*** FUTURE POSTS WILL ALSO APPEAR AT 'NOW AND NEXT' : https://rolfnorfolk.substack.com
Tuesday, June 30, 2009
Sunday, June 28, 2009
Another letter to The Spectator
Sir:
Irwin Stelzer (“No more consensus: this time there is a choice”) holds up Ronald Reagan as a model of a Conservative working for the ordinary voter. He could hardly have chosen a worse exemplar.
From 1947 to 1981 (the year in which Jimmy Carter left, and the Great Communicator took office), US public debt outstanding had fluctuated between $2 – 2.5 trillion (inflation-adjusted to 2009 dollars). Carter ended his Presidency with the debt no worse than it had been when he began. Under Reagan, the debt doubled in real terms (average 9.7% p.a. increase). Bush senior continued this trend (7.3% p.a.); the next two terms under Clinton showed a significant slowing (1.8% p.a.); but Bush junior picked up the pace again (6.3% p.a.) America now has $11.4 trillion public debt around its neck, approximately 5 times the equivalent in 1980, when Reagan asked voters, “Are you better off than you were four years ago?”
Well, how much better-off is Joe Average now? In the latest issue of Harvard Business Review, Gary Pisano and Willy Shih conclude that “average real weekly wages have essentially remained flat since 1980.” Instead, the “trickle-down effect” has turned out to be a torrent for the upper stratum only: in a 2006 speech reviewing hourly wage rate increases from 1973 – 2005, the economist Janet Yellen, of the Federal Reserve Bank of San Francisco, said “... the growth was heavily concentrated at the very tip of the top, that is, the top 1 percent”. The rest played catch-up by taking on extra personal debt: an investment analyst quoted in The Economist (22 January 2009) says “... the share of household and consumer debt alone went up from 100% of GDP in 1980 to 173% today, equivalent to around $6 trillion of extra borrowing.” Naturally, this process was much to the advantage of bankers, brokers and others in the top 1%.
In short, America has been pretty nearly busted by and for its elite. So much for the party of smaller government; so much for supporting the core Conservative, hard-working average wage-earner; not so much clear blue water, as a tide of red ink. One can only hope that the next British Conservative government, if there is one, will seek not to emulate Reagan and the Bushes.
Yours,
Irwin Stelzer (“No more consensus: this time there is a choice”) holds up Ronald Reagan as a model of a Conservative working for the ordinary voter. He could hardly have chosen a worse exemplar.
From 1947 to 1981 (the year in which Jimmy Carter left, and the Great Communicator took office), US public debt outstanding had fluctuated between $2 – 2.5 trillion (inflation-adjusted to 2009 dollars). Carter ended his Presidency with the debt no worse than it had been when he began. Under Reagan, the debt doubled in real terms (average 9.7% p.a. increase). Bush senior continued this trend (7.3% p.a.); the next two terms under Clinton showed a significant slowing (1.8% p.a.); but Bush junior picked up the pace again (6.3% p.a.) America now has $11.4 trillion public debt around its neck, approximately 5 times the equivalent in 1980, when Reagan asked voters, “Are you better off than you were four years ago?”
Well, how much better-off is Joe Average now? In the latest issue of Harvard Business Review, Gary Pisano and Willy Shih conclude that “average real weekly wages have essentially remained flat since 1980.” Instead, the “trickle-down effect” has turned out to be a torrent for the upper stratum only: in a 2006 speech reviewing hourly wage rate increases from 1973 – 2005, the economist Janet Yellen, of the Federal Reserve Bank of San Francisco, said “... the growth was heavily concentrated at the very tip of the top, that is, the top 1 percent”. The rest played catch-up by taking on extra personal debt: an investment analyst quoted in The Economist (22 January 2009) says “... the share of household and consumer debt alone went up from 100% of GDP in 1980 to 173% today, equivalent to around $6 trillion of extra borrowing.” Naturally, this process was much to the advantage of bankers, brokers and others in the top 1%.
