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Archive for March, 2010

Equinox

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Equinox

Time of change

Change of times

Clocks forward

Or back, I forget

Weather wet

Then dry

Then wet again

Blustery winds

Changing temps

Only the day and night are equal

Everything else swings in extremes

Maybe not quite the change of seasons

But definitely the herald

Wont be long

Soon now

Summer gone

Winter comes

Warmth and sunlight go

Cold and dark return

The cycle turns

The tipping point

The division bell

Equinox

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( I wish I was a Godwit – follow the sun 🙂

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Run out can mean a couple of things. Either you are down to zero, and are all out of something. Or it can mean to sell off or use up the last of a run of something. Or alternatively it can mean to let a mechanism run out to its limits. They are all subtly different and yet are all fundamentally linked as well. It is about reaching the end of something, it is just the circumstances and particulars that are different.

And what is the relevance of any of that? Well, it is because of some anecdotal information I have been hearing recently.  The gist of which is that we may be looking at a bit of a tipping point very, very soon. On the basis of completely unscientific observation – it would seem that a lot of companies are working on orders that are in run-out.

Companies and enterprises that have managed to get by OK to date are now looking at a situation where the current work and orders they have and are working on are it. Once that is done, there is no more work in the pipeline. There are no new orders coming in and no more prospects in sight either.

Now it is really easy to over-state this sort of thing of course, and one sectors famine may be another sectors feast. But then again, maybe not.  In general I am pretty impatient with the whole maybe yes, maybe, no sort of analysis. That’s not analysis to my way of thinking, that’s just guessing. But sometimes that’s all you are left with too, when there isn’t anything firm to make a judgement on. Certainly the whole economy has been rocking along in a state of confusion for nearly 2 years now. Not sure whether we were going to sink into a depression, whether we are now in a recovery, whether we really have a clue what is happening or what will happen next.

On the other hand though, yes we really are in a depression, that’s not really in question. And considering that nothing has changed in respect of the factors that have put us here, then you would have to say that the depression isn’t going to go away any time soon either. That just leaves a question as to what happens next.

This whole fear that there is a big issue of Run-Out looming up may be misguided. Even assuming that there is a lot of sectors of the economy that have imminent work halts coming, that may not be what it appears to be. People placing orders may simply be holding off until the last minute before they step back into the market. That preserves their cash position for as long as possible and gives them more time to make sales projections. That is a pretty normal sort of reaction to an economic slowdown. In the end, things still need to be bought and sold, and things need to be produced and consumed. But nobody in the interim wants to be making too big an assumption about anything or make too long term a commitment. So forward orders dry up and everyone gets a bit nervous and twitchy in the process, but business does actually continue in the end to get done. Buyers know that there is spare inventory and capacity out there, there is no need to panic in that respect and if there is a shortage of buyers, then there is even the possibility of doing a good deal on price when you do call for tenders.

That’s the good news side of the ledger. Things can get scary and difficult for a while, but in the end it is all swings and roundabouts, and life goes on. Or maybe it is actually different this time…

To cast the situation as a dichotomy, an either/or situation; then we are alternatively looking at a situation where people and businesses which have been desperately hanging on in there, are finally getting to the end of their rope. At that point there is a real potential for a domino effect, and we could get a cascading sequence of business failures, bankruptcies and layoffs.

In a way, that isn’t really a terribly credible prospect – because we haven’t seen anything like that in our lifetimes. Why would our whole economy suddenly turn tits up at this point? More to the point, why would a depression suddenly turn into an economic catastrophe? And probably that is right, the probabilities are much stronger that at worst thing might follow a middle path on this, and the knock along/slow recovery scenario is most likely.

Now I do have to admit that I am kind of a glass-half-empty sort of person, so I do incline towards contemplating the worst case scenario’s.  They are so much more alarming and exciting aren’t they, Haha. Sometimes you do have to rein in your imagination though and take a deep breath. The sky is almost certainly not falling.

