The blogs told you so

by Jerome a Paris Sat Dec 29th, 2007 at 09:57:58 AM EST

An argument that has been regularly put to use on my doom-n-gloom diaries about the economy, the dollar or the oil situation is that I've been predicting some of these things (like a recession, or a housing slowdown) for so long that they are bound to happen at some point and thus my prognoses have little value. As the old joke goes, "economists have predicted 9 of the last 4 recessions"...

I went through some of my earlier diaries today - those from early 2005 to look at what I had written then, and (pat, pat on the shoulder) I'm pleased to say that they were quite on target, and provide a decent explanation of what's been happening in recent months.

So to those that say: "who could have predicted this?", I'll respond quite directly: we did, on the blogs; and quite well, including the 'what' AND the 'how', if not quite the 'when.'

There have been 3 main predictions in my diaries: the increase in the price of oil (which lead to my Countdown to $100 oil series), the coming housing bubble crash, and the fall in the dollar.

In the early days, I started with a description of the imbalances (whcih the bulls were dismissing), and the reasons why I thought some of the resulting then-going-strong trends that the bulls were bragging about (asset price increases, housing going strong, economic growth) were unsustainable, and were likely to revert sharply in the near future. I also flagged some trends that were already happening then (the fall of the dollar, the rise in oil prices) and put them in that context, suggesting that these had not yet run their course.

The next phase was to provide deeper explanations for all of this. On the oil front, it was the theory of peak oil (or, at least, the idea that supply was struggling to keep up with demand); on the dollar and housing front, the Greenspan Bubbles - ie insanely cheap money provided by the Fed and other central banks and fuelling a debt binge.

And, underpinning all this, a more comprehensive theory, which I labelled the "Anglo Disease" (as a nod to the well-known "Dutch Disease") which tried to link all the above phenomena, and explain how they were all really driven by explicit policy choices underpinned by a comprehensive, pervasise ideology, that of neo-liberalism, or, as it should really be called, neofeudalism, whose main symptoms are a massive increase in inequality and a breakdown in solidarity (the poor, like the rich, have what they deserve).

I'm focusing on my own diaries, but I want to flag again that I wrote many times on the basis of information or insights gleaned in other diaries, or in comments, and have often felt to be some sort of de facto spokesperson of the community of smart bloggers that looked at these issues and discussed them before everybody else.

Countdown to $100 oil

I'll start with oil and energy, as this is still the topic I'm most closely associated with. When I first started writing on the blogs, oil had just reached the unheard, and then-scary level of $50 per barrel. Peak oil theories, long known only by a small handful of people (which did not include me), were beginning to be discussed in more widely read books or in occasional mainstream media articles. But these were easily dismissed, and the spike in oil prices was seen as just that - a spike, which would recede as the temporary or irrational factors keeping prices high disappeared.

We all know how that turned out:

Via FreeCharts.com

In March 2005, a few months before starting the Countdown diaries, I wrote: Oil prices at record highs - speculation to blame? , with the following factors listed as explaining the oil price increases:

the OPEC has gotten its shit together in recent years (...) and they have been a lot more effective in maintaining their discipline in the market,

they have been helped by the faster than expected increase in demand in the past two years, fuelled by record worldwide growth (...) which has brought spare production capacity to its lowest levels in many years. The absence of that safety cushion makes that any temporary technical or political problem in the oil chain becomes a major event on the oil market (...)

the instability premium caused by 9/11 and fuelled by Bush's wars has never been higher. (...) The US is not a force for stability today, and it has a price in the oil market;

(...) Big Oil is running out of places where to invest: the country that have the reserves do not welcome them - and they are unable or unwilling to invest in increased production capacity themselves.
(...) There is not enough oil to provide for China's needs. Don't blame speculators, it's just that they notice these things before us.

Nothing of what happened in the past 3 years requires changing a line of this diagnosis: this is a demand driven price increase, supplies are tight, and Western oil majors are increasingly kept out of oil-rich countries, which show no desire or no ability to increase production. In fact, the most significant fact in that period is that production has essentially been flat throughout, as this graph from the Oil Drum shows:

And the result, of course is that, the trend has continued to be upwards, despite the loud crowing on the business-as-usual crowd whenever prices did dip for a (usually short) while. While the headline WTI index did not quite reach $100 (it briefly touched $99.29), it's been above $90 for the past 2 months, with no more apparent consequences on our economic behavior or our energy policies than when $50 was reached 3 years before. Which only means that the policy changes required grow bigger as time goes by. But people will not be able to say they were not warned.

It was all on the blogs 3 years ago.

Bubbles Greenspan

A year and a half ago, Alan Greenspan left his job as Chairman of the Federal Reserve Bank under almost universal praise. The "Maestro" was lauded for his ability to steer the economy through various crises and to help create unprecedented prosperity, as evidenced in massively higher financial markets.

Only a few lonely voices were saying then that this apparently successful monetary policy was fundamentally flawed, based on inflating ever bigger bubbles to hide the mess of the previous one, until it would no longer be possible to hide the whole sorry thing and it would burst in a massive crisis. Those voices said that it was inevitable, and that the longer it took to get there, the worse it would be. They were mocked mercilessly.

Here are two graphs, one from the WSJ, one from the BBC, showing almost the same thing:

The housing bubble slowed down in late 2005 and collapsed completely this year. The debt bubble explosed quite unexpectedly and quite completely on august 7 this year, when bankers, for some reason, had a "uh oh" moment and stopped lending altogether:

And guess what? This was all announced on the blogs, loooong in advance:

Greenspan's bubbles - more graphs (10 March 2005)
The second graph (...) shows that the increase in homebuilders's share prices (a proxy for the real estate market) is looking distinctly frothy.
What this means is that US consumers are spending real money based on the virtual increase in the value of their homes - after spending the real money based on the virtual increase in the value of their shares a few years back.
(...) consumption is not fuelled by a healthy economy, but by increasing debt.
(...) the number of homes available for sale is at record highs. Should demand slow down (because debt gets more expensive with increased interest rates), supply will be too plentiful, thus leading potentially to a nasty fall in prices - and makind all that "virtual" equity worthless - but nonetheless already spent.

Debt funding consumption...
Debt hiding the lack of real economic progress for most...
Increasing reliance on the housing and financial sectors for "growth"...
Massive overbuild underway...

All flagged 3 years ago.

The US - a finance-based economy on crack (17 February 2005)

the huge fiscal and current account deficits;

the very low interest rates that "do strange things to a highly deregulated financial system" and "fuel an increase in risk appetite and leverage"

most of the assets of US financial institutions are not subject to the regulations that apply to banks

a growing concentration of financial assets and liabilities
houselhold debt at a peak, both in absolute amounts (close to 10,000 billion $ - yes, that's billion) and in relative terms (120% of disposable income, as compared to 60% in the 70s and 80s);

the phenomenal growth of unregulated hedge funds, which banks are desperate to finance (the "crack cocaine of global finance" quip above refers to prime brokerage for hedge funds, i.e. the services that banks provide to these funds to buy and sell shares - and finance the transactions)
(...) an amazingly high portion of these profits come from financial firms, who seem to be making these by taking advantage of very low interest rates to take growing risks, especially in lending to hedging funds and buying untested derivatives.
(...) the probability that a serious crisis could be triggered - and amplified by the financial system - is worringly high. Add in a financial sector in denial (we have big profits, why worry?), an administration oblivious to the situation and most likely unable to react, and you have a lot of ingredients for a "perfect storm".

Weakening of regulation...
Increasing risk raking...
with the impression that risk has been covered ("hedged") and that all is well...

Bankers are dangerous people (17 January 2005)
Loss of trust in a bank can always turn into a loss of trust in the banking system; insolvency or simply illiquidity (when it does not have enough cash at hand even though it has valuable, but not liquid, assets in its books) of a bank threatens all entities that have assets with that bank - depositors, corporate treasuries, other banks, etc...and that illiquidity can spread to otherwise healthy entities. The existence of such macro risks, called "systemic risk" has led governments to heavily intervene in the banking sector
(...)
the ironic thing is that the most sophisticated banks will be allowed to decide on their own how much capital they will put aside for each operation they do (of course, they will have to follow consistent rules that are supposed to be monitored by the regulators, but essentially, they will make their own allocations). Back to square one and the Venise merchant bankers trading on their good name alone
(...)
in the bond market, it is even worse, because the banks that structure the deal (define its parameters and negotiate them with the borrower) do not even keep the risk - they sell it all to the bond market. Once it's sold, they don't really care how it fares (especially as the restructuring teams are usually completely different form the initial structuring teams if there are any problems). and how do they sell their bonds? By having massive sales desks who work, for a good part, on their reputation
(...)
just because a banking crisis has not happened recently does not mean that it won't happen again. Bankers are really smart at finding new ways to lose money, especially when it's not theirs.

Securitization as a force to take extra risks and dump them on (unsuspecting and/or imprudent and greedy) investors...
Banks left to their own devices to invent new products without supervision...
Greed, greed, greed everywhere...

When euphoria turns to fear, trust disappears, and transactions that made sense only if everybody believe in them suddenly start looking definitely shaky. And the result is supposedly ultra-safe AAA-rated securities ending up being dumped as "toxic waste" because people no longer know what they actually are worth. And these AAA securities are held by pension funds, local administrations and others who thought they were investing prudently money they had the care of.

The financial world moved with incredibly brutality from endless and cheap liquidity to a mad scramble for cash as debt disappeared. The exact way the bubble was burst, and trust turned into revulsion could not have been predicted, but what triggered the crisis is exactly what was announced: unsustainably inflated values for various classes of assets, starting with US real estate and the insane loans that went with it, and that were repackaged, rebundled and releveraged into the markets, spreading the toxic waste far and wide. Everybody thought they were free of it (and their claims in that respect suggest that they knew from the start it was shitty stuff they were peddling), but somehow did not consider that their clients might not be, and would turn to them when the problems appeared...

And, of course, the housing crisis is no longer denied by anyone now, as prices (and number of sales, a bas sign) show record declines.

It was all on the blogs 3 years ago.

Dollar Dump

After all that crowing, let's end with something somewhat anti-climatic: the dollar continued to weaken, but not, in fact, that much.

