In our experience, people seem to intuitively know when they are partaking of some great swindle or scam. An expression of this is a bumper sticker comes we seem to remember: "Please God, just one more bubble before I die," is how it goes in our memory. Also, the investors who gave Bernard Madoff all their life's savings often 'knew' that he was running a scam -- they assumed that he was operating on insider trading. Unfortunately for their belief in their own cunning, Mr. Madoff was running a swindle.
These are two isolated and recent -- in the case of the sticker, rather ephemeral -- examples, but the mentality is not far removed when semantics are considers. When things are moving up in a speculative orgy, the preferred nomenclature is a 'boom,' rather than a bubble. The movement only becomes a bubble after the fact, when it has burst and wiped out entire fortunes. After the burst, when the present-tense-boom becomes a past-tense-bubble, there is one question that is often asked: where is the next boom?
The United States, at its birth, was a tiny nation facing massive amounts of land of unknown qualities to the West. It was an experience wholly unlike anything that had been seen in Europe in recorded history. No one living at the time had ever enjoyed the experience of facing the sunset and thinking about the impossibly vast territory that lay beyond the borders of the Colonies.
It didn't take long for the nascent United States to figure out that great riches lay in the easily conquerable land. The infamous push westwards began, and with it a mythos was born: no matter what one's situation might be, one could always go somewhere else -- at the time, westward -- to begin anew. Fortunes could be made and lost, but there was always the knowledge that something else lay waiting on the frontier.
The focus on the West faded in time, but the sense remained that something was always out there. There was suburbia to develop, after all. Even if, say, the dot-com companies weren't the bubble -- sorry, 'boom' -- they once were, there was always housing in California. Now that the housing (ahem) 'boom' is over, the hoped-for next 'boom' is in green energy. And after that is revealed to be a bubble, it is assumed there will be another boom... and so on, and so forth.
Such a reliance on riding the bubble cycle is both illusory, and destructive. The illusion is that there 'will always be another boom;' the destruction is that such waves of exaggerated boom-and-bust is horrendously wasteful of natural resources. If Peak Just-About-Everything is past, or even nigh, the resources will no longer be abundantly available to perpetuate this frontier mentality. Attempting to continue this fetish with bubbles in the future will become more and more destructive of dwindling resources of all sorts. The peak of each bubble will never quite get as high, and the trough will be ever more miserable.
Showing posts with label swindle. Show all posts
Showing posts with label swindle. Show all posts
Saturday, March 14, 2009
Thursday, January 8, 2009
Growth: Quantitative versus Qualitative
For the purposes of this discussion, Quantitative growth in business or society could be said to be just doing more of the same thing with more people and machines or whatever. Qualitative growth is doing a given task more efficiently, or developing more valuable products and services from less valuable ones.
When economies are expanding, quantitative growth will usually yield impressive growth of sales, and profits. For society as a whole, there is increased economic activity, increased tax revenue for governments, and increased income for investors and workers.
Qualitative growth tends to happen more slowly. It comes about through innovations. Sometimes it happens as continuous incremental improvement, or sometimes as flashes of inspiration.
There has been a lot of quantitative growth in the world over the last several hundred years, and especially over the last fifty. We believe this trend is transient, and largely the consequence of the exploitation of fossil fuels and mineral resources. As society glides down the slope past peak just-about-everything, quantitative growth and the economic theories which justified it will become a thing of the past.
On the other hand, qualitative growth seems to spring from the human spirit and will probably rise to the occasion of being more needed than ever as the product of the bowels of the earth are exhausted. On this count we are very optimistic. From what we have seen of ingenuity in ourselves and others, this is an inexhaustible resource.
To allow qualitative growth to become humanity's primary economic driver, several changes will have to happen to the way people look at their lives: First, they will not measure themselves by how much they consume, but rather by how well they do things. Second, they will have to let go of always wanting more and different, and instead learn to be satisfied with making the best of what they have, with only a small allowance for novelty. Third, they will have to learn to practice restraint.
It seems to be human instinct to "be fruitful and multiply." Unfortunately, the human race seems to be multiplying itself into overshoot and collapse. People need to realise that humans can either shrink their numbers gracefully, or have the natural limits of the Earth do it for them painfully. In not many years time, much of what was once termed progress will be seen to have been a swindle - an orgy of consumption and resource extermination that benefited only a tiny minority of plutocrats and left the rest with broken illusions.
When economies are expanding, quantitative growth will usually yield impressive growth of sales, and profits. For society as a whole, there is increased economic activity, increased tax revenue for governments, and increased income for investors and workers.
Qualitative growth tends to happen more slowly. It comes about through innovations. Sometimes it happens as continuous incremental improvement, or sometimes as flashes of inspiration.
There has been a lot of quantitative growth in the world over the last several hundred years, and especially over the last fifty. We believe this trend is transient, and largely the consequence of the exploitation of fossil fuels and mineral resources. As society glides down the slope past peak just-about-everything, quantitative growth and the economic theories which justified it will become a thing of the past.
On the other hand, qualitative growth seems to spring from the human spirit and will probably rise to the occasion of being more needed than ever as the product of the bowels of the earth are exhausted. On this count we are very optimistic. From what we have seen of ingenuity in ourselves and others, this is an inexhaustible resource.
