Ali’s blog

Mostly quant stuff with occasional digressions

Archive for February, 2009

Contours of descent

Posted by alifinmath on February 24, 2009

Okay, the title of the post is ever-so-slightly misleading. It’s more about the depression we’re in. The following is excerpted from the Glenn Beck program on Fox:

BECK: OK. What is life like — under that scenario — what is life like in 2014 for America?

CELENTE: New York City looks like Mexico City. If you have money or they think you’re going to have money, you’re going to be a target for a kidnapping. We’re going to see major cities look like Calcutta. There is going to be the homeless, panhandlers, hookers.

CELENTE: And the other thing, even these — even these gated communities won’t be safe, because you’re going to see criminality — you’re going to see gangs like you’ve never seen before. Listen, when people have nothing left to lose, and they’ve lost everything, they lose it. And now, you have a society — we’re a dissenting society. I mean, you look at high school graduation rates — you have under 50 percent in major cities.

CELENTE: You have people that are ignorant, functionally illiterate, and whacked out on drugs, Hillbilly era, well, you name it, meth, go down the line, and they have nothing to lose.

You know, I’m a practitioner, a close combat practitioner, Attackproof.com is my instructing — teachers, John Perkins, and he’s a self defense expert. He’s a close combat. Number one, anybody that wants to look him up, he’s there.

You know what he teaches us? He teaches us to prepare for the worst — survival. And then you back off from that. So, let’s look at what you are doing. You are doing the perfect thing. You are building the worst-case scenario.

From that, we can back off, but people better realize that the worst-case scenario could actually happen.

CELENTE: The cities are going to look like Dodge City. They’re going to be uncontrollable. You’re going to have gangs in control, motorcycle marauders. You’re not going to have enough police or federalis, just like Mexico, to control the situation.

If you ever want to get depressed, listen to Gerard Celente. Some of his interviews have been posted on YouTube.

Here is more analysis from Dmitry Orlov, comparing the imminent US collapse to the Soviet collapse. Keep in mind it came out over two years ago — yet remains intensely topical.

About ten years ago one could walk down Nicollet Avenue in downtown Minneapolis without encountering any panhandlers. Today there are two or three on every block and it’s like running the gauntlet. There is even a gentleman — probably a liberal arts graduate — outside the IDS building who will compose a poem on the spot for the modest consideration of fifty cents or a dollar. There are Vietnam and Iraq 1 veterans. There are panhandlers on all the downtown I35 ramps. There have been panhandlers sitting outside on Nicollet even in temperatures of 10F (~ -12C): these are temperatures where I feel cold even walking, let alone sitting immobile on the ground.

My conviction is that desperation is the mother of crime. When I left Karachi in 1986, the guards outside banks used to carry rusty old muskets that had obviously never been used. But already armed crime was beginning to rise precipitously — a function of reduced opportunities, particularly for the urban young. When I returned in 1994, all the bank and hotel guards were carrying AK47s. On the street of the house where I was living, every single house had been broken into by armed robbers with AK47s. An AK47 could be rented by the hour. So one wonders whether US cities will come anywhere close to this.

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Slumdogs helping themelves

Posted by alifinmath on February 24, 2009

Most of the world’s population growth has been occurring — and will continue to do so — in the “Third World.” Much of this population will drift to the mega slum cities of Sao Paolo, Rio, Mexico City, Cairo, Karachi, Mumbai, Lagos, and a host of others. What are now towns will become cities; what are now cities will become mega cities; and what are now mega-cities, well …. These places are not cities in any European or North American sense. They are vast sprawls of people in “informal housing” made of cardboard, hardboard, mud, and corrugated iron. There is no infrastructure — roads, water, electricity, plumbing, schools, or medical care. The inhabitants scratch out a living in the euphemistically-labeled “informal sector”: recycling waste, repairing shoes and clothes, hawking fruits and veggies, and so on. As for so many other things, lack of times precludes my saying more on the subject. The causes for the growth of these cities is population growth, lack of redistributive land policies, and the chill winds of globalisation which have caused peasants and small farmers to lose their land or be unable to to make a living based on prices determined in the rigged global marketplace. A book I recommend in this connection is Mike Davis’s Planet of Slums; in fact anything by Mike Davis is worth reading.

