No Way: Scottish Vote A Win For Canny Good Sense

SCOTLAND opted resoundingly yesterday to continue its 307-year union with the rest of Britain, with the “no” vote prevailing in 28 of 32 local authority areas; the result was the only sensible outcome, and whilst the United Kingdom will remain united for the foreseeable future, grievances will continue to be nursed on either side of the border. The resignation of Scotland’s First Minister in the wake of the vote, whilst gracious, was inevitable.

In the end, some might say it came down to the head triumphing over the heart.

Yet such a platitude is too simplistic to be meaningful when it comes to evaluating the outcome of yesterday’s referendum on Scottish independence from the rest of the UK; many of those who voted “yes” — seeking to break the 307-year bond between Scotland and its neighbours — knew that every argument advanced by the other side was correct, but voted against them anyway; similarly, many who voted “no” desperately wanted to believe the case presented by the Nationalists, but baulked.

Either way, I never expected the referendum to succeed, although after the published polls in Britain swung firmly toward a “yes” outcome some weeks ago, the question became one of whether the margin of victory for “no” would be sufficient to prevent the Scottish Nationalists from having another go in 10 or 20 years’ time.

With 55.3% of the votes cast, the “no” side has achieved a solid, if unspectacular win, and in this sense the Nationalists will find it very difficult indeed to justify another attempt at engineering independence in the medium term. But the margin was hardly conclusive enough to prevent such a thing in the longer run.

In the sometimes blunt way we do things in this column, I have characterised this referendum previously as an attempt to give form to the cerebral hatred of the English of the First Minister, Alex Salmond; a shrewd operator if ever there was, his prosecution of the “yes” case has bewildered and enraged many observers, built as it was on fundamentally misleading positions over key aspects of what a post-separation Scotland might look like that was nonetheless accepted as fact by hundreds of thousands of his supporters.

Businesses based in Scotland warned that they would relocate to London, taking jobs and capital with them. Salmond’s response? They’re bluffing.

The Governor of the Bank of England warned that an independent Scotland would not be able to retain the British pound — not officially, at any rate — creating mammoth short-term costs on the Scottish government to establish a currency, reserves, and a mint. Salmond’s response? The BoE was wrong.

Brussels — headquarters to the European Union — warned that an independent Scotland could not be assured automatic membership of the EU, and that if granted membership, the delay could be considerable. Salmond’s idiot-simple response? The EU is wrong; Britain is an EU member and as a successor state, so too would Scotland be.

On and on it went, covering everything from the retention of the monarchy, to defaulting on Scotland’s share of any carve-up of British national debt, to rights over North Sea oilfields, and beyond.

Every time Salmond’s assurances and promises of no pain and no disadvantage to Scotland were slapped down, he still argued black was white.

In being prepared to say literally anything to convince his countrymen to abandon their bond with England, it’s little wonder so many bought into it, with turnout for the referendum a record 85%.

But the best interests of Scotland — and its people — were acted upon by the majority who, in the end, refused to support Salmond’s grab bag of empty and misleading promises.

One man likely to be extremely relieved today is the British Prime Minister, David Cameron, who was staring stonily at the prospect of being forced to quit his post if the Union had been lost yesterday; happily, no such fate awaits him, at least not this week.

But attempting to break up a country like the UK is a high-stakes enterprise at the best of times, and someone was always going to lose.

It is fitting that in the aftermath of the votes being tallied, Salmond has chosen to fall on his sword; just as Cameron’s tenure may have proven untenable had the referendum succeeded, Salmond’s certainly is now, and whilst his statement of a need for fresh leadership in Scotland was gracious — even noble — he had no alternative in view of the “opportunity” he has squandered.

