Borisgonski_Cover

WRY & DRY #2: Borisgonski

And… Albo’s travels. The end of the UN?

Whilst enjoying your Perrier-Jouët Belle Époque…

Borisgonski

Irregularly, the Brits have a way of electing mercurial prime ministers. In between, they elect stunningly boring folk, who occasionally have flashes of personality or policy success.

In the latter, the flaws are hidden in the undergrowth of caution. The ascent to the top gig is a long process of networking, flattery and pleasing. Risks are to be avoided.

In the former, the flaws are there for the world to see. Risks are seen as opportunities.

For the mercurial to succeed, the circumstances must be compelling. For Borisconi, he was elected with all of his flaws on stage. And circumstances when he was elected were seriously compelling.

He did what he was elected to do: get Brexit done, defeat Corbyn (the far-left Labour leader) and restore his party. Having done all of that, he might have built a succession plan and then given himself the DCM.

But the arrow of self-awareness was never in his quiver.

Like other mercurial British prime ministers (Disraeli, Lloyd George, Churchill, Thatcher), Borisconi found that the talents that got him elected and were successful were found wanting once the main tasks were done.

But in the pantheon of prime ministers, Borisconi’s statue will not be there.1 Readers should remember that Borisconi was hated by the British establishment and the City (i.e. the financial part of London) because of Brexit; he was hated by the French and German leaders for the same reason; he was hated by Sleepy Joe because of his attitude to the Northern Ireland protocol (Sleepy Joe’s Irish heritage is never far from the surface).

But those same haters admired his courage on the international arena, especially with NATO and recognising Tsar Vlad for what he is. Ukrainians will erect his statue.

Borisconi was straight out of ancient Greek central casting2. He was blessed by the gods with brilliance, breeding, ambition, (in his youth) good looks and easy charm. But the gods also gifted him flaws: arrogance, dishonesty, explosions of childishness and a wandering sexual appetite.

To paraphrase one scribe: there is a moment at the climax of every Greek tragedy when it has long been painfully clear to all – to the others on stage, to the audience – that the hero is done for. And yet the flawed, deluded hero somehow does not know this.

When the gods wish to destroy you, as Sophocles had it, they first meddle with your mind3.

Historians will ponder for some time when it was that the gods started meddling with Borisconi’s.

1 The pantheon is Churchill, Gladstone, Thatcher, Attlee, Lloyd George, Disraeli, Pitt The Younger and Earl Grey.

2 He actually spoke some ancient Greek, as well as Latin and French.

3 Whom the gods would destroy they first make mad.” Rendered in Latin as “Quos Deus vult perdere, prius dementat.”

Albo in Ukraine: who knew?

Australian headlines were filled to the max with photos and stories of Albo in Ukraine. He was clearly playing away from home, as he wasn’t wearing a hi-vis vest. And no army fatigues.

And, clearly, Albo’s charm offensive with De Gaulle Macron worked. Le Figaro4 mentioned his visit to Ukraine and the $100m of extra military support We-The-Taxpayers are funding.

Err, but it seems that no-one else knew. Wry & Dry scanned the major on-line journals (The Times, New York Times, Financial Times, Le Monde, etc) and didn’t see Albo mentioned.

Wry & Dry hastens to add that he strongly disagrees with critics of Albo’s frequent flyer points accumulation. He’s doing exactly what he should in the circumstances, show leadership where it matters.

The Morrison government MPs who have been baying for Albo to travel less still don’t get it. The voters who matter (and, yes, some voters are more equal than others):

  • want serious comments on serious issues not whining
  • are happy to see a more global Australia and more maturity from its leader

Visiting the flooded parts of outer Sydney may provide great photo opportunities and swell the hearts of local mayors, MPs and I-wannabe-seen-on-tv folk. That’s the role of the governor-general and lesser members of government.

But the domestic baying was overwhelming for Albo. So he donned the hi-vis vest. And the photos were taken.

4 Le Figaro is a French daily morning newspaper founded in 1826 and published in Paris. It is the oldest national newspaper in France and one of the three French newspapers of record, along with Le Monde and Libération.

The end of the UN?

It’s probably been coming for some time. But last week’s NATO meeting in Madrid has confirmed in Wry & Dry’s mind that the UN is now essentially a wobbly three-legged stool:

  • The developed west
  • China, Russia and their client states (Belarus, Laos, etc)
  • Others

The stool is straining as two of the three legs are moving further apart, riven by ideology.

Tsar Vlad stoked the dying fire that was NATO. His invasion of Ukraine caused NATO to expand, and healed the fracturing relationships within the EU and with the US. And NATO made some significant announcements.

The biggest of these were not about increasing ‘high-readiness’ NATO forces from 40,000 troops to over 300,000.

They were about the threat to NATO’s interests of Russia and… China. Consider these words:

“The PRC’s malicious hybrid and cyber operations and its confrontational rhetoric and disinformation target allies and harm alliance security.”

