Followers of this blog may have noticed I've left off for a week. Events conspired to put me elsewhere, but this is the work I chose.
It was good to sit back and reflect on what has been going on the last month, highlights being -
1. McDonalds 11% off the top and 13% off the bottom line misses, one in fifty stores closed (as just an example of one of countless other chains cutting back.
2. GE gave up its ability to print money.
3. Two trillion in euro-bonds at negative interest rates.
4. Chicago pensions go junk rating.
5. USA Banks are testing cashless regimes and outlawing storing cash in safety deposit boxes (with inspections as part of the deal?)
6. Stock buy-backs are luring people into maliciously rising equity prices, and feeding real estate boom again.
What would you do if all of the connected and insider folk were buying boats and stocking them with food? Would you look into it to? But then, when you did, the new rules say you may not buy a boat nor stock up on food. Would you get nervous?
Well, that is in essence what is going on in the face of these epochal changes. Naturally your mind might turn to revolution, but that is a false dilemma. There is an alternative that is actually better than "stocking up a boat (which is forbidden to you) or violence.
That is simply starting your own business, it does not matter what, I teach small biz int'l trade, it could be food truck for all care.
If you see how we got here, you can then start to see the way out. What we have is massive misallocation and malinvestment. The pensions are misallocations of credit, and malinvestment is the financing of the unproductive and unneeded.
All of this flowed from the creation of credit by means of the stand-by letter of credit facility granted by charter to banks, which is both off the balance sheet and has no reserve requirement, mischief begun in the mid-70s and went wild when its first failure was bailed out by uncle sam. There is no rational limit to how much can be lent, but there is an irrational end to it, which apparently we have reached.
All this comes from the inevitable failure of lending asset-less backed credit. The circumstances are dire, for those who are invested in the circumstances. If you are invested in it, you'll be inclined to fight fo what you will lose anyway. That is time taken away from working on THE solution, that happens to be also YOUR solution.
The key, the utterly contrarian position right now, is to forget your "investments" and start our own biz. As far as I know , I am unique in arguing this, but who in the financial press would say "get out"?
And the key to the start -up is credit, not this asset-less backed fraud we've had for the last 40 years, but the bad credit that crowded out the good credit.
Think of this... the extractors dig up tin and sell it to the processors with 30 days to pay... the processors turn it into sheets and sell it to manufacturers with 30 days to pay... manufacturers create goods and sell it to wholesalers with 30 days to pay... wholesalers to retailers another 30 days... and then retailers to their clients, another 30... all this was how the world worked prior to circa 1975 as the banks learned they could get away with creation of credit by means of the stand-by letter of credit facility granted by charter to banks, which is both off the balance sheet and has no reserve requirement. think of how massive that private credit was, and all asset based. Plus, never a dime in interest charged.
Think of how today it is all through banks, and all interest bearing, in spite of the fact the vast majority at loan at interest has no asset behind it at all! No wonder banking is so huge, and the powers that be bail it out. It is the source of their power. But it has come to an end.
Before then, people patronized the corner store, and paid their bills at the end of the month. The community kept itself in check, people behind for a sick kid were cut slack on catching up, people who were profligate got their credit cut off.
But then came massive credit, asset -less backed, junk bonds... and Office Depot rolled up all of the corner stationery stores, Lowes rolled up all of the corner hardware stores, Petco rolled up all of the corner pet shops, Walgreens rolled up the corner pharmacies, Vons/Safeway etc the corner grocery...
You got cheap food, bad food, obesity and unemployment, but who cares, government rolled up the charities and now you get "free health care" although it is amazingly expensive and rather narrow in scope. Everybody seems to have the exact same diseases, not matter what symptoms they report. Or you would think from what BigMedicine has to offer. You shift from a few nice things you keep to crap you toss pretty quickly after a newer cool junky thing appears. Now we are down to pixellated fascinations, my facebook page vs my human connections.
Now, we see how we got into this mess. I urge you to in essence "write off" (emotionally) your property, paycheck, pension and focus on building a business. Note all of that credit above, among the players, in the good old days. Well the work is to go back to where we got off track, circa 1970. You will be too small to make illegal (I never advocated breaking any rules), and your creativity will be uniquely challenged. You will thrive under the radar, and the key is to re-join the credit extenders, as in the old days.
Now, you tell me... of all that old-school credit extension, starting with the extractors, and ending with the fellow who goes into the pub and gets a beer on his tab... all that credit stats with the extractors... where do they get their credit to pay for the extraction.
Understand this, and you "get it" all... ready to experience rare anagnorisis? Answer this question... before I reveal it tomorrow.
Feel free to forward this by email to three of your friends.
It was good to sit back and reflect on what has been going on the last month, highlights being -
1. McDonalds 11% off the top and 13% off the bottom line misses, one in fifty stores closed (as just an example of one of countless other chains cutting back.
2. GE gave up its ability to print money.
3. Two trillion in euro-bonds at negative interest rates.
4. Chicago pensions go junk rating.
5. USA Banks are testing cashless regimes and outlawing storing cash in safety deposit boxes (with inspections as part of the deal?)
6. Stock buy-backs are luring people into maliciously rising equity prices, and feeding real estate boom again.
What would you do if all of the connected and insider folk were buying boats and stocking them with food? Would you look into it to? But then, when you did, the new rules say you may not buy a boat nor stock up on food. Would you get nervous?
Well, that is in essence what is going on in the face of these epochal changes. Naturally your mind might turn to revolution, but that is a false dilemma. There is an alternative that is actually better than "stocking up a boat (which is forbidden to you) or violence.