Consider this: Salmond — who has made a career of working to engineer Scotland’s rejection of union with England — was provided the wording he wanted for the referendum question; the timing he preferred for the vote to be held; extracted concessions from Westminster during the campaign in the form of additional powers of self-governance for Scotland, if it voted to stay in the UK, that he subsequently used to suggest his country was no better off inside the UK than outside it; and ran a shockingly misleading and dishonest campaign that could only be expected to add the gullible, the stupid and the contemptible to the core base of supporters he started with.

If Scottish Nationalists could not convince a majority of their countrymen to abandon the UK in the glow of such a favourable alignment of circumstances, when can they hope to do so ever again? It is impossible to say “never,” and foolhardy to do so on any question of electoral politics — in the UK, or anywhere else. But this is a point that suggests that in terms of any future attempt at breaking the Union from the Scottish side, the 44.7% “yes” scored yesterday might overstate the true level of underlying support for such an endeavour.

If there is one good thing that can come of all of this, it is the prospect of England achieving more or less the same degree of autonomy over matters solely pertaining to its own governance that the other constituent countries of the United Kingdom enjoy; the concessions extracted by Salmond have had the consequence of enraging many English MPs — especially in Cameron’s Conservative Party — and the pressure for an extensive overhaul of the constitutional arrangements of the UK will be irresistible in the days ahead.

Whilst this column was somewhere in the distant future at the time, I was resolutely opposed to the idea of “devolved government” for Scotland and Wales when the Blair government introduced it 15-odd years ago; one of the reasons for it was that yesterday’s referendum on breaking up the UK was always going to be one of its repercussions.

The “devolution max” concessions offered to Scotland now bring the further inevitability of more change in Britain; in the interests of perspective I will leave those aside for now, and revisit them at some later juncture when they become the issues of the day.

But I did want to say a few things at least about what happened yesterday; owing to the ongoing constraints on my time I have faced of late I feared I would be unable to do so, but here we are.

I really do believe — and I mean in my bones, not just to make the point — that had the Nationalists triumphed yesterday, the consequences for Scotland would have been cataclysmic: perhaps not now, but in five, ten, twenty years’ time, yesterday’s date would have lived on in infamy north of the border.

It wouldn’t have done much for the English, either, or the rest of the UK, its people, and its partners.

As someone who identifies as Scottish — by descent — I understand too well the tide of history, and the deeply seated forces that drive Nationalist fervour where it exists (and not least, from stories passed along through familial links).

But money, jobs, trade, decent living standards…these are things which Scotland derives from its union with the rest of Britain, not in spite of it; and whatever historical enmities might exist between the two sides, Scotland is better off comfortable inside the Union than facing an uncertain future — or worse — without it.

My own ancestral seat of Glasgow voted clearly (but not overwhelmingly) in favour of breaking away; I had heard many horror stories about Glasgow before I went there some years ago — what it was like in “the old days,” which is what I’m told it’s still like if you go to the right districts — and was stunned to find a vibrant, thriving town of which I was immediately proud. It’s surprisingly like Brisbane — before they started knocking the heritage buildings in Brisbane down, that is — which is probably not so much a surprise at all when it’s remembered that those who built Brisbane came disproportionately from Scotland some 200 years ago.

Anyway, I digress.

One way or the other — despite competing loyalties, split affiliations, and the contest between the heart and the head — Scottish voters got it very, very right yesterday.

The United Kingdom remains united, and Scotland, like Britain overall, will be a better, stronger place for it.


Ukraine Crisis: A Ticket To Somewhere Unpleasant

HOT ON THE HEELS of a “referendum” in Crimea — showing 97% of voters wanted to become part of Russia, with Vladimir Putin seemingly ready to oblige — ominous portents continue to appear around the worsening crisis on Europe’s eastern flank; the United Kingdom warns of “a new Cold War” if Russia attempts to annexe the Crimean peninsula, while a state-sanctioned Russian TV network has made a thinly veiled nuclear threat against the West.

