We make progress as a species when we are forced in one way or another to evolve to seeing ourselves and the world in new ways. Necessity is the mother of invention, etc.
Monetary policy is an important public policy, but it is not the only one to stabilize our economy and reduce its business cycles. The leading central bank, the Federal Reserve of the U.S., has introduced, after the 2008 global financial crisis, new instruments and unusual facilities to implement its new innovative monetary policy. The financial world and mostly the social scientists watch as the Federal Open Market Committee (FOMC) decides on a target interest rate in the federal funds market for the next period. The framework that the FOMC uses to implement monetary policy has changed over the last twelve years and continues to evolve today. Here, we try to evaluate the new instruments and their “effectiveness”. Before the 2008 financial crisis, policymakers used one set of traditional instruments (tools) to achieve the target rate. However, several policy interventions, introduced soon after the crisis, drastically altered the landscape of the federal funds market and the traditional economic theory. This new and uncertain environment, with enormous reserves and even interest on reserves, necessitated a new set of instruments by the Fed for its monetary policy implementation. Lately, after seven years of zero interest rate, the FOMC began in December 2015 to increase the target rate and then, went back again to a lower one, but many questions arise. How did they evaluate the effectiveness of these new instruments? Is the current federal funds rate the appropriate one for our economic wellbeing? How efficient was so far this ZIR monetary policy after the latest global financial crisis? Why the Fed put all these burdens of its ‘innovated” new monetary policy to the poor taxpayers (bail out) and to the risk-averse depositors (bail in)? Is it possible for the Fed’s policy to prevent the future financial crises? The federal funds rate was very low and affected negatively the financial markets (bubbles were growing), the real rates of interest (it is negative for twelve years), and the deposit rates (they are closed to zero for twelve years). The redistribution of wealth of depositors and taxpayers continues, which means the true economic welfare is falling and a new global recession was in preparation, if the current unfair easy money policy will persist, ignoring the necessity of a prevention of financial crises. Then, it came as an unexpected plague the coronavirus pandemic, following with a new but, the worse in economic history global crisis (chaos).
Why the next decade will shape the century!adusault
A position paper on the forces converging into the next decade, which will create more volatility. We constantly underestimate changes and resist new conditions.
Monetary policy is an important public policy, but it is not the only one to stabilize our economy and reduce its business cycles. The leading central bank, the Federal Reserve of the U.S., has introduced, after the 2008 global financial crisis, new instruments and unusual facilities to implement its new innovative monetary policy. The financial world and mostly the social scientists watch as the Federal Open Market Committee (FOMC) decides on a target interest rate in the federal funds market for the next period. The framework that the FOMC uses to implement monetary policy has changed over the last twelve years and continues to evolve today. Here, we try to evaluate the new instruments and their “effectiveness”. Before the 2008 financial crisis, policymakers used one set of traditional instruments (tools) to achieve the target rate. However, several policy interventions, introduced soon after the crisis, drastically altered the landscape of the federal funds market and the traditional economic theory. This new and uncertain environment, with enormous reserves and even interest on reserves, necessitated a new set of instruments by the Fed for its monetary policy implementation. Lately, after seven years of zero interest rate, the FOMC began in December 2015 to increase the target rate and then, went back again to a lower one, but many questions arise. How did they evaluate the effectiveness of these new instruments? Is the current federal funds rate the appropriate one for our economic wellbeing? How efficient was so far this ZIR monetary policy after the latest global financial crisis? Why the Fed put all these burdens of its ‘innovated” new monetary policy to the poor taxpayers (bail out) and to the risk-averse depositors (bail in)? Is it possible for the Fed’s policy to prevent the future financial crises? The federal funds rate was very low and affected negatively the financial markets (bubbles were growing), the real rates of interest (it is negative for twelve years), and the deposit rates (they are closed to zero for twelve years). The redistribution of wealth of depositors and taxpayers continues, which means the true economic welfare is falling and a new global recession was in preparation, if the current unfair easy money policy will persist, ignoring the necessity of a prevention of financial crises. Then, it came as an unexpected plague the coronavirus pandemic, following with a new but, the worse in economic history global crisis (chaos).
Why the next decade will shape the century!adusault
A position paper on the forces converging into the next decade, which will create more volatility. We constantly underestimate changes and resist new conditions.
