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There is a plan B. Unlike some commentators and experts and even the Newsnight webteam website say, economies can be predicted with precision.

It is about phase transition. The economic situation now preoccupying politicians and the media is nothing more than the end or dip of a phase.

This was known to happen, when it would happen and the magnitude. What wasn't done was the initiation of a rising phase which would have caught this one now and taken development sustainably into the future.

What we have to do now is initiate that phase, put up with the dip until the next one comes on strong.

The problem is transition management, New Labour should have initiated this new phase as soon as they came into power instead of artificially prolonging the existing phase.

What we are experiencing is the manifestation of the Government not doing the right thing in 1997.

I will supply an example of predicting complex systems in a new post. Hopefully the moderators will allow it because it is in the national and international interest.

I can recommend this though from ³ÉÈË¿ìÊÖ4 last night. But only as an introduction to the subject, it is a bit 1982 ish for ecologists.

/iplayer/episode/b00dzypr/High_Anxieties_The_Mathematics_of_Chaos/

If you accept in this model of reality attractors, strange or otherwise. Then the thesis presents the antithesis.

If there is an attractor then move it. You are not just predicting a complex system (eg economy) you can control it to derive the optimum conditions.

Everything is simple when you know how.

What I find disturbing about the new shift in economic peril is the news shift. The recession is now being reported as the Credit Crunch was initially - tricky, but not really major. Employment might get higher but 'not as bad as the nineties'. This is the ³ÉÈË¿ìÊÖ's Hugh Pym!

I think at this point there's an obligation to inform of, if not worse case scenario, then something slightly stronger than a 'technical recession' recovering in late 2009. It isn't going to happen. Not only is money pouring out of the system, but the money that remains and which is being taken for granted as solid is going to come under ever more pressure. Families, extended families are going to have to draw on savings just to keep going. This will damage bank capital ratios even further and worsen the money supply situation while in a likelihood increasing the cost of borrowing.

I think we are going to see record unemployment figures. The chance of the state creating jobs has go to be close to nil as it struggles with the debts it has taken on board with the banks - which will get much worse - and as tax revenue decreases; and as social security spending rises. This will mean, of course, less consumer spending (mainstay of the economy) and it will mean that we'll have higher taxes and probably spending cuts. What we can't have is a denial of reality and that's what finally has caught-up with us.

Infact, we could have all this and still watch as debt increases. The world has changed. We almost had the banking system collapse at just the tip of the economic storm, now we're just entering into it, and that has to be a factor.

I know the ³ÉÈË¿ìÊÖ has a duty not to panic people, but there has to be a sounding for reality or what it could be. There are negative consequences to stating too rosy a picture.

Paul can you guys on the news night team ask a simple question next time you have an FSA representative on your programme. Given the interbank lending effectively stopped because of banks concerns that their counterparties might be contaminated with the "toxic debt" and no one knew for sure what the level of exposure was to individual banks. Were the CFO's and directors of those banks not in breach of FSA and stock exchange rules which require immediate public disclosure of material facts that affect the asset base of the affected banks.
I had always understood that breech of these rules left the directors as liable to the share holders for any losses that result from the withholding of such information.
In the US congretional hearings are investigating Lehman Brothers executives but here in the UK no one appears to be investigating the actions of the directors of the banks that failed.
Is this because that it is assumed that this calamity was unavoidable and therefore it was just tough luck that northern rock and B&B went to the wall and that RBS and HBOS had to be rescued. Or is it a case of the establishment closing ranks and protecting their own despite the losses to shareholders and pension funds that have resulted? The value of these assets did not just collapse overnight

One of the people Paul said had foreseen the current crisis was economist Graham Turner. In a Guardian article last month ( ), Turner pointed out that by the end of the last financial year, Britain's banks had borrowed £3.9 TRILLION from abroad, more than two and a half times the UK's annual GDP (gross domestic product - ie the total value of the goods and services produced). Of this, £3.6 trillion was short-term debt.

With UK banks and the banking system in their present state, could somebody explain to me how this debt will be repaid? And if it can't, what will happen?

Turner also said that international creditors are worried that a sharp rise in the US government's borrowing will cause it to default. According to Chalmers Johnson, the US national debt is now over $9 trillion dollars, up from c.$5.7 trillion since Bush took office.

In short, both the UK and the US seem to be in the same position as Iceland, the UK because of the banks' borrowing, the US because of its government borrowing. And that was BEFORE the current crisis and bail-out/rescue plans. The mind boggles.

