World debt: getting a grip

The world economy is in an unstable state. Here are some data and thoughts to add to your own and hopefully cast a little light on what is happening to our global financial system. I’ve concentrated on the world’s biggest economies to try to keep things relatively simple

EUROPE

Debt levels of the 4 largest economies in Europe

as % of GDP (2009 figures) + GDP growth rate

Country	Total debt	Financial Institutions	Houehold debt	Commercial debt	Government debt	GDP growth rate 2010 % p.a.
UK	466	194	103	110	59	1.25
France	323	84	44	114	80	1.50
Italy	315	82	41	41	109	1.3
Germany	285	80	64	69	73	3.5

So the UK is overall much more indebted than the next three largest European economies. Its household and financial institutions have collective debt of 3x the GDP, much more even than Italy or France, and its GDP growth in 2010 was the lowest of the big four . It is not surprising that the UK is unable to integrate with them. The figures will have changed since 2009 and 2010, but not substantially.

Why did it contribute so much to the EU funds in recent years? Possibly to give it bargaining power to prevent European-led regulation of its financial services.  I have no evidence for this but I can’t think of anything else. If this is true it would have been good for the city economy and, of course, the tax revenue would have been good for the UK citizen in the short term. Nevertheless deregulation plus bad behaviour by powerful individuals in the city, together with reckless borrowing by house buyers, has put the UK in a dire situation.

Why is the UK not in more immediate trouble than the Eurozone? I can only conclude (please correct me if you have reasons to suppose I’m wrong) that the answer lies in the willingness of the Bank of England to conjure fictional money into its bank account (quantitative easing), something the German-led European central banks have been unwilling to do. This virtual money is then used to help swell the apparent assets of the financial institutions. This is done by buying various bonds with the fictional money to force up the price of the bonds.Since the banks hold huge reserves of such bonds the value of these reserves is artificially increased, which allows the banks to lend more to businesses and house buyers as well as reduce the chance of the banks folding. Hardly a sound long term solution but what other option is available?

Why is GDP growth important? Because it is a measure of the economic activity which in turn is a measure of the tax revenue generated. The more tax that is collected the less strain there is on government finances.

USA, JAPAN and CHINA

Debt levels  as % of GDP (2009 figures) + GDP growth rate

Country	Total debt	Financial Institutions debt	Household debt	Commercial debt	Government debt	GDP growth rate 2010 % p.a.
USA	296	53	97	79	67	3.0
Japan	471	110	69	95	197	4.0
China	159	18	12	96	32	10.4

Japan’s total debt (4.71 x GDP) is even worse than the UK’s overall debt (4.66 x GDP) largely due to government spending through a prolonged period of stagnation from which it is only just emerging and a financial sector debt second only to the UK’s. China is the only large economy with a healthy balance and a high growth rate. Most of its debt is where it should be – money lent to a rapidly growing commercial sector. Its financial services account for only 18% of GDP. What the above data doesn’t show is that there is a strong property bubble in China. If the price of property suddeny dropped all the debt levels in China would go up, as would some of the debt in other countries with investment in Chinese property. Growing social unrest in China may make it difficult for its government to rescue reckless spenders and gamblers in the west with the money of Chinese savers.

None of these countries look as though they could lead the others out of debt.

Russia, Brazil and India are all relatively healthy financially and each is comparable in economic size to any of the major European economies listed, and collectively they have a GDP about equal to Japan’s. But even these have some of their own debt problems and even if they could pool resources this is unlikely to solve the overall problem..

Looking at various data on the web I can’t find one nation that is in overall credit. To whom or to what is all this money owed? The answer seems to be the tax payers of the future. As soon as a government builds up its financial reserves it is under political pressure to spend them on public services or, more recently, rescuing the financial institutions.   In practice, the people of the next generation will not be able or willing to pay off the debt in real money and their governments will no doubt be forced to pay it off in the way the UK and US governments have already started to: by using unearned, virtual money (quantitative easing is being used now but there are other possibilities). This causes inflation to outstrip interest rates. One can only hope this will be done in a gradual and controlled way, without causing the social chaos, Nitzchian fascism and, indirectly, totalitarian communism which blighted the first half of the 20^th century.

Or maybe I’ve overlooked something and you can see an alternative route to secular salvation. If so, please let me know and I will pass it on to the readers!

