This is a story about changing beliefs...

Imagine being marooned on a rock in the middle of a vast ocean that's so deadly to life that you couldn't survive for more than a few seconds if you fell in. The ocean is lifeless and has no utility: it can't be purified or harnessed to generate energy. The rock has a fragile ecosystem that keeps you alive, but there is a relentless wind that threatens to blow away all the life-giving nutrients at any moment. You don't know how you got there, why you're there, or how the hell you're going to get off the rock if it can no longer keep you alive.

Welcome to the world according to science.

Isn't it much nicer to imagine an anthropocentric world, where some kind of paradise was created by an imaginary sky monster, just for us. Imagine there's some invisible guiding hand, making things happen, always with us Earthlings in mind. Imagine there's an all-seeing eye that only gives a shit about one particular species on one particular planet. Imagine that this universe isn't all there is: there's also some kind of afterlife. There... that's much more comforting, isn't it?

You could say that scientists believe in nothing. They don't think we were put on Earth for a reason: it's just a cosmic accident. Energy condensed into matter; quarks combined into protons and neutrons, which were fused into atomic nucleii; atoms bonded into molecules and reacted to create amino acids and proteins; the primordial soup created life, through pure chance. There's no reason for us to be here, except that given enough time - 14 billion years ought to do it - life as we know it becomes inevitable, given the laws of physics laid down at the birth of the universe.

When you start to study cosmology, you get some perspective on just how insignificant we are. When you start to deal with things on a cosmological scale, the numbers boggle your mind. There aren't even rulers that can measure the distances between objects in the night sky, because space and time are warped by matter and energy. Things are so far away, and we only have a tiny planet to move around on, so it's not like we can triangulate the position of anything. Everything in the universe appears to be just a point in space to us: the twinkling dots of light in the night sky.

If you think about time and evolution, you begin to see the staggering number of living creatures that died - our ancestors - so that we could be alive today in our current form. Take a look at an ear: it's a fucking weird looking thing, isn't it? Why the hell would it look like that? I can't tell you, but I know that I can take a shower without getting water in my ear canal, which is pretty awesome for listening out for any approaching sabre-tooth tigers while I'm washing myself.

Then, what about consciousness? Why is it that you are you? Why were you were born at the exact moment you were born? Why are you alive, right now, and not a hundred years ago, or a few thousand years ago?

So far as you know, you're the only you. Everybody else is somebody else. You've got your own unique set of experiences. You've got your own unique set of senses, and your own consciousness processing the sight, sound, smell, touch and taste of everything around you.

Ultimately, we can reach the conclusion that each universe is actually tailored to a single individual. The reason why there are lots of other people around who look very much like you is an inevitable consequence of the universal laws of physics. If I tweak the numbers one teeny tiny bit, we might get an almost identical universe, but there's a different person whose mind is "the one" that is truly conscious.

You feel pretty conscious, don't you? You feel like you've got free will and memories and you're seeing the world, right now, for what it is. But, that's only in your own universe. In your universe, I have no free will or consciousness: my world is dictated by your actions. In your universe, I'm not deciding to write these words... I'm not even aware of what I'm doing, even though I think I am.

The test is this: what would happen if you killed yourself?

Right now, there are about 7 billion people in the world. If I was to kill myself, 7 billion people would agree that I was dead and buried. 7 billion people would say that I just killed myself. But what about me? What about my opinion?

Here's how it goes: I get a gun, aim it at my head and pull the trigger. Guns are pretty reliable these days, so lets say I have only a one in a million chance of surviving a point-blank gunshot wound to the head. This is my free will, right? I make the decision to commit suicide, because I'm a conscious being with free will and that's my prerogative to do so.

So, what happens if the gun misfires? What happens if I put the gun down, pick up a different gun and that one misfires too? What happens if I pick up a machine gun, aim it at my head, pull the trigger and it just goes click-click-click-click-click as it keeps misfiring?

Essentially, if you take our very best scientific theories and follow them to their inevitable conclusion, this is what is predicted. If you keep asking "why?" over and over again, until you get to the deepest possible understanding of the universe as we observe it, you will conclude - from reproducible experiment - that the world is influenced by us, as observers. Our very consciousness is inseparable from reality and the laws of physics.

It's quite possible to answer the question "why are we here?" with the answer: so you can ask that question.

That might sound like begging the question, but it's actually perfectly logical.

Without consciousness, the examination of the world around us is not possible. Arguably, without being conscious of the existence of the universe, does the universe really exist?

Taking this reasoning a stage further, you can start to argue whether anybody in the universe in which you inhabit has ever truly been conscious. The evidence would suggest that they haven't, given that they are not able to experience the universe as you do: they are not able to answer the quantum suicide paradox, so they are unable to prove or disprove the reality in which they inhabit.

You and you alone are truly conscious, and everybody else is just an inevitability of the laws of the universe: entropy will destroy anything so ordered and sophisticated as a conscious being like you, but once you get one (you) it's inevitable that there will be billions of knock-off copies that didn't quite make the grade in your universe.

Ultimately, you are immortal and you will witness the end of the universe. It's the only logical reason why you were born when you were born.

"But what about all those people who die before me?" I hear you ask.

Well, they were never really conscious. I'm sure that in their own universes, which were nearly identical to yours, they were perfectly conscious, but the one universe in which you live, is made just for you: you're going to witness the death of everything and everybody, even if you try to kill yourself.

Taking this a stage further, we then wander into the territory of the theological.

What about heaven and hell?

If you're immortal, how do you think the world's going to be shaped by your actions?

Once you realise you're immortal, are you going to be naughty or are you going to be nice?

How's anybody going to stop you doing anything you want, if they can't kill you? You might as well be a thief; you might as well rape and murder; you might as well take anything you want and enslave all of humanity. As you rape and pillage, the world will become scorched and barren: Hell on Earth.

Alternatively, you could live virtuously, impart your wisdom and not abuse the discovery of your immortality. You could influence the people of the world to look after their home planet and try to preserve it beyond the longevity of their mortal lives. Over time, the world will become a place where everybody benefits from the generation before them, and it becomes received wisdom that it's better to co-operate and act with restraint, rather than act selfishly: Heaven on Earth.

Thus, we have arrived at a scientific reason for morality, as well as the negative consequences for 'sinning'. Science has drawn the same ultimate conclusions as religion: don't be a dick.

The chances are our species will wipe itself out before we are able to terraform nearby planets. The idea we're all going to fuck off to Mars on one of Elon Musk's SpaceX rockets, is actually just a massive excuse to continue raping and pillaging. The billionaires think that they've got an escape capsule, so there's no reason to rein in the corporate excesses and end the inequality that's destroying the planet.

Scientifically and through historical study of past civilisations, we're utterly fucked. The pursuit of pacifism, debt forgiveness, abolishment of usury and the creation of a fair and equal global society, has been completely abandoned in favour of rape and pillage. Capitalism must inevitably lead to the destruction of the natural world, overpopulation and enslavement of the developing nations, in order to fulfil its insatiable demand for unnatural growth. Things can't grow forever on a planet of finite resources: the laws of physics say that we can't just magic all our problems away.

We're acting like a blackjack player who's got a score of 20 but asking for another card, hoping to get an ace. Chances are, we're going to bust.