In short, America has been pretty nearly busted by and for its elite. So much for the party of smaller government; so much for supporting the core Conservative, hard-working average wage-earner; not so much clear blue water, as a tide of red ink. One can only hope that the next British Conservative government, if there is one, will seek not to emulate Reagan and the Bushes.
Yours,
Saturday, June 27, 2009
Down
Read Brad Setser on the USA's deterioration in the net international investment position.
The left-hand scale is in $billions.
To quote Status Quo, "down down, deeper and down".
The left-hand scale is in $billions.
To quote Status Quo, "down down, deeper and down".
Thursday, June 25, 2009
Cash vs the stock market: an inconvenient truth
Tuesday, June 23, 2009
Inflation, not deflation
Jesse today, maintaining that inflation can indeed happen...
Our own view is that a serious stagflation with further devaluation of the US dollar as it is replaced as the world's reserve currency is very likely, after a period of slackening demand and high unemployment. A military conflict is also a probable outcome as countries often go to war when they fail at peace.
Tips?
From my own readings in this area, the people who tended to survive the Weimar stagflation the best were those who:
1. Owned independent supplies of essentials including food and shelter and were reasonably self-sufficient.
2. Had savings in foreign currencies that were backed by gold such as the US dollar and the Swiss Franc
3. Possessed precious metals
4. Belonged to a trade union and/or had essential skills or government position which guaranteed a wage
5. Were invested in foreign equity markets, and even in the domestic German stock market for a time
Our own view is that a serious stagflation with further devaluation of the US dollar as it is replaced as the world's reserve currency is very likely, after a period of slackening demand and high unemployment. A military conflict is also a probable outcome as countries often go to war when they fail at peace.
Tips?
From my own readings in this area, the people who tended to survive the Weimar stagflation the best were those who:
1. Owned independent supplies of essentials including food and shelter and were reasonably self-sufficient.
2. Had savings in foreign currencies that were backed by gold such as the US dollar and the Swiss Franc
3. Possessed precious metals
4. Belonged to a trade union and/or had essential skills or government position which guaranteed a wage
5. Were invested in foreign equity markets, and even in the domestic German stock market for a time
Sunday, June 21, 2009
US public debt since 1945 - inflation-adjusted
Sources: Treasury Direct, Robert Sahr. Click to enlarge.
Presiding over indebtedness... or as helpless as King Canute?
Presiding over indebtedness... or as helpless as King Canute?
A samizdat on Europe
How many Internet users in the UK, with their own printer at home or permitted some private use at work?
Why can we not design and post up a form - a petitition for a referendum, for printing-off and taking round for signing by work colleagues, friends and neighbours? With a request that everyone follows suit - downloads, prints, distributes and posts into a central address?
Or even an unofficial, but fairly-worded referendum itself?
Or are we indeed "entering a post-democratic age?"
So, never mind the Lisbon Treaty, that sly strategy to get us into the bedroom on some basis other than the consummation of marriage? Is it not time to seek democratic legitimation of the UK's membership of the EU per se?
Why can we not design and post up a form - a petitition for a referendum, for printing-off and taking round for signing by work colleagues, friends and neighbours? With a request that everyone follows suit - downloads, prints, distributes and posts into a central address?
Or even an unofficial, but fairly-worded referendum itself?
Or are we indeed "entering a post-democratic age?"
Saturday, June 20, 2009
US Public debt vs. gold
Still trying to see the debt mountain in context... So let's see how hard it would be to pay off in gold, assuming that in 1791 a single "bag" of gold would have cleared the account.
For the first 70 years, the gold-priced public debt was always less than twice its 1791 level, and often below the starting point.
Now to see the progress of the public debt since 1860:
... and second, since 1945:
For the first 70 years, the gold-priced public debt was always less than twice its 1791 level, and often below the starting point.
Now to see the progress of the public debt since 1860:
... and second, since 1945:
These pictures seem to indicate the influence of:
(a) two world wars
(b) the closure of the "gold window" in 1971
(c) monetary expansion since the 1980s
(d) the Grand Bust of 2000, NOT 2007, and the consequent flight to commodities
- and on this way of measuring the catastrophe, we're 50% worse off than at the end of WWII - plus we're not rebuilding the economy, we're doing the reverse.
