Oly Ost

Sit UBU Sit

2009-03-27T12:02:00.001-07:00

It's looking my break is going to be longer than expected. Maybe, I'll be back, maybe not.

For kicks, my twitterpage is here, and my shared items (to which you can subscribe) will keep you in constant supply of all the bad news you love to hate.

If this is it, best to all.

While I'm Away...

2009-03-22T09:15:00.000-07:00

Reich Again

2009-03-21T07:46:00.000-07:00

Like Reich, I am also taking some time off. It is not about a populist rampage; ok, maybe it is.

Angry populism thrives on stories about the rich and privileged who use their influence to get cushy deals for themselves at the expense of the rest of us. AIG's bonuses provide a perfect example. It's too bad the same populist outrage doesn't extend to issues involving far more money, affecting many more people, and entailing far more insidious abuses of power. Congress's potemkin populism over AIG's bonuses disguises business as usual when it comes to the really big stuff.

[I will resume blogging at the start of April. Until then, I'm off on a populist rampage.]

AIG: Up a Notch

2009-03-17T18:54:00.000-07:00

I certainly hope so.

You really don't think there's anything in what happened at AIGFP that we're not going to find out fell seriously afoul of a lot criminal statutes? And we're still paying out these bonuses? I suspect we need to get this conversation out of Treasury and over to DOJ.

Go over there and have a read.

Economy Down

2009-03-16T19:59:00.000-07:00

Michael Panzner of Financial Armageddon knows how to take the wind out of a reasonably decent day. His latest work is particularly heart rendering:

If you'd like a reading on how the economy is affecting the average San Franciscan, you could call an economist. You could study wages and layoffs. You might even graph the rise of foreclosures.

Or you could stop into the Provident Loan Association on Mission Street behind the Old Mint.
[...]

Last week a woman came in with more than a dozen items. She told him several of the pieces had been custom crafted. She had sky-high appraisals.
Shemano took a look at what she had. Before he met her eyes, he knew she would be disappointed.

"It was just a nightmare," he said. "She asked for the number, and it was just devastating to her."

She told him how she'd had an impressive job with an international firm that went belly-up. Her investments went south, and now she and her husband had rented a three-bedroom home with two other couples.

The plan was to sell the jewels, get a little cushion and hope for an economic uptick. Surely, she thought, her grandmother's prized pearl necklace would fetch a nice price.

"It's always Grandma's pearls," Shemano said. "They bring in these high appraisals. But how can you price for a secondary market when there is no secondary market?"

Why is there no secondary market? It's because few have any need for luxury items anymore. It's sad. On the other hand, reality must set in before we move on. Perhaps we will salvage something of the departing economy and push on toward the a permagrowing future. I don't believe in planning for the best however.

As deeper reality sets in, more of us will be forced to create a viable economic system. As I rarely say, the more the merrier.

Mark to Marketeering

2009-03-16T17:47:00.000-07:00

Don't trust our corporatocracy? Now you have even less reason to: FASB is making it easier to mislead, obfuscate, deny, and delay the inevitable.

The Financial Accounting Standards Board, pressured by lawmakers to change the fair-value rule blamed for worsening the financial crisis, proposed permitting companies to use “significant judgment” in valuing assets.

Discretion, the one thing that we need; the one thing we've always had in overabundance.

Mark-to-Market. The proposal for estimating market values will take into consideration whether there is an active market (such as the number of recent transactions, whether price quotes are based on current information, whether price quotes vary substantially, etc.). If there is not an active market, then the quoted price is a distressed transaction unless certain other conditions exist. For distressed transaction prices, “Level 3” techniques (such as present values of future cash flows) are used instead of the distressed prices and should reflect an orderly transaction between market participants, including a reasonable profit margin for uncertainty in a non-distressed situation.

Ugh, present value of future cash flows? How is that determined? Well just pretend everything is normal and you could sell it. The value would be the price you could fetch under those circumstances. My 1.5 bedroom house is worth a million dollars--it's close to the water and has a view of the water tower, after all. I can't sell it now because the market is bad, but I can luckily borrow against it for the value of a million dollars under this new rule.

