My Problem with John Hussman

 I love John Husman's work. I love the charts he includes, well maybe not the 3D ones quite so much, but I definitely love the charts overall.

But I have a problem with his analysis..

We have had an incredible bull run in interest rates since 1983.

Using relatively simple maths and some round numbers:

1983 to 2023 is a nice round 40 years.

Long term interest rates in 1983 were say 15%. The inverse of that is 6.67. That can be thought of as the PE ratio of the bond in a loose sort of way.

In 2023 long term rates are say 3.5%. The inverse of that is 28.6. That can be thought of as the PE ratio of a bond issued today.

So if the long term bond rate is an imperfect but big picture reliable guide to the relative returns of other assets, the running yields soughtt for various assets will have followed a similar path.

And if the yields required have followed a simple path, then so have the PE ratios.

You know I don't mean that they are the same numbers for all assets, and you all know that some assets will be doing materially better and others materially worse at any individual point in time. You know I am talking big picture here.

So this poses the question as to whether that undermines the use of historical returns as any guide to the medium term future. Why should we think that a benchmark based on periods when rates were aberrantly high is relevant? It is only relevant if we think there is a real possibility, even a likelihood, that there will be another aberrantly high period of rates in our investing timeframe.

Will governments and their institutions allow a period of inflation such that interest rates will need to go anywhere near the aberrant peaks of the past, or can we rely on governments and central banks to react to stop inflation?

The current experience says that Yes, central banks will raise rates so high that the economy will slow sufficiently that inflation will be beaten back to the target range of 2 to 3%.

In that case surely the expected range of long term interest rates is 0% to 5% and so the range of PE's of bonds is likely near infinity to say 20.

And other assets will as always in the past generally reflect that in their earnings and PE ratios unless there is some unusual event eg ChatGPT being released with profound global potential.

And how long will rates remain at an elevated 5%? Maybe 1 year in 7? Or 10? Or 15?

So when the market is confident that inflation will be beaten, how should it price returns and assets?

A mix of discount rates would seem appropriate. Maybe we thing 4% will be the cap and that next year rates will be 3%, then 2% the following 5 years and then a recession will take them to 0 for 3 years.

This sort of approach is used in valuing commercial buildings with a significant vacancy. A period and expense of getting the building to an average vacancy rate and rental income is allowed and is in effect deducted from what the value of the building would otherwise be. (#Covid, #SanFranVacancy and #WorkFromHome has thrown this methodology into some doubt, but not so much in the share market). 

So if bonds are goiing to have an interest rate of 2% and a PE of 50 in 3 years time what is the value of shares and residential property now? Will shares go from PE of say 28 to PE of say 50 over 3 years? Does that mean a $100 investment today will be worth (100/28)*50 = 178? And if the costs of getting there is 5% pa for 3 years or say $20 when compunding is considered. is $58 a good return on $100 over 3 years? 

It all depends on your faith in Central Banks and governments to hold the line against inflation. The stock market has bifurcated. Huge growth in revenue and profits possible for those best able to implement and commercialise AI (very high PEG ratio on those stocks now, maybe little growth likely from here), and the rest of the market as a whole excluding the AI stocks barely able to hold there value, and worse for regional banks under pressure.

Place your bets on governments running a tighter fiscal policy for the masses to reduce demand on the one hand and the central banks holding the line on rates until inflation is dead. The former is much less certain than the latter.

John has loooked carefully at the effects of demographics and their impact on economy wide growth, but there are a whole lot of other changes that have taken place. A few of the big ones going back are:

1 Leaving the gold standard

2 A fixed exchange rate regime

3. A floating exchange rate regime

4 The second world war

5 The Cold war. 

6 The invasion of the eastern bloc countries by Russia

7 The Korean war.

8 The Vietnam War 

9 The Oil shocks

9 The Rise and Collapse of Japan real estate and stock market

10 The collapse of the USSR

11 The "independence" of central banks (they are actually interdependent with government fiscal policy).

12 The 1992/3 recession

13 The formation of the European Union 

15 The dot com bubble 

16 The 2002 recession

17 The rise of China and 600 million lifted out of poverty, competing way more for  food and other resources

18 Falling population growth and the commencement of decline in population in developed countries leading to projected increasing dependency rates and requiring dramatic but gradual redeployment of labor and capital.

19 The Global Financial Crisis

20 Covid disruptions to global economies and societites

21 The war in Ukraine and the current inflation breakout.

Why on earth do we think that anything before about 1970 is really relevant, other than to show the rhythms of fear and greed?

The average return over the last 100 years is not a meaningful guide to the next 50 years but John seems fixated on that as his guide. It certainly was not an appropriate guide over period of the greatest bull market in interest rates from the Mid 1980's to 2020. John has updated his menthodology to focus more on "market internals" which is more about market momentum now rather than the returns over the last 100 years.

Many stock markets have not had the returns of the US market, I suspect mainly because the USA, for all it's faults, is an English speaking country that embraced a culture that has permitted it to dominate intellectual property in the forms of movies and software, for 50 to 100 years. This enabled it to ride the wave of English becoming the main language of commerce. Other languages like Spanish and Mandarin Chinese and Hind  just did not come to dominate commerce. The US experience is thus very different to that of most other markets.

A Bloke Losing 15kg

I am losing weight and controlling my blood sugar, almost never peaking above 9.9 at one hour after food.

But I am almost never very hungry as I still have snacks between meals and sometimes before bed BUT I am very particular about what I snack on.

I have a glass of wine with dinner many nights, desert most nights (and sometimes after lunch too or instead) and some chocolate most nights with my (white) coffee.

By controlling my blood sugar I will slow the progress of my diabetes, maybe even go into remission.

What follows is a rough estimate of reality. Reality is far more complicated, but this is a "good enough" plan that is not too extreme. It trades off taking longer in favour of being manageable and not extreme, and building good habits to adopt for a lifetime. 

None of the various measures are perfect for everyone but if you are pretty close to being an average overweight guy with a gut they are a good starting point.

As a recently diagnosed diabetic I wanted to lose weight and control my blood sugar. but to do that I needed to understand my blood sugar.

There are two types of diabetes. Type 1 (the old "juvenile" diabetes) and Type 2 (the old "mature onset" diabetes).  I am type 2, diagnosed at 70.

Reading Blood Sugar

There are three main sources of measurement used:

1. Instant blood test using a finger prick (reports as eg 5.6 in units mmol/L or 100.95 mg/dL.)
2. HbA1c done by a pathology lab at your doctors request which gives an average over 3 months with different proportions of the reading representing different periods of accumulation.  (reports as eg 33 mmol/mol (IFCC) and/or 5.1% (DCCT/NGSP)
3. Based on a glucose tolerance test done at a lab starting with a fasting blood glucose test. After the first blood is drawn you drink a special sugary syrup. A second blood draw is take after 1 hour and a third after 2 hours. This gives 3 separate readings and enables a determination as to how well your insulin is allowing you to process sugar from your blood stream. It helps build a profile across time and is like a simulation of what happens after a meal.

