A little over 40 years ago, western financiers and their advisors were
torn. On the one hand they were quietly thrilled by the audacity of recent
imperial outreach work in
the middle east. On the other hand, they now felt a little nervous about
the scale of the transfer of wealth
closer to home.
The superpower of the day had stopped reporting on the creation of money
investors rightly took this to mean that too
much money was being pumped into the world's financial system. Their
response was to stop building dollar reserves and to stock up on euros.
Institutional investors moved money into tangible assets. Speculation
raged. Land, commodity and energy prices spiked.
The value of the dollar fell.
Then as the unprecedented housing boom predictably turned into an unprecedented
housing bust, something shook the banks. As house
prices collapsed, borrowers started to turn round and hand
back the keys.
Investment vehicles froze like a startled fox in the headlights. With
the banking system over-lent and barely
solvent, cheap loans evaporated. Buyers vanished. Shares were hammered.
And, despite the injection of hundreds of billions of dollars by central
banks, trust and confidence continued to wane.
It was then that some of us started to comprehend the scale of the speculative
bets being made. Oil soared to $110 barrel. Gold screamed up to $1000
But the fat controller was spooked, not by the end of the boom
with a bust – but by the possibility of violence on the streets.
Stoking anarchy in the middle east was one thing, but Anarchy in the
UK was beyond the pale. Large numbers of people were going to lose jobs,
homes and businesses. Protest would grow. Administrations both sides of
the atlantic sought to extend detention
From a world of wasteful abandon...
The convergence of oil depletion, resource wars, climate change and financial
meltdown, saw elites turn to private security firms for succor.
The financiers were certainly not preparing to queue at the fuel pump.
Ideas were floated. Depopulation?
They had already decided which they preferred.
Meanwhile we had swapped social, spiritual and sexual communion for TV
dinners and pornography.Climatologists warned that
the planet was about to shake us off like a bad cold, but restraint on
consumption was nowhere obvious. The UK government had plans for more
roads, more runways,
more houses, more power
plants, more... prisons.
Our hunger for domestic energy remained insatiable. Whereas the Roman
might keep a horse, citizens of the West thought nothing of tethering
100 horses to their chariot.
At the turn of the century we celebrated the
wizardry of city finance, the low cost of goods made in Asia, and
the excessive choice provided by the [super] market.
All this cheap abundance came at a high cost. Manufacturing, mining, drilling
and agriculture were fast exhausting natural resources. Only it was now
happening out of sight. Unpleasantness had effectively been banished.
The London smog was now Beijing's
problem. This was what we meant by globalisation.
Television was a daily diet of little of any real consequence. Our daily
travails kept most of us excessively busy turning cogs in government or
corporate wheels. In the commercial world, profit imperative remained
centre stage. Politicians repeated the mantra of never ending growth.
But, all the signs were that ours was not
an exemplary way to live.
Worse still, we felt disconnected. Catastrophic human losses had disoriented
us. It felt like reality was
being fabricated. We were hypnotised. For a while, TV became a disaster
movie of terror and anthrax
To the dawning of the real world...
During the austerity of the Great Depression of 2010, something finally
dawned on a great many westerners. Our fast living fast spending overstocked
supermarket of a culture was only possible thanks to the continued exploitation
of foreign workers.
The one way traffic of resources had always, in fact, been based on presumptions
of superiority. Now, with growing demand for resources from cash rich
China, we were about to experience the reverse flow of resources. Asia
would now price the meat and fish off our plates.
We looked at our reflections in the mirror and we realised how precarious
our position had become. We had been carried all these years, as if on
a chaise longue, by an army of foreign labourers. Carbon trading and offsetting
was just another convenient deceit born of a misplaced belief in our own
We started to recognise that our profit driven work ethos had caused errors
of judgement. It had accelerated the depletion
of the very resources needed for man and planet to enjoy happy continued
co-existence. Convenience, we now discovered, had a counterproductive
side. We had built little to last.
In fact, we had done little to resolve the fundamental issues. The most
fundamental of all was the entrenched injustice stemming from the private
ownership of land. The UN's 2020 Vision
Development Goals raised our hopes – a debate began to unfold.
Some of us looked for examples of sustainable development. Often we found
it in places reviled or even embargoed by the west –
Castro's Cuba for example.