The problem with games of brinkmanship is that they can escalate beyond control, and whilst I still think the most likely outcome of events unfolding in Ukraine will be some kind of accommodation that de-escalates rocketing tensions between Russia and the West, those nominally in control of proceedings certainly aren’t showing signs of moving in that direction just yet.

Most readers will know that the hastily convened referendum in Crimea at the weekend — providing voters with a choice of either joining Russia or reverting to a more autonomous, 1992-era constitutional arrangement as a semi-independent province of Ukraine — resolved, with nearly 97% of the vote, to amalgamate with Russia.

“No change, quite literally, was not an option on offer.

In the days since, the West — led in this case by Britain and its Foreign minister, William Hague — has vowed not to recognise the referendum result.

Indeed, Hague has warned that Russia faces “a new Cold War” if it moves to formally annexe the Crimea, with the EU suggesting that Russia faces “a ‘far-reaching’ economic blockade.”

For good measure, the EU has drawn up a list of Russian MPs, government officials and business people who will be subjected to travel bans: a move likely to have absolutely no impact.

All of this comes as the interim government in Ukraine readies to call up 40,000 reserve troops in readiness for war with Russia, a prospective contest likely to prove futile for Ukraine to even participate in should it eventuate.

It comes as reports are circulating today in the European press that Moldova is the next ex-Soviet satellite on Putin’s radar as he apparently sets about implementing his plan to “recreate” the USSR and restore it to is allegedly rightful place as a world superpower, with Romania on the list after that.

And it comes as a Russian television journalist — hand-picked by Putin as a state-sanctioned mouthpiece for the Russian government — has suggested that Russia is capable of turning the USA “into radioactive ash,” in a news report featuring a large nuclear mushroom cloud as its backdrop.

Whilst the proposition might seem far-fetched, the fact a propaganda stooge has been the one to raise it certainly indicates Putin is in no mood to cool the temperature of rapidly worsening relations between his country and the West.

My sense remains that there will be some kind of accommodation of Russia; perhaps tolerating its “annexation” of the Crimea on the basis that its majority Russian population and historical status as part of Russia before 1954 make the change something the West can grudgingly live with.

Any move by Russia to repeat the Ukraine episode in Moldova — or beyond, for that matter — might be a different story.

On one level, the West (and the EU and NATO in particular) can do little to stop Crimea rejoining Russia without risking military conflict with Russia, the consequences of which could be dire: and by dire, the demonstration on Russian television I have mentioned is the kind of thing such a war could easily escalate into, and represents a scenario too terrible to contemplate.

Yet at some point — should he pursue territorial claims beyond the Crimean peninsula or, at the very least, those ex-Soviet countries that are not NATO member states — the West will have no choice but to intervene to stop Putin from re-establishing the Iron Curtain across Europe.

The whole neo-imperialist adventure that Putin seems to have embarked upon all adds up to a ticket to somewhere that is potentially very unpleasant indeed. It is to be hoped that some way of sabotaging the campaign bus can be found and enacted before it is able to continue much further along that destructive path.



War Clouds: The Chilling, Brutal Reality Of Ukraine

WITH THE SITUATION in Ukraine continuing to deteriorate — and the prospect of Russian military intervention increasing in likelihood — there are a couple of chilling and brutal realities that so far have failed to dare to speak their name. I hope and wish the crisis in the Black Sea can be resolved peacefully and without appeasement; should the protagonists involved come to blows, the outcome is likely to be very, very ugly indeed.

Let me reassure readers that I haven’t taken leave of my senses: I’m not paranoid, given to conspiracy theories, a career pessimist or willing on defeat. But in this case, an astute reading of events means knowing what is said — and what is fact — even if it comes to nothing by way of an adverse outcome. In this case, I post today purely to provide readers with something to think through.

Among the many sources of information, intelligence and background reading I avail myself of, however, is an American columnist who is regularly accused of being all of those things. His name is Jeffrey Nyquist, and we have looked at one or two of his pieces during the time I have been publishing this column.