Falling dollar, offshoring and the coming crunch (5 December 2004)
...[a] weaker currency has the following long term effects:

oil producers, who currently get paid in dollars, are not happy with the continued erosion of the purchasing power of the dollars they get. They spend most of them in Europe, and thus need Euros. They thus expect their oil to at least keep its purchasing power in euros, which means that, if expressed in dollars, the price must go up as the dollar falls. The Europeans don't really care, because the price for them will stay constant in euros. Americans, who have big gas-guzzlers and do not have heavy taxes that could cushion these movements, will feel the increase very directly at the pump; as an absolutely non substitutable import, this will only increase the deficit with no chance of a reduction other than serious reduction in consumption, which will be a consequence of economic hardship rather than going for substitutes (public transport), which are totally unavailable for most Americans.

holders of T-Bonds will need to be convinced to hold on to them - and to keep on buying more of them. The thing is that they are so little diversified tday that any move to change the balance of their reserves (inevitably towards the euro) has an immediate impact for the dollar, as we currently see - and for the interest rates required to keep them happy. Asian central banks may want to hold on longer than others, as they have the incentive of protecting their exports, but others (especially the oil producers of the Middle East and Russia) have growing incentives to bolt out before it gets worse. And Asians may decide on day that enough is enough, and you could have a real meltdown.

So far, the meltdown has not happened, although it is now openly disucssed in the mainstream media, for the very reasons I flagged above. The increase in oil prices (ie the dvaluation of the dollar against oil) has happened, but not, so far, the revulsion of T-Bills owners. The oil windfall has sent so much money their way that they have, in effect, not have had the time to park it anywhere else but in T-Bills.

But the big story today is the threat of inflation trending up, which is essentially the same thing in a more diffuse manner (the dollar losing value against goods in general). The great unwinding of the big imbalances (budget deficit and trade deficit) has not yet happened, but it does have to.

And the dollar has kept on going down, not up

Anglo Disease

The one big crash which has NOT happened so far is on the equity markets. They have broken new records several times this year, and are not far from their highss. Many countries, especially in emerging markets, have seen spectacular gains.

So. Wrong predictions?

Maybe not. But the mirror of this other trend:

Note: this graph was posted earlier this month by a kossack, but I have lost the link - if anyone can point me to it, I'll give proper credit. Update: this came from Afferent Input and was flagged by kossack militant progressive. With thanks to Halcyon in the dKos comments.

The big underlying trend of the past 25 years, and of the last 7 in particular, has been the increasing concentration of wealth in a very small number of hands - roughly the top 0.1% in the US and a few European countries. They have managed to essentially capture all income growth for themselves, leaving everybody else with stagnant real incomes.

In that context, plentiful and cheap debt was a simple way to distract people from their plight, by giving them a convenient way (and, when backed by house price increases, an apparently safe one) to continue on spending even without the requisite income, and thus to feel prosperous.

That was a deliberate con, pushing the ideology of greed, idolising financial markets and the stupendous profits they seems to generate (but, in fact, capture from others), and driving the economy to focus on only one thing: corporate profits, at the expense of everything else, in particular wages and workers' perks and rights.

Tax cuts for the rich, pork for corporate friends, anti-labor propaganda everywhere, and cheap debt for everybody to "pay" for it or sugarcoat it.

This is still under way. It was visible as a coherent plan 3 years ago, and it has only gone worse since. The Democratic candidates are talking about it today, a bit, but nowhere near enough to reverse 25 years of permanent lies.

It's been said on the blogs, but it needs to be said louder. Maybe our track record will speak for us now?

:: ::

And now, some links:

Bubbles Greenspan (and debt) diaries
Alan Greenspan - zombie by rdf
Bubbles Greenspan: Mission Accomplished
Stiglitz: the 'mess' left by Greenspan
Level 3
Credit Crunch - Act II
The M3 money supply: much ado about nothing? by Migeru
Bubbles Greenspan: Oops
The Chinese can weather an American recession. by BruceMcF
Bubbles and Balance by ChrisCook
Financial crash: blaming the victims
The Pyramid Scheme of CDOs by das monde
So they all knew it was a bubble, now?
Market meltdown caused by (who else) liberal media
Credit markets: "Don't panic", they beg
'Bubbles' Greenspan to blame for current market woes
Constant Fretting Doesn't Pay Off by wchurchill
Breaking: housing prices collapse
Dow hits new record of 13000, as US & world economies continue to grow by wchurchill
Housing bubble - 'reform' needed.
Good bankers need not care about systemic risk
Housing affordability by wchurchill
Stunning indictment of 'Bubbles' Greenspan in WSJ Op-Ed
Hyman Minsky on financial crises by das monde
Is Civilisation A Pyramid Scheme? by das monde
The Big Meltdown, Paul Krugman by wchurchill
Numbers and USA Mortgages by Laurent GUERBY
NOW the Fed worries about deficits

Runaway globalisation and the dollar
Bubble, bubble, when will you burst?
Dow Jones sets new all time high last week by wchurchill
Outbondadding bonddad : house market crash palooza
US housing to crash? by Colman
WSJ on Bush economy: when in hole, stop digging
US Housing Market Crash? Not yet, anyway by wchurchill
World economy: major bear suddenly turning optimistic
Not an energy diary - a debt diary
Dollar Dump: Central Banks reduce dollar reserves by LondonYank
Kaboom: Peak copper, superspike prices, oil and US debt
The Fed is eliminating the canary in the mine
That, which cannot go on forever, won't
UK conservative says it: financial capitalism is out of control
The Carry Trade: Borrowing from Yoshi to Pay Ahmad and Ping by LondonYank
The Profligate American Baby Boomers. by wchurchill
What Does the Trade Deficit Mean, and How Does it Affect Us? by Drew J Jones
Do Deficits Matter? Do the Deficit Disco! by Alexander G Rubio
The Economy's Not Looking Well by Drew J Jones
The Economist: anti Greenspan, but pro-Bush
Playing the economist - explaining why I was wrong last year

Bernanke faces tough year as he replaces 'Bubbles' Greenspan
If Greenspan Was The Maestro, We're All Doomed by Drew J Jones
Where is US growth coming from - and where is it going?
Eurozone interest rates thread
Enough With The Goldbug Preaching by Drew J Jones
Global Economy & Imbalances by wchurchill
Bernanke, inflation, China and the housing bubble
Why is the dollar so important, and what happens when it tanks? by Lud
Did Gordon Brown & the BoE Bitchslap Greenspan? by Drew J Jones
Greeting Greenspan Recession by das monde
Countdown to 100$ oil (14) - Greenspan acknoweldges peak oil
You thought I was a pessimist? Not until you read this!
Greenspan 'it's a bubble' -- Krugman "he's a hack"
Countdown to 100$ oil (11) - it's Greenspan's fault!
Bubbles Greenspan gets TWO blowjobs in the FT
Is the US Housing Boom running out of Steam? by Alexander G Rubio
Europe also faces a financial bubble
Running out of options
US June Trade Deficit hits new High on surging Oil prices by Alexander G Rubio
America still "splurging on the credit card"
Housing bubble - Krugman and the Financial Times lay the case
'Bubbles' Greenspan gets more fan mail
'Bubbles' Greenspan RIP: US savings down to ... ZERO
UK bad debts rising
Dr Copper and Currency signals Conflict by Alexander G Rubio
Bubble bursts for UK
Chinese Currency move might be a long way off by Alexander G Rubio
Stephen Roach: Good Growth, Bad Growth by Alexander G Rubio
'Bubbles' Greenspan vs 'Conundrum' Greenspan
Housing (worldwide): the biggest bubble ever
A tale of two continents. Is 'Bubbles' Greenspan worth it?
Bubbles Greenspan - The hedge funds time bomb
Markets have already priced in a recession
Bubbles Greenspan - good news on the housing front
Bubbles Greenspan - so sez the Wall Street Journal
Greenspan's Bubbles: 'Too late to escape the consequences'
Scary financial story on CDOs - 'no one knows if they work'
Bull and Bears further apart than ever (w/ trade deficit)
Greenspan's bubbles. No - his 'monster' (says Morgan Stanley)
Greenspan's bubbles - more graphs
Greenspan's bubbles - a graph
The US - a finance-based economy on crack

Anglo Disease diaries

The FT worries about the Anglo Disease by Jerome a Paris on December 10th, 2007
Anglo Disease: Optimism and Dismay in the Narrative by Jerome a Paris on December 8th, 2007
Anglo Disease: LQD - the Economist is worried by Jerome a Paris on December 1st, 2007
Anglo Disease - early signs of hangover generate denial by Jerome a Paris on November 22nd, 2007
Anglo Disease: Dollar Dump & Boom-n-Bust by Jerome a Paris on October 30th, 2007
Anglo Disease: hangover in Manhattan by Migeru on October 15th, 2007
Anglo Disease fever by Jerome a Paris on August 28th, 2007
Anglo Disease - Fools and Bourses by ChrisCook on July 9th, 2007
Anglo Disease watch (5) - just break the thermometer and all is well by Jerome a Paris on July 5th, 2007
Anglo Disease watch (4) - No industry is vital - except finance by Jerome a Paris on July 4th, 2007
The Anglo Disease (3) - an introduction for non-economists by Jerome a Paris on June 24th, 2007
Anglo-Disease Sidelights (1): UK = Tax Haven by afew on June 22nd, 2007
Anglo Disease (2) - Martin Wolf's take by Jerome a Paris on June 19th, 2007
The Anglo Disease - Financiers worried about end of great bull run by Jerome a Paris on June 18th, 2007
UK conservative says it: financial capitalism is out of control by Jerome a Paris on March 21st, 2006
The Anglican Model, "Laissez-Faire" Capitalism & J.K. Galbraith by Drew J Jones on Dec 30th, 2005

The blogs told you so | 126 comments (126 topical, 0 editorial, 0 hidden)

Giving credit (4.00 / 19)

As the list of diaries shows, many eurotribbers have participated to creating this awareness (including contrarians, who helped us hone our arguments), so this is definitely a collective effort.

As I have only included ET diaries, it's worth mentioning kossacks like bonddad, New Deal Democrat, taonow, gjohnsit, and many others (my apologies if I'm forgetting anyone, I'll add them later).

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Dec 29th, 2007 at 10:02:13 AM EST

Kudos, Jerome (4.00 / 6)

all the best insight I've acquired into the markets has come from blogs such as this one (and Atrios) and also from Krugman.