If you are diagnosed as diabetic, instant blood tests become a large part of your life, and the focus is on results in mmol/L.

There is an online calculator for converting between readings at https://www.hba1cnet.com/hba1c-calculator/ 

Because patches are so expensive for me, my focus is on instant tests and I have built a daily profile based on fasting, pre-meal, meal +1hr, meal +2 hr and pre-bed tests. My fasting blood test ranges from 5.2 to 5.9 mmol/L averaging 5.6

Diagnosed diabetics in Australia register with the National Diabetes Support Scheme (NDSS) and get access to lots of information and a free instant blood sugar testing meter and cheap strips (but the needle cartridges for testing a retail). You have to ask yourself: Why isn't the intense focus on educating everyone the moment they are regarded as pre-diabetic.

Patches

The most common blood sugar patch is Freestyle Libre 2. They are heavily subsidised in Australia for those formally diagnosed with Type 1 (T1) diabetes. They allow you to see your whole of day sugar profile and see the effects of different foods/amounts on that profile. Unfortunately they are not subsidised for T2 diabetes and are horrendously expensive. However they are available as a trial for AUD15 if, having been diagnosed with T2 diabetes you get a letter (get the draft from the Freestyle people by ringing them) signed by your doctor. 

This would be an invaluable tool for people who are pre-diabetic to understand what their current diet is doing to their blood sugar levels after meals.

In any event, they are an invaluable aid to seeing and understanding your sugar profile especially if used in conjunction with a food diary, even just for a week. I instead used the finger prick testing over a few weeks and at different times in relation to rising, meals and bed to determine my profile and see how to adjust my diet to reduce peaks.

Dawn Effect

Some people have a spike in their blood sugar in the early morning and so their blood sugar is elevated  when they wake and take their fasting blood sugar. In this case try to have your last significant carbs (which includes sugars don't forget) earlier in the day and definitely not late in the evening. If you continue to have high fasting blood sugars then you need to see your doctor about it.

About Me

I am a 71 year old male 184cm (72.5in) tall weighing 95kg. (210 lbs)

My Body Mass Index (weight divided by (height squared)) is 28.1 which is obese (just). BMI is not a perfect indicator. It is not appropriate for use by weightlifters, gym junkies, or athletes. They need more sophisticated measures of body fat that are far less convenient than BMI

My gut is big but not huge. My hip to Waist Ratio is 1.07, but should be 0.99 or lower. (My waist is 111cm (44in) at the belly button. My hips are 104cm (41 in) at their highest reading.)

On my reading, there are a few key facts:

1. A kg of fat represents 7700 Calories: excess calories taken in, deficit of calories to accumulate to lose it.
2. You burn calories just by living even the most sedentary lifestyle, and the number burnt basically depends a lot on your weight. Those calories are your Base Metabolic Rate.
3. As you lose weight your BMR reduces, so your calories needed to maintain your weight decrease, so you have to take in less calories again to keep losing weight.
4. It is generally suggested that you keep above 1500 calories a day so as not to stress your body too much and to maintain nutrition. Many use 1200 calories as a hard bottom limit. I'm using 1500 calories as my average with some days higher, some lower..
5. When you lose weight most of it is exhaled as carbon dioxide and water.  

So, I needed some way to determine a target to work to. I chose something that would give me a normal healthy BMI and  a round number at the top end of that range: 80kg.

My target is to lose 15kg and hopefully reduce my gut and get a better Waist to Hip Ratio to reduce my risk of early expiration.

Here is my process:

How big is my gut?

I kg of fat is roughly the same volume as 1 litre of milk

2 kg of fats is roughly the same volume as 2 litres of milk

4 kg of fat is like a 4 litre wine cask

So I want to lose almost 4 wine casks (4 x 4kg = 16kg) of fat! 

A lot of fat will be lost from my gut, but some will be fat from other areas. But some of the weight lost will be from muscle. (See below)

Determine Base Metabolic Rate

I needed to know what calories I needed just to maintain my weigh, my BMR. The traditional measure is the Harris-Benedict equation:

For men Men: BMR = 66.5 + (13.75 x weight in kg) + (5.003 x height in cm) - (6.755 x age in years).
For me that formula came out to 1819.

 
Then assuming you are sedentary like me you multiply it by 1.2 (an activity factor). So I am using a BMR of 2182.
That gives a false sense of precision, but it's a good enough place to start. Another formula claimed to be more accurate says 2251, but let's not sweat the small stuff too much.

NB: If you've been putting weight on you have been taking in more than enough for the BMR. Even if you are stable now but are overweight, you have taken in too many calories at some earlier point of time.

For most people, giving up the extra calories and taking a reduction of 500 to 600 below BMR is doable. I find snacks of air fried chicken or boiled eggs or almonds keep the hunger away. If I have eggs for breakfast rather than cereal I have a whole fruit snack for morning tea. (but only 1/2 if its a banana, too many carbs otherwise)

Remember, 1 kg of fat represents about 7700 Calories and as you lose weight your BMR reduces so you need to recalculate. 

Let's recalculate after each 5kg of weight lost. Again it's a good enough approach, but for greater accuracy you could do it every 2.5kg. 

Determine a manageable reduction in calories below those needed for BMR

5kg of weight represents 7700 x 5 = 38500 calories.

So to lose 5kg I need to create a deficit of 38500 calories. Exercise could burn some of it, but most if not all has to come from reducing calorie intake. I'm lazy; much easier and less time consuming for me to eat less than to take up an intense exercise program.

So let's look at how many calories under my BMR I have to be to lose that 5kg of weight over time.

It's simple division. 38500 / 30 days =1283 calorie reduction. That would mean an intake of only 2182 - 1283 = only 899, way below the suggested minimum.

So I looked at some other possible periods of time (I love a spreadsheet):
Daily deficit of 1283 Cals for 30 Days
Daily deficit of 856 Cals for 45 Days
Daily deficit of 642 Cals for 60 Days
Daily deficit of 558 Cals for 69 Days
Daily deficit of 475 Cals for 81 Days

I chose 642 for 60 days to lose my first 5kg.

I also set up my 3x 5kg step progression to my target weight and my final weight to maintain:

You can see that my maintenance calories reduce as I lose weight. If I continued at a 642 calorie deficit but recalculated using my new BMR maintenance calories I would breach the 1500 calorie guideline for the next 2 x 5kg steps.

