[donshan]

This post is based on the excellent post by MrBill in this Forum’s topic on “ A Survey of the World Economy” taken from “The Economist, and all those who posted comments there. I learned a lot from you, and now want to pose some questions and I hope to learn more, and learn the fallacies in my own ideas too!

I am asking these questions based on the premise that ” Our foreign debt represents a claim on the production of the real goods and services from the US economy.”

What real “tradeables” can America produce in surplus beyond our own needs for export without creating severe domestic problems?

How do we avoid becoming the “Servants to the other Countries holding our debt?” These “tradeables” must be things the foreign debt holders want and will trade for at acceptable terms. In principle foreigners could be buying US stocks, real estate, and our exports, but they are not, at least not enough of them. So the US is borrowing about 50% of the world’s savings.

“The Rich rule over the poor, and the borrower is servant to the lender”- Proverbs 22:7

Anyone who has gone into debt and then had to write the checks each month to make the payments understands this ancient piece of wisdom. If the debt becomes too high and 100% of available income is needed for debt service I think one can revise the proverb to become:

“ The borrower is slave to the lender”.

If you work 24/7 and your whole output goes to your master are you any different than a Roman slave was?

In his October 9, 2005 Market Watch commentary Marshall Loeb wrote “ How the boom of 2006 ended- we should have seen it coming”. It is a discussion of debt leading to recession.

He said in part,

“We were living beyond our means, saving absolutely nothing, spending more than we were earning -- like there was no tomorrow.

Most Americans were doing that. Worse, the government was doing it -- piling deficit upon deficit. And at the end of 2005, the total federal debt per U.S. household was more than $450,000.”
____

I have always tried minimize debt and get compound interest working FOR me, not against me. While my personal debt situation is sound, I resent being told I now owe $450,000 to somebody else! Also, I am retired now (So I thought!).

Sorry creditors, I can’t pay back that $450,000. I only hope someone else can.

But who will pay this debt for me?

I have savings myself, and I always thought I could draw out some dollars and buy the goods and services my family needs and wants. I think that each of those dollars of savings is a “claim” on the production of goods and services of the US economy to be delivered “on demand” My dollar bill explicitly says “ This note is legal tender for all debts, public and private”

Thus all foreign holders of dollars have the right to demand real goods and services from the USA, just as much as I do. Taking just another paper IOU in payment is NOT the same thing.

What goods and services do we have to export to satisfy these debt claims, when the day arrives that foreigners DEMAND real goods and services in payment and will no longer take an IOU piece of paper in exchange?


I have extracted several paragraphs from “The Economist” article without editing them, just removing a lot of the detail in between these paragraphs. These Economist paragraphs define America’s problem of debt repayment. At the end of WWII the US economy was over 50% devoted to production of goods that were “tradeable”. Now it is less than 10% and I think it is fast approaching 5%.

From "The Economist” copied from MrBill's post
……
"Moreover, this cyclical story conceals a more serious problem. To generate the exports that will eventually be needed to service its foreign debt, America needs to invest a lot more in sectors that produce goods and services that can be sent abroad. Yet exports make up less than 10% of America's economy. Whereas the world's surplus savers—China, Japan, Germany—have too many resources devoted to exports and too few to expenditure at home, America has the opposite problem.

But the longer America acts as global consumer of last resort, the more dangerous these domestic weaknesses become. The longer the economy concentrates on non-tradables, for instance, the harder it will become to produce the exports that America will soon need. Moreover, the foreign saving glut removes America's incentive, and to some extent its ability, to reduce its domestic distortions.

But, as this survey has shown, that global growth has come at a price. America's current rate of borrowing is excessive. Despite the advantages of having the world's reserve currency, an enviable rate of productivity growth and the world's most liquid capital markets, America cannot continue to borrow at an accelerating pace forever.

More important, America's easy access to cheap money is pushing its economy in the wrong direction. Most of that foreign money is going into consumption and housing rather than boosting investment in productive American assets. Building houses does not raise long-term economic growth in the way that equipping a factory does. And the current rate of consumption, fuelled by housing wealth, leaves many indebted consumers at risk. The world as a whole may have savings to spare, but many Americans do not.

