Tragedy of the Commons

As all thoughts lead to Bankers these days I thought this article about the 'Tragedy of the Commons' explained (in part) why bankers, builders, politicians destroyed the country. Basically, the benefited enormously but only have to pay a fraction of the cost.

The tragedy of the commons develops in this way. Picture a pasture open to all. It is to be expected that each herdsman will try to keep as many cattle as possible on the commons. Such an arrangement may work reasonably satisfactorily for centuries because tribal wars, poaching, and disease keep the numbers of both man and beast well below the carrying capacity of the land. Finally, however, comes the day of reckoning, that is, the day when the long-desired goal of social stability becomes a reality. At this point, the inherent logic of the commons remorselessly generates tragedy.

As a rational being, each herdsman seeks to maximize his gain. Explicitly or implicitly, more or less consciously, he asks, "What is the utility to me of adding one more animal to my herd?" This utility has one negative and one positive component.

1) The positive component is a function of the increment of one animal. Since the herdsman receives all the proceeds from the sale of the additional animal, the positive utility is nearly +1.

2) The negative component is a function of the additional overgrazing created by one more animal. Since, however, the effects of overgrazing are shared by all the herdsmen, the negative utility for any particular decision-making herdsman is only a fraction of -1.

Adding together the component partial utilities, the rational herdsman concludes that the only sensible course for him to pursue is to add another animal to his herd. And another; and another.... But this is the conclusion reached by each and every rational herdsman sharing a commons. Therein is the tragedy. Each man is locked into a system that compels him to increase his herd without limit--in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.

End of the Dollar

Three linked articles on the end of the dollar (I feel like one of those, 'the end is nigh' guys)

The American Empire Is Bankrupt

This week marks the end of the dollar’s reign as the world’s reserve currency. It marks the start of a terrible period of economic and political decline in the United States. And it signals the last gasp of the American imperium. That’s over. It is not coming back. And what is to come will be very, very painful.

Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to continue to prop up an inflated dollar and sustain the massive federal budget deficits, swollen to over $2 trillion, which fund America’s imperial expansion in Eurasia and our system of casino capitalism. They have us by the throat. They are about to squeeze.

De-Dollarisation

When China and other countries recycle their dollar inflows by buying US Treasury bills to “invest” in the United States, this buildup is not really voluntary. It does not reflect faith in the U.S. economy enriching foreign central banks for their savings, or any calculated investment preference, but simply a lack of alternatives. “Free markets” US-style hook countries into a system that forces them to accept dollars without limit. Now they want out.

The Game is over: There Won't be a Rebound

MH: The idea that we’re even in a business “cycle” is whistling in the dark. To think of the economy being in a cycle is to imply an automatic recovery is in store. This free-market idea was developed at the National Bureau of Economic Research by opponents of government regulatory policy. The fantasy is that the economy oscillates in a fairly smooth and regular sine curve. But this always has been a fiction. 19th-century writers didn’t speak of economic cycles, but rather of periodic financial crises. There is a slow buildup, and a sudden plunge, so the shape is ratchet-shaped.

It’s Finished

Very long article about the end of banking/capitalism as we know it. Worth reading

It isn’t hard to know how to slay the zombies. The only way to do it is to hold a gun to the head of the various bankers – those various guys sitting with their heads in their hands staring at balance sheets with holes in them – and force them to admit what their assets are worth, right now. Many of the banks will turn out to be insolvent. In that case the bank is nationalised, or at the very least goes into administration and receivership. Then, a number of options become available, one of the principal ones being to break the bank up into the viable part of the business, which will eventually be refloated back onto the market, and a ‘bad bank’ of dodgy assets which must be sold off (or arguably held until the values recover) in whatever way makes the most possible money for the taxpayer.

Nobody in power wants to do that. Nobody with power in the banking system, and nobody with power in government. Both the British and the American plans to help the banks are very, very, very expensive variations on the theme of sticking their fingers in their ears and loudly singing ‘La la la, I’m not listening.’ This is what’s happened so far.

[snip]

But there are four things you don’t want to have, going into the current crisis. 1. You don’t want to have had a boom based on a property bubble. 2. You don’t want to have a consumer credit bubble. 3. You don’t want to have an economy based on financial services. 4. You don’t want your government to have just gone on a massive spending spree. We have all four of those things that you don’t want.

Jim Rogers: “The Worst is Not Over”

Life Inc.

Looks interesting



link

Why the crash will continue for a long while yet

Just why the whole "green shoots" thing is a crock of shit.

