Tuesday, January 31, 2012

The Brittleness of Stupidity

The "brittle system" idea has been bouncing around here for a few weeks - the idea that the U.S. and many other Western governments and societies have systems in place that allow for no flexibility or the entire thing comes unwound.  This is especially true in the paranoid/crony capitalist/security state machine which requires terrorists behind every For Sale sign in America.
Here is a story out of LAX that illustrates what happens to the "Security" machine as it plays out towards the unraveling:

US bars friends over Twitter joke
by Andrew Parker, The Sun
Two pals were barred from entering the US after innocent tweets joking about "destroying America" were picked up by the country's anti-terror cops.

US special agents monitoring Twitter spotted Leigh Van Bryan's messages weeks before he left for a holiday in Los Angeles with pal Emily Bunting...

...They spent 12 hours in separate holding cells and were then put on a flight home.

Leigh, 26, was kept under armed guard in a cell with Mexican drug dealers. The Department of Homeland Security flagged up Leigh as a potential threat when he posted a Twitter message to his pals ahead of his trip to Hollywood.

It read: "Free this week, for quick gossip/prep before I go and destroy America"...

It is this kind of nonsense that, if allowed to continue to metastisize, that will undermine what is left of the Republic.  Everything is a major emergency in the eyes of the paranoiacs in the Security State.  There is not room for gradation or risk analysis or anything approaching an adult response to this.  It is either, you are a subject of the empire/tax sheep or you are a target.

Plus, this kind of thing leaves the "Security" services wide open to spoofing and hoaxes.  Ugh.

Tuesday, January 24, 2012


The last post was a wee bit disjointed.  I am having some troubles coalescing my thoughts.

Here is where I am stuck - I continue to use the socionomic model as my guide to the general lay of the land, so to speak.  Having been witness, as you all have, to the tech bubble and the housing bubble, and living in the waning days of the Big Government Bubble, the idea that mass herding effects drive events is not hard to accept.

Where I am stumbling is really what to say about, and how to prepare for, events in the early days of a steep and quick downturn in mood, when we are swept up in the vast river of mood and have to grab at a branch floating by just to stay afloat.  I still agree with a variety of analysts out there that financial markets and the world system in general is quite vulnerable to a significant dislocation.  Our systems are brittle and a mass stampede away from "risk" and away from trust, good will, harmony, a generally honest government, and all the other emotions that were considered as "givens" as our current way of life established itself, could result in some big failures, big dislocations, big headaches and, sadly, big violence.

I am also fairly comfortable with where this tide will carry us - a lot of violence, possibly insurrections, a severe degradation in trust between unlike groups, the degradation of civil structures, the rise of organized private violence in areas, mass poverty as the enormous debts run up during the last few decades comes unwound, the rise of angry religious cults, and in general, an ugly 14th Century feel to a lot of things.

I am not comfortable with is this ongoing rally period in the sense that I am not good at gauging how to take advantage of it via the markets or via positioning myself in a social or even geographic sense.  Frankly, back when I was actively trading, I sucked at these types of markets.  Now, not being in the market at the moment allows me to ponder what to do should we get this dislocation to the downside I expect.

Why worry about it, you ask?  Well, the thing is, many of the choices and decisions that get made in a time of crisis or as a "temporary" fix, have a bad habit of sticking around and becoming the new structures we build our stories and societies around when we pass through the tear-down phase of the bear mentality and get back into a building-up, bullish mentality as a society.  And frankly, I expect the tear-down to be significant when Primary Wave 3 engages to the downside.

When I recommend being a bridge-builder and active member in your local area, I am thinking in terms of you being like a seed that sprouts after a fire devastates a forest.  Lot's of other competing organisms are out there.  Much of the population seems to long for a final authoritarian clamp-down in this country.  As a beliver in the Republic and as a believer in the Bill of Rights and Constitution, I continue to be sickened as policy after policy comes out of D.C., and frankly, out of political capitals around the world, that leverage technologies to spy on, harass, and crush those opposed to whatever public/private looting regime is in place at the time (Jon Corzine, et al).

Being a strong citizen, being someone who helps out others, who shows that free individuals can move mountains when they work well together, who values liberty - that is something that I hope can help offset this coming black tide.  No guarantees, of course, but your decisions and actions in the coming Crisis will matter, it will help shape the mold into which our melted society will be recast in the years to come, a society that will then have to face Supercycle Wave C, but that is a tale for a different day...

