QE3 & the Ponzitards

As depicted by the thtle of this post, we are now witnessing geopolitical/economic/environmental meltdown in real-time.  It's an accelerating train wreck that has the public paralyzed - frogs in boiling water.  Their only recourse is American Idol, South Park and Faux News. 

No sooner had I written my most recent diatribe against the alpha males who bulldozed their way to the top by repeating the same moronic strategies over and over again, than I am presented with yet more mind boggling examples.

First off, with respect to Monetary Policy, I was remiss in not pointing out the most egregious (albeit obvious) aspect of the latest policy moves.  Which is the constantly overlooked fact that monetary policy - cheap money - got us into this mess in the first place.  Once again, it's the signature of the Idiocracy to believe that the way to get out of a problem is to just apply MORE of the same bad policy that caused the problem to begin with.  As a reminder, both the ECB (via OMT) and the Fed (via QE3) this past week declared that they will print as much money as necessary to resolve these ongoing debt problems that were created by easy money.  

With respect to Fiscal Policy, that Full Retard moment has been building for years across all Western Nations.  However, the recent climactic moment occurred when non other than Larry Summers - Dean of Harvard and a key architect of the 2008 meltdown, said that the best way for the U.S. to get out of debt is to borrow MORE money.  

I try not to get too political since I have outright disgust for the two party pseudo-democratic system, but when Mitt Romney indicated that his election platform involves yet another tax cut for the wealthy, I almost shit a brick.  Bush's tax cut from a decade ago is still baselined into the recurring deficit and requires ongoing borrowing i.e. it's a tax cut paid for by America's grandchildren.  And apparently paying for 60% of the Federal budget (borrowing the rest) is just too much burden for today's 'taxpayer'.  So, they need a bigger break.  Leave aside the fact that the wealthy, including Romney himself, already pay a lower tax rate than the middle class and they keep their real money in offshore bank accounts paying 0% tax.  Meanwhile, lest we forget, Bernanke's latest lubing of the stock market (and all risk assets) is a direct income benefit to the wealthy and a commodity inflation tax on the middle class.

The Economist Goes Mad Magazine

Speaking of insanity, the subject that spawned this latest diatribe - geopolitics.  Just this week "The Economist", in examining the recent spate of Anti-American protests across the entire Muslim world, declared that the best response for the U.S. was to interfere MORE in the region.  So again, the best response to a failed policy leading to widespread anarchy, poverty and disillusion is to just double down on the same bad policy.  To be specific, "The Economist", which is ostensibly an economics-oriented magazine devoted an entire article giving glib armchair general advice on how the U.S. should provide military support to the rebels in Syria.  I didn't realize that the pencil necked geeks at "The Economist" were military strategists.  Of course, the same magazine was a proponent of U.S. involvement in Libya where the U.S. embassy was just blown up.  Who knew that intervention could have such high and immediate ROI?  And dare I state the obvious, but if a Danish cartoon or homemade video on YouTube can cause a billion Muslims to go apeshit, then stay tuned for a lot more cartoons and homemade videos...

Wow, this shit is melting down in real time and the only thing preventing public acknowledgement of the fact is the new season of NFL football commanding attention.  Also redirecting attention away from reality is the impending election to determine which of two Harvard buffoons will be the best spokeman for the 14,000 special interest groups operating in D.C.

Lastly, with respect to iPhoney 5 (really 6, but who's counting), as expected, the Idiocracy really, really wants one: lol this is hilarious... 

Angus & Julia Stone - Mango Tree (Live at the Vanguard)

A Microcosm of Japan’s Tough Future?

A Microcosm of Japan’s Tough Future?

The population of Yubari in Hokkaido has shrunk more than 90% of its peak, services are vanishing and white elephant public works projects have left the greying inhabitants with a mountain of debt. Welcome to Yubari, Japan in miniature. 