Robert Reich has long been decrying the crisis of trust. This doesn't exactly help.

Smithsonian: TraderZ

2009-03-15T14:16:00.000-07:00

The second post which I found so interesting by way of Naked Capitalism in which Yves Smith described some of the antics traders pull not only against the market in general, but inside their own firms, as she says:

The next, which gets even less attention, is how traders play games with their own firms. I don't mean the rogue trader version (although that is an out of control variant, usually born out of a trader taking on big risk to get himself out of a lossmaking position, making matters MUCH worse, then hiding his losses from management as he continues to spiral downward).

I would very much like knowledgeable readers to elaborate (particularly with any incidents they can vouch for or appeared in the press, even in specialized industry publications) but here are some typical variants (note these are crude typologies, so corrections and elaborations welcome):
Marking phony prices. Can be done in illiquid markets where what you trade doesn't relate (much, at all) to any benchmarks). It has to be reasonably credible (you can't be showing gains when your sector is losing, for instance). Management is supposed to have ways to vet/validate pricing, but the funkier it is, the harder it is for management to keep.

Colluding with your trader buddies to produce market prices that are distorted. This reportedly happened with collateralized loan obligations, where traders would trade them among them selves in small lots at fictive prices that they then used for valuation purposes. That kept them in the upper 80s for a while while the the rest of the credit markets were falling more severely, but the CLOs then started to be priced more realistically (I assume some real trades got done, making the ruse impossible to maintain). I presume this is a favorite activity at year end, particularly since a lot of institutions cut way back on trading as of Dec 15 to square their books, so year end volumes are particularly thin.

Now these are really amateur versions, but are still effective. Think of the games that are possible with derivatives.

Yet this type of chicanery gets perilous little notice. Why? Because management is complicit, either by commission or omission. The poster boy of "commission" was Joe Jett, the Kidder Peabody so called rogue trader who in fact never lost the firm a dime, but reported huge phantom profits due to a flaw in Kidder's reporting system. I won't bore you with details, but there is good reason to believe that Jett thought the profits were real, that he did not think he was perpetrating a fraud.

However, anyone with an operating brain cell, and particularly his bosses, should have questioned the idea that it was possible to make such monster profits in the Treasury market, Even if Jett had miraculously discovered some anomaly, it should have been arbitraged away, pronto.

So what happened? Jett was barred from the securities industry, and forced to disgorge his bonuses (I am going from memory, but I believe they were about $8 million). And what happened to his boss, Ed Cerullo, who made $20 million thanks to Jett? Nada.

For those of us in this side of the known universe, it is extremely difficult to read about these kinds of activities without extreme outrage. It seems a prerequisite for employment in this field is lack of ability to act ethically. The post details a few examples of additional chicanery including this one:

From one Anonymous:
I was a junk bond trader for a large firm during the 1990's. I was intimately involved in year-end book-marking chicanery to boost profits and hide bad positions.

I can guarantee you that the traders at Merrill violated every securities rule in the books and every possible code of ethics in order to boost profits.

NO QUESTION ABOUT IT. BEEN THERE DONE THAT.

We may be onto something bigger here which could have expressed itself most tanglibly with the recent Stewart Cramer interview. I do hope we are:

Go back and look at the Cramer tape. It's actually brilliant. He is not very specific! There is no "when I was short X stock in 2004, I did F, T, and H and the price fell by $Z and I made $100,000 in two days." It's all murky, to the point where Henry Blodgett, in parsing the transcript, had to insert words at quite a few junctures to make what Cramer say make sense to him (and note I in reading the transcript would have inserted different words). That's why this incident never really stuck to Cramer. It all came off like knowing innuendo, but he didn't present a smoking gun.

So unless we have a Pecora commission, or a lot of ex-traders and trading managers coming forth with particulars, the great unwashed public is not going to know enough of what happened to know where to direct its diffuse but well warranted anger over having been had.

