Financial topics

[Higgenbotham]

Organic permaculture is substantially more productive than 'conventional' industrial agriculture. I'll present the data on this topic later if anyone wants it, but for now suffice it to say that I've done an LOT of research on it, and there IS enough land for everyone.

I've studied this topic a lot too and maybe you can answer a question. With all the documentaries you watch and reading you do, maybe you've run across "The End of Suburbia" (I haven't watched it) or the concept that suburbia will be a wasteland down the road. With intensive gardening, wouldn't it be possible for every family to grow most of their own food on a suburban lot? You might want to check out urbanhomestead.org formerly path to freedom if you haven't already. Now I'm not saying the suburbs are the optimal arrangement and there may be other problems, but in a lot of areas of the country I think they are reclaimable.

I think it would take more than 250 people to take down all the infrastructure in the entire country, but not more than ten times that. But then again, we've absolutely no reason to attack vital infrastructure like that, and most of us would be horrified at the notion.

But yeah, if you wargame it out, the advantage in modern warfare is tilted strongly towards guerrillas and away from occupying forces, and the greater the availability of modern computation and communication tools to the popular insurgency, the more uneven the contest. People have not yet seen the true effects of this trend any more than they'd seen the true effects of mechanization and armor on the battlefield before the Blitzkrieg was first used.

My guess would be that the largest (non-representative) group that could be put together for the purpose of violent attacks would number around 25; any number over that becomes unwieldy in my estimation, so I kind of doubt the infrastructure gets taken down internally as a whole. There may be attacks on certain areas or certain entities. By about 2015, at least I estimated at one time, DNA sequencing and synthesizing technology may become cheap enough and available enough for a "lone wolf" to release a pathogen that takes the system down. This or some version of it is I believe to be the most likely "black swan" breakdown mechanism. Check out this article and let me know what you think (in general) on this topic: http://www.washingtonpost.com/wp-dyn/co ... 00580.html

I'd estimate the system requires about 3% real growth to sustain itself. That hasn't been achievable since about 2005. That's the reason for all the bubbles and $1 trillion plus deficits. The most likely general breakdown mechanism in my view is that out of necessity people find other living arrangements. As an example of what I'm taking about, there's a little known publication called Traffic Volume Trends that tabulates the vehicle miles traveled in the US. At the end of each monthly publication, there is a long term graph of vehicle miles traveled. I'd be interested to see what you think of this too. It tells me that younger people may be finding ways to live without a vehicle for the very first time, either out of preference or out of necessity. Anecdotally, I'm finding that this is true. Housing and automotive is the backbone of the current economy, so if people increasingly find other arrangements the existing economy will collapse of its own dead weight and something new will take its place.

PS I checked the graph near the end of the latest Traffic Volume Trends and it goes back to 1985. However, the database goes back further and you can see that even through the oil crisis of the 1970s (when gasoline took up a larger percentage of the family budget at times), traffic volume did not decrease for very long before it went to new highs. I realize there are other reasons traffic volume may be decreasing such as more online banking and fewer trips to the bank but given the pattern of the graph that does not appear to be the whole story.

[OLD1953]

That population density is what the reply was based on, rolling back to the earliest days of informed agriculture, which is what you are stating, requires a human population of no more than a billion planet wide. That is, assuming there will be no use whatsoever of redistribution of minerals or fixation of nitrogen besides bacterial action or natural electrical events. (I spent a LOT of my life as a farmer, on a KY hill farm, doing this exact thing, I fully understand the limitations and practicalities from a real world standpoint. We COULD feed a large number of people with say 15% as farmers, rather than 5% or less, with the rest living in cities and turn to a more recycle oriented agriculture, but we CANNOT put 90% on the land and feed a large number, people take up too much space, it's an inefficient use of the area. Moreover, if you really wanted to maximize production, you'd be using/doing things that got put aside a long time ago, such as carbon monoxide fuels, which is the universal "green" tech that nobody seems to care about. )

Vince, deflation dropped off after 1850 as the population worldwide rose, more people need more money in circulation or you have unending deflation and a dead economy because absolutely no one will borrow money for any reason in a time of deflation, payback costs are too high. The inflation since 1950 was by design, why complain about a system that is doing what it was designed to do? If it needs a redesign then push for it, but it's designed to put an end to deflation and that's in all the documents from the 30's/40's about stopping deflation forever.

