The impact of easy money of the system gets back to what Minsky has said “To be exact leadership does not seem to be aware that the normal functioning of our economy leads to financial trauma and crises, inflation, currency depreciations, unemployment and poverty, in the midst of what could be virtual universal affluence. In short, financially complex capitalism is inherently flawed.”
The system is now much more fragile that most people realise and volatility in the real economy (with price, currency inflations and deflations as well as unemployment) will most likely become a common feature over the next few years. Or until most of the toxicity works it’s way out of the entire system (globally).
Haha the name was Scrooge McDuck! Thanks for the reminder lol.
John, it’s really encouraging to know that executives at Pacific Brand were in belt-tightening mode when they awarded themselves pay increases of up to 170% while they drew up the hit list for the poor schmucks on the factory floor. The CEOs pay rose from around $800,000 to $1.8m.
Tough life being an executive in a company with the staggers.
The more I think about it the more it infuriates me.
Hi John, long time no chat… I have thought of our debates on the economy long and hard over the last months.
You were dead right that the economy and the stockmarket were in for a fearsome pounding. Hats off to you! I really didn’t believe it would be so bad until Lehman Bros fell of the cliff. After that, it started to look like one long nightmare of bad news.
I’m still clinging to my notion that we aren’t going to see times as bad as the Great Depression. People always tend to overreact to the latest news, especially bad news. It seems that we are trapped in a reinforcing cycle of negative sentiment now. Not 1930’s exactly, but certainly not good at all.
At the moment things would be pretty awful especially for self-funded retirees. It doesn’t matter whether they have money in stocks, bonds, listed property trusts or term deposits. All are dreadful investments.
Thank goodness for dark chocolate to keep our spirits up…
Can some open the door and let my friend Elise from Perth in.
Sorry Elise, I can see your comments waiting to be approved simply because your a new visitor but I can’t approve it.
Nice to hear from you.
“People always tend to overreact to the latest news, especially bad news. It seems that we are trapped in a reinforcing cycle of negative sentiment now. Not 1930’s exactly, but certainly not good at all.””
This is the great danger now Elise. We know that the global financial system has been a house of cards and now we’re seeing the chaos its causing, yet, the reality it that the underlying economic reality is that, with time, should be able to regain a degree of stability.
But as you say, the reinforcing cycle is extremely negative and our ability as human beings individually and in groups (from local, national and international perspectives), to maintain perspective is not going to be easy.
I still refer back to some of Hyman Minsky’s insights , such as when he wrote that “Over a a protracted period of good times, capitalist economies tend to move from a structure dominated by hedge finance units to a structure in which there is a large weight to units engaged in speculative and Ponzi financing.”
And Minsky would probably not attribute current the crisis to irrational exuberance or manias or bubbles. Those who were caught up in the boom behaved rationally, at least according to the model of the model they had developed to guide their behavior. That model included the prospective course of asset prices, future income, behavior of policymakers, and ability to hedge risks or shift them onto others. It is only in retrospect that we can see the boom for what it was: mass delusion propagated in part by policymakers and those with vested interests.
However, a large part of the blame must be laid on the relative stability experienced over the past couple of decades the tranquility that made the boom possible also created fragility because,according to Minsky, stability is destabilizing.
The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility.
It think it is far too simple to attribute the current crisis to a speculative boom in real estate, to excessive monetary ease, or even to lax supervision. The causes are complex and have developed over a very long period.As such, solutions will also be multifaceted, tentative,and contingent upon continued evolution of the financial system, with an eye to longer-term trends that have made the system much more prone to crisis, in my opinion..
Elise… “I have thought of our debates on the economy long and hard over the last months.”
You made me work damned hard at explaining myself and my reasoning and for that I’m really grateful. I’ve also been thinking long and hard and often find myself referencing things you said in the past which helps to keep perspective.
I’ve asked a few times where you were and thankfully scaper tracked you down. Your business knowledge, experience and ability to cut through the fluff will be a real asset in discussions I have no doubt.
Don’t know whether you’ve seen this interview, it’s a real eye-opener
Credit Crunch Forecaster a YouTube Sensation
Nice to see you again, Elise.
Thank goodness for dark chocolate to keep our spirits up…
And, yes, very, very nice to see you here, Elise; spotted you briefly over on the “Stars ‘n’ Snipes”. The thing is a “catastrophe”, to quote Australia’s least-qualified and, imo, paradoxically best (former) Treasurer, Keating. And there’s still years and years worth of uncoordinated fun to run on it internationally…the fun of political jostling over new terms for the fractured financial and trade ‘global order’, the fun of recriminations over emerging protectionisms, the fun of ‘fixing’ the interlocking balance sheet black-holes, the fun of not-profit reports; and all that before touching on the real world impacts on people and their lived existences.
