It is Obvious

Chris Rick has got altogether too much to say

Brave New World…revisited

Posted by chrisrick13 on October 16, 2017

It is obvious: writing is simple

A comment on the earlier blog shows the paucity of my writing.

We are sitting on an exponential curve for many things. Economic activity is one of them. Without that regular doubling everything collapses. Particularly important are pensions that need young people producing more to support the pensioners. A simple way out of this is to kill them off – old people who is. The coming failure of antibiotics might well see to that. Population growth which is flattening in many parts of the world links to this.

economic growth is also essential with governments running deficits. Continued economic growth pays for the extra borrowing. We will never stop spending and start saving to pay off debt. Individuals might but governments never will.

The point of my earlier blog is that we are on a ‘J’ curve and have trundled along the bottom for many, many years. Now we are turning the corner just before the vertical line.

Except we are not. It is just not possible. The next doubling is always 35 years away at 2%. Go back to 1950 and we probably did double to 1985. The next double from there is to 2020. It is very clear that it is not happening and will not happen. The obvious reductio ad absurdum is that we either need a London twice the size of the 1985 London or a second London. Same for all the other cities and towns in the UK. Has not happened, will not happen, cannot happen.

Thus the end of economics, as we have known it for all our lives is set in the system. Central banks have ‘kicked the can’, most obviously since 2007 but in fact for a long time before that. Simulating continued growth or creating it by borrowing against the future.

How long have we got? Things always trundle for a lot longer than you think they possibly can. To my mind they have already done that! I’ve been looking for triggers that will start things off. It doesn’t have to be a trigger though. Just the natural order of events will do it. The obvious one for the UK is a run on the pound. The only way to defend this is to put interest rates up. Otherwise we cannot buy things from other countries and as debt rolls over at higher and higher rates demanded by lenders we can no longer pay our debts and default. That then means nobody will lend us money. End of foreign holidays! End of orange juice. End of bananas. End of a lot of stuff. The alternative is to put up interest rates…and put a million people out on to the streets where they will riot.

I cannot understand why there has not been a run on the pound yet. Maybe Brexit will trigger it? It will be devastating for many people. It will be short though and we will quickly come out the other side. Look at Iceland.

Invest in yourself. Take the simple steps you can to protect yourself. I think cashing pensions and spending the money is a good idea. Even put it abroad to places that you think might fare better than the UK. Norway looks pretty secure except it is mighty close to Russia.

This is not a blog for financial advice. All the advice here is worth what you pay for it. Think about it though. Try some scenarios out and think what you might do. Start with interest rates returning to the long-term average of the last 100 years (4% ish). What happens?

It is obvious: writing is simple but it is not easy


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