*** FUTURE POSTS WILL ALSO APPEAR AT 'NOW AND NEXT' : https://rolfnorfolk.substack.com
Saturday, September 26, 2009
Squaring the circle, packing your bags
Wednesday, September 23, 2009
Trusting soul
Cut the cr-- and send 'em down
I had a dream last night
What a lovely dream it was
I dreamed we all were alright
Happy in a land of Oz...
- John Sebastian
Tuesday, September 22, 2009
A glimpse of the past
Up with bonds, down with equities, out with with-profits
My concern is that the market is now so volatile that only active traders will be interested. The smoothing approach of British with-profits funds has been undermined by downswings so sharp that more than once recently, they have had to apply penalties to investors seeking to exit early; which in turn will make those investors less inclined to reinvest in with-profits, and indeed quite possibly put them off investment generally.
That, plus the need to take more income as the population ages, plus a poorer next generation that will work longer, be taxed more and have less in State and other pension provision, plus the burgeoning of the world population, the gradual equalization of world average income (and it's a very low average), plus increasing ecological limits to fast-buck-type growth, all tend to make me more a bear than a bull for as far as I can see, whatever may happen in the short term as a result of desperate overstimulation with fiat cash.
Yes, there'll be opportunities for the agile financial player; but for the mom-and-pop saver?
Monday, September 21, 2009
Where's the gold, really?
At its peak, the Fed held 12,700 tonnes of the metal, but it's hard to establish even what it claims to have now - try making sense of the prose the Fed issues on the subject here. Some think the vault now contains no more than a lottery ticket and a horse-pistol.
Could they be snorting with laughter over their glasses of Petrus as they look down at us trusting plebs?
Sunday, September 20, 2009
The coming tide
Pollock, whose presentations are useful to the layman because he is at pains to be clear and calm, notes that the volume of trade is low, which may mislead us as to the value of the market as a whole. It is as if, in a slow-moving housing market, your neighbour suddenly manages to sell his house for much more than expected, because the purchaser has certain private reasons to get in.
He also notes that the gains on the Dow are counteracted by the fall in the dollar's value, and this is a theme I've touched on many times. You have to look at real gains; and even when you think you're beating the present rate of inflation in your country, currency exchange movements may be the early indicators of higher future inflation. This is why, comparing where we are now to the period 1966 - 1982, I think we may yet see the real-terms equivalent of Dow 4,000 and FTSE 2,000.
Pollock goes on to consider gold, over which he puzzles (but then, there's a lot of dirty work and hugger-mugger in that market); and oil - if foreign economies begin to recover and industrial production rises, increasing the demand for oil, then if the dollar continues to be weak the price of energy in the USA will become so high as to damage growth prospects there.
So, where are we with all this?
Even academic economists are beginning (very belatedly) to question the validity of their models. Across the world, the games are so weighted and rigged, the rules so suddenly variable, that we are talking about how things ought to work, rather than how they really do. This is why it's now a fertile ground for conspiracy theorists: there really is a lot of conspiracy. Trouble is, we don't know all of the plots, all of the players, and all of the details.
What I think we can do, is look at the ocean tide, and not at the individual waves.
Historically, Western countries became wealthy on technological advances and were able to sell goods not just to each other, but to undeveloped countries in exchange for cheap resources. Then the latter countries began to industrialise, and goods could be carried at low unit cost in vast bulk across oceans and continents. All that remained was to break down political barriers to trade, as Nixon began to do with his visit to China in 1972.
Trouble is, controlling the rate of change. It's one thing to turn on your oil-fired central heating, another if your fuel storage tank catches fire. We want to carry on as we are (or as we used to be), but poor people are in a hurry to attain our wealthy lifestyles, and are disinclined to progress more slowly. Vast international businesses and globe-trotting billionaires stand to do very well out of facilitating this trade; national politicians are under pressure from their voters to resist it - but on a personal level, will know how rich they themselves will be when they leave office, so long as they don't try too hard for the people who elected them.
So, while I don't quite subscribe to the Dick-Dastardly-and-Mutley view of politician's summits (G-name-a-figure, Bilderberg, et al.), I can see the natural attraction for them of a world (or at least supranational) government. It means being further away from the Great Unwashed, mixing with all the Right People, fine wines and yachts etc; it means going with the flow, helping wealth and power to gather into certain centres, and organising dole handouts to regions that lose out as a result. Only the fools will try to play King Canute.
Imagine the world economies as a series of canal locks descending a steep hill. We are in the top section, the poor countries lower down. Now if all the gates are opened at once, there will be a destructive gush of water; the narrowboats in the top lock sink into the mud; the ones at the bottom float on a higher tide; a brave soul on a surfboard (the international trader) rides a thrilling wave down the hill.
Free-traders will argue that trade brings mutual benefits; but I don't think the argument works when world income disparities are so great. A Dutchman bought Manhattan from the occupying tribe for $24, but I doubt they'd get it back for that price now, not even with 400 years' interest.