We resolved to cycle to work, eat less meat, generate our own hot water
and electricity where practicable. In small ways we relearned how to do
things for ourselves – how to be more self-sufficient. We grew food.
We travelled less. We shared more.
We were not luddites. We eagerly anticipated the convergence of technologies
- the reduction of all communications into one chip set. We loved being
able to download software to take control of another aspect of our lives.
We loved the wireless freedom to roam. We revelled in the ability of new
fabrics, garments and prints to harness energy and insulate against heat
We began to value clean air, clean unfluoridated water, seasonality
in all things. We backed up or dug new homes into hillsides and covered
them in soil and grass. We aspired to clutter free lives and relearned
the art of designing products which had long lives of rich utility.
We were hopeful. We took time to meditate and developed faith in humanity,
because without this faith there could only be more carrots and sticks.
And carrots and sticks, we knew, were meant for donkeys.
Oil had been a remarkable gift to mankind over an entire century. Oil
but there were, of course, other gifts.
US Marketing Consultant, Victor Lebow Journal of Retailing 1955:
'Our enormously productive economy demands that we make consumption our
way of life, that we convert the buying and use of goods into rituals,
that we seek our spiritual satisfactions, our ego satisfactions, in consumption.
The measure of social status, of social acceptance, of prestige, is now
to be found in our consumptive patterns. The very meaning and significance
of our lives today expressed in consumptive terms.'
Graph: Bad loans peak again in Spain going in 2013.
Graph: 5 year % change in US household net worth to 2011 at annual
Graph: The average duration of US unemployment grows relentlessly into
Graph: 580 world 'leaders' project more of the same for the next 10 years
- Fiscal crises, Geopolitical Conflict, Extreme energy price volatility,
Economic Disparity. Part of their preparation for Davos 2011 meeting.
Click graph to enlarge. From WEF
Global Risks Report 2011.
Table: (Sep 2010) Index suggests poor sales remain a problem for small
US businesses (From NFIB's
quarterly survey, based on responses from a sample or some 4000 small
Graph (to July 2010): The Economic Cycle Research Institute (ECRI) Index
from 1965 to date has tended to fall steeply in advance of recession.
Lowering the base interest rate has historically been the preferred tool
for reviving demand (with the carrot of cheaper credit and stick of lower
returns on savings). Click graph for larger version. Note this has since
Chart: The Bank of England's June 2010 Financial
Stability Report (p18) suggests that business as usual (ie. all green)
for the banks is still some way from returning.
Data that would tell readers anything new about the demand for either
of these two forms of struggling securities has been stripped from the
same chart as it appears in the Bank of Englands's later December
2010 Financial Stability Report (p14) below. The sea of grey for CMBS
data hardly inspires confidence.
Demand for bulk container ships isn't what it was.
Graph: Six measures of the severity of the first phase of the crisis compared
to previous recessions. From page 13,
Chapter 1 of the IMF's World Economic Outlook (WEO) Crisis
and Recovery Report of April 2009.
Graph: They'll save/invest so that we can spend/consume. Or will they?
China might have other plans. In 2009 it proved necessary to employ 'quantitative
easing' to shore up wavering
demand for government bonds in the US/UK. China reduced holdings in
Graph: IMF's 2009 WEO forecast. Developing economies to rebalance whilst
rich economy governments borrow more to defer the pain.
Graph: Dow Jones from its 1929 peak, compared to recent movement in
this US share index. Compare the % fall of the first leg down and % rise
of the first leg back up in each case. It's uncanny. So, is today a similar
calamity in slow motion... or a similar calamity on fast forward with
the worst bits cut out? TBC
Graph: World industrial production from 1929, compared to 2008 as set
out with other many telling graphs in A
tale of two depressions
Graph: Dow Jones Share Index 1920-1940, click for detail.
Following the 1929 crash, the market enjoyed numerous
rallies before finding bottom at the value it had been at
around 18 years earlier.
Graph: Dow Jones Share Index 1900-date, click for detail.
The 1929 crash made a serious dent.
Graph: Historical price of gold. It previously peaked with the high
oil prices brought about by the 1979 oil crisis (the Shah was ousted from
Iran. Iraq, supported by the US/UK, then invaded Iran, hitting oil production
and causing wide spread panic over supply).