Incidentally I was wondering about something related to the recent market turbulence and I thought you or someone here might know the answer. Recently the US government, through the Fed has "injected" hundreds of billions of dollars in "liquidity" into the banking system. Its European counterparts have taken similar actions. What I am wondering about is, where does this money come from? I know the President hasn't asked Congress to appropriate a couple hundred billion extra to the Fed this year, and I didn't think the Fed had hundreds of billions of dollars in surplus cash sitting around in its coffers. So how does it raise this money?

by gobacktotexas (dickcheneyfanclub@gmail.com) on Sat Dec 29th, 2007 at 10:17:29 AM EST

Re: Kudos, Jerome (4.00 / 10)

The money is created out of thin air by the central bank and lent to the banks on a short term (from overnight to 3 months). After the money is repaid with interest, the money disappears from existance and the Central Bank pockets the interest.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 10:44:20 AM EST
[ Parent ]

Re: Kudos, Jerome (none / 1)

Wow! Are you serious? It seems strange that this fact is not more highly publicized....our banking system is being propped up by a fiction. What is the difference between this and a government which prints more money to pay the bills? And isn't this bad for inflation?

by gobacktotexas (dickcheneyfanclub@gmail.com) on Sat Dec 29th, 2007 at 10:51:44 AM EST
[ Parent ]

Go see this diary (4.00 / 4)

Bankers are dangerous people

But actually, the recent central bank lending is for very short periods (15 days, to tide banks over the new year, traditionally a tough period, but a lot worse this time round) and will be "mopped up" quickly.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Dec 29th, 2007 at 11:00:42 AM EST
[ Parent ]

Re: You forgot Northern Rock (4.00 / 2)

Not quite. The Bank of England's lending to Northern Rock is going to be around for some time.

This is (thanks to "seignorage" derived from base rate income and zero cost) in fact hugely profitable to the "tax-payer" who nevertheless believes - as the equally (or wilfully) mistaken politicians and Press tell him - that "tax-payers' money" is at risk.

The actual workings of a Central Bank are the ultimate financial pornography, and no decent newspaper will print anything relation to it, more's the pity.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 01:18:51 PM EST
[ Parent ]

Re: You forgot Northern Rock (4.00 / 2)

The actual basic workings of a Central Bank are rather quickly grasped: they make it up, lend it to special customers, some time later the special customers return the principle, with interest, to the Central Bank, and the euros, yen, bucks, or pounds go bye-bye.

The impenetrable haze of obfuscations, nonsense, puffery, quackery, jiggery-pokery hiding the actual workings of a Central Bank is the problem.

The process of the special customers (Money Market Banks) lending the euros, yen, bucks, or pounds and what happens as the money circulates and spreads in the global economy is a bit more complex, I grant.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Dec 29th, 2007 at 01:45:03 PM EST
[ Parent ]

Re: You forgot Northern Rock (none / 1)

The actual basic workings of a Central Bank are rather quickly grasped: they make it up, lend it to special customers, some time later the special customers return the principle, with interest, to the Central Bank, and the euros, yen, bucks, or pounds go bye-bye.

The reason why Central Banks get to do that is that they act as clearinghouses for the banks, hence the "special customers" (members of the clearinghouse).

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 01:50:32 PM EST
[ Parent ]

Re: You forgot Northern Rock (none / 1)

Yup.

But, by some odd coinky-dinky, the Clearinghouse Banks always seem to be owned/controlled by friends and relatives of the people who set-up the Central Bank.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Dec 29th, 2007 at 02:52:02 PM EST
[ Parent ]

Re: You forgot Northern Rock (none / 1)

What happens if the Central bank lends huge sums to a major bank which then actually does go broke? Is taxpayers money not then at risk - if it is not returned?

Also the effect of Government/central banks bailing out huge banks/hedge funds is to make their activities a one way bet. They win if the investment go well. They get bailed out if the investments go badly.

Individual bankers bonuses are hugely dependent on the gains they make -and thus higher risks are incentivised. If the whole thing goes belly up, they get no bonus, but it isn't their billions that have been lost.

I don't think we can present this as a no lose position. House sellers, borrowers, investors have all lost as a result of the profligacy which is being underwritten by the central banks.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 01:58:18 PM EST
[ Parent ]

Of course it is (4.00 / 3)

But default by the central bank or the government simply means inflation rather than outright losses - money is diluted

It is false to see central bank lending as free. The price is paid in a loss for every citizen (inflation wasting their money away) instead of for a bank's shareholders.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Dec 29th, 2007 at 02:50:39 PM EST
[ Parent ]

Or worse (4.00 / 2)

In Ireland in the 1980's the Government bailed out AIB, the largest bank, after it had made a very imprudent investment in an insurance company which, as it turned out, had huge unquantified liabilities. Shortly afterwards AIB declared a very healthy profit. Shareholders lost nothing but the Taxpayer paid the cost. It was all done to secure "the stability and confidence" of the banking system - an asset on the banks "goodwill" balance sheet - but funded directly by the taxpayer.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 02:58:12 PM EST
[ Parent ]

Re: Or worse (none / 0)

The government should obviously been issued shares in the bank as a compensation for bailing it out.

Then when the crisis passed, the shares could have been sold and the money used for something useful, or handed back to the citizens. That's what happened when we had to bail out all our big banks (except Handelsbanken) back in 1991. The State still owns like 30 % of one bank and the stake will be sold sometime in the nex two and a half years, barring total TSHF.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Dec 29th, 2007 at 04:22:02 PM EST
[ Parent ]

Re: Or worse (4.00 / 2)

Buyouts not bailouts.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 06:44:30 PM EST
[ Parent ]

Re: Disagree (none / 1)

I don't see it in quite this way.

I don't see Money as being diluted in a default to the Central Bank: I see it is as being extinguished. If Northern Rock were to default on its debts to the BoE then the effect would be just the same as if a few skip loads of grubby time expired bank notes were burnt.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 03:13:44 PM EST
[ Parent ]

Re: Disagree (none / 0)

But presumably depositors and shareholders who got their money out after the bail out but before the default would have gained materially from the central bank intervention? If they gain, who loses? At some point the real value of money in everybody's pocket must have been diluted?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 04:59:23 PM EST
[ Parent ]

Re: Disagree (none / 1)

Firstly, there is a difference between "gaining" and "not losing".

Secondly, there is a difference between "price" and value.

Money has no value. It is a means for the transmission of value (or "money's worth") by reference to a "value unit".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 05:30:37 PM EST
[ Parent ]

Just as when the fiscal authority 'spends ... (none / 0)

... money', vertical money is created, and when Inland Revenue receives tax revenue, vertical money is extinguished. When the Central Bank lends, vertical money is created, and when loans are repaid, vertical money is extinguished.

Its highly unlikely that "too much" money will have gone out without being extinguished, as a result of a bank default, because in the event of a major bank default, the liquidity preference of individuals will rise, the degree of leverage decline, and a smaller amount of horizontal money will be leveraged from the same amount of vertical money.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Dec 29th, 2007 at 10:58:17 PM EST
[ Parent ]

Re: Just as when the fiscal authority 'spends ... (none / 1)

Can you explain what you mean by horizontal and vertical money in a little more detail?

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Dec 30th, 2007 at 06:11:11 AM EST
[ Parent ]

Re: Just as when the fiscal authority 'spends ... (none / 1)

CoFFEE, the Centre of Full Employment and Equity at the University of Newcastle, NSW, is a good source for the strand of Post Keynesian economics that uses this terminology.

* Educational Brief: Vertical and Horizontal Relations in the Money Supply process

Essentially, in a central reserve monetary system, Vertical Money is the fiat currency issued/created by the Reserve Bank, acting as the government monetary authority. The government has a monopoly on the issue of fiat currency, so that any net spending by the fiscal authority creates vertical money, while any net tax receipts by the fiscal authority destroys vertical money. Also, any payments by the monetary authority for financial assets creates vertical money, and any payments to the monetary authority destroys vertical money.

Since most payments in a reserve banking system pass through commercial bank accounts, liabilities of commercial banks also function as money, and indeed the majority of the money in the system is not vertical money, but credit-money created as a side-effect of commercial bank lending. This credit-money, which involved in part leveraging of the existing supply of vertical money, is referred to as horizontal money.

The terms vertical and horizontal are, in part, a reference to the controversy in Keynesian economic whether the central bank in a reserve banking system fixes the quantity of money in the system, or rather fixes the cash rate with commercial banks determining through their actions how much money will come into existence. With interest rates on the vertical axis and the quantity of money on the horizontal axis (the conventional micro layout, value to the left and quantity below), the first is the "vertical" position and the second is the "horizontal" position.

The answer for fiat currency is that it is vertical, but the answer for credit-money is that it is horizontal. Hence the names they gives to the two types of money.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Dec 31st, 2007 at 01:53:26 PM EST
[ Parent ]

Re: You forgot Northern Rock (none / 0)

Let's see... if NR owes money to other banks the money NR owes has been created as a multiple of some reserves held by the other banks.

If NR is insolvent there is a good case that those loans should never have been made, therefore the money created by them should never have been created and as it is "excess money" it is inflationary.

If and when NR goes bankrupt, the other banks have to write off the value of the unpaid fraction of the loans they made and part of the money created disappears. But this money was inflationary, so its disappearance is a good thing and doesn't cause deflation. But you have to deal with the systemic effects of a bank failure, which are not good (a cascading failure can be triggered).

As long as the Central Bank lends short-term money to NR in order to keep NR solvent, it is validating the loans and so contributing to cement the potential inflation caused by them. When NR repays the Central Bank's loan the money created by the original loan is extinguished except for the interest that is repaid to the Central Bank. In this way, the Central Bank validates a small fraction of the money created and negates the rest: this is slightly inflationary and it is as if the government just created money which has the effect of a flat tax through inflation.

It is possible that the shareholders of NR and its creditors have lost more "paper value" of their shares than the amount of interest the Central Bank is collecting, in which case the entire "tax" has been levied from them.

Therefore:ChrisCook:

This is (thanks to "seignorage" derived from base rate income and zero cost) in fact hugely profitable to the "tax-payer" who nevertheless believes - as the equally (or wilfully) mistaken politicians and Press tell him - that "tax-payers' money" is at risk.

Unless the NR shareholders and creditors lose enough paper value of ther shares, this process is not profitable to the taxpayer, but it is for the government. It is a flat tax levied on all money, which is good for the national reserves but not free for the taxpayer.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 07:19:23 PM EST
[ Parent ]

Re: You forgot Northern Rock (none / 1)

If NR is insolvent there is a good case that those loans should never have been made, therefore the money created by them should never have been created and as it is "excess money" it is inflationary

I do not agree that this money was inflationary other than of the price of the homes which the loans were created to purchase. This "property-backed" money is essentially "static" value which never gets into circulation, since repayment of capital extinguishes the original money created.

