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We've been going since 2006 - completely free speakers, tackling consumer issues, current affairs and other issues and injustices that arise. Based in Australia and New Zealand we enjoy the privaledge of free speech without the threat of the Chinese Communist Party's Green Dam, Iranian Government, the USA's "Homeland Security" thought police, CIA (so much for "Land of the Free!"), and almost all the other fruitloops in the world who can't handle some constructive criticism.

Is this the World’s first Cyber-war?

Posted By on June 29, 2017

In 2016 a piece of malicious code was attached to a popular accounting package in the Ukraine. Although the publishers strenuously deny it, all the indicators point to the code being part of an update to Ukraine’s MEDoc accounting software package. This gave birth to the ransomware that came to be known as Petya, which in turn evolved into the “Notpetya” virus attack. But is it really ransomware or are we seeing the first salvo of a true cyber-war?

First came the Wannacry ransomware that had a devastating effect, in terms of infecting systems. It relied on a single flaw to access computer systems. Once inside a system, it quickly spread to all the computers attached to that system. The code itself, was rather amateurish, with a simple kill switch (registering the domain it was looking for). However in hindsight, was it a test for what was to follow?

Next came the Petya ransomware. This spread in a similar manner to Wannacry, utilising the “Fatalblue” code that the USA’s NSA developed to spy on people’s computers  but unlike Wannacry, it uses multiple flaws to get around computer security measures. This one is playing havoc with the Ukraine power grid and somehow jumped from there to some hospital systems in the USA and to the computer systems of Maesk, the international shipping line.

Both of these were ransomware. They demanded a payment in Bitcoin. We assume the objective was for profit. The Wannacry ransomware was removed once confirmation of payment was received. So far we have no evidence that any system infected by the Petya ransomware, has been freed, once the money has been paid.

Now we have the next evolution – the “Not-Petya” or “Netya” ransomware. Like the Petya ransomware, this uses a variety of vulnerabilities to gain entry into a system. Once inside, it wreaks havoc by encrypting the files, like Petya and displays a ransom note. However, the Notpetya ransomware then attacks the master boot record (MBR), crashing the entire system, to the point where it will not start up at all – no more ransom note. This begs the question, if the ransom note cannot be displayed, was the goal really ransom? Since it wipes the hard drive it has been reclassified as “Wipeware” and its aim is to shut down the whole system

If there is no way to make any payment, no ransom note and no master boot record to start the computer up, to the point where it can operate, then what was the purpose of the attack? Even if the MBR was repaired, the files are encrypted – unreadable.

Experts in several computer security companies agree that the Notpetya attack code was designed on a large budget. There are examples of repeated amendments to the code after trials. That is not usual where a single person or few hackers have collaborated. This looks like a larger group of very professional programmers, have spent a lot of time writing multiple exploits, for a wide range of vulnerabilities. If we are not looking at a small group on a tight budget, then we are looking at an organisation. There’s no demand for payment or any way to recover the files, so what was their aim?

The only option left, is cyber-war.

Let’s look at the evidence:

  1. The USA claims Russia hacked the emails of different election candidates to swing the votes in favour of Donald Trump, a self confessed friend of Vladamir Putin and therefore Russia. They claim to have evidence that points to Russia directly.
  2. The French claim to have evidence of Russian cyber tampering with their recent elections.
  3. The Petya and Notpetya ransomware first attacks appear in the Ukraine – a country at war with Russia, the perfect test bed for a cyber attack.
  4. There appears to be a progression of developments and tests leading up to the Notpetya ransomware. Not typical of a sole operator. Were these tests for Notpetya or is something worse coming?
  5. The code seems to be written by an organisation aiming to disable systems en masse, not for any financial gain.


Since writing this, the Netya attack has jumped from the Ukraine and USA to thousands of other systems in various countries, as far away as a chocolate business in Tasmania, Australia, Port of Auckland and Port of Tauranga in New Zealand. Container ships are arriving in ports, unable to forward their manifests before they are docked. In some instances no-one knows whats on them until they are unloaded.

The next Ransomware threat is here – Fireball

Posted By on June 11, 2017

Wannacry ransomware took over millions of computers before it was annihilated. The fatal flaw was in the ransomware’s own code. Once discovered it was a simple matter to kill the malware. However the entry point in Windows and Mac computers remains and is about to be attacked by a new version of Ransomware. This one is a bit different – it’s semi-legitimate but could prove just as costly.

