And I give below a graph I've constructed from official figures, showing what's happened here in the UK:
For those inclined to blame solely New Labour for the economic disaster, this should be an eye-opener - look where we were in 1997.
And I give below a graph I've constructed from official figures, showing what's happened here in the UK:For those inclined to blame solely New Labour for the economic disaster, this should be an eye-opener - look where we were in 1997.
A further caveat: the graph looks as though it's a fairly regular cycle, but there are features of our present situation that are not cyclical, at least not in the usual few years/couple of decades frame. Some see the downwave of several longer-term cycles coming together in the not-too-distant future - here's an example from Charles Hugh Smith:
Here are some other reasons why the present recession (I believe it hasn't finished and has only been disguised by recent official financial intervention) may not be part of the "normal" business cycle:
Respected commentators like Mike Shedlock and Marc Faber (see yesterday) believe that the US, UK and other countries will not be able to square the circle. They differ only in how they think the disaster will play out.
In short, I would say that investing in gold is indeed a speculation, and to get into that market now appears to be coming a little late to the party, but if you share the wider outlook of many of the "bears" I've been following for the last 3 years, it may still be worth considering as an insurance against disaster. Perhaps we're at the point where we might even be prepared to accept a degree of loss on such a speculation, rather than lose far more if we remain in cash and see inflation destroy the value of money.
Investing in gold isn't the only precaution to consider. Look at what Faber says in the interview I posted yesterday - he's thinking in much bleaker terms and talks about buying agricultural land, moving out of the city etc. Faber isn't the only gloomy one: US Congressman Ron Paul is predicting social unrest when the government begins to fail on its commitments to citizens.
In short, the recent past is no guide to the future. Those graphs issued by investment funds and financial retail outlets, showing growth over 3 or 5 years (or whatever carefully-selected period makes their recommendation seem promising) are, in my opinion, pretty much useless. Whichever view you take, it is now important to make that a wider, longer view, because macroeconomic factors have become more significant.
And yes, the doomsters could also still be wrong, either about how things will go, or how soon, or both.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Since 1959, total net household wealth has increased 5 times in real terms. But houses have gone up in value 11 times, and mortages are 23 times bigger. Consumer credit is also 13 times greater.I don't think we can really run a successful economy on the basis of inflating the value of our huts by getting into hock with moneylenders. Sooner or later, we have to get out there and hunt something.
Since 1959, total net household wealth has increased 5 times in real terms. But houses have gone up in value 11 times, and mortages are 23 times bigger. Consumer credit is also 13 times greater.I don't think we can really run a successful economy on the basis of inflating the value of our huts by getting into hock with moneylenders. Sooner or later, we have to get out there and hunt something.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Another difference is that the crisis is now global. The US and the UK are in serious difficulty, but so are many European countries and the European banking system that has tried to hold them up; and the increasingly productive East has become dependent on the profligate West.
Historically, says Schama, the pre-Revolutionary French government would partially default on its borrowing (e.g. the 1720s, and in 1770), as well as raise more taxes and find more lenders. Now, we seem to be trying hard to avoid default (perhaps because once it started in one place, there'd be so many following suit); taxation of various kinds is already taking well over 40% of our income, in return for a creaking system of benefits and services; and where are the lenders who will take on so much global debt? And if they do, at what price?
Yet international finance is so murky, anything could happen. Towards the end of Andrew Rawnsley's book on New Labour, "The End of the Party", he says (pp. 626-7) that at last year's G20 summit "it was reliably estimated that more than $10 trillion of private wealth was concealed in paradis fiscaux [tax havens]". I don't think it's all invested in BP shares. Maybe it's waiting for governments to come to heel; to co-operate with each other in some glum global deflation that will further enrich the "oofy", as P.G. Wodehouse would term them.
In a splendidly furious recent rant, American writer Joe Bageant said:
"If we decide to believe the money economy still exists, and that debt is indeed wealth, then we damned sure know where to go looking for the wealth. Globally, forty percent of it is in the paws of the wealthiest one percent. Nearly all of that one percent are connected to the largest and richest corporations. Just before the economy blew out, these elites held slightly less than $80 trillion. After the blowout/bailout, their combined investment wealth was estimated at a little over $83 trillion. To give some idea, this is four years of the gross output of all the human beings on earth. It is only logical that these elites say the only way to revive the economy, which to them consists entirely of the money economy, is to continue to borrow money from them."
