content-in-context

Notes From The Edge Of Tectonic Change…

2011-10-08T14:22:00.000-04:00

What is it? A high impact change in culture, economics, politics and behavior from the micro to the macro. Multiple “power-shift” events occurring simultaneously.

Creative Destruction

Entire swaths sectors of the economy will disappear or will change so much they might as well disappear:

* America may well not be in the auto industry soon. “American car sales have dropped to an annual pace of nine million, from some 17 million in 2007. Even if sales increase considerably, that is likely to leave a lot of unneeded auto factories,” said The London Times.

* Financial services will have to be completely remade (by government?). Check "Eight Bubbles" mmap.

* Newspapers will start to vanish. Magazines are in worse shape. Books‘ channels of manufacturing, distribution, and sales are going though through upheaval. Check "Kindle" mmap.

* Broadcast media will become meaningless, replaced by digital delivery.

* Advertising will be next to feel the earthquake, after media.

* Large-scale retail will shrink and consolidate and then be transformed by a search-and-buy economy.

* Business travel - including the convention and conference business - will take a huge hit in the financial crisis and much of it won’t come back, replaced by more efficient communications.

* Carbon polluting energy industries will shrivel, with or without govermant incetivized corruption.

* Residential and commercial real estate will have to restructure around a new capital structure. Homes will get cheaper but so much of homeowners’ equity has been wiped out in real estate and stock investments that apartments will be what’s built, when building returns. Commercial real estate had its own bubble and it will be hit with a double whammy as tenants shrink and disappear. Construction will, of course, decline.

* Health care was the one sector in this month’s employment report that showed growth. But we know that medicine, pharma, and insurance will undergo a forced restructuring.

* Computers are getting so small and cheap and open that that industry is under growing pressure. As every other device we have becomes smart and connected, the "computer" ( a physical box of switches) itself will begin to disappear.

* Universities are facing competition from each other and commercial newcomers online and have suffered huge blows to their endowments; they will have to change. We should be so lucky that elementary and secondary education will also face such pressure.

* Education is a growth opportunity but not in its current institutions. As industries are killed and turned upside-down, present and former employees will need to be retrained in technology, in the skills of starting and running a business, in entirely new skills.

* Finally, consumer products of all sorts will have to change in the face of empowered customers and, in some cases, with competition from small competitors given the benefits of scale on platforms (see: eBay, Etsy, Amazon, et al). They will also face price pressure thanks to online comparison shopping. “prosumerism” and new retail structures.

* Government will grow but thanks to the empowered populace, it, too, will face fundamental change.

“Power-shift” - the process of transformation that accompanies radical innovation

The opening up of new markets and the organizational development from the craft shop and factory to such concerns as (“fill in the blank”) illustrate the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one ... Current methods, processes, "things", must be destroyed to create the new. This always causes upheaval on ALL fronts. Microsoft, MTV, CNN, FedEx, Intel, Hewlett-Packard, Burger King all started up in this kind of "crisis"

Current Transformational Issues

The change in our society and how it is structured are both causing and necessitating change in the economy, society, politics and industries. The crisis is bigger than it appears in the rear-view mirror. It’s more than jobs lost and companies folding. It’s a new socio-economic realty, built on a new society that we are only just beginning to recognize if not understand.

Because of these changes, it’s hard to build a business model anymore out of screwing people - since when you do, we, the screwed, can rise up and be heard and fight back and make evil too expensive much more effectively that in times past. Our interconnectedness is also what made the complex derivatives & MBS’, CDS’ etc. - the toxic assets - that triggered the financial crisis possible - but that is all the more reason why we will demand transparency, our best antidote to evil. That will change how business is run in fundamental ways.

Frameworks:

Socio-political

Don’t be overly optimistic about the impact of technology on the future of society, although it has the most immediate effect.

Transformation phases (pre-development, take-off, acceleration, stabilization) can provide essential insights

Essential change in international relations & constructs - NATO-like organizations in every corner of the world.

Relationships will become more "bottom-up" oriented as inter-connectedness becomes pervasive.

Applies from the "bottom-up" socially

Global Restructuring

A new economy built on a new society that we are only just beginning to recognize if not understand
A great “compression,” as an economy built on perceived value reconciles with actual value (ex. - derivatives.).
Emerging Markets - China/India/Latin America - financial expansion/contraction of these nations is accelerated.
Globalization is not simply a trend or fad but is, rather, an international system. It is the system that has replaced the old Cold War system, which replaced the old empire-based Colonialist System, and, like that Cold War System, globalization has its own rules and logic that today directly or indirectly influence the politics, environment, geopolitics and economics of virtually every country.

"Great Power" dissolution -

Instability

I don't forecast a 1776-style revolution to spontaneously erupt globally or locally. It will happen in stages, and it will spread among the classes (over, under, sideways, down…) and will be waged in many forms … over the Internet, in town halls, on the ballot as well as at the physical/literal "barricades".

What will be the spark that ignites it? A final straw bailout? Another tax hike? Disappearing entitlements? Or will it be the ultimate “let them eat cake” policy that pushes people past the breaking point? Who will break first?

The vast middle of transformative political-socio-economic change being wrought right now by globalization's spread/speed.
Re-tooling military role - "war among the people" - get out of a big-war mentality and focus on the reasonable scenarios ahead
Ditch the UN - NATO-like organizations in every corner of the world.
The former middle class that lost their jobs, 401ks, IRAs, pensions … and even their homes?

Jobless, blue-collar, and paycheck-to-paycheck workers, their credit maxed out and heading toward homelessness?
The young and restless with dead-end jobs or no jobs, who believe their future has been stolen and want revenge?
The artists and intellectuals on one hand, the hardcore conservatives and impassioned patriots on the other, united in outrage at Big Brotherhood’s control of the entire socioeconomic and political system?

One of the above? Some of the above? All of the above

I hate to say it, but-

Jobless, broke and nowhere to go, “Self Storage” will soon live up to the meaning of its name. Down and out, thrown onto the streets … homeless Americans will empty out storage lockers of useless junk … to store themselves. When Panic strikes, it will only be a matter of time and a question of survival before they move in. Whether on their own or with family in tow, living in concrete and steel 4x8s will be a step up from sleeping in the streets or risking a night at a homeless shelter.

The implications of a nation in decline are already in the making. As legitimate options to earn real money dwindle, the business climate for crooks and cons of every stripe and social order to invent new scams (and bring back old ones) to fleece easy marks, will expand across the social spectrum. Pyramid sales – termed “multi-level marketing” by the people in the business – with promises of big bucks by hitting up friends, family and strangers to buy some of what the Pyramid boss is selling, will hook flocks of hungry suckers. The informercial business will also thrive as the newly out of work and the sunk in debt toss the dice on a get rich scheme that promises a money back guarantee.

Like other third world nations threatened by a heavily armed criminal class, a frightened public will be locking themselves in both day and night. Surveillance equipment, gates, bars, anti-theft devices, attack dogs, attack-proof products, security guards, identity theft and theft protection … any businesses and service promising “protection” will proliferate.

Anti-immigration movements will intensify as many of the problems ranging from increased crime, to loss of job will be blamed (rightly or wrongly) on the illegal population. Immigration will also remain a major Campaign 2008 hot button issue. A dark horse candidate with a populist bent and a strong anti-illegals position will find a wide voter base.

Wage riots and street protests will escalate in size and intensity as demands for better pay and income distribution become calls to action from out-of- work and the low-paid masses. As with other nations on the skids where the police are used to protect the powers, brute force will be inflicted upon the crowds and planted shills will turn peaceful protests ugly by inciting violence.

As major corporations fall and chain stores break apart, ample opportunities will be available for entrepreneurs to fill the gap the big guys left behind.

European riots over austerity measures - measures brought about by financial carelessness, that was brought about by US “nuclear umbrella” of the Cold War era. Our defense budget is so high, so they can make theirs so low… and spend it on social welfare.

Arab Spring - may be co-opted by Muslim Brotherhood, military orgs.

Occupy Wall Street - has an element of “astroturf” to it, but many of the protesters are sincere.

What of it?

Now we talk about the emphasis on people, not technology ... though the interlinked digital infrastructure amplifies the issues considerably.

“First, we shape our structures .. then, they shape us.” - Me

“The goddamn internets just let any idiot find out things without having to go through an approved corporate filter of 'What Happened' “ -- Tom McHenry, circa 1998.

Frameworks:

Restructuring of Society: Back in the Roosevelt Days you had at most 10 groups who could influence policy making; today there are hundreds. In this new mosaic society, we need to rethink the fundamental systems of laws.

Bureaucratism: most prevalent form of power in a system. Not capitalism or socialism. The flow of information and the flow of money; both are important. Power will flow to those sectors which regulate information in a super symbolic corporation. Bureaucratic power-shifts will occur.

Dynamic Equilibria? Don't ask me to “prove” any of this - just think about it.

Power is inherent in all social systems and in all human relationships. It is not a thing but an aspect of any and all relationships among people. Hence it is inescapable and neutral, intrinsically neither good nor bad.The 'power system' includes everyone - no one is free of it. But one person's power loss is not always another's gain. The power system in any society is subdivided into smaller and smaller power subsystems nested within one another (my note .. some call this 'holarchy'). Feedback links these subsystems to one another, and to the larger systems of which they are part. Individuals are embedded in many different, though related, power subsystems. The same person may be power-rich at home and power-poor at work, and so forth.

Because human relationships are constantly changing, power relationships are also in constant process. Violence, which is chiefly used to punish, is the least versatile source of power. Wealth, which can be used to both reward and punish, and which can be converted into many other resources, is a far more flexible tool of power. Knowledge, however, is the most versatile and basic since it can help one avert challenges that might require the use of violence and wealth, and can often be used too persuade others to perform in desired ways out of perceived self-interest. Knowledge yields the highest “quality” power. due to its inherent utility.

The relationship of classes, races, genders, professions, nations, and other social groupings are incessantly altered by shifts in population, ecology, technology, culture, and other factors. These changes lead to conflict and translate into redistribution of power resources. Conflict is an inescapable social fact. Power struggles are not necessarily bad. Fluctuations caused by simultaneous shifts of power in different subsystems may converge to produce radical shifts of power at the level of the larger system of which they are a part. This principle operates at all levels,. Intra-necine conflict within an individual can tear a whole family apart, power conflict among departments can tear a company apart, power struggles among regions can tear a nation apart.

At any given moment some of the many power subsystems that comprise the larger system are in relative equilibrium, unilke others are in a far-from equilibrial condition. Equilibrium is not necessarily a virtue. When power systems are far-from-equilibrial, sudden, seemingly bizarre shifts may occur. This is because when a system or subsystem is highly unstable, nonlinear effects multiply. Big power inputs may yield small results. Small events can trigger the downfall of a regime. A slice of burnt toast can lead to a divorce. Chance matters. The more unstable the system, the more chance matters. Equality of power is an improbably condition. even if it is achieved, chance will immediately produce new inequalities. So will attempts to rectify old inequalities.

Perfect equality implies changelessness, and is not only impossible but undesirable. In a world in which millions starve, the idea of stopping change is not only futile but immoral. The existence of some degree of inequality is not, therefore, inherently immoral; what is immoral is a system that freezes the maldistribution of those resources that give power. It is doubly immoral when that maldistribution is based on race, gender or other inborn traits. Knowledge is even more maldistributed than arms and wealth. Hence a redistribution of knowledge (and especially knowledge about knowledge) is even more important than, and can lead to, a redistribution of the other main power resources. Over-concentration of power resources is dangerous. (examples: Stalin, Hitler, and so on. Other examples too numerous to itemize). Under-concentration of power resources is equally dangerous. The absence of strong governments in Lebanon has turned that poor nation into a synonym for anarchic violence. scores of groups vie for power without reference to any agreed conception of law or justice or any enforceable constitutional or other restrictions.

If both over-concentration and under-concentration of power result in social horror, how much concentrated power is too much? Is there a moral/ethical basis for judging? The moral basis for judging whether power is over - or under-concentrated is directly related to the difference between 'socially necessary order' and 'surplus order'.

REPOST - The Secular Roots OF Islam

2011-08-14T16:42:00.000-04:00

I wish I had a COMPLETE copy of my War College candidate paper on "The Secular Roots of Islam". Back then (1986) we didn't have PC's or word processors to save things digitally, and they don't have it anymore due to their records deletion policy (every 5 years) so all I have are scraps! Any-who, for your info, here is the overview (flying at 100K feet) of my research:

1. Islam is not a religion, as we understand it... it is a socio-political mass movement, more like socialism or conservatism or Ayn Rands Objectivism, or even the "hippie" or "flower child" movements of the '60's & early '70's. The Koran is a ham-handed rewrite of the Old Testament, with a healthy dash of Arab, pre-Islamic pagan animism (references to "Jinns", "genies" & carnal pleasures in the afterlife, or Paradise).
2. There was no person named "Mohammad" who acted as a 7th century prophet in the Medina/Mecca region... no SECULAR references can be found for the existence of such a person, save for a single reference by the Greek historian Polymeades, who thought he was still alive in 685 AD. Mohamed reputedly died in 638 AD or thereabouts, according to Islamic scholars.
3. I advance the thesis that the content of critical sections of the Qu'ran has been broadly misread by succeeding generations of scholars, through a faulty and exclusive reliance on the assumption that classical Arabic formed the foundation of the Qu'ran, whereas linguistic analysis of the text suggests that the prevalent language of this region was the Syro-Aramic language, up to the 7th century. This suggests that the migration of Islam can be traced (using philological methodology as a basis for analysis) all the way back to Anatolian Turkey (@ 280AD), then on down though northern Saudi Arabia in the 6th century.
4. Despite the insistence to the contrary by Islamic scholars, no complete version of the Qu'ran existed until @ 740 AD, when one popped up in Damascus. By that time, the age of Arab Imperialism was well underway in N. Africa, Spain & southern France, when the Arab (more specifically, Bedouin) forces were stopped by Charles Martel ("The Hammer) in the battle of Tours in 732AD. The word Qur'an itself is derived from 'qeryana', a Syriac term from the Christian liturgy that means ‘lectionary’ a book of liturgical readings. The book, being a Syro-Aramaic lectionary, with hymns and Biblical extracts, created for use in Christian services. This lectionary was translated into Arabic as a missionary effort. It was not meant to start a new religion, but to spread an older one.
5. Islam, as practiced by the Arabs & Persians (Iranians) of the Middle East, is markedly different than the method of practice in Malaysia, Indonesia and other S.E. Asian countries. Therefore, the aggressive, violent and bloodthirsty nature that is the conventional view of Islam in the West, is a unique expression of Middle Eastern culture. BTW, if you lived in that damned desert for millennia, you would be fooked up in the head too.
6. Unlike Christianity & Judaism, Islam has never undergone a revolutionary Reform movement. It has to, in order to integrate into the world community, or it will implode or ex-plode, or... God only knows.
7. I also advance the theory that this movement was encouraged early on by Arab warlords of the region, in order to achieve a more manageable population, united by a strict code of personal conduct, and a feeling of oneness (the Uma) coupled with extreme paranoia and violent attitude toward "the other". or in their parlance. "infidels". This provided the Caliphates of Damascus & Baghdad a pool of willing executioners for their aggressive policies, suitable for rapid conquest of the local region & beyond.

That's just an overview, and remember, my analysis was conducted using SECULAR (non- Qu'ranic) historical sources... there's much more, but I don't have time to expand on it here. But you get the idea. Now, my aim was not to discredit Islam, but figure out where the hell it came from, without all the superstitious rubbish clouding the picture. I sure wish I had a complete copy of the thing, but my goal in attending the War College was to make Major, not become a history professor.

The Psychology Of The Social Deconstructionist Movement.

2010-12-11T12:02:00.001-05:00

OK, so in my previous post I outlined the most over-arching characteristics of what I call " Social Deconstructionism". Let's g o ahead and try to figure out not WHAT these folks believe-that is all too obvious-but WHY they believe such insane rubbish.

People who describe themselves (and are described by others) as "Social Deconstructionists", "leftists", "socialists", "social democrats", "Communists" and (in North America) "liberals" do have some things in common. And that is important. However unsatisfactory and apparently simplistic the Left/Right division of the political world may be, there is any amount of research showing it to be a powerful, ubiquitous and perhaps inescapable way of identifying both people and political parties (e.g. Budge et al., 1987; Ray, 1982; Bobbio, 1996).

An important part of what I proposed was that what Social Deconstructionists basically want does not have to be the exact opposite or mirror-image of what Rightists basically want -- and vice versa. This may seem at first surprising but does have some precedents. Kerlinger (1967) suggested that Social Deconstructionists and Rightists have different "criterial referents" and even thought that he had found in his survey research a complete lack of opposition between Social Deconstructionist and Rightist attitudes. Kerlinger's reasoning is interesting but that he misinterpreted his research results has previously been shown in Ray (1980 & 1982). Whether Social Deconstructionist and Rightist objectives are opposite or just simply different, how Social Deconstructionists and Rightists go about achieving their different basic objectives certainly generates plenty of conflict and opposition between the two sides.

My basic proposal, then, is that most (but not all) Social Deconstructionists/liberals are motivated by strong ego needs -- needs for power, attention, praise and fame. And in the USA and other developed countries they satisfy this need by advocating large changes in the society around them -- thus drawing attention to themselves and hopefully causing themselves to be seen as wise, innovative, caring, noble intellectuals etc. Rightists by contrast have no need either for change or its opposite and may oppose change if they see it as destructive or favour change if they see it as constructive.

We will see below why one of the most consistent themes to emerge from the Social Deconstructionist's love of change is the claimed need for "equality". And the belief in "equality" also tends to lead to support for such things as redistribution of wealth generally, heavily "progressive" income taxes, inheritance taxes, foreign aid, feminism, gay rights and socialized medicine. Again for reasons explored below, Social Deconstructionists also tend to oppose religion and the churches and this in turn tends to mean that they favor abortion and oppose or obstruct religious schooling in various ways. So let us now briefly look at some of these characteristic Social Deconstructionist/liberal themes to see how they relate to basic Social Deconstructionist motives.

Human Nature

Something that Social Deconstructionists have had in common from the beginning is the rejection of any idea of "human nature". Basically, Social Deconstructionists seem to believe that "education" can change almost anything in human behavior. This root and branch rejection of heredity was of course what underlay Stalin's support of Lysenko's otherwise thoroughly discredited theory of evolution -- the idea that characteristics acquired in one's lifetime can be passed on to one's offspring, something Darwin rejected in toto. So how do such views flow from a yen for change?

Quite obviously, any idea of human nature says that important things about human beings just CANNOT be changed and that does not suit the change-loving Social Deconstructionists at all. So Social Deconstructionists simply reject what does not suit them -- regardless of the enormous evidence in favor of inherited characteristics. The entire discipline of behavior genetics should not exist from a Social Deconstructionist point of view.

Conservatives, by contrast, not only have the view that there are important and essentially ineradicable inherited human characteristics but they share with Christians the view that those characteristics are of a "fallen" kind: characteristics of selfishness, aggressiveness, untrustworthiness etc. That Christians and conservatives share such a central belief about human nature is of course a large element in the general compatibility between Christianity and conservatism and the frequent opposition between Christians and Social Deconstructionists (e.g. "Godless" Communism versus the Roman Catholic church).

This conservative (and scientific) rejection of the Social Deconstructionist idea that human beings are infinitely malleable AND infinitely predictable ( an assertion Lord Keynes also posits), does of course pose a major threat to the Social Deconstructionist's assumptions, theories and programs and it is one that the Social Deconstructionist cannot really rebut so the usual Social Deconstructionist response is simply an ad hominem one: To abuse and demonize conservatives for lacking "compassion". Abuse, therefore and necessarily, takes the place of argument (Krauthammer, 2002). And in the same sentence, Social Deconstructionists will then accuse any perceived opponent of a total lack of rationality or logical thought! How did they get there?

The United States faces overwhelming fiscal problems. Our current level of government spending and future entitlement obligations are simply unsustainable. However, as concerning as these fiscal matters are, the biggest problem America faces has nothing to do with economics, but rather psychology.   The strength of a nation reflects the character of its citizens. While America was once considered a nation of individuals fiercely independent and self-reliant, her citizens are moving closer to a state of dependence, characterized by irresponsibility and ambivalence. This change has been instigated by the politics of collectivism and the growth of the social welfare state. The most important change which extensive government control produces is a psychological change, an alteration in the character of the people.

 To understand how this alteration occurs, one must first understand the psychological concept known as locus of control. In 1954, American psychologist Julian Rotter introduced the concept that describes how individuals could be divided into two basic groups, which represent two ends of a continuum (Figure 1): internals believe that their locus of control is within themselves, and externals believe that they are under the control of outside forces. According to Lee Harris, author of The Next American Civil War:

 "[Internals] believe that they are the masters of their own destiny; they tend to be high-achievers, optimistic about their ability to improve their lot, and to discard bad habits. They believe in willpower and positive thinking. They are determined to control their own lives, for better or worse. [Externals] look on themselves as victims of circumstances, the playthings of fate. If they go to bed drunk, light up a cigarette, and burn their house down, they explain the disaster as another instance of their bad luck, and not their poor judgment, much less their bad habits."

  Based on Harris's description, it is simple to understand why having an internal locus of control is desirable, while having an external locus is not. Furthermore, individuals can move along the continuum in response to external factors. American psychologist Martin Seligman's experiments provided an explanation for why and how movement occurs along the continuum.

This concept came to be known as learned helplessness.   Learned helplessness explains how an individual can move from an area on the continuum characterized as internal to one characterized as external, and while this condition can be induced by pain, it can also be induced by many kinder, gentler ways.

  In "The Conscience of a Conservative", Barry Goldwater described what he believed would ultimately be the consequences of social welfare on the psyche of its beneficiaries.

  "The effect of welfarism on freedom will be felt later on -- after its beneficiaries have become its victims, after dependence on government has turned into bondage and it is too late to unlock the jail."  

Real-world examples of how modern entitlement programs have done harm to their beneficiaries are boldly presented in libertarian political scientist Charles Murray's Losing Ground. What makes this book stand out, according to Brian Doherty, senior editor of Reason magazine and author of Radicals for Capitalism, is that -   “Murray does not rely on the 'welfare cheat' rhetoric ... he took a different tone and approach to the free market assault on welfare, speaking in a voice clearly concerned with the fate of the poor and blacks, about incentives and productivity and self-respect ... He uses trendline analyses to show that any improvement in the lives of the poor that happened after [the late 1960s wave of income transfer] programs went into effect was merely a continuation of progress that had begun long before the federal effort did -- and that the progress in most cases stopped as the 1970s began and the program's effects became clear. Crime and unemployment went up for the poor as the welfare state grew in the 1960s; income and educational achievement went down.”   According to Charles Murray, the author of "The inspiration for Losing Ground" -

 "grew out of sixteen years of watching people who run social programs ... I was struck by two things. First, the people who were doing the helping did not succeed nearly as often as they deserved to ... Second, the relationship between the ways people were to be helped and the quality of their lives became increasingly confused."   Murray's policy recommendation to improve the social condition and self-esteem of America's poor, which emanated from his personal experience and dedicated research, was to eliminate all racial preference programs, institute educational vouchers, and eliminate all income transfer programs, later reinstating short-term unemployment insurance.   Murray's research provides compelling evidence that suggests that social welfare programs are harming their recipients via the learned helplessness mechanism.

However, there is something even worse than creating codependency on government through entitlement programs, according to Lee Harris.   "This occurs whenever a deliberate campaign encourages people to think of themselves as victims. Victims are not in charge of their own lives and destinies."   The victimization mentality is closely related to having an external locus of control. As a consequence of this mentality, people who consider themselves victims erect invisible barriers around themselves from which they cannot escape. Like Seligman's dogs, they give up trying because they don't believe they are free to succeed.  The victimization mentality is advantageous for left-wing politicians, who rely on their constituents' needing government benefits. Remember Hillary Clinton declaring, "I am the candidate for individuals who need government"? Unfortunately, the spread of this mentality foreshadows a poor prognosis for the survival of freedom in America.

The Making of a Social Deconstructionist

The appeal of Social Deconstruction to the average person is simple: The Social Deconstructionist offers something for nothing. And that is always hard to resist -- fraudulent though it usually is. If the Social Deconstructionist offers to redistribute somebody else's wealth into your pocket, that is one hell of an appealling scam to those who stand to benefit from it.

But the Social Deconstructionist's advocacy of equality is not all it seems. The Social Deconstructionist's passion for equality is only apparently a desire to lift the disadvantaged up. In reality it is a hatred of all those in society who are already in a superior or more powerful or more prosperous position to the Social Deconstructionist and a desire to cut them down to size. Social Deconstructionists really aim at (and sometimes succeed at) the equality of making everyone poor rather than the equality of making everyone rich.

This explains the common puzzle of why it is that modern-day "liberals" are still indulgent about the old Soviet system. As Amis (2002) points out, the many people in literary and academic circles today who once supported Stalin and his heirs are generally held blameless and may even still be admired whereas anybody who gave the slightest hint of support for the similarly brutal Hitler regime is an utter polecat and pariah. Why? Because Hitler's enemies were "only" the Jews whereas Stalin's enemies were those the modern day Left still hates -- people who are doing well for themselves materially. Actually, in Niall Ferguson's' epic "The War Of The World", he correctly points out that Stalin was persecuting non-Muscovite Russian ethnicities, while working for Lenin! So Stalins' racist policies were staggeringly more encompassing than even the Nazis'!! Modern day Social Deconstructionists understand and excuse Stalin and his supporters because Stalin's hates are their hates.

Much the same explanation applies, of course, to the similar puzzle of why the French military dictator, Napoleon, is to this day generally regarded as a hero even though practically every family in the France of his day lost a son in his wars. The figures for Napoleon's Russian campaign alone are horrendous. He took 600,000 men into Russia but brought back only 70,000. In terms of loss of life, Napoleon's wars were every bit as bad for France as Hitler's wars were for Germany but Hitler is universally (and justly) reviled whereas Napoleon is still admired! Napoleon, however, justified all his actions as extending the French revolution to other lands and this explanation still resounds favorably with today's Left-leaning intellectuals.

Such vast egotism and hunger for power and attention does of course make a mockery of the Social Deconstructionist's claim to be in favor of equality. Like the pigs in George Orwell's "Animal farm", the Social Deconstructionist wants to be "more equal than others". He wants to rule or at least dominate. Beneath his deceptive rhetoric, he is the ultimate elitist. He actually despises most of his fellow men and thinks that only he and his clique are fit to run everything. The last thing he wants is to be lost in a sea of equal people. This was of course amply shown in the Soviet Union, where membership of the Communist Party became the only pathway to the good life -- conferring on the member all sorts of privileges and access to goods and services not available to other Soviet citizens.