But the present deficit is excessive and dangerous. Left alone, it could end in a global recession, rampant protectionism, and even a disastrous financial crash. That is why policymakers need to act soon. With his “saving glut” speech, Mr Bernanke focused attention on the scale of the global thrift shift. Now, as one of Mr Bush's top economic advisers, he should persuade his boss of the importance of making the thrift shift safe. "
_____

I know with all the financial wizards with smoke screens and mirrors, that games and derivatives can be created to stave off the problem. But “WHAT IF”, like has happened in other countries; Mexico, Argentina, Brazil come to mind, the IMF steps in and we must pay in real goods and services. In many of these rude adjustments people just like me, who thought that they had money savings, suddenly had NONE! Is that going to be the outcome? And, before the Gold bugs chime in, I know (and I have some!) Saying our trade deficit and national deficit problem is just due to a money exchange problem with China is a copout!
I don’t want to see a depression, I want to see a solution.

For a few starters I have started a list of 10 ideas, that I admit seem so ridiculous that most American’s would never “accept” them, unless they had no choice. So after reading this list, please give me some ideas for repayment the $450,000 that I owe that has a chance of working.

1. America leads the world in Films, Music, Software, Entertainment, TV programs. We export them, but much of what we produce is so easily pirated and copied that America seldom gets paid. How do we get paid? I don’t mean more negotiations, I mean get paid full dollar!

2. We could export a bigger share of our grain crop, but this would raise the price of bread and meat. Marie Antoinette said to this same problem “ Let them eat cake”, and we all know her fate!

3. America is great at getting consumers hooked on credit cards, so our financial experts could get the contract to sign every Chinese citizen up for 3 credit cards and collect the 3% fee on each card transaction. Our advertising sector will be given the task of convincing the Chinese that it is an ancient Confucian proverb that is good to be in debt up to your eyeballs.

4. America has the best military in the world, and mercenary armies have been hired out since the beginning of time. We have been the “de-facto” protectors of Saudi Arabia for years. Why don’t we collect significant fees for our cop role?

5. We could earmark the full output of the Alaska Pipeline and open the Arctic Wildlife Reserve to drilling and send the full oil output as exports to pay down debt. The problem that would occur at our gas pumps is obvious.

This was graphically illustrated on an actual picture I saw of a Shell gas station price sign:

REGULAR Arm 9/10

Mid-Grade LEG 9/10

PREMIUM First Born 9/10

6. The President makes a speech to the World :

“Due to the recent electricity shortage and the Nationwide blackout, computers crashed all over America, especially in the US Government. As a result we find we have lost all records of debts owed, which vanished into cyberspace. Thus, as of this announcement we are declaring “A year of the Jubilee” and all debts, foreign and domestic are forgiven. Starting tomorrow at 12:00 AM EST all debts owed will be reentered into our computers as ZERO. I am also establishing a new Department of Computer Backup Security to assure the world that this will never happen again. I am sorry to tell those few Americans with savings accounts, that those accounts are set at zero too, since your “asset” was someone else’s “debt”.

7. We could start by stop denying that these twin deficits, and our energy deficits are “ a problem”, and level with the people as to what sacrifices are needed now, as Winston Churchill did at the beginning of WWII.

8. We could make just enough changes to start all the deficits in budgets, trade and energy on an improving slope. Often just the expectation that things are getting better creates enough hope and extra effort that it becomes a self-fulfilling outcome. Two successive scores in the last quarter of the game to lessen the losing score do wonders for morale and effort.

9. Is The Economist Wrong? Maybe the USA has already found a product to export that the rest of the world wants very badly, namely US treasury debt. Foreigners think Treasury bonds denominated in US dollars are the best buy in the world and can’t get enough of them- forever and ever! If so, America is on easy street, and we have discovered an economic perpetual motion machine.

10. Who me worry? There has always been a break-though invention that altered the economics of each age. Maybe genetic engineering will solve the health care crisis with miracle cures for every ailment and only the USA can make them. Maybe someone will invent a “Startrek” beam transporter using crystals NASA will discover to solve our energy dependent transportation system. Whatever it is , “don’t worry about it, said the grasshopper to the ant”, there is plenty enough for now, and tomorrow will take care of itself”.

You get the idea. I am at a loss as to how we ever expect our economy to produce enough for ourselves, along with a surplus of “tradeables” to export, with NO PAYMENT received, except reduction in our debt accounts. It will take a different investment and savings strategy as The Economist says, unless they are wrong.

