Category Archives: Financial Crisis

The Sky is Falling

The Sky is Falling. The media often says that the sky is falling, but is it true?

I’ve been reading up a lot about the financial crisis for a while and have had a chance to learn a few truths and a few lies and a few things in between.

Recently I have been reading the Britain’s Financial Times.

The FT provides real news about finance, or so I’d like to think; if anything it is not owned by News Corp.

If you read that stuff the picture seems pretty bleak, austerity has become common and the benefits of it have been none, yet it is full steam ahead.

Markets have been rising but housing sales are down and jobs are dreadful. To be clear, the jobs aren’t coming back, they are gone forever. They have either become so under priced that no first world person can afford to do them or automation has made them obsolete.

Debt is at an all time high and keeps piling up, countries are in debt and so are people. Housing prices alone have indebted millions for lives of indentured servitude.

The talking heads don’t seem to care, or at least they don’t seem to want to do much about it, but you can’t balm them, the politicians gave up a long time ago and the system is pretty much mostly corrupt and broken.

I tell people we live in important times, but they don’t seem to care, cynicism has taken a hold. But the truth is we live in very important times, this is a time when we can take hold and make things meaningful again.

I believe that we can still do something about it, the future has not given up on us, we have given up on it, but we can change that by doing what is right.

If the sky is falling then we must prepare.

Ready my short story: Korean Affair

The Greedy

We live in a rent-seeking world, a place where people get away with stealing value and not creating any of their own. Of course, value is created, but its done by the hands of the many to the benefit of the few.

Once upon a time there wasn’t very much, probably only a couple of people sitting around. Some of them were hunting and some of them were gathering and things were pretty easy. Then there was a point when things started to change, men and woman worked together to create value that was more than the sum of its parts.

Great things were built and then there was a moment of leverage, an instantaneous and disastrous discovery of greed. Of course, we were probably always greedy, but in this moment it changed and became something different.

the greedy
the greedy take and dont give

Like any skill there are those who are better at it than others, even at being greedy. The greedy created games out of the things that were created by everyone else. But because everyone else was also greedy they got in on the games too, although they didn’t realize they were fixed. There started to be new products, and almost everyone wanted them, so they joined in on the game too.

As the times past and the gap grew, the people who were better at being greedy started to get more, for awhile they only got a little more. But as they got better at being greedy they began to discover that they could take a lot without actually having to create anything. It was a perfect addition to their casino and created a whole new set of money vacuums.

Over the millennium those who were good at being greedy popped up everywhere. The greedy developed great empires and gather intangible things. They have always wanted more and they’ve always been able to get it, while everyone else has had to suffer the consequences.

Ready my short story: Korean Affair

Highway Robbery in Cyprus

Last week news broke that the government of Cyprus was considering taxings all savings in the countries bank accounts at 10%. This was met with obvious anger from the citizenry, and shocked awe from the rest of the world.  People have been lining up at ATM’s to remove as much money as they can before the tax was imposed.

cyrus highway robbery
central banks are requiring leverage from bank deposits.

After great debate the latest plan calls for a tax of 25% on all accounts holding more than 100,000 euros at the Bank of Cyprus. This tax will be used to secure a loan from the IMF and the European Union’s central bank. The 10 billion euro loan is required to save the country from its impending bankruptcy and descent towards chaos.

The problems arose over the years as the banks used their huge deposits to fund failing Greek banks.  The Cypriot banks were filled with funds exceeding the countries GDP, mostly from foreign investers looking to avoid taxes. Large sums are believed to come from Russia and there is speculation that the country is being used for money laundering.

The problem comes from the fact that the banks were too risky in their investing and had to much money and leverage. Given the current plan, regular citizens will not be excepted to foot the bill.

This bail out represents a much more chilling reality than meets the eye. Not only is it a sign that the ground is caving in under the countries feet, but its also setting precedent that it is alright for a country to commit highway robbery on its citizens to pay for the risks its banks took. Not only are the banks tumbling, but the citizenry are left holding the bag.

My hope is that this is a freak incident but my mind is telling me that this may become the new normal. The coming depression is again glaring its ugly teeth.

Ready my short story: Korean Affair

Walmart Destroys Communities

Walmart destroys communities while customers may not be able to shop anywhere else. Walmart is the place to go to get cheap and plentiful products for all occasions. The prices are often better than local retailers and can all be found together. Why go to the local mom and pop shop to pick up one thing, when you can pick up many things at Walmart?

Morality is a Luxury
Saving money at Walmart maybe makes morality a luxury

When money and time is tight there is often no other option but to go to the cheapest and most convenient place. But often convenience comes at a price, and that price is usually hidden in plain sight.

Shopping at Walmart creates demand for the brand and encourages expansion to new markets and locations. This leads to more Walmart’s and more sales which leads to more growth and expansion, the ball keeps on rolling.

Think about what happens when a Walmart moves into a new location, at first they create new jobs which makes the community happy. Then they develop and gain more customers, people stop shopping at local shops or start spending less there. Eventually this leads to lower sales at the local shop, if they are lucky they may have to cut back on shifts, if they are unlucky they shut down. This ends up killing jobs and and in turn Walmart destroys communities.

On top of this, in order for Walmart to have such great prices they are required to purchase and manufacture outside of the country, often in developing nations like China where costs are much lower. This means there are fewer jobs in North America and larges sums of wealth being moved over seas.

