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Archive for October, 2010

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If you enjoy reading rather long rambling discourses, then you might enjoy this.

I did, odd person that I am.

http://europe.theoildrum.com/node/5528

This year, 2009, marks the 2000th anniversary of the battle of Teutoburg that led to the annihilation of three Roman legions, and changed forever the history of Europe. It was a tremendous shock for the Romans, who saw their mighty army destroyed by uncivilized barbarians. It was not yet the peak of the Roman Empire, but it was a first hint that something was deeply wrong with it….

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Our Druids may be better than those of the times of the Roman Empire, at least they have digital computers. But our leaders are no better apt at understanding complex systems than the military commanders who ruled the Roman Empire. Even were our leaders better, they would face the same problems: there are no structures that can gently lead society to where it is going. We have only structures that are there to keep society where it is – no matter how difficult and uncomfortable it is to be there. It is exactly what Tainter says: we react to problems by building structure that are more and more complex and that, in the end, produce a negative return. That’s why societies collapse.

So, all our efforts are to keep the status quo ante… even if people will starve. We do everything we can to keep things as they are.

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An interesting analysis of the parallels with our current situation.

Put aside about an hour or more though, to wade your way through it.

Cheers  🙂

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PS. an interesting addendum from the comments section of the essay.

I think you over-emphasize the importance of gold. The major thing it allows you to do is efficiently monetize the economy so as to make the extraction of surplus easier (a very hard thing to do in pre-industrial subsistence economies). “Running out” of gold would have made this more difficult and may partly explain the transition to barter and payments in kind in the later empire.

Does that remind you of anything…???

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In order for us to have a Revolution, we would have to have enough energy and gumption to get off our arses and work to make it happen. Although I am currently wondering if we are capable of even getting out of our own way.

Charles Hugh Smith has written another great essay.

The Normalization of Sociopathology in America

He, as always, writes about the United States, but also as usual the lesson is universal. As well, we here are so culturally synchronized with the States that it makes no difference. What ails them, similarly afflicts us.

Here is the redacted part of the essay that covers the main point and illustrates my concerns.  Just substitute New Zealand for America.

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The moral rot at the center of American life results from a normalization of pathologies–sociopathic and psychopathic states and behaviors are now “normal” or incentivized.

We are all heavily programmed… Though we like to favor ourselves as autonomous entities brimming with individuality, most of our worldview and behaviors are programmed by our social-economic status and conditioning.

Consider how easily the behaviors and values of most Americans fall into three basic class cultures… This reality is part of what I term the politics of experience:

The “working class” is programmed to rely on television for most of its “information” about life, and thus they are programmed to:

1. Consume copious quantities of fast foods and convenience foods, and consider indolence a luxury. As a result, they are programmed to become obese/diabetic.

2. The boys are programmed to favor football and basketball in sports, service in the Armed Forces as the only viable choice to low-skill, fitful employment, to drop out of four-year college if pressured to enter, and vocational training, often paid for by the G.I. Bill after military service.

3. Males are programmed to place identity value on their vehicles and real-world “manly” skills (working on vehicles, farm equipment, woodworking, etc.), but their programmed aspirations are aimed at impossibly narrow fields: professional sports, hip-hop and other entertainment, etc. As a result, their real-world skills are generally undeveloped or modest.

In essence, they are programmed to fail in the “knowledge economy” and in real-world practical jobs which are not glorified by the broadcast media. They accept low-level work and are dissatisfied, often turning to drugs to relieve their ennui.

4. Their interests are channeled by the media into extreme sports, mixed martial arts, auto racing, football, etc., but they are programmed to express these interests through passive video games rather than by real-world experience. Programmed to low confidence, they generally give up quickly when faced with arduous training, except when forced by institutions such as the Military.

5. Working class families have few resources to draw upon, and the mobility favored by Corporate America has shredded the social networks which once offered support (church membership, social clubs, neighborhoods, etc.) Family “help” is a sofa to sleep on at a relatives’ house.

6. The girls are programmed to have sex and children early, as motherhood has positive identity value, even if they are woefully unprepared for parenting. Career choices tend to be “pink collar” type labor in Corporate America’s sickcare system or government jobs; females are programmed to support their children and demand little of the fathers. Dependency on the State /Welfare in one form or another is the norm.

