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Opinion & Analysis |
Thursday, April 23, 2009 |
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Error of passing debt on to our children
OCCASIONALLY, I’VE got into trouble over unpaid debts. Usually this was due to forgetfulness so I would pay promptly when reminded, but sometimes it was because the money wasn’t there, and wasn’t even coming in. I don’t recall, however, a single instance where I was advised that the cure for my unpaid financial obligations was to borrow even more and to spend more and worry about settling my now increased debt at some indeterminate date in the future. The universal advice was to stop spending, start earning and repay my creditors, a cure which never failed. I’m no financial guru, but that is why I feel very uncomfortable about the solutions proposed by Barack Obama, Gordon Brown and others more learned than I. They say the problem of financial institutions collapsing under gigantic toxic loans that will never be repaid and of the associated recession will be solved if people spend more money by buying more goods, and that this can be achieved if already indebted governments borrow a lot more money and pour it into their economies so that it filters through to individual spenders. This money will be repaid through future taxes once economies recover. Perhaps there is some merit in a financial stimulus if funded by money you already have. But certainly not if it requires trillions of dollars of debts so large that they can never be repaid via existing workers, but must be passed on to their children and grandchildren. Furthermore, with Europe’s demographic suicide now well under way (birthrates of 1.3-1.9 babies per woman vs replacement rate of 2.1), the many grandchildren needed to pick up the tab will simply not be there. A year ago the price of a barrel of oil was in the $140s; it averaged $99.6 for the year, according to the US Energy Information Administration. Today it’s around $50 but is forecast to average $42.1 for this year. In 2009, OECD consumption was averaging 48 million barrels per day; this year it’s predicted to be down about 4 per cent to 46 mb/d. When you do the sums, this means that the OECD spent $1.74 trillion on its oil last year, but it will cost only $0.70 trillion in 2009. Lower oil prices alone will provide a stimulus to OECD economies of more than a trillion dollars this year – roughly what the G20 has just agreed to give the IMF. That’s a hefty sum, but it gets bigger. The energy consumed by the OECD as a whole is the thermal equivalent of more than 110 mb/d of oil, which puts the market share of oil itself at about 40 per cent. Since all energy prices roughly track oil, this means the total energy stimulus this year is in the order of $2.5 trillion. (For Ireland, which consumes 260,000 b/d of oil equivalent, the stimulus would be almost $6 billion, or €4.5 billion.) This could be compared to President Obama’s $3.3 trillion US stimulus, except his is spread over several years and will have to be repaid by future generations, whereas the $2.5 trillion energy stimulus is happening in 2009 alone with no repayments at all. People often say that money is the lifeblood of the economy, which is why banks must be saved at all costs. I think oil is as much the lifeblood because it too permeates every corner of business and life – and therefore so will the energy stimulus. The energy price reductions that we’re seeing today will make everything else cheaper, from logistics to agriculture to industry to construction to food to consumer products; the effect is already noticeable. The West’s $2.5 trillion energy stimulus is thus not the whole story. For what are price reductions in other goods and services but a further stimulus to the economy? What is the effect of today’s historic low interest rates but a route to lower mortgages and other borrowing costs and thus an added stimulus? And what is the effect of the housing crash but a stimulus that enables people to buy and rent accommodation at realistic prices for the first time in a decade? I cannot calculate how many trillions the non-energy part of such stimuli will amount to. Why are OECD governments so keen to create further, artificial stimuli through debt when they stay silent about the far bigger stimuli already coursing through their economies? Today’s baby boomers will surely be cursed by their progeny for the massive debt legacy that we are casually and unapologetically bestowing upon them. © 2009 The Irish Times
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More on this subject in a blog post entitled “Stimulated Curse on Baby-Boomers” |
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Gift Idea |
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Good to report that as at
FREED AT LAST, |
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BLOGROLL
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What I've recently
But it's not
entirely honest in its subtle pro-Palestinian bias, and therefore needs
