Increasing complex systems have a tendency to collapse in more catastrophic ways.Â Hence, when George Soros and Nassim Nicholas Taleb say that this economic crisis will be worse than the Great Depression, I am not surprised at their appraisal.
However, what does a Depression actually mean, in our current socio-political economic condition?Â No doubt, circumstances across those three areas of analysis do differ from the 1930s and so we have to ask ourselves, what does that mean for us?Â The only viable mass movements of the moment seem to be, at least in the American contexts, religious ones.Â In the UK, I don’t think even that is possible.Â While I think the worries about fascism, at least in parts of the Third World, are valid, platforms explicit about such a program are rejected, and not just because of the negative connotations of such labels.
And how will the internet affect such a Depression, as well?Â Will we see spontaneous protests, or even peaceful urban takedowns, orchestrated via Facebook and Twitter?Â Or will the net become a talking shop, the modern day equivalent of a soapbox, where gripes and despair about our current conditon are aired but little else is actually done?
Obviously, my thoughts turn to recent graduates and attempts to get jobs, for personal reasons.Â Will unemployment and the lack of prospects lead to, as it did in Italy in the 60s, a militant intellectual movement who felt they had more in common with the proletariat than their (usually) middle class backgrounds?Â Or could it breed a new class of cosmopolitan guerrilla entrepreneur, an anti-Davos man if you will.
I could really do with a team of sociologists and cultural theorists right now.
Just a short economic roundup:
Japan’s economy is going down the tubes at the fastest rate in 35 years.
Ireland could default.
Keep an eye on Eastern Europe (yes, I know the Telegraph are apocalyptic enough as it is, but hysteria aside, there are valid concerns about the state of the region)
China’s recovery may be riding on the back of sham loans
Kansas is having money trouble
Collateralized Loan Obligations could be next financial black swan.
Santander has liquidity issues.
In summation, things don’t look too good.Â More and more, I find myself agreeing with John Robb, even when I actively try not to.
Nassim Nicholas Taleb has long been a favourite of ours at PD.com, well before the current crisis had materialized.Â And since he has been proven remarkably right about the current crisis and how it is unfolding, its worth paying attention to him when he speaks.
Private-equity firms may follow banks into failure should U.S. stocks extend their worst rout since the Great Depression, said Nassim Nicholas Taleb, author of the best- selling finance book â€œThe Black Swan.â€…
The Standard & Poorâ€™s 500 Index has dropped 4.7 percent this year following a 38 percent plunge in 2008 that was the worst in 71 years. Blackstone Group LP, manager of the worldâ€™s largest buyout fund, fell 78 percent since the end of 2007.
â€œBanks are being bailed out, and private-equity firms are going to go next,â€ Taleb said in an interview with Bloomberg Radio. â€œThese people in a bull market look like geniuses. And now they donâ€™t look that intelligent, and itâ€™s going to get a lot worse for them. If the S&P goes down 20 percent from here, what will happen to private equity firms? Theyâ€™re all under water.â€
Layman’s terms.Â You know all those venture capitalist companies with tons of money to throw at possibly profitable projects?Â These are those guys.Â And private equity was a boom market in the early 2000s, which is why, as Taleb says, these guys looked like geniuses.Â Unfortunately, much of this boom was created by loose lending standards.Â Now, why does that sound familiar…?
Private equity funds are raised by people with money to put them in the specific funds.Â And, as we’ve noticed, the banks are not lending right now.Â So unless you have the money to hand, cash for these firms and their managed funds is not immediately apparent.
The upshot of this is that there is going to be another round of bailouts, probably every bit as expensive as the banks.Â Possibly slightly more helpful, in that such venture capital firms actually do invest and thus help create jobs.Â But so long as the banks refuse to lend, this is a temporary solution at best.
Capitalism hasn’t failed. The people who run it have. While at a basic level, Capitalism comes down to “I have greed, and you have need. Let’s do a deal!”, we all know there is much more to it than that. Otherwise none of us would get worked up over Globalisation(tm)and workers rights and the like. There is obviously a social element to Capitalism, both from “our” point of view, and also “theirs”.
Given this very human element, there comes a time where dead wood needs to be cut out of the system – for it to run at maximum wealth-creating efficiency. We normally call these recessions. The weak fall, the strong and the innovative survive. When you postpone a recession with massive public borrowing, that’s all you are doing – postponing it. Artificially propping up the weak can only last for so long before they fall off, like balancing a ball on a very thin stick.
When you get a recession, every weak element in the system will be tested. If you’ve postponed it, they’ll be tested massively. And they’ll fail, epically.
So, I state again, the reason why everything is completely fucked now isn’t so much the system (as flawed and distasteful as it may be), but the people who have allowed 2 or 3 recessions to hit us at the same time. Any system you replace Capitalism with will still be run by pretty much the same people. Even if they have different faces, they’ll still have the same flawed ideas. And we’ll be fucked again.
Change the ideas, THEN the system, and you may be onto something.
Stimergic learning is covered here.
The structure of secular conservative “framing” of events is discussed here.
Note the most interesting thing, that actually being an amorphous mass with seperated command structures but all communicating is actually an effective strategy. Its essentially an open-source platform, applied to political and information operations.
In both cases, each rely on various groups innovating and trying varying methods of attack, the communicating their effectiveness back to other groups who share their aims. The techniques are refined, then packaged for mass release. Then the process is repeated. It is constant refinement based on the ability for fast feedback AND, a mass of people willing to try various strategies.
Its essentially a Black Swan approach to events. By allowing groups to experiment, the whole movement can take advantage of successful methods, whereas failures will only impact on those directly involved in them. Its very smart, really.