We are where we are.

Greetings Reader.

I must admit I haven’t a clue where we are. We could be on the cusp of the second dip and some global deflation. We could be on the brink of a heavy dose of inflation courtesy of the ECB joining in the QE process. My prejudices still lean towards the former.

I do not believe that the ‘authorities’ know where we are either. We are in the teeth of a crisis and in a crisis ’something must be done’. Not so much as to solve the crisis as to justify the continued remuneration and adulation of the ‘authorities’. All too often the response to ’something must be done’ is “Here! This is something. Let us do this”. In other words, “Look busy and pray this works….”.

It is still my belief that the answer to ‘too much debt’ should not be, and cannot be, ‘more debt’. In all cases (US, UK & EU) that is what is being tried. The most it has managed so far is to mitigate the severity of the eruptions of the symptoms. But the eruptions keep happening. Last Thursday was just another example of the fragility of the system. As usual, ‘trader error’ was the culprit wheeled out to take the blame much as aviation authorities rush to finger ‘pilot error’ in the event of one of their catastrophes.

There is a fine piece of analysis over here that does not rush to any easy judgment while giving a detailed account of the events. Clearly, the ’system’ is astoundingly complex and beyond the ‘ken’ of anyone person. Clearly, also, there are diminishing returns to complexity which can turn negative.

We have a ‘HeathRobinson’-esque financial markets system that is massively removed from the needs of capital formation for industry and safe investment vehicles for our pensions and savings. It is clear to all that this grotesquerie has now become a vampire, feeding off that which it was supposed to serve. It has become bloated at the expense of a healthy economy, infrastructure and society.

What we need right now is less finance, not more, and less debt, not more.

There is a ‘green’ angle to all of the above ‘blather’. Everywhere you look on the planet right now humanity is banging up hard against the diminishing returns to complexity. Take the Large Hadron Collider and compare it to what sort of laboratory James Clerk Maxwell needed to resolve the complexities of electromagnetism. Examine the differences between the illfated ‘Deepwater Horizon’ rig and what was required in the age of Standard Oil to harvest fossil fuels. Contrast the ‘Green Revolution’ of Norman Borlaug with the manipulations of Monsanto. In all cases we are adding enormous complexity for less and less return.

This has been analysed and forecast by Joseph Tainter in his book ‘The Collapse of Complex Societies’. You should read it.

Where we are is exhausted at the top of a ridge, with steep, near-vertical, falls on either side and folks just want to rest but the air is thin and cold and we cannot lie down….

UPDATE

Tyler Durden over at ZeroHedge.com says this…..

The race to the currency devaluation bottom is now in its final lap. And gold is the only alternative to the now imminent collapse of the fiat system: the world had a chance to take writedowns on losses, punish those who took risk and failed, and refused to do so. There is now no risk left, but it only means that eventually all the risk will come back and lead all capital markets to zero. The result will be the end of Keynesian economics as we know it. Do not trade in this broken market, do not hold your money in a bank as they are all now one hour away from a terminal bank run – buy and hold real, FASB mark-to-myth independent assets.

I think I agree, though whether the run will be deflationary or inflationary I still don’t know. But, for sure, hold real assets only….

Another fine mess you’ve got me into….

For years I have listened to British commentators excuse their unfair and unrepresentative electoral system on the grounds of the ’strong government’ that it facilitated. That argument has always been most loudly promulgated from the ‘Right’.

This time it has delivered a result that is anything but strong.

The Lab/LibDem combination is not sufficient on its own and would be beholden to either the DUP or a Celtic ‘combo’ of SDLP/Plaid Cymru/ SNP.  I presume both principals would rather not do business with SinnFein.

The Cons/LibDem combination is a marriage of advantage with little in common between the parties and Mr. Cameron’s party, historically, the most wedded to the existing electoral system.

All of which would be academic were they sailing in sunnier climes but everyone knows that some seriously hard decisions must be taken and cutbacks imposed on the British public as soon as the next Cabinet is formed.

