Market stability?

The FTSE 100 closed about 37 points higher today, an all time high.  The pound is worth 1.365 euros. Apparently the Greeks have reached agreement with their creditors for a 4 month delay in debt repayments.

It remains to be seen if this is the end of the Greek crisis or just a postponement of the inevitable?

Debts UP since the crash

See http://www.bbc.co.uk/news/business-31136707 .

Despite everything and plain common sense, the level of debt in the world has gone up since the crash and we risk yet another financial melt down. It seems to me that governments, companies and individuals all have to reduce their debts and live within their means. This means pain and some hardship. The trouble is it is possible to borrow money at very low cost at the moment. When this is no longer possible we'll all be in deep trouble.

Greek debt

In some ways I feel sorry for the ordinary Greek man and woman.  They are having to replay huge debts whilst their economy is doing very badly.  Many in Greece are experiencing real poverty.  They should never have been allowed into the Euro club all those years ago.  Tax avoidance had become a way of life in Greece and they are so far out of step with the economies of northern Europe. In many ways the Greeks expected it too easy within the Eurozone. Now they are finding out the hard way.

I very much doubt they will be able to re-negotiate their repayment terms.  If they leave the Euro now it will be very bad for Greece and hard on the Eurozone.  Sadly,with other indebted nations "in the wings" Germany and others in the Euro club cannot give in to Greece.  Tough times are ahead.

See http://www.independent.co.uk/voices/as-in-1942-germany-must-show-restraint-over-greece-10015905.html .   Apparently,Germany has misread Greece in the past.

USA and UK growth and debt

The BBC News reports that the US economy is growing at a greater rate than expected and that the number of jobs created has averaged 241,000 a month this year. They say the USA economy powers the world. It all depends on whether or not an economy really can live on debt.

It seems to me that both the USA and the UK economies depend on debt to exist. This is not sustainable. Every nation has to live within its means or ultimately wither. When nations like China will no longer buy government IOUs (gilts) the game is up. The debt game cannot go on for ever. In reality, we all know this.

We no longer rule the world. We no longer have an Empire to exploit. We live in a new world order and the sooner we wake up to this the better for us all.  Up to now, the UK has always paid those it owes money to on-time. There may come a time when it cannot or the pound will be devalued and people will no longer want to buy our debt.

See http://www.dmo.gov.uk/index.aspx?page=gilts/about_gilts .

National debt

Like many in the UK, I get very confused about national debt levels. The Conservatives say debt is falling yet we are now borrowing more than ever. Who is right?  That we as a nation are living beyond our means is an indisputable fact. Personal debt levels in the UK are still very high but less I believe than they once were. It looks like spend under Labour would have been as high or even higher than the Conservatives with their cuts and austerity.

http://upload.wikimedia.org/wikipedia/commons/thumb/6/65/UKExpenditure.svg/596px-UKExpenditure.svg.png

I'd like someone to explain the UK National Debt  to me, preferably without the politics! Are things getting better or worse? 

Sorry about the text colours in this Wikipeadia graph text. Debt interest alone costs us £30billion a year! Staggering.

See also http://blogs.spectator.co.uk/coffeehouse/2013/11/the-tories-have-piled-on-more-debt-than-labour/

National Debt in the UK (and USA)

Sometimes I feel like we are living in the 1930s: we can see a crisis looming but carry on hoping it isn't going to happen, yet in my gut I feel that it is imminent.

What is bothering me? Well it is the indebtedness of the UK (and the USA) and the almost inevitable deep crisis that will result if it continues to mount. The true level of the UK's debt (around £900 billion) is VERY close to that in Wiemar Germany in the early 1920s when inflation went mad (money became worthless) and social unrest and national socialism took hold.  If interest rates rise by just a few percent, the UK will be unable to repay its debts, banks will fail and there will be no government money to bail them out. In summary we would be in totally uncharted territory where no savings, salaries or pensions would be safe. It is quite possible that social order would break down and a revolution and far left or right politics would be the order of the day. This is just in the UK. The same story is likely in the USA and across the Eurozone. The stability we have enjoyed since WW2 would be well and truly over.

I hope and pray that I am wrong.

The ONLY answer to this is for the nation to live within its means both nationally and on an individual level. We CANNOT continue to borrow money to support services and lifestyles we cannot afford.  

Read http://pro.moneyweek.com/myk-eob-tpr123/PMYKP703/ to get the background on this. I also recommend the book "How did we get into this mess?" by the BBC financial commentator Robert Peston.

The sickness of banks

Having just read an excellent book by the BBC financial correspondent Robert Peston called "How Do We Fix This Mess?: The Economic Price of Having it All, and the Route to Lasting Prosperity" I am appalled by the action of banks and bankers over the last 10-20 years. Rotten to the core does not describe them accurately enough.

Reading this book it is clear that, from the very top, many in the banking business were corrupt, greedy, arrogant and deceitful people who greatly contributed to the crisis that has left many nations, including the UK, greatly in debt and living beyond their means. Not all the blame is on the banks: there was a total absence of control from governments of all flavours too and, as individuals, we were guilty of believing that something for nothing was possible. But, overall, we were being run rings around by greedy individuals who should be strung up and made to repay every penny of their ill-gotten bonuses.

Fixing the problem will be a long slog with a need for a cultural shift: we have again to live within our means at all levels. We need to earn our way in the world and not live on cheap finance (debt) provided by nations like China. The sooner the UK becomes a manufacturing nation again the better.

Globalisation cannot be stopped, but we need to make some major readjustments.

A final lesson from the book: the crisis is far from over and NEVER trust banks or governments with your money. Burying some of what you have saved in a box at the bottom of the garden may not be such a bad thing.

The Four Horsemen Cometh?

We increasingly behave like lemmings running towards that cliff edge. The question is when will we reach it? 2012, 2013?

In Europe there are no signs of solving the Euro crisis. In the USA the congressional committee tasked with getting bipartisan support for huge spending cuts has totally failed to come up with anything. The indebtedness of the UK has risen to 492% of GDP, according to new research.  World CO2 emissions were higher still last year and the rate of increase is accelerating.  When ARE we all going to wake up and realise all this is not a computer game, but for real?

Somehow  as individuals and nations we've lost our way and got our values all wrong. Maybe this is the big wake-up call we need to change our behaviours, individually and nationally, to sustainable and better ones. I can't see it happening without a lot of pain though. Rarely before have we needed innovative and creative thinkers, strong communities, and human kindness and generosity so much.

The alternatives are too frightening to contemplate: mass unemployment, resource shortages, poverty, civil unrest, lurches to the far left or far right leading to violent revolution on a scale not seen for nearly 100 years. And on top of that we have a planet that is being cooked.

Sometimes it seems the Book of Revelation was right and those Four Horsemen really are riding towards us. If this reads like a tract for the Jehovah's Witnesses then please forgive me. I am a rational person but the portends for humankind are not good unless we change and change fast. It is up to us. No-one else is going to save us.

Fixing the Euro?

So the politicians in Brussels have come up with a package to fix the Euro debt problem. Why does my mind think of Neville Chamberlain coming down the plane steps having arrived back from his meeting with Hitler in Munich in 1938? Probably because I think this bit of paper and his have about as much chance of working.

I hope the plan works, but think it totally wrong that the good honest workers of Europe have to bail out profligate and irresponsible governments and banks. The voice of the common man will not accept this much longer. Many, but not all, citizens of Greece have made tax avoidance a way of life. In Italy corruption is still endemic. If countries cannot run their affairs properly when members of the European club then they MUST take the consequences of their (in)action. If the Greeks are allowed a haircut on their debts why not Ireland?