Wednesday, December 17, 2008

Look for Opportunity in Times of Crisis

Here is post pulled from the comments section of my last missive "Recipe for Failure" that summarizes our current situation

Written by: Anon on a California Mountain:

It is indeed unsettling for many to consider the fact that the force of this current deflationary motion (continually feeding upon itself as it spirals downwards, gathering more and more momentum) may at this point be unstoppable. The Fed and US government will do everything and anything to prevent it (destroy what is left of the dollar—hyper inflating a la 1930's Germany; turn us into a socialist or minimally a "government or central bank controlled capitalist state"; and so on) but at this juncture the forces may be too great to mitigate or hold at bay.

Our government (one administration after the next) has been able to avoid, cover up and push economic maladies forward for decades... refusing to face the unworkability of the systems and stubbornly attempting to prop up the status quo and "protect it" from the natural forces and laws of economics.

Maybe amidst this current insanity of ad hoc government groups throwing out unusual and arbitrary solutions, and every tool they have in their tool box—no matter how dangerous the future ramifications are of their usage—and by possibly inventing new "tools", can prop things up for another decade or generation. Maybe they'll "work the magic" and postpone the threatening debacle again.

Natural market forces just want to punish excess, errant behavior and unusual solutions (unusual solutions always become tomorrow's problems). Earlier, these forces wanted to purge the system of these unusual solutions. Now they may want to destroy the whole system so we can start anew... hopefully with ethics, a responsible view of the future and coming generations, and solid economic fundamentals.

(Keynesian economic theory was written when we were on a gold standard and before we had floating foreign currencies. It's obsolete theory! Government spending to stimulate the economy was only supposed to be an occasional tool, not de rigueur.)

The public's complete loss of confidence in the government, academia, corporate leaders, and the resultant crash of the system would be the necessary fodder for the creation of a "new civilization" as it were.

Unpredicted natural forces have unwittingly been put into play by actions implemented as early as 1913... such as: poor monetary and fiscal policies, government interference in business; the Marxist concepts utilized by FDR; Keynesian economics; corruption; excess of debt and consumption; de-industrialization; etc. etc. etc. ad infinitum.

We have made ourselves terribly "crisis prone". These multiple forces are beginning to bombard us all at once, forming a "perfect storm". In my opinion, the government's actions over the next 1-2 years (or sooner) will let us know what direction America is headed towards for the intermediate and long term: a deep and long recession, like Japan's "lost decade"... or a depression.

Being a boomer, I’ll bet that the majority of boomers (raised in affluence and security) never thought there would ever be a depression in their lifetime. We have a 50/50 chance of depression at this time. Such a collapse will not bring us into a "dark age". Of course there will be chaos and pain in the short interim. Yet, I believe that a collapse will manifest into a long needed evolutionary step—an opportunity for integrity and knowledge to flourish, raising us up to a more responsible, civilized and survival oriented status with a long term world view.

This old Chinese proverb is quite relevant: "within each crisis lies a great opportunity". We must stay positive and focus on peace and prosperity no matter the current conditions... and discover that opportunity.

Copyright 2008 All rights reserved


surfaddict said...

Man CAN NOT have integrity and courage without FREEDOM. This means less (no) government interfering with the economic machine. USA blossomed becasue of fredom, and wilts when gov interferes too much.

Anonymous said...

surfaddict has it right, but the long-term trend is for the government (and forget if Dem or Republican, it makes little difference) to make things worse and diminish freedom.

Have you seen Governor Paterson of NY's totally insane and criminal desire to raise taxes on the people of that already overburdened state, with taxes on almost EVERYTHING (and regressive-to-boot)? Downloads to your Ipod...soda pop...and a list of hundreds of items.

And I have read that businessmen do not want to hire, not simply because of the economics, but because the insane regulations one must follow to be able to hire anyone. They are doing the John Galt thing, walking away. Again, a lack of freedom to be able to run a business without tremendous interference. While we need some regulation and the such, we've gone the wrong way. We regulate that which shouldn't be overregulated, and then manage to...oops...miss the 50 billion Madoff Ponzi scheme, in spite of the SEC.

Freedom is easy to lose, and we need to be not merely vigilant, but start pressuring our politicians to not take away any more freedoms and to return some of them to us.

Anonymous said...

Man can have integrity and courage in all situations at all times and in all places - our government situation does not have to define our morality

Sincerely, Catholic girl

Anonymous said...

... that said, freedom is a great good for mankind and deserved I believe simply by virtue of our creation :) it should be strived for and fought for as a good... but if it is lost- we as humans are not lost... simply curtailed and usually not forever...