We're at DEFCON 2 right now. What we desperately need is monetary reform and probably an order of magnitude more radical than even Gordon Brown and the powers that be envisage.

There are a number of changes we can make, late in the day as it may be:

-- A return to prudent lending (eg mortgages with at least a 20% deposit and no more than 3x salary), which will ensure that house prices fall and become more realistic and affordable;

-- Shady 'off balance sheet' items that are currently invisible to us to be declared on balance sheets as 'dodgy assets' and 'potential liabilities';

-- A minimum acceptable and gradually increasing fractional reserve requirement for banks asap;

-- Governments legislating to make certain mad-cap contracts -- or 'bets' -- in truly monstrous and looming derivatives (eg credit default swaps) null and void before they really sink us;

-- Investment in value, not in exponentially-rising debt;

-- And never forget the old Sufi adage: "This, too, shall pass", so hang in there, folk.

And if we get to DEFCON 1 (a great depression), though heaven forbid we do, then maybe we can even look to cutting usury out of the equation.

BETTING IN THE GLOBAL CASINO

This should appear in the Private Eye classified tomorrow or Friday

----------------------------
Celtic Lion Ltd seeks £2 billion to restore global ecological and socio-economic stability.
----------------------------

Now Robert Grant from Tenalps publishing will confirm this was placed on Tuesday 7th October.

Talk is cheap but whisky costs money. On Tuesday 7th Celtic Lion 'bet' that in the next week all the world's political leaders, economists, financiers even with £ or $ trillions would not be able to stabilise the global economy. Let alone the ecology of the planet. So the ad would still be relevant.

Economies are so easy to predict.

The ad or post does not break this blog's House Rules because it was done to demonstrate a point, was not done for personal gain, but in the wider national and international interest.

When the magazine comes out that entry will still be relevant despite £2,000,000,000,000 and all those people trying to solve the problem, because Celtic Lion knew they couldn't do it.

The current economic debt-system can only function if there is growth. If there is growth there is an increasing use of finite and diminishing resources.

Sooner or later this insane pyramid scheme, for which the powers that be appear to have no sustainable Plan C, will fail.

VOLCANISM - AN APT ASSOCIATION

Vulcan: A tale of an ugly face (as in 'Capitalism') maternal rift, clever plunder of the earth (with associated CO2 release) and a legacy of eternal misery. Britain in 2008.

Nice one Paul.

The one thing everyone recalls about Krakatoa is that it is 'East of Java' as in the file title - and unfortunately wrong as it is in fact 'West of Java'.

It reminds me of the musical conductors remarks about a band member "Loud but Wrong"! I am moving towards my point in what I must admit is a rather circumlocutory manner.

The essence of my thoughts on the coming depression is that mostly we will all get it wrong. We start by not being alarmist so that we do not scare the horses. Then we panic for a bit. It goes in waves and only after the waves have settled can we rebuild.

The sums lost in financial gambling are astronomic and this is very worrying. Somehow, perhaps a thousand trillion dollars of bets have to be either written of or set off against one another. I cannot see anybody even starting to think about how to do it - yet it must be done.

# 3 GrouchoMarxist1

Yep. I'm in the camp that says we'll soon be witnessing a 'convergence of catastrophes', and that recent mass media reporting, by and large, has been skimming over the surface of what is one almighty storm coming our way.

Just a little digging beneath the surface of all the workaday reporting going on right now and it's easy to find plenty of credible, technical analyses pointing at serious economic, social and geopolitical trouble just over the horizon.

My own approach these days is to assume that one of the more cataclysmic scenarios will indeed come to pass. I have no faith whatsoever in our political class whom I think are now selling us down the swanee. I'm preparing myself, my home and my family for a troubled period ahead. The killer blow will come when the reality of the end of mankind's era of cheap, fossil-fuelled energy really hits home: our way of life is about to change forever.

PS You'd think I was a crank reading that. However, I'm a regular guy; a company director; ex armed forces' officer; wife's a doctor; kids at private school; couple of dogs; go to dinner parties; walk in the woods etc etc. But I'm just getting a very, very bad feeling about what's swirling around the globe at the moment.

THE LODESTONE OF WISDOM

I've said it before . . .

In the pursuit of cleverness, we have eclipsed wisdom. I suspect every one of Ed Balls' wunderkinder can tell you what 'clever' means, but I think they would struggle to define 'wisdom' and be unable to explain how wisdom constrains cleverness.

Wisdom, in our culture, is like an extinct species. Its remains protrude in odd places, but it no longer plays an active part in our lives.

