Monday, February 20, 2012

Over and over

These three books give good evidence of how a trading economy for net profit has probably existed since the beginning of human existence. Given any animals propensity to use as many and all the resources in its environment to survive and reproduce humankind is tough on the environment and eventually itself.

Smith, Richard. 2009. Premodern Trade in World History. Rutledge. N.Y.

Reinhart, Carmen and Rogoff, Kenneth. 2009. This Time is Different: Eight Centuries of Financial Folly. Princeton U. Princeton.

Chew, Sing. 2007. The Recurring Dark Ages. AltiMira. N.Y.

Together they essentially say some form of trading has been around for thousands of years in one form or another. After person to person or group to group of the Paleolithic, trading evolved. One initial form was with governments including the religious hierarchy financing trade between other powers. The aim was primarily to get goods not available in their area as well as to develop allies but some profit was extracted. This moved into a more entrepreneurial phase with top families financing trade expeditions on land and water for profit. All of this took place thousands of years ago.

For thousands of years there has been a convergence of misuse of people by the wealthy, environmental degradation vis a vis the particular resources valued at the time and natural happenings such as volcanic eruptions, climate change, floods that brings about periodic crashes (dark ages) that last at least decades if not centuries. It has generated crashes periodically across millenniums that mirror this latest one.

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Trade in the past:

Two non-perishable commodities that serve as good examples of how long-distance trade worked in the Neolithic and Bronze Ages are obsidian and amber. Obsidian is volcanic glass formed by the cooling of viscid lava. . . .

In the prehistoric world, nothing made a sharper edge for knives, daggers, scapers, razors, sickles, and projectile points for spears, harpoons, and arrowheads than obsidian. . . . By Neolithic standards, it was a high-value item. . . .

. . . a good deal of flux is apparent in the obsidian trade. Over a period of time, a particular site can go from having 90 percent of its stone tools in obsidian to practically nothing and later back up to 90 percent. No doubt the trade was widespread, and today obsidian tools are found scattered across southwest Asia and parts of Europe hundreds of miles from their source.

Extracted from – Smith, Richard. 2009. Premodern Trade in World History. Rutledge. N.Y. pgs 19-20

“Inevitably, the luxury of yesterday tended to become the treat of today and the necessity of tomorrow.” Smith, Richard. 2009. Premodern Trade in World History. Rutledge. N.Y. pgs91

Another example of distant trade in the distant past:

Lapis laxuli occurs naturally in very few places worldwide. The closest to the ancient centers of civilization was in Badakhatan in the snowy mountains of northeastern Afghanistan 1,500 miles as the crow flies from Mesopotamia and twice that far over the circuitous routes trades actually traveled. . . .

Lapis first appeared in northern Mesopotamia in the form of beads at the end of the fifth millennium bce although it did not become abundant until the middle of the fourth.

Smith, Richard. 2009. Premodern Trade in World History. Rutledge. N.Y. pg. 37

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Economic folly

Varieties of crises:

1. Inflation crises - An annual inflation rate of 20 percent of higher

2. Currency Crashes – An annual depreciation versus the relevant anchor currency of 15 percent or more.

3. Currency Debasement –

A. A reduction in the metallic content of coins in circulation of 5 percent or more.

B. A currency reform whereby a new currency replaces a much-depreciated earlier currency in circulation.

4. The bursting of Asset Price Bubbles (equity or real estate)

5. Banking crises –

A. Bank runs that lead to the closure, merging, or takeover by the public sector of one or more financial institutions.

B. The closure, merging, takeover, or large-scale governemtnt assistance of an important financial institutions (or group of institutions) that marks the start of a string of similar outcomes for other financial institiutions.

6. External debt crises – outright default on a government’s external debt obligations.

7. Domestic debt crises – the freezing of bank deposits and/or forcible conversions of such deposits from dollars to local currency.

