This is just a brainstorm that lacks stucture but I’m going to use it for future reference….

We can use law or anticompetitive collusion to change the world, which means emergent order is powerful but only to the extent that it’s allowed to exist. Strange. See article on chaos. Mises, Hayek, etc. figured out something important about the consequences of human meddling in chaotic systems that produce emergent order. Hence their love of a gold backed currency. The problem is that the Fed is using the Fiat system to combat deflation(cite Fed study), the libertarian fear of inflation is therefore off base. They’re wrong because they understand money, human nature but not the concept of accelerating change (quote Greenspan circa 1999).

To the extent that we adapt to change does exponential progress become linear in our eyes? To what extent does our perception of change affect the markets?

Economists, techno-philosophers, media pundits, are all talking about tipping points… In my opinion this is accelerating change rearing its head. Stephen Roach has it right when he says

“policy makers always fight the last battle — as evidenced by the ascendancy of inflation targeting at just the moment when inflation is all but dead.“

Human nature is the elastic goo that makes things lag behind then snap back in the face of accelerating change, the tipping point is letting go of the rubber band

I have a copy of Bastiat’s “The Law” next to my pillow. Amazing read. He points out that Democracy became a way for the lower classes to use the government to steal from the rich which was not the original intent or moral purpose of law.

France has high productivity because labor restrictions prevent businesses from cost effectively hiring workers. So they buy better computer systems. Socialists accidentally showing us what the capitalist future will look like. France is, oddly, a vision of the future. High unemployment thanks to productivity which was encouraged by labor laws. Are geopolitics after globalization just politics?

The fact that people are saying housing will pop even though they assume inflation is rampant is worrying. If you assume techologically fueled deflation is accelerating then you also have to assume the Fed is going to have to slash rates in the near future. That’s great if you have an Adjustable Rate Mortgage, how much is an Interest Only loan if rates are at zero? But if salaries are dropping due to deflation that $400,000 mortgage remains unworkable in the long run. Bernanke on the problem:

However, a deflationary recession may differ in one respect from “normal” recessions in which the inflation rate is at least modestly positive: Deflation of sufficient magnitude may result in the nominal interest rate declining to zero or very close to zero.2 Once the nominal interest rate is at zero, no further downward adjustment in the rate can occur, since lenders generally will not accept a negative nominal interest rate when it is possible instead to hold cash. At this point, the nominal interest rate is said to have hit the “zero bound.”

Idea. Housing isn’t a side effect of the explosion of the M3 it’s your standard issue speculative bubble set off by the declining median income numbers. The reversion to mean is going to be rough.

So housing pops. Banks/hedgefunds, etc. blow up. There’s a flight to quality, gold takes off in the short run, then crashes when people realize there’s a cash shortage as banks write off huge losses due to foreclosures (this needs more thought). The Fed, already flooding the market with money, fires up their virtual helicopters and start dropping money. But they can’t do it equitably without starting riots unless… they open the Federal Reserve with accounts based on SSN. And we get something that looks like “The Plan”.

The middle class isn’t going to be happy. We’ll all have plenty of food but the dignity of the $65/hour job at GM will be torn from their hands and some people care more about pride, dignity, etc. more than food.

Technology is a funny thing. It enabled the original fiat currency experiments with the printing press which lead to inflation, now it’s reached the point that the presses(electronic) can’t print enough to keep up with deflation, or maybe they can but the lackeys at the Fed have absolutely no idea how much money to put out there. That’s why they’re now “data dependent”. The problem is that they’re looking at old data. The M3 money supply report is now hidden in the bowels of the Federal Reserve bank but I imagine the numbers are huge.

Does a country that creates fiat money out of thin air that’s fighting accelerating deflation have too much control over the economy by virtue of their power to purchase?

All that said, I think the Fed is wrong too. They’re a banking cartel and have a built in bias against deflation of any kind. Good deflation makes computers cheaper but hurts Dell’s stock price. The Fed isn’t ready to trade lower earnings for higher standards of living yet.

Only one cup of coffee today but I’m getting motivated to write again which means I may be on the brink of another manic writing frenzy, maybe…
I spend a lot of time thinking and writing about free markets vs. socialism, globalization vs. protectionism, low taxes vs. safety nets. I write to convince myself that my beliefs aren’t just a temporary mental romance with ideology, something to which I’ve always been prone.

I’ve been watching the French protests with less frustration these days. There was a great point made at the Becker Posner blog that the protesters are acting in their best interests in spite of their hatred of free labor markets. Most of the protestors aren’t the same kids from the banliues during the last riots, they’re kids afraid that they’ll have to compete with the kids from the banlieus.
The reason I’m not angstridden over their lack of acceptance of economics is the result of an epiphany I had… It doesn’t matter if they get it. As someone pointed out “You can’t stop globalization” Change is no longer dependent on education. At some point the French will tire of their ideals and will decide instead to do something productive even in the face of competition, because they’re going to get hungry.

So I’m going to write less about econ now that I’ve convinced myself that I’m not wrong (that only took four years). I’m taken up a new interest in my old major, Finance. A co-worker suggested I should be a financial advisor and maybe he’s onto something. So much of IT is jumping through hoops because standards are insufficient. Imagine being a race car designer during the 1920s. You’d spend the majority of time fixing flat tires and fuel leaks and lug nuts of varying sizes. IT is in a similar state today. I spend much of my day solving problems that shouldn’t be a problem in the first place. Databases, on the other hand, remain interesting because most of the complexity is the result of the data and not the code.

I was watching a few financial gurus arguing about the future of the global economy. They were both experts and both had completely different opinions about where things were going. If you put two of the best heart surgeons in a room and had them diagnose a patient only to find one thought he was just fine while the other gave him a week to live you might begin to question the entire profession. So I’m questioning the entire profession of stock picking. If it is just a crap shoot then are these people highly paid because investors like the idea that their own raw genius is responsible when their investments increase and have someone to blame when they take a loss?

Technical analysis is the realm of large brains and larger charts. The analysts believe that they can look at trends and predict the future. I’m hugely sceptical of this line of thinking in part due to the death of LTCM in spite of their hoardes of experts. That said, there is something seductively convincing about a really smart person convinced of their own line of reasoning. Jim Cramer is one of the most unlikeable personalities on TV but if you watch this clip his logic is pretty convincing.
I’m back coding again. My news site I’m building is a combination of everything I’ve learned from reading tens of thousands of words about journalism and the media business from the blogs of Jay Rosen and Jeff Jarvis with a sprinkling of Web2.0 Ajax flavoring. I’m absolutely convinced it’ll work and take the media world by storm if someone doesn’t do it first AND if I don’t fear potential success. And if it sucks and nobody uses it then I’ll have learned a lot about media and marketing because I can’t for the life of me figure out why it won’t succeed.