I encourage readers to provide suggestions, links to any known incidents or articles about market manipulation and internal games playing with position valuations (most important, in fixed income and derivatives markets, since that is where the big damage was done), either links to stories or personal examples (per above, the more specific, the better) or write me at yves@nakedcapitalism (I promise I will not go public with any information unless given explicit permission).

Yves Smith recently closed a book deal; I do hope the scope of its work will continue this very important aspect of our beloved and infallible market.

Detroit: Super Duper

2009-03-15T14:14:00.000-07:00

Small scale urban food production in Detroit.

Innovation returns to the Motor City.

Detroit is one example of how a city can provide its inhabitants with locally produced food. Every year, more than six tons of produce are harvested and sold on local markets. Rooftops, walls, unused landareas, planters in malls and on sidewalks are all subject for agriculture when Detroit is being transformed into a sustainable city. Together with backyard gardens and larger scale farms they provide thousands of pounds of fresh, nutritious produce for Detroit families. Simultaneously they improve communities by connecting neighbors, providing an alternative to trash strewn vacant lots, improving property values and reducing crime.

Smithsonian: AIG

2009-03-15T14:07:00.000-07:00

Yves Smith has a couple of wonderful posts today. The first is her discussion of AIG's determination to award bonuses because it is contractually obligated to do so despite the fact that it would not have existed at all, had it not been awarded a huge taxpayer funded bailout to the tune of 170 Billion dollars. Read the article here; I'll give a couple of clips:

Liddy needs to consult DeGaulle, who remarked, "The graveyards are full of indispensable men." And the folks at AIG should consider themselves lucky not to be in jail.

Since the WaPo excerpt did not make it explicit, the Financial Products group was the one that entered into the credit default swaps that brought the company to its knees. Given the fact that AIG keeps coming back for more money, I see no evidence that this group is doing a good, or even remotely competent, job.

Conclusion:

This is the problem with not declaring bankrupt firms bankrupt. Then the bonuses COULD be clawed back, via fraudulent conveyance. Instead, we not only witness looting, but add insult to injury by having Liddy defending payment of bonuses out of a bust enterprise.

Each time this garbage happens it gives Obama less credibility to do the things he was elected to do. As the Administration sees it, I'm sure, they cannot push forward on their agenda without AIG due to its threat of systemic collapse should it fail. Damned if you do; damned if you don't.

I am just trying to get you excited. Read the whole post.

Sanctimoniosity

2009-03-15T12:15:00.000-07:00

Spot on, Seajane.

Where is all this concern for contracts when it comes to labor contracts like the UAW? How come mortgage contracts are off limits when they talk about "cram downs"? What about the State of Washington's contract with it's workers on pay raises?

Why are bonuses to folks who bankrupted their company so privileged for this contract protection? I'm sick of this class warfare.

Business X.0

2009-03-15T11:34:00.000-07:00

Another Financial Times article about the would-be, could-be shift underway in the world today. I should point out right away that this had little to do with overarching nobility of the slaveholders:

If, as it has become painfully apparent, the value system and operating principles that informed the corporate psyche since at least the end of the cold war were found wanting, what should replace them?
Business leaders are by instinct glass-half-full type of people but, this time, few believe their companies’ future lies in their own hands. The financial sector’s role in causing the shocks that have jolted the world economy has had a big side-effect: the debate on the future of corporate governance is no longer confined to the boardroom. Stakeholders ranging from trade unions to activist investors and government itself are claiming the right to draw the boundaries of a new corporate order. In the words of one union leader: “The time for corporate dictatorships is over. This is our time.”

What could be some of the effects of this change in bargaining position?

