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’.
A purportedly true story is told (from yellowbridge.com) about Henry Kissinger when he was in China in 1972, laying the groundwork for President Nixon’s visit. At a meeting with Chinese prime minister Chou En-Lai, Mr. Mr. Kissinger asked the prime minister if he believed whether the 1789 French Revolution benefited humanity. After mulling over the question for a few minutes, Chou En-Lai replied, “It’s too early to tell.” – One thing we can be sure about is that there will be pain. Everyone’s assuring us commitedly about this pain we’ll feel and how it is to be shared out, and… Read more »
I think I highlighted this Chinese Interest in Aussie a couple of months ago here on the blog.There were delegations out my way in Perth looking to buy shares in the mines, that mates of mine work in.The locals are not under any great pressure to sell,so the Chinese wont buy anything cheap,that’s for sure.Some of the workers well laid off awhile ago,when prices dropped,but that was more to do with managing the long term resource value,than any financial stress of the Companies involved.I included a lot of this information in a piece I wrote about critism Paul Krugman recieved… Read more »
Being Self Conscious is a sign of genuine reflection whereas petty character assassinations are the work of cornered bullies. Lenihan and Co. are quite obviously scared senseless of whats going on, they are afraid to admit to reality as it would reveal the true state of their flimsy resolve. Instead they seem quite prepared to carry on regardless with advice gained from dubious individuals and institutions which benefits the limited few and not the majority . Your articles have been consistent ,realistic and relentless. If there is one thing that I have noticed from watching this site is that your… Read more »
The future which could become reality relatively quickly considering the ‘turmoil’ in global markets is for Ireland to be the destination of choice for companies from the ‘emerging’ markets such as China to use Ireland as an ‘operations’ and ‘sales & marketing’ centre to deliver their products and services to customers in Europe and beyond. Unfortunately, as John McGuiness has now confirmed the current ‘administration’ including top civil servants and their well paid advisers are not identifying the root cause of the problem and proposing ‘real world’ solutions which can be implemented now. The IDA is failing to attract enough… Read more »
Ballybunion : This beautiful resort can be liken to Ireland today .In a yesterday year it had the creme de creme of Irish society visit it’s once beautiful hotels ( including Vincent Browne ) and the merchant class’s of west Limerick and north Kerry tried to emulate their counterparts in Kilkee , Co. Clare across the the mouth of the Shannon Estuary where the Merchants from Limerick ( including Richard Harris ) encamped and built a ‘Brighton sur Mer’ .Today , all that is lost .Ballybunnion has itself encamped in a time capsule that was never opened even during the… Read more »
More bearings : We are a western nation on the edge of europe .Well thats the official version .We are also an eastern nation also on the edge of europe , if you were to view it from Chinese persective looking across the pacific ocean and USA.Our name Ireland suggest we are a western nation ( eeeerland ).Today it does not matter how you look at it because the Earth is a smaller place ( Age of Aquarius – Internet etc ) and what goes round comes round and the boom a rang proves that . Shannon Airport was set… Read more »
David said: “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.” The same has been true for every generation since the industrial revolution. My first toe in the water was working in a frozen pea plant in Cleethorpes, where the money was good, overtime plentiful, and the majority of the temp. staff of several hundred, were students from QUB, TCD and UCD. The craic was good but the lesson was that the painful self-concsciousness about mixing across the social divides was completely forgotten… Read more »
From farmland in Central Asia mines in Africa, oil everywhere, uranium in Australia, the constant theme is China securing resources.
While the economics is interesting, the mathematics is much more compelling…the chinese know we live in a resource constrained world and are securing supplies. It doesnt really matter whether this is for export or domestic consumption….
I wonder will our Ministers for Energy trot out the same old excuses they are using on the current crisis “Nobody say it coming” when the reality dawns that a few windturbines producing intermittent power are no replacement for the current energy backbone.
Australia has been doing very well from increasing trade with China in recent years. In the past two years, it ran out of shipping facilities in Newcastle for exporting coal, such was the demand.. Australia and NZ are also well positioned to supply the 10 Asian countries, which account for half the world’s population, as diet changes with rising income. Irish-owned exporting firms should diversify from the UK to the Eurozone rather than focusing on Asia. Over the years, there has been a lot of gab in the West about the 1.3 billion consumers in China but it has taken… Read more »
The Chinese seem to have a different concept of value. David is right. The problem is that most people do not have any concept of how to prepare for this. The emergence of a major economic power has ramifications across other players in the economic system. China is playing a long term game. Even by the standards of other semi-Chinese sucesses like Hong Kong, Macau, Singapore or Taiwan. And big on China’s concern list is infrastructure. Chinese infrastructure projects are large. Costs are maintained in a manner that would be aghast to the Irish legal profession. China reckons it will… Read more »
How do we adapt ? The sooner we drop the delusions that we hold concerning the value of the Western consumerist lifestyle the better.