If the city of Yubari is, indeed,  a glimpse of future Japan,  this may be what the Nikkei has been or starting to discount.  The index is still down a stunning 77 percent from its December 29, 1989  all-time high and has only managed a 27 percent bounce off the October 2008 low.

It’s the economy demographics,  stupid!

Japan has suffered through severe trials and tribulations, including the bursting of a real estate and stock market bubble, a prolonged depression,  and a tragic earthquake and tsunami.   One can only wonder about the social stability of, say, the U.S.  or other western countries if they were to experience the same scale of testing.  Just imagine a similar stock market nightmare which would put the S&P500 at 282.99 in August 2026.  Ouch!

What a testament to the non-entitlement  mentality of the Japanese people.   Godspeed, our Japanese friends.

Steve Keen Study Economics At UWS September 2012

Steve gave the talk at UWS's Open Day, as an intoduction to economics for prospective university students. 

the Economics & Finance program at UWS has been almost unique amongst economics departments around the world in deliberately pursuing a "pluralist" approach to economics.

Robert Glasper - The Spirit of Jazz - Reflection of Society

Rob hits so many good points regarding the current state of jazz.Its both refreshing and fantastic that Glasper is pushing the genre forward as apposed to staying in the nostalgic style of play. it's like jazz quit progressing after the 80s. the 70's was like the last major shift in jazz and as a result it stagnated . I love what the Experiment are doing! 

Peter Schiff - US Real Estate & Stocks outlook 08-06-12.

Peter Schiff bearish when it comes to the US dollar and economy. He as an ardent opponent of the Federal Reserve, and proposes reduced government spending and taxes and increased personal savings as the solution to the US debt problem. He blames the collapse in housing prices on unrestrained lending by banks and predicts a similar economic collapse in the near future triggered by sovereign debt.

Two Guys in Bow-ties Jim Grant

The bow-tied-and-bespectacled bringer-of-truth was on Bloomberg tv this providing his own clarifying perspective on what we should hope for (and what we should not) from Jacksons Hole this weekend. Jim Grant's acerbic comments on Krugman's view of the world, on the gold standard as a "force for growth and stability", and the "unproven and truly radical methods" of the SNB and Fed, pale in significance when he is asked about the stock market distortions: "I think we live in a hall of mirrors in finance thanks to the zero interest rate regime and the chronic nonstop interventions," and when asked when Bernanke should start raising rates, the simple (yet complex) response is "Last Year! And Eric Rosengren would be in a different line of work." Must watch to understand the central-banker-meme-du-decade.

KONDRATIEFF WAVES

KONDRATIEFF WAVES (or, for short, K-waves) may be defined as a pattern of regularity characteristic of structural change in the modern world economy. Some 60 years in length, it consists of an alternation of periods of high sectoral growth with others, start-up periods of slower growth. The study of this pattern helps to trace the evolution of the global economy, and aids in politico-economic prediction.

One of my earliest introductions to the world of economics came from someone who was a true believer in the Kondratieff Wave – the idea that there is a much longer cycle, lasting approximately fifty years, which overlays the ordinary, and shorter business cycle. You'll be pleased to know that if the present crisis marks the start of a classic Kondratieff downswing, then we've got between five and thirty-six years of slump still to come.

In any case, it was a delight to have my attention drawn to an article, published back in October 1987, which postulated that the stock market crash of that month marked the crest of a Kondratieff Wave, ergo it would therefore be downhill from then on for the next 20-30 years. Well there was a recession shortly afterwards, albeit shallow and shortlived, but thereafter decent levels of growth resumed and continued but for another brief hiccup around the turn of the century right up to the present crisis.

Nor was this the only error in prediction. Kondratieff Waves tend to be associated with the eclipse of one world superpower and the rise of another, so it was logical to assume back then that the still apparently unstoppable rise of Japan would eventually dislodge the United States from its position of economic hegemony. How wrong can you be?