It's coming, it's coming fast, it's coming destructively; and the people we pay to stop it are telling us the lies we want to hear and planning their personal advancement*. Let us return the favour.
* “It is a totally wrong notion of people to assume that the government does anything for the people; the government is there to do something for itself, and not for the people” – Marc Faber on GoldSeek, 12 September 2009
Saturday, September 19, 2009
And another thing
At the time, this monster cash extraction (done with freshly borrowed money) was more than three times Arcadia's operating profits, but I'm sure the banks that (expensively) approved the loans didn't care. And it was legal.
However, if, in the economic downturn, turnover and profits are savaged, and tangible assets decline sharply in value, and Arcadia becomes very weak, or even goes bust, what will Peston say then? Arcadia Group employs 27,000 people; was it really OK, other than in a strictly legal sense, to put such a heavy yoke around its neck? Had the dividend not been paid - and especially, not been funded by humungous bank loans - what more might the group have achieved? The consolidated balance sheet for 31 August 2008 is here; what will the 2009 one look like?
What are the implications for our so-called democracy when captains of industry become so gigantic, and the rest of us become relatively as insignificant as crablice?
Running out of bigger fools?
According to FT Alphaville (htp: Michael Panzner) it's technical/leveraged buying/betting:
Very likely it is still a combination of program trading, short coverings and portfolio managers desperately trying to make up for last year’s epic losses.
And when it becomes painfully clear that there are no more mugs to buy the rubbish off you?
Spiralling round the black hole of inequality
Once income concentration becomes a reinforcing cycle of the kind we are witnessing, it is never stopped by pure market forces. Only extensive government intervention, of the kind that will inevitably create high controversy, reverses this trend.
Read the rest of Mark Thoma's piece here.
People get ready
Karl Denninger, still indignant and vengeful but now also beginning to sounding the Cassandra note of inevitable defeat ("We are one cycle away from a collapse - if we're lucky"), graphs debt against GDP for the USA and it's clear that there must be a break in the smooth lines at some point.
And however bad it is for America - a country which periodically falls over, picks itself up, dusts itself down, and starts all over again - it'll be far worse for Britain, a country where the management has never quite lost that 1066 sense of being quite unconnected with the indigenous peasantry subjected to their cruel alien rule. This is why our overlords find it so easy to flee the country to take their place in the new pan-European aristocracy currently under construction, an unlovely amalgam of big-business swindlers, venal politicians and their marketing men. They're allying with old money smart enough to know which side its bread is buttered; history is made in the bedroom and the backroom (“Let others wage wars: you, fortunate Austria, marry”).
There is a long history of England's rulers employing foreign mercenaries (especially Germans) to put down uprisings of the overwrought population, both here in the sixteenth century, and in the American colonies in the eighteenth. In the modern world, where the predominant avatar of Power is money (Bertrand Russell's 1938 book is illuminating on the three-headed helldog), we are being driven off our business smallholdings and made day-labourers for giant enterprises owned abroad or by equally huge collective investments in which the individual shareholders' voices are lost "like tears in rain".
And when the Empire falls, as it must, as all do, the great forgetting will descend. Perhaps we can take comfort in the thought that after the bloody cataclysm, the Dark Ages, so named because untroubled by the scribes and accountants of expansive rulers, were, quietly and anonymously, as sunlit as ours.
Thursday, September 17, 2009
The night they raided Minsky
So he's another forecasting and fearing systemic collapse - like Marc Faber and Max Keiser recently - and now Karl Denninger.
As the Dow heads for 10,000, the FTSE soars above 5,000 but gold seems now to be consistently drifting beyond the $1,000 breakwater, I feel of the bankers, traders and politicians, as Talleyrand said of the Bourbons, that "They have learned nothing and forgotten nothing."
Wednesday, September 16, 2009
Evolution of Creationism
Culturally is a different matter.
Biblical literalists, principally in the US, with some in Canada, Australia, England, Ireland and elsewhere, have fought a public relations rearguard action, retarding US science and education. Even as they lose in the scientific arena, they also have lost in legal battles.
Ironically, this pressure has caused their arguments to evolve:
CREATION SCIENCE (ruled religion and not science by the US Supreme Court in 1987)
A used-car salesman in a cheap suit. Tries to convince you that a rusted-out junker is better than a new car.
INTELLIGENT DESIGN (Kansas and Ohio School Board hearings)
Salesman has a nicer suit. Paints over the rust, and tells you that the car IS new.
'ONLY A THEORY' and 'STRENGTHS AND WEAKNESSES' (Cobb County, Georgia and Dover, Pennsylvania court cases)
Salesman caught on video turning back odometer. Hides car and denies everything. Points out 'major defect' in new car next door. Closer inspection shows defect to be dead bug on windshield.
Sunday, September 13, 2009
20:20 hindsight and the coming stock collapse
So, is all well again?
