It's been a while since I posted, I know. The reason is simple, I couldn't think of anything worthwhile to say. It was there, but I was looking for the words to express it and couldn't find them. Well, here it is, expressed much better than I could of. I'm quoting from a blog, that is quoting from another blog that is quoting an article in the New York Times, that is full of quotes of rich people (and some no longer quite so rich people). How very 2009. Follow the links to see the sources. I might wish I were more clever, but frankly I don't think it could expressed any better. Least ways not by me. So here it is:
Inquiring minds are taking a close look at point number five, A Revaluing of Intangible Assets in today's Five Things by Kevin Depew. “It’s kind of funny, but I feel much more satisfied with the things money can’t buy, like the well-being of my family, I’m just not seeking happiness from material things any more”
New York Times, "Conspicuous consumption, a Casualty of Recession," March 9, 2009
If the 90s and most of the first half of the 2000s were about accumulating and displaying "wealth," the next decade will continue the mean reversion toward something altogether more austere, if not more sensible. Debt reduction and the rejection of (and guilt projection toward) materialism will continue as meditations on not just doing more with less, but doing less... period.
All manias leave something undervalued. What has been undervalued for a long time now - reflection, quietude and time, to name but a few of the things "money can't buy" - will now enter their own bull market, which entails a different ordering of priorities and a more challenging view of what it means to "possess wealth."
While this may seem refreshing and positive in the way I've oversimplified it, the difficulties we face going forward will lie in how capitalism seeks to commoditize things that are difficult to measure and quantify, and what mediums of exchange compete for primacy in the market for these intangibles.
More Times Excerpts
Carol Morgan, who teaches law at the University of Georgia and whose husband has a private law practice, said she felt a responsibility to cut needless spending. “That is probably something that is a prudent thing to do in any event, but particularly now I see it as the right thing, as the moral thing to do,” she said, adding that she also hoped to increase her charitable giving. “Before, extravagance and opulence was the aspiration, and if we can replace that with a desire to live more simply — replace that with time with family, or time for spirituality — what a positive outcome to a very negative situation.”
Kim Gatlin, a novelist who lives in Park Cities, in the Dallas area, said some of her friends had urged their husbands not to give them jewelry over the holidays. “They were like, you know, ‘There’s nothing I’m dying for right now — let’s just wait,’ ” she said. “It makes them feel like they’re participating, although they don’t contribute to the income stream.”
Even some of the very affluent said they were reluctant to be conspicuous in their spending.
“It’s disrespectful to the people who don’t have much to flaunt your wealth,” said Monica Dioda Hagedorn, 40, a lawyer in Atlanta who is married to an heir of the Scotts Miracle-Gro fortune. “I have plenty of dresses to last me 10 years.”
Craig Robinson, 34, a manager at a real estate investment firm in Atlanta, agreed, saying that he was not tempted to join those who were scooping up deals at department stores. “There’s one guy to the right of me showing me this great deal he got on his tie,” he said, “and there’s four guys to the left of me who got laid off and can’t find a job.”
It's tough to want to flaunt wealth when so much wealth has vanished.
45 Percent of World's Wealth Destroyed
The CEO of Blackstone says 45 percent of world's wealth destroyed.
"Between 40 and 45 percent of the world's wealth has been destroyed in little less than a year and a half," Schwarzman told an audience at the Japan Society. "This is absolutely unprecedented in our lifetime."
Schwarzman said problems were then exacerbated by mark-to-market accounting rules. Those rules ask banks and other financial institutions to price assets at a value related to how they would be sold in the open market.
Mark-to-Market Scapegoat
Schwarzman and Blackstone are attempting to blame poor investment decisions on Mark-to-Market accounting.
I disagree.
It was the excessive leverage that destroyed Bear Stearns, Lehman, Citigroup, AIG, Bank of America, Merrill Lynch, etc., not mark to market rules, evil short sellers, or hedge fund bets via Credit Default Swaps as discussed in Is Debt the Lifeblood of the Economy?
Furthermore, the only way 45% of the world's wealth could vanish in a year is if it was a mirage in the first place. That wealth was perceived, not real, and it vanished right along with a forced reduction of leverage that is still underway.
Moreover, neither leverage nor earnings are coming back anytime soon because attitudes of banks towards lending and consumers towards borrowing and spending have changed for good.
Role Of Changing Attitudes
Changing attitudes are what Bernanke faces in his battle to inflate. Flaunting wealth is out. Frugality is in. I have been talking about frugality for quite some time. A Google search of this blog for the words Frugal, Frugality pulls up 88 instances (soon to be 89). I am quite sure this is not the end of it.