Security firm Check Point Threat Intelligence has discovered this new high volume malware threat, called Fireball. Unlike WannaCry, this threat makes no attempt to conceal the source, a large Chinese marketing company called Rafotech. It has two main functions:

  • Fireball allows entry of other malware, onto your computer.
  • Fireball outputs responses from your computer that appear as if you clicked on advertising, generating fake advertising hits and revenue for advertisers.

By the end of May, over 250 million computers were infected. The worst hit countries were India at an estimated 10.1% and Brazil at an estimated 9.6% of computers. Fireball infects machines running Windows or Mac OS.

Fireball is semi-legitimate software that operates by turning home pages and default web search pages into fake pages, directing the user to ads or sponsored content rather than free content. So far, Fireball has only been used to generate fake web traffic but it has the potential to redirect the user to malicious sites or allow entry of spyware.

Fireball is spread through a marketing technique called “bundling”. Rafotech conceals Fireball in a collection of other software, like games etc, that would appeal to users. Accepting what you think is only a game, means you get the booby prize too – Fireball.

How to detect if you are infected with Fireball:

Checkpoint has compiled a list of symptoms that will identify an infection. If you can’t do each of the following, you are probably infected:

  • Start up you browser. Was the Home page set by you? Go to your settings and change it. Shut your browser and restart it. Does the new page you set, appear?
  • Was the default search engine in your browser, set by you? Can you change it or any of the extensions?


Creating software that is difficult to remove would place any company is danger of costly legal action worldwide. Because Fireball is semi-legitimate, Rafotech has covered their legal backsides by packaging it as stand alone software. So remove is the same as for any other programs:

  • On Windows, you can do this from your Programs and Features list in the Windows Control Panel.
  • On Mac, locate the Applications in Finder and drag the suspicious program to the Trash.

Note that you have removed Fireball but not anything else it may have let in. You should complete the removal process by running a full virus and malware scan with up to date antivirus and malware software.

It could make a great movie.

Posted By on May 22, 2017

Honestly, the “wannacry” scenario sounds like a Hollywood B-grade disaster movie script!

An employee in an intelligence agency gets an attack of ethics, leaks some information that the people should know and some evil malcontent seeking world dominance, uses it to write a childishly simple program to dominate the world’s computers.

In hind sight it sounds more like a children’s cartoon script. That makes it all the more embarrassing!

However for the spy novel readers, there’s a few twists in the plot thrown in too!

Microsoft, in an effort to maintain world computer system dominance tells us porkies; that it’s minor updates are critical for our computer security. It creates entirely new systems to convince us our original one is no longer worth having, when it could revise it. It’s lied that the Windows Advantage upgrade was a security upgrade, when it was spyware that checked your system registration. Today we can’t tell when they are lying or telling the truth any more.

The NSA, an agency supposed to maintain and uphold our security, not only finds a weakness in our national computer systems and says nothing but it writes software to exploit it!

As if that’s not enough, to add insult to injury, the NSA’s own security is so flawed that while it is haemorrhaging secrets, it leaks the instructions to manipulate this computer weakness to the world. Wrap all this up in a nation run by a leader who can’t keep his big mouth shut, giving secret intelligence away to the enemy (even worse – the source of that secret inteliigence!).

But it’s the simplicity of the whole thing that’s so like Hollywood – the software looks for a website that doesn’t exist, indefinitely, meanwhile displaying a ransom note on your screen. When someone created the website, the whole ransomware code was neutralised. . . or was it?

The code is still resident in those systems, meaning the hole is still there to be exploited again. Next time it might not be so simple to fix and capable of penetrating more up to date systems.

When Windows XP was created, it was hailed as a huge leap forward in computer security. Now it’s been compromised. In time the same will be said about today’s latest systems, Windows 10. It’s a catch-up game that we are locked into, always keeping one step ahead of the bad hackers.

It also highlights a few flaws too!

  1. It’s time businesses took a serious look at other operating systems, rather than Windows. Hacks are written for specific operating systems. If most of the world uses one system, that’s the one the hackers will target. If you run a Linux based system (SuSe, Ubuntu, Fedora etc), you’re probably laughing at the “wannacry malware” shambles.
  2. We are engrossed in connecting everything to the Internet – the IoT or Internet of things.

