The Big Picture

---

• Can We Build Our Own Economy From the Ground Up?
• Last Call: The TBP Influence List
• 10 Monday Afternoon Reads
• Market lift off lows
• 10 Tips for Making Beautiful Slideshow Presentations
• How to Focus in the Age of Distraction
• Big Bank Chart
• Read It Here First: Rising Market Volatility
• The Long-Term Case for Stocks
• 10 Monday AM Reads

Can We Build Our Own Economy From the Ground Up? Posted: 12 Sep 2011 10:00 PM PDT The Economy Is Stuck In a Depression … For Most Americans The mainstream economy is stuck in depression. See this, this and this. More accurately, there are two economies: In one economy, the top .1% are being made richer and richer due to access to government handouts, fraud and bad government policies In the other economy, everyone else is getting poorer Alan Greenspan agrees: Our problem basically is that we have a very distorted economy, in the sense that there has been a significant recovery in our limited area of the economy amongst high-income individuals… Large banks, who are doing much better and large corporations, whom you point out and everyone is pointing out, are in excellent shape. The rest of the economy, small business, small banks, and a very significant amount of the labour force, which is in tragic unemployment, long-term unemployment – that is pulling the economy apart. The average of those two is what we are looking at – that they are fundamentally two separate types of economies. Put another way, the top .1% are currently acting like parasites, stealing the money from the rest of the population. Moreover, the giant insolvent banks – which are receiving trillions in bailouts, guarantees and opportunities – are not lending to Main Street, while the smaller banks are (even though the smaller banks are being unfairly penalized by the Fed.) And perhaps most importantly, consumer confidence – and Americans' confidence that their government is doing the right thing to fix the economy – is extremely low. Why? Largely because the rule of law has broken down, and fraud is so rampant – and is actually sanctioned by the government – that it has become "the business model" of Wall Street. And see this. In short, people no longer trust the economic system, which makes an economic recovery impossible. So people aren't spending, but are instead "keeping their powder dry" until the rule of law and free markets are restored. People know – either consciously or below the surface – that we have socialism for the rich, and that the little guy doesn't have a chance. See this, this, and this. Under such circumstances, people will not spend. Is There A Solution? We can't get out of this depression until trust is restored and consumer spending occurs again. Trust and spending won't happen unless the rule of law is followed. But the government refuses to enforce the rule of law or to prosecute most of the Wall Street fraud, partly because Washington D.C. has been bought and paid for by Wall Street. So we're stuck in a seeming catch-22. But maybe we can build our own economy. Yes Magazine has a new article out entitled: Who's Building the Do-It-Ourselves Economy? Corporations aren't hiring, and Washington is gridlocked. Here's how we take charge of our own livelihoods. We – collectively – have enough money in our personal stashes to be able to grow a vibrant economy. If we held our own money, we wouldn't need the big banks. Public banking could also really help us obtain credit to grow our local businesses and economies. But the big banks (and Federal Reserve itself) are exerting tremendous pressure to kill any public banking movement. Local currencies and barter are also becoming huge trends. As John Stossel noted in March: The Cleveland Federal Reserve notes that private currencies have even helped the economy function in the past: During the Great Depression, the Federal Reserve failed to keep enough currency in the economy – so some companies issued their own currencies and helped fill the void. But the government at times cracks down ruthlessly on alternative currencies … going so far as to label them a form of "domestic terrorism". Moreover, there is a growing consensus that – since there is simply too much debt in the world to repay (much of it fraudulently incurred) – the debt should simply be written down. See this and this. However, the bondholders are fighting that idea with tremendous lobbying efforts. So the large organizations – perhaps with the best of motives – are trying to keep us trapped in the dysfunctional, debt-based system. Re-Building Local Communities of Trust As professor of social anthropology – and debt expert – David Graeber points out, we don't really need debt and money as such: The big question in the origins of money is how a sense of obligation – an 'I owe you one' – turns into something that can be precisely quantified? Well, the answer seems to be: when there is a potential for violence. If you give someone a pig and they give you a few chickens back you might think they're a cheapskate, and mock them, but you're unlikely to come up with a mathematical formula for exactly how cheap you think they are. If someone pokes out your eye in a fight, or kills your brother, that's when you start saying, "traditional compensation is exactly twenty-seven heifers of the finest quality and if they're not of the finest quality, this means war!" Money, in the sense of exact equivalents, seems to emerge from situations like that, but also, war and plunder, the disposal of loot, slavery. In early Medieval Ireland, for example, slave-girls were the highest denomination of currency. And you could specify the exact value of everything in a typical house even though very few of those items were available for sale anywhere because they were used to pay fines or damages if someone broke them. But once you understand that taxes and money largely begin with war it becomes easier to see what really happened. After all, every Mafiosi understands this. If you want to take a relation of violent extortion, sheer power, and turn it into something moral, and most of all, make it seem like the victims are to blame, you turn it into a relation of debt. "You owe me, but I'll cut you a break for now…" Most human beings in history have probably been told this by their debtors. And the crucial thing is: what possible reply can you make but, "wait a minute, who owes what to who here?" And of course for thousands of years, that's what the victims have said, but the moment you do, you are using the rulers' language, you're admitting that debt and morality really are the same thing. If Graeber is right in his claim that modern ideas of money and debt came from warfare and slavery, if the large banks and their "bought and paid for politicians" continue to block public banking, and if the IRS is going to tax barter transactions and block alternative currencies, what can we do to escape the clutches of the wealth-extracting system we currently have? Graeber hints at one possibility: [French anthropologist Marcel Mauss] was one of the first anthropologists to ask: well, all right, if not barter, then what? What do people who don't use money actually do when things change hands? Anthropologists had documented an endless variety of such economic systems, but hadn't really worked out common principles. What Mauss noticed was that in almost all of them, everyone pretended as if they were just giving one another gifts and then they fervently denied they expected anything back. But in actual fact everyone understood there were implicit rules and recipients would feel compelled to make some sort of return. What fascinated Mauss was that this seemed to be universally true, even today. If I take a free-market economist out to dinner he'll feel like he should return the favor and take me out to dinner later. He might even think that he is something of chump if he doesn't and this even if his theory tells him he just got something for nothing and should be happy about it. Why is that? What is this force that compels me to want to return a gift? This is an important argument, and it shows there is always a certain morality underlying what we call economic life. In other words, in communities or webs of human interaction which are small enough that people can remember who gave what, we might be able to set up alternative systems of money and credit so we can largely "opt out" of the status quo systems of money and debt measurement. I'm not arguing for becoming Luddites and living in mud huts (but that is fine, if you wish to do so). Nor am I suggesting that we all have to become selfless saints who give away all of their possessions without any reasonable expectation of something in return. I am arguing that it might be possible to empower ourselves – and create our own systems for keeping track on a local or people-centered basis, and create our own vibrant economies using the resources we have – by moving away from the national and global systems dominated by the biggest banks and oligarchs, and towards a system where we "spend" resources and goodwill into our local communities in a way in which trust is built from the ground-up, and the energy of trade and commerce can be re-started. Postscript: Mainstream economists will argue that we need a universal, fungible type of money in order to trade on a global basis. But because currencies are now unpegged from anything in the real world and are traded on the currency markets, their values fluctuate wildly in the modern world. In other words, one of the essential characteristics for money – that they represent a universal, fixed yardstick – has disappeared. And fiat currencies have a very short lifespan. So how valuable are they, really, for anyone but forex speculators?

