Category: Current

For at least 20 years there has been speculation that the housing market in China is heading into a bubble territory, but rapid urbanization and economic expansion proved the doomsters wrong. There seemed to be a limitless appetite for new accommodation. Newly prosperous Chinese didn’t only buy properties to live in. They also bought second and third apartments because they found it hard to invest their excess saving in the underdeveloped and restricted financial industry of China. The rising prices lured in ever more speculators and ever higher geared property developers.

The party is over now. The housing bubble has burst. The property prices have decreased by about 35% or more over the previous two years.   That is about the same as the decline experienced during the 2006 – 2008 US housing market crash. Yet the wider financial fallout in China has been subdued. Why?

A steep decline in property prices has almost always caused havoc in the banking system. Yet we have not heard of any bank in China in trouble. Part of the reason for that is because no one in the world saves as much as the Chinese. Yet the overall consumer debt in China has been rising sharply over the last 15 years, which suggest that more and more property purchases were funded by obtaining credit from financial institutions. The banks are well funded and could probably absorb a modest decline in the property market. However, such a massive collapse of the property market would be hard to absorb for even the best capitalized banks.

The government had a few other tricks up its sleeves. For one, the financial institutions did not need to recognize some bad debts if they held on to them. The banks also sold portfolios of poorly performing loans to Funds whom the banks lend the money to buy the non-performing loans. By removing the non-performing loans, the banks look stable. Then there is the only lightly regulated shadow banking industry that is so murky that no one knows how much money they have lost because of the property crash.

The underlying problems have not gone away. If there is negative equity in some of the properties, then someone is going to have to take a loss at some stage, unless there a remarkable boom in property prices. That is unlikely. Declaring bankruptcy, especially for private individuals is almost impossible. This means that the over-leverage drag will carry on for years to come. The most likely scenario is that the property sector will just bumble by at 0% growth for decades to come.

I recently read an article in the British Press on how the installation of Rooftop Photovoltaics Solar Panels (PV’s) in South Africa makes the society even more unequal. It is an attention grabber, and poorly informed article.

Firstly, the electricity price that Eskom, the South African power utility, is allow to charge, is set by a national regulator. At current prices, foreign investors are falling over themselves to get their hands on Independent Power Producer contracts, because the return on their investment is to attractive. That means that there is not much pressure to increase electricity prices, no matter how many private households install PV’s on their roof.

Secondly, there are much fewer periods of load-shedding because private individuals and companies generate their own electricity, instead of relying on the intermittent supply of Eskom. Less load-shedding leads to more productive economy, which leads to more job creations. That is good news for the youth, where every second one does not have a job.

More importantly, it is a bit rich for a foreign journalist to criticize the increased use of solar panels for home electricity generation, because it will increase the Gini coefficient. The worlds Gini coefficient has increased dramatically over the last 15 years in favor of the developed markets. The whole of Europe and North America has experienced a boom in housing prices fueled by an almost 0% interest rate environment. In contrast, residents of developing countries are charged double digit interest rates when they wanted to purchase a home.

It wasn’t only the property market that sparked a wealth boom, but the stock markets shot the lights out. Should they have not benefited from the stock market boom or the housing bubble, they were at least sure to find a job. Unemployment rates across the rich world were at all time lows. Many companies are desperate for more workers. In some countries there were two to three jobs open for every person looking for work.

All of this is a good thing, obviously. And I am not arguing that it happened at the expense of the developing nations. However, we know that a country with a small middle class and a high disparity in wealth is an unstable one. And therefore, a world with a widening divide between the rich and the poor nations is going to be an unstable world.

Immigration is a topic that often decides elections. The hope of making their lives worth living will always draw the desperate people of poor countries to the rich ones. Unless the developed countries take their responsibilities as world citizens seriously, tensions will increase.

The war between Israel and Hamas is dominating the headlines. Not a day goes by without the pictures detailing the horrendous bombing raids on Gaza appearing in our newsfeed; not a day goes by without a news statement by the Israeli government justifying their act.

It all started on the 7th of October when Hamas soldiers managed to cross the border into Israel and committed some of the most horrific act of violence against mostly unarmed civilians. There are stories abound of women being raped, sometimes In front of their kids, arbitrary people being abducted, and men, women and children killed in cold blood. There was apparently one particularly gruesome story where a Hamas soldier tried to behead his captive but couldn’t find anything sharp enough to cut his neck off, but he nevertheless persisted and eventually savaged the head off. This is the definition of horror. One can’t begin to imagine the pain the parents of the captive must have felt.

In response to the brutal attacks, Israel decided to launch the biggest counter attacks since the 1967 six-day Arab-Israeli war. It Started with a bombing campaign that seems very indiscriminate. Many civilian structures were flattened. Most Palestinians are running out of food and water. There are reports of whole families being wiped out because of the bombing campaigns. The people of Palestine are trapped in a living nightmare.

Nobody wins when there is war. There can never be a justification to kill someone daughter or son. No least a political validation. The citizens always hurt the most. They are just used as pawns by megalomanic politicians. Benjamin Netanyahu, the hawkish Israeli Prime Minister who portrays himself as a strongman, had a laps in judgement of Hamas. It turned out that the border was poorly defended, and that even though they knew that Hamas was using child labourer to dig the tunnels, did nothing about it.

The Hamas leaders don’t even stay in Palestine, but apparently live a lavish life in Qatar and Turkey. Yet they use a combination of threats of violence and bribes to cement their power in the Gaza strip. Even though Iran supports Hamas, they don’t care about the Palestine people, otherwise they would have sent money to build schools and universities. Instead, they send money to buck rockets. The other Arab states have not offered to take in any of the Palestine refugees. Why?