In hindsight, is that wise?

Will the next ransomware screen say “Pay $300USD in Bitcoin within 48 hours and we will unlock your home and release your car from your garage. Failure to pay will mean your fridge and freezer will defrost totally and your lighting, phone, hot water and sewage will be disconnected from the grid. If you do not pay within 72 hours, not only will your services be permanently disconnected, but you will be signed up for the highest level of subscription TV services and your TV be locked on permanently.”

Or worse – at 100kph the screen on your dashboard, that was a street map a few seconds ago, tells you that unless you pay $300USD in bitcoin, your engine control module will trip into crash mode. You will be unable to move your vehicle at more than 5kph for a distance of 5 kilometres. Already your car is slowing, oblivious to the other cars on the freeway, all doing 100Kph and you are in the outer lane!

Maybe it’s time for a rethink.
Do we really want everything interconnected?
If so, be prepared to keep it permanently up to date with the latest operating system and all it’s updates.

“wannacry” the cyber-disaster waiting to happen.

Posted By on May 17, 2017

Wow! What a week!

  • The “wannacry” ransomware malware shut down over 30,000 systems worldwide before a fix was discovered (largely by accident too!)
  • As if that wasn’t enough, it’s revealed the ransomware malware was designed from data leaked from the NSA!
  • Microsoft is accusing the NSA of knowing about flaws in computer systems and deliberately not divulging them, so fixes could be made.
  • Donald Trump, America’s motor-mouth president, divulged top secret ISIL intelligence to the Russians, along with the source of that intelligence!
  • And more will come out – the “wannacry” threat will be linked to North Korea, though it’s doubtful we’ll ever get 100% ironclad evidence to prosecute that.

What’s the big deal? It’s only 30,000 of the billions of systems in the world right?

Wrong! Firstly, we’re talking “systems” as in commercial systems, where hundreds (or in some cases thousands) of computers are all interconnected. If you are counting actual computers, it could be millions.

Secondly those systems weren’t home computers. They included most of the UK’s medical systems. scanning machines, intercommunications between services, specialists – right down to GPs, were effected. Attacks were recorded on various government and corporate systems as far away as India, Germany, USA, Spain and Australia.

If that doesn’t alarm you, just imagine if every traffic light in your city turned green at once and you needed an ambulance but your mobile phone network was down. At the same time all planes vanish from the flight controllers radar consoles. Now multiply that for every city in your country. This time the malware targeted old Windows XP based systems. That meant that air traffic control systems weren’t effected – yet!

By the way, the only reason they weren’t is because back on 3rd of May 2014, at 2:00pm, a vintage U2 spy plane upset the California Air Traffic Control system and drew the authority’s attention to the weaknesses in the air traffic control system and they did some major upgrades. The U2 was flying at 60,000 feet and it’s on-board computer tricked flight control into thinking it was the same altitude as commercial airliners, creating havoc as they tried to move airliners out of the way of an aircraft that wasn’t there. Since the U2 was designed in the 1950s, the red faced air traffic control bureaucracy decided it was time to upgrade their systems.

As weaknesses are discovered and systems evolve to meet new demands, a new operating system versions are created, tested and released. Some upgrades are minor and require a few patches to fix the weaknesses, like Windows 95 to Windows 98. Others are major and require a complete rewrite, creating an entirely new version like Windows XP to Windows 7. For governments and large businesses, this means paying millions of dollars for the new system, then paying their IT folks a fortune to adapt their in-house software for this new system.

Throw in this mix, a bunch of sneaky profiteers like Microsoft who try to make new minor revisions look like major rewrites and want customers to buy the new versions so they can spy on their usage and we have huge financial mistrustful disincentives for businesses to keep their systems up to date. They no longer trust Microsoft when it announces new “critical” updates.

Into our so called ‘secure system’ you can add all the people who take work home onto their personal computers at home and download it back onto the corporate or government system tomorrow. Effectively this doubles the number of machines in any system and therefore the number of weaknesses.

Now add the icing on the IT cake – a secretive intelligence organisation like the NSA, who discovers a weakness, writes malware to use it and refuses to tell their own countrymen about the weakness, so they can improve their own national security.