7. Politics holds little interest and most of the working class are programmed not to vote as it “never does any good anyway.”

8. There are few books or other reading materials around the house, little to no original decorative art, few musical instruments that can actually be played with any joy or expertise; the lived environment is a cultural desert. The TV and a computer offer distraction and entertainment and little else. If they pursue social media, they are members of My Space and Facebook. They are deeply attached to their cellphones, which are perceived as markers of accessible status. Passports are unknown; foreign travel is experienced through military service only.

The “middle class” aspires to the “upper class” life they see on television and other media, but their aspirations are for the trappings of wealth rather than for the engines of wealth.

1. Though the middle class person clings mightily to various totems of “membership” in the middle class, and experiences tremendous loss of identity and self-esteem when these totems are lost, in reality their wealth is modest and they have few family resources.

2. Though they watch a lot of TV, they also consume massive quantities of other low-value media through the electronic devices they see as emblematic of the “middle class” lifestyle: laptop computers, iPods, etc. Their cellphones and other electronics are key identity markers: the higher the status of the brand, the more valuable the device. Apple products are de riguer “high status.”

3. Books and reading materials around the house tend to be best sellers or materials assigned in class; few households receive newspapers or magazines other than National Geographic. If books are read, they are genre books such as mysteries. Dog-eared copies of the Harry Potter series abound. Those households which aspire to “upper class” education may subcribe to a few magazines which are viewed as totems of high-class lifestyles: The New Yorker, Saveur, etc.

4. “Education” is valued but mastery is not; the goal is to obtain the certificate or paper required by gatekeepers in the government or Corporate America, not the actual skillsets. Though education is “valued,” few households (regardless of income, which is often high) save religiously enough to fund university educations; borrowing vast sums of student loans is the norm. Adult education is pursued to obtain the same gatekeeper certificates in whatever field the adults toil in. Learning for the pleasure of learning is unknown or deemed a waste of time when “we could be having fun.”

“Enrichment” classes are provided to the children, but the purpose is to gain a veneer of respectability as an aspirant to upper-class membership; piano lessons are dutifully offered but nobody plays music in the house for enjoyment, so the lessons are soon dropped. Live performances are also attended occasionally as “enrichment.” Foreign travel is experienced via college programs or packaged tours fit into 2-week vacations allowed by Corporate America.

5. Favored sports include soccer and volleyball for the girls, and skateboarding and baseball for the boys. Team sports are favored over individual competition, and adults spend significant time ferrying kids to various after-school sports, which are deemed “character-building.”

6. Ownership of status brands is highly important; brand consciousness is acute. Target is favored over Wal-Mart, and designer-luxury brand purses, shoes, autos, etc. are highly desirable “markers” of success and identity. Most of the family income goes to paying for these “markers” of membership.

7. A four-year college degree is the goal, with an MBA or master’s degree considered a higher-level enabler of a better career. The cherished goal is acceptance to an elite university which is viewed as a magical ticket to “fast track” advancement in the government or Corporate America. Meritocracy is accepted as the norm. Military service is shunned in favor of attending college right out of high school. Favored social media are related to career/corporate advancement: LinkedIn, etc. Foreign films and chic dining are valued as “markers” of high-class status.

The upper class has the confidence born of the knowledge that the family resources can always bail one out. High-paying jobs will be provided via networks; art-aspirant careers are highly valued, and family resources enable dilletante dabbling in acting, film-making, visual arts, etc.

Entrance to prep schools and family money/connections enable entrance to institutions the middle class must gain entrance to via meritocracy.

Favored careers include venture capital, high-status government positions, management of family businesses, plum slots in NGOs, etc. Noblesse Oblige is served via membership on boards of charities, the local symphony and museum, etc. These networks provide connections to business opportunities unavailable to the middle class.

Children already get passports and foreign travel to exotic locales as standard. Middle-class aspirants are viewed paternalistically or with scorn; they are worker-bees for the Corporate America/State owned or managed by the upper class. The working class is avoided except as servants, who are often immigrants.