The financial media is abuzz with talk of a recovery as equities inch their way higher every week.
[snip]

For 19 months, Bernanke has kept a steady stream of liquidity flowing from the vault at the US Treasury to the NYSE in downtown Manhattan. The Fed has recapitalized financial institutions via its low interest rates, its multi-trillion dollar lending facilities, and its direct purchase of US sovereign debt and Fannie Mae mortgage-backed securities. (Monetization) The Fed's balance sheet has become a dumping ground for all manner of toxic waste and putrid debt-instruments for which there is no active market. When foreign central banks and investors realize that US currency is backed by dodgy subprime collateral; there will be a run on the dollar followed by a stampede out of US equities. Even so, Bernanke assures his critics that "the foundations of our economy are strong".
[snip]

So far, $12 trillion has been pumped into the financial system while less than $450 billion fiscal stimulus has gone to the "real" economy where workers are struggling just to keep food on the table. The Fed's priorities are directed at the investor class not the average working Joe. Bernanke is trying to keep Wall Street happy by goosing asset values with cheap capital, but the increases to the money supply are putting more downward pressure on the dollar. The Fed chief has also begun purchasing US Treasuries, which is the equivalent of writing a check to oneself to cover an overdraft in one's own account. This is the kind of gibberish that passes as sound economic policy. The Fed is incapable if fixing the problem because the Fed is the problem.
[snip]

The banks are all playing the same game of hide-n-seek, trying to hoodwink the public into thinking they are in a stronger capital position than they really are. It's just more Wall Street chicanery papered over with vapid media propaganda. The giant brokerage houses and the financial media are two spokes on the same wheel gliding along in perfect harmony.

link

A different take on income tax

Seeing as yesterday the Irish government robbed us all to pay for theirs and other mistakes here is a different take on income tax.

I don't really agree with it, but its food for thought;
(certainly how taxes are spent is a huge issue)

An income tax is inconsistent with the historical definition of freedom. Today in America government has a claim on every person’s labor, just as feudal lords, the government of that time, had claims on the labor of serfs and nineteenth century plantation owners had on slaves.

link

Global Financial Collapse

Who do we (everybody) owe all this money to?

An Argentine opinion on the Global Financial Crisis, describing the whole Global Financial System as one vast Ponzi Scheme. Like a pyramid, it has four sides and is a predictable model. The four sides are: (1) Artificially control the supply of public State-issued Currency, (2) Artificially impose Banking Money as the primary source of funding in the economy, (3) Promote doing everything by Debt and (4) Erect complex channels that allow privatizing profits when the Model is in expansion mode and socialize losses when the model goes into contraction mode.

Take your money out of the banks it seems is the advice?

link from Information Clearinghouse

Is Capitalism Finished?

I can't say I'm convinced - some form of usury will always be required, however you can get your daily dose of impending doom here.

The Issue

Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.

[snip] The Problem

Economies built on credit and debt are by nature unstable. Caught between cycles of expansion and contraction, they are also vulnerable to the vagaries of man and the dictates of nature, i.e. war, famine, greed, drought, etc.

When the backing of gold was finally removed from paper money, it was the final straw that was to bring down the bankers’ house of cards. But before the house of cards collapsed, capitalism was to erupt in one last display of shameless glory.

[snip] The Flaw

EXPANSION BEGETS DEMISE

Capitalism’s fatal flaw is apparent only in its later stages. As capitalism matures, its inherent systemic instability manifests. The very expansion of capitalism sets in motion its demise. The Achilles heel of capitalism is its perpetual need to expand.

Only perpetual capital expansion can create sufficient capital flows to service and retire previously created debts, the amounts of which are always increasing because of the accruing compound interest being charged. While any slowdown is cause for worry, a contraction bodes far worse.

[snip] Concealing the problem

In his wonderful and final and most readable book (at least for me), Grunch of Giants, (Design Science Press, 1983) Buckminster Fuller writes about the history of power and money in a way that explains our present economic system.

Bucky’s word “Grunch” is an acronym for gross (GR) universal (UN) cash heist (CH) and the word Giant is a reference to modern corporations and those who control them. On page 18, Bucky recounts a conversation with one of the “giants”, a friend of his who was a scion of the JP Morgan family.

He said to me, “Bucky, I am very fond of you, so I am sorry to have to tell you that you will never be a success. You go around explaining in simple terms that which people have not been comprehending, when the first law of success is, “never make things simple when you can make them complicated.”

The roots of modern economics are intertwined with institutional deceit on a massive scale because the material rewards are so great. Therefore, the attempt to ascertain the truth about money is not an easy task; and it is not made easier by those who benefit by its deceit.

So the situation is not good...

Now, if someone could explain to me why 'gold' has an intrinsic value? It's pretty and popular but not terribly useful. Is there a short list of currency standards anywhere?

All of them must go!

Naomi Klein has an interesting article here about the current financial situation and I couldn't agree more, even in the mist of the greatest crisis since the depression they are still talking about "reform", while in actuality, handing money over to the criminals who destroyed the system in the first place.

This is however, the first time I've heard Ireland described as a "basket case" ... just wish it wasn't true.

