This is what Ballybunion is going to look like after a bit of global warming. Looking out at Bondi Beach as the big surf rolls in and the beautiful people catch the waves on a warm Sydney autumn evening, it is easy to imagine the west of Ireland in a few decades.
Apart from the fact that I haven’t felt this ugly and self-conscious since going to discos in the 1980s, being in Australia makes you think. It focuses your mind on the changes that are on going in the world economy and how they are going to affect us all.
The Irish accents in the bars and restaurants here underscore that we are at the beginning of yet another great era of Irish emigration. We are about to enter yet another period in which Irish governments regard the safety valve of emigration as the price we all have to pay for the mistakes of a few.
It was the same 25 years ago, when Brian Lenihan, the current Minister for Finance’s father, told us that there were ‘‘too many of us to live on this small island’’. The family firm is still in business, and the flight of the young will still be tolerated.
Yet again, Ireland is addressing its economic difficulties with the insider/ outsider solution. The insiders – those with reasonably secure jobs in the protected sector – will be fine and will simply suffer the indignity of being poor versions of the European middle-class.
The real pain will be suffered by the outsiders: the young, the unemployed and those without a secure stake in society. It will be like the 1980s all over again. And the 1950s.And the 1930s.
Given the way things are going, this new era might be a long one. As a member of the only generation that might have to emigrate twice in our working lifetime, this is a rather sobering prospect. Twenty five years ago, as self-conscious teenagers, we knew that, by the time we were 20,there was little chance of many of us remaining in Ireland.
Now, a new generation of Irish teenagers will have to prepare themselves for a similar exile.
However, distinct from the Irish angle, the headlines in Australia reinforce that the world is changing rapidly, and it is this world to which we in Ireland must adjust.
Last Friday’s editorial in the Sydney Morning Herald started with the line: ‘‘Once again, news from China will have an impact on Australia.”
This is about the huge demand for Australian uranium, following China’s announcement that it is going to dramatically increase the rollout of new nuclear plants in the years ahead.
This came after Britain, Germany and Italy signalled similar news, and Japan was making noises suggesting it was about to do likewise.
The Australians know that the world is turning nuclear, and it can, as the Herald suggested, expand its uranium industry from Aus$900 million toAus$9 billion.
The move to nuclear is a signal that China acknowledges that it has to wean itself off burning coal to drive the energy demands of that huge country.
However, there is also something else going on, something that suggests a change in Chinese tactics and strategy towards how it spends its huge reserves. This change will have significant ramifications for the US – and everyone else.
In recent weeks, the Chinese have signalled that they are fed up buying US Treasury bills. Last week, at the Asian Economic Conference, delegates from China commented on their unwillingness to increase their investment in such bills.
China holds more than $1trillion of US paper, and the US, by printing money hand over fist, has as good as said to the Chinese that the value of these ‘T-bills’ will fall. The US is going to inflate away its debt burden and, via an exchange rate devaluation, rob the holders of US debt via a weaker dollar.
This poses a huge dilemma for the Chinese. On what are they going to spend their entire current account surplus – the vast excess of the money they earn from exporting compared to what they spend on imports? They will spend a certain amount in China, but they need to buy overseas assets. This is where Australia comes in.
Australia is China’s quarry. Its huge mineral resources make it crucial to China’s continued growth. So the Chinese investment agency is considering taking strategic stakes in Australia’s mining companies, such as BHP and Rio Tinto. In addition, the Chinese are keen to sign long-term agreements with Australia to secure uranium, iron ore and coal.
But China can’t switch away from the US overnight. It needs the US spending to keep its factories open to produce goods for export to the US.
So the world’s banker is trying to play a tricky balancing act, diversifying sufficiently away from the dollar and the US to protect itself, but not diversifying so dramatically as to cut off funding to the Americans.
This process is going to define global financial markets and geopolitics for the next five years. If China is successful, it will manage America’s decline gradually and without incident. Countries like Australia will benefit as resource players.
If it fails and the US dollar falls too quickly or the US doesn’t recover, then the entire Chinese gamble will backfire. The Chinese gamble is to use the US as its growth engine until it is ready to spend its money at home.
The country clearly needs more time and is not prepared to pump-prime its domestic economy just yet. Thus far, China has avoided an implosion similar to Russia’s in the 1990s, and the politburo in Beijing is obviously keen to do things slowly and methodically.
Irrespective of the timeframe, it seems plausible to argue that that is the ‘big trade’ – the big investment story of the next few years. It will change all our lives. Not that you’d know here in Bondi.
Little do the surfers realise that, yet again, Australia looks set to live up to its moniker as ‘the lucky country’.