20 January, 2017

Monthly Musing

Perhaps I ought to explain why the status quo is so objectionable.

There are many reasons. The first, using a key trigger word, is sustainability. The world we westerners live in is unsustainable. Ever increasing debt is absolutely necessary for the status quo. It is also absolutely unsustainable.

Government growing ever larger is also unsustainable. Yet that is what we have had for at least a century.

Ever increasing house prices and financial assets are also unsustainable. Yet, we have 'enjoyed' this state of affairs for decades.

I suppose, house prices can continue to rise as long as interest rates continue to fall. Under such circumstances, a zero percent interest rate is not a boundary. Merely a point to pass through as interest rates continue downwards.

That is the paradox of our western civilization. For things to remain the same, certain things have to continue to change. So no rise in interest rates despite central banker blathering to the contrary.

Is this sustainable? No. America pays much the same in interest payments each year. The status quo requires the debt to continually grow, so it does. The status quo cannot afford increasing interest rates, so they fall.

Politicians blather on about productivity gains. Again, these gains are also required for the status quo to continue.

Those wishing I would be quiet and want everything to carry on without change are missing the point entirely. Ever increasing debt and productivity are essential in maintaining this state of 'no change'.

In the last fifty years, productivity gains have come from women entering the work force and more recently ever more powerful and affordable computer power. Not to mention ever increasing supplies of oil. How can these productivity gains be expected to continue forever?

I read an article that said we needed to find a new oil field every eight years the size of Saudi Arabia's biggest oil field. To keep the 'game' going. Well we haven't which may be why fracking is so heavily funded despite the lack of profit.

That is my answer as to why can't things just carry on.

There is no need to do anything. The unsustainable, eventually, can no longer continue.

The biggest 'promise' our governments make is about our retirement. Apparently, they promised me that I could retire at 65. Now it is 67. In Germany, the people are a little upset too. They were told that they could retire at 62 and now 67 is also their new number. The status quo needs this number to increase to around 80.

The status quo is heavily reliant upon its parasitic financial system. This needs a continuously more productive private sector and a public sector to continually grow its debts or the financial system just collapses. Slowly at first.

Those are a few reasons for my objection to the status quo. I feel that they are quite big issues. I am not suggesting any politician has ever lied about our collective pensions but the underlying assumption of ever increasing productivity has failed and with it our collective pensions. Or at least, the age of pension entitlement will need to rise further and faster.

The pension industry needs returns of about eight percent, forever, to meet its financial obligations. As interest rates must continue downwards, this eight percent becomes increasingly riskier to achieve. If not, actually, impossible. That little paragraph should have you smash whatever device you are reading this on. (I hope someone who loves you has given you a printed copy.) I have just explained that the pension you covet is actually worth nothing. NOTHING. Currently, it is worth something, HOPEFULLY.

At this point, should you be happy that all of the above is a reasonable view of the world, I feel obligated to give you some financial advice that would be worth its weight in gold. I suspect that would be illegal. Illegal is Latin for 'whatever those in power say you can and can't do'. Well, I cannot offer you a silver bullet to protect against whatever collapses first. Not legally. I can only ask you to seek out whatever treasures you truly value. The treasure with true value. I mean of course, your neighbours, friends and family. Somethings really are as good as gold and as shiny as silver.

Perhaps I ought to write a piece on subliminal manipulation. For examples read a newspaper or watch the news.

The trouble with sustaining the unsustainable is that when it can no longer be sustained then we get severe and abrupt changes that will impact heavily upon all of us. Even me.

For the hard of understanding, we are basically slaves on a Roman ship that is sinking. The reason for it sinking and getting increasingly difficult to pull on the oars is that we are not rowing hard enough. Well, that is the government's version of the truth. One that the boomers agree with. Why the millenials are happy to row is beyond me. The only thing that puzzles me more is my own involvement. (Rowing whilst screaming the ship is sinking.) So, are we set to row until we drown? Are there no human beings capable of imagining something different?