[…] David McWilliams shows in today’s Business Post what this all means for the ordinary joe. Emigration. Quite sad really. Possibly related posts: (automatically generated)God Help The Public After The Next Election- Armageddon levels of public de…Massive Strike Closes FranceWhen government calls the shotsTrading Places: China And The U.S. […]
Deco – I agree
Also in relation to Exploration of Natural Resources in Ireland by super powers I believe is the only option we have because time is moving fast and proper adaption is the key to the change we are faced with .Our natural Resources need to be surrogated to super powers ie leased
Hi David, you touch on three interesting topics …. Emigration In a small open economy like ourselves, emigration should play a role. But the palateness of it is determined by choice, whether its mainly push or pull or just a way to avoid poverty. How many have left and have never returned ….. emigration and the Irish psyche is closely intertwined. There will be times when we need to do it. A new challenge for us are the recent immigrants. We will have a situation where immigrants will stay yet ‘Irish’ people will be ‘forced’ to leave. This is new.… Read more »
Total world supply of Uranium are current burn rates(about 70Ktonne/year) is about 70 years. When China jumps in, that number could half or more and bear in mind everyone wants a piece of that action. So, this stuff is going to get very dear and may make it non-economic in jig time (so I would not turf out the windmills and the dinky electric cars yet). So, if they just acquired it and even if they did nothing with it except part it in a field somewhere, it would be better than rushing and making nuclear power stations (which take… Read more »
Did Lenihan senior explain how our neighbouring Island supports 60 million people in an area 3 times greater than the 26 counties?.With 2 billion people in China and India willing to work for peanuts-the public sector will account for one third of Irish employment within 3 years.
@ MH-Finfacts I’d have to disagree with your comments. I think there are major opportunities for Ireland in China especially in terms of education. I believe that so much that I borrowed money to fund my trip to China this year to pursue things. I hope it will lead to something for Ireland in the long run – but again the lack of government sponsorship for such ‘runs’ is appalling. I am taking lessons in Chinese customs, history and language – I am doing this off my own bat with no ‘assistance’ from the IDA or anyone else…….. I look… Read more »
@ Deco as a follow up on his comments on infrastructure……….. On Saturday April 25th, at 10.17, a woman in Buttevant, Co. Cork, with a green umbrella and white socks, brought Cork-Limerick traffic to a standstill when she crossed the zebra crossing. In Charleville Co. Cork, a man and his dog did a similar feat at 10.55. I love the environment and we should do everything to protect it, but I am appalled everytime I get into my car in Ireland. We are not at the races in terms of infrastructure when traffice between two major Irish cities can come… Read more »
Sony played this mind-blowing video at their executive conference this year. Ireland doesn’t figure in their plans for these reasons:
http://www.youtube.com/v/cL9Wu2kWwSY&hl=en&fs=1
Greetings from a wet and windy Glanmire, I think David has got it wrong about global warming in Ballybunion. It’s more likely to rain and blow all summer and get drier during winters. All the surfing will be in wetsuits. But, it’s good to read a clear perspective on how China is playing the global game. Makes sense to me. I remember reading Marx & Engels on China: people have been predicting the power of China for a long time. For us who’ll remain in Ireland, the advance of thinking ability is, I think, crucial. We need every shred of… Read more »
subscribe.
David’,
really good read and jumping out for me is the american hegemony
meltdown and China’s role in it,.. Big big story and open’s up the ‘ol
chestnut surrounding Empires in decline and ascendancy and history
repeating itself, ie, 1910 n empires folding and rising = War, and so
i figure a good time to be reminded on what war is….
http://www.scribd.com/doc/2624419/war-is-a-racket
“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’’. I’m absolutely shocked by that remark – I was around then, but under such pressure, that it must have passed me by. I know that that useless alcoholic was asking the Americans to take in more of our people, but to say that there were too many of us on the island, was nothing short of criminal – that’s something that you’d expect Hitler to have said. What a… Read more »
I spent 3 years in Aussie and Bondi Beach is a seduction for new backpackers and tourists. But the average Australian gets a little bored of it after a while. It truely looks like the promised land when travelling first on the route 380 from town. There are a few home truths about the Australians and one is a deep mistrust of Asia. Sure maybe slowly, they are being amalgomated, but there is a strong urge to keep a sense of a national identity outside of Asia. Also memories of the Japanese attacks in WWII is still very strong to… Read more »
Very old news, the chinese have been at that for a very long time. But are we forgetting the green energy factor here. Technology is going to change the rules of game over the coming decades. I am not sure if Chinese have thought this through. We have all played ages of empires right?
