Looking back all I did was look away
Next time is the best time we all know
But if there is no next time where to go?
The first rule of bubbleology is, you don’t know when they will pop, and in fact, they can expand a lot longer than you think. Or as Mr. Keynes said, markets can stay irrational a lot longer than you can stay solvent. The second rule of bubbleology is — bubbles always pop. In the last year, we’ve watched as “man of the year” Mr Bernanke flooded the world with liquidity and it has had an impact, most importantly “inflating” global currency markets, what that means over time, well, we’ll see. Doug Noland is a bubbleologist extraordinaire, he writes at the Asia Times:
The markets’ perception of “too big to fail” has for years been an integral facet of bubble dynamics. And despite all the talk of trying to rid the marketplace of this notion, the markets remain more persuaded than ever: the unfolding global government finance bubble is much too gigantic for policymakers to risk letting it come anywhere close to failing.
So, the real question is how long policymakers can keep things afloat. In the end, that depends on the real economy, and looking at that has become a Rorschach test, unless you’re unemployed, it just looks one way, pretty shitty. It certainly seems deflationary trends are fairly entrenched. The most recent inventory numbers in the US show they remain down a whopping 10% from last year. While the FT reports regulators are telling US banks to hold onto their money “until political and economic uncertainty surrounding the industry dissipates.”
Over in Europe, the roulette wheel turns to see which sovereign debt problem makes it to the front page next —
Portugal, Spain, Italy, the Brits, or back on red with the Greeks once more? Ed Harrison has good piece on the not looking too good European economy. Can everyone really export and devalue their way out of this mess?
There is one bright spot and that is Asia. And China is moving, but where? The problem with command and control economies is they push on the thing that is working until it doesn’t work anymore, and then there’s great problems. The FT reports the Chinese are indeed exporting and certainly from last year’s cratered numbers things look better, but in the last paragraph the FT notes:
The “new export orders” component of China’s official PMI fell from 53.2 in January to 50.3 in February, while the import component dropped from 53.4 to 49.1. The PMI readings are forward looking and a level above 50 indicates expansion while a level below 50 indicates contraction.
Cross-posted from Archein: remake/remodel
Los Angeles marked Transportation Freedom Day last week. What’s that? It’s the day when the typical median-income family has earned enough money to cover transportation costs for the entire year.
Your basic middle-class L.A. household spends about $8,600 a year on gas, insurance, parking and vehicle maintenance, according to the California Public Interest Research Group, a watchdog organization.
That compares with about $8,000 for the average U.S. family and represents more than 20% of most people’s annual expenditures.
Ten weeks of work a year just to pay the oil, automobile, and insurance industries — freedom indeed! I did a rough calculation, far good enough for energy numbers, an industry whose numbers make Wall Street’s accounting look rigorous, at $3 a gallon, the county of LA sends fifteen billion dollars a year straight out of the local economy simply for the cost of oil. Call it an oil industry tax. In fits and pieces, LA has attempted to do public transit, but the only thing worse than sitting in a car in the middle of LA traffic is sitting on a bus. Mr. Lazarus writes,
My car was in the shop last week, and I rode public transit around town. I don’t mind going by bus or rail — it’s a nice change from playing road warrior. In fact, I’d willingly ride public transportation every day if the system were more user-friendly.
But it’s not. And it’s almost as if the dozens of entities that constitute the region’s public-transit network are conspiring to make the system as unwelcoming as possible.
Now this is an important point, because government has actively subsidized automobile usage in this country for a century. Los Angeles County has 88 local municipal governments to coordinate, making any reasonable transit plan a challenge. But an important question is instead of what would traditionally be the solution of placing power into some over-all central authority, how instead can we get these entities working together in some sort of distributed networked system. Doing so will be a fundamental element of reforming and evolving self-government for the 21st century. Open architecture, open standards and cooperative integration, three elements of the still young internet era can be important components in evolving LA transit.
Which brings us to Google and their fight with China. Now to this point, Google has been co-operating with Chinese censorship, so congrats are not necessarily in order. And as this article points out, it’s as much, if not more, a business decision than any political stand. It’s timing is a little interesting in regards to the brewing trade war. The creation and growth of Google is an amazing story. They’ve used many of the principles of open architecture, open standards and cooperative integration that has made the Net the revolutionary medium it is. But, it also raises serious questions on the control of information and how we evolve our political economy for the 21st century. The questions put forth by the Net are as important to the future of self-government as those posed by industrialization were at the beginning of the 20th century. The forces of self-government were not well matched to the forces of industrialization. We need to do better this time.
Cross-posted from Archein: cars, google, and china
We watched the financial system help bring down the economy, but the fact is all finance remains a sideshow to the what is really the main event of modern life — energy. It is the harnessing of fossil fuels for human use that pretty much allows much of what we deem modern. And no nation on the planet has been more proliferate in its use of energy than the United States, thus America for the past hundred years has been equated with modernity. The most important fossil fuel for American modernism has been oil, more accurately cheap oil, and that is becoming increasingly problematic.
America first became aware of its oil dependence back in the 70s, but has done little about it except build its military in attempt to secure the remaining resources. The simple accounting fact is the finding of new sources of oil peaked back in the mid-1960s and has been pretty much a straight line decline every year some. Over the last decade, it has been struggle for the oil industry to even keep discoveries equal to existing use.
States most recent oil program was the occupation of Iraq, and we will not be gone from Iraq until we solve our oil addiction. Stuart Staniford of The Oil Drum has an interesting piece about the redeveloping of Iraq’s oil industry and the Iraqis claim they can eventually pump 12 million barrels a day. This is very hard to believe for many many reasons. It would mean the Iraqis increasing total global production by over 10%. But, let’s say they’re right. It would be good news for the world only in the sense that as Staniford piece points out it gives the world more time to transition away from oil. However, there is no sign of this happening anywhere, particularly in the US, and of course China is going full bore in building their own oil dependence — call it modernity.
Thinking about energy gives a whole new meaning to the term post-modern. Every idea about future economic health needs to be tied to a transition away from oil. The good ideas don’t for the most part include present bio-fuels, particularly the turning of food-stuffs into transportation fuels. The American ethanol program is plain and simple immoral. But there’s other problems with many bio-fuels and the Post has good piece on the problems of increasing bio-fuels with more forest materials.
Energy remains the foundation of any discussion on the economy and it’s future health. One easy way to think, burning isn’t a solution. For America, it means conservation and efficiency foremost, and our waste is of such a horrendous magnitude there’s plenty to gain. The other is the sun and after many years of procrastinating, we seem finally to be getting serious about it. And that’s much better news that any increase in Iraq oil production.