Another psychological motivation for Social Deconstruction that is sometimes mentioned is one that I have always had severe doubts about: Guilt. Or, more to the point, White Liberal Guilt.The claim is that affluent people feel bad (guilty) when they see how poorly others are doing and want to rectify that by getting handouts for the disadvantaged (but not from their own pockets of course). They are "limousine liberals". I have always seen this as just another Social Deconstructionist hoax: They may sometimes explain their motives in such a high-minded way but if they really felt guilty there is plenty they could do to help others rather than agitating to tax them to the eyeballs.

The undoubted fact that Left activists and agitators (from the Bolsheviks on) tend to come from affluent families does not to me point to guilt as their motive at all. Rather the "limousine liberal" phenomenon shows me that those who have all that they want materially then seek other luxuries: such as self-righteousness, praise, power and excitement -- particularly the excitement of being demonstrators in the case of "rich kid" Social Deconstructionists. And if the young limousine liberal can have praise and self-righteousness along with his/her excitement what a good deal it is! It is much the same motivation that causes self-made rich men (such as Bill Gates) to become highly philanthropic. Bill Gates has power and wealth so he now seeks praise and righteousness.

There are, however, many other reasons for Social Deconstructionism:

Because of its pretensions to standing up heroically for various difficult causes, Social Deconstruction can seem "cool" to many of the unthinking young and not so young. Particularly in the worlds of academe, the media and entertainment, being Social Deconstructionist means being "in" with the "smart" crowd. Not to be Social Deconstructionist is to be left out. How awful! Even if such people can see faults in Social Deconstructionist thinking, they are afraid to come toward the Right for fear of losing the approval of others around them.

Some people become liberals because they are genuinely outraged by things that they do not understand and are unwise enough to want to change those things willy nilly. In particular, they may be genuinely grieved by the unhappy experiences of others and want to fix that ASAP without being wise enough to seek for means of fixing it that have some prospect of working or that are not self-defeating. They might, for instance, be disturbed by the impact of rising rents on the poor and propose rent-control as a quick-fix solution -- though a few minutes of thought or the most elementary inquiry should tell them that rent control will after a time also have the effect of degrading and shrinking the existing stock of rental accommodation and drying up the supply of new rental accommodation, both of which make the poor much worse off in the long run. Some are Social Deconstructionists because they are still young and unaware of most of life's complexities so that the drastically simple "solutions" and mantras proffered by the Left simply seem reasonable. Social Deconstruction has the appeal of simplicity.  Some Social Deconstructionists, again particularly the young, are idealists who find the imperfect state of the real world deeply unsatisfying. That there is some genuine idealism even among extreme Social Deconstructionists is shown by the exoduses from Communist Parties in the economically successful "Western" democracies that followed the violent Soviet suppression of the East German, Hungarian and Czechoslovak uprisings against Communist rule in 1953, 1956 and 1968. Once the real nature of Communist regimes became too clear to be denied, honest decent people whose wishful thinking had led them to believe Communist protestations of benevolence and good intentions saw the light and abandoned Communism. In the USA (in New York particularly), some liberal intellectuals even saw enough in the Soviet actions of those times to cause them to abandon "liberalism" and found neo-conservatism. Similarly in Australia of the 1950s and '60s, the Andersonian libertarians of Sydney were also intellectuals who might otherwise have been Social Deconstructionists but who were united by realism about Soviet brutality.

Some Social Deconstructionists know that they themselves are weird by general social standards so preach change towards greater tolerance for all weirdness out of sheer self-interest. As George Orwell said in "The road to Wigan pier":

"One sometimes gets the impression that the mere words socialism and communism draw towards them with magnetic force every fruit-juice drinker, nudist, sandal-wearer, sex-maniac, Quaker, Nature-cure quack, pacifist and feminist in England...

"We have reached a stage when the very word socialism calls up, on the one hand, a picture of airplanes, tractors and huge glittering factories of glass and concrete; on the other, a picture of vegetarians with wilting beards, of Bolshevik commissars (half gangster, half gramophone), or earnest ladies in sandals, shock-headed Marxists chewing polysyllables, escaped Quakers, birth control fanatics, and Labour Party backstairs-crawlers.

"If only the sandals and pistachio-colored shirts could be put in a pile and burnt, and every vegetarian, teetotaler and creeping Jesus sent home to Welwyn Garden City to do his yoga exercises quietly. As with the Christian religion, the worst advertisement for Socialism is its adherents."

Well, more on this later... I have to take an aspirin, and lie down for awhile.

The Social Deconstructionist Agenda

2010-12-11T11:22:00.003-05:00

This is a re-post - read it anyway!

define: social deconstructionist

I’ve used this term “social deconstructionist quite a bit, and some have asked “what the hell is THAT?”. Well, he is my best effort at explaining - and it takes a bit of doing, so here goes.

There are many fractionalized groups in this (or any other) country with seemingly “diverse” goals and objectives. Eco-feminists, anarchists, anti-globalists, La Raza and the Atzlan Movement, environmental extremists, radical gay & lesbian activists, Black Nationalists, Code Pink - ists, Marxist-Leninists, pro-pedophila (NAMBLA), anti-war activists, the “all-sex-is-rape crowd, and on and on. Seems a lot of groups around that all have different axes to grind... it seems. But there is one corrosive thread that runs through all of them. They all share a common hatred of what they call “white skin privilege”. What does this really mean?

Actually, it’s fairly simple. All these groups believe that white, European, Christian male culture has “oppressed’ them, over the millennia. And like their Marxist-Leninist brethren, they have learned to use the dialectic to argue their point, but like all practitioners of dialectics (who can argue that the law of gravity is a capitalist fraud), their arguments are just more tedious drivel.

That’s why these people give -
• Islam / Middle Eastern
• China
• Africa (except Israel, which is a white conspiracy)
• Russia (non-white white people - oppressed folks ya know)
• Any non-Christian, therefore non-European religion (despite the fact that, geographically, Christianity is an Eastern religion)
• Eskimos
• Native Americans (you know Indians... it’s OK for me to use that term because I am 1/4 Choctaw)
• All of South (“Latin” - how ironic!) America
• Anyone who hates the West, America, Europe (ESPECIALLY self-hating Europeans!).
gets a pass. A pass on anything, no matter how heinous... blowing up women and children as a deliberate tactic, mutilating women, slavery, piracy, kidnapping narco-terrorism, illegal immigration (it's human right ya know), random murder... you get the idea.

Now, do they all work together, like the Big Oil Companies? Do they gather together to conspire against us like Bill Gates and the Coven of 13 does every Halloween, at the Lord Mayor of London’s house to receive their orders from SATAN! Hmmmmm, well no, I don’t think so.

But their mutual derangement springs from the same fount, so therein lies the relationship - Most intellectuals like to find ways of joining in the struggle of the weak against the strong. So they hope that their particular gifts and competences can be made relevant to that struggle. The term most frequently used in recent decades to formulate this hope is "critique of ideology.", deconstruction being the preferred term / method of late, a method of literary and social critique that originated in France in the mid-20th century. and based on a theory that, by the very nature of language and usage, no text can have a fixed, coherent meaning. Since nothing has any meaning, anything goes. No evil, no good, no nuthin’. Do your own thing, all over everybody. If you're going to San Francisco...

Years ago, when I worked at Computer Sciences Corporation, at one of our lunchtime “how to save the world” bull sessions. I asked (to no one in particular) why a politician would deliberately want anarchy... to what purpose, as a tool of change or whatever. I was genuinely confused about it: history is replete with deliberate incitement of anarchy, and it never seems to turn out well. Ken Beale, turned to me, without batting an eye and said -”because when you have anarchy, everyone - and I mean everyone - has a shot at power.. That’s why. French Revolution, Russian Revolution, all the same. You have a period of wild-ass anarchy, followed by a totalitarian dictatorship. You end up with Napoleon or Stalin.”

So the objective is anarchy - because they all want that shot at power, not as a utopian system, which would be unworkable due to the vagaries of human nature. And this will be the ultimate undoing of the present incarnation of the Democrat party, if they don’t get their own act together. They will get the anarchy that they will claim they want, in order to keep hold onto the ever more fractionalized base. But if it comes, the fractionalized base will turn on them, then turn on each other.

Or maybe not. Maybe we, as a nation, will muddle though this mess and get through more or less OK. But we will be changed by it. How we are changed is up to us, the middle 60%.

REAL History

2010-12-10T11:24:00.000-05:00

According to the logic of the American myth, all dictators, from Oliver Cromwell to Saddam Hussein, are evil autocrats trying to destroy freedomand democracy. This is clearly not the case. They are a fundamental andnecessary part of the revolutionary transition, which leads to only one place, democratic market society.It is true that some of these dictators have gotten out of hand. This wasespecially a problem back when conquering empires was considered to beacceptable behavior. It is entirely possible that some dictators in the present and the future will also cause more trouble than they are worth. It is probably a good idea for the world to have an emergency process for the removal of revolutionary dictators that cause too much trouble. In order for such aprocess to work, the world has to understand what dictators are and why theyare here.

Theory One-

One theory, which is the conventional wisdom of modern America, is based onthe World War II experience. It says that the world is in the midst of a war between the forces of democracy and the forces of dictatorship. It equates thisto the conflict between good and evil. According to this theory, evil dictators—like Hitler, Stalin, Saddam Hussein, and their fellows—are fighting against freedom, democracy, and world peace. It comes to the conclusion that these dictators are a cancer on the world and must be destroyed in order for democracy, and all things good, to flourish.

Theory Two-

My theory is more complicated and is based on the entire flow of human history.It posits that the world is undergoing a massive revolutionary transformation of its economic, political, and social institutions. This revolution was set off by the adoption of markets as the primary mechanism for the distribution of food.Dictators are part of the revolution. War is part of the revolution.

Chaos and anarchy are part of the revolution. All of these things are temporary. They will not last forever. The end result of this revolution is democratic market society.If the democratic nations of the world are going to go out and remove dictators from office, they should at least know why dictators exist and why they are connected with violence. Here are two very different explanations. Only one of them can be correct. Which one is it? You decide.In accordance to my barely - literate friends, the graphic below will show you what I mean by a world historical, revolutionary transition through oligarchical societies to market systems - Enjoy

If this freezes, tryhttp://www.flickr.com/photos/rwagner337/3338901102/ and click on "All Sizes" to read it.

"But what about the poor...?"

2010-12-10T11:22:00.002-05:00

Believing that poverty is a live political issue is a form of self-delusion by elite liberals for which conservatives should be very grateful — it leads liberals into vast wastes of effort. But it isn’t just liberals who get taken in. A conservative friend who was in on the email discussion said to me, in effect, “But what about the homeless?”. His argument was that homeless people are America’s ‘real’ poor, and he has a point. The trouble with taking that argument any further is that there are too few homeless people to have any effect on politics other than as an emotive issue that wealthy white activists can flog to make themselves feel more virtuous.

In 2003, the Census Bureau reported that 35.9 million persons “lived in poverty”.

What the report showed, in part:

– Forty-six percent of all poor households own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and porch or patio.

– Seventy-six percent of poor households have air conditioning.

– Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.

– The average poor American has more living space than the average (i.e. not poor) individual living in Paris, London, Vienna, Athens and other European cities.

– Nearly three-quarters of poor households own a car; 30 percent own two or more cars.

– Ninety-seven percent of poor households have a color television. Over half own two or more color televisions.

– Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.

– Seventy-three percent own a microwave oven, more than half have a stereo, and a third have an automatic dishwasher.

“Overall, the typical American defined as poor by the government has a car, air conditioning, a refrigerator, a stove, a clothes washer and dryer, and a microwave. He has two color televisions, cable or satellite TV reception, a VCR or DVD player, and a stereo. He is able to obtain medical care. His home is in good repair and is not overcrowded. By his own report, his family isn’t hungry, and he had sufficient funds in the past year to meet his family’s essential needs. While this individual’s life is not opulent, it is equally far from the popular images of dire poverty conveyed by the press, activists and politicians.”

I remind you all - this was in 2003, actually reflecting a 2002 framework.

Thoughts?

Fatal Purity and the Health Care debate.

2010-12-10T11:21:00.002-05:00

With its striking images of an oppressed and riotous people razing a prison to the ground and of swift justice doled out to both the rich and poor by the cold, unsympathetic edge of a guillotine blade, the French Revolution is a period oft-romanticized by historians and story-tellers alike (even I couldn’t help myself just now).

The eternal notion of truth, conformity of thought with reality, impels us to say: This displeases me and annoys me, but it is none the less true. Still, human interests are so strong that Pontius Pilate's question often reappears: "What is truth?" One answer which we must examine is that of pragmatism.

Nancy Pelosi has informed her peers (slaves?) that they MUST vote for the health care bill, even at the risk of their political careers because "we need courage" to pass something comprehensive, not incremental. This is the very definition of "Fatal Purity" - to be so committed to a policy, belief or philosophical framework, as to reject even the very notion of anything else to do with same.

I hate to shift Nancy's paradigm, but even Abraham Lincoln had to conclude, during the Civil War (The War Of Northern Aggression as it is properly known in the South) that the Constitution itself is "not a suicide pact" - in other words principles are fine, but one is not required to drag others to your impending self-immolation scene.

In Pelosi's case, the Holy Grail of universal health care taking over a substantial percentage of the American (and God knows who else's - read the thing!) economy, thus control of the Great Unwashed, has imputed a serious condition… Look into the eye of a a serial killer, religious fanatic or a chicken and you will see it - her self-induced, quasi-religious ecstasy is bordering on public orgasm!

Well, be it so… but I would keep one thing in mind if I were her - that the bloody excesses, due to fatal purity, of The French Revolution did not lead to "Liberté, égalité, fraternité, French for "Liberty, equality, fraternity (brotherhood, for those living in Perryville, KY) for all.

It led to Napoleon Bonaparte.

A "Safe European Home"?

2010-12-10T11:20:00.000-05:00

Riots in Spain & Greece, mass protests all over the rest of Europe - what's really going on here? Blaming this on the latest global financial meltdown is too easy, more a symptom than really a root problem. Why? Because the people of Europe have been promised a "safe European home" by their political leaders, and the leaders, from Lenin & Lloyd George to Merkel & Papandreou, for the last 90+ years - and they have failed to deliver. Therefore, hey... the people are pissed off.

In the grisly aftermath of World War I, European politicians were eager to guarantee, as best they could, a world safe from the death & destruction of war. However, the result of the Treaty Of Versailles only guaranteed a resentful Germany.

The Treaty of Versailles was neither lenient enough to appease Germany, nor harsh enough to prevent it from becoming the dominant continental power again. The treaty placed the blame, or "war guilt" on Germany and Austria-Hungary, and punished them for their "responsibility" rather than working out an agreement that would assure peace in the long-term future. The treaty resulted in harsh monetary reparations, millions of Germans turned into minorities in neighboring countries, territorial dismemberment, mass ethnic resettlements and indirectly hampered the German economy by causing rapid hyperinflation - see inflation in the Weimar Republic. The Weimar Republic printed trillions to help pay off its debts and borrowed heavily from the United States (only to default later) to pay war reparations to Britain and France, who still carried war debt from World War I.

The treaty created bitter resentment towards the victors of World War I, who had promised the people of Germany that U.S. President Woodrow Wilson's Fourteen Points would be a guideline for peace; many Germans felt that the German government had agreed to an armistice based on this understanding, while others felt that the German Revolution had been orchestrated by the "November criminals" who later assumed office in the new Weimar Republic. Wilson was not able to get the Allies to agree to adopt them, nor could he persuade the U.S. Congress to join the League of Nations. The result was A Germany ripe for Adolf Hitler to exploit. The recounting of Hitlers crimes during the war need not be done here, as it is an expansive & well understood topic of it's own.

The destruction of Europe and the destruction of a significant portion of the United Kingdom's cities (via aerial bombing) would also ruin the reputation of the imperial nations in the eyes of their colonies. Coupled with the enormous expense incurred in the war, an empire was perceived to be an unnecessarily expensive possession. This would enable the rapid decolonization process that would see the empires of the United Kingdom and others swept away.

The European Union grew out of the European Coal and Steel Community (ECSC), which was founded in 1951 by the six founding members: Belgium, the Netherlands and Luxembourg (the Benelux countries) and West Germany, France and Italy. Its purpose was to pool the steel and coal resources of the member states, and to support the economies of the participating countries. As a side effect, the ECSC helped defuse tensions between countries which had recently been enemies in the war. In time this economic merger grew, adding members and broadening in scope, to become the European Economic Community, and later the European Union.

But here is the "crux of the biscuit" - the politicians of Europe, from the UK to France, Germany & Greece promised, and fully intended to provide a "safe European home" to the people of The Continent. We are seeing the result of that today - the ever expanding social services, submission to the trade unions, and unsustainable birth rates (Germany & Italy's birth rate is below replacement level - guarantees a lower tax base) have led to the crisis we see today in Greece, Spain, France and all across Europe. Protestors don't want their subsidies cut, they want their money, so they protest the austerity measures necessary for these nations to survive.

They want their "safe European home". But there is no money. So what to do?

Years of unrestrained spending, cheap lending and failure to implement financial reforms left all European Nations badly exposed when the global economic downturn struck. This whisked away a curtain of partly fiddled statistics to reveal debt levels and deficits that exceeded limits set by the eurozone, particularly in Greece. If Europe needs to resort to rescue packages involving bodies such as the International Monetary Fund, this would further damage the euro's reputation and could lead to a substantial fall against other key currencies.

Has Europe learnt nothing from the 1920s when Germany was, in many ways, in a similar situation to Greece today? Prevented from raising exports to service its foreign debt (reparations) by mercantilist policies, Germany embarked on a disastrous course of deflation and depression which paved the way for the horrors that followed. Today as then, deficit countries cannot simply save their way out of crisis, they must have the opportunity to grow their way out. And this is also the only way to limit the damage to surplus countries, who are otherwise also destined to lose out in terms of growth, employment and financial stability. Greece, indeed all Europe, all the globe has just got to feel the pain for a while. Riots will ensue in Europe maybe even here in the US, but I think a cultural reassessment and adjustment will follow. Or not.

Remember, in fluid unstable economic times, wars often start - the promise of a "safe European home" once again rings hollow.

Capital Punishment - a freak Gonzo perspective.

2010-12-10T11:19:00.000-05:00

Thinking about the death penalty (capital punishment to you wonks out there). We could easily pass these reasons off as barbaric and unnecessary…if they didn’t actually work. The crime rate gap between Singapore and the United States, for example, is rather vast; in fact Singapore has one of the lowest crime rates in the world. In a country where smuggling over 50 grams of heroin is certain to result in the same punishment as slaughtering another human being, obviously, a criminal has to decide if breaking the law at all is really worth their life.

1. Justice

2. Retribution

3. Deterrent to Crime

4. Religious Doctrine

5. Removal of a Threat to Society

6. The Fairness of the Death Row Process

7. Necessity - Under the law of most militaries throughout history, the crimes of murder, mutiny, treason, and desertion during a war time warrant a mandatory, (and even on the spot) death sentence. However, during a time of war, where survival of an army and even the civilization that army is represents is at stake, death may be the only reasonable punitive tactic to employ. Under full abolition of the death penalty, some of the criminals who would see lives lost through their lawlessness or cowardice would have to waste the time of those fighting the war through the lengthy judicial process, and in war, time and manpower makes all the difference.

8. Cost - awful, but it IS a consideration. Incarceration costs can reach into the hundreds of thousands, PER prisoner.

9. Life Imprisonment Changes - you can be pardoned, reduction via appeal or government intervention.

10. More Humane than other Forms of Punishment - Compared to “incapacitation”, which is a kinder phrase for lobotomy, or sentencing a criminal to solitary confinement for the next 25-50 years, executing a criminal may seem like a more humane option. A criminal sentenced to life without parole will never again see daylight, and will have to consider the consequences of their crime until the day they die.

But the real reason, IMHO, has nothing to do with these. The real reason has to do with the rights of the STATE (meaning, the nation-state framework). It has to do with the “slippery slope” argument. It is cold, but rational and logical.

Consider this - if you remove the State’s right (in the US, the People are the State, as the recent election demonstrates) to take life (under very strict guidelines - due process for example), what is next? The States right to - levy taxes? What are the consequences to that? How about provide for the common defense? Anti-war folks LOVE that one. Want to remove that? How about the right of the State to --- do anything? How about eliminating the State period? Anarchists and those who truly understand Marx would love that one. After all, Marxs’ final compelling point in “Das Kapital” was the withering away of the State - not a super-powered, uber-nation.

Once the right of the State to legitimately murder (because, after all, that’s what I’m talking about) it’s citizens, albeit under strictly defined, strictly controlled circumstances, is taken away, you have established a dangerous precedent.

The precedent that the State has no absolute rights at ALL.

Just another bizarre rambling of a fully blown mind - what say you?

Quo Vadis, Herr Marx?

2010-12-10T11:18:00.000-05:00

Marx and Dickens - random free form funk... yeah, it's all over da place.

I often rant about the people who are stuck worshiping the 19th Century Dutch recluse who lived in London. I tend to call them damnMarxists, one word. But the reality is that most Lefties are more accurately referred to as damn Dickens-Marxists.

Why? Because they are trapped in the observations of two men living in Britain, who were one year apart in age: Karl Marx and Charles Dickens. Karl Marx and Charles Dickens both observed a world that had only fifty years of rudimentary experience with industrial commerce. They were observers in the earliest years of industrial commerce.

When both men came of age in the 1830's there were no elevators to make skyscrapers, canals were just being built for transport, horse and wagon were the main mode of transport, bicycles hadn't been invented. Trains were virtually unknown as were any form of telegraph. England, particularly London, had no sewer system no bathing, no toilets and dentistry was done by barbers. Ships had sails, but only a few masts, since square riggers were yet to come, muskets were common as were swords and dueling. Department stores, fixed pricing, cash registers and the notion of doctors with clean hands were only to come in the last part of either man's life; after most of their writing had been done.
Dickens described the lot of most people, not just poor, but most people in the foul smelling, illness bound London. It was miserable and Dickens saw the cause as industrial commerce. Karl Marx saw the same thing, with the additional cause in the rudiments of global trade. England and much of Europe were buying global supplies with the protection of armies and navies to maintain modest stability with local communities mostly in rebellion.

That is the world most lefties still see today. They see Dickens poverty all around them, they see Marx's elitist class analysis and labor theory of value based on mid-19th Century industrial commerce. Marx's and Dickens world had only the rudiments of technology, rudiments of international trade, no agricultural surpluses and no significant banking or capital markets...certainly no government regulation of contracts, labor law, health codes or anything else.

A Lefty view of the world is pretty much the way an angry 2 year old sees the world.

Charles Dickens and Karl Marx?
A Christmas Carol, though? Did you know that Dickens and Marx were writing at the same time in the same city about the same thing, about the consequences of capitalism without a conscience? We know Dickens' vision through the narrative universe he created in stories like Oliver Twist, David Copperfield, Hard Times, Great Expectations-and perhaps most dearly of all, A Christmas Carol. I wonder if you have you ever thought of what A Christmas Carol is really all about? Or have you ever thought of it in relationship to Das Kapital, Marx's magnum opus?

Both Dickens and Marx observed the aches and pains, the groaning and suffering of an industrializing Europe-of the dissonance between the Scrooges and the Tiny Tims’ of this world. Both could see that capitalism without a conscience was a cultural dead-end that would lead the masses into alienation from each other and the world around. The one did so as an artist, with his finger-to-the-wind, sensing and feeling the direction of his moment, mid-19th century England; the other did so as a political philosopher, with his brilliant mind at work on the social and economic reasons for the cracks in the capitalist dream that led to such alienation.

To say it very plainly: over the next century-and-a-half, scores of millions lost their lives over the misreading of the human condition and history at the heart of Marx's critique, and the world as we know it has been radically and tragically affected by his misunderstanding the nature of vocation and therefore occupation, of what life is about and therefore what our lives are about. In the early 21st-century, there is almost global acknowledgement of this truth.

But when I was 20 I thought that Marx was very close to the truth. He had a passionate commitment to a just world; at least it seemed so to me in my young idealism. He had a comprehensive critique of the world, and of our place in it, and I desperately wanted that too. But as tempted as I was by him, eventually I was drawn even more so into a vision of the kingdom of God. When push-came-to-intellectual-shove, the vision of Jesus for the way life ought to be answered my questions and addressed my hopes more fully than did Marx's.

Like most folks, I wanted a way to see the world that made honest sense of the world. I yearned for the world to be the way it ought to be, and I knew that I needed a worldview that could make sense of what I saw and heard all around me, that could help me understand the hopes and heartaches of human beings that were increasingly part of my place in a pluralizing, globalizing world. In the end, Marx, and Mao were inadequate for that. In the end, their visions were lies of the most fundamental sort, offering a fiction about who we are and how we are to live.
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When Karl Marx wrote the Communist Manifesto, he made a mistake. Instead of using a realist philosophy such as Thomism to ground his theory, Marx used Idealist Materialism. Following Hegel’s Idealist notion of the Dialectic of Absolute Spirit in History, Marx argued that History is based upon Idealist Dialectical Materialism. The problem with this of course is that Marx rejected Plato, the only idealist philosophy that ever works.

Instead Marx butchered idealism by juxtaposing it with materialism. Since the ideal cannot be real except in Platonism where the Immutable Platonic forms are Substantial, Marx was stuck with the idea that materialism is ideal. Everyone knows of course that the material universe is real not ideal. Thus a material tree is not a “Reified Concept” but instead is “concrete” or real.

Additionally, since Marx rejected the existence of God in his political philosophy, idealist materialism soon came to be atheistic materialism. Atheistic materialism then supports the absurd philosophy of the science of Logical Positivism which was totally destroyed by Kant and Husserl. Communism will never work because its’ underlying reality premises are wrongheaded.
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Marx, like his contemporary, Charles Dickens (?!?!?!?!?),formulated the idea of traditional communism at the peak of the industrial revolution. During which time things like labor unions, minimum wages, etc... had yet to come into existence. So theoretically the only way to provide justice for the proletarians was to overthrow the industrialists and form a new form of government-- communism. Keep in mind that Marx's intended communism to be used in advanced industrial nations, but the only countries that made use of communism were countries that were still stuck in the Middle Ages. Communism simply doesn't work the way Marx intended it because we live in a shitty world where the motto of "survival of the fittest" is engrained into the minds of everyone no matter where you live. Therefore the people who ultimately form the governments to these so-called communist countries, which would probably have Marx turning in his grave, realize the power they ultimately have and maybe will initially use it for the "good" of the nation but will ultimately use it for their own means.