But consider my observations from your own perspective. Have you talked to many people about the economy? Have you got friends or family running a business? Do you talk to shop owners, or builders, or couriers etc. We will leave out people who work in government jobs from this equation, they live in a insulated bubble world anyway. So what is the news that you are hearing? For those people you know who make their living in the private enterprise arena, how many of them are optimistic? How many of them are saying that they really don’t have any new work coming in and they are just working on completing old orders and those will be running out soon?

How many of us are running out of time and options and cash?

How close are we to a crash?

How close are you?

How many “you’s” are there out there. It would be nice to hear some real numbers on this rather than spin or anecdote. If my gut feeling is correct though and the stories I am hearing are the truth, then we are not far away from a genuine depression. I heard a comment once that it is only a depression if you don’t have a job. I guess we had better hope that the money, the work and the jobs don’t actually run-out.

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BTW – if you have been hearing a lot of the sort of things I have, I would be very interested to hear your comments. Write something in the comments block below.

Cheers P,

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How long can you keep the balls in the air?
once again, someone else post that says it all, so I wont bother repeating it in my own words.

A few comments…
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All about:
Kicking the can down the road/Extend and pretend/Printing your way out of trouble.
I have also been contemplating just how long it is possible for the-powers-that-be to keep the whole sad creaking edifice up.  Actually… far longer than you would believe possible. The 1930’s depression went on for pretty well a decade. And as I indicated in my Post Status Quo, the system breaks in stages, rearranges, resists some more and then subsides a fraction more…

Fracture, subside, rearrange, resist, hold for a time, then fracture again…

Wash, rinse, repeat…

Actually, it isn’t even that difficult – if they are doing it on some-one else’s back and dime.

Sure it drags out the agony for you – but hey, you’re just a pawn… move along…

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ZH comments

As I was trawling through Zero-Hedge, I can across an article posted there.

Pension Black Holes Set to Explode? ~ by Leo Kolivakis

As it happens I haven’t actually read the article at all, so can’t actually say anything on that, but I did read the Comments section.

I have posted a number of them here, I thought they made for some interesting reading.

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by three chord sloth.   on Sun, 03/07/2010

Here is the direct link to his post.

by Mr Lennon Hendrix   on Sat, 03/06/2010 – 23:03

[….. Pensions are such a huge issue (every adult who has one mentions their pensions to me when I discuss Econ with them).  The system is relying on them.  Silly system.

by Kreditanstalt    on Sun, 03/07/2010 – 00:10

[….  Living standards have been built on a cream puff foundation for decades.  They’ve depended on growth rates of 5, 8 or 9%+, rates we’ll not see again.  And those rates have never reflected actual growth in productive capacity and in societal WEALTH.  One only need look at REAL, not nominal, wage growth and the price of gold.  It’s almost as if all growth in the entire western world economy from about 1984-85 onwards was a bubble, a bubble of statistics, borrowed money and ever-rolled-over debt.  But no real, owned outright and fully paid for GROWTH.

If these pension behemoths sink, it will only be just.  Living standards have to be reduced to a point where real, debt-free gains in wealth begin to occur and where western-made products become internationally competitive again.

These looming insolvencies (or, more likely, desperate tax grabs) are one step on that path.

by three chord sloth    on Sun, 03/07/2010 – 01:06

I completely agree, although I would place the bubble’s beginning back in 1973 or so.

by Kreditanstalt    on Sun, 03/07/2010 – 01:10

Maybe even earlier…maybe 1971, as many commentators seem to say.  You know, gold window closing & end of Bretton Woods.  I just remember that most things were going well, my dad could leave my mom at home with the kids, the coinage was silver & our rent was $120/mo., quite affordable back in 1966-69…

by nicholsong    on Sun, 03/07/2010 – 01:16

I was going to agree and say 1971 myself, acknowledging that time as the default-by-another-name that it was. Many a salient trend line gets noisy after 1971.

by Anonymous    on Sun, 03/07/2010 – 09:02

Trend got worse after 1982 – thats when 401k / IRA system started and middle class started pouring money into equities (artificially) boosting returns for pension funds.

