It is Obvious

Chris Rick has got altogether too much to say

Look out

Posted by chrisrick13 on July 23, 2013

It is obvious: I’m smart

I’m in the remotest place I’ve ever been to.  I paid a lot of money to sit in temperatures 10 degrees C less than in England.  Wall-to-wall sunshine but a bit windy and…cold.  No central heating but I can turn the air-conditioning on if I want.

Why does this town exist?  It is at the end of one of the few rivers that exist in this country.  Not what we would classify as a river.  Occasionally during the year it rains inland and scours all the decent soil off the land and dumps it near the end of the river.  So there is good farming.  Also there are a lot of shrimp just off the coast.  Or at least there were.  So 600 miles of road lead from semi-civilisation to nowhere.  The road goes another 400 miles to nowhere else.

But there is stuff in the ground just north of here.  The country is Australia and it is busy exporting itself to China.  You can capture a country by persuading its inhabitants to bring it to you.  Invading army not needed.  I’ve seen it done in business and perhaps it is not deliberate but China has poured money into Australia for its stuff.  Australia has spent heavily getting its stuff extraction as efficient as possible.  As the Chinese economy shrinks so will the money it pours into Australia.  Then what?  Australia will have a problem.

Australia is a country that has killed the inner reef, and so messed with wildlife that there are not enough animals to eat the vegetation resulting in huge bush fires.  It is the country that has destroyed the indigent population with little hope of the survival of that way of life.

In more recent times it has created a housing bubble and houses are down 20% from their peak.  More is to come.  They have lost to the Lions, are losing the Ashes series and got fewer gold medals than us.  They also stuck a speeding ticket on me for doing 120 in a 110 limit.  Would never happen in the UK.

I think I have persuaded my son that he is in no rush to buy a house.  He gets a good deal on his rent so it took little persuading.  He does, as do I, have assets and no good idea what to do with them.  With money you are at least agile and can get out of it and into an asset quickly if you need to, but what asset?  Cyprus has served a warning though.  If it is easy for you to move and use the government might decide to curtail that.

If you hold money anywhere, and by that I do mean bytes in a computer and no more, then the purchasing power of that money is reducing.  This is Stalin’s twin grindstones of inflation and taxation.

I split my reading into to two groups now.  There are the propaganda messages from governments and the media in general.  There are independent commentators who fall into two groups: those with an axe to grind and those who try for simple analysis.

The latter group is in consensus that the ‘good’ news is a mirage and we are in a worse place than last time to cope with the coming crunch and one is coming.  The problem is that nobody will recommend best courses of action.  It is the axe-grinding group that do the recommendations.

It is obvious: I’m smart but not smart enough

3 Responses to “Look out”

  1. Bill said

    Glad you are keeping well – if marooned in the wilds of Oz

    Very true. The so-called ‘independent’ commentators do seem to split into those who recycle government spin and those that present the facts (as they see them). But no answers to the burning questions from the later group – just dismay at the way things are going…

  2. OMG said

    Funny – I thought that I knew about the world and on the face of it I did. I did know that banks lent out money based on the amount deposited with them and I also knew that they lent more than they actually had in – what I didn’t know was the gearing. In a recent post on Not A Yes Man’s Economics I found out that for Barclay’s this gearing was 33x (or have I got this wrong?). That is for every £1000 I place on deposit they can lend that £1000 to 33 people and get interest payments. So assuming that for a nominal interest rate of 2% – then they pay me 2% and get 66% back. it’s even worse – even on a bad, bad day there is a spread between borrowing and lending so they’ll get get at the very least 4% back. So for my £1000 they are getting a 120%+ return while I get 2% –

    True they have costs to check out the people they lend to and some of these will default – but even so, its a LOT of difference. Maybe this is why they just HAVE to pay HUGE bonuses?. If they didn’t they would be in real trouble on profiteering and have their taxes upped?

    • Very late response.

      Banks have huge losses on loans, fines, and liabilities from mis-selling stuff. Yet they set aside a few billion in the accounts and still make a profit. I think your estimate of the return is far too low. In the US insurance companies are not allowed to make a profit of more than a few percent. It is regulated and there has to be a lot of ‘engineering’ going on to make damn sure that their profits fall below the maximum. Even so it might be worth trying it with banks?

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