Wednesday, February 29, 2012

Mood and Dow 13,000 Again, and Again, and Again...

The DJIA continues to chop along here at 13,000, a mirror to a population growing frantic in the search for things to be optimistic about (or, as may be more likely, frantic in its efforts to not face up to the ugly facts that surround them in terms of a corrupt finance and political organism, massive indebtedness by the public and their elected governments, and Europe's slow motion implosion).

Culture Notes

As Friend of FutureJacked, WL, pointed out to me, cultural signs continue to abound that we are topping out in terms of optimism.  Grasping at icons that bring back the fond memories of earlier positive mood eras, people have flocked to Whitney Houston, after her death, Madonna got scheduled for the SuperBowl and the Material Girl, along with the Beach Boys, are going back on tour:

Grammys 2012: More Beach Boys, less Maroon 5, Foster the PeoplePop and Hiss, the LA Times Music Blog
The surviving members of the Beach Boys, who will tour this year in honor of the band's 50th anniversary, gave fans a sneak preview at the 54th Grammy Awards. Though the lead-in with Foster the People and Maroon 5 was puzzling at best and cringe-inducing at worst, the Beach Boys' run-through of "Good Vibrations," while not an exalting return to the stage, was borderline heartwarming...
Madonna set for first Australia tour in 20 years
ABC News
Madonna is set to tour Australia for the first time in 20 years, exciting fans who were left devastated when the Queen of Pop bypassed the country on her last world tour...


President Obama has clawed his way back in the approval ratings from 38% to as high as 49% approval in recent days (according to Gallup), recovering along with the market averages.  Mitt Romney, perceived as a very "safe" candidate on the Republican side, continues to pile up victories while potential "radical" opponents such as Ron Paul are consigned to the margins.  In my opinion, as go the markets, so goes Obama's chances in November.

European markets and political leaders continue to be given more rope with which to hang themselves as mood in European core countries continues to hold up in the face of the coming Greek default.


The recent spate of attacks in Iraq, along with the riots that have accompanied the Qur'an "burning" incidents in Afghanistan, along with the recent reactivation of MEND activities in Nigeria point to a slowly boiling pot, but it does not have a feel of some out of control steamroller of war.  Yet.  That comes with the attack on Iran...


I've continued to puzzle over just how best to prepare, assuming the decline in mood, markets, social cohesion, and individual liberty will be one for the record books in many ways.  I've suggested, many times, such things as:

  • You should acquire quality gardening tools, plant a small plot and get a feel for the growing of your own food, even in the most limited manner.  It is productive work and while I don't expect you to be raising all your caloric needs via intensive gardening, it is one of those skills necessary to navigate hard times.  A green house might not be a bad idea either.
  • You should build ties with neighbors and be ready to partner with them.  If you have land, consider solutions that allow unemployed males of work/military age to use to grow, build, or otherwise occupy (ha ha) the land for productive purposes. 
  • You should get a side business going that might have some chance of survival in a credit-starved, angry world.

Unfortunately, the more I think about these "resilient community" type solutions, the uglier the reality gets, especially if we think about implementing things like this in the early days of the next wave of the decline.  If you build too much garden, many of you in Surburbia will get pounced upon by a Homeowners Association.  If you (are allowed to) build a greenhouse, that will have tax consequences in many communities as you have improved the land.  If you build a substantial greenhouse and consider selling produce, expect a mountain of junk fees, regulation nightmares, and local petty bureaucracy to try and strangle your ideas in the crib.

If you have acres of land and want to let a family build a modest place on your land, or otherwise "improve" it, then expect your property taxes to jump.  If you want to employ local youths to do labor in exchange for meals or other in-kind work or a little cash to have in their pockets, consider that the various taxing authorities will be all over you for how that labor is treated for tax purposes, or that wage you are paying them is accounted for, etc.

Ditto the agony of starting a small business in an environment of significant local taxation and regulation.  We won't even mention the coming credit crunch and what that will do to marginal business opportunities.