Denninger thinks not. To get back to where we were in 2000, either debt has to be slashed (this isn't the path chosen by the powers-that-be over the last couple of years) or GDP and incomes have to soar (how? Who are we suddenly going to sell loads more to?).
Given a choice of the impossible and the merely unpleasant, it looks as though there must be a large-scale default sometime - either of actual debt, or of current and/or future government-provided benefits (or both).
In the meantime, the monetary pumping may erode the dollar's value and cause a highly misleading leap in nominal stock prices. Like I said yesterday, I think we could be looking at a re-run of the mid-70s to 1982. I remember an old financial adviser colleague reminiscing about the stockmarket "boom" of 1974, but he didn't mention the inflationary context, which is what concerns Marc Faber - the fundamentals are still all wrong.
What's good for the [Dow] ISN'T good for the country
This is what I have been thinking - that the stock indices are now fundamentally disconnected from the health of the economy.
Predicting the 2010 General Election Result
Many voters and critics have been left confused by Prime Minister Gordon Brown's explanation of how he appeared to predict Thursday's General Election results.
Some 4.6m viewers saw him claim to have asked 24 people to guess the successful candidates for the 646 commons seats and use an average of the total for each to predict the result.
But some mathematicians have dismissed his explanation as "complete nonsense".
And on blogging site Twitter one fan said he was "still confused", while another called it a "massive letdown".
IT trickery
On Brown's own Twitter account, he said: "Well there you go. I trust all is clear now."
He also added that his blog, which has been set up for people to comment on his tricks, has received 5 million hits.
However, it is currently not working.
Thursday's show on Channel 4 attracted 2.7 million people - beating the actual Election 2010 programme on BBC One, which 2.4 million tuned in for.
Brown successfully produced the correct numbers during The Live Event programme, at the same time the actual results were announced on the BBC's coverage.
He then promised viewers they would discover the secret of the trick on Friday's Channel Four News.
During How To Win The Election - which attracted a peak of 4.6 million viewers - he revealed that he had worked out the election numbers by asking a group of 24 people to guess them.
Once he had their answers Brown said he added the numbers up for each candidate and divided them by 24.
However, Alex Newton, a professor of Pure Mathematics at the University of Oxford, has dismissed Brown's explanation.
"Mathematically it is complete rubbish. It is a bluff on his part," he said.
And Roger Penwiper, professor of psephology at the University of Cambridge added: "There is a difference between guessing between the weight of an ox and guessing election candidates, which is un-guessable.
"That is just a clear wind-up and complete nonsense. There is absolutely no way he did that."
Other theories, that have been suggested in the newspapers, claim Brown used IT hacking trickery or a wall of postal votes to help him complete the stunt.
Michael Pundit of The Times newspaper rated the show five out of five, saying Brown has turned from "most irritating man on television to the most intriguing".
However, he added: "It was, of course, still one hell of a trick — far too good for him to give away."
Twitter critics of the explanation show include dCameron1966, who said: "I'm still confused about what way he did it to be honest."
T-Benn called the 59-year-old a "massive letdown" and AnthonyCLB said: "Is it just me or was Gordon Brown's explanation last night very disappointing?"
But some voters enjoyed Brown's stunt.
Peterm&elson posted on his Twitter page that the show had been "very interesting & entertaining".
Kjongil added: "Gordon Brown is pretty cool... I can see why people are so skeptical [sic] about him, but I think he's on to something here."
Fashion and the stockmarket
PS: My wife says 80s-style shoulder pads are coming back in the Autumn catalogues. A bullish sign?
Saturday, September 12, 2009
Dow now, and then - "Brief Encounter"
Signs of a tipping point in the market again?
Stinking fish and red herrings
Those of us who are old enough will remember the history: how venture capitalist Jon Moulton came with a plan to reduce the money-haemorrhaging plant to a smaller, actually-profit-making outfit specialising in sporty cars. The rest of the enormous site would be cleared and developed as a residential and shopping area. Redundant workers would be suitably paid-off and their pensions preserved - and many of them might then have had a chance of employment with other car makers elsewhere in the country.
Oh, no, this would never do. The land was polluted and quite unsuitable for residential development. Rover still had a future. Moulton was a wicked chancer. His twopenny-halfpenny firm had no business meddling with a great bellwether of the British economy.
Now, the site has been cleared for residential and retail development. There is no car making at all. The workers didn't get the compensation they would have had, nor the pensions, nor the alternative employment. A few men have - legally - made about £9 million each, hardly worth mentioning in the same breath as the outrageous booty brought home by bankers and City gamblers.
And the Fourth Estate plays along with the distraction of the public's attention.
Robert Peston is the son of Maurice Peston, Baron Peston of Mile End, a Labour life peerage created for Peston senior on 24 March 1987.
Another collapsist
The question is, how bad is it for other countries (e.g. the UK) and what will trading partners do to stop their export markets being hit? If all major countries try to devalue their currency, then maybe only certain commodities will be worth holding on to while the winds blow.