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My point is that to varying degrees, the normalization of narcissism and social pathologies is now embedded in the programming of all social classes. The rot in America is not limited to “deviance” in any one class; it is present in various manifestations in all social classes.

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Astute and succinct – thanks Charles, an excellent essay.

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(2010) Bathurst – Mount Panorama – The Great Race…

Australia had its “Great Race” yesterday – and it had a “Great” finish too…

But apparently lying and cheating have become the new ‘Normal’ everywhere now, including here.

Anyone who has the slightest involvement with corruption within horse and harness racing would have taken one look at the result and instantly stated “the fix was in”.

What a crock that result was.

The biggest money team with the biggest name drivers and with the most at stake, was moments way from having it all turn to ashes in their mouths, when Deus-Ex-Machina, a miracle happens which saves the day.

I don’t think so.

I think the fix was put in.  And its not like we haven’t had precident now is it. How long ago was it we had a scandal in Formula One, with a driver crashing in order to affect the result? Hmmm… that would be – not that long at all.

Where big money and prestige are involved, it is no leap at all to assume that there are plenty of people who will use any corrupt or underhand manoeuvre in order to assure they get the result that they desire.

In fact people who are dealing in millions and hundreds of millions of dollars don’t leave the results to chance. They ensure that they get the desired result, whatever it takes.

If you have your multi million dollar motor sport team leading the race – but just about to expire a little short of the finish line, and take all your hopes and dreams and winners cheques away, then you do something.

In this case what happens is that an also-ran nobody who was never in the race other than making up the numbers, suddenly has a crash.

Not a major crash, just a bit of a hard bump into the wall that spreads a few motor body parts across the track and brings out the safety car for half a dozen laps.

Viola – all your problems go away: No one was hurt, the fuel dilemma/disaster goes way, the race can still be run for another  half dozen laps, and finished at race pace. The crowd favourites come in first and second. The big name sponsors get the result they want. Perfect per the script.

And a corrupt, staged lie.

Perhaps I shouldn’t get too upset. I mean, how is that any different from Professional Wrestling.  It is all actually just entertainment isn’t it, its not suppose to be real or honest. Real and honest would mean that on any given day you might lose. And big money is not in the business of chance or losing.

If they don’t know the result ahead of time, then they aren’t interested in playing. They certainly aren’t going to let their sure thing get derailed either.

So the fix was put in.

Some-one somewhere talked to our hapless also-ran and gave the word:

“Yes I know you have been circulating faultlessly for 95% of the race – but I now need you to drift a little wide on one of the corners and give the wall a decent belt. Not so hard you understand that the race will need to be stopped, that’s not really desirable, but just hard enough. Ohh, and don’t involve anyone else please. Find a bit of clear enough space where it can be controlled and contained. Maybe even in front of a good crowd for spectator appeal. Maybe in just enough of a blind spot so that there isn’t very good camera coverage of the incident so that commentators can’t analyse what went wrong and ask awkward questions. Thanks, that would be perfect. And you know, you scratch my back, I’ll scratch yours. Trust me, I’ll see you right.  We can manage to get you a few contracts, swing some sponsorship your way… we will make it worth your while.”

Hell, it may have even been jacked up before the race.  Get a back-marker into the race as an insurance policy, ready to call on if  or when something is needed, call it your undercover team player.

I think I have watched this farce for the last time.  Excuse me while I go have  a quiet vomit somewhere.  I feel nauseous all of a sudden.  😦

And so the corruption and cheating spreads into everything. Or maybe it was always there and I just never noticed before now. Once the scales fall from your eyes and you stop accepting things at face value, is what is left, always and everywhere, the grubby fingerprints of the cheats and crooks?

It would seem so apparently.

Ohh, I suddenly feel an itch to make the Stalin Purges look tame.  😡

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(PS – if we keep rewarding and honouring the crooks and the cheats, then they become the standard and the norm.  Think about that – is that what we want?)

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Left, Right

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Every so often you hear, or get into, a conversations that degenerate into Left vs Right dialectic.

This is the best summation of that dichotomy I have ever seen (from the comments section of ZeroHedge).

