Please forgive the digression, but all of this discussion of financial and social breakdown, overpopulation and impending water and energy shortages, lead me to make the following observations.
As a scientist with interest in just about everything, I have come to the conclusion that the underlying cause for most, if not all, of these problems is that our psychology and cultures have not caught up with the Scientific Revolution.
I will begin with that statement that science has emerged as the most useful method of determining fact, if not truth.
However, like our cousins the Great Apes, we still waste resources when they are plentiful, with no thought of the future. We still generally pick our leaders as the most virile male, i.e. the silverbacks, rather than their ability to actually solve problems.
And we still insist on pre-Enlightenment thinking, as is demonstrated by this piece from DC's Improbable Science 'blog:
A recent report by the King's Fund in the UK on complementary medicine contains the following passage:
“This report outlines areas of potential consensus to guide research funders, researchers, commissioners and complementary practitioners in developing and applying a robust evidence base for complementary practice.”
In other words, if we spend enough money, we will find the stuff that works, and best way to use it.
However, the US National Institutes of Health has spent over $1 billion in the past decade on carefully researching these practices. Not a single one was found to be of benefit. This was so distressing to some there, that each new report resulted in a slew of resignations.
Wednesday, September 02, 2009
Water wars
James Quinn raises another critical resource issue, namely, water.
Taking his list "Total Renewable Freshwater Supply, by Country" (which excludes Australia, though the situation there could easily become much more challenging), I divided the figures by population size to obtain a per capita water supply, as follows:
From this we note that Canada may have something to offer the USA (Al Capone would be into mineral water now, I guess), and that India may face an even more desperate shortage than China, unless and until desalination plants take off. And parts of South America may have their attractions.
But the Congo: no. I once taught a lad whose family trekked 1,000 miles to the coast to get away from the civil war, and he very nearly didn't make it, because of a blood-thirsty armed patrol. His father nominated him for the chop rather than the favourite son, but they eventually relented.
Any views from survivalists as to where to move the family for a long-term future?
Don't save the planet, save the country
A couple of days ago, the Daily Telegraph reported on threats to our energy supply. "There will be huge reliance in the short term on gas, with up to 50 per cent of electricity coming from gas fired power stations. "
Instead of challengeable pi-jaw about global cooling/warming/okay-let's-compromise-and-call-it-change, why don't we look to reducing our energy use for the sake of liberty? No more dirty deals with Putin, Gaddafi, the Saudis et al. And less chance of another industry-crippling 1974 energy price hike.
An initiative that I think will run long and grow big is "transition towns", started by a man called Rob Hopkins in Totnes, Devon. Out from among the patchouli-scented crystal-wavers and hare-worshippers will yet come ideas to help us adapt to Peak Oil.
Instead of challengeable pi-jaw about global cooling/warming/okay-let's-compromise-and-call-it-change, why don't we look to reducing our energy use for the sake of liberty? No more dirty deals with Putin, Gaddafi, the Saudis et al. And less chance of another industry-crippling 1974 energy price hike.
An initiative that I think will run long and grow big is "transition towns", started by a man called Rob Hopkins in Totnes, Devon. Out from among the patchouli-scented crystal-wavers and hare-worshippers will yet come ideas to help us adapt to Peak Oil.
The Fourth Horseman
Michael Panzner's prescient book "Financial Armageddon" listed four major threats to the economy: debt, retirement and healthcare benefits for the elderly, government bailouts, and financial derivatives. So far, three have exploded into public consciousness; but the fourth is still to come.
Some say that the derivatives market is now worth over $1 quadrillion, as compared with gobal GDP of some $55 trillion. For most people, these numbers mean nothing, so here's a graphic representation:
Supposedly, this shouldn't matter, since every bet involves two parties and so the sum total is zero. This ignores counterparty risk, i.e. the chance that the other person will fail to deliver when the time comes. It's the sort of thing that busted the UK's oldest bank, Barings.
From what little I understand, the derivatives market suffers from much the same complexity and obscurity as the packaged mortgage mess - the dealers are making loads of bets with loads of other people - so the misery could get spread around rather than just take down one or two incautious players.
If just 1% of the derivatives market fails, this equates to some 18% of global GDP. We in the UK are dealing with an economic contraction of less than 6% year-on-year, and that's causing paroxysms.
An argument for holding some emergency cash, away from the banks?