I really don't want a Tesla electric car: I'd rather not have to go to my bullshit made-up job. I really don't want a rocket ride to Mars: I'd rather people in Africa had some bicycles. I really don't want a NutriBullet food blender: I'd rather we abolished economic policies that leave nations starving, while others waste vast quantities of food. I really don't want an iPhone 8: I'd rather not have wars over mineral resources needed to make throwaway electronic gadgets. I really don't want private schools and top universities: I'd rather educate young women so they can make smart family planning decisions.

Just remember where the fuck you are: you're floating on a rock in the vacuum of space, with an incredibly thin layer of atmosphere just clinging to the surface because of the extremely weak force of gravity. The only reason the air isn't blown away into space - leaving you suffocating - is because planet Earth has an iron core which generates a magnetic field, diverting away the solar wind. Only 29% of the planet is land, and the rest is salty water you can't drink or use to water the crops. Have some fucking humility.

"But I'm some hot-shot CEO of a massive global corporation"

Yeah, right buddy. Try counting your money while holding your breath.

"But Elon Musk is going to fly me to Mars"

Yeah, and what are you going to do when you get there, you fucktard? There's no breathable atmosphere. There's no fertile soil.

"Scientists and engineers will find a way"

You mean the guys and girls who are telling you that the climate is fucked?

"God will guide us"

Good luck with that.

Tags: #economics #capitalism #politics #physics

This is a story about the pecking order...

Respect my authority. I did well in school and I've risen up the chain of command. I have stripes on my epaulettes and letters after my name. I've got a fancy job title and I'm very well paid. Don't-you-know-who-I-am and I'm oh-so-superior to the likes of you. Back in your place, underling. Get back in line.

Our systems of population control breed subservience. Why don't the workers rise up and seize the means of production?

"I'm not good with numbers"

"I've got no interest in politics"

"I just keep my head down and do what I'm told"

Could there be anything more degrading than having your fellow human beings sitting in judgement over you? Who are they to say "yay" or "nay" on the question of your utility? How dare they decide your fate!

Job insecurity keeps wages down, because workers develop a misplaced sense of gratitude for their income. In hard economic terms, workers get a terrible deal: they do all the work and they only see a tiny fraction of the profit. Why on earth would they do that?

"You're easily replaced"

Yes. While I dislike people who attempt to make themselves into key-man dependencies and build little fiefdoms of complexity to make themselves indispensable, I also think that the commodification of human beings is one of the most awful things that's happening in the modern world.

What happened to the artisan; the craftsman?

Small is beautiful, in a way. Think back to a time when each village had a butcher, a baker and a candlestick maker. There was the blacksmith, the miller, the cobbler, the tailor, the farrier, the thatcher. There were apprentices aplenty and sons followed in their father's footsteps.

Of course, it's easy to bring up infant mortality and the large number of women who died during childbirth. Infections and treatable diseases used to be fatal. In the past, manual labour, poor diet and poor healthcare, meant that life expectancy was much lower. People were superstitious and afraid of death and disease. Nobody went skydiving.

Now, nobody has any place. We live with terrible insecurity. We could lose our jobs and have our homes repossessed at any moment. If your job becomes redundant due to ever-advancing technological changes and globalisation, you're unlikely to be able to afford to retrain. Besides, how would you ever even compete with all the people who are already trained and vying for the few available jobs?

What's the purpose of anything? What meaning is there to anything?

It was pretty clear why you got up at the crack of dawn to light the fire in the ovens: because if you didn't, people wouldn't have any bread and they'd be pissed off about that. In the village, everybody would be like "no fucking bread" and "yeah, I know. Shit isn't it!"

Now, why did you work hard at school, go to university, battle through those job interviews and kiss arses as you squirmed your way up the greasy pole; the career ladder? So you can punch numbers into a spreadsheet and give powerpoint presentations? So you can go to meetings and sit on cramped commuter trains? So you can eat pre-packaged sandwiches at your desk, getting crumbs all over the keyboard? Why the fuck are you even alive? What's the point of your existence?

If you're trying to get a fancier car so you can impress your friends and neighbours, or if you're trying to get a pay rise and a promotion, so you can 'win' and brag about how rich and successful you are, then perhaps you've found your purpose. Perhaps status symbols and meaningless job titles are the answer to the big question: why are we here?

What happens when it all goes bang and the whole fucking mess comes tumbling down? What happens when you realise you wasted your whole fucking life? You can't eat university diplomas or bonds or banknotes. You can't keep a house warm with supply chain statistics or flow diagrams. You can't live in an insurance certificate or legal contract. You can't clothe yourself with tax returns, essays, dissertations or theses.

Our world has divided into two camps: the celebrities and the nobodies; the powerful and the powerless; the rich and the poor; the smart and the stupid; the valuable and the valueless.

Did you ever notice how anybody who's anybody is rich, famous, powerful, smart and incredibly valuable to humanity, and everybody else is a worthless nobody who can go to hell? "Everybody else" accounts for 99% of the world's population, by the way.

Who wants to read the autobiography of Ahmad who sits behind the counter at my local dry cleaner? He must be pretty stupid if he's not powerful or rich. He's not famous so he can't have any value. He knows his place, which is about the only good thing we can say about him, right?

Modern society has led to city living because of economies of scale. It makes sense to have a multi-billion dollar mass transit system in a city, to make it easy for everybody to get to work efficiently. It makes sense to build all the high-rise head offices that can hold thousands of people, in one place. The net result is urban solitude and anonymity. Nobody knows who their neighbours are. Nobody knows who the local shopkeepers are. Nobody knows anybody, except the rich famous people who are the only ones with any value: they're indispensable.

One face is the same as another. Two workers who've held the same job title are interchangeable. Hire and fire. Who gives a fuck... human lives are cheap. Make the balloon go higher by chucking more bodies onto the fire.

We are running our economy by the numbers: we're wedded to our spreadsheets and all we care about is that this month's numbers are bigger than last month's numbers. Growth! Growth! Growth! More! More! More!

The top tier - our rulers, our managers, our executives - look at the graphs: are they going up? Who gives a fuck what's going on at the bottom. The tip of the iceberg is in charge of the rest.

You're drowning and freezing cold in the icy depths. You're part of that huge mass of ice beneath the surface, but you'd better not try and climb out of the water or else you'll topple the whole system and plunge the tiny tip into the depths... and nobody wants that, do they?

Chances are that you could do a better job than those in charge, because the country couldn't get much worse: inequality is a disgrace, poverty is rife, depression and suicide rates are skyrocketing, life is miserable and there are few prospects.

We're supposed to be ruled over by a house of commons: ordinary people from all walks of life. In fact, career politicians and massive political parties supported by wealthy donors & commercial interests, completely dominate the political landscape. We live in a plutocracy, as evidenced by the fact that the rich are getting richer and the poor are getting poorer.

I count the middle class in the 'poor' bracket.

Of course, it seems ridiculous to suggest that well paid educated professional people in the middle class are poor - they have the best jobs, high quality housing and disposable income - but within a generation or two, the middle class are going to be utterly fucked. Skyrocketing house prices just don't work: they will erode your wealth, because you want somewhere for your kids and grandkids to live, don't you? Unless you live in a castle big enough for all future generations of your family, you're going to need some affordable housing at some point.

