Depression and Transformation

As we have stated repeatedly in prior posts, this Depression will be a life-changing event for everyone who lives through it. It is not an interruption to the economic routine. The economy is not going to 'recover' to where it used to be.

The world is going to look very different on the other side of the Depression. Most of the old rules of economics and finance - both high and personal - will be tossed out the window. There may be vast political and social changes as well. We don't know what they will look like, only that they will happen. However, we shall speculate on some changes that may take place, and the opportunities that will lie therein.

First and foremost, the economy at all levels will be focused on efficiency. This will be necessary due to less available investment capital and depleting natural resources. We do not doubt that efficiency can theoretically make up for many lacks. But it will not necessarily do so. There is a great deal of cultural inertia, especially in (but not limited to) the USA, that looks at conspicuous consumption as the non plus ultra of human existence.

Compounding this problem there is a lot of turf that is going to get vigorously defended. Bank bailouts (for example) are not for preserving the integrity of the economic system, but for preserving an opulent lifestyle for well-connected bankers even after their banks stop creating value for society.

But moving along, what sort of efficiencies are waiting in the wings? The Internet will enable a wide range of peer-to-peer markets. You can buy and sell stuff on an auction market or classifieds, you can make loans or borrow on a lending network, you can put up a website and sell your services. All of these markets capitalise on the process of disintermediation, or cutting out the middle man.

Another, less glamorous level of efficiency is simply making do with less: smaller living spaces, perhaps shared with (more) others; a smaller car - or no car. Beyond efficiency, there is becoming more of a producer: growing a garden; cooking home meals, mending and fixing instead of replacing.

All of the above mentioned activities involve learning new skills and attitudes. Multiply these and more across all of society and you have transformation. If this change is resisted by individuals and institutions, change will be slower, and the Depression will be prolonged. Nevertheless, if you embrace the trend, your personal circumstances should prove manageable and you may find the quality of your life even improves.

It's Not Just the Bankers Who Destoyed Western Civilisation

Ah, the Bankers, how they have garnered the wrath of the world. Between the growing public anger vented on their villas, and the recommendation that bank employees wear their "civvies," it's not a happy time to be associated with a bank. Especially a bank whose name is recognisable by a large number of people. The violence is growing, and we don't doubt that things will be getting worse for the world's new collective whipping boy.

It's not without some truth: the world's major banks designed, packaged, and sold various schemes which - intentionally or not - was the poison pill for the world's economy. The question is whether or not the pill contained sufficient poison to kill the economy, or merely give it some serious health problems. It seems that the latter is true, as the world economy is in a flaming tailspin, as the numbers seem to suggest.

However, we feel the bankers have gotten more than their fair share of the blame for destroying Western civilisation as it is presently understood. On the Times Online's list of 'ten people who should be most hated,' we see ten faces very deserving of anger. There is, we feel, another clique of individuals who have an equal - or perhaps greater - share in the collapse. They should get their fair share of the anger. These persons are the realtors and developers of the United States.

No, really. The reason we level our finger at these recently unemployed persons is simple. They are the architects of the great suburban build-out in the United States, the mortgages for which is a goodly part of the toxic crap now causing the world's economy to keel over in convulsions. The build-out was strongly popularised at the end of World War II, through such legislation as the G.I. Bill. A house in suburbia became the Holy Grail of the average American, as evidenced by the last sixty years or so of rapid suburban construction.

It was a seemingly endless source of money, and it became enshrined as part and parcel of the so-called American Dream. Great amounts of money have been made selling dreams, and so the developers built suburbia, the realtors sold it, and the bankers financed every step of the process.

From this unwholesome ménage à trois the poison pill was crafted. To and from suburbia flowed the sub-prime mortgages, the credit cards, the automobile loans, and the like. All those forms of debt were sliced and diced into many new and interesting forms; other, even more exotic expressions of High Finance were invented to slice and dice further. Put simply, the bankers are indeed to blame, but they had very willing assistance in their quest for more money.