Get into dealing with banks and other financial institutions today, and you will quickly realise just how big a distraction the process of effecting Brexit has been. The prevailing economic orthodoxy of Planet Earth is not only on a collision course with sovereign States; globalist business, the banks and the media are engaged in a concerted campaign of deception about Crash2
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During the first year at University, I took economics as a subsidiary subject to my joint course in History and Politics. I also studied it in the sixth form at school. Since my retirement twenty years ago, I seem to have thought about very little else.
The overriding conclusion (from my involvement with the subject since the of sixteen) has been that economics is a pseudo-science at best, and a form of quackery in general. Indeed, one of my favourite smile-inducing thoughts is the degree to which the fluffy Left is in thrall to anything “economic experts” have to say – even though 90% of the time they’re saying stuff that contradicts Socialist orthodoxy, and many of them are spectacularly wrong 100% of the time.
At some point shortly after the false dawn of the 1980s, the economic “system” the world employs moved largely away from social capitalism towards a belief in so-called monetarist ideas comprising various strands – Friedmanism, mercantile globalism, laissez faire capitalism, neoliberal government intervention and bourse funding of capitalist growth.
There is a great deal of muddle in the way people see all this – not least in many being unable to separate the tenets from the consequences of monetarism. It is a pillar of the theory, for example, that wealth will “trickle down” from those at the top, but an outcome of the application of monetarist ideas that the “financialisation” of capitalism (via an imbalance towards the provision of financial services) leads to all kinds of problems…..problems that tend, on the whole, to be kicked down the road by one finance minister after another.
Broadly, however, the neoliberals/monetarists hold that top end taxes should be cut, exporting via a global presence is the key to success, government spending on social provision should be slashed, the only corporate responsibility is to the shareholders, growth can be financed by the issuance of debt, all markets should be deregulated and overseen with a light touch, cutting costs is a key element of product distribution and formulation, Big is Good, mergers can be fun, and there is nothing wrong if, across the planet, some nations are running surpluses while others run deficits: in the end, they balance up to a zero sum.
This last tenet of monetarism is something that has crept to prominence in recent years, as the founders of this way of thinking (who by and large expected deficit economics to become a thing of the past) have been forced to accept that financialised bourse capitalism is leading to more and more sovereign debt…..and higher and higher costs of servicing it. Economists (as any CEO will affirm) are very good at explaining why something went wrong, just not very good at seeing it coming).
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Veteran Sloggers already know my views on the monetarist-cum-neoliberal approach to economics, fiscal structures and financing growth. But for the record, I’ll state them in one place here.
- Like all systemic ideologies, there is no place in it for the human and social sciences, which are ignored in all the thinking
- This had led its proponents to hopelessly underestimate the human capacity for greed, trickery, sharp practice and spin
- Thus – far from trickling down – wealth gushes up….and stays there
- Poorer State welfare provision and education reduces the spending power and creativity of the average citizen
- Far from reducing the cost of government, the expenditure goes up – to bale out banks, provide unemployment benefits, offer more healthcare as medical technology cures more things, and manage sovereign debt
- The democratic nature of the State becomes increasingly diluted, because – by being in debt to banks and bond holders, and requiring funds to operate Parties in a more complex society – the power balance shifts to global brand owners and debt providers, but away from the People
- This is exacerbated by the power such organisations have to get their taxes reduced, or be given massive tax breaks in return for inward investment in the sovereign
- The flow of talent from business and finance to State bureaucracy and back again further strengthens the power of civil servants: what was once a cop v robber situation becomes one of sharing bodily fluids and ignoring moral hazards
- This same revolving doors traffic applies in particular to the media sector, allowing moguls in that space to “swing their support” behind one Party (or candidate) in return for “gratitude” if and when the recipient is in government
- The taking of vast energy profits at low taxes for several decades by greedy oilco managers created a dearth of new ‘finds’, and made the geopolitics of energy ever more pressing….leading to the geopolitics and neoconservative foreign policy that further cripple various States today in terms of military purchases and technological investment
- The huge shift of power from labour to capital in deregulated employment markets produced a catastrophic fall in real spending power among the mass of the population, and this in turn has made it more and more difficult over time to arrest recessions without eye-watering interventions via QE and Zirp….yet more welfare overheads, and more debt liabilities piling up over time
- The principle of ‘financialisation’ encourages banking firms to expand way beyond capital provision for business and into trading among themselves via sectors such as derivatives – a good idea initially aimed at farmers, but perverted once again by the rise and rise of accountants and quants with the moral compass of the co-conspirators in The Producers
- A technological focus on robotisation in business and electronic money in the financial sector has caused sovereigns to spend yet more on welfare, and enabled their now largely independent central banks to “pay for” the debt management by the electronic creation of fiat money – ie, not backed by gold
- SOL trading on the bourses (alongside algorithmically automated models of buy and sell) have rendered any control over fraud in doing that impossible, have kept the smaller investor out of the stock markets, and make for a UXB the next time a curved ball hits the system
- Bourse capital creates the amoral, disloyal remote shareholder who almost always prefers a 25% short-term return on the gross to investment for the good of the company’s future survival.