Too often people confuse communism with socialism. Russia and other so-called communist regimes were Socialistic dictatorships. Cuba isn't communist...its controlled by a dictator. If you truly read Das Kapital, the difference would be crystal clear. Socialism is when the "government" controls the output of their national product. Actually, look at the USA GNP and you'll see over 35% of our economy is Socialistic...in that the government spends 35% on "social" programs. Socialism...Social security... pretty close. Communism in it's purest form is actually a simple thing. It's basic manner, according to the Founder of Communistic theory (Karl Marx) is this ...."From those who can....to those who need". This is found in close knit church groups and was prevalent in American Indian Society. The only reason communism does not work is BECAUSE of government interference's...such as Cuba, Chile, and USSR. There has never been a pure Communistic nation,,,only successful Socialist governments such as Sweden. Even Canada is successfully moving towards socialism with their socialized medicine, free education to its citizens, etc.

Communism seems to be most efficacious in smaller groups, say, tribes or cults less than a few hundred. without the individual contact, people begin to feel like they might be contributing more than their neighbor. so, they slow down. One of the biggest problems with Communism is that it inherently lacks a motivational mechanism. without drive, people just waste away. It seems to work in practice and in theory, on a small scale, because the effect of the "lazy" people is minimized. On large scale, though, the hard working people start out by counterbalancing the not-so-hard working people and as time goes on, they start working less. And the people before who were average workers work less, so the curve shifts and eventually you have a population where the majority of the people don't work very hard. People are very short sighted by nature, at least in Western Civilizations.

Working hard in the present sucks for the present, but benefits in the future. Working average in the present isn't so bad in the present, and is sort of mediocre in the future. Working below average in the present is awesome in the present, but catastrophic in the future.
As a PERSONAL philosophical framework, I think that it's fine, even a bit noble to be a "small case c", Communist. Get a group of like-minded folks together, form a commune, and go for it. The Oneida Community (http://en.wikipedia.org/wiki/Oneida_Community) lasted almost 38 years, until it declined due to succession woes ( see article).

Ultimately, You can debate all you want about Communism, Socialism, and Capitalism, but in the end, most everyone uses bits of all three. We are certainly a capitalist system, but we have socialist elements (Medicare, Social Security) and even institutions based on communistic structures (the prison system, the public school system, the military). The question, then, isn't why communism doesn't work as an economic system, but for what reasons the major communist regimes that we have known have failed.
The chief factor is that too much decision-making rests in too few hands, and economic forces are curbed not by market demand (the natural force of capitalism) but by arbitrary policy. Price setting and fixing, and production levels of key commodities, are set by government, and they must work a very vast and complex machine (a national economy) and all its moving parts (supply chains, raw materials, labor pools, meteorological forces and surprises, political upheaval, etc.) manually.

The result can be devastating. During his Great Leap Forward, Chinese Communist chairman Mao Zedong tried to change his system in mid-stream to respond to market forces. He curtailed food growth by a huge cross-section of the Chinese agricultural economy and had them smelt pig iron in their yards in small forges. Not only was this method flawed, producing shoddy iron, but the next years after his program found China with not nearly enough to eat...and almost 78 million starved to death. This makes Mao the greatest mass murderer in history - Adolf got nuttin’' on hiz ass.

These kinds of problems occur when small groups try to arbitrarily manage market forces. Competition and free-market pricing tend to work much better, though no system is flawless or foolproof (as our current economic situation proves).

Musings on the Day Of Infamy…

2010-12-10T11:16:00.002-05:00

This note is going to get me in some trouble with some of you. Some of you will cry “America Hater”; some will say “he’s retarded” (probably closer to the truth) and most of you will say… “meh”. That’s OK. Those of you that know me, know I am not an America hater, or a person that is gratuitously anti-war. But something is not quite right in this country, and it's not Obamas fault or Bushs' fault, etc, etc, etc. It is a grievous wound & it is deep.

My Uncle Marsh was there that morning, at the base depot, getting some spares for the gun turret he & his team were repairing. He was a civilian shipyard worker at the time - that wouldn’t last long. Eventually, three more of my uncles would join Marsh & my Dad in the Pacific War.

Pearl Harbor has been frameworked as a sneak attack by massive naval air forces by Imperial Japan. The term “sneak attack” is not a precise one. We knew the Imperial Japanese Fleet was underway when they left Yokosuka, earlier in November. And while conspiracy folks will claim Roosevelt knew the where & when, this is not accurate either. Target lists included the Guam, The Philippines & Wake Island. All were attacked in the 3 day period between December 7th and 10th. Excuse for entry into the war, to help Churchill? Consider for a moment, that Adolf Hitler did NOT declare war on the USA on December 10th. What excuse then? No European Theater for us! What if, in a fit of pique (over Japans refusal to help Germany, by invading Siberia), Hitler declared war on JAPAN instead, announcing he would ally Germany with the US against them? Neutralizing ANY effort to help Great Britain. Good Lord!

And while it’s always interesting to explore these scenarios, they are not the subject of this rant. The Pearl Harbor attacks’ effect on our psyche, our way of thinking since, indeed, our way of like as Americans, is.

The response to Pearl Harbor, even now, reflects a general viewpoint in harmony with the belief that we were dealing an isolated occurrence, unrelated to Asian history or world affairs, and is to be considered, even now, as a subjective event to be seen through the eyes of a politically naive sailor, several decks down on an exploding ship, or a housewife standing on a rooftop five miles from the embattled Base, describing the smoke and the noise of the explosions. And editorial writers still produce copy which reads like more indignant screeds contemporaneous with the event. For most journalists, it is simply another occasion to tie the past into contemporary opportunism and to use it to buttress current policy, in one way or another. The fact is, Pearl Harbor was anything but an isolated incident, and it’s effects linger still in the psyche of American foreign policy. Lets look at some facts, through the lens of present-day policy.

The United States has 6,702 installations, some large, most small (less that 50 personnel) around the globe. 96 large bases are in U.S. territories around the globe, and 702 of them are in some 130 plus foreign countries. But as Chalmers Johnson has documented, the figure of 702 foreign military installations is too low, for it does not include installations in Afghanistan, Iraq, Israel, Kosovo, Kuwait, Kyrgyzstan, Qatar, and Uzbekistan. Johnson estimates that an honest count would be closer to 1,000.

The number of countries that the United States has a presence in is staggering. According the U.S. Department of State's list of "Independent States in the World," there are 192 countries in the world, all of which, except Bhutan, Cuba, Iran, and North Korea, have diplomatic relations with the United States. All of these countries except one (Vatican City) are members of the United Nations. According to the Department of Defense publication, "Active Duty Military Personnel Strengths by Regional Area and by Country," the United States has troops in 135 countries.

The question is why, and the answer is never approached. I did several Google searches today on “present-day effects of Pearl Harbor” & the like. Not a single hit advanced anything outside of the “indignant screed” I previously referenced, or a stereotypical “hater” commentary about the USA being a terrorist state, provoking the Japanese, blah, blah, blah. Every single sane entry was focused on the all-to-famialr recitation we are familiar with - the "sleeping giant" reference, Admiral Yamamotos' admonishment that he could "run wild" in the Pacific for only 6 months. the event as a mobilizing factor for US citizens... we know all this already. None of these views informs the evolution of American foreign policy, Intelligence and military frameworks due to the Pearl Harbor attack, in my opinion.

Before World War Two (the so-called “inter-war” period), the USA was a sleepy country, still in the throes of the Great Depression. Military reserve readiness was minimal, with just over 127,000 active duty Army troops, and just under 180,000 for the Navy & Marine Corps. Pre-war mobilization in 1940 called for ramping up to 1.2 million troops via National Guard mobilization. The Senate did not ratify the League Of Nations Treaty (pre-war version of the UN), and the American People were distinctly Isolationist (led by none other than Charles Lindberg) in their attitude toward foreign policy. Pearl Harbor changed all that, and permanently.

During the war, in order to ensure victory, Generals Marshall & Arnold led the effort to totally integrate industrial production & innovation into military operational objectives-- the so-called "military/industrial complex" the US had been evolving since the Civil War (and that President Eisenhower warned us of) was now a matter of fact...

Demobilization after the war was swift and led to a grievous shortfall of men & materiel when The Korean War began in 1950. This would not do, so during and after that conflict, things would change. Funding for the military did not demobilize much of anything, bases were constructed from Antarctica to Greenland, and CIA was tasked with more covert missions, with the money to carry these out. From Guatemala to Iran, CIA was on the move worldwide to shape the world as our foreign policy saw fit. In 1952, the National Security Agency was founded, and the “Puzzle Palace” began an epic sweep of electronic signal intelligence & analysis everywhere. And so the “Pearl Harbor-iztion” of national military/State department policies began.

Our continuous military buildup since World War II and the 702 plus military bases we currently maintain in other people's countries is the result. Yet as 9/11 so heinously points out, such expansion, amounting to military Keynesianism, has not brought us all that much increased security. The question has to be asked - is this buying us anything?

Honestly, I just don’t know. I can see the point that a lot of this infrastructure is wasted time, effort & money. But on the other hand, we DO have enemies that should not be ignored. Then again, this expansion may explain why we are hated around the world. The concept of "blowback" does not just mean retaliation for things our government has done to and in foreign countries, something I have direct personal experience with. It refers to retaliation for the numerous covert operations we have carried out abroad, that were kept totally secret from the American public. This means that when the retaliation is visited upon us -- as it did so spectacularly on September 11, 2001 -- the American public is unable to put the events in context. So they tend to support acts intended to lash out against the perpetrators, thereby most commonly preparing the ground for yet another cycle of blowback.

I'm often asked why we have 530,000+ troops in over 53 countries worldwide... why NSA & CIA scarf up every electronic signal in existence, why Americans appear so paranoid, and why all this effort fails from time to time. Pearl Harbor seared & embedded the fear of sneak attack into the psyche of this nation, affecting us right down to the present.

I make no judgement for good or ill, but some peeling back has to be done, for we just can’t afford this either in national morale, statecraft or monetary terms.

2010-10-01T18:56:00.001-04:00

Simple, beautiful... http://ping.fm/epY7f

2010-10-01T12:14:00.001-04:00

Clapton's new one, "Clapton", is easy listening, but great easy listening. http://ping.fm/PXRAw

2010-10-01T08:47:00.001-04:00

>ping<

2010-09-14T17:05:00.001-04:00

Robert Plants new "Band Of Joy" - most impressive record I've heard this year.

2010-09-02T11:08:00.001-04:00

...digging "The Complete Bitches Brew" on iTunes 10. http://ow.ly/2yxGi

2010-09-02T11:02:00.001-04:00

digging the Complete Bitches Brew Set, on iTunes 10. http://ping.fm/da98A

Mistakes In Marxism

2009-11-12T10:27:00.001-05:00

Mistakes In Marxism - reasonable rant

Marxism
has certainly done a lot of damage in the past two centuries, but Marx
himself insisted until his death in 1883 that he was "not a Marxist."
I've never held him accountable for the great damage done in his name
during this century, any more than I would hold Christ accountable for
the Inquisition. In the same way, John Maynard Keynes would be
mortified if he were alive today, seeing the global damage his
"neo-Keynesian" followers have done in his name. Marx was a theoretical
socialist, an intellectual giant of his time who found his ideas
twisted by the militant revolutionaries of Europe into action schemes.
All the while he objected that history could not be hurried: Capitalism
first had to outlive its usefulness, he insisted. It was not until 1913
when Rosa Luxemburg, a militant communist theoretician in Germany, was
brave enough to acknowledge that Marx left this giant loophole in his
system of thought -- which admitted the possibility that capitalism
could develop indefinitely. Marx wasn't hedging. His precise, formal
scholarship was, after all, keyed to the Hegelian dialectic, which
would permit that outcome. In addition (and before you jump on me, read Capital first! All of it!) there is nothing in his writings to suggest he thought it a good idea that the state own the means of production, as to him the state itself was the problem. To Marx, "communism" merely meant community ownership of property, to prevent the landed gentry from accumulating capital amidst the pauperization of the workers and peasantry. As policy, he advocated confiscatory inheritance taxes to keep property and society fluid. Clearly he would have been more amazed by the widescale worker ownership of land and commercial equity that he would see today in the West. His theoretical advocacy of common property was built on an assumption that a small class of capitalists would eventually accumulate all property, that capitalism could not find a way to disperse property to the masses. Revolution would occur when disequilibrium became intolerable. It was V.I. Lenin who fostered the idea of a bureaucracy that would manage the community's property. But Marx was a man of his time, and objective analysis shows this. And his assumptions are "of his time" also... and that's where he run afoul of his own wrong-headed historicity.

There are many mistakes, or just unaddressed
issues in Das Kapital (in English, "Capital"). The most egregious include:

Innovation
– In my deconstruction “Das Kapital”, in grad school, I was struck with
the way Marx not only “assumes away” certain economic foundational
principles (scarcity immediately comes to mind) but ignores realities
of not only in economic, but human and social advancement – namely, the
role of innovation. The transfer of earned wealth that socialist
policies mandate, are a detriment to entrepreneurship and innovation.
Entrepreneurship and innovation are driven by the potential for
material rewards. If we take away or reduce the material rewards, we’ll
have less innovation. Less innovation means less of all the cool,
useful, and life-saving stuff we all love And if you don't believe
innovation matters - tell me all about the personal computer
industry... in 1888. You can't. Guess why?
Stasis –
Hand-in-hand with the exclusion of innovation, is the concept of
economic “stasis”. This is the assumption (that word again!) that all
the industrial/agricultural processes that CAN be invented or developed
HAVE been invented or developed. At the turn of the 20th century, Lord
Kelvin, the great 19th Century physicist, announced that “all that can
be learnt in physics, has been learnt... all that now remains is more
and more precise techniques in measurement...” Well, didn't work out,
did it? And it doesn't for Marx... processes are continually being
improved and re-engineered.
Enpurpled Victorian prose - An example of the problems which confront the ordinary scholar is the
phraseology '...immense accumulation of commodities-its unit being a
single commodity': one elephant = one mouse. You be the judge of this equivocation.
That
human beings MUST be predictable, and therefore, must be controlled in
order to reach the consistency of behavior necessary to make the whole
thing work. See below.
And the over-riding exclusion, a topic
Marx doesn't even touch - Where are the angels to run your system?
Where are these people to be found? Someone who won't “game” the
system? Even if one grants Marx his best possible case—that they (the
planners/ the dictatorship of the proletariat) are well-meaning,
farsighted individuals armed with complete knowledge of present and
future conditions and have the best interests of consumers in mind, as
opposed to being fools and psychopaths—from their own perspective, the
ONLY way to exclude “revisionists” and “counter-revolutionaries” is,
ultimately (when re-education and imprisonment fail), to kill them off.
Continually. There is something desperately implausible about Marx's
belief that there are simply no costs whatever to life under communism.
Ignoring the importance, nay, primacy of the individual. And
this ties in directly with the innovation factor. I believe that in
law, business, and technology individual primacy is almost absolute.
That is, the law should do everything possible to maximize
opportunities for individuals (and, by extension responsibility) and
the community should only be important where one individuals rights are
beginning to trump others (a tough line to draw, I know). Businesses
should do the same. Institutions should do the same. So should
technology. This is how we innovate, this is show society progresses -
not by collective action, ONLY.
The mistake interpreters of
Marx make. This is the worst mistake, for Marx, the philosopher and
political theorist, has been transmogrified into a rabid polemicist by
atavistic, thuggish revolutionary opportunists like Lenin. Neither "The
Communist Manifesto", nor "Capital' are rabid calls to action- they are
social critiques. Consider - who else was a major social critic during
the period Marx was active? Charles Dickens, that's who. My contention
is that both Marx and Dickens offered the observations of two men
living in Britain who were one year apart in age. Both observed a world
that had only fifty years of rudimentary experience with industrial
commerce. They were observers in the earliest years (and most egregious
abuses) of industrial commerce. When both men came of age in the 1830's
there were no elevators to make skyscrapers, canals were just being
built for transport, horse and wagon were the main mode of transport,
bicycles hadn't been invented. Trains were virtually unknown as were
any form of telegraph. England, particularly London, had no sewer
system no bathing, no toilets and dentistry was done by barbers. Ships
had sails, but only a few masts, since square riggers were yet to come,
muskets were common as were swords and dueling. Department stores,
fixed pricing, cash registers and the notion of doctors with clean
hands were only to come in the last part of either man's life; after
most of their writing had been done. Dickens described the lot of most
people, not just poor, but most people in the foul smelling, illness
bound London. It was miserable, and Dickens saw the cause as industrial
commerce. Karl Marx saw the same thing, with the additional cause in
the rudiments of global trade. England and much of Europe were buying
global supplies with the protection of armies and navies to maintain
modest stability with local communities mostly in rebellion.

That
is the world most Marxist-Leninists (did you catch that?) still see
today. They see Dicken's poverty all around them, they see Marx's
elitist class analysis and labor theory of value based on mid-19th
Century industrial commerce. Marx's and Dicken's world had only the
rudiments of technology, rudiments of international trade, no
agricultural surpluses and no significant banking or capital
markets...certainly no government regulation of contracts, labor law,
health codes or anything else.

Dickens offers
his readers a world of cheer and evil, a world of
melodrama and pathos. To gauge the mood swings of this world, the
readers in fact need only to observe the way Dickens pictures London.
It is in his beloved city, one that he can never stay away for too
long, and one that is his best source of inspiration for his endeavors.
If London’s cityscape is upbeat and bright such as is found in The
Pickwick Papers, then England is doing good, and the mood of the
Dickensian world is happy and hopeful. This is the case with Dickens’
early phase of creativity. A gloomy London, with muddy streets and
enveloped in fog and soot and gloom such as is found in his later
novels, means England is sick and needs diagnosis. But, being a
documentarian of the age, Dickens does not rise to his level of
incompetence-he does not play the physician and say "And Now What Must
Be Done?".... Marx does offer a critique of capitalism, and certain
remedies for mitigating it's more abusive excesses. But none his work
never pretended to be a playbook ("Rules For Radicals" anyone?). that
was left to the militant revolutionaries of Europe, to transform Marx
and his insightful and penetrating social critique, into failed action
schemes

The
problem with Marx was not his diagnosis of capitalism (all too
pertinent, for the time). His problem was in his proposed solutions...
far was worse than the problem. More fundamentally he failed to
understand
that any system will get abused by powerful, motivated
people..communism failed to have a mechanism to get rid of them.
The labor movements which created safer and better-paying jobs did gain
immensely from Marx's ideas. However, Marx was wrong about a great many
things, most significantly about capitalism. Capitalism is blind, and
what is more, it is a component of human nature. Marxism, or the forced
collection and reallocation of wealth is only brought upon man by
convention and, being an ideology created by man and not by nature, it
is inherently both evil and faulty. If man is ever to prosper it is
best that he claims personal responsibility for himself and through
hard work and ingenuity raise himself to a better life.

I tend to agree with Churchill in his assessment about
democracy...terrible system, but less bad than all the others. I think
the same applies to capitalism... many faults just the least terrifying option.

By
way of commentary, let me finish with this, possibly trite, yet true
observation of all the "isms" we encounter in life. Both Marx and
Dickens and indeed, the vast majority of people, personally known to
me, view the pastiche of life as a continuum. A sort of linear spectrum
- right or left, up or down, hot or cold. In my experience, life -
social, political. economic. goofing off: is not a linear experience
folks. It;s a sphere. And like the Universe itself, the sphere is
constantly expanding - upward, outward, all over. And unlike a
polyhedron, there isn't even a flat place to land your philosophical
framework on!

It's like the study of complex systems - which extends to ALL disciplines - history, biology, economics, name it. Complex systems is a scientific field which studies the common properties of systems that are considered fundamentally complex, that is fundamentally interactive, not static. It is also called complex systems theory, complexity science, study of complex systems, sciences of complexity, non-equilibrium physics, and historical physics. The key problems of complex systems are difficulties with their formal modeling and simulation. From this perspective, in different research contexts complex systems are defined on the base of their different attributes. Since all complex systems have many interconnected components, the science of networks and network theory are important aspects of the study of complex systems. At present, the consensus related to one universal definition of complex system does not exist yet. That's how life REALLY operates... a complex system of different, yet constantly interacting systems of being, of thought, of execution. Now if that sounds like hippy-dippy drivel, consider these examples of complex adaptive systems, including the stock market, social insect and ant colonies, the biosphere and the ecosystem, the brain and the immune system, the cell and the developing embryo, manufacturing businesses and any human social group-based endeavour in a cultural and social system such as political parties or communities. Does your head hurt yet?

My personal view is that, blind adherence to any ONE agenda or belief (religiosity!) "the way", is, at best, one dimensional thinking, and at worst, psychotic... there is no "one way" guys. Constant requirements gathering and evaluation followed by execution based on those data... that, to me, is sanity.

Eight Critical $$$ Bubbles Redux

2009-10-10T15:05:00.003-04:00

Well, it's been a few months since my brilliant essay on the Eight Critical Bubbles that led to the current financial kerfluffle. This is an update,

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1 off-book asset liabilities

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1.1 GAAP allows

toxic assets (under performers) are simply taken off the books and dumped into offshore accts. Can't be audited at that point, but they are still REAL!

1.2 Action taken - some companies transitioning IFRS, bit slow change is the order of the day - Grade D.

1.3 Additional action required - Get with it!

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2 credit card debt

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2.1 Description - Many Americans resolving this debt issue, but n critical mass yet. The unintended blessing of a long jobless recovery may be the

extension of the time frame to resolve credit card debt!

2.2 Action taken

2.3 Additional action required

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3 Emerging Markets

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3.1 china/india/latin america

financial expansion/contraction of these nations is accelerated.

3.2 Action taken none. these countries are taking effective stimulus action, but their base is STILL manufacturing for the West.

3.3 Additional action required - Uncertain. Will they transform to Western style upper tier process economy, or still act as subcontractors. To soon to tell.

*** A word about China: Taking into consideration data provided by both Chinese and respected international sources of macroeconomic indicators the Chinese economy, as well as the likely impact recent events within China, no imminent collapse of the Chinese economy appears likely over the next five years. Rather, the economy is likely to continue to perform favorably when GDP growth, urban unemployment, external and domestic fiscal balances, stability of the banking system, FDI, and exchange rate stability are given relative importance. As the world financial crisis unfolds China may wind up owning substantial shares of some major financial institutions.

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4 Sub-Prime Mort

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4.1 see visual guide - Beginning to lessen in pain, but the root cause - Toxic assets still held by banks- has NOT been resolved.

4.2 Action taken - need to exercise some forensic accounting and identify these assets, extract them, and put them in a government - sponsored "band bank" to resolve them.

4.3 Additional action required

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5 private derivative contracts

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5.1 Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Products such as swaps, forward rate agreements, and exotic options are almost always traded in this way. The OTC derivative market is the largest market for derivatives, and is unregulated. All derivatives valuation depends on it's "underlying assets", not the instrument itself.

5.2 Action taken- Various competing bills in Congress to regulate the derivative market, but no action so far.

5.3 Additional action required

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6 Default credit swaps

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6.1 A credit default swap (CDS) is a swap contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) goes into default or on the occurrence of a specified credit event (for example bankruptcy or restructuring). Credit Default Swaps can be bought by any (relatively sophisticated) investor; it is not necessary for the buyer to own the underlying credit instrument. All derivatives valuation depends on it's "underlying assets", not the instrument itself.

6.2 Action taken

6.3 Additional action required

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7 bond market inflation/deflation

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7.1 Radical swings in bond yields, usually in a negative parallel track with the stock market - That's how the bond market could be gutted, and trillions in wealth destroyed. Theoretically, financial disruption may (???) occur which causes some of the trillions in derivatives to go sour, causing massive selling of the underlying assets to raise cash to reduce margin and other debt. Such a sudden "crisis" could erase trillions from global liquidity. How? Because the money was lost. The derivatives turned out to be worthless, and the stocks and bonds were sold into a plummeting, panicky market. All derivatives valuation depends on it's "underlying assets", not the instrument itself.

7.2 Action taken - Static so far. Waiting for the shoe to drop.

7.3 Additional action required

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8 Banking reserve exposure

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8.1 banks over leveraged - The reserve requirement (or required reserve ratio) is a bank regulation that sets the minimum reserves each bank must hold to customer deposits and notes. These reserves are designed to satisfy withdrawal demands, and would normally be in the form of fiat currency stored in a bank vault (vault cash), or with a central bank.

The reserve ratio is sometimes used as a tool in monetary policy, influencing the country's economy, borrowing, and interest rates. 10:1 is a good ratio of borrowed assets (leverage) to "cash on hand". The US bank average is now 30 to 50:1. European banks go to 135:1. THIS IS VERY BAD!!

8.2 Action taken. No change. The over leveraged banks are still very vulnerable to fluctuations in LIBOR

8.3 Additional action required

http://s3d.netfirms.com/Downloads/Criticalbubbles.jpg

Banking Mess as Foreign Policy Issue

2009-03-14T07:05:00.016-04:00

Here is some simple background:

If we let A.I.G. fail, said Seamus P. McMahon, a banking expert at Booz & Company, other institutions, including pension funds and American and European banks “will face their own capital and liquidity crisis, and we could have a domino effect.” A bailout of A.I.G. is really a bailout of its trading partners — which essentially constitutes the entire Western banking system.

No one wants to say it, but essentially the Fed has been bailing out European banks.

The inflation-adjusted cost of the Marshall plan has been estimated at about $115 billion in current dollars. If we end up spending $250 billion on AIG, how much of that sum will go to European financial institutions and might it someday exceed the scope of the Marshall plan? (I do not, by the way, think that central banks ought to treat foreign creditors differently.)

One attempt to formulate a bailout plan for eastern Europe just failed. This is round one in a series of longer negotiations. As the European financial crisis worsens, and Germany asks itself whether it will bail out Ireland and Hungary and maybe others, it will become increasingly clear that major foreign policy crises are afoot.

The best actual marker of the progress of the financial crisis is not stock or real estate prices, but rather how well international cooperation holds up.

Why is the banking crisis so hard to solve? We stood and watched while Hank Paulson and Ben Bernanke fumbled with their response in the fall. Now we are being treated to the distressing spectacle of Tim Geithner struggling as well to articulate a clear policy for dealing with zombie banks. How come these smart and powerful men can’t get a handle on the problem?

