Thursday, March 24, 2011

Never Never Land


Rome decline © fintag

News comments:

I know you are bored about debt and so is everyone else. Debt is fun if you use it to make money and then repay the debt off soon after. Debt isn't fun when it is racked up to pay for day to day living and the thought of paying the debt off, let alone servicing it, induces insomnia.

Portugal, as tiny as it is, is a debt ridden bankrupt country. Ireland, Greece, Italy and Spain also have the grim debt reaper shadowing their every move. The UK will be seeing its debt rise over the next 3 years despite trying to cut back (thanks partly to inflation) and will soon be joining the ranks of the big creditors. Not that it is alone for the US has so much debt, it is now owned by China and as for the great Japanese ponzi scheme, its savings banks will soon be abolished.

Debt is so easy to build up and so hard to repay back. It is a bit like losing at cards where you keep on betting hoping to cover your loses and they just keep on getting bigger. Think Madoff, think The Other Guys.

We are all dead in the long run and it is better to die in debt than with assets. For individuals this makes sense as long as they are happy for their debts to be absorbed by other solvent individuals and companies after they have gone (as well as being sure their isn't a debtors prison in the afterlife).

Countries don't die. The only way they can pay off huge debt is to write it all off, get someone to bail them out, create a new currency or create rampant inflation. This last strategy is what the US and UK are doing. For the UK it is working well but for Bernanke in the US it appears he hasn't been printing nearly enough dollars.

So far the CRA's have been slow off the mark although I am delighted Moody's picked up my comments on the 1p Budget. The UK's debt is going to grow and the growth isn't. We can thank Mr Inflation, increases in debt payments, 20% sales tax, general miserableness, IR35, bailing out Portugal, welfare and a rising yield curve. (telegraph)

Today's shorts:
Port is passed to the right (bbc)

Today's longs:
Bernanke to explain how printing money works (bloomberg)

Debt to be renamed Bet'd.