The net result of defending a dysfunctional system that lacks the human realities has been the development of so-called MMT – or Modern Monetary Theory. By and large, it scores highest of all on the Economics Toshometer.
It is a myth that “sovereign debt is not problematic because the central bank can’t go bust”. Ask the Greeks who went through 2011-2018, the Italians getting heat from the Brussels machine, and the Venezuelans brooking US interference right now. As long as bondholders and banking firms have a grip on politicians, all debt is a potential disaster.
It is a myth that “the US and UK employment and inflation figures prove that monetarism works”. The sovereign statistics on both dimensions are so obviously designed to disguise the real picture, only a moron would take them at face value. A “job” in England is anything that pays a wage of any kind; in the US, a person no longer getting benefits (they aren’t infinite) is treated as a person who “has found a job”. In both countries, the basket of goods used to “measure” consumer spending power have been manipulated by every finance Minister since the early 1990s.
It is a myth that mergers and acquisitions produce economies of scale. As long ago as 2006, The Economist concluded that 58% of them destroyed shareholder value in the end.
It is a myth that rising stock markets reflect underlying economic health. Cheap money has enabled multinationals to take on debt and transform it into unwarranted dividends: since 2011, over 70% of all stock trades on the NYSE have been corporate executives buying their own stock. The mismatch between real profit performance and a Dow at its currently ridiculous level is one of the biggest reasons to void any exposure to mainstream stocks at the moment.
It is a myth that the US Fed can “normalise” borrowing and investment rates from here on. So much sovereign debt in the developing world is Dollar denominated, the more the Buck strengthens and rates rise, the more we will see a catastrophic trail of major sovereign defaults….which can only lead in the medium term to multivariate market panics. Algorithmic formulae not programmed to take that on board will make things worse: those involved in that field of endeavour would be well advised to ask themselves now, ‘How easy is it going to be to override the auto-pilot?’
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Why am I writing abut this now?
Over the Christmas period, I finally decided to make radical changes to my investment portfolio. Don’t get carried away: thanks to Ben Bernanke, it’s been not so much a portfolio as a porous jar since 2012.
Suffice to say that I am now handling all investments (pension or otherwise) personally…..and I have but one mission: to find as many ‘spread’ safe havens as I possibly can.
What this process has revealed is two very worrying and blindingly obvious features of the financial sector in 2019:
- The conflicts of interest, joined up dominoes and moral hazards involved are far, far worse than they were in 2007
- Retail-exposed financial institutions will do anything – invent any lie, peddle any bollocks and disguise any affiliation – in an overt attempt to stop you getting at your own money.
This reality alone should be enough to ring alarm bells. In the coming days, I will be going into more detail on the obfuscation, subterfuge and general mendacity I’ve experienced.
In the meantime, I offer this advice: lift your eyes from the trees of Brexit, and take a closer look at the termites burrowing into your furniture.
Caveat emptor. Stay tuned.