The MBS (mortgage backed securities) have been packaged, re-packaged and re-re- packaged, sliced, diced and blended on "vaporize" to the point that know one knows who owns the original paper. I have a friend ( a lawyer) who has a client that just got foreclosure notices from FIVE different entities FIVE! They all think they own the paper for the house! This is clearly insane.

We can throw money from here to eternity at he "zombie banks" and it won't do any good until the toxic assets in these vaporized MBS packages are resolved, and they cannot be "picked out" of the packages that have been "Cusinarted" to death. It is a structural problem - but more about that later...

In the decade 1988-97, net financial investment for households totalled $2.6 trillion, as households accumulated more financial assets than liabilities. In the decade 1998-2007, net financial investment for households totalled negative $3 trillion. This was an enormously significant shift. This was the first decade on record where households took more money out of the financial system than they put in. Who took the place of households as net investors? It was foreign money, pouring into the country in the trillions of dollars. Foreign investors were buying everything from subprime mortgage-backed securities to hedge funds to purchases of shares.

Foreign investors in the U.S. flocked to investments which offered decent returns and high (perceived) safety. This demand for safety showed up in the Fed statistics. Between 1998 and 2007, foreign investors poured roughly $10 trillion into acquiring financial assets in this country. Out of that total, only about $3 trillion went into supposedly-risky equities, mutual funds, and direct investment in U.S. businesses. The rest went into perceived less-risky investments, such as Treasuries and mortgage-backed securities (after all, housing never goes down!).

Wall Street catered to this foreign demand for safety. Many hedge funds, for example, promised “positive absolute returns”, meaning that they would do well even in down markets. That’s one important reason why hedge funds boomed in this decade—they promised safety to foreign money, which were willing to pay big fees to get it. Many hedge funds were pitched directly to foreign investors. When Paulson testified before Congress in November, he said that 80% of his $36 billion in assets came from foreign investors.

And when there wasn’t enough “safe assets” to sell to willing foreigners, the intrepid investment bankers created more. Consider, for example, credit default swaps, which pay off if a bond defaults—in effect, insurance on debt. Wall Street saw this as a ‘two-fer.’ They would sell corporate bonds to foreign investors, and at the same time collect fees on credit default swaps on the bonds in order to reassure those apparently too-nervous investors from another part of the world. This started with A.I.G. (TRILLIONS in CDS and OTC derivatives), and will end with A.I.G.'s Chapter 11 discovery process - after they have burned through half a trillion dollars of YOUR MONEY, young people... your money- when their CDS/derivative exposure is unmasked. Then we will learn that these instruments of the Devil are really worth about 2 - 5% of their book or face value. Then the entire international banking/investment infrastructure will implode, as it should.

Time, September 17, 2008

"On September 1st, few knew that AIG, the largest insurance company in the world with over $1 trillion in assets, was in deep trouble. By September 12th, the rumors about major trouble were everywhere. By September 15th AIG’s corporate life expectancy was being measured in days, and the question was: bankruptcy, buyer or bailout? By the evening of September 16th, the federal government had massively intervened, making an $85 billion loan to AIG in exchange for a controlling 79.9% equity share of the company.

Welcome to the brave new world of credit derivatives driven collapses. A world that is far more dangerous than the world of subprime mortgage derivatives. A complex world that because of its sheer size can potentially cause more damage in a matter of days than the subprime mortgage derivatives caused in their first year in the headlines. In fact the relative size of the credit derivatives and subprime mortgage markets is 66 to 1. That mean the total CDS investment at AIG is 660% larger than the sub-prime mortgage derivative money outstanding!"

But the joke, in the end, was on Wall Street. The foreign investors bought the bonds, but they also bought the protection, credit default swap derivatives—which much to everyone’s surprise was needed. And the U.S. banks and investment banks were left with piles of ‘toxic assets’—the obligation to pay off all sorts of bonds and derivatives. But the "hit" was, these "toxic" assets were not integral - they were inputed through -out the paper chase of contracts, in dribs and drabs, molecules within vast hectares upon hectares of financial goo!

The arithmetic is simple. Foreign investors were the main source of funds during the boom years, when these mortgage-backed securities and credit default swaps were being issued in droves. Since not many of these securities are being sold these days, it’s likely that foreign investors are still on the other side of these securities. Moreover, as companies struggle, more details are revealed of their problem. When Lehman went bust, its bankruptcy filing showed that Lehman’s biggest bank loans came from foreign banks such as Japan’s Mizuho Corporate Bank and Aozora Bank.

Goldman Sachs tops the list of companies that received funds from the government via A.I.G., but that may be misleading. If Goldman marketed its investment funds to foreign investors, these foreign investors are the ultimate beneficiaries of the payments from the government via A.I.G. There is absolutely no transparency.

The international angle is very important. Geithner and Bernanke keep saying that the problem is that no one knows how much the toxic assets are worth. But that’s not the full story. If the counterparties and beneficiaries of the toxic assets held by American banks are also American, it would be relatively easy for Geithner and Bernanke to gather them in a room and make them come to a ‘reasonable’ agreement about how much these securities were worth. After all, even the most powerful hedge funds must ultimately bow to the power of the Fed and Treasury, especially in a crisis.

But with most of the counterparties in other countries, the job becomes much more difficult. There’s no way for Bernanke and Geithner to force European banks, for example, to accept any particular valuation of derivatives or bank bonds—not without the cooperation of the foreign regulators.

In fact, right now we have the worst of both worlds. U.S. banks own securities which may or may not obligate them to pay a large amount of money to foreign investors. And foreign banks have assets on their books which no one trusts are worth what they say. The uncertainty is killing both the borrowers and lenders. Sometime later this year we will have a massive global conference aimed at simultaneously resolving the banking crises in the major developed countries. The goal will be a political negotiation of the value of the toxic assets, and a clearing of the books.

If the conference succeeds, then it will be possible to fix the financial system relatively easily. But if it fails, then things get very dicey. Pack you bags now... just to be sure.

I wish to thank Michael Mandel and Tyler Cowan for conversations related to these topics.

Quote o' the day

2009-03-12T11:50:00.001-04:00

At Matthews request-

"As an economic historian, I can tell you that economics is incredibly "post"-dictive, not pre-dictive, like a real science( math, physics, etc). Econ. is a SOCIAL science, and as such, is infinitely malleable. Just look at how Jon Stewart root-hogged that idiot Jim Cramer! We need to understand the limits of our profession, our discipline, or people will stop paying attn all-together. :

Me...

The Rate of the Rate of the Rate....

2009-03-10T11:10:00.008-04:00

Related Rates-

In differential calculus, related rates problems involve finding a rate that a quantity changes by relating that quantity to other quantities whose rates of change are known. The rate of change is usually with respect to time. Time can even be related to another quantity (even time!) as long as a formulaic relationship can be shown. So what? We are living in a related rate problem, right now. The recent economic mess is a great example, since may economists knew this kind of implosion was coming - someday, off in the future sometime. And would occur in phased steps, over about a ten to 15 year period. WRONG! This problem started in the Fifties with the RAND Corporation recommending the shift from a saving/investment economy, to a consumerist (they called “Rational Choice”) economic model. Now days, rate of change has not only increased, but the rate of the rate of change has increased!

The models underlying society at every level, which are largely based on a linear model of change, are going to have to be redefined. Because of the explosive power of exponential growth, the 21st century will be equivalent to 20,000 years of progress at today's rate of progress; organizations have to be able to redefine themselves at a faster and faster pace.

Over time,the pressure I outline below reached a super-critical mass, and when the cards fell, they fell in a matter of days. Take a look:

Critical $$$ Bubbles (see graphic link at end of post)

off-book asset liabilities

GAAP allows toxic assets (under performers) are simply taken off the books and dumped into offshore accts. Can't be audited at that point, but they are still REAL!

Action taken - adopt IFRS over GAAP for acct'ng.

Additional action required

---------------------------------------

credit card debt

Use of credit cards & home equity to make up for wage rise differential - past 20 ears.

Action taken - savings rate going up, but will go back down when mkt stabilizes.

Additional action required

----------------------------------------------------

Emerging Markets

china/india/latin america - financial expansion/contraction of these nations is accelerated.

Action taken - current deflationary cycle will continue thru 2010

-----------------------------------

Sub-Prime Mort

see visual guide http://s3d.netfirms.com/Downloads/visualguidecrisis.jpg

Action taken - see blog

Additional action required

---------------------------------------------

private derivative contracts

Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Products such as swaps, forward rate agreements, and exotic options are almost always traded in this way. The OTC derivative market is the largest market for derivatives, and is unregulated. All derivatives valuation depends on it's "underlying assets", not the instrument itself.

Action taken

Additional action required

---------------------------------------

Default Credit Swaps

A credit default swap is a swap contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) goes into default or on the occurrence of a specified credit event (for example bankruptcy or restructuring). Credit Default Swaps can be bought by any (relatively sophisticated) investor; it is not necessary for the buyer to own the underlying credit instrument. All derivatives valuation depends on it's "underlying assets", not the instrument itself.

Action taken

Additional action required - it has to crash

------------------------------------

bond market inflation/deflation

Radical swings in bond yields, usually in a negative parallel track with the stock market - That's how the bond market could be gutted, and trillions in wealth destroyed. Theoretically, financial disruption may (???) occur which causes some of the trillions in derivatives to go sour, causing massive selling of the underlying assets to raise cash to reduce margin and other debt. Such a sudden "crisis" could erase trillions from global liquidity. How? Because the money was lost. The derivatives turned out to be worthless, and the stocks and bonds were sold into a plummeting, panicky market. All derivatives valuation depends on it's "underlying assets", not the instrument itself.

Action taken

Additional action required - it has to crash.

-----------------------------------------------

Banking reserve exposure

banks over leveraged - The reserve requirement (or required reserve ratio) is a bank regulation that sets the minimum reserves each bank must hold to customer deposits and notes. These reserves are designed to satisfy withdrawal demands, and would normally be in the form of fiat currency stored in a bank vault (vault cash), or with a central bank.

Action taken

Additional action required

--------------------------------

Current Transformational Issues (see graphic link at end of post)

- my random thoughts in trying to pull all the political/social/economic issue threads together, or as Stephen Stills once sang, "there's something happening here...what it is ain't exactly clear".

The change in our society and how it is structured are both causing and necessitating change in the economy and its industries. The crisis is bigger than it appears in the rear-view mirror. It’s more than jobs lost and companies folding. It’s a new economy built on a new society that we are only just beginning to recognize if not understand. What is happening now, is just such a transformation, and it has everyone concerned, upset, worried, whatever. the important thing to remember is that this is NORMAL! This has happened many times in human history, but with no recent memory of so many threads converging at once, we are all apprehensive. Starting with the RAND Corporations recommendation of shifting from a saving/investing economy to a “consumerist” one (RAND theorists' notion that rational self-interest, rather than collective interests like religion, governs human behavior was the theory) to the present day vultures coming home to roost is what we are witnessing - in real time!

Creative Destruction

Entire sectors of the economy will disappear or will change so much they might as well disappear:

America may well not be in the auto industry soon. “American car sales have dropped to an annual pace of nine million, from some 17 million in 2007. Even if sales increase considerably, that is likely to leave a lot of unneeded auto factories,” said The Times.

• Financial services will have to be completely remade (by government). Check "Eight Bubbles"

• Newspapers will start to vanish. Magazines are in worse shape. Books‘ channels of manufacturing, distribution, and sales are going though through upheaval. Check "Kindle"

• Broadcastmedia will become meaningless, replaced by digital delivery. Even the way we distribute, buy and play music and movies is radically different from just ten years ago!

• Advertising will be next to feel the earthquake, after media.

• Large-scaleretail will shrink and consolidate and then be transformed by a search-and-buy economy.

• Business travel- including the convention and conference business - will take a huge hit in the financial crisis and much of it won’t come back, replaced by more efficient communications.

• Carbon polluting energyindustries will shrivel.

• Residential and commercial real estate will have to restructure around a new capital structure. Homes will get cheaper but so much of homeowners’ equity has been wiped out in real estate and stock investments that apartments will be what’s built when building returns. Commercial real estate had its own bubble and it will be hit with a double whammy as tenants shrink and disappear. Construction will, of course, decline.

• Health carewas the one sector in this month’s employment report that showed growth. But we know that medicine, pharma, and insurance will undergo a forced restructuring.

• Computers are getting so small and cheap and open that that industry is under growing pressure. As every other device we have becomes smart and connected, the "computer" itself will begin to disappear.

• Universities are facing competition from each other and commercial newcomers online and have suffered huge blows to their endowments; they will have to change. We should be so lucky that elementary and secondary education will also face such pressure.

• Education is a growth opportunity but not in its current institutions. As industries are killed and turned upside-down, present and former employees will need to be retrained in technology, in the skills of starting and running a business, in entirely new skills.

• Finally, consumer productsof all sorts will have to change in the face of empowered customers and, in some cases, with competition from small competitors given the benefits of scale on platforms (see: eBay, Etsy, Amazon, et al). They will also face price pressure thanks to online comparison shopping and new retail structures.

• Government will grow but thanks to the empowered populace, it, too, will face fundamental change.

The process of transformation that accompanies radical innovation

• The opening up of new markets and the organizational development from the craft shop and factory to such concerns as (fill in the blank) illustrate the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one ...

• Current methods, processes, "things", must be destroyed to create the new. This always causes upheaval on ALL fronts.

• Microsoft, MTV, CNN, FedEx, Intel, Hewlett-Packard, Burger King all started up in this kind of "crisis"

----------------------------

Socio-political

Because of all this, it’s hard to build a business model anymore out of screwing people - since when you do, we the screwed can rise upand be heard and fight back and make evil too expensive. Our interconnectedness is also what made the complex derivatives & MBS,etc. - the toxic assets - that triggered the financial crisis possible - but that is all the more reason why we will demand transparency, our best antidote to evil. That will change how business is run in fundamental ways.

• transformation phases (pre-development, take-off, acceleration, stabilization) can provide essential insights

• Essential change in international relations & constructs - NATO-like organizations in every corner of the world.

• Realtionships will become more "bottom-up" oriented as inter-connectedness becomes pervasive.

• applies from the "bottom-up" socially

-----------------------------

Global Restructuring

• a new economy built on a new society that we are only just beginning to recognize if not understand

• a great “compression,” as an economy built on perceived value reconciles with actual value.

• Emerging Markets - china/india/latin america - financial expansion/contraction of these nations is accelerated.

globalization is not simply a trend or fad but is, rather, an international system. It is the system that has replaced the old Cold War system, and, like that Cold War System, globalization has its own rules and logic that today directly or indirectly influence the politics, environment, geopolitics and economics of virtually every country.

But remember... not very long ago, economic globalization— the free worldwide flow of capital,goods,and labor—looked both inevitable and inexorable. Most governments seemed to embrace the very real benefits being offered by rapid technological change and international markets and sought to liberalize their economies in order to maximize these gains. Policymakers worked to prepare their societies for a world of ever-increasing interconnectedness and relentless competition,and the debate—at least within the United States—started to revolve around how to cope with the effects of this new “flat”earth. Globalization WILL continue, but in a slower more "muddled" fashion - I know this contradicts the related rate scenario, but this is a temporary contraction of the process.

--------------------------

"Great Power" dissolution

• the vast middle of transformative political-socio-economic change being wrought right now by globalization's spread/speed.

• Re-tooling military role - "war among the people" - get out of a big-war mentality and focus on the reasonable scenarios ahead

• Ditch the UN - NATO-like organizations in every corner of the world.

General Sir Rupert Smith and General David Petraeus have both theorized and implemented just such an approach - Six Rules, based on the British experience in Malaysia, seem most the most effective:

Keep an achievable, realistic goal uppermost in mind. “Eliminating Global Terror” is not realistic. Containing it is.
Coordinate your efforts with all concerned governments. Terror organizations are extra-statist, so this is critical.
Intel ---> Know thy enemy!
Separate terror organizations from their base of support. This is primarily a social function, like a police or firefighting department.
Neutralize them physically when you can.
Have a Post Action Plan at the ready.

All the anxiety out there requires someone to offer comfort...or at least some sort of rational explanation. The irony is, if you insist on a rational explanation, there probably isn't one. Humans look for patters, even if there aren't any, and that turns our ex[pectations into pre-meditated dissapointments, So, I found this list o' thoughts that my friend Pete Cochrane has on his web site ( http://www.cochrane.org.uk/ )... he is an inveterate list-maker, but this oneis pretty good, so:

1. The new economy does not obey the laws of physics

2. Online markets are not the same as the old ones

3. The more bits that flow, the more the atoms will want to move

4. The Internet enables new and novel interactions

5. It also enables new forms of organization

6. Organisational charts should be hyper-linked, not hierarchical

7. Hyperlinks subvert hierarchy

8. Networked markets can change suppliers overnight

9. Knowledge workers can change employers over lunch

10. Networks promote new forms of knowledge exchange

11. Networked markets know more about products than companies do

12. Markets are getting smarter, more informed, and faster

13. People get better information and support from one another than from vendors

14. What happens to markets happens among employees

15. Brand loyalty is the corporate version of marriage - look out for divorce!

16. Companies that do not network and belong to a community will die

17. Exponential change is like a tidal wave - by the time you see the danger it is too late to run

18. We now have two classes in our society: those who will spend any amount of time to save a little money; and those who will spend any amount of money to save a little time

19. Work is no longer a place - it is an activity - and I got to my office to be interrupted - for "pheromonal" excitement

20. Technologies and economies are like a ratchet - we cannot go back, an agrarian economy could not support the 6 Billion people now on this planet.

According to Michael Panzner, the U.S. is not in a typical recession. Instead, he believes the crisis more closely resembles a depression, in which we can expect an extended period of economic contraction accompanied by deflation.

Panzner said the largest players in our banking system are insolvent. He suggested their current situation was brought on by a combination of factors, including exposure to trillions of dollars of mortgage backed securities, derivatives, and default swaps, and suggested that bailouts and stimulus packages will only postpone the inevitable, not resolve the nation's financial troubles. "What got us here, decades of excesses, decades of imbalances, you can't just stop them by saying, 'OK, we're determined and we're going to think positive,'" Panzner remarked. (Editor's note : that's me - since real value of wages has been static for the last 20 or so years, we have, as a society, replaced normal wage gains with CREDIT CARDS and HOME EQUITY credit. Now this is part of a greater whole, as Panzer points out, but very underestimated and unrecognized...)

What does Michael Panzner see on the horizon then? Our currency will continue to be devalued by the ongoing 'printing press' policies of our government, he said, and we can expect an inflationary environment. Real estate prices will fall even further, perhaps not reaching final lows until 2012 at the earliest. There will be multiple "lurches down" in the stock market, Panzner continued, noting the DOW might fall by as much as 75% from its current level. The retail sector could be wiped out as the "religion of consumerism seems to be dying," he said. At the extreme, Panzner foresees the U.S. breaking apart, conflict with Mexico, and perhaps another world war. You see, we had a "globalization" framework before - it was called colonialism, and ended with World War One.

Parts of the country will become "suburban wastelands" due to water and energy issues, Panzner further speculated. He exhorted listeners to adjust their attitudes and lifestyles accordingly, and to accept the reality that the current economic downturn is not short term -- it's the new norm. He recommended people pay down debt and live within their means, and advised investors to look at precious metals like gold, silver, and platinum.

Please see the "Eight Bubbles" graphic on the links below-you may have to download it and pull it into your Windows / Mac / Linux graphic viewer and zoom in, bit the graphic pretty much tells the story...

Graphic One: CRITICAL BUBBLES - http://s3d.netfirms.com/Downloads/Criticalbubbles.jpg

Graphic Two: Current Transformational Issues - http://s3d.netfirms.com/Downloads/Currenttans.jpg

Look, I voted for Obama, but...

2009-03-06T09:27:00.002-05:00

From "The Rational Capitalist", actually pretty even-handed food for thought... wish I had written it, but I'm working on it. Check next week ->>

WASHINGTON – President Barack Obama said the consensus from the White House health care summit is that there is an immediate need for health care reform, and signaled that he's open to compromise on Thursday.
Obama told participants at the end of a health summit that although he offered a plan during last year's campaign, he isn't wedded to that proposal. He told Republicans and Democrats, doctors and insurers — "I just want to figure out what works."

Seriously, this is becoming too easy. I have said over and over that Obama's essential philosophy is pragmatism. He is, in fact, a gross caricature of the philosophy of pragmatism. The above is a stunning example.

Since pragmatism holds that nothing is true and nothing can be proved absolutely (except of course the that absolutely nothing is true), the pragmatist must first seek consensus from others since he is unable to reach any independent conclusion. Since he rejects absolutes, he not only dismisses principles held by others but can not even firmly believe his own "hypotheses". Therefore, he openly seeks compromise and is willing to negotiate on anything. Who knows if one idea is right or wrong, just act and see what happens. There is no good or bad - let's negotiate, seek consensus, compromise, get something or anything done.

In this case, Obama is not even sure he is right. The consensus said there is need of health care reform so let's do it, but, to be sure, he is still open to compromise. He just wants to figure out what "works." This is his pattern on every issue not just health care. He forms a consensus from "experts", is willing to negotiate anything, and then acts. In fact, as we are now discovering, he brings a teleprompter wherever he goes. In other words, he appears unable to speak without a complete and literal rendering of the words which he is to utter. In the Declaration of Independence, Jefferson was able to offer the principle of unalienable rights thus enabling one to deduce concrete applications to an almost infinite variety of political questions. Over two hundred years of modern philosophy later, we now are observing the spectacle of a president who is so unprincipled (on principle) that he is unable to deal with virtually any concrete and is reduced to simply parroting words placed in front of him.

I can't help quoting Ayn Rand on pragmatism:

[The Pragmatists] declared that philosophy must be practical and that practicality consists of dispensing with all absolute principles and standards—that there is no such thing as objective reality or permanent truth—that truth is that which works, and its validity can be judged only by its consequences—that no facts can be known with certainty in advance, and anything may be tried by rule-of-thumb—that reality is not firm, but fluid and “indeterminate,” that there is no such thing as a distinction between an external world and a consciousness (between the perceived and the perceiver), there is only an undifferentiated package-deal labeled “experience,” and whatever one wishes to be true, is true, whatever one wishes to exist, does exist, provided it works or makes one feel better.
A later school of more Kantian Pragmatists amended this philosophy as follows. If there is no such thing as an objective reality, men’s metaphysical choice is whether the selfish, dictatorial whims of an individual or the democratic whims of a collective are to shape that plastic goo which the ignorant call “reality,” therefore this school decided that objectivity consists of collective subjectivism—that knowledge is to be gained by means of public polls among special elites of “competent investigators” who can “predict and control” reality—that whatever people wish to be true, is true, whatever people wish to exist, does exist, and anyone who holds any firm convictions of his own is an arbitrary, mystic dogmatist, since reality is indeterminate and people determine its actual nature.

So insane, it might work...

2009-02-11T11:34:00.002-05:00

I love "out-of-the-box-" thinking, so I am going to quote wholesale from The Rational Capitalist Blog - it sort of reminds me of my grandpa, who used to say the federal government should restrict itself to making war and delivering mail...

How to Solve Economic Crisis in 5 minutes

from The Rational Capitalist by Doug Reich

Recognize that the role of government is to protect individual rights including property rights by barring the initiation of physical force and repeal all laws and regulations in violation of this principle including any laws that abridge the freedom of production and trade
In accordance with this principle, restrict the federal government to the following activities:

The national defense
Enforcement of domestic criminal law
The court system to resolve disputes
Specifically, this would entail cutting all federal government departments except the following:

Department of State – foreign relations, treaties, etc.
Department of Justice – settle interstate legal disputes and enforce interstate criminal law issues
Department of Defense – maintenance of standing military
Department of the Interior – administer the federal government’s land and buildings
Department of the Treasury – administer finances of federal government

Repeal the Federal Reserve Act to eliminate the Federal Reserve System

Government’s gold stock made redeemable for US Dollars
US Dollars priced in gold at whatever price necessary not to contract present money supply
Federal government recognizes gold and silver as legal tender at prevailing market rates
Allow private banks to replace the Federal Reserve as depository, loan and clearing institutions
Law recognizes the difference between deposit contract and loan contract, i.e., irregular deposits made with banks do not constitute a de facto property transfer whereas a loan does constitute a transfer of property

Eliminate all federal taxes and replace with system of voluntary contributions and user fees for government services including fees to uphold contracts, register deeds, etc.
Auction off all federal lands (including waterways) and buildings except those needed for the above departments
Everything else left to states

I predict that the Dow would triple if not more in one day if this program were announced on CNBC. As well, all foreign currencies would plummet relative to the dollar which would force other countries to follow America's lead and go back on a gold standard.

Note that this plan would lead to widespread prosperity and happiness and does not cost any money.

Eight Critical Bubbles

2009-02-04T08:30:00.001-05:00

Eight Critical Bubbles

The Other White Meat...

2009-02-04T07:54:00.016-05:00

Credit default swaps, which function primarily as a type of "insurance" are useful, under the right circumstances. The REAL problem is with the private or OTC derivative contracts.

Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Products such as swaps, forward rate agreements, and exotic options are almost always traded in this way. The OTC derivative market is the largest market for derivatives, and is unregulated.

All derivative valuation depends on it's "underlying assets", not the instrument itself, or any kind of real ownership of the asset. A word about this stuff - it's not easy to understand... for example, in finance, a forward rate agreement (FRA) is a forward contract (agreement between 2 parties to sell an asset some time in the future) in which one party pays a fixed interest rate, and receives a floating interest rate equal to a reference rate (the underlying rate). The payments are calculated over a notional amount over a certain period, and netted, i.e. only the differential is paid. It is paid on the effective date. The reference rate is fixed one or two days before the effective date, dependent on the market convention for the particular currency. FRAs are over-the counter derivatives. A swap is a combination of FRAs. The payer of the fixed interest rate is also known as the borrower or the buyer, whilst the receiver of the fixed interest rate is the lender or the seller.

Thanks Wikipedia --- Got all that? Me neither, and I have a PhD in economic history. Here's the salient point - According to the Bank for International Settlements, the total outstanding notional amount for ALL these "investments" is $684 trillion (as of June 2008). What? And global GDP is only 53 trillion dollars? Are we getting the problem yet? That's bad enough, but guess what? Two parties can write an OTC derivative contract using ANYTHING as an underlying asset. Anything. Including the weather in Latin America during the agreed time period, or traffic rates on the 405 freeway between Garden Grove and LA, or whether the next batter will hit a single, a double or strike out (just kidding - I'm trying to make a point). This is beyond gambling, this is insanity.

