Farmer Diaries

Forty trillion dollars is a lot of money! Even on planet earth its a lot of money.  The problem is that America is not the only one borrowing, moreover, more than three trillion dollars worth of maturing bonds have to be refinanced.  That's a lot of money. The other factor that is important to understand is that America is not the only one borrowing, but it is the only one that is trying to kill its trade deficit.  What American policy makers fail to understand is that a trade deficit is basically a situation where you get stuff and you give sellers little pieces of paper that they keep in safes.   About 40% of all new treasury bonds are purchased by foreign holders.   The two largest holders are the Japanese government and the Chinese government.   The latter is reducing its holding quickly because it needs liquidity.  The reality of China that most don't seem to understand is that it is quickly aging and about 25% of its economy is dis...

An often asked question is, could the US dollar's hegemony be at an end?  Could another method of exchange be used, and could commodities be priced in things other than dollars?  The short answer is YES, the long answer is IT COULD take a long while. The problem is that the dollarisation of the planet for trading has been in place for nearly five decades.   The convergence of very specific factors (a) the American economy eclipsed the rest of the world in the 1950 and 1960s (gold was still an important benchmark then).   (b) A large percentage of trade was directed to the United States, and (c) many currencies were not freely exchangeable or very liquid.   The only real debt markets were the UK (the old standard of exchange) and the United States.  In short it became "convenient" to price things in US dollars. The first American President to weaponise the US dollar was Bush after the World Trade Center attack.  People forget that once th...

OK first,  I have no skin in the game, but what is remarkable is that I had completely understated the amount invested in the AI sector.   To give you a sense of how large the investment in the sector is, the Bank of England in a recent study indicated that for AI investment to meet the current stated rate of return, the entire sector would need to generate nearly $2.5 trillion in revenues per annum.  To give you a sense of perspective, it's equal to 140% of the total revenues from the global tech sector.  BTW, that's a lot of money! Today, right now, (and from the same study) corporate executives use AI for about 100 minutes per week, they pay small amounts and have generally indicated that they have not seen any real value to the product.  Still they pay the minimum (a few hundred dollars a year).  The second group are small businesses that have been able to scale up their operation using AI instead of human staff.  Again, not nothing, but not a...

There were two American icebreakers, the Polar Star and the Healey.   The first one has been in drydock for over three years, but the work has now stopped, it has now been determined that the 50 year old hull is simply not up to the challenge.   The Healey was supposed to be the answer, in 2024 it suffered from a massive fire, and limped back to port. In its recent sea trials it had a massive engine room fire. It is not clear at this stage if the vessel can be rehabilitated.  In short, the US navy needs new icebreakers. So far so simple, one tiny fly in the ointment, there are no US shipyards that are currently able to build a new military vessel (the shipyards that could, are booked until at least 2031).   The solution is to purchase new hulls from other nations.  The problem: the two shipyards that have the ability and capacity to build such vessels are in Canada and Finland.   Not exactly good friends right now.  The first is obv...

It has been evident that the era of scientific achievements has now passed, it has taken two Republican governments to seal the faith of science as a cornerstone of the American system. Don't believe me, look at who leads the nation today; lawyers and idiots – think Robert Kennedy or the recent candidate to the CDC – obvious examples of people who are driven by ego and "truthiness" rather than the cold reality of science.   The seven stages are: The Age of Pioneers: Small, energetic nations burst onto the world stage with high courage, dynamic leadership, and a strong sense of collective purpose. The Age of Conquests: Territorial and political expansion through military might, building upon the momentum of the pioneer phase. The Age of Commerce: Great enterprise and trade flourish, bringing massive influxes of wealth and transforming the nation into a global economic hub.The Age of Affluence: Wealth peaks and comfort becomes widespread; however, greed begins to replace ...