The LibDem’s will not be thanked by the electorate if they bring down a Government in a fit of pique. Whatever deal they strike they must stick at it long enough to bring a referendum before that electorate who are resistant to change for changes sake and who will not be disposed to reward a party they see as imposing cuts and bringing hard times. But they will be punished by their supporters if they do get a referendum on electoral reform.

A poisoned chalice of decisions awaits the beneficiaries of the great British publics taste for indecision.

Facebook’s ‘issues’….

Following on from my abandonment of Facebook and the Legions of the Enslaved, as of March9, I came across this fine article in Gizmodo which gives a much more coherent description of the problem than I was able to manage at that time.

The narrative is purely a ‘technical’ one and does not touch on the ’societal’ and ‘pyschological’ aspects of F’book.

We already live in a highly artificial society where ‘marketing’ and ‘consumerism’ tries to make slaves of us all. Most of the artefacts of the market deliver far less than they promise, thereby generating discontent and anxiety for whomever they are ‘consumed’ by.

F’book exacerbates this trend by giving an illusory and superficial rendering of community, society and amity delivered via the ‘Web’. At the same time, as documented in the article, they are abusing your data so as to further manipulate you and your ‘friends’.

I trust that I am not alone in seeing in F’book the first elements of the cyber-enslavement of our minds that was so brilliantly exaggerated in the film ‘The Matrix’. ‘Hyperbole’, I hear you say. If you take a minute to reflect on it you might think differently. How many of the people in some of your F’book circle of friends have met recently? How many of them have you ever actually met? If you are in some campaign, how do you know that the majority of these are not just ‘avatars’ rendered to you by F’book in the same manner as the androids in ‘Blade Runner’ were given ‘lives’ and ‘back-stories’ by their creators.

You don’t know. And the more you rely on F’book the less and less you will know.

Until you find some program or interface that repects yours and everyone elses’ privacy and data, until you start refusing to allow yourself to be treated merely as a consumer and not as a citizen you are part of the problem rather than the solution. As with all of these things, by the time the majority wake up to the problem it will most likely be too late to bring about meaningful change.

Yes, I know it is ‘convenient’. So is buying green beans flown in from Kenya. We all know where that is leading to.

I know that I am not the only ‘blue-pill’ guy on the planet and I am sorry that my computer skills are not up to building a better Web but no one is forcing you to enslave yourself.

UPDATE

Wired magazine have joined in on the subject in this article.

UPDATE 2

These guys have a good plan for doing ’social networking’ properly and it seems that they have some backing as well. Go for it, guys…..

Goldman’s pirates…

This is just too delicious not to post it here rather than linking to it.

NORFOLK, Va.—Eleven indicted Somali pirates dropped a bombshell in a U.S. court today, revealing that their entire piracy operation is a subsidiary of banking giant Goldman Sachs.

There was an audible gasp in the courtroom when the leader of the pirates announced, “We are doing God’s work. We work for Lloyd Blankfein.” The pirate, who said he earned a bonus of $48 million in doubloons last year, elaborated on the nature of the Somalis’ work for Goldman, explaining that the pirates forcibly attacked ships that Goldman had already shorted.

“We were functioning as investment bankers, only every day was casual Friday,” the pirate said. The pirate acknowledged that they merged their operations with Goldman in late 2008 to take advantage of the more relaxed regulations governing bankers as opposed to pirates, “plus to get our share of the bailout money.”

In the aftermath of the shocking revelations, government prosecutors were scrambling to see if they still had a case against the Somali pirates, who would now be treated as bankers in the eyes of the law. “There are lots of laws that could bring these guys down if they were, in fact, pirates,” one government source said. “But if they’re bankers, our hands are tied.”

Fake news by Andy Borowitz

Just perfect…….

Gangrene.

With gangrene, you can treat and be lucky or you can cut and be sure.  I have been saying (but not yet blogging) for some time that debt is like gangrene. This is true for Ireland and the Eurozone and everywhere.

Gangrene is a symptom that becomes a problem in its own right. When you are even moderately healthy the bugs and virii and detritus that cause gangrene don’t cost you or your immune system a moments thought.