by Rusty Shorts    on Sun, 03/07/2010 – 10:52

1982, the paradigm shift.    http://www.youtube.com/watch?v=HiW2-hygtzU

by litoralkey    on Sun, 03/07/2010 – 15:25

Thomas Sowell had a good series of mainstream media articles related to …. wage stagnation …. The gist of it was African-Americans had not increased their purchasing power index income since 1972-73 for most trades, and no trades had better income purchasing power since the Reagan first term recovery.

by SWRichmond    on Sun, 03/07/2010 – 19:25

Ya know, I keep coming back to that, too.  It seemed like such a good idea, reinvesting capital in the future and so on.  But what it did was nationalize everyone’s investments, or more correclty, it “Wall Street-ized” them.  By sending everyone’s investment money to Wall Street, Wall Street was placed firmly in charge.  Raise money for local investments?  How?  Wall Street was placed at the epicenter of all significant investment activity, and the skimmers who get paid anytime anything gets rated, issued, sold or bought got filthy freaking rich from the churn. Greatest scam of the century.

by Close 2 the Edge    on Sun, 03/07/2010 – 21:44

I’d go with earlier.  ’71 was when we got caught bluffing and the gold window closed as a result.  We’d been lying for a few years prior to that about our real financial situation….. Then again, I’ve read quite a few things that show we really paid off the WWII debt through inflation, not actual earnings…  Seems the Government doesn’t know how to do anything but fudge when it comes to book keeping.

by nicholsong    on Sun, 03/07/2010 – 01:14

I concur.  Misallocations must be eliminated…. All the statistical hoodwinkery and ever-rolled debts and stimulus and bailouts and POLICY_MEASURES serve to accomplish is to prevent the price discovery so necessary for an actual recovery of both honest living standards and marketable constructive enterprise.

by Alexandra Hamilton    on Sun, 03/07/2010 – 02:24

Growth is overrated anyway. Everything that has a growth rate above 0% is not sustainable midterm given the limited resources we have. Growth will take mankind over the cliff under any circumstances, it’s just a question of how fast. The more growth the faster.

by Winisk    on Sun, 03/07/2010 – 09:08

Agreed.  Conservation should be on everyone’s minds.  Touch the earth lightly.  If we can shed this ridiculous short term growth strategy, maintain the peace until the atypical demographic bulge passes on, the environmental stresses should abate as the economy and population naturally downsizes, thus improving everyone’s lifestyle.  The economy may not grow but so what.  I’m trying to be positive here.

by exportbank on Sun, 03/07/2010 – 06:14

[…. For the past 15-years we’ve committed a couple of huge errors. We allowed secure public sector workers to value themselves more highly that those “at risk” in private sector employment. Probably our greatest sin is stupidity of thinking that jobs that simply push paper from one person to another create long term wealth. I type some words – you type some words – the next guy types some words.. That’s entertainment as opposed to the farmer that plants and harvests a crop or the person that digs up the iron ore and turns it into a scalpel that saves your life. In a recent Leo post he mentioned an increase in employment in law, finance and accounting – these are simple paper pushing jobs that steal from instead of adding to the wealth of the nation.

by Kayman    on Sun, 03/07/2010 – 11:57

[…..  Without real growth in GNP, all we have seen is ASSET INFLATION financed by DEBT INFLATION. The ILLUSION of wealth.….. The foundation of all nations are crumbling to a greater or lesser extent and our politicians and financial maestros are fiddling the same tired old tune.

by Anonymous    on Sun, 03/07/2010 – 13:35

[….. “Pensions” have simply been another lie when things are good.

by sgt_doom    on Sun, 03/07/2010 – 13:59

Geez, can anyone spell obvious.  Take the pension fund situation in the USA, the state pension funds are heavily managed and controlled by the private equity firms (to the tune, as of 2007 or thereabouts, to $111 billion [according to the PE firms’ own stats]).  Pension funds invest in leveraged buyouts and hedge funds, which in turn are heavily leveraged and structured upon CDOs, CLOs, CFOs, with an infinite amount of CDSs thrown in.  Big Bang, anyone?