And the sad thing is that our leaders, being blind to its elegant facility, far from giving its remains the kiss of life in these dire times, are simply piling another layer of cleverness on the rubble of the last lot.

J Gordon's Moral Compass is faulty - he should seek the Lodestone of Wisdom.

It would be more useful to be using the position you are in to give people the tools to be active i.e. really useful, key information, rather than going for bigger and better metaphors.

No, this is not an essay competition for you, nor is this, for all of us, a dress rehearsal. It is our time to fight.

Playing 'what is it like' gives many possibilities. Maybe one can grade them? for me the most useful ones are those that don't need explanations?

The fed has two might fail lists. one with a 100 banks on it and one with a 1000.

In the minds eye one might look at the uk financial landscape and think we have just come through the Battle of Britain where the few like Gordon had their finest hour. Now we might expect the Credit 'Blitz' as the financial effects hit the high street and civilians start to feel the effect?

Where the City is all in flames but St Paul's [the conscience of the nation] remains intact?

With the unemployment numbers building we could reasonably say that all sense of a phoney war is over?

these are the days of 'blood, toil, tears and sweat?' The days to memorise Kipling's 'If'?

#11 Moraymint

Could I take it from the name you are from Scotland.

I told Pete Wishart a SNP MP in Jan 2006 that there was a shortfall in the UK economy of £50 billion per year. This would have accrued to £350 billion by 2008, precipitating a collapse.

I discussed the situation with a business consultant the next month. He suggested I rewrite the business proposal for the Millennium Dome in 2001 as an executive summary for Scotland in 2006 to generate £30 billion for the Scottish economy. This was sent to all MSPs at Holyrood at the start of April 2006.



We are not sure if it was sent to David Cameron and the references specific to Scotland removed, which became the re branding of the Conservatives.
See the section Northern Tundra Alliance. 3 weeks after Annabel Goldie and Murdo Fraser had the document -Cameron went to Norway.

Also the countries the SNP mentioned in their arc of prosperity are all here.

Is it a question of the document predicting what the political parties would do?

Or sadly did political parties take apart £30 billion per year for the Scottish economy and use it for party interests instead?

I think you are correct about impending disaster. I have never been wrong in predicting the outcome of complex systems. Unfortunately those who have the power or influence to do something- Governments, politicians, police forces, media are not interested. Allowing preventable disasters to happen preferring to react or report on the aftermath.

My model predicts ecological systems will collapse in 4 years, 5-6 billion deaths.

Celtic Lion has the solutions though.

Paul

You miss that the atmospheric problems associated with Krakatoa though not feeding back to cause more volcanic eruptions or Tsunamis, they did affect and cause food production problems.

Feedbacks do not have to go directly back to the source-positve feedback, they most often set off trips in other systems.

Moraymint though I appreciate your concern over economic, social and geopolitical systems. I still have to offer it will be ecological collapse which will trip these into chaotic states.

Clinton should have said its the ecology stupid and Blair ecology, ecology, ecology.

This comment has been referred for further consideration. Explain.

METAPHOR AND THE CAUSES OF METAPHOR (#13)

I rather suspect that metaphor is the last refuge of the dispirited. It certainly is for me.
I started trying to offer practicalities in 1995.
Now, I suppose I 'metaphor' in lieu of praying. Just about every agency of good has now been successfully turned on its head in our culture. We are in a permanent state of agitation that we attempt to quell with damaging mental and physical inputs.
Society is in the grip of negative feedback. Several generations fed on a weird mixture of license, PC, media madness and fads of every description, now regard this as normal. Some of them are governing us.

I hold the view one should have a solution before complaining. In that spirit, I came to the conclusion that it is impossible to break into this self-reinforcing horror, so the young must be immunised against its malaise, almost by stealth. My best shot is described on my website (search under my name above - I am not the Morley Prof.)
Labour are for-ever consulting 'the people' but as a 'non person' they don't ask me.

I can't cope with the magnitude of some of this, so I'm going to ask a smaller question.

I watched Newsnight on Tuesday night as Jon Sopel (I think) interviewed an estate agent from Winkworths, some guy who'd written a book about property speculation, and Yvette Cooper - all three about the bank bailout. I thought Mr Sopel did a good job of articulating the contradiction in the government's "target" for banks to return to 2007 lending levels. As he said, doing that just means re-creating the housing bubble. Cooper either couldn't understand the issue or didn't dare address it. The other two seemed obsessed with re-inflating the housing bubble.

