10 Years After the Most Serious Depression Since 1929



Enrique Aboitiz Mendieta

06 – 2017


My role is merely that of an aggregator of ideas and thoughts from the various fountains of knowledge that I’ve read and put together; not data, not just knowledge, but also some wisdom to achieve some level of insight into the future. Your critique and comments are very much welcome.

A decade ago we thought the whole economic world, and with it our socio-economic world, would fall upon us. It seems that man has again prevailed. I repeat – It seems. Self-healing seems to have functioned and now proceeding to strengthen.

Arrogance led the Fed to think they could control the world with interest rates, and that it would be sunshine forever. It seems it never is. Man has to earn his progress in life. There is always some man who wants to be the master of the universe and he always fails. God sent his only son, Jesus Christ, to create a monopoly and he failed. Then he sent the Prophet and now he has a 60% market share and growing.

Finance heads with poor ethics, mixed junk with quality securities, and tried to sell this average for premium paper. Kings did this 1,000 years ago, mixing bronze with silver, passing it one for a pound sterling so to speak. The poor were ignorant but they were not stupid; they could, with a bite, know how much real silver was in the coin. One can understand why a mother would steal bread to feed her starving children. What one tries to understand is how anyone with “Resume” is willing to fool people for more money than he can ever need. He thinks that his reputation is not affected, but has done damage to the entire institution and to the future of his children.

In ‘Age of Anger’, Pankai Mishra tells us that after the industrial revolution and into the consumer age man pursued wealth, not for the well-being it brought about, but rather because others pursued it. The times of the memetic effect, in his words.

Then these Seikos in Rolex boxes were sold all over the world.

As these Seikos were being sold, the anti-progress sentiment takes down the Twin Towers, damages the Pentagon, and gets a President with a very small mind to overreact and throws many trillions of dollars, that the US had to borrow, in revenge of 3,500 lives. He takes over Afghanistan and Iraq at the highest cost in history. The sin of commission is the decades-long war. The mortal sin of omission is neglecting American infrastructure and American productivity and American jobs.

At the same time the world is trading more and more around itself – Globalization. This brings 2 billion people out of poverty, mostly Chinese, at the cost of instilling envy and frustration to so many of those who were left behind by this train and those who were actually hurt by this trend. Here perhaps the rich world committed sins of omission.

You see in the age of democracy everyone above 18 in a democratic country has the right to vote, the right to a super un-informed opinion, the right to whine; but he does not have the right to be responsible for his actions or in actions that do him harm. We have the right to our opinion but not the right to our own facts. That it is always someone else’s fault is ubiquitous.

The greatest equalizer has always been education. In the reverse, it has to be the greatest disequalizer. Public money is being spent on the wrong type of education. Private money is being spent on better education. So the rich get richer, many get less rich, a part of the middle class is devastated, but the poor get less poor. The fault of this inequality is the privileged; not the government and not the individuals themselves who have made no effort to improve their situation. The white uneducated U.S. middle class could have gotten jobs and did not, many did. The immigrants did. But they would take a truck driver’s job, a waitress’ job, but not work 24 hours running a deli in New York or cleaning hotel rooms. So the immigrants come in – then let’s blame them.

Then it happened, D-Day!

The day of reckoning comes and the dominoes threaten to all come falling down. The U.S. Government balance sheet is used to damn the dominoes and the “Resume” guys get a pass with a USD700 billion dam of hard earned American tax money. It’s hard earned but easily thrown away by an ever increasingly irresponsible government. Bush Jr. did not have the IQ to handle complex problems. Obama just liked to listen to himself speak. Now we have to wait for Trump and see what he does. So far we see a President that has his own facts quite separate from the facts the rest of us have. They all forget their voters, and the rest of the world do not care at all about their poetry nor their legacy; people on the street only care about a better life. That the 16 years of Bush and Obama did not give to all of them. They gave the wealthy more money but not a better life. More money in a country with more unhappiness, more drugs, lesser education, a higher occupancy in jails, more guns et. al. is not a better life. Warren Buffet, who is both very rich and very ignorant, keeps talking of GDP per capita and how it will double in X years if we grow at 2%. There is a rising America and a rusting America – let’s see how the resilient Yankees fix the latter. My bet is they will.