However, none of this disproves the Kondratieff theory. The mistake made in article may have been merely to misread the cycle. Kondratieff, a Russian economist who died in Stalin's Gulags, identied three distinct long waves, the dates of which you can see in the table below. The downswing in the last of these waves begins during the First World War or shortly afterwards.

Subsequent students of Kondratieff cycles have placed the end of this third cycle during or shortly after the Second World War, which seems logical enough, and have identified a further two cycles thereafter, with the fifth upswing beginning in the 1980s and ending with the current crisis. On past durations, we are now in a downswing phase lasting anything between ten and forty one years. Dating the beginning of the crisis from 2008, that's between five and thirty six years to go (See table below).

Part of the difficulty with Kondratieff is deciding precisely what the cycle is. Kondratieff himself observed the waves first in capital investment dynamics – high periods of investment followed by low periods – and then later in production of pig iron. Subsequent followers have observed the cycles in price indices, or relatively elevated periods of inflation followed by low ones. A further explanation connects them with waves of technological innovation. Kondratieff himself observed that "during the recession of the long waves, an especially large number of important discoveries and inventions in the technique of production and communication are made, which however are usually applied on a large scale only at the beginning of the next long upswing".

The Austrian economist, Schumpeter, was also a disciple of this latter explanation. Intuitively, it seems likely there is something in it. Periods of very high, transformational innovation are followed by rapid development and high investment as the new infrastructure is rolled out. The consequent increase in productively leads to big gains in living standards. But then the development phase comes to an end and there is a pause for breath before the next big thing comes along. In the modern age, there have been five or six great transformations, starting in Britain with the industrial revolution and then on to the transport revolution brought about by rail. Subsequently there was the era of electricity and the automobile, then came eletronics, air travel, and televisions. The present one, perhaps now largely over, is that of mass communications.

Oh come off it, If you are talking about the intermittent march of progress, that's one thing, but to connect it with a discernible, time specific wave of ebbing and flowing economic activity is quite another. Well maybe, but research by Andrey Korotayev and Sergey Tsirel published by the University of California on its eScholarship website suggests that there is indeed some correlation between the long K-cycle and world GDP.

However, somewhat confusingly, their analysis suggests two interpretations of the current global economic crisis. One is that it doesn't mark the start of the fifth Kondratieff downswing at all, but can be interpreted as a temporary depression between two peaks on the upswing, where the second peak may even exceed the first. On this interpretation, the big meltdown doesn't begin until 2018-2020 (memo to self: liquidate all positions by 2020).

However, there is also quite a bit of evidence to suggest that the current financial crisis does indeed mark the start of the downswing. Given that this is not a normal recession, but a downturn caused by an all-embracing banking crisis, 2008-2010 seems the more likely inflection point. It also correlates quite closely with the separate "40 year rule", an old piece of Wall Street folklore which has it that really serious banking crises only happen once every forty years because this is how long it takes for all institutional recollection of the last one completely to die out, allowing the new generation of banking hotheads to let rip once more.

Yet another good  way to expand your knowledge is check out the website of the Long Wave Group whose publications cover the global economy from the long-term prospective.  You will discover that over the past decade the company's President, Mr. Ian Gordon has accurately predicted the banking crisis , the housing crisis, the stock market crash, the pension crisis, the sovereign debt crisis and  the double bottom of the gold bullion market in 1999-2001. 

One last point worth adding, no school of Economics has a theory of technology, yet it is technology improvements that drive wealth improvements in general.

At the moment we are in a situations where an awful lot of easy gains over the past thirty years have stopped happening, due to the maturing of computer technology.  For example, an iPad is an innovation, but it is only a marginal one from a laptop and does not completely replace it.  It is a much smaller gain than from desktop to laptop, or from PC to multimedia PC and multimedia to Internet.

Now humanity is back in our usual position of having to find something new to do.  And greatly impeded by the metastatic growth of government that computerisation has allowed, effectively rendering further computerisation almost useless and economically harmful. 