Reinhart, Carmen and Rogoff, Kenneth. 2009. This Time is Different: Eight Centuries of Financial Folly. Princeton U. Princeton. pg. 4-11

“Broadly speaking, financial crises are protracted affairs. More often than not, the aftermath of severe financial crises share three characteristics:

1. Asset market collapses are deep and prolonged. Declines in real housing prices average 35 percent stretched out over six years, whereas equity price collapses average 56 percent over a downturn of about three and a half years.

2. The aftermath of banking crises is associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points during the down phase of the cycle, which lasts on average more than four years. Output falls (from peak to trough) more than 9 percent on average, although the duration of the downturn, averaging roughly two years, is considerably shorter than that of unemployment.

3 . . . the value of government debt tends to explode . . . “

Reinhart, Carmen and Rogoff, Kenneth. 2009. This Time is Different: Eight Centuries of Financial Folly. Princeton U. Princeton. Pg. 224

“Broadly speaking, financial crises are protracted affairs. More often than not, the aftermath of severe financial crises share three characteristics:

1. Asset market collapses are deep and prolonged. Declines in real housing prices average 35 percent stretched out over six years, whereas equity price collapses average 56 percent over a downturn of about three and a half years.

2. The aftermath of banking crises is associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points during the down phase of the cycle, which lasts on average more than four years. Output falls (from peak to trough) more than 9 percent on average, although the duration of the downturn, averaging roughly two years, is considerably shorter than that of unemployment.

3 . . . the value of government debt tends to explode . . . “

Reinhart, Carmen and Rogoff, Kenneth. 2009. This Time is Different: Eight Centuries of Financial Folly. Princeton U. Princeton. Pg. 224

Letter to Dr. Carmen Reinhart and Dr. Kenneth Rogoff, sent 2/1/2012

I have enjoyed your book, This Time is Different: Eight Centuries of Financial Folly, in giving me an outline of historical “financial folly” and how it pertains to the present. I would ask if this time is actually different because of the convergence of population (underwritten these last 200 years by fossil fuels) overshoot, peaking of easily accessible, relatively low cost petroleum, tremendous environmental degradation that is accelerating in attempt to maintain lifestyle via fracking, tar sands, assault of the arctic, deep water drilling, mountain top removal, depletion of food fish stocks, depletion of potable water and aquifers, topsoil depletion and other non-fuel mineral depletion or scarcity.

Sing Chew in his book The Recurring Dark Ages proposes that for multiple millennium there have been a convergence of oppression of people by the wealthy, environmental degradation vis a vis the particular resources valued at the time and natural happenings such as volcanic eruptions, climate change, floods that brings about periodic crashes (dark ages) that last at least decades if not centuries. I believe we are on the edge if not in the midst of one of these convergences. This time it is global as is the concerns I outlined in the above paragraph.

“Unlike past Dark Ages, the options today are limited in terms of the various paths for system recovery. In the previous Dark Age period, the world system was not as globalized and encompassing, and system could expand in terms of the search for natural resources and labor, thereby enabling previously degraded and exploited areas to recover. At this stage of the globalization process, planet Earth is fully encompassed, and thus if ecological collapse (Dark Age) occurs there are few replacement areas for system expansion. Besides this, the level of connectivity of the world system in terms of production and reproduction processes means that the collapse will be felt globally, unlike previous Dark Ages in which not all the peripheral areas were impacted by the collapse.

Chew, Sing. 2007. The Recurring Dark Ages. AltiMira. N.Y. pg. 181

http://sunweber.blogspot.com/2011/05/we-are-here.html

http://sunweber.blogspot.com/2011/05/new-middle-ages.html

and

http://www.blottr.com/world/breaking-news/peak-oil-crisis-no-one-talking-about

http://ourfiniteworld.com/2012/02/01/the-most-important-resource-for-our-future-inexpensive-oil/#more-14593

http://www.sciencedirect.com/science/journal/03605442/37/1

Scroll down to: “Oil supply limits and the continuing ļ¬nancial crisis”

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