Tuesday, June 5, 2012

How Bad Can It Get?

May 29, 2012
United Kingdom Debt Management Office: Press Release

The United Kingdom Debt Management Office (“DMO”) announces that the re-opening by syndicated offering of £4.0 billion nominal of 0⅜% Index-linked Treasury Gilt 2062 has been priced at £116.520 per £100 nominal, equating to a gross real redemption yield of 0.040%.

Here's what $100 would look like after 50 years of 0.04% real growth.

Note that I am not counting taxes.


dearieme said...

"Note that I am not counting taxes." You only get taxed on the interest bit, not on the index-linked bit. That makes all the difference, obviously.

The pension fund of the employees at the Bank of England filled its boots with Index-Linked Gilts just before they shot up in value. I wonder how I can get advanced notice of the trustees of the fund deciding to sell.

Stagflationary Mark said...


You only get taxed on the interest bit? Are you sure?

I ask because in the USA we're taxed on both the inflation part and the interest part each and every year. Painful!

Troy said...

New CBO long term projections released yesterday.

Nominal Wage Growth for Workers Covered by Social Security

2012 0.0%
2013 0.5%
2014 5.4%
2015 6.0%

So 2014 is when everything turns around. Good to know.

Real GDP (2012 dollars)

2020 20,000
2032 25,700

"$20T by 2020 or Bust!" -- good campaign slogan.

And in 20 years we're going to have $10T more productivity than now.

Assuming we have 100M more workers adding $100,000/yr in wealth-creation, no problem!

Is "medical" marijuana legal in DC???

Stagflationary Mark said...


I don't see any reason we can't get to $20 trillion in real GDP by 2020.

All we need to do is assume one thing.

Real GDP grows at its historical average even with all these exponential trend failures.

See? Super easy!

P.S. When I get the time I'll be posting this data. Nice find.

Stagflationary Mark said...

Here's the link for those interested. The data is found in the supplemental link on the left.

Anonymous said...

"Is "medical" marijuana legal in DC??? "

I don't know , but I've heard that sales of bath salts have skyrocketed in DC :


At the moment , DC politicians are only focused on eating the faces off the middle class.

We can only hope that eventually they'll turn on each other.

Troy said...

whenever somebody says something about the future and things not being horrific on a per-GDP basis, I just cringe.



I see real productivity might rise to $110,000 by 2030.

Just look at that plateau in the 1965-80 period, man.

Being generous and going with $120,000, $25.7T in productivity by 2030 is 214M jobs.

extrapolating to 214M jobs from here:


Blue bars is PAYEM. Look at it go!

Red bar is native-born age 16-65 population.

Look at it not go.

Now, my population estimation is different from http://research.stlouisfed.org/fred2/series/USAWFPNA but I'm not going to arse myself to figure out why.

Troy said...

So . . . people with 2 jobs, are they in PAYEMS twice?

(google google google)

"This series represents the number of people reported as employed by companies (so, if a person has two jobs, they are counted as two employed persons)."

I think I have cracked the code. The heavens have parted. I see The Way, and it is Glorious.

Stagflationary Mark said...


We can only hope that eventually they'll turn on each other.

They are doing it now. There's plenty of arm waving and movement. Lots of spin. No real work gets done.

It's called a square dance, lol.

Stagflationary Mark said...


If you tell two friends to work two jobs, and they tell two friends, and so on, and so on...

600 million jobs!!

dearieme said...

"You only get taxed on the interest bit? Are you sure?"

Yep, the index-linking counts as a capital gain and capital gains on Gilts are exempt from Capital Gains Tax.

Mind you, we've only held Index-Linked Gilts within a tax-sheltered account, so we pay no tax on either element. Yippee!

Stagflationary Mark said...


Wow! Lucky you.

If inflation rose to 10% or more here the taxes could really hurt.

That said, at least I'd be earning 10% to be taxed. It could be worse. For example, picture the pain dished out to those who locked in a fixed 2.7% yield for 30 years. Ouch.

I'm not predicting 10% inflation but I wouldn't bet my nest egg that it couldn't happen again.

dearieme said...

My guess is that years of erratic inflation, including years of 10% or even 20%, are likelier than Weimar inflation. I hope.

Stagflationary Mark said...


I'm right there with you. I could survive erratic inflation rather well. I could not survive hyperinflation. I have virtually no defense for it.

My paid off house wouldn't even protect me. Housing prices rise much slower than inflation overall during hyperinflation. Too much money is diverted to things like food. Sigh.