Interest on the mortgage loan is another matter. Money has to be created by future economic activity to pay interest on these loans, and what is IMHO inflationary is any excess of the rate of interest charged above the actual property rental value.

When NR repays the Central Bank's loan the money created by the original loan is extinguished except for the interest that is repaid to the Central Bank. In this way, the Central Bank validates a small fraction of the money created and negates the rest: this is slightly inflationary and it is as if the government just created money which has the effect of a flat tax through inflation.

This is right at the heart of the matter, Migeru...

The interest (currently 5.5%) that is paid on the Bank of England loan is "seignorage" and is pure profit to the BoE since it was created at nil cost and backed only by "fiat".

I think that this may, in its entirety, be "inflationary" in the sense that it is baseless. Whereas private Bank money created as loans is "inflationary" (only?!) to the extent that it is unbacked by Capital.

But note that both may only be inflationary of asset prices, and neither is inflationary of retail prices which is IMHO a fiscal phenomenon.

But of course when it is used to replace existing money it is not inflationary at all.

It is possible that the shareholders of NR and its creditors have lost more "paper value" of their shares than the amount of interest the Central Bank is collecting, in which case the entire "tax" has been levied from them.

NR shareholders have "lost" because the market price has come down, and that was of course based upon the massively reduced perception of the net present value of future NR earnings.

NR shareholders are currently losing to the extent that NR profits are being reduced by the increased NR funding costs, but NR is only paying base rate of 5.5% for this in cash; the penalty of 1.25% is being rolled up as a subordinated loan from the Treasury (ie a gift from the BoE to the Treasury).

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 08:11:07 PM EST
[ Parent ]

Re: You forgot Northern Rock (none / 0)

ChrisCook:

I do not agree that this money was inflationary other than of the price of the homes which the loans were created to purchase. This "property-backed" money is essentially "static" value which never gets into circulation, since repayment of capital extinguishes the original money created.

I don't get this.

A owns a house. B takes out a mortgage to buy the house from A. A then goes and, instead of buying another house with it, spreads the proceeds among consumption, savings and investments. The money has gone into circulation. Meanwhile, it will take B maybe 30 years to pay the mortgage back, and at the beginning a smaller proportion of the repayments goes towards principal than at the end. So the money created by a mortgage loan goes into circulation in the short/medium term and is repaid and taken out of circulation in the long term.

In addition, the interest repayments on the mortgage don't come from any value generated by the house itself, which is not a productive asset, but from B's wages.

So mortgage loans are inflationary, especially in case of default but also generally.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Dec 30th, 2007 at 06:08:02 AM EST
[ Parent ]

Re: You forgot Northern Rock (none / 0)

The inflationary nature of bank created money is its absence of value in exchange. ie its "deficit basis".

Money can only be inflationary if it is in circulation, so of course if, as in the example you give, the money goes into circulation then it may - as the money is spent - lead to inflation.

But for the most part mortgage loans created cancel out other mortgage loans, typically within "chains" of property purchases. Sure, some leaks out, particularly through transaction costs (estate agents, lawyers), but a large chunk also goes back to the government in taxes. Very little goes into immediate consumption which possibly fuels inflation.

I see energy as an exact analogy for value.

I see Capital as "Static" or "Potential" value and Money as "Dynamic" or "kinetic" value. In fact I think Money only actually exists in the transitory moment of exchange. "Fixed" Capital tied up in assets is less easily "fungible" than the "Working" Capital which consists of obligations/IOU's issued by banks and traders.

In addition, the interest repayments on the mortgage don't come from any value generated by the house itself, which is not a productive asset, but from B's wages.

Of course a house is a productive asset. It has a rental value. It's just that the "owner" of the house is occupying a house for which he is not paying someone else such a rental but is instead renting the "Capital" invested in the house in the form of a "secured loan".

So mortgage loans are inflationary, especially in case of default but also generally.

I would say that mortgage loans are inflationary insofar as the money created leaks out into circulation.

But I think you have polarities reversed in relation to defaults. When loans default, deficit money is extinguished, and the result is IMHO deflationary, not inflationary eg 1929, Japan and so on

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Dec 30th, 2007 at 07:44:41 AM EST
[ Parent ]

Re: Kudos, Jerome (4.00 / 7)

gobacktotexas:

Wow! Are you serious?

Yep.

gobacktotexas:

What is the difference between this and a government which prints more money to pay the bills? And isn't this bad for inflation?

It's a kind of quantum banking - you can change the sums by as much as you like, so long as the period is short enough to make sure they don't appear in annual or quarterly accounts.

Allegedly the difference is that the money is destroyed once the loans are paid off. On its own this wouldn't be inflationary - in fact it's almost a kind of tax, because the central banks pocket the interest. (Although they don't necessarily do anything useful with it except add it to national reserves.)

But the problem is that the banks and hedge funds have been running similar schemes themselves, lending and relending money and otherwise 'creating value' that isn't secured on anything except hope and wishful thinking. That money then stays in the system for much longer periods, which certainly does distort real value in an inflationary direction, creating some profitable but unstable bubbles.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Dec 29th, 2007 at 12:10:55 PM EST
[ Parent ]

Re: Kudos, Jerome (4.00 / 4)

gobacktotexas:

It seems strange that this fact is not more highly publicized....

It is infuriating that people who should know better speak in terms of "printing money". Cash gets printed. But if you think of the fraction of the money in your bank account that you have in cash at any given time, and how long the actual cash (as opposed to plastic) you spend takes to make it back to some bank you will realize that banks only need a small amount of cash compared to their clients' deposits. Moreover, if an ATM runs out of cash that doesn't trigger a panic. We say "oh, well" and go to another ATM, possibly belonging to another bank altogether.

....our banking system is being propped up by a fiction.

That fiction is called fiat money. When something is done by fiat it is done just because I say so. So money has a value just because the government says so. The way this happens is that the (for instance, US) government prints on its (dollar) bills something to the effect of "this note is legal tender for all debts, public and private". In other words, you have the right to have your paper money accepted in lieu of payment and if it isn't the government can get involved.

This is not as odd as it seems. In the past when money was on a precious metal standard there have been times when due to debasement people stopped accepting the coins minted by the government and the government was forced to actually enforce the use of its money. This happened in England in the late Middle Ages.

Our whole economy rests not so much on fictions but on consensus and expectations, and it is unclear to me that fiat money is responsible for that. Any economy will be based on consensus as to the value of things, and expectations as to the future consensual value of things. Why do you think consumer confidence is considered an important economic indicator?

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 12:48:45 PM EST
[ Parent ]

Re: Kudos, Jerome (4.00 / 4)

Oh, one more thing.

The "fact" that the monetary system rests on "a fiction" is not widely publicised because if it were widely known it would lead to a monetary crisis caused by lack of public confidence. People would think money is worthless, and there would be a "flight to quality" in which people would try to convert as much money as possible into "hard assets" (gold, mostly, at least initially) as quickly as possible. But if everyone is trying to do this, those who have gold won't sell it for cash, and even if they do the price of gold would go through the roof.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 12:59:18 PM EST
[ Parent ]

Re: Kudos, Jerome (4.00 / 5)

But you can not eat gold. So you have to trade it for food and pay a sales tax in government money bought by selling gold. And most of us are not independently wealthy so we have to use what means of production we have (land, labor, machinery) to earn a living, and those means of production are taxed. Again government money is needed, even if you barter. And if you do not the taxman hands the case over to police and judicial system.

Confidence is the foundation. Taxation in government money (and police and punishment to uphold taxation) is a feedback mechanism that keeps the foundation solid.

Btw, the fall of western rome and the shift from money economy and taxation to barter and taxation in kind, should say something interesting about this, though I have not quite formulated it.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sat Dec 29th, 2007 at 04:35:56 PM EST
[ Parent ]

Re: Kudos, Jerome (4.00 / 2)

Even with hard assets the system is rigged for the commoner. It is difficult in most countries for a person to acquire or sell hard assets over the board at the daily fixed rate. Other than taxes, he'll pay extra or be shortchanged, usually with the excuse of an unlikely risk factor.

by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Sat Dec 29th, 2007 at 04:40:30 PM EST
[ Parent ]

Re: Kudos, Jerome (none / 1)

typo?

Did you mean "the system is rigged against the commoner?"

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Dec 29th, 2007 at 09:31:19 PM EST
[ Parent ]

Re: Kudos, Jerome (none / 1)

You're write! It's a mistake.

by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Sun Dec 30th, 2007 at 02:40:06 AM EST
[ Parent ]

Re: Kudos, Jerome (none / 1)

There's been quite a bit in recent threads about this.

In Zimbabwe we see inflation caused by the combination of unconstrained printing of money by the Central Bank combined with a fiscal deficit.

The money printed by a Central Bank to maintain liquidity as now will not directly cause inflation if it is used to repay existing bank debt as in the Northern Rock case.

Every pound created essentially extinguishes one pound of existing "money as debt" issued as a loan by the relevant bank.

What could happen is that banks re-start the lending binge on the basis of replenished reserves, and that takes us down the asset price inflation path again. Retail price inflation is another issue entirely, and IMHO largely a fiscal phenomenon.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 01:28:15 PM EST
[ Parent ]

Re: The blogs told you so (4.00 / 7)

On the other hand, you were just a few days ago reminding us about the scam of making market predictions to sub-groups and then concentrating on those groups where your predictions were correct.

How do we know you aren't on some other blog making predictions that oil-based energy will be too cheap to meter, or that climate change is the result of too few pirates? :-)

by asdf on Sat Dec 29th, 2007 at 10:59:54 AM EST

Heh (4.00 / 3)

Good point!

I have tried to be as systematic as I could in identifying all the Greenspan-related diaries on ET or that I wrote on dKos. I'm hoping to do the same on energy and on inequality in the near future.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Dec 29th, 2007 at 11:02:10 AM EST
[ Parent ]

Re: The blogs told you so (4.00 / 2)

I told you you were right...

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Dec 29th, 2007 at 11:04:25 AM EST

Trackrecord (4.00 / 4)

Maybe our track record will speak for us now?