Back in 2008 (not coincidentally, by the way, in the immediate aftermath of the Russian invasion of Georgia under similar circumstances to those in Ukraine) he wrote an article that I thought at the time was a little on the far-fetched side, but there was just enough in the case he made for me to commit the piece to memory for possible future reference. I would suggest every reader of my article reads this and then come back: the pertinence of the Nyquist article will immediately become obvious, and especially when it is remembered that it was written more than five years ago.

Russia — for at least the time since it was first led by Putin as President — has been modernising, rearming, and militarising; the entire vision Putin has for his country lies in its reclamation of the status and prestige it lost when the USSR formally dissolved and its designation as a superpower — socially, economically and militarily — was forefeited. Putin is not so much a communist as a modern-day Tsar; Russia through the ages has been a peasant society governed by a small, all-powerful ruling elite. It was ever thus. In the absence of the Communist Party, Russia’s Tsarist tradition has found new expression through the totalitarian nationalism of its present President.

There are many, both in Australia and internationally, who pooh-pooh the idea of a militarily resurgent and aggressive Russia. Its armaments are in decay, they say. Its armed forces are subject to a desertion rate so high it is impossible to maintain troop numbers, they say. Russian democracy may well have started out with the best of intentions. But Russia is not a democracy (although many are naive enough to believe it is) and far from sinking into military disarray, Russia has been readying — both directly and through a well-orchestrated series of international allegiances — to reclaim what it sees as its rightful place in the world for some time.

Putin is on record as saying that the break-up of the Soviet Union was “a travesty,” and has made no attempt to hide the fact his objective is to reassemble the old order in this regard.

The invasion of Georgia was opportunistic, made possible as it was by an uprising in South Ossetia that was in Russia’s interests to crush and counter to those of the West for it to interfere. Nonetheless, Russia was able to annexe additional territory from the exercise. Beyond that, it had to wait: and Russians, famously, can be very patient indeed.

The situation in Ukraine, however, is vastly different to the one six years ago in Georgia.

For one thing, Ukraine sits wedged between Russia and the EU (in some respects as North Korea does between China and South Korea), making its strategic importance critical to an expansionist regime in Russia.

For another, the internal struggle in Ukraine between integration with Europe and the West or re-integration with Russia is one Russia cannot afford to “lose” the outcome of: for Russia to lose all effective control and influence over Ukraine would be to suffer a colossal blow to resurgent Russian prestige, and a strategic disaster that would permanently tilt the balance in Europe back toward the West.

And in any case, the concentration of ethnic Russians in Ukraine makes the entire situation impossible to draw black and white conclusions around: the Crimea, gifted to Ukraine by Nikita Khrushchev in 1954 as a token gesture, is full of Russians, and ostensibly the pretext Putin is using to justify manoeuvres involving 150,000 troops ahead of almost certain deployment. If Russia’s interests extended no further than regaining the Crimean peninsula — ostensibly providing a safe haven for other ethnic Russians in Ukraine who did not wish to join the EU — there might be an acceptable case to be made for that.

But the latest reports are that an initial 6,000 Russian troops (at a minimum) are about to be sent into the capital, Kiev, and if that should occur, then all bets are off.

The interesting thing about the Nyquist article (which if you haven’t read, go back to the link now and do so) is that of all the Western European powers involved in the Ukraine crisis, it’s the Germans who are calling most loudly for the USA to get involved. It’s the Germans who are making the most noise about NATO. And it’s the Germans, who — the UK aside — are the most dependent on the natural gas supplies that flow through Ukraine from Russia that Russia has shown in the past its wont to literally turn off the tap as an economic and diplomatic weapon when it suits its agenda.

(As an aside, once this is all over, Western Europe must make fresh arrangements to secure its fuel requirements: the Russians simply can’t be trusted when it comes to energy security — a fact that, hopefully, has dawned on the leaders of the German government).

