Thursday 29 October 2009
Wednesday 21 October 2009
All we are doing is buying time, (in essence restructuring the principal debt burden) and deluding ourselves that the fundamental problems have been solved. Which of course is not the case.
I think Paul Samuelson defined economics in one of his textbooks as “...the study of scarcity...”
Yes, the crisis was born out of the scarcity of liquid funds or assets, but a large contributor that became a key driver which exacerbated the crisis was regulatory driven, especially the misconstrued IASB (International Accounting Standards Board’s) IAS39 Financial Instruments: Recognition and Measurement standard.
Remember, money or monetary values (currency) only act as a proxy or crude measure for the ‘real economic’ measurement of value and output. At a basic level we have been experiencing a large equilibrium shift away from the traditional factors of production (land, labour, capital and technology & innovation) and the holders or owners of these factors of production, to a fairer distribution and access to these factors of production.
When the equilibrium cannot be maintained at a specific unsustainable level we experience some form of ‘discontinuity’, such as the current crises we are experiencing.
In the old Western oriented G8 or now G20 democracies (and one or two new monarchies throw in together with a quasi-communist regime for good measure), the old G8 leaders thought they were immune against the odd banking crisis . Recall here the Asian Crisis of 1997-1998, the Russian Financial Crisis of 1998, the Argentinean default of 1999; all minor disturbances in the developing economies which did not affect the West.
However, with ‘The Great Moderation’ (thank you Ben Bernanke for that one) so recently behind us, the Great Credit Quake of 2008 – 2009 suddenly meant that the entire G20 club and beyond were dragged into the quagmire.
Therefore, my belief or opinion is that we are still in the midst of a major equilibrium adjustment and the ‘step down’ or up from the previous level will continue to be uncomfortable for many years to come. Asset classes will continue to try to find their new sustainable equilibrium valuation levels, and the stoking of the fires by governments with sovereign debt will only continue to contribute to dragging on the crisis for longer.
Ultimately, the market mechanism did not fail, but a few key players within those markets failed spectacularly. Pumping more liquidity into the system will NOT heal the moral hazard created before and now supported by the current interventions.
Growth is rightly touted as one of the mechanisms by which we get ourselves out of this crisis, but I can see two other unpopular tools at our disposal, one being raising tax burdens generally and the other lesser of the two evils being inflation.
Shall we jump, or wait to be pushed?
The Market Soul © 2009
Sunday 18 October 2009
Monday 12 October 2009
Sunday 11 October 2009
This will be the title of my next series of articles. For when I grew up, we lived in a straw hut in Africa, with cow dung smeared on the floors to serve as insulation or to keep the snakes away; I can't quite remember anymore.
My children don't appreciate the sense of history and perspective that living in the 'civilised' world affords them, because for cultural entertainment, we had to watch the Dung-beetles mate. What start in life was that I ask you?
Anyway, I digress.
A lot of business life is like chasing, or at least wiping off the muck and dung that life throws at you. Dung smells and so does money! And a great deal of this mucky stuff is pretty sticky, therefore dealing with the mucky stuff can be made so much more tenable if we are able to deal with the dung in the way the Dung-beetle manages to deal with it.
These (muck scraping) thoughts will be developed further...
If you are interested in hearing more about it, please post a comment.
theMarketSoul (c)2009 & Idea Merchant
It will be short and sweet. It is a note about persuasion and the art of keeping stakeholders on board. If anyone knows the secret, then please let me know.
I am searching for the elusive ingredients. And the stewing pot of persuasion.
Saturday 10 October 2009
Sunday 4 October 2009
Which was entirely a side track to the real intention behind this posting.
‘The Ice Age is Cometh’ was an article headline in the Radio Times edition of 16 – 22 November 1974. I friend of mine came out with the rank smelling edition of the Radio Times of late 1974, that he discovered stuffed in the chimney breast of his new home. Stuffed in that chimney-breast to obviously keep the cold draughts out, as according to the subtitle the next 1,000 years could be very, very cold, with an advance of the polar ice caps and glaciers. Did I blink or something? I will challenge the BBC to dig out the programme aired in the week of 16 – 22 November 1974 on BBC 2, so that we can be reminded how quickly the agenda and the focus can shift, if we take our eye off the ball and let information asymmetry spin the agenda out of our control.
And I suppose we cannot deny the evidence currently in front of our eyes. Polar ice caps are retreating, which is true if you focus purely on an evidence based approach to trying to understand the wider system. But do make your observations and emotive arguments from within the system, or do you need to step outside that system in order to be more objective. And what about intuition? On a purely intuitive level I believe the earth of GAIA is a self correcting system but we do not have enough evidence to conclusively prove this assertion.
So, in the meantime, we swing one generation to the next, waiting for the ‘Information Assymetrists’ (yes my new made up word de jour) to set the agenda and the morals of the market.
As a soul in this market arena I just keep on being amazed, day in and day out. Please just give me the ability to take the long view…