And, noting the risks associated with engagement with China: “The PRC seeks to control key technological and industrial sectors, critical infrastructure and strategic materials and supply chains. It uses economic leverage to create strategic dependencies and enhance its influence.”

NATO is no longer just about the North Atlantic.

Recall that both Russia and China are Permanent Members of the UN Security Council. And acting in self-interest, of course, will block anything that is not in their self-interest. Those interests are increasingly mutual.

Wry & Dry sees that a NATO+ (the plus including the AP4: Australia, New Zealand, South Korea and Japan) grouping of countries will increasingly move independently of the UN.

And that splendid monument to intergovernmental bureaucracy will find its usefulness outside of humanitarian work decaying faster that it realises.

Rates rise I

It was the worst kept secret since Hitler somehow hid from Stalin the 3.8 million German troops staying in Airbnb accommodation on the border with Russia in 19415.

On Tuesday, the Chief Teller of the Reserve Bank raised Australia’s cash rate by 0.5% points. This was the third consecutive monthly rise. Cries of woe were heard throughout the land.

Readers may wish to have a squiz at the below chart. Ever since Moses played full-back for Sinai interest rates have been higher than before 2019.

So, why the wailing? Well, when it comes to economics people tend not to consider history. Just because interest rates are low today, it doesn’t mean they will be low tomorrow.

Of course, the Chief Teller of the RBA himself told Readers that interest rates wouldn’t go up before 2024. The trouble was that the RBA failed to anticipate inflation and its persistence. They, and other central banks, use maps from the disinflationary era of 1980-2020. Those are the wrong maps. And any traveller will tell you, when your map diverges from the terrain, follow the terrain. Not the map.

Blend three years of loose monetary policy, pent-up lockdown savings (like water accumulating in a dam and then released) and unsustainable covid-fiscal stimulus and, voila, “Houston, we have a problem.”

Toss in supply side shocks and inflation is a big problem. No-one under the age of 45 understands how big.

New Treasurer Jim Chalmers at least has had the courage to say that inflation will get worse before it gets better.

5 Almost everyone else knew, including the members of the Russian embassy in Tokyo, whose warnings went unheeded.

Rates rise II

As Readers would expect, it took the major lenders a nanosecond to increase mortgage rates by the same 0.5% points that the RBA increased.

But what about the other side of the balance sheet? Wry & Dry remembers that the left-hand side always equals the right-hand side.

Err, no. Not in the case of Australian banks. Wry & Dry sought to find deposit rates happily going up by 0.5%. And found few.

“The headline increases being announced might look big, but the highest rates are often only on offer for new customers,” said an executive for Canstar, a rate monitoring company.

Its analysis shows that the big four lenders have passed on to depositors about 71 of the possible 75 basis points increases for promotional accounts, but only 35 basis points for others.

Corporate snouts in the trough, again.

Loop the loop

Chairman Dan’s desire for a place in history is built around things that are built. Not for him the pesky problems of a decaying healthcare system, an emergency system that often doesn’t work when needed, or significant increases in drug use and drug-related crime.

It’s all about removing railway level crossings and digging tunnels. Some of which are needed – but, oh my, what of the cost of the overmanning, featherbedding and incompetence?

Which brings Wry & Dry to Chairman Dan’s signature project: the Suburban Rail Loop. This is a 90 kilometre passenger line that crosses the radial rail network. It seemed like a fine idea.

But this $50-$80 billion dream has not had a teaspoonful of scrutiny. It didn’t get on Infrastructure Australia’s priority list. It wasn’t on the government’s “Plan Melbourne” blueprint. Infrastructure Victoria did not recommend the project and was not even consulted before the project was announced. Neither were Cabinet nor the Department of Transport.

It hasn’t been conceived as a part of any integrated transport plan. Interested Readers should watch:

No-one seems to have asked the simple question, is there another way to achieve the same result?

But, Train Driver Dan has tooted the whistle. And already the loop is resembling a pear. Over the last few weeks the media is beginning to notice the problems.

The mooted links and interchanges with existing rail-lines are not interchanges at all. SRL stations are not connected to many existing stations. There will be ten to fifteen minute above ground walks from many existing stations to SRL stations. This is faintly ridiculous.

And someone has worked out that the 15 new stations have only 10% of Melbourne’s jobs between them – and those jobs are dispersed. Unlike those that are concentrated in the CBD.

Of course, the big issue is the cost. There is no way this project will be achieved at less than $100 billion.

But Train Driver Dan will not be around then.

Turning Chinese

More on the 25th anniversary cake cut by Emperor Xi.

Since the ‘handover’, Beijing has been steadily making Hong Kong more Chinese. Or, more accurately, more like Beijing. The great bi-culture of Hong Kong (Hong Kong Chinese and British) is being supplanted. Readers might consider:

  • Language: Cantonese is being replaced by Mandarin.
  • Identity: School children are now being taught the sort of patriotic education to be found on the mainland. This means that Hong Kong’s history is being rewritten.
  • Dilution: the steady stream of mainlanders settling in Hong Kong have been chosen by Beijing meeting the ‘patriotic’ requirement – these now number more than one million, over 14% of the population.