Not only that (but wait, there's more), many different derivative OTC contracts can have many duplicate underlying assets - in other words, say you have 2 OTC's... these 2 discrete contracts can base their valuation on the exact same underlying assets (which let's be honest, are merely underlying conditions, not real assets) without the burden or encumbrance of actual ownership.

Are we tearing our hair out yet?

It should be obvious by now that these products, like any complex financial instrument, can present significant risks if misused or misunderstood. A number of large, well-publicized financial losses over the last few months have focused the attention of the financial services industry, its regulators, derivatives end-users and the general public on potential problems and abuses in the OTC derivatives market. Now, I am no communist, but folks, we need to bring these operations under regulation - that's right, remember I said this $684 Trillion market is unregulated. Let's start out with some simple regs, then ratchet down as necessary, including eligible transactions, eligible participants, clearing, transaction execution facilities, registration, capital, internal controls, sales practices, record keeping and reporting. The release also asks for the views of commenter's as to whether issues described in the release might be addressed through industry bodies or self-regulatory organizations.

Or we can ban them outright... too radical? Maybe. Probably. Needs more thought I guess. One thing is for sure, this unregulated (and practically invisible) $684 trillion market is either the best thing that happened to risk management or it's going to bring down the entire financial system.

Credit Default...WTF?

2009-02-03T07:53:00.006-05:00

A lot of my young(er) friends have been pummeling me with questions about the current economic unpleasantness - which is gratifying, because at least they are ASKING about what's going on, instead of assuming their default position of their insane, homosexual, communist, atheistic human trash former professors. Good on ya' kids!

Back when Lehman Brothers started going under (September 2008), I thought "uh-oh, here we go". This was due to the fact that Lehman is holder of the most (in dollars) Derivative investments than any entity on the planet. Notice I used a capital "D" - a Derivative is a particular type of investment class that is beyond unique - in fact, I would call it "FM" - F*****g Magic. There are several sub-classes of Derivatives, and they are a fairly complex investment instrument, so this will take a few posts to get the message across - but it is important, nay, CRITICAL that you all understand what these things are and aren't, because when they start to collapse (and collapse they will) we are all (planet Earth) in worlds of sh*t.

A derivative, in very simple terms, is an investment whose valuation depends on it's "underlying assets", not the instrument itself. In fact, a derivative contract doesn't even have ANY ownership of the underlying asset. The current global valuation for all Derivatives is about 535 TRILLION dollars. OK, that;s a big number, but get this - if you add up the GDP (gross domestic product) of the entire planet, the number is 58 TRILLION dollars...get the picture? Many derivatives can have multiple, redundant underlying assets. Remember my concern about Lehman? If Lehman had gone into bankruptcy receivership, the discovery process (I suspect) would have revealed that ALL the derivative investments were actually worth only 2 - 5% of their face value. That's right, 2 - 5%. Can you say 'global economic implosion"? Can you say "food riots"? Can you say "cannibalism"? So it's critical that you understand.

The most common Derivative is the credit default swap - instead of my mind-crippling explanation, I am re-publishing, without permission (so sue me) a recent article that explains it far better than I.

Oberg: Credit Default Swaps 101

Eric Oberg

02/03/09 - 07:36 AM EST

This post appeared yesterday on RealMoney. Click here for a free trial, and enjoy incisive commentary all day, every day.

There has been a lot of talk about what to do with the credit default swap (CDS) market. Given that most people had not actively followed the somewhat arcane fixed-income markets until the recent credit crisis, it is surprising how much airplay CDS have received. Are these really the root of all evil? Or do they actually fulfill a valid function in market processes?

Most people have probably heard the analogy that credit default swaps are similar to an insurance policy -- and that may not be a bad way to think about them. If I own a car, I buy insurance, paying regular premiums for the right to "put" my car to the insurance company should I get into an accident. Similarly, a CDS contract is an agreement between two parties where one pays a premium for "protection" on corporate or sovereign debt; in the event that entity should default, the protection buyer is made whole on a par claim.

But simple explanations never fully capture the complexities, and these are derivatives after all. For instance, what constitutes a default? What is the basket of securities that are deliverable? Should it matter if I own or don't own the underlying securities, given that there is a defined set of deliverables?

Before we can have an active discussion, we need to establish a better understanding of the market and its evolution, and then we can pick apart how to handle the shortcomings while maintaining the positives. For what it is worth, I believe that the positives outweigh the negatives in the case of CDS, so this market is worth delving into so we can better understand how to address it.

To start, we need to better appreciate the fixed-income markets more broadly. For the purposes of this discussion, when I refer to the fixed-income markets, I am referring to the corporate debt markets, but a lot of the concepts apply across the fixed-income spectrum. Capital structure aside, the debt markets differ from the equities markets in one key point: how the markets themselves function.

Fixed-income markets do not have exchanges -- there is no order flow to route and match. They are principal-based businesses, meaning that a dealer is on the other side of each transaction acting as principal, either buying bonds from or selling bonds to an end-user.

So if Pimco or Fidelity calls up and asks for a bid on 50 million of XYZ bond, the dealer places a bid as to where it will take down that risk (I'm talking about what happens in "normal" markets...). There is no time to accumulate an order book; dealers use their judgment as to where they can take down the risk and trade (or hedge) their way out of it.

The reason why this is the case is that the debt markets themselves are very fragmented. When we trade equity, everyone knows where to go and find the price. Stocks trade on the NYSE or Nasdaq, and anyone knows where to seek price discovery. There may be slight differences for an odd-lot or a block trade, but they all hover around that observable price.

But if you think of the debt markets, companies issue various forms of debt -- fixed rate, floating rate, secured bank loans, unsecured bonds, subordinated bonds, first mortgage bonds, callable bonds, convertible bonds, maturities that range anywhere from overnight commercial paper to 30 years and any maturity in between (and beyond), issued in various currencies and formats -- euro bonds, DTC-eligible bonds, Samurai bonds, and so on and so on. One company can have dozens, even hundreds, of individual debt issues, yet they have typically only one stock ticker. If I ask, "Where is IBM(IBM Quote - Cramer on IBM - Stock Picks) equity trading?" you can log on to the Internet and tell me to the penny. If I ask, "Where is IBM debt trading?" you have to ask me several follow-up questions.

One other critical element is that each debt issue of a company is limited in size. Companies typically only borrow what they need at a time, so you will have debt issuance of $100 million, $200 million, maybe up to $500 million or $1 billion. Only on rare occasions do you get debt issues larger than $1 billion.

Furthermore, since the debt markets are dominated by institutions, many institutions do not lend out their portfolios. Both of these factors combine to connote that the "repo" market for corporate bonds is fragmented, meaning they are hard to borrow in order to deliver into a short sale (particularly in contrast to the equity market, where the float is the float -- it is all fungible, and much of it available to borrow).

What often happens is that if Pimco or Fidelity comes to look for a bond, it ends up in a game of "go fish." If I do not happen to be long the particular issue they are looking for, I have to pass, because I cannot guarantee I can even borrow that bond in order to short it to them. For a lot of issues, they have simply gone to "bond heaven" -- meaning no one will ever see them again, because they are locked up in an insurance company or pension fund portfolio to match a liability stream and will never trade again.

So while bonds may be quoted with a bid and an offer, the offered side generally is subject to having the bonds in inventory. Historically, only the "on-the-run" (usually larger bond deals that were recently issued) had actionable two-way activity. In short, the corporate bond market has historically been an inventory-driven business.

One must also understand that a corporate bond carries risk beyond just the company's ability to repay -- there are other embedded risks (duration and optionality, to name two). Just because I may like Company XYZ, that does not mean that I necessarily want to take on 30 years' worth of interest rate exposure.

This also raises the point that investment-grade bonds typically trade on a yield spread to Treasuries, the risk-free rate. So the parties typically agree to the spread, then agree to the risk-free rate, to give the bond's yield in order to calculate the price. You need to recalculate a price based on that yield at any given time. This has added complexity if the bond is callable or prepayable.

And although I may be comfortable with Company XYZ for the next few years, that doesn't necessarily mean I want to take on XYZ credit exposure for 20 or 30 years. Supply does not always meet demand -- there may be demand for three-year XYZ paper, but only 20-year paper exists.

These issues just scrape the surface. Many factors go into a bond's price and trading, so price discovery on fixed-income instruments can be difficult.

Because of the myriad issues a company may have outstanding in the debt markets, and because of the myriad factors that go into pricing each piece of debt, it is virtually impossible to expect a market construct other than that of a principal market to develop. You need a market maker to step in and provide temporary liquidity and then redistribute that risk. That redistribution process can take weeks. That is the principal's risk; they hopefully make some bid-ask spread to compensate for this.

Enter the credit default swap market. The CDS market helps fill in some of the gaps in the fragmented debt markets. As mentioned at the beginning, the CDS market is focused on a company's credit risk. The premium exchanged strips out other ancillary variables, such as interest rate risk (to be sure, there is some interest rate risk in the pricing model, but nothing to the extent that you see in a fixed-rate corporate bond). CDS can be for terms unrelated to a company's actual debt maturity schedule. CDS are not dependant on being able to borrow a bond, although an active repo market helps establish arbitrage boundaries.

For example, XYZ could have a 10-year bond outstanding that trades at 220 basis points more than Treasuries. To price that bond, I need to know where the 10-year Treasury is, add the spread and then price the bond. But I may not want to take 10 years of XYZ exposure, or 10 years of interest rate risk. And a dealer might not have the bonds, even if I wanted them.

With CDS, I may be able to take on XYZ credit exposure for five years and get paid 150 basis points. This distills my trade to just focus on the credit risk of XYZ for five years. I have not taken on the concomitant interest rate exposure, and I have set the term of my exposure to only five years rather than 10. I get paid 150 basis points a year, and if XYZ defaults over that time frame, I need to pay the buyer par in exchange for the defaulted bonds. If I wanted to then take on interest rate exposure, I could always go buy Treasuries with the maturity of my choice.

When the first formal credit derivatives standards were put forth in 1998, CDS won out over the total return swap (TRS) market in terms of single-name risk transfer, because CDS were viewed as a "unifier" in these fragmented markets. As opposed to the TRS market, which is based on the total return of one bond, the CDS contract allows for multiple deliverables (similar to bond futures), so liquidity extends beyond any singular debt issue. One could deliver any bond or loan, any maturity, any G7 currency, of a given company to fulfill a contract. This created bridges across all of these markets and players, from the convert arb to the bank loan portfolio manager -- they could all meet up in the CDS market. Thus we could reach price discovery that truly had input from all players in the credit markets.

I can use CDS to quickly shed or take on exposure. I can customize my exposure. Say a company only has a 10-year and 30-year bond outstanding, but I only wish to take five years of exposure. With CDS I can do so. As a market maker, I will be more willing to take down a larger block of bonds if I know I can hedge the "jump to default" exposure, thus liquidity can be increased. I can better control my "spread duration" (duration is essentially the price reaction to a change in interest rates or in this case, spread). Furthermore, the advent of the CDS market has raised the level of sophistication in pricing corporate debt into components. Generally speaking, CDS help facilitate more complete corporate debt markets.

That isn't to say that the CDS market is free of issues, but I believe the issues can be managed in a way that does not call for draconian measures such as complete abolition or require their use for hedging purposes only. In the next section, we'll take a look at some of the issues surrounding CDS -- some valid, some not so valid -- and explore possible mitigants to the concerns.

Netbook or cloud computer?

2009-01-01T10:00:00.005-05:00

I gave myself a netbook for Christmas - more out of curiosity than anything else. So far I really like it. Yeah, I know - the keyboard is a bit too small, and the screen (I wear glasses) causes me to squint. The upside to that is that I can read it up close (because I have to be close to type!) without my glasses. Hmmmm. The model is the Acer Aspire One, with WinXP. I'll put the rest of the stats at the end of this post, but for now, I found an excellent article on GigaOm.com - Here 'tis:

The relative success and cult-like popularity of Asus’ Eee cloud computer has helped raise the level of interest in what’s being called a new class of computers. Some call the new machines ultra-mobile PCs (UMPCs), others have labeled them Netbooks, and many are safely referring to them as handhelds. It’s hardly a surprise that the PC powerhouses — Intel, Microsoft, Hewlett Packard, Dell and dozens of others — have gone running after this opportunity.

After using one of the so-called Netbooks, it has become obvious that they really need to go back to the drawing board and rethink how people are going to use these devices if they want to participate in the next big shift of computing.

So far, all they have done is cram traditional notebooks into smaller, maybe-lighter-to-carry bodies. They’re neither good for computing nor for communication. To me, the dozens of models being touted seem like a genetic experiment gone wrong, a fact that was brought home when I tested one of the most talked-about devices: Hewlett Packard’s HP 2133 miniNote.

The miniNote is being introduced into the educational market and will cost between $499 and $1,199, depending on the configuration. It looked like a promising device and I was quite eager to try it out. However, my excitement didn’t last very long. In fact, barely three hours after trying out the device, I decided to pack it in. Why? Not because it was underpowered, or the keyboard was too cramped, or the screen made you squint.

On the contrary, the Via C7-M processor makes the machine capable of easily handling all sorts of tasks and the keyboard was actually quite nice and sturdy to use, though it’s not advisable to use it for typing out long documents. The keyboard reminded me of the Powerbook 12, which had one of the best keyboards on a laptop. (For a more in-depth review and discussion of features, I recommend jkOnTheRun.)

So if those aren’t the issues, then what’s the problem? Many, if you ask me. It is a little too heavy — 2.7 lbs — for an ultraportable, especially if you factor in the fat extended battery you need to run this thing. It runs Windows XP and no surprise, takes too long to boot up. (There is a Linux version, but I didn’t try that.)

More importantly, in less than an hour it was generating more heat than my first Macbook Pro, aka the oven. It is not as if I had dozens of apps open. All I was using was a simple Internet Explorer. (I have not installed Firefox yet.) Maybe it’s a problem with the pre-production demo unit, but if it’s not, then the issue of heat is a dealbreaker for me, and it should be for other people as well. Any highly mobile device whose primary function is to surf the web should not become a kitchen appliance within an hour. It would be virtually impossible to use it on one’s lap.

So after playing around with the miniNote this weekend, I came up with a checklist of features that should be a must in a machine that has to qualify as a cloud computer (or whatever you want to call it.)

Instant On
Doesn’t generate too much heat.
Minimum 5 years hours of battery life.
Must feature at least four communications options: WiFi, Ethernet, Bluetooth & Wireless Wide Area Network connection to, say, an EVDO or HSPA Network.
Less than three pounds (batteries included).
Screen size of 3.5-8 inches (wide-screen proportioned)
The primary function of the computer should be cloud-based activities that can include everything from listening to live music, reading blogs and watching videos. Writing research reports or cranking out spreadsheets isn’t the primary purpose of these machines.
It should cost no more than $300. This isn’t a computer; it’s a communications device. It should really be an on-the-go device. It is a device for the moments when your cellphone isn’t enough, and laptop is too much. An iPhone should qualify.
Its innards, ports should be geared for Internet-based activities — from making calls on Skype to consuming RSS feeds — though it should be able to handle external peripherals.
In the future it should move away from the keyboard and have a touchscreen interface that allows one to sift through large amounts of data (or web pages) quickly, as cramped keyboards and touchpads can be hard to use.

What do you guys think?
-----------------------------------------------------
The ten recommendations the author makes are ALL incorporated into the Acer Aspire (except instant on, and the price). I've used Skype with the webcam, RSS feeds, Google Docs (I uninstalled MS Works), Thunderbird for emaill & calendaring. In fact, I'm writing this post on it. The wireless works flawlesly too. All told, it was worth the $500.00 ( 1 gig RAM upgrade and 160 gig hard drive). All my movies and my complete iTunes library is on board. Run it through the stereo, and it's like a CD jukebox. Throw in a link to HULU.com, and what else do you need?
---------- My Acer Aspire One Specs-------

Model AOA150-1570, combines Windows XP with 1GB of memory and 160GB hard disk.It has an Intel Atom processor, clocks at 1.6 GHz

For $359, the Aspire One AOA110-1722 stays closer to the first Eee recipe but can come with the WinXP operating system. Three is some "crapware", MS Works, etc, but these can be uninstalled easily, just like a desktop PC. The Aspires come with a three-cell battery pack that fits flush with the back of the case. Acer has assigned the $399 ($359 if oyu look around)price point to a new Win XP configuration (AOA150-1447) with a 160GB hard drive and six-cell battery.

Again, what do you guys think? Leave a comment.

russell

More on globalization, or "WTF?"

2008-12-27T17:25:00.007-05:00

Before I begin this week's (and the year last, thank God) sermon, let me share this very interesting list I found on yahoo (who knew?) news today -

Being both an economist and an historian, it seems to me that this recession will be something unprecedented. Keep in mind my raving about how physical "things" are being replaced by virtual "stuff".... (BTW, all bolds, italics are mine)

One reason is that that there was no Internet or mobile technology in the 1930s. That means individual people and companies have very low-cost, high-efficiency alternatives for doing a wide range of activities. That will accelerate the demise of those things fated to be replaced anyway.

Here are 10 things that I believe won't survive the recession.

1. Free tech support
The practice still employed by some companies of paying humans to answer phones and solve technical problems with hardware or software purchased for consumers will become a thing of the past. PCs, laptops, and hardware peripherals, as well as application software -- these categories will be purchased like airline tickets, with price becoming the sole criteria for many buyers. In order to compete on price, companies who now offer real tech support will replace it with message boards (users helping users), wikis, wizards, software-based troubleshooting tools, and other unsatisfying alternatives.

2. Wi-Fi you have to pay for
Everyone is going to share the cost of public Wi-Fi because the penny-pinching public will gravitate to places that offer "free" Wi-Fi. Companies that charge extra for Wi-Fi will see their iPhone, BlackBerry, and netbook-toting customers -- i.e., everybody -- taking business elsewhere. The only place you'll pay for Wi-Fi will be on an airplane.

3. Landline phones
Digital phone bundles for homes (where TV, home networking, and landline phone service are offered in a total package) will keep the landline idea alive for a while, but as millions of households drop their cable TV services and as consumers look to cut all needless costs, the trend toward dropping landline service in favor of cell phone service only will accelerate until it's totally mainstream, and only grandma still has a landline phone.

4. Movie rental stores
The idea of retail stores where you drive there, pick a movie, stand in line, and drive home with it will become a quaint relic of the new fin de siecle (look it up!). The new old way to get movies will be discs by mail, and the new, new way will be downloading.

5. Web 2.0 companies without a business plan
The era when Web-based companies could emerge and grow on venture capital, collecting eyeballs and members at a rapid clip and deferring the business plan until later are dead and gone. Yeah, I'm talking to you, Twitter. Sand Hill Road-style venture capital is shrinking toward nothing, and investors in general will be hard to come by. Those few remaining investors will want to see real, solid business plans before the first dollar is wired to any startup's bank.

6. Most companies in Silicon Valley
Tech company failures and mergers will leave the industry with a low two-digit percentage (maybe 25 percent) of the total number of companies now in existence. Like the automobile industry, which had more than 200 car makers in the 1920s and emerged from the Depression with just a few, Silicon Valley is in for some serious contraction. The difference is that the auto industry ended up with the Big Three, whereas the number of tech companies will grow dramatically again during the next boom.

7. Palm Inc.
Elevation Partners, which has among its principals U2 lead singer Bono, pumped a whopping $100 million into the failing Palm Inc. this week.

The idea is to give the company time to release its forthcoming Nova operating system, which will take the cell phone world by storm and give Apple a run for its money. It would have been far more efficient, however, to just flush that money down the toilet. With the iPhone setting the handset interface agenda, BlackBerry maker RIM kicking butt in the businesses market, and Google stirring up trouble with its Android platform, this is no time for a clueless company like Palm to be introducing a new operating system. By this time next year, Palm will be gone. And so might Elevation Partners.

8. Yahoo
Yahoo is another company that can't seem to do anything right. Or, at least, can't compete with Google. Yahoo will be acquired by someone, and its brand will become an empty shell -- used for some inane set of services but appreciated only by armchair historians (joining the ranks of Netscape, Napster, and Commodore).

9. Half of all retail stores
Many retail stores are obsolete and will be replaced by online competitors. Entire malls will become ghost towns. By this time next year, most video game stores, book stores and toy stores -- as well as many other categories -- will simply vanish. Amazon.com will grow and grow.

10. Satellite radio
I'm sorry, Howard Stern. It's over. The newly merged Sirius XM Radio simply cannot sustain its losses. The company is already deeply in debt and would need to dramatically increase subscribers over the next six months in order to meet its debt obligations. Unfortunately, new car sales, where a huge percentage of satellite radios are sold, are in the gutter and stand-alone subscriptions are way down.

Change is hard. But efficiency is good. While boom years gives us radical innovation and improve consumer choice, recessions help us focus on what's really important and accelerate the demise of technologies and companies that are already obsolete.

So say good-bye to these 10 things, and say hello (eventually) to a new economy, a new boom and a new way of doing things.

NOW! Back to our previously schedules program, already in progress...

There has been a lot of bloviating about "globalization" and it's various pros and cons, but we have been here before. Oh yeah reader, we sure have. From about 1880 to 1914, we had a global economy - it was called British (and to some extent Dutch) mercantilism. Between 1600 and 1800 most of the states of western Europe were heavily influenced by a policy usually known as mercantilism. This was essentially an effort to achieve economic unity and political control. No general definition of mercantilism is entirely satisfactory, but it may be thought of as a collection of policies designed to keep the state prosperous by economic regulation. These policies may or may not have been applied simultaneously at any given time or place.

We had a global, stable, political system too - it was called colonial imperialism. 19th century globalism with its irenic vision of free trade as the solvent for war and imperialism. In an 1846 speech given in Manchester, then the center of the British trans-Atlantic textile industry, the British liberal Richard Cobden laid out his vision: "I see in the principle of free trade" a force that draws "men together, thrusting aside the antagonism of race, and creed and language, and uniting us in the bonds of eternal peace." For the next half-century it looked as though Cobden's vision would prevail. By the late 19th century, globalization seemed irreversible. Investment, information, industrial goods, and food supplies moved freely between nations and across seas. Immigrants moved freely across borders without the need for passports. In 1913, writes Lindsey, "Merchandise trade as a percentage of gross output was about 12 percent for the industrialized countries. They did not match that level of export performance again until the 1980s." The British liberal Norman Angell, writing in a celebrated 1911 book, The Great Illusion, which was translated into 18 languages, argued to widespread applause that "internationalism had made states so dependent on the bond market" that they couldn't afford to even consider war. Three years later, World War I began initiating a period of war and totalitarianism, known as the short 20th century, that lasted until 1989, when the las t Soviet (read that Russian) troops left East Germany.

Today the world financial system is still near a dangerous tipping point of uncertainty and chaos. The mortgage crisis was only the beginning. Yet our politicians, from both political parties, fixate on the trivial. Our financial house is on fire, yet our leaders are squabbling over arranging the furniture in the front parlor. Instead, they desperately need to develop a “big think” doctrine that defines America’s economic and financial future in the world. Financial innovations, including those that new electronic technology makes possible, enable both firms and individuals to carry out their ordinary business more effectively and to protect themselves better from the risks to which they are inevitably exposed. But these innovations also make it possible for both firms and individuals to take on new risks to which they never would have been exposed in the first place. What are meant to be improvements therefore sometimes make people worse off, and when the risks involved are sufficiently intertwined those supposed improvements can make people worse off who never even sought to take advantage of them. Globalization, the great paradox of our time, has been an impressive wealth-creating, poverty-reducing machine. In the last quarter-century of globalized markets, the Dow jumped from 800 to well over 12,000. To match that success the next twenty-five years, the Dow would have to exceed 170,000. Yet the fruits of globalization are distributed unequally. Globalization itself produces huge pangs of anxiety for average working Americans. Oil and food prices have skyrocketed. There is no denying the globalized financial system both enables and threatens our national well-being.

But if you kill capital flows and you’ll kill the global economy. The problem is that the world today lacks a financial doctrine, or even much in the way of a set of informal understandings, for establishing order in a crisis. Instead, we grope and manage incrementally, like trying to perform delicate brain surgery with one hand tied behind our back and the other wearing an ill-fitting boxing glove. Today is very similar to an earlier period of globalization and prosperity, from 1880–1914, which ended with World War I. Soon the seeds were planted for an economic depression.

The collapse of the Wall Street firm Bear Stearns, as the devastation rippled throughout the financial system, would have savaged the pocketbooks and pensions of every working American. Still, policy moves have unintended consequences. The Fed appears to have placed a government guarantee under the entire U.S. financial system, not just the banks. Sounds great, but some new, all-encompassing regulatory structure is therefore needed to protect the public interest at a time of financial deleveraging. That means the profitability of the U.S. financial services industry will decline.

In addition to this. people picture central banks as having magical powers to step in and save the day. Dream on. All (Paul Volcker, Alan Greenspan, and Ben Bernanke) would admit the power of the central bank is rapidly diminishing. Worse, in the case of the United States, interest rates have increasingly become a captive of global financial forces. To a certain extent, therefore, Americans are no longer in complete control of their own monetary policy. That is why central banks, led by the Fed, have become a kind of grand global theater. Because the world’s ocean of capital is so huge and powerful, the central bankers have had no choice but to become the lead actors. They use their dramatic skills to try to tease, persuade, charm, and bluff the markets. And of course the Lawrence Olivier of this process was Alan Greenspan. It’s not quite like The Wizard of Oz with the little man behind the curtain pulling the levers, but the analysis is not completely off the mark. The job of central banking, because of the need to bolster confidence, has become an elaborate form of ‘theater,’ with the financial markets acting as the audience. But during the subprime mortgage crisis, we are forced to travel down an endless, dangerously twisting and turning road of volatility with steep valleys and risky mountainous climbs. We can’t see financial risk ahead. A small village in Arctic Norway can see its entire financial future destroyed because its financial managers invested heavily in a Citigroup product called a collateralized debt obligation.

Greed-driven bankers and investment bankers deserve the most blame. They set up dubious, off-balance-sheet vehicles to hide risk. The lack of transparency created a global crisis of confidence that nearly tanked the world economy and now threatens the future of liberalized capital markets. The world still faces a trillion-dollar credit problem. When the credit crisis hit in August 2007, the world’s central banks flooded the global economy with liquidity to avoid immediate disaster. Luckily, today’s policymakers have learned from the mistakes made in the 1930s. The Federal Reserve also placed all U.S. financial institutions under the government “safety net.” Sounds reassuring, but the credit contraction is still likely to linger for years, and could become worse if policymakers aren’t careful. In the face of today’s powerful ocean of capital, there are limits to the effectiveness of government solutions.

