The festive tyrannies of fun precede the oncoming recession and celebrations will accordingly have a more manic and histrionic feel to them this year as there is a general perception that things can only get worser.
Via two posts, we will attempt to really depress you about the state of the planet and the global economic system prior to demonstrating that the gambling sector is one of the few to benefit from periods of recessionary pressures and, consequently, is a prime area of focus for creative trading strategies during such windows in the business cycle.
Baudrillard reasoned: "My hypothesis is that we have already passed the point of irreversibility, that we are already in an exponential, unlimited form in which everything develops in the void, to infinity, without any possibility of reapprehending it in a human dimension; in which we are losing the memory of the past, the projection of the future and the possibility of integrating that future into present actions". Pretty much the whole of this first post may be adequately condensed into this one statement but we attempt to add some market-orientated and systemic modelling to the argument. Inevitably, some aspects of this post will be derivative in nature in that the arguments of others are utilised alongside our own overviews as market analysts but we'll attempt to dovetail the two together in a semi-grammatical manner.
We're living in serious times. The key issue is this - systemic stability. Whether we choose to look at a universal, solar system, planetary, atomic or quantum level, we are dealing with systems in a state of equilibrium - a balance of the forces of physics that allow sustainability of the system over time. The shareholder capitalist economic infrastructure is also a system and, similarly to physical systems, the economic system also exists in states of equilibrium and stability. Or not... The economic system is a sub-system of our planetary eco-system - the two systems are inextricably linked and the former depends on the stability and the sustainability of the latter. As we are all of one species, we frame our analyses in similar ways and, consequently, the mathematics, statistics, logic and pattern recognitions utilised in one area share many parallels with similar techniques used in other systems. This aids our modelling. For example, the Oxford Interpretation or the Many Worlds Interpretation (MWI) in quantum physics shares many analytical similarities with both the global economic system and with football match betting markets in that the overall system or event must exist in one of a range of stable states of multiple equilibria - a football match must end with an integral number of goals differential or parity. In multi-layered systems, the situation is complicated by the presence of numerous feedback loops that accentuate any dynamic at play - the recent credit crisis is a result of feedback loops causing the markets to be unaware where the real risk lay and, similarly, the flaring between the two stars in a RS Canum Venaticorum Binary System produces new causal effects that destabilise the stellar system.
It is these feedback loops that will determine the future of both the current economic system and our planet - it is our argument that we face both systemic and super-systemic risk for the first time in our history. Firstly, we intend to look at the economic arena and address the obsession with economic growth and, secondly, we will address the risks in relation to the eco-system. We will also focus on the feedback loops between these systems. If we have done our research well, by this point we will have induced a degree of misery and, so, we will complete the post with a qualified optimism for a different future. But, before anything so uplifting, we need to deconstruct the economy.
Financial Markets in extremis are the current reality as the perverse incentives and warped feedback loops come back to haunt a non-sustainable economic system. Baudrillard: "...the phenomenon of globalisation is in itself random and chaotic, to the point where no-one can control it or claim to subject it to strategy". To a large extent, this statement is undoubtedly true but the modern globalised financial system allows certain institutions to directly apply a macro-dynamic to the market system. When the not-so-great and the not-so-good meet for the World Economic Forum each January in Davos, there are co-ordinated strategies put in place by the core protagonists. To some extent, business cycles may be controlled thus but the feedback loops effectively remove control of the strategy from the hands of the manipulators. This is the situation today. The world is teetering on the edge of a potentially major recession. The world's largest economy will certainly reach recession in 2008 and the impact of the subprime scandal, the dysfunctional money markets and the economic slowdown will create a global bust. The new paradigmists believe that the old restrictions on the growth in an economy no longer exist and their misguided optimism leads them to evaluate that the rapidly growing Indian and Chinese economies will offset America's well-deserved slump. Not so. The IMF and The World Bank have recently, and rather quietly, released figures which suggest that the economies of both India and China, measured at purchasing power parity (PPP), are 40% smaller than originally projected! We return to this point when looking more closely at growth and PPP below but the key impact of this information with regard to the oncoming recession is that the slowdown will be significantly more severe than most economists are currently projecting. There is no safety net. The recent injection of liquidity into the banking system is a rather desperate attempt to delay the inevitable. Resources were misallocated because of the cheapness of credit and the problem will not be solved by simply making money cheaper once again. Invasive intervention by the central banks and the state is hardly indicative of a free market economy that is both systemically robust and sustainable. Markets are primarily psychological rather than economic mechanisms and the only reason that the markets have not yet fallen to more realistic levels is the perseverance of economic theory perpetrated by the new paradigmists. Every economic boom brings out these operators whose idiocy is only superceded by those who they follow, like imperial apologist Niall Ferguson who moves between his academic posts at speed lest his intellectual frailties be exposed.