I’ve had my own reservations about the film, “Slumdog Millionaire.” It’s designed to appeal to the sensibilities and hypocrisy of Western audiences who “feel the pain” of the world’s poor — but do precious little else. And because it shows individual salvation and not — and now I speak as the socialist I am — collective salvation, which cannot be won by winning some TV contest. It is what has been termed poverty porn (indeed, to extend the analogy a bit further, just as there is sex tourism to poor countries, there is now a niche market for poverty tourism, where affluent Westerners can visit slum cities and vicariously enjoy the suffering of slum denizens). Here is one good (albeit brief) review of the film.

In today’s FT, there’s an interesting piece by the director of the Rockefeller Foundation, from which I have drawn the following excerpt:

It is hard to structure aid so that equitable growth is achieved, especially in poor societies suffering from HIV infections or civil strife. But HIV infections do not kill children at anything like the rate that a lack of clean water and sanitation does – a rate equivalent to having a jumbo jet full of kids crash every four hours. Nor are wars as dangerous as the lack of sanitation. As a recent United Nations report put it: “No act of terrorism generates economic devastation on the scale of the crisis in water and sanitation.”

As a socialist, I don’t agree with the tenor of the piece. I’ve heard the cliche of “empowering the poor” one too many times. That is not really the issue. The issue is probably an entrenched class system with concomitant political corruption and a ruling elite that serves as compradors to the twin demons of global finance capital and imperial control (which on closer examination turn out to be two sides of the same coin).

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Yet more on the Depression

Posted by alifinmath on February 23, 2009

Just came across this at dissidentvoice.org:

Let me tell you in no uncertain terms that we are facing a synchronised global economic depression and I am not the only one that is saying this. In early February, the International Monetary Fund’s chief Dominique Strauss-Kahn said the world’s advanced economies — the U.S., Western Europe and Japan — are “already in depression.” Gordon Brown, the UK’s Prime Minister also used the word “depression” to describe the global economy, although his aides quickly said it was a slip of the tongue.

The politicians and others of course avoid using the term “depression” for fear of creating a panic; instead they use terms such as “severe recession” or “one of the most serious financial crises since the great depression,” etc. But they all are saying the same thing, we are in a depression and all the available data support this. An important fact to remember is that this depression is synchronised and this synchronicity has been made possible by the globalization and accompanying deregulation; the very things that were making workers poorer and the rich, richer.

The US economy is in a terrible shape, with all sectors going through severe depression. Housing market has completely collapsed. The auto industry is going bankrupt. The banking sector is alive only by the grace of the government handouts. The entertainment industry (TV and film industry excluded) is facing severe problems and unemployment is increasing rapidly.

According to Howard Davidowitz, chairman of Davidowitz & Associates, as quoted by Aaron Task in Yahoo Finance, American’s standard of living is undergoing a “permanent change” — and not for the better as a result of:

• An $8 trillion negative wealth effect from declining home values.

• A $10 trillion negative wealth effect from weakened capital markets.

• A $14 trillion consumer debt load amid “exploding unemployment,” leading to “exploding bankruptcies.”

“The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car,” Davidowitz says. “A lot of that is gone.

This is merely an excerpt. Ah well, time to pour myself a stiff drink. Now where did I stash the whiskey?

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A Depression, Not a Recession

Posted by alifinmath on February 23, 2009

Lately (well, okay, for over a year), I’ve been obsessed with the Depression. But a year ago it was more potential than realised, whereas today it is for real, and we are clutching the straps as the roller-coaster of global finance capital hurtles downwards and threatens to go off the rails altogether. Not good for the digestion.

Every serious thinker and writer I know is squinting and staring into the murky fog of the future and trying to discern how bad things could get. No-one I know sees a bottom where things will stabilise.

We are clearly in depression country now. No more quibbling about it being a recession. A description of the distinction can be found in this piece by Bill Bonner here:

The typical recession is nothing more than the economy taking a little breather after a brisk walk. A depression, on the other hand, occurs after a long, uphill sprint – when the economy clutches its chest and falls down dead.

A depression is not merely a pause…it is the end. Unless the meddlers can work miracles – such as raising the dead – they will just make things worse. Because, while they are trying to revive a corpse, they are standing in the way of change.