Now, many of these things will "work themselves out" over time - as you get strong and, shall we say, spirited opposition to the things holding us back from finding a bottom and beginning the recovery, but it will be painful, and many people who want to do things we regard as good - such as help their neighbors or run a business, will get tagged as criminals between here and the there of recovery.

I don't have good advice, other than to be aware and do the best you can.  The longer we levitate this thing, the uglier the fall is going to be, in my opinion.  We are setting ourselves up for the the Mother of All Plunges, and with nothing to cushion the fall - no network of small family farms to absorb productive talent, no resilience built into our energy use patterns, no national bank account to draw from or to use as collateral for new credit.  Have a lot of popcorn on hand.  Watching this thing unwind is going to be the biggest horror show in 200 years...

Friday, February 24, 2012

Extreme Contingency Planning

While we continue to hold this amazing (and in my opinion, almost frantic) level of optimism as expressed in markets, as well as in the rising of President Obama's popularity from the ashes, the nature of the coming decline has me very, very worried.  I especially worry about the next war, frankly.

As part of that, if you want to indulge in some worst-case planning, click over to Alex Wellerstein's NukeMap.  This is a tool that lets you use Google Maps to drop a variety of nuclear warheads, from an improvised terrorist nuke to the largest bombs ever tested or deployed, anywhere on the map and see the expected results.  Note that the blast pattern shown will not include effects of terrain and is an optimized air burst (in other words, the blast you will see is a worst-case type of scenario).

This is not really meant to be disaster porn, but if you are concerned that nuclear war could accompany the coming era a deep negative mass sentiment, then this tool may help you at least see what a nuclear strike could do to places of interest to you and yours.

Wednesday, February 22, 2012

Imagine Trying to Enforce This

I've not blogged much on Greece as I think they are only the sideshow, but they do provide a small-scale experiment, much like Argentina a decade ago, to demonstrate what the political elites are going to attempt in the U.S. and throughout Europe when the debt bomb goes off in the "core" of those regions.

Imagine trying to enforce this on your citizens, lowering pay retroactively:

Greek austerity moves leave nation's economic safety net in tatters
Roy Gutman, McClatchy Newspapers, Febuary 9, 2012
...As Greece's political leaders struggle to reach an agreement with international lenders before a March 30 deadline, the toll is growing from an austerity program that promises only to get tougher. Greece has been living beyond its means for decades, and now the little man is paying the price...

 ...For Delpina Koutsoumba, however, this is a winter of discontent. She's 37, a trained archaeologist with a master's degree who works for the ministry of culture's department of "aquatic antiquities," issuing licenses and supervising construction of ports, hotels and other investments on Greece's storied coastline. Her take-home pay last month was $860.

"I'm an archaeologist, married with a child. Of course, I cannot live on this," she said.

Nominally, she earns $1,190, but late last year the government announced that it was lowering salaries retroactively - and docking everyone's pay accordingly.

"They told us: 'You owe us money from last year.' And they take whatever money they want," she said. So for three months, it's a starvation salary. Her apartment alone costs $730 monthly...

Emphasis mine.

This is another example of the "brittleness" that worries me so much about our current system.  If a crash hits, then everything goes down at once.  Docking pay has massive knock-on effects.  It will kill debt service, which will exacerbate the situation.  Docking pay and layoffs have to happen, though, due to the massive amounts of leverage in the system and because the financial elites own the governing structures and are preventing Greece from pulling an Iceland and defaulting on the debt.  This leads to further unrest, an excuse for more anger, and feeds conspiracy theories.

This is coming to North America.  It will leave no one untouched.

Friday, February 17, 2012

The Geography of Dependence

Hat tip to John Robb over at Resilient Communities for a link showing the geography of government dependence.  This is an interactive map produced by the New York Times that shows "[g]overnment payments to individuals in more than 50 benefit programs, from food stamps to Medicare."