That final wave of consumer recklessness created the exact conditions required for its own destruction. The housing bubble orgy was the last hurrah. It is not coming back and there will be no bigger bubble to replace it. Consumers and banks have both been burnt, and attitudes have changed.
It took nearly 80 years for people to get as reckless as they did in 1929. 80 years! Few are still alive that went through the great depression. No one listened to them. That is the nature of the game. The odds of a significant bout of inflation now are about the same as they were in 1929. Next to none.
Children whose parents are being destroyed by debt now, will keep those memories for a long time.
Those preaching inflation simply do not understand the role attitudes play on the the Fed's ability to inflate, nor do they understand the Fiat World Mathematical Model that also hinders the Fed's ability to inflate.
In the meantime, take one more look at the key sentence from "A Casualty of Recession" because this is what the Fed is fighting:
“It’s kind of funny, but I feel much more satisfied with the things money can’t buy, like the well-being of my family, I’m just not seeking happiness from material things any more.”
All manias leave something undervalued. In this case, that something has nothing to do with seeking happiness from material things.
On a Friday night not that long ago, I attended a talk in San Francisco sponsored by the Long Now Foundation. The events of that night have stayed with me, appropriately enough. Looking around I wondered at the time if not the room was filled with a rather larger-than-normal complement of time-travelers. And I seem to keep going back there in my mind; the whole experience is quite fresh and well… “Now-ish”. The impetuous for this blog started that night... ahem, THIS night. Time is strange stuff.
Now, you may not have heard about The Long Now Foundation, but they are a sort of "Commonwealth Club" started by Stewart Brand; they host monthly speakers on topics concerning the long view of human betterment. I hadn't heard of them either until … uh… now, but if the name Stewart Brand sounds familiar it should... he's the one who was responsible for the Whole Earth Catalog. He apparently still lives on a houseboat of sorts in Sausalito. Who knew? Apparently he's been involved in lots of stuff which you can read about here: http://en.wikipedia.org/wiki/Stewart_Brand but I digress.
The speaker this Friday night was Dimitry Orlov. His talk was provocative, witty, more than a little ominous and the full text of his talk available on his blog. I highly recommend it.
As you can see right away from the text of the link it concerns in no small or timid way a view of our current situation which is a bit outside the normal consensus. Rest assured, he does have wonderful sense of humor and he's not at all tedious or shrill. However he does have a unique perspective which I believe is worth at the very least a quick skim.
Orlov's presentation consisted of his reading the text and as he is a rather literary sort of fellow, reading his text will give you a good sense of his thesis. An MP3 audio recording has been posted online here: http://www.longnow.org/projects/seminars/
In the meantime, check this one out. Here is Jared Diamond speaking with Paul Solomon of PBS TV’s News Hour. Get this: it was published on that very same day, Friday the 13th of Feburary 2009. Sheesh. With such a long now, why do these guys cram it all into one day! Who ARE these guys anyway!
Perhaps even more interesting is that the video was never aired online, however it was aired on PBS radio (I heard it) and comes up in the search list (but not when you follow the link) on the PBS website. However, due to the magic of YouTube, here it is, while it lasts. Get it while it’s hot folks.
There’s a lot out there folks. There’s even a long version of his talk given at the …. wait for it ….. Long Now Foundation!
Welcome, everyone, to the year of the Ox. Female Earth Ox to be precise, but then that would be Earth Cow, wouldn’t it. Is that a Dzomo? Not sure.
Anyway, one thing is certain. The year of the Mouse is now officially over, so time to stop cowering and get on with it. And what a year we have ahead of us! Plenty of furrows needing tending; some appearing on brows, others more productively appearing elsewhere. What? You say you want to plant a garden but don’t have land? Well, truth be told, neither do I. Not yet anyway. Farming requires land, yes? Well, perhaps not necessarily.
Not everybody who worries about food security and is interested in doing something about it has access to plenty of land or money to buy land and necessary equipment. I was in this situation a few years ago and rather frustrated by it. Perhaps this story will give others some ideas, and I should note that touch the soil is a great source of information about the food system and efforts to transform it at all levels.
OK there is this guy, and he’s lost his car keys. It is night and it’s dark and he’s painstakingly searching under a streetlight. A help stranger happens by and asks. “What are you doing?”
“Looking for my car keys”, he replies.
“Do you need some help?” the stranger asks.
“Why, that would be great, thanks!” And so the two patiently scour every inch of ground around the area. After a while, when it is clear that the keys are nowhere to be found, the stranger asks, “they don’t seem to be here anywhere, are you sure you lost the keys here?”
“Oh, no, the man cheerfully replies. I lost them in that alley over there.”