However as I understand this, I think I am talking about a “Dollar Crisis” and the demise of the dollar as the world’s reserve currency!

We will probably wait until it hits, then as Loeb said

“Why didn’t we see this coming?”

Any ideas? Please tell me I am wrong, but I don’t accept the idea that the USA is not responsible for finding solutions ourselves.

[rogerhb]

If the sum borrowed is in dollars then you hyper-inflate the dollar. Just like Germany did in the 20s to avoid paying the reparations demanded by the Treaty of Versailles.

You end up paying the debt at the old value in worthless currency. True you trash the economy, lives and savings, but you keep your physical assets.

Eg: Alan, press the "print" button.

[fossilnut2]

There's lots the USA can and does export. The USA is the world's largest exporter. About 800 billion dollars a year. That's about 7 times more per capita than China. The issue with the USA is not exports but imports....imports are completely within the control of the USA if the USA didn't waste so much.

[OilsNotWell]

What's that saying....?

"If you owe the bank $1,000 and can't pay it back, that's your problem...If you owe the bank $180 Billion per year (the amount of the current account deficit), that's their problem..."

[rogerhb]

$this->bbcode_second_pass_quote('fossilnut2', 'T')here's lots the USA can and does export. The USA is the world's largest exporter. About 800 billion dollars a year. That's about 7 times more per capita than China. The issue with the USA is not exports but imports....imports are completely within the control of the USA if the USA didn't waste so much.

[fossilnut2]

$this->bbcode_second_pass_quote('rogerhb', '')$this->bbcode_second_pass_quote('fossilnut2', 'T')here's lots the USA can and does export. The USA is the world's largest exporter. About 800 billion dollars a year. That's about 7 times more per capita than China. The issue with the USA is not exports but imports....imports are completely within the control of the USA if the USA didn't waste so much.

[donshan]

$this->bbcode_second_pass_quote('OilsNotWell', 'W')hat's that saying....?

"If you owe the bank $1,000 and can't pay it back, that's your problem...If you owe the bank $180 Billion per year (the amount of the current account deficit), that's their problem..."

[ohanian]

$this->bbcode_second_pass_quote('rogerhb', 'I')f the sum borrowed is in dollars then you hyper-inflate the dollar. Just like Germany did in the 20s to avoid paying the reparations demanded by the Treaty of Versailles.

[rogerhb]

$this->bbcode_second_pass_quote('ohanian', 'E')xcuse me but if my history is correct, the Treaty of Versailles requires payment in GOLD not worthless pieces of paper.

[jimmydean]

It's hard to believe that Greenspan and FDR have not known about this for a long time, more likely they don't know what to do about it. Short term solution is print more paper money and everyone keeps borrowing + buying. Tariff's may have actually been a good idea but that's anti-capitalistic and counterproductive for the wealthy getting wealthier as they can easily move manufacturing out of the country and make higher margins.

We are in for an economic contraction. Jobs moving east (happening now), Boomers retiring/reducing spending (about to happen), energy prices cutting consumer spending and forcing companies to increase good prices (beginning to happen).

If you look at the huge debts of U.S. companies they are leveraged on future profits which can only come about if people keep spending (GM $300B in debt!) which isn't going to happen if the economy contracts.

Contraction unfortunately means wide scale bankrupcies and a depression. The fed can print more money but historically we know that doesn't help the situation. I don't think we can escape a paper money collapse and return to species

[rogerhb]

Don't forget the baby-boomers realising there is no pension coming then trying to sell their overpriced houses to realise the value trashing the market for themselves and everyone else.

I recommend watching from a safe distance.

[ubercrap]

$this->bbcode_second_pass_quote('rogerhb', '')$this->bbcode_second_pass_quote('ohanian', 'E')xcuse me but if my history is correct, the Treaty of Versailles requires payment in GOLD not worthless pieces of paper.

[rogerhb]

$this->bbcode_second_pass_quote('ubercrap', 'T')hey didn't do it on purpose. They made some payments, then defaulted because they could no longer pay. France occupied the Ruhr valley, Germany's industrial center, and I believe the German government encouraged the workers not to cooperate- basically not go to work. I believe the rampant money printing started with the government printing to pay these workers? In the mean time, the German economy was tanking. The other details, such as the rapid wage inflation happening seemingly so easily, are less clear to me...