Add all this together and we have the perfect storm, just waiting for some hacker to create the disaster that was the “wannacry” ransomware cyber attack.

Thinking ahead – I can’t afford it

Posted By on April 30, 2017

Most people say they cannot afford to put anything aside for investment but that’s rarely the truth. When we talk about investments we immediately think in terms of thousands of dollars. That may have been true decades ago but times have changed; there are investments that cost far less but still give a good return. Think outside the square. Forget the banks and big investment houses. They have huge managements and expensive buildings to fund and guess where that funding comes from?

You and your investments! Whats left after they extract their huge salaries and bonuses, is what they give you – the person who scrimped and saved to get that money together, in the first place. Each of the heads of the major banks actually earn more than the Prime Minister!

An emerging trend in finance today, is to use the public to source funds, rather than investment houses (which include banks) with their huge overheads. Everyone puts in a small amount to create a large pool of money to lend. They each get a small share of the returns, as interest, plus their investment amount, back at the end of the investment term. This can be in one of two forms:

  1. Crowd sourcing or crowd funding, where someone has an idea and a plan then advertises for investors, who become shareholders until the enterprise funds are sufficient to buy back the shares.
  2. P2P lending – someone needs funds for some purpose and rather than go to a bank, they go through a P2P lender who breaks the loan down into notes and advertises for small investors, who each buy one or more notes. These investors effectively become shareholders in the loan. Depending on the P2P Lender, these notes can be as low as $25 each. Unlike a bank or finance house offering an interest return anywhere between 1.5% up to 5%, the P2P Lender can offer returns starting as low as 9% up to 39% per year on a five year loan.

Honestly, if we really tried, could we not scrabble $25.00 together over a month or two?
That’s how you get started in investment. You don’t need thousands to begin.
That $25 invested at $9.9% over a 5 years loan will return you $40.93 and that’s the lowest rate.
At the highest rate of 39.9%, your $25 will return you a whopping $177.94. Try getting that from a bank!
Of course the risk is reflected in the interest return. At 9% return, you are funding a borrower with a good credit history. At 39% your borrower is likely to be a young person with few assets and new to borrowing.  Dodgy borrowers get rejected in the same way they do with any other investment house lending program.

Lets imagine you were planning to save $1,000 to fund an investment and it would take two years to save that amount. To get the best interest rate from the bank you’ll need to lock it away for 5 years. In other words we are looking at the return after 7 years (2 to save and 5 to invest).
That’s around $42 a month you need to save or $125 every three months, the equivalent to 5 P2P lending notes.

If we assume you invested in P2P lending instead, as you saved the same amount of money, at the lowest P2P interest rate of 9.9% per year. In the first 3 months of year one you have 5 notes to invest at 9.9% each ($40.93 x 5 = $204.65) giving a return of $204.65
That’s in 5 years time (not 7 years) like the bank.

In the second 3 months of year one you have another batch of 5 notes and another $204.65 in 5 years.  By the end of the first year, you have four lots of 5 notes invested, which will return $818.60 in 5 years. You are only 181.40 short of your $1,000 goal and it’s only year one of your two years!

Unlike a bank, the interest returns along with the repayment of your $25 invested, are deposited into your bank account and can be reinvested in new notes, along the way. This means that by the end of year one, you could easily have achieved your $1,000 goal. Using the same two year time frame, you could have another $1,000 return coming back in the next 5 years (or six years for the lot – year one and year two’s investments each to mature in 5 years time).

The whole lot will mature a year sooner than our original plan with the bank, but it gets better!

The bank was at a maximum of 5%, whereas P2P investment was at 9.9%. Your $1000 invested there, for 5 years, with the bank, would give you a total of  $1,190.94 if invested at 3.5% or $1,283.36 if invested at 5%. That’s after saving up for 2 years, so we are talking about a total time of 7 years.

By contrast, the same $1,000 investment with P2P lending at the lowest rate for 5 years would return you $1637.17 after only 6 years. That’s a higher return in a year less. But wait! Using the same savings plan over the two years, with P2P lending, we saved and invested an extra $1,000 in year two. That’s a total of $3274. 34. In other words, using the same savings plan to invest in P2P lending versus a bank you can almost get three times the amount ($1283.36 versus $3274.34) back for the same outlay!

