pushing the sky

You almost want to set a musical to images like those found at this brand-spanking-new tumbl-log.

I’ve largely tried to stay out of saying anything on this “credit crisis” because there are far more credible experts out there, such as Nobel Laureates who blog (a first?). However, it’s getting to the point where I just have to ask one thing – why is everyone in a position of authority seemingly caught unawares?

The Background – or why this matters

The “credit crunch” is taking place behind the scenes far more than it is on measures visible to the public – the equity markets are a mirror to the murky world of money markets, where once billions of dollars flew around the world daily. When I joined DB, I was told almost point blank – the stock market measures you see is a vanishingly small component of what the business of a bank is all about. Brokerage and trading earns tidy sums, but the main reason banks exist is (was?) to handle the flow of money from those who have it to those who need it – creditors to debtors, the flow of capital.

It’s almost the idea that capitalism is built on – someone has extra money than they need, someone else has an idea for which they have insufficient money. The money is lent on the presumption of repayment in future, along with an interest charge to account for the time value and the utility that the money has provided. The borrower will borrow on the expectation that by using it – to buy tools, raw material, whatever – they will earn money from customers, use that to repay debt, and thus complete the cycle.

So: debt is fundamental. But what about shares?

Shares are a way to raise capital without the cost of interest, but in return you give up ownership, and often is limited by the properties of shares. Shares have the advantage to the investor that there’s unlimited upside – when profits are high, it’s returned to the share holders to the maximum value. On the flipside, shares also have unlimited liability – when things go bad, it’s possible to wipe out all your value. Debt is easier: it’s got limited upside – you only get paid back what you lent – and it’s got limited downside – you only lose as much as you lent, and in the capitalist system, you’re also first in line when things go belly-up.

The Crunch

Banks lent. Then they lent some more. Then they thought: I can sell this off and then lend some more again! And lent some more. Eventually, they got so addicted to the profits that they lent to people who really couldn’t pay it off if things turned out less than optimistic.

Which they did, inevitably – and then the crunch began. As default rates climbed, banks started to lose money, writing off values. The loans which had been sold on caused those who bought them to lose money. The haphazardly built house of cards came crashing down, and gradually, over the course of a year from last August, lending – credit – tightened.

Creditors feared that borrowers wouldn’t be able to pay back, so they hung on to their money rather than lending out again, or worse, called in loans. As borrowers sold, the glut forced prices down, and the feedback loop began in earnest. Asset prices falling meant the security against which the debt has been lent was less likely to recoup the cost of the loan, so creditors panicked some more.

As crashes go, the death of the credit market is proportional to the stock market bottoming out at about 1% of the highs.

So now we’re stuck at the point where no-one wants to lend to each other for fear of not getting paid back. Profit margins that were at 0.09% are over 2% for anyone that does lend, but still no-one is lending, and that’s what has everyone spooked – the grease on the gears of capitalism has dried up.

Why didn’t anyone see it coming?

Japan is ahead of the game: they did all this at the start of the 90s.

The Japanese banks lent money with reckless abandon in the 80s, and when the bubble was pricked, it all came to a crashing halt. It led to 10 years of neglegible growth of 1% or less, and petrified Japanese banks with billions of yen of bad debts that they couldn’t write off. The Japanese government attempted make-work programs to kick-start the economy, but failed to do anything other than run up 195% of their GDP as public sector debt. That is to say, it’d take two years of the dollar value of everything Japan made or did to pay off public debt – to contrast, Australia’s at about 14%.

The Japanese bubble was backed on exactly the same thing that the American bubble was – overvalued houses. While we’re skipping ahead to the Japanese solution implemented after nearly a decade – buying into the banks – why didn’t anyone spot the pattern in the first place?

Debt works, but only for so long. As money chased investment opportunities, debt was racked up on the assumption that it would always be as cheap as it was in the early years of the Double-Os, and that payback was a simple matter of selling it to the next sucker. The whole boom was fuelled by debt, not savings, and one day that debt would come due. What’s more, with leverage, the debt was quickly detached from any parity with earnings growth.

The problem seems to be that whenever these things happen, a collective someone thinks, it’ll be different this time.

Alright, but what do we do?

