From the Summit of the Moral High Ground

There was a time when caring for another human being rarely appeared in the national accounts. Parents raised children. Adult children cared for ageing parents. Neighbours looked after neighbours. Meals were cooked. Clothes were repaired. Homes were maintained. None of this counted towards Gross Domestic Product. It generated no invoices. It attracted no taxation. Yet society functioned. This raises an uncomfortable question. When politicians speak proudly of economic growth, are we always producing more wealth, or are we sometimes merely paying for activities that families once performed without charge? Suppose a mother stays at home to care for her own child. Economically, almost nothing happens. No wages are paid. No income tax is collected. No National Insurance contributions are made. No VAT is charged. The child receives care, but GDP barely notices. Now suppose that same mother returns to paid employment. The child enters professional childcare. The mother earns a salary. The ch...

What is really going on and when did it happen? Do you want to know? I'm going to try to bring together all the economics posts of the last month and try to paint the picture of what is actually happening. Before you read on I remind you that ignorance is bliss. On the 27th October I postulated that the collapse of Dexia bank was just the first in a series of dominoes which would fall, well we now see the systemic collapse continuing throughout western governments and banks. The death of the monetary system has its main motive in the refusal of governments either to manage finances responsibly or to repay debt in the usual manner. Debt grows faster than the economies. The plan is to swindle via the hidden  inflation  tax in return. Greece and now Italy have tumbled because they are locked in a single currency and cannot unilaterally devalue. The creditors (the people who own the bonds) are not involved in the important decisions to debase the currency. Those decisions ...

Central banks have been attempting to drive down interest rates by purchasing long-term treasury debt and selling short-term debt. This is just the latest instance of a central bank desperately flailing around doing something, merely for the sake of doing something. Central Banks still do not understand-- or admit-- that the central banks themselves caused the financial crisis by driving interest rates too low and relentlessly expanding the money supply. Any action on their part will just exacerbate the problem. A one hundred trillion Zimbabwe dollar note how long until we see the same in US dollars? The decision by the ECB to print more Euros under pressure from France is just the latest in a long list of examples. Markets, however, understand that the central banks have failed and have no clue what they are doing. This is why markets are in a tailspin. Stock, bonds, and commodities drop in price while the financial press wondered whether this worldwide sell-off mea...

Sir Phillip Bailhache and Ian Gorst I like Ian Gorst, he is a most amiable person. I must admit that it has come as a shock to see him elected as Chief Minister. I even had to re-write the blog post! Fundamentally neither candidate met my primary criteria - a basic understanding of economics. Nick Palmer on his blog expresses similar concerns. I'm afraid that, like it or not, the economic reality is going to come home and it is going to hit hard. For far too long the entire Western world has been spending beyond its means, driven by the demands of the electorate to provide ever more extravagant public services coupled with the natural and inevitable inefficiency of bureaucracy. Jersey is perhaps the worst culprit for this, but we have had unusually high revenues which have masked the problem until now. Sir Phillip was right about one point which you may have missed during the hustings - he accurately pointed out that the inability of the Chief Minister to appoint his '...

Historical Archive This article is preserved as part of the historical record of this blog. It reflects the author's views at the time of publication. The content has not been substantively altered, although the HTML, accessibility and formatting have been updated to meet modern web standards. Italy's sovereign debt crisis. Flicking through the media coverage of the Italian financial crisis, the first thing I notice is the biased reporting of the facts. These nations have been overspending for years and building up huge debts. The overspending is caused by politicians keen to win votes with government services and benefit payments. Yet the language used by the media places the blame squarely on the "markets", the ultimate denial of culpability because the markets are made up of countless entities, largely the major financial institutions. "The European Central Bank, the only effective bulwark against market attacks, intervened to buy Italian bon...

