CLOG: FRIDAY 25-07-11.
CAPTAIN’S LOG: FRIDAY, 22-07-11.
I still can’t find an answer to this question: if all of Europe, including UK and even more so the great US of A, is in huge debt, from whom have we all borrowed the money? Can it really ALL have come from China? Is it not possible that we all contribute to the IMF and such like organisations who then lend it back to us at an increased rate of interest?
It may be recalled that the “old lady of thread-needle street” came up with something even better than printing money – Quantative Easing (QE-1?). Now money is generated at the touch of a keyboard. I can’t understand it but it may work something like this. Generate a lot of “i-money” where I stands for “imaginary” (or virtual). Then lend this to your chums at the “more respectable banks” (this is a relative expression: perhaps they could be described as “i-banks”). These i-banks quickly pass the “i-money” down through a chain of banks of decreasing respectability (probably quite untraceable, in fact), each i-bank pausing only to deduct interest and increase the interest rate. This process is repeated down the food chain until the interest rate approaches that being offered by countries like India and Brazil. Then the tricky waiting period begins. If the investments in India, Brazil etc. bear fruit (hopefully not just bananas), the reverse sequence of events takes place with the invested principle and, with a bit of luck, a small surplus returning to the “old lady”. At another touch of the keyboard, the Principle can then be returned whence it came, namely into the ether. “But surely it never existed in the first place?” do I hear. Well, there must be a great temptation to breathe life into it, now that it has returned, safe and sound, to its mother with a little somethin (REAL) in addition. To complete the parable, I wonder how the real money (whatever that is, these days) would feel, if it ever found out what was really going on? Now to think the unthinkable – India, Brazil, etc can’t or won’t continue to pay exhorbitant rates of interest. After all the i-deductions have been i-deducted (in both directions), only a trickle returns to Threadneedle St. What to do? There is not much choice in the matter. Try QE2 but if this fails, then bomb Libya!
Cap’n Jim.