“the fun of recriminations over emerging protectionisms”
The economic system is primarily an extention of US…Humanity…and how we utilise the planet we live on, it’s offerings? (some refer to as resources).
Offerings?…perhaps we should look at it as competing organisms that sometimes adapt towards a SYMBIOTIC relationship in order to enhance survival chances.
And what of the inorganic material? The LIFELESS. The atoms that can be agitated to provide ENERGY.
The planet has enabled us to play THE GAME…our DNA, codes evolve, mutate in order to play to SURVIVE…sometimes we create fantasies, myths, supersitions in order to MAKE SENSE, alleviate the panic & anxiety, comprehension of our MORTALITY…deal w/ the sense of DOOM.
On occasion we resort to emotion tamp downs, DIVERTERS, allow ourselves to be entertained to provide pleasure, distraction…& often in the process IGNORE the CHAOS, the inherent contradictions, ignore the suffering of the OTHERS that share our DNA (to a large extent)…escape from the knowledge that THIS IS IT. The EXECUTIONER awaits…it is in every one of our DNA.
The DISTURBANCE that comes w/ the thought, the RECURRENT THOUGHT, knowledge, hunch, sense that this LIFE, game will end, perhaps end roughly…’cause let’s face it, death is no fun…and happens to ALL..even our closest ones…can lead to HYSTERIA…the NEED to ESCAPE into other things…
How many do we accuse ignorantly of crimes, of callousness, of murder?…when they are merely attempting to survive the best way they know how…taught to be such…providing the FOOD, the nutrition…playing the RELUCTANT EXECUTIONER for us…&/or our pets..feeding their very families…& SELF.
Hypocrites WE. In THE GAME. We create…of LIFE. EXISTENCE.
And yet. The search for THE LIGHT. The desire to bring about the least HARM…the less suffering…by acquisition of knowledge & implementation of such…WORTHY…indeed WORTHY. I think of Buddha…and the ever-fluctuating myth & use of such as an educational tool.
Economic BOOMS are partially a reflection of our need to escape the fear.
To provide a false sense of SECURITY, like WAR, that provides RELIEF, a temporary sense of I’M SUPERIOR…my JUDGEMENT & DECISIONS are better than others…and consequently MY ACTIONS will provide me, my family, others w/ the security & LONGEVITY that this gawdforsaken place can’t.
Kinda playing LITTLE GOD.
I watched a half-decent film tonight, 30 Days of Night…reminded me of The Descent, The Thing, The Shining, 28 Days later, Assault on Precinct 13, Dog Soldiers…a mixture of Nihilism, Survivalism, HOPE.
The search for that which is DAMAGED, TRAUMATISED in us…why we fight…how we become, ADAPT to that which potentially PREYS on us.
Darwin had his fears…recognised that once he left PURPOSE…DESIGN…GOD out of the picture…well, all HELLCLONE could break lose.
Nihilism (from the Latin nihil, nothing) is a philosophical position that argues that existence is without objective meaning, purpose, or intrinsic value. Nihilists generally assert that objective morality does not exist, and subsequently there are no objective moral values with which to uphold a rule or to logically prefer one action over another.
The term nihilism is sometimes used synonymously with anomie to denote the general mood of despair at the pointlessness of existence that one has when they realize there are no necessary norms, rules, or laws. Movements such as Futurism and deconstructionism, among others, have been identified by commentators as “nihilistic” at various times in various contexts.
Are WE ALONE?
Is there A LIGHT?
How can there be a BIG BANG?…something exploding outwards from nothing.
Is the Universe expanding?…contracting?…stable?
Is it any wonder that masses of people climb aboard an offer to BOOM…to OWN…to CONSUME themselves into FORGETTING? Faux security perhaps.
Based on what information?
Who gains? As the people RUN towards the EXIT.
ESCAPE from the INEVITABLE.
Whilst others face it…cautiously…at a pace learnt from experience.
Perhaps we really do need to REACH OUT…& touch somebody.
Feel the REAL.
KNOW…WE ARE NOT ALONE.
You made me work damned hard at explaining myself and my reasoning and for that I’m really grateful.
So you’re to blame for John’s long posts 😉
Welcome Elise – very happy to have you here.
Lol I wish I could blame it on someone and I’d love to blame someone …but I can’t… see, even N”s got the bug..
Joni: I just thought the I would allow this spam to get thru as it is exactly what some have been discussing on here…. I have disabled the links so that we do not get caught with any viruses.
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