A caller to the excitable Max Keiser's show (htp: Nathan Martin) quotes from a statement by Bob Janjuah at Royal Bank of Scotland, warning clients to cash in and hunker down while the market tests "new lows". (And Jesse says "wealthy insiders are increasingly trying to liquidate investment positions to raise cash and diversify their holdings into cash and hard assets.")
Keiser got wide attention in July when he referred to Goldman Sachs as "scum" and (I think, not incorrectly) said that the practical results of some of their activities were worse than terrorist atrocities. Protests like this make no difference, except that they may relieve hearts clogged with helpless anger: what we've learned recently is that the shameless tenacity of politicians and bankers will outwear public indignation.
But society may change when everyone gives up looking to the the über-scum to help, and concentrates instead on personal benefit and survival. I think I may not even bother to vote in the next General Election.
Oh, and Nathan Martin also directs us to an article by Robert Kiyosaki, who compares the market to a dead frog galvanized by ever-higher charges of financial electricity until "Pretty soon the dead frog will be fried frog." Kiyosaki cites demographic change as a major threat in the long term.
Sunday, August 30, 2009
How much does education matter?
Greg Mankiw thinks that correlating SATS scores and subsequent earned income misses the point that inherited intelligence are a factor in both. This appears to be supported by the graph in Alex Tabarrok's blog that shows "higher parental income predicts higher child income but only for biological children and not for adoptees."
David Davis points out that the £45,000 true cost of a university education is not always recouped by graduate earnings. (See also Charles Hugh Smith's piece, "Is Higher Education Worth a Lifetime of Debt?")
I have read that there is a positive correlation between shoe size and IQ. Public policy is to buy big shoes for everybody so they get smarter.
David Davis points out that the £45,000 true cost of a university education is not always recouped by graduate earnings. (See also Charles Hugh Smith's piece, "Is Higher Education Worth a Lifetime of Debt?")
I have read that there is a positive correlation between shoe size and IQ. Public policy is to buy big shoes for everybody so they get smarter.
Hitchens against war
Really fascinating article by Peter Hitchens today, on what the world might have looked like if Britain had not declared war in 1939. And a wonderful three-paragraph (in the print edition) pudding of complaints about our present condition:
... if we won it, how come we look back on the Second World War from conditions we might normally associate with defeat and occupation? We are a second-rate power, rapidly slipping into third-rate status. We have a weak currency and shrunken armed forces, deployed as auxiliaries in wars that are not in our interest, and we are largely governed from abroad.
Our Parliament is a bought and paid-for puppet chamber. Our culture and customs have been debauched and our younger generations corrupted, as subject populations are, with drink, drugs and promiscuity.
We are compelled, like an occupied people, to use foreign measures to buy butter or meat, and our history is largely forgotten or deliberately distorted in the schools to suit anti-British dogma. Those schools are unable to educate most of our children up to the levels of our main rivals, so ensuring that we provide no challenge to them. Our country has been Balkanised into provinces and regions. Our language is invaded by foreign words and expressions. Our food and most of our consumer goods are imported, along with our TV programmes and films.
The remaining veterans of the supposedly glorious struggle, far from being gratefully honoured, often live in pinched poverty, scared of feral youths, or die neglected in squalid hospitals in a country many of them no longer recognise as their own.
A little over-egged, but still tremendously good.
... if we won it, how come we look back on the Second World War from conditions we might normally associate with defeat and occupation? We are a second-rate power, rapidly slipping into third-rate status. We have a weak currency and shrunken armed forces, deployed as auxiliaries in wars that are not in our interest, and we are largely governed from abroad.
Our Parliament is a bought and paid-for puppet chamber. Our culture and customs have been debauched and our younger generations corrupted, as subject populations are, with drink, drugs and promiscuity.
We are compelled, like an occupied people, to use foreign measures to buy butter or meat, and our history is largely forgotten or deliberately distorted in the schools to suit anti-British dogma. Those schools are unable to educate most of our children up to the levels of our main rivals, so ensuring that we provide no challenge to them. Our country has been Balkanised into provinces and regions. Our language is invaded by foreign words and expressions. Our food and most of our consumer goods are imported, along with our TV programmes and films.