And Keiser says the wealthy have been shifting their capital out of America since 9/11. He's been choosing defensive stocks, ones that will survive high unemployment, consumer boycott and anti-American sentiment. One big and possibly vulnerable name he mentions is Coca-Cola (remember Qibla Cola?) - a staple of Warren Buffett's portfolio.
Friday, September 11, 2009
Thursday, September 10, 2009
What's Next?
My father was a natural scholar, who was pulled out of school at age 14 by my grandmother, on the grounds that 'education would not do him any good'. My mother, raised in Nazi Germany, lost any chance of further education because of the war.
While raising my brother and me, they encouraged us to do our best, and to take advantage of the excellent (at that time) British education system. In doing so, however, they allowed us to find our own paths, and for that I am grateful.
Why do I make these comments?
It is my opinion that, even if we survive the current economic mess, there are cultural movements that threaten to cement in place a caste system worse than the old class system.
On one hand, we have the 'education experts', who have so meddled with schools on the grounds of inclusiveness and diversity, that the education system now produces people qualified on paper, yet unable to do anything useful.
In the US, we have religious extremists on the right trying to kill public education for many reasons, and attacking science and its funding at every turn. In the UK, students now have to pay tuition, leaving them deeply in debt, just like in the US.
We also have a relatively new phenomenon, the 'helicopter Mom' of the middle class, who micro-manage every aspect of their childrens' lives. I have interviewed students for a select medical school program. Full 3/4 are of Indian descent, with both parents in the medical field. They have been groomed from birth to do just the right things to follow their parents.
Just how free will the next generation be?
Compassionate Conservatism
Even the Soviets recognized that this trust was inviolate. Not so the corporate raiders, who started in about 1980 to raid the funds to pay for their purchases, totally destroying many of them in the process.
Today, the conservative US columnist George Will published a piece blaming California's financial ills on over-taxing the rich, and the 'generous' state pension system.
I find it a very odd coincidence that the very same day, conservative Republican lawmakers in Ohio announced that their public pension system is in trouble, and requires a major overhaul, to be done on the backs of the current retirees.
Tuesday, September 08, 2009
Hi-yo Silver, away!
And gold briefly cracked the $1,000 ceiling today. Naturally, there'll be a reversal at some point, but I have a hunch that much money and effort have been expended trying to put off this psychologically important event. Once you've made the first crack in the eggshell, it gets a lot easier.
Monday, September 07, 2009
Every little thing's gonna be all right
United 93
Sunday, September 06, 2009
A positive step: solar cooking
Will Tony Blair take Irish nationality?
That is not to say that the parents might not later choose to apply. Advantages would include the famously lenient Irish tax treatment of writers and artists (once entirely exempted, but now lightly taxed at 1% on annual income up to €100,000 and 2% for those earning above that figure). Eire is a good country for those who specialise in popular fiction.
Not that the people of the Irish Republic are afraid to call people to account*; they take their religion and morality quite seriously there, still. I watched the Gay Byrne Show on 28 October 1994, when Gerry Adams faced political opponents and a far from sympathetic Southern Irish audience and was called a murderer to his face (he remained lethally calm and turned the point into an issue of good manners).
Perhaps Tony Blair, that son of Proteus, will one day be seized and held until verity is forced from him.
Update
*The current PM is ostentatiously backing compensation claims against Libya for supplying the IRA with explosives. Could we start a leetle closer to home? How much are the IRA, PIRA and the rest prepared to pay?
Fisk this - Jack Straw on oil and Al-Megrahi
Mr Straw also claims today that Mr Brown had nothing to do with his change of heart over the PTA [Prisoner Transfer Agreement], adding: “I certainly didn’t talk to the PM. There is no paper trail to suggest he was involved at all.”
Even if literally true, the above statement is consistent with the possibilities that:
- Mr Straw communicated via a third party with the PM on oil-for-Lockerbie-bombers (or, the PM raised the matter with others)
- Mr Straw communicated directly with the PM, but not through speech
- There were once paper-based records to show the PM's involvement, but they have been destroyed
- There were, or still are, records held in other form (e.g. email)
A good example of a "non-denial denial"?
PM to quit?
What will all these people do for a hate-figure if Mr Brown quits, as I think he will probably do on ‘health grounds’ before the Election?
I reconfirmed our electoral register details by phone yesterday; but I really don't know whether I will be able to vote for any of the candidates. Have we got to the point where mass abstention sends a stronger signal than positive choice?
It occurs to me that even using the phrase "sending a signal" reveals how much the political class has lost touch with us.
UK public debt worse than USA
Saturday, September 05, 2009
Lone wolves and the herd instinct
It's true even now. British PM Gordon Brown is down, heir-presumptive David Cameron is up. We shall see what Balloon Head makes of the economy when he gets in.
