Thursday, August 20, 2009

Wisdom From The Geese

I was at the beach yesterday, watching a large flight (gaggle?) of geese aloft a perfectly blue sky circling and weaving, forming and breaking up, apparently preparing for their long trip south. So soon? Is the summer already over? I puzzled. But of course it is, came the answer embroidered in beautiful sky-swirls, at least if you are a cautious migratory bird.

And thus came the thought that, after a spring of economic thaw and a summer full of green shoots and blooms, there may come an autumn chill and a winter of discontent. Why do I think so? In a word, because of "crisis".

Crisis here, crisis there, crises everywhere. The world is awash in "Crisis", the word liberally slathered onto every news item and analysis. In my discussions with shopkeepers and small business owners (I always talk to them to get a sense of the real economy) it invariably pops up: "'s the crisis, you know..", and they shake their heads. But they always go on to say that they expect things will get back to "normal" next year, next season, next whatever cycle they operate on. When I ask them why, their answer is based on only two items: (a) hope and (b) the recent performance of financial markets, a.k.a. the Dow Jones Industrial Average. (Ain't propaganda grand, in all its modern ticker-tape manifestations?)

Well, I think it is entirely misleading to describe the current state of affairs as a "crisis". The term denotes a sharp, but short-lived condition leaving behind an aural after-taste that everything will be OK pretty soon. Particularly, when combined with talk about massive doses of monetary and fiscal sauce being poured over the cooked goose of the economy.

Instead, we should be using a terms like Stagnation or "The Long Emergency" (note: I am NOT fond of Mr. Kunstler's tirades and expletive-laden tent-revival style. But this book is not half bad).

Let me give you reality from the trenches - well, the sand dunes...

  • At the same beach I met a regional sales manager for a huge global telecoms equipment manufacturer. Sales in his region are down a whopping 75% from last year and he sees signs of only a very modest uptick in 2010, say 5-10%.
  • Two weeks ago I was at a very popular vacation spot and shopkeepers and restaurant owners told me that while visitors were down only about 10%, their sales collapsed a whopping 35-45%. People are still going on vacation for the most part but they are cutting down very sharply on extras like souvenirs, impulse purchases and fancier meals.
Yet, financial markets are basking in the sun and blue skies of summer...

And that's precisely the contrarian wisdom of the geese: if you know that winter is to come start your trip south when the weather is good, not when the storms are already upon you. Otherwise you are very likely to end up on a rocky coast as a pile of smashed feathers and bone.


  1. They'll just keep replacing the underperforming names in the Dow Jones and S&P500 to prop the indexes up. Eventually though all the potential substitutes will be affected by the downturn, or not?

  2. A summer vacation in the nile (or denial?), smoking green shoots and drinking the cool aid.
    It seems like the market cheers any kind of news these days. Unemployment up, market goes up. Foreclosures hit an all time high, market goes up. Too Big to Fail Bankcorp cooked their numbers better than expected, market goes up.
    Either this is the beginning of a new bubble with all the crazy bailout cash looking for a new home or we're in for some very vicious decline in the markets. Something is not right here.

  3. I agree with you about Kunstler, his hyperbole and obvious biases (suburbia for one) do him ill, but his is a skilled and entertaining writer sometimes. The "long emergency" is a good coin of phrase.

    Just dealing with a temp employment agent today, he said his volume was down 40%

  4. Beginning now and going forward through to Sept/Oct the reality will become set in stone. Which is, the masses will come to understand we are now firmly entrenched in Greater Depression II.

    Jim Sinclair now has a countdown going for loss of confidence in the USD around Nov 5th. This will usher in hyper-inflation over the course of 2010 such that by the end of 2010 the whole of US Empire will totally collapse.

    We are headed to a barter, calorie-based economy.

    Joe M.

  5. I'm beginning to think I'm stupid for sitting in cash.

  6. Go read Jim Willie at today. The chart he shows tells a huge story.

    Bottom line: Foreigners have already cancelled the US credit card.

    Joe M.

  7. Sigh....
    "Now is the winter of our discontent made glorious summer by this son of York."
    Love it. Thanks for Richard III, Hell. You are a true writer. That's why I like your blog, and continue reading it although I remain obnoxiously and stubbornly ignorant of much of its economic content.
    Our time is very keen on Richard III. He is a seductive figure. So... conveniently... VILLAINOUS and manipulative.
    Richard II would be more useful these days, when the long emergency unfolds before us just like it unfolded before the English/French as divine right monarchy finally bottomed out (and the Catholic church with it ?) :

    KING : "Down, down, I come, like glist'ring Phaeton,
    Wanting the manage of unruly jades.
    In the base court ? Base court, where kings grow base
    To come at traitors' calls and do them grace !
    In the base court come down ? Down court ! down king !
    For night owls shriek where mounting larks should sing." III, iii 178-183.