To allow qualitative growth to become humanity's primary economic driver, several changes will have to happen to the way people look at their lives: First, they will not measure themselves by how much they consume, but rather by how well they do things. Second, they will have to let go of always wanting more and different, and instead learn to be satisfied with making the best of what they have, with only a small allowance for novelty. Third, they will have to learn to practice restraint.
It seems to be human instinct to "be fruitful and multiply." Unfortunately, the human race seems to be multiplying itself into overshoot and collapse. People need to realise that humans can either shrink their numbers gracefully, or have the natural limits of the Earth do it for them painfully. In not many years time, much of what was once termed progress will be seen to have been a swindle - an orgy of consumption and resource extermination that benefited only a tiny minority of plutocrats and left the rest with broken illusions.
Thursday, December 11, 2008
"Say it ain't so, champ!"
A friend tells us this line comes from The Champ (1931), when the young Jackie Cooper finds that his hero isn't as heroic and upstanding as one would have hoped. So, too, are the best and brightest of Wall Street losing their stature. Today, for example, saw the discovery of what is probably the second biggest Ponzi scheme in financial history (bested only by the original, Charles Ponzi).
The mastermind? Bernard Madoff, former chairman of the NASDAQ. The grand total? Clocking in at around $50 billion or so. This tops the other Ponzi scheme recently ended, a measly $3.5 billion swindle orchestrated by Tom Petters, a Minnesota 'entrepreneur'-cum-felon. Both these men ran schemes which ripped off the gullible for fun and profit; both these men are criminals. Both these men were respected investors; the news of their unscrupulousness is "inconceivable" to their cohorts.
Hahahaha. As Bugs Bunny says, "aw, go on."
These two swindles are telling, however, for a trend of the 2007 Depression. A Ponzi scheme -- indeed, any confidence scam -- is inherently unstable, even in the best of times. The 2007 Depression is going to squeeze these sorts of swindles into non-functionality, and some may blow up spectacularly. There are, however, more swindles out there than just the average Ponzi scheme, and many of them come in forms one wouldn't necessarily expect.
Take banking: one puts one's money in an account, and then pretends it's still in the bank. Unfortunately, one's money does not simply sit in the bank's vault; it goes into, say... synthetic CDOs; or stock of Fannie Mae and Freddic Mac; or sub-prime loans. The point is, one's money is not in the bank anymore. In fact, we'd argue it probably isn't anywhere anymore. Yes, if one wanted to take out one's money, one can simply walk into a bank and withdraw it. But what if every depositor of the bank wanted their money? The bank never holds enough physical cash to cover its deposits; it can't afford to. The bank, like Mr. Madoff's and Mr. Petters' Ponzi schemes, would implode, and depositors would be left holding the bag, hoping that government insurance pays out.
But the biggest swindle, in our opinion, is money itself. We use it every day: these green pieces of paper get us our food, heat, and shiny, shiny gold. They're legal tender, all right -- every bill tells us so -- but who guarantees this? The Federal Reserve, we presume, since they're the ones who own them... but the Fed is just a bank. We ask: what happens when everyone metaphorically cashes in their dollar bills to hold something tangible? "Say it ain't so, champ!" will be the general cry.
The mastermind? Bernard Madoff, former chairman of the NASDAQ. The grand total? Clocking in at around $50 billion or so. This tops the other Ponzi scheme recently ended, a measly $3.5 billion swindle orchestrated by Tom Petters, a Minnesota 'entrepreneur'-cum-felon. Both these men ran schemes which ripped off the gullible for fun and profit; both these men are criminals. Both these men were respected investors; the news of their unscrupulousness is "inconceivable" to their cohorts.
Hahahaha. As Bugs Bunny says, "aw, go on."
These two swindles are telling, however, for a trend of the 2007 Depression. A Ponzi scheme -- indeed, any confidence scam -- is inherently unstable, even in the best of times. The 2007 Depression is going to squeeze these sorts of swindles into non-functionality, and some may blow up spectacularly. There are, however, more swindles out there than just the average Ponzi scheme, and many of them come in forms one wouldn't necessarily expect.
Take banking: one puts one's money in an account, and then pretends it's still in the bank. Unfortunately, one's money does not simply sit in the bank's vault; it goes into, say... synthetic CDOs; or stock of Fannie Mae and Freddic Mac; or sub-prime loans. The point is, one's money is not in the bank anymore. In fact, we'd argue it probably isn't anywhere anymore. Yes, if one wanted to take out one's money, one can simply walk into a bank and withdraw it. But what if every depositor of the bank wanted their money? The bank never holds enough physical cash to cover its deposits; it can't afford to. The bank, like Mr. Madoff's and Mr. Petters' Ponzi schemes, would implode, and depositors would be left holding the bag, hoping that government insurance pays out.
But the biggest swindle, in our opinion, is money itself. We use it every day: these green pieces of paper get us our food, heat, and shiny, shiny gold. They're legal tender, all right -- every bill tells us so -- but who guarantees this? The Federal Reserve, we presume, since they're the ones who own them... but the Fed is just a bank. We ask: what happens when everyone metaphorically cashes in their dollar bills to hold something tangible? "Say it ain't so, champ!" will be the general cry.
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