While concerns about poverty and earning capacity were raised now and then, it was only after the 2008 financial crisis that employment and the earning capacity of people were catapulted into the center stage of political discourse. Part of this discourse has focused on the relationship between employment and consumption, where the tension between providing jobs and decreasing the environmental footprint of industrialized and industrializing states was acknowledged. This relationship has historically focused on increasing production and consumption with insufficient or little regard to their effects on the environment, and energy and resource limits.
Climate change perceptions and perceived risk in the
United States has become increasingly partisan, with increased
belief in and support for climate change and regulation among
democrats, but decreased belief and support among
republicans. These divergences are partly attributable to
increasingly partisan news outlet viewership and coverage. We
inhabited a game theory model to recognize optimal climate
change communication strategy through news media outlets.
Actor strategies included whether to converse with pro- and/or
anti-climate change new outlets, and to emphasize regulation,
renewable energy, whether climate change is real, man-made,
and/or causes harm to the United States Payoffs consisted of
change in public opinion for each of the candidate topics
actors can chose to emphasize. Solutions to games where
players have a continuous choice about how much to pollute,
games where players make decisions about treaty
participation, and games where players make decisions about
treaty ratification, are examined. The implications of linking
cooperation on climate change with cooperation on other
issues, such as trade, are examined. Cooperative and noncooperative approaches to coalition formation are investigated
in order to examine the behavior of coalitions cooperating on
climate change. One approach to accomplish assistance is to
design a game, known as an apparatus, whose equilibrium
corresponds to an optimal outcome.
Speaking to a crowd of more than 1,000 students and other members of the University of Texas at Austin community, Dean Tom Gilligan used colorful charts and detailed graphs to explore trends in prosperity and poverty around the world. He explained how gross domestic product (GDP) is used as a measurement tool, how “real GDP” and “GDP per capita” are calculated, and how these figures are used to compare economies across regions, across populations and across the world.
Nice article with some thoughts on the way the present Energy Transition and Climate Mitigation works, or not works.
Great input document for the more useful dialogues and conversations.
April 2021.
Gayle Allard (Vice Rector of Research at IE Business School), brought to us an analysis of the causes behind the actual European crisis, drawing the attention to the enormous challenges ahead. Referring to the different factors that contribute to the satisfaction of women, Gayle Allard shared with the audience a research survey illustrating the lack of correlation between wealth increase (GDP) and happiness in general, inviting all the presents to reflect on the way society should be heading to.
Speaking to a crowd of more than 1,000 students and other members of the University of Texas at Austin community, Dean Tom Gilligan used colorful charts and detailed graphs to explore trends in prosperity and poverty around the world. He explained how gross domestic product (GDP) is used as a measurement tool, how “real GDP” and “GDP per capita” are calculated, and how these figures are used to compare economies across regions, across populations and across the world.
While concerns about poverty and earning capacity were raised now and then, it was only after the 2008 financial crisis that employment and the earning capacity of people were catapulted into the center stage of political discourse. Part of this discourse has focused on the relationship between employment and consumption, where the tension between providing jobs and decreasing the environmental footprint of industrialized and industrializing states was acknowledged. This relationship has historically focused on increasing production and consumption with insufficient or little regard to their effects on the environment, and energy and resource limits.
Climate change perceptions and perceived risk in the
United States has become increasingly partisan, with increased
belief in and support for climate change and regulation among
democrats, but decreased belief and support among
republicans. These divergences are partly attributable to
increasingly partisan news outlet viewership and coverage. We
inhabited a game theory model to recognize optimal climate
change communication strategy through news media outlets.
Actor strategies included whether to converse with pro- and/or
anti-climate change new outlets, and to emphasize regulation,
renewable energy, whether climate change is real, man-made,
and/or causes harm to the United States Payoffs consisted of
change in public opinion for each of the candidate topics
actors can chose to emphasize. Solutions to games where
players have a continuous choice about how much to pollute,
games where players make decisions about treaty
participation, and games where players make decisions about
treaty ratification, are examined. The implications of linking
cooperation on climate change with cooperation on other
issues, such as trade, are examined. Cooperative and noncooperative approaches to coalition formation are investigated
in order to examine the behavior of coalitions cooperating on
climate change. One approach to accomplish assistance is to
design a game, known as an apparatus, whose equilibrium
corresponds to an optimal outcome.