The financial world is still a dangerous place. That’s because the world is flirting with moving away from the last quarter-century’s model of globalization and free-flowing capital markets toward something more reminiscent of the nineteenth-century mercantilist economic model. What I’m describing is an era of backroom rivalries, deal making, and tensions based on ambitious national political agendas with capital flows, and commodities led by oil, increasingly controlled by governments. One does not have to be a rocket scientist to see the picture emerging: financial wealth and power are moving away from the United States, Europe, and Japan.

The global financial system is near a tipping point of uncertainty and could come crashing down to the detriment of all of us. Protectionist and class warfare policies, and other policy prescriptions to curb reckless volatility, may be well-intended efforts to deal with the anxieties of global trade and financial markets. But the danger is that they produce unintended consequences that could send us over the edge.

Next time ----> "a credit swap what?"

More on monetizing (or DE-monetizing) virtual worlds

2008-12-16T10:46:00.006-05:00

"Pirating music? Oh man, that's so 1995..."

Yeah. I quote voraciously from The New Statesman online rag:

"The relationship between context and content in music has always been problematic. The rise of the anonymous public in the course of the 18th century certainly liberated musicians from the patronage of prince or prelate. Never again would a composer of Mozart's stature be booted out of the service of the Archbishop of Salzburg ("with a kick to my arse", as Wolfgang put it in a letter to his father). The development of a prosperous public sphere in London allowed Haydn, in a matter of months, to make six times the annual salary paid to him in Austria by Prince Esterházy. Yet public patronage came at a cost. Haydn chose not to settle in London, but to remain in the service of the Esterházys until the day he died in 1809. He may well have had an inkling that the public could be a much harder taskmaster than the relatively undemanding aristocrats he served at home."

"In the course of the 19th century, ever- growing markets, bigger spaces for music and better communications allowed many more performers to make much more money. Sopranos, especially, became rich beyond the dreams of avarice of even the most famous singers of the past. Between September 1850 and June 1851 Jenny Lind, "the Swedish Nightingale", gave 95 concerts in the United States, earning $176,675 net of all expenses. Moreover, all along the way she was feted as a queen. Had she lived long enough to take advantage of the invention of recording, her colossal fortune might well have been multiplied many times over. In 1914, Enrico Caruso was earning £20,000 a year from world sales of his records, which may even have increased ten fold after 1918."

"

In the course of the past century, a rush of technological changes has made music more accessible and ubiquitous than ever before. Cinema, the gramophone, radio, the jukebox, television, the electric guitar, transistors, LPs, stereo, the Walkman, discotheques, CDs, the internet, DVDs, the MP3, the iPod and all the rest have drenched the modern world in music. Moreover, the eruption of youth culture after 1945 simultaneously propelled musicians to pole position in both status and material reward. As the annual Sunday Times Rich List shows, no other branch of the creative or performing arts can boast such a concentration of wealth. When Bono or Bob Geldof (both honorary Knights of the British Empire) lecture politicians on what to do about the problems of the third world, those politicians have to appear to be listening.

Here's a point: As I said in a previous post, physical stuff (records, tapes, CD's, software boxes, etc) is being replaced by non-physical stuff (FTP's of mp3 files. .avi movie files. .dmg or .img, or .iso files to install software).

For years the music industry made its money primarily through the creation of a physical product -- first the record and then the CD. But with the evolution of the digital age, the physical nature of music is fast becoming obsolete. Just at vinyl records hold nostalgic value, soon CDs will be a novel relic of a bygone era. I remember telling several of my buddies at Computer Sciences Corporation that the CD was transitional technology - they challenged me to name the replacement. In 1995, I didn't have a clue... but I knew it would happen. Remember the scene in the movie "Men In Black", where Tommy Lee Jones is giving Will Smith a tour of the secret facility? Row upon row of advanced alien tech, wonderous and breath-taking, is displayed - the they come to a mounted...well, it looks like a bottle cap to me. Tommy Lee intones "See this? They say some day this will replace te CD.". HA!

So is this the death of the music industry? Of course not. Music has been written, performed, and enjoyed for centuries. Music is part of culture. In many ways music as a business is thriving more than ever before. It is a period of fundamental change for this industry.

But, for every Bono and his countless millions, there is a host of modestly paid session players, 90 per cent of whom earn less than $35,000 a year, according to one of their leaders. It will come as no consolation to them to know, if they do not know it already, that it was ever so. Ever since musicians emerged from the servile but cosy world of aristocratic patronage into the harsh daylight of the public sphere, the musical profession has been a pyramid with a broad base and a sharp top. The new opportunities brought by every major technological shift have also left many casualties among musicians unable or unwilling to adapt. A good example was the advent of the gramophone, which sent an army of pianists, piano teachers and piano manufacturers to the scrapheap.

More recently, a combination of digitization and the Internet has torn a great fissure in the recording industry, which has not died (as Norman Lebrecht claimed in a characteristically strident book last year), but which has certainly been forced into fundamental change. Nor, one imagines, will the musicians plugging their way through yet another Muzak recording session be cheered by the reminder that Jimmy Page (worth $175m, according to the Sunday Times) started out as one of their number."

One of my LinkedIn buddies published an online poll asking about how to implement DRM effectively to protect intellectual property rights, especially for producers of music and to "protect" the buyers of same - the overwhelming response was "who the hell buys music anymore?!?!".

Well... what's on YOUR iPod?

The REAL Economic Tsunami - Conclusion or what's the GD point?

2008-12-15T12:26:00.009-05:00

Let's review the topics of my current sermon/rant -

1. Root economic change
2. What is a job?
3. The death of US manufacturing
4. The death of traditional media (newspapers, etc.)
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.

The point is simply (or not), that things are not disappearing, so much as they are changing. Now, people don't like ONE change at a time, but we have several (there are many more than the five I have screeched about), and that is what is imputing the sense of "dis-ease" we all feel today. It's like related rate problems in calculus - it's not the rate of change that's accelerating... it's the rate of the rate of change that is accelerating. Maybe even the rate of the rate of the rate!!!

You've heard your friends talk about it - they have a sense of doom. It’s like the 1930’s. Everyone knows there’s going to be a war with Germany. Some, like Chamberlain, deny it. They don’t want to believe it. Others, like Churchill, are clear that we must not appease the Nazis.

I'm not talking about the spectre of the disaster of the week - climate change, ecological implosion, terrorists with nukes, Bush/Cheney/Haliburton (wasn't Bush supposed to declare martial law a few years ago?), Religious zealots oppressing the atheists, Militant atheists calling on burning churches and killing priests (1789 anyone?), children being exploited by radical gays and lesbians, radical gays and lesbians being exploited by everybody, Bush/Cheney/Haliburton being exploited by children - AAARRRRGGGHHH!

EVERYBODY JUST SHUT UP!

It's not just the spectre of CHANGE, and the execution of change, but the sheer number of things changing and we are having a real hard time dealing with it all.

Root Economic Change - As I said "My contention is that these eight conditions are contributing to the real economic tsunami that is about to hit us. And like the Industrial Revolution before (the so-called "information revolution" is just a preliminary ripple), it will affect everyone on the planet, with the attendant "law of unforeseen consequences" vaporizing our current world view of the nature of work." (see Part I for detail on the 8 points)

What Is A Job? - " today's organizations are trying to use outmoded and underpowered organizational forms to do tomorrow's work. They insert an empowerment program here and a new profit-sharing plan there and then announce that those things aren't so great after all because profits are still falling. Such organizations won't have better results until they do two things. First, get rid of jobs. Second, redesign the organization to get the best out of a de- jobbed worker. A big task, sure. But like any evolutionary challenge, it will separate the survivors from the extinct." (see Part II for details)

The Death Of US Manufacturing - " the coming transformation will be painful, but we will get through it. We will have a money economy of highly intelligent machines (robots, if you will) manufacturing goods for sale here and abroad, designed built and maintained by American workers and a huge non-money economy of DYI types using the technology the money economy provides, to provide for themselves. - IF and only if, we have the guts to be flexible, agile and swallow our stupid pride and re-tool out skills to meet the paradigm shift. Or wallow in your "I'm a victim" status and become a ward of the state." (see... well you know what to do).

The Death Of Traditional Media (newspapers, etc) - " The simple historical fact is that mass communication technologies are never replaced by newer technologies. They co-exist, while continuing to evolve. We still have the newspaper, the telephone, the radio, and the movies, despite the fact that each of these was at the time of introduction viewed as the beginning of the end for the other. The only mass communication medium in history to have been replaced by another is the telegraph, a service which began in 1851 with the founding of the New York and Mississippi Valley Printing Telegraph Company and spanned 150 years, ending finally on January 27, 2006".

Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher. - " How is all this supposed to make me any money!"

The unifying factor of all this crap, is that this transformation requires the evolution of information into knowledge, and it's capture, storage, use and re-purposing - this is a continuum process. All of you computer science and IT majors my remember the progression you learned in those interminable classes on " the profession" - facts are processed into data, data is processed into information, information is processed into... what? Knowledge, that's what! And as the late, great Peter Drucker said in "Managing in a Time of Great Change", when you apply knowledge to knowledge, you should get wisdom...

Remember that, besides its great flexibility, knowledge has other important characteristics that make it fundamentally different from lesser sources of power in tomorrow’s world. Thus force, for all practical concerns, is finite. There is a limit to how much force can be employed before we destroy that we wish to capture or defend. The same is true for wealth. Money can't buy everything, and at some point even the fattest wallet empties out. By contrast, knowledge does not. We can always generate more.

The Greek philosopher Zeno of Elea pointed out that if a traveler goes halfway to his destination each day, he can never reach his final destination, since there is always another halfway to go. In the same manner, we may never reach ultimate knowledge about anything, but we can always take one step closer to a rounded understanding of any phenomenon. Knowledge, in principle at least, is infinitely expandable. Knowledge is also inherently different from both muscle and money, because, as a rule, if I use a gun, you cannot simultaneously use the same gun. If you use a dollar, I can’t use the same dollar at the same time. By contrast, both of us can use the same knowledge either for or against each other—and in that very process we may even produce still more knowledge. Unlike bullets or budgets, knowledge itself doesn’t get used up. This alone tells us that the rules of the knowledge-power game are sharply different from the precepts relied on by those who use force or money to accomplish their will.

But a last, even more crucial difference sets violence and wealth apart from knowledge as we race into what has been called an information age: By definition, both force and wealth are the property of the strong and the rich. It is the truly revolutionary characteristic of knowledge that it can be grasped by the weak and the poor as well. Knowledge is the most democratic source of power, which makes it a continuing threat to the powerful, even as they use it to enhance their own power. It also explains why every power-holder—from the patriarch of a family to the president of a company or the Prime Minister of a nation—wants to control the quantity, quality, and distribution of knowledge within his or her domain.

The control of knowledge is the crux of tomorrow’s worldwide struggle for power in every human institution.

That's all for now --- now I have to take my medication and relax through Christmas.

Merry Christmas everybody!

The REAL Economic Tsunami - Part V

2008-12-11T08:14:00.015-05:00

Took a while to get this out due to social obligations and fast-shifting events concerning Part 4! Check this out -
"As the combination of NBC's decision to replace its 10 p.m. scripted dramas with a talk-show format and a threatened actors' strike throw a chill over tinseltown, Marley-like voices from the writers' walkout that shut down Hollywood last Christmas are telling cautionary tales.
The industry has already been battered by the estimated $2.1 billion impact of the 100-day writers' strike that ended in February. Now, everyone from top showrunners (usually writer/creators who've become top producers) to the daytime scribes, say times in the television industry, long considered the writer's medium, are getting tougher.
"It is a particularly difficult time," says veteran showrunner J.J. Abrams, noting that as networks turn to shows from overseas as well as remakes of old shows to save costs, he feels "lucky" to have an original show on the fall schedule ("Fringe" on Fox).
"It's always hard, but it's getting harder," says Bryan Fuller, creator and showrunner of ABC's "Pushing Daisies." When the show returned after the strike-imposed hiatus, he says, the network made budget cuts as well as numerous requests to make the story less "weird."
Whether you are a prime-time, A-list writer such as Steven Bochco, who has migrated from broadcast networks to cable in pursuit of creative freedom, or a daytime soap opera scribe such as Karen Harris, who grinds out an 80-to-90-page "General Hospital" script every week, the challenges facing the nation's small-screen storytellers are the same: dwindling clout, an industry in historic transition and a larger economy in tatters.
Individual network heads such as Angela Bromstad, the new programming chief for NBC, often voice their respect for writers.
"I've always been very protective of showrunners' vision and passion," she says. "If it's not led by their passion, then we don't have a show."
But business trumps passion, more often than not these days, says Patric Verrone, president of the Writers' Guild of America, West (WGAW).
"In an era of motion picture and TV production controlled by seven multinational conglomerates, it's difficult for any individual to have clout or personal creative freedom," he says. "When it's in the hands of the conglomerates there is a lack of appreciation not just of writers but of the entire talent community and what they bring to the table in terms of development of content."
WOW! No wonder I watch most of my content on HULU.com, And none of it is scripted shows. In a rare show of sanity, MSNBC's Courtney Hazelett declare scripted television dead at the 10 pm mark... the rest to follow. WOW!

Pulling into the station now, so hang in there!

So we have covered:

Root economic change.
What is a job?
The death of US manufacturing
The death of traditional media (newspapers, etc.)

We need to cover:
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.

How is all this supposed to make me any money!

Web 2.0 provides potent business models for making web applications which apply them successful, or least, ever popular with their users. These techniques typically have to do with connecting supply with demand cheaply and effectively (The Long Tail theory) or by providing a unique source of information that is difficult to recreate elsewhere. Unfortunately for the creators of many of these web applications, they sometimes confuse popularity with financial success, or more often, they optimistically believe the former can turn into the latter. The truth is, monetization of Web 2.0 services is a genuine issue for those that are planning to use Web 2.0 ideas for non-strategic purposes. Yet many Web 2.0 services seem to be intent on tactical financial capitalization of the attention and user base which Web 2.0 applications can build almost overnight. ZDNet's Phil Wainwright thinks this issue, namely lack of revenue, is a big piece that's missing from the Web 2.0 business model. He posits that the next iteration of Web 2.0 will solve this and other problems, which he dubs Web 3.0. Phil's analysis is pretty sharp and he has identified at least three revenue models that will form the basis of commercial succesful Web 2.0 services:

Advertising: Phil doesn't think much of this model, no matter how well Google is doing with it and despite the fact the Microsoft is increasingly interested in the entire online ad space.
Subscriptions: Divided up into fixed rate, variable rate, and fixed+plus variable models, subscriptions are very popular with leading Web 2.0 companies like 37Signals and I'm with Phil that this will continue to be popular for large footprint services, but not for mash-ups and aggregation services that provide bite-size functionality.
Transaction Commissions: Best exemplified by companies like eBay that charge for a given successful transaction, Phil believes this will ultimately become the biggest player.

My issue with this trinity of revenue models is that it doesn't explicitly leave room for a fourth or possibly fifth needed model. I truly believe there is an active need for one or two as-yet-uninvented revenue models to fund Web 2.0 services that face the general public. Web 2.0 monetization, for now, is heavily reliant on advertising. UsingGoogle’s AdSense contextual advertising program is one of the fastest and most popular ways of monetizing a new Internet business. For more information see Deitel’s Google AdSense and Website Monetization.

When is the last time you clicked on a banner ad/google adwords ad? I don’t really believe that there is going to be a silver bullet that can monetize all sites, but there are interesting ways to rein in the brand that most successful have built. (And no, I am not talking about “Mashable” Brand Potatoes.) Maybe the best way to make money as a content producer is to do direct sales, according to folks who’ve been there (I concur).” I believe what is missing is the adaptation of successful advertising models from outside the net to online.

Or maybe the key is not to sell the content, but sell the process. Content alone doesn’t get the job done. The dominant web 2.0 business model is the FREE business model. It comes in many different variants, but the most widely used are the freemium business model (I always thought Fred Wilson came up with that term, but he says it was Jarid Lukin) and the free with ads based business model. With freemium you get a service for free, but for the real cool features you need to upgrade and pay a subscription. Flickr, YouTube and others use that business model. The free with ads based business model lets you use a service for free, but in return you get advertisement. Facebook is the most obvious example, but many other services use that model as well. So the subscription model looks good for certain types of transaction, but it NOT a panacea, as we shall see.

I just saw an ad on TV (yeah, I still watch TV!) for the singer Rhianna - the tag line was not, so and so many albums sold or records sold... it was "100 million SONGS sold"! Now that's a subtle, but powerful and important message. Not physical units of anything, but MP3 files off of iTunes Store, or Amazon or Rhapsody. Like the software we used to buy in a box (it's all downloaded off the Net now), these things are not physical (or, as Alvin Toffler would say "symbolic") but electronic files (again, the Tofflerism is "super-symbolic"). And that is one of the most fundamental changes in our goods and services world - the physical things we are used to that represent value (symbolic) are no longer all that physical, and have become "super-symbolic". It's like the difference between a "classicist" painter/sculptor and an "impressionist" When a classicist paints a house, or a tree or the sky, that's just what he paints - but an impressionist looks at these things, then paints the IDEA of a house, a tree or the sky - do you see? When you buy music or movies (or just watch movies and TV, like on HULU) you are purchasing a super-symbolic thing. And HULU and other video media sites sell you LOOKS at the media -what would we call that? Hyper-symbolic?

So what's the point here? Simply, that the massive changes in socio-economics, what work is, what is manufacturing, what is media and how do we get it, how all this is monetized (you always have buyers and sellers, but now that term much more universal, and a just plain different PROCESS) are all happening simultaneously. Because of this, we as a culture are undergoing a similar confusion that out great-great grandparents underwent during the Industrial Revolution.

Look for me to pull all this rubbish together by Wednesday ---->>>>

The REAL Economic Tsunami - Part IIII

2008-12-10T20:52:00.030-05:00

So far we have covered:

Root economic change.
What is a job?
The death of US manufacturing

We need to cover:
4. The death of traditional media (newspapers, etc.)
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.

The Tribune Corp filed a Chapter 11 bankruptcy on December 8th in Delaware. It reportedly has 13 billion in debt. The Chicago Cubs franchise and Wrigley Field are not included in the filing. Tribune has fallen below the cash flow required under its agreement with its bondholders, but it is not clear how seriously Tribune is thinking about seeking bankruptcy protection. Analysts and bankruptcy experts say that the hiring of advisers, including Lazard and Sidley Austin, one of the company’s longtime law firms, could be a just-in-case move, or a bargaining tactic. Like most newspapers, Tribune’s have suffered double-digit percentage declines in advertising this year, as ads and readers continue to shift to the Internet, and the recession has prompted retailers and other businesses to curtail their ad spending. What makes Tribune’s problems more serious is the heavy debt load it carries as a result of last year’s buyout.

The weak state of newspapers has made some lenders more loath than usual to force bankruptcy, fearing that it could worsen their chance of significant recovery, or at least delay it
Maureen Dowd writes about a newspaper that’s offshoring editorial content and learning to make it work. James McPherson is the editor and publisher of Pasadena Now, a small weekly. A year ago, he fired his entire editorial staff and farmed out coverage to a staff of Indian writers he recruited on Craigslist. He pays them about $7.50 per 1,000 words, compared to the $30,000 to $40,000 he was paying each reporter annually. The Indian writers “report” via telephones, web harvesting and webcams, with support and guidance from McPherson and his wife work for.

Reaction to the idea was brutal at first, but the concept of editorial offshoring is gaining traction. Dowd counts MediaNews Group chairman Dean Singleton among the ranks of executives who have recently talked about massive offshoring to save costs. Singleton says most preproduction MediaNews’s California papers is already outsourced to India, which has cut costs by 65 percent.

If the idea sounds preposterous, think about it. How many people in a standard newsroom never leave the building? Any job that primarily involves computer and phone work is a candidate for offshoring. Between cell phones, webcams, virtual meetings and instant messaging, the need for face-to-face contact is diminishing to the point of irrelevance in many cases. On-site reporters will always have value, but in the future they could become a small corps of feet on the street feeding copy to a virtualized production force that is largely invisible. The compelling cost efficiencies give publishers a lot of incentive to be creative.

Former Los Angeles Times editor James O’Shea comments at some length on recent statements by Tribune Co. CEO Sam Zell about the failure of newspapers to listen to their customers. O’Shea has a problem with that philosophy. “If all we had to do was ask readers what they wanted in a newspaper and then give it to them, wouldn’t someone have done that years ago?” he asks? In fact, they did. “I’ve seen dozens of papers march down that road to no success.”

O’Shea agrees that journalists have done a poor job of demonstrating their value as stewards of the public trust, but he thinks that failure is actually due to their efforts to listen too closely to their customers. The conventional marketing wisdom is that readers want soft, lifestyle stories and the more we give them that pabulum, the more we undermine our value as serious journalists. “To the extent we blur the differences between these once-distinct voices with pandering coverage that resembles advertorial and not editorial we play right into this trap,” he writes.

And if the newspaper industry is dying, apparently no one told Saharra White. The California State University, Northridge journalism major pooled her savings and donations from friends last year to launch Say It Loud!, a newspaper for African-Americans of the San Fernando Valley. “I wanted to start the newspaper because there are black people in the Valley doing some positive things,” she says. Say It Loud! is one of about 200 black community newspapers across the US, according to the Black Newspaper Publishers Association. White says she felt the stunning election of an African-American as President demanded new media to cover the impact of the Obama administration on America’s future. She distributed the paper in print for a year, but now has gone online-only as a matter of economic necessity.

Folks, this train has been a-comin' for about 18 years now...since the early 1990's. I remember the first time i saw the World Wide Web - remember: the Internet is not the WWW - The WWW is part of the Internet. The Internet includes file transfer capability email and chat and other mechanisms for communication. What I saw was simplistic, even crude graphics, and loopy text formatting - but you could click your mouse cursor on some of the words, and BAM! You instantly transported to another document explaining the meaning of that word, and attendant subjects. And you could click and click and click. I was flabbergasted, stupefied (some say that's a permanent condition with me)... How was such a thing possible? And what would it lead to?
Well, we have response times, when it comes to news, measured in seconds - not days or even days. Ad revenue has been declining for a decade now- ask the newspaper guys and they mutter "aw, it's that damned innertubes, or whatever.". Did they "get it" then, and do they "get it" now?
Frankly, I think there are many reasons for the decline and eventual fall of traditional media (newspapers, magazines, radio & TV) - the culture wars, "happy talk" replacing hard news and vice-versa (the public is a harsh mistress), plus the "homogenization" of news to reflect the MacPaper framework of USA Today. However while this may be the case there are certainly other issues we should consider.

Firstly, a similar thing happened around the last so called “dot.com bubble”. Businesses flocked online, spending millions advertising etc... Then the “dot.com bubble” burst leaving many people in serious debt. It could be considered that this current increase in online advertising is just another “dot.com bubble”, only time will tell whether this is the case or not.

Secondly, this increase could be a temporary “blip” so to speak. Many of the traditional media companies have been slow to act on digital media, meaning that some of the newer so called “new media” companies have been able to take up a large market share quickly in the absence of any real competition. It could be argued that once the traditional media companies embrace digital media that we may see this shift in advertising revenue re-balance itself as the traditional media companies will be able to integrate digital media into their traditional medias easier than a digital media company can integrate itself into the tightly controlled and extremely competitive traditional media market. We have already seen some of the traditional media companies trying to buy their way into the successful new media companies for example, News International buying the company that owns the hugely successful MySpace.com website. Again it may be a number of years before we can see whether this theory is correct.

Also, with all the reports describing this decline of traditional media compared to digital media, there have been reports of digital media companies such as Myspace and Google using traditional media methods. “MySpace weighs up spin-off magazine” (The Guardian, 2006). This reports how Myspace is considering a “spin-off print magazine” for the users and fans of Myspace. Although this is less surprising since the takeover of Myspace by News International and the want to integrate it into some of News International print output. Google has also used traditional media recently “Google Ads share the love with newspapers” (NYT, 2008), “Google's radio ads” (NYT, 2006) both of these report on a trial being conducted by Google on it’s advertising output, both of the trials for the different mediums work along similar lines to Google’s “Adwords” technology used on it’s search engine. Long established Internet and search engine company Yahoo is also conducting a similar trial with US local newspapers “Yahoo! to share classified ads with US local newspapers” Yahoo has signed a deal with 150 local US newspapers to provide them with classified advertising and content.

It can also be argued that another one of the reasons why these digital media companies are making deals with local newspapers (like Yahoo) relates back to one of characteristics of digital media described in the chapter “What is digital media?” One of digital media characteristics is that while it can be a mass media, it can also be personalized unlike traditional forms of mass media. While this is true, one of the most popular forms of digital media, the World Wide Web has struggled until recently to be personalized or “local”, yes it is possible and rather clever that you can speak to someone on the other side of the world. A lot of the time though, users of the World Wide Web want local content, hey want to be able to see when the bus is coming, or when the film they want to see at the cinema is on, or what is happening in their town. Digital media’s characteristics that it is in a “constant state of flux” (Lister, 2006) rather than fixed lends itself perfectly to this. Where digital media has failed mainly is actually being able to deliver that local content, this is why they are making deals with the local newspapers etc to enable to finally make the idea a reality. Traditional media companies are also trying to use digital media for the very same thing. “ITV broadband television in the starting blocks” (NYT 2008) reports ITV is “gearing up for the launch of its local broadband TV service, ITV Local” The same report also describes how ITV has also acquired Enable Media, which owns directory service Scoot, another part of ITV local strategy. As we can see there is a clear trend by both traditional and digital media companies towards providing this local content and this can be seen in advertising campaigns such as yell.com made by the company AKQA (AKQA 2005).

This customization feature is the "killer app" of the new media - I think the entire concept of the "newspaper" and the "magazine" is disintegrating. They were the products of physical formats that are increasingly irrelevant. I have found much smarter people on the net than I ever encountered in newspapers and most magazines. (Journals are another issue.) I use Google Reader to set up sophisticated filters to handle information noise and overload. I felt much more information overload in ye olden days of print, which I miss not in the least Yet, there is, of course, another point of view here...

PriceWaterhouseCoopers C-levels say traditional media are not dead yet… because their consumers are not dead yet. Analyst Marcel Fenez (via Press Gazette): “One of the things we need to get into context here is that traditional media isn’t dead yet and won’t be for the next five years. It’s very important to think why. The over-50s are helping to sustain traditional media, and also in many of the emerging markets there is still plenty of room for traditional media. The death of traditional media is exaggerated, at least in a five-year context.”

