Musings Report #46 11-10-12 40% discount and 6 points
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For those who are new to the Musings reports: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
40% Discount for Key Supporters
Though I think my new book Why Things Are Falling Apart and What We Can Do About It is my best summary to date, I must qualify that by saying the basic ideas will be familiar to readers of my previous books. What's "new" is the attempt to explain all sorts of complicated financial and systems-analysis concepts in the simplest possible terms. I wrote this for everyone with a high-school reading level. Did I succeed? Only time will tell.
As a very modest way of thanking you for your enduring support, I'm offering the Kindle ebook at the wholesale discount, 40% off, through Saturday evening Nov. 10 - the retail price is $9.95, this limited-time discount price is $5.95. Why Things Are Falling Apart and What We Can Do About It Those of you who have been subscribers for over a year will be offered a free signed print edition once I have the print books in hand, as will anyone who contributed $75 or more this year and who did not request a previous book.
Feel free to forward this 40% discount Kindle offer to friends. The best discount I will offer to regular oftwominds.com readers will be 20% ($7.95). The ebook just now went "live" and you are the first to know of its availability. The book is 70,000 words, the shortest of my major works to date, roughly half the length of "Survival+."
Here is the core of the book, the agenda I present for reaching an integrated understanding of our situation:
1| Understanding Debt, Money and Leverage
2| The Government, Manager of the Economy
3| Structural Problems in our Economy and Society
4| Prosperity and Happiness
5| Understanding Systems
6| What We Can Do About It
Here is the book's Introduction:
Things are falling apart--that is obvious to everyone but paid cheerleaders of the Status Quo.
Why are they falling apart? The conventional answer is a few “bad eggs” in our financial system triggered a recession that just won’t end.
The correct answer is that the U.S. economy and society have structural problems that cannot be solved within the current Status Quo.
What can we do about it? We must embrace the fact that complex systems with diminishing returns will revert to simpler, lower costs systems either by collapsing under their own weight or by being replaced by systems that are faster, better and more sustainable.
Protecting vested interests at the expense of the average citizen is a key reason why things are falling apart. When people lose faith in the institutions that were supposed to protect them, when they feel that they have little recourse against abuses of power, the social fabric of the society falls apart.
Capitalism is based on a handful of principles: capital is invested—placed at risk—to earn a return. The marketplace is transparent to buyers, sellers and regulators. The market prices goods, services, risks and interest rates. “Creative destruction” eliminates inefficient, unproductive enterprises and frees the trapped capital to be deployed in more productive ways.
When vested interests keep failed systems from collapsing, creative destruction is not allowed to reallocate capital and labor.
When vested interests protect their monopoly from market forces, it acts like a hidden tax on our economy: the cost is spread to everyone. Protecting vested interests creates distortions that eventually bring the entire economy to its knees. When risk and consequence have been eliminated for the favored few, the system itself collapses.
But even if we eliminated the legalized looting of vested interests, our future is endangered by much deeper flaws in the Status Quo. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand.
The purpose of this book is to explain those fundamental forces so we can change what we leave future generations.
It is human nature to want to blame others. Yes, self-serving vested interests are eroding our society and economy. But it’s not that simple: it is the entire Status Quo which is robbing future generations.
People tell me that the reason they like my weblog is that I make complex topics understandable. This is my trade, and I learned it over 25 years of free-lance journalism.
The only way to understand complex systems is to break them down into core concepts that act like “building blocks.” Once we assemble these key concepts, we will have a solid understanding of our nation’s problems.
I call this an integrated understanding because all the problems are related. It’s the difference between understanding all the systems in a vehicle—the engine, fuel and electrical systems, brakes, transmission, heating and cooling, electronics, suspension and so on—and knowing that the car moves forward when you press the accelerator pedal. The person whose understanding is limited to pressing the accelerator pedal has no clue how to fix the car when it breaks down; they are helpless.
We will cover the five core reasons why things are falling apart:
1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy
We will then cover what we can do to change an unsustainable future into a sustainable one.
One of the core ideas in this book (and in all my books) is that we are not powerless. Just because we are not individually rich and powerful does not mean we have no power. The Status Quo depends on us passively playing our role as consumers and taxpayers and allowing the vested interests to control the nation’s finances and politics. Just as each vote we cast in an election is a vote for or against the Status Quo, every dollar we spend is a “vote,” too. Every dollar we don’t send to a vested interest is a dollar we can invest in our own household.
If we don’t insist on change, then nothing will change, and things will fall apart. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.
First we have to understand what’s really going on, and then we have to accept responsibility to do two things: 1) change our daily lives to support what is sustainable, adaptable and open and 2) insist positive changes are made to the nation’s bankrupt financial and political systems.
Market Musings
It's ironic that a perma-bear (me) gets surprised by October bearishness extending into November, but I suppose it serves me right for expecting the Bulls to conjure up the usual year-end rally. One does have to wonder if "official" support was in play to keep the market from crashing prior to the election.... is the "fiscal cliff" or Eurozone weakness a surprise? Hardly; the market supposedly "discounts known knowns" like these. So the 300+ plummet in the Dow Jones Industrials the other day is suspicious. Bear Trap or the start of a massive cascade down?
As I type SPX has bounced off 1381, having lost the critical 1400 and 1387 levels. Fear has suddenly entered from Stage Left, as depicted by the CPC ratio of puts/calls:
This ratio suggests fear is spiking. If the SPX fails 1380, then this will spike higher and panic will take hold. If the SPX recovers 1387, the whole thing might turn out to be a Bear Trap. That said, these sorts of volatile swings characterize tops, not bottoms.
From Left Field
The end of the "China growth story":
The Chinese Credit Bubble: sobering levels of debt were supposed to be a Japanese, Eurozone and American problem, right? China's debts are even more precarious, especially local government debts
Airbnb, Coursera and Uber: The rise of the disruption economy (via Michael R.) Gatekeepers and regulatory moats are trying to maintain monopolies and cartels, of course....
Rise of the Tiger Nation: Asian-Americans and the burden of belonging to an idealized (and perhaps envied?) group
Adam Curtis of "The Century of Self" on the two-dimensional world created by PR and propaganda: He's Behind You, an essay on Gaddaffi's long career as international bete noir. Long and excellent (via Lew G.)
"Every great idea starts with a delusional premise."
Thanks for reading--
charles