OOOOOHHHH MY GOD ,he’s stillin the Denial phase…………………………………………………………………………………….TAOISEACH Brian Cowen trumpeted the Government’s economic rescue plan yesterday and claimed Ireland would go down in history as one of the first countries to tackle the global recession. In his first address as Fianna Fail leader at the party’s annual Arbour Hill Easter Rising Commemoration, Mr Cowen used the opportunity to give a wide-ranging and robust defence of the Government’s economic actions and solutions. He told the party faithful that Ireland’s response had been “unprecedented in its breadth, its speed and its force”. “I firmly believe history will show that we were… Read more »
We keep telling ourselves that our education system is wonderfull the best. Well the time has come to prove that, is it fact or is it fiction. We talk about china and india and how they may help us and us them by providing a stepping stone into Europe as we have done so sucessfully with american companies. Well its time to think again because we have very little to offer either right now other than a market for their goods and even that isn’t looking so hot right now. If we are to have a future then its us… Read more »
G’Day David,
You right about one thing Australia’s the lucky country. I came here less than three years ago. I have a thriving software business and a house in Surry Hills. The culture is a relaxed, laid-back version of Ireland’s. Add in the weather and can someone please explain to me why you wouldn’t emigrate here from Ireland.
Meanwhile, I can’t hire a plumber or electrician for love or money. If you’ve lost your job on a building site in Kilkenny – come to Oz. Please!
Darren
PS: drop us a line David and we’ll go for a schooner!
Australia might be the lucky country – but we had a lot of luck in the past thirty years. And for the most part, it appears that our irresponsible attitude and reckless thinking has blown it. We should be trying to modify our thinking. Instead it seems that we are playing along on a sea of emotion, with everybody defending their corner in the economy. The lies that were the hallmark of Modern Ireland have continued. This is evident in Hanafin defending the ‘record’ of Minister Coughlan. And Cowen’s attitude to McGuinness, Behan and Conor Caseby. McGuinness may get the… Read more »
[…] ArticlesChinese whispers down underBanks giving us two fingers don’t deserve State bailoutBad debts could turn out goodLet us not […]
From Joe Brennan in today’s Indo:
Mr Desmond recalled sending a chief executive of an Irish bank a particularly bleak outlook from an independent Irish economist of the property market a few years back. “He sent it back and said, ‘That’s nonsense. It’s a bit eccentric. Don’t believe it’.”
DMcW scores again?
Not intending to divert from the main topic and indeed in an attempt to weave something in, can anyone think of a means of sustainable growth (in line with population and their increasing need – rather than want) which is not too debt driven or can start from a shoe string Things that come to mind: Quality tool Hire Repair and maintenance – of anything Agriculture & Horticulture – seasonal renewal Recycling, un-manufacture and re-manufacture Warehousing for seasonal and buffering etc. If I were to borrow anything from China or anywhere else, it would be their manufacturing jigs and tooling.… Read more »
President Obama has announced that he wants U.S. to spend 3% of GDP on research.
What are we doing?
@David McWilliams: “….china needs US spending to keep it’s factories open” “………….diversifying away from USA, balancing trick….” “..this process is going to define the global markets and geo politics for the next 5 years” Now can i ask all bloggers and David to look at link below,… http://www.marketoracle.co.uk/Article10272.html Ok, having read this rather devastating analysis i reckon JPMorgan will ensure all monies finding it’s way to China on buying their exports are about to come to a full stop, whence JPMorgan goes south and tip’s USA into a depression. So, china’s “engine for growth” – USA splutters out of gas… Read more »
The urinals at the Sodoma bar in Reykjavik are now outfitted with photos of former bankers who’ve fled the country. All three of Iceland’s major banks collapsed late last year and the IMF had to bail out the government.
We like this. Seems like a far more constructive response to the crisis than the one exhibited by Icelandic voters over the weekend. They voted in candidates from two parties pushing for Iceland to join the European Union. Yeah, that’ll learn ’em.
OK here is one idea We have 200,000+ people who have lost there jobs in the last 12 months a lot of these people have a wealth of experience gained in there previous jobs some of them will have excellent business ideas that they would like to research & develop. We have Universities, regional colleges and Fas centers kitted out with the best Engineering, computer and Lab equipment that money could buy, and totally under utilized (come summer everything will be idle). Would it be at all possible to bring the people with their ideas and the equipment needed to… Read more »
Aus has a housing bubble too. Same troubles as the rest of the anglosphere, including Ireland.
And China is going to get it in the nuts – their export figures will follow Japan’s, they have insane overcapacity in industry and commercial property, their GDP figures are bogus. Plus they have a politburo running a banking system that makes Wall St look like a choir of angels.
How very dare you, Mr McW!
Just a few rushed points: Global warming – James Lovelock was interviewed recently on RTE Radio 1 and saw Ireland as a practically unique “life boat” on account of its climate. Insiders and Outsiders – I share DMwW’s analysis here – this has always been the way siince the foundation of the state (and long before) and is not some recent aberration over the last few decades (see eg Crotty and Lee). What is happening is that with the credit flood receding the old structures are being revealed once again. Lee sees it in terms of performers and possessors –… Read more »
No direct flight between Ireland and China, Chinese student told me she had to change twice to get here.
The Irish can go via London-Beijing. Doesn’t strike me as a good enough. Wish Aer Lingus or someone would conduct a feasability survey, if they haven’t done so already, there must be opportunities for Irish business out there (?)