Doubtless Hong Kong will survive. But the one-country-two-systems promise made by Deng Xiaoping has been smashed by Emperor Xi.

Inflation

Just a chart to remind Readers that at least four very large western countries have inflation problems worse than Australia’s.

Unclear on the concept

Newbie Treasurer Jim Chalmers has directed the federal Treasury to model the impact of climate change on the Australian economy and the budget.

Err, that’s good, as far as it goes. But the bigger issue on which Slim Jim should get the boffins to consider is the cost to…

  1. we-the-taxpayer (direct and indirect);
  2. the environment (in Australia and overseas); and
  3. labourers in third world countries who have to dig up the stuff of which renewables rely

…for Australia to get to Net Zero 2050.

Readers will now know that Australia achieving Net Zero is the panacea to climate change.

Wry & Dry awaits Slim Jim’s action.

Habits: Thanks for the service

So, you work for 27 years for a company and never miss a day’s work. Then you retire. Your retirement gift is a:

a) gold watch;

b) biz class trip for two to London and $1,000 to spend;

c) dinner with the president of the USA; or

d) string backpack, a movie ticket, a Starbucks coffee cup and a lanyard.

Close. But no cigar. The correct answer is d). Burger King Las Vegas Airport employed Kevin Ford for over 27 years. The good news is that social media added value for a change. A GoFundMe page raised over $300,000 for him.

No news on the fate of his boss.

Meanwhile, in Chile, a worker resigned and was accidently paid 330 times his salary. The worker has since disappeared.

Losing it

Elon Musk has done for the electric vehicle industry what Steve Jobs did for the mobile phone: effectively create an entirely new product (Tesla and iPhone) to replace a dating legacy product.

The persona required for this sort of success has amazing self-belief and arrogance embedded within. This arrogance sometimes leads to a sense of infallibility.

Mr. Musk purchased $1.5 billion of Bitcoin on Tesla’s balance sheet early in 2021. It was a, err, radical move that made it the biggest company to invest part of its cash reserves into cryptocurrency. That investment is now worth about $800m.

So, how do Tesla’s shareholders feel when they invested in an electric vehicle manufacturer?

Perhaps not as bad as they do now, knowing that Musk has used some of his personal holding in Tesla to guarantee loans for his takeover bid of Twitter (made on 14 April). That bid price was $43 billion.

With the market collapse, Twitter was last night worth just $29.2 billion.

Sure, it’s Mr. Musk’s money. But if his lenders force him to sell the shares to repay the loans, or even interest on the loans, they will not be happy campers.

Snippets from all over

1. First home buyers’ grants actually help vendors, not buyers

Australian governments spent more than $20.5 billion on first-home buyer help in the past decade, which made housing affordability worse by driving up property prices6. (The Age)

Wry & Dry comments: Captain Obvious research. New home buyers push up the price they are prepared to pay at auction by the size of the grant. Vendors love the idea. And the politicians love it because voters think it is a good idea. And We-The Taxpayer pays. Again.

6 The Australian Housing and Urban Research Institute’s study found that Australia provided demand-side support instead of increasing the supply of homes.

2. Prices that are going down

Commodities’ prices are tumbling from historic highs, as investors reverse bullish bets on everything from corn to copper and oil in the latest sign of recession fears gripping financial markets. (Financial Times)

Wry & Dry comments: Oil 29% off its recent peak, agricultural prices down 28%, copper down 21%, iron ore down 30%.

3. That ain’t inflation? This is real inflation

Turkey’s consumer prices rose 78.6 per cent year on year in June. (Financial Times)

Wry & Dry comments:  Analysts had forecast 80%, so Sultan Recep Tayyip Erdoğan says it’s a good result.

4. Sleepy Joe: bring forward the retirement plan

More than 70 per cent of Americans do not want President Biden to stand for re-election in 2024, according to a new poll. (The Times)

Wry & Dry comments: Harsh, indeed. He’ll be only 81 at the election. And 85 at the end of the term.

5. Buy now. Pain later

Klarna in talks to raise fresh cash at slashed $6.5 billion valuation. (Wall Street Journal)

Wry & Dry comments: The company, one of the world’s first Buy Now Pay Later companies, was valued at $46.5 billion in 2021. CBA owns 5.5% of the company and faces a $2 billion writedown.

Data

  1. Germany recorded its first monthly trade deficit since 1991.
  2. America recorded its 309th mass shooting since 1st January this year.
  3. 16% of new car registrations in UK in June were EVs.

And, to soothe your troubled mind…

The British PM has screwed his own economy busy fighting a war in Ukraine.”

  • Komsomolskaya Pravda, Russia’s best-selling tabloid, on the announcement of Boris Johnson’s resignation.

Some might say that Borisconi did many things with his screwdriver. And the UK economy was certainly on the receiving end.

PS The comments in Wry & Dry do not necessarily reflect those of First Samuel, its Directors or Associates.

Cheers!

Anthony Starkins

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