The remaining veterans of the supposedly glorious struggle, far from being gratefully honoured, often live in pinched poverty, scared of feral youths, or die neglected in squalid hospitals in a country many of them no longer recognise as their own.
A little over-egged, but still tremendously good.
Saturday, August 29, 2009
HSBC: Britain's safest bank
... at number 18 in the worldwide list. 4 of the top 10 are German; the safest US bank (Bank of New York Mellon Corp) is at #32.
Meanwhile, the Daily Finance is sanguine about the US banking system, reporting the view of several analysts that the total number of failures will merely be in the hundreds, as opposed to Nouriel Roubini's "much too high" 2008 prediction of 1,200.
Meanwhile, the Daily Finance is sanguine about the US banking system, reporting the view of several analysts that the total number of failures will merely be in the hundreds, as opposed to Nouriel Roubini's "much too high" 2008 prediction of 1,200.
Cold turkey would kill the US debt junkie
Reading Jim from San Marcos' latest, it occurs to me that debt default looks like a seriously bad idea - cutting off your nose to spite your face doesn't come into it.
Tuesday, August 25, 2009
Debt, unemployment and escape routes
Interesting observation by Steve Keen: unemployment correlates closely with the amount that debt contributes to demand in the economy.
Let me try to reason out the consequences, however inexpertly.
So, as everyone scrambles to cut spending and get out of debt, unemployment will soar. Since there is a great deal of international trade, the hit will be felt internationally.
Then government finances will come properly unravelled, especially in countries that have generous social welfare provisions. Worldwide, sovereign states will look for anyone who has real money to lend.
This should result in higher interest rates, but that would make the cost of debt, and its sustainability, extremely difficult, both for states and for corporations (and the burden on the latter will tend to result in even more unemployment and more claimants on the government). A rise in rates would also hit holders of long-term government debt, which may be one of the reasons the Chinese have been swapping that for shorter-dated Treasuries. A collapse in bonds will affect the capital value of pensions and investments, oh dear.
Another way out is default on debt. But who will be hit by that? Not just foreigners, but our pensions and managed investment funds.
A third way, which given that we have history to learn from doesn't seem likely, is the true hyperinflation approach. Germany in 1923, Hungary, Argentina, Zimbabwe... do you really see this happening here?
Then there's the downgrading of debt, with corresponding falls in the traded value of the currency. We've seen some of that - what, 20% off the pound? - so maybe there's more to come from that direction. Except other countries may follow suit. In 1922, if you were a far-sighted German, I suppose you might have sold marks and bought dollars; what currency would you buy now?
Or there's "more of the same" again - talking up the economy and pumping in cash until you spend because you daren't leave it to rot in the savings account.
Which way will it go? Where will it all end?
Let me try to reason out the consequences, however inexpertly.
So, as everyone scrambles to cut spending and get out of debt, unemployment will soar. Since there is a great deal of international trade, the hit will be felt internationally.
Then government finances will come properly unravelled, especially in countries that have generous social welfare provisions. Worldwide, sovereign states will look for anyone who has real money to lend.
This should result in higher interest rates, but that would make the cost of debt, and its sustainability, extremely difficult, both for states and for corporations (and the burden on the latter will tend to result in even more unemployment and more claimants on the government). A rise in rates would also hit holders of long-term government debt, which may be one of the reasons the Chinese have been swapping that for shorter-dated Treasuries. A collapse in bonds will affect the capital value of pensions and investments, oh dear.
Another way out is default on debt. But who will be hit by that? Not just foreigners, but our pensions and managed investment funds.
A third way, which given that we have history to learn from doesn't seem likely, is the true hyperinflation approach. Germany in 1923, Hungary, Argentina, Zimbabwe... do you really see this happening here?
Then there's the downgrading of debt, with corresponding falls in the traded value of the currency. We've seen some of that - what, 20% off the pound? - so maybe there's more to come from that direction. Except other countries may follow suit. In 1922, if you were a far-sighted German, I suppose you might have sold marks and bought dollars; what currency would you buy now?
Or there's "more of the same" again - talking up the economy and pumping in cash until you spend because you daren't leave it to rot in the savings account.
Which way will it go? Where will it all end?
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