One may certainly hope so. But most of the time prophets of doom are ridiculed until their predictions come true. Then they are run out of town.

by generic on Sat Dec 29th, 2007 at 11:19:21 AM EST

Re: Trackrecord (4.00 / 5)

We're just not serious enough.

But then again - it's not the job of the existing serious pundits to be right, but to write the right kind of nonsense.

When the political establishment is delusional, writing nonsense is seen as reflecting reality accurately, and reflecting reality accurately is seen as writing nonsense.

It's really quite Soviet in its circularity and closed-mindedness.

Unfortunately the problem isn't being right, it's having a loud enough voice to start changing the establishment narrative.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Dec 29th, 2007 at 12:20:34 PM EST
[ Parent ]

A core point (4.00 / 6)

it's not the job of the existing serious pundits to be right, but to write the right kind of nonsense.

Our job - or more precisely our politicians' job - is to change what constitutes 'the right kind of nonsense', ie what is conventional in our societies. This is about influencing deep-seated assumptions of a society, and it can only be a long term plan.

Our job is to get the ideas in the open, get them repeated enough and absorbed, and then fronted by politicians, unitl they become part of the fabric.

But pundits dfo play a role there by influencing discourse in one direction or another, or in cementing what the conventions on any new topic are going to be.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Dec 29th, 2007 at 02:53:47 PM EST
[ Parent ]

Re: A core point (none / 1)

You are absolutely right.

And among the "right kind of nonsense" that it is essential to change are the two root causes of our problems:

(a) Banks as money-creating intermediaries, rather than service providers;

(b) the toxic legal form known as the."Corporation".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 04:43:36 PM EST
[ Parent ]

Re: A core point (none / 1)

Indeed.

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Sun Dec 30th, 2007 at 02:58:00 AM EST
[ Parent ]

Prophet of doom (4.00 / 6)

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Dec 29th, 2007 at 11:29:07 AM EST

Re: Prophet of doom (4.00 / 7)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Dec 29th, 2007 at 11:31:01 AM EST
[ Parent ]

Re: The blogs told you so (4.00 / 11)

The most important factor in the perspicacity of your arguments IMHO, (apart from your education and experience) is that, unlike almost all mainstream media, you do not have to deliver an audience to advertisers, and thus you do not have to pander to an audience in order to retain their loyalty.

The Fourth Estate "refers to the press, both in its explicit capacity of advocacy and in its implicit ability to frame political issues". What we must ask now is advocacy and framing on whose behalf?

And, while the term Fifth Estate has been used to describe any class or group other than the clergy, the nobility, the middle class and the press, it has included 'trade unions, the poor, organized crime, German propaganda and spies during World War II (by the French). It can also be used to describe media that sees itself in opposition to mainstream (Fourth Estate) media.

The world that Thomas Carlyle described 150 years ago no longer exists in the W*st, though it may still describe some non-W*estern societies. And yet there remains a deal of nostalgia for it in the W*st. 78% of Brits recently polled wished to retain the monarchy. They also regularly vote by purchase for a pacified soundbite tabloid vision of society that bears little relation to reality.

It has been a long time since the last great intellectual upheaval in our society. In the Fifties and Sixties (lead, I believe, by the French) the Establishment was rigorously challenged. It is time to rechallenge the now morphed Establishment, and it is fine by me if it is again lead from France. However I believe the seeds of that new challenge lie in the whole of Europe.

You can't be me, I'm taken

by Sven Triloqvist on Sat Dec 29th, 2007 at 11:42:21 AM EST

Reposting this from the Salon (4.00 / 9)

Paul Krugman - Op-Ed Columnist - New York Times Blog - Housing: How far is down?

More bad housing news this morning. The question remains, how far is down?
Below are two pictures. The first is the CBO's estimate of the housing-rent ratio -- the ratio of home prices to an estimate of the rental rate on equivalent properties. It's comparable to the PE ratio on stocks. What you see is that it fluctuated in a relatively narrow range until this decade, then took off for the wild blue yonder.

Well, one thing has changed: interest rates, including mortgage rates, are lower, in large part because of huge capital inflows from China and other countries. Here's the chart:

So I come down to the view that the price-rental ratio will have to move most if not all the way back to historical norms. And that's a long, long way down.
PS: Aha. For really long historical perspective, the Shiller price index corrected for inflation.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sat Dec 29th, 2007 at 11:54:28 AM EST

Re: Reposting this from the Salon (4.00 / 3)

Yikes.

...Although I'd guess that's corrected for the hand-wavey Fed inflation stats, and not consumer price index inflation. Taming that slightly would make the change less extreme - probably down to around 50-60%.

So allowing for an overshoot there's room for a 60% correction, settling down to 40-50% over the next year or two.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Dec 29th, 2007 at 12:16:26 PM EST
[ Parent ]

Re: Reposting this from the Salon (4.00 / 3)

California's median house price is over $500k. That would be way out in left field in Los Angeles or San Francisco, taken by themselves, by for a statewide median to reach that level is truly frightening. South Florida and the Southwest are hip-deep in it, too.

And just wait until the local governments start going bankrupt. Some already have, but the shit doesn't seem to have fully hit the fan yet.

On the other hand, if you live in Southeast and the near-Southwest, you're probably going to see prices fall a bit -- and I think they have now fallen very slightly -- in the panic, but the fundamentals in those places really are fine, as far as I can tell, and they've enjoyed booms that were actually based on development (with weird things like wage increases) rather than solely on binge-borrowing. Nobody's going to lose or gain much there, unless, of course, the Deep South manages to run out of water, in which case there might be a bit of a problem to deal with.

There's a fair bit in between, too, in places like Philly and Chicago, which are inflated but not to the obscene levels of the Northeast/New England area and the West Coast.

My sense is we'll see a 30% correction nationwide, with 50-60% corrections in the real fuck-up towns. Needless to say, it's a bad time to own in Miami.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Dec 29th, 2007 at 02:13:37 PM EST
[ Parent ]

Bias? (4.00 / 4)

Drew J Jones:

Reality has a well known liberal bias.

Ah but God is a Conservative....

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 02:50:45 PM EST
[ Parent ]

Re: Reposting this from the Salon (4.00 / 2)

Thus the graph therefore imply a halving of house prices from peak until the historic rent/price ratio is reattained?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 12:39:01 PM EST
[ Parent ]

Re: The blogs told you so (4.00 / 2)

Ok Jerome. So why are you still here and why haven't you made a fortune as an investment banker? Or can you only predict disasters? Where would you put your money, if you had it, NOW? I don't mean the obvious stuff - alternative energy companies etc.

Cui bono if you are a prophet in the wilderness? Why not be a profit in cyberspace? Investers, pension funds etc. have to put their money SOMEWHERE. They are relying for advice on people with the same training and access to information as you. Bankers, brokers have an obvious vested interest in talking up their "investment vehicles".

Small investors don't have the luxury of funding or the ability to identify genuinely disinterested "advice". There are probably loads of websites out there giving such advice but who knows their provenance?

How about an ET Ethical investors forum?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 01:00:25 PM EST

Re: The blogs told you so (4.00 / 2)

Frank Schnittger:

Ok Jerome. So why are you still here and why haven't you made a fortune as an investment banker? Or can you only predict disasters? Where would you put your money, if you had it, NOW? I don't mean the obvious stuff - alternative energy companies etc.

Sigh...

Why do people think that making predictions of future gains is what finance is about? It's actually about managing risk, not about predicting returns, unless you're Warren Buffet.

And Jerome already finances investments, just not with his own money.

I mean, who here has wealthy enough to "put their money where their mouth is", anyway?

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 01:07:35 PM EST
[ Parent ]

Re: The blogs told you so (4.00 / 2)

Hopefully most of us have some sort of pension provision (especially those of us who live in countries with inadequate social welfare provision). Some may even manage their own pension fund, and if you have to live on the proceeds you need to get some handle on upside opportunity as well as downside risk.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 01:16:48 PM EST
[ Parent ]

Re: The blogs told you so (none / 1)

I mean, who here has wealthy enough to "put their money where their mouth is", anyway?

Anyone who has more than €3000 in the bank?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Dec 29th, 2007 at 04:51:49 PM EST
[ Parent ]

Re: The blogs told you so (none / 1)

I'm way more risk-averse than you are, clearly.

A gain of in the low hundreds of euros per year doesn't make risky investment worthwhile.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 06:51:50 PM EST
[ Parent ]

Re: The blogs told you so (none / 0)

Of course, it depends on how good the social security system is in your country, the weaker it is the bigger your cash reserve have to be. And if you have children you need a bigger reserve, maybe an extra €1000 per child. This reserve is to be used for unexpected costs only.

If you are saving for something else, like vacation or a car or something, then shares are obviously a bad idea. But for longer term savings, 5+ years I see no reason to be in bonds instead.

How much would you have in bonds/defensive hedge funds/cash before entering the stock market?

Granted that you were not believing a recession/TEOTWAKI is coming.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Dec 30th, 2007 at 04:23:12 AM EST
[ Parent ]

Re: The blogs told you so (none / 1)

Not only the risk investment, but also the time investment needed to make a proper entry into the stock market. The kind of information getting and analysing needed is too long for getting only a few hundred €'s.

There's some bloggin' to do after all...

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sun Dec 30th, 2007 at 04:27:28 AM EST
[ Parent ]

Re: The blogs told you so (none / 0)

The usual way of dealing with that is by having an automatic monthly investment in a mutual fund (hint, hint, possibly a certain Norwegian one...). Maybe €30-€300 depending on how big monthly surpluses you have after all expenses.

And if you have a big sum to invest, you should gradually be moving from bonds to shares over a period of several years.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Dec 30th, 2007 at 04:40:44 AM EST
[ Parent ]

Re: The blogs told you so (none / 1)

That rules me out . . . :-(

by Zwackus on Sun Dec 30th, 2007 at 11:30:37 AM EST
[ Parent ]

Re: The blogs told you so (none / 1)

How about Jerome starting his own ET hedge fund? ;)

* taking cover *

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Dec 29th, 2007 at 04:15:09 PM EST
[ Parent ]

Re: The blogs told you so (none / 1)

Fer chrissake, as if the information alone wasn't worth its weight in gold.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Sat Dec 29th, 2007 at 06:23:37 PM EST
[ Parent ]

Re: The blogs told you so (none / 1)

Your diagnosis has been spot on: Congratulations.

Now for the $64 trillion question.