Historical Archive This article is preserved as part of the historical record of this blog. It was originally written by Dr Willie (The Golden Jackass) and is republished here with permission as part of an ongoing effort to preserve historical economic commentary that has since become unavailable. The content has not been substantively altered, although the HTML, accessibility and formatting have been updated to meet modern web standards. Readers interested in Dr Willie's more recent writings can visit www.golden-jackass.com . JPMorgan is a wreck, their businesses are tanking. Their tight grip on the silver market could be loosened in time, helping to end price fixing and allowing silver to rise to its true value. Profits announced by the big US banks are phony. A laundry list of tainted supposed profits came in the last two weeks for the entire crew of giant insolvent US banks. The Debt Value Adjustment (DVA) deception is the main common thread. The accounting ...

Historical Archive This article is preserved as part of the historical record of this blog. It reflects the author's views at the time of publication. The content has not been substantively altered, although the HTML, accessibility and formatting have been updated to meet modern web standards. 1.1(k) The effect of category 1.1(k) is to provide a market and an underpinning of prices for high-value properties. By effectively ensuring a £1,000,000 price tag for the largest properties, the top of the housing market is established. 1.1(h) By reducing the qualification period for category 1.1(h) of the Housing Regulations, the Government can artificially stimulate additional demand for mid-range properties. Conversely, by increasing the qualification period, it can artificially reduce demand. Conveyancing By gr...

Historical Archive This article is preserved as part of the historical record of this blog. It reflects the author's views at the time of publication. The content has not been substantively altered, although the HTML, accessibility and formatting have been updated to meet modern web standards. Introduction In order to ensure a satisfactory standard of living, it is essential that an average family can afford to purchase an average family home. The Affordability Gap At the time of writing, typical lending criteria used by banks were: Maximum lending of five times the annual salary of the main earner. Plus one additional annual salary from a second income. With an average annual salary of approximately £32,448, the maximum borrowing available to an average household was around £195,000. ...

Historical Archive This article is preserved as part of the historical record of this blog. It was originally written by Dr Willie (The Golden Jackass) and is republished here with permission as part of an ongoing effort to preserve historical economic commentary that has since become unavailable. The content has not been substantively altered, although the HTML, accessibility and formatting have been updated to meet modern web standards. Readers interested in Dr Willie's more recent writings can visit www.golden-jackass.com . How can a Greek DEFAULT be a success? Right now, we're seeing much the same global reaction we saw after many of the EU's previous 13 crisis summits: officials are congratulating themselves for doing next to nothing. The media is proclaiming the meetings "successful." So are all stock markets and currencies except for the dollar. So where's the beef behind Europe's latest news? THERE IS NONE! Over the next f...

Historical Archive This article is preserved as part of the historical record of this blog. It was originally written by Dr Willie (The Golden Jackass) and is republished here with permission as part of an ongoing effort to preserve historical economic commentary that has since become unavailable. The content has not been substantively altered, although the HTML, accessibility and formatting have been updated to meet modern web standards. On Monday, the first gold contracts denominated in the Chinese Renminbi (also known informally as "yuan") came to the Hong Kong market. Analysts have been quick to note the implications of a yuan-denominated contract, realising that the new contract could drive nearly three times as much demand as the dollar-denominated contract. Looking at the yuan product from the macro view, a move into gold is about more ...

Twenty Dollar Gold Coin (1 troy ounce fine gold) I was looking at my $20 dollar gold coin the other day. It is amazing how little it has changed since it was minted in 1887, the greatest change being the value of it which has ranged between $1,550 and $1,900 so far this year, which since it was worth $20 until 1933, then $35 until 1971, is a sign that the good times ended a long time ago. But the truth is that if the coin has not changed, if it is the constant, then what has changed? The answer has to be the value of the dollar. Inflation is a hidden tax and, like all taxes, is disproportionately levied on the 'poor'. By 'poor' I don't really mean the poor, who on a global scale are those who earn less than $800 per year; they have nothing anyway, so they have nothing to lose. In fact everyone who lives in Jersey is rich; everyone has an income of at least $7,500 per year. That places them in the top 20% of the world...