The view from Ha’penny bridge

  • Closing soon to new members: ‘Overnight Dividends’
  • Manufacturing growth
  • Too soon?
  • In the mailbag

In our hurry to get to Bristol Airport, to catch a flight to Dublin, your editor didn’t have the time to stop to take snaps of three of Isambard Kingdom Brunel’s engineering legacies.

We’re talking about the Clifton Suspension Bridge, Bristol Temple Meads railway station, and the SS Great Britain.

Of course, thanks to the wonder of the internet, you can check them out for yourself with a simple search.

It’s worth the effort if you have the time.

And so, instead of a photo of Bristol engineering skill, here’s a photo of Dublin’s Ha’penny Bridge:





Source: Port Phillip Insider
Click to enlarge


Extraordinarily, the Ha’penny Bridge celebrated its 200th birthday this year. That means it predates all but one of the bridges that crosses the River Thames in London (Richmond Bridge was built in 1777).

We walked over the Ha’penny Bridge on the way back from a stroll to the grounds of Trinity College, following a brief visit to Dublin Castle.

Dublin seems like a pleasant city. It has plenty of hustle and bustle, but not to the manic extent of somewhere like London or New York. In our view, that’s a good thing.

Due to a lack of adventure, we had dinner at our hotel, and retired to our room early — after all, there is still an editorial deadline to meet.

We stay in Dublin tonight, before making the two-hour drive south to Waterford for a business meeting tomorrow.

Until then…

Markets

Overnight, the Dow Jones Industrial Average fell 14.24 points, or 0.08%.

The S&P 500 fell 1.98 points, or 0.09%.

In Europe, the Euro Stoxx 50 index closed up 9.21 points, or 0.31%. Meanwhile, the FTSE 100 gained 0.23%, while Germany’s DAX index added 0.63%.

In Asian markets, Japan’s Nikkei 225 index is up 102 points, or 0.62%. China’s CSI 300 is up 0.49%.

In Australia, the S&P/ASX 200 is up 12 points, or 0.22%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$42.87 per barrel. Brent crude oil is US$45.17 per barrel.

Gold is US$1,335 (AU$1,745) per troy ounce. Silver is US$19.74 (AU$25.79) per troy ounce.

The Aussie dollar is worth 76.54 US cents.

Closing soon to new members: ‘Overnight Dividends’

If you haven’t yet checked out Matt Hibbard’s ‘Overnight Dividends’ strategy, there’s still time. But not for much longer.

At midnight next Monday evening, we’ll close the door on new memberships for the immediate future.

To be honest, we may have to close the doors sooner. So far, around twice as many folks as we expected have chosen to learn more about Matt’s ‘Overnight Dividends’ strategy.

For more details on how it all works, go here.

Manufacturing growth

As we mentioned above, there is plenty of hustle and bustle here in Dublin.

But perhaps not as much as there could be. The unemployment rate is still 8.6%, according to the most recent figures.

That’s an improvement. Until three years ago, Ireland’s unemployment rate was around 15%.

That was among the highest in Europe, and among the highest in the developed world.

And depending on your point of view, the trend for Ireland’s GDP is heading the wrong way, too. For the most recent quarter, the annualised growth rate was 2.3%.

For those hoping for continued growth, while that number may appear to be positive, many would want more.

For instance, 2.3% falls a long way short of 2015’s reported annualised GDP gains.

As you can see from the chart below, Ireland’s economy was on fire:



chart image

Source: Trading Economics
Click to enlarge


Wow!

That’s what we call growth. However, why can’t Ireland achieve the same, or similar, growth again?

The Irish Times asked this question in a recent article:

You could call it a €75 billion mystery. Or a €300 billion conundrum. But either way trying to interpret the official economic figures for 2015 is next to near impossible.

Everybody knows that the 26 per cent plus growth rate recorded for 2015 may be a statistical fact, but in terms of reflecting what is actually going on it is clearly a fiction. But trying to pull apart the various different bits of the puzzle is very difficult, because for confidentiality reasons the amount of information the Central Statistics Office felt able to provide was very limited.

The Irish Times dug deeper.