Friday, January 20, 2012

In the Days Following a Plunge

I’ve been mulling over what we in the U.S. might see in the short run should mood turn very negative, very quickly. The assumptions that go into the following thought experiment include:

  • Big pieces of the current system (finance, insurance, real estate, consumer spending, new business development, farming), where access to easy credit underpins nearly every single financial transaction or decision that occurs in the U.S., is “brittle.” By “brittle” I mean that things work very well and very efficiently as long as individuals and firms have access to easy credit to finance operations. Should that credit be choked off via bankruptcies in the financial sector (MF Global, anyone?) and the fear associated with such a bankruptcy, the removal of access to credit would be like removing the fuel in an airliner 50,000 feet up – things are great, until they aren’t.
  • Speaking of farming, in hand with the brittle nature of the credit system, modern farming continues to come up in my mind when I think about the vulnerability of the current way of life we have built for ourselves. The vast majority of people have no idea just how reliant most farmers are on credit to get a crop in. Modern farming is very productive, but very brittle as well – it is like an efficient factory relying on just-in-time inventory. Take out easy access to relatively cheap fuels and man-made fertilizers, take out access to credit to buy those inputs and vast portions of farming in the U.S. would plummet in productivity. The way we farm today is totally reliant on modern inputs. Most soils are in very bad shape and could not be very productive should farmers be forced to return to more robust, if less efficient methods of farming. That is a long way of saying food is on my mind. We won’t be starving here in the U.S. any time soon, but as goes credit, so goes modern farming in the short run. 
  • The immediate result of a market collapse or major disruptions due to war will not lead to a Mad Max environment in the short term. Most populations handle short-term disasters or disruptions by being neighborly and dealing with it. A bank holiday is more likely to lead to a lot of pot luck dinners with neighbors or group meals at church or at the Rotary Club than to tanks in the streets – in the short term
  • War, even a war with a limited deployment of nuclear weapons – and even if some of those weapons went off in the U.S., will not result in an apocalyptic end-game of famine, shortage and environmental disaster. The wave count gives us a good chance at a war, but remember, you will still have to get up and be productive in some way, the sun will still rise, even if Teheran is nuked and refineries bombed in Saudi Arabia. Nuclear weapons are horrible, but they are not world-ending devices, despite the hype.

So what is my point here?

Well, I wonder about what happens in the month following a rush of events. How will we tell ourselves the story of our coming plunge in negative mood? It could be something like a banking collapse that results in bank holidays around the globe as regulators and financiers try and patch things up, a bombing campaign against Iran that results in blowback including a temporary closure of the Straits of Hormuz and some damage to Saudi Arabian petroleum delivery and refinery assets, anger directed by the “99%” against the “1%,” etc.

What would that mean to you and yours?

What Happens in the First Month After a Financial Collapse?

The short answer is, I don’t know. I have no idea how a highly interdependent global economy built on structures put in place in an era of cheap transportation fuels and extremely positive mood, high trust, and reliant on highly efficient movements of goods and credit would handle a new environment of very negative mood, low trust, expensive transportation fuels and little available credit.

There would of course be the initial shock. Many people are heavily reliant on debit and credit cards and carry far less cash than would have been the norm 30 years ago. What happens to the vast array of automatic bill pays and automated deposits that keep the wheels of commerce turning if regulators tried to implement a bank holiday? I haven’t cashed a physical paycheck in over ten years. How would credit rating agencies handle all the late payments on your credit score? Would there be anyone who gives a crap about your credit score a year later anyway? How would local businesses handle their cash deposits?

What happens when you make it home and see on the TV that some someones have bombed suspected nuclear sites all across Iran, along with bases and buildings belonging to the Army of the Guardians of the Islamic Revolution and Iranian Naval assets. Over dinner, you hear rumors being reported of fires at the Ras Tanura complex in Saudi Arabia and of Shi’ite uprisings in the east of the Kingdom that have caused damage to pipelines and infrastructure. You recall that you only had a quarter tank of gas in the car…

You make it to the end of the week. Your job will be affected, one way or the other, by these events. Are you in real estate, insurance or finance? You may have angry customers, worried customers, or no customers, depending on where you sit. Are you in long haul trucking? You may have real issues with fuel costs and maybe even fuel availability, especially as news of the U.S. involvement in Iranian regime change grows and rumors of fuel rationing spread.

Occupy protests would probably grow in intensity. Even now, no one is still sure of what to do with the anger expressed by that movement, but they would spread, especially as many workers will have been sent home on short weeks as small businesses worry about being able to pay employees or access their money and credit once the banks reopen...

And Then?