University tuition fees and the cost of student accommodation, comes on top of the private school fees you paid in order to get your little darlings the straight-A grades they needed to get onto the few degree courses that might lead to an actual job. A job doing fucking what exactly?

OK, so your silver-spooned little shits got themselves a degree and a professional qualification in law or accountancy or something, but you're going to have to fork out £100k+ to get them onto the housing ladder. Your terribly bright and brilliant kids now need a place to live near their job - London and the South-East - which means top dollar house prices.

Wealth has been hoarded by the baby-boomers who were gifted it by good luck and the inflation that eroded their debts relative to their incomes. The baby-boomers are now having to fork out all that filthy lucre in order to support their children and grandkids. There just aren't any well paid jobs that allow our special snowflake millennials to support themselves financially, no matter how hard they work.

So, the only group who have a place are the ones at the top of the pile: the ones who already control more wealth than they could ever spend in a hundred lifetimes, and who can easily generate some more because they already have the money, the fame and the power to make a success out of whatever the fuck they want to do. I mean, Paris Hilton is a DJ now, for fuck's sake: she presses the play button on a CD player and people pay to see that fucking shit.

All in all, why bother? Why the struggle? Why the stress? Why the anxiety and and the insecurity and the hideousness of battling over the crumbs from the cake?

We're all fighting with each other at the bottom, like crabs in a bucket, pulling down anybody who tries to escape.

Just stay in your place though. Don't complain. I'm sure those in charge know best.

Tags: #politics #capitalism #economics

This is a story about parasites...

Everybody has to work, right? There's a social contract that we implicitly signed up for when our parents had sex on our behalf. In return for our parents' selfless act of having unprotected sex, we agreed - before we were born - to a life of wage slavery and paying bills.

The other way of looking at things is to ask what would happen if you didn't work.

A big hole in the ground was dug to make the foundations of your house, where you live. You dug that hole, right? What about the concrete that was used to fill the foundations? I presume you slaked the lime to make the mortar and you dug the aggregates to make the mix that was poured into the hole you dug. I mean, that's only logical.

Bricks were laid to make the walls of your house. I presume you collected the clay, shaped it into bricks and baked them in a kiln that you made. That's only logical.

Joists and beams were needed to make the floors you walk on and the roof that keeps you dry. I presume you chopped down those trees and milled them into the straight timbers that were needed. That's only logical.

Slates were hung to make your roof able to divert rain into your guttering. I presume you quarried those slates. That's only logical.

Nails were forged to join the wood. I presume you collected the iron ore and blacksmithed the nails. That's only logical.

Sand was melted in a furnace at incredibly hot temperatures to make the glass that glazes your windows. I presume you gathered that sand and kept the fires burning in order to make those panes of glass that adorn your house. I mean, that's only logical.

Meat, vegetables, kernels, pulses, herbs, salt, oils and other condiments were combined to make delicious meals to keep you going while you were doing all that hard work. I presume you farmed the edible things to make those meals. You harvested the corn, milled the flour and baked the bread. That's only logical.

Water was raised from the underground aquifers. I presume you dug the wells and winched up the buckets of water. That's only logical.

How are you doing so far? You can say that everything you've benefitted from has been a product of your own hard labour, right? You can show directly how your contribution to society means that you deserve your slice of the pie, of course. That's only logical.

"Actually, I'm much more important than that."

Right, let's test that hypothesis.

What do you actually do?

"I go to meetings in a big fancy office."

Alright. Let's go.

Coffee beans were picked, dried and roasted. The coffee was ground and infused in boling water. I presume you were there in South America, harvesting the crop. I presume you roasted your beans and ground them yourself. That's only logical.

Spreadsheet software was crafted from binary ones and zeros. Microsoft Excel was created from nothing, using computer programming. I presume you wrote Excel. That's only logical.

Companies were incorporated with memorandums and articles of association. Laws were made. Everything was written down on paper. Paper was made from wood pulp. Ink is made from pigments and dyes. I presume you made the paper and the ink, and you wrote down all the laws that govern your company. That's only logical.

Cotton was picked. Thread was made. Thread was woven into garments. Fancy shirts and suits of clothes were made so that the people in the offices could look powerful and important at their meetings, sipping coffee and putting made-up numbers into spreadsheets. You made all those things. That's only logical.

How are you doing now? Are you with me so far?

"You just don't understand. I paid for all those things."

Oh you PAID did you? Let's see how that stands up to cross-examination.

Gold was panned or mined out of the ground. Gold was melted down into bars and coins that were assay marked to vouch for purity and weight. I presume you were down in the mines with your pickaxe, or in the river bed with your panning bowl, plucking gold nuggets out of the ground. I mean, that's only logical.

Banknotes were printed and coins were minted. Banks held ledgers and reserves. Payments were recorded. I presume you made the currency that was hard to counterfeit. I presume you created the payment systems that were hard to defraud. That's only logical.

How about now? Keeping up?

"For fuck's sake. You just don't get it. I did my job and I got my salary. That's how I paid for my house and my food."

Oh, right. I get it now. What exactly did you do for your job? What exactly was your contribution?

Tags: #capitalism #economics #career

This is a story about a fictitious bear and an imaginary bull...

To explain how a speculative bubble bursts is very easy indeed. Investors are like a herd of cattle. They are not rational actors. When a critical mass of investors become spooked and start selling off their investments, this creates a market with more sellers than buyers, which means the asking price for financial instruments has to be lower to attract more buyers. Pretty soon, there is a stampede, as all the investors try to 'cash in' their investments and take their profits or minimise their losses. The asking price drops lower and lower, and buyers simply wait, knowing that the ever growing crowd of panicked sellers will underbid each other in a desperate attempt to offload their devaluing assets.

Anyway, that's so simple and obvious that it doesn't warrant further discussion. What I want to write about is what causes a speculative bubble in the first place.

We could look at historical examples, like the tulip mania during the Dutch Golden Age, with tulip bulb prices peaking in 1637, before crashing spectacularly. The Madness of Crowds explains the crash, but not the initial price bubble, in any satisfactory way for the modern financial markets.

To understand your average investor in publicly listed companies on the major stock exchanges, you only need to understand two human characteristics: greed and laziness.

The greed part is simple. Any of your friends who have reached a point of economic prosperity where they have disposable income are likely to have 'invested' some of their wealth. It's highly unlikely that they made angel investments in small startup companies where they knew the founders, the business model and understood the domain in which the embryonic enterprise operated. Instead, they thought they could make a quick buck by buying shares in a major corporation.

The laziness part is slightly more complex. The lazy divide into two groups. The speculative private investor looking to make a quick buck isn't interested in doing any actual work in order to earn their extra wealth. One phonecall to your stockbroker, having read a stock tip in your preferred newspaper does not count as an investment of labour, and so it is clear that these investors are lazy.

The second group are institutional investment managers: the people who look after pension funds. Now, you can ignore profit:equity (PE) ratios, yields, earnings per share (EPS), turnover and EBITDAs (Earnings Before Interest, Tax, Depreciation and Amortisation). You can ignore the philosophy of Warren Buffet, who is an active shareholder. The pension fund manager is passive and invests for one reason and one reason alone: the market capitalisation of the public company has reached a certain threshold. That is to say, the market values a public company above a certain amount of money.