Soon the seemingly odd periods of time I looked at will make sense. 

After 60 days of a 642 calorie deficit to my BMR of 2182, I switched to a 558 calorie deficit to my new BMR of 2099 calories, BUT...instead of doing it for 60 days I will hold it for 69 days to accumulate the 38,500 calories that will reduce my weight by 5kg.

The next step will be the third and final 5kg step and for that I will run a new deficit of 475 calories from my then new BMR of 2017 calories BUT...I will need to hold it for 81 days to lose the third lot of 5kg. 

As my weight and BMR reduce I extend the time I hold each calorie level to reduce the daily deficit to keep above the 1500 guideline.

To be more effective you could recalculate after every 2 or 2.5kg weight loss, or interpolate from the above table to reduce the calorie target as weight is lost.

Afterwards

My BMI will be normal, my Waist to Hip Ratio will be less than 1.0 and I will be able to increase my calorie intake from 1542 per day during the 3rd step to 1935, more than I will have eaten for 210 days.

Exercise to eat more

To earn 100 calories to spend on desert or wine, or a bigger steak, or a very (!) tiny cake with coffee, 30 minutes brisk walk or exercise bike workout will do the trick. Cake with coffee is generally a very  bad idea! But say once a week before a 30 minte walk...we've got to live!

Carb Timing

There are three aspects to carb timing.

First Have a VLC (Very Low Carb in this case - often used for Very Low Calorie) breakfast. The Glucose Goddess calls this a "savoury breakfast". Scrambled eggs with Cherry tomatoes and mushrooms for example. Or some cold chicken, 2 slices of cheese, 4 cherry tomatoes (and maybe an apple if needed). For morning tea also eat low carb foods like a protein bar, or other low GI (Glucose Index) foods. This means that your blood sugar should stay lower on average through most of the morning. More time "in range". A VLCarb breakfast also, surprisingly, causes a lower blood sugar peak for the following meal as well.

Eating everything else before you eat the higher carb foods in your meal helps slow the digestion of the carbs, lowering, but drawing out your postprandial (after eating) sugar peak.

Eating your highest carb meal so that you can exercise within 30 minutes of eating the carbs as described in Exercise Timing below.

Exercise Timing

The best exercise is the excercise that reduces a sugar peak after  high carb meal. Try to find a way to have your carbs at a time that will allow you to have a 20 minute moderate intensity excercise starting about 30 mnutes after you've eaten your carbs. It can help to eat all the other components of your meal first and have your carbs last, making it easier to start exercising within 30 minutes.

Sugar, Carbs and Nutrition - Protein, Fibre and Vitamin Supplementation

Because I am diabetic with insulin resistance (diagnosed by a glucose tolerance test at a pathology lab) I am on Metformin and I am reducing my carbs as well as my calories. That means there are issues with fibre intake being below the recommended range and maybe not getting a full range of vitamins and minerals. I use Psyllium husk (5 grams only, read the warnings about increasing water intake) to give me some additional fibre and am taking 1 multivitamin a day. I am eating less fruit and veg than I used to, but just because a food is good for you it doesn't mean you should keep eating more of it! The Norwood Surgery in UK did not find supplementation to be needed if a nutrient dense, low calorie diet was followed with gradual weigh loss. 

Carbs, Protein, Fibre and Alcohol

Different food types have different calories per gram:

Carbohydrates 4 cals /gm
Fats 9 cals/gm
Fibre 4 cals/gm

Some say that you don't count calories from fibre so you deduct every gram of fibre from total carbohydrates to get "Net Carbs". A number of Diabetes organisations do not recommend only counting net carbs on the basis if either that there is no supportive consensus or insufficient evidence to support a recommendation. I count all carbs as a result. The fruits and veges that are the best low sugar, low carb, low GI fruits and vegetables include
a) berries: eg blueberries, raspberries, strawberries, and blackberries (also good for anti-oxidants)
b) leafy greens: eg spinach, kale, and lettuce (also good for vitamins, minerals and fibre)
c) non-starchy vegetables: broccoli, carrots, and cucumbers (also good for vitamins, minerals and fibre)
d) avocado, 
e) broccoli (also good for vitamins, minerals and fibre)
f) cauliflower, (Can be grated or finely chopped and light ly coooked to make a rice substitute)
g) eggplant (also good for fibre), and
h) zucchini (also good for fibre).
BUT you still need to consider your total calorie intake and target deficit if you want to lose weight.

For low net carbs per 100 grams of food consider 

Alcohol is a bit vexed. The nutritional information is harder to come by. But some say beer is liquid bread and to be avoided completely. I found that XXXX Gold 3.5 mid strength beer is moderate and I could have a Stubby or schooner, or two middies over a couple of hours say once a week. And 1 250ml glass of red wine once a day, but I have 2 AFDs (Alcohol Free Days) each week. To have those alcoholic drinks I need reduce something else while trying to lose weight so as not to blow my carb target of 26% or my calorie target which is (at 87kg and 185cm) 1450 (approx a 500 calorie a day deficit)

Food diary

I use a food diary app loaded with most common Australian foods. Easy Diet Diary (available from Google Play Store). I set up standard recipes for Breakfast, Lunch, Baked vegetables, Salad, meats, my long white coffee, my common deserts, my glass of red, the beers I drink. The first few weeks were a bit tedious but now it only takes about 10 minutes a day to keep it up to date, mostly done while waiting for the coffee machine. (If it says on Google play store that it won't work, just contact the developer)

Low Carbohydrate Diets

The Norwood Surgery used the term "Low Carbohydrate Diet" as meaning a carbohydrate intake of less than 130 grams per day which means less that 520 calories from carbs in a diet of about 1700 calories per day and an eventual maintenance intake of about 1980 calories a day (about 26% when at maintenance stage). Other sources also mentioned the magic 26% of calories from carbs.

Prefer Low Glycaemic Index (GI) (slow sugar release) Carbs

Low GI foods include:

Whole grains: Brown rice, quinoa, whole-wheat pasta, oats, barley, millet, rye
Legumes: Beans, lentils, chickpeas, peas
Starchy vegetables: Sweet potatoes, butternut squash, yams, parsnips, carrots, potatoes (but most of these are so high in carbs it is better to just skip them or eat only say a total of 80 grams in any one meal)
Nuts and seeds: Almonds, walnuts, peanuts, chia seeds, flaxseeds
Dairy: Greek yogurt, cottage cheese, milk
Fruits: Apples, pears, berries, bananas (unripe), grapefruit

Frozen green beans are great for lazy people like me. Just microwave and eat. low calories, virtually no carbs, fibre, stave off hunger, cheap. 