I just came across Gail Tverberg saying (better) what I just said.
https://ourfiniteworld.com/2019/01/09/2019-world-economy-is-reaching-growth-limits-expect-low-oil-prices-financial-turbulence/
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Thanks John
The big picture is that growth has already stalled out for permanent reasons, and may have reversed globally, despite all of the tricks of illusion being played upon us. The contraction in complex systems usually looks like “Seneca’s Cliff”, the Wile-E-Coyote-Moment. Some coyote’s notice a little before others. The “smart money” already knows, and gets to choose the moment sometimes. We are “Muppets”. Our resources get sent upstairs, and the IOUs in our cookie jars go “POOF” all at once some day. You have already been working to reduce the leaks in your stores of value, and find that the smart-money has raised further walls and imposed further mandatory losses upon asset transfers. It will worsen until the “poof-moment”, which looks like it is coming any day, and has looked that way for years, already.
I have no advice other than the habit of living cheaply and simply, growing vegetables and riding a bike. Having friends who also do so, and who do useful work, is also good.
Somewhat-diversified-John
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The Big Economic Switcheroo
Robert Reich’s explanantion of the Big Economic Switcheroo
http://robertreich.org/
“The rich used to pay higher taxes to the government. Now, the government pays the rich interest on a swelling debt, caused largely by lower taxes on the rich. Which means a growing portion of everyone else’s taxes are now paying the rich interest on those loans, instead of paying for government services everyone needs.”
See video:
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Not for nothing is there a war on cash. The possession of cash enables a degree of independence of thought and action. Dealing with cash also costs banks money. Banks, like bars are vanishing rapidly. Taking out highstreet banks reduces personnel, overheads and buildings. It also “encourages” people to go”electronic”. Closing bars stops the citizenry communicating with one another. Control the cash, control the people! Start rioting and your neighbourhood cash machine stops (if it has not already vanished) It is not beyond the wit of man or control freaks to zap your bank cards as well. The increasingly military nature of our police is another very worrying trend.
They have moved a long way from the formation of the special patrol group, in London, in the 60’s.
The changing nature of politics and surveillance is rapidly destroying out few remaining freedoms.
Is the coming crash inevitable, accidental, or engineered?
One does not need to be a conspiracy theorist to see hard times ahead, simply a realist.
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AT the risk of labouring the money system point here is Cullen Roches MMT Critique and a Blog I just put together covering some of the bases.
https://www.pragcap.com/modern-monetary-theory-mmt-critique/
https://longhairedmusings.wordpress.com/2019/01/27/more-mmt-memory-hole-post-in-search-of-st-bill-of-mitchell-and-st-richard-of-murphy-steve-keens-guide-for-the-perplexed-mmt-circuittheory-doublepenetrationgatekeeping-neilwilson-neilwilson/
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“The dot-com Bubble, the Housing Bubble and now the Everything Bubble”
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A nice 6 minute explanation of why so few people trust the media (just 27% of Britons have faith in what they see and read). Particularly good on the betrayal of the native working class by the Left.
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MMT AND MONEY CREATION READING LISTS. ( MY SUGGESTIONS) #CONQUESTOFDOUGH
https://longhairedmusings.wordpress.com/2018/05/08/mmt-and-money-creation-reading-lists-my-suggestions-conquestofdough/
At the same time as I was banned from Richard Murphys tax Blog he had asked people to provide suggestions for a reading list this was mine which was never cleared past.
The Censor!
This article was one of the early things I read on the subject along with Tomlinson’s book which is at the top of the attached list,
http://www.economania.co.uk/various-authors/money-matters-bill-kruse.htm
Bill often posts at Richards Blog
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I think Ian R Crane is right in saying that everybody has to get off their fat arses and say enough is enough. I agree also, that it should be a mass peaceful process, but envisage that scene in Gandhi (the film) where lots of peaceful demonstrators regarding the `salt tax` where battered by the police but the next wave of peaceful demonstrators took their place. Eventually peaceful popular unrest has to win, otherwise we our fucked, and our children and grandchildren. Trickle down economics is for dickheads.