*** Recessions are a natural feature of the inventory cycle. The economy gets a little over-stocked…and has to clear the shelves. Prices are cut. A few people are laid off. And then, after a few months, everyone is back in business… It’s “laissez les bons temps roulez,” as they say in New Orleans.

Depressions are a natural feature of a much bigger cycle. A part of capitalism that people love to talk about when the going is good…but despise when it turns against them. We’re talking about what Schumpeter describes as “creative destruction.” Everyone loved “creative destruction” in the late ’90s – when they thought it added to their balance sheets. Now, they beg government to save them from it.

What we are witnessing in the economy is creative destruction at work. And what we are witnessing in politics is a bunch of numbskulls trying to stop it.

What’s being destroyed? Trillions of dollars’ worth of asset values, of course. Millions of jobs. Hundreds of thousands of businesses.

In a recession, the basic plan or formula for the economy is still valid. The economy just needs a little time…and maybe a little monetary boost…before it continues growing. Typically, inventories are sold down…so a new burst of production can begin.

But in a depression, the problems are structural.

The last depression took about 20 years…and a major war (talk about creative destruction!) Then, the United States was making the structural shift from a Japan-like capital investment-led economy…to a post-WWII consumer-led economy.

Our guess is that it (the Depressioon — AA) will also destroy the U.S. consumer-economy model…and the dollar-based world monetary system.

My apologies for the lengthy cut-and-paste but this is one well-written essay.

Now what should one do in a Depression — i.e., how is one to stay alive, keep body and soul together? Many of the people I know have been stockpiling water purification tablets, tinned food, ammunition and guns (to keep the marauding hordes at bay), seeds, and so on. I can’t say they’re doing wrong: we may be looking at some form of “collapse.” As enunciated by Dmitry Orlov, the five stages of collapse are:

1) Financial collapse

2) Commercial collapse

3) Political collapse

4) Social collapse

5) Cultural collapse

I believe we are already past the first stage. How much further we go on the road to collapse is not clear to me. Incidentally, a couple of relatively recent books devoted to social and cultural collapse (from the American point of view) are Berman’s “Dark Ages America” and Jane Jacobs’ “Dark Age Ahead.”

Where to find more advice on how to survive in the looming dark age? One useful site I’ve found is The Global Depression Survival Guide. It’s chockful of practical down-to-earth advice. If anyone knows other such sites, please post them in the comments to this post.

And finally some words from one of my favorite Conan stories, Beyond the Black River:

“Barbarism is the natural state of mankind,” the borderer said, still staring somberly at the Cimmerian. “Civilization is unnatural. It is a whim of circumstance. And barbarism must always ultimately triumph.”




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Change I can believe in

Posted by alifinmath on February 23, 2009

As I may have stated in earlier posts, I never had a shred of faith in the pope of hope (otherwise known as Obama). As Ken Livingstone — an English politician — once pointed out, if voting could change anything, they’d have abolished the ballot box a long time ago. So what kind of change can we hope for, can we believe in? Recent demonstrations in Iceland, Greece, and Latvia answer this question. And now it would appear that British authorities are fearful of rioting on British soil; from the Guardian:

Police are preparing for a “summer of rage” as victims of the economic downturn take to the streets to demonstrate against financial institutions, the Guardian has learned.

Britain’s most senior police officer with responsibility for public order raised the spectre of a return of the riots of the 1980s, with people who have lost their jobs, homes or savings becoming “footsoldiers” in a wave of potentially violent mass protests.

Superintendent David Hartshorn, who heads the Metropolitan police’s public order branch, told the Guardian that middle-class individuals who would never have considered joining demonstrations may now seek to vent their anger through protests this year.

He said that banks, particularly those that still pay large bonuses despite receiving billions in taxpayer money, had become “viable targets”. So too had the headquarters of multinational companies and other financial institutions in the City which are being blamed for the financial crisis.

If one glances back at history, this is the only way real change has been effected. The authorities would have us believe peaceful methods — voting or peaceful protests — can accomplish change. But this is exceedingly naive and experience and history indicate otherwise. It would truly require “the audacity of hope” to believe in this specious nonsense. The powerful would have us believe that “non-violent resistance” is the way forward. I doubt it. It wasn’t a Gandhi who brought real results (despite massive propaganda suggesting he did); it was Indian nationalists like Subash Chandra Bose and also the shellacking an armed and militant Japan administered to British imperial interests in Asia.