Avoid High GI Foods

High GI foods include:

Refined grains: White rice, white bread, pasta, bagels, pastries
Sweets: Candy, cookies, cakes, ice cream, soda
Fruits: Bananas (ripe), watermelon, grapes, mangoes, pineapple
Potatoes: Mashed potatoes, French fries, potato chips
Legumes: Lentils (cooked), split peas (cooked)
Dairy: Milk, sugary yogurt, sweetened condensed milk

Some Great Substitutes

Grated or finely chopped cauliflower microwaved is a good low carb substitute for all rice. You can buy Frozen Riced Cauliflower instead but it is about 4 times the price but you save time and won't skin your knuckles on the grater). Using cauliflower this way means that you can have a generous smear of Patak's sauce over chicken on a bed of "rice" and keep your carbs way down compared to if you had it even on brown, let alone white, rice.

Zucchini strips from peeling through a zucchini are a good substitute for spaghetti for Bolognese. Or if you don't care about tradition just bulk up the "Bolognese" meat ragout with lots of low carb vegetables, what my mother used call "savoury mince". But don't have it on toast.

Lentils have half the calories of minced meat/ground beef but unfortunately for diabetics they are 23g/100 of carbs 15.3 g/100 of net carbs while minced meat is only virtually no carbs. Lentils seem to be a great substitute regarding calories and fat, but not so much for carbs. I find I am more carb constrained by my desire to keep carbs to 26% of my dietary intake of calories at 4 calories per carb. Lentils would be good if my constraint was calories or fats, especially saturated fats. (Fats are 9 calories per gram which is why the meat is much higher in calories).

Low carb noodles and their Carbs/Calories per 100 grams include:
Shiritaki 0/9
Zoodles 2.4/17
Kelp 3.6/10
Konjac 0.8/10 

Bean noodles are much higher than these with 17/80 (Carbs/Cals)

Ketosis

My diet does not induce ketosis in the way a ketogenic diet would. I am eating about 115 grams of carbs a day which means about 460 calories are coming from carbs. That's roughly 25-30%. To achieve ketosis most people will need to reduce their carb intake to 20-50 grams per day. That's only about 3 to 10% of calorie intake. Ketogenic diets are extreme and aside from some epilepsy I think they are unwarranted.

Very Low Calorie Diets

I am not into VLC. I am about building a habit of eating sensibly to gain and maintain my target weight. I break out socially occasionally, and it means either a little more exercise for a day or three and maybe a little more restricted intake for a day or two as well. 

Intermittent Fasting/Re-feeds

While there might be no real problem for most people with having a VLC day or even a few in a row, it may not be helpful if the consequence is having "Faturday" - a day of almost binge eating of foods that should only be consumed rarely and/or in small quantities. 

There is a benefit to a mix of intakes during the week including a day of higher than maintenance intake in terms of not letting metabolism get into a slowdown as a response to consistent low calorie intake. It may help avoid a plateau slowdown of weight loss, and reduce weight gain when you return to the normal maintenance intake based on normal base metabolism calculation. 

On the other hand, it will slow your weight loss by about 20% as your weekly deficit will be more like 2750 rather than 3500 calories (7 x 500). 

There can be a social element to having a "faturday"/re-feed when it involves a lunch or dinner with friends and that means feeling less deprived by the constraints of a diet. A brisk walk for 10 (or better still 30 minutes) after the meal can help offset the extra intake and more quickly reduce the post-prandial (post meal peak). Just park the car further from the restaurant, or walk around the block (maybe even 2 or 3 times ) before hopping in to drive home.

Shakes

Shakes can be a help but are not necessary. I am using the Man Shake sometimes for one meal a day, it adds to variety and variety makes life just a little bit more interesting. It ought be supplemented at other meals with elements that contain Omega 3 fatty acids, Vitamin C, Folate, Magnesium, Zinc, Antioxidants. Typical food elements for these include Salmon, nuts (almonds), berries (Black, Rasp, or Cran), green leafy vegetables (baby spinach is easy to use), oats and green beans. I try to balance out over a week.

Carbs and Blood Sugar

I have found by experiment and testing that if I keep my carbs at every meal below 42 grams, then I don't have a sugar peak of 10 or more. Chicken, eggs, salad, almonds, small steaks all help with keeping carbs to about 25-30% of calorie intake. One gram of carbs is 4 calories. 115 grams of carbs = 460 calories from carbs = 27% of 1703 daily calories. Rice, potatoes, sweet potato, pumpkin and bananas are very high in carbs and to be minimised. Greek yoghurt and tinned peaches (preferably) or pears (each in juice not syrup) is good for desert. Dark chocolate is much lower in carbs and even a couple of squares reduces the feeling of missing out. Mid strength beer seems to be the best choice for me if I am out, but only 1 (maybe two!) middies.

Food order

If you eat high sugar/high GI foods on an empty stomach they will be getting absorbed quickly into your blood stream as you move into the other foods in your meal. I have been told by someone who is a fitness / body fat /strength guru (Thank you, Robert) that the order of eating food can also have an impact. This was discovered through wearing a sugar patch (eg Freestyle Libre 2) and watching the effects in almost real time on a mobile phone app. The recommended order is effectively carbs and sugars last. The specific recommendation was salad with balsamic vinegar, protein such as chicken or steak, carbs last. It seems intuitive that having the carbs on a full stomach dilutes their absorption.

Muscle Wastage

When you lose weight some of the weight lost will be from muscle. Rebuilding muscle gets more difficult with age. When losing significant weight consider:

1. increase protein intake possibly using shakes
2. do more weight and resistance training.

It probably pays to increase your resistance/weight exercise when losing weight, more so if you are older and the plus side is you can then have more calories intake to offset those burnt. This is the case where you can net out your calories. 

In general, weightlifting for 30 minutes can burn between 90 and 126 calories, depending on a person’s body weight. So 40 minutes ought reliably burn off the calories from 1 large ripe cavendish banana. If you are right into weightlifting vigorous weight lifting for 30 minutes may burn between 180 to 252 calories, depending on a person’s body weight.

Fitness

Keep up or improve your aerobic fitness as you lose weight. This can be an opportunity to have more fruit - just eat it 15 minutes before you start actually training and do enough training to burn the pre-training calories so you don't get a sugar peak or ruin your sugar profile for 2 to 3 hours.

Twelve 12 minutes working on an exercise bike or brisk walking is about 120 calories which will burn off 1 large ripe cavendish banana. Dog walking is half that, so 25 minutes for a banana.

 If you have just one standard Mars bar then you need 25 minutes of brisk walking or cycling because there are 244 calories in 1 Mars Bar (53 g).