To understand market cap, let's take Apple Inc. as an example. We take the number of Apple shares that are issued (5.4 billion at time of writing) and multiply that by the share price ($118 at time of writing) and we arrive at a market capitalisation of $637 billion. That is to say, if you had a spare $637 billion in your bank account, you could buy Apple outright^*: every single share. You would be the sole shareholder of Apple, which is the biggest company in the world, by market capitalisation.

Now, Apple might have absolutely dog shit products lined up for the next 10 years. The CEO, Tim Cook could be an absolute moron who's going to run the company into the ground. The institutional investment manager doesn't give two hoots. They're going to buy Apple stock simply because it's highly valued. In fact, they're going to buy ALL the highly valued companies, above a certain market capitalisation.

In the UK, we have a kind of football league, with the premier league being the FTSE100 and then the league below being the FTSE250. As the market caps change, companies drop in and out of these 'leagues'. Consequently, investment managers will buy the new entrants and sell the ones that drop out. Easy as pie, right?

The laziness that drives all this is retirement. People saving for retirement are too lazy to make their own investments that ensure the value of their pension is not eroded by inflation, so they get an investment manager to 'track' the value of an index like the FTSE100, which generally outperforms inflation, over a long period of time. That makes sense, right? Money invested in the 'best' companies, should outperform money that's just sitting in the bank earning interest.

Furthermore, when people come to retire, they want their pension pot to be managed for income not for growth, but they're still too lazy to shop around to make sure that the yield or dividends that they are receiving on their pot of money give them the best possible income, while also protecting their capital.

In essence, the biggest part of our economy is driven by greedy lazy people. Instead of the industrious and ingenious entrepreneurs finding it easy to borrow money or sell a share of their company in order to raise the capital they need to grow, the sad reality is that almost all of the wealth in the developed world is ploughed into corporate behemoths that have already extracted all their value from the public, in order to keep people who have nearly reached the end of their lives in the manner to which they have become accustomed to.

Yes, that's right. By the time a company comes to the point where it floats on a stock exchange, it has peaked. It's time for the original founders, angel investors, venture capitalists, private equity and other shareholders to now cash in and fleece the public by offering their shares in an Initial Public Offering (IPO). Because the company has reached a certain 'valuation' (as decided by market sentiment and the bullshit written by the underwriting investment bank in the prospectus) then it has to be bought by the institutional investors, because it is highly likely to have a market cap that will put it straight into the FTSE100 or FTSE250. The companies with the smallest market cap in the FTSE250 are around £400m; for comparison Twitter floated with a market cap of $30,000m, which is 75 times more.

Let's take a hypothetical example. If I was to build a company with a turnover of approximately £20m per month, or £240m per year, then one might say that it could be valued using a rough multiplier of 2x turnover at £500m. That would easily be enough to make for an attractive IPO, because the market cap is going to attract all the institutional investors who have to buy FTSE250 companies. In effect, the IPO is underwritten by the pension tracker funds.

Therefore, greedy lazy people buy dog shit stock, it appreciates in value because of market sentiment - "ooh the price is going up, let's buy more" - and the fact that public companies can use their shares to acquire other companies (growth through acquisition) until they have a dominant market position (some may say monopoly, ahem!).

Growth through acquisition is not really growth. If I have 100% of the shares in company A, and 0% of the shares in company B, and then I use 49% of my shares and a bit of cash to acquire company B, such that I now own 51% of company A and 51% of company B, no new value has been created. There may be cost savings, there may be benefits from anticompetitive practices, but really all I'm doing is increasing the market cap of the parent company, hoping to move from the FTSE250 to the FTSE100, where a whole load more pension funds will have to buy shares for their index trackers.

The same deal goes on in the US, where companies are trying to IPO at a certain valuation in order to get into the Dow Jones or the NASDAQ, such that the US tracker funds will have to invest. The public - mostly pensioners - get fleeced.

So, in conclusion, the cause of a speculative bubble is actually institutional. Because the pension funds are so massive and they are passive investors, using index tracker funds, there is an immense amount of fake value created by mergers and acquisitions, as growth by acquisition carries such huge rewards. This starves the companies - who are truly growing and innovating - of much needed investment capital, stifling the economy and instead creating corporate giants who are too big to fail.

Eventually, the central banks and the rest of the money multiplying machine reaches the limit of how much the value of dinosaur institutions can be artificially inflated. These dinosaurs move at glacial pace and stifle change and competition. The lack of efficiency of markets to deliver capital to those companies who have true growth potential, undermines the economy for years, until finally things reach breaking point.

Overvalued companies, market disruption by venture-capital backed challengers, the faltering of capital gain and the end of effortless profits, are the things that spook the lazy, greedy investors. So, then begins the market crash.

The dying behemoths are dangerous animals. For example, the 'too big to fail' banks were able to hold the world's largest economies to ransom, with the threat of unimaginable disruption to our systems of payment and borrowing that underpin so many mortgages, overdrafts, credit cards, car loans and how we get and spend our wages each month.

For now, the status quo persists, because the idea of smoothly transitioning to truly free and competitive markets is beyond comprehension, such is the web of complexity that has been created by supranational organisations that have swallowed so many competitors around the globe.

Until we move to active investment rather than passive investment, we will always have the cycles of boom & bust.

Tags: #economics #capitalism

* - You couldn't actually buy all Apple's shares for $118 each, because the very process of buying up all the available stock for sale would drive up the price. I merely offer a simplified example.

This is a story about slavery...

Do you have to run just to stand still? Does it seem like no matter how hard you try, you just can't get ahead? Why is it that the only time you're going to get to enjoy any leisure time, is when you're sick and old?

Even if I owned my own home outright, I would still need to pay council tax, gas, water, electric and sewerage. Even if I grew all the vegetables I needed and never left my plot of land, I would still need to raise a significant sum of money every single month.

Let's assume that I had solar panels, wind turbines and I heated my own water using firewood from my own trees. Let's assume I got water from my own well, and I operated my own miniature sewerage plant, so I could release my processed effluent back into the water table, without breaking environmental protection laws. I would still have to pay council tax.

I don't object to council tax. Council tax pays for the police, who will protect my self-sustaining home from being burgled. Council tax pays for the fire service, who will come and douse my house with water, in the event that it should catch alight.

If I never leave the house, I grow everything I eat and compost everything I waste, then I have no use for dustbin collection, and I have no use for street lighting or roads. I have no use for car parks. I have no use for regular parks and recreation grounds.

Furthermore, I have no use for schools or libraries. I certainly have no use for councillors, council officers and other civil servants.

Let's assume I surround my land with a 15-foot electrified fence, topped with razor wire. Let's assume that I install a sprinkler system, and have my own high-pressure hoses and firefighting training. I would still have no exemption from paying council tax. Paying council tax is my civic duty, because of the air that I breathe in a particular county.

This isn't a rant about how "taxation is theft". I'm just pointing out that there's no such thing as a free man in the United Kingdom. Somebody will always want something from you, even if you're minding your own business, being totally self-sufficient and working in harmony with nature and the land.