Money as Debt got us into this position: how is Money as Debt going to get us out of it?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 01:09:03 PM EST

As you know, I disagree with you (4.00 / 2)

The problem is not money as debt, it is poor risk-taking (which transforms debt as money into unpaid debt as inflation)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Dec 29th, 2007 at 01:57:59 PM EST
[ Parent ]

now I'm confused (none / 0)

Jerome a Paris:

The problem is not money as debt, it is poor risk-taking (which transforms debt as money into unpaid debt as inflation)

Surely the result of unpaid debt (i.e. loan defaults) is asset deflation as loads of assets (e.g. houses) on which the loans were secured go on the market?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 02:04:11 PM EST
[ Parent ]

sorry (4.00 / 4)

I was jumping ahead, thinking about a bailout and thus inflation.

As I wrote elsewhere in the thread, there are two outcomes to bad risk taking: losses for the shareholders, or losses to the community via a bailout paid either by taxes or by printing money (inflation). Bank crises, due to their systemic nature, usually require public intervention.

The outcome will be, I expect, inflation - or, more explicitly, wage deflation, as the poor are "taxed" by inflation to cover up the systemic losses created in fucking them over the first time. Asset deflation (mostly housing deflation) will be part of the hit for the middle classes - given that financial assets will be to a large extent bailed out for "systemic" reasons.

Sounds sucky? it is.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Dec 29th, 2007 at 02:59:12 PM EST
[ Parent ]

Re: sorry (none / 1)

The middle classes will take a hit on house price deflation, and that - coupled with high rates on mortgages (increasingly decoupled from Central Bank rates) will cut household spending.

Which isn't inflationary.

What may be inflationary for the US is a collapse in the dollar against other currencies and "money's worth" such as oil.

Retail inflation as far as I can see is bugger all to do with monetary policy and everything to do with fiscal policy.

I don't see how Central Banks bailing out clearing banks can possibly be inflationary, but I can see how not doing it could be deflationary.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 03:54:56 PM EST
[ Parent ]

Not so sure (none / 1)

ChrisCook:

The middle classes will take a hit on house price deflation, and that - coupled with high rates on mortgages (increasingly decoupled from Central Bank rates) will cut household spending.
Which isn't inflationary.

The middle classes have to spend more on mortgages and so have less to spend on other things. The first effect is inflationary, the second is deflationary, but the NET effect is surely inflationary because the middle classes are getting less value (i.e. same housing plus less other goods) for the same overall amount of money.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 05:12:17 PM EST
[ Parent ]

Re: Not so sure (4.00 / 2)

As far as I know housing costs aren't included in the usual inflation stats because if it were, then an interest increase would be directly inflationary for everyone with a mortgage.

Which is what you imply.

The financial system is, first of all, not what most people think it is, and secondly, quite literally insane.

Credit (or "time to pay") is what makes the economy go around, and has a cost, consisting of system costs and default costs.

Capital (consisting of ownership of productive assets) also has a cost - which is the market price.

But Money has no cost unless it is the bank-created "Money as Debt" created by banks and based upon a tiny amount of value.

This "Money as Debt" is unsustainable mathematically due to the operation of compound interest on the money supply.

We have to have something else, which IMHO will be forms of "money's worth" such as land rentals or energy units changing hands within a "Clearing Union" and subject to a mutual guarantee of the necessary credit.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 05:51:14 PM EST
[ Parent ]

Re: Not so sure (none / 0)

ChrisCook:

As far as I know housing costs aren't included in the usual inflation stats because if it were, then an interest increase would be directly inflationary for everyone with a mortgage.
Which is what you imply.

The Irish Consumer price index (CPI) includes mortgage interest costs but the European Harmonised index of inflation dos not. There is therefore a significant difference between the two at times of rising or lowering interest rates which averages out over the interest rate cycle. Whichever way you measure it, however, interest payments are real costs which have real impacts on disposable income and impact on the average price people pay for their housing and other needs. Rising interest rates are therefore inflationary - whether reflected in the official stats or not.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 07:27:12 PM EST
[ Parent ]

Re: Not so sure (4.00 / 2)

It's more than just direct inflation.

We constantly have ground in by the MSM the "fact" that rises in wage costs are a cause of inflation.

But a rise in financing costs is clearly OK, and naturally to raise prices to maintain or lift profit margins is not inflationary....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 08:21:34 PM EST
[ Parent ]

Re: Not so sure (none / 1)

Ah no - rising finance costs, and prices are inflationary, but they are simply governed by "the laws of supply and demand" and are therefore auto-correcting as supply rises in response to increased demand/prices.

Now wage rises, they're a different kettle of fish entirely, they're a distortion of the market caused by those big bad unions and will thus lead to loss of competitiveness and increased unemployment.

Please get your lines right!

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 09:22:06 PM EST
[ Parent ]

Re: As you know, I disagree with you (4.00 / 2)

The poor risk-taking was enabled and abetted by the obscene paper profits made through manipulating money-as-debt.

This isn't something that 'just' happened in 2007, out of the blue. It happened in 1929, 1967, throughout the 1970s (Stagflation Period), the Volker 'recovery' in the 80s, the Savings & Loan Collapse in the 80s, the Internet Bubble of the 90s, and here we are today.

It's inherent in the nature of the beast.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Dec 29th, 2007 at 02:30:39 PM EST
[ Parent ]

Re: You have polarity reversed (4.00 / 2)

I really don't know where you get this from. Unpaid debt doesn't cause inflation. It causes deflation.

The Crash of 29 saw debts unpaid on a huge scale and a massive reduction in money supply as a result.

Result, Depression. Not inflation.

In Japan we saw massive insolvency and money destruction. Again, no inflation but a bout of deflation that is still hanging around.

Asset price inflation is caused by base-less credit creation, as now. It would be possible for this to leak out into retail inflation via equity release, but in fact what has happened in the Greenspan Bubble is that, as you identify, people have kept on consuming through taking on debt, despite being gradually impoverished in income terms by the returns from growth flowing to Capital rather than Labour.

The principal cause of inflation is fiscal, and caused by excessive printing of money by Governments (cf Zimbabwe) - who make matters worse by adding an unnecessary interest burden by routing money creation through a redundant Central Bank as intermediary.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 03:28:17 PM EST
[ Parent ]

Re: The blogs told you so (4.00 / 3)

Using money-as-debt to solved the problems created by money-as-debt is exactly same as trying to open a box with a crowbar inside the box.

Can't do it.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Dec 29th, 2007 at 02:02:04 PM EST
[ Parent ]

Kos Reaction (4.00 / 4)

Quite a love-fest for Jerome going on at the Orange Place.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Dec 29th, 2007 at 04:01:26 PM EST

Permanently available (4.00 / 3)

It would be great if these lists of previous diaries on a theme (perhaps with a short summary) were somehow permanently and prominently accessible on the front page of the site. I know there are archives - but casual or impromptu visitors (journalists for instance!) will not go searching. Knowing about blogs, they will scan the FP, recommends and recents. They might find something that will keep them looking, but our front page and diary lists at any one time present many different snapshots of the ET profile.

The real, complex profile of ET is only understood over time: the news, community, technology, humanities, arts or entertainment diaries are necessary IMO to sustain the community from week to week. The dynamics change from day to day. Regular users are aware of these fluctuations, but also that almost all agree and hope that ET could be an instrument of social change in the wider society.

To help achieve that, we need journalists to use ET as a resource and a source for stories. As ET is linked more often and more widely, and Jérôme's public appearances increase, more journalists will visit to see what it is all about.

All I am saying is that we should think about the content and priorities of the Front Page to better lure in journalists. And the many diaries that are in these themed lists could give a consistent 'instant' profile' that show the depth of the community on particular expert issues.

I understand the necessity also to attract new members, and the FP is important for that purpose. But the raison d'être for this community is change. We can do it one member at a time, write LTE's, goad the EU bureaucracy, or appear on soundbite TV. IMO giving new narratives to turnable journalists is a very good way of reaching a lot of people fast. Our FP is not narrative based. If these journalists do visit, they need to find a narrative or two fast. As I've said before - one has about 2 seconds to 'capture' a visitor to a website. What does our 2 seconds look like?

You can't be me, I'm taken

by Sven Triloqvist on Sat Dec 29th, 2007 at 07:11:01 PM EST

Re: Permanently available (4.00 / 2)

Heh, for once I can fully agree with you.

One of the reasons for putting up these lists in indeed to have them easily accessible. The hardest bit has been done, now we just need to put them somewhere visible (or easily reachable), and update them as relevant...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Dec 29th, 2007 at 07:14:55 PM EST
[ Parent ]

Re: Permanently available (4.00 / 2)

As you know I have created "Table of Contents" stories visible only to the Frontpagers for "Socratic Economics", "Gnomemoot" and "Anglo Disease".

I can create "Table of Contents" stories based on the lists you have here, and post them in the Debates section, if you want.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 07:21:21 PM EST
[ Parent ]

Re: Permanently available (4.00 / 2)

It needs a new section called something like Indexes instead.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Sat Dec 29th, 2007 at 07:26:08 PM EST
[ Parent ]

Re: Permanently available (none / 1)

That can be arranged.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 07:26:53 PM EST
[ Parent ]

Re: Permanently available (none / 1)

Let me know when you get started. I've got some ideas regarding regarding the Information Base organization.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Dec 29th, 2007 at 09:38:56 PM EST
[ Parent ]

Re: Permanently available (none / 1)

You migh as well just e-mail me now.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Dec 30th, 2007 at 05:54:37 AM EST
[ Parent ]

Re: Permanently available (none / 1)

Oh yeah, "Indexes" is sooo sexy! ;-)

You can't be me, I'm taken

by Sven Triloqvist on Sat Dec 29th, 2007 at 07:40:49 PM EST
[ Parent ]

Re: Permanently available (none / 1)

It should be indices.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sat Dec 29th, 2007 at 07:41:15 PM EST
[ Parent ]

Re: Permanently available (none / 0)

Even sexier! Sure to pull in the crowds.

You can't be me, I'm taken

by Sven Triloqvist on Sat Dec 29th, 2007 at 07:42:32 PM EST
[ Parent ]

Re: Permanently available (none / 1)

Allright, "Indicies with added sex"

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Sat Dec 29th, 2007 at 08:06:17 PM EST
[ Parent ]

Re: Permanently available (none / 0)

"Indices which can launch WMD's within 45 minutes".