These moves give campaigners new ammunition in the first big battle to reshape the rules of the business game: executive compensation. The failure of Wall Street’s high-risk, high-reward model is set to bring about change on two main fronts: top management’s pay and the use of stock options.
After years of soaring pay, business chieftains in America can expect to reap relatively meagre rewards in the coming years. As the downturn moved from Wall Street to Main Street, even companies that have not received federal aid, such as GE, FedEx and Motorola, have joined those on government life support in slashing top executives’ compensation.
Many are also re-examining the gap in pay between executives and other employees. In America, the discrepancy between the compensation of those at the top of the corporate tree and those further down the trunk has grown steadily for decades, reaching an estimated 275 times the average in 2007 and contributing to rising wealth inequality in the country.
A significant portion of the blame for rocketing executive remuneration and managers’ obsession with short-term goals is being pinned on stock options and other forms of incentive pay. Hitherto praised as a tool to align executive compensation with shareholders’ gains, options have been increasingly discredited for rewarding executives for stock market rises that have nothing to do with them. In banking, end-of-year awards of options and stock had the added drawback of remunerating staff well before the company or its shareholders could find out whether their bets had paid off.

Compensation is one area where we put our own interest before everything else. It's not all however, in the world of class war.

Boards themselves will be in the line of fire. The losses suffered by financial groups have exposed the belief that directors were the knowledgable guardians of shareholders’ interests as a fallacy – one that will not be lost on angry investors and fee-hungry lawyers. As a result, the composition of boards is likely to change dramatically.
Russell Reynolds, the doyen of American headhunters, says directors will have to be both more knowledgeable and more selfless. “Gone are the days when directors played a good game of golf but did not understand the risk-reward ratio of the business,” he says. “And yet the current environment calls for people who can devote time to the business for relatively little pay. It is almost a charitable act.”

I have enjoyed people in the smoldering wrecking of their system of sacred cows now begin to question the validility thereof. Most of these initiatives described above have been the objects that so called "anti-business" groups have been screaming about for years. It would be wonderful to think that we might change our ways because of what has transpired. On the other hand, the global financial architecture is not our only problem. It is not even close to our most serious problem. If we intend to recognize our structural issues only after they have wrought the worst possible outcome, most of us cannot expect to survive climate catastrohpe and resource depletion.

Eco-Patriotism

2009-03-15T09:59:00.000-07:00

I have a soft spot for new terms, especially when they reflect something worthwhile:

Every single American has the power to stimulate their local economies: not by spending more, but by supporting local businesses. In economic theory, more local spending translates into less "leakage". This means a greater percent of the money spent actually stays and circulates within the region, supporting more employment, investment, goods and services. Local spending leads to economic multipliers that strengthen the regional economy.
[...]
How do we turn the tide? How can we support investment, in both our human capital and our natural capital? In the current economy, local investment by local citizens in goods and services that support both economic and ecological sustainability seems like a win-win solution.

Eco-patriotism - a new word that we're kickin'‚ around this week - might be part of the answer.

Eco-patriots are a group of folks with the slogan "Love for America, love for the environment." Their mission is to help us all reduce our ecological footprint, and make that critical connection between personal action and environmental consequences.

I've always hated the use of patriotism lately. It's fascinating that in the last 10 years flying the flag typically means you support military intervention or even shopping at a mall. If we were to take on the meaning of caring about the ecologoical systems that support us, we might really be on to something.

Back to the Treehugger piece with a illustrative example:

Sustained investments in human and natural capital don't have to be complex: in this case, we're talking about where you get your coffee and where you buy your veggies. Making those investments eco-friendly is easy, when you buy local from people who source locally.
Here's one story: this week a new café opened up in Maynard (a big deal for us townies, as it doubled the number of cafes in our 5.4 square mile town). La Mattina serves the usual espresso-cappucino-latte fare, plus a chalkboard listing of Middle-Eastern fare. But there are four things that set this café apart, and make it a model of eco-patriotism. It's open on Sundays, the coffee is from a local supplier, the bread is from a local baker, and the drinks are served in gorgeous ceramic mugs.

Open doors on a Sunday morning in Maynard means that La Mattina - and its genial, talkative owner, Samir - is building community. Young couples with toddlers, pairs of trendy singles, clusters of chatty seniors, and ubiquitous middle-agers were all crammed into the café last weekend. Every few moments another customer said hey to friends, caught up on the local news, or chuckled over somebody's kid. Nick and Kelli, next-door business owners, donned aprons and helped handle the overflow crowd.