Very few people would be able to buy a sufficiently large plot of land to be able to grow enough trees to give them a lifetime's supply of firewood. Also, you're going to need somewhere to grow all those vegetables you're going to eat. You're probably going to need greenhouses and polytunnels to grow more frost-sensitive fruit & veg.

There's capital expenditure necessary to buy a wind turbine and a lifetime of spares for any repairs. Solar panels don't come cheap, and they have a finite lifespan. You're going to need a shittonne of batteries, so that you can store energy for when it's not windy or sunny.

You're going to need a well insulated house with a wood-fired boiler to heat hot water as well as to keep you warm in winter. Your home is going to have to be super energy efficient, because you don't have much electricity, so you'll use LED lighting and cook on a wood-fired stove. You won't be able to use a washing machine, dishwasher, tumble dryer, electric oven, microwave, electric hob, hairdryer, electric heater or other electricity consuming units.

Then, to keep your smallholding running, you're going to need tons of tools and machinery. Doing it all on your own means you'll want a petrol-powered rotivator, strimmer, lawnmower and a bunch of chainsaws to chop up all that firewood. You'll need lots of gardening equipment to make sure you're growing enough food to keep yourself nourished the whole time. You'll need lots of building equipment, to make sure you keep your house repaired and maintained.

If you don't have a well on your plot of land, you're going to have to dig a borehole and install a pump. Building a sewerage processing plant is no small investment of time, labour and materials, and probably not something you would do yourself, although you would be responsible for ongoing maintenance: a lovely job.

Remember, you're also going to need a lifetime's supply of petrol, engine oil and other consumables such as soap, toothpaste, spare lightbulbs etc.

So, after all this, your miniature self-sustaining estate has probably set you back the best part of £1 million, and you still have to work full-time to tend to your fruit and vegetables, and maintain all the equipment that generates power, pumps water, pumps sewage etc. etc.

Worst of all, you're going to have to sell some of the fruit & veg that you produce to pay your council tax, so really, you're not very free at all.

You may end up busting your balls in all weather, just so some council bureaucrat can take paid sick days and generally not work very hard at all.

Through economies of scale, farmers can harvest the crop in huge fields in a single day, when previously it would have taken men and women all summer to do it with sickles and scythes. Something as basic as a masonry nail is incredibly hard for a blacksmith to make, but in factories, vast quantities of goods like nails can be produced much more cheaply, in terms of labour effort.

"The good life" and nostalgia for a time of peasantry is nothing more than stupidity. Only a tiny handful of people blessed with inherited wealth can be idle in the countryside, doing the occasional spot of gardening, and otherwise spending their trust fund income in Waitrose and charging around the countryside in a gas-guzzling Range Rover.

Thus, I don't believe in communism, with its emblem of the sickle and hammer. Growing your own vegetables, or making ornate ironwork is a nice hobby, but we don't want to return to the era of blacksmithing and working in the fields. The combine harvester is a thing of great progress, as is the ability to mass-produce metal goods in factories.

The communes that sprang up in California in the 1960s and 1970s all failed, because they were set up by lazy bums who just wanted to sit around smoking dope. When they ran out of money, they found that they had been subsidising their stupid middle-class fantasies all along. Eventually power struggles tore the little hippy communities apart, but they were doomed to failure from the start.

In climates where the need for heating is less pronounced and the crop yields can be much higher, there are already population problems. For sure, you can go and buy a plantation in the developing world relatively cheaply, but aren't you then headed down the colonial path? When you employ local labour to till the fields, because it's too hot to do it yourself, you've then economically enslaved your workforce.

The division of labour is a hard problem to solve, but there is also dignity in labour, if you're doing something that you feel is productive and useful. Perhaps the high sickness rates in local government are due to the fact that their staff know that all they're doing is pushing paper around their desks and looking busy. It doesn't feel morally right, to tithe the estates of the hard-working men and women who are working the land, only to spend it on fancy offices, coffee machines and watercoolers.

Eventually, I decide that we must move to a model of state-owned enterprise for everything that's in the public interest: transport, education, healthcare. But where do you stop? What about housing, food and clothing?

Clearly the technocrats of the Soviet Union completely failed in their attempts at central planning, but can we be sure that there's less wasteful use of resources in private enterprise? My experiences certainly don't bear this out. Every company I've ever worked for has been full of idle incompetent fucktards. That's not supposed to happen in capitalism. Capitalism is supposed to lead to efficiency.

If we look at the vast amounts of food and energy that are wasted by the United States and Britain, we can be certain that capitalism is a failed model for the efficient use of labour and scarce resources, and the fair distribution of wealth. Capitalism has failed every single test, including its ability to weed out the 'bad apples'. One only has to look at the 2008 financial crisis to see that the idea of market efficiency has been replaced by monstrous monopolies: enterprises that are too big to fail, but are bleeding our economy dry.

The banks need to be nationalised. The railways need to be re-nationalised. No more council houses can be sold off. Any private parts of the National Health Service need to be re-nationalised, and a huge cull of middle-management dead wood needs to happen. Executive pay needs to be capped, and those who wish to work in public services should be proud to be performing their civic duty for their fellow citizens.

Of course, wealth will flee offshore. Investors will panic. Let them.

The assets are here. The workforce is here. We don't need the paper money created by the plutocrats. We can rebase our currency back to a sensible gold standard, forgive all loans and start over. Clean slate.

One only has to study the German economic miracle to see that these reforms can work, do work, and will transform a country into one of happiness and productivity.

The strategy of trying to print money to get out of economic trouble, and enforce bad policy with a police state and martial law, is always doomed to failure. We are at the tipping point. Things could boil over at any moment.

So, the Western world finds itself at a crossroads: to continue with the folly, down a path that has always led to ruin for past civilisations, or to learn from the lessons of history, and take the alternative route.

Tags: #politics #economics #capitalism

This is a story about cyclical natures...

Summer = happy. Winter = sad. It's usually that simple. Why would anybody be happy in winter? Winter is a time of hibernation, cold, hunger and death.

However, human society has evolved to take advantage of seasonal variations. We all tend to have a wild time in August, as our children are off school and we also enjoy the good weather and general festivities. Summer brings optimism and joy, in line with our increased energy levels due to longer days and the balmy air temperature.

Frankly, this summer has been the most depressing that I can remember.

I thrive on human connection, and most people are distracted with all the fun of the fair at the moment. The bright lights and fanfare of the Olympics and other theatrical bullshit are titillating the fickle attentions of the proletariat. It's mighty dull for anybody who doesn't subscribe to the mass hysteria that can afflict our society of simpletons.

So, I'm riding out the summer, waiting for reality to bite and the true situation to reveal itself. Things always look better when bathed in golden sunlight. In the shortening days of the autumn, things are going to look pretty bleak. I don't relish the collapse in the current mood of delusional optimism, but at least destruction heralds reconstruction. So many things are broken. Limping along thinking everything is OK is not helping anybody.

I have now come to understand my own cyclical nature. Normally my moods are dictated by the prevailing weather, but now my mental health is so deeply damaged that even summertime cannot lift my depression. However, I'm able to appreciate that all of humanity is similarly affected by the weakness that means they feel unreasonably happy when the sun is shining.

Last year, I predicted a winter of discontent. This was plainly wrong.

But! I tend to be a bit premature with all my proclamations of doom. The number of years that I've been talking about a collapse in the London housing market have proven ridiculously wrong... although the bubble continues to inflate to epic proportions.

