Friday, March 23, 2012

The Lay of the Land

Woodland Path, William Arnold

What to do?

I continue to expect the path our society, our political system, and our financial markets are following, to reach an inflection point the likes of which have not been seen in over two centuries in the immediate future.

Until we see the crises unfold that this shift in the social dynamic will cause, we continue to be left dangling in the wind, preparing as best we can.  I thought it might be useful to at least go over some of the more obvious results once the crises pick up in speed and intensity.


When federal spending shrinks, the ripple effects will be huge.  Transfer payments alone are measured in the billions of dollars each month.  I fully expect you will see means testing imposed on Social Security and Medicare payouts (likely as an "emergency" Executive Order at first that gets hashed out in the courts or Congress later, assuming there is enough coherenc left in the government sector to make that relevant).  You can also expect the large and expensive systems related to the Obamacare system to not be funded and that as payouts drop, to see tremendous numbers of "billing errors" from insurance companies as the scramble to loot what little is left in the system becomes frantic.

For those with money in the bank, if you are reading this, then you know as well as I do that this is a crap shoot.  What banks mnight survive, what "emergency" legislation might get passed to "help" the banking system, etc. is completely unknown.  As the bureaucracy is not very creative, we can expect cold leftovers from previous crises, which might include a Bank Holiday, capital controls, etc. all in the face of strong advice to not to.  What this would do to an economy heavily reliant on automated billpay, electronic transfers, reliance on outsourcing for many manufactured goods, and the entire mechanism that keeps things humming along is unknown. 

The short term agony of a cutoff or reduction of government transfer payments as well as probably hiccups in the banking system would then be replaced with the long term agony of an economy which has to now adjust to a radically different set of circumstances.  The credit spigot will have been choked off, the debt burdens would be enormous, and the income streams available will be unable to service the debt, much less anything else.  Bankruptcies will skyrocket. 

What remains to be seen is how the millions of students who were programmed to go to college and took out enormous loans to do so handle the fact that student loans cannot be discharged easily in bankruptcy.  I would imagine that courts would eventually take into account the economic environment and grant the "undue hardship" exception on a wide basis - but in the early days of the crisis I would expect that many courts would continue to have the mindset of the Bubble Years and lecture said debtors on their lack of gumption, or their unwillingness to work hard or start low on the totem pole as a fry cook or something like that. I fully expect some utterance from a constipated justice late to his tee time to feed into the political revolt I expect will be ongoing at the time via viral videos.  I particularly look to the student aspect as this demographic is one most easily co-opted into the Occupy Movement, which I think will itself, or a splinter group, form the nucleus of a valid Third Party. 

The rest of it is as unknown to me as it is to you.  Will your job survive?  Will your renters be able to pay their rent?  Will those dividend stocks continue to pay?

Incomes will plummet.  Debt will be discharged - most often painfully.  The system to process all this debt and property transfer activities will gum up.  Chaos will reign in many regions as local bureaucrats try to sort things out.

Even having a chunk of proprety paid off may not help as much as you'd think as we can expect much more in the way of...

Taxes and Government Intervention

Even if voters knock down attempts to raise taxes in an environment of falling property values, high unemployment, and collapsing incomes, expect a rise in unk fees and outright theft via government action.  Charles Hugh Smith gives us a taste of what is to come in a recent article entitled Welcome to the Predatory State of California - Even if You Don't Live There.

Remember how easy the feds and states made it to get your tax refund by asking for your bank account information?  Well, that is how they can, and in some cases I fully expect will, reverse the flow and initiate seizures of your property based on the flimsiest of rationales.  Have fun with the appeals process.

I won't go into detail on what I expect the paranoid Security State apparatus to try and get away with when things are in full free-fall.  Suffice it to say that, as the Elliott Wave Theorist put it 9 years ago, "[t]he U.S. will require internal travel papers" - and that will only be the beginning of it.  Where the paranoid Security State will run into problems is who will pay for it.  Yes, governments always seem to find cash to fund oppressoin when the chips are down, but the U.S. is a heavily armed, continent-sprawling country with a mythos rooted in liberty and resistance.  This will probably break down into a theme where overt authoritarian actions are confined to large population centers with the more subtle cultural pressures used to keep the far-flung Flyover States in line.  Should be interesting to see how it works out.