Recalculating Macros

The less often you recalculate your macros, the more time you will be using a less than optimal calorie deficit. A training and weight loss guru suggested that recalculating for every 5 kg lost was not really efficient so I am recalculating for every 2.5 kg lost.

Mix it up

At least once a week you should break out and eat more calories than otherwise. This reduces the chance of your body changing its metabolism (like going into power saving mode on a laptop) and the way it produces grehlin and leptin.

Grehlin and Leptin

Ghrelin and leptin are two hormones that play a key role in appetite regulation. Ghrelin is a hormone that is produced in the stomach and it increases appetite. Leptin is a hormone that is produced by fat cells and it decreases appetite.

Where does the weight go?

Matter changes form but is not destroyed. The chemistry of weight loss is that the weight lost is mainly exhaled as water vapour.

Breakfast

A zero/very low carb (VLC) breakfast will keep your blood sugar low so scrambled eggs with no toast and a black tea or coffee will extend your low blood sugar from your overnight fast for hours compared to a breakfast of cereal and fruit. If you feel the need for some carbs, have a small helping of berries or fruit (not banana or mango) after the scrambled eggs.

Skipping breakfast goes against my intuition because I grew up with "Breakfast is the most important meal of the day as it sets you up for the rest of the day", and that makes sense. 

If you will be doing a 10 minute brisk walk to transport on your way to work, starting within 15 minutes of breakfast, a cereal based breakfast might be less of an issue for your blood sugar peak and profile - see Fitness above. 

Glucose Goddess 4 Main Hacks

These are in the same order as in her 2nd book "The Glucose Goddess Method". Add a new hack every week.

1. A low carb savoury breakfast (eg scrambled eggs and mushrooms with cherry tomatoes)
2. A tablespoon of vinegar (eg apple cider vinegar) each day, preferably before eating something sweet or starchy. Dilute it, drink it through a straw, protect your teeth.
3. Add a "Veggie Starter" to a meal each day. Salads count. It can be in addition to what you would normally eat at that meal. It should make up 30% of the what you eat at that meal. Salad with a dressing with 1 tablespoon of vinegar kills two hacks with one meal. Veggies can be raw.(eg a bitter leaf salad with Greek yoghurt as dressing.
4. Move (soon) after eating - even just 10 minutes. (eg A walk around the block) (Do it after the meal with most carbs to blunt sugar peaks, lower average blood sugar)

A day.

I don't particularly enjoy cooking or shopping so I like low effort eating. 

Test fasting blood sugar. Enter it in diary or spreadsheet.

250ml water - hydration kickstart

Berocca  soluble tablet and 500mg chewable vitamin C (because we are cutting some high sugar high GI foods)

White Coffee

For the balance of the day, if you are hungry and can't hang out to the next scheduled food, you can have 50gms of airfried chicken with salt pepper and paprika and a light spray of olive oil as an additional snack and you can do this multiple times a day if you really need to.

Breakfast

Scrambled Eggs (2 per person, only 10g pp butter, 1 tblspn milk per egg, salt, pepper). No toast.

or 

20gm Plus Fibre cereal, 5 gms oats, 5 gms Psyllium husk, 120gms milk, 20gms water plus 2 slices canned peaches from juice not syrup, or 8 blueberries or half a canned pear (from juice not syrup) 

and

white coffee or tea or 250ml water

AM Snack

3 Ikea meatballs 54gms

or 

50 gms chicken with salt, pepper, paprika, light spray of olive oil, airfried (180C for 8 then shake and another 7 minutes) (or baked in oven)

and

white coffee or tea or 250ml water

Lunch

Bowl: 2 slices tasty cheese, 1 medium to large tomato, 2 ave baby beets (or 1 larger and 1 smaller), and 1 tuna tempter 95gm

80gms Greek yoghurt over 2 slices of canned peaches in juice, not in syrup.

White coffee or tea or 250mls water.

PM Snack

If cereal for breakfast, 1 boiled egg and handful of roasted almonds. After 10 mins if still hungry have a 2nd boiled egg, but not before 10 minutes.

White tea or coffee or 250ml water.

Dinner

120 gms airfried chicken seasoned with salt, pepper and paprika, or 100gms steak lightly seasoned

With either the steak or chicken have:
20gms sweet potato, 60 gms carrot, 100gms cauliflower, 80gms zucchini

or

Bolognese sauce with lots of vegetables chopped in including mushrooms, carrots, capsicum, Use thinly sliced (like peelings) of zucchini as pasta.

glass of red wine 250ml

(wait 15 mins)

80gms Greek yoghurt over 2 slices of canned peaches in juice, not in syrup.

(wait 15 mins)

2 squares of old gold dark chocolate

White coffee or tea or 250 mls water.

Late snack

Do not have any carbs before going to bed. 

Do not have caffeine within 3 hours of going to bed

If you really need to a snack: 

250mls water

50gms of the usual airfried chicken or a boiled egg (no more than  3 eggs in any one day) or a handful of roasted almonds

You need never feel hungry!!!

Reading

"What predicts drug-free type 2 diabetes remission? Insights from an 8-year general practice service evaluation of a lower carbohydrate diet with weight loss "
Dr David Unwin et all
Norwood surgery, UK
https://nutrition.bmj.com/content/bmjnph/early/2023/01/02/bmjnph-2022-000544.full.pdf 

"Pure White and Deadly: How Sugar is Killing Us"
is a 1972 book by John Yudkin, a British nutritionist and former Chair of Nutrition at Queen Elizabeth College, London.

"Glucose Revolution"
by Jessie Inchauspé, a French biochemist and author. She writes about the importance of balancing one's blood sugar for optimal health.

Fixing Rape Law Australia

 All the statistics on unreported rape, long delayed reporting of rape, low rate of charging alleged offenders, frequency of withdrawal of complaints and low rate of convictions would cause any reasonable person to conclude that rape law in Australia is broken and probably thousands of perpetrators escape sanction and thousands of victims have little chance of getting justice. It is also an obvious conclusion that the current legal regimes have little to no deterrent effect. Society has an interest in seeing a system that provides justice for victims and just as importantly metes out justice to perpetrators and causes a deterrent effect

So how can we reform Rape Law to deliver more justice to both perpetrators and victims?

Make rape a new category of civil action that is investigated by police and includes immediate rape kit collection and testing and independent counselling by qualified rape counsellors.

Rape itself would not be punishable by a prison sentence, but by a financial order in favour of the victim that bankruptcy would not cure plus compulsory counselling plus community service orders and limitation on certain things including drugs, alcohol, and a curfew.

 Breaching the community service and behavioural orders would be a criminal offence. 