I was once young and naïve. Now I'm old and cynical.

I've made a few smart predictions: the credit crunch, the commodity boom (gold, oil) and Bitcoin. I've profited from astute investment and hedging during every crisis of the last 20 years. I'm most definitely proactive, not reactive.

The simplest thing to predict is that summer must come to an end. People will come back from holiday. The kids will go back to school. Workers will go back to their jobs.

In the cold light of day, everything's going to look pretty shit.

Tags: #economics #politics #bipolar

This is a story about getting rich or dying trying...

People come to London seeking their fortune. I went to Ireland seeking my salvation. In a way, I kinda found it.

My life had fallen apart. I had lost a lucrative contract with Barclays through no fault of my own (the guy who terminated my contract was then sacked because of his stupid decision) as well as breaking up with my girlfriend, being evicted from my apartment in Swiss Cottage (again, through no fault of my own) and had once again found myself homeless and unemployed. Many friends took sides during my breakup, and I ended up suddenly alone.

It was January, in the depths of a depressing British winter. No job, no money, no friends, no girlfriend, no nothing. I was fucked.

A friend who I met in the summer, when I first became homeless, had returned to the emerald isle. He had generously made an open offer that I could go and stay with him and his family if I ever needed it, and oh boy did I need it. I was suicidally depressed and a big danger to myself. Camden council had been supremely unhelpful to a resident who they owed a legal duty of care, but they didn't give a shit whether I lived or died.

I guess a lot of unimaginative runaways go to London, and a huge proportion of them will end up in Camden Town. Camden is cool, undoubtably. Camden is full of wide-eyed young people, tourists, and huge amounts of recreational drugs, casual sex and music venues. It's a great place to spend a summer on a shoestring, smoking strong cannabis and chatting up girls.

I had made a couple of similarly Peter Pan-esque pals in Camden, in their mid thirties and working dead-end jobs on low pay, forced into living in hostels and dreadful squat-like houses with several people sleeping in every room. For me, it was a hugely novel experience, having been a wealthy IT consultant working in banking since I took my first big money contract at the age of 20, for Lloyds TSB in Canary Wharf. After 17 or so years of fabulous wealth, slumming it for a summer was almost fun.

My girlfriend at the time was a waitress at an Italian restaurant. Despite having a degree in economics from the University of Bologna, she had rejected the rat race in favour of a minimum wage job and getting ridiculously stoned every day. She was fun and easy going, just so long as all you wanted to do was sit around while she chain-smoked joints, and have great sex of course.

I wouldn't say I outgrew my circle of friends, because I loved them dearly, but the stresses and demands of my contract at Barclays were not really compatible with the lifestyle of casual labour and the pursuit of recreational drugs. At some point, the worlds were going to collide.

My girlfriend and most of my friends felt that I had arrogantly snubbed them, but in fact I was desperately dependent on our social circle for my wellbeing and happiness. When things all fell apart, I did too. I was devastated by the collapse of my social life, as well as losing the structure and routine of my employment.

I ran away to Ireland, and my friend picked me up from Cork airport and took me back to the little village of Killavullen, that he and his family call home. Nestled in the hillside above the village, looking over the valley below and just at the edge of a vast forest, my friend's family home is a peaceful idyll that is completely unlike the rat race of London.

The timing was not ideal, and I arrived in the middle of various challenges facing the family, but they welcomed me and treated me with incredible warmth, kindness, care, despite the crises that they were dealing with. It's not my place to be indiscreet about the family matters that I became aware of, but suffice to say the last thing they needed was some sick burnt out heartbroken citydweller suddenly thrust into the mix.

My state of mind collapsed still further, as it became clear that there would be no reconciliation with my former friends: I was a pariah. There was nothing for me back in London, except a certain collapse in my will to live. My friend's family insisted that I should stay with them until I felt fit and well enough to return home. I missed my return flight and didn't book another.

I tried to go along with the flow of family and village life, getting to know the people that my friend grew up with, and his family.

My friend and I went panning for gold - I had bought him a kit while in England and had brought it over to Ireland for him - as well as climbing to the top of the 'mountain' that he lived on. We drove around the vast forest that covered the hillside, and explored the neighbouring villages, as well as nearby Cork city centre. Although I had visited Ireland twice before, I had missed the point about stopping to smell the shamrocks. I'm always in the mode of rush, rush, rush.

We travelled to the huge cliffs at Old Head, and I stood there on the edge, having had a haircut, a shave, a bunch of hot meals and having slept in a warm comfortable bed in a welcoming family home for some time. Instead of wanting to jump off the edge of the cliff, I was actually happy to be alive.

Tags: #friends #homeless #london #ireland #family #suicide #depression #career #banking #computing

This is a story about invasions...

Are you worried about your culture being wiped out? Are you concerned that we could all end up speaking German, Japanese, Chinese or Arabic? Are you concerned that you will no longer be able to worship your favourite imaginary friend? Are you concerned that you'll have to salute a different combination of colours, stitched into fabric and raised on a flagpole?

When you look at nationalism, you'll see that it's pretty insane. While some people willingly learn another language and enthusiastically adopt the culture of another country, and go and live amongst those people, others believe that "our" way of life is worth dying for. In fact, they believe "our" way of life is worth killing for.

Why would somebody learn German and go and live in Germany? Surely that would be like surrendering to the enemy. Surely that would be a slap in the face to our brave grandfathers and great grandfathers, who fought in two world wars so that we never had to learn another foreign language or eat a bratwürst. Our dead relatives laid down their lives so that we should never have to suffer an Oktoberfest and drink large steins of cold beer brought to us by buxom wenches in lederhosen.

When we study history and people's attitudes, it was nationalism that was the main reason we went to war, not the protection of the Jews. The genocide that was being committed is what we are mainly taught about today in schools, but the strongly held belief in British hearts, was that we needed to protect our country.

Only when our European allies had been completely overwhelmed by German forces, and they had reached the northern beaches of France, did we decide to put some boots on the ground.

If you examine the rhetoric of Donald Trump and the Brexit movement, you will hear similar attempts to stoke up nationalistic fever and paranoia over an 'invasion'. Apparently, a "swarm" of brown people are on their way to our shores, intent on fucking up our national identity. We are told to live in fear and mistrust of our Muslim neighbours, who wear strange clothes and congregate in strange buildings. Islamic culture is so different from ours, and we are being trained to treat what is different with suspicion of an ulterior motive, of overwhelming everything we hold dear.

Talk of walls and pulling up the drawbridge. Shut down the borders. Send "them" home. Look after "are" (sic.) own. Britain First. Make America great. Blah blah blah.

But, if we ignore the social problems that are driving suport for far-right jingoistic nationalists, like Trump, Farage, Le Pen, then we fail to defeat them. By continuing to bury our head in the sand and repeatedly just cry "racist" and "bigot" then we continue to drive a wedge between enlightened liberals, and the vast numbers of poorly educated people who feel economically disenfranchised.

Why would I talk about economics? Surely ordinary British people just want an integrated society, full of fellow British people, not all these damn foreign types with their weird food and strange customs? Well, no not really. The reason why people have rounded on immigrants, as has been stated ad nauseum, is that people feel poor and insecure in their jobs. Ordinary people are economically disadvantaged, and there is a popular belief that immigrants are fuelling excessive competition for a finite number of jobs and resources.

