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None of This Makes Any Sense

The asset bubble has become 'Too Big to Burst'
Monday, December 2, 2013, 12:33 PM

I have to confess, these are trying times for those of us trying to make sense of the markets from a fundamentals standpoint.  We are back in serious bubble territory, and during the heights of bubbles, all sorts of newly-minted rationalizations are bandied about as the new wisdom or a 'new normal'.

I am simply amazed that we are in yet another massive bubble, so soon after the last ones, and that so few remember the lessons from those events. » Read more

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Off the Cuff: Look Locally for Reasons to Hope

That's where productive change is happening
Thursday, November 28, 2013, 2:22 PM

In this week's Off the Cuff podcast, Chris and Gregor discuss:

  • Unjust Wealth Inequality
    • Growing by money printing vs productive output
  • The Evils of Reflationary Policy
    • Stealing from the many to reward the few
  • Our Low-Growth Future
    • Less to go around
  • Local Solutions
    • Where hope lies
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A Better Human Habitat for the Next Economy

How to build for prosperity
Monday, November 25, 2013, 7:10 PM

Executive Summary

  • 'Smaller' will be the major theme in future development
  • The general principles for resilient human settlement
  • How redesigning our towns & cities offers liberation from the soul-sucking models we live in today
  • What we can leverage from the New Urbanist movement

If you have not yet read (Un)Paving Our Way To Nirvana, available free to all readers, please click here to read it first.

Before I review some of the basic rules and principles for assembling a human habitat worth living in and with some prospects of enduring, a few words about demographic change. The failing suburbs will not drive everybody in them to move to the cities. The big cities of America face equal difficulties with resource and capital scarcity, failing infrastructure that won’t be replaced, and problems as yet off the radar screen such as water safety, public health, food shortages, and social turmoil. The big cities will have to get a lot smaller and that process will take decades to resolve.

I’m convinced that the action in this country will move to the existing smaller cities and small towns, especially places that have a meaningful relationship with food production because there ought to be no question that agri-business will fail, and with it the entire food production and distribution process as we currently know it. One implication of this is that we will restore a visible edge between what is urban and what is rural, and what these places are for. As that occurs people will redevelop an appreciation for the distinction. The human settlement will no longer endeavor to be a cartoon of the rural countryside. And rural places will be organized and inhabited differently.

Therefore, a first general principle is... » Read more

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Off the Cuff: Look Like an Idiot Now or Later?

Bubble markets force you to choose
Friday, November 22, 2013, 12:31 PM

In this week's Off the Cuff podcast, Chris and Charles discuss:

  • Overly Complacent Markets
    • Prices reflect expectations of eternal perfection
  • Think Like a Criminal
    • If you want to reap short-term profits in today's markets
  • Manipulation Magnifies the Destructive Potential of Bubbles
    • Makes them fall harder because systemic trust is eroded
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Why Social & Environmental Imbalances Are Becoming the Biggest Risks

As the story becomes more desperate
Tuesday, November 19, 2013, 1:14 PM

Executive Summary

  • The growing risk of disinflation
  • Why instability in the U.S. is accelerating
  • The danger of social rifts emerging in the near future between economic classes
  • Why environmental constraints and social instability may trump energy issues going forward

If you have not yet read What Happened to the Future?, available free to all readers, please click here to read it first.

If this is the case, it echoes the realization now dawning on economists in the U.S. that an acceleration in the economy, which many expected, is simply not going to arrive. As was discussed in previous essays, OECD GDP growth appears to be converging once again at a level below 2.00%. The U.S. is on track to achieve only 1.6% GDP growth this year. This is a primary reason why inflation, again outside of natural resources has still not broken out, or even appeared. Moreover, the U.S. and the OECD could once again be on the verge of disinflation.