Source1
Source2

See also Reforming the world economy


See also the interactive chart http://www.economist.com/blogs/graphicdetail/2012/01/daily-chart-8

John

Author, 2077 AD

cosmik.jo@gmail.com

Equal but not equal

Name one human attribute held equally by any two human beings out of the 7 billion on our planet. Gender, race, skin colour, culture, nationality, social standing, job, religion, medical condition, physical strength, height, physical attractiveness, mental power, income, social position, imagination, empathy, sexual orientation, kindness ....etc. etc. Each  individual is unique.

Yet all social progress over the last few hundred years rests on the assumption that we are all equal. In the following it is assumed that all potential recipients of collectively financed and implemented help are equal, at least within the developed world:

•  Freedom from enslavement 
•  Freedom from torture, harassment and discrimination
•  Education, health and protection against crime
•  Fire services
•  Fair trial
•  Protection against foreign invasion
•  Freedom of religion and expression
•  Alleviation of involuntary hardship
•  Right to vote

Internationally there are Human Rights Watch, Amnesty International, Médecins Sans Frontières, the Red Cross, UNESCO, Oxfam, Christian Aid, Scholars at Risk and scores of others.

All act on behalf of any individual regardless of race or skin colour or nationality or religion or gender or anything else. One can argue about individual injustices but the ideal which drives these organisations is that all people are equal, a belief on which parliamentary democracy itself is founded.

So in what respect are we equal? Before some humanly appointed authority, like a dictator or a monarch or a president or a team of scientists? According to some human construct?

I can think of only one sense in which all people on Earth are absolutely and timelessly equal and that is in a spiritual sense. Yet if spiritual equality is just a human construct it is a product of circumstances and so is liable to change as circumstances change. For it to be sacred it must derive from God, or at least be deemed coming from some transcendental source. Listed below are cases where the divinity of the concept of human equality is not glossed over.

• The US Declaration of Independence begins ‘We hold these truths to be self-evident: That all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness; that, to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed; ....’

• The US constitution is based on the work of Thomas Paine and holds that all men are created ‘equal’. From where did he get his idea for equality, apart from the above Declaration? Here is a quotation from his book The Age of Reason: ‘I believe in one God, and no more; and I hope for happiness beyond this life. I believe in the equality of man; and I believe that religious duties consist in doing justice, loving mercy, and endeavouring to make our fellow-creatures happy.’ (He despised the church but nevertheless believed in a Creator and life after physical death.)

• Florence Nightingale established the  foundations of the UK's NHS and all 20th century health services.  There is absolutely no doubt that her Christian beliefs were the driver. All patients were equal to her except in their suffering.

•  Charles Dickens did an enormous amount to raise awareness of social injustice in Victorian Britain and was inspired by Jesus Christ (rather than organised religion). He was a true Christian in his beliefs, not a Sunday morning only observer of rituals, and wrote a book on the life of Christ for his children. He was not perfect (who is?) but held that we were all equal before our Creator. 

• John Newton (the slave ship owner who wrote Amazing Grace) and William Wilberforce (a politician) were both inspired to abolish slavery by a revelation from God that all are equal before Him.

• Martin Luther King was a Baptist minister whose Christianity inspired a non-violent movement for Civil Rights and a belief in all the higher aspirations of humanity. Imagine what America would be like now had he and his followers not been so active in 1960s. 

• The landmark novels Uncle Tom’s Cabin, The Grapes of Wrath and To Kill a Mockingbird were inspired by belief in our equality before God.. All three of these novels have never gone out of print.

• The Holy Bible itself proclaims in Galatians 3:28: ‘There is neither Jew nor Greek, there is neither slave nor free, there is neither male nor female – for all of you are one in Christ Jesus.’ This was written at a time when slavery and exploitation were rife and power was based on strength and cunning, as it appears to have been for hundreds of thousands of years previously. In Mark 16:15 He said to his disciples ‘Go into all the world and preach the good news to all creation.’

There is much more evidence that could be mustered– enough for a large tome by a serious scholar. I can’t really see how Peace on Earth can ever happen without the recognition of the truth which makes the statement ‘all people are equal’ any more than an arbitrary, politically correct postulate. Marx tried to found a new socio-economic order based on the idea of equality but failed to invoke the source of this idea. The result is well known.

