Category Archives: Systemic Denial

19th November 2013 — No bubble here Part II

As if we needed it, last week we were served further evidence of the precarious position policy makers find themselves in and the poor state of journalism covering this crucial issue, which is likely to define several generations. This all took place in the events surrounding Janet Yellen’s confirmation hearing before the Senate Banking Committee and I am, of course, talking about how the Fed ever hopes to withdraw and unwind its Quantitative Easing programme.

The headlines after Yellen read her prepared remarks were what you’d expect in this “keep calm and carry on” world of ours – “Yellen sails through confirmation hearing”, “Yellen says imperative to promote strong recovery”, “Yellen says Fed has more work to do to promote recovery” etc etc.

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October 15th 2013 — Hedge your bets; 48 hours from an American default

If you are not watching this story, it’s time to switch on. The deficit ceiling debacle is back in full force. News crossed the wires, about an hour ago, that the Republican leaders in Congress have had to admit defeat in their efforts to provide an alternative plan to the bipartisan agreement, which is taking shape in the Senate.

We are now just over 48 hours from a US Default.

While the odds are still against this actually happening, they have nevertheless just shortened significantly.

The Democrats have a new found hardness about them and it looks like they are determined not to blink first in this latest fractious standoff.

 

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15th September 2013 — Spain warns the eurozone crisis is not over

Well what a difference a year makes!

This time last year and news that Spanish public debt was about to hit a new record would have sent markets reeling. Now, however, I expect them hardly to budge.

The numbers out of Spain are truly awful. Unemployment is above 26% and youth unemployment above 50%. The national debt is now €942.8bn, which equals 92.2% of GDP. This is 15% higher than September 2012 and Spain’s central bank expects the situation to deteriorate over the next 3 years, with public debt to GDP eventually topping 100%. Considering how pitiful the efforts of eurozone policy makers in predicting anything at all have been, this prediction could even be on the positive side!

 

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12th March 2013 – Dissonance Theory; why we act against our own beliefs

I’ve just read this fascinating article on the BBC website about Dissonance Theory.  It is a succinct explanation of how people are able to act in ways contrary to their beliefs.

Say for example you aggressively pursue policies to flood a financial system with liquidity, saving it, allowing it to continue gorging itself on wildly excessive bonuses, even though you know much of what this financial system represents is the worst kind of unrestrained and socially corrosive behaviour…

That would be an interesting case study.

18th February 2013 – How has this happened?

I’ve just finished writing an article about the prospect of the introduction of an oil-backed currency. It’s taken me a long time to research and write. It has also been a quite shocking experience.

I knew that the state of the Global Financial System was bad. I also knew that the debt burden was growing.

What I didn’t know was the scale of the problem.

The US debt clock is a famous site. It is inaccurate at the moment as it puts the Federal Debt at $16.5trillion so hasn’t been adjusted for the accounting sleight of hand performed at the start of the year, which gives Congress and the White House until the end of March to reach a deal.

I’ve seen this site several times before. I just haven’t look at it properly.

Excluding financial-sector debt and off-balance sheet (but real) liabilities, such as future pension commitments and Medicare-costs, the total US debt/GDP ratio is 370% and rising. American consumers and corporations, US State and Local Government organisations and the Federal Government owe $58.5trillion.

What is even more trouble is in terms of total debt/GDP ratios America’s is by no means the worst. During my research I came across this 2012 report from the McKinsey Global Institute. I have made some effort to cross-reference the figures with latest available data and this report seems to me to be the most accurate in assessing the global situation, even though it is a year old.

The headline figures have to be that Japan and Great Britain’s total debt/GDP ratios are both in excess of 500%.

This is staggering. Continue reading