I'm about to suggest another, more controversial reason, why we have been taught that the West has 'won' and our way of life is the correct one.

Let's leave all discussions about anti-Semitism and the holocaust aside. Of course, any discrimination based on colour or creed is wrong. Of course, any act of genocide is deplorable. These things are not the topic of my thesis. Let's set those points to one side, because they're discussed at length elsewhere.

Now, let's think about how the Nazis swept to power. Do you think Hitler said "let's kill all the Jews" and all the Germans went "Yeah! Brilliant idea! Let's vote for this guy!". Nope. Even if the Nazi policies of getting rid of gypsies, homosexuals, the mentally ill, Jews and other minority groups was central to their meteoric rise to power, something else was driving it.

Think about the economic situation in Nazi Germany. The country was saddled with debt. The war bonds were a crippling millstone around the neck of the ordinary German people. For every Deutsche Mark that was produced by hard working ordinary Germans, 17 more Marks had to be found for the repayment of national debt. The German people felt enslaved to the money lenders, and the money lenders were perceived as Shylocks (Jewish money lenders, Jewish bankers).

In the twenty year period in-between the world wars, ordinary Germans had been massively economically disadvantaged by the national debt, in the form of war bonds and reparations, that their own government and nation had taken on. Do you think the ordinary Germans felt that they owed this debt? Do you think that, given the choice, they would have borrowed so much?

The German people wished to free themselves from the slavery of interest payments and the tyranny of capitalism. The Nazi movement was essentially an anti-capitalist movement, with the ideas of Gottfried Feder at its roots. The Nazi movement was more akin to communism than the neoliberal capitalist democracy that we assume was the basis for all Western economies in the 20th century.

How were the Nazis able to motivate so many people to work hard to produce vast quantities weapons of war that are hard to not admire, for their sheer feat of engineering prowess? Germany took a great leap forward in putting the instruments of industry to productive use. From a position of being economically depressed, and with massive financial problems, how was it able to build airships, planes, tanks, bombs, guns, and massive amounts of infrastructure to support itself? How did Germany go from depressed doldrums, to becoming a world superpower, so quickly?

The answer is that they abandoned capitalism.

What, in essence, is capitalism anyway? Well, it's putting capital to work, through interest bearing financial instruments. Instead of having labour exchanged for food or goods or services, instead, debt is exchanged for factories and machinery, and people work because they don't own any of the factories or farms anymore. Where does the capital come from? The capitalists. Where does money flow to? Back to the capitalists.

Gottfried Feder figured out the pyramid scheme of capitalism. In his Manifesto for the Abolition of Interest Slavery, Feder explains how the owner of a factory does not benefit from the productive output, and neither do the workers either. Instead, the bonds that paid to purchase the factory bear effortless interest, meaning the profits of the factory flow back to the capitalist. The people who work in the factories need to buy the goods that the factory produces, so, their money again flows back to the capitalists. And through the exponentially multiplative effect of compound interest, the capitalists will grow ever richer, while never having to do a single day's labour. Infinite endless effortless capital.

It was an economic idea that brought the Nazis to power and kept them there. The Nazis brought a sense of prosperity and wellbeing to a nation that had felt depressed and enslaved to the capitalists. The Nazis brought about pride, not in the nation, nor the flag, nor the Nazi party, but in their productive contribution. People feel proud to have done a good day's work and to have produced something. Economic depressions rob people of their feeling of self worth. Economic depressions rob people of their self esteem.

Now, if we look at Islam, we can see that a core teaching of the Muslim faith is that earning interest is a sin.

In fact, do you think of yourself as Christian? Yes? Did you know that Christian supposedly means that you're Christian. That is to say, you follow the teachings of Jesus Christ our Lord and saviour. Do you believe in Christ?

Well, Christ is documented as saying "build no store of wealth on this Earth". Christ is documented as smashing the tables of the money lenders in Herod's temple. Think about that for a second.

Had time to digest that? Yes, that's right. Jesus Christ was anti-capitalist.

So, if we look at the successful religions from the past 2,000 years, and the most recently succesful attempts at world domination, you will see that anti-capitalism is the secret to their success.

Look at the Chinese. In 58 years, the Chinese have brought a nation of 1.3 billion people into economic prosperity. China has become a world superpower. China is one of the largest economies on the planet. How did they achieve that? By rejecting capitalism.

Islam counts 1.6 billion souls following the Muslim faith, and enshrined in law in Arab countries is the illegality of charging interest on loans. Imagine that! Imagine every bank in Europe and America being no longer allowed to charge any interest!

So, if you're looking for a reason why we should all fear the 'invasion' of these conquering hordes, and the demise of our precious culture, you might find that you're empathising with the likes of Rothschild and Goldman Sachs, cowering in terror because their plutocracy is about to be overthrown by the people that they have economically enslaved.

Why do we have a nation of bankers, lawyers and accountants, when those professions are only needed by the very wealthiest 0.1%? We are shaped in the image of what our rulers think is important. When we are governed by billionaires and millionaires, our whole nation and the priorities of our laws are shifted towards supporting their needs, not ours. We are producing trillions of dollars worth of useless derivatives, rather than useful goods & services.

Imagine if we took our best & brightest out of UBS, JPMorgan, Deutsche Bank, Merrill Lynch, and instead deployed them to work in science and engineering. Imagine if we took our hardworking poor in McJobs, and instead allowed them to build wonderful things for the betterment of humanity. Imagine how much happier and productive everybody would be if they were working towards something, rather than against everything.

Our world is so adversarial, with us & them, the haves and the have-nots, the rich and the poor, the wealthy white Westerners and those pesky brown people who want a few crumbs from the table.

In actual fact, there's plenty of everything to go around, but we are so intent on playing by the existing rules of the game, that we fail to wake up and realise that we are propping up a status quo that only makes us poor, disadvantaged and divided.

What have the Nazis ever done for us? They've shown us that economic ideas can create prosperity, optimism and productivity. They've shown us that there's a better way than neoliberal capitalist democracy.

It's distasteful to revere the successes of the Nazis, because I might be seen as also endorsing their genocide and ethnic cleansing. However, what could be more ethnically cleansing than building a massive wall, deporting all the Latinos and banning people of a certain religious faith from entering your country? Trump epitomises everything that is bad about the Nazis, whilst offering nothing that was good about them.

We need to cherry pick the best ideas, and we need to get rid of the ideas that enslave us and hurt the vast majority of ordinary people.

Tags: #economics #politics #capitalism

This is a story about the debt spiral...

When the burden of debt in society is too great, and lenders are unwilling to forgive - to take a debt haircut or even write off debts - then there will be popular uprisings.

It's not that people don't want to repay their debts. In fact, most people accept that debt is a necessary evil in order to get the things they need when they need them, rather than towards the end of their life, in senile old age and infirmity.

And so, we become burdened with a mortgage, in order to give our family a stable roof over their heads. We become burdened with a car on hire purchase, so that we have a reliable and safe modern vehicle to be able to take the kids to school, and to get us to work without breaking down. We put our holidays and special occasions on credit cards, and pay back the debt when we get back, or after the festivities are over.