Last Call: The TBP Influence List Posted: 12 Sep 2011 05:15 PM PDT As noted each of the previous two evenings, I found the Bloomberg finance 50 sort of milquetoast. Instead, I solicited you the home viewer to suggest a more significant group of influential people  — who affect your thinking, your trading and your outlook. The categories: Asset Managers Technicians/Analysts Researchers/Strategists Techologists/VCs Media/Blogs Add your suggestions and I will pull together a list based on reader votes, plus a little of our own secret sauce. Please use the comments to suggest as many folks in each category as you like . . . > Previously: TBP50: Who Influences YOU the Most? (September 11, 2011) Meh! Bloomberg Market's 50 Most Obvious (September 10, 2011)

10 Monday Afternoon Reads Posted: 12 Sep 2011 01:30 PM PDT Here is my train reading for the ride home: • China Rescues the World* Again, Italian Bond Edition (WSJ) see also The solvency solution for Europe: time to do the unthinkable (Reuters) and Germany May be Ready to Surrender Over Greece (Bloomberg) • Eveillard: Expect a Mania in Gold Before This is Over (King World News) • Plan Emerges to Pay for Obama Jobs Bill (Bloomberg) but see How to Make Business Want to Invest Again (NYT) • Simon Johnson: Brace for a Long Recovery From Global Credit Glut (Bloomberg) • Equities: Why I Continue to Sit Out (Joe Fahmy) • Bubble Boys (NY Mag) see also The New Apple Advantage (Daring Fireball) • Six Mistakes Housing Investors Make (WSJ) • Dubya and Me (The American Scholar) • Novak Djokovic: The Shot and The Confrontation (Grantland) • F-16 pilot was ready to give her life on Sept. 1 (Washington Post) see also Time to leave 9/11 behind (Washington Post) What are you reading? Source: Jeff Saut, Raymond James

Market lift off lows Posted: 12 Sep 2011 12:06 PM PDT Market lifted on this headline, *ITALY IN TALKS WITH CHINA FUND TO BUY BONDS, FT SAYS