Some say that the derivatives market is now worth over $1 quadrillion, as compared with gobal GDP of some $55 trillion. For most people, these numbers mean nothing, so here's a graphic representation:Supposedly, this shouldn't matter, since every bet involves two parties and so the sum total is zero. This ignores counterparty risk, i.e. the chance that the other person will fail to deliver when the time comes. It's the sort of thing that busted the UK's oldest bank, Barings.
From what little I understand, the derivatives market suffers from much the same complexity and obscurity as the packaged mortgage mess - the dealers are making loads of bets with loads of other people - so the misery could get spread around rather than just take down one or two incautious players.
If just 1% of the derivatives market fails, this equates to some 18% of global GDP. We in the UK are dealing with an economic contraction of less than 6% year-on-year, and that's causing paroxysms.
An argument for holding some emergency cash, away from the banks?
Fight back against self-organisation
A lovely contrarian piece from Lifehacker: dump your to-do-list. Just do one thing at a time.
I can see the logic in this: when I've listed all I have to do, the heart sinks and then I rebel against the lot. When you've planned your life too systematically, the life-impulse within you is driven to smash the system. A degree of disorder, of randomness, of openness to change, is like opening a window in a stuffy room.
"Delight in Disorder" by Robert Herrick:
A sweet disorder in the dress
Kindles in clothes a wantonness:
A lawn about the shoulders thrown
Into a fine distraction--
An erring lace, which here and there
Enthrals the crimson stomacher--
A cuff neglectful, and thereby
Ribbands to flow confusedly--
A winning wave, deserving note,
In the tempestuous petticoat--
A careless shoe-string, in whose tie
I see a wild civility--
Do more bewitch me than when art
Is too precise in every part.
I can see the logic in this: when I've listed all I have to do, the heart sinks and then I rebel against the lot. When you've planned your life too systematically, the life-impulse within you is driven to smash the system. A degree of disorder, of randomness, of openness to change, is like opening a window in a stuffy room.
"Delight in Disorder" by Robert Herrick:
A sweet disorder in the dress
Kindles in clothes a wantonness:
A lawn about the shoulders thrown
Into a fine distraction--
An erring lace, which here and there
Enthrals the crimson stomacher--
A cuff neglectful, and thereby
Ribbands to flow confusedly--
A winning wave, deserving note,
In the tempestuous petticoat--
A careless shoe-string, in whose tie
I see a wild civility--
Do more bewitch me than when art
Is too precise in every part.
Unemployment a good thing? For economists?
A thought-provoking piece from Mark Thoma, in which he argues that many jobs that have gone deserved to go; it's the creation of new ones that should occupy our minds.
There is a pipe-smoker-in-a-leather-chair comfortableness about this (I'm not sure what the unemployment rate is for economists; should the 10 - 15,000 who failed to predict the credit crunch all be sacked?), but he may be right.
However, the allegedly self-righting mechanisms of the market may not operate quite so efficiently in a single nation's economy when there are other major causes of disequilibrium at work in the world, including quarrelsome international politics and sharp disparities in global wage rates.
An image: picture a man in his study, happily using a tiny screwdriver to adjust the mechanism in a carriage clock, while a block of frozen waste hurtles silently towards him from a passing jet liner.
PS:
Coincidentally: "... if you fail to heed the roar in your ears and fail to look up what will inevitably come, while it may surprise you, does not surprise anyone who has passed sixth grade math." - Denninger
There is a pipe-smoker-in-a-leather-chair comfortableness about this (I'm not sure what the unemployment rate is for economists; should the 10 - 15,000 who failed to predict the credit crunch all be sacked?), but he may be right.
However, the allegedly self-righting mechanisms of the market may not operate quite so efficiently in a single nation's economy when there are other major causes of disequilibrium at work in the world, including quarrelsome international politics and sharp disparities in global wage rates.
An image: picture a man in his study, happily using a tiny screwdriver to adjust the mechanism in a carriage clock, while a block of frozen waste hurtles silently towards him from a passing jet liner.
PS:
Coincidentally: "... if you fail to heed the roar in your ears and fail to look up what will inevitably come, while it may surprise you, does not surprise anyone who has passed sixth grade math." - Denninger
Welcoming the disaster
Two (among others) good links from Credit Writedowns:
"On April 17, 2007, famed short-seller Jim Chanos and other hedge fund managers met under tight security at the World Bank in Washington for the G-8 meeting. Chanos and Paul Singer briefed prominent policy officials about the growing financial instability. They gave irrefutable evidence that a catastrophe was building. They told officials that banks that were about to sink the global economy. They called for decisive action.