When the 2008 day of reckoning came, the Europeans were jumping with joy. They have been saying for decades that their system was the best; leisure over work is the definition of a better life. Now the wind blows east from California, and it picks up speed over the Atlantic and hits Europe the hardest. Why? Because they are the most arrogant. As the Chinese start taking away jobs from everyone two decades ago, the Europeans raise wages and benefits as they lower workloads. Years of training at the Sorbonne have not taught an increasingly irrelevant France that one cannot compete by working less no matter how smart you think you are. Furthermore, trying to outsmart the Chinese, Koreans, Vietnamese etc. is not an easy task when one is on a bicycle around Aix-en-Provence and they are in the fields planting and harvesting. The bell was ringing but no one in Europe listened to the wakeup call. In the meantime, the Germans keep selling BMWs to the Spaniards, Italians, Greeks, and Portuguese who did not have the money to buy them. So the Germans lent them the money. That is fine. But when they could not pay for the BMWs, the Germans lent them money again. When they could not pay the interest, again more loans. What school did these guys at Deutsche Bank learn this from? The school of hope or the school of kick-the-can-down-the-road? The cracks in the entire system were clear on the X-rays of Pre-Mortem.

The American decided that continuous blood transfusion is necessary. The Europeans know better so they cut the fat from the diet and feed the patient less. The Japanese do not know what to do because they have been trying all kinds of medicines for almost 30 years to no avail. The Chinese have yet to be hit. Their debt levels are high and rising. Eventually it’s blood transfusion for all. The self-healing mechanism of the USA is the best and it seems that patient is ready to leave the hospital. The wind then blows east again from California and it seems that some wind is reaching Japan and China. Any real structural change? Not really. They all come out of the hospital deep in debt and piling with huge deficits.

What are the structural changes that are possible?

  1. The U.S. has to bring in private money to privatize American infrastructure. Its present and its new infrastructure. It is the same medicine that the Philippines took in 2001 and very successfully implemented. Sell everything that the government owns that the world’s private sector wants to buy. Freeways, bridges, damns, etc. Let the world capital rebuild America.

It also has to create more service sector jobs as it cannot create manufacturing jobs. That is all going to AI and robots, and not even to the Indians nor the Nigerians. America is a great tourist destination. Build the terminals, the roads, the hotels, and the service jobs to hire your own. The truck drivers are going to lose their jobs – plan for it now. They missed out the last time around when they knew the Chinese would take their manufacturing jobs. Orient your people to take any job, including menial agricultural jobs. If not, the Mexicans will come in and, as Lee Kuan Yew warned, they will Latinize the U.S. of A and ruin it. Any system that is ex-Spanish and Catholic ruins because they have no concept of accountability. Go to the confessional and any sin can be forgiven week after week, Sunday after Sunday, and daily if you wish – the result is a culture that lacks accountability. We watch with interest.

It really took WW 2 to pull America out of the Great Depression and maybe it will take the great rebuilding of America to really pull it out of this Great 2008 Recession.

  1. The European Structural change begins with having to work for a living. You see Europe has lived off it colonies, then off the Americans, and then off its debt for the past 600 years. It has to now actually start working for a living. It also has to realize that they no longer matter as individual countries. The market cap of the South Korean stock market is worth more than Spain and Italy combined. Europe matters, and within Europe, Fraternité matters more than ever. It’s Fraternité or La Morte. Europe is about too much Liberté, so-so Egalité, and very little Fraternite. It has built the present Europe with a lot of debt for its grandchildren to pay.

They have to pull themselves out of this Great Recession. Will Europe transform itself from a group of communist and semi-communist nations? Do not fool yourself France is a communist country. At its peak, the USSR had a government that was 70% of GDP. France is approaching 60%. What is the difference? It is Communist. This new President of France has other ideas. Again, we watch and see.

