Friday, 23 September 2011

08:25 – Well, it’s official. I just read an article that says Greece’s finance minister says there are three possibilities, one of which is that Greece will default and pay off creditors at 50 cents on the euro. The article didn’t mention the other two possibilities, but my sources tell me the first is that Greece will default and pay off creditors at one cent on the euro, and the second is that Greece will default and pay off creditors at zero cents on the euro. I’ll let my readers decide which of the three is most likely.

There have been millions of words written about the euro crisis, but few of them about the root cause of the problem. As I’ve been saying for 20 years or more, European cradle-to-grave socialism simply will not and cannot work. The reason that Europe is bankrupt is that the costs of these social programs are coming home to roost, paid for with borrowed money. As bad as the sovereign balance sheets of Europe look now, they’re nothing compared to what they would be if unfunded pension and healthcare liabilities were being shown at their actual present values.

Making matters worse, the horrible demographics of Europe ensure that the downward spiral will continue. Europe’s population is old and getting older. Fifty years ago, for example, German women bore an average of something like 2.5 children each. That figure is now down to something like 1.5 children each, not even replacement level. The rise in government employment is equally ominous. The ratio of productive workers to retirees and government workers is falling fast, and that trend is accelerating. There’s simply no way this can continue.

Which reminds me of last night. We were watching an episode of Desperate Army Housewives (or something like that). One of the characters was a 30-something nun. I commented to Barbara that that must be the youngest nun on the face of the planet. She said that was ridiculous, that there must be plenty of young nuns. I said I thought the average age of US nuns must be something like 70 years old, and she said that was ridiculous. So I did a quick Google check and found that the average age of US nuns is currently about 77 years old. And that’s Europe’s problem. It’s full of 77-year-old nuns.

10:43 – Someone asked me what I’d estimate actual European debt loads to be if “hidden” liabilities were included. That’s impossible to answer with any accuracy, for several reasons. First, because much of the data remains hidden. Second, because events can cause huge changes in the underlying data, almost always for the worse. Third, because any net present value calculation has to make many assumptions, some of which inevitably make the error bars larger than the calculated values. If someone forced me to answer that question for, say, Greece, I’d say that the nominal sovereign debt load is currently around 1.5 times GDP (which itself is falling, thereby increasing debt as a percentage of GDP), but the actual debt load including bank and personal debt as well as unfunded liabilities (the biggest chunk) is probably around 15 times GDP. The same factors apply to the debt loads of the US and other countries, albeit at considerably different multipliers.

14:12 – If you’re wondering why I haven’t commented on the recent news articles about neutrinos traveling faster than light, it’s because I don’t believe it. As Sagan said, “Extraordinary claims require extraordinary evidence”, and we don’t yet have that evidence, as the original investigators were the first to admit. In fact, they presented their data as something they themselves didn’t believe and asked other scientists to help refute it. If it turns out that this phenomenon is reproducible, much of what we think we know about physics goes out the window. It is unlikely that scientists have been that wrong for so long, so the inescapable conclusion is that this phenomenon almost certainly does not actually exist, but is a result of experimental error.

Actually, although I don’t believe they will be, I hope these scientists are proven right. What an exciting world it will be if FTL is real. Perhaps one day we really will learn how to send ships through wormholes, and we can begin colonizing first the galaxy and then the universe.