by bingaling    on Sun, 03/07/2010 – 14:17

Funny but I read somewhere , way back when, where I thought, not sure about this… that under some crappy accounting law that a lot of publicly traded firms somehow took the pension money and put it on their books as a credit and not a liability , which showed up as growth somehow , it was before the “crisis” that pretend and extend was already going on . The article if I remember right , was worried about all of the boomers retiring and taking that pension money away from the bottom line  causing a slow market crash.

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And another quote touching on the same issues…

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It was always inevitable, on a finite planet, that there would be a limit to economic growth. Industrialization has enabled us to rush headlong toward that limit over the past two centuries. Production has become ever more efficient, markets have become ever more global, and finally we have reached the point where the paradigm of perpetual growth can no longer be maintained.

Indeed, that point was actually reached by about 1970. Since then capital has not so much sought growth through increased production, but rather by extracting greater returns from relatively flat production levels.  Hence globalization, which moved production to low-waged areas, providing greater profit margins. Hence privatization, which transfers revenue streams to investors that formerly went to national treasuries. Hence derivative and currency markets, which create the electronic illusion of economic growth, without actually producing anything in the real world.

this comes from:

Crashing Towards a New World Social Order 2012

The end of growth – capitalists vs. capitalism  ~ by Richard K. Moore

I am not really into conspiracy theories and the like, but this article makes for some pretty dark and grim reading, and is a kind of alarming cautionary tale.

Not really a path we want to end up seeing ourselves going down…

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The thing about the way things are is that there is myriad links and connections within society that hold it that way. The status quo is the status quo because there are good reasons for it to be so. Now to say that they are good reasons isn’t to say that I approve of them, merely that in peoples dealings with each other, they all have good reason to behave the way they do and for the relationship to be the way it is. If they are making choices based on a macro economic environment that biases certain outcomes, for most people that is nether here nor there. They structure their personal environment, as far as they are able, to be advantageous to themselves. They have created their own world-space in which they have proprietary interests and socio-economic interconnections. Their interests are dependant on maintaining the continued stable commerce of exchange within their societal network. Be it on a large or small scale, what they do is what they do and there is a very large resistance to changing that. Either because their  constructed relationship are appreciably beneficial and profitable, or because it would involve reconstructing a whole world view and discarding a large prior investment in their construction of reality. Change don’t come easy, and circumstances will be defended, even to an irrational degree.

It often doesn’t matter if something is right or wrong, it merely matters that it is theirs. Such things are often defended, even to the death, even when there is no longer any logical reason to do so. History is full of examples of this, and it is because they have not made the choice to let it go and accept a new paradigm. Humans can be spectacularly resistant to change and new ideas. Perhaps less and less as we move further into a modern age of progress and transformation, but perhaps also at the same time, more and more in reaction to that rapid evolution of our technological environment. We can accept cellphones and the internet, they are external ephemera; but are our internalised worldview and values in consequence much less discardable or malleable. The more things change, the more we need some things to stay the same. Certainly the older we get the harder it is to adapt to a changed environment. We developed and grew to be optimised for a particular set of circumstances, only to find that that those no longer exists, or at the very least not as we knew it, but as through a looking glass, strangely distorted. The instinct is to cleave to the familiar, struggle to pull things back to the way the way they were, or at the very least to the way we remember them. One of the great truths of philosophy however is: you can never go home!

