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Economics and commerce, all built from scratch.

Surviving & Thriving

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To every thing there is a season, and a time to every purpose under the heaven.
Ecclesiastes 3:1 (KJV)

Anyone who has been close to the edge knows what “survival mode” is like.  Small flashes of adrenaline propel you from one day to the next.  Each fitful dawn is a mix of dread and possibility, all of them taken one at a time.  Next week?  Worry about it when it comes.  Next month?  Forever away.

Many people find themselves in “survival mode” through this Depression, especially those without either work or unemployment bennies.  For them it is a slowly unfolding tragedy, but in great numbers they become a society, a culture, and an economy that is unable to function.  That’s because a free market only reaches equilibrium in the long run, actually running on small differences in the short term.  But in the very longest term the magic of market forces become something else altogether.

Everything has its own time.  When we start to understand that “The only thing we have to fear is fear itself” it helps to appreciate the short, long, and very long term that are all whipping us through each day and all of our days.

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Stocks Lower Because … They Just Are, Dammit!

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The Dow Jones Industrial Average (DJIA) is down for the third straight day. News outlets that have to attribute it to something attribute it to “global tension,” which does appear to be running a bit higher than usual. But the entire exercise of watching an index from one day to the next is a bit silly from the start.

A more interesting question asked by some commentators is, “Does this mean that the bull market is over?” The short answer is no, it doesn’t, but not for the reasons that most people think. The reality is that we have been in a secular (or long term) bear market since 2000, roughly the start of what we call a “Managed Depression,” and this small correction is nothing but a regression to the mean that proves it.

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New Measures for New Times

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When the first estimate for Gross Domestic Product (GDP) in the second quarter of this year (2Q14) came out, there was reason to cheer. A solid gain of 4.0% seemed to really shake off the fear cause by the figure for 1Q14, revised up to -2.1%. There wasn’t a new recession after all, and growth is back to being robust. Right?

It’s OK, we’re among friends. Your skepticism is justified. The main reason for the fall in 1Q14 was a big drop in health care expenditures, partly due to a revised way of calculating them. The problem is the way we gather this magic figure called GDP, a supposed measure of the total size of the economy. Just before the figure for 2Q14 came out a new measure of the economy, Gross Output (GO), was introduced by the Bureau of Economic Analysis (BEA). It illustrates the problems with GDP, especially as we all focus on jobs as the real sign of economic health.

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World Currency

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Another summer re-run, this one from 2012.  It’s still valid, if more than before, as Russia and other nations work to reduce the influence of the US Dollar.

Imagine a single currency, all around the world.  No more converting between Dollars and Euros and Pounds, the money in your wallet is your ticket to ride anywhere.

Sound like a fantasy?  Throughout history it’s been more or less the standard.  The coins from one era might come from Rome or Madrid or London or Beijing, but one accepted unit of exchange was the norm until very recently.  In many ways, the standard now comes from twelve Federal Reserve banks in paper form, printed with green ink.

But we’re a global society now, with total worldwide trade taking up nearly $8T of the global product of $52T.  Is it time for a new global currency that isn’t subject to the needs and politics of one nation?  More and more, the answer is “yes”.  But getting there, as with anything international, is the hard part.

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Making Predictions

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Can anyone predict the future? Weatherpeople are routinely called on to tell us more than just what happened today- they are supposed to say if it’s going to rain and what temperature we can expect. Sportscasters have moved beyond a blank reporting of the Vegas line, say the Dolphins +4, and are expected to put themselves on the line with a solid call every week.

Not economic reporters. When there’s a lot of money on the line no one is willing to stick their neck out and tell you just what will happen tomorrow. That’s especially strange when you realize that a free market economy is all about balancing risk and reward, which is to say at some point boiling it all down to a solid prediction as to how likely an investment is to come in versus the possible gain from it. Business and economic reporters usually get a pass that the weather and sports people must only dream about. But that’s ridiculous.

Barataria is all about making a prediction and standing by it. Let’s refine that model a bit.

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