So here we remain until something happens in someone's garage to open things up again, assuming their garage is located in a entrepreneur friendly jurisdiction, so nowhere in the West.

Something similar happened in the 1930s with the motor car.  All the easy gains from replacing horses over the previous 30 years stopped dead.  Suddenly it was all about marginal improvements and on the back of that change there was the most enormous recession.  Same thing in the 1840s about railway technology, and again in the 1870s.

If Kondratieff was right. If is the the key word here.  Because frankly a Soviet-era Socialist economist has probably very little to teach us.  

I use the term Soviet-era Socialist economist in the sense of schools of economics. Classical, Neoclaissical, Keynsian, Monetarist, Socialist, Fascist, and Austrian/Neo Austrian. 

The Fascist school is also known as Corporatist in modern parlance. Monetarist could also be called Neo-Keynesian. What is techically Neo-Austrian is usually just refered to as Austrian today. Of them all, the (Neo)Austrian school is the best, but there is much that is not explained by any school, such as the role of technological development.

Instead of parroting bien-peasant economic theories popular with those who don't actually think about it, why not take a look at Austrian economics.  The Austrian school is able to explain why there is a depression much more effectively than Kondratieff voodoo, and what to do to exit the recession - stop diverting productive resources by inflating the money supply and radically shrink back the metastatic state, and allow liquidation of bankrupt assets.

Austrian economists were predicting a major depression of unlimited duration since the early/mid 2000s,

Food for thought.   

A Freshman’s Guide to Commercial Real Estate Analysis: Becoming an Excel Bully, Free CRE Excels

As a new member of this Blog, Scroll down to "Networkedblogs" and click "Follow" & I will forward to you Free Commercial Real Estate Analysis Spreadsheets & Guides. (Free-Excels)

(If you’re looking for professional Real Estate Analysis Models or Real Estate Analysis Services its all here) you might find the analytics / financials overwhelming, so I’ve developed a freshman course, and for those

 long-time veterans, I promise not to tell as you wipe the rust away.

We’re here to make it easy… so sharpen your pencils, master the finances, and add my blog and I will forward you the following spreedsheet Excels. 

Free Excels include

Cap Rate Calculator & Matrix – A basic Cap Rate calculator including a sensitivity matrix. Great for basic pricing with a Net Operating Income!

GRM Calculator & Matrix – A basic GRM calculator including a sensitivity matrix. Great for basic pricing with Gross Rent.

Cash on Cash Calculator & Matrix – A basic Cash on Cash calculator including a sensitivity matrix based on Rates, Loan-To-Value (LTV), and Amortization. Great for understanding Positive vs. Negative leverage.

Debt Service Coverage Ratio Calculator & Matrix – A basic Debt Calculator utilizing the Debt Service Coverage Ratio (DSCR) including a sensitivity matrix based on DSCR, Cash Flow, and LTV.

Positive V Negative Chart – A PDF guide to Positive vs. Negative leverage.

PMT – The Excel Formula ‘PMT’ explained, with basic and advanced application.

IF Statement – The Excel Formula ‘IF’ explained, with basic and advanced applications. From the blog: Becoming an Excel Bully.

Other IF Statements – The Advanced ‘IF’ statements explained with application. From the blog: The “other” IF Statements

Custom Cell Formatting – Easy application of custom cell formatting within excel specifically tailored to commercial real estate analysis. From the blog: Excel for Commercial Real Estate: Custom Cell Formatting.

Present Value – An Excel Spreadsheet outlining the importance of PV and its practical use.

Future Value – An Excel Spreadsheet outlining the importance of FV and its practical use.

Cold Call Tracker – An Excel Spreadsheet for Commercial Real Estate Cold Call Tracking.

Robert Glasper Trio "FTB" Tokyo Cotton Club Live

FTB- Robert Glasper Trio

Eddie Harris - That is why you're overweight

A bit long but still juicy as a hunter...