Wednesday, September 7, 2011

Fall 2011 Financial update.

If the currencies of the world were truly undervalued, there wouldn't be a rush into them. The reason these bonds are yielding so low is because the governments don't need to raise yields in order to sell them. This is an indicator of very high demand. The debt issue is overblown and mostly propaganda. The reason the debt issue simply shows up when it's convenient, and then goes away is good evidence of this. Further evidence is that in Japan, the debt to gdp ratio is much much higher than in the U.S. But still Japan has no inflation. If there were a true loss of faith in the dollar, the yields would be much higher (i.e. government a attempts to lure buyers with a rate of return that is higher than say.. 1%. So it would say offer bonds with a yield of 14% over 10 years. If yields were higher, we may say that there is a loss of faith in the currency because only people getting a 14% (for the sake of argument) on their bet would buy the bonds. But what we have now is major investor class players buying them up with a near zero return on investment. The phenomenon is global--and it indicates a lack of profitability in the private sector--which is creating a bottleneck into the safer issue of bonds.

As for gold, gold is a bubble in my view. Commodity speculators are able to plow into it and create massive false demand with loans that are magnified at the commercial level. So 1 actual dollar can turn into 100 financial market dollars. The theory behind allowing this is basically a super charged elite view of the economy, but the essence of it is that despite this magnifier on all financial returns on investment, there is still not enough investment in the real economy (probably because the only money values worthwhile are all people at the top--which forces them to buy and sell each other, so to speak, hot money, financial bets instead of real investment, etc).

This explains the stock market being pumped up after the 08 crash, it explains the commodity markets going sky high, but the money coming into the broad and vast majority is declining. Working class wages declined for the past 30+ years. Household income requires 2 earners, etc..

Thursday, July 14, 2011

Music industry and the value of content

Some battle piracy, some also wish to believe their valuations on their content are much higher than they are. Furthermore, content producers at the elite level controlled the entire media landscape boxing out small artists for many years. You all recognize the deflationary price implications of unlimited downloads, but you need to also understand that the same falling rate of profit tendency applies to the production side too. There are WAY more good content producers now than ever because of the falling costs to produce the content... the costs would have fallen naturally were they ever in a market place. A core part of the problem is that the old media system was a cartel. It used cartel pricing in the first place. Without the cartels in music for instance, CD prices could have been around 2-3 dollars at a decent mark up from costs. The price inflation on media is what made the music industry much more valuable than it actually was in simple commodity terms.

The solution to me needs to benefit the small players, but not by fixing the system for the cartels or elites. I think the state needs to play a role, and everything should be freely streamed by consumers for maximum efficiency, but that the federal state should probably manage the pool of aggregated values. The devil's in the details, but how else can we drive up the value of content when there is no market leverage on pricing due to extremely low production costs and infinite supply of digital commodities. Supply and demand sets the price right? Supply is unlimited and so the price is zero or near zero, or the price is almost arbitrary. If the state does it, then we can just declare the value of the entire music business to be 100 billion dollars per year, and then divvy it out to the artists, with caps on the top to create regional, national, and local acts, drive out the money laundering gangsters that are all over the industry, and create a genuinely reflective music culture.

Sunday, July 10, 2011

Distribution of power in society.

The private sector is the dominant sector in our society. As a general rule, I prefer to spread power away from any concentrations. I do not think that there are technocratic issues of talent so much as massive concentrations of power within institutions that create a demand for very specialized, key individuals which occupy those institutional slots. The state, while very large in areas of imperial assaults and maintenance of proxy state power (i.e. Colombia, Egypt, Israel, Saudi Arabia, Bahrain, Iraq, Afghanistan, etc), is still quite smaller than the much larger private sector. Control over most of the social space resides in the hands of the few, and it doesn't matter if it's Hellenistic Greece or Roman oligarchy or the Roman empire or our current variation on themes as old as written records.

As for markets, closed or open, I am not a fan. I am generally opposed to concentrations of power, and markets are simply mechanistic institutions, as old as settled societies, that are crude tools that at their best, determine prices of things and people (most importantly people) on the simple and archaic mechanics of buyer inputs and seller inputs. The information that gets written off as externalities--which are enormous and far reaching, demonstrates clearly the need for a different set of economic institutions that can more accurately determine values on stuff (services, commodities, et al) and on people. Both market systems and state systems have proven their abilities through politics to subordinate the many to the power of the few. There have been massive successful challenges to that rule, civil rights, women voting, or women allowed to occupy higher slots in the economy, labor rights for the bottom 60%, etc. This has created reformist mindsets that mitigate the effects of each type of system (competitive market systems or more coordinated state capitalist hybrids) but by and large, there has been no attempt at creating a system that enhances local power, prevents concentrations and blockages, and maximizes economic outputs for the maximum number of people.