to be read in conjunction with an antidote, such as See detailed review +++++
BP's ambitious CEO John Browne expanded it through adventurous acquisitions, aggressive offshore exploration, and relentless cost-reduction that trumped everything else, even safety and long-term technical sustainability. Thus mistakes accumulated, leading to terrifying and deadly accidents in refineries, pipelines and offshore operations, and business disaster in Russia. The Macondo blowout was but an inevitable outcome of a BP culture that had become poisonous and incompetent. However the book is gravely compromised by a litany of over 40 technical and stupid errors that display the author's ignorance and carelessness. It would be better to wait for the second (properly edited) edition before buying. As for BP, only a wholesale rebuilding of a new, professional, ethical culture will prevent further such tragedies and the eventual destruction of a once mighty corporation with a long and generally honourable history. Note: I wrote
my own reports on Macondo +++++
A horrific account of:
More details on my blog here. +++++
After recounting a childhood of convention and simple pleasures in working-class Aberdeen, Mr Urquhart is conscripted within days of Chamberlain declaring war on Germany in 1939. From then until the Japanese are deservedly nuked into surrendering six years later, Mr Urquhart’s tale is one of first discomfort but then following the fall of Singapore of ever-increasing, unmitigated horror. After a wretched journey Eastward, he finds himself part of Singapore’s big but useless garrison. Taken prisoner when Singapore falls in 1941, he is, successively,
Chronically ill, distraught and traumatised on return to Aberdeen yet disdained by the British Army, he slowly reconstructs a life. Only in his late 80s is he able finally to recount his dreadful experiences in this unputdownable book. There are very few first-person eye-witness accounts of the the horrors of Japanese brutality during WW2. As such this book is an invaluable historical document. +++++
This is a rattling good tale of the web of corruption within which the American president and his cronies operate. It's written by blogger Michele Malkin who, because she's both a woman and half-Asian, is curiously immune to the charges of racism and sexism this book would provoke if written by a typical Republican WASP. With 75 page of notes to back up - in best blogger tradition - every shocking and in most cases money-grubbing allegation, she excoriates one Obama crony after another, starting with the incumbent himself and his equally tricky wife. Joe Biden, Rahm Emmanuel, Valerie Jarett, Tim Geithner, Lawrence Summers, Steven Rattner, both Clintons, Chris Dodd: they all star as crooks in this venomous but credible book. ACORN, Mr Obama's favourite community organising outfit, is also exposed for the crooked vote-rigging machine it is. +++++
It is really just a collation of amusing little tales about surprising human (and occasionally animal) behaviour and situations. For example:
The book has no real message other than don't be surprised how humans sometimes behave and try to look for simple rather than complex solutions. And with a final anecdote (monkeys, cash and sex), the book suddenly just stops dead in its tracks. Weird. ++++++
It's chapters are organised around provocative questions such as
It's central thesis is that economic development continues to be impeded in different countries for different historical reasons, even when the original rationale for those impediments no longer obtains. For instance:
The author writes in a very chatty, light-hearted matter which makes the book easy to digest. However it would benefit from a few charts to illustrate some of the many quantitative points put forward, as well as sub-chaptering every few pages to provide natural break-points for the reader. +++++
The author was a member of Britain's V Force, a forerunner of the SAS. Its remit was to harass Japanese lines of command, patrol their occupied territory, carryout sabotage and provide intelligence, with the overall objective of keeping the enemy out of India. Irwin is admirably yet brutally frank, in his descriptions of deathly battles with the Japs, his execution of a prisoner, dodging falling bags of rice dropped by the RAF, or collapsing in floods of tears through accumulated stress, fear and loneliness. He also provides some fascinating insights into the mentality of Japanese soldiery and why it failed against the flexibility and devolved authority of the British. The book amounts to a very human and exhilarating tale. Oh, and Irwin describes the death in 1943 of his colleague my uncle, Major PF Brennan. +++++ Other books here |
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After
48
crackling, compelling, captivating games, the new World Champions are,
deservedly,
England get the Silver,
No-one can argue with
Over the competition, |
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