Just how could an advanced economy like Ireland record such huge GDP growth in such a short period? Especially during a period of uncertainty for the Eurozone economies, of which Ireland is a part.

As you should be able to guess, these days, it seems that rarely is economic growth real economic growth.

Just as governments and central banks think you can grow an economy by printing money, it appears that a jiggling of the books by a private company can also result in huge economic growth — assuming you accept that it is real economic growth.

As the Irish Times continued:

So why did this happen? Why has the measured level of exports risen so dramatically?

Let’s look at our second mystery figure: the €300 billion, which refers to the increase in Ireland’s stock of productive assets. As pointed out by economist John FitzGerald in his column today, this figure rose from some €700 billion in 2014 to over €1,000 billion last year, again an extraordinary jump in a number which normally just edges up from year to year.

We now enter into the world of speculation about why exactly this happened — and the CSO’s reticence to tell us suggests that a small number of companies are involved. What must have happened is that a few companies moved productive assets to Ireland from abroad, leading to a jump in our capital stock. We know, for example, that aircraft leasing company AerCap moved the domicile of its fleet of aircraft into Ireland, which has a total value of over €35 billion.

In other words, just as a central bank can create billions and trillions of dollars in new money to stimulate an economy, companies can help create GDP growth for a country simply by reallocating sales and profit revenues to a new tax jurisdiction.

As far as we’re aware, a company like Apple Inc. [NASDAQ:AAPL] doesn’t actually have to physically shift any productive assets to Ireland.

It can simply write a ‘file note’ saying that asset ‘X’ is now the property of an Ireland-registered corporation.

That’s especially easy to do in the case of intangible intellectual property. A simple shift of domicile of, say, a trademark or technology brand will suddenly result in a boost for economic growth.

That’s even if it hasn’t created one dollar of benefit for the local economy. And by that, we’re not simply referring to the taxation benefit gained by the Irish government.

We’re talking about the genuine benefit of employing local staff, or using local suppliers, or any other tangible or intangible benefit.

Of course, folks will say that, globally, it’s a ‘zero sum’ gain. For if Ireland has benefited from the transfer ‘in’ of GDP growth, another economy must have suffered from the transfer ‘out’ of GDP growth.

But whatever. It’s a fool’s errand to try and make sense of official statistics such as these. They don’t really mean anything. It simply helps to highlight the flaws of relying on government statistics as a method for showing the performance of an economy.

This is your editor’s first visit to Dublin, so we can’t compare it with the Dublin of the recent past. All we can say is that, even though there is hustle and bustle in the streets, from ground level, it doesn’t look as though it’s an economy that’s seeing much in the way of real economic growth.

Perhaps that’s because there isn’t any economic growth. Hence the ongoing desperation by the European Central Bank to push ahead with further money printing stimulus programs.

Too soon?

The market loved Australia & New Zealand Banking Group Ltd’s [ASX:ANZ] latest cash profit announcement.

As noted by Bloomberg, the bank…

‘…posted a 3 percent decrease in cash profit in the first nine months on higher expenses for bad debts.

At the time of writing, the bank’s stock is up around 3% on the previous close.

Clearly, despite falling profits, the market considers this to be better-than-expected news.

Is the market right to feel this way? Our guess is that the market is trying to time the re-entry into bank stocks after a relatively poor performance for the sector.

If history is anything to go by, most investors tend to be premature when it comes to timing a stock rebound. We’ll watch it with interest in the coming months.

But don’t be surprised if this bank stock rebound turns out to be a short-lived affair.

In the mailbag

The letters on the subject of digital money continue to roll in.

Subscriber, Thorsten, writes:

I am concerned about the prospect of the abolishment of cash. Digital money is the perfect tool of exercising control over people imo.

Our politicians are puppets and I wouldn’t expect much support from their side, but strangely enough the crooks in this world, who can be politicians as well ;-), may be the ones we have to thank for preventing total surveillance and control by “the System”.

Wonder how? Well, for instance, my imagination just struggles with the idea a suitcase full of drugs being paid for using a credit card and mobile terminal and I really don’t think the “System” would want illegal drug operations to cease…too much money in it.