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by Al Gorerhythm

on Sun, 10/10/2010 – 09:14

#638373

 

LEFT, RIGHT, LEFT, RIGHT, LEFT, RIGHT, LEFT!

SQUAD, HALT!

LEFT FACE!

SHOULDER ARMS!

TAKE AIM!

FIRE!!!!

This is like a dems / repub argument.

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Fuckit

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As I have said previously:

” Empires, nations and civilisations fall when there isn’t anyone left who is interested in fighting for them any more. ”   ~R.

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Gonzalo Lira On The Coming Middle-Class Anarchy

Zero Hedge 10/10/2010 02:17 +1200

Submitted by Gonzalo Lira

The Coming Middle-Class Anarchy

True story: A retired couple I know, Brian and Ilsa, own a home in the Southwest. It’s a pretty house, right on the manicured golf course of their gated community (they’re crazy about golf).

The only problem is, they bought the house near the top of the market in 2005, and now find themselves underwater. 
  
They’ve never missed a mortgage payment—Brian and Ilsa are the kind upright, not to say uptight 60-ish white semi-upper-middle-class couple who follow every rule, fill out every form, comply with every norm. In short, they are the backbone of America. 
  


Even after the Global Financial Crisis had seriously hurt their retirement nest egg—and therefore their monthly income—and even fully aware that they would probably not live to see their house regain the value it has lost since they bought it, they kept up the mortgage payments. The idea of them strategically defaulting is as absurd as them sprouting wings. 
  


When HAMP—the Home Affordable Modification Program—was unveiled, they applied, because they qualified: Every single one of the conditions applied to them, so there was no question that they would be approved—at least in theory. 
  

Applying for HAMP was quite a struggle: Go here, go there, talk to this person, that person, et cetera, et cetera, et cetera. “It’s like they didn’t want us to qualify,” Ilsa told me, as she recounted their mind-numbing travails. 
  
It was a months-long struggle—but finally, they were approved for HAMP: Their mortgage period was extended, and the interest rate was lowered. Even though their home was still underwater, and even though they still owed the same principal to their bank, Brian and Ilsa were very happy: Their mortgage payments had gone down by 40%. This was equivalent to about 15% of their retirement income. So of course they were happy. 
  


However, three months later, out of the blue, they got a letter from their bank, Wells Fargo: It said that, after further review, Brian and Ilsa had in fact not qualified for HAMP. Therefore, their mortgage would go back to the old rate. Not only that, they now owed the difference for the three months when they had paid the lowered mortgage—and to add insult to injury, they were assessed a “penalty for non-payment”. 
  


Brian and Ilsa were furious—a fury which soon turned to dour depression: They tried contacting Wells Fargo, to straighten this out. Of course, they were given the run-around once again. 
  
They kept insisting that they qualified—they qualified! But of course, that didn’t help at all—like a football, they were punted around the inner working of the Mortgage Mess, with no answers and no accountability. 
  


Finally, exhausted, Brian and Ilsa sat down, looked at the last letter—which had no signature, and no contact name or number—and wondered what to do. 
  
On television, the news was talking about “robo-signatures” and “foreclosure mills”, and rank illegalities—illegalities which it seemed everyone was getting away with. To top it off, foreclosures have been suspended by the largest of the banks for 90 days—which to Brian and Ilsa meant that people who weren’t paying their mortgages got to live rent free for another quarter, while they were being squeezed out of a stimulus program that had been designed—tailor made—precisely for them. 
  


Brian and Ilsa are salt-of-the-earth people: They put four kids through college, they always paid their taxes. The last time Brian broke the law was in 1998: An illegal U-turn on a suburban street. 
  
“We’ve done everything right, we’ve always paid on time, and this program is supposed to help us,” said Brian. “We follow the rules—but people who bought homes they couldn’t afford get to squat in those McMansions rent free. It would have been smarter if we’d been crooks.” 
  


Now, up to this point, this is just another sob story of the Mortgage Mess—and as sob stories go, up to this point, it’s no big deal. 
  