My view is that we stop rowing, dismantle the ship and build lots of new ones in a range of sizes and designs. Then we must be forever careful about who we choose to captain the vessels. No doubt, we will eventually be swayed by an enigmatic captain in a huge boat that he says is unsinkable. The boat will be as cheaply made as possible and already taking onboard water but not enough to worry about, yet.

You all take care and look after each other

P.S. A great many baby boomers will really struggle with the concept of nearly all of their pension being worthless. They will also struggle with the reality of heating their homes and feeding themselves but not yet, HOPEFULLY. I do write these things well in advance of publication.

7 comments:

Anonymous said...

I've been reading your blog for a few weeks now - still catching up. Reassuring to know there are fellow travellers out there!

Only this week we had notification of our enrollment into workplace pensions at my firm. The overwhelming reaction of my colleagues (from late teens to late fifties) seemed to be a kind of collective "oh well, we might as well, it's the sensible thing to do". To me, having been aware for some years of the unsustainable financial situation, I could see that with paying out 3% of their wages into the pension scheme by 2019, that they are unknowingly entering into a lottery rather than a supposedly sober contract with the govt to provide for themselves in old age. So in that sense it is more of a tax. One chap, in his late fifties, who is reasonably savvy with investments just couldn't conceive of the possibility that his pension wouldn't pay out in full (if at all); that there was any element of risk involved and that the financial sector could possibly be in such a precarious state. It is very difficult to communicate these realities with people who just don't want to hear what you've got to say as it is too unsettling to contemplate - I should mention that I'm not constantly browbeating them with this information, simply slipping-in these facts when I get an opportunity!


I think, with pensions (both NI-based and private) just like with the NHS and the welfare state, many of us believe such structures are "forever" as it were and cannot be underminded. My "education" in these matters came just after the 2008 crash; previously I'd been pretty much like my co-workers, not particularly interested in the subject. It came as a rude awakening. THe great challenge in creating any kind of U-turn in policy is that as many of the population as possible need to have their eyes opened to the reality before us. But how, when the mass media is constantly selling them what suits the elites rather than the masses (rhetorical question).

Anyway, thanks for doing your bit here.

David Watkinson said...

Thanks for reading and for commenting. Everything in our society is tightly coupled with everything else, including the financial sector. Understanding everything is an impossible task. So all we are left with is faith.

2008 did not shake most people's faith. It did yours but not mine.

Perhaps hyperinflation will destroy people's faith in government, finance and the media. However, it didn't in Weimar Germany, it reinforced it. It is a strange world.

You take care and carry on as you are. Our journey is interesting, stimulating and enlightening. We must accept that others may find it terrifying and that they seek comfort in their shared beliefs. Easing their terror is a humane first step. This blog probably won't help ease their fears.

David Watkinson said...

I have given a little more thought to your colleagues who believe that contributing three percent is doing their bit. Society is a wonderful comfort blanket. Society hides the risk.

Basic maths and simple logic states that if you wish to work for forty years and retire for twenty. Then you need to save one third of your wages, 33%.

I could do more arithmetic and basic logic but our colleagues are happy in their faith that this 3% is sufficient. As this increases to 6%, they will grumble a little but their faith will, most likely, be firmer. Their reaction to 'trouble makers' a little more aggressive.

What to do is a great question. You carry on, as best you can.

My other blog suggests that we unconditionally love everyone. Once our colleagues feel unconditionally loved, it is my belief, they will feel more secure in having thoughts of their own. These can grow into big ideas. I am sure critical thought will then be far easier.

In this environment, your colleagues will be far more receptive to discussing your non main stream thoughts and ideas. This will strengthen and develop your ideas and they will develop their own too.

That is my belief. It is what I have faith in. Most people have faith in central bankers and politicians. I have no faith in central bankers and politicians. Society can still continue when no one has faith in it. I just don't know how long for.

Anonymous said...