Samir sources his coffee from the George Howell Coffee Company in Acton, the next town over, and his artisanal, hand-made bread from Jessica's, a few more towns over in Woburn. By using ceramic ware (instead of disposables), La Mattina saves the town a bundle of money on trash collection fees, in addition to saving trees. And those lovely cups of Samir's encourage those of us who would otherwise tend to rush in, grab our drink, and rush out, to actually sit down and chat.

So when I plunk down $2 or more for a snazzy cup of barista-brewed, frothy coffee, I'm supporting Samir and the café staff, the George Howell workers, Jessica's business, and the town of Maynard as a whole. (I'm also decreasing my ecological footprint, because I walk to the cafe.)

Can we practice eco-patriotism in Olympia?

Capitalism Act II

2009-03-15T09:04:00.000-07:00

CorpWatch had a great piece and critique on the Financial Times' series on the next generation of mover's and shakers. As detailed therein, they happen to be the same as the last generation of mover's and shakers:

Following the damning critique of markets and poor government oversight, the last ones we should turn to for leadership are the powers that be. Yet that is exactly the group that dominates the list of those who, according to the editors of FT, will lead the way forward. The 50 movers and shakers include 14 politicians, starting with President Obama and Chinese Prime Minister Wen Jiabao; ten central bankers; three financial regulators; and four heads of multinational institutions such as the IMF and the WTO. Also included are six economists, including Paul Krugman and Obama advisor Paul Volcker, and three prominent investors, among them George Soros and Warren Buffett.

According to the author:

Then again, the problem may not be thickheadedness among FT editors. Perhaps the voices for radical change have simply not been loud enough to earn a place on a list of those who will play a significant role in the shaping capitalism’s future. In fact, one of the articles in the FT series suggests that in Europe neither the Left nor the labor movement has taken a leadership role in responding to the crisis, even as spontaneous protests have erupted in numerous countries.

In the United States, where those forces are weaker, anger at the crisis has to a great extent been channeled into support for the Keynesian policies of the Obama Administration. That’s unavoidable in the short term, but it doesn’t address the need for fundamental alteration of economic institutions. If, as the Financial Times suggests, the future of capitalism is up for grabs, let’s make sure we all join the fray.

I enjoy Berd's posts on OlyBlog, the latest of which is here:

Compelling and thought provoking video about sustainability from Bellingham, WA. In order to achieve true sustainability, there is need for a massive and deep, yet not necessarily unpleasant, transformation. The idea I have (and aspects of which are touched on slightly in the following video) is watershed economics, where all of the basic necessities: food, shelter (building materials), health care products, educational materials, clothing, shoes, etc. are manufactured locally from local, sustainable, and renewable sources. Maybe that seems extreme. But the challenges humanity faces are not to be underestimated.

This analysis is similar to the narrative of Deep Economy, whose author is Bill McKibben. If nothing else, FT has identified the need for new systems and is doing its best to examine the opinion of those who it believes will contribute. On the other hand, any new system built on sustainable practices are not probably now visible enough to merit the FT's attention. They are developing, but under the radar. Perhaps the systems to which human life subscribes, arising from the wreckage of this one, will not be sufficient to sustain a paper like the FT at all.

What to Watch: Government Financing

2009-03-14T06:52:00.000-07:00

How are we going to finance our massive spending in this year's budget? We borrow by issuing bonds. As we do that, a greater percentage of our incoming revenue each year must service that debt which an another problem entirely. Let's look at how borrowing has been going elsewhere:

STEPHEN LONG: It's crowding out the rest of the world but the issue then is, not only huge hunger, poverty because countries in the developing world can't get finance, but is there a real question about whether America, Britain, the major advanced western economies will be able to raise that kind of money, will be able to fund their debts?

SATYAJIT DAS: Well I think this is the question that everybody's asking and the signs are not good. For instance this year alone, we have had two German bond auctions, this is where the German state auctions its Bunds, which are its government securities. Two of these auctions have failed. What that means is when they offered a certain amount of securities for sale, there wasn't sufficient buyers to cover the entire amount.