If friendship and partnership with Russia is a mistake — as Nyquist clearly asserts — then current events give every indication that the Germans have awoken to that fact. But it may be too late to benefit anyone.

If Putin wanders into Ukraine and a war breaks out, it will begin conventionally; after all, nobody — not even the Russians — wants to risk all-out war in which even the “fruits” of victory (to paraphrase JFK) would be the taste of ashes in their mouths.

Should such a war be confined to conventional means, it is likely the Russians would prevail; Putin could move hundreds of thousands of ground troops into Ukraine before Britain and the US could send their own deployments in numbers meaningful enough to influence proceedings. It is worth remembering that at a time of war, the Russians would also be able to shoot down aircraft or sink ships carrying NATO troops without fear of subsequent prosecution for war crimes.

In such a scenario, does the West sit back and allow Putin to staple Ukraine back onto Russia as a huge leap forward in his quest to reassemble the USSR? Or — God forbid — does David Cameron or Barack Obama order the unthinkable in retaliation, and launch a nuclear strike on Moscow?

Many will talk of wiser and cooler heads, of the uselessness and pointlessness of nuclear arms, and the guaranteed eventual extinction of humanity were they ever to be used on a widespread basis.

But the alternative, at that point, becomes an existential calculation of its own. If they do nothing, where will Russia stop? Are its territorial ambitions confined to Ukraine, and if not, how widespread are they? And if the Iron Curtain, in time, were to be re-established, what would remain to stop Putin then turning his sights on the enemies who put up a token resistance, but were just too weak to take the only measure that could stop him?

In short, should Putin be appeased over Ukraine, or is doing so just a recipe for eventual calamity on an even greater scale that should be dealt with sooner rather than later? Suddenly, parallels between 1930s Europe and the crisis today are too compelling to dismiss.

In case anyone thinks all of this is hypothetical, here’s another article: this time from Britain’s Daily Express. We may be nearer finding out answers to these terrible questions much faster than anyone ever hoped.

If Russian troops already in the Crimea advance further into Ukraine, or indeed into its capital, then any ambiguity around the question of whether Russia has “violated the territorial integrity of Ukraine’s borders” will be summarily dispelled.

And if argument over whether the so-called Budapest Memorandum — committing the UK, USA, Ukraine and Russia to protect the integrity of Ukraine’s borders — can be formally invoked on the back of a clear breach by Russia concludes that it can be, then Britain and America will find themselves at war with Russia.

From there, God alone knows what could happen.

But if Russian troops advance on Kiev today — and as things stand, the prospect of them doing so appears certain — then World War III may very well begin today too.

Wiser and cooler heads are very much needed at such a delicate time and in the context of such a delicately poised point in global politics.

It’s a fair bet, however, that as night falls on Europe, Britain’s Vanguard submarines — the operational vehicles for its Trident missile system, and the first line of the NATO nuclear strike capability — are nowhere near their base in the Firth of Clyde in Scotland, and it is to be hoped their whereabouts, in the context of the current situation in Ukraine, never become apparent.


POSTSCRIPT: As I publish (just before 1am on 3 March, Melbourne time) there are unconfirmed reports that Russia has issued a declaration of war on Ukraine.


In Bongo Bongo Land: How Not To Win Friends (And Votes)

JULIA GILLARD and her anti-misogyny handbag hit squad would choke on their breakfast if confronted with this: a British politician has been thrown out of his party after the latest in a long sequence of questionable comments about women and foreigners. Is this larrikinism, or a bridge too far?

The news overnight that a Member of the European Parliament (MEP) from the United Kingdom Independence Party (UKIP) has been ejected from UKIP comes as little surprise.

I am posting on this matter this evening because of the real contrast it throws up between the crusade Gillard went on during the last Parliament — railing against “misogyny”, as they believed it personified by Tony Abbott — and the reality of what has been bubbling away at UKIP for years, and which has lately come to an ugly head.

