Wednesday, December 17, 2008

On yer bike

Thus Denninger:

Bernanke clearly thinks ... that he can "restart borrowing." ... This is causing the dollar to get slammed - at least for a little while... These sorts of actions ignite wars. Choose between a trade war (about 75% chance) and a shooting war (the other 25%).

The dollar weakness, by the way, won't last. Either sort of war puts every other nation in the world in worse shape than us, which over time leads to the same place - "we're screwed but they're screwed worse."

He's not wrong. Total US debt, foreign and domestic, has recently been calculated as 392% of GDP; but alas for us Brits, UK external (foreign) debt alone is running at 400%. I just don't know what a like-for-like comparison would show.

The TV news here tried to put a merry gloss on sterling's collapse, reporting how it helps exporters like a bicycle firm they visited. A bit desperate: the start of the 'Oxford Automobile and Cycle Agency’, this isn't. You know you're in trouble when they tell you to "smile, smile, smile."


Anonymous said...

Those figures from Citigroup are an absolute farce. Firstly they seem to have gorssly understimated total US debt which consists of very large amounts of the following:-

Government debt,
State debt (e.g. California),
Domestic debt (housing boom),
Corporate debt (including Citi),
Private Equity debt (Blackstone)

For the UK debt it seems the Citigroup chap has assumed that UK banking doesn't operate fractional reserve banking and that therefore of £6trillion of debt almost all of it must be owed to foreigners. That simply ain't true. There is no reason to believe that any more than £600bn is owed to foreigners. Furthermore UK banks VERY OFTEN lend TO foreigners. HSBC actively lends to the Far East. o how you can do some "back of a fag packet" calculation that would come up with £4trillion in foreign debt I don't know. Its extremely difficult to work out and very likely to be much, much lower than this.

Most of the money was lent by our banks to our people, which is how the bubble blew up and is why pulling the plugs on the reckless banks becomes a great solution. Now you can see why Citigroup want to suggest that all the money is owed to foreigners. Instead of pulling the plug on banks like Citi and letting new fresh banks take their place, Citi are suggesting that we can't possibly do that because billions of foreigners would get upset and posibly start wars and some such. Bullshit.

James Higham said...

No need for gloom - everything is just spiffing.

Sackerson said...

Thanks, both, and it would be interesting to see your own estimates for the Uk and USA, Anon - thank you for the length and detail of your comment.