Peace to all

John

Author, 2077 AD

cosmik.jo@gmail.com

Sport: the individual and the team

I have little interest in sport other than casually kicking a ball round a field with friends or family, using coats on the grass as goal posts, and am fully aware that I’m in a minority.  Sport is so important to so many people in so many countries that it can’t be ignored by anyone purporting to want a peaceful world.

Here are some interesting facts from the world of sport which I recently came across (Prospect, Dec 2011). They set the scene for the thoughts I express after listing these facts, and which you will no doubt find less interesting.

• In the 18^th century gentlemen thought that training was not in the spirit of sport.
• Since 1997 the world record for the 10,000 metres has been broken five times, dropping from 26 min 31.32  sec to 26 min 17.53 sec, each time by a Kenyan or an Ethiopian.
• The National Sports Centre at Bisham Abbey (30 miles west of London) has a large room that can simulate high altitude conditions, so that athletes can raise their red blood cell count. The World Anti Doping Agency deems this legal while banning the use of drugs to get the same effect.
•  The major Olympic teams are assisted by physiologists, nutritionists, massage therapists, coaches, biomechanicists, lifestyle instructors and performance analysts.
•  105 world swimming records were broken in 2008, mostly by swimmers wearing the Speedo LZR Racer suit made of a high tech drag reducing fabric tested in NASA wind tunnels. Successors to these suits were banned in 2009 because of their enhancement of performance.
•  International athletes typically have running shoes made to measure and costing $10,000.
•  Football boots today (as opposed to a few decades ago) make it significantly easier to control and shoot the ball, and as players get fitter the pitch seems to get smaller.

Why do people compete?  To assert themselves, perhaps; or to test their abilities against each other and grow spiritually by accepting the limitations that competition reveals. Why is being a spectator so popular? I don’t know but people like to watch sport and talk or argue about it. Watching and following sport is evidently a pleasure, bonding strangers together in a way no other pass-time can do. It gives spectators the chance to hone their analytical skills, to feel excitement and to admire human skill and endurance. International occasions like the 2012 London Olympics help to raise awareness that we all live on the same planet.

As an outsider I am becoming aware of two complementary trends.

1. Individuals are playing a growing role in team sports.
2.  Teams are playing a growing role in individual sports.

Team sports like soccer, American football, baseball and rugby are enormously popular and it seems to me they have the potential to help weld society together and drive it forward as the power of cooperation and competition are demonstrated in front of millions. It also helps break down racial, cultural and national barriers, if only by bringing them into the open as fans misbehave. Unfortunately, in recent years there has been a tendency for individual stars to be paid enormous fees and to bask in the media limelight, which counteracts these beneficial affects of group competition. And as the pressure to win intensifies for financial reasons competition not infrequently escalates into on-pitch conflict or verbal abuse between individual players.

So individual behaviour is becoming a problem in team sports.

In events where one individual is pitted against another, as in athletics or motor racing, there is an increasing necessity to have a whole panoply of expertise, technology and support behind each competitor. This is inevitable. The runners have to run and the drivers have to drive ever faster, the high jumpers have to jump ever higher, to the limits of human ability – concentration, will power, endurance, self control, strategy, reaction time and skill are tested to the limit, with speed records being broken by tiny fractions of a second and high jump records  by millimetres.

Thus the runner has a host of helpers. Experts are needed to design, develop or advise on shoes and clothes to maximise traction and aerodynamic efficiency, to personalise altitude tents to boost haemoglobin levels in the blood and recommend regimes to improve aerobic efficiency and cardio-respiratory function.  Legal advice is needed to ensure that he or she does not become disqualified by inadvertently breaking some rule or eating a substance which, after metabolisation, could lead to a false drug test result. (See also above list.)  

In fact a modern athlete is becoming akin to a Formula 1 racing car driver. In Formula 1 racing there are large teams involving expert mechanics, R&D engineers, materials scientists, financial managers, PR officers and probably others I can’t think of.

Are teams a problem in individual sports?

 For the competitor perhaps, in that he or she has to go through an increasingly stressful and complex regime of preparation as well as face the gruelling test of the event itself. The competition is indeed becoming a team event, with the individual sportsman becoming the front person of a team, albeit the one who has to work the hardest and take the greatest risk.

So in conclusion one could say that individuals are becoming a problem in team events while in events between individuals the co-opted teams are altering the nature of the competition. One more way in which the world is changing.

John

Author, 2077 AD

cosmik.jo@gmail.com