Of Gaps and Grass-Eaters

Are the American people obsolete? Salon argues that because of globalisation and technology there is now a increased separation between capital and labour. The activities that generate wealth have both been outsourced to cheaper shores, and become more efficient because of technology. As a consequence the social contract in Western society between rich and poor – the rich provide the capital while the poor provide the labour – is breaking down. The rich still have capital, but they can now move the production of goods to the East, creating a shortage of jobs in the West.

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Detroit – Ground Zero for Economic Collapse

Here is a video showing how badly Detroit has been affected by the collapsing housing market. Towards the end of the video you can see some amazing mansions in the worst-hit areas of Detroit that you can supposedly buy at a massive discount.

Social Collapse – Best Practices

Hmmm…. first I read this transcript from a speech by Dmitry Orlov entitled “Social Collapse – Best Practices”, and then I saw on Boing Boing the post How are you coping with Collapse-Anxiety?

The first post describes what might happen if the US collapses in the same way economically as the USSR did in the 1990’s. It then goes on to making recommendations about what to focus on – essentially food, transportation, shelter and security. I thought it was fascinating because although I have been thinking for a number of years that the economic situation was going to get bad, I didn’t envision quite a collapse of that order of magnitude. As the crisis continues however, the possibility suddenly seems to become credible.

I found the comments interesting in the Boing Boing post. It seems as though quite a number of people were actually starting to find themselves in situations reminiscent of those described in the first post – primarily from posters in the US. Scary.

Comparison of Downturns

A while ago, I created a Mathematica plot comparing the Great Depression, the Tech Crash and the Oil Crisis with the current financial crisis. This analysis was inspired by a chart I saw last year comparing these recessions with our current situation. Anyway, I thought it was worth bringing the chart up-to-date.

[Edit] The original chart I saw was this one.[/Edit]

Comparison of four economic downturns
Comparison of four economic downturns

The Coming Collapse of the Middle Class

Here is a great talk by Harvard Professor Elizabeth Warren on the upcoming collapse of the middle class. The first 5 minutes are spent on introducing Professor Warren, so I recommend skipping to roughly 5-6 minutes into the video. She gives a very, very interesting comparison of the changing socio-economic factors between 1970-2007. The talk was given on the 8th March, 2007 at Berkeley.

Financial Turmoil

This past week has been facinating in the financial markets. After a long slide downwards, the markets tumbled at the beginning of the week, and now they are bouncing back upwards.
Initially the market dive looked like it was triggered by worries over the problems with the Monoline Insurers.
The Fed responded by cutting interest rates by 75 basis points on Wednesday. This seemed to have little effect with various indices falling even further. It did however seem to have a dramatic effect on the probability that the US will go into recession.
On Thursday we found out that Societe Generale lost $7 Bln from trader fraud (leading the market wags to dub it “Shock Gen”. This seemed to have little negative impact on the markets with the indices all shooting upwards. They are all up today, albeit not as much as yesterday. It looks like the momentum is leaving the bounce.

So could the massive falls be attributed to Soc Gen selling out of their positions and realizing their losses? Can some of the market euphoria be attributed to proposed monoline bail-out?

I guess we’ll see how next week develops!