“Then why are we searching over here, under the light?” the stranger replies in exasperation. “Why don’t we search in the alley?”
“Are you crazy? It’s dark in the alley!”
It’s not enough to diligently search; we have to search where the answer lies, not where we want to search.
The answer and where it lies will come as no great shock or surprise. But first, as promised last time, something about money. Because that’s where we have been searching for some time.
What is money, anyway? After all there are lots of movies about “What is Love?” Why is it that nobody ever makes a movie about “What is Money?” Well guess what, someone did.
In my last post, I closed with the upbeat, albeit outrageous, remark that I think we’re going to be OK in the end. Well, who exactly do I mean by “we”? I certainly don’t mean that the shell of the egg is going to come though this intact. I am referring of course to the hatching chick that is going to be OK. I’ll get to talking about the chick in a bit, but first we need to understand the shell. And the shell is history; literally.
Remember Buckminster Fuller, Bucky for short? The geodesic dome was his claim to fame, but he spent his entire lifetime designing up futuristic versions of houses, cars and other stuff. In his heyday, the 60’s and 70’s, was famous for being famous in the way that celebrities often are. In the year he died, which was 1983, he published a short book called “The Grunch of Giants”, Grunch being his anacrym for GRoss UNiverse Cash Heist. Prescient, don’t you think?
Grunch was his summation of his view of the world and his valedictory to those who would inherit the coming collapse. It is sad and beautiful, prophetic and mistaken as only the words of the soon to die can be. It was also of course, completely ignored. Surprise, surprise.
An excerpt. It’s a bit long, alas, and would be better if presented in a 11 minute video. (Anyone out there want to do it? Pretty please?). But I just can’t bear to cut any more; it is after all, a précis of 30,000 years of social development. The uncut version is chapter 3 of the book.
If a long post is not your style, just scroll down to the bottom, where you'll find a nice movie. But if you can handle it, it's worth the read.
[…]
One of my many-years-ago friends, long since deceased, was a giant, a member of the Morgan family. He said to me: "Bucky, I am very fond of you, so I am sorry to have to tell you that you will never be a success. You go around explaining in simple terms that which people have not been comprehending, when the first law of success is, 'Never make things simple when you can make them complicated.'"
So, despite his well-meaning advice, here I go explaining giants.
[…]
There is no historical record of religion founders who have been so bold as to assert that God had deeded land to anyone. History shows that religious leaders have, however, frequently complied with their king's instructions to plant a cross or other symbol of God's approval of their king's sword-accomplished vast lands-seizure and ownership-claiming.
Over thirty thousand years ago, these prehistoric horse-mounted "landowners" began expanding their territory northwardly and westwardly beyond the Himalayas into Mongolia and then ever westward into Europe.
[…]
Millennia after the first club-swinging Oriental horseman claimed land ownership, the man on the horse westbound from the Orient to Europe became helmeted and armored in metal. Due to the horses' weight-carrying limit and the penalty of weight on the horses' speed, the most effective of the horse and armored riders was, like the present-day jockey, the wiry, strong, little man. Inspection of the European museums' armor discloses the diminutive size of the most successful knights. The main significance of what we are learning is that, to the man on foot, the horse-mounted and armed men became a new and formidable "giant."
Because the armored knight required many helping hands to mount him and maintain his horses and arms, he had to have their goodwill and support lest his helpers overwhelm him when dismounted and encased in his armor. As a consequence, the little, wiry man in horse-mounted armor frequently became the champion of traveling bands of the little people. The little armored knight was more maneuverably effective than the armored giant when the latter's multi-folded weight overburdened his mount.
[…]
Squads of armed horsemen could protect caravans of goods-carrying horses, camels, and elephants along with human bearers. These caravans could transport the initially culture-evolved riches of the Orient westward to the ever more westwardly advancing frontiers of humanity, where the newly powerful cultures could acquire the historically recognized appurtenances of Oriental courts of power.
A new kind of wealth-making occurs historically with the invention and development of stoutly and heavily keeled, ribbed, and planked, high-seas-keeping, deep-bellied, and, in much later times, cannon-armed sailing ships.
[…]
The ship was, of course, a tool, but not a craft tool produced by one man. It was an industrial tool, mass-producible and operable only by large numbers of highly skilled craftsmen, metalworkers, woodworkers, sailcloth makers, rope-makers, iron chain- and anchor-makers, seasoned sailors, and the coordinated muscle of "all hands." The merchant ship was a wind-energized industry, a tool that could sail around the world and carry cargoes worth many fortunes to lands not containing the materials brought by the ships, which when integrated with the home-port-occurring materials produced real wealth of increased life-support for more and more people.