And they were ignored.
Gordon Brown was there..."
- New Deal 2.0
My comment: there's always a nice conspiratorial frisson when you think you can show They Knew All Along. Except there will have been other voices (like the 10 - 15,000 American economists who didn't foresee the credit crunch). And self-delusion. I don't think this nails the guilty parties.
Expect a major house-cleaning, a second American Revolution. We predicted the "Great Depression 2" around 2012. Well, we doubt taxpayers will passively sit one more time, like in the 1930s, in 2000, and the past few years. Next time voters will take a page from the history books about past revolutions in the American Colonies, France and Russia. A perfect storm will erupt in a massive global credit meltdown, bringing down Wall Street and the clandestine $670 trillion shadow central banking system.
- Paul Farrell
My comment: The appeal of revolution is to juvenile minds drunk on testosterone and misled by ignorant optimism. This is why the Communists have focussed on the young. I am reminded of how Rupert Brooke welcomed the onset of WWI:
Now, God be thanked Who has matched us with His hour,
And caught our youth, and wakened us from sleeping,
With hand made sure, clear eye, and sharpened power,
To turn, as swimmers into cleanness leaping,
Glad from a world grown old and cold and weary,
Leave the sick hearts that honour could not move,
And half-men, and their dirty songs and dreary,
And all the little emptiness of love!
I don't think he would have agreed with his younger self by the end of the Great War. After a disaster comes the greater disaster: Romanticism.
"On April 17, 2007, famed short-seller Jim Chanos and other hedge fund managers met under tight security at the World Bank in Washington for the G-8 meeting. Chanos and Paul Singer briefed prominent policy officials about the growing financial instability. They gave irrefutable evidence that a catastrophe was building. They told officials that banks that were about to sink the global economy. They called for decisive action.
And they were ignored.
Gordon Brown was there..."
- New Deal 2.0
My comment: there's always a nice conspiratorial frisson when you think you can show They Knew All Along. Except there will have been other voices (like the 10 - 15,000 American economists who didn't foresee the credit crunch). And self-delusion. I don't think this nails the guilty parties.
Expect a major house-cleaning, a second American Revolution. We predicted the "Great Depression 2" around 2012. Well, we doubt taxpayers will passively sit one more time, like in the 1930s, in 2000, and the past few years. Next time voters will take a page from the history books about past revolutions in the American Colonies, France and Russia. A perfect storm will erupt in a massive global credit meltdown, bringing down Wall Street and the clandestine $670 trillion shadow central banking system.
- Paul Farrell
My comment: The appeal of revolution is to juvenile minds drunk on testosterone and misled by ignorant optimism. This is why the Communists have focussed on the young. I am reminded of how Rupert Brooke welcomed the onset of WWI:
Now, God be thanked Who has matched us with His hour,
And caught our youth, and wakened us from sleeping,
With hand made sure, clear eye, and sharpened power,
To turn, as swimmers into cleanness leaping,
Glad from a world grown old and cold and weary,
Leave the sick hearts that honour could not move,
And half-men, and their dirty songs and dreary,
And all the little emptiness of love!
I don't think he would have agreed with his younger self by the end of the Great War. After a disaster comes the greater disaster: Romanticism.
Tuesday, September 01, 2009
What do our politicians control?
Plenty has been said about the EU and how it rules us, withour ever having had our consent to do so. But equally, our daily lives are governed by giant firms, often foreign-based.
On September 8, 1966, the first (and very beautiful) Severn Bridge opened. It was constructed with the inventive help of the Royal Engineers (my father included), who floated prefabricated sections of the roadway on pontoons down the river, to be hoisted into position by cranes atop the towers that would hold the suspension cables.
For example, (and I offer this merely as a tiny, representative instance) I now have to pay a Frenchman to talk to a Welshman.
On September 8, 1966, the first (and very beautiful) Severn Bridge opened. It was constructed with the inventive help of the Royal Engineers (my father included), who floated prefabricated sections of the roadway on pontoons down the river, to be hoisted into position by cranes atop the towers that would hold the suspension cables.I stood on the Welsh side with my mother and brother, listening to the Queen's speech from across the water, and watched as the Royal car came through. (Only a West Indian family near us had had the forethought to buy some flags on sticks to wave as Her Majesty passed.) The toll for cars was the then-equivalent of 35 US cents.