There’s no way to force people to lend money, short of the government taking it off them through taxes and budgets and lending themselves.

Oh wait.

In any case, it seems to me that when something is critical to the infrastructure of a system – like banks to capitalism – you would hope that there’s some level of control and constancy exerted on them. It’s pretty clear free-marketism only works if you’re willing to accept the downsides and the cycles. For a more stable system, you have to smooth the top of the cycle in order to ensure the bottom is smoother too – but that doesn’t sit well with those who cheer free markets (as long as it’s going up) and boo intervenion (unless it’s when their asses are on the line).

I’m an advocate of government involvement and infrastructure investment – critical pieces to the wellbeing of nations should not end up in private hands. To borrow a slogan, you’ve got to keep the bastards honest.

Disclaimers:

• I work for a bank directly affected by this, and my job may be (is?) linked to recovery.
• I’m not a US tax payer, and no longer a UK or EU tax payer.
• I’m no finance or economics expert, so take the above as a crude explanation at best.

“Mate, it’s almost Christmas soon.”

Shit.

There goes another year. It’s October again, all of a sudden, and I’m just wondering what happened to the months Feb – Sep inclusive. 2007, which feels like I’ve only just gotten used to writing, is about to disappear – a couple of months to go yet, sure but in the context of the year it’s nearly over! What on earth did I get up to this year?

Oh, apart from the whole move-to-another-country thing. I mean, that practically fell into my lap. Sure, the process started in February… didn’t get over here til June… had a little side-trip to Singapore… Oh, the parents moved up early in the year, and my sister moved to Adelaide, but that’s not really me…

Every day ticks over so quickly, and almost sneakily there’s a pile of them marked “2007: expired” behind me. New Years Resolutions? pfft, I think I thought about them in May sometime.

Photographic evidence of the year doesn’t suggest much, either. All I can really tally up is that 2007 was – is – a big year for my liver. I’ve been so caught up in the day to day at work, I think I’ve forgotten entirely the longer-term picture.

Where did your 2007 go? What do you have to frantically cram in to the last couple of months to make it feel worthwhile?

Primary Rule of Writing: Show, don’t tell.

Resolution: Stick to it, for frig’s sake.

I have a theory as to why it was the English, and the Europeans more generally, who came to dominate the world, instead of say some racial group from the tropics, say. Something set these guys apart – something made them go out to other places and take over, something made them the inventive people who worked so hard.

The reason? Cold. Miserable, wet, windy, cold weather you wouldn’t want to hang around in too long. Unfortunately enough for these people, that’s where they were destined to spend their whole lives if they didn’t go about changing things. So I say to you, an accident of geography and meteorology is more responsible for the European domination than anything else.

Think about it: when you’re cold, you do things to either take your mind off it, or alleviate your coldness. You invent things, like fire you can carry with you and control at will. On the other hand, if you’re hot, you sort of sit around in the shade, looking for a siesta maybe, until the heat of the day wears off. And then it’s time to go to sleep… and before you know it Europeans are marching around your town.

This theory plays itself out: The Romans dominated Mediterranean Europe/North Africa and a little bit further north, but ultimately the warmth of Rome and Constantinople meant they weren’t as motivated as the barbarians of the north. Some of the most exploratory people were the Vikings, who just wanted a patch of grass for their sheep to graze on. The Mongolians dominated vast expanses of Eurasia, but when they got bogged in Persia they ultimately fell to bits. The Chinese expanded south to Vietnam and Thailand, but couldn’t be bothered going further (seriously, it’s damnably humid down there).

More recently even – the French empire reached across Europe, to Moscow (where they hit people colder and thus more hard-headed than themselves), but reaching into Spain and northern Africa? That’s when they turned around and said, “bugger that, our south coast is warm enough.” The English on the other hand picked a place like Canada and northern America to expand first, and even then when they started to reach what would become the southern states, they let it go. When the USA got to Texas, and California, they took one look over the border to Mexico and said, “You know what? keep it.” The Russians – they hold vast expanses of basically arctic tundra, and they hold it well. The Germans – cold place that – romped across Europe twice before being beaten back from the warmer climes. The Japanese, even with their humid summers, made use of the cold winters to sharpen their skills and quickly brought most of Asia under their control, or at least until they got to Indonesia or the islands of the Pacific.