Capitalism has a built in assumption that population always increases. This has been true from the earliest conception of modern capitalism to about 1970, when world population growth rate of change fell off sharply. Since then, capitalism has had problems. Inflation is a symptom of those problems, not the issue per se. You can't understand what's going on by looking at the numbers, you have to look at the first and second derivatives of the function of the curve fitting the numbers (velocity and acceleration, IOW) to actually understand the phenomena.

[John]

Nikkei is down over 10%. Bank of Japan is gushing a tsunami
of liquidity, to no avail.

European stocks are down 4%.

Dow futures are down 200 points.

What happens next?

John

[vincecate]

What happens next?

Conditions do seem rather ideal for a crash at this point.

1) Generational timing.
2) Stock market was about where it was 10 years ago then up 30% in 6 months. So anyone can feel it is high. Probably a bunch of stop loss orders put in as the market went up fast that can be tripped on the way down for a very fast drop (like flash crash fast).
3) All kinds of market sentiment measures at or near record highs.
4) Insider selling at or near record highs.
5) Interest rates are near record lows since leaving gold standard in 1971. As they go up the P/E on stocks will go down.
6) It looks like the market is past the top and starting down. So momentum traders going to be switching to short.
7) Disaster in Japan. Hurts Japanese economy and somewhat the world economy. Results in more money printing which could tip Japan into hyperinflation or at least encourage interest rates to go up. Nuclear power trouble likely to hurt future of Nuclear power, which will make demand for oil higher, and so prices of oil higher, which will hurt world economy.
8) Options expiring Friday (4 trading days counting today) means very cheap to take a gamble that market crashes in the next 4 days.
9) At the moment pre-market S&P is down 2.5%. This is very close to where people will say, "the stock market is down for the year". Once they start saying that many people will feel the market is going down.

Probably many more reasons too that it looks like things are setup for a huge crash.

[Higgenbotham]

Nikkei is down over 10%. Bank of Japan is gushing a tsunami
of liquidity, to no avail.

European stocks are down 4%.

Dow futures are down 200 points.

What happens next?

John

Interesting situation because my first thought was to go back to previous similar disasters and think about what happened to the stock market after those occurred, but there's a problem with that because none of them occurred during crisis eras. The ones that come to mind are the 1871 Great Chicago Fire, the 1906 SF earthquake, and Chernobyl. What is common to all 3 is the stock market crashed roughly 18 months later. Also, the last 2 are one generational cycle apart and preceded the 58 year "false panic" cycle John discussed at one time.

[vincecate]

The ones that come to mind are the 1871 Great Chicago Fire, the 1906 SF earthquake, and Chernobyl. What is common to all 3 is the stock market crashed roughly 18 months later.

With the Internet things will probably happen much faster today.

[Higgenbotham]

The ones that come to mind are the 1871 Great Chicago Fire, the 1906 SF earthquake, and Chernobyl. What is common to all 3 is the stock market crashed roughly 18 months later.

With the Internet things will probably happen much faster today.

At one time I read some analysis about why the time delay with the US disasters. What comes to mind is rebuilding temporarily stimulates the economy, overheats it a bit, then it collapses due to the effects of both the disaster and removing the temporary rebuilding activity. So I don't think anything has changed. But it might be important to keep in mind the disaster everyone seems to have forgotten already - the BP disaster in the gulf - and whether the scale of that disaster would be sufficient to put it in the category of the other US disasters listed above. I don't know the answer to that, but my first inclination would be to say no.

[John]

There's another way of looking at these questions -- the current
situation and the "time delay" issue.

From the point of view of Generational Dynamics, what I keep watching
for is panic -- a generational panic that will be remembered for
decades. When you have a selloff triggered by a natural disaster,
then there's no reason for panic. Investors simply think that they're
selling because of the disaster, creating buying opportunities, since
the market will recover as reconstruction occurs.

The 1929 panic and other major panics occur for no apparent reason.
If the market starts crashing for no reason at all, then people really
do start to panic. That's not the situation today.

A time delay panic would be explained if investors begin to realize
that the reconstruction isn't going to occur as hoped, and so a real
panic might set in.

John

[vincecate]

Stimulus worked really well in the 1920s when few understood the fed was making more money. But at this point I don't think it will help japan, the usa, or the uk.

[Higgenbotham]

A time delay panic would be explained if investors begin to realize
that the reconstruction isn't going to occur as hoped, and so a real
panic might set in.

John

That was one of my thoughts - for example, if it's discovered the insurance companies aren't strong enough to pay out, or if the insurance companies will have to unload stocks or bonds to pay out, etc.