The building, rigging, and arming of such vessels and the production of the materials with which to build them, as well as the production of the food and other necessities to feed and clothe all those engaged in the shipbuilding, required an effectively powerful military authority able to command the full-time commitment of the work and skills of the large numbers of humans involved. It also called for the amassing of large sums of negotiable wealth. Preferably the negotiable wealth was in the form of trade-implementing precious metals and jewels, commercially acceptable around the world.
For ages earlier the negotiable wealth had been the efficiently demonstrable products of labor and its produce, the grains and the livestock. Of the latter, the protein amassed cattle constituted the most concentrated possible yet maneuverable realization of actual life-support wealth. Cattle were put up as collateral for the banker's loan of gold, silver, and copper coinage. When the voyage was successfully completed, the merchant-ship venturers repaid the banker and paid the banker his "interest" in the form of calves that had been interimly produced by the collateraled cattle. This was called "payment in kind"— kind being the kinder or "children" of the cattle. When bankers eliminated live cattle as collateral and dealt only in gold or silver, there were no gold coins being bred by gold coins as calves had been by cows, so interest was taken out of the capital gold by diminishing the equity of the borrower when he repaid his debt. The banker's interest was cut out of—that is, deducted from—the depositor's original "cap"-ital (head of cattle) stake. […]
The safe return of the merchant venturer's ships was so unpredictable as to constitute a capital investment of high risk but also of very high potential gain—most significantly a risk whose rewarding payoff might take several "crop" seasons to realize. The voyage might take several or even many years to complete. These risks in turn could be lessened by insurance.
As a consequence of all the foregoing, … a new and overwhelmingly greater form of invisible seagoing and land-strutting giants appeared on planet Earth. This was a legally contrived, abstract giant —"legal" because the physically uncontradictable "topsword" king decreed it was legal. Having the most favored privileges accorded real humans, the giant, abstract, corporate "man" is inventively created in 1390 in England. (The corporate "human" may have been invented in ancient Babylon to cover the potentates' voyaging venture, but we have as yet no written record of such.) "His" abstract name is the "Merchant Venturers Society." This composite man was formed by the king of England with a small group of his very powerful friends, who lorded over their king-deeded vastlands.
By royal prerogative, the venture-financing riskers could not be held liable for any losses of the venture. With limited liability, individuals might sue the company but not the human individuals who underwrote the venture If the enterprise failed and went bankrupt, its shareholders lost their ventured stake but were not to be held responsible in any way for its debts. The creditors of the company were the losers, and not the shareholders. Bankruptcy could reflect no credit stigma upon the companies' shareholders. The shareholders were held absolutely blameless for any misfortunes of their ships' crew or for damage caused by collision of their ship with another ship. If the ship and its cargo were lost, the shareholders lost their original shares, but no more. As long as the ship operated successfully, the shareholders shared its trading profits
Whether the ship was lost or not, the banker who loaned the gold for the merchant ship's trading held the life-support-producing lands and their cattle as collateral. Since many voyages ended in disaster, the banker occupied a long-time, steadily profitable position in the overall merchant venturing—and as yet does.
Naturally, the shareholder's limited-liability advantage, granted by sovereign decree, encouraged a swift expansion of such enterprises.
In 1522 Magellan's ship demonstrated that the world is not a laterally extended plane off the edge of which a ship might plunge, nor an ocean extended laterally to infinity from which there was no return. Magellan's ship's circumvoyaging proved that the Earth is a sphere—a closed system with enormous trade-monopolizing potentials. Laws of the land could not be enforced on the sea. The seagoers were outlaws—privateers or pirateers. The most powerful outlaws became the sovereigns of the ocean sea.
In 1580, Queen Elizabeth was the largest shareholder in Sir Francis Drake's merchant ship The Golden Hind. Naturally, the queen granted Drake's venture "legal" freedom from liability. After paying Elizabeth her conspicuously major share, Drake and his other shareholders each realized almost 5,000 percent profit on their risked capital.
Enthusiastic over her Golden Hind venture, in 1600 Queen Elizabeth chartered the limited-liability East India Company. This time the shareholders acquired shares in a fleet of ships, docks, and warehouses in both England and India—not shares in just one ship, as in the earlier "venturing."
Employing her sovereign power, Elizabeth limited the losses of its chartered riskers to their initial monetary or equivalent capital stakes, while continuing their right to receive their proportional profit dividends for as long as the venturing company might exist—in perpetuity.