The estate agent's behaviour isn't a surprise but what worries me is that maybe they aren't alone. Previously I had seen the Deputy Director-General of the CBI lauding the half per cent interest rate cut because (if I remember correctly) "it sent a clear message to the public that it is safe to go onto the high street and buy" (my approximate quote). Are these people crazy?

My real question is whether these hints are what they seem? Do people like government ministers, the CBI and maybe the current heads of the big banks really still believe that it is possible to run a national economy on endlessly soaring debt?

Bad day huh? Guess I better go watch newsnight :)

Luckily Krugman is updating "the return of depression economics" should be out by December.

Hants GW

Saw it myself. I think the technical term is 'one trick pony'.

If there is a problem the solution is making consumers more confident so they get back on the High Street and buy buy buy.

The entire potential of the human race and this planet has been diluted to that. Not much to show after 4,500 million years.

I thought the greatest challenge before the stock market and the banks was climate change and the environment.

The solution then was to use less, we were told. Some disonance going on somewhere.

Well I'm going to bed.

If there is anyone out there and haven't seen the news.

The Nikkei and Australian stockmarkets have just opened. The Nikkei appears to be in freefall. Lost approaching 10% in minutes.

forget what happens on the stock market. That will bounce about between technical levels. Its just bets that there will be more unemployment demand destruction etc.

The hub nub or hob nob of the crisis is in interbank lending ie libor. Which reflects a psychological problem among a small number of bankers. Some of whom are not even bankers but the old school tie mob who have no banking background. No wonder they are frozen like rabbits in the lorry headlights.

There needs to be a management decapitation of banks and fresh minds brought in.

As long as a psychological paralysis exists among those 20 or so people nothing will happen.

And what is driving that psychological crisis? They are thinking about their own shareholders not the wider economy. So its based in self interest thinking. The time for that is over. But clearly those in charge now are not able to adjust to the new realities. Which is why new people need to be brought in.

Suddenly everyone knew this(economic Tsunami) would happen.

Hindsight on the Lehman ditching giving birth to a sea of 'I told you so' comments.

It would be nice, just once for the political and economic academics to show imagination and scientifically map the way forward with consensus, omitting personal or corporate greed.

This is a chance to do something different, sustainable and positive.

Why does even typing this make me so aware that my last comment is beyond the scope of our whole society.

I truly have passed into la la land..

This comment has been referred for further consideration. Explain.

BIG QUESTION - SMALL MINDS

Hants_gw (#19) that is no small question and the answer is 'small minds'.

Education education education (really school, school, school, aka institutionalisation X 3) ensures a nation of small minds. Perversely, some of the smallest, are in Westminster - would YOU put up with that banal charade?

The ultimate measure of maturity, in my view, is the ability to compromise for the good of all. We are all desperately immature and unable to break free from self interest. Add the frantically power-hungry to this mix, who morgage sleep, leisure and humanity in their pursuit of power, wealth and adulation (think Blair) and here we are.

Once drafted into school, we are shaped for work and deprived of wisdom. This needs questioning, however small the question might seem.

Paul

Just a quickie on global ecological systems. Krakatoa and the Boxing Day Tsunami are part of the SE Asia tectonic plate system.

The largest feature is the Indian plate pushing up into the Asian one. This produces the Himalayas. This are very high and rainwater and snowfall on them end up in the rivers of India and Bangladesh.

These support high levels of human population and food production. Orthogenesis: mountain forming is also a part of the control of CO2 in the atmosphere.

Remember when you eat your Basmati rice, Krakatoa is part of the process which put it on your plate.

#11 I'm with you. I've read a lot over the past few years on the converging castrophe theme. I started looking at peak oil and moved on to climate change, top soil erosion, etc. I'm not certain that everything I have read is accurate but intuitively I believe there is a problem with the concept of growing world economies within a finite planet with finite resources. Some of the books I have read predicted the collapse of the financial system for the reason that they requiring growth and that growth can only be achived with "cheap energy" (i.e. oil) which we have only finite supplies of. This is perhaps not exactly what has happened here but I have to think that increases in living costs due to energy price increases both here and in the US have contributed to the current situation. One of the strains on mortgage payers must be the additional cost of petrol, gas, electricity.

It seems logical to me that all of the moves towards a greener way of life will only delay the problem. The fundamental problem is that the world is overpopulated. I've thought about taking steps to protect my family from the onset of catastrophe but, at the end of the day, if it gets as bad as I think it might, we could well be reduced to anarachy - in that case, I won't be able to rely on the police to stop the looters from stealing my hoarded tins of spam!