So media forecasting becomes mortality prediction. On that basis, assuming advances in healthcare continue to extend human lifespans, “traditional” media may even be around for more than five years. Although digital ad spend will grow 11 times faster than print up to 2012, it will still only be 10 percent that in newspapers, Fenez said.

In a way I agree: I used to love reading my Sunday newspaper in bed, munching on donuts, giving the kids the comics and my wife the fashion and social sections, This was a ritual in my life - but nowadays, no wife, kids are grown - no ritual, because it no longer serves any purpose. But consider the following - (there is no cohesion to these thoughts, but here it goes):

1. Internet advertising is not the end all be all. A lot of local businesses, where you live, are picking up on the new media/ social media craze, by hiring new media savvy marketing and IT staff. Its amazing how marketing firms continue to blindly exploit internet advertising to sustain their businesses. This is unsurprising looking at the recession in the advertising industry general, as marketing firms are looking for ways to sustain and increase business.

2. How can we predict the usage and adoption of digital and social media? Think about what they call the “Internet generation- a 20 year old in 1995 (when the Internet became prevalent) would now be 33 years old. Think forward another 10 years. Not only are we looking at an increase in education, maturity, and access around the Internet- but also an influx of Internet savvy youth, who will grow into their jobs, taking an “Internet aware” approach to their work.

3. Print Will Never Die: The Internet in harmony with print. Arianna Huffington, with the HUFFINGTON POST uses this great analogy: “The shifting dynamic between the forces of print and online reminds me of Sarah Connor and the T-101 in The Terminator. At first, the visitor from the future (digital) seemed intent on killing Sarah (print). But as the relationship progressed, the Terminator became Sarah and her son’s one hope for salvation. Today, you can almost hear digital media (which for some reason has a thick Austrian accent) saying o print: “Come vit me if you vant to live!”
In a way, the trad media and new media sort of feed off each other, the way I decribed the relationship between the nonmoney economy and the money economy. Not the death of the trad media (my friend Laura calls it the "drive-by media"), but a transformation into something else - the point of this whole rant.

The Great Television Switch Off

The television switch off is real. In the United States, 2.5 million viewers switched off in the spring on 2008 compared to the same time in 2006. Statistically this is only a small percentage of the overall viewing audience, but among those still watching television, the amount of television they watch each day is declining.

The decline in television viewing is stronger among younger statistical groups. In Europe, a 2005 study from the European Interactive Advertising Association found almost half of 15- to 24-year-olds are watching less TV in favor of browsing the web. A study reported in The Guardian in 2007 headlined with “Young networkers turn off TV and log on to the web.” The television switch off in the United States among younger people has seen the average age of a TV viewer increase to 50. Why? What does it mean?

We can think about whether television is going to die in two ways. First, by looking backwards, at the history of the mass media, and second, by looking forward, and trying to understand some of the impulses behind what is going on, behind media proliferation.

The simple historical fact is that mass communication technologies are never replaced by newer technologies. They co-exist, while continuing to evolve. We still have the newspaper, the telephone, the radio, and the movies, despite the fact that each of these was at the time of introduction viewed as the beginning of the end for the other. The only mass communication medium in history to have been replaced by another is the telegraph, a service which began in 1851 with the founding of the New York and Mississippi Valley Printing Telegraph Company and spanned 150 years, ending finally on January 27, 2006, when Western Union discontinued the service. Western Union report that telegrams sent had fallen to 20,000 per year, due to competition from other communication technologies, including -- and probably mainly -- email. Arguably, of course, the telegram was not a mass communication technology." Thus, the Five Year plan of Marcel Fenez.

I have some sadness for the putative death of television. Anyone in Generation X or older would have grown up with the medium, and spent countless hours on the couch watching it, and yet today, people worldwide are switching off. As younger viewers happily switch to their computers, forgoing the experience of a television set altogether, newer, more consumer friendly devices will deliver Internet content to the broader population, often via the television screen, and the switch off of television networks will accelerate. By the time my (by now 17 year old) daughter has children of her own, broadcast television will be a thing of the past, replaced instead by an always on society with the Internet as a nearly unlimited smorgasbord of choice.

Just to clarify one point in this post that some seem to be confusing, and perhaps I wasn’t clear enough. I am not suggesting that the experience of sitting around a large screen TV watching sport or other content is going to fall. It never will, but content delivery via broadcast television (ie television networks, or collectively the television media) will fall. There will always be a place for a television set in many lounge rooms, but that set in the future will be a conduit for digitally delivered, on-demand or custom mixed content, delivered over the Internet, from many different providers.

The "sine que non" here is-

a) New media technologies have altered the flow and increase the volume of social communication by decreasing costs and distance sensitivity of moving information; increasing the speed and volume of communication. The exchange of information have become instantaneous and global.
b) New media technologies have changed the way journalists 9and everybody else) work through the abundance of easily accessible information over the net as well as giving portability for journalist to produce news, e.g., notebook, PDAs, etc. Together with advances in long-distance traveling have make it possible to down-size and de-skill newsroom by increasing reliance on pooled information fed into eth information net by PR firms and news agencies.
c) The transformation of ‘broadcasting’ to ‘narrowcasting’ to audience. The customization of the flow of news, etc is the important change and control factor here.

And one final point - no communication technology is easier to use, or more portable, than a book. Paper is the most successful communications innovation of the last 2000 years, the one that has lasted the longest and had the most profound effect on civilization. One can easily make the case that without the technology that is paper, there would be no civilization. Yet most of the time, we don’t even think of paper as a technology. And so we don’t ask the questions we routinely ask about other technologies: How does it work? What are its strengths and weaknesses? Is it easy and enjoyable to use?

Confused yet? GOOD - that's the point! All this stuff is onter-related, as i hope to wind up in my conclusion this weekend. Now, let's see how this all relates to generating capital, and how that capital is used ------------->

The REAL Economic Tsunami - Part III

2008-12-10T10:29:00.036-05:00

Before I get going on the "death" of US Manufacturing, allow me to quote from The Rational Capitalist on this latest guvmint stag part--er, bailout -

It is immoral for the government to expropriate the money from the earnings of others and shower it upon bankrupt firms such as the automakers. If individuals believe it is truly in their self-interest to invest or provide alms for bankrupt firms they may do so – by purchasing their stock, bonds or by simply sending them money. The idea that the “need” of the automakers and their employees somehow justifies theft is the height of evil and is an argument that could be used to justify virtually anything. Since when does the “need” of anyone justify theft? If this argument is not valid in a criminal court, then why does it become valid when applied to firms?

Every business, whether big or small, must stand on its own merits. If it does not provide a product that individuals are willing to voluntarily purchase then it must restructure or fail and the faster the better. It is absolutely unconscionable that these CEO’s would plead for their Godfather’s in Washington to shake down taxpayers rather than focus on how to make their failing firms more profitable.

Plus some "housekeeping" - some folks can't seem to get Blogger to save comments, so I will post them. This one from my old pal Carl Sarrazolla, International Superstar:

"For some reason the blogger won't let me post my comments on the site, so here's my feedback.
I like where you're going with this. In additions to companies needing to change, we need to get some laws changed, especially the ones that define a job as 8 hour day, 40 hour week, etc. In addition, the laws that govern contractor/employer relationships also need to change as many are designed to force people into classic job roles once certain conditions are met."

Well put, buddy!

Now, let's get going- so far we have covered:

1. Root economic change
2. What is a job?

We need to cover:

3. The death of US manufacturing
4. The death of traditional media (newspapers, etc.)
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.

The "death" of US manufacturing - like Mark Twain's death - is a little premature. It's not dead or dying, just changing. But since people don't recognize change while it's happening, let me help you all out.

Massive amounts of manufacturing have moved overseas in recent years, specifically to China, Malaysia and India . The pressure to turn a profit in manufacturing has prompted many companies to seek refuge in low-cost labor areas, putting onshore factories at a competitive disadvantage.

The problem with this logic is as follows: in many industries, labor accounts for less than 10 percent of total manufacturing costs. Factory automation, robotic inspection and process efficiencies have made labor less of a factor in the overall competitive picture. Savvy companies have learned to take advantage of these and other innovations to make their Americas-based business a success.

And now I will quote massively from the Washington Post's Gilbert B. Kaplan - He said it better than I:

No wonder this is an issue in the presidential campaign, especially in big manufacturing states. To get to the bottom of the problem, though, we have to cut through the many myths that have been fabricated about the industry over the years.

1. It's all about cheap wages. American workers are just paid too much.

For most manufacturing sectors, that's just wrong. Labor costs are already less than 10 percent of the cost of making many products (emphasis mine), including steel and semiconductors. Many of the real cost disadvantages the United States confronts are self-imposed. Our government doesn't rebate taxes to corporations when they export manufactured products, the way other countries do: A Brazilian steel company, for example, can get a 17 percent tax credit for every ton of steel it sends abroad. In addition, many foreign countries keep their currencies valued extremely low against the dollar. Most economists believe that China undervalues its currency by as much as 40 percent. That makes Chinese goods very cheap here and U.S. exports very expensive in China. This is a key driver of the $260 billion trade deficit with Beijing. We should deal with these issues in our international trade negotiations, but we haven't.

2. U.S. manufacturers can save themselves by investing in innovation.

Okay, but how much are you going to invest? U.S. private-sector companies can't put as much money into technology and research and development as foreign governments do to build up their sectors. As the chief executive of a technology firm with whom I've worked for many years says, "We're the best company in the world, but we can't compete with foreign governments." Consider Airbus. The European Union has put more than $15 billion into building this aircraft company from the ground up. Whatever you may think about the recent U.S. Air Force decision to buy tankers from Airbus rather than Boeing, one thing is clear: Through its subsidies, the E.U. has managed to build a highly competitive aircraft industry. South Korea has put more than $12 billion into its semiconductor industry to similar effect, severely harming the U.S. semiconductor manufacturing base. Business' are leveraging Guvmint resources for strategic advantage - this a sort of "reverse State Capitalism" (SC is MY deal BTW)

3. Trade laws and trade agreements level the playing field for U.S. manufacturers.

If only this were so. This should be the main goal of our trade negotiations. The manufacturing sector is hurting more than any other, but we're using our political capital -- in the Doha round, for example, the latest World Trade Organization negotiating round -- to help the service and agricultural sectors. Little is being done for basic manufacturing. There are international trade laws under which U.S. companies can file cases to offset unfair practices in China, Japan and other countries, but they're difficult to use, expensive and haven't solved the problem. In 2006, despite a manufacturing trade deficit of more than $600 billion, U.S. manufacturers filed only eight new trade cases. If these statutes were really working, we would see hundreds of new cases each year, instead of watching U.S. companies decide that it's better to give up and just move manufacturing plants abroad -- something I've recently heard executives in both the textile and electronics sectors say they're thinking about doing.

4. Good management can make U.S. manufacturers lean enough to fight in the international economy.

I wish it were that easy. Even the best management can't overcome some of the structural disadvantages we face. Take health-care costs. In Europe, these costs are absorbed by the government. In the United States, manufacturers have to pay for them. General Motors, for example, has estimated that the cost of health care adds about $1,600 to the price of each of its vehicles. How can you compete when you have to add that cost to all the other challenges a U.S. manufacturer faces? Then there are environmental-compliance costs. One recent study shows that these costs are about $77 billion a year for U.S. manufacturers. China, Taiwan and many other foreign jurisdictions have no environmental costs of any significance, because they either have no environmental laws or don't comply with them. The United States also has laws and regulations to keep our products and workplaces safe that we don't require our trading partners to comply with.

5. We make high-tech goods here, so we're okay. It's only schlock items that come from abroad.

Really? The truth is, very few high-tech companies are building new plants in the United States. The name on the box of the computer you just ordered may be Dell or HP, but the computer itself was probably made in Asia. The fancy light-up screens on your cellphone and iPod -- liquid crystal display screens, or LCDs -- are all made in China, South Korea, Singapore and Japan. Even our greatest semiconductor companies, such as Intel, are building new state-of-the-art facilities in China. And what about the most sophisticated high-tech product in the world -- microlithography machines used to make semiconductors? These machines are a true enabling technology -- a technology from which everything else follows. It's too bad that not a single one is made in the United States. We depend on Europe and Japan for them.

All true. But the real transformation may not be where things are made, but HOW and WHY. Now you may ask yourself "Russell, what in the name of God's holy creation are you jibber-jabbering about NOW". Well, just... think about it. It's actually some good news - remember, PROCESS is more important that MECHANICS.

There are powerful, unrecognized interactions between the nonmoney, or “prosumer,” (producing what you consume - eating your own dog food) economy and the money economy of our world. Rather than ignoring these interactions, we need to understand that these two economies are, in fact, parts of a unified “wealth system” in which the two parts pass value back and forth. If you really think about it, I mean REALLY think about it many of the linkages through which prosumer activities, from creating blogs and open source software to volunteering in a hospital, or Habitat For Humanity, or performing do-it-yourself projects, frequently add significant value to the money economy. There just isn't a "mechanism" to account for it! But, I assure you, it is very real.

Think about this - Many of us still think of the money economy as a closed system. But the growing importance of knowledge and prosuming in the wealth system makes the closed model obsolete.

There are all these channels between what people do without money and what goes on inside the money economy. I think these channels are going to multiply as the money economy creates more and more technologies that people can use to do things for themselves. For example, if you’re of a certain age, you probably remember that when you wanted to get photos developed and printed, you took them to a drugstore, they sent them to Kodak in Rochester, N.Y., Kodak sent them back, and then you paid the drugstore, and took your prints home. Now you do all that in the palm of your hand, because you have the digital camera technology that makes that possible. As a result, the market for printing and developing film is disappearing. It is moving from the money economy into the nonmoney economy.
This i s in the same tradition as the "seLf-sufficient" American, but on an immensely larger scale. What’s new these days is the cyberstructure that allows prosumers to create value and rapidly disseminate it across the globe, where others find ways to commercialize (monetize) it.

This transformation that we think of as the “new” economy actually started in the 1950s (the rise of consumerism - based on a RAND Corporation study) and is far deeper and more complex than most people suspect (as I have been saying ad nauseum). The underlying pattern is the breakdown of Industrial Age civilization, fed by the replacement of Industrial Age technologies and sweeping cultural changes, as well. The nature of the emergent wealth system is changing our civilization. But the reverse is also true, and to understand how these affect each other, you have to synthesize observations across all traditional academic borders, the boundaries that separate economics from sociology, from history, and so on. How do you lump finance, manufacturing, services, and countless other activities under the term economy? The link is that they are all monetized. The term prosumer (again, thanks to Alvin Toffler for that word!) deals with activities that are not monetized.

Although they are very different activities, they have a powerful aggregate impact on the money economy. In fact, their very disparity points to how widespread prosumerism is, and how important it is. Measuring things does not necessarily make them important, and unmeasured things are not necessarily unimportant. On the other hand, although I’m not a mathematician, I am an engineer, so I believe everything can, in principle, be measured, at least to some degree, by measuring a “surrogate” that is presumed to be analogous to the phenomenon at hand.

I'll leave it to you math geniuses, to figure out how....

So, I see the bifurcation of the manufacturing economy in the US - and it will be painful, but so was the Industrial Revolution. Split between highly mechanized production and the "prosumers". Here's an apocryphal story (and it has the added virtue of being true):

The Jacquard Loom is a mechanical loom, invented by Joseph Marie Jacquard in 1801, that simplifies the process of manufacturing textiles with complex patterns such as brocade and damask. The loom is controlled by pasteboard cards with punched holes, each row of which corresponds to one row of the design. Multiple rows of holes are punched on each card and the many cards that compose the design of the textile are strung together in order. It is based on earlier inventions by the Frenchmen Basile Bouchon (1725), Jean Falcon (1728) and Jacques Vaucanson (1740). This was part of my Econ History doctorate, so I know this story very well.

Each hole in the card corresponds to a "Bolus" hook, which can either be up or down. The hook raises or lowers the harness, which carries and guides the warp thread so that the weft will either lie above or below it. The sequence of raised and lowered threads is what creates the pattern. Each hook can be connected via the harness to a number of threads, allowing more than one repeat of a pattern. A loom with a 400 hook head might have four threads connected to each hook, resulting in a fabric that is 1600 warp ends wide with four repeats of the weave going across.

The Jacquard loom was the first machine to use punch cards to control a sequence of operations. Although it did no computation based on them, it is considered an important step in the history of computing hardware. The ability to change the pattern of the loom's weave by simply changing cards was an important conceptual precursor to the development of computer programming.

Now, this device, invented at the dawn of the Industrial Revolution, could be hooked up to dozens of looms, and produce beautiful, sophisticated textiles by the thousands of yards, very cheaply. Which, of course, put thousands of French weavers out of work. With no French Guvmint bailout to rescue them, the weavers treated like any good socialistic Luddite - they rioted. They took their wooden shoes (SABOT) and threw them into the infernal machines, thereby committing the act of sabot - age : sabotage.

The point is, the coming transformation will be painful, but we will get through it. We will have a money economy of highly intelligent machines (robots, if you will) manufacturing goods for sale here and abroad, designed built and maintained by American workers and a huge non-money economy of DYI types using the technology the money economy provides, to provide for themselves. - IF and only if, we have the guts to be flexible, agile and swallow our stupid pride and re-tool out skills to meet the paradigm shift. Or wallow in your "I'm a victim" status and become a ward of the state.

I'll leave the choice to you, because you own it ---->

The REAL Economic Tsunami - Part II

2008-12-09T08:45:00.015-05:00

"We (the US) are in the middle of an economic transformation the likes of which we haven't seen since the steam engine. Yes, people will be thrown out of work - for a while. Yes, companies will be in receivership, in order to re-organize - for a while. But the transformation will come, no matter what manner of backward, insane, neo-socialist, buggy-whip making stupidity the guvmint tries to inflict, And if the guvmint doesn't midwife this transformation, it will be stripped down against it's will too. We are moving, albeit slowly, into a new economic paradigm, in which KNOWLEDGE, will supersede information as the controlling factor - this means jobs will be discarded and replaced with new types of jobs, manufacturing will shift from human-based to machine-based labor, hell, even the very definiton of what a damn job IS will change. The end of the "job", if you will, is coming, and nothing can be done to stop it..

The end of the "job" as a way of organizing work, it is a social artifact that has outlived its usefulness. Its demise confronts everyone with unfamiliar risks -- and rich opportunities.

Each day's newspaper and blog carries another story of new job losses. We hear the recession has been in effect for quite a while. The coming Obama Administration is trying convince you that they can create jobs, but critics claim some of its new taxes and regulations will destroy jobs. We are told the only way to protect our jobs is to increase our productivity, but then we discover that business process re-engineering, using self-managed teams, flattening our organizations, and turning routine work over to computers always make many jobs redundant. We used to read predictions that by 2000 everyone would work 30-hour weeks, and the rest would be leisure. But as we approach 2010 it seems more likely that half of us will be working 60-hour weeks and the rest of us will be unemployed. What's wrong? It is not that the President or his critics don't care what happens to us, or that organizations that asked for our loyalty and grew because of our efforts have double-crossed us. The fault does not lie even with that dread monster overseas competition, which has been blamed for everything from unemployment to falling living standards. It's a shame these things are not the culprits, for if they were our task would be simpler.

The reality we face is much more troubling, for what is disappearing is not just a certain number of jobs -- or jobs in certain industries or jobs in some part of the country or even jobs in America as a whole. What is disappearing is the very thing itself: the job. That much sought after, much maligned social entity, a job, is vanishing like a species that has outlived its evolutionary time. A century from now Americans will look back and marvel that we couldn't see more clearly what was happening.

The job is an idea that emerged early in the 19th century to package the work that needed doing in the growing factories and bureaucracies of the industrializing nations. Before people had jobs, they worked just as hard but on shifting clusters of tasks, in a variety of locations, on a schedule set by the sun and the weather and the needs of the day. The modern job was a startling new idea -- and to many, an unpleasant and perhaps socially dangerous one. Critics claimed it was an unnatural and even inhuman way to work. They believed most people wouldn't be able to live with its demands. It is ironic that what started as a controversial concept ended up becoming the ultimate orthodoxy -- and that we're hooked on jobs. Now the world of work is changing again: The conditions that created jobs 200 years ago -- mass production and the large organization -- are disappearing. Technology enables us to automate the production line, where all those job holders used to do their repetitive tasks. Instead of long production runs where the same thing has to be done again and again, we are increasingly customizing production. Big firms, where most of the good jobs used to be, are unbundling activities and farming them out to little firms, which have created or taken over profitable niches. Public services are starting to be privatized, and government bureaucracy, the ultimate bastion of job security, is being thinned. With the disappearance of the conditions that created jobs, we are losing the need to package work in that way. No wonder jobs are disappearing."

Definitions of job on the Web:

occupation: the principal activity in your life that you do to earn money; "he's not in my line of business"
a specific piece of work required to be done as a duty or for a specific fee; "estimates of the city's loss on that job ranged as high as a million dollars"; "the job of repairing the engine took several hours"; "the endless task of classifying the samples"; "the farmer's morning chores"
a workplace; as in the expression "on the job";
an object worked on; a result produced by working; "he held the job in his left hand and worked on it with his right"
the responsibility to do something; "it is their job to print the truth"
the performance of a piece of work; "she did an outstanding job as Ophelia"; "he gave it up as a bad job"
a damaging piece of work; "dry rot did the job of destroying the barn"; "the barber did a real job on my hair"
problem: a state of difficulty that needs to be resolved; "she and her husband are having problems"; "it is always a job to contact him"; "urban problems such as traffic congestion and smog"
a Jewish hero in the Old Testament who maintained his faith in God in spite of afflictions that tested him
profit privately from public office and official business
any long-suffering person who withstands affliction without despairing
subcontract: arranged for contracted work to be done by others
(computer science) a program application that may consist of several steps but is a single logical unit
a book in the Old Testament containing Job's pleas to God about his afflictions and God's reply
work occasionally; "As a student I jobbed during the semester breaks"
caper: a crime (especially a robbery); "the gang pulled off a bank job in St. Louis"

Whew! That's lot to digest, but you get the idea - there are a lot of definitions for the word job, but for now, let's focus on "occupation: the principal activity in your life that you do to earn money". This is changing, and at an exponential rate - just as in calculus, the rate of the rate of change is increasing. One great example can be found at Toyota (just down the road from me in Georgetown, KY) - no one line worker has just one "job". They perform, as in olden pre-industrial revolution times, shifting clusters of tasks... but still on the assembly line, at the plant, in Georgetown. But this is a quantum change from the UAW, unionized paradigm of singular tasking, a la Frederick Taylor ( see http://en.wikipedia.org/wiki/Frederick_Winslow_Taylor for more). What is the "job" becoming? In a fast moving economy, jobs are rigid solutions to an elastic situation. I think it means: tasking is "permanent"; economies have always changed, so that it is necessary to have flexible solutions to solve problems in the tasks to be performed. For coming generations, the traditional job will never exist. Even the idea of the 9-5 job is becoming obsolete, simply because it's not good time management, and it's expensive. Productivity doesn't need a stop watch, or people poring over time sheets. All it needs is actual production and viable costs. The job monoculture no longer exists. You won't get vast crops of new accountants, herds of clerks, and fields of paper pushers anymore to be JUST accountants, etc. Bureaucracy is dying, and so is its infrastructure. They're inefficient. You don't need them any more. A spreadsheet, a document or so, and an email address will do. That's got rid of a lot of dead end jobs, and careers based mainly on inertia. Nor are you stuck with a career path which turns you into a clone of your parents. With the removal of the office motif, the workplace and the employment market are now a lot more advanced, and this is only the beginning. The new generations may never need to work under such restrictions, with so few options.

For job hunters, this may involve some good organization, and very good sources of information, but in practice, it works entirely in their favor. This is an extremely fluid workplace, and there are now multiple job opportunities, literally every second. You don't have to commit a whole day to just one job. Nor are you confined to just one career, or just one skill set. In the past, a person with multiple skills across multiple fields was very unusual. People specialized in one field. Their career choices were severely limited by that specialization. Now, you can accumulate multiple degrees, multiple qualifications, and transfer common skills across different professions. All the suffering caused by downsizing workforces and cost cutting in wages has had a very strange result. It's completely changed the entire concept of employment, both for employers and employees. What used to be a so-called good solid job now looks like a bad risk. Cheapskate wages and neurotic downsizing, particularly in the US, have added a lot of incentive to looking for much better ways of earning a living The rise of the contract worker, originally seen as the end of the world by the traditional job market, has worked well. The average contract worker has more choice than anybody in the employment market has ever had before. If you're prepared to do the work, you can make as much money as you can find in the contracts, and have some spare time for your own projects. You can even have a life.

And what about companies, corporations? Who will do the ...er, jobs? Well, you won't have jobs, I think, just task clustering. And corporations will become more like movie studios - project factories, with flexible scheduling, task assignment, even manufacturing (off-shored to some Third-World sh*thole no doubt, at least at first. Labor exploitation is part of the human genome you know). Manufacturing will return to the US, but it will performed by American made robots (!?!?!?) designed and maintained by, yes American workers, as one their clusters of tasks, as part of a project. Specifically, companies that have already begun to employ de-jobbed workers effectively seem to share at least four traits:

They encourage rank-and- file employees to make the kind of operating decisions that used to be reserved for managers.
They give people the information that they need to make such decisions -- information that used to be given only to managers.
They give employees lots of training to create the kind of understanding of business and financial issues that no one but an owner or an executive used to be concerned with.
They give people a stake in the fruits of their labor -- a share of company profits. The organization that wants to move down the path toward the post-job future must answer several key questions:

-- Is work being done by the right people? -- Are the core tasks -- requiring and protecting the special competencies of the organization -- being done in-house, and are other tasks being given to vendors or subcontractors, temps or term hires, or to the customers themselves? -- Are the people who do the work in each of those categories chosen in such a way that their desires, abilities, temperaments, and assets are matched with the demands of the task? -- Are such workers compensated in the most appropriate way? -- Is everyone involved -- not just the core employees -- given the business information they need to understand their part in the larger task? Do they have the understanding needed to think like business people? -- Does the way people are organized and managed help them complete their assignments, or does it tie them to outmoded expectations and job-based assumptions? Too often new ways of doing things are viewed as add-ons: "If we ever get a spare moment around here, let's flatten the organization chart!'' That's a big mistake, of course. Part of the reason there is so little time is that most of today's organizations are trying to use outmoded and underpowered organizational forms to do tomorrow's work. They insert an empowerment program here and a new profit-sharing plan there and then announce that those things aren't so great after all because profits are still falling. Such organizations won't have better results until they do two things. First, get rid of jobs. Second, redesign the organization to get the best out of a de- jobbed worker. A big task, sure. But like any evolutionary challenge, it will separate the survivors from the extinct.