But here’s where the story gets ominous—here’s where the Jaws soundtrack kicks in: 
  
Brian and Ilsa—the nice upper-middle-class retired couple, who always follow the rules, and never ever break the law—who don’t even cheat on their golf scores—even when they’re playing alone (“Because if you cheat at golf, you’re only cheating yourself”)—have decided to give their bank the middle finger. 
  


They have essentially said, Fuckit. 
  


They haven’t defaulted—not yet. They’re paying the lower mortgage rate. That they’re making payments is because of Brian: He is insisting that they pay something—Ilsa is of the opinion that they should forget about paying the mortgage at all. 
  
“We follow the rules, and look where that’s gotten us?” she says, furious and depressed. “Nowhere. They run us around, like lab rats in a cage. This HAMP business was supposed to help us. I bet the bank went along with the program for three months, so that they could tell the government that they had complied—and when the government got off their backs, they turned around and raised the mortgage back up again!” 
  
“And charged us a penalty,” Brian chimes in. The non-payment penalty was only $84—but it might as well been $84 million, for all the outrage they feel. “A penalty for non-payment!” 
  
Nevertheless, Brian is insisting that they continue paying the mortgage—albeit the lower monthly payment—because he’s still under the atavistic sway of his law-abiding-ness. 
  
But Ilsa is quietly, constantly insisting that they stop paying the mortgage altogether: “Everybody else is doing it—so why shouldn’t we?” 
  


A terrible sentence, when a law-abiding citizen speaks it: Everybody else is doing it—so why don’t we? 
  
I’m like Wayne Gretsky: I don’t concern myself with where the puck has been—I look for where the puck is going to be. 
  
Right now, people are having a little hissy-fit over the robo-signing scandal, and the double-booking scandal (where the same mortgage was signed over to two different bonds), and the little fights between junior tranches and senior tranches and the servicer, in the MBS mess. 
  
But none of that shit is important. 
  
What’s really important is Brian and Ilsa: What’s really important is that law-abiding middle-class citizens are deciding that playing by the rules is nothing but a sucker’s game. 
  


Just like the poker player who’s been fleeced by all the other players, and gets one mean attitude once he finally wakes up to the con? I’m betting that more and more of the solid American middle-class will begin saying what Brian and Ilsa said:  Fuckit. 
  


Fuck the rules. Fuck playing the game the banksters want you to play. Fuck being the good citizen. Fuck filling out every form, fuck paying every tax. Fuck the government, fuck the banks who own them. Fuck the free-loaders, living rent-free while we pay. Fuck the legal process, a game which only works if you’ve got the money to pay for the parasite lawyers. Fuck being a chump. Fuck being a stooge. Fuck trying to do the right thing—what good does that get you? What good is coming your way? 
  
Fuckit. 
  


When the backbone of a country starts thinking that laws and rules are not worth following, it’s just a hop, skip and a jump to anarchy. 
  


TV has given us the illusion that anarchy is people rioting in the streets, smashing car windows and looting every store in sight. But there’s also the polite, quiet, far deadlier anarchy of the core citizenry—the upright citizenry—throwing in the towel and deciding it’s just not worth it anymore. 
  
If a big enough proportion of the populace—not even a majority, just a largish chunk—decides that it’s just not worth following the rules anymore, then that society’s days are numbered: Not even a police-state with an armed Marine at every corner with Shoot-to-Kill orders can stop such middle-class anarchy. 
  


Brian and Ilsa are such anarchists—grey-haired, well-dressed, golf-loving, well-to-do, exceedingly polite anarchists: But anarchists nevertheless. They are not important, or powerful, or influential: They are average—that’s why they’re so deadly: Their numbers are millions. And they are slowly, painfully coming to the conclusion that it’s just not worth it anymore. 
  
Once enough of these J. Crew Anarchists decide they no longer give a fuck, it’s over for America—because they are America.

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Some-one else humming my tune…   R.

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Guest Post: No Way Out        [redacted]

Zero Hedge 10/07/2010 09:49 +1200

Submitted by Doug Casey of Casey Research

No Way Out

I really dislike sounding inflammatory. Saying that things are going to go terribly wrong runs a risk of being classed with those who think the world will end in December 2012 because of something Nostradamus or the Bible says, or because that’s what the Mayan calendar predicts.


