Re: [energyresources] 8 trillion in sovereign debt now at negative interest

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Denis Frith

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Jul 6, 2016, 12:04:03 AM7/6/16

to energyr...@yahoogroups.com, Senescence Of Civilization, Roeoz

Hi, Gerry,

My understanding of financial matters is very limited as I have focussed on physical operations during my career. However, I believe that, as you say, financial perdition lies ahead (of most of the physical deterioration I expect). I believe harsh physical realities such as resource depletion and climate change will have increasing impact on the decisions being made, including on the financial markets, in due course.

However, I am trying to improve my understanding on what is happening now in relation to sovereign debt. The Australian sovereign situation appears to be an example of what you discussed. Ironically, pursuing economic growth is one of the major points in policy discussions leading up to the elections held last week.

Banks, investors (global as well as local, professional as well as superannuants) and businesses have lent the money that is the sovereign debt in the belief that financial assets will increase in value over time due to the interest paid by the debtor. That is based on the presumption by the debtors (governments in the case of sovereign debt) that the economy will continue to grow, so pay the cost of that interest from the increased income from taxation of the growing economy. However, that growth is slowing down so the interest rate has been dropped to encourage public and business expenditure on goods and services rather than various forms of investment as the return is now so low. The obligations on governments (pensions etc) are increasing even as economic growth (and taxation income) slows. Dropping the interest rate is having only limited belated remedial impact so the growth of sovereign debt will continue until the inevitable financial implosion. What happened in Zimbabwe is only one past example of this process.

I expect that this financial dynamic process can be repesented by a non-linear differential equation which yields cyclic economic growth only in the limited circumstances that have now been exceeded in the US and other countries, including Australia.

It is interesting that our Reserve Bank did not drop interest rates yesterday (they are at 1.75 % which is high compared to those with the negative rate) even though the inflation rate is lower than deemed by economists to be desirable. Of course, this financial market does not take into account ecological costs - as yet.

regards,

Denis

Sent: Sunday, June 26, 2016 at 4:46 AM
From: "'Gerry Agnew' ga...@telus.net [energyresources]" <energyr...@yahoogroups.com>
To: energyr...@yahoogroups.com
Subject: Re: [energyresources] 8 trillion in sovereign debt now at negative interest

Hi Eric!

Yes, you are correct about the case of “gotta have it now”. Ring it up on the credit card, take it home and do whatever the thing you have brought is supposed to do. It is the “Wow” flavour of thing run completely amok. It leads to giant industries which have sprung up in the last generation (let’s just mention cell phones and the many apps which are coming out which enable you to run your life at low cost) and which will get bigger. People scream for more and more on many fronts and the terrified bureaucrats (who understand little of this) in government tend to exacerbate risk because they “go with the flow” and push more grants and the like into fields they feel “safe with”. Today this sees enormous flow of public money into solar and wind power because “everybody knows that this is the future” and so they feel safe. This is despite the fact that neither one of these is at all promising on the scale which has been promised.

With respect, I think I CAN answer the comment about “where we are going”. It is straight to financial perdition simply because the demands on the public purse (think pensions here) is far too great to be serviced. This being so governments are issuing incredible amounts of debt which works out fine now because rates are negative in much of the world. When rates go back up (as the Fed is thinking of doing) these governments are going to be caught with huge additional expenses (interest) which will cripple the system. This is the killer and I can’t see it being avoided to be frank.

You are quite correct about the dangers of holding government bonds. Marty Armstrong a few days ago wrote that these are among the most dangerous investments on the planet, because of the interest rate risk. They have leveraged themselves on the current negative rates and are so badly caught it isn’t funny anymore.

Gerry

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From: mailto:energyr...@yahoogroups.com

Sent: Saturday, June 25, 2016 10:57 AM

To: energyr...@yahoogroups.com

Subject: Re: [energyresources] 8 trillion in sovereign debt now at negative interest

There is no historical precedent for this in the history of man. Deferred gratification

apparently has become an antiquated concept replaced by a "live for right now

only" mentality. That mentality, previously associated with the poor apparently has

spread to most of the global population regardless of economic class. And this

has occurred without any promise by any government that a compensatory safety

net would be there in case this story goes south.

There is absolutely no reward for risk taking in this current scenario so why

take risk? That penalizing of risk taking has been tried in the past and has

repeatedly brought hardship to peoples adopting that strategy...short term

gain followed by longer term economic decline. But we are here, living for

now, and so be it.