To summarise: Times have changed and anyone can afford to invest now. You can get a much higher return if you look outside the box and steer clear of the finance houses with their pet investment advisors, taking juicy salaries, bonuses and commissions from your investments.

If I was a bank today, I’d be very worried because this could spell the end of banks as a lending institution. Startup enterprises and highly profitable small lenders, are vanishing – two of the banks important income streams are drying up. While the banks have been pandering to the big investors, they have forgotten about the little guys and we’ve gone elsewhere.


Thinking Ahead – Investment strategy

Posted By on April 25, 2017

Note – when we say retirement, we don’t mean at 65 years old. It could be any age at all, it’s simply a matter of planning and putting enough into that plan to make it happen when you want.

At this stage it probably feels impossible to invest enough to provide a large enough amount that will make much difference to your lifestyle in say 5 years time. Don’t be so sure; the miraculous properties of compounding interest will surprise you. Even if the figures seem a bit fairy tale today, once the process starts to “snow ball” you’ll be kicking yourself you didn’t do this sooner!

There’s two types of investment for retirement – lump sum and annuity.
Lump sum is where you construct your investment(s) to mature on a certain date.
Annuity is where you arrange them to mature in stages, providing an income or income supplement.

Of the two, you should go for annuity because:

  1. Down the track, governments will be looking for ways to exclude people from the pension and the first thing they will target will be people with large sums of money – lump sums.
  2. Lump sums have a habit of looking huge at first. You are tempted to spend a little on luxuries then suddenly wake up that the sum wasn’t so large and there’s not enough to live on for the next 10 years or so. Just ask anyone who has taken a redundancy package!
  3. Governments will possibly penalize people who have disposed of lump sums too. It’s a common practice for people approaching the pension age, to blow their savings on a cruise, so they are poor enough to qualify for a pension. It’s only a matter of time and governments will devise a way to penalize these folks.
  4. Because annuities don’t withdraw all the investment, the remainder left, keeps investing earning interest, thus in the long run you get back more for your outlay, from an annuity, than a lump sum.

To be a useful investment strategy, the investment must “snowball”. This means it has to reach a certain amount that it’s returns will pay for more new units of investment.
For example:
If I can only buy my investment in lots of $10, then I need to build up the number of $10 units to the point that the interest will buy another $10 unit. If I never add any more money, the investment will grow regardless – it’s snowballing.

Picture of snowballs growing larger as they roll down a snow covered hillside

Aim for that critical stage “Snowballing”, where your investment becomes self replicating.

When planning any investment, work out when the returns will reach this self replicating stage and make this your first investment target.

Magic moments

Once you start your investment off, you will discover there are little delightful surprise moments where things happen that you hadn’t foreseen. For example, I planned to buy 4 units or notes in P2P loans per month. I had designed a table that showed how they would compound over their 3 and 5 year life spans and how much I would make. However, for all my maths work, I was way off the mark. As repayments came in, I used them to buy more units, in addition to the 4 per month. My annual goal was attained in only 7 months!

We think we understand compound interest but until you actually get it working for you, it’s difficult to imagine the effects of the compound interest compounding on itself, buying more investments which compound on themselves to buy more units and so on.

In the next installment, we’ll look at one real life example and you’ll see that it is possible for anyone to do this.

United Airlines – the fine print doesn’t matter.

Posted By on April 14, 2017

By now, if you live on planet Earth with an Internet connection, you’d have seen the video of the three security thugs violently hauling a 69 year old doctor out of his seat, breaking his nose, cutting his lip and breaking two front teeth, all because they wanted his seat for an employee. It wasn’t as if he hadn’t paid, had contraband, or even been belligerent – they decided they wanted his window seat so one of their employees to fly back to the USA.

Here’s the link for the video, if you haven’t seen it already: United Airlines security assaults passenger

According to United Airlines, their contract allows them to do this whenever they feel inclined and we don’t have a leg to stand on. Of course, it’s written on the ticket somewhere and as travelers we should have read all that fine print and understood all the nuances of the legal jargon they used, to communicate this important point to us.

Firstly, regardless of the wording, using three strapping security thugs on a 69 year old man exceeds all reason. David Dao is not a sumo wrestler by any definition. He is a doctor, more accurately physically described as diminutive in stature. Rather than “removing” the passenger, as the airline describes it, “airline authorised assault on a passenger” would be a better description. When a 69 year old diminutive Asian man ends up with a broken nose and two broken teeth, you’d have to say that it’s a bit more than a “removal”!