I've long considered the energy component of the coming crisis to be far more important and far-reaching than one might think at first.  The current method of generating and distributing power was deployed during the greatest era of bullishness and positive mood the U.S. has ever experienced.  This infrastructure is complex, easily disrupted by bad actors, and reliant on supply chains that have never had to endure a long-term bear market.

Prices for electricity very well may stay low for an extended period of time as demand collapses.  It is likely that power rationing may be put into place at times as a result of violence or breakdown.  Something is going to give and I expect that the way we produce and use electricity will be fundamentally different by the time we traverse this era of negative mood.

This goes for liquid fuels as well.  Oil prices may very well collapse again as demand drops during a downturn, which will be good for those who still have a job to fund their driving habit.  It very well may be the case here, as in electricity, that internal politics or violence could cause fuel disruptions long before any geological limits are reached.

As for the promise of new nuclear power plants, I spent some months in early 2011 trying to work with the data to find how the use of nuclear power matched up with the patterns in the stock market.  This has proved, so far, to have been a bit of a dead end.  The very long lead times and large cash outlays involved seem to have clouded the response to changing moods, at least in the short term.  I continue to chew on the  issue, but don't see a clear correlation yet.  What I can pass along is the "flavor" of what I expect.  Nuclear power seems to have a split personality.  It came of age in the optimistic 50's and 60's, then deployed in the 1970's during an era of net negative mood.  The bomb program has always been tied to it, and the fear associated with the few major nuclear accidents have been of extreme magnitudes in relation to the actual damage caused.  The plants in operation today are products of a positive mood era - big plants providing massive amounts of electricity feeding into a complex grid. The future may very well be bright for smaller nuclear plamts (the so-called Small Modular Reactors, an area of great promise) that can be produced in factories, deployed on-site, not require refueling, can be small enough to power local areas but not reliant on a national grid to safely distribute the load, but on the whole, I expect the coming downturn to kill off the building of new nuclear plants as their massive initial cost in a time of declining energy demand will not be justifiable. 

Electricity may not cost a lot, but it may be intermittent for those relying on the grid.   That will, like most things, depend on how your fellow citizens handle themselves and the outlets they choose to use to express their anger.

Supply Chains

As the U.S. faces a decline in its ability to project empire, we can expect severe dislocations as regional players assert themselves.  I agree with the February Socionomist that now is probably not the time to expect World War III, but that doesn't mean that "police actions" in the Middle East or Asia won't be devastating to world trade.  Add into the mix the desire to erect trade barriers and fight trade and currency wars and you can expect a lot of changes in how companies get things built and how supply chains for everybody from Wal-Mart to vitamin-makers work when the U.S. and China duke it out via trade sanctions, or Europe goes on the offensive via the WTO (for as long as that organization will last, at least).


In short, incomes down, taxes and regs up (at least initially), energy unreliable but probably cheap in the right circumstances, and supply chains that have to be refashioned.

Do with that what you will.

Have a great weekend.

Monday, March 19, 2012

The Changing Wind of Socionomics and Justifying Controls on Emigration

One theme that the team over at the Socionomics Institute has followed on a regular basis is the trend towards increasing authoritarianism in an era of negative mood bias.  The expression of that net negative mood may change depending on the time and place.  Just as you need "seed"particles to generate a good rain - or massive thunderstorm - so do you need "seed" ideas or memes to generate the horrible events that can unfold in times of intensely negative mood.

These ideas are out in the wilds of academia all the time.  Which ones get seized and energized by the mass mood looking for an outlet can, I theorize, be shaped to a degree by advertising or propaganda, but the beast itself must have ideas to express through.  That is why, at the end of the day, philosophy is so important.  As Lord Keynes his ownself once said:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

Which is why I read with interest an article at interfluidity (h/t Yves) with the dull sounding title "Partial equilibrium intuitions about choice."  Here Messr. Waldman discusses (with a reasoned and, in my opinion, honest attempt at tugging at a thorny issue - all the while implicitly accepting the role of entities such as the Federal Reserve or governments to actively mold policies and peoples' lives to a "good" end - as defined by the political elites) discusses how it might be better to restrict emigration out of a country:

