My unpublished (100,000 word) book “The Financial Jigsaw”, is being serialised here weekly in 100 Issues by Peter J Underwood, author
Quote of the Week: “Health is the greatest possession. Contentment is the greatest treasure. Confidence is the greatest friend.” – Lao Tzu
NOTE – If anyone would like a free updated, 4th edition, electronic copy of the complete book, I should be pleased to email a free PDF on request to: [email protected]. The book has many footnotes linking to relevant and explanatory Appendices, websites and videos.
The news this week has been dominated by the herd’s panic over Covid-19 and the cry is “we are all going to die” and for some this is true – but how many? What we do know is that around 500,000+ people die of ordinary flu each year and we have happily lived our lives without worrying at all! So, I did some of my own calculations for the potential impact of this virus assuming everyone gets it.
Here are my maximum estimates based on the almost 100,000 cases so far and this is the true and sober information from ‘The Scientist’:
https://www.the-scientist.com/news-opinion/why-some-covid-19-cases-are-worse-than-others-67160 Bear in mind that Covid-19 is highly contagious and even now, in the early stage, authorities are unable to identify patient zero in many cases like California. It is likely that the virus can persist on surfaces for many days and people can remain infectious for up to a month or so.
- Worldwide: people >65 account for 9% of the 7.8Bn global population.
- In Europe this figure is 20% as is UK
- Death rate at present for >65 is 15% approximately
- Death rate at present for <65 is 2% approximately
Thus: Estimated death rates:
>65 – 702 million at 15% = 105 million
<65 – 7Bn at 2% = 140 million
Total maximum estimated global deaths = 245 million or 3% of the global population.
World-shaking events last week have caused many commentators to forecast the future. In an interview with Germany’s Der Speigel, Dr. Doom – who correctly predicted the bursting of the U.S. housing bubble in addition to the 2008 financial crisis along with the ramifications of austerity measures for debt-laden Greece – believes that coronavirus will lead to a global economic disaster and that U.S. President Donald Trump will not be re-elected as a result:
This is sound advice about Covid-19. TPTB are lying through their eye teeth for the benefit of the money markets – they will fail: “What we really need to know about the coronavirus is how it will affect us as individuals. The picture presented by governments is sketchy at best. Driven by agendas such as preventing panic and spinning the ramifications to lessen their toll on financial markets has made what they say unreliable. The big issue facing all of us is what to expect and how to prepare. Below is a list of five crucial issues before us.”
http://brucewilds.blogspot.com/2020/03/coronavirus-five-things-we-need-to-know.html
This article is long and technical, but for those wanting to know all about the IMF’s Special Drawing Rights (SDR) it is worth a read. I have surmised in my book that an SDR-based global currency might work – apparently this is likely not the case. “From all the deficiencies concerning the SDR—it’s not a currency, there is no market, no liquidity, its essence can be changed, etc.—I think the SDR will continue to play a marginal role in international economics; at most its use as a unit of account will be expanded. In the near future I expect gold’s role in the International Monetary System (IMS) to increase. When economic growth declines, countries will (likely) devalue their currencies, and when “economic nationalism” increases, reserve asset managers will prefer to hold the only universally accepted financial asset that doesn’t have counterparty risk and can’t be printed: gold.
https://www.voimagold.com/insight/what-is-an-sdr-and-will-it-be-the-next-world-reserve-currency
Here is the link to last week: Issue 93
I will continue to provide updates this year as Brexit negotiations with the EU progress as well as offering items about Britain generally:
“Boris Johnson’s chief negotiator, David Frost, and his EU counterpart, Michel Barnier, will convene the first formal meeting for the negotiation of the future relationship between the UK and the EU on Monday afternoon. Negotiations start in Brussels but will alternate between the Belgian capital and London, with a deadline of 31 December 2020 bearing down on the two sides. Here are the key issues of contention, and the chances of them blowing the talks up in the months to follow:”
“AN ARMY of 100 negotiators will tell Brussels that Britain will not follow EU rules in return for a post-Brexit trade deal. Talks continue today with the European Union insisting the UK must sign up to common standards in order to be given preferential trading conditions.”
https://www.express.co.uk/news/politics/1250025/EU-rules-brexit-UK-trade-talks
Parliament continues its work this week. Details of Parliament’s deliberations can be found here:
UK has now left EUROPE so I will continue to comment on relevant EU – UK events:
“The EU is urging Britain to drop the “political rhetoric” around Brexit as historic talks on the future trading relationship open in Brussels. As an army of 100 officials led by Britain’s chief Brexit negotiator, David Frost, descend on the Belgian capital on Monday, senior EU diplomats are warning that if the political temperature continues to rise over Brexit in the UK it will risk smothering talks. They are concerned about the political relationship between the UK and the EU, characterised by furious language including warnings that each side will “rip” each other apart, and the second relationship – that among officials tasked with examining the deeper, drier technical complexities of disentangling and reimaging 47 years of joint laws and regulations.
“Today, however, we are seeing the impoverishing downside of decades of political centralization in both the US and Europe. Government regulations decreed from Brussels and Washington continues to stifle innovation and entrepreneurship. The EU has sought to crack down on low taxes in smaller member states. Both the EU and the US are erecting trade barriers to producers outside their trading blocs. The antidote to all of this is to decentralize. Decentralization, after all, has never been a true barrier to economic growth. If anything, the rise of mobile capital and global trade has made economic success more attainable for small states than ever before. Moreover, the implosion of the Soviet Union provides yet another example of how the disintegration of a large state can lead to far more economic progress than had been thought possible.”
https://mises.org/wire/political-anarchy-how-west-got-rich . Unfortunately those in power, who benefit from the status quo and from holding the reins of large states, are unlikely to relinquish their power without a fight.