If a negative mood event kicks off in such a manner, there will be plenty to worry about. I do not know your situation, but please do keep a few things in mind:

  • If we apply socionomics, remember that mood is a herding event. It is tough, but you don’t have to participate. Be aware, but spinning around in worry and fear does no one any good. 
  • Be a positive bridge-builder in your immediate area. Get outside, talk with neighbors. Organize a potluck dinner at your house or a block party or a neighborhood dinner at local church or school. Do something that allows people to share a little and get a benefit of a positive communal interaction – being able to share some beans or a ham that has been in your freezer since Christmas, but get a meal out of the deal that allows you feed the kids some fresh vegetables or a fresh dessert at a potluck can go a long way to helping your frame of mind.
  • Be aware that past wealth-building strategies may no longer work in this environment. Easy credit for real estate speculation has already dried up. Other strategies, such as internet businesses that rely on credit transactions and cheap outsourced manufacturing overseas will face the headwinds of bank problems, trade barriers and possibly high transportation costs.
  • Cash on hand is great, but don’t flaunt it. “Flaunt it if you got it” is a philosophy that already rings hollow and will got out the window in an era of deep negative mood. Blend in. Be helpful. Don’t rouse envy.
  • Have some board games and decks of cards. In times of trouble it might be best to turn off the TV and spend get your mind off the fear out there and focus on games with family and friends.

I don’t have “the” answer as to how to make money a month into a negative mood event. You will see how things are trending. Know these things move in waves. Be ready to think differently. There may be many very successful people with large sums in the bank that never see that money again. There will be vast upheavals in politics and law. In the early days of a plunge, the world won’t end, though it may seem like it at times. Be ready to do a lot more comforting, bridge building and befriending than spending time looking for the best angle to make a buck.

The will rise every morning.  What you do with those mornings is what will define the future.

Further thoughts on how to handle a major credit and world crisis in the month following the first big sign of the drop?


Thursday, January 5, 2012

Socionomic Trendspotting 2012

Well, 2012 is here. That creaking noise you hear is the sound of the superstructure of Western finance, politics and popular society weakening. The world we here in the U.S. have constructed for ourselves, based on fractional reserve lending, fiat money, crony capitalism, enormous public and private indebtedness, world-wide military commitments, privatization of prisons and security functions, all slaved to a hyperactive and paranoid security state, is crumbling. When the mood that supports this worldview turns against it, either a spectacular crash is going to follow, or a long, grinding year of disappointment, anger and increasing tension.

In this edition of Socionomic Trendspotting, we will step back and try to see where the debris is going to fall, in an attempt to use a “macro” gauge like socionomics to help you plan on the “micro” level. I’ll try and adhere to Alan Hall’s Principles for Applying Socionomics and hopefully we can tease something useful from the trends.

Now, on to 2012…

The Maya Calendar Countdown

I’ve had a Maya Calendar Countdown at the bottom of the blog for several years now. At one time I thought this meme might grow into something influential enough to affect more than book and movie sales. I was viewing this as a vehicle that could possibly be used as an outlet for anger or even violence and maybe even serve as a large cult meme. Unless something significant changes, the “End of the World” in December, 2012, will probably pass with little to no related violence or organized trauma.

However, this topic can serve as a placeholder for something that could grow in 2012 and that is a variety of cults and gangs as more and more people become angry at “the system” and actually begin doing something about it.

Action Items: Like a lot of “alternative” movements, you can expect a lot of failures, a lot of bad press, some crazies and the occasional odd success as the “resilient community” meme and other movements struggle to rise up as our larger society begins to fail more and more people. Be aware of the alternative movements and find what is useful in them, but avoid the “true believer” trap.

Eat the Rich?

Will this be the year the worm turns for the “Masters of the Universe” who have, shall we say, not quite lived up to their fabled intelligence nor their fiduciary responsibilities in many cases over the past decade? Maybe not, but if mood does turn, I expect this to be one of the outlets people will use to express their anger.

I’ve set out the warning about show trials or scapegoating (in some cases, warranted) of the financier class in the past, only to be proven stunningly wrong by both mass mood and an Eric Holder. An Eric Holder is an inert form of matter currently occupying a chair in the Attorney General’s Office, an office that has spent more time worrying about Barry Bonds, Cam Newton’s dad and Roger Clemens than it has in pursuing the root of the rampant mortgage market frauds perpetrated during the Bubble, as well as the various frauds inflicted on the public by the big banks that get minor civil penalties but no criminal time.

The blatant travesty that was the MF Global Collapse continues to unwind and yet John Corzine is still free. Perhaps I am still too early, but I’ll say it again, the financier class has too much money and is too sociopathically arrogant in the main to avoid being scapegoated if mood turns sour.

Another reinforcement that this trend may be early can be found in The Wave Principle of Human Social Behavior by Robert Prechter, “Bear markets of sufficient size appear to bring about a desire to slaughter groups of successful people…. …Such undertakings, particularly when sponsored by the state as most of them are, require immense cooperation. It might be postulated that major “C” wave declines are times when destructive social goals are achieved with wide cooperation, just as third waves on the upside are times when constructive social goals are achieved with wide cooperation.” (WP, page 270) Assuming we are in Cycle wave C, this iteration of negative mood hopefully won’t be enough to drive mass killings, but it might be enough to drive mass jailings.

