According to Thomas Friedman, we need a green revolution. And we will get one, by necessity and the need for local resilience in the face of the global wave of multiple defaults.
Another green revolution is underway – a green (money) revolution, but perhaps not as we planned or designed. Allow me to post the most compelling of the last week’s economic news articles and a few responses. No analysis, just the linkage:
Ray Dalio, Barron’s: Recession? No, It’s a D-process, and It Will Be Long
Basically what happens is that after a period of time, economies go through a long-term debt cycle — a dynamic that is self-reinforcing, in which people finance their spending by borrowing and debts rise relative to incomes and, more accurately, debt-service payments rise relative to incomes. At cycle peaks, assets are bought on leverage at high-enough prices that the cash flows they produce aren’t adequate to service the debt. The incomes aren’t adequate to service the debt. Then begins the reversal process, and that becomes self-reinforcing, too. In the simplest sense, the country reaches the point when it needs a debt restructuring. GM is a metaphor for the United States.
George Soros, Huffington Post: A Plan for Economic Recovery
We are facing the prospect of global deflation and depression, similar to but potentially worse than the 1930s. That said, I believe the situation could be turned around by adopting a bold and comprehensive program. Unfortunately, Treasury Secretary Geithner did not present a convincing case. I outline the basic elements of such a program in my forthcoming Book, The Crash of 2008 and What it Means. I am providing an excerpt here in the hopes that it will stimulate discussion and help generate the necessary political will for bold action.
Dean Starkman, Mother Jones: How Could 9,000 Business Reporters Blow It?
The demise of the mainstream media, especially newspapers, has been forecast for decades, but the years following the tech wreck of 2000—the period of the housing bubble—opened a new, defining chapter. The most shocking plunge in values came, Morton says, around mid-2007, just about the time the credit crisis burst into full view. For instance, the market capitalization of the Journal Register Company, publisher of the New Haven Register and hundreds of smaller papers, has fallen more than 99 percent since the start of 2007—long before, it’s worth remembering, the credit crisis made business flameouts commonplace. In newspapering, it was the business model itself that fell apart.
And David J. DesLauriers, Resource Investor (2005): The Kondratieff Winter Is Upon Us
We are in the winter but its being masked by the Federal Reserve dropping interest rates almost in a panic down to 1% and also the huge money printing that Greenspan has done. So in some ways, the evidence of winter is not upon us but when we do feel it its going to be a lot worse than probably the previous winter experience because the debt build-up has been much more horrific.
Yes, that last article was 2005, one of the most recent articles citing the Kondratieff long-wave cycle (K-wave). Whenever anyone says that nobody could have predicted the economic crisis we’re in now, read up on Nikolai Kondratieff and you will be able to tell them that yes, it was predicted in 1925.
News Flash: Here’s a synchronistic socionomic signal for you. I posted this blog article Saturday, and explictly measured the most recent Web article – from blogger or paper – discussing Kondratieff as 2005. The next day, the Sunday New York Times includes a respectable article Economic Lessons from Lenin’s Seer, in the Week in Review. Kyle Chrichton notes Kondratieff’s insights from his early Soviet-era economic theory held value in understanding the nature and depth of the current economic crisis. I’m not sure how far beyond Wikipedia Kyle’s research extended – he discusses none of the controversy over when the K-winter started. He states:
Today, Kondratieff’s disciples (a dwindling band, by the way) are just as certain that the bad times began in 2000, with that year’s stock market crash. That was followed by the autumn phase of the Bush years, characterized by an enormous (Kondratieff would say desperate) expansion of debt and leverage in an attempt to maintain the prosperity of the spring and summer years.
The Kondratieff WINTER started around the year 2000, and Alan Greenspan merely extended the Autumn with extraordinary means, believing he (a good Randian disciple) was chosen to defeat the historical cycle which he himself understood. Perhaps its a thin thread, but a well-known thread among fringe economists, that Greenspan said in 1966 he wanted to be Fed Chairman during this time in history because he (like Rand’s Roark) knew what to do. According to Ian Gordon of Canaccord Capital”
“I think Mr. Greenspan certainly knows the extent of the bubble. I had a friend in London who knew Alan Greenspan in the ‘60’s and Alan Greenspan, at that time, said to him, “I would love to be Federal Reserve Chairman when the Kondratieff Winter comes because I think I could override it by dropping the interest rates and printing enough money that it would overcome all the deflationary aspects of economy.” He’s certainly trying that. So, I think he’s aware of what’s out there. Official people say a lot of things to try and bring some calm into a growing economic and stock market calamity.”
Now we have the score – Greenspan=0, Deflation=1. We already should have known a central banker could overcome a global deflationary tidal wave, a necessary systemic cleansing to clear out the massive worthless debt obligations and allow for the restoration of new economic order. Leviticus shows that the Torah law planned for the eradication of debts every 50 years, the Jubliee, sustaining a society that prevented the few from owning the assets of the many. Our society indeed requires a new Jubilee, based on the same principle – that the accumulation of wealth by social and political power (think lobbyists for Citibank) must be mitigated by a legally-supported clearing of debts and land obligations to prevent debt (wage and mortgage) slavery. Jubilee goes further, preventing generational transfers of power and wealth without merit.
We are at a critical point in our shared and understood histories to reimagine that economic scenario in the free-falling and flatlining globally interconnected economies happening today, and this year. The American Dream has turned into the American Daydream, and because it was a consumer-led daydream we took the rest of the world down with us. All of us had plenty of warning, from the Club of Rome’s (1970) Predicament of Mankind to the dire concerns of the 2000 market crash. Most of us did not use that time to prepare – so now we are faced with the need to redesign and radically transform our democratic, social, and commercial institutions – together, rapidly, in mid-air, while falling.