EYE-BALL’s Herman on – Materialism Part 4 – The Anti Wall Street Rallies

October 16, 2011
Herman O'Hermitage
Title:
Materialism Part 4 – The Anti Wall Street Rallies.
By: Herman O’Hermitage
Herman O'HermitageWhen I predicted the default of Greece 4 months ago, I could not see much, it came down to the crippling risk premiums attributed to Greek Sovereign debt by Credit Default Swaps. This meant that default was the only solution.

Greece will lose access to capital markets, which will force change upon the Greek nation where they will meet their obligations as they fall due. The disparate sentiments between Athens and Berlin last June are just minutae.

The force and momentum are what was, and remains the force and the momentum.

Momentum, a very very important scientific observation. Trends.

Rome RiotsThis year we have seen a newer force that is gaining momentum, and we can loosely call it civil disobedience. In our world we have the British Police Riots of late July, and now the anti Wall Street rallies spreading across the West. This is not to overlook Syria Egypt Libya and so on. The anti Wall St has spread overseas to Australia amongst others – read “Wall St Protests go GLOBAL” story here.

Rome RiotsNews reports about the Wall St protests include snippets like the top 1% of income earners cream off 21% of GDP. Don’t forget we have many wealthy people saying that they are prepared to pay more tax. Best example is Warren Buffett saying he pays less tax than his secretary.  This is all so confusing.

For a start what has occurred in Europe will take many years to fix, but there is not much more sobering up to occur. Wanton and loose and frivolous self endowment is over. In America, this is not so. There is much to play out. The central message from the USA is why has the excesses of the capitalist system fallen so heavily on the underclass, while the bankers act as if life goes on.

While this divide is always there, always has been and always will be, in my lifetime I can not recall it being so acuminate. I need to go back in history like the French Revolution or the Meiji Restoration or one of the Communist Revolutions in order to see with clarity what is happening and foretell what might occur next.

Wrap it any way you choose and it is the same. Why are so few taking so excessively while so many can not cope? The very concept of two speeds is disgusting. It is trendy to say that Marxism is a broken model. That it is.

Under Lenin and Mao Tse Tung and all other experiments disincentive and corruption were proven just as predicted by George Orwell in Animal Farm.

Most importantly the Free Market model is now just as broken. Very importantly the best economies today are those who are centralised or planned. This includes the Norse, China, and maybe even Russia. Indonesia and Brazil and India and a few more, are doing well but they have massive hurdles still in front of them.

For me there is no denying, a centralised or planned economy will always crush individual brilliance, but maybe individual brilliance needs more definition. What creates a Steve Jobs, an Albert Einstein, a Thomas Edison, or for that matter a Black Caviar? This tends to go to one of the greatest dilemmas of all, who comes first, the individual, the family, the community or the economy? It is held that Singapore is unlikely to ever give us a character like Steve Jobs, but Japan did give us Akio Morita and Masuru Ibuka and Sony Corporation.

Maybe the difference in political dynasties here holds the key. Japan has a revolving door prime minister from the same party over the last two decades, while Singapore probably needs a dose of variance. Importantly the ruling party in Japan keeps evolving, and while their economy has been moribund for 20 years, their control and influence in some industries like cars or entertainment is just amazing. Those two industries were the bastion of North America.

Idiot SymbolismThe USA (or North America) now has so little international significance, yet still carries on like it was still the immediate post world wars era, (or the cold war era). In what industry other than banking is America supreme? [-Monkey is as Monkey does…]

Military, and ? Where will their new industries emerge in the next 2 decades that will see them able to start paying their way?

If you were to study both the Meiji Restoration and the French Revolution, you will find that they were attributed largely to an over inflated civil service, and an elitism that was not sustainable. That is where we are today. Trying draw correlation is extremely difficult but co variance is easy to observe. Under the Shogunate, Japan had too many Ninja’s drawing a stipend who were not productive, there were simply some sort of quasi lawman. Too often fighting amongst themselves. Is that not a fair summation of American Politics and their vested interests including Ben Bernanke now?

Similarly before the French Revolution they had a particularly bloated aristocracy and civil stipend.

What never really leaves me is the basic foundation for happiness. It is everywhere throughout the ages. Your daily bread, something to do with your hands, something to do with your mind, and someone to love. Where does the Ferrari or Maserati fit into that one. Something to love? (A possession) After Ferrari include a Gucci handbag, a Rolex watch, a yacht, a villa on the Mediterranean, or a chalet in Aspen. You exert far too much energy protecting what you own to really enjoy what you have. I truly advocate holiday rentals rather than owning a seaside second property where maintenance becomes a chore.

But this world of wanton materialism continues, where taking excessively is quite normal. You can never have enough. This is no different from alcoholism. An alcoholic can not stop his craving of another drink, and this wealth-aholic simply wants more too.

Reverting to history of the rise of Superpowers, and the decline of Superpowers, the rise is supplying the basics of life to the masses. In 1873 Britain through their colonialism produced 24% of internationally traded goods. By the turn of that century they were competing seriously against Germany and the USA. America became the biggest exporter throughout the 2 world wars, and started to become the biggest international investor.

This morning I searched the fundamentals of BHP. Very quickly the current capitalisation is justified by earnings. BHP announced an earning per share of USD4.291 fully diluted at their last reporting date. Their dividend policy is nonsense, but in this matter that is irrelevant. Maybe it is not.

From 2008 to 2009 they saw a 15.57% drop in total revenues translate to a drop in profit attributed to shareholders of over 60%. This tends to explain the volatility in share prices over the last month. If I was to do the same exercise on one of the Australian banks you will find similar. After sub prime their provisioning skyrocketed, which would mirror BHP’s drop in total revenues. Right now the banks would appear to be a screaming buy, but you must consider the risk of a substantial drop in earnings. Clearly so much is at stake.

Rome RiotsDuring the week Bill Clinton was commenting – [read “Chicago Tribune” story here] – how the anti Wall St protests are healthy but in a back handed way went on to say they must lead to solutions. Protesting must offer solutions.

The solution through everything here is the powerful must cut their excesses. Barak Obama has made a small start by exiting the space frontier and cutting military spend. The USA must increase taxes. It goes without saying they will further stimulate their economy. This can not further balloon their fiscal deficit. The USA must increase their production of import replacements and suffer a further deterioration of terms of trade.

China must float their currency. If China continues to deny this then other currencies will be forced to employ pegs, just like Switzerland has. Wall St by its own design will not cut their excesses until it is forced upon them.

This can only occur through prosecuting recalcitrant’s for their market manipulations. Washington must stand up to Wall St, and bring them to heel.

Washington is scared of the banks contracting their activity.

The frightening part of all of this and history, that if these warnings and steps are not employed, there will be military conflict between Beijing and Washington. Overnight the G20 has made it clear than China must float its currency. But what if not? I am truly frightened and have been for some time.

________________________________

Herman …

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  1. October 16, 2011 at 12:43 pm

    One of your best post’s yet Herman … throughly engrossed with the story and motivational as well …

    Well done… EYE-BALL

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