United Airlines claim they chose their victim by ballot and it’s all fair. Maybe so, but a doctor, with appointments to see patients, should be sufficient grounds to remove a passenger from any ballot, when compared to others who are tourists.

All airlines overbook their planes, banking on last minute cancellations and passengers who don’t turn up. That’s common practice and it’s catered for in their contract with passengers but that contract states that passengers can be prevented from boarding the aircraft, not already seated on the aircraft. If we want to ignore reason, decency, common sense and descend to legal jargon, there it is. United have breached their own contract wording. The passenger had been allowed to board the aircraft and had met all the terms of the transportation contract.

United Airlines claim that without the four employees back in the USA, they would have had to cancel flights, is also highly suspicious. Essential employees in all airlines usually are employed on a 3-stage roster. One stretch (typically a month) is on duty, a second is on standby where they can be called to work at immediate notice and the third stage is off duty. If any airline is so inept that it cannot rake up some staff on standby, maybe it shouldn’t be allowed to manage something as complex as air flight!

When you take away the legalities, it all comes down to trust. I trust my airline to treat me fairly and get me there safely. I don’t expect them to beat me up before the plane has left the tarmac. I accept that turbulence might throw me around and trust the airline’s employees will do their best to limit my injuries – not cause them while we are still on the ground!

The heart warming part of this whole fiasco is the public response. United Airlines share prices dropped by 300 million following the incident going viral on the Internet, largely due to you, and millions like you, viewing the video online. Personally I hope he sues their arses off; no-one should be treated like this.

Let this be a message to all corporations seeking to hide behind complex legal jargon and fine print of contracts – ultimately it comes down to people power and the Internet’s ability to get the message out there – the fine print doesn’t matter.

Australia gives employees another slap in the face

Posted By on April 2, 2017

Australia has moved to cut employees penalty rates for Sundays to match Saturday rates.

Successive Australian governments have ignored the large section of the population who are employed but due to the prevalence of casual, temporary and part-time employment, do not have enough hours of work to earn a liveable wage. In many cases their income is so low they are below the minimum wage and rely of top ups from welfare, to survive.

Because they are employed more than 2 hours a week, they do not appear on the “unemployed” radar or in national statistics for the unemployed. If they work more than 20 hours a week, they do not qualify for unemployment payments either but still take home a wage that is below the minimum liveable wage. They even have a name for this category of the population – “The Underemployed”.

In a country where a vast number of workers are unable to get enough hours to take home a liveable wage, working Sundays was one way many low paid workers could make ends meet. Those on higher full time incomes tend to avoid working weekends, meaning this is just another slap in the face for poor end of town.

Conversely, employers claimed that reducing weekend penalty rates, would increase employment because businesses could afford to employ more staff and the Productivity Commission believed them!

Let’s get real here! Businesses exist to make profit. They have no ethical or moral compunction to limit that profit, in fact the more profit they make the more they are lauded. Reducing staff wages, a major business overhead, is just another way of making more profit.

What business is going to see this as a philanthropic chance to offer more employment?

If this was true, we’d see electronic checkouts being removed from retail stores. Even with the high incidence of shoplifting facilitated by these, the opportunity to create more employment and win good PR in the community, the big retailers are not removing these to create more employment.

I’ll wager, true to form, they’ll take the money and run. We won’t see any increase in employment.

When it comes to employment in Australia, the Productivity Commission is the Fox guarding the hen house and this is just one more example.

Is the USA about to step on a financial landmine?

Posted By on March 13, 2017

Unlike most other countries, the USA government does not have to balance it’s spending every financial year. Instead, they have a debt ceiling that they are not supposed to exceed. During the Obama administration, the government crashed into that debt ceiling and needed the backing of Congress and the president to raise the amount of that debt ceiling.

Shamefully, US politicians placed party politics before civil responsibility and this was demonstrated in 2011 when the US government came alarmingly close to running out of funds to pay their employees. This culminated in the Budget Control Act of 2011, which limited the amount the government could borrow and required the government to justify the spending against trade-offs in budget cuts. This was supposed to fix this issue and slow down the exploding deficit the USA was creating. It didn’t and the same problem arose again in 2013. The Obama administration created a debt holiday, to expire on the 15th March 2017.