More on this later ---> ONWARD!!!

The REAL Economic Tsunami - Part I

2008-12-09T07:18:00.021-05:00

I've been threatening to write about his for over a year now, so finally here goes:
the question really is - What the hell is going on? Why all this chaos in the economy, in world affairs is, well, everything?

Change, friends, change - and it ain't gonna be pretty. Here is the view from from low Earth orbit:

1. Root economic change
2. What is a job?
3. The death of US manufacturing
4. The death of traditional media (newspapers, etc.)
5. Monetizing manufacturing/media's replacement (in the US at least) - Web 2.0 and higher.

Now these are topics of biblical scale, so I'll probably end of tackling them one post at a time, but bear with me. You may realize a few things overtly, and maybe learn a few things you haven't thought of (or only in a tangential way).

Root causes/real outcomes -
The implosion of the US, and subsequently European, then Asian economies has been blamed on a variety of processes, from the toxicity of mortgage backed securities, derivative instruments values at 500% or more of actual asset value, to the self-immolation of the US auto industry - I could go on and on. But, as usual, there is a deeper meaning here, a deeper and more pivotal reason (or rather, set of reasons) that point to a more fundamental change in our world, how we work, interact, communicate and entertain ourselves. what's really going on here? Why are all these things happening now and all at once?

Many years ago, when I was working on my M.B.A., I tried to show a demonstrably more efficient way to use capital to replace labor, via the massive use of Information Technology at all levels of production: a radical idea at the time. Seemed like a slam-dunk at the time, I mean after all, there must be a solid reason why all corporations and even small businesses used PC's and networks to conduct the tasks that business required right? There must be demonstrable economic advantage to the use of IT, right? Or we wouldn't be doing it at such a massive level...right?

WRONG! Or at least my preliminary analysis showed that, by using GAAP (Generally Accepted Accounting Procedures), you could not show any advantage in the use of IT over a pencil and legal pad, to run a company. What? This can't be... or can it? Like Professor Bob Solow (1987 Nobel Prize, Economics) says, "You can see computers everywhere but in the productivity statistics." So does my old professor, Paul Strassmann (former CIO of the Department of Defense and Xerox). The debates about the productivity paradox range from strongly held biases and self-serving claims, to misused statistics, to facts. My own work, which is based entirely on verified, validated, and audited corporate data, has been involved in such discussions. Therefore, the credibility of my work depends entirely on the reliability and trustworthiness of that data and the analytical methods. And that's what I found - That GAAP cannot measure these kind of productivity numbers, so I turned to IFRP (International Financial Reporting Processes), and voila, the productivity numbers fell out. IFRP was more recent at the time, so what was really being measured here?

Indications are (as my pals at CIA like to say) that the world might be in the early stages of a major paradigm shift in global economic development. It is the root cause of most (if not ALL)social, political and economic instability and insecurity.

Eight points-
Root causes of the socio-economic crisis must/should be addressed simultaneously. Below is an eight-point list-in-progress of root causes.

• Anthropocentrism, the assumption of human superiority over nature.

• Unlimited, linear economic growth in a world dependent on nonrenewable resources and closed loop production cycles.

• Technology worship, the prevailing paradigm that technological evolution is invariably good and that problems caused by technology can be solved by more technology.

•Modern chemistry, the invention of substances that cannot be returned productively into the planet’s natural cycles. For many modern chemicals, such as DDT or PCBs, there are no organic counterparts capable of biologically degrading these substances.

• Domination of mass media (particularly TV and advertising) by viewpoints that serve the interests of the "smokestack" industrial world and suppress alternate views.

• The concentration of power amongst corporate executives and owners, and the consequent loss of democratic empowerment that has been profoundly detrimental to human beings.

• The absence of long-term time perspectives: actions based on the desire for short-term gratification can degrade the conditions for life and reduce options for subsequent generations.

• Lack of education in industrial cultures in general systems theory or whole-systems thinking leading to ignorance in the "quantum connectivity" or impacts of one set of actions upon another, on a global basis.

Now, don't mistake this for a hippy-dippy, "one world is enough" clarion call. It's practical. My contention is that these eight conditions are contributing to the real economic tsunami that is about to hit us. And like the Industrial Revolution before (the so-called "information revolution" is just a prelimenary ripple), it will affect everyone on the planet, with the attendany "law of unforseen consequences" vaporizing our current world view of the nature of work.

More on my next post----> stay tuned, talk amongst yourself and discus!

Why I hate everyone I went to high school with..

2008-11-18T20:29:00.003-05:00

Why I hate everyone I went to high school with..

People bullied me for no apparent reason.
A rumor has been going around about me the last 36 years that is not true and people that I don't even talk to, believe it and it really makes me mad!
so much relationship/friendship drama
some of the teachers are more fun then helpful
the rich kids lorded it over the poor kids...guess where I was?
class warfare - 38 years later, class warfare
Graduation day was easily one of the happiest days of my life...and a week before, I received death threats at my home.
the girls were evil and self centered and mean and hateful and cruel. They guys were just nasty..
The jocks and preps who thought I was weak AND stupid, even though I lettered in two sports with 7 total medals in 3 years at the state championships. JESUS GOD!
the teachers at my school were nothing more than glorified prison guards and it wasn't till i left school that i began to start learning
I have never been to a single one of my high school reunions. There are two main reasons:
First of all, I can't stand the thought of the people who made my life a living you-know-what coming up to me and saying, "Oh, remember all the GOOD times we had?" like nothing happened.
Second, I've had people (my own sister, for one) tell me that I should go to see "who got fat and bald". That is not my idea of enjoyment. I don't get jollies from other people's misery (and who's to say that they ARE miserable? Maybe they're fat, bald and happy - and all the best to them).
I graduated with close to 1,000 kids - I keep in touch with less than 5.
To be concise and clear, I have spent the last 30+ years trying to improve myself. i got the DOD to send me back to school twice - for a BSEE, then to the Naval War College, where I got my PhD in Economic History (you had to back in the '80s to get promoted). Then I persuaded an employer to pay for my M.B.A. and you know what? It doesn't matter one whit to those self-absorbed morons - they still (we're all @ 52yo) talk to me like I'm something they scraped off their shoe. I'm not one of the "special people", and never will be, and I don't know what possessed me to make contact with those assholes again

Just goes to show how wrong you can be....

The Warning

2008-11-18T08:18:00.004-05:00

When it was released, David Halberstam said the The Reckoning was his most ambitious of the trilogy on American power; the earlier two were on politics and the media.
Halberstam described why he wrote the book. “One day I was on a book tour and I kept noticing that Chrysler was almost gone, Ford was in trouble, all those great American companies were (gone). ... The Japanese were taking cars, which was an American signature, and doing better at them. I didn't see it as a business story. I saw it as a social cultural story."

In economist John Kenneth Galbraith's New York Times 1986 review of the book, he said the result of Detroit’s downfall is that "life for most Americans (is) bound to become leaner. But in the middle of 1986, there seems to be little awareness of this, let alone concern about it."
Indeed, that was Halberstam's gloomy conclusion of The Reckoning. He wrote: "No country, including America, was likely ever to be as rich as America had been from 1945 to 1975, and other nations were following the Japanese into middle-class existence, which meant that life for most Americans was bound to become leaner. But in the middle of 1986, there seemed little awareness of this, let alone concern about it. Few were discussing how best to adjust the nation to an age of somewhat diminished expectations, or how to marshal its abundant resources for survival in a harsh, unforgiving new world, or how to spread the inevitable sacrifices equitably."

Amen. And the review on Associated Content of April 17 said: “Although The Reckoning is a 20-year-old book, its message has never been truer than it is now as America's once leading automobile industry is heading for deep decline. In my opinion, Halberstam's book should be retitled The Warning. By the time this book was published in 1986, the United States had already gone through two devastating energy crises orchestrated by OPEC. While Ford Motor had experienced some success with its energy-conscious Ford Taurus, the production emphasis was still on gas-guzzling trucks and luxury vehicles. While praising Nissan and other Japanese car companies' business model of affordability, fuel economy and quality control, [Halberstam] doesn't completely let them off the hook in his description of Nissan's union strife in the Fifties.

“In the meantime, in 2007, the price of gasoline is over $3 a gallon, the Iranians are once again threatening the Straits of Hormuz, Ford has laid off thousands of workers, Toyota is now the world's second largest carmaker,” the column written April 17 concluded.

Make that gasoline that could hit $4 gallon and, as of this morning, Toyota is the world’s No. 1 automaker.

What 99% of the people out there, including the politicians (who constantly yammer about "the American Dream". as if they even know or care about what that is) don't understand, is that the 30 year ascendancy of American economic hegemony was a complete anomaly - an accident, if you will, just like Spruance winning the Battle of Midway.
Think about it - from 1948 to 1978, the US workforce was flooded with new college graduates (thanks to the G.I. Bill) and worldly war veteran high school graduates, moving into a newly dynamic industrial base, that grew faster than Guth's inflationary universe... with abundant negative consequences. By the '70's (which I remember ALL to well), Kodak had "workers" napping in film rooms, G.E. had engineers and such (not executives) on the local golf course, and the American work force had become a hyper-bloated warthog from hell by 1978. Change that nibbled on the edges came in the '80's and 90's, but now the same worthless gang of idiots is running GM/Ford/Chrysler, et al, making cars nobody wants or needs, thinking that more (not better) marketing and adding gadgets will boost sales of inferior products. And now they have their collective hands out for guvmint money.

Well, I say - "Fu*k 'Em!
We (the US) are in the middle of an economic transformation the likes of which we haven't seen since the steam engine. Yes, people will be thrown out of work - for a while. Yes, companies will be in receivership, in order to re-organize - for a while. But the transformation will come, no matter what manner of backward, insane, neo-socialist, buggy-whip making stupidity the guvmint tries to inflict, And if the guvmint doesn't midwife this transformation, it will be stripped down against it's will too. We are moving, albeit slowly, into a new economic paradigm, in which KNOWLEDGE, will supersede information as the controlling factor - this means jobs will be discarded and replaced with new types of jobs, manufacturing will shift from human-based to machine-based labor, hell, even the very definiton of what a damn job IS will change. The end of the "job", if you will, is coming, and nothing can be done to stop it..

The end of the "job" as a way of organizing work, it is a social artifact that has outlived its usefulness. Its demise confronts everyone with unfamiliar risks -- and rich opportunities.
Each day's newspaper and blog carries another story of new job losses. We hear the recession has been in effect for quite a while. The coming Obama Administration is trying convince you that they can create jobs, but critics claim some of its new taxes and regulations will destroy jobs. We are told the only way to protect our jobs is to increase our productivity, but then we discover that business process re-engineering, using self-managed teams, flattening our organizations, and turning routine work over to computers always make many jobs redundant. We used to read predictions that by 2000 everyone would work 30-hour weeks, and the rest would be leisure. But as we approach 2010 it seems more likely that half of us will be working 60-hour weeks and the rest of us will be unemployed. What's wrong? It is not that the President or his critics don't care what happens to us, or that organizations that asked for our loyalty and grew because of our efforts have double-crossed us. The fault does not lie even with that dread monster overseas competition, which has been blamed for everything from unemployment to falling living standards. It's a shame these things are not the culprits, for if they were our task would be simpler.

The reality we face is much more troubling, for what is disappearing is not just a certain number of jobs -- or jobs in certain industries or jobs in some part of the country or even jobs in America as a whole. What is disappearing is the very thing itself: the job. That much sought after, much maligned social entity, a job, is vanishing like a species that has outlived its evolutionary time. A century from now Americans will look back and marvel that we couldn't see more clearly what was happening.
The job is an idea that emerged early in the 19th century to package the work that needed doing in the growing factories and bureaucracies of the industrializing nations. Before people had jobs, they worked just as hard but on shifting clusters of tasks, in a variety of locations, on a schedule set by the sun and the weather and the needs of the day. The modern job was a startling new idea -- and to many, an unpleasant and perhaps socially dangerous one. Critics claimed it was an unnatural and even inhuman way to work. They believed most people wouldn't be able to live with its demands. It is ironic that what started as a controversial concept ended up becoming the ultimate orthodoxy -- and that we're hooked on jobs. Now the world of work is changing again: The conditions that created jobs 200 years ago -- mass production and the large organization -- are disappearing. Technology enables us to automate the production line, where all those job holders used to do their repetitive tasks. Instead of long production runs where the same thing has to be done again and again, we are increasingly customizing production. Big firms, where most of the good jobs used to be, are unbundling activities and farming them out to little firms, which have created or taken over profitable niches. Public services are starting to be privatized, and government bureaucracy, the ultimate bastion of job security, is being thinned. With the disappearance of the conditions that created jobs, we are losing the need to package work in that way. No wonder jobs are disappearing.
"People get ready - There's a change a-comin'"
more on this rant to come....

GM "bailout" and the buggy whip syndrome...

2008-11-13T06:59:00.005-05:00

Good God, what year is it? 1908?

GM is peddling fast to make a comeback from the brink of extinction. In the case of the auto manufacturer, the problem hasn’t necessarily been superior foreign competition. GM has been struggling out from under the weight of a “buggy-whip maker” syndrome, a syndrome that GM itself participated in at the turn of the century, when the auto industry began to displace entrenched, horse-drawn craft. When your product, no matter how good,is no longer found to be useful, it’s time to get off the track before the innovative express flattens you. If you’re a buggy-whip maker, you can have a legendary history (GM does) and a line of products unsurpassed by others (GM does), but excellence isn’t going to save car dealers.

You might have expected that the company that invented heavy-duty manufacturing and decentralized financial management, would have been faster to rethink,retool, and reinvent itself, but progress has been slow and more painful than expected. You can now choose from among a line of GM cars and trucks, with a few "experimental" flex fuel trinkets thrown in as an afterthought, OR choose a more robust car from Honda or Toyota (and others on the way) that offers the same (or better quality) for less cash, and straight-up H2 or electric vehicles already in the pipeline.

There already IS a bailout system in this country - it's called Chapter 11 bankruptcy. GM won't go away, and a draconian purge of the current (mis) management team wil be the kind of caustic medicine needed to kick the alternative energy revolution in the ass... and serve notice to the other automakers. Tom Friedman has got this right in his NYT op-ed: the Wall Street Journal said on Monday by Paul Ingrassia, a former Detroit bureau chief for that paper.

“In return for any direct government aid,” he wrote, “the board and the management [of G.M.] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver — someone hard-nosed and nonpolitical — should have broad power to revamp G.M. with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company ... Giving G.M. a blank check — which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant — would be an enormous mistake.”

I would add other conditions: Any car company that gets taxpayer money must demonstrate a plan for transforming every vehicle in its fleet to a hybrid-electric engine with flex-fuel capability, so its entire fleet can also run on next generation cellulosic ethanol.

Let 'em die on the vine, then rise from the ashes.

Marx a la Redux

2008-10-18T15:18:00.003-04:00

Nearly forgot this gem - a review of the demands contained in the Communist Manifesto - under the email heading "Any of this look familiar?"

Taken from the online version of "The Communist Manifesto" at http://www.gutenberg.org/etext/61

10 Planks of the Communist Manifesto

1. Abolition of property in land and application of all rents of land to public purposes.
2. A heavy progressive or graduated income tax.
3. Abolition of all right of inheritance.
4. Confiscation of the property of all emigrants and rebels.
5. Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.
6. Centralization of the means of communication and transport in the hands of the State.
7. Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally in accordance with a common plan.
8. Equal liability of all to labor. Establishment of industrial armies, especially for agriculture.
9. Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country, by a more equable distribution of the population over the country.
10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, &c., &c.[5]

Pass the pitchfork yet?

russell

There's been a lotta crap lately....

2008-10-18T14:13:00.003-04:00

...about the latest financial "crisis" - apparently nobody can remember back to 1987 or (God help you) 1975. These are both years I remember quite well, because they both had economic implosions, and the same, dog-tired, old, retread crap that one hears now in the dinosaur media was bleated back then. "Financial meltdown, the end of capitalism, etc., etc. It's all CRAP!

In capitalism. markets are SUPPOSED TO FAIL - from time to time. That's how the system flushes out the suckers, but since no one from Ben Stein to Lou Dobbs seems to get this, here is a re-cap of my weeks e-mailings on this matter -

"OK OK OK!

Everybody just calm down!

Jim sent out an interesting powerpoint on the current, so-called "crisis"... sorry Jim, but that thing engaged in FAR too much "Republicans Good" - "Democrats Bad" nonsense. There is enough blame to go around here, but I am sick and tired of this stupid "teamism" going around... You all know me, and by that knot, you know that I HATE all politicians - they are all gangsters and pirates and all need to be dumped in the drink. So there. Now, after sitting down and reading all I could get my hands on, from all sides of the question, here is my take on what really has happened - no blame game, no third grade recess "teacher, he's touching me again" baby talk!

Read it a and weep -

The government, wall st., and everyday average citizens wanted more people to buy and own houses. Instead of traditional loan procedures like good credit, jobs, income level, collateral, and 10-20 percent downpayments, ALL of the above mentioned people thought it would be a good idea to sell loans to people with a good interest rate and low downpayment, when these people couldn't afford it, had bad credit or no credit, little to no collateral, and maybe even no job. These people, obviously, began to default on these loans because as you can imagine, they could not afford it in the first place. Now, again, the blame lies EVERYWHERE. From Wall St. to the Clinton presidency to the Bush presidency to everyday people like you and me. Everyone thought, for some reason that this would, in the end, be a good plan to increase home sales and ownership.

Now, if you don't know anything about economics, read the following closely - contact me if you have questions. Read on..

These loans were then used to back or leverage other deals and transactions, thinking that the interest/payments paid on these loans would more than pay for any other transactions made. These transactions were "mortgage backed" transactions. When people started missing their payments, all of the sudden these "mortgage backed" transactions were not funded any longer. This drove the value of these mortgages as investment tools down to almost nothing. No one would buy them, no one would sell them- which equals death in the market. They became what people call "toxic" or unable to move at all either buying or selling, they are worthless. These investment houses and banks owned so much of these mortgage backed expenses that it absolutely overwhelmed them. It would be like if you owned a business that sold furniture. All of the sudden the furniture was worthless, but you still owed your creditors, the utilities, the rent on your store, and could not pay them because your inventory was worthless. You would go out of business. That is a weak example, because it doesn't take so many things into consideration, but you get the idea.

However, there are real houses out there that are certainly "worth" something, AS LONG AS THERE ARE PEOPLE IN THEM MAKING PAYMENTS ON THEIR MORTGAGES.. That is the government's "bail out" plan. To infuse enough money back into these "toxic" assets in order to get them trading again, and to get people back in them that will pay their mortgages fully and on time. Then, in the near future, these assets will no longer be "toxic" because this money infusion goal is to get people back in them paying their mortgages, which in turn will hopefully make them EXTREMELY valuable, and maybe even make the government 7-10% in gains over the next few years.

Now to Part 2 of this mess -

All of this also leans into the credit market, especially the overnight lending which usually occurs between banks to keep loans/etc. afloat. This has virtually stopped. I heard yesterday that if you want a car loan, unless you have at least a 720 credit score, you will 100% not get one. Loans for businesses & banks to stay active, trading and working is crucial. So this is the "credit crisis". Banks are hoarding cash and not lending it to ANYONE without the most pristine credit. So this adds to the already terrible problem. So much more but I have not the time to explain it all.

SO, the big question is, will all of this work? Let's all hope so, because there are seemingly no other options on the table. Whether you agree with Democrats or Republicans, it doesn't really matter in this case. We will ALL come down if this doesn't work. Oversight, Oversight Oversight on the money is needed. Brilliant people need to be in charge, and like I said, politics must take a back seat. Paulson, by all accounts, and from EVERYONE I know and have heard, is a brilliant man. Whether this power corrupts him is yet to be seen but I am sure he has the best intentions.

One more note - it would cost the government (that's you and me people), depending on which set of numbers you vet, 144 to 202 billion dollars to just BUY THE TOXIC PAPER OUTRIGHT! Now, I'm no socialist, but it seems to me that the guvmint is giving this money to the wrong people, 'cuz if the bad mortgages are PAID, everyone makes out. Then the FHA/VHA/whatever, can re-issue a, let's call it a certificate, to the current home squatter that is the equivalent to a 99 year mortgage, or the occupant has the option to be evicted. Either way, it would go a long way to solving this w/o giving away a trillion bucks or more.

'nuff said

russell"

Eve Jagger wrote:
> Russ
> That was a helpful explanation for people like myself. Makes much more sense now. What do you predict is going to happen these next few months and how will this affect average americans?

Eve-
If this is managed correctly - and I have absolutely no faith that it will be - forget about getting ANY kind of loan for ANYTHING for 18 - 38 months. The guvmint needs to set up a resolution trust entity to buy up the toxic paper then, as I said previous -"BUY THE TOXIC PAPER OUTRIGHT! Now, I'm no socialist, but it seems to me that the guvmint is giving this money to the wrong people, 'cuz if the bad mortgages are PAID, everyone makes out. Then the FHA/VHA/whatever, can re-issue a, let's call it a certificate, to the current home squatter that is the equivalent to a 99 year mortgage, or the occupant has the option to be evicted."

At this point the toxic paper can be liquidated at a static rate, or the guvmint (IE, taxpayers) will eventually make money on the deal - but his will take TIME. The spillover is going to get worse, but not catastrophic - yet. I quote myself yet again -"leans into the credit market, especially the overnight lending which usually occurs between banks to keep loans/etc. afloat. This has virtually stopped. I heard yesterday that if you want a car loan, unless you have at least a 720 credit score, you will 100% not get one. Loans for businesses & banks to stay active, trading and working is crucial. So this is the "credit crisis". Banks are hoarding cash and not lending it to ANYONE without the most pristine credit. So this adds to the already terrible problem". So hang on to your car for a while, and rent... don't even attempt a mortgage for the time I specified.

Check the following :

http://en.wikipedia.org/wiki/Mortgage_securities
AND
http://en.wikipedia.org/wiki/Credit_derivative#Types

The S*** will hit the fan when the guvmint bailout fails, (and it will fail -see my statement of non-faith, above) and Congress will or can no longer fund this illegal give away of our money. Then the finance houses will HAVE to declare bankruptcy, and during the due diligence and discovery process of the proceeding, we find out that credit derivative investments (mostly unfunded paper) have a real world value of about 2 - 5% of their book value.

Then it will be "Pass the pitchfork, comrade"...

Learn survival skills from Kieth, and hang on.

russell

Donna Williams sent me an email on McCain's proposal to renegotiate bad mortgages - I replied -

Donna-

Yeah, I caught that last night too -- it is exactly what I recommended in an email exchange with some of my people about 3 weeks ago - I am quoting my favorite economist... ME! Read on -

" However, there are real houses out there that are certainly "worth" something, AS LONG AS THERE ARE PEOPLE IN THEM MAKING PAYMENTS ON THEIR MORTGAGES.. That is the government's "bail out" plan. To infuse enough money back into these "toxic" assets in order to get them trading again, and to get people back in them that will pay their mortgages fully and on time. Then, in the near future, these assets will no longer be "toxic" because this money infusion goal is to get people back in them paying their mortgages, which in turn will hopefully make them EXTREMELY valuable, and maybe even make the government 7-10% in gains over the next few years."

" If this is managed correctly - and I have absolutely no faith that it will be - forget about getting ANY kind of loan for ANYTHING for 18 - 38 months. The guvmint needs to set up a resolution trust entity to buy up the toxic paper then, as I said previous" (emphasizing my own genius)

"One more note - it would cost the government (that's you and me people), depending on which set of numbers you vet, 144 to 202 billion dollars to just BUY THE TOXIC PAPER OUTRIGHT! Now, I'm no socialist, but it seems to me that the guvmint is giving this money to the wrong people, 'cuz if the bad mortgages are PAID, everyone makes out. Then the FHA/VHA/whatever, can re-issue a, let's call it a certificate, to the current home squatter that is the equivalent to a 99 year mortgage, or the occupant has the option to be evicted. Either way, it would go a long way to solving this w/o giving away a trillion bucks or more."

But Donna, it will never be done - this has been in the planning, not by some global conspiracy, but by like-minded elitists, for decades now. And now the actions is being takes to destroy, first the US economy, then the rest of the world. Depressing isn't it? And there is nothing that can be done about it, short of... well nothing really. It's all part of the plan my dear...

'nuff said

russell

I concluded the week quoting from George Orwell's 1984 -

Sad song, sad song =

"After the revolutionary period of the fifties and sixties, society regrouped itself, as always, into High, Middle, and Low. But the new High group, unlike all its forerunners, did not act upon instinct but knew what was needed to safeguard its position. It had long been realized that the only secure basis for oligarchy is collectivism. Wealth and privilege are most easily defended when they are possessed jointly. The so-called 'abolition of private property' which took place in the middle years of the century meant, in effect, the concentration of property in far fewer hands than before: but with this difference, that the new owners were a group instead of a mass of individuals. Individually, no member of the Party owns anything, except petty personal belongings. Collectively, the Party owns everything in Oceania, because it controls everything, and disposes of the products as it thinks fit. In the years following the Revolution it was able to step into this commanding position almost unopposed, because the whole process was represented as an act of collectivization. It had always been assumed that if the capitalist class were expropriated, Socialism must follow: and unquestionably the capitalists had been expropriated. Factories, mines, land, houses, transport -- everything had been taken away from them: and since these things were no longer private property, it followed that they must be public property. Ingsoc, which grew out of the earlier Socialist movement and inherited its phraseology, has in fact carried out the main item in the Socialist programme; with the result, foreseen and intended beforehand, that economic inequality has been made permanent."

THE THEORY AND PRACTICE OF OLIGARCHICAL COLLECTIVISM

by Emmanuel Goldstein

(The 'Book within a Book' from George Orwell's Nineteen Eighty-Four)

passer la fourche camarade -

russell

A word about the rant process...

2008-09-15T09:09:00.002-04:00

The reason I embarked on this series is that I got off on an email rant with Ramesh (LinkedIn buddy) on this stuff and he said "well then my very good friend, why don't you publish the damned thing!". Well 400 plus pages and the graphs and references to people you ( and all the other on the list) never heard of required that I SEVERELY edit it down - I've left out a LOT, but it got it out of my system.

Thanks to all

russell