And yet it seems to be that the general world population is expected to take a side. There have been many demonstrations worldwide, often for the plight of the Palestine but also against the rise of antisemitism. There has been no demonstration for peace.

How are we supposed to take side in a conflict that goes back to biblical times? Clearly, it is a very complicated scenario. There are too many issues to address them all. There does not seem to be any reasonable of justifiable outcome in sight. Yet, it is time to stop killing innocent civilians. It is time to imagine how the region could look like in 20 years’ time, and then come up with a plan on how to get there. Both parties must stick to that plan.

Healing will take time, but it is possible. It has been done before, just look at Norther Ireland or South Africa. One needs to start with respecting each other as human beings. Then stop shouting but rather listen. Listen to what the general population wants. Listen to what they need. But that can’t be done with the current leadership in Israel, and it can’t be done with the current leadership of Hamas and Palestine. They need to step down.

As the war in the Ukraine is turning one year old, most Western media are headlining the dreadful milestone. Before the war, Russia used the pretense of a war-games with Belarus to build up a massive military presence at the border to Ukraine. The on the 20^th of February the Russian army crossed the border into the Ukraine and began what the Kremlin called the “special military operation”. The true reason why Putin decided to begin an armed conflict with its sovereign neighbor can only be speculated about. Officially he wanted to “de-Nazify” the country (whatever that means). He, and most other western leaders, thought it would probably be a quick war. They were mistaken have miscalculated the Ukrainian tenacity to fight for their independence.

Whatever the reason for starting the war was, the facts remain clear. Russia invaded Ukraine. Bar two minor targeted attacks, Ukraine has not launched any attack on Russian sovereign ground. Russia has used its large artillery capacity to destroy whole villages and towns. It didn’t look like the destruction was aimed at purely military installations. Many residential buildings were hit by missiles, hospitals were truck and townhalls were destroyed. Pictures of cities such as Mariupol remind of those taken of Dresden after the bombing campaigns, everything destroyed.

Yet the reality is that most of the worlds population don’t care, or at least say that they are unaffected. According to them, the bigger focus should be on the China – USA fractious relationship. They are mistaken.

For one, the Chinese president, Xi Jinping is watching the battle closely. If the West support is fading, then surely it will fade too if China attacks Taiwan. Also, if the West is not able to replenish its weapons supply quickly, then he only needs to stretch out the war with Taiwan to make the promise of new ammunition a fantasy.  Once China invades Taiwan, the trade between the USA and China will collapse. Each will shower the other with sanctions, import duties and restrictive rules, and it will take decades for those to unwind. This will impact most businesses in most parts of the world.

Secondly, the Ukrainian war is not simply a war between to sovereign countries. It is a war between a thriving democracy and an autocracy governed by a ruler who has bent every rule to stay in power for the last 22 years. The one side defends free speech, a society where every one is equal before the law and a government that upholds human rights. The other silences any critics of the leadership, controls the propaganda in the press and  locks up opposition politicians on trumped up charges. Those who don’t care about the war in the Ukraine should decide in which society they would rather live, a free and fair one or one controlled by a single person, because the winner of the war will dominate the political landscape everywhere.

Thirdly, all those leaders with atom bombs or ambitions to build one are paying close attention. Putin is making the threat of a nuclear strike. No one knows how real this threat is, but if the West gives in, countries like North Korea will copy the playbook. A nuclear bomb will become the ultimate bullying tool.

Lastly, the war misses an even greater picture. For as long as humans have lived in tribes, there have been wars between them. Boundaries and countries borders have changed many times, because of war. One of Putin’s reasons for invading was that there is a region which was dominated by Russian speakers. That might be so, but that is no reason to start a war. We must come to accept that borders are lines on a map that outline a country. Most were set not by the current inhabitants, but often for arbitrary reasons. We have a much bigger problem to tackle, however. Climate change will unleash desperate times all over the world, from the farmer affected by drought in Kenya, to flooding victims in the Philippines and inland shipping companies in Europe. No one will escape the impact of the fast-changing weather. Money spent on the wars and the money spent on increasing ammunition supplies is money not spent on fighting climate change. It is a zero-sum game. It is time for everyone to understand that climate change is coming, it will be disruptive, it will be devastating and it will change the way humans are living. We have the ability to reduce the impact, but only if we have the money to spend on it. It is a waste spending such on wars.

Exactly 20 years ago, the USA invaded Afghanistan under the pretext of fighting international terrorism. The tried to hunt down Osama Bin Laden, then the head of al-Qaeda, who was wanted for his involvement in the 9-11 attacks. In the process the USA also overthrew the Taliban, an extreme conservative Muslim organisation that was ruling the country. 

Ever since then, the USA had thousands of troops on the ground in active combat. It has been estimated that the war cost the USA 2 trillion US Dollars, which is the equivalent of 100 times Afghanistan’s GDP of 2019. Now, 20 years later, the US abruptly withdrew from their longest war in history, just to give the country back to the Taliban. It is astonishing, that all that effort lead to nothing. But it is not without precedence. The Vietnam war also only served as the backdrop for countless brutal and horrific movie scripts, it served nothing else. When the USA withdrew, they left a country in ruins and countless American families grieving their lost sons. 

This doesn’t only highlight that the USA is incapable of leading a war, but that they have a misjudged attitude towards international policy making. They are supposed to be the leaders of the free world. They are supposed to encourage the spread of liberal ideas, such as the principle that everyone is equal before the law, that everyone should have the freedom of speech, enjoy a free press, be able practice the religion of their choice and be able to work in a free market economy. Women must enjoy the same privileges as men, and children must be protected and not prayed upon. If need be, the USA must step in to defend those principles.  That can not be done with bullets and rockets, but by conquering the heart and minds.