Most people diligently repay their debts.

In free-market economics, prices are able to fluctuate to find the point where affordability meets maximum profit. Do you think the cost price to the producer or supplier of the goods and services that you purchase, bears any relation to the retail price that you pay? Of course not. That's why a designer brand T-shirt costs at least 10 times as much as an unbranded garment, even though they come from the same sweatshop in the developing world.

In our consumer society, you are 'free' to select the goods and services that you want. However, in order to fit in with your buddies who are in a similar socioeconomic group to you, you will select the brands that they do. If you're rich, you'll do your supermarket shopping at Waitrose. If you're poor, you'll do your shopping at Asda/Walmart. However, the food you buy will have similar calorific content.

The brands become better and better at pricing their products so that you are just about able to buy everything you need, but won't have much spare cash left over. The brands know the income bracket that they're targeting, so they know the level where their consumers will become price insensitive. I literally don't care whether my coffee costs £2 or £4. If my coffee cost £5, then I'd think "blimey! that was expensive, I'm not going to go there again" but the £2 coffee shop could literally increase their prices 100% and I wouldn't even notice.

Once everybody has maxed out their budget, on the mortgage, the car finance, the credit cards, the overdraft, the store cards and some personal loans, where do you really go from there?

We demand that our corporations make increasing profits, but yet in order to do so they must hold down wage inflation and the cost of raw materials. We demand that our economy grows, but in order to do so, people must use increasing amounts of their limited pot of disposable income to drive consumption. What happens when everybody is just maxed out?

We're living in the age of low growth, high borrowing and low wage inflation. In order to sustain corporate profits, the cost of goods & services continues to increase. In order to prop up the capital growth of the pension funds, asset prices - such as house prices - have continued to be overvalued. However, the only way that the general population have been able to maintain their standard of living is through borrowing.

Ordinary people have not been profligate and stupid. People were promised pay rises and promotions, and instead they've been given job insecurity and wage cuts in real terms. If your wage increases just a few percent, but the cost of your housing, bills, food and transportation all increase in double-digit terms, then you're actually getting poorer.

If the headline rate of inflation - which is pretty much just concerned with wages - is low, then the value of your loans & mortgages is not getting inflated away. The baby boomers might complain about interest rates reaching over 15% in the late 1970s, but they forget that their wages were also increasing too. By the time the 1980s came around, people's mortgages were a tiny fraction of what they were earning.

What we see today is people's cost of living skyrocketing, but their wages are the same, which means they're earning less and less in real terms. If your wages stay the same, and your cost of living is increasing, that means you have less and less money to service your debts. So, you tighten your belt and cut back on your consumer spending, which in turn hurts an economy that is so dependent on spend, spend, spend!

What we see today is far worse than the Japanese stagflation that meant that the price of goods and services was getting cheaper, which encouraged people to become thrifty because they could buy things more cheaply if they waited. Instead, what we are seeing is people who have been promised growth, completely screwed over by a system that robs them of their wealth with no opportunity to do anything about it.

In a zero growth world, debts need to be forgiven or else ordinary people will become so unhappy that they will overthrow their idle creditors.

Tags: #banking #capitalism #politics

This is a story about premonitions...

Our perception of reality is subjective, and it is coloured by our state of mind. I'm deeply depressed, so I tend to see everything as negative, hostile, and doomed to failure.

Yesterday, I was writing a piece about how I thought the markets had over-corrected, and how I expected to see another rout in the FX and equities markets, of Sterling and the FTSE. Little did I know, that as I was writing, a terrorist attack was occurring in Istanbul, Turkey.

When your mental health is suffering, sometimes you can start making too many connections, seeing too many co-incidences. Last year I started to misinterpret events as significant in my life somehow. I started to feel overly connected to things happening around me - because I was unwell - and thought I was at the epicentre of a seismic event again, like during the Credit Crunch, when I felt at the very heart of the derivatives market and Credit Default Swaps, with JPMorgan.

Michael Cherkasky, the monitor from the US Department of Justice, still isn't happy with HSBC's customer due diligence, but nobody seems to give a shit. The share price might have dropped almost 20%, but so far as I know, nobody's going to prison for not warning the shareholders, which would be a violation of the Sarbanes-Oxley Act, which has tried to force public corporations to be honest and open when things are going wrong.

The thing is, the show must go on, and everybody has a vested interest to some extent. Bear Stearns couldn't fail, because the markets were already spooked by Lehman Brothers. Greece couldn't default, because the entire stability of the European single currency and the stability of global markets was at stake.

Even now, with Britain prompting a disorderly rush for the door, and the potential for systemic collapse, as a domino-like chain of events is set off, we are still seeing a surprising amount of stability.

Market economics is supposed to weed out the weak and the reckless. The companies and governments that have gone beyond their means are supposed to be punished by the market, but actually what we have all demanded is stability, not a free market.

Really, Bear Stearns should have been allowed to fail, AIG should not have been bailed out, Greece should have been allowed to default on its debts, the UK should be allowed to precipitate the collapse of the Eurozone and the inevitable failure of the Euro and debt defaults across Southern Europe.

What people seem to be voting for is the free market that we supposedly have. Where would we be, if we had bitten the bullet in 2007/2008 and not simply propped everything up? Aren't we going to have to suffer a global recession that is many, many times worse than it might have been if we'd allowed reckless companies and governments to fail earlier?

However, the politicians and the banks believe that they've been tasked with economic stability. Certainly, the Bank of England's brief is to try and maintain inflation in a certain range. It certainly runs contrary to our Keynesian understanding of economics, when central banks are actually used to prop everything up, to maintain the status quo.

Gordon Brown famously declared that we had seen the end of boom & bust, but haven't we simply made a farce of the idea that debts ever have to be repaid, and there isn't an endless supply of money?

Civilisations normally fall when the burden of debt is unmanageable, but creditors refuse to forgive debts.

The world needs to deleverage, to have a debt haircut, for debts to be forgiven. The system has failed. There's no moral hazard. Everything is too big to fail. There is no market economics anymore.

I think that what people want is either inflation, to inflate away their debts, or debt forgiveness, because they are over-burdened with huge mortgages, student loans etc. etc. People feel that they've been hurt in the pocket, and they really don't care about the stability of stock portfolios and the value of Sterling.

I see the Brexit decision as almost a vote to accept a devaluation, in the hope of stoking up domestic inflation. It's a vote to accept volatility and chaos in the financial markets, that we supposedly wanted to avoid during the Credit Crunch, but people were never asked if they were OK with a whole heap of bad banks going bankrupt.

Yes, people are probably naïve about how upset they'd be about their life savings being wiped out, and having to use a barrowload of pound notes to pay for a loaf of bread, but perhaps it's better than their lives of quiet desperation, while the rich get richer and the poor get poorer?

I'm incredibly impressed to see stability in the markets today, but I don't think that's what anybody wants. People are looking for a shake-up in the pecking order. People are rocking the boat, because they're unhappy, and they literally don't care about the global economic impact and systemic risk. Perhaps propping it all up, and forcing a very long period of austerity onto everybody wasn't such a smart move.

The next question is: how far are the wealthy prepared to go, in order to get their pound of flesh?

Tags: #politics #banking #capitalism #hsbc #politics #europe