Speaking to a crowd of more than 1,000 students and other members of the University of Texas at Austin community, Dean Tom Gilligan used colorful charts and detailed graphs to explore trends in prosperity and poverty around the world. He explained how gross domestic product (GDP) is used as a measurement tool, how “real GDP” and “GDP per capita” are calculated, and how these figures are used to compare economies across regions, across populations and across the world.
Nice article with some thoughts on the way the present Energy Transition and Climate Mitigation works, or not works.
Great input document for the more useful dialogues and conversations.
April 2021.
Gayle Allard (Vice Rector of Research at IE Business School), brought to us an analysis of the causes behind the actual European crisis, drawing the attention to the enormous challenges ahead. Referring to the different factors that contribute to the satisfaction of women, Gayle Allard shared with the audience a research survey illustrating the lack of correlation between wealth increase (GDP) and happiness in general, inviting all the presents to reflect on the way society should be heading to.
Speaking to a crowd of more than 1,000 students and other members of the University of Texas at Austin community, Dean Tom Gilligan used colorful charts and detailed graphs to explore trends in prosperity and poverty around the world. He explained how gross domestic product (GDP) is used as a measurement tool, how “real GDP” and “GDP per capita” are calculated, and how these figures are used to compare economies across regions, across populations and across the world.
Orientación sobre cómo relacionar conceptos matemáticos básicos como la suma y la resta con la realidad del entorno escolar y actividades diarias del alumno.
FUTURE AGENDA: Future of wealth (initial-perspective) Prof. Julio J. PradoJulio Jose Prado
In the post-recession era,
there is an increasing concern
on topics related to wealth
inequality in Developed
countries, most notably in
the USA and the Euro Zone.
56% of people living in rich
countries, believe the most
pressing problem of the
economy is inequality.
Today’s economic and political upheavals reflect an ongoing misalignment between business and economies (on the one hand) and acceptable societal outcomes (on the other). There is still time to adjust, if we are willing to reexamine some long-held assumptions.
Fasanara Capital | Investment Outlook
1. The Future Is Wide Open: Avoid The ‘Illusion Of Knowledge’ Trap
The single most dangerous thinking trap / optical illusion for investors today is to look at Trump, Brexit and Italy Referendum as non-events, buried in the past. We believe that 2017 may likely be driven by the same factors that failed to shape 2016. The non-events of 2016 are likely to be the drivers of 2017. Finally, we will get to find out if Brexit means Brexit, if Trump means Trump, if a failed Italian referendum means early elections and a membership of the EMU in jeopardy down the line.
2. Structural Shift: These Are Transformational Times
The macro outlook of the next years will be influenced the most by these structural trends:
› Protectionism, De-Globalization & De-Dollarization. In Pursuit of Inclusive Growth
› End of ‘Pax Americana’. The ascent of China. Geopolitical risks on the rise
› End of ‘Pax QE’. Markets without steroids, but still delusional.
› 4th Industrial Revolution: labor participation rate falling from 63% to 40% in 10 years?
3. Our Baseline Scenario: Bubble Unwind, Equities and Bonds Down
Starting this 2017, our major macro convictions are as follows:
› Global Tapering to progress
› US Dollar to keep grinding higher
› European Political Instability to worsen
› US Equities to weaken
Dynamic Stability: US Strategy for a World in Transitionatlanticcouncil
We have entered a new era in world history, a post-post-Cold War era that holds both great promise and great peril for the United States, its allies, and everyone else. We now can call this a "Westphalian-Plus" world, in which nation-states will have to engage on two distinct levels: dealing with other nation-states as before, and dealing with a vast array of important nonstate actors. This era calls for a new approach to national strategy called "dynamic stability."
The authors of this paper—Atlantic Council Vice President and Scowcroft Center Director Barry Pavel and Senior Fellow Peter Engelke, with the help of Assistant Director Alex Ward—kick off the Atlantic Council Strategy Paper series by telling the United States to seek stability while leveraging dynamic trends at the same time. The central task facing America is "to harness change in order to save the system," meaning the preservation of the rules-based international order that has benefited billions around the world, including Americans themselves, since 1945. Within its pages, the paper outlines the components of strategy in a swiftly-changing world.
Instructions1. On the top of the page, provide the article citat.docxnormanibarber20063
Instructions
1. On the top of the page, provide the article citation in current APA format.
On the next line down, type the topic of your articles: (Gross Domestic Product (GDP)
in all caps and bold format.