Action Items: What actions can be taken if this trend does actually play out? The warning signs will be there and that makes me think this could take a few years to get traction – it will probably take a third party or a demagogue of some sort in one of the main parties to gain control or influence over enough of the levers of power to begin pursuit of some of the financier class that will get some of the blame for the economic malaise. If you are wealthy enough to worry about this, you probably have already taken precautions. If you are in some sort of support service for the financier class, it wouldn’t be the worst thing in the world to begin compiling a database of documents and emails so that you have something to trade when the wolves come calling.

War (Good God, Ya’ll)

This topic is on my mind more and more. Going with the count from the Elliott Wave Financial Forecast, we are in Cycle Wave C. Referring back to The Wave Principle, we find that “The most intense conflicts, such as wars, are not associated with all large bear markets but typically occur during or immediately after the largest C waves in corrective processes of Primary degree and higher. A waves, regardless of extent rarely result in war.” (WP, page 267) This tells me to expect war. One can hope we can avoid it this year, but it is coming. Alternativley, I could be reading this section of the Wave Principle wrong and we should expect the big war some time towards the end of, or just after, Supercycle Wave C (or maybe we would get both).

If we look to the various “hotspots” where public mood is being pushed to accept war, the first name that comes up is Iran. With the consequences of the “Arab Spring” still bubbling along, one wonders if other Middle Eastern/North African countries might be added to that list as well. Other outlets for this expression of negative mood include China (though I regard this as low probability) or even intervention in the Western hemisphere (if, for example, Mexico were to implode and the U.S. were “provoked” to intervene against one or more of the cartels, in a replay of the “Pancho Villa Expedition” of 1916) or internally.

Action Items: I’m not sure if now is the time to plan for global thermonuclear war (you may need to wait until Supercycle Wave C a few decades hence) but I think you should at least think about war and the disruptions it could cause. Maybe we can avoid conflict for a few more years. Don’t get bogged down in partisan “news” about various regions, but do think seriously about the consequences of, say, a war with Iran that closed the Straits of Hormuz for some weeks or months and resulted in damage to oil refineries all around the Gulf, or other consequences in terms of rationing or further restrictions on liberties.

The Clashing Grind of Politics

I think it will be more of the same this year. I don’t see enough signs of the groundwork being laid for a successful third party structure and there should be enough mental inertia that allow the majority of voters to continue supporting the two-party system through the election cycle. Assuming a downturn in mood, President Obama should be ousted, despite his recent recovery in the polls. With his recent “recess appointment” of Richard Cordray to the laughable CPFB causing a lot of controversy, he may be giving his opponents a legal stick with which to attack him just as we are on the cusp of a downswing in mood.

Expect more of the same in terms of the product you get from your lawmakers, especially the federal ones, as well. The recent gutting of the Bill of Rights with the signing of the recent NDAA (on the 220th Anniversary of their signing no less), on top of the PATRIOT Act and other attacks on the foundations of the Republic, sends a clear signal that more, not less, authoritarianism is coming our way.

Action Items: It may still be too early for you to do much in politics, but if that is your thing, getting involved now may allow you to get some experience under your belt which will allow you to take advantage of the bottom that we could see in the 2016ish time frame. As for the rest, who knows just how ugly the authoritarianism is going to get. It could be bad. Be aware of your surroundings.

Thoughts on the Coming Year

It is entirely possible that 2012 may be 2011 all over again, just worse. Mood could slip less than I expect, bringing markets only slightly lower, not crashing down. Instead of an outright leap into the abyss, we could continue this agonizing slog towards it instead. Jobs would continue to be lost. Tensions would be high and rising. Dysfunction would reign in most every court of public life – and we’d just have to deal with it.

Alternatively, we could see a big Primary Wave 3 plunge that shocks the system and maybe gets us closer to the bottom more quickly – but possibly with a higher risk of things like war or mass violence.

I actually am tending towards the “more of the same” scenario, which can still accommodate big market plunges – there may be enough inertia left over from the dying system to carry this zombie economy on longer than you might think – especially if Europe tanks first and the U.S. gets a temporary benefit of hot money looking for a home.

My suggestions are ones you’ve heard before but bear repeating – be aware of your surroundings, keep a positive frame of mind, do your best to rationalize your finances, be prepared for disruptions of the basics of daily life (fuel, food, electricity, internet access, etc.) but don’t settle into a bunker mentality. Life is to be lived and in times of chaos, the seeds of a new dawn are sown. Be out there sowing those seeds while others are cowering in fear. We have a rough three or four years ahead of us – be ready.