Beware the ides of March, when Obama’s debt holiday expires!

Of course there were all the economics experts extolling buzz phrases and complex economic theories but it all boiled down to a simple problem: the manufacturing sector, that used to be the mainstay of the US economy, was dead – sent to third world countries with cheaper wages. The resulting unemployment meant, not only less tax revenue coming into treasury but also cost the US dearly in welfare payments. It caused a real drop in take home pay (and therefore tax) or at best prevented pay (and tax) rises that had been forecast. So, on one side of the economy they had less money flowing into the coffers and on the other side they were haemorrhaging funds in welfare.

Now if this was the 1900’s there would be a crash but after the second world war, the system changed. Credit was introduced. It was originally debt offset against the ability to repay that debt. However, since then we have extended that repayment time to several decades, creating personal as well as economic debt that may not be paid in the foreseeable future.

Now add technological advances into this mix, making the foreseeable future even more unpredictable. The US manufacturing powerhouse was good for credit in the 1970s. But in the 1980s computerisation made whole industries redundant. The manufacturing businesses that still required labour, were sent offshore, reducing employment even further. The cheap goods coming back into the USA killed any manufacturing left. The result is an economy with a serious balance of payments problem.

The general feeling is that the USA cannot go broke, no matter how high the debt rises, because it is the largest economy in the world. The US dollar is the world’s benchmark currency. Many countries around the world owe the USA money. If they collected those debts, the problem would be solved right?


Firstly most of those countries do not have the ability to repay those debts. Many of those debts are the result of war aid. They are now battered and still recovering from civil war (aside from the fact the USA seems to have an uncanny knack of funding the losing side).

Secondly the debt was created, in many cases, by funding the side that didn’t win. That’s not the side running those countries now, so it’s not really their debt any more. As far as they are concerned, the USA should get their money from those who borrowed it.

For example, in Cambodia, the USA funded the Lol Nol government that was toppled in 1975 by the Khmer Rouge. Although the money was tagged officially as agricultural aid, it was really used to supply arms to the Lol Nol regime and to bomb large tracts of Cambodia to prevent supplies from Communist supporters reaching South Vietnam. The debt has accrued interest and is now at $500US Million. Why should Cambodia repay it at all?

Similar arguments apply to El Salvador, Columbia, Iraq and a host of other countries.

So added to this imbalance of revenue equation, is the fact that the debts owed to the USA, claimed as assets on the balance sheet, are not really assets at all. They are write-offs, if not wholly, then at least in part.

Put it all together and you have:

  1. An income that is less than the government of the country spends.
  2. A government that doesn’t have to balance the books and believes it’s too big to crash, so has amassed colossal debts ever since the Regan presidency.
  3. Claimed Assets (loans to foreign countries) used to offset debt, can never be liquidated and are growing larger due to interest charges. Trying to call in these loans will bankrupt the countries, create an economic domino effect and destroy financial confidence, causing a financial collapse throughout the Western World.
  4. A new president that wants to spend up large to kick start manufacturing and create a rival to the Great Wall of China, and unlike his predecessors, has Congress on his side.
  5. A fiscal time bomb waiting to blow the whole thing wide open on the 15th of March, when Obama’s debt holiday ends.
  6. And for the first time in history, another huge economy in China that could replace the USA as the world benchmark (India is out of the contest because she just killed off part of her currency).

It doesn’t matter who is president, the problem is beyond politics. The USA economy is like a long train racing towards a broken bridge and Donald Trump thinks he’s the train driver in control.

Thinking ahead – Real life example

Posted By on March 7, 2017

I had been made redundant. The pay out disappeared rapidly and finding a job was proving difficult. I was forced to do Temp work just to put food on the table. When I had work, times were good but holidays, with no pay quickly taught me I needed to have some strategy to save some of my income for the lean times. On the advice of my (recently fired) finance consultant, I had increased the insurance cover on my superannuation. Without regular wage contributions, the balance was going down. I needed to find some way of investing my money in irregular small amounts, other than my stupid banks so-called “high interest account” which was not keeping pace with inflation. I still had shares on the ASX but the market was at an all time low but I was sure it would pick up later.