2. In a double-spaced document, briefly explain the author’s purpose for writing the article. One way to understand the author’s purpose is to ask yourself why he or she wrote it. (For example, consider current and future events, politics, or anything else that may have inspired the article.)
3. Summarize the article(The criminality of Wall Street), focusing on the discussion of the topic the article addresses. Incorporate relevant economic theory that is present so that discussion of the article content is clear.
Article: The Criminality of Wall Street
Tabb, William K. Monthly Review66.4 (Sep 2014): 13-22.
The current stage of capitalism is characterized by the increased power of finance capital. How to understand the economics of this shift and its political implications is now central for both the left and the larger society. There can be little doubt that a signature development of our time is the growth of finance and monopoly power.1
In 1980 the nominal value of global financial assets almost equaled global GDP. In 2005 they were more than three times global GDP.2 The nominal value of foreign exchange trading increased from eleven times the value of global trade in 1980 to seventy-three times in 2009.3 Of course it is not certain what this increase means, since such nominal values can fluctuate widely, as we saw in the Great Financial Crisis. They cannot be compared directly and without all sorts of qualifications to the value added in the real economy. But they do give an impressionistic sense of the enormous magnitude by which finance grew and came to dominate the economy. Between 1980 and 2007, derivative contracts of all kinds expanded from $1 trillion globally to $600 trillion.4 Hedge funds and private equity groups, special investment vehicles, and mega-bank holding companies changed the face of Western capitalism. They also brought on the collapse from which we still suffer. Ordinary people may not be acquainted with the numbers (and even those best informed are not sure of their significance), but people generally understand in different and often deep ways what has been happening: namely, an ongoing process of financialization that has come to dwarf production.
What is particularly important is that despite the huge bubble created by this metastasizing growth of finance, the economy did not expand as rapidly as it had in the postwar years, before the goods producing industries lost ground in terms of employment to other sectors of the economy, and when government spending was used actively to promote growth. While the nature of much of the growth that occurred then is certainly open to criticism from all sorts of standpoints, at the time there was widespread understanding in policy circles that government spending was.
The next global economy is emerging in a new world full of unprecedented technologies, new ideas about resources and capital, and new approaches to business. Crucially, we are also being confronted with environmental and economic challenges never before imagined. The ‘next economy’ or ‘green economy’ approach to investment management asserts that the basics of the global economy are evolving in tandem with these changes and that methods of investment management must evolve with them. Green Alpha Advisors contemplates a future economy in which the next generation of asset management must be integral to and reflective of that next economy which both functions to support the integrity of earth’s systems and also can function within earth’s tolerances and finite resource base.
To appropriately invest in this emerging, green economy, one must appreciate that the next economy is by definition not the legacy economy of previous generations, and that it therefore requires a new understanding, new definitions and a new set of rules. To some degree, this requires redefining the parameters of modern portfolio theory to reflect this new world with its technologies and challenges. This in turn requires new economic models, new portfolio construction methods, and new sector classification schemes. Green Alpha Advisors approach to all three is presented here in brief.
“Rebooting after the economic crash: IT, ET and America 3.0.”
Professor Jonathan Taplin , USC Annenberg School and ARNIC
The financial crisis will leave the next president with the task of rebuilding a shattered American economy. Professor Taplin will describe the potential roles of information technology and energy technology in America 3.0.
A U.S. Chamber of Commerce report, second in a series, that imagines what the economy would look like today if the shale energy revolution had not taken place. It's not a pretty picture.
CASE STUDY CAPITALISM This case views the global, capitalistMaximaSheffield592
CASE STUDY CAPITALISM
This case views the global, capitalist economic system through the prism of the 2007–2008 financial crisis (referred to here as the
Financial Crisis). More than a decade later, what more do we now know? How did the crisis emerge, and what were its consequences
(short- and long-term)? What challenges does it present for capitalism today? What was the role of social responsibility? And
perhaps most importantly, what changes does a strategic CSR perspective suggest moving forward?
