{"id":23581,"date":"2017-04-14T14:28:00","date_gmt":"2017-04-14T19:28:00","guid":{"rendered":"http:\/\/olduvai.ca\/?p=23581"},"modified":"2017-04-14T14:28:00","modified_gmt":"2017-04-14T19:28:00","slug":"how-heavy-is-this","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=23581","title":{"rendered":"How Heavy Is This?"},"content":{"rendered":"
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How Heavy Is This?<\/a><\/h3>\n<\/header>\n
\n

\"\"<\/p>\n

Here is a glass of water.\u00a0You\u2019re holding it.<\/p>\n

How heavy is it?<\/p>\n

The answer is: the actual weight probably doesn\u2019t matter. It\u2019s just a glass of water. What matters is how long\u00a0you hold it.<\/p>\n

Hold it for a minute, it\u2019s no problem. An hour and your arm will ache. A day and your arm will feel paralysed.<\/p>\n

The weight doesn\u2019t change but the longer you\u00a0hold it the heavier it becomes and the greater the probability you\u00a0finally just have to put it down or risk dropping it altogether.<\/p>\n

Now, take a look at this graphic which I nicked from Hugo Salinas:<\/a><\/p>\n

\"\"How Heavy Is This?<\/p>\n

Betting against\u00a0the ability of governments and their central banks to keep holding the proverbial glass of water has been a losing proposition for a looooong time.<\/p>\n

Now, simple math tells us\u00a0that although this debt growth is pretty damned fantastic it needn\u2019t be a problem if income growth has kept up with it. Income, after all, services debt.<\/p>\n

Since income growth hasn\u2019t kept up clearly that\u2019s not the case. So what is it?<\/p>\n

The answer lies in this chart which shows the cost of capital across the major economies of the US, the EU, the UK, and Japan.<\/p>\n

\"\"<\/p>\n

When the cost of debt servicing is low or zero, then the size of debt really doesn\u2019t matter much. It\u2019s as if the glass of water has no weight at all.<\/p>\n

Now here\u2019s something worth pondering\u2026<\/strong><\/p>\n

On an historical timeframe we\u2019re at the tail end of the long term\u00a0debt-cycle\u2026 a cycle that typically lasts between 50 and\u00a075 years.<\/p>\n

Today, bonds are more\u00a0sensitive to price movements than at any other time in history and the yield achieved on them so low that it doesn\u2019t take all that much for a positive return (just) to turn into a loss.<\/p>\n

Now take a look at this:<\/p>\n

\"\"<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

How Heavy Is This? Here is a glass of water.\u00a0You\u2019re holding it. How heavy is it? The answer is: the actual weight probably doesn\u2019t matter. It\u2019s just a glass of water. What matters is how long\u00a0you hold it. Hold it for a minute, it\u2019s no problem. An hour and your arm will ache. A day […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[49,109,8785,124,195,4085,2889,15116],"class_list":["post-23581","post","type-post","status-publish","format-standard","hentry","category-economics","tag-balance-sheet","tag-capital","tag-capitalist-exploits","tag-central-banks","tag-debt","tag-debt-cycle","tag-demographics","tag-income-growth"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/23581","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=23581"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/23581\/revisions"}],"predecessor-version":[{"id":23582,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/23581\/revisions\/23582"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=23581"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=23581"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=23581"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}