But Latvia's troubles are indeed special: the very policies that allowed the "Baltic Tiger" to grow at a rate of 12 percent in 2006 are also causing it to contract violently by a projected 10 percent this year: money, freed of all barriers, flows out as quickly as it flows in, with plenty being diverted to political pockets. (It is no coincidence that many of today's basket cases are yesterday's "miracles": Ireland, Estonia, Iceland, Latvia.)

Also, Michael Parenti, nicely sums up just effect these bailout's are having;

Worse still, the ensuing multi-billion dollar government bailouts are themselves being turned into an opportunity for pillage. Not only does the state fail to regulate, it becomes itself a source of plunder, pulling vast sums from the federal money machine, leaving the taxpayers to bleed.

So in typical "Irish leadership" (a phase sure to become an oxymoron) our dear leaders handed over €7 Billion to the crooks last night the very week it emerged Permanent TSB secretly transfered €7 Billion to the now nationalised Anglo Irish Bank in order, one assumes, to make it's books look prettier. That wasn't Cosy Capitalism, it was full on XXX Rated Capitalism where the boy's swap and share everything and anything and the party never ends.

Only now the government (a.k.a the Mom) has accidentally walked into the room catching her favorite son doing things she never even imagined whereupon she promptly turns on her heel, leaves the room and pretends nothing happened. Later when her son comes down for tea she act's like he has just arrived in, rambles on about the neighbours and hands him money so he can have a good time when he's out later..."He's such a good son you know"

The Root Cause Of The Economic Catastrophe

lifted wholesale from SeeingTheForest;

Everyone understands that the root cause of this economic catastrophe was corporate money's influence on our politics. Corporations are able to concentrate money. We, the People let them do that because it enables them to undertake large-scale projects. But currently executives can access that money and use it to influence politics through bribery and/or manipulating public opinion. Deregulation, unfair tax codes, loss of consumer and worker protections and decades of falling wages and benefits have been the result -- hardly in the interest of the public.

Until we stop allowing use of corporate money to influence politcians and the public these problems will only increase.

When are we going to come to grips with that?

Joseph E. Stiglitz on the Credit Crunch

He gives 5 reasons for the crunch, but they can be summed up as follows;

The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of government should be minimal

.

A Message from the Auto Industry

Socialism for the rich continues unabated ...


from BoingBoing

A better bailout system

ok, more more for this morning

More Shock Doctrine

The IMF trying to reimpose tyranny;

The worst is over

I've been hearing this a lot lately, especially concerning house prices

Brokers Believe Worst Is Over and Recommend Buying of Real Bargains

Wall Street in looking over the wreckage of the week, has come generally to the opinion that high grade investment issues can be bought now, without fear of a drastic decline. There is some difference of opinion as to whether not the correction must go further, but everyone realizes that the worst is over, and that there are bargains for those who are willing to buy conservatively and live through the immediate irregularity.

-- New York Herald Tribune, October 27, 1929

Don't believe a word of it myself...
lifted from Seeing The Forest.

(Edited 17.11.2008, forgot to add last sentence)

The Irish Banks

Every morning on my way into work I have to listen to some financial 'expert' on the radio deliver the mornings financial news. Without fail they chirp when the markets rise and wail when they fall, we are also treated to various wishful musings on 'house price recovery' (as if this would be a good thing), 'market stabilisation' and currency exchange rates.

How does one become a financial expert? You don't seem to have to know anything about the market at all bar "Up good, Down bad". Every single one of them mocked David McWilliams when he warned of the impending disaster, they smirk when the word 'social' and 'responsible' are used in any way relating to business and genuinely seem to the think the worst is "almost" over.

Mr McWilliams reckons we are about to enter phase two of a three part collapse but you'd never know it from by listening to the 'experts'.

Anyway, looks like the Bank Of Ireland is fucked! I bank with these idiots.

[it] doesn't have anything like the wriggle room. It has almost none. It can sell its life business, which is decent enough. There's also a bit of hedge fund stuff in the States. The BIAM asset management division is a dog, having lost billions in mandates. Nobody will touch it with an asbestos-covered barge pole. There's also a medium-sized British mortgage business. But you'd need Hulk-sized stones to even think of buying that.

This means that unless it can get Banco Santander to buy it lock, stock and barrel, Bank of Ireland is probably going to be owned by you and me.

link

The Bertie Bubble Burst

Because the Irish government is so inept and corrupt they have decided to aid the very people who helped cause the problem.

The real priorities are cutting back on health care and education and shoveling more money to the bankers and builders.

This clip from Prime Time shows the latest madness of the government becoming a sub prime lender.

http://www.rte.ie/news/2008/1028/primetime_av.html?2441845,null,230

Why Wont The Bail Out Work?

Shocking numbers mentioned here;



thanks to Information Clearinghouse for the video

The Secret History of the American Empire

link