THE FINANCIAL CRISIS
In many ways, the dramatic economic events that began toward the end of 20071 (widely reported as “the most serious financial
crisis since the Great Crash of 1929”2 or the “Great Recession”3) brought into focus the comprehensive nature of CSR. From
individual greed and the abdication of responsibility to organizational fraud and the mismanagement of resources, to governmental
failure to monitor and adequately regulate the financial system, the crisis emphasized the many interlocking factors that make CSR so
complex. At the same time, and with the benefit of hindsight, these events demonstrate how straightforward CSR can be. At its
simplest, CSR is not rocket science. It is often common sense, combined with an enlightened approach to management and decision
making. To look back at some of the decisions that contributed to the economic crisis and try to rationalize why they were made,
however, represents an exercise in exasperation:
What do you call giving a worker who makes only $14,000 a year a nothing-down and nothing-to-pay-for-twoyears
mortgage to buy a $750,000 home, and then bundling that mortgage with 100 others into bonds—which
Moody’s or Standard & Poor’s rate[s] AAA—and then selling them to banks and pension funds the world over?4
Essentially, the crisis resulted from the cumulative effects of multiple bad decisions by many individuals who had lost their sense of perspective.5 What was amazing
at the time was “how so many people could be so stupid . . . and self-destructive all at once”
6
to produce “a near total breakdown of responsibility at every link in our financial chain.”7 The scale of
At the height of the boom, the subprime mortgage industry in the United States had clearly lost all sense of proportion. The result
was higher default rates and, as a consequence, higher rates of home repossessions:
Between 2005 and 2007, which was the peak of sub-prime lending, the top 25 subprime originators made almost
$1,000bn in loans to more than 5m borrowers, many of whom have [since] had their homes repossessed.10
The industry as a whole experienced all the signs of a bubble, the aftermath of which generated dramatic headlines such as “Sex,
Lies, and Mortgage Deals.”11 As a society, we should have picked this up earlier and acted to diffuse it. As such, the Financial Crisis
highlights the central role of CSR in today’s global business environment. It is a lens through which excesses ...
WE TALK A LOT ABOUT SUSTAINABLE DEVELOPMENT AND BELIEVE THAT IF WE ADOPT RESPONSIBLE ATTITUDE IT MAY HELP US TO ACHIEVE OUR GOAL. HOWEVER, WE FORGET THAT NOTHING GROWS CONSTANTLY. EVERYTHING AND EVERYONE HAVE LIMITS. BY STRETCHING THE LIMITS WE CAUSE CRISES. IN MY OPINION, WITHOUT MAJOR REVISION OF THE GLOBAL FINANCIAL SYSTEM SUSTAINABLE DEVELOPMENT IS UNLIKELY TO HAPPEN.
12th-14th May,2020 -the FT launched The Global Boardroom, a new live-
streamed three-day event gathering "the most influential voices" from policy, business, tech and finance to offer a comprehensive picture of the global response to the Covid-19 crisis.
Similar to A new endA New End: A New Beginning (Part 2) (20)
Today’s financial “crisis” is facilitating the evolutionary jump to the next stage of human development – shifting from faulty, money-measured GDP growth to the cleaner, greener sustainable economies
This kind of contact with the Earth’s cycles and bounty truly is life-giving and enlightening, and returning us to a healthy relationship with the natural environment is part of the Great Shift.
Fundamental reforms were not addressed, including the need to re-design debt-based money and banking or to create a new global reserve currency, already proposed by China, Russia, India, Brazil and other G-20 members so as to relieve imbalances and excessive pressure on the US dollar.
Fundamental reforms were not addressed, including the need to re-design debt-based money and banking or to create a new global reserve currency, already proposed by China, Russia, India, Brazil and other G-20 members so as to relieve imbalances and excessive pressure on the US dollar.
Since ancient times, people have celebrated the Summer Solstice as the victory of light over darkness. Monuments like England’s Stonehenge are gigantic calendars marking the Earth’s turning toward the light and have become sites of annual festivals to give thanks to the Divine for the life-giving sun.
The idea of cities as catalysts for sustainability will be the focus of a panel talk at VERGE DC 2012 this week. The topic will be in the spotlight at further VERGE events this year.
Our new strategic partner is EIW Corp, a global energy management corporation specializing in intelligent energy conservation applications and delivery of service solutions in the domains of energy management-related processes.
With energy and humor, Pam Warhurst tells at the TEDSalon the story of how she and a growing team of volunteers came together to turn plots of unused land into communal vegetable gardens, and to change the narrative of food in their community.
Organizations from around the world have come together with the vision of co-creating the Largest Globally-Synchronized Meditation and Prayer for Peace in human history.
