker. He merely restored your previous condition. That money could have created different jobs, perhaps more productive ones. They’re unseen.

People favor government projects because they notice the seen, not the unseen.

Creating jobs is not difficult for government. What is difficult is creating jobs that produce wealth.

The private sector does that.