That's how much it costs now for a big mac, a french fry and a coke.   In 2019, the same meal would cost $7.50.  What happened? The reality of the fast food industry in America is fascinating, the country is awash with fast food restaurants and low value chains.  The reality of the game is two fold: first the corporations that run the fast food industry have run against a fundamental large number problem – there's simply no room for expansion.   The franchise that operates new restaurants cannot find "interesting opportunities" which translates into areas where there is a shortage of supply.  In order to keep their stock prices up they have resorted to increasing the price of ingredients that the franchises have to purchase (including services).   Over the past five years, despite virtually no additional outlets, and stagnant sales figures, companies such as McDonald have increased margins through higher prices, which translates into a 160% increase in the ...

First, its been obvious for weeks that the stories around the deterioration of the Washington Reflection Pond were completely made up but a morally bankrupt administration.  Now the head of the Justice Department and the head of the department of interior are fighting about who is more at fault, especially now that it has been proven that not only did the Park service testimony was that there was no evidence of willful destruction.  In addition, those who have been accused of damaging the reflection pool are now seeking legal redress – it's going to cost a few people some serious coin. Now the head of the department of health, an anti-vaxxer had a total meltdown on television over the weekend, where he accused the interviewer of not being a scientist…which is true, but he is not a scientist either.  The public health crisis, the complete stupidity of those being sent up to the Hill for confirmation.  The person that was nominated to head the CDC had never heard or rM...

I don't care about football.  However, I do know one thing. Inside the European football union (whatever they call themselves) they never agree to anything, ever.  When it was announced that FIFA was selling out to investors the rights to the world cup for $20 billion, the reaction was almost immediate.   55 members said that if there was a sale, they would not participate in any world cup event, ever!  It took the 55 members exactly one hour over a Zoom call to agree to this. That dog don't hunt – as my American friends would say

In my opinion, the biggest change to the world over the next five years will be the application of AI to government services.  Let's be honest here, Governments provide services, much of which are pushing bits of paper from  A to B.   A lot of the "work" is a reflection of a world before computers.   If an accountant, trader, banker and a lawyer can be replaced by AI then civil servants should be the first to go.    From my experience (and it has been limited) the vast majority of civil servants are there to collect and collate information, and disseminate the results of new rules and laws as drafted by politicians and senior civil servants. In a nut shell, probably in excess of 40% of current civil servants could be replaced by AI.   Now, the tricky part, as the US government has recently discovered, is who are the essential bits and who are the redundant bits.  Part of the problem is identifying the right one, and again this is wh...

It has been the most successful investor strategy over the past 30 years, but like everything it must come to an end.  For 30 years, hedge funds, private equity funds and other investors have been borrowing in Yen and investing all over the world.   The truth was that for the past 30 years the zero interest rates and the slowly depreciating Yen allowed the financial community to borrow massively (aka leverage) and generate higher returns.    How does this work?  Well you borrow $1 million in the tokyo market, effectively you borrowed Yen 100 million at a rate of exchange of 105 to the US dollar.  The interest rate on this loan is 1.3%.  That's the start, the risk is that the Yen rises, that's it.  You take that money and invest it at 4% (buying US treasury 10 year bonds for example), and you take the yield and declare it as your profit.   Now let's say that you do this for $100 million, and that you used $2 million of your own capit...

The new American CPI numbers came out yesterday and the news is excellent, inflation is down 0.5% which no one expected!    That's the good news, now the not so good news.   Oil prices are stripped from that dataset, its normal, fuel prices distort the "economic indicator".  However, the CPI figures have to be taken with a grain of salt (always mister negative – as the title indicates).  The 2020 pandemic led to massive consumer price increases.  What no one noticed is that since then prices have not fallen back, as a stupid example. In 2019, a brick of espresso coffee was £2.35.  Last week the same brick of espresso coffee was £6.75. Same brand, same size – almost three times as expensive.   Now, the point is as follows, and it's important, Americans have for years replaced revenues to meet their expenses with savings and debt.   This is not a secret to anyone in the world.   Americans have more debt today and less s...