STEPHEN LONG: And Germany is seen as one of the lower-risk nations of Europe.

SATYAJIT DAS: That's absolutely correct, and Great Britain recently issues 30-year bonds and one dealer to me described this auction as a debacle, as this process unfolds over 2009 we are effectively seeing the US issue between $40-billion and $60-billion of paper every week. And at some point in time there is going to be a problem of demand.

Will people buy it? It depends now on the Chinese and Japanese and these developing countries - their appetite for this paper.

The problem is they themselves are in a position where their surpluses are turning to trade deficits, we've just seen that with Japan. And so under those circumstances, there just isn't the money. So this is the million-dollar question, or the trillion-dollar question – will they be able to get this paper away, or will they have to resort to literally the Zimbabwean option of printing money.

The source:

MARK COLVIN: The risk analyst and author Satyajit Das predicted the current economic crisis in 2006. He wrote a paper titled 'The Coming Global Credit Crash', highlighting the toxic debts that would poison the global financial system.

The inspiration--SAR.

Corporatism

2009-03-13T21:44:00.000-07:00

In case you had any doubt, it really is just piles upon piles of bullshit.

(I'm talking about "news".)

For a week they couldn't stop talking about this, but then Cramer couldn't even muster a defense to Stewart's funny but ultimately serious assertions. MSNBC, naked beyond the curtain, turns to censorship.

If Keith and Rachel weren't sycophantic slags themselves, they'd have quit over this. Ok, that's too harsh; I'll give them a couple of days during which I will not be holding my breath for them to comment.

Living Roof

2009-03-13T08:11:00.000-07:00

And each building needs one.

They are called "living roofs" because they provide a habitat for these species which are disappearing due to development of vacant lands, front yard parking, patios and parking lots.

They aren't really roof gardens because they are designed for bugs and birds, not humans. Species such as the Brown-banded carder bee (pictured) and the Black redstart will flourish again, it is hoped, with careful tending of the roofs.

Household Net Worth

2009-03-13T06:24:00.000-07:00

Households losing money.

• Household assets as a whole fell 15% to $65.7 trillion, unadjusted for inflation.
• Household liabilities a declined less than 1% to $14.2 trillion.

• Net worth of American households (difference between assets and liability) was $51.5 trillion, down $11.2 trillion or nearly 18% from 2007.

• Americans’ total wealth is now back to levels prior to 2004.

Continue reading here. Sad news.

Lubrication

2009-03-12T06:27:00.000-07:00

From the mighty Some Assembly Required:

Resourcefulness: Each US citizen goes through 25 barrels of oil a year. In Japan it's 16 barrels. In China it is 2 barrels a year and in India about 1. As oil supplies decline, who's going to miss them most? Which economy will suffer most?

You still hear people say that technology will save us if the resources are in fact adequate. Whose technology will function in a resource squeeze? While we're trying to figure out public transportation systems to ludicrously move people to office buildings (in the office parks), India and China will be creating technology. Do you think they'll lend it to us or ask us to pay back their notes?

Rising Tides

2009-03-12T04:03:00.000-07:00

Just so you don't think our only problem is the economy, let's remember that because of that problem, we're ignoring this one. (via Naked Capitalism)

SCIENCE and politics are inextricably linked. At a scientific conference on climate change held this week in Copenhagen, four environmental experts announced that sea levels appear to be rising almost twice as rapidly as had been forecast by the United Nations just two years ago. The warning is aimed at politicians who will meet in the same city in December to discuss the same subject and, perhaps, to thrash out an international agreement to counter it.
The reason for the rapid change in the predicted rise in sea levels is a rapid increase in the information available. In 2007, when the Intergovernmental Panel on Climate Change convened by the UN made its prediction that sea levels would rise by between 18cm and 59cm by 2100, a lack of knowledge about how the polar ice caps were behaving was behind much of the uncertainty. Since then they have been closely monitored, and the results are disturbing. Both the Greenland and the Antarctic caps have been melting at an accelerating rate. It is this melting ice that is raising sea levels much faster than had been expected. Indeed, scientists now reckon that sea levels will rise by between 50cm and 100cm by 2100, unless action is taken to curb climate change.