The problem with Brown is that he is, in my (educationally experienced) opinion, mildly autistic. He's the kind that academically dumber, normal kids pick on and wonder why he doesn't fight back. He hasn't helped himself by aiming obsessively at a job which requires quite different skills, which the flashy Blair has in spades; but self-knowledge comes hard for ASD types. Star Trek fans will understand that Scotty could never take Captain Kirk's seat in the Starship Enterprise; but maybe he harboured ambition, all the same. Had Kirk made Scotty his deputy, it could have lit the touchpaper.
The autistic child senses his vulnerability, and will make compromises to be part of the flock. Desperate for acceptance and respect, Brown has paltered with the truth throughout his political career, as commentators on his time as Chancellor have often noted. The brawling pit of the House of Commons has never been the place to nurture an inner-directed, analytical man's integrity.
But the pack is blind, too. Unrestrained, the instinct to group-bully the outsiders, the different ones, would send the human race well back into the Stone Age. And then look at the ones they instinctively, collectively follow. How many years was it before the Press revealed what they must have known all along, that the overjoyed crowd that greeted Blair in Downing Street after the 1997 General Election, was a handpicked mob of Party members? I shall believe in journalistic independence when a new incumbent is promptly probed and criticised.
And what is the pack now saying about Afghanistan? Are they correct? Would it solve our problems to withdraw and concentrate on more achievable aspects of domestic security (some British Army regiments stationed by our ports, airfields and the Channel Tunnel might not go amiss); or would it be a sign of weakness, the crumbling that in ancient times not only ceded the provinces formerly under the Pax Romana, but at last saw Alaric's Visigoths rampage through Rome itself?
Friday, September 04, 2009
Income mobility and income structure
Elsewhere, I've read that the middle earning bracket as a whole has not advanced, and the top end has become wildly richer. But if individuals can progress up this ladder, does it matter that the gap between the rungs has stretched?
Thursday, September 03, 2009
A heavy golden straw in the wind?
(htp: Max Keiser)
Wednesday, September 02, 2009
Evolutionary Dead End?
As a scientist with interest in just about everything, I have come to the conclusion that the underlying cause for most, if not all, of these problems is that our psychology and cultures have not caught up with the Scientific Revolution.
I will begin with that statement that science has emerged as the most useful method of determining fact, if not truth.
However, like our cousins the Great Apes, we still waste resources when they are plentiful, with no thought of the future. We still generally pick our leaders as the most virile male, i.e. the silverbacks, rather than their ability to actually solve problems.
And we still insist on pre-Enlightenment thinking, as is demonstrated by this piece from DC's Improbable Science 'blog:
A recent report by the King's Fund in the UK on complementary medicine contains the following passage:
“This report outlines areas of potential consensus to guide research funders, researchers, commissioners and complementary practitioners in developing and applying a robust evidence base for complementary practice.”
In other words, if we spend enough money, we will find the stuff that works, and best way to use it.
However, the US National Institutes of Health has spent over $1 billion in the past decade on carefully researching these practices. Not a single one was found to be of benefit. This was so distressing to some there, that each new report resulted in a slew of resignations.
Water wars
From this we note that Canada may have something to offer the USA (Al Capone would be into mineral water now, I guess), and that India may face an even more desperate shortage than China, unless and until desalination plants take off. And parts of South America may have their attractions.
But the Congo: no. I once taught a lad whose family trekked 1,000 miles to the coast to get away from the civil war, and he very nearly didn't make it, because of a blood-thirsty armed patrol. His father nominated him for the chop rather than the favourite son, but they eventually relented.
Any views from survivalists as to where to move the family for a long-term future?
Don't save the planet, save the country
Instead of challengeable pi-jaw about global cooling/warming/okay-let's-compromise-and-call-it-change, why don't we look to reducing our energy use for the sake of liberty? No more dirty deals with Putin, Gaddafi, the Saudis et al. And less chance of another industry-crippling 1974 energy price hike.
An initiative that I think will run long and grow big is "transition towns", started by a man called Rob Hopkins in Totnes, Devon. Out from among the patchouli-scented crystal-wavers and hare-worshippers will yet come ideas to help us adapt to Peak Oil.
The Fourth Horseman
Some say that the derivatives market is now worth over $1 quadrillion, as compared with gobal GDP of some $55 trillion. For most people, these numbers mean nothing, so here's a graphic representation:
Supposedly, this shouldn't matter, since every bet involves two parties and so the sum total is zero. This ignores counterparty risk, i.e. the chance that the other person will fail to deliver when the time comes. It's the sort of thing that busted the UK's oldest bank, Barings.
From what little I understand, the derivatives market suffers from much the same complexity and obscurity as the packaged mortgage mess - the dealers are making loads of bets with loads of other people - so the misery could get spread around rather than just take down one or two incautious players.
If just 1% of the derivatives market fails, this equates to some 18% of global GDP. We in the UK are dealing with an economic contraction of less than 6% year-on-year, and that's causing paroxysms.