[MrBill]

Hello Donshan,

sorry I did not see your posting until now. I will have to read your posting more carefully in order to address your questions one by one or together, but in general, I think you have touched the raw nerve of the problem. There are no easy solutions. Each solution creates a new problem or is unpalatable to today's consumer/worker/taxpayer/government, etc.

First of all if you get over what is pleasant and focus on what needs to be done, there is plenty that can be done to address America's budget, trade and current account balances. They will all require adjustments and they will most likely trigger a recession in the USA and abroad.

Raise income taxes, eliminate the housing interest credit against personal income and cut discretionary government spending are the first three things necessary to bring the budget deficit in-line with the government's revenues. The US on average pays 29% taxes compared to the EU, which pays 41.5%. According the Laffer Curve higher taxes may result in lower revenue overall as the economy slows. But the US has become the Laughing Stock by not collecting enough revenue in the form of taxes to pay its debts despite eniviable economic growth. It is time to cut. They can always loosen later.

Raise taxes on petroleum, introduce road taxes and tax heavier vehicles with registration fees. The faster the US weans itself off cheap oil the better. It would be better if this extra revenue was used to pay down debt, but if you want you can make it revenue neutral by giving tax credits for commercial vehicles. Gasoline in the US is just $2.50-3.00 a gallon versus $5.00-6.00 in the EU. The difference is almost entirely due to taxes. Higher prices would decrease demand and result in a net increase in tax revenue, although not one for one due to falling demand.

As $2 trillion of the US' $8 trillion in debt is held in foreign hands higher interest rates and a devaluation of the dollar will be shared pain. Fair enough. They sold products to America and help dislocate US jobs, so their savings in the form of US treasuries will be worth less, too. Also, as higher interest rates & higher energy costs reduce consumption and squeeze consumers other countries will export less to the US, so their own economies will slow down. No one is immune. The EU may not export much directly to the US, but they export a lot to Asia and Asia does export to the US. If Asia exports less, they will buy less from the EU. One chink in the armour of the argument that the euro will automatically benefit from a fall in the US dollar. As the euro appreciates its export competitiveness will be challenged.

These are all very unpopular measures, which explains to some degree why they have not been adopted up to now. Higher taxes and lower consumption are not easy to sell to voters. So, America will have to make a choice. Adopt unpopular measures or follow the path of Argentina into ever deeper debt and eventual default. Except substitute default with issuing more and more debt until hyperinflation devalues the dollar to peso levels. Imagine the US having to issue debt in foreign currency? Many governments have to do exactly this to attract foreign investors because they have proved themselves to be unreliable stewards of their own currency.

However, before we get carried away there is one thing to remember. Not all US citizens are mired deep in debt. Some households are hopelessly in debt on their houses, their credit cards and their car payments. Others do not have any debt. There are 9 million paper millionares in the US. More than anywhere else. There are many households that have no debt. As others default on their debt these savers will see their purchasing power increase. If the US' GDP was to contract by 35% in real-terms it would be a serious depression. However, some households would be better off than they are now as they would see their relative wealth increase. The US economy would still be worth $6.825 trillion, just a little smaller than the EU15 now, assuming no contraction in the EU economy from a worldwide slowdown. Wealth will not completely disappear.

Also, if a 35% haircut were to be applied to all US assets then there would be some real bargains to be had by foreign investors. The US dollar is not worthless. It has been exchanged for many things of real value. Research, means of production, educations, skills and physical assets to name just a few. As the dollar loses its value these commodities become more attractive to foreign investors. What European investment bank would not like to pick-up a top notch Wall Street firm at knock-down prices. Russian steel mills buying American ones. Airbus buying Boeing. These are not real examples, but use your imagination. Unless you subscribe to the world is ending point of view physical assets and real skills will find a market either domestically or through foreign investment.

If you are as old as me, you may recall a film in the 1970's called 'Roll-Over' staring Kris Kristophersen and Jane Fonda? The whole premise of the film is this. The US current account is funded by Arab petrol-dollars and one day the Arabs stop rolling over their investment in US dollars, so the world financial system starts to crumble (sound familar?). At the end of the movie, Kris Kristophersen is selling dollars. He tells his dealers to sell everything. Sell dollars, sell yen, sell Sterling, sell francs, sell deutschmarks. It was really amusing because anyone who has ever traded foreign exchange knows that you sell dollars and buy deutschmarks. You sell dollars and buy yen. You sell dollars and you buy something else. You cannot sell and sell and sell and not buy something else.

