The price of cocktails had just barely doubled and are about half what you pay at a bar in Sydney or Melbourne. Takeaway mixes from one of the ubiquitous ABC stores were $3.00 a pop so what a treat with Diamond Head as a backdrop.

The Raff figures that Honolulu tourism is at capacity judging from fixing the number of visitor’s daily to key locations like Pearl Harbor and Hanauma Bay. Waikiki is packed with tourists mainly by the 20-30s or +50s age groups. It seems that teenagers prefer destinations in Asia because living and activities are cheap. Asia might be cheap but with the AUD so strong against the USD, Hawaii is a paradise for shopping. Cosmetics and fine Hawaiian made clothes (Google Jams World) are half to a third of the price of the same or comparable item in Australia.

The price differential for most things is so huge the reasonable conclusion is that Australian shoppers are being ripped off and it’s no wonder online shopping is accelerating apace. Here is one example: a particular shampoo that the Raff’s eldest daughter buys in Sydney for nearly $30, cost $6.80 at a supermarket in Honolulu.

Beach settings like Waikiki are pretty well same the world over but the backdrop is iconic. The Raff likes the Big Island better and spent most days hiking or snorkeling.  The volcanic landscape is extraordinary and there is no other place on earth where, in the space of a few hours, visitors can experience all the world’s climates except polar and permafrost.

Beautiful as it is, the Big Island is doing it tough. In six days not one player appeared on an adjacent golf course to the top floor condo rented in South Kona.  Most of the condos were unoccupied but this might have been due to fact that it was outside school holidays. For $725,000 the top floor condo 20 metres from the ocean is for sale, and has been for many months. The Raff could not help but notice a small real estate office in Kailua Kona with a large number of properties under foreclosure. A piece of paradise can be yours for $150,000, a small cottage in a tranquil setting, and with a mai tai in hand what else could one want?

Jobs are in very short supply and workers are driving across Hawaii each day to work; in round figures this is at least 160 km each way. The Raff guesses that employment opportunities are no better in California. On its front page the New York Times carried an article on unemployment in California, which if the Raff's memory is right, is supposedly one of the largest economies in the world in its own right. Accountant Byron Reeves lost his job four years ago. Over that period Byron sent off around 1,600 resumes resulting in less than 20 interviews. The number of unemployed professionals is vast and the state unemployment rate is 10.7 % and higher east of Los Angeles at 12.6 %.

The unemployed have formed self-help and encounter groups in support of one another. Official unemployment figures are nonsense. The maximum period, after extensions, that an individual can receive an unemployment cheque is 99 weeks. Apparently some 930,000 people in California have been unemployed for over 27 weeks. This group accounts for 45 % of California’s unemployed. It’s no wonder that older workers in particular just give up looking for work and drop out of the labour force, reducing the participation rate. The hidden unemployment rate is obviously far higher than official figures and it is equally obvious that the Obama administration has no solution to fix the problem.

The easiest way to fix a problem is either create a bigger problem, and forget the earlier one, or not hide from the truth and admit this is the way things are as a base from which to move forwards. The change in global dynamics relating to manufacturing and service providers is a challenge that few western economies seem capable of meeting. Perhaps in 20 years time economists will look back on the ethos of the flat playing field and a free for all, agriculture being a common exception, as being a bad idea because of the amount of human misery it generated. Cheap goods are not a panacea for social disharmony.

It should be apparent to one all and sundry that flooding the west with money probably will not work. Japan has particular problems with an aging population but the experiment with near zero interest rates is over 20 years long with little to show for it. In Australia, handing out dosh ensures that imports of foreign goods rise to greater heights. The Gillard government cites the strength of services, but so what? Services are non-productive and without manufacturing an economy will surely fail and the current account deficit will rise towards an unsustainable level.

Thinking in terms of sustainability the CEO of Volkswagen said in a business interview that the market for autos in Europe would remain bleak for 2-3 years. One of the talking heads then cited growth in US autos as a good signal, which is true. A view was then put forward that emerging economies were the place to invest, with Russia cited as having double-digit growth. Now the Raff is not sure where the double-digit growth figure comes from because Russian GDP is running at around 4 % with industrial production (IP) increasing a bit above 2 % y/y.

The only key countries in the Euro area with positive IP, and barely just, are Austria and Netherlands. Eastern Europe is doing much better, supporting the thesis of investing in emerging countries. The Czech Republic, Turkey, and the low countries of Denmark and Norway are doing much better than Australia. 2Q12 was a miserable period for Australia with IP measured at 0.5 %. IP in South Africa is growing at multiples of 0.5 %. This comparison is not something that Australia should be proud of.

A key observation over the past few weeks is the escalating price for takeaway food and restaurant meals on Sydney’s North Shore. The price hikes are generally above 10 %. Without a doubt this is partly because of declining patronage. Owners of restaurants and takeaways are trying to make up for fewer buyers with higher prices, a business model that will fail. A leading manager of a large real estate firm sees problems brewing. He foresees, and the Raff agrees, that there will be a huge wave of restaurants that will go bust.

A collapse in the restaurant trade would have negative implications for banks, commercial property values and employment. The Raff also notes fewer shops open on Sundays. The combination of declining store sales and penalty rates has hit hard and the number of vacant shops is rising. At a recent dinner party the Raff learnt that a very well known construction company specializing in second floor additions to houses has not signed a contract for a month.

The Raff is tired of hearing how good things are; well it’s simply not true. Just because situations might be worse in another country is nothing to gloat over.  Labor is covering its failures with comparisons to basket case countries; relative ratios of debt to GDP cited most frequently. It is tantamount to an investment fund manager saying that I am sorry, I lost 12 % of your money but the broad market fell 20 % so how good am I.

Even a drunken sailor has to get money from somewhere, but at least he mostly works for it; but not so the Government with its plunder of the ARPC. What is the ARPC some readers might ask?  ARPC stands for Australian Reinsurance Pool Corporation. ARPC was established some years ago to deal with terrorism-related insurance claims. In a nutshell surcharges are being applied to commercial and business property insurance policies. The surcharge is 12% in the CBD, 4% in the suburbs and 2% in the country. The idea is to establish a fund to cover commercial property against damage from a terrorist attack. ARPC is not supposed to be a profit making business but that is what it has become.

For the Government the ARPC has turned into a goose that lays golden eggs. With a truckload of money in the coffers the Government has raided the cookie jar and created a dividend stream a mere $100M or more. How nice, but the right thing to do, would be lower the surcharge and thus reduce the cost of insurance for businesses. All levels of government are picking the low hanging fruit with NSW following other States with respect to fire levies. The levy will form part of council rates and no longer be included in private insurance premiums. The Raff figures this change will mean a net increase of several hundred dollars. For most households the addition to the rates is one dollar per $1,000 of unimproved property value. This is going to be another unexpected impost for many people. No wonder discretionary expenditure is under attack.