Though I agree in the connectedness you mention, perhaps the closest I come to “faith” (the 2008 crisis caused me to recalibrate my expectations and seek alternatives) is in trusting ordinary people to organise their own lives, in a decentralised fashion; to trust their own judgement once given an unbiased lens to view the issues facing them, in contrast to the centralised command economy - of either the corporatist Right or socialist Left – of (many) professional politicians who game the system to benefit themselves and their cronies.

Maybe a bigger crash will force people to reject the current set up and try something new, out of necessity. Though I suspect we might not get a crash, maybe more of a slow economic strangulation over decades, with an equilibrium forming between an impoverished West and a slightly wealthier third world – we’ll see.

Yes, interesting times.

Below are a couple of links to other blogs, forums, an ebook, and a message board, which might possibly interest you and your readers. I hope you don’t think it presumptuous. I include them in the spirit of widening options and alternatives that can either be embraced or rejected.

The Lifeboat News
http://members5.boardhost.com/xxxxx/


https://thearchdruidreport.blogspot.co.uk/


http://www.economicconfidencemodels.com/

Martin Armstrong Discussion (a long thread, picked up from today)
https://bitcointalk.org/index.php?topic=1082909.3020

Economic Devastation discussion ( another long thread, chosen at today’s date)
https://bitcointalk.org/index.php?topic=355212.2840

Shelby Moore (AKA iamnotback, Anonymint, TPTB_need_war)
https://bitcointalk.org/index.php?action=profile;u=851556;sa=showPosts

Shelby Moore is an interesting chap, who while rather pugnacious, has interesting ideas and concepts; often challenging one’s comfortable assumptions. Usually elicits a Marmite reaction!
Is principally a computer scientist developing a decentralized and scaling blockchain that he claims fixes the problems of bitcoin.

Stone-Age Economics (free download)
https://libcom.org/files/Sahlins%20-%20Stone%20Age%20Economics.pdf
“...The basis of Sahlins’ argument is that hunter-gatherer societies are able to achieve affluence by desiring little and meeting those needs/desires with what is available to them. This he calls the "Zen road to affluence, which states that human material wants are finite and few, and technical means unchanging but on the whole adequate" (Sahlins, Original). This he compares to the western way towards affluence, which he terms as the "Galbraithean way" where "man’s wants are great, not to say infinite, whereas his means are limited... “

Cheers,

MW

Anonymous said...

Thanks for taking the trouble to think more on the my first reply.

A tricky one regarding the comfort blanket of society. How to provide an adequate safety net and provider of essential services, without becoming over dependant on an overweening “nanny state”.

Interesting you should refer to the maths relating to pensions. The other day I read one that stated we should halve our age and use the resulting number as a percentage of our income that we should each be setting aside until we retire (though I’m not sure what age they had in mind – I understand around 80 would be fiscally most realistic). Let’s just say that in my case it would be over a quarter of my wage! This is simply untenable for many of us, as of course many in full-time work yet forced to use food banks could not be expected to contribute even the slightest fraction. Yes, I kind of agree that these percentages that will be demanded to fund our old-age will gradually creep up. I wonder at what point the boiling frogs will start to protest. I really feel for them and hope we can find a way to enlighten ourselves before it’s too late.

I’ll check out your other blog.

Cheers again,

MW

David Watkinson said...

Hi MW,
I am currently reading and absorbing and being completely enthralled by the ebook link, stone age economics.

It appears humans, in a natural state, work about as hard as cats.

Thanks for generously sharing the links. I look forward to following them all up. At the moment, the ebook is my focus. It destroys what I thought I knew, replacing false knowledge with an improved understanding of mankind. This takes time. I will read it in the same style as a stone age man would. Intermittently with lots of naps. In other words, properly.

Anonymous said...

Pleased you seem to be having a similar reaction to Stone-Age Economics as when I read it a couple of years ago. Would be interesting, over forty years on from when it was published, to have a re-appraisal of the subject.

Yours intermittently,

MW