Blog Feb 6th 2018:
So euphoria was in the air a fortnight ago at Davos; and today there is a hint of panic as some form of reality, naughtily reasserts itself. Is it an “out of Nowhere flash crash, affecting the whole planet: or simply a reminder that the mountain may be about to fall over onto the road.
Whether the present general adjustment in stock market levels and values proves enduring, or a simple case of generalized “Flash Crash-itis” it is a valuable reminder to those who operate in credit structured businesses, that debt is real and failure to kolekt your share, when its due, is the single biggest reason there is for business failure.
And right now a noticeable feature of the range of komment [sic] on the present, planet wide market move into Bear territory, in equity markets, is the sudden concern over the extent to which [almost] everything in the global economy today, is financed with DEBT capital [if I may use such a daring, yet strangely common, oxymoron].
One of the ironic truths of today’s world is this strangest of anomalies, related to the [apparently] new ‘Economics of Abundance’ [circa 2007 -2018.]. Ironically, because in an era defined as “Post –Truth”, we have the combination of a decade long exercise in ‘radical economic transformation’ called Quantitative Easing [QE]; coupled to almost manic: “Casino economy” financialised economics” and somehow along the way ordinary people vanished.
Effectively ‘business’ has for the past decade been almost exclusively concentrated on Yield. This means that global debt is today, almost infinitely greater now, than it was in 2007, when the world of money crashed as a result of debt: un-ever–payable. It is most odd, but, as I always said, over the four decades during which I often dealt with matters Economic in classrooms. … The difference between ‘us’ [economists] and the other “Subjects”, I would say, glaring at everyone, is that every year we ask the same questions in the exams… [pause while that sinks in]. We simply keep changing the answers … Everyone would laugh, uncomfortably perhaps …Surely not!!?
And then. Wow! Have we done it this time. Even the redoubtable Mrs Yellen has whined for a decade about how come we have a quadzillion of fake money out there: and there is NO INFlATION!!! There is simply about fifty years worth of stuff out there, with not enough ordinary people to spend on it. The ‘people’ [consumers for the purists] never got the free money… so they all went to work for free on Facebook and reddit and, and, and….
In other words: In the ‘Auld days’ [certainly when I studied finance and monetary theory in the late ‘60’s] a financial institution was constrained to lend no more than ten times what it had in secured assets [i.e: 10:1] on penalty of bad things happening [which they did… remember]. This is known [infamously to many on the varied fringes] as the Fractional Reserve Multiplier, invented centuries ago.
When Lehman Bros capitulated in 2007 and triggered off the [so-called] ‘Great Recession’ their debt to asset ratio stood at roughly 33 to 1. Today a decade of central bank fudged finance has pumped some 21 [twenty one] Trillion, artificial, dollars [US] into the global system. That is more than the entire US economy pulls annually and more than 21 times what that country spends annually on Defence matters.
And that is only the official “Secured” ‘money’.The number of US dollar figures for unsecured debt obligations are being, apparently, calculated in Quadzillions. I have no equipment that will enable me to do calculation on such numbers… none is all that commercially available either.
This [mass] represents a hard wired, octane fuelled, debt financialised hysteria, that among other weird effects produced a recent, almost fantasy based journey, into something called BITCOIN two months ago, that had Fred and his dog borrowing heaps of money to spend on one of the dodgiest assets in the history of bubbles… Now, of course, cometh the margin calls, and the ‘thing’ KitzBoin? ‘whatever, is/was/ has crashed deluxe, in what could quite possibly be one of economic history’s most successful Ponzi’s, to the extent that it is perhaps no longer safe.
Apparently ‘They’, coiners, aka miners, claim to be are using an allegedly impregnable, so-called ‘Blockchain’ arrangement, of destributed ledgers; that cannot be hacked by Government agency. However they have been seemingly, continuously been robbed by hackers… Like Govenmnets can’t hack? And anyway so much for Blockchain security effectiveness. if ‘they’ are not all lying about the thefts.
The effect of all this, and other generalised debt build up over the decade, has been, what some money management commentators, on business channels such as Bloomberg, and elsewhere, suggest, is a seriously scary thought about day to day financial reality.
Apparently total [unsecured] debt obligations, in the form of Derivatives, Hedges, Options, Warrants and numerous other variations on the computer driven ‘betting” game are what is being measured amongst the mass of quadzillion numbers. The financial markets have seemingly, somehow, morphed into a game that is really not much more, than considered gambling on ‘which fly would take off from the table first’ odds.
This category of “investments” [another oxymoron perhaps?] has morphed the idea of “secured” loans into the land of fable… And the business of money management has taken on the characteristics of an informal backwoods casino.
The ultimate expression of how we have devalued money over the past decade is reflected in this following piece [written in 2016] that I mused on, about an unprecedented financial experience in the 5000-year history of capital, lending and rates of interest charged for the privilege of borrowing.
Switzerland’s: 50 year
Negative yielding Bond
The differential race:
Taking two indicators
Equities rise… and rise: so
Bond returns go on sale
Down, down: down
They broke down
Below minus point nought
One hundred basis
and you said
that’s as low
as it can go it’s not going
further and point by
point it has
has broken minus
nought three hundred
for the Nth
and the trend is to minus
And MONEY… Plausibly fake but nonetheless
Been wonderfully nourished
And grown in profusion
Never have so many been
in the flood of
above and down across the bowers
of reluctant gains, miserly
and the ever present ebb
as the overwhelming cosmic gaze of
spite the best attempts
of those who bathed
therein to restrain
So since many of you may be out of practice in kolekting debt, money having become such a fantastical konstrukt, it is perhaps time you should come back to earth with the pragmatic: “7Ways to get your money: without resorting to violence or the law” on sale at Amazon.com: an organization that deals in real things, at good prices you can still afford while you still have time before the fall… to Universal Income.