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An economy relies on money to exploit its resources to create wealth, and equitable distribution thru; employment
Alas, what we have in the UK is mainly Finance Capitalism, which is money chasing money ,producing nothing of worth or socially useful.
Finance Capitalism does not contribute to GDP, but is a drag on it. Banks have but one product and that is debt.
The mainstream Economists come up with the Dynamic Stochastic models (DSGE) which omit Money and Banking. The models are worthless.
They come up with models to control inflation by unemployment (Phillips Curve and NAIRU) which again are worthless.
Finance Capitalism in the UK uses approx. 96% of the credit issued by banks to play in their non-productive Circus of Finance, Insurance and Real Estate (FIRE)
Industrial Capitalism is the Real Economy, producing socially useful manufacture and giving employment.
Only 4% of banking credit is issued to the Industrial sector in the UK.
Germany is the most efficient ECONOMY in Europe. It has long solved the problem on Industrial credit by the setting up of local non-profit banks ( approx 1500) to invest in SME’s.
German SME’s provide the main employment source in their economies.
The UK economy is dysfunctional and will not recover until an Industrial investment policy is implemented, either by direct Govt intervention or by small scale Industrial investment non profit banking.
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An outstanding thread, thank you. JW
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I think you are right, economics is a fluffy subject. I don’t really know what it is anyway. My gut feel is that it is about human behaviour and organisation but I may be wrong. I think supply and demand is a major part of it but they are open to manipulation by corporations and politicians so I guess it comes down to politics and power. Perhaps I should apply to study it at University as that way I could get a student loan to replace the state pension this Govt are refusing to pay me.
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Good plan. JW
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The result of forty years of neoliberalism is that a mere eight men own as much as half the world’s population. https://d1tn3vj7xz9fdh.cloudfront.net/s3fs-public/file_attachments/bp-economy-for-99-percent-160117-en.pdf
The system isn’t failing: this is precisely what it is intended to do.
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a great subject JW. MMT is well explained by the words ‘asset stripping’. The toshometer will break trying to measure it.. total world debt is said to be around a quarter of a quadrillion $s. that is 250 trillion or a quarter of a million billion.. all earning interest for the non producers.. trickle down is them pissing down your neck..
Tipsters lose there jobs when they are always wrong but economists don’t as long as they toe the looters line.. heck they are not even quasi anything.. astrology is more of a science than MMT which is just looters BS..
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Worth a watch, its really since 2001 and 9/11 that it has all gone pete tong for the whole shooting match.
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Correct address for comprehensive list of USA sanctions ‘war’ against Venezuela
mppre.gob.ve/wp-content/uploads/2018/06/Coercives_Measures.pdf
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Not only would malone disagree, michael hudson would too and he is an expert on balance of payments and monetary systems (at least the pentagon hired him to explain the then new petrodollar system to them, and he later advised canadian gov re healthcare). Steve Keen was opposed to MMT despite being hudsons friend, but finally conceded he had misunderstand how it worked, its important to distinguish public from private and foreign sectors. I only have a cursory understanding after reading bill mitchell’s blog. Some very highly educated nonacademic fans out there, eg former bond trader ed harrison. Plus its not actually all theoretical.
Things already work this way in practice to some degree, and have done for decades, the FED and treasury get together on a daily basis to pay all the bills. Nothing whatsoever to do with taxes, those are immediately destroyed after collection according to those actually doing this job. Appearance versus reality, us still keeps up the appearance of gold standard, with a fractional reserve at 10%, but uk and nobody else has one now, and alot of the daily banking procedures are utterly pointless in this fiat system according to Prof Richard Werner. But the petrodollar was the first fiat currency acting as global reserve in history, the other fiats are derivatives, so in many ways we are in unchartered waters. Still standing, but still on life support after ten years. No solution to a debt crises but to remove or reduce the debt down to affordable levels.
I personally dont expect MMT to become the new global system, but I do think it can be made to work successfully at smaller scale, just as public banking systems worked successfully at national scale (and regional scale, ref ellen brown). Until they failed. Maybe its human nature, or just nature, things will change but a decentralized models can be modified more quickly and easily. Historically every type of monetary system (commodity or fiat), collapsed in under 40 years going back millenia, according to hudson, and always for the same reason, too much debt issued. Hence the debt jubilee every 50 years by law or earlier if necessary. Rules get bent and broken as real life intervenes.