Guess too many politicians wouldn’t like to see all their little deals on the side officially showing up on bank account statements either.

Yeah, so sadly enough that’s the only thing I can bring up which may prevent a cashless society.

In regard to the helicopter money discussion I want to say, the monetary systems and financial markets in the whole world are totally screwed up…crash, severe hardship and a possible resulting revolution may fix it.

Subscriber, Richard, writes:

Any move towards exclusively digital money is an assault by the privileged elites and governments on the working persons of the global village.

This from subscriber, Brett:

Have often thought that the call to withdraw large denomination notes as they were mainly used by large criminal organisations was a furphy — my 88 year old mother likes to get her money from the bank (teller) in $100 notes. I have no idea why.

The idea that the only people who use them are criminals is absurd, and certainly the introduction of digital money would account for the idea of removing large denomination notes.

I do see one issue, or, maybe, a way to avoid the effects, for some people. Digital money can only work in societies where everyone has a bank account, or could be forced to. I have lived in England, China and the Philippines, as well as Australia. Certainly it could happen in Australia and England, but would be difficult in China, and impossible in the Philippines. Even with China’s economic growth, literally millions of Chinese do not have bank accounts. But then, in China, there will always be a way to impose something if the central government decided it was going to happen.

But it would a very different situation in the Philippines, many other Asian countries, most of Africa, and I suspect a lot of South America. And while that might not affect Australia greatly, it does give those of us with access to foreign accounts, and I don’t mean tax havens, a very real and quite simple way to transfer wealth out of Australia while it was still our own. This won’t happen overnight, and anyone who is paying even vague attention to what is going on would have plenty of time to move money. And even after, if you use your money to buy, say, diamonds, which are easily transportable and saleable almost anywhere, there would be ways around it.

I agree that there would be a large proportion of the populace would not have the ability or the capacity to understand how to do this, but there would also be a huge number who would.

Though after a generation or two of this, everyone would accept it as the norm, I would think.

Subscriber, Thomas, offers this take:

What a pity we missed out on a Royal Commission into banking! That includes the Reserve Bank.

I remember when the banks introduced bankcard. It came because the banks said the public wanted it. That was a lie; the public was never consulted. They charged the traders 5% so the traders immediately raised prices by the same amount so the public paid. Recently the banks claimed they were not getting sufficient return and started whining again.

The movement from bankcard to a multitude of branded cards and at the end of the line — digital money has all been accomplished without any consultation with the public which is being treating as a milking cow.

Start alerting the unaligned politicians in the Senate and get them to gang up and defeat any attempt by anyone to introduce digital money. If they can see the consequences, they will surely torpedo the project.

If, in spite of all attempts to spoil their plans, we are saddled with it, I can see outrageous fees being charged for buying simple things like a biro for $1.

Furthermore, there are many elderly citizens who do not have a bank account; can’t manage or own a computer; are too mentally handicapped to manage and some who will go under in this brave new world.

Finally, subscriber Bert makes the following observation:

I have been following your articles about this “funny Money” and I think it very apt.

For a while now I have been observing everything you need to do is done digitally. I have been in a shop recently when the computers went offline and the employees were at a loss. They did not have an idea how to write out an invoice or to even count money and work out the change without the help of their phone.

The main reason is that we are being indoctrinated by the digital revolution to use our flash card to pay for everything. All that is left of our income is already on that.  We do not need cash for anything, unless of course we have to pay for an electrician or any other tradie in cash for services rendered. Of course to enable them to get by GST and you also scoring.

The digital money would not make such a big impression on the normal run of things but if no cash was available how would beggars survive, what about all the homeless people we have? We all have our favourite musician “Troubadour” on the corner with his hat out. What do we give him, a number????

The digital banking control is coming anyway and I am glad that I would not have to suffer it for too long as my teeth are too long. Big Brother is going to have control of everything, from the cradle to the grave.

You have to immunize your children and old people, The strongest will survive but what about the others? You Have to pay TAX, pay TAX, pay TAX. Everywhere. There is no getting away from it ever! Especially not with digital money.

That’s all for today; until tomorrow.

Cheers,
Kris