The market is not just a reality, it is an ideology. Such belief in a corrupt system requires for consumers to be convinced of the symbolic value of a product as opposed to a real value. A system based on lies and sleight of hand will always have a limited shelf life. Anti-growth economist Gustavo Esteva sums it up: "Without discussion, we accept that accelerated economic growth is desirable. Now the time has come to abandon this pernicious obsession". True. Growth-based shareholder capitalism requires vast income inequalities, resource abuse, inefficiency, a huge disenfranchised global underclass and a corrupt infrastructure backed by the military-industrial-financial elite. Growth also requires brinkmanship. In a competitive system, risks will always be taken to gain competitive advantage - the fallout from these risks is felt by us all through a wide spectrum of realities from dodgy pharmaceuticals to cluster bombs, from nuclear waste to an economy negatively impacting upon climate change. Esteva's research parallels the economic system with other systems and he asserts that most organisms achieve a correct level of growth and that any further growth is highly dysfunctional - think cancer. The economic system needs to accept a limit to its growth. Paul Streeton has shown that economic growth is inversely proportional to levels of justice in the world which is a good enough reason in itself. Furthermore, as we argue below, there is no trickle down effect without the utilisation of dishonest mathematics. Growth has a further major impact on its super-system, our eco-system. The level of economic activity is directly proportional to resource usage. At current projected rates of growth, George Monbiot points out that we will use as many of the planet's resources in the next 23 years as we have since the dawn of time. Even more disturbingly, this extrapolates into us removing 16 times our historical impact on the planet's resources within just one century! A sustainable future?
Baudrillard, again, cheers us up by stating: "Everything is taking us into a world steeped in definitive uncertainty". Once we start assessing man's impact upon the planet, there are no certainties, there are no laboratory experiments, there is no historical reference, the computer-generated scenario analyses are laughably simple - the Intergovernmental Panel on Climate Change (IPCC), for example, does not take the feedback loops which accelerate the rate of climate change into account when undertaking the mathematics! Despite this gross underestimation, the IPCC still projects that we will require a 85% global cut in carbon emissions by 2050 - as Monbiot says, this is a "complete decarbonisation of the global economy". And, what is the response of our great leaders? Well, Kyoto calls for cuts of 5% below 1990 levels in the next five years! The US, meanwhile, wants to introduce voluntary self-regulation in 2008 which is a nonsense. Self-regulation = no regulation as the protagonists who have created our unstable reality in the first place continue to act with a fascistic libertarian attitude. Greenwash is everywhere as the globalisers attempt to incorporate this critical issue into their marketing and branding campaigns and, more disturbingly, governments are playing along. When the EU decided to give away carbon permits rather than auctioning them as Game Theory suggests is preferable, they were effectively destabilising the nascent marketplace before it even came into existence. When one is addressing major vulnerabilities in an eco-system, there is a certain futility to establishing trading schemes to trade the risks. Baudrillard: "We have not taken a single step closer to the possible end goal. We have merely gone through a number of paradigms that have no end other than in the moment of their metamorphosis". And, we overrate our levels of development as a species. Four hundred years ago, Galileo was outside the system. If we are still around in another four hundred years, which of our current laws and certainties will be shown to be laughably simplistic? Well, we can only hope that they are not the ones relating to rate of climate change. This planet can exist in a range of equilibrium states. We are fortunate enough that the prime state is one that sustains our lives. But, our planet would be equally comfortable with an equilibrium state akin to Mars or Venus. The latter option, in particular, will make Djibouti, and even Leeds, seem idyllic by comparison.
Economics is not a science. It is a multidisciplinary arena. Early last century, Bertrand Russell wrote: "...but as everybody now recognises, supposed laws of economics have a much more temporary...validity". Put simply, economics may not be modelled in a manner that can be replicated ie it is not a science. Scientists may launch a space probe that uses planetary gravitational effects to visit several of our celestial neighbours. Economists cannot tell their arse from their elbow in comparison and no strategy may be orchestrated with any degree of certainty. Russell continued: "the authorities no longer have sufficient belief in the justice of their cause to think that it can survive the ordeal of free discussion". And not much has changed in the intervening century as shareholder capitalism hurtles towards oblivion.
As ever in our distorted capitalist system, the key to understanding the true aims of the global elite lies in PPP. If PPP is shown to be fallacious twaddle (which, of course, it is), there exists not one economic macro-measurement to demonstrate the integrity of the shareholder capitalist system. Measured in all other ways eg at market exchange rates, the plight of the world's poor is worsening by the day while the global oligarchs bask in incredible luxuries. The distortion of PPP allows economists to make the claim that shareholder capitalism improves the lives of us all. Even if this ludicrous claim were true, 1% of nothing is worth considerably less than 1% of a lot. But, its not true. This is why so much effort is made by the likes of the IMF and the World Bank to peddle the tissue of statistical lies that is PPP. We have outlined numerous arguments previously and we have many more stored away for future advantage, but for the sake of this post, we need to revisit one of our earlier statistics.