This is different.


In the first half of this year, people were looking at the U.S. economy and seeing that some things were better. Auto sales were up – because of the wasteful Cash for Clunkers program. Home sales were up – because of the $8,000 credit and distressed pricing. Employment was up – partly because of Census hiring, and partly because hundreds of billions have been thrown at the economy.

The recovery impresses me – as a charade.


Let’s get beyond what the popular media parrots are telling us and attempt to derive some reasonable assumptions about how things really are and where they’re headed.



A Brief Summary of Our Story So Far….


Before we get to where things stand at the moment, let’s briefly look at where we‘ve come from.


That a depression was in the cards has been foreseeable for decades. The distortions cranked into the system in the ‘60s – the era of “guns and butter” spending by the government – resulted in the tumult of the ‘70s. Things could, and one could argue should, have come unglued then. They didn’t, for a number of reasons that have only become clear in retrospect:


But sadly, taxes, government spending, and deficits soon started heading much higher. Despite the collapse of its only conceivable enemy, U.S. military spending continued to skyrocket. Monetary policy encouraged everyone to take on huge amounts of debt, much more than ever in the past, and everyone soon found they could live way above their means. The stock, real estate, and bond markets got pumped up to ridiculous levels. The main U.S. export became trillions of paper dollars. Worst of all, the U.S. devolved into just another country, undistinguished by anything other than a legacy of a high standard of living.


The standard of living in the U.S. is now going down … It’s also something as big and as inevitable as a glacier coming down a valley during an Ice Age.


This, along with other problems presented by the business cycle have ushered in the Greater Depression.



How Long Will the Greater Depression Last?


…everything the U.S. government is doing – raising taxes, increasing regulations, and inflating the currency – is not only the wrong thing to do, but exactly the opposite of the right thing.


This is really serious, because the government is the 800-pound gorilla in the room. What governments do makes all the difference – 
I say this because there’s no realistic possibility the Obama regime is going to change course. To the contrary, they’re likely to accelerate in the present direction. They believe the government should direct society – as do most Americans at this point. They feel government is a magic cure-all and not only can but should “do something” in response to any problem. Most complaints aren’t that they’re doing too much, but that they’re doing too little. Everything on the political front, therefore, is a disaster.

What are the chances they’ll make a 180-degree turn, in the direction of someone like Ron Paul? I’d say close to zero, and libertarianism will remain a fringe movement, at best. Will Boobus Americanus vote for someone who says the government should actually do less – much less – in the middle of a crisis?


Simply, the chances of a reversal in what passes for the philosophical attitude of this country are slim and none. And Slim’s left town. While there are some who hope for an improvement on the political front, I think that’s very naïve.


The Tea Party movement? Its ruling ethos appears to be a kind of inchoate rage. They feel bad that it’s no longer the America portrayed in Jimmy Stewart and John Wayne movies, but many are quick to blame the changes on swarthy immigrants. They’re desperately looking for a political solution. These folks tend to be highly nationalistic and atavistic, with a tendency to worship their preachers and the military. I just hope some popular general doesn’t get political ambitions…

So, how long will the Greater Depression last? Quite a while, at least for the U.S.



The Dollar


Over the years I’ve been agnostic as to whether this depression would be inflationary or deflationary. Or both in sequence, with inflation first, followed by a credit collapse deflation; or a deflation followed by a runaway inflation. Or perhaps both at the same time, just in different sectors of the economy – e.g., prices of McMansions collapse because people can’t afford to live in them, while the prices of rice and beans skyrocket because that’s all people can afford.


At the moment I’m leaning towards a deflation in most areas.

Even so, contrary to popular opinion, deflation is much better than inflation.

[However] 
Because today’s dollar is just paper and credit, and because deflationary conditions will create a clamor for many more of them, the government will eventually succeed in its inflationary efforts.


Here’s a speculative scenario. To solve these deflationary problems and resolve Ben’s helicopter conundrum, maybe the Fed will go into the retail banking business by directly taking over the hundreds of institutions that are now failing. The average American would feel safe depositing directly with the Federal Reserve. And the Fed could lend as much as they want, without the restrictions imposed by actual capital or pesky shareholders.