The Geography of Government Benefits

Part planning tool, part warning system.  When the debt bomb goes off, those relying on transfer payments will suffer mightily if not prepared - and in large enough numbers, they will be able to make sure others suffer mightily along with them...

Tuesday, February 14, 2012

Great Quotes

Too busy for a full blog post, but I just read an article and had to share some of the fantastic quotes:

The True Value of Money – or Why You Can't Fart a Crashing Plane Back Into the Sky
by Charlie Booker, The Guardian
...Banknotes aren't worth the paper they're printed on. If they were, they'd all have identical value. Money's only worth what the City thinks it's worth. Or, perhaps more accurately, hopes it's worth. Coins should really be called "wish-discs" instead. That name alone would give a truer sense of their value than the speculative number embossed on them.

The entire economy relies on the suspension of disbelief. So does a fairy story, or an animated cartoon. This means that no matter how soberly the financial experts dress, no matter how dry their language, the economy they worship can only ever be as plausible as an episode of SpongeBob SquarePants. It's certainly nowhere near as well thought-out and executed.

No one really understands how it all works: if they did, we wouldn't be in this mess. Banking, as far as I can tell, seems to be almost as precise a science as using a slot machine. You either blindly hope for the best, delude yourself into thinking you've worked out a system, or open it up when no one's looking and rig the settings so it'll pay out illegally...

It is the frantic drive to maintain that suspension of disbelief on the part of the public and the media types they choose to pay attention to that is driving the current insane policies.  When that suspension of disbelief fails, well, that is what this blog is pretty much about...

Tuesday, February 7, 2012

Skynet Begins to Learn at a Geometric Rate

Nanex Research has put together this excellent .gif to illustrate the rise of the algos driving HFT.  (h/t Mish)

Like all geometric series, this one starts slow, but it ends with a bang (or will it actually be a crash?).

I know that humans wrote the code, but do they really know what all those algos are going to do when the humans interfacing with the market start relentlessly driving the price "signals" down, down, down? Can you say Flash Crash from Hell, boys and girls?

The Terminator: The Skynet Funding Bill is passed. The system goes on-line August 4th, 1997. Human decisions are removed from strategic defense. Skynet begins to learn at a geometric rate. It becomes self-aware at 2:14 a.m. Eastern time, August 29th. In a panic, they try to pull the plug.
Sarah Connor: Skynet fights back...

Remain calm.  All is well.

Friday, February 3, 2012

The Tilting of the Megapolitical Balance?

We've discussed the theory of Megapolitics before (recently here, a good book here) - a theory that states the technology of violence shapes political and social systems, along with informing the attitudes of those who live in or oppose the societies that employ that technology.  If socionomics is the river sweeping us all along, megapolitics describes the types of boats we'll sail in on this river, as well as how the crew interacts with the passenger, so to speak.

I've been carrying in my head the idea that tech trends have been shifting the balance towards defense.  Automatic weapons, putting "brains" on missiles (and now even on bullets!) allowing for cheaper "smart bombs," cyberwarfare, etc.  A balance towards defense would imply more ability for smaller political and social units to wield violence for their own ends at the expense of larger political or social groups.  It also makes empire hard to do and much more expensive. 

In the future map I've been trying to build, I've pictured this technological trend receiving deep reinforcement from the expected deep plunge in mass mood.  Thus, I am anticipating secessionist movements in portions of the globe that should succeed, along with a significant rise in the power of non-governmental entities to wield violence against run of the mill citizens of nominally sovereign states.

Negative mood swings during megapolitical eras that were tilted in favor of offense might be expected to lead to temporary rebellions easily put down by a central government (the Paulista War of 1932 in Brazil is a prime example).  Negative mood swings during megapolitical eras tilted in favor of defense could lead to succesful secessionist movements or long, drawn out wars.

Offense Gets a New Tool?

Then I watched this video, made as part of a research project at UPenn (h/t John Robb):