Catholic girl

Jim in San Marcos said...

Hi Surfaddict

I ignored the first sentence of your post, it is just too abstract to really have a universally accepted meaning that everyone agrees on. The discussion might encompass several volumes.

I do agree that government has no business in interfering with the economic machine.

Thank you for your comments

Jim in San Marcos said...

Hi Anon 4:27

You point out a very valid point that I have referred to several times in the past.

State governments in the 1930's raised taxes to increase revenue flows and got the exact opposite result, a decrease in the amount collected.

When times are tough, a decreasing tax base is a more than real reality. Realizing that gives you a good idea how things will progress from here. It doesn't look good.

Thank you for your comments

Jim in San Marcos said...

Hi Catholic Girl

Great moral stuff that rings true.

I think we have a problem in the US with freedom, it is not linked to moral responsibility anymore.

Walk into any public restroom and you can enjoy this freedom that we have. They are trashed. People are free to do what they want and they are even too lazy to flush a toilet.

Drink and Drive, its a free country.

Clean up after your dog? What for it isn't my lawn.

Freedom involves responsibility and lets face it, without both, you really can't have either.

I'm like you and idealist, but sadly, I have concluded that most of the people in this country have no concept of real freedom being linked to responsibility.

Without that link, in my opinion, the concept of real freedom, is only an argument.

Thank you for your comments, I value them.

Anonymous said...

Integrity has nothing to do with freedom. It has to do with a populace that does not think ahead.

Let's take a look at this logically. Some of Madoff's investors invested with him precisely because they thought he was beating the system. In fact, he was beating them.

Now, let us make a little switch. As citizens, we have a habit of trying to win at "someone else's expense". While competition is good, the government is prone to breaking laws to keep certain populations happy and the normal people keep their mouth shut until it starts affecting them. If you are cheating on your taxes, you are engaging in the same behavior as a Madoff. It's about following the rules even when it benefits you if they are broken.

The funny thing about this crisis is that the panic is creating an opportunity for many things. Businesses who don't panic will find less competition. Investors that become educated instead of irritated can protect some of their resources. Normal people can start to apply very serious pressure through the political process in packs.

The question is whether we do it ourselves or whether we wait for someone to save us. Someone that may never come.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Wow ... that was a very long post, with a lot of good information.

I read it twice, and I agree with most of it ... particularly as far as cause and effect, and the major conclusions.

One thing rubs me the wrong way though, and it is this:


Millionaire? A million dollars is very little now ... and how do you calculate if someone is a millionaire or not? I live in a farming community. The farmers who own land are almost all technically 'millionaires', but these guys are scraping by, and don't live a flashy lifestyle at all.

I think you should replace the word millionaire with billionaire, then everything would make more sense.

A million bucks is not what it once was ... and if superinflation hits -- as it is likely to -- there will be an influx of many more millionaires, none of whom will be feeling very 'rich'.

frakrak said...

I see the concept of this post a little differently .... I have seen personal choice/freedom being regulated by governments in an adhoc basis for nearly three decades. Minority or self interest has prevailed long enough. Too much government interaction here in how we should feel about our shared humanity. And far too little financial regulation. The Australian government has de-regulated just about everything that has anything to do with the economy since 1983.

I am feeling that this maybe the case with our much bigger brother.

Find it almost defying gravity that anyone should not have seen our economic stability termited for this period. Have you not seen the look on the faces of those execs as they have packed the contents of their desks (along with their flimsy faith in economic theory)into cardboard boxes and walked down Wallstreet for the last time? Kind of took away my confidence in my misguided concept that "well at least our financial systems are with people that know what they are doing".

I feel that we are all now packed in some steamy subway waiting intransit for THAT train that has been promised to pick us up and drop us off back into a warm sunny day.

Don't think I will be getting on board this one, show me the exit please.....

Jim in San Marcos said...

I deleted two posts today. One was about 4 thousand words (Personally I consider anything over 250 words a reading assignment). I try to point out to people that it is very hard to get others to read more than the first one or two sentences of my blog or anyone else's for that fact. Check out my site meter at the page bottom. For every 10 hits, I get one readers attention for about a minute.

Karl Denninger (one of my links) get about two minutes of my time and this guy can wear out a keyboard with one post. So if it isn't short and to the point you have lost 99% of your audience.

The second deleted post was a cut and paste from another web site. I consider this as being a tad bit rude. It is very easy to post a link. Here is a Link on how to do it.

While I am recommending things, spell checker is great for checking your spelling before you post in the remarks column.

Happy posting to all, and to all, a good night. Take care.