Any other assault committed in conjunction with the rape would remain a criminal offence, as would any deprivation of liberty, kidnapping or other associated offence. 

Where a person without mental deficiency but a minor committed a rape the parents would be liable for half of the penalty imposed unless they could prove that they had taken all reasonable steps to adequately educate the minor of the consequences of rape, the onus to obtain clear consent, that self induced diminished capacity is not a defence, that consent obtained by false representation or from an inebriated person or pwerson under the influence drugs is not a sufficient consent for any sexual act

The burden of proof for only the rape would be on balance of probabilities. It would not have to be proven beyond reasonable doubt. 

All employers of or persons standing in locus parentis to a person not of full legal capacity would be obliged to report an occurence of rape of which they are aware advising the police of the name of the alleged assailant.

Police would be obliged to use all reasonable endeavours to obtain a signed sworn affidavit from the alleged victim as soon as possible after the alleged offence and that statement would be required to name the alleged assailant but in the case of a bona fide belief as to identity the alleged victim would be immune from defamation or similar proceedings. The normal penalties for a false declaration would apply.

No alleged victim would be obliged to give evidence in a court hearing even if it meant that the case against the alleged assailant did not proceed.

The police would be obliged to keep an up to date database of all allegations of rape and it would be able to be interogated by assailant and victim and other relevant details.

Where a person was subject to multiple allegations supported by sworn statements, evidence of an alleged pattern of behaviour would be admissable.

The old maxim about better for the guilty to go free than for one innocent person to be found guilty is causing such injustice and perversion of criminal law, and undermining of deterrence in case of rape that the current law must be reformed.

A Long Term Interest Rate Outlook

To come to a long term interest rate outlook we should first look at interest rate history and the outlook for growth.

30 years ago our western/developed economies were experiencing higher inflation and growth than today. The inflation was tamed by a combination of higher interest rates and some slowing in government deficit spending. As inflation reduced, nominal interest rates fell, but real (inflation adjusted) interest rates did not reduce anywhere near as quickly.

Over the past 30 years long term interest rates have fallen from ~12% pa to ~1 pa. So asset values have effectively had a boost in the price to earnings multiple from 8.5 times to 100 times if we simply use the inverse of the long term bond rate, However equities, being volatile and prone to occasional crashes, command a premium over bonds to attract purchasers, so let's make the growth in PE multiples from 10 times to 33 times.

This fall in interest rates has also reflected slowing of real growth rates on a per capita basis in most developed countries. Nominal GDP has grown through the effects of immigration, inflation and productivity.

These falls in interest rates did not of themselves cause major realignments of currencies, because the governments of other western countries were doing the same things. While the currencies were generally losing purchasing power (generally measured in relation to a basket of consumption goods) at similar rates the relative values of the currencies tended to relatively remain stable, except for other reasons eg Australia and it's post GFC resources development boom.

These interest rates were driven by giving central banks an appearance of independence and a mandate which typically includes goals of maintaining full employment and keeping the value of the currency reasonably stable over time at a target rate of inflation (loss of consumer purchasing power).

In fact, central banks are not wholly independent of governments as the central bank must respond to the impact on the economy of the change in spending by governments. If governments spend too much inflation breaks out and central banks raise interest rates and if governments don't spend enough the private sector loses spending power and the central bank cuts interest rates to increase spending power of most businesses and consumers (but reduces the spending power of those dependent on interest income, which is typically older retired people).

The relatively consistent increase in asset values brought about by falling interest rates over a long period creates a golden era for governments, democratic and autocratic, because everyone is happy to see the value of their assets going up, whether it be their home, retirement savings, share market investments or investment properties. The increase in value of housing also provides a way to assist funding of retirements as retired people sell large homes in prime locations for employment and buy smaller homes, sometimes in less expensive areas where there are reduced opportunities for employment. The reduced employment opportunities do not affect retired "empty nesters".

So, given that background, what is the outlook for long term interest rates over the next 30 years?

Well, to achieve the same outcome of a golden glow of happiness in the population, why wouldn't governments continue with the same approach?

So expect to see one of three things:
1. interest rates keep falling through the 0 mark and moving increasingly negative over the long term 

2. increased deficit spending by governments to maintain full employment or
3. some combination of the above.

At present progressive governments tend to spend more to increase employment and conservative governments restrict spending to maintain a pool of unemployed to give employers more bargaining power and thereby force central banks to cut interest rates. This is often done under the guise of "stopping the blowout in government debt"

Japan has tended to increase deficit spending rather than reduce interest rates substantially below the 0 mark, especially at extreme times such as during a recession. Lowering interest rates does not send as powerful a signal that the economy and jobs will be protected as government showering money on the private sector. When governments are practicing what they call "fiscal responsibility" and the economy is slowing, cuts in interest rates are often sufficient to increase spending, but not when there is a severe economic or social disruption.

So over the next 30 years, I expect interest rates to continue to fall when conservatives are in power and will not be surprised to see the 0 bound breached more and more frequently until we enter a period of stained negative interest rates, even if immigration is able to be resumed Covid-19. When progressive governments are in power we will see expanded deficit spending and higher so called "government debt" (although much of it will be held by central banks and so be fake debt owed by one part of the government to another part of the government). Over the long period we will see the effect of alternating policies as we have seen over the 30 years. 

 

It is possible that in 10 years we could see long term bond rates at -5% pa, bank deposit rates at -6% pa, home loan rates at -4% pa, and for house prices and stock prices to have continued increasing at 5% pa and so producing capital gains for investors even from today's seemingly bubble prices.

John Hussman - two observations

I really like John Hussman's work.

But, and there's often a but, I have two major criticisms.

1. John largely ignores the power of sustained changes in long term bond rates and the trend which has driven large parts of the increase in earnings multiples incorporated into prices, the Price Earnings (PE) ratio.

2. John looks at stock market valuation largely in isolation from the need to save/invest surplus funds and so largely ignores comparison with other investment opportunities (other than occasional references to bonds or cash).

1."Permanent" changes in the required/assumed earnings rate drives changes in capital value

We have been in a 30 year bull market in bonds as interest rates have slowly fallen from the highs of the war on inflation to the present day occasional fear of deflation. It is important to recognise that what John has called "yield seeking behavior" is not new, it is just played out in an adjusted context.

Some simple maths. The inverse of the rate of income is effectively the price multiple applied to the income stream. There are lots of potential qualifiers to that statement but lets accept it as a broad generalisation. If a an assumed permanent rate of earnings is 10 then the implied capital value is dependent on multiple applied. So if one assumes 10% pa in perpetuity the value is the inverse of 10% which is 10. If the assumed required yield is 8% then the multiple becomes 12.5x. If it is 5% the multiple is 20x, 3.33% it is 33, if it is 2.5% then 40, 2% then 50, 1.5% then 66.67x, 1.25% then 80, if 1% then 100, if 0.5% then 200 . Note that as the required earnings rate approaches 0 the multiple gets higher and higher (it approaches infinity). If the required rate is only 0.10% then the earnings multiple is 1000.