Walmart destroys communities when doing the right thing for your community and country becomes too expensive and inconvenient. Shopping at Walmart may save you money, but it also hurts your community and your countries economy.

Next time you consider shopping at Walmart think about what it is doing to the economy, do you really want to be the cause of the coming depression?

Ready my short story: Korean Affair

Income Disparity

The great depression has already arrived for most of us, while the rich keep getting richer. Even worse the rich aren’t just getting richer, they are getting much richer. Check out this graph from Wikipedia that shows income distributions in the United States from the late 40’s to 2010.

US income distribution
Graph showing the growth in upper class income and the lack of change for the lower classes.

As you can see the lower 20% has seen very little change in income since the 1940’s, whereas the the middle class has seen slight increases, but marginal when compared to the upper class, or top 5% of income earners.

It could be argued that this doesn’t matter much as people who have spent more money on education have gone on to earn more, and this has compounded as their children go on to do the same thing. But the above graph blurs the real changes that have occurred, particularly in the upper 1%.

Income changes 1% vs rest
The growing gap between the 1% and the rest of us.

The above graph shows the change in income for the top 1% vs the other 99%. As you can see the gap is growing at a breakneck speeds and is unlikely to change anytime soon.

With more income disparity comes greater conflicts between the needs of the upper class and everyone else. Family’s with larger incomes have more to contribute to political causes and have greater influence over the future of government actions.

Logic follows that people will make choices that more greatly benefit themselves, as a result it is likely that political changes will be inline with benefiting the upper class and increasing the gap. This will in turn make things worse for almost everyone else.

This isn’t to say that people who work hard and earn more money should be punished for their success, what is more important is that the playing field should be fair for those who work hard but are unable to find such great success.

Ready my short story: Korean Affair

Indebted Law School Graduates

Many heavily indebted Law School Graduates have been unable to obtain the lucrative paying jobs that their predecessors used to get on graduation.

The coming depression has been showing its teeth more and more these days, job have been lost and those that are returning are often in the service sector, were low wages and benefits are hard to find.

The biggest problem comes from the movement of jobs to other countries, particularly China and India where wages are fractions of those in North America. This problem has for the most part affect blue collar workers however there are signs that white collar employees are also being affected.

An recent article on Forbes entitled “Why Attending Law School is The Worst Career Decision You’ll Ever Make” references a wall street journal analysis that declared 45% of law school graduates are unemployed or working a places like Starbucks after graduation. Even worse, starting salaries have dropped by $9000 between 2009 and 2010.

Even worse, only 8% of graduates are getting jobs at big law firms which have the money to pay decent salaries. It is also likely that these graduates went to Ivey League schools, meaning that a student from an average school is much less likely to get a good job after graduation.

It is important to add that 85% of law school graduates have a debt load averaging $98500. This means that without the decent salary they were expecting at graduation they will be carrying this debt for most of their lives.

All of this bad news has lead to a class action lawsuit against 15 law school for making dishonest statements about graduate employment.

These graduates will add to the ever growing number indebted citizens with little hope for the future, the coming depression will be even worse for them.

The problem these days is that people are going to school thinking they will be able to get decent jobs with decent pay, the harsh reality is that most of the decent jobs are already gone and wont be coming back.

Ready my short story: Korean Affair

Spanish Unemployment

Spanish Unemployment is a scary thing and if this isn’t a sign of things to come, then I don’t know what is.

More than 500,000 people lost their jobs in 2012, in Spain, bringing the Spanish unemployment rate to 24.63%, the highest in the industrialized world. The number of people seeking jobs for more than two years has grown by 21 percent in 2012.

The Spanish unemployment rate stood at 26.3% in the second quarter of 2013, down from a record 27.2% in the first quarter of 2013, according to the Spanish Instituto Nacional de Estadistica. http://www.ine.es/en/

The reality of Spanish unemployment is that it will probably get worse before it gets any better, as the summer comes to an end many seasonal jobs have evaporated.

However the Prime Minister is optimistic saying there should be jobs returning to the country by 2014. Although these views would be good for the country and its economy the International Monetary Fund disagrees and fears that more jobs will be lost and the economy will continue to shrink.

There does seem to be a call for a bailout which would help create job and lessen the countries debt while also helping create a little bit of optimism about the future.

Ready my short story: Korean Affair

Quantitative Easing 3

On September 13th, 2012 the FED announced that it would be pump 40 billion dollars a month into the economy to keep it a float. The idea being that at some point in the future this flow of capital will raise the stock market and housing prices. This new plan has no end date, but will take 20 months to reach the output of Quantitative Easing 1.

This is a sure sign that the FED realizes that things will not be getting better anytime soon, so they are doing what they can to keep the bubble inflated. But we all know this is just a ploy and will likely lead to higher inflation and artificial GDP growth.

It was also announced this week that 2nd quarter growth was less then previously reported. Initially the rate of growth was said to be 1.7 %, while the latest report puts that number down to 1.3%. Both of these numbers are down from the 1st quarter which was reported as 2%.

Lets see what the 3rd quarter reports say, then we will know if there is a trend.

Quantitative easing is a euphemism for falsified growth, if any of us did this kind of trickery on our financial reports we would be going to jail.

Once again the FED is sweeping the dirt under the rug, eventually the rug is going to be lifted and we will all have a mess on our hands.

Ready my short story: Korean Affair