On the other hand, there was no armies marching out of Africa, the tropics or indeed anywhere where it is far more preferable to just genially lay on the beach. Nothing’s been invented in these places, either. Why do you think South Indians prefer to work white-collar jobs? Air-con! Who can be bothered working in a hot factory?

Call me crazy, but I don’t think I’m wrong here.

Note: Theory based entirely on thoughts plucked out of thin air.

(It’s inevitable, isn’t it? As soon as I say “I’m on hiatus,” I think of something to write)

I think what’s got me in a bit of a zone is the fact that suddenly, things are real. I don’t know why it hasn’t felt like that until just recently; maybe I’m finally getting out of that age range where you’re expected to goof off, and hitting 22 suddenly sounds very much like “Ok, you’re supposed to be grown up now. Get on with it.”

Maybe it’s the fact that I’m in London and suddenly I’ve realised that, wait, I’m actually here for 7 whole months. Not just two like last time, most of which was spent larking about. Maybe it’s my flatmates – they’re all much, much older, and while they are students, it’s something they’ve come back to.

Maybe it’s that others are talking of careers, and homes, and lifetime partners, and I’m not thinking of any of that, because… well because I’m not sure that I should. That’s Scary Stuff, don’t you know? The grad program I’m on is a nice feather-bed to land on on my way into the workplace, because for the first year at least, it certainly felt like I was just out of uni but not really, and it was all a bit of a lark. And then London happened, or at least kicked off, and it still felt like it was just going to another semester.

But then I got here, and found a place to live, and suddenly… it’s all too real.

Whatever the reason, it’s like I’m finally realising I’m out of uni, and way out of school. The work I do day-to-day affects other people in their day-to-day world, even if just slightly. In some cases, there are people praising my work, and that drives an intense sense of satisfaction. In others, there are those who criticise and point out how it gets in their way. And all the time I’m watching them thinking “hang on, you use this for real?“, as if I’d always considered that this was merely an exercise like at uni, and I was being trained for the “real thing”. But now I’m here, I’m called on as a subject expert, having worked on it for a year and a half (and still knowing all too little).

It’s not too early for a quarter-life crisis, is it? When the hell did life become real?!

You’ve sent a birthday wish to someone via SMS. But since it’s been a while since you last called, you have a little doubt that they may not have got it.

They haven’t responded.

Do you try to contact them some other way? Especially as the birthday is now slipping further into the past? Do you take it as a subtle hint that they don’t wish to talk? Tell me what I should think, dear internet!

Ladies -

If in response to:

“Do I look fat (e.g. in this dress)?”

… which we all know is a loaded question, a guy, presumably your boyfriend, was to reply:

“No, there’s just more of you to kiss.”

… would he get away with it?

Cheers,

Karan.

Memo: To all women working in offices around the nation

Those high-waisted skirts? Hawt.

Memo: To all Indian men working as outsource employees in overseas companies.

Please, shave that upper lip. What is it, a uniform? Part of the condition of letting you go overseas? Yeesh.

(Also, that leather jacket? Not appropriate in summer)

Let’s think the unthinkable, let’s do the undoable, let’s prepare to grapple with the ineffable itself, and see if we may not eff it after all.

WFT-II was the only British software company that could be mentioned in the same sentence as such major U.S. companies as Microsoft or Lotus. The sentence would probably run along the lines of “WFT-II, unlike such major U.S. companies as Microsoft or Lotus …” but it was a start.

It was his subconscious which told him this – that infuriating part of a person’s brain which never responds to interrogation, merely gives little meaningful nudges and then sits humming quietly to itself, saying nothing.

Dennis Hutch had stepped up into the top seat when its founder had died of a lethal overdose of brick wall, taken while under the influence of a Ferrari and a bottle of tequila.

I am rarely happier than when spending entire day programming my computer to perform automatically a task that it would otherwise take me a good ten seconds to do by hand.

All opinions are not equal. Some are a very great deal more robust, sophisticated and well supported in logic and argument than others.

A learning experience is one of those things that says, ‘You know that thing you just did? Don’t do that.’

Time is an illusion, lunchtime doubly so.

– Douglas Adams