An argument for holding some emergency cash, away from the banks?
Fight back against self-organisation
I can see the logic in this: when I've listed all I have to do, the heart sinks and then I rebel against the lot. When you've planned your life too systematically, the life-impulse within you is driven to smash the system. A degree of disorder, of randomness, of openness to change, is like opening a window in a stuffy room.
"Delight in Disorder" by Robert Herrick:
A sweet disorder in the dress
Kindles in clothes a wantonness:
A lawn about the shoulders thrown
Into a fine distraction--
An erring lace, which here and there
Enthrals the crimson stomacher--
A cuff neglectful, and thereby
Ribbands to flow confusedly--
A winning wave, deserving note,
In the tempestuous petticoat--
A careless shoe-string, in whose tie
I see a wild civility--
Do more bewitch me than when art
Is too precise in every part.
Unemployment a good thing? For economists?
There is a pipe-smoker-in-a-leather-chair comfortableness about this (I'm not sure what the unemployment rate is for economists; should the 10 - 15,000 who failed to predict the credit crunch all be sacked?), but he may be right.
However, the allegedly self-righting mechanisms of the market may not operate quite so efficiently in a single nation's economy when there are other major causes of disequilibrium at work in the world, including quarrelsome international politics and sharp disparities in global wage rates.
An image: picture a man in his study, happily using a tiny screwdriver to adjust the mechanism in a carriage clock, while a block of frozen waste hurtles silently towards him from a passing jet liner.
PS:
Coincidentally: "... if you fail to heed the roar in your ears and fail to look up what will inevitably come, while it may surprise you, does not surprise anyone who has passed sixth grade math." - Denninger
Welcoming the disaster
"On April 17, 2007, famed short-seller Jim Chanos and other hedge fund managers met under tight security at the World Bank in Washington for the G-8 meeting. Chanos and Paul Singer briefed prominent policy officials about the growing financial instability. They gave irrefutable evidence that a catastrophe was building. They told officials that banks that were about to sink the global economy. They called for decisive action.
And they were ignored.
Gordon Brown was there..."
- New Deal 2.0
My comment: there's always a nice conspiratorial frisson when you think you can show They Knew All Along. Except there will have been other voices (like the 10 - 15,000 American economists who didn't foresee the credit crunch). And self-delusion. I don't think this nails the guilty parties.
Expect a major house-cleaning, a second American Revolution. We predicted the "Great Depression 2" around 2012. Well, we doubt taxpayers will passively sit one more time, like in the 1930s, in 2000, and the past few years. Next time voters will take a page from the history books about past revolutions in the American Colonies, France and Russia. A perfect storm will erupt in a massive global credit meltdown, bringing down Wall Street and the clandestine $670 trillion shadow central banking system.
- Paul Farrell
My comment: The appeal of revolution is to juvenile minds drunk on testosterone and misled by ignorant optimism. This is why the Communists have focussed on the young. I am reminded of how Rupert Brooke welcomed the onset of WWI:
Now, God be thanked Who has matched us with His hour,
And caught our youth, and wakened us from sleeping,
With hand made sure, clear eye, and sharpened power,
To turn, as swimmers into cleanness leaping,
Glad from a world grown old and cold and weary,
Leave the sick hearts that honour could not move,
And half-men, and their dirty songs and dreary,
And all the little emptiness of love!
I don't think he would have agreed with his younger self by the end of the Great War. After a disaster comes the greater disaster: Romanticism.
Tuesday, September 01, 2009
What do our politicians control?
Monday, August 31, 2009
Massive inequality
The same can be said of the savings rate, and here Andrew Kaplan plays with figures to show that US income is so unequally distributed that the top 1% could theoretically account for all the savings in the US. It is getting dangerous, I feel - I sense (I hear) among many ordinary people an inchoate rage against the financial elite, as well as against the remote political class that services them.
This concentration of wealth and power is exactly what sparked the American revolt of the 1770s. But a colonial secessionary war is quite different from a civil war; making peace after the latter is much harder. "O Freunde, nicht diese Töne."
Marc Faber - total breakdown ahead
... in my view, the big crisis is ahead of us. It may come in 4 or 5 years' time, maybe only in 10 years' time, but the total breakdown of the system is ahead of us and it will devastate the global economy. (4:18 on)
You have to decide whom to believe. Including Steve Keen, it's said that only 12 professional economists worldwide foresaw the crunch, although there are 10 - 15,000 practising in the US alone. So the majority verdict is useless. To me, Faber has the ring of truth.
The good news, such as it is, is that we may have a few years to prepare.
As to perceived turning points, I looked at this last December:
Splat
Sunday, August 30, 2009
Top travel tips from Lifehacker
The terrorist state comes closer
Wikipedia says, "All British passports are issued in the exercise of discretion by Her Majesty's Government under the Royal Prerogative. In any event, discretion must be exercised reasonably and not on a whim, and even though there is no statute governing the issue of passports, such prerogative powers are susceptible to the normal processes of judicial review (Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374)."
