"The opposite of a sovereign debt crisis"

Being paid to look after money isn't what governments ought to be doing.

Business Insider's Joe Weisenthal has written a blogpost which is doing the rounds at the moment, in which he argues that the world is experiencing the opposite of a sovereign debt crisis:

The problems of Spain, Italy, and Greece are often pointed to as being somehow bleeding-edge, canaries in the coalmine that serve as warnings to other governments of what might happen if they don't get their acts together.

But the real story today is just the opposite. The world is experiencing whatever the reverse of a sovereign debt crisis is, as borrowing costs for government are plummeting EVERYWHERE. . .

What this essentially means is that there's a lot of money out there that sees no productive investments in the real world, and thus people are willing to stick it with entities that promise them a very meager return.

The whole piece is great, with compelling charts and stats, and is definitely worth a read.

As government yields hit zero or lower, conventional economic realities fall apart. Jonathan Portes has written about the possibility of financing a £30bn infrastructure program using just the income brought in by the now-defunct pasty tax, while Matt Yglesias has arguedfrequently –  that when real interest rates are negative, it simply makes no sense to collect taxes.

It isn't just governments facing unusual situations in a world of free money. Google's chariman Eric Schmidt was faced with the reality of his company's situation in a debate with tech investor Peter Thiel:

ADAM LASHINSKY (Moderator): You have $50 billion at Google, why don't you spend it on doing more in tech, or are you out of ideas? And I think Google does more than most companies. You're trying to do things with self-driving cars and supposedly with asteroid mining, although maybe that's just part of the propaganda ministry. And you're doing more than Microsoft, or Apple, or a lot of these other companies. Amazon is the only one, in my mind, of the big tech companies that's actually reinvesting all its money, that has enough of a vision of the future that they're actually able to reinvest all their profits.

ERIC SCHMIDT: They make less profit than Google does.

PETER THIEL: But, if we're living in an accelerating technological world, and you have zero percent interest rates in the background, you should be able to invest all of your money in things that will return it many times over, and the fact that you're out of ideas, maybe it's a political problem, the government has outlawed things. But, it still is a problem. . .

ERIC SCHMIDT: What you discover in running these companies is that there are limits that are not cash. There are limits of recruiting, limits of real estate, regulatory limits as Peter points out. There are many, many such limits. And anything that we can do to reduce those limits is a good idea.

PETER THIEL: But, then the intellectually honest thing to do would be to say that Google is no longer a technology company, that it's basically – it's a search engine. The search technology was developed a decade ago. It's a bet that there will be no one else who will come up with a better search technology. So, you invest in Google, because you're betting against technological innovation in search. And it's like a bank that generates enormous cash flows every year, but you can't issue a dividend, because the day you take that $30 billion and send it back to people you're admitting that you're no longer a technology company. That's why Microsoft can't return its money. That's why all these companies are building up hordes of cash, because they don't know what to do with it, but they don't want to admit they're no longer tech companies.

What we are seeing is two sides of the same coin. When companies like Google – which, as Lashinsky says, is one of the biggest fans of blue-sky innovation in Silicon Valley – can't find anything to spend their war chests on, then they have to keep them somewhere. Banks are, for the first time in a generation, perceived as risky, so they turn to sovereigns, thus driving yields even lower.

The problem is, since these companies are looking for safety rather than income, yields have a lot further to fall. How much will Google pay for a safe place to keep its money? We don't know. But it's likely to be a lot more than a measly 0.3 per cent.

Google CEO Eric Schmidt, who has the unfortunate problem of Too Much Money. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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No, IDS, welfare isn't a path to wealth. Quite the opposite, in fact

Far from being a lifestyle choice, welfare is all too often a struggle for survival.

Iain Duncan Smith really is the gift that keeps on giving. You get one bile-filled giftbag of small-minded, hypocritical nastiness and, just when you think it has no more pain to inflict, off comes another ghastly layer of wrapping paper and out oozes some more. He is a game of Pass the Parcel for people who hate humanity.
For reasons beyond current understanding, the Conservative party not only let him have his own department but set him loose on a stage at their conference, despite the fact that there was both a microphone and an audience and that people might hear and report on what he was going to say. It’s almost like they don’t care that the man in charge of the benefits system displays a fundamental - and, dare I say, deliberate - misunderstanding of what that system is for.
IDS took to the stage to tell the disabled people of Britain - or as he likes to think of us, the not “normal” people of Britain -  “We won’t lift you out of poverty by simply transferring taxpayers’ money to you. With our help, you’ll work your way out of poverty.” It really is fascinating that he was allowed to make such an important speech on Opposite Day.
Iain Duncan Smith is a man possessed by the concept of work. That’s why he put in so many hours and Universal Credit was such a roaring success. Work, when available and suitable and accessible, is a wonderful thing, but for those unable to access it, the welfare system is a crucial safety net that keeps them from becoming totally impoverished.
Benefits absolutely should be the route out of poverty. They are the essential buffer between people and penury. Iain Duncan Smith speaks as though there is a weekly rollover on them, building and building until claimants can skip into the kind of mansion he lives in. They are not that. They are a small stipend to keep body and soul together.
Benefits shouldn’t be a route to wealth and DWP cuts have ensured that, but the notion that we should leave people in poverty astounds me. The people who rely on benefits don’t see it as a quick buck, an easy income. We cannot be the kind of society who is content to leave people destitute because they are unable to work, through long-term illness or short-term job-seeking. Without benefits, people are literally starving. People don’t go to food banks because Waitrose are out of asparagus. They go because the government has snipped away at their benefits until they have become too poor to feed themselves.
The utter hypocrisy of telling disabled people to work themselves out of poverty while cutting Access to Work is so audacious as to be almost impressive. IDS suggests that suitable jobs for disabled workers are constantly popping out of the ground like daisies, despite the fact that his own government closed 36 Remploy factories. If he wants people to work their way out of poverty, he has make it very easy to find that work.
His speech was riddled with odious little snippets digging at those who rely on his department. No one is “simply transferring taxpayers’ money” to claimants, as though every Friday he sits down with his card reader to do some online banking, sneaking into people’s accounts and spiriting their cash away to the scrounging masses. Anyone who has come within ten feet of claiming benefits knows it is far from a simple process.
He is incredulous that if a doctor says you are too sick to work, you get signed off work, as though doctors are untrained apes that somehow gained access to a pen. This is only the latest absurd episode in DWP’s ongoing deep mistrust of the medical profession, whose knowledge of their own patients is often ignored in favour of a brief assessment by an outside agency. IDS implies it is yes-no question that GPs ask; you’re either well enough to work or signed off indefinitely to leech from the state. This is simply not true. GPs can recommend their patients for differing approaches for remaining in work, be it a phased return or adapted circumstances and they do tend to have the advantage over the DWP’s agency of having actually met their patient before.
I have read enough stories of the callous ineptitude of sanctions and cuts starving the people we are meant to be protecting. A robust welfare system is the sign of a society that cares for those in need. We need to provide accessible, suitable jobs for those who can work and accessible, suitable benefits for those who can’t. That truly would be a gift that keeps giving.