recently i read a great post (of many great posts) over at theautomaticearth.blogspot.com
please read it:
this helped me recognize that i have been thinking about the wrong things. i have indulged in the details of economic activity lately, while neglecting the more important bigger picture. the big truth that can be lost in the day-by-day.
the economic system as we knew it is over.
this takes time. it is easy to forget that what happened in 2007-08 was not a discrete event, with a beginning and end. that was the beginning of the fall. the first recognition that the system is kaput.
the american capitalist system of the 20th century was built on a foundation of unending growth. as domestic manufacturing growth approached its natural limits financial growth and consumption of imported goods took over.
that financial growth was founded upon factors with their own natural limits. ever increasing housing prices and demand (demand based on employment), and ever decreasing overseas labor costs for consumer goods.
those factors are done. housing prices hit the wall and fell sharply. more importantly, they are not going back up. period.
housing demand is based on increasing employment. but, employment is going down steadily.
both these factors have failed to abate despite government efforts.
other vast areas of financial 'growth' are precariously balanced upon housing prices. all those mortgage backed securities. all those derivatives. the true value of these 'assets' have been hidden by much greater government efforts. printing money to buy tons of them. suspension of accounting rules to lie about the value of other tons of them. fannie and freddie guarantee of most new mortages, and guarantee of those two entities themselves. and artifically cheap money/manipulated low rates from the fed.
trillions of dollars of future taxpayer liabilities, thrown at this system of financial growth and innovation that was itself a ten-year long mirage.
and it has failed. while the mirage has been maintained a bit longer, the actual value of all those instruments, in the absence of government printing, buying and hiding, is not growing at the very least.
the efforts of the american politicians, european politicians, and central banks here, there and in japan, have all been directed at 1) protecting and saving the big banks; and 2) going back to the way things were, with rising housing prices (and other asset prices) and ever increasing consumption.
#1 worked for a while; but all those banks are still insolvent by any objective measure. #2 is flat out impossible.
the actual path toward the inevitable endpoint makes little difference. the duration of that path is also not real important, if you believe as i do that they will not be able to stretch it out past my lifetime. five years maybe, ten years absolute tops, but more likely numbered in months.
and i have been hung up on the path, not the endpoint.
part of the reason is greed. i figure if i can discern the path accurately, i can snag some big bucks. and if i am clever, convert those big bucks into a lasting store of wealth (property, foreign currency, metals and gems). forgetting that, as long as i maintain my physical and mental health, i am lucky and blessed to be assurred of wealth and prosperity after the fall. i am honest, i am a good friend, and i have essential medical and healing skills that today are deeply discounted, but will be rewarded plenty in time.
part of the reason is entertainment. i love sports. because you don't know how things are going to turn out. not only the path to the finale, but the outcome itself is in doubt.
well, no matter how much i scramble, i have tremdous tools for security in the next phase future. and no matter how much i delve into the details, there is little drama and no doubt of how this economic story finishes.
the system reached the natural endpoint. it is over. they cannot put it back together.