The only constant is change, and while we are not incapable of change, there is a rate at which change becomes more than we can cope with. Even more so with institutions and bureaucracies. Our society even in the midst of rapid evolutions is unavoidably a mixture of the early adaptors and the trailing holdouts. In nett terms, and particularly in a democracy, the rate of change is constrained by what the majority is capable of and prepared to accept. In comparison, something like a monarchy or dictatorship is more likely to reflect the individual in charge.  An early adaptor can drag society with them, a conservative will hold innovation back. There are dangers and costs to all of these situations, and they are very real regardless of whether they are appreciated or not. But the biggest danger isn’t in anybody’s purview or governance. When the rate of change comes simply too fast for plan or expediency to cope with, that is where in the natural world the resolution of incompatibilities typically results in massive die-off. Actually, it’s not that uncommon, excess populations of many creatures frequently either starve or succumb to diseases. Humans add the innovation of war to that dynamic.

However, I am not so interested here in the extremes, but rather the scale between a static environment and one in catastrophic collapse. In a static system, there is no need to change anything, it will have evolved to be optimised for the environment. In catastrophic collapse, there are no changes that will be sufficient to preserve either the system or its constituent parts. Massive transformations do happen, exceedingly rarely, the dinosaurs were wiped out by a scale and pace of change to their world they could not handle. Actually, 99.9 percent of life couldn’t handle that change, but that really was an extreme situation. A once in a, hundreds of millions of years, event. What we will ever have to deal with will be on a much more modest scale.  I have no expectation of an “End of the World as we know it” event, or at least not in the conventional sense. I believe there is the distinct possibility of a phase shift, but it is a very fine and interesting line between evolution and revolution. Evolution is when the status quo makes the necessary adjustments to cope with changed circumstances; and revolution is when the hierarchy is overturned by force of circumstances. It is a very interesting and subtle dividing line between one and the other.

In general, the odds are on the side of the status quo, the established order does have strength and resilience on its side. Interestingly, the structure of society is much like the internet. The internet was originally conceived and constructed as a military project to devise a communications network that would be resistant to damage and attack. All the various nodes were to be semi independent and adaptable in order to reconfigure themselves and their connections if any individual components stopped working. Society is built up of discrete nodes, called people. They communicate and interact and form a latticework of connections. At any one time there are always new nodes being created or dying, contracting or expanding, it is a continuously evolving organism. Where pressures or opportunities exist the complex flows and ebbs in response. All very adaptable and resilient, to a point. Enough pressure or intensity will force a transformation, what I would describe as a phase change. Ice and water are exactly the same basic ingredient, but add enough heat and the linkages change completely. That is a bit of a simplistic analogy to draw to humans and society, but does illustrate the concept of pushing a system passed a point where the status quo can continue to exist. It is relevant because in human society, the question is: where is the transition point and what is the result?

Our societies are constructed in certain particular ways, most people would never even stop to consider whether it makes sense or could be done differently, it just is, it is their lived reality and they just get on with it. In general, that is perfectly valid and fair enough, taking on the whole world is not a good survival proposition. Living cooperatively within the social system makes a lot of sense and can be richly rewarded. Right up until its not; and there lies the crux of the issue. Any system is always going to be under constraints and pressures. Currently there are a rich array of pressures looming over us; potential, immanent and current. Global warming, peak oil, population explosion, food availability, pollution, fresh water shortages, financial mismanagement, political incompetence, energy, economic imbalances and demographics.  As these bear down on us, certain sectors and individuals will be more exposed than others. Certain props of the system and linkages will break, the load will shift and other elements (read People) will take the strain instead. To a certain extent, the load will spread and affect everyone, but inevitably some more than others. That’s the way it has always been and it’s expected. The system has processes for dealing with the breakages and moving on. Even quite extreme stress can be handled and adapted to, to stay within the system and work to maintain it is the default position.

In order to move to a position of active opposition to the established order and structure, requires that you have been so forced out of position by external forces, that even you best efforts to keep a hold are to no avail. When your situation is the result of internal pressures, when you appear to have been singled out for sacrifice as the weakest link/member of the pack, then even more-so there is likely to be bitterness and resentment. Typically what happens in normal circumstances when that situation arises, and there are enough of you who can form an alliance to seize the political initiative; there is simply a changing of the guard at the top and the Have-nots depose the Haves, positions are swapped and everything goes back to much as it was before. The the staus quo is resumed, the minimum necessary change is effected, the structure reorganises, life goes on.