That is simply starting your own business, it does not matter what, I teach small biz int'l trade, it could be food truck for all care.
If you see how we got here, you can then start to see the way out. What we have is massive misallocation and malinvestment. The pensions are misallocations of credit, and malinvestment is the financing of the unproductive and unneeded.
All of this flowed from the creation of credit by means of the stand-by letter of credit facility granted by charter to banks, which is both off the balance sheet and has no reserve requirement, mischief begun in the mid-70s and went wild when its first failure was bailed out by uncle sam. There is no rational limit to how much can be lent, but there is an irrational end to it, which apparently we have reached.
All this comes from the inevitable failure of lending asset-less backed credit. The circumstances are dire, for those who are invested in the circumstances. If you are invested in it, you'll be inclined to fight fo what you will lose anyway. That is time taken away from working on THE solution, that happens to be also YOUR solution.
The key, the utterly contrarian position right now, is to forget your "investments" and start our own biz. As far as I know , I am unique in arguing this, but who in the financial press would say "get out"?
And the key to the start -up is credit, not this asset-less backed fraud we've had for the last 40 years, but the bad credit that crowded out the good credit.
Think of this... the extractors dig up tin and sell it to the processors with 30 days to pay... the processors turn it into sheets and sell it to manufacturers with 30 days to pay... manufacturers create goods and sell it to wholesalers with 30 days to pay... wholesalers to retailers another 30 days... and then retailers to their clients, another 30... all this was how the world worked prior to circa 1975 as the banks learned they could get away with creation of credit by means of the stand-by letter of credit facility granted by charter to banks, which is both off the balance sheet and has no reserve requirement. think of how massive that private credit was, and all asset based. Plus, never a dime in interest charged.
Think of how today it is all through banks, and all interest bearing, in spite of the fact the vast majority at loan at interest has no asset behind it at all! No wonder banking is so huge, and the powers that be bail it out. It is the source of their power. But it has come to an end.
Before then, people patronized the corner store, and paid their bills at the end of the month. The community kept itself in check, people behind for a sick kid were cut slack on catching up, people who were profligate got their credit cut off.
But then came massive credit, asset -less backed, junk bonds... and Office Depot rolled up all of the corner stationery stores, Lowes rolled up all of the corner hardware stores, Petco rolled up all of the corner pet shops, Walgreens rolled up the corner pharmacies, Vons/Safeway etc the corner grocery...
You got cheap food, bad food, obesity and unemployment, but who cares, government rolled up the charities and now you get "free health care" although it is amazingly expensive and rather narrow in scope. Everybody seems to have the exact same diseases, not matter what symptoms they report. Or you would think from what BigMedicine has to offer. You shift from a few nice things you keep to crap you toss pretty quickly after a newer cool junky thing appears. Now we are down to pixellated fascinations, my facebook page vs my human connections.
Now, we see how we got into this mess. I urge you to in essence "write off" (emotionally) your property, paycheck, pension and focus on building a business. Note all of that credit above, among the players, in the good old days. Well the work is to go back to where we got off track, circa 1970. You will be too small to make illegal (I never advocated breaking any rules), and your creativity will be uniquely challenged. You will thrive under the radar, and the key is to re-join the credit extenders, as in the old days.
Now, you tell me... of all that old-school credit extension, starting with the extractors, and ending with the fellow who goes into the pub and gets a beer on his tab... all that credit stats with the extractors... where do they get their credit to pay for the extraction.
Understand this, and you "get it" all... ready to experience rare anagnorisis? Answer this question... before I reveal it tomorrow.
Feel free to forward this by email to three of your friends.
4 comments:
[note started writing this earlier but got distracted]
At least in the US, workers will work for about two weeks before getting paid. This is an extension of credit. Therefore the workers who do the extraction are extending some credit.
Extraction often requires some tools. The toolmakers or blacksmiths could extend their creativity and labor as credit to the extractors so the workers will have tools.
The extractors must convince the workers and toolmakers to extend them the credit of their labor and intellect. This extractors need to show the workers they've removed the risks of the operation and there's a good probability they'll get paid. They need to paint a picture of success. This is what Steve Jobs did with Wozniak when he convinced Wozniak to extend his labor at a reduced cost (credit) and build a computer for future profits. It all starts in the mind.
No person extends the toolmakers and laborers credit. They can live off the land as hunter-gatherers, get paid for work in advance, or extend their labor as a form of credit and get paid later. If the workers are prepaid for their labor, the extractors are actually extending credit to the workers.
When goods are directly exchanged or bartered for other goods, for example a 60 ounces of silver for an ounce of gold, no credit is necessary if both goods are exchanged simultaneously. Labor, even if it is paid every hour on the hour, cannot be exchanged immediately--it is either prepaid or postpaid.
No person extends the toolmakers and laborers credit.
Well, sure they do... the extractors who produce the iron ore for the toolmakers extend credit. Laborers are extended credit by the grocer and the pub. Labor extends the extractor credit, and labor originally made they own tools, to get the ball rolling, with ever-improving tools by means of division of labor.
I'm thinking of the original laborers or agricultural workers who made the choice to either live as wild hunter gatherers or to operate as organized laborers for a wage. Sort of like Enkidu in the Epic of Gligamesh.
O! You do go back! Although Enkidoo story is older, the Genesis story goes back farther ... and in it Cain is told to wander the earth (hunter gatherer?) but he immediately disobeys and settle down. (Mining?) In any event, at tome point someone introduced usury and trapped workers into slavery. I wonder what the oldest story of usury is in lit...
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