So looking at the last 30 years, the 3 year average of long term US bond rates have fallen from about 12% to about 2.5%, which implies a change in the multiple from 8.33 (100/12) to 40. A perpetual bond earning $12 at a yield of 12% was worth $100 ($12 x 8.33) but now the same bond would be worth $12 x 40 = $480. The fall in long term rates from 12 to 2.5 has resulted in a 480% increase in the capital value. This is permanent if the change in interest rates is permanent.

What happens if over the next 30 years the 3 year average of long term bond rates falls by the same proportional amount as over the last 30 years. Over the last 30 years they fell from 12 to 2.5 or by 79.17%, so they are only 20.83% of the 12 they once were . So if they fall from 2.5 by the same proportion over 30 years they will be only 20.83% of what they are now, that is in 2050 long term rates would be 0.52% and the perpetual bond earning $12 would be worth $2,307. Now lets see how much of an increase that is in the bond price. It was worth $100 in 1990, 480 in 2020 and in 2050 it is worth $2,307. So how much did it increase over the second 30 years? You guessed it, by 480% again!

As an aside, we have recently all learnt a couple of things.
a) there is no 0.0% lower bound of interest rates, central governments can manipulate them into negative territory times, even so negative that consumer rates can also be negative:
https://www.theguardian.com/money/2019/aug/13/danish-bank-launches-worlds-first-negative-interest-rate-mortgage
b) no matter how much a government is ideologically focused on reducing taxation and welfare and reducing budget deficits and repaying the debt, when it really hits the fan they will run huge deficits to maintain stability, or at lest to dampen the turmoil. (See US, British and Australian governments fiscal response to Covid19
c) central banks and governments can do "whatever it takes" (Mario Draghi European Central Bank) when they so decide, more so if they are a sovereign issuer of their own fiat currency, and moreso again if that currency is a global reserve currency. Such countries don't have to tax to spend, but that is another topic.

 So let's look at our long term institutional settings. Inflation targeting has been all the rage among central banks, but complicated by also having to target full employment, and all the while having to do this without any control over fiscal policy. If fiscal policy settings are too tight then interest rates will have to compensate by getting lower, even turning negative. If fiscal policy becomes overly expansionist then inflation might take hold and cause interest rates to rise. So the future depends significantly on the dance between fiscal and monetary policy of governments.

John has done analysis of US demographics (beforeCovid 19 hit) and made estimates of real growth in productivity and concluded that there is little to drive real growth in income per capita beyond about 2% pa. That means that in the absence of some black or white swan there is  little to cause huge economy wide demand for money for capital investment other than to achieve lower labor costs or to replace economically obsolete assets. Lower migration means lower population growth means lower housing demand and lower growth in GDP, all other things being equal.

So the big question is why do stock market averages that include when we were on the gold standard, when we were on a fixed exchange rate standard, while we were fighting a war on inflation, while we were fighting either World War matter at all? Why is the past any indicator of where things should be? Why should the market revert towards where it was at those times?

There are some economic policies that could make US GDP change at a different rate such as allowing an increase in immigration and rebooting manufacturing by moving away from free trade and towards isolationism, but these policies would be contentious and impose other costs, direct and indirect on parts of society that they would otherwise not suffer, but the policies would benefit the stock market and owners of capital.

2. The value of the stock market will ebb and flow around the outlook for other mainstream investments.

John looks at the value of the stock market not so much in relation to other asset such as real estate, gold, cash or commodities but in relation to what it used to be at some earlier time, whether a boom of a bust. He has recently been projecting very low to small negative returns in the US stock market over the coming 10 or 12 years. But what returns will real estate have, or cash, or bonds, or foreign currencies or commodities such as oil or soybeans? Will the stock market provide a higher return than those assets or lower? There are many advantages to investment in major stocks including no property taxes, no vacancy factors, low transaction costs, ability to sell small parts of a holding over time to provide funds for living in retirement and they also form part of any assessment on where to invest. On the other hand there can be more volatility and greater short terms losses and often people tend to sell after they have endured much of the fall and then not get back in before the market gets above where they sold.

John's analysis is also restricted to US stocks and that is understandable but it also ignores about 46% of the global stock markets. Will Japanese, German, UK or Chinese stock markets be better investments than the US market? Will the USD depreciate against the EUR?

So John's analysis is not about macro asset allocation either geographically or between asset classes and so is only relevant for that part of your investment funds that you have already decided to allocate to US stockmarkets. But it does not help much with decisions on stock picking, sector weightings, which indexes to follow through ETF's. So it is of little help in making specific investments other than a decision in relation to US ETF's which largely track the S&P 500.

There are however, people watching all these different markets and crossing over between them, so no one very large market is going to have a much higher expected risk adjusted rate of return than any other such market for very long as investors and fund managers will begin selling in one market and buying in the one with the higher expected risk adjusted rate of return, It could take weeks for any premium to dissipate, or it could happen almost instantaneously, but it will happen. So although the US S&P might have projected returns of only 0.5% over the long term, that might be more than the expected return from holding cash. All asset prices that are valued based on a return are susceptible to adjustment as long term bond rates move to new seemingly permanent lower of higher rates, for the reasons discussed at  1. above

Some techniques of investing accentuate new trends because as they emerge from the activities of some investors others identify a change in trend and jump aboard and there are various systems for choosing when to jump into a trend,

So while the expected return from the sock market is low, investors are betting that they will get a greater return there than from other alternatives such as cash or bonds, or the UK market or Japanese market.

Thanks John for all your great work, which I have been reading for over 10 years.

Ethics of Triage

The great majority of triage decisions are based on the memory of a protocol in a time of great stress.  In real life it is never as simple as saying run over a dog to avoid hitting 4 people.

The base protocol is to save as many as you can by letting those most likely to die anyway die without any attempt to save them. In this way the lifesaving efforts are directed to those with the best chance of surviving longer term.

It was reported during March 2020 that in northern Italy as the health system was overwhelmed by Covid19 patients triage was for ventilators was based on age and that at one stage people over 60 were denied ventilators so they could be given to younger people who needed them and the allocation decision was being made by front line medical staff without benefit of a protocol as none had ever been needed before for this type of decision.

This can lead to long held feelings of guilt for the person making the decision and affect their willingness or ability to continue in their career.