...It is not incoherent to argue that a country might benefit from retaining talented people, and it is not even incoherent to argue that individuals who would choose to emigrate might in fact be better off themselves if they as well as all their compatriots could be persuaded to stay and contribute to development at home. Most of us view freedom as a per se good, and for myself, I’d have a very hard time arguing for emigration restrictions anywhere. Model risk is a bitch. That you can tell a story doesn’t mean the story is true, and when the cost of error is uselessly confining people, we should subject our fairy tales to pretty strict scrutiny. Fortunately, the existence of choice is not binary. We can think of “no choice” as a choice where one alternative is accompanied by either an infinite cost or infinite payoff. (That is, I have “no choice” but to stay in-country if the cost of migration or the benefit of staying is infinite.) A state that forbids emigration at pain of jail or death attaches a large negative payoff to trying to leave. But a country might attach a modest cost to emigration, or perhaps subsidize the retention of talented people. This sort of “nudge” does much less damage to norms of personal freedom, and may well contribute to the welfare of both the people affected and the polity as a whole. Indeed, in the US, the same sort of people (like me!) who support open borders are enthusiastic about interventions intended to retain foreign-born entrepreneurs and graduate students by offering them valuable immigrant visas. Whether you want to call this proposal a subsidy or elimination of a cost, it amounts to using the instruments of the state to reshape people’s choice space in ways that are arguably good for them and good for the polity. And ultimately, that is something a state ought to strive to do.

Does this sort of policy translate to “more” freedom or “less”? You can’t say. Freedom is not a scalar quantity. Sometimes actions of the state render one alternative overwhelmingly preferable to any other, and so clearly restrict choice. But the opposite tactic — having the state reshape people’s choice space so that alternatives that become evenly matched and force people to make agonizing tradeoffs, hardly serves the cause of freedom. And in a world of prisoner’s dilemmas, laissez faire policy, leaving the “natural” choice space undisturbed, just turns notional freedom into a figleaf for predictably bad choices and outcomes. People often can and do develop means of cooperating and coordinating to avoid prisoner’s dilemmas without the assistance of states at all, or with forms of assistance that libertarians find unobjectionable, like enforcement of contract. That’s awesome. But the world is full of hard problems with very serious consequences not all of which resolve themselves. It is reasonable that ones enthusiasm for state intervention into the choice space of individuals is conditioned by how prone to corruption and error one thinks the state to be. But it is either simpleminded or cynical to rule out such intervention based on economistic arguments about how choice always improves welfare. That’s simply untrue...

I'll leave the debate aside for the moment.  Having watched the U.S. political and economic elites behavior since 2008, I have my own thoughts on how "ones enthusiasm for state intervention into the choice space of individuals is conditioned by how prone to corruption and error one thinks the state to be" but that is not the point today.

What I want to draw your attention to is how the philosophical framework of tyranny gets constructed.  Messr. Waldman sounds like someone who strongly values liberty and freedom, but that would not stop someone from taking the above general concept and turning it into a pernicious set of laws that would be continually ratched up, preventing freedom of movement to citizens in a Diocletianesque maneuver to keep people "in line" with the goals of Goldman Sachs local governments.  Imagine telling a kid from an inner city background, or someone who has had a very bad experience growing up in a small town that they must pay a stiff tax to move - because it would be better for them and for their peers if they were kept in their place of birth, locked in and expected to work hard to lift others up or because it is for the Greater Good, according to a white guy with an Ivy League education and a tax-funded job?

Keep an eye on the intellectual whirlwinds that will pick up when we reverse this rally.  A few short years from now, you may not recognize your country.

Thursday, March 15, 2012

Speaking of War...

The contributors over at Information Dissemenation are some of the best on the planet when it comes to current thoughts and trends in Naval warfare, so consider the following with care:

Preparing for War
by Galrahn, Information Dissementation
In chess, to achieve checkmate you must first position your pieces properly.

For years I've dismissed the topic of war with Iran. I just never thought it would happen, or at least knew we would see it coming so have repeatedly dismissed claims that war is near. We'll, this is the kind of movement I've been waiting to see happen before taking this too seriously as a legitimate possibility, rather than an implied one...

...In other words, the Chief of Naval Operations announced to the Senate Armed Services Committee this morning specific details about preparations for war with Iran, and in response the Senators drooled on themselves in silent capitulation. The only thing missing from that scene from this mornings Twilight Zone moment in the Senate was the CNO knocking on the microphone asking "is this thing on" for dramatic effect...