Ridiculous? I think not, certainly not after GM, Fannie, and the rest. Certainly not when you consider that this depression is still in only the second inning. It would be one way to head off deflation.


Be that as it may, or may not, at some point after the deflationary waters have receded as far as possible, an inflationary tsunami is going to wash ashore, to the surprise of all.


Everybody knows how bad things were in Weimar Germany, and what a catastrophe hyperinflation has been in Zimbabwe. If it hits in the U.S., as highly specialized and urbanized as it is, it will be an unparalleled disaster.

And not just for the U.S., because the reserves of almost all governments are mostly U.S. dollars. And dollars are used as the de facto currency by the average man in about 50 countries. All told, there may be as many as seven trillion of the things held outside of the U.S., and, at some point, everybody will be trying to unload them at once. At which time they’ll lose value very, very quickly.

the dollar is going to be a lead player in the catastrophe called the Greater Depression.

And all the other paper currencies are going down with it. Pity the fool who doesn’t see this coming.
  Or, for that matter, what’s going to happen to interest rates.



Interest Rates


The government is doing everything in its power to keep interest rates as low as possible. Low rates make it easier for people to support their debt burdens and borrow more. Low rates inflate the value of stocks, bonds, and real estate.

But, perhaps even more important, it’s a lot easier for the government to service $12 trillion of official debt at 2% than at 12%. That much of a rise in rates alone will add over a trillion$ to what they need to borrow to keep the giant Ponzi scheme going.


Of course it’s a fool’s game. Eventually (I’ll guess between six and 24 months), when their creation of dollars eventually overcomes the credit markets’ destruction of dollars, consumer prices will go up. That evidence of inflation will cause interest rates to rise, with all the short-term negative effects the government so fears. But higher rates are absolutely necessary to get out of the depression.

Rates – the price of money – shouldn’t be controlled by the state, up or down, any more than the state should control the price of oil, or bread, or toothpaste.

One reason why Japan has been fading into the economic background over the last two decades is that the government has artificially suppressed rates, in the vain hope of stimulating the economy. All they’ve gotten is excessive levels of government debt, which will result in the destruction of the yen. And what will be tens of millions of impoverished, and very angry, Japanese savers.

The same thing is in the process of happening in the West due to suppressed interest rates.

The Next Steps Down in the Markets

When rates inevitably go higher, stocks, property are likely to head much lower. That’s entirely apart from the fundamentals under them, which are truly ugly. In turn, that will bankrupt pension funds across the economy, many of which are already severely under-funded.


These pension funds are likely to be the centerpieces of the next leg down of the evolving crisis. Will the government bail them out?  More likely it will nationalize them, assuming their assets in exchange for a special class of its paper. In the interest of “fairness,” that will happen to small and solvent funds as well as large and bankrupt ones.


After that, the next problem area will be insurance companies. Even the well-managed ones have their assets invested primarily in commercial loans, commercial property, bonds, and stocks.

How This Will End

Nassim Taleb has popularized the concept of the Black Swan: an event that no one thought was possible

Until the actual moment it hits, everything is completely normal. Then everything changes radically.

Either way, it’s far from being all gloom and doom.

How This Could Be a Good Thing

Everyone, certainly including myself, prefers good times to bad times. But much of the good times of the last two decades were a result of an entire civilization living above its means. It was great fun while it lasted, but the party is over. The result will be massive unemployment, lots of business failures, and huge investment losses. These things are most unpleasant, but inevitable. That said, I always like to look at the bright side.


And what might that be?

The bankruptcy of the U.S. government will, at least at some point, lead to a big drop in the number of government employees. This is a good thing, since little of what they do serves a useful purpose; most are an actual impediment to production.

Internationally, it seems to me a sure thing that organizations like the UN, the IMF, the OECD, and so many more, will be totally hollowed out or even disappear. At a time when governments are straining to maintain themselves, they’re unlikely to ship scarce capital abroad. So the people who are worried about the UN taking over the U.S., One World Government and such, will have to find something different to fret about.