But when you are in a long period of physical stress (climbing Mt Everest or getting so fat that your circulation fades) then the slightest problem can set off a chain that becomes a gangrenous infection.

Economically, the EU is betting on treatment but the gangrene is spreading. At home, we are entirely committed to treatment in the hope that someone else will carry us down the mountain of our debt.

Personally, I have always believed in cutting as the treatment for economic gangrene for three simple but massive reasons. Economic gangrene accelerates away from the capacity of the ‘doctors’ to treat it very rapidly.  Cutting enforces economic discipline (removes the temptation to ‘moral hazard’) which strengthens the economic ‘immune system’. The biggest and best reason for cutting is that, unlike in the human case, the economic body can always regrow the limb and the smaller and quicker the cut the sooner and stronger the regrowth.

“When you realise you have it you have to cut your leg off in order to survive, it is contaminating all the spreads and distorting all the risk assessment measures. It is also threatening the stability of the entire financial system.” Angel Gurria, OECD Secretary General

The real problem with gangrene is that it is extremely hard, medically and economically, to spot the moment when the scope for ‘cutting to be sure’ passes away and the patient is set on the road to passing away also. We are, rapidly approaching that moment.

Lenihans lips are moving, again.

I am getting a bit ‘raged out’ which is why the frequency of posting has declined recently.

However, the latest lies to come out of the mouth of Brian Lenihan easily vaulted over even my heightened threshold level for ‘foaming at the mouth incandescent rage’.

The Minister has claimed and it has been echoed by several others than the debt reclassification is technical and does not affect us in any way.

This is wrong.

It is not possible for our tiny brains to deal in billions and make sense of them, mine included, indeed especially mine. Which is why he gets away with these lies so easily.

On the human level what has happened is that our banker has taken a big slug of our mortgage and put in onto our overdraft. Yes, guess what, we still owe exactly the same amount of money.

The difference is that we have to pay it back 10 times faster and they are charging us more for it and we still are expecting to maintain our lifestyle at the same overdraft limit.

If the average mortgage is 250,000 what the Minister has created (since it was he, he says, instructed Eurostat on the correct treatment of this expense) is a situation where our mortgage has gone down by 15,000 and our overdraft up by the same amount.

This comes at a time when we have agreed to repay the overdraft in 3 years time and when we are having difficulty living within the overdraft anyway.

That’s all it is, a mere technicality….Mar dhea!

Gaia strikes!

Gaia, with the slightest, but sublimest, of efforts, has shown her colours.

A mere burp from her innards and swathes of humanity’s economic “juggernaut” are brought to a standstill. A significant proportion of European and trans-Atlantic air traffic has been grounded by small volcano and an odd weather pattern.

The volcano has been erupting for a month and the last time it erupted it did so continuously for two years.

Not only are thousands of people being discommoded and put to expense but the unknown duration of the event is beginning to worry businesses globally. Without dependable air freight between Europe and North America an enormous number of businesses are going to be massively affected.

Not only are the airlines and their bankers at risk but also all of the businesses who depend on ‘just in time’ delivery of high value finished and capital goods. Should the disruption last for two years, even on an ‘on and off again’ basis then potentially even the aircraft manufacturers could be affected.

All this from a small volcano and an unusual weather pattern. Something that was not on anyone’s radar as to risk, either physical or financial.

I hope that as people reflect on the impact of this tiny geophysical event they have the wisdom and foresight to imagine what serious planet-wide disruption will feel like when the climate change juggernaut starts to kick in. Sadly, I do not think many of the suggestible apes will do so.

Truly, we live in interesting times.

Aphorism ‘du Jour’

Money is the 2nd derivative of energy.

Put that in your pipes and smoke it for a bit.

Video Excellence.

I was referred to this by a link on author’s blog.

Yes, it is an ‘ad’, a video ‘blurb’ in fact.

But a powerful and well made one.

Enjoy.

Today’s Aphorism.

Inspired by a fellow contrarian, I came up with this, the other day.

The grass is always greener where the herd hasn’t trampled it.

Well, I liked it. An ‘AD’ original – there’s more where that came from.