I've read somewhere that there was a time when the British could travel abroad without a passport. And according to "Stiggy" on the No2ID message board, it's still legal to do so - I'd be interested to know if this is so, and how it could be done.
"Get out of the market" - RBS strategist
Keiser got wide attention in July when he referred to Goldman Sachs as "scum" and (I think, not incorrectly) said that the practical results of some of their activities were worse than terrorist atrocities. Protests like this make no difference, except that they may relieve hearts clogged with helpless anger: what we've learned recently is that the shameless tenacity of politicians and bankers will outwear public indignation.
But society may change when everyone gives up looking to the the über-scum to help, and concentrates instead on personal benefit and survival. I think I may not even bother to vote in the next General Election.
Oh, and Nathan Martin also directs us to an article by Robert Kiyosaki, who compares the market to a dead frog galvanized by ever-higher charges of financial electricity until "Pretty soon the dead frog will be fried frog." Kiyosaki cites demographic change as a major threat in the long term.
How much does education matter?
David Davis points out that the £45,000 true cost of a university education is not always recouped by graduate earnings. (See also Charles Hugh Smith's piece, "Is Higher Education Worth a Lifetime of Debt?")
I have read that there is a positive correlation between shoe size and IQ. Public policy is to buy big shoes for everybody so they get smarter.
Hitchens against war
... if we won it, how come we look back on the Second World War from conditions we might normally associate with defeat and occupation? We are a second-rate power, rapidly slipping into third-rate status. We have a weak currency and shrunken armed forces, deployed as auxiliaries in wars that are not in our interest, and we are largely governed from abroad.
Our Parliament is a bought and paid-for puppet chamber. Our culture and customs have been debauched and our younger generations corrupted, as subject populations are, with drink, drugs and promiscuity.
We are compelled, like an occupied people, to use foreign measures to buy butter or meat, and our history is largely forgotten or deliberately distorted in the schools to suit anti-British dogma. Those schools are unable to educate most of our children up to the levels of our main rivals, so ensuring that we provide no challenge to them. Our country has been Balkanised into provinces and regions. Our language is invaded by foreign words and expressions. Our food and most of our consumer goods are imported, along with our TV programmes and films.
The remaining veterans of the supposedly glorious struggle, far from being gratefully honoured, often live in pinched poverty, scared of feral youths, or die neglected in squalid hospitals in a country many of them no longer recognise as their own.
A little over-egged, but still tremendously good.
Saturday, August 29, 2009
HSBC: Britain's safest bank
Meanwhile, the Daily Finance is sanguine about the US banking system, reporting the view of several analysts that the total number of failures will merely be in the hundreds, as opposed to Nouriel Roubini's "much too high" 2008 prediction of 1,200.
Cold turkey would kill the US debt junkie
Tuesday, August 25, 2009
Debt, unemployment and escape routes
Let me try to reason out the consequences, however inexpertly.
So, as everyone scrambles to cut spending and get out of debt, unemployment will soar. Since there is a great deal of international trade, the hit will be felt internationally.
Then government finances will come properly unravelled, especially in countries that have generous social welfare provisions. Worldwide, sovereign states will look for anyone who has real money to lend.
This should result in higher interest rates, but that would make the cost of debt, and its sustainability, extremely difficult, both for states and for corporations (and the burden on the latter will tend to result in even more unemployment and more claimants on the government). A rise in rates would also hit holders of long-term government debt, which may be one of the reasons the Chinese have been swapping that for shorter-dated Treasuries. A collapse in bonds will affect the capital value of pensions and investments, oh dear.
Another way out is default on debt. But who will be hit by that? Not just foreigners, but our pensions and managed investment funds.
A third way, which given that we have history to learn from doesn't seem likely, is the true hyperinflation approach. Germany in 1923, Hungary, Argentina, Zimbabwe... do you really see this happening here?
Then there's the downgrading of debt, with corresponding falls in the traded value of the currency. We've seen some of that - what, 20% off the pound? - so maybe there's more to come from that direction. Except other countries may follow suit. In 1922, if you were a far-sighted German, I suppose you might have sold marks and bought dollars; what currency would you buy now?
Or there's "more of the same" again - talking up the economy and pumping in cash until you spend because you daren't leave it to rot in the savings account.
Which way will it go? Where will it all end?
Monday, August 24, 2009
More on Al-Megrahi
And the total number of visitors to Professor Robert Black's blog has leapt 50% in the last week. They also serve, who only stand and wait.
The world may not be flat, but the universe is... or maybe not
Credit contraction is outpacing monetary stimulus
- Mish.
The more I read around, the more uncertain I become. All I have is my instinct, that things are out of control and we're being told fairy stories to lull us.