And these issues really are for the perusal and interest of readers, and I would love to know what Gillard would make of them. Her attack dog Nicola Roxon, too, for that matter.

There are some elements — both in the political community and in the wider community generally — who lament the disappearance of the “larrikin” from Australian politics, but I doubt this is the sort of thing to elicit such nostalgia.

Godfrey Bloom — a UKIP MEP from Yorkshire — has apparently exhausted the patience of both his party and UKIP leader Nigel Farage in his latest outburst, decrying the fact Britain spends £1 billion per month on aid to “Bongo Bongo land” and after saying in an address to an event to promote women that “this place is full of sluts.”

The outburst comes as the latest instalment in a colourful career that has featured Bloom having to be carried out of the European Parliament by an aide, too drunk to complete a speech, and using the using the Nazi slogan “Ein Volk, ein Reich, ein Führer” to insult a German Social Democrat politician during a separate debate in Brussels.

Readers can access two articles on Bloom’s latest exploits here and here. A YouTube clip of his doorstop press conference yesterday — ostensibly to clarify his remarks, but which (predictably) ended in further controversy — can be found here.

The point is that anything Tony Abbott has ever been accused of by the likes of Gillard, the odious Roxon, and their fellow finger-shaking comrades pales in comparison to this.

But the question, very simply, is whether Bloom has gone too far.

Some will find his remarks — and antics — distasteful in the extreme, labelling him a sexist, racist, xenophobic pig with a bigoted view of the world and a jaundiced perspective on the role of women (and anyone beyond Britain) in it.

Others will take the view that political correctness has all gone too far; that people take themselves far too seriously, and that the likes of Bloom add a little colour to what is otherwise the dour, dull grind of democratic politics.

In any case, it has been many years since this sort of thing was a feature of Australian politics.

What do readers think? Is Bloom out of line, and right to be punted from his party in disgrace? Or is it the case that UKIP being just a bit too prim for its own good, and should take a load off and calm down.

I’ll be interested in people’s thoughts. Keep it clean.



Gathering Storm Clouds…

There’s a word Western governments dare not utter; it’s a phenomenon some thought had been eliminated; and the GFC of three years ago — mild, in the rear-view mirror — lulled many into a false sense of security.

There’s a hard — and unpalatable — economic reality brewing; and this time, the storm is almost perfect.

Recessions aren’t sexy events, and nobody really wants them.

Governments hate talking about the prospect of them, or even acknowledging they exist, and will say and do almost anything these days to will them out of existence.

A recession is as good as a series of interest rate rises in a democratic country these days as a perceived recipe for certain electoral defeat.

But the grand-daddy of world recessions is on its way, and it is largely the fault of elected governments.

I’m going to put a whole stack of indicators down here tonight and I wonder — I just wonder — if anyone can argue the other side; that is, that a world recession is not imminent.

I’m no pessimist, mind; but the perfect storm is brewing, and the storm clouds are gathering.

Innocuously enough, the price of crude oil is falling, and that of gold rocketing; gold is a perceived investor safe haven in troubled times, and the price of oil declines on the back of lack of demand and, in this case, world markets spooked by lack of confidence.

Stock exchanges in the Western world have been on a rollercoaster these past couple of weeks, and whilst there has not as yet been an overall, sustained crash, the stock markets also reflect, as a crude measure, the general sentiment of the wider world economy and reflect broader trends as an element of that.

Governments around the world, for too long, have lived through a vicarious lack of restraint, or appalling fiscal and monetary policies, or a combination of the two.

Market economies are just that: market economies. And they work, and work well, too — when not distorted, interfered with or intervened in by governments obsessed with the political cycle.

And nobody thinks a recession is rollickin’ good fun, either. But there’s a reason recessions appear roughly every seven years in the cycle: it’s to impose a market-driven correction on the system.