It is the one about the IMF and the World Bank suddenly realising that India and China's economies are 40% smaller than originally thought, when measured at PPP. If PPP were a robust statistic, such outrageous errors would not exist. It is the belief of our traders that the overestimate was a deliberate manipulation by the overseers of the global financial system to engender the required boom-and-bust market cycle so beloved by the insiders although we are obviously unable to prove this assertion. The impact of the poor modelling and decrepit statistics at the highest levels of our global system is marked. It had been thought that the global economy had been tootling along at 5%, the highest rate since the 1970's, when, in fact, it has actually been growing by 3.4% which is even slower than the 1980's. As it has got rather better for some, it has got markedly worse for a whole lot more. Without the fake mathematics of PPP, the reality of increasing income inequality, non-sustainability, psychopathic short-termist profit maximisation strategies and a complete lack of any democratic right to have a say in the demise of the planet on which we all live, are shown to be a deliberate structure enforced on the global population by the Davos brigade. A systemic autocracy removes the freedom of everyone - we are all either a slave to the workplace or to the dollar. My man, Baudrillard, yet again: "Misfortune, misery - all these things are traded very easily these days. There is a stock exchange of negative values, so to speak. So, debt, which is something negative and, at the same time, something virtual, can be traded".
Bertrand Russell might have been posh but he sure comes out with some great holistics: "In the modern world, there are clever men in laboratories and fools in power. The clever men are slaves...mankind (sic) collectively under the guidance of the fools and by the ingenuity of the clever slaves, is engaged in the great task of preparing its own extermination". And, so it is... There are two key aspects to this pretence of a system - corruption and reality. We'll take them in turn.
Corruption is endemic at all levels of the global economic and financial system. Nietzsche's "Power likes to walk on crooked legs" is an understatement! But, corruption is a vital part of the system - the economic template and corruption are systemically intertwined. People may stand up against corruption but it morphs into a new reality or alters the current reality to suit its continuing agenda. Corruption is an ever-present. No apologies for yet more Baudrillard: "In the same way that Nietzsche spoke of the vital illusion of appearances, we might speak of a vital function of corruption in society. The principle of corruption is illegitimate, it cannot be made official and hence it can speak only in secret". Due to the critical input of corruption to capitalism, there are no institutional attempts to impose regulatory or structural restrictions on the waves of corruption which underpin the entire financial system. If powers wished to reduce the opportunity for psychopathic corruption, a less absolute template could easily be created.
It is of the utmost importance for the mass corruption of our reality to be kept away from prying eyes. Shareholder capitalism achieves this goal through developing spectacular yet fake realities with the complicit support of the mainstream media while hiding away the occasional real reality with warnings to avert our eyes "as you might find some of the scenes in this report harrowing". "The real has only ever been a form of simulation" said guess-who and, in a world where we have "all been cloned mentally and culturally", the steady stream of spectacular realities become the equilibrium realities presented to and accepted by the cloned masses. In a further act of elitist name-dropping, Régis Debray, commenting on the society of the spectacle states: "we have...not communication but contamination of a viral type...everything spreads from one person to another in an immediate fashion". True.
So, we are in the position of having an economic system that is about to unravel disastrously while, at the same time for good measure, this self same system attempts to destroy the very environment in which it operates. As Baudrillard determined: "the economics sphere...is not exchangeable for anything". The necessary action MUST be determined by the near future actions of our overseers. If there is no concerted attempt to create a less psychopathic and more nurturing global system, there will be no other choice of action other than mass Direct Action against the supply side of the economic system. Their financial markets will need to be similarly targeted. Baudrillard is surely correct when he claims: "Something in all men profoundly rejoices in seeing a car burn". But it needn't come to widespread Direct Action (although it probably will...).
"We need to recover a sense of proportion that is simply another form of common sense: that sense that exists in community. To struggle against a culture of waste, disposability, destruction and injustice, and the culture that has produced global warming to which disasters caused by irresponsibility are now attributed, we can reclaim the sensible and responsible rejection of what is unnecessary in the name of socially viable goals, and discard forever the idolatry of economic growth. The time has arrived to seriously propose the advantages of a negative growth rate, clearly specifying what we would continue to stimulate. For example, the support of highly efficient, productive and sensible sectors, such as those that make up the majority of the persecuted “informal sector.” This will imply a focus on strengthening the productive capacity of the majority, instead of supporting the inefficient giants. The economists’ nightmare, a drop in the gross national product, could be a blessing for the majority" - so says Gustavo Esteva. The targeting of a negative growth rate is the ONLY option on the table.
Personally, I aim for a society based on solidarity, self-management, equity, diversity, environmentalism and scientific humanism where I choose not to differentiate hierarchically within or between species. I should grow up really...
In that he continually changes the way I perceive issues, the last word must go to Baudrillard.
"Destiny cannot be exchanged for anything...exchange is a delusion, an illusion, but everything conspires to have us act as though ideas, words, commodities, goods and individuals can be exchanged...That death itself can be exchanged for something".
© Football Is Fixed/Dietrological