The 4th edition of The Financial Jigsaw issued recently includes a Foreword, Preface, Epilogue and Appendices which I will publish here in advance. Next come the Appendices:
Here is Appendix VII – It has comments about Gross Domestic Product (GDP) as a measure of a country’s economic health. Perhaps it is not such a good measure and that we should adopt a more relevant set of equations which test the ‘happiness’ of a country’s people and their general mental health instead.
According to the 2019 Happiness Report, Finland is the happiest country in the world, with Denmark, Norway, Iceland, and The Netherlands holding the next top positions. The World Happiness Report 2018 ranks 156 countries by their happiness levels, and 117 countries by the happiness of their immigrants:
“This is the 7th World Happiness Report. The first was released in April 2012 in support of a UN High level meeting on “Wellbeing and Happiness: Defining a New Economic Paradigm”. That report presented the available global data on national happiness and reviewed related evidence from the emerging science of happiness, showing that the quality of people’s lives can be coherently, reliably, and validly assessed by a variety of subjective well-being measures, collectively referred to then and in subsequent reports as “happiness.”
Each report includes updated evaluations and a range of commissioned chapters on special topics digging deeper into the science of well-being, and on happiness in specific countries and regions. Often there is a central theme. This year we focus on happiness and community: how happiness has been changing over the past dozen years, and how information technology, governance and social norms influence communities.”
https://worldhappiness.report/ed/2019/
APPENDIX VII
Three of these studies about GDP percentages were conducted by foreign scholars and published outside the United States. They are listed below:
- Swedish economists Andreas Bergh and Magnus Henrekson find a “significant negative correlation between size of government and economic growth in as much that an increase in government size by ten percentage points is associated with a 0.5% to 1% lower annual growth rate.” (Journal of Economic Surveys, April, 2011)
- In an empirical investigation for the euro area, Cristina Checherita and Philipp Rother find that government debt to GDP ratio above the turning point of 90-100% has a “deleterious” impact on long-term growth. Additionally, the impact of debt on growth is ‘non-linear’. This means that as the government debt rises to higher levels, the adverse growth consequences accelerate. (European Central Bank, Working Paper 1237, August 2010)
- In The Real Effects of Debt, Stephen G. Cecchetti, M.S. Mohanty and Fabrizio Zampolli determine “beyond a certain level, debt is bad for growth. For government debt, the number is about 85% of GDP.” (Bank for International Settlements (BIS) in Basel, Switzerland, September, 2011)
- In Debt Overhangs: Past and Present – Post 1800 Episodes Characterized by Public Debt to GDP Levels Exceeding 90% for At Least Five Years, Carmen M. Reinhart, Vincent R. Reinhart and Kenneth S. Rogoff confirm that public debt overhang episodes are associated with growth over one percent lower than during other periods, and such episodes lasted an average of twenty three years. They write: “the long duration also implies that cumulative shortfall in output from debt overhang is potentially massive”. (National Bureau of Economic Research, Working Paper 18015, August 2012). Reinhart and Rogoff had made a detailed study of public debt in their book: “This Time is Different – 2009”. Furthermore when private debt rises above 160% to 175% of GDP, growth is also stunted. This argument is important since private debt in U.S.A. was 213% of GDP in 2017.
https://www.amazon.co.uk/This-Time-Different-Centuries-Financial/dp/0691152640
With the world news now immersed in the Covid-19 emergency, the coming US elections and the Democrat’s extraordinary voting results, we can be forgiven for forgetting about the on-going key issues facing our economies. Leading on from the Venezuela experience last week, here is an after-thought about how events are panning out:
Venezuela is a poster-child for the coming energy crisis
This does not necessarily mean oil production will simply slowly grind to a halt. As production limits are reached using current techniques, new techniques might be brought into play to try to mine vast reserves of more difficult resources.
However, whatever technological innovations emerge they are unlikely to be able to avert the trajectory of increasing costs of extraction, refining and processing before getting fossil fuels to market. And this means that the surplus energy available to devote to the delivery of public goods familiar to modern industrial consumerist societies will become smaller and smaller.
As we shift into a post-carbon era, we will have to adapt new economic thinking, and restructure our ways of life from the ground up.
Also, perhaps climate change has been exaggerated for nefarious reasons by TPTB?
https://www.zerohedge.com/s3/files/inline-images/2019-yir-image043.png
To be continued next Saturday
TPTB have printed mega-trillions of dollars to sustain the Stock Market and keep the Elite rolling in Dough (even more money than printed for the destructive Great Society’s FSA). When hyper-inflates strikes, TPTB will continue printing and funneling Dough to the Elite who will buy all the meager produce available. That’s a big reason the Elite built and stocked with Taxpayer money 1500 DUMBs for themselves.
Thanks Robert and I do agree that hyperinflation in the form of currency collapse has to be the end result of this dysfunctional financial system but I suspect that we will face a greater depression first.
As you say, TPTB only know how to print their money and this is how all fiat currencies have come to their sticky end. What comes after is a matter for conjecture.
245 million is how many people would die normally on earth over roughly two to three years time.
So other major considerations would be how quickly those 245 million people infected with COVID-19 would die along with any other proportionate accelerating / corresponding mortality factors. Because the global grid won’t collapse gracefully.
Interesting article even if the predictions are dire to the point of a potential Mad Max outcome.
OH dear, Uncola, I didn’t mean to make dire predictions – I rather thought that the maximum kill rate was sort of OK as we suspect that at least 50% of the world will not be affected at all. Anyway it will all pass over in due time and I am sure some good will come out of it, if only to reset this crazy economic system to a more humanitarian one.