To protect the mental health of the person making the decisions, a protocol is determined in advance and those making the final decision they are told that they are not making the decision to let someone die, they are merely following a policy determined by others that is fair and reasonable in difficult circumstances.

Some take all human consideration out of the decision by making selection of those who get lifesaving treatment by some form of lottery. Every patient in the hospital on a respirator and those waiting for a respirator are given a number. A means of "drawing lots" is used to see who wins or loses respirators. Respirators are given to those who win (or don't lose).

Another such way is simply first come first served. If you need one you go in the queue and if you are lucky someone with a respirator gets better or dies and you get there respirator. If you are unlucky you die before you get to the top of the queue and a respirator becomes available.

Both of these methods can result in saving the life of an old sick person with advanced dementia over the life or a newly qualified intensive care specialist, MBA, Ph. D. or budding Mother Theresa and this imposes a significant cost on society as a whole. There has to be a better way.

An economic rationalist would say what is the amount this person can contribute to production of valuable goods and services in the future versus how much they are expected to need support from the rest of society over their lives? Anyone in paid work would be saved in preference to someone not expected to do unsubsidised paid work  in future and even moreso if they are on any form of government benefit.

Age as a determinant can be an independently verifiable way to triage in a hospital setting and estimating age can be a "quick and dirty" way to triage, but with many errors at the margin. Those that look old are offered whatever palliative care is available if any and those that look much younger will get the ventilator and hopefully be saved (although a large proportion of patients who are put on an invasive ventilator (ie intubated) do not survive.

However some young people have diseases that limit their life expectancy severely, while some older people have long productive years of life in front of them.

Also, among older people there can be significant differences in life expectancy. Cancer and heart disease for example can mean a very low life expectancy for a younger person than an older healthier person has. Between two older people a smoker may have a lower life expectancy than a non-smoker  or a mature person with diabetes, hypertension, coronary artery disease and early stage dementia may have a lower life expectancy than an older person in good health.

So, if the goal is to maximise the overall benefit to society perhaps the expected disability adjusted life years is a better measure. But what about parapalegics? How is their disability taken into account? Does it matter if they caused it themselves eg by crashing a motorbike at high speed on the wrong side of the road? What about if skydiving? Or hit on a pedestrian crossing  in broad daylight by a car driven by a drunken drug addict that ran a red light in an unregistered vehicle?

Can people coming into hospital be given a point score on admission that takes all the circumstances listed above into account? How long would it take? how much would it cost to administer? Could you appeal? Could the dependants sue if the calculation was performed negligently and the person died for lack of a ventilator or an operation?

From the point of view of practical application the decision in accordance with the protocol has to be able to be made quickly and in accordance with the protocol by the front line worker. Society and the front line medical worker are both concerned that the perfect does not become the enemy of the good.

In a hospital setting, sometimes the decision can be made by the patient even if not conscious or having mental capacity through the application of a living will made previously by the patient. Examples are "Do Not Resuscitate" directions. There are also directions that the patient is not to be either put on or kept on life support for more than eg 5 days if they meet certain criteria. The criteria can be certain illnesses, prognoses or statuses. It could also be that certain other medical treatments are to be withheld based on certain criteria. A signed, witnessed living will and an enduring power of attorney copied to family members can make clear who is to make the decisions and in what circumstances they have discretion and in which circumstances the living will must be followed. This can relieve the front line medical staff of having to make any triage decision at all in most cases and also ease the making of difficult clinical decisions.

In many ways however the "best" triage decision is likely to be made by a senior medical practitioner who has thoughtfully considered all the above issues in advance and to relieve that burden age is a good but imperfect proxy for rapid estimation of societal benefit when overlaid over the clinical decision of who is most and least likely to survive in the medium term.

Fake Government Debt in Australia

It's fake debt!

There need be no debt crisis from Australian Commonwealth government rescue packages legislated to sustain the economy during the economic crisis caused by the Corona virus health crisis and response because it is fake debt.

There are 7 principles to understand.

1. When a commercial bank lends money it creates the money out of nothing (DR Loan to Joe Bloggs, CR Joe Bloggs cheque account, no outside or additional funding needed to make the loan. When Joe spends the money then, unless Joe spends it with a customer of the same bank, the lending bank may have to borrow from the general money market). (See the confirming Bank of England paper here)

2. A commercial bank can buy a bond, by creating the money from nothing (Dr Asset: Bonds, CR Commonwealth Government Treasury).

3. If it so desires the Reserve Bank of Australia ("RBA") and Commonwealth Government ('the Government") acting in concert RBA can make it attractive for banks to buy bonds from the Government and then sell them to the RBA, either by simple suasion or by making regulations that banks have to hold reserve assets such as Government bonds or credits at the RBA

3. When the Reserve Bank of Australia buys something like Commonwealth Government debt (Commonwealth Government Bonds) from a commercial bank, it does not inject money into the real economy, it simply recognises that the bank has increased reserves at the RBA (DR Asset: Government Bonds, CR Commercial Bank (eg Westpac) Bank Reserves

4. The RBA does not have to pay interest on reserves (but in some circumstances the government may make it pay such interest)

5. When the RBA makes a profit eg from interest on Commonwealth Government bonds, it pays that profit to the Federal Government Treasury as a dividend.

6 . Effectively the Treasury funds the interest it credits to the RBA as holder of the bonds from the additional dividend it receives from the RBA's additional profit. It is what is commonly called a "round robin". The money ends up back where it started.

7. When commercial banks get no interest on reserves at the central bank, their returns on assets fall a little compared to just before they sold them, but their profit will go up slightly as they will sell the bond at a slightly lower yield than that at which they bought it, effectively taking a small fee for their trouble.

So all this debt can effectively be at no net cost to the government and never have to be repaid.

This all works because the Commonwealth Government is a monetary sovereign that created and controls the Australian dollar as a fiat currency, controls the banks and controls the reserve bank and owns and runs the Australian Government Treasury

This does not work for state governments as they do not issue and control their own currency, instead they use the Australian Government's currency. Also the state banks do not control the RBA or the Australian Treasury.

It does work for other countries which are monetary sovereigns and have similar structures and institutions to the Australian Government eg USA, UK, Japan, China.

It does not work for countries that have surrendered their monetary sovereignty to some higher (in relation to money) authority. Primarily that is the countries that use the Euro as they ahve agreed to be bound by European institutions and to use a currency that the country does not control, the Euro.

The government could do this with more debt, it is simply a matter of political will, but there are some real limitations. If the Government gives people too much spending power it can cause asset or general inflation (and eventually hyper inflation). If the Australian government does huge amounts and other nations do none, then the Australian Dollar ("AUD") will fall in value relative to other countries' currencies.