In this connection I would recommend a couple of books:

How Nonviolence Protects the State, by Peter Gelderloos, and

Pacifism as Pathology, by Ward Churchill

Note that for the record, I am not advocating violence. But I am asking the question of what it does take to bring about real change. One can’t appeal to a tiger’s sense of justice and fairness to persuade it to become a vegetarian. Why do people think that moral and logical appeals to a venal and ruthless ruling financial and political elite is going to be any more effective?

The pope of hope, the chairman of change, the mocha messiah, is delivering absolutely nothing. It’s another triumph of style over substance. Global finance capitalism is in a deepening crisis — and the measures proposed so far will do next to nothing to ameliorate it. Indeed what these measures seem to be about is a hegemonic financial elite taking care of its own interests in a structural crisis that is the inevitable consequence of a system this elite has presided over and benefited from.

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Getting Out of the USA

Posted by alifinmath on February 17, 2009

I’ve examined the idea of getting out of the USA in a couple of posts I submitted last year. I feel even more strongly today about getting out of the USA pronto (and to demonstrate that I put my money where my mouth is, I now live in Nordic Europe).

The USA is a moribund and failing state. I won’t yet call it a failed state, but give it a bit more time. US elites have no idea — and probably no interest — in reviving civil society. There is no social contract.

As Paul Craig Roberts points out in one of his essays, US unemployment as measured by 1980 criteria is now around 17.5%. Income and wealth inequality is approaching Brazilian levels. Tent cities are sprouting up all over the country — reminiscent of eighty years ago.

There’s a recent article in Pravda that gives advice to Amerian professionals:

Let’s face reality, the American dream is dead, the future has never looked so bleak and as a professional in any industry, your prospects of working in your chosen career has never been so low. Sure you can reinvent yourself, but how many of you have already done this once, twice, thrice? It is not easy and the list of choices is getting shorter and shorter. But it does not have to be this way.

The Bank Panic of 2008 and the General Collapse of 2009 have once and for all, pulled the covers off of the old dead reality and showed it for the withered husk it is. However, most American professionals either refuse to accept it or cling to the pantlegs of Uncle Sam hoping for Never Never Land to return. In short, it will not.

If you want a future for yourself and your family, my suggestion is: get a passport, learn another language or enough to get by and start looking else where. Unlike the US, many nations kept their industrial and technological base, defending this and many nations are in need of the skilled labor to fill it.

So take a clue, in this case, the grass is greener on the other side.

My sentiments exactly.

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When does the “recession” become a “depression?”

Posted by alifinmath on February 6, 2009

My initial intention was to examine the semantics of “recession” and “depression,” and to demonstrate that the dividing line is blurred and unclear and that there’s no clear consensus, in any case, of what constitutes a “depression.” But I can see that this has already been done.

I’ve been meaning to say something about this for some months but the catalyst for this post came from some recent comments from the GE boss:

The US economy is suffering its steepest downturn since at least the 1970s and could descend into a depression, Jeff Immelt, General Electric’s chief executive, warned on Thursday.

“Unlike the other downturns that I’ve been a part of, this one is faced with limited liquidity,” Mr Immelt, GE’s chief since 2001 told a conference. “Once you break through ’74-’75, you don’t stop ’til you get to 1929.”

When asked whether he would call the current slowdown a recession or a depression, Mr Immelt joked that he would need to refer to his college economics text book for a precise answer but said “it is one of those”.

Perhaps it’s not really germane how we classify what’s happening today — leave that to pedants. What is important is that there is no way out. Even if the downward spiral is arrested, it will only be a respite. The downward spiral into chaos and disorder is inexorable and its roots lie beyond economics. We are not going back to some golden era. Our crowded world, our diminishing resources, and and our changing climate guarantee that this century is going to be unusually testing, unusually violent, and unusually anarchic. The economic turmoil is in some sense a corollary of this but I can’t be bothered to sketch the causal connections in detail. Suffice it to say that a world of ever more brutal domination and ever-increasing divides between a minority of haves and a majority of have-nots generates its own systemic economic crises.

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