10 Tips for Making Beautiful Slideshow Presentations Posted: 12 Sep 2011 12:00 PM PDT As someone who makes presentations on a regular basis, and does not like most powerpoints, I found this PPT presentation excellent: 10 Tips for Making Beautiful Slideshow Presentations View more presentations from Edahn Small

How to Focus in the Age of Distraction Posted: 12 Sep 2011 11:49 AM PDT Learning Fundamentals via litman

Big Bank Chart Posted: 12 Sep 2011 09:30 AM PDT Click to enlarge: Source: How Banks Got Too Big to Fail, MoJo

Read It Here First: Rising Market Volatility Posted: 12 Sep 2011 08:15 AM PDT The front page of today’s New York Times is a very interesting if rather familiar article on the increase in market volatility: “With these whopping 4 percent swings — up 500 points, down 500 points, up another 500 points, down another 500 points — traders have whiplash. We saw another huge move down Thursday, when the Dow, Nasdaq and S&P all lost big, plummeting 3.68 percent, 5.22 percent and 4.46 percent, respectively. What is going on? It seems that 4 percent — plus or minus — is the new black.” Ooops, my bad, that was my column published August 19th in the Washington Post, titled Smacked by big market swings, investors should alter their outlook. The NYTimes piece from today is called Market Swings Are Becoming New Standard, and it begins like this: “Day after day, stocks swing sharply by hundreds of points. Last week they tumbled 3 percent in the first 90 minutes of trading on Tuesday morning, then on Wednesday closed nearly 3 percent higher and dropped almost 3 percent on Friday. All of this on the heels of unusual back-to-back 4 percent leaps and dives in one week in August. Now traders head into the week with fresh worries about the chances that Greece will default on its debt and the havoc that would wreak on European banks. All of this anxiety has caused experts to ask whether there are new forces at work in the stock market that make trading permanently more erratic.” That’s also good stuff, but for investors, it is rather late to the party. And that is the key to our Read It Here First series. I am not suggesting that Louise Story in any way copped my piece. Hey, Volatility is out there, you would have to be blind to miss 500 point swings in the Dow. But the point I want to make is that market practitioners/bloggers have advantages over Old Media in spotting these trends. Its always fun to beat the big guys to the punch on these things. Indeed, we had almost a full month head start. Other researchers, bloggers and strategists who cover markets do get to see their work bubble up eventually to the front page of the NYTimes. We have been looking at “influence” a lot lately, and it is gratifying to see the new media community influencing the debate (even if we have to use old media to do it!) > Previously: The Most Volatile Market Ever (November 25th, 2008) Stock Market Volatility, Bank of America, Investing (August 9th, 2011) Sources: Market Swings Are Becoming New Standard LOUISE STORY and GRAHAM BOWLEY NYT, September 11, 2011    http://www.nytimes.com/2011/09/12/business/economy/stock-markets-sharp-swings-grow-more-frequent.html Smacked by big market swings, investors should alter their outlook Barry Ritholtz Washington Post Friday, August 19, 2011  http://www.washingtonpost.com/smacked-by-big-market-swings-investors-should-alter-their-outlook/2011/08/18/gIQAriG8RJ_story.html

The Long-Term Case for Stocks Posted: 12 Sep 2011 07:00 AM PDT Richard Sylla, economic historian and professor of economics at New York University’s Stern School of Business, talks with WSJ’s E.S. Browning about his formula for predicting market performance. Source: A Long-Term Case for Stocks Prof. Sylla is a financial historian at New York University’s Stern School of Business, studying market behavior all the way back to 1790. By analyzing patterns detected years ago with two colleagues, he accurately predicted in 2000 the decade of overall declines that haunted investors.

10 Monday AM Reads Posted: 12 Sep 2011 06:30 AM PDT Lots of interesting reading to start the week: • Buy and Hold Is Not Dead Even Though John Bogle Drank Your Milkshake (Phil Pearlman) see also Why a Legendary Market Skeptic Is Upbeat About Stocks (WSJ) • Is There Gold In Them Thar Hills? (Barron’s) • The magical world of voodoo 'economists' (Washington Post) see also What caused the recession of 1937-38? (Vox) • Dividends: Collect, Reinvest, Repeat—for Decades (WSJ) • Growth is about so much more than just the top rate of tax (Gurardian) • 20 Quotes from European Leaders About European Financial System (The Economic Collapse) • California, long a leader in public higher education, is now privatising it (Economist) • Why technology start-ups won’t save us from recession (Guardian) • A Horribly Unimpressive List of Products Yahoo Launched under Carol Bartz (Launch) see also My Plan as the New CEO of Yahoo: Video, Social and Mobile (Launch) • The True Cost of 9/11 (Slate) What are you reading? > via Indexed

You are subscribed to email updates from The Big Picture To stop receiving these emails, you may unsubscribe now.	Email delivery powered by Google
Google Inc., 20 West Kinzie, Chicago IL USA 60610

.