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Dec 30th, 2007 at 04:21:07 AM EST
[ Parent ]

Re: Permanently available (4.00 / 2)

The important thing is instant visibilty of these for journalists. Even a big red button saying 'MEDIA' that linked to the list tree and summaries might do the trick ;-)

You can't be me, I'm taken

by Sven Triloqvist on Sat Dec 29th, 2007 at 07:36:34 PM EST
[ Parent ]

Re: Permanently available (4.00 / 2)

I also think we should have a short statement under the logo that is ET in a nutshell. That is going to be quite hard to agree upon, but it would be worth the effort. We have experts in this too.

You can't be me, I'm taken

by Sven Triloqvist on Sat Dec 29th, 2007 at 07:25:48 PM EST
[ Parent ]

Why don't you (none / 0)

provide a first draft? It's your idea after all. Run with it!

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Dec 29th, 2007 at 07:45:36 PM EST
[ Parent ]

Re: Why don't you (none / 0)

OK

You can't be me, I'm taken

by Sven Triloqvist on Sat Dec 29th, 2007 at 07:47:06 PM EST
[ Parent ]

Re: Permanently available (4.00 / 2)

I agree wholeheartedly.

We would need only a few links, say one for each theme, which then immediately linked (via a brief intro?) to thematic lists of Diaries.

A sort of Diary ontology, I guess.

Migeru?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Dec 29th, 2007 at 07:20:59 PM EST
[ Parent ]

Re: Permanently available (4.00 / 2)

Having designed Information Systems (about eleventy-million times) I suggest we need to establish the Goal and then work on the Process.

The first step in deciding on the Goal is to determine the intended audience; in short: Who is we After?

Intimately bound into this is the question: What purpose/reason will Who come here?

In Biz-Speak: who's the target market, what's the product?

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Dec 29th, 2007 at 10:09:06 PM EST
[ Parent ]

Re: Permanently available (none / 1)

And having done so we need to decide on the information architecture which best fulfills that goal. In other words what are the key themes, sub themes, etc. that will appeal to our target audience and which we can populate with stories, archival material, and new material as it is produced.

Thus if I am a political reporter researching a piece on alternative energy, how do I find the relevant material - by free text search, by navigating down a hierarchical folder list - Energy->Alternative->Wind->offshore and how do I get a quick overview sense of he range of material available - a "library catalogue" of sorts...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 10:29:47 PM EST
[ Parent ]

Re: Permanently available (none / 0)

Scoop supports all this.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Dec 30th, 2007 at 06:09:34 AM EST
[ Parent ]

Re: Permanently available (4.00 / 2)

I agree with you and the goals, but we must take into account some of the features that characterize ET:

_ it is a community based on collaborative thinking, so the "product" and the "process" are the same thing unless there is a summary made afterwards. That means a new architecture should not hinder the dynamics of exchange and the conviviality of the community.

- we are working on a voluntary basis: we write diaries and comments according to what motivates us. That means we should not let the "marketing" lead our reflections/exchanges.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sun Dec 30th, 2007 at 08:41:15 AM EST
[ Parent ]

Re: Permanently available (none / 1)

The "market" and "product" are external to ET and should - I trust - have no impact on the way we do things. It really shouldn't. ET, as it is now, is the 'sensory input' and knowledge processing side. There is no reason to change it and every reason that we shouldn't change it.

That's our Value Added.

The Information Base is the persistent memory of ET. An Information Base, properly designed, is a repository from which data/information/knowledge can be easily and rapidly accessed. Given available technology "easily" and "rapidly" requires a fairly solid idea of Who is going to be looking.

BTW, 'Who' is plural. ;-)

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Dec 30th, 2007 at 12:47:16 PM EST
[ Parent ]

Re: Permanently available (none / 0)

I think if we were in the business of creating an information base we would have a mediawiki.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Dec 30th, 2007 at 01:32:30 PM EST
[ Parent ]

Re: Permanently available (none / 1)

An Information Base is what we're constructing. The Functionality (what's going in the IB and how stuff is retrieved) of the IB is what we're discussing.

My position: Let's go Crazy and Blue Sky what we would like and then pare down to what we can do.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Dec 30th, 2007 at 01:51:39 PM EST
[ Parent ]

Re: Permanently available (none / 0)

I think the issue here is that regular users tend to use the recommended diary list and the recent comments, and so the Front Page is an underutilised resource. So, I don't see anything wrong with gearing it towards an external audience.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Dec 30th, 2007 at 01:33:39 PM EST
[ Parent ]

Re: Permanently available (none / 1)

Well, I think there are different ways to use the ET interface. I, for one, don't use the recent comments frequently.

However, I'm not against formatting the front page to make it a more newcomer-friendly one.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sun Dec 30th, 2007 at 02:22:06 PM EST
[ Parent ]

Re: Permanently available (4.00 / 2)

Re: Hierarchical Folder List

ACK!

No. No. No. No. No.

Users hate them things. And rightfully so; they are annoying, time wasting, frustrating PsOS.

With a little more effort a much better Human Interface can be constructed.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Dec 30th, 2007 at 01:01:15 PM EST
[ Parent ]

Re: Permanently available (4.00 / 2)

As a new user I must say I find that I never use the front page and am a bit unclear as to why there is a separate Front page and Diary section. The Open threads and European Salon de News, Discussion et Klatsch are the sort of more informal stuff you would expect to find in a diary section.

The Home and Frontpage sections of most websites are the shop window which highlight all the main features, important stuff, site maps, tables of content, and semi permanent content which is used for navigation around the site. It should give an overview of the scope and content of the site and be visually appealing, intellectual stimulating, and emotionally exciting!!!!!

At the moment it looks awful, is very wordy, fussy, content rich but confusing and with an awful lot of Klatsch which is great if you're an ET groupie but a little bit strange and off putting to the new or casual visitor who is wondering what the site is all about and what resources and functionality the site has to offer. Is it a chat site or a serious intellectual resource? (Of course it's both, but the chat itself shouldn't be on the front page - a link would suffice to emphasise the participative community nature of the site).

It comes across as very interactive, which is great, but it is difficult to separate the chat from the really authoritative, serious stuff, which perhaps explains why (if) ET isn't taken very seriously by MSM.

Otherv features which would be of interest is on-line stats of page hits per day, who is currently online, number of unique users per day etc. because otherwise it is hard to tell whether it is a site for a couple of dozen inveterate hobbyists or a serious and widespread community.

Otherwise its just great!

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Dec 29th, 2007 at 07:47:27 PM EST
[ Parent ]

Re: Permanently available (4.00 / 3)

I think this site is quite noticed by the MSM, though not yet at the level of sourcing. But the frame of the debate may well be changing. Based upon personal experience.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Sat Dec 29th, 2007 at 08:01:33 PM EST
[ Parent ]

Re: Permanently available (4.00 / 3)

As I said above, the community is also the "production tool" of ET. Thus maintaining and developing it is essential. The Open threads and European Salon de News, Discussion et Klatsch are the place where the community create bonds that are a prerequisite for the quality of debates.

That doesn't mean that we shouldn't try to separate the informal/humorous exchanges and digressions from the more "on the point" comments, but the spontaneity should be preserved.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sun Dec 30th, 2007 at 09:09:15 AM EST
[ Parent ]

Re: Permanently available (none / 0)

Wouldn't we need both a "best of" linking to maybe 10 or 20 stories, that would be about the main subjects we breach on EuroTrib, and also apply topics or keywords to each diary, for ease of sorting and access ?

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sun Dec 30th, 2007 at 06:40:41 AM EST
[ Parent ]

Re: Permanently available (none / 1)

The indices box has been created.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Dec 30th, 2007 at 07:20:12 AM EST
[ Parent ]

Re: Permanently available (none / 1)

It's great that you have done this, but it isn't the real solution. To work as it should, in the short capture time needed for journalists, it has to be very 'user friendly'. What you have done is to create a new resource for existing members who are already aware of the visual field of the layout and can learn to navigate through its foibles it over time.

However I am thinking about the short statement under the logo, and in due course will have some scoop-implementable suggestions for the FP.

You can't be me, I'm taken

by Sven Triloqvist on Sun Dec 30th, 2007 at 08:04:46 AM EST
[ Parent ]

Re: Permanently available (none / 0)

No, it's not the solution but it's a baby step. Point out the next step and it will be implemented.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Dec 30th, 2007 at 08:08:29 AM EST
[ Parent ]

Re: Permanently available (none / 0)

I was thinking about a left-hand box that would have at most a dozen stories that would be a "best of", and covering a width of subjects that would define what's talked about around here. A sort of "read those first" quick introduction and mission statement. Of course, identifying those stories and diaries is quite some work in itself...

Also, Scoop already has topics (say, energy, inequality, astrology) that could first be added by the diary writer and/or front pagers to new diaries. It could be possible to add topics after a discussion in the open thread or in a salon, to be able to remember and classify those discussions.

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sun Dec 30th, 2007 at 08:26:05 AM EST
[ Parent ]

Re: Permanently available (none / 0)

Scoop has sections and topics.

Sections include Diaries, News, Indices and Debates. Only Frontpagers can post things other than Diaries (called "Stories"), but that can be changed with a clich of a mouse, so it is open to debate. New sections can be created. They can also be eliminated and all the existing content added to a existing section. Sections can be nested. Right now they are all top-level but they needn't be.

Topics are selected in the story/diary edit form. They include Everything, Diary, Economy, Energy, ET Community, Europe, International, PDB and USA. Topics can be added or eliminated as well. I believe PDB is an old occasional series written by soj back when they were a frontpager.

People could select an appropriate Topic for their diaries or we FPers could do it. This way of classifying content has been superseded by tags in more modern blogging practice, but that's the way SCOOP works.

Boxes can be made to display the latest N stories in any topic/section. A box could also be created with links to the various sections or topics.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Dec 30th, 2007 at 08:34:39 AM EST
[ Parent ]

Re: Permanently available (none / 1)

There are a bunch of scoop sites where tags have been grafted on. I believe it is in the CVS now. I don't know if that helps, but just so you know.

by Metatone (metatone [a|t] gmail (dot) com) on Sun Dec 30th, 2007 at 02:19:37 PM EST
[ Parent ]

Re: Permanently available (none / 1)

There is a certain amount of thought required even to make a draft suggestion. I can't do it today. And I hope that everyone will have a chance to comment before action is taken.