Friday, March 9, 2012

The February Socionomist Talks War

The new Socionomist is out and the lead article is entitled "How Will the New Social Psychology Affect Military Action?"
It jives well with my amateur analysis - expect lot's of breakdown, terrorism, petty authoritarianism, and maybe some spectacular one-offs in the form of a terrorist nuke or bio-terror weapon that gets loosed on the world - but the Big One is (hopefully) is not due until we have had the plunge we are tip-toing towards at the moment, enjoyed the Supercycle Degree (b) relief rally, which sets us up for the second corrective wave down.

Interesting and worth pondering.

Hack Your Brain?

I am a big fan of mental exercises, the "how" of how people think, and have a long-running interest in the literature on brain function and peak human performance - damn you Robert Anton Wilson for helping blow up my country boy paradigm a few decades back. A lot of literature has been popping up over the last few years on trans-cranial direct stimulation as a way of addressing the symptoms of clinical depression, as well as a method to induce the "flow state" and allow for rapid learning and mastery.

Human brain function in general fascinates me (hence my attraction to socionomics) and I've worked with light and sound machines over the years to generate interesting effects but little lasting change.

Well, I just stumbled across a site that was put up a few weeks ago to take pre-orders for a kit to build your own tDCS device. Looks like some college kids having fun, like Dell in the early days. I have signed up on the pre-order list. I am working on a self-experiment test plan. While I don't expect to become Limitless, I am very interested to see if I can improve math and verbal scoring (initially based on smartphone apps) as well as improve retention on my engineering work.

I'll post my results down the road for those interested in this type of thing as I continue to look for anything to give me an edge as we teeter here on the abyss...

Tuesday, March 6, 2012

More on Stock Markets and the Presidency

I clicked over to Yahoo! Finance, watching the market decline today and saw this interview with Robert Prechter that goes hand in hand with the paper cited below.


Friday, March 2, 2012

Socionomic Paper and Event

Many of you will have already seen and read this paper, but just a heads-up that "Social Mood, Stock Market Performance and U.S. Presidential Elections: A Socionomic Perspective on Voting Results," by Prechter, Goel, Parker, and Lampert has been getting a lot of attention at the Social Science Research Network site.  It is a good read and even better antidote to the political posturing we see during silly season.

Also, for those of you who have been bitten by the Socionomics bug, the 2012 Socionomics Summit will be held on April 14th, at the Georgia Tech Hotel and Conference Center.  Register before March 9th and you save $50.

Thursday, March 1, 2012


Strive High, Julia Sonmi Heglund

I ended yesterday's post on a bit of a downer.  The more I think about it, we don't need more negativity out there.  For those of us trying to keep our heads up a bit more than the average citizen and peer over these choppy waves towards the horizon, we do see a new day dawning.  Getting there may be rough, but the tough times shall pass and we will have yet another chance to rebuild on the ashes of this decayed and hollowed-out system.

On that note, while I still do think starting a business in this environment is a challenging endeavor, it is not hopeless, and, frankly, having a source of income that you have more control over than you would as an employee is going to be a necessity in our coming changed world.  When applied correctly, technology is helping make it less hopeless to start a business every day.  As an example, I want to highlight a recent posting by Tim Ferriss, a serial entrepreneur and wired, high-energy type of guy who pushes hard for people to start their own businesses in his book The Four-Hour Work Week, as well as on his blog.  In a recent post, he talks about leveraging contests to help your start-up succeed:

“The Start-up’s Secret Weapon: Contests” or “How to Turn $100K into $12,000,000″
by Tim Ferriss
In the world of magazine articles, one of my all-time favorite headlines is “Anything You Can Do, I Can Do Meta” from the MIT Technology Review, a feature about billionaire programmer, Charles Simonyi. Charles designed Microsoft Office and is outstanding at looking at programming as different layers of abstraction.

How can we raise our perspective from 5,000 feet to 30,000 feet to learn a few things? This post will do that with competitions...
Read, enjoy, learn, apply.

Interesting Note:  I stumbled across the society6 website and absolutely love much of the artwork I see there. I plan to use images from various works in many of my blog posts going forward.  On a funny socionomic note, for today's post I plugged the word "happy" into their search feature.  I received zero - yes, zero - returns.  I plugged in "death" and received back over 1,000 hits.  Now I know the stereotype of an "artist" is of a brooding genius, suffering for their art, but a disparity like that on a keyword search is amazing.  We'll see if that changes once we round the turn on this, granted enormous, bottom coming our way.