“By 2025, it is possible that cash transfer systems will become the principal mode of providing assistance to poor people. If this happens, people-to-people international transfers could look more attractive and efficient than inter mediation through foreign governments.”
1. A New End: A New Beginning (Part 2)
There are numerous indicators that suggest the big change is coming.
Multiple trends are converging - Huge, extraordinary, global trends, any
number of which would be enough to derail our present way of life, are
converging to precipitate a historic big transition event. A partial list would
include:
The global financial system is collapsing. During the next 10 months, it
appears that wave after wave of blows will strike the system (see this Feb.
15th piece by Dave Martin about the next big shock), raising the very real
possibility that it will experience large-scale failure sometime before the end
of the year.
We have reached the beginning of the end of petroleum. Global production
has been flat for the last three years. Senior oil company executives are now
saying that they will not be able to pump more. Supply will likely begin to
decrease significantly after we move across the peak. Prices will increase
again if the demand holds up. This is important because our present way of
life is built upon petroleum.
The global climate system is changing – some say it is getting much warmer,
others now suggest a mini-ice age within the next decade. In any case,
probably increased irregularities in local climates will result with attendant
problems in agriculture, natural disasters, and economies.
The cost of food is increasing rapidly as a result of global shortages not seen
in 40-50 years. This could be exacerbated by increasing energy costs and
climate changes.
The effects of larger solar eruptions hitting the earth through a tear in the
magnetosphere will disrupt global communications, weather, perhaps
satellites, and even organic life over the next 3-4 years.
2. Problems are much larger than government – These kinds of problems
are much greater than anything that contemporary governments have ever
had to deal with before. Peak oil, climate change, and the financial
meltdown by themselves have the potential to significantly overwhelm the
capabilities of government. If bureaucracies can’t deal with the aftermath of
a natural disaster like Katrina, something ten or more times that damaging
would leave most people fending for themselves. If these extraordinary,
disruptive events end up being concurrent, then the whole system is at risk.
The problems are structural - They’re systemic. Perhaps the best source
for beginning to understand the deep, interdependent nature of all of this is
by taking the Crash Course at Some of these issues, especially the financial,
oil, and food problems are also a product of how we live, our priorities, and
our paradigms. We are creating the problems because of our values and
principles. Without extraordinary, fundamental changes in the way we see
ourselves and the world, we will keep getting what we are getting.
Leaders think the old system can be “rebooted” – Almost everyone in
leadership positions in the Obama administration and in other countries,
wants to make the old system well again. Jim Kunstler has said it well:
“Among the questions that disturb the sleep of many casual observers is how
come Mr. O doesn’t get that the conventional process of economic growth
— based, as it was, on industrial expansion via revolving credit in a cheap-
energy-resource era — is over, and why does he keep invoking it at the
podium? Dear Mr. President, you are presiding over an epochal contraction,
not a pause in the growth epic. Your assignment is to manage that
contraction in a way that does not lead to world war, civil disorder or both.
Among other things, contraction means that all the activities of everyday life
need to be downscaled including standards of living, ranges of commerce,
and levels of governance. “Consumerism” is dead. Revolving credit is dead
— at least at the scale that became normal the last thirty years. The wealth of
several future generations has already been spent and there is no equity left
there to re-finance.”
That is why:
We’re not dealing with the structural issues - All of the biggest efforts are
attempts to reinflate the financial bubble, and keep the mortally wounded
3. institutions alive. The knee-jerk reactions come from the same people who
helped to design and feed the present system. These people are also deluded
– they think (or act like) they know what they are doing. They don’t realize
that:
The situation is so complex that no one really understands it – The
Global Business Network’s Peter Schwartz, reporting on a conversation with
the Financial Time‘s Martin Wolf said that Wolf’s key point was that the
nature and scale of the credit crisis is so novel that it’s not clear we know
what we’re doing when we try to stop it. He is deeply worried. Steve Roach
of Morgan Stanley said at the World Economic Forum annual meeting at
Davos that he agreed with Wolf: we are in uncharted waters. Nassim
Nicholas Taleb, author of The Black Swan: Impact of the Highly
Improbable, says the financial system is so complex that it is impossible for
anyone to understand it . . . and because of that complexity it is inevitable
that it will exhibit significant, unanticipated behaviors (his Black Swans)
that careen across the planet.