One notable and important piece of the disinflation puzzle is the continued growth in inequality. As income growth narrows to a tiny vanishing point among workers, it’s become increasingly difficult to mount economic growth across many industries. Demand for goods from the 1% is robust. Demand from the rest of the populace continues to dwindle. It may be hard to believe, but policy makers, politicians, and gasp! even economists and financiers used to be deeply concerned about wealth inequality. Today, it’s as if enough time has passed for an entire generation to forget the destructive structural damage that long-term inequality can wreak on an economy.

For those of you who remember, one of the more severe cases of wealth inequality for many decades was the country of Brazil. Tellingly, it was not until Brazil elected a reformer, Lula, that the country left behind its days of boom-and-bust, debt crises, inflation, and general instability and embarked on its current path as a more balanced, sustainable economy. Coincidence? Not likely.

But what’s really scary is... » Read more

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Off the Cuff: Bad Moon Rising

All the risks from 2008 are back & bigger than before
Friday, November 15, 2013, 9:38 PM

In this week's Off the Cuff podcast, Chris and Mish discuss:

  • Growing Demand for Bad Ideas
    • Politicians are showing an astounding ignorance of how money works
  • We're In Another Bubble
    • Bigger and more dangerous than before
  • A Shortage of Sanity
    • Malinvestments galore
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A Fed Insider Comes Clean

And validates our worst suspicions
Wednesday, November 13, 2013, 12:02 AM

After they behaved badly and almost ruined the entire world financial system while pocketing fat fees along the reckless road they laid down, the big banks got 'made whole' by the Federal Reserve.

While couched at the time in fancy acronyms, a lot of complexity, and some good old motherhood and apple pie (that is, the Fed talked about helping the economy recover and people get their jobs back), the truth of the matter is simply that the Fed cared only about helping the big banks repair their balance sheets. » Read more

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Off the Cuff: The Anxiety Gap

If things are so great, why are we so unhappy?
Thursday, November 7, 2013, 12:42 PM

In this week's Off the Cuff podcast, Chris and Charles discuss: » Read more

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rangizzz

How to Overcome Diminishing Returns

Avoiding and reversing their effects
Monday, November 4, 2013, 2:26 PM

Executive Summary

  • Identifying the 8 characteristics that signal a system is experiencing diminishing returns
  • The powerful advantages simplification can offer
  • Debt-avoidance as a forward strategy
  • The criticality of creating parallel, self-reliant systems

If you have not yet read Our Era’s Definitive Dynamic: Diminishing Returns, available free to all readers, please click here to read it first.

In Part I, we surveyed examples of diminishing returns and touched upon the forces that generate devotion to systems beset by diminishing returns. In Part II, we’ll look a little deeper into the dynamics, with an eye on avoiding being ensnared in systems that are doomed by dwindling yields and rising costs.

Characteristics of Diminishing Return Systems

1. Friction. Sources of what I term 'friction' include procedural impedance between dissimilar systems, fraud, inefficiencies, and processes that no longer add value but that are accepted as “the way things work.” (I wrote about systemic friction for Peak Prosperity in 2011: How Much of the U.S. Economy Is Friction?)

Common examples include the proliferating “reward cards” from retailers that fill our wallets and purses with low-value complexity and our absurdly complex income tax system that costs billions of dollars while serving primarily as a conduit for special-interest tax breaks.

2.  “Solutions” that do not address the root problem.  One example is our healthcare system’s haphazard approach to mental health: A great many mentally ill people who fall between the system’s cracks end up being incarcerated, in essence passing the cost and responsibility for mental healthcare to the already-burdened criminal justice system. Imprisoning the mentally ill is clearly a diminishing-return “solution” to our systemic lack of mental health care. » Read more

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Farmland LP

Off the Cuff: An Opportunity to Own Productive Farmland (Revisited)

Without having to run a farm yourself
Friday, November 1, 2013, 7:34 PM

In this week's Off the Cuff podcast, Chris and Craig discuss sustainable farmland -- specifically, a model for how investors can own it.

Two years ago, we announced this model on our site: » Read more