We will not comment on the situation in Crimea. We know nothing about it. All we know is that yesterday, it gave the markets the heebie jeebies. Dow down 153 (back from a 250-point sell-off). Gold up $28.
We also know that the Fed’s zero-interest rate policy and its $4.1trn balance sheet are a standing invitation to trouble. What form that trouble takes will be determined later.
Meanwhile, the mountain of debt gets bigger and bigger – aiming for $20trn of official debt by 2020. As it gets bigger, it weighs on the economy. Several studies have shown that debt slows down economies. The reason is fairly easy to see.
Remember that hamburger you ate in 2007? You enjoyed it then. The hamburger joint made money. The cook made money. And the economy registered a boost to GDP.
But if you paid for it with a credit card, the transaction may still be incomplete. You may still be paying interest on the burger. That means less money for you to spend and less for others to earn. And this drag on the economy won’t go away until you’ve paid the debt off.
In monetary terms, the money supply expands when the credit card loan was made. It contracts when it is repaid. Banks create money out of nothing when they make loans. When the loan is repaid, the loan goes back whence it came.
As economies slow down, it becomes harder and harder to keep up with the debt. More and more of current output must be used to satisfy past consumption. By way of comparison, the US government has ten times as much debt-to-GDP as Russia. In this sense, if no other, the US has ten times as much trouble in store.
But again, we await developments.
We spent all day yesterday driving back from Aiken, South Carolina.
“You’re not going to try to drive back,” said the clerk at the Willcox Hotel. “There’s a huge snowstorm coming. The whole east coast is going to get hit hard. You won’t be able to make it. Better stay here another day.”
But we were getting a little restless. Not that Aiken is not delightful and charming. But we had been there a week. Elizabeth had won her blue and yellow ribbons. It was time to move on, snow or no snow.
So, we set off early in the morning, keeping an eye on the weather via our smartphone. It was sunny and warm in South Carolina; hard for us to believe the weather could be so much worse up the coast.
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We dallied, taking small roads over to Columbia, in order to get a better idea of the countryside. What we discovered was that it was poor. The earth was poor; in some areas there was barely any topsoil covering the white sand. People were poor too; many of them lived in dilapidated trailers or rustic shacks. Often, there were the husks of automobiles and trucks decorating their yards and gardens.
Then, almost as soon as we got on the highway, the foul weather caught up to us, first a light rain, then, a heavy rain, then, freezing rain, and then, as we entered North Carolina, sleet, and finally snow.
We kept up a tolerable pace. Our plan was to continue going north as long as possible. If the snow became too heavy or the road too icy, we would put in at a motel in Greensboro, or Durham, or, if we made it that far, Richmond.
The thing that bothered us was geography of the route. There is a vast pine forest that envelopes US 85 as it goes through North Carolina and Virginia. If the storm were to hit us hard there, we might not find a port to put into. Signs were warning travellers. Cars and trucks were returning home. The roads were becoming more and more quiet.
Still, in a light snow, we set out from Durham hoping at least to reach Petersburg or Richmond before we got walloped.
Our wheels, a Ford F-150, do not have much traction unless the truck is loaded. Normally, it slips and slides readily. But the longer we kept chugging along, the more ice clung to the chassis and the heavier it got. Soon, the road was covered in snow and ice, but we just kept moving along without much trouble.
By the time we got to Richmond, it looked as though we had reached the end of our travels for that day. Traffic was still thin, but there were many accidents. Several cars had hit the guard rails, a few more had slid off the road, and one tractor-trailer, pulling what looked like a gasoline tank in tow, had jack-knifed just south of the city.
But just when we began looking for a Motel Super 8, or a Sleepy Time Inn, the sky brightened enough to give us hope. Besides, the smartphone reported that the snow had stopped in Washington. If we could just get clear of Richmond, we reasoned, it might be clear sailing.
As it turned out, getting clear of Richmond was a long, slow slog, but it eventually worked out more or less as we had hoped. We arrived at the Washington beltway around rush hour. But there was no rush. Federal employees had deserted their posts at the first snowflake.
The Washington Beltway was as empty as we’d ever seen it. And with the cops busy with so many accidents in the area, we felt a strange liberty. What should we do? Rob a liquor store or just break the speed limit?
In the event, we hastened home…
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