The point being it is all relevant. Yes, you can sell dollars and buy gold, but if you buy another currency you have to take into account their own exposure to the US in terms of trade. Keep in mind that some eurzone members have worse budget deficits and debt to GDP measures than the US. If you add in a worldwide slowdown then you not ony slow trade, but you make their own debts worth more in real-terms as well since they can only repay their debts either through savings, growth or devaluing their own currency. I hope you see the Catch-22 here? Not everyone can devalue their currency at the sametime to become more competitive.

Also, many tend to view one man's loss as another's gain. However, this only partially reflects reality. There are many world players and not just the EU and the US. The Middle East, Africa, Asia and Latin America are anything but disinterested bystanders. Their own growth and prosperity are linked to the US and the EU through trade and investment. If you believe that economic isolationism is the answer then many countries will be poorer not just the US and/or the EU. You may view less trade as being better as it curbs consumption, but this is really a rich world view. There are thousands of economic migrants jumping fences onto European soil in Algeria and Morocco as well as Mexicans crossing the US border everyday who would beg to differ.

If you believe less is better then implement those tough reforms above. Higher taxes, less government spending, higher interest rates and a lower dollar. You will see the poorest in America suffer the most. They have less assets to fall back on in tough economic times. If you think that is unpalatable then imagine that through less trade and investment you are condemning millions more to less before they even have a chance to acquire a fraction of the wealth of America. A 35% contraction in the US' GDP would still make it one of the richest countries in the history of the world. I think they can afford a few sacrafices now for continued global stability in the world. A good start may be the Doha Round of the WTO and cutting agricultural subsidies.

[Doly]

Mr Bill, what do you think personally is the most likely outcome? The US take measures now, or they keep things as they are until they become Argentina II?

[MrBill]

$this->bbcode_second_pass_quote('Doly', 'M')r Bill, what do you think personally is the most likely outcome? The US take measures now, or they keep things as they are until they become Argentina II?

[donshan]

$this->bbcode_second_pass_quote('MrBill', 'H')ello Donshan,

sorry I did not see your posting until now. I will have to read your posting more carefully in order to address your questions one by one or together, but in general, I think you have touched the raw nerve of the problem. There are no easy solutions. Each solution creates a new problem or is unpalatable to today's consumer/worker/taxpayer/government, etc.

[MrBill]

Looks like an excellent thought provoking argument. I think I can access it via the news watch function on Reuters, so I will look forward to reading it in its entirety.

Of course, I come down firmly in the camp that says the deficits are ultimately unsustainable and I have every single financial crash in history as proof of my argument. Those that say that deficits are sustainable in the long run ignore history and have no facts to back up their argument. Although we have seen countries have near misses like Brazil & Turkey recently.

The only questions are a) how long can the imbalances be sustained, b) how will they unwind; and c ) what will be the consequences for third parties?

I would feel much better about the Bretton Woods argument if it was based on real wealth generation in the US & elsewhere (Australia, Spain, Holland, Canada) and not on taking equity out of their homes via higher housing prices and refinancing mortgages. If the consumer was genuinely getting wealthier due to productivity gains at home then I see nothing wrong with outsourcing production to China et al. for their consumption, although its magnitude is quite vulgar. However, it is not. The consumer is spending their equity and taking on debt to finance their conspicuous consumption.

I would also feel better if China's economic miracle in manufacturing had a basis in a real sustainable competitive advantage. They have lot's of people, so labor intensive industries are possible. Also, they have been quite adept at combining high technology with an abundance of cheap labor. However, this has largely been financed with cheap credit. The same kind of cheap money that fuelled excesses in the USA and elsewhere. Money has been misallocated and as earning a return on investment/equity/assets is not necessary it has resulted in excess capacity in some sectors and waste in others. So far foreign firms have been happy to provide this equity in the form of joint ventures which has given China access to proprietary technology, know-how, management expertise and capital. If these firms cannot cover their own costs of capital which have to come from somewhere then they and their shareholders will get tired of investing and seeing no returns.