Pick the one which scares you more.

Sharing

2009-03-11T18:17:00.001-07:00

Here's another way.

Cuts

2009-03-11T18:11:00.000-07:00

This is another case of missing the forest for the trees. We're cutting police forces and healthcare the demand for which is only going to explode. The costs for these services will continue to sink providers creating an ever more desperate situation.

I predict that in the not too far distant we'll have a lot of public officials shrugging whilst saying "who could have known?"

Edith

2009-03-11T13:34:00.000-07:00

Pieces like this make me sad, which I suppose is exactly what they are supposed to do.

It's a well-known story by now: Macefield refused $1 million for her 1,000-square-foot, circa 1900 house, so the developer of Ballard Blocks built the retail and office building around it, blank walls rising on three sides. Construction superintendent Barry Martin befriended Macefield, who willed her house to him before she died June 15, at 86.

Ballard Blocks is done now, taking up most of the block between 14th and 15th avenues northwest, and Northwest 46th Street and Northwest Ballard Way. The Spandex set file in and out of LA Fitness next to Macefield's house. Carts overwhelmed the aisles of the new Trader Joe's on the other side of the building Saturday, a day after it opened.

And Macefield's house is still there -- ceramic cats, dogs and pigs in the window, light bulb on over the front door, a can of uncollected trash out front beside her uprooted handicapped parking sign, buds emerging on the tree between her sidewall and the white plywood fence that still serves as the border between her property and progress.
[...]
The site really should become part of the new building, which was designed to expand onto it, he said. "Two or three times she was basically going to sell and move, and then I know the last time she ended up falling and breaking some ribs, and that kind of took the gas out of her, and then it was just too much work."

I remember when the wind leaving the sails of grandmother's life in much the same way. While she was not offered a million dollars to move, it got to the point where she wanted to stay put and die after her body had failed her. I am happy that her deathbed suffering was not accompanied with concrete walls erected around her home of many years. How depressing. I am glad to see people left flowers on her fence.

This did not help; if you zoom in, you can see the ceramic cats and dogs, the car parked in front, and the light bulb still shining.

Effecient Asset Uses

2009-03-11T13:24:00.001-07:00

And here's another: baby boomers looking for roommates.

Ask Why.

2009-03-11T08:56:00.000-07:00

Discussion of the fear of an L-Shaped recession (explained below) has increased lately as support, belief, and hope in a quick turnaround has met with the icy face of reality. As Yves Smith said a few days ago, even the erstwhile optimists have begun to change their tune:

While Wolfgang Munchau's latest comment for the Financial Times, "An L of a recession – reform is the way out," fell short of being apocalyptic, it was the gloomiest piece I can recall coming from him. Munchau argues that the world is going into what is politely referred to as an L shaped recession, but he sees it as a full blown, Japan style recession. Why? Because governments lack the will to take the painful steps necessary to forestall even more painful outcomes.

In the comment she linked, Munchau’s analysis is not pleasant to contemplate:

In an L-shaped recession, however, recession gives way to depression, despite the fact that both countries thought they had done their “homework”. If nobody can afford to run a large deficit for a long time – which is what an L recession effectively implies – the economic models of Germany and Japan will no longer work. Germany had a current-account surplus of more than 7 per cent last year. It is the world’s largest exporter. Exports constitute about 41 per cent of national gross domestic product – an extraordinary number, given the size of the country.

So what should these countries do? The right policy response would be to reduce the dependency on exports and undertake structural reforms that facilitate the shift towards non-tradable goods...

Unfortunately, the opposite is happening. Germany is clinging to its export model like a drug addict. An example is the debate about the future of Opel, the European car manufacturing subsidiary of General Motors. Opel is unlikely to survive without help from the government. The proponents of a state bail-out of Opel argue that the company is systemically relevant. This argument is obviously wrong. There can be systemically relevant banks, but there can be no systemically relevant carmakers. But the answer is also revealing. What it means is that Opel is systemically relevant for the country’s export-oriented model. The bail-out adherents are clinging to an industrial structure that has no hope of survival in an L-shaped world...