In Australia, from approximately 1995 until 2008, we didn’t see a recession. Partly through good economic management and partly by virtue of luck, we missed a turn in the cycle whilst other countries foundered in the late 1990s and early 2000s.

We kidded ourselves that it was a golden Australian age: we were enjoying the greatest prosperity in Australian history.

In reality, it was nothing of the sort. It was simply a repeat of our country missing a turn in the cycle as it did in the 1950s under Menzies. In those days, we “rode to prosperity on the sheep’s back” with a little help from our wheat farmers.

Then, as now, the idea of Australia’s “miracle economy” was a myth.

This brings us to the so-called Global Financial Crisis — or GFC — of 2008.

In the USA, decades of so-called sub-prime mortgage lending had caught up with Uncle Sam. Roughly the equivalent of “no-doc” lending in Australia, mortgage originators (primarily Fannie Mae and Freddie Mac) lent money hand over fist to homebuyers of questionable repayment quality and capacity.

When that bubble burst — and hundreds of thousands of foreclosed mortgages flooded the US property market — it was the US government who bailed out the biggest financial institutions, with others left to wither and die.

Unlike Australia, if one buys a house in the USA, if one is unable to continue to pay a mortgage, there exists the opportunity to simply walk away.

Yes, you lose whatever equity you may have built up; but you also lose all liability in relation to the mortgage when you pull up the stumps and move on.

In Britain, many of its major banks carried large exposure to the US sub-prime market, with the result that again, many collapsed — only to be bailed out by the British government.

This cause and effect pattern was replicated elsewhere.

And as market systems are wont to do, the reverberations from the crisis manifested themselves around the world in plunging share markets, plunging oil prices, plunging consumer confidence, soaring gold prices, and knee-jerk reactions from governments desperate to either avert recession at any cost or to minimise and mitigate the scope and duration of recession should it occur.

The money being thrown around at that time — in the name of governments bailing things out or shoring up their economic interests — originated primarily from Chinese economic growth and Russian petrochemical dollars.

And all the while, a host of unresolved issues rested on a steady simmer on the world economic hotplate.

Certainly, here in Australia, we had “stimulus” which basically amounted to the Rudd government throwing $130 billion of borrowed money at anything and everything that moved — and at some things that didn’t.

Certainly, millions of taxpayers got a $900 cheque just for the sake of sending them one.

But the distorted, inflated property bubble was given another pump from the oxygen bottle, and billions of dollars were thrown at ridiculous programs such as “Building the Education Revolution” and the “Pink Batts” fiasco in the name of staving off a recession.

And so now, well, here we are…

One of the greatest acts of economic lunacy in the late 20th century was the Euro: a currency founded on the noble but idiotic belief that it is possible to federate a couple of dozen disparate countries into an economic and political union and — among other things — give them the same single currency to spend.

Many of these countries, whose currencies were rapidly appreciated to qualify for entry into the ERM and then the Euro, were left with nowhere else to go except the path of high sovereign debt to compensate for the fact there was less money in real terms to run their economies as a consequence.

Britain — which (wisely) stayed away from the ERM under Margaret Thatcher, later joined and then left again under John Major, and never took the Euro as its currency (despite an unprecented push under Tony Blair, which even saw the emergence of Euro trading zones in Britain) nonetheless went on a gargantuan debt and spending binge under the Chancellorship, and later the Prime Ministership, of Gordon Brown; events which also covered the period of the bailout of the British banks during the so-called GFC.

And the USA has been borrowing trillions of dollars for decades to fuel its economy; in the long-term, a completely unstable model.

Now, China has decided it wishes to slow its rate of economic growth from 10% per annum to 7% to deal with domestic inflation in that country, and given a large slice of the West has become dependent on Chinese spending and lending in the last 20 years, the system has arrived at the point where something has to give.

Economies across Europe are collapsing — or at least buckling — under the strain. Ireland and Greece have already needed to be bailed out; Spain, Italy and Portugal are unsteady on their feet; and now we have France with a decided case of the wobbles.