Also, China's economic miracle has been built on western technology and most of that has been stolen. I have a few friends who are intellectual property legal experts in the SF area and they have nothing but horror stories about theft of everything from software to proprietary manufacturing know-how. Mainly through joint ventures with Chinese partners. Call me naive, but no country can build a sustainable competitive advantage if they cannot recover the true cost of their capital and if it based on stealing someone else's technology. Produce cheaper, yes. But, China manufacturing policy is a make work project. A page out of the New Deal.

Not only is China not earning any money (really), but they are storing up huge future liabilities. Their one child policy creates the 4-2-1 dilemna whereby you have one grandchild helping to support two parents and four grandparents in some cases. China does not have a social safety net per se. It is a patchwork of policies, but there are big cracks for the old, infirm and rural poor to fall through. Hence why China's manufacturing policy is a make work project.

Also, other future liabilities are environmental degradation on a massive scale and competition with the west for scarce resources. Again they are using free or low cost credit to buy access to mines & minerals abroad, but it is easier to buy an asset than to fund it. Canadian coal miners are going want to be paid at the end of the month, every month, and that introduces the real cost of capital into the Chinese model for the first time.

You may remember that China raised interest rates earlier this year. However, many state-owned and state-sponsored firms are insolvent, so higher interest rates are not an effective allocator of capital if the debt is uncollectable. It is estimated that China needs to spend $600 billion to clean-up the uncollectable debts to its state enterprises. The Bank of China gave $60 billion to banks earlier this year as a start. $600 billion is +/- 60% of China's foreign exchange reserves. Do you still think they have a bottomless supply of foreign exchange reserves to support the US' current account deficit? A lot less once you wipe out China's own internal debts. And, this is a one off measure, but the loss making companies on which China depends for its stability are still grossly inefficient and will continue to lose money because there is no way to eliminate excess capacity without causing unemployment and labour unrest. What they are trying to avoid in the first place.

That just addresses the USA & China. Japan also has massive debts equal to or greater than her GDP. Japan's growth is also to a large extent dependent on exports, especially to the USA and to China.

The USA is the main paymaster for the UN and is also the largest foreign aid donor in the world. Ironically they are borrowing to fulfill these roles, but a deep economic shock in the USA will be felt far afield too. It is only a large, stable international market which can accomodate the Tequila crisis, the Asian crisis, the Russian crisis, the Argentine crisis in which hundreds of billions of debt is written off and yet the system does not collapse. Nevermind it still has the resources to write-off uncollectable debts to Iraq and the world's poorest countries. But, if several of the world's main drivers of growth get knocked-out at the sametime the whole system becomes less robust and more prone to systemic shocks.

For this reason I find it morally reprehensible that the US would pass such laws as the energy and transportation bills wasting so much money at a time when debts & deficits need to be addressed more than ever to correct the US' large external imbalances. Where is the leadership? There is none. Imagine now that Mr. Greenspan retires in January. Who will be his replacement? A steady hand to reassure markets and make tough monetary decisions or more likely another political hack? It is a very disturbing thought. Not only that, but as I look around the G7/G8 I see no world leaders with any vision or who can speak with any degree of moral authority about global problems. The UN? Please let's be serious. They have lost their voice and any credibility they might have ever had. Blame China, France, Russia and the USA equally for that plus all its members who put national politics ahead of communal consensus.

I guess it comes down to this. Perhaps we believe that the markets will save us because we have no choice? The markets automatic adjustment mechanisms of interest rates, integrated capital markets, growth and foreign exchange dynamics have become the sole levers of power that operate rationally and are capable of disciplining prolific national governments. The markets are the only true superpowers left in the world today. Let's hope they brandish their might with care?



today's humour we cannot be serious all the time

[Doly]

$this->bbcode_second_pass_quote('MrBill', '
')I guess it comes down to this. Perhaps we believe that the markets will save us because we have no choice? The markets automatic adjustment mechanisms of interest rates, integrated capital markets, growth and foreign exchange dynamics have become the sole levers of power that operate rationally and are capable of disciplining prolific national governments. The markets are the only true superpowers left in the world today. Let's hope they brandish their might with care?

[MrBill]

$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('MrBill', '
')
This is one of the scariest things I've read lately. If there's something I have come to understand about markets, it's that they can crash. And quite heavily. I can't expect the sort of situation you are describing to get magically solved by the market. Market forces, left alone, are going to make a mess out of this.