Time for another Jubilee

Karl Denninger elegantly demonstrates that compound interest on debt will always tend to blow up the economy, if the interest rate x is more than y (the average rate of economic growth) + z (the average rate of default).

Lenders will try to achieve this blessed state of affairs, but if they succeed, they will eventually end up owning everything, and the system will go "pop" long before that point. Which is why the Bible talks about a Jubilee year of total debt forgiveness, occurring every half-century.

Getting governments to take over all bad debts interferes with that reset, and so the "pop" must be louder when it finally, inevitably happens.

They could be right, darn it

The British Government claims it wants to do more for our health.

There's the new Change4Life campaign, encouraging us to eat less fat, take more exercise and live longer; and there are the perennial pushes to give up smoking and (after they've extended the licensing hours and vastly increased the number of licensed outlets) reduce alcohol consumption.

On the other hand, we have the prospect of the State pension system hitting the buffers, thanks to millions of coffin-dodgers; not to mention the cost of care homes and the bed-blocker burden on the National Health Service. And if we all became totally abstemious, we would cost the State its £10 billion annual revenue from tobacco, and £8 billion from alcohol. At first sight, if you wanted to destroy the State, you'd follow its advice - a novel strategy of subversion by civil obedience.

Hence, tabloid-style contrarianism! I haven't found the evidence, but I expect that staying healthy (and working longer) will more than pay for itself, by reducing the costs of chronic ill-health and increasing revenue from taxes on income.

Deflation, low interest rates and the poor old saver

The British Government claims it wants to do more for the saver. Actually, it's already done a lot: the Daily Telegraph reports that the Halifax estimates house prices fell by 16.2% in 2008. Putting it another way, someone holding cash in a shoebox has made 19.33% tax-free, measured in house price terms; or 32.22% gross for a 40% taxpayer.

And that's a point: the government doesn't tax you on the gains of deflation. But I'm sure they're keen to rectify that: normal inflation will be resumed as soon as possible.

MSM admits keeping shtum

Edmund Conway breaks journalistic ranks to admit he should've said something sooner.

A safe haven?

Just a thought.

Disaster deferred (and increased), not averted

Karl Denninger goes back to basics, explaining how the reflation is merely paying you-now from you-future's account. Knit faster, we're running out of wool.

Murky business

Brad Setser does a very interesting bit of detective work and concludes that much of the UK's holdings of US Treasury securities, are on behalf of China. He gives us a graph demonstrating that when the UK's official holding declines sharply (usually in June), China's suddenly rises.

Setser estimates that China owns $1.425 trillion in Treasuries and Agencies, which is equivalent to about 10% of US GDP. ("Treasuries" are debts directly owed by the US Government, "agencies" are debts of the US Government's organisations, as explained in this Federal Reserve handbook from 2004.)

He ends by calling for more transparency in British accounts of these holding - that would be most welcome all round, generally. Half our problems (and, I assume, opportunities for fatcat swindlers) stem from our not knowing the real position of the world's finances.