Known later in England as "Ltd." (for "limited liability"), in France as "Societe en Commandite," in Germany as "Kommanditgesellschaft," and as "Corporation" under the U.S.A.'s "Inc." (for incorporated) status, this newborn abstract legal giant was to be treated as a human personality, empowered to do anything humans can do but also accredited to operate as an abstract, legal entity able to enter or leave any nation without a passport. As such it was able to employ millions of people and any amount of money, tools, buildings, and equipment, and to perform its giant acts anywhere about the oceanic world exclusively for the profit in perpetuity only of its shareholders.
[…]
The fourteenth-, fifteenth-, and sixteenth-century rulers who instituted and empowered those abstract corporate giants were able to popularize their acts by celebrating the visual wealth of goods it brought to their country and to the political satisfaction of their many citizens. The profit to society was visibly distributed as the goods, services, museums, and public-place rarities the enterprising produced. The shareholders' dividend checks were invisibly distributed.
With the battle of Trafalgar in 1805, the risk-capital powers backing the "British Empire" became the "Sovereigns of the Seas." Until that time the high-sea venturers had carried gold and silver as their trading medium. This induced world-around high-seas piracy. The behind-the scenes masters of the British Empire then invented the annual balance of trade" as a world-around bookkeeping system which kept its gold off the seas and instead, after the year-end tallying of the trade interactions, transferred the gold from one country's London vault to another country's London vault. This withdrew the gold from the seagoing pirate's reach. However, it brought many of the pirates into the financial districts of great cities.
Naturally, shareholding in Ltd. enterprise became increasingly attractive as an investment risk, but soon the monetary size of investment required for share participation grew beyond the acquisition means of all but the wealthy. Stock-exchange brokers, for their own convenience, imposed trading only in hundred-share "lots" or "blocks," which quickly raised the equity-purchasing increments to so great a price that only the very wealthy could any longer participate in such venture-sharing. The capital games' playing-rules "kept the pikers out," the original pikers being the on-foot, pike-bearing castle guards.
In the nineteenth century the limited-liability corporate venturing began not only putting its shipyard donkey engines' steam engines in ships, but also mounting them on steel wheels on rails and powering them out of the shipyards. Thus they began railroading heavy loads inland. This initiated new mass-production industry centers at inland water-power sites. For instance, industrial venturing underwrote water-wheel-driven mass-yardage cotton mill fabric production, preferably in such low-wage-paying countries as India. The annual balance-of-trade accounting brought about many obviously inequitable economic conditions, such as, for instance, India's burlap bag-makers working for a penny a day. It was the vast profits made on burlap bags so produced which financed the early-twentieth-century expansion of the Massachusetts Institute of Technology in the U.S.A.
Such cotton and woolen fabric production-venturing was logically followed by thread and needles, pins, buttons, and small hardware mass-production moving-line ventures. With the introduction of electricity and the electricity-driven motor, industry began moving-line mass production of dollar watches, tin cans, safety razor blades, big-city clothing-production sweatshops, then bicycles, then motor cars. In World War I, it introduced steel steamship mass-production; in World War II, transoceanic aircraft mass-production; and, in the "cold," puppet-nation-waged war (World War III), extraterrestrial travel and transport, and mass-production of invisible mass-killingry potential. […]
As mass-capital-venturing flourished after World War I, General Foods Company absorbed many pre-World War I individually owned, independent mass-producers of canned and packaged food. General Electric acquired other successful electrical goods manufacturers. The growth of corporate venture activity was, however, at that time yet identified by unique product categories.
After World War II, "mergers and acquisitions" and outright "takeovers" agglomerated almost all successful industrial capital ventures, regardless of their class of produced goods and services. The great conglomerates found it more profitable, safer, and more credit-powerful to diversify their risking. The successful "biggies" became ever more gargantuan—for example, the Dupont chemical company's 1981 acquisition of Conoco, America's ninth largest oil company, for $7.57 billion, to form the seventh largest industrial corporation in the U.S. Because many of these conglomerations embraced all the national defense weaponry production, they "legally" qualified for guaranteed government "bailout" should their operation become financially "embarrassed" or debts unmeetable. The U S government's decade-ago bailout of Lockheed Aircraft or its multibillion-dollar guaranteed loan to private Chrysler Corporation (the government's military-tank producer) are the current outstanding examples.
The rise of the corporation, industrial capitalism and military conquest are all part of the shell. Like it or not, this is the world into which we born and it all most of us know. This is especially true of Americans, mostly true of the “developed” world (this is after all what “development” actually is), and these days pretty much everywhere else too, which is what “globalization” really means. If you buy your food and pay for your accommodation with money, or rely upon people who do, this means you.
Which brings us to another component we need to address: Money. We’ll do that next time. Until then, here’s a movie:
