Headline September 03, 2016/ ''' *CHEAP MONEY* -*DEBT*- CHEESE MUFFINS '''



*FOR SURE -THE IDEA SEEMS LAUGHABLE NOW*  -but when the twenty-first century began, the Congressional Budget Office was projecting:

That the United States would pay off its debt owed to the public by the middle of the present decade. Per the  CBO's January 1999 Economic and Budget Outlook.

''The Long term projections indicate that debt held by the public,  driven by continued budget surpluses, will fall below  zero  by 2012.''  

Today, debt held by the public is more than *$14 Trillion*, so they didn't quite make it. But while the idea of less   {or no}    debt seems unambiguously positive from a local perspective, it raises serious, fundamental questions from the viewpoint of monetary policy.

Let me now turn to England, and skim one more example: Consider the data on the liabilities of  UK based financial institutions. And if you want a large number try this : Pound 20.5 trillion.   And, and around a quarter of these are  financial derivative contracts.

Many of these companies are foreign firms with UK operations. But UK banks   -which the taxpayers still effectively underwrite because they  ''are too big to fail''  have aggregate liabilities worth  Pound 7.5 trillion.

What these big numbers emphasis is that we all live in mind-bendingly busy, complex and internationally connected world economy. The figures you hear about, writes Ben Chu,  and which pundits fixate upon-

Are often the difference between two, or sometime more, very, very large numbers. That bigger context should not be ignored. The economic risks and fragilities of any economy are not always where we're invited to believe they are.

And so on, *Cheap money*  destroying all our futures and killing all variations of capitalism, time enough to order some cheese muffins.......

John Maynard Keynes would have been delighted :  writing in 1936, he called for the  ''euthanasia of the rentiers'' , the destruction of those who rely on interest, dividends and rents for their income.

Keynes thought that this would save capitalism; in reality his recipe would have destroyed it.

There are plenty of downsides to  super-low  interest rates. They are making it hard for banks to make a profit, threatening the supply of loans. They are damaging pension and insurance companies, leading to likely hikes in premiums.

They have created massive black hole at the heart of residual final salary pension schemes, threatening the retirement prospects of millions.  The funds are making less money from their investments, and their future liabilities are worth more.

One reason for the  UK's relatively low level of business investment is that the companies are forced to spend so much plugging these holes, rather than on factories or machines.

The deficits are so large that the Government may need to allow such funds to pay out less in future, perhaps adopting a softer measure of inflation for indexed pensions.

There are no easy solutions to the crisis facing Britain's ownership society. The fundamental problem is that interest rates have fallen too much all over the world.

Some  of this has been caused by the genuine macro=economic forces. But governments and central banks are also to blame; their obsession with pushing down the cost of borrowing has lead to a monumental mispricing of money.

It maybe, in the end, that we will all have to contribute twice as much, saving up to 20 per cent of our incomes across our working life, while spending less on luxuries and retiring even later.

But Theresa May and Philip Hammond must also take a long, hard look at the monetary policy.

Free credit comes at a crippling hidden cost.

AND, in every imaginative way, for England, and even the world, public debt expressed in dollars would rise in absolute figures, but in some cases may drop as a percentage of GDP.

The situation will for sure, get further aggravated by the new trend of borrowing externally in dollars, so that the government will not crowd out the private sector or deprive it of obtaining the necessary credit facilities.

The result being, that the share of foreign loans, denominated in dollars, rose quickly. The world should never forget:

Too much of local or foreign debt is very bad enough, but  *foreign debt* is riskier. Countries do not default on their local loans because they can deviously issue local money to pay lenders.

*They cannot print dollars*.  

With most  respectful dedication to all and every Leader, Student, Professor and Teacher of the world. See Ya all on !WOW!  -the World Students Society and !E-WOW!  -the Ecosystem 2011:

''' Change Dilemma '''

Good Night and God Bless

SAM Daily Times - the Voice of the Voiceless


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