Hi,
Good counter. I shall try to explain how we may “make or do more”. Please bear with me on this. There is nothing new here, except that my recent area of interest in crypto has brought this full circle from my experiences of the 1970s and 1980s.
Crypto is all about new currencies, but if we are to learn anything about crypto useful to us as individuals, it is a deeper understanding of what is lovingly referred to as the phenomenon of “impermanent loss” in providing liquidity pairs to extreme promises of annual APR figures in the tens of thousands.
I failed to understand this term a few months ago, and it was the extraordinary use of the word “impermanent” in describing the phenomenon that took me a while to understand, until I understood 2 or 3 examples of it relating to my own portfolio. Like many things in our wonderful world of finance, the use of this word relating to crypto currencies I now loosely describe as “smoke and mirrors”. On a cynical day I may refer to it as “snake oil” or just downright misdirection.
All those snake oil salesmen are doing in crypto is extending what has been practiced for centuries in the treatment of fiat currencies by historical governments, be they socialist or capitalist. As my wife sometimes says “same sh_t, different smell”.
It relates to debasement of currency. And the behaviour of the fiats is no different than the behaviour of the cryptos. They lose their buying power over time. But the cryptos do not yet have the kudos or “backing” of jurisdictional governments to make their use or misuse “acceptable” to the public.
I refer, of course, to the stealth tax called inflation.
First agreement with your macroeconomic figures. I broadly agree with your figures, and provide links to the information sources.
UK population over 18 79% of 68.5M = 54.1M
Pay everyone £12K per year. Cost is 54.1M x £12K = £649Bn (or 86% of your estimate of £720Bn, but what is 14.5% between friends a mere year’s worth of difference?). Close enough.
68.5M current x 0.79 = 54.1M
Second - Govt debt is £2,223 Bn and last year’s addition was £324Bn, or 15% of GDP
• UK government debt and deficit - Office for National Statistics
• UK general government gross debt was £2,223.0 billion at the end of the financial year ending March 2021, equivalent to 103.6% of gross domestic product (GDP).
• UK general government deficit (or net borrowing) was £323.9 billion in the financial year ending March 2021, equivalent to 15.1% of GDP.
Third - deflators since 1978/1979
The figures show that GDP has grown by 6.0% per year compounded over 42 years using the compound formula A = P(1+i)^n where A = £2,223Bn (2021), P = £192Bn (1978), and n = 42 years.
So it’s time for the government to repeat the practices of the 1970s (not just our government - the USA has printed 40% more USDs (M2) in the past two years than all USDs in existence prior to 2000).
Analysis of recent gloom and doom news.
Pending world war 3 (blame historical enemies, sanction them, get the public on your side, tell them that times are going to be harder) - prepare the public to be on the side of their government - there is a foreign enemy to beat here and instead of moaning about how useless the government is, the general public decide to support their governments’ decisions to “kill the enemy”. Note here that whether the enemy targets are real or imaginary depends on the success of the preparation plan.
The pandemic has created real shortages of goods. Great excuse for price rises.
Wage inflation must follow so that the citizens are not starved to death.
Proposed solution for ultimate citizen worship of their government
Announce a universal basic income to cope with inflation (the stated enemy of the state caused by world events such as the pandemic and the pending WW3)
Implement the UBI
Here is what a 15% inflation per year looks like in 10 years time.
Current GDP £2,223bn, GDP in 10 years when inflation is 15% per year = £8,993bn.
Maintain a continuous deficit of £650bn per year - this does not take into account the current £192bn spent on current income support, housing support, or other taxes that would be zeroised with a UBI), so let’s say the net cost is something like £450bn, and is held static for 10 years. £450bn is 20% of current net debt, but is only 5% of net debt in 10 years’ time.
Additional tax revenue? Take your pick. If you can convince the public that they will all receive a minimum basic income regardless of whether they work or not, how can the majority complain? Increase VAT to 25% more like the EU, move the basic tax rate to 50% for any income over £12K per year. The important element here is that the use of magic money can continue to hoodwink the majority of citizens as it has done for 5,000 years since currencies began, and be thanked for it. Job done.
Summary
Note that this situation is simplified from reality but shows how “impermanent loss” can be applied to a currency that its citizens relate to as “static” in terms of value, but in fact has eroded real purchasing power 1,000% over the past 42 years and 10,000% over the past 100 years.
I rest my case
(although latterly concentrating mostly on Forensic Contractual Claims and Litigations)
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