    Institutions don't die overnight, they take a long time going. So... the "crisis" is like a tide going out. By the time you notice it, it's been going on for quite a while.
    Don't ask me "what" is going out. I'm not exactly sure...

  8. They said that it could not be done,
    He said "Just let me try."
    They said, "Other men have tried and failed,"
    He answered, "But not I."
    They said, "It is impossible,"
    He said, "There's no such word."

    He closed his mind, he closed his heart...
    To everything he heard.
    He said, "Within the heart of man,
    There is a tiny seed.
    It grows until it blossoms,
    It's called the will to succeed.
    Its roots are strength, its stem is hope,
    Its petals inspiration,
    Its thorns protect its strong green leaves,
    With grim determination."

    "Its stamens are its skills
    Which help to shape each plan,
    For there's nothing in the universe
    Beyond the scope of man."
    They thought that it could not be done,
    Some even said they knew it,
    But he faced up to what could not be done...


    Benny Hill

    Best regards,


  9. Looks like we could be heading toward another rewrite of the French revolution with the financial sector in the villainous role of the ah... ARISTOCRACY, and the deceased middle class touting all those guns, pitchforks, whatever arm comes to mind or to hand.
    WILL the president/government control the police and the army ? There's an interesting question for you...

  10. Hell said:

    "And that's precisely the contrarian wisdom of the geese: if you know that winter is to come start your trip south when the weather is good, not when the storms are already upon you. Otherwise you are very likely to end up on a rocky coast as a pile of smashed feathers and bone."

    South is safe harbor for the geese, what is the safe harbor for people in the financial world?

  11. @Eco: you story kind of reminds me of the little engine: "I think I can, I think I can, I think I can"

    @Marcus re: safe harbor

    I sugest you start looking for fractals fast. For I am sure you do not want to forget Hell's age old wisdom: "real vs. imaginary economy". Nothing ever changes that much, only the perception of what you are observing ;-)

    Hope you are well

  12. On the topic of smashed piles of feather and bone:

    "Will Americans, smashed and destroyed by “their” government’s policy, which always puts Americans last, ever understand who their real enemies are?

    The great American superpower and its 300 million people are being driven straight into the ground by the narrow interest of the big banks and the munitions industry. People, and not only Americans, are losing their sons, husbands, brothers, and fathers for no other reason than the profits of US armaments corporations, and the gullible American people seem proud of it. Those ribbon decals on their cars, SUVs and monster trucks proclaim their naive loyalty to the armaments industries and to the whores in Washington who promote wars.

    (Americans) are not ruled by elected representatives but by an oligarchy that owns the Washington whorehouse."

  13. A possible scenario of how inflation can take hold under conditions of high unemployment and a contracting economy:

    (The)functioning of a state and its fiat currency depends on its citizens offering its labour in exchange for goods and services. Abba Lerner also suggested:

    “The modern state can make anything it chooses generally acceptable as money…It is true that a simple declaration that such and such is money will not...(by itself be sufficient but) if the state is willing to accept the proposed money in payment of taxes and other obligations to itself the trick is done.”

    But the quid pro quo is that there must be tax compliance.

    If debtors' revolt extends to tax non-compliance, then you've got the makings of a severe inflationary problem. Hyperinflations often occur when the government can print ever increasing quantities of money, but find little for sale, even as resources sit idle. The brief history of the Confederacy during the US civil war is an excellent illustration of this phenomenon. This does not require full employment; indeed, most hyperinflations take place with lots of unemployment because once hyperinflation sets in, it is virtually impossible to undertake 'money now for money later' operations..

    The printing press, then, becomes a symptom of the problem, not the cause because it is the breakdown of the tax system which causes the government's fiat money to become worthless, not the running of the printing presses per se. Tax gives value to a fiat currency. When one has widespread tax avoidance, it marks the beginnings of true political dysfunction.

    To be sure, we haven't come close to this point yet. But it becomes an increasing risk for an administration that seems determined to recreate the financial conditions that led to the disaster we are now experiencing.

  14. Information about crisis all over the world. You can find information about Currency rates.