Reasons Unbeknownst

Most people think of higher gas prices when they hear the word inflation. I like to look at how our food portions shrink while retaining their prices. The outcome is the same, higher cost per ounce, but it probably makes more business sense to put fewer chips in the bag than to raise prices. Apparently this phenomenon also angers sausage eating southerners as evidenced by the following recording.

This gets a tad not safe for work near the end…

Angry Jimmy Dean Sausage Customer

I keep wondering what the Fed is going to do about this situation. I imagine that by the middle of December things will be worse and they’ll be forced to cut, probably 50 basis points. Let the sausage lovers eat cake.

When I searched for ‘happy turkey’, a common Thanksgiving greeting, Flickr found this photo of happy Turkish kids. Which I think is more cheerful than a picture of a hapless, flightless, delicious bird.

Here’s a video in case you feel like making turkey soup with the leftovers:

Photo by Traces in the Sand

Some people prefer to remain blissfully unaware of potential problems in the near future. Others prefer to know so they can plan for what’s ahead. If you’re the type who favors happiness over preparedness then I would advise you not to read this economic forecast from Nouriel Roubini. He’s often quoted by The Economist and WSJ and has a hell of a track record.

“I now see the risk of a severe and worsening liquidity and credit crunch leading to a generalized meltdown of the financial system of a severity and magnitude like we have never observed before. In this extreme scenario whose likelihood is increasing we could see a generalized run on some banks; and runs on a couple of weaker (non-bank) broker dealers that may go bankrupt with severe and systemic ripple effects on a mass of highly leveraged derivative instruments that will lead to a seizure of the derivatives markets (think of LTCM to the power of three); a collapse of the ABCP market and a disorderly collapse of the SIVs and conduits; massive losses on money market funds with a run on both those sponsored by banks and those not sponsored by banks (with the latter at even more severe risk as the recent effective bailout of the formers’ losses by theirs sponsoring banks is not available to those not being backed by banks); ever growing defaults and losses ($500 billion plus) in subprime, near prime and prime mortgages with severe known-on effect on the RMBS and CDOs market; massive losses in consumer credit (auto loans, credit cards); severe problems and losses in commercial real estate and related CMBS; the drying up of liquidity and credit in a variety of asset backed securities putting the entire model of securitization at risk; runs on hedge funds and other financial institutions that do not have access to the Fed’s lender of last resort support; a sharp increase in corporate defaults and credit spreads; and a massive process of re-intermediation into the banking system of activities that were until now altogether securitized. “

Click the image for photo info.

It may be ugly but it’s functional. I’m trying to get this thing up to snuff because I think specialized, semantic blog about pages will eventually kill off social networking sites like Facebook. There are very few fluid width themes that support widgets so I’m sticking with this for now.

Edit: Switched back, wasn’t IE compatible. Updated a bunch of stuff and I’m going to add OpenID support for the comments.

On my way home from the garage I find myself looking at businesses and wondering: What the world would look like if we ran on batteries instead of food, didn’t get sick, and bought things that didn’t break? I’ve come to the conclusion that we would be left with flower shops and the UPS store, so you could send flowers to people.

The question is really about wealth. How do jobs, which exist only due to inefficiency, create wealth? If we removed that inefficiency we would be somehow more wealthy but the economy would collapse. I think it all gets back to labor and capital. We have brains and arms. If we’re able to successfully satisfy our basic needs then we have time to satisfy the needs of others. We’ve hunted down the sheep and now we’re bored.

Maslow’s Hierarchy of Needs says something similar. We have some basic needs according to the Hierarchy. Ranked from fundamental to optional they are: Food, security, hot monkey love, self esteem, creativity. We’ve got food production down to a science. That frees up the potential assets between our ears to focus on using the crap we dig out of holes in the ground for the betterment of our quality of life. So the dentist does rely on the fact that teeth fall apart as we age but there appears to be no distinction between pain prevention and creativity. That’s what was having a hard time grasping. I think I get it now.

In other words, the dentist won’t care if he has to look for a new job if he knows his car will never break down again. The question posed by some union leaders is valid: If even knowledge economy jobs can get automated/outsourced then what comes next? This gets back to one of my theories: Economic inefficiency is the glue holding the middle class together. Maslow might call this the deficiency economy. Sounds terrible but the analogy works.

Some guesses as to what industries will continue to boom as the deficiency economy gasps for it’s last breath. Travel, news, food, arts/culture, sports.

Tired. I’m still having trouble converting the tangible to the real. How many kilos of rice is a trip to Disneyland worth? Wealth is subjective once needs are sated. To what extent are our wants derived from their ability to find a price? $300 jeans trendy because they cost $300. I need to think about this more.

Rent: Renters don’t care what you paid for your house, the rent must equal what they can afford + their ability to increase their debt. So what does that mean for a price floor on your bestuccoed asset? The assumption is that housing has some immutable, fundamental value attached to the land and construction. But the problem lies in the fact that houses fall apart. A house can be a liability if the maintenance is greater than the equivalent rent provided. If people start moving home with their parents or renting out spare rooms when times are tough the demand for housing will fall off a cliff just as supply(spare rooms) goes up. If you can only get $1100 a month in rent for a house it’s probably only worth $150,000, even if you paid $400,000 for it. Would you buy an investment house in Detroit for $5,000 if nobody wanted to rent it?

Also thinking about personalized democracy. And that it would never work because wealth transfer works across classes.

Next time, labor as wealth – “I like my job”. Money as a tangible abstraction of needs.

Photo by China.64