It is clear that you and I have a very different understanding of how money is created and moves around the world’s economy. So I will pick on just one economy to be more specific. However I want to see what your understanding of the present monetary system that is used around the plant.

Mine is that about 320 years ago William and Mary (king and queen of England) were running out of gold to finance England’s empire plans. So they contacted some local money lenders to see if they could help. And so was born the first central bank in the world, the bank of England. It was 20% owned by the monarch and 80% by the money lenders. This was the birth of the fractional reserve monetary system. If you think this is just a conspiracy theory, check Google.

Japan is heading for a full-blown solvency crisis as the country runs out of local investors (they are dying off). There present government debt is around 10 times the annual budget, Olivier Blanchard, former chief economist at the International Monetary Fund, said zero interest rates have disguised the underlying danger posed by Japan’s public debt, likely to reach 250pc of GDP this year and spiraling upwards on an unsustainable trajectory. So when the next generation inherits their parents JGB’s they are likely to cash them in as opposed to roll them over.

As for pensioners I suggest you check out what the state pension is to see if you could live on it. Almost zero returns on our savings is making it very hard.

Chri

The Bank of England did indeed start out in private hands, but was nationalised in 1946. Unlike the Reserve Bank of Australia, which has always been entirely in the public sector.

I'm guessing you believe that governments set the monetary base and fractional reserve banking ensures that the total money supply is some multiple of that. It's a common myth, but completely wrong. How much banks lend has nothing to do with the reserves they hold; it depends on two things: the Basel capital requirements, and how much profitable lending opportunity they find.

To find out more about how money is created, read the explanation on the BoE's website:
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

Japan is not heading for a solvency crisis at all. Like Australia, Japan has its own floating currency. Japan's public debt is all in yen, so it doesn't pose any danger to anyone. Even if they run out of bondholders willing to lend to them, they can always borrow from the BoJ. If in the future the people spend more of their money then Japan will have to tighten its fiscal policy. But that's of little relevance to the current situation.

As for the pension rate, I understand it to be $873.90 per fortnight, or $658.70 per fortnight for couples. Not great, but not terrible either, especially as most pensioners already have their own house. And of course most pensioners supplement it with super.

There are certainly things that governments can do to improve the life of pensioners, but ensuring there's a usury to keep them rich would be very bad policy.

Hi Again
First, thank you for the correction regarding ownership of the central bank of England along with many others.

So money supply no longer any connection to that which is on deposit, is that not likely to cause massive inflation? I did read the small print regarding a term deposit I have with the ANZ. It turns out that ANZ is a company and I am an unsecured creditor if it goes bust. But I digress.

So as I understand it government debt totals around 200-250 trillion US$ worldwide, who is it owed too? Also you don’t believe Olivier Blanchard (ex IMF chief economist) when he says Japan is heading for serious financial trouble. Am I also to understand, that all this fiscal expansion which is inflating many assets beyond the reach of ordinary working folk is not a problem?

My concern regarding pensions is not for people like the baby boomer generation, but the one my daughter is in, many will never own a home, and rents just keep on rising.

Chris

62 Billionaires Own Half the Worlds Wealth
http://www.theguardian.com/business/2016/jan/18/richest-62-billionaires-wealthy-half-world-population-combined

Private Central Banking is a Ponzi Scheme.
http://www.whatreallyhappened.com/WRHARTICLES/fedponzi.php#axzz4J0ZVvQDn

Some good financial videos here.
http://www.youtube.com/channel/UC1rnp-CySclyhxyjA4f14WQ

All the financial data coming out of the US is garbage.
- In fact NOTHING that comes from the US can be trusted anymore.
http://youtu.be/F29bNPN8FTE

Lefty One,
What no one takes into account is that both QE (printing)
and fiddling with interest rates are not working.
These are the main tools used to "adjust" the economy.
The economists are only now starting to realise that these tools no longer work.

It all comes down to the cost of energy.
It has disturbed the whole economic structure.
Oil has gone from US$20 a barrel in 2000 to US$45 today after a
period over US$100 and US$50 is is too low to be profitable.
Coal use is declining due to peaking and political manipulation.
Coal production appears to have peaked worldwide and the alternatives
except gas are very much more expensive.
Until we can fix the energy system, growth will keep declining worldwide.
The money men are now spectators.

Aidan believes that the government debts will never be repaid and he is probably right.

Chris,

It depends what you mean by "massive inflation". The money supply is set by monetary policy (mainly setting interest rates, though it can also include QE) and fiscal policy. Too much money created is likely to result in too much inflation, but that can be counteracted by raising interest rates so that less money is created.

What it won't result in is hyperinflation, aka currency collapse. That is usually the result of governments fixing the currency's value against gold, or the US dollar (like the recent Venezuelan hyperinflation) or another foreign currency. When a currency is overvalued, fixing its value prevents the market from correcting it, and the currency will keep on exporting too little and importing too much until either the government devalues the currency (highly inflationary but not catastrophic) or the government runs out of money so suddenly loses the ability to maintain the currency's value.

Countries with floating currencies are usually completely immune from hyperinflation, but it can still occur if the country has to make large foreign currency debt repayments. The problem is not applicable to Australia, as the Australian government only borrows in Australian dollars.

Yes, you're an unsecured creditor. If your bank went bust, the government would give you some protection, and AIUI you'd be ahead of the bondholders in your claim on the bank's money, but there is still some risk.

Government debt is owed mainly to banks, but also to other corporations, individual bondholders, and other governments.

Fiscal expansion would be a problem if it were inflating many assets beyond the reach of ordinary working folk. But it is not. Inflation has been consistently low in Japan and is low globally. Fiscal contraction is what really disadvantages ordinary working folk.

And the superannuation system has been in place long enough that generations after yours should be able to rely on it to supplement their pensions. Although of course there are some unaffordable locations.