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was this the Saturday Rssay one day early JW? – – Felt like it.
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I believe that there will be an event to overshadow any crash, and therefore can take the blame, as opposed to any of the banking community who will wish to remain blameless.
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Murphy seems to have had something of a conversion on the road to MMT Damascus here.
https://www.taxresearch.org.uk/Blog/2019/01/22/i-live-my-life-in-practice-and-not-in-theory/
RIchard was quite cross with me when I accused him of straw manning the PM position Here
Why Positive Money is wrong
Posted on May 6 2018
http://www.taxresearch.org.uk/Blog/2018/05/06/why-positive-money-is-wrong/comment-page-1/#comment-805559
“Your article here Richard is a Polemic it does not honestly state the Positive Money Position but states your strawman interpretation of it. You state your political objections which are perfectly valid but with which others are quite likely to disagree. Politics is like that, Political Economy is like that and the Dismal Science, try as it might to elevate its members to a sort of priesthood, remains the dismal science Thinkers like Tim Morgan are changing that slowly but exchanging one lot of Neo-Liberal commissars for another lot of Post Modern Marxist Commissars, No thanks.
Perhaps this a carryover from your 2015 discussion with Ben Dyson, Ben as you probably know is now at the Bank of England in their Blockchain / CryptoCurrency team
http://positivemoney.org/2015/06/response-richard-murphys-concerns/
On The MMT side of things again there is much re-treaded rubber to examine.”
https://longhairedmusings.wordpress.com/2018/05/07/why-richard-murphy-disagrees-with-positive-money-on-monetary-policy/
And the Arguments all continue adnauseum.
“Most intellectual progress and comprehension of complex
phenomena cease once the mind deludes itself into
believing it has uncovered a Holy Grail or an eternal truth.
Any meaningful analysis of reality must consider all such
so-called truths as merely tentative expedients.”
-Wilson Bryan Key, Subliminal Seduction
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@kweladave
January 26, 2019 at 2:48 am
As far is it goes you are right but John does add this provision
“As long as bondholders and banking firms have a grip on politicians, all debt is a potential disaster. ”
RIchard Murphy has been deprogrammed from MMT Cultism he did this recent blog.
https://www.taxresearch.org.uk/Blog/2019/01/22/i-live-my-life-in-practice-and-not-in-theory/
Richard and I had our own little spat at the start of his MMT radicalisation.
https://longhairedmusings.wordpress.com/2018/05/07/why-richard-murphy-disagrees-with-positive-money-on-monetary-policy/
Resources and particularly Net cost of Energy ECOE or Energy Cost of Energy are the real driver of prosperity and also the terms of trade between nations.
https://longhairedmusings.wordpress.com/2019/01/20/brexit-and-the-wait-for-godot-discussion-on-dr-tim-morgans-blog-brexit-from-a-surplus-energy-and-peak-oil-perspective-prosperity-analysis-you-never-had-it-so-good/
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Hi John,
Now you just know your resident MMT usurper isn’t going to leave your comments on it unchallenged. All MMT actually does is describe the sectoral balances between the state, households and exports. It also describes how governments spend using accounting identities which are beyond dispute.
Greece and Italy (along with all Euro users) break the first rule of MMT under no circumstances do you surrender your own currency or borrow in a foreign currency, they do both and are no longer sovereign countries. Venezuela decided to play a dollar game (oil) in Bolívares a fools errand even with a competent and non corrupt government which they don’t have.
MMT is the future and, who knows, I may be monumentally wrong about it but I have a strong feeling I’m not. A very strong feeling.
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30 years ago, on a science course we had a dip into Economics.
A stand in, economics lecturer asked if anyone had read Keynes. No one had, but just in case we were too he diverted our attention to the word ‘bloviate’. His opinion, there was another master of such a word, Freud.