This story has been told in economic classes but never imagined on a

global scale as institutional policy. As governmental employees select

that profession because they fear risk, they are poor choices to act as

dispensers of monies to replace private equity in allocating the development

of new risky ventures that our world depends on to continue.

Yes, this is all very baffling and without precedent. Anyone that says

that they understand where this is heading should be ignored.

Oh, and government bonds do carry risk (of loss of wealth). That risk

of loss is currently close to 100%. The risk of gain is minimal except for the

very short term trader of those bonds. I guess the game here lies in betting

that the global economy will continue to deteriorate pushing bond prices

higher (the stock market game in reverse). It works as long as governments

honor the bonds issued.

It's all so very odd.

From: "BREK...@aol.com [energyresources]" <energyr...@yahoogroups.com>
To: energyr...@yahoogroups.com
Sent: Saturday, June 18, 2016 3:31 PM
Subject: [energyresources] 8 trillion in sovereign debt now at negative interest

This was on Bloomberg, 8 trillion in sovereign debt now at negative interest rates. Any comments? I don't think this has ever happened before. Also it goes against economics 101. My economics teacher told us the reason one gets interest on their money is because the person borrowing gets to enjoy that money now. The person loaning it puts off gratification of using that money for a fee, interest. After all we don't know the future and could die before we ever collect what we loaned. Bill Gross noted that should interest rates turn the people holding these bonds will take huge losses.

Brek

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Posted by: "Gerry Agnew" <ga...@telus.net>

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Denis Frith

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Jul 6, 2016, 12:27:19 AM7/6/16

to energyr...@yahoogroups.com, Senescence Of Civilization, Roeoz

Classical economics has never taken into account:

the ecological cost of divestment of natural material wealth, including the depletion of some ninety natural resources, including oil,
the devastation of the environment, including climate disruption, ocean acidification and warming, land, sea, air and product pollution, reduction of soil fertility and loss of potable water
the effect of species extinction on biodiversity

As a consequence, continuing economic growth is an unsustainable anthropocentric delusion based on the flow of that intagible, money. The high debt levels are a symptom of the vain attempt to maintain economic growth whilst ignring realities.

I find it ironical that the Australian Prime Minister is basing his policy thrust for the up coming election on economic growth and jobs (without being selective about which jobs should be encouraged).

Brexit has determined that Britain will leave the EU. This move is coming about because of the votes of the working class. Ironically, Sanders has adopted a similar posture in the US Presidential race.

These are examples of the public belatedly responding to the deleterious consequences of pursuing economic growth and to hell with the consequences.

But what is happening now is benign compared to what will happen when:

global trade declines rapidly as fuel oil for the many thousands of container vessels inevitably becomes unavailable
airline travel becomes possible only for the rich as there is no effective altenative to jet fuel (from crude oil) despite decades of research (crude oil has concentrated energy capital)
the supply of electricity for the vast range of operations declines for a variety of reasons, including lack of understanding of the fundamental aspect of physical energy flow
global population growth, combines with other factors to rapidly increase

Sent: Thursday, June 23, 2016 at 10:29 AMr

From: "'Gerry Agnew' ga...@telus.net [energyresources]" <energyr...@yahoogroups.com>
To: energyr...@yahoogroups.com
Subject: Re: [energyresources] 8 trillion in sovereign debt now at negative interest

Classical economics has taken a big hit. Interest rates are at 500 year lows in Europe (Deutsche Bank) and according to Marty Armstrong who researches these things, are at 3000 year lows! The economy is ruined across the world as terrible debt levels cripple what is available for basic consumption (the demographic problems are also starting to raise their heads in many serious commentaries as well).

Billionaires are running for cover anywhere they can find it and if that means paying governments to hold your money (ie negative interest rates) they will do it. Interest rates at these levels will cripple savers and ruin pension funds, just when they are needed with huge numbers of fresh retirees looking for their pensions.

Gates is correct. If governments start to float more and more debt to take advantage of negative rates, then this becomes ingrained in national cash flows. If rates then go back up, budget deficits will balloon.

Probably beyond hope now.

Gerry

*******************************************

From: mailto:energyr...@yahoogroups.com

Sent: Saturday, June 18, 2016 2:31 PM

To: energyr...@yahoogroups.com

Subject: [energyresources] 8 trillion in sovereign debt now at negative interest