There is only so much Germany can do, and there are even rumblings that Europe’s one enduring powerhouse over the last thirty years is also showing signs of trouble.

In Britain, a Conservative-led government is frantically — and ruthlessly — slashing government expenditure, and with it, the public sector borrowing requirement. The problem is that these painful reforms will take time to produce the desired effect: a lean economy trimmed of fat and primed for growth. In the short-term, the withdrawal of money from the real economy, as part of these measures, may induce another recession there; the difference being that such a recession may actually effect the structural correction required to ready Britain for sustainable economic growth.

China this week, following the first downgrade to the US government credit rating in 94 years, issued a strident rebuke to the Americans about living within their means and not borrowing endlessly from the rest of the world to maintain its culture, artificially inflate its economic position, and maintain its military might.

Ominous words indeed from a country not only a major creditor nation to the West, but a rising and potentially malevolent military superpower in its own right.

Talking of superpowers, and despite its domestic problems (something Russia has papered over for centuries anyway), three years ago — to resolve a dispute over payment terms, Russia shut off the main gas pipeline to most of Eastern Europe to make a point, and show Europe who was boss.

Russia, too, has spent a good portion of the past decade remilitarising and modernising its military hardware.

Most of Europe, as well as Britain, are almost solely reliant on Russian gas and largely dependent on its petroleum production. North Sea oil is a minnow compared to the Russian oil behemoths.

Russian companies — state-owned and private — now own vast business interests in Britain and the rest of Europe across a raft of industry and service sectors, including sizeable holdings in the media.

But returning to the US — its burgeoning debts appear to have caught up with it; indeed, the deal to lift the US debt ceiling struck this week also involved legislated commitments to begin to trim trillions of dollars out of recurrent government spending over the next four years to start to nudge the US toward a more sustainable financial footing.

And for the last three years, the US treasury has maintained a policy of simply printing more money: it devalues the US currency, and helps the US deflate its own economy, but harms every other country with dealings with the USA.

If you doubt this, look no further than Australian exporters struggling under the burden of an Australian dollar worth 35% more than it was five years ago.

And it is a poke in the eye to China, whose investments and debt holdings, in US dollars, become steadily more worthless as the process goes on.

In all of these cases, governments have been serial borrowers, and serial bailers-out of businesses that ought to have failed in the pre-eminent market conditions that existed three years ago.

And what of Australia?

Having come to power with a clean debt slate, the Rudd/Gillard government has already racked up $190 billion in government debt, with a bill before parliament to raise our own debt ceiling to $250 billion — all in the space of four years.

Along with throwing money at virtually everything and anything in 2008-09, the Labor government here achieved a special piece of economic insanity: through inflated subsidies to the property sector, it artificially maintained the ballooning boom bubble in the housing market.

In practical terms, this meant that most people who had borrowed 90, 95, 100 percent — or more — of the purchase price of their properties, and thus leveraged to the hilt, were shielded from the threat of foreclosure and the loss of their asset.

In other words, the financial imbecility of brainless idiots borrowing large amounts of money at the very peak of a property boom — taking maximum risk with little or no equity holding — were protected from the consequences of their own stupidity by taxpayer dollars sluiced around by a government that borrowed heavily on world capital markets in order to do so.

Clearly, this post is a first point in the discussion. At double the normal length of my articles, it’s time to down tools and let people think about these issues.

But the economic storm clouds are building.

This time, unlike 2008, there isn’t a government buyout, or bailout, or handout.

This time, the corrections are going to need to be made, the world over.

If they’re not made now, we will be back at this point in another couple of years.

And racking up more debt to Russia and China is no solution. After all, they’ve both made it known they’re…unhappy…with the West and the way it has handled these things.

We’ll talk more about all of this in the next few days, I’m sure.

In the meantime, what do you think?