30 years later, a second bridge was completed, crossing further down the estuary to Cardiff and West Wales. A new holding company was formed (Severn River Cossings plc), as a partnership between John Laing plc, a French firm, GTM-Entrepose, and others.
John Laing plc is based in London and controls assets worth £698 million (December 2008 accounts); but the revenue from both bridges went to GTM-Entrepose which was subsequently taken over by Vinci Concessions SA, a subsidiary of Vinci SA, which controls assets worth almost 52 billion Euros and is based in Rueil-Malmaison, France.
The toll for cars is now £5.40 (you pay to get into Wales; any fool who wishes to leave can do so for free), and as late as last month there were protests that this highwaymanning is hampering trade and transport. But what, exactly, can the private citizen, the commercial haulier, or even the professional politican do? Doubtless any attempt by HMG to intervene would be challenged in a European court.
I think our national politicans are little better than a species of fraudster, pretending that they can do something for us but (I suspect) privately agreeing among themselves that they are powerless. In which case, all they can do is take instructions from their wealthy patrons and (perhaps partly out of impotent spite) divide and bully the insignificant people, some of whom (at permitted intervals, to be determined by their masters) vote them into office.
And now, I want to wave my little flag.
Monday, August 31, 2009
Massive inequality
I've said more than once that the housing market is segmented geographically and by price bracket, so discussion of house price movements in aggregate is not very helpful.
The same can be said of the savings rate, and here Andrew Kaplan plays with figures to show that US income is so unequally distributed that the top 1% could theoretically account for all the savings in the US. It is getting dangerous, I feel - I sense (I hear) among many ordinary people an inchoate rage against the financial elite, as well as against the remote political class that services them.
This concentration of wealth and power is exactly what sparked the American revolt of the 1770s. But a colonial secessionary war is quite different from a civil war; making peace after the latter is much harder. "O Freunde, nicht diese Töne."
The same can be said of the savings rate, and here Andrew Kaplan plays with figures to show that US income is so unequally distributed that the top 1% could theoretically account for all the savings in the US. It is getting dangerous, I feel - I sense (I hear) among many ordinary people an inchoate rage against the financial elite, as well as against the remote political class that services them.
This concentration of wealth and power is exactly what sparked the American revolt of the 1770s. But a colonial secessionary war is quite different from a civil war; making peace after the latter is much harder. "O Freunde, nicht diese Töne."
Marc Faber - total breakdown ahead
... in my view, the big crisis is ahead of us. It may come in 4 or 5 years' time, maybe only in 10 years' time, but the total breakdown of the system is ahead of us and it will devastate the global economy. (4:18 on)
You have to decide whom to believe. Including Steve Keen, it's said that only 12 professional economists worldwide foresaw the crunch, although there are 10 - 15,000 practising in the US alone. So the majority verdict is useless. To me, Faber has the ring of truth.
The good news, such as it is, is that we may have a few years to prepare.
As to perceived turning points, I looked at this last December:
Splat
A couple of days ago I said that US debt default would splat the US far worse than its trading partners; of course, I missed the point. The real danger is rejection of US debt and the US dollar by its foreign purchasers, and both Karl Denninger and Jesse see that as an outcome of the Japanese election result.
Sunday, August 30, 2009
Top travel tips from Lifehacker
Many useful suggestions on travelling and working here (htp: Credit Writedowns).
The terrorist state comes closer
No2ID has put a full-page ad in The Spectator (p.47) saying that the Home Office plans to make issuing your next passport conditional on your agreeing to be on their super-database.
Wikipedia says, "All British passports are issued in the exercise of discretion by Her Majesty's Government under the Royal Prerogative. In any event, discretion must be exercised reasonably and not on a whim, and even though there is no statute governing the issue of passports, such prerogative powers are susceptible to the normal processes of judicial review (Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374)."
I've read somewhere that there was a time when the British could travel abroad without a passport. And according to "Stiggy" on the No2ID message board, it's still legal to do so - I'd be interested to know if this is so, and how it could be done.
Wikipedia says, "All British passports are issued in the exercise of discretion by Her Majesty's Government under the Royal Prerogative. In any event, discretion must be exercised reasonably and not on a whim, and even though there is no statute governing the issue of passports, such prerogative powers are susceptible to the normal processes of judicial review (Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374)."
I've read somewhere that there was a time when the British could travel abroad without a passport. And according to "Stiggy" on the No2ID message board, it's still legal to do so - I'd be interested to know if this is so, and how it could be done.
"Get out of the market" - RBS strategist
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.
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.
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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