Really it is a matter of degree, in general a certain degree of pressure equals a certain degree of change, more pressure equals more change, but it is relatively rare that you get wholesale sweeping change. It is uncomfortable and confusing for most people, they would rather have their changes in small doses. In the last couple of hundred years, France had a revolution, America had a revolution, so too did, Russia(twice), Iran, the Philippines, China and Cuba. So it is not that it inconceivable (albeit it may be debateable just how much actually changes in reality), revolutionary change does sometimes happen. On the other hand, it also doesn’t happen, even under circumstances that you would have thought were a Monty for it. The subtle interplay of circumstances and ingredients make analysis pretty futile, and we are left with the parable of the seedling – it does because it can. The obverse being true of course too, it doesn’t because it can’t.

The first and second world wars were very interesting object lessons. Here were societies under immense stresses; staggering casualties, poisonous politics, grossly distorted economics and severe food and energy shortages. During and following the First World War there was a string of revolutions and very-nearly revolutions. And yet when all the usual suspects lined up to do it all over again twenty years later, the result was very different. While it may be argued that France had merely postponed a revolution until Nazi Germany forced one upon them, for the rest of the belligerents, the political order was maintained in the face of all but complete defeat. The status quo triumphed even unto death. German and Japan fought on past any sensible rationale until there really wasn’t any State left to govern, and their populations acquiesced in that. In retrospect it seems beyond comprehension, but there are reasons, or at least there have been reasons proposed. As it happens, I don’t dispute them, my assessment concurs with the theory that it all has to do with unity of purpose and belief.  A population will be prepared to sacrifice, and be sacrificed, so long as there exists a belief that it is for a common good. Without that belief the equation is dramatically different. The less belief there is that a common goal is real and meaningful, the less burden and duress people are likely to accept. Particularly when there appears to be a good argument to be made that removing the elites and the privileged will resolve the problems. The propaganda battle at that point becomes very material to outcomes, but the stage is set and the game in play.

And so to our current situation, where is the point of balance for our society?  Certainly there are significant pressures and there are a lot of linkages suffering and breaking. There are always pressures and crisis, that too could be considered the status quo, but are those pressures any greater than normal and is there a greater sense of alienation and resentment about the distribution of pain and reward? The political status quo is quite capable of carrying on even in the face of a dramatic collapses in the economic status quo. Even a war wouldn’t necessarily change anything. Right up until the point that belief is lost, that there doesn’t exist any community of purpose, or sense of common interest and consideration, then the political game is in play. From an objective point of view, it is a most interesting exercise watching the system fracture, slump, restructure and repair as it comes under increasing stress, history shows just how dramatic that can be, a society can be practically pulverised and still fight to maintain some sort of cohesion every step of the way down. On the other hand, we are not objective, we all live within our societies and are intimately affected by the systemic failures and fractures, they directly hurt us. At what point do we decide that our distress is not random or unavoidable, but the direct result of policies and actions taken by individuals and organisations that have not only created the situation in the first place, but have then manoeuvred to pawn off the cost of it all onto us in their stead.

The status quo prevails only so long as the Commonwealth and the Commonweal are not exposed to be a lie and a scam.  What say you?

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And now for something completely different.

Check this out.

To crib a phrase:

The antidote de Jure

Enjoy   🙂

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A little gem from the comments section

~ by Cognitive Dissonance

on Wed, 24/Feb/2010 – 15:34

#243767

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Unfortunately, the purpose of schools is not to inform, educate or even inspire (if they happen to do so, a terrible mistake was made) but to indoctrinate and propagandize the general population in the ways of the world as it has been created for us to slave in. What we in America so eloquently parrot as “freedom” is actually “liberty” as in “you are at liberty to select from thousands of professions as long as you accept that the current economic and social system is the only method afforded to you.”

Now time to join the “real” world. We have a brand new hamster wheel ready and waiting for you, personalized with all the latest bells and whistles. Ready, set, GO!

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