Mish's argument is that "The credit bubble that just popped exceeded that preceding the great depression, not just in the US but worldwide. Thus, it is unrealistic to expect the deflationary bust to be anything other than the biggest bust in history. Those looking for hyperinflation or even strong inflation in light of the above, are simply looking at the wrong model." If he's right, it's cash is king, for a long time to come.
Thursday, August 20, 2009
Freedom and healthcare
But it seems to me that if you want private solutions for problems which all have (or will have), but not all can afford, then you must address the question of inequality of resources.
Peter Rogers, co-creator and producer of the Carry On film comedies, once remarked he would 'do anything for my actors except pay them.' Similarly, so much is done for us in the UK, perhaps so badly, in the way of health and education (to name but two functions), when it might work so much better if we had the money personally and could make our own decisions.
We are witnessing a concentration into ever fewer hands on both sides the Atlantic, not only of power but of economic wealth. Every dollar and pound is a vote in the daily election of goods and services. To use the terms of the French national motto, if we wish for liberty but mistrust fraternity, then perhaps we should contemplate some redistribution of wealth to restore a greater degree of equality.
For example, how about some form of credit card (funded from general taxation and directed to individual accounts) that can only be spent on defined areas of need, but the holder to determine how to use his/her budget to best effect? Something like the educational voucher idea, but radically extended?
New fiction website
Wednesday, August 19, 2009
The long crisis, and the rediscovery of the family
Meanwhile, Leo Kolivakis looks at the looming meltdown in US pension schemes, mirroring what's going on now in the UK.
Long term, it looks like down with house prices (since the younger generation will have much less free income to take on debt) and (thanks to the oldies' rising income need) down with stocks.
Nurture your young.
... and the money trickles up
- Paul Craig Roberts (htp: Jesse)
The ranks close
- Robin Hanson
The energy crisis
But how much could we still do in the way of more efficient use, and non-use, of energy? According to this DTI report based on 2001 stats, the home uses 31% of the nation's energy (see Chart 1.3 on page 9). Chart 1.6 shows that in 2000, space heating accounted for 40% of all non-transport energy consumption.
More woolly pullies?
Tuesday, August 18, 2009
Law
The house has a fabulous view southwards, across fields and woods to the silver river and the sea beyond. This is an Area of Outstanding Natural Beauty, which is also a Site of Special Scientific Interest, so it should be highly protected. However, the field immediately in front is owned by a farmer who wants planning permission to build six houses on it. He's tried several times before, and although he's on the local council himself, he's been turned down each time, so far.
I jest to the owner of our house: "Have you tried dropping a few rare species in the field?"
"There are rare species. The Authority wrote a letter to him saying that they would be conducting a field survey. When he got the letter, he mowed the whole field - right down to the ground. Then he sprayed it all over with weedkiller."
Saturday, August 15, 2009
I see a bad moon rising
Friday, August 14, 2009
Market signals
"How much is the Telegraph?"
"90p."
"Okay." She rings it up. "Do you want the paper?"
"No."
She folds it and puts it to one side.
Everybody happy.
Thursday, August 13, 2009
A gross miscarriage of justice?
It is well known that GP Jim Swire, who lost his daughter in the atrocity, attended the trial in the Netherlands and became convinced that Al-Megrahi was innocent of the charge laid against him.
It is also most interesting to read a blog set up two years ago by Robert Black QC FRSE, Professor Emeritus of Scots Law in the University of Edinburgh. His blog supports Swire's contention and discusses the way in which the legal case against Al-Megrahi was conducted. The very first post contains this paragraph:
It is my firm view that the crucial incriminating findings made by the judges were unwarranted by the evidence led in court and were in many cases entirely contrary to the weight of that evidence. I am convinced that no Scottish jury, following the instructions traditionally given by judges regarding the assessment of evidence and the meaning and application of the concept of reasonable doubt, would or could have convicted Megrahi. So how did it come about that the three distinguished and experienced judges who concurred in the verdict felt able to convict him?
Black summarises and comments critically on numerous points of evidence and the court's findings in relation to each. He posts again today and says:
The families of Pan Am 103, as victims, deserve justice; they deserve to know the truth. My own dark thought is that any decision made by Mr MacAskill will not really be based on compassion but on political expediency. There seems to be a desire to get Mr Megrahi out of the country and to have the appeal halted at all costs. Perhaps the Crown Office and governments fear what might be revealed as the appeal continues.
Black's blog stat counter shows that he has had only some 33,000 visits since October 2007. Perhaps, reader, you will look at what he has to say and encourage others to do so.
Tuesday, August 11, 2009
Liberty: a debating point
Libertarian laissez-faire needs to mean more than simply standing aside and watching the rich and powerful cock it up for everyone. Paradoxically, libertarianism implies some kind of rule-setting and limitation of power.
Does that seem reasonable?
Monday, August 10, 2009
Back where we started
If you have any suggestions as to what other currency to use instead, I'd be glad to read them. I fear that future weakening of the British pound and the US dollar may well undermine apparent future recoveries on their stock exchanges.