  1. The Japanese: I personally don’t think that they have an easy future. How can the future be with the old? Or perhaps if they are lucky and we are lucky they will find a way that will be a lesson for all of us because there is little doubt the all countries will get old. Japan got rich before it got old. China will get old before it gets rich. America is trying to stay young. They have a lot of Fraternité. They have built a treasure trove and are spending it.
  1. The Chinese: They have a country to build, 700 million people that expect to be pulled out of poverty, and a Silk Road to build to connect the Hans with the Franks. Maybe that will be how they come out of their extreme debt situation.
  1. The Russians have serious problems. The success of fracking is turning America into a serious producer of oil and that is keeping prices of petroleum low, weakening a Russia that is having demographic problems. It’s population is dropping. It has AIDS problems in a productive part of its population, and its alcohol problem is taking its toll.

America seems to be evolving positively. It is growing. Its technological advances are creating two Americas. The rising one and the rusty one. They are very resilient and they adapt to change, so there is a very good chance that the rusty America will evolve independent of a President that seems to be a little off.

Low oil prices are also moving cash from the producers to the rest of the world and their consumers who are buying for much of the world that needs purchases – Europe, China, USA, and Japan. This should continue for quite some time.

The rest of us: We will have to see what these four will do, hope India becomes the fifth player and build our economies using the private sector. The Philippines has a public sector that is 15 % of the economy. The 85% gives the 15% license to participate in the Philippine political telenovela and do little as the private sector is building the economy. The national government has to just stay out of the way.

As all of these events, side by side with technology, are improving the lot in life of more and more every day, we are seeing more and more adolescence in the public sector. That will probably not improve but what may happen as a major structural shift is the shrinking of government as people take away from them more and more of what they are doing. This new ‘world of the Commons’ of Jeremy Rifkin may just be really happening. More and more will be done by the Commons and, hopefully, a private sector who shifts from “greed” to long-term “greed”; and, less and less by the Government. Maybe this last depression and the evolution of democracy will be one against the large government evolution of the past many decades to one of less government and more private sector wealth creation.

Let me explain to you my theory of long-term greed. We like to use enlightened self-interest because we love euphemisms. Man is greedy. He is selfish. There is no question about it. God made him that way. Now he can be stupid and be greedy short term or he can be greedy for the long term. The truly “greedy” are those who don’t want inequality because they don’t want customers without purchasing power. Inequality is to no one’s interest, except politicians that can only be elected when people are angry.

Is there an argument that the truly lazy are the organized? When computers came out people would say that they did not have the time to learn to touch type. The reality is that they did not have the time not to learn to touch type. Typing on a computer like a penguin is for people that value hard work over systematic work. The truly long-term lazy value systematic work over hard work or hard work on top of systematic work. Order is about being “lazy” and not wanting to invest time in duplication.

Perhaps this idea of less Government, more Commons, more responsible and long-term greedy business may just be the solution to a world that is decently wealthy for all, decently clean for all, and decently safe for all in the medium-term, and moving forward improving continually in the long term. We know we can create wealth for all. We know we can eradicate poverty. We know we can clean the air. We know all of this and how to do it.

The long-term outlook on energy could very well change the world for a very long time. Low fossil fuel prices driven by fracking as a transition to lower renewable costs and electric cars. If we can get the sun to fire up desalination plants, you have low-cost water and then lots of food.

Perhaps we are on this positive path.

Sure, there is a lot of current as we navigate upriver, but analyze the wind behind our sails.

Technology is advancing at an incredible rate, enriching lives everywhere. It is entering the medical field, not only to save lives as before but now to enhance lives with organs for the older, with better cures, with better knowledge on what certain food do to us and how to be younger longer.

The most important of all winds behind our sails is the knowledge on how to enhance our lives.

World War II brought the world out of the 1929 recession, and maybe fracking and low fuel prices will bring us out of the 2008 serious recession, for lack of a better word.