To be perfectly honest, I had resigned myself to the fact I was financially screwed but on a whim, I Googled, “investing small amounts” and came up with several search results. Of course there were the usual obvious scams like “Christchurch Mum buys Ferrari after one month…” and Forex ads where you pay $5,000 for a course to show you how to lose $50,000 a week. But one was something I had never heard of ; Peer to Peer lending.

It’s where a group all put in a small amount into a pool that is loaned out to people, much the same as the banks do, with personal loans. The difference is, there’s no banking corporation with branches, staff and super rich executives dipping their sticky fat fingers into the honey pot, taking out profits before you get to see them. The organisers take out a tiny fee and you get the rest.

P2P lending is something the banks don’t want to become common knowledge and here’s why:

Let’s say you put $25 into an investment account at the bank:

  • You’ll get around 3% to 4% interest per annum (per year). If we work on their top rate of 4%, that’s 0.33 % or a third of 1% per month. In the first month you will have your $25.00 and interest of $0.0825 or 8 cents because they round it off. You’ll have an account balance of $25.08.
  • Meantime the bank will lend your $25 at anywhere from 16% to 10% on a personal loan. We’ll assume the lower rate of 16%. That’s 0.013% per month. In the first month they will make 35.5cents on your money but only pay you 8 cents, keeping 27.5 cents, over twice as much as they pay you. Sadly most of that 27.5 cents will go to people who are already wealthy – shareholders and corporate honchos.

Let’s take $25 and put it into P2P lending :

  • Your $25 will be loaned out at a rate of anywhere from 9.9% to 39.9%, depending on the level of risk you choose. Let’s be very fair and say you are extremely cautious and go for the lowest risk at only 9.9% (that’s 0.825% per month). That’s 20.6 cents interest in the first month, so your $25 will earn $25.20.
  • A service fee will come out but it is around 2 cents, leaving a balance of $20.18

So already you are ahead of the banks by 10 cents. It might not sound much but that’s 10 cents every month compounding at 9.9% (rather than 4%). There’s the trap – very few people understand compound interest. We usually see it working against us and seldom understand how it works when it’s in our favour.

Using the bank example, at 4% interest, after 5 years your $25 would become $30.52.

That same $25.00 put into P2P lending at the lowest rate of 9.9% it becomes $40.93. And don’t forget that was their lowest rate, at their highest rate it would become over $177.00!

Just like I discovered with the Finance Advisers, superannuation funds and investment trusts, the killer in any investment is the people all taking their fees and commissions out of the investment before you get it, usually at the input end. This reduces your small investment before it’s even invested!

I decided to try one note – a $25 share in a loan but first I needed to see if they were legitimate. And this is something I suggest you do too:

  1. Google for “complaints with …..”, “problems with ……” and “Is ….. a scam?” I found nothing alarming, just others asking the same questions.
  2. Send a question to their contact or help page contact and see how long they take to respond. This is important because if something goes wrong, you want help fast. Shady schemes rarely employ customer service staff and will reply only by email. I spoke to a human in New Zealand too!
  3. Find their business address.
  4. Read ALL of the Terms and Conditions. Even if it takes several days, you need to know there’s nothing concealed in the fine print.

The next step was to invest a small amount, just to see if it worked as well as they claimed.

I decided to try one note (as they call a share in a loan) at $25.00. That went well, within 24 hours my account showed I had invested in one note. I called their help centre again with a question and the attendant was very helpful. He saw I had bought one note and explained that if that one loan went bad, I was totally exposed, Whereas if I had 5 notes and one went bad, the interest on the others would cover my loss and conserve my investment outlay. I was waiting for the close, “would you like to commit to…” but it never came. There was no sales pitch, just the simple explanation.

That week I was able to buy another nine notes – I was on a Temp contract at the time. The next month I saw the repayments coming in, exactly as promised. They took tax out and withheld it as arranged, so what I was seeing was all mine.

Since March last year, I have squirreled away another 52 notes at $25 each. Eleven notes have been repaid early (there’s no early payment penalty) and the funds have been reinvested. Along with the repayments, I have reinvested, I have 61 notes in action today. That’s not much for almost a year but I’ve had an operation and three months off work since then. If I take the average of the monthly repayments, I need 107 notes before it starts snowballing – that’s my next target.

Considering what a crappy year it’s been, financially, I have still built my investment portfolio. I couldn’t have done that any other way I know of.