The audience concerns we have to address IMO are :

Visiting media. These will be hit-and-run journalists who have seen ET mentioned in some form elsewhere and come to check it out. They need to get an instant FP feel for the key themes, and the depth, quality and richness of the content if they stay to explore. But they need to find the main narratives very fast. The visual 'imprinting' has take place in 2 seconds. They are uninterested in community. But we are very interested in them.
Visiting experts. They come because of a particular interest (eg Wind Energy) via a link or a story elsewhere. They need to find links to their subject quite fast. They are also not interested in community because they probably have a specialist community of their own. We also need to link expert communities together for finer grain resourcing, so making contact is important.
Visiting bloggers. These visitors know how blogs work. They will sample content and if they like it they might stay. Our increasing use of visuals is IMO a good way of increasing visits. The number of members/page views is not important in the short run, but does build the reputation of ET. However the number and richness of comments is important on a daily basis. The New User Guide is important for them.
Lurkers. I believe most long term lurkers remain because of the content. But ET can be a forbidding place in its intellectual intensity, and make it hard for some to join in. I doubt if we can do anything about that. Changing the look and feel of the site is not going to influence them.
Members. Some are occasional, some regular, some go off on sabbaticals ;-) The uniting factor is the desire for change in the RW and some pride in belonging to a community that promotes change.

There are subsets of members, but the FP is not an issue. Different tools could be improved though, and we must thank eg Someone for showing us that there is still life in Scoop

You can't be me, I'm taken

by Sven Triloqvist on Sun Dec 30th, 2007 at 08:48:44 AM EST
[ Parent ]

Re: Permanently available (none / 1)

I'm wondering about the concept of identifying a "best of" ET, that would be narrower that the indices ; it would be useful for the first two categories, and possibly interesting for Lurkers and Members, who haven't been here for such a long time, and may be interested in discovering older stuff they may have missed . It already exists in the wiki, but that one seems to have fallen out of use (Is it the right tool for the job ? Is it too hard to access ?).

Would there be interest in identifying such a list ?

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sun Dec 30th, 2007 at 09:05:16 AM EST
[ Parent ]

Excellent ecology of visitors (none / 0)

This is a good base to work on. And I understand that your goal is to find a way to make the front page more friendly to the first two categories, and to "hook" them convincingly. and i support that goal, obviously.

One idea I'm throwing here would be to have a box (maybe called "resources") with a small number of items, which would link to specific pages - either a diary if a comprehensive one already exists (like the one on the French economy written with afew), or a series of selected diaries, ideally with a short summary there. I can think of the following headline topics (in bold a shorter selection)

on European energy
on relations with Russia
on Iran
on NATO and Atlanticism
on the Anglo Disease
on "reform"
on bubbles Greenspan
on Peak Oil
on energy technology
on inequality
on unions
on object blogging (train, clock, bridge, wind farms)
on the European Union
on the media
on election coverage
on sustainability

(not a preferred list, or a complete one, just things that come to my mind and presumably reflect my interests rather than that of the whole community for now, so to be updated)

A separate box could be the one suggested by linca above, with the same for topics of more interest to the community (photoblogging, etc...)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Dec 30th, 2007 at 10:25:41 AM EST
[ Parent ]

Re: Excellent ecology of visitors (none / 1)

I think it's a good idea. I would add: "on GDP and other economic figures" and "on Unemployment". I also think we should adapt some titles: for example, "Anglo-Disease" makes sense to those who have followed the series, but doesn't speak to newcomers. "on the Financial Crisis" would be better.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sun Dec 30th, 2007 at 10:39:28 AM EST
[ Parent ]

Re: Excellent ecology of visitors (none / 0)

Along with this could be a Kos-like tag system, wherein new diaries are tagged according to the appropriate topic. Then, in addition to the short selection of top diaries, there could be a link to current diaries with the current tag, or something to that effect.

by Zwackus on Sun Dec 30th, 2007 at 11:29:36 AM EST
[ Parent ]

Re: Excellent ecology of visitors (none / 1)

Yes. It is really about bringing the wiki element ('accumulated knowledge') to the fore for those two categories - but also as reference for members. (We do after all revisit a lot of subjects and there is much essential past writing)

My guess is that we have room to give prominence to only half a dozen items. We can argue which would be the key items. 'European Union' might be too broad, 'Greenspan' too narrow - but whichever are finally chosen they should be aimed at visitors, and thus framed in the terms that they would recognize.

The summaries (which I think important) should be positional statements that reflect the ET consensus. I realise that might be difficult, and therefore I suggest that the summaries are 'signed' by an individual, appearing as diaries under the FP links. The 'diaries' would be the summary, plus the list of links. And basically not for commenting - only updated with new links.

I also believe that faces are important to make an instant connection. I would have explain why in more detail, but it has certainly been an effective tool that I have used with corporate communications. I.E. in this case, face + nick + brief outline of skills and experience (without revealing too much RW detail). Maybe this is not a first concern ;-)

You can't be me, I'm taken

by Sven Triloqvist on Sun Dec 30th, 2007 at 11:41:55 AM EST
[ Parent ]

Re: Excellent ecology of visitors (none / 1)

A face attached to communication lends creditability to the communication.

Why?

No idea. Just 'tis. (Actually I do have an idea but it can't be stated simply and I've bored everybody enough, already.)

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Dec 30th, 2007 at 01:57:00 PM EST
[ Parent ]

Re: Excellent ecology of visitors (none / 0)

It used to be a classic of TV ads that the ideal testimonial size on the screen should be the same perspective size as someone sitting across from your kitchen table. That was fine in the days when screens were more uniform in size and the viewing distance similar.

Don't work anymore. Nor testimonials for that matter ;-)

You can't be me, I'm taken

by Sven Triloqvist on Sun Dec 30th, 2007 at 02:02:28 PM EST
[ Parent ]

Re: Excellent ecology of visitors (none / 0)

That intimates the size of a YouTube type visual needs to be significantly larger than the dinky little screens now used.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Dec 30th, 2007 at 02:23:52 PM EST
[ Parent ]

Re: Excellent ecology of visitors (none / 0)

Obviously we don't want to make the whole thing too complicated, but another idea would be to allow members to tag themselves (under user info or settings) under a number of headings - e.g. EU, Politics, Energy, Sociology, Management. This would create special interest groups of members interested in - e.g. EU - who would could have their own discussion area/debate area/ collaborative writing space, and who would be notified if a diary/story with that tag is published.

I find that there is a lot of stuff going through ET (and other sites) and to avoid info overload you have to be selective in what you look at. Titles are sometimes misleading and you can miss stuff you would really have been interested in. Obviously your tags wouldn't preclude you from having access to other stuff as well - it would just be a way of selectively channeling content your way and building specialist sub-communities - important as the user base gets bigger.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Dec 30th, 2007 at 02:04:33 PM EST
[ Parent ]

Re: Excellent ecology of visitors (none / 0)

Response moved to new location.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Dec 30th, 2007 at 02:32:04 PM EST
[ Parent ]

ET/IB Discussion - Meta (none / 1)

This discussion needs to be sliced-out and made into its own Diary/Debate -- I suggest the latter, but I lack gnomic powers. ;-)

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Dec 30th, 2007 at 12:52:28 PM EST
[ Parent ]

Re: ET/IB Discussion - Meta (4.00 / 2)

I have created a debate based (very clumsily) on this discussion.

Please feel free to move there.

We have met the enemy, and he is us — Pogo

by Carrie (migeru at eurotrib dot com) on Sun Dec 30th, 2007 at 02:23:46 PM EST
[ Parent ]

Re: Permanently available (4.00 / 2)

Re: Keywords

Need to get technical here.

The problem with Keywords is the 'key word' has different interpretations and train of associations depending on the user, her background, his background (sex/gender impacts language use,) training, goal, immediate need, long term use, social class, & etc. This means the use of a Key Word has unique connotations and denotations (Intensional/Extensional) for each user which intersects the 'Group Semiotics and Semantics' of the complete population of English language users but is not a subset of the 'Group Semiotics and Semantics.' (Why? Can't use the Axiom of Exclusion -- and that's another story.)

Further compounding the problem is the existence of technical language (i.e., jargon) comprising the same Representem (token, "word") but having different meanings (Semantics, roughly) in two (or more!) fields. "Entropy" is a good example, compare it's meaning in Information Theory and Thermodynamics.

I concur a Keyword-approach is the best approach but we should be aware of its limitations.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sun Dec 30th, 2007 at 01:35:12 PM EST
[ Parent ]

Re: The blogs told you so (4.00 / 2)

Well Jerome.. it has been obvious for a while around ehre that you have been right on all counts and you quite deserve a big appreciation for it.... well actually not on all counts... there has been always a black spot.. a black spot which I particualrly care about becasue I was frankly one of the main supporters of the idea.

This is, I have always thought that a drop in the dollar , and a strong and continuous one (which is bound to happen and deepen int he future), would lead to raising interest rates to keep foreign governments (specially the petrodollars) in T-bonds.

So you can imagine my surprise when your forecast (which I supported completely) has not materialized and demand for T-bonds are as strong as ever and the financial market outside the bank lending interchange market is on supermaximum values.

Furthermore.. I have found myself listening to one of the economist I respect more (not because I respect the economic science but because I think he ,a least, tries to makes sense in n honest way, of the economic indicators that I do trust) Krugman, saying that he is not worried at all about the fall in the dollar, saying that the imapct in the US inflation will be low and that dollar value has basically not relation with demand of T-bonds.. Actually, he says, people only sell T.bonds if they would knew how much the dollar would fall (once is high or is very down it really does not matter).

I must say I quite not udnerstand this principle and I even did a socratic diary about it... I read this diary waiting for more insight and I see that you basically admit that right now Krugman is right but who knows in the future...

Being naive as I am, I would love that someone could convince me about what kind of arguments is correct about the dollar fall.. it really does not matter regardign interest rates adn T-bonds.. or it could indeed matter if one day the Chinese decide to sell, sell sell.

I know it would need a full diary to explain it... but frankly Jerome you are the best I know to do it :)

Take it as a request :)

and a well deserved love-fest in Daily Kos indeed.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Sat Dec 29th, 2007 at 08:04:30 PM EST

Superb, Jerome!!! (none / 0)

Fantastic presentation of your long-term focus and study, synthetising of ideas and vision for catching trends.

Really fabulous!!! First Prize!!!!
Speechless.

Our knowledge has surpassed our wisdom. -Charu Saxena.

by metavision on Fri Jan 4th, 2008 at 08:36:26 AM EST

The blogs told you so | 126 comments (126 topical, 0 editorial, 0 hidden)

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