As domestic currencies the world over are inflated away, some medium of exchange and store of value will have to be agreed on. I don’t see any realistic alternative to gold. China is going to be a focus of change in this regard

But if the U.S. and governments of other advanced countries lose power, governments in places like Africa will collapse; Somalia is a model of things to come there.

That may sound like a horrible thing, but – notwithstanding teething pains – it’s a big step forward.

Deprived of free money, free weapons, and lots of free bad advice that have entrenched kleptocracies, the Africans are likely to make real progress after the Greater Depression plays itself out. [emphasis added ~ Recision.  ...” if you don’t want people doing something, don’t pay them to do it ” ]


The transition period, however, is likely to be messy almost everywhere.


Can we prevent the status quo from falling apart, and preclude these messy changes? Further, should we, if we could?


Entirely apart from the fact that change is an essential part of life – and I think the status quo is in dire need of some real change (although absolutely not the kind Obama and his posse might have in mind) – I actually don’t think there’s a[nother] realistic solution to the problems the world is facing in this [next] decade.


Yes, there are solutions that the government could proactively bring about – almost entirely by doing less, rather than more. But the odds of the U.S. voluntarily defaulting on its debt, abolishing the Fed, using gold as money, abolishing all agencies not specifically designated in the Constitution, eliminating the income tax, and cutting back on military expenditures by about 90% — among other things – are so small as to be considered a fantasy.


In fact, the concept of invoking changes of that scale are too scary for most to even contemplate. But they’ll happen anyway.

Which means these things aren’t going to happen voluntarily, under some kind of control, and in a more or less orderly manner.

Even so, because anything that must happen will happen – all these things and more will actually happen and, in the happening, will be most unpleasant and dangerous.


It seems to me that the upset we’re looking at could be the biggest thing since the Industrial Revolution.  we could have another American Revolution,


But it’s hard to see how it could be anything like the first one, which was led by thoughtful, rich, free market-oriented farmers and merchants. More likely this one will center on people like Sarah Palin and Sean Hannity on the one side, and Michael Moore and Nancy Pelosi on the other – strident, antagonistic, and bent, but also full of charisma and certainty. I don’t see much chance of collegial and reasonable compromise.


The best advice is not to be around the watering hole when two antagonistic groups of chimpanzees are hooting and panting at each other, getting ready to fight for control of it.


I’m afraid the current state of affairs is corrupt through and through. there’s no feeling of shame in gaming the system any way possible. 
[there is no] escape from the very unpleasant consequences of very stupid past – and current – actions.


I’ve just scratched the surface of the possibilities for the next ten years here.

What’s clear is that some patterns of production and consumption are unsustainable; they will stop. What’s not clear is what new patterns will replace them.

But that’s not so worrisome; what is a matter of more concern is what forms of political and social organization will appear.


But let me leave you with a final bit of good news. Most of the real wealth – science, technologies, capital and consumer goods – will still be here. There’s just going to be a change in ownership.

Based on the above, what looks good to me on a long-term basis…

In general, stocks, bonds, and property are dead ducks, and headed much lower.

But when a real bottom arrives, perhaps even in this decade, fortunes will be made buying back into them. Gold and silver, even though they’re no longer cheap, are going much higher; they’ll be what you’ll trade for things that are cheap.

Agricultural commodities are going to do well. The trillions of currency units being printed all over the world will definitely ignite more bubbles, which should present fantastic speculative opportunities.

And because the political situation will be hairy, diversify your assets outside of your home country.

………………………………

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Changes

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I was doing a bit of a browse around the site a couple of days ago and realised that I hadn’t added anything to the “What to Change” section in a long time. Seeing as that was really rather the point of this blog, I guess I will have to remedy that pretty soon (even do some revisions and editing in there). Actually I have been pretty slack about adding content in general recently. However, I have also been rather busy with other stuff too, so that’s my excuse.

Time to get back to it though, and hopefully you all will have lots of interesting stuff to read over the next wee while.

I have a redacted version of an interesting “guest” essay coming soon. As well as my own stuff on a variety of subjects: My Turn, Fantasy, Lotto…

Now all I have to do is sit down and write them!

Cheers

~ RECISION

 

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