Letter to Paul Krugman,
Nobel Prize Economist, NY Times
Dear Mr Krugman:
Fascinating, disappointing and not comprehensible. These are just some of the words that come to mind when object analysis and evaluation is applied to those who promote, support and endorse the current economic doctrine. Many of you are people of great intelligence, knowledge and remarkable cognitive capabilities. With all these extraordinary gifts there appears, however to be a disconnect that exists between fanciful words and the realities of this small planet we share.
What is clear by all measures is that we live in a world with finite resources. And against the great landscape of time this finite construct will some day intersect with infinity. Our existence and destiny mathematically moves to a foregone linear conclusion. Plainly there are two courses we may take. One is to move as rapidly as possible to this final linear intersection, or to defer the date of this intersection and the demise of our species for as long as possible. What is clear is that the current economic doctrine has chosen to exacerbate the speed and shorten the journey to this intersection.
The pursuit of sequential GDP and population growth with deficit financing by nations evidences a bias towards the rapid use of the gifts (most particularly non-renewable resources) of our planet. Moreover, these belief systems also encourage an accelerated debasement of currencies and other related monetary metrics such as stocks and bonds. The logical and final course of such debasement is both the collapse of currency and the global financial structure. The outcomes of this collapse bear untold risks and consequences.
The thesis of current economic beliefs has not only failed as evidenced by the events leading to the 2008 meltdown. Without any hesitation whatsoever it is destined to fail again – and in all likelihood in just a few short years. “This time perhaps without practical remedy.” Why leading economist and thinkers in this field prefer fanciful words over harsh realities puzzles the object mind? One may surmise that a vested bias exists to maintaining the unsustainable and exponential path to exhaustion of the planet’s wealth. I do not profess to know the reason, but I do understand that the consequences will be great and beyond the theatre of words.
I do not write to simply set out the prevailing and obvious shortcomings of the conventional economic doctrine. But, it is to also request that our minds turn to revision. That good measure is given to alternative doctrines that will form new ways aimed to affect a change in the economic yardsticks and resultant human behaviour. With a plain and clear goal to set the economic doctrine on the second path that works to defer the day when we ultimately meet the intersection of time and exhausted wealth.
The linked abstract to “The Wealth of Planets” sets out a possible revisionist doctrine. This short illustrative comparison of two nations; Rapidusers and Slowusers, portrays how two fates may result as a consequence of misleading economic information and doctrines. In the last analysis, the fate of Slowusers is the most sensible preferred course of behaviour and destiny. For the greater sake of our larger noble cause, it would be of good fortune if the people who possess so many formidable gifts of talent and intellect could turn their minds to advancing us towards this more sensible road.
To close, we have a responsibility beyond vested interest. Beyond nations. Beyond the present inhabitants of our planet. That responsibility includes a sense of fairness to our children. Our grandchildren. To our future generations. If we continue on the current path then we unjustly steal the possibilities of their futures. This is a crime of unmeasured proportions. Many dare to term it with stronger words and call it an “invisible genocide”.
Thank you for your time.
T A McNeil
First Financial Insights Inc.
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Thursday, June 23, 2011
Thursday, June 16, 2011
Fuelled by Credit Crunch - Markets Melt
WNN Business News (AP)
Breaking Report, June 17, 2011
The Greek debt crisis whether today or at some point in the future is certain to send the Global Banking System back into a death spiral. An unprecedented collapse is expected as major Banks in
France, Germany, Great Britain and the will field the brunt of this new meltdown. Loans to United States are estimated to top $100 billion US. This number comes right out of the equity boxes of the Banks and destabilizes a system still recovering from the 2008 financial shocks. Fear is the rippling effects of a liquidity contraction will take more than One Trillion dollars in leverage out of the system. One banker reported “this is the last thing the struggling global economies need, credit will just dry up and again this will see a ripple down effect to Main Street. Greece
Expect this to extend the global recession for sometime.”
Expect this to extend the global recession for sometime.”
Worse yet. This credit tightening parallels the events of 1932 that saw the world slide into a long deep depression after the 1929 stock crash. Experts say there is little that can be done to stop the spill over into the Equity Markets as the system is highly levered on a global basis. Markets can go down 40 to 50% globally; there is little anyone can do about it.
WNN Business News spoke to Terry A McNeil, a world leading financial advisor who had forecasted the 2008 financial meltdown in 2007. He said, “We are at a crossroad in human history and the markets. What we have seen over the past 50 years is an anomaly that was caused by cheap energy and commodities. It cannot be repeated when populations are expanding and key elements are dwindling. There is no Santa Claus to bring more presents of infinite resources. The world needs to wake up.
WNN pressed Mr McNeil further to explain where he believed markets were going and why they would go there? “Sure a tumble of 50% or so is quite realistic and we expect they are going to stay down, if not get worse. Our firm, First Financial Insights has determined seven key drivers that will set the stage for this long extended decline in markets. WNN asked, “Do mind sharing these with our readers? “Certainly” Mr McNeil responded, “there are seven inter-related drivers as our firm sees it”
“One, the leverage in the system created by the Banks which is ten times World GDP bears no relationship at all to the utilities of the global productive capacity of nations. It is funny money and implicitly worthless. That is a huge burden to overcome.
