This week I got to see Sam Fender play live, one of my favourite music artists. It was a real joy to spend the evening with Mrs Ellison and some good friends, listening to live music again after many events were put on hiatus because of Covid. I like to call Fender the Geordie Springsteen and find his songs thought provoking, inspiring and simply perfect for a sunny field and a beer. In the title song for his second album Seventeen Going Under, he quotes someone saying, “the debt, the debt, the debt” so in part tribute to Mr. Fender, that’s the target for these bullets:
1. The Debt
A few weeks ago I said pay attention to Japan’s debt. Their debt to GDP (income) ratio is over 250%, meaning that if the Japanesse government spent nothing for 2 and a half years, and took 100% of the income created by its citizens in that time through tax, they’d just about have enough to pay it back. Clearly that’s never going to happen and it’s an impossible situation that will simply end up with Japanese people paying the price in one way or the other. The thing I didn’t mention is that over the last 200 years, of the 52 countries that have ever gone above a debt to GDP ratio of 130%, 51 of them have defaulted on that debt, wiping out any savings citizens may have in that country. Maybe it won’t happen in Japan, maybe that’s the 1 out of 52, but below is the most worrying chart. The US and other major European nations are all over the same ratio of 130%.
No wonder the European Central bank held an emergency meeting the other week. Surely the central bankers will sort it out. Check out this clip from ECB President Lagarde about how she plans to bring down the enormous balance sheet and judge for yourself. I just can’t see how they can get out of this situation, and neither can they, because their money system based on debt is broken. She admits her son owns some crypto though, I wonder why?
<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Watch Christine Lagarde of <a href="
25, 2022</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
2. The Debt
Nation state level debt is bad enough, but there is consumer debt all over the world too. UK household debt to GDP is over 86%, the US is 78%, and Switzerland top the list of countries at 130%. The stark thing here is that every country I’ve looked at has seen household debt increase dramatically over the last 50 years, peaking in the 2008 financial crisis and barely budging since. Back in 1980, the UK household debt to GDP ratio was only 30%, but since then we’ve all been encouraged to take on cheap debt to buy houses. No wonder housing has become unaffordable for many and the answer can’t simply be to build more houses than there are people to live in them. A debt fueled monetary system is one that is unsustainable, creating inequality and burden for future generations.
Households Debt to GDP - Countries - List (tradingeconomics.com)
3. The Debt
In the crypto world, debt is wreaking havoc too. Exchanges and custody businesses that offered attractive interest rates to hold your crypto “safe” for you, have been taking on debt, leveraging their businesses with risky trades or simply running illegal ponzi schemes. When Luna blew up, owning billions to other exchanges, one by one they started to fall. 3 Arrows Capital and Celsius being some of the latest casualties, but the real victims are the people who bought the story and stored their crypto assets with them in the first place, who’ve now lost everything. @DylanLeClair who writes for Bitcoin Magazine is doing a brilliant job at exposing some of those exchanges most at risk, so give him a follow and learn how to self-custody. One of the great advantages of Bitcoin is that you don’t need to trust another entity to hold your Bitcoin for you if you don’t want to.
The other part of the tribute to this letter is reserved for my newest subscribers. One of which, I’m always reminded of when I listen to Sam Fender, because he’s a massive music fan too and a good Geordie boy. You know who you are, thanks for subscribing. And if you’re new here, don’t be afraid to subscribe yourself, so you never miss an issue (you can’t always rely on the LinkedIn and Twitter algos).
Peace, love and Bitcoin,
Rob
Incisive and informative writing Rob. You have yourself a new Geordie fan. Looking forward to more ‘Bullets’ soon!