The issues are global – Japan’s exports fell by 46 percent in January, and
Hong Kong’s economy contracted 2.5 percent in the last three months of
2008. Foreign investors closed 45,000 factories in China in the last 8 months
and China closed 20,000 itself. Those closed factories mean products aren’t
being shipped.
The system is fundamentally out of balance – In the U.S., the rich are
getting richer (at unconscionable rates). National media has reported that
the government is monitoring all internal communications of its citizens –
but lies and says it is not. Common sense is not included in big, sweeping
federal edicts. The Transportation Security Administration, for example,
wants to make pilots produce background checks on members of their family
(and their business associates) in order to legally give them rides in a non-
commercial, private airplanes. The Agriculture Department in its NAIS
program wants all small farmers (big feedlots are exempt, of course) to put
GPS/RFID tags on all of their animals: chickens, cows, horses, goats – even
fish were initially included – so that the beasts can be tracked, on a day to
day basis by the government, It’s also now against the law in some states,
like Illinois, for farmers to save the seeds that they’ve grown – they must
buy new ones each year from large seed companies.
4. Most of the U.S. federal budget goes to the military – More than half of
the U.S. federal budget goes to military and military-related agencies. This
kind of growth, of course, is what brought down the Soviet Union. In sharp
contrast to the political apparatchiks that protest that more money is needed
to reverse the shrinking, aging, and decline in readiness in the Army, Navy
and Air Force, few seem to understand that budget increases are a primary
cause of the problems, a symptom clearly described in the new book,
America’s Defense Meltdown: Pentagon Reform for President Obama and
the New Congress. (by Winslow Wheeler, et al., available in late March)
No new ideas, government can’t be responsive - If the natural solutions to
these massive issues include innovation, foresight, adaptability,
sustainability, and resilience, it is unlikely that a thinking American could be
found who would suggest that the source for these capabilities would be our
government. They’re in charge, but they have no new ideas about how this
all should work. They’re also slow – and this situation needs fast, agile
responses. There is an additional problem: even if they did have good ideas
the government wouldn’t be able to effectively implement them because -
Too much inertia, too many lawyers and lobbyists — There is a huge,
well-funded effort in place to maintain the status quo or to shift the future to
benefit one group at the expense of others. It would be impossible within
the present system to initiate dramatic change when the threat was still on
the horizon. Every group or organization that might be negatively affected
would fight in congress and the courts to keep themselves alive regardless of
what was at stake for the larger community. Only when the crisis was about
to crash down on everyone – when adequate time and resources for effective
response were nonexistent – might everyone pull together for the common
good.
Potential solutions take too long to implement – These issues are so
gigantic that confronting and redirecting them takes a long time. One study,
for example, suggested that a national crash program to find alternatives for
oil would need to have been started 20 years before the peak in order for
there not to be significant disruption of the underlying systems. We do not
operate with either that foresight or resolve.
Supply chains are long and thin - Globalism and just-in-time production
has produced supply chains in most areas of commerce that are very long –
often to the other side of the earth – and very fragile. There are many places
5. between there and here where something can go wrong. If and when that
happens, necessities will not be available and in those situations, people
resort to unconventional and/or anti-social behavior.
$600 trillion in derivatives are a house of cards — Looming over the
whole financial situation is an almost unfathomable quantity of financial
instruments – derivatives – which are essentially casino bets with no
underlying value supporting the transaction. Warren Buffett calls them
financial weapons of mass destruction that could bring the whole system
down. Derivatives only work if there is confidence in the system – you
believe the casino will really pay your winnings. If other things in the
environment erode that confidence there is the real possibility that things
rapidly reconfigure themselves.
Cooperation is unlikely, protectionism will prevail - Instead of countries
cooperating with each other to deal with these big transnational problems,
we’re seeing a pulling back to protect each country’s perceived short-term
interests, regardless of what the implications might be in the longer term. At
the same time we’re all connected to each other in very complicated ways,
so if any substantial pieces of the system don’t work it will affect all of the
other ones.
History says it’s time – Perhaps what is most compelling to me is that
history strongly suggests that the time is right for an upset – they always
happen about now in the historical cycles. I talk about this in my book a bit,
but the short version is that big punctuations in the equilibrium of evolution
have produced extraordinary, fundamental reorganizations to life on this
planet on a regular, accelerating basis from the beginning of time as we
know it. We make progress as a species when we are forced in one way or
another to evolve to seeing ourselves and the world in new ways. Necessity
is the mother of invention, etc.
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