30yrs ago he stipulated that economics started with a answer and worked backwards and because it excluded anything to do with with Ecology of this World, it wasn’t humans best friend.
He considered Economists, Capatilism and its sidekick Marketing at the Holy Trinity of the Devils Hand or an enabler of mans greed and self anahilation.
It was an interesting 1 hours lecture by a stand in.
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Is it not true that under EU/EZ rules it is prohibited for national central banks to create money which can only be done through loaning from Commercial Banks? Under Article 4 of the Lisbon Treaty I’m probably not allowed to voice that criticism.
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Spot on John,
We will see whether the yellow vests bank run materialises. One point I would make is that assuming the higher-ups want to avoid a crash is not a natural assumption one should make?
https://d.tube/#!/v/tonefreqhz/ah5vxtf1
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Reblogged this on RogersLongHairBlog and commented:
Spot on John,
We will see whether the yellow vests bank run materialises. One point I would make is that assuming the higher-ups want to avoid a crash is not a natural assumption one should make?
https://d.tube/#!/v/tonefreqhz/ah5vxtf1
https://emb.d.tube/#!/tonefreqhz/ah5vxtf1
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I have invested in canned and dry foods (beans, rice, soups, fish) also have 2 large freezers full of food.
Plus, I survived Birkenhead North in my youth, so I am well prepared for the future. That’s my portfolio
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“It is a myth that “sovereign debt is not problematic because the central bank can’t go bust”. Ask the Greeks who went through 2011-2018, the Italians getting heat from the Brussels machine…”
I think you have magnificently missed the point!
Both Greece & Italy are members of the eurozone ie. their national currency is the Euro, the supply of which is controlled by the Brussel’s ECB. They are NOT fiat economies, their central banks do not control the supply of their national currencies unlike, say, the UK, USA, Australia, Japan, China, Canada etc etc. The eurozone countries might as well be using the US$.
“…and the Venezuelans brooking US interference right now.”
How does this undermine MMT? Just a quick look at the severe monetary & physical sanctions against Venezuala waged by the US over the last 3-4 years http://mppre.gob.ve/wpcontent/uploads/2018/06/Coercives_Measures.pdf.
Generally agree with & enjoy your pieces but you are probably wrong about MMT. Suggest your Toshmeter is re-calibrated.
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Most impressive analysis.Thank you
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As a simple engineer I have never succeeded in understanding the media pre-occupation with debt, when there must be an exactly equal amount of credit – down to the penny.
Why do we only ever read and hear about the debt crisis when an equally valid term is the “credit crisis”? Both views of the crisis are equally severe.
If there IS a serious problem with debt, let’s add it all up to get a figure of total global debt. An amount which is owed by 7 billion people, companies, cities & states through their loans.
Of course exactly the same amount of credit exists too, but this time owed to… maybe just 7 thousand people. Now surely it wouldn’t take the media more than a year to figure out who those people are, and to invite them to participate in a 90% jubilee.
Wouldn’t that be preferable to Crash 2 ?
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Very true – there is a Tsunami on its way but is currently invisible to Governments and mainstream economists.
Current World debt is horrific and I think we’ve run out of leaves on the Magic money tree
Further to this there could well be a shortage of oil supplies – due to chronic under investment – hitting us in the next few years. NB fans of US fracking beware – many firms have been issuing large amounts of debt to stay afloat.
Still on the subject of oil about 5 years ago I wrote to be MP about the dangers of deteriorating EROEI – he forwarded it on to the Treasury who came back and said they didn’t know what this acronym stood for – not a great start. I did supply an explanation but did not receive a reply.
Brexit has just been a sideshow which is (thankfully?) diverting people away from the real problems.
Donald
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”The net result of defending a dysfunctional system that lacks the human realities has been the development of so-called MMT – or Modern Monetary Theory. By and large, it scores highest of all on the Economics Toshometer.”
Golemxiv AKA David Malone I think would beg to differ.
Personally, I’ve given up trying to understand economics.
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“I was never for profit” and I never claimed to be a prophet” Jesus, a carpenter
“Follow the money” Confucius
“Yield is a bitch” unknown
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