Or as humorist J. B. Morton (aka the Daily Express' "Beachcomber") put it in his “A Dictionary For Today”, long ago:
“WORLD-PEACE: A state of affairs which would make it possible for the international moneylenders to get even more power than they possess at present.”
It's there to be taken from us: for except among the very poorest, there is so much wealth we still have, such a high standard of living. In the early 80s, businessmen strode into our insurance office with mobile phones the size of bricks tucked proudly under their arms; now, the primary-age children of the underclass have iPhones that my fingers are too fat to operate.
Underneath the polemic of many of the doomsters who now write on the Internet is, I think, a hope that in some way disaster or revolution will save us, because they cannot see us deliberately planning and achieving a better state of affairs. I think this is a dangerous line for the imagination to take: we might find we'd burned what we thought was the Phoenix, but were unable to resurrect it.
But change of some kind is certainly on the way, and in the course of it we must remember to hold onto the things that really matter, especially civil liberties and the democratic form of government. Perhaps the biggest mistake is for us to think that money is the main issue.
Another difference is that the crisis is now global. The US and the UK are in serious difficulty, but so are many European countries and the European banking system that has tried to hold them up; and the increasingly productive East has become dependent on the profligate West.
Historically, says Schama, the pre-Revolutionary French government would partially default on its borrowing (e.g. the 1720s, and in 1770), as well as raise more taxes and find more lenders. Now, we seem to be trying hard to avoid default (perhaps because once it started in one place, there'd be so many following suit); taxation of various kinds is already taking well over 40% of our income, in return for a creaking system of benefits and services; and where are the lenders who will take on so much global debt? And if they do, at what price?
Yet international finance is so murky, anything could happen. Towards the end of Andrew Rawnsley's book on New Labour, "The End of the Party", he says (pp. 626-7) that at last year's G20 summit "it was reliably estimated that more than $10 trillion of private wealth was concealed in paradis fiscaux [tax havens]". I don't think it's all invested in BP shares. Maybe it's waiting for governments to come to heel; to co-operate with each other in some glum global deflation that will further enrich the "oofy", as P.G. Wodehouse would term them.
In a splendidly furious recent rant, American writer Joe Bageant said:
"If we decide to believe the money economy still exists, and that debt is indeed wealth, then we damned sure know where to go looking for the wealth. Globally, forty percent of it is in the paws of the wealthiest one percent. Nearly all of that one percent are connected to the largest and richest corporations. Just before the economy blew out, these elites held slightly less than $80 trillion. After the blowout/bailout, their combined investment wealth was estimated at a little over $83 trillion. To give some idea, this is four years of the gross output of all the human beings on earth. It is only logical that these elites say the only way to revive the economy, which to them consists entirely of the money economy, is to continue to borrow money from them."
Or as humorist J. B. Morton (aka the Daily Express' "Beachcomber") put it in his “A Dictionary For Today”, long ago:
“WORLD-PEACE: A state of affairs which would make it possible for the international moneylenders to get even more power than they possess at present.”
It's there to be taken from us: for except among the very poorest, there is so much wealth we still have, such a high standard of living. In the early 80s, businessmen strode into our insurance office with mobile phones the size of bricks tucked proudly under their arms; now, the primary-age children of the underclass have iPhones that my fingers are too fat to operate.
Underneath the polemic of many of the doomsters who now write on the Internet is, I think, a hope that in some way disaster or revolution will save us, because they cannot see us deliberately planning and achieving a better state of affairs. I think this is a dangerous line for the imagination to take: we might find we'd burned what we thought was the Phoenix, but were unable to resurrect it.
But change of some kind is certainly on the way, and in the course of it we must remember to hold onto the things that really matter, especially civil liberties and the democratic form of government. Perhaps the biggest mistake is for us to think that money is the main issue.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