Secondly the globe is running out of oil and no one right now has a firm grasp on just where supplies are and how long they will last. This is like telling a diabetic insulin supplies are about to run out, Science may or may not have an answer in both cases. Sorry.
We see the third factor as being commodity prices that are set to rise dramatically. Having gone through an extended 50 year period where prices have declined we are seeing a logical breakout to the upside as populations grow, and land, fertilizers and water become scarce. This is a physical conundrum.
Global warming is another biggy that Governments have failed to address for years. Now, it’s all coming home to roost. The impacts of severe changes in weather patterns and water levels affect the whole food chain and infrastructure. This is a biblical event.
Five, we see expanding populations being an untenable algebra. We are in huge overshoot relative to what our planet will sustain. Some leading scientist say the earth can ideally house 1.5 billion and we are at 7 billion and climbing to 10 billion. A mean reversion is set to occur that is not good for business.
Interest rates will soon rise sharply as monetary policies will chase a voodoo belief that it controls inflation by raising rates. Silly, because people will have to eat. Add to the brew that supplies are declining, and then prices will climb no matter what. This is not a textbook. It’s life.
Against this background we see global unemployment going to 25 or 30% with food and supply shortages a daily occurrence. This is not a good business landscape and thus GDP’s will shrink by 10 to 20%. Real GDP will contract even more as currencies everywhere debase without supporting resources.”
So how long do you think it will take for this to correct or turn the corner? WNN asked. “Listen the days of economic growth are over and markets ultimately reflect reality. The real physical relationships among resources, population, ecology, climate and mathematics simply caught up to us. Market metric and currency values are pretty much irrelevant” he lamented.
WNN Business News (AP)
Friday, June 10, 2011
Redefining Intrinsic Currency
In the end, we are all accountable, in some way; economists, governments, accountants, regulators, bankers, media;
Wall St et al. for the debasement of currencies.Focus should not be so much on "who’s to blame?"- But rather how do we fix it?
The conceptual issues related to currency remain highly abstract. And this issue by its nature will not change as the complex idea of "value" itself... has meanings offering multiple definitions. A form of social consensus or contract is needed to be practical.
In theory, we print money based on a nation's on-going ability to produce goods and services...Its wealth. It assumes GDP (income statement) properly measures that wealth. This is where conundrums occur. Currency has future value if a nation continues to produce at higher, current or reasonable historic levels. It is preferred that these values are concrete objects over intangible abstracts.(i.e. more legal, accounting, banking fees and the sort add little to the real object economy).
What is not accounted for in this traditional equation is the productive asset capacity of a nation (balance sheet). This would in some measure, consist of its natural resources - a.k.a depleting concrete objects. So it follows any nation/planet with natural resources concurrently erodes the value of its currency as such resources are depleted. This suggests then that the "intrinsic value of a nation's currency" rests somewhere between its income statement and balance sheet. If it has resources.
As to gold - being a last store of value - trading one abstract for another is simply a redundant exchange. Abstracts do not feed, heal or warm folks. Concrete objects do. The end goal then is to focus on sustaining and allocating the concrete asset capacity of a nation/planet for as long as possible. It means changing our way of looking at things.
Monday, June 6, 2011
How it works – The WALL ST. GANG
May 28, 2011
Accounting Asymmetrical and Central Banking
Since I am not a great believer in academic dissertations...I tell funny stories instead
The cause of so many recent financial disasters relates directly to the asymmetrical use and arbitrage of accounting principles amoung different jurisdictions. Here are some notes fromrecent accounting classes at Goldman Sachs, Enron, et al
Lesson: 1. How to create an asset? Set up lots of sub-entities. Create a certified paper transaction from magical objects with nine PhDs from MIT. Call the paper a hard paper asset (HPA) Concurrently, record off- balance sheet liabilities in your sub - entities. Then record certified paper -HPA- on balance sheet of the primary entity. Presto...Primary entity books billions in profits. Everyone Celebrates.
Lesson 2 Take your Company's solid balance sheet and borrow cash to create more assets (HPA). Pay Bankers big fees and use your asset (HPA) with the Bankers as Collateral Security. Set up trading rooms to show liquidity of HPAs to auditors. Very Popular security. Pay more Big Fees. Everyone Celebrates.
Lesson 3 Bankers need cash and borrow it from the Central Bank based on their solid balance sheet and Collateral Security. Central Bank creates money with the super magic journal entry. They have no assets so they debit a black box (negative equity). Money (IOU) created by the journal entry is lent the Bankers. Everyone Celebrates.
Lesson 4 The system works. Assets are growing. More HPAs created. Volumes and liquidity soar. Everyone is creating paper. Everyone has money. Everyone celebrates.
Lesson 5 The Department of Justice (DoJ) is at the gates…prepare for early retirement teaching the next generation of Math PhDs at MIT. Fondly recall past celebrations in lectures.
Well… for some reason this doesn’t seem so funny.
T. A. McNeil
First Financial Insights Inc.
Winston Churchill “a joke is a very serious thing”
Enjoy the video and its charms of juxtaposition
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