Glory days
US Public Debt - annual rate of change
US Public Debt - the long view
Any more inconvenient truths?
"Only now can we afford the truth," concludes this book review . The book admits that the French Resistance made no significant difference to the course of the war, but the myth of the Maquis helped De Gaulle resist Allied attempts to break up the French Empire.
Do you believe that there is a right time for the truth to be revealed?
Can you give examples of any truths that should be revealed, or myths dispelled, now?
Do you believe that there is a right time for the truth to be revealed?
Can you give examples of any truths that should be revealed, or myths dispelled, now?
Friday, June 19, 2009
Chinese SWF: a subtle assault on the US dollar?
Jim Willie (a notable gold proponent) submits an interesting essay on China's influence in the currency and commodity markets.
Gold bugs say that the price of gold and other commodities has been held down by parties interested in maintaining the credibility of the US dollar. Willie thinks that the entry of a large Chinese sovereign wealth fund may foil such market manipulation in future, especially since the Chinese can back their hedge fund loans with their US Treasury holdings. An attempt to break a Chinese-held commodity position, if successful, could lead to a selloff of Treasuries and so crater the bond market, leading to raised interest rates and/or a drop on the dollar.
Between a rock and a hard place. This is what it is to be a debtor.
Gold bugs say that the price of gold and other commodities has been held down by parties interested in maintaining the credibility of the US dollar. Willie thinks that the entry of a large Chinese sovereign wealth fund may foil such market manipulation in future, especially since the Chinese can back their hedge fund loans with their US Treasury holdings. An attempt to break a Chinese-held commodity position, if successful, could lead to a selloff of Treasuries and so crater the bond market, leading to raised interest rates and/or a drop on the dollar.
Between a rock and a hard place. This is what it is to be a debtor.
Commercial real estate to crash?
Giant retailer Tesco has just sold and leased back 12 stores, netting £430 million (£458m, according to another source). This comes on top of another such move 10 months ago, which brought in another £605 million from 13 properties.
There's various ways you could interpret this - e.g. it could be a way to deflect criticism of Tesco's powerful position in the retail commercial property market, which some say has been used to prevent competitors setting up near their own outlets. But there are cheaper ways to deal with critics.
I think this billion-pound bet may be a straw in the wind - or perhaps an uprooted tree in the mighty gale - portending a significant fall in commercial property values.
There's various ways you could interpret this - e.g. it could be a way to deflect criticism of Tesco's powerful position in the retail commercial property market, which some say has been used to prevent competitors setting up near their own outlets. But there are cheaper ways to deal with critics.
I think this billion-pound bet may be a straw in the wind - or perhaps an uprooted tree in the mighty gale - portending a significant fall in commercial property values.
A fish rots from the head down
A month ago, we learned that Tony Blair's receipts have been "accidentally" shredded, so that we cannot examine his financial behaviour as keenly as his hapless ex-colleagues. Yet Guido's blog shows that the shredding was paid for, receipted and claimed as an expense.
Are there some people who just get away with it, for ever?
Are there some people who just get away with it, for ever?
Tuesday, June 16, 2009
Survival
In a Dublin talk last week, Dmitri Orlov bears out my repeated theme of diversity, dispersion and disconnection - the way in which efficiency and survival are at odds. It's also a theme of James Howard Kunstler. Even Rob Kirby's latest post refers to a "financial ecosystem" and asserts that the concentration of power at the top threatens the structure.
Big changes are on the way. Jesse reports on how the world is weaning itself off the dollar; the Contrarian Investor notes how China is cornering the market in rare minerals vital to modern technology.
There is a power struggle - a host of power struggles - going on. The good news is that life goes on, too. The bad news is that not everybody makes it.
Don't be the doughboy this time.
Big changes are on the way. Jesse reports on how the world is weaning itself off the dollar; the Contrarian Investor notes how China is cornering the market in rare minerals vital to modern technology.
There is a power struggle - a host of power struggles - going on. The good news is that life goes on, too. The bad news is that not everybody makes it.
Don't be the doughboy this time.
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