We are nowhere near a solution to the crisis. After committing errors of omission, global leaders are now producing errors of commission. The Americans dream about a return to a world of credit finance consumption while the Germans dream about assembly lines. In an L-shaped world, these are nightmares.

While we grapple with these issues, Common Sense Forecaster links to a NYT article that formulates the issue I wish more were contemplating. Here is the meat of the short article:

“We created a way of raising standards of living that we can’t possibly pass on to our children,” said Joe Romm, a physicist and climate expert who writes the indispensable blog climateprogress.org. We have been getting rich by depleting all our natural stocks — water, hydrocarbons, forests, rivers, fish and arable land — and not by generating renewable flows.

“You can get this burst of wealth that we have created from this rapacious behavior,” added Romm. “But it has to collapse, unless adults stand up and say, ‘This is a Ponzi scheme. We have not generated real wealth, and we are destroying a livable climate ...’ Real wealth is something you can pass on in a way that others can enjoy.”

Over a billion people today suffer from water scarcity; deforestation in the tropics destroys an area the size of Greece every year — more than 25 million acres; more than half of the world’s fisheries are over-fished or fished at their limit.

“Just as a few lonely economists warned us we were living beyond our financial means and overdrawing our financial assets, scientists are warning us that we’re living beyond our ecological means and overdrawing our natural assets,” argues Glenn Prickett, senior vice president at Conservation International. But, he cautioned, as environmentalists have pointed out: “Mother Nature doesn’t do bailouts.”

One of those who has been warning me of this for a long time is Paul Gilding, the Australian environmental business expert. He has a name for this moment — when both Mother Nature and Father Greed have hit the wall at once — “The Great Disruption.”

“We are taking a system operating past its capacity and driving it faster and harder,” he wrote me. “No matter how wonderful the system is, the laws of physics and biology still apply.” We must have growth, but we must grow in a different way. For starters, economies need to transition to the concept of net-zero, whereby buildings, cars, factories and homes are designed not only to generate as much energy as they use but to be infinitely recyclable in as many parts as possible. Let’s grow by creating flows rather than plundering more stocks.

The first step toward overcoming the crisis is accepting its reality. Perhaps the fundamental issue is not the ecological constraints as articulated above, but if it is, do we really want to be caught off-guard with politicians telling each other and the cameras, "no one could have predicted?"

There is no excuse, NONE, for not preparing for this reality now. The economy must be rebuilt from the ground up, beginning with the provision of basic needs. Any economic growth must accommodate those needs first and foremost. As explained here,

"Think of the global credit crises," he says. "Well, in 10 to 15 years we could see something similar happen with food, a sort of global food crunch. This would have far worse consequences than this financial crises ... In just a few generations we have burned almost all our reserves of fossil fuel and pumped the gas into the atmosphere."

We have huge problems in the realms of finance and resource. They are interrelated and so are their solutions.

Home and Gardening Again

2009-03-11T08:06:00.000-07:00

As a follow up to what I wrote here, we have one example here:

We're into purging excess "stuff" around the house, especially around the springtime, but we're sometimes at a loss for what to do with all the stuff we no longer need. Print out this handy guide from Real Simple, and you'll find you can recycle more than you thought.

And another here:

Designing flexible, affordable housing is a challenge that architects have not often risen to successfully- Apartment designs are usually fixed and people have to move a lot.
That is why the designs recently approved in Burnaby, BC are so intriguing; they are purported to be the first legalized secondary suites within apartments. Designed to provide housing for students, the blue zone can be "locked off" and rented out separately and has its own entrance. It's kind of like a basement apartment in the sky. The Tyee discusses student housing, but the impact of this kind of thinking goes far beyond that.

It's tough to guess how long it might be before a "secondary market" is created for all the excess stuff we have laying around (including the excess space in our homes), but thankfully, it seems like we are heading in that direction.