Hudson's 21st Century Outlook

[Chris Coles]

Re: Hudson's 21st Century Outlook

Force will solve things, it just won't solve things well. OTOH, "market based solutions" hasn't solved things well either, except for the people who make, then twist and bend the rules of the markets.

Shiny! How right you are. Your point is well made. What I left out were the two words True Free. I should have written:

We must find true free market based solutions.

[dcarrigg]

Re: Hudson's 21st Century Outlook

This post-bubble environment of debt-strapped austerity is empowering the financial sector to become an oligarchy much like landlords in the 19th century. It is making its gains not by lending money – as the economy is now “loaned up” – but by direct ownership and charging economic rent. So we are in the “economic collapse” stage of the financialized bubble economy. Coping with this legacy and financial power grab will be the great political fight for the remainder of the 21^st century.

This is a very important thread. Just read about all of the talking heads describing an "asset light lifestyle" for youth. Youth gets asset light while banks get asset heavy. Meanwhile state and local governments sell off assets at a rapid pace to cover bad bond issuances. The real estate market is an obvious place to see what's going on here.

I find it troubling that it is so easy to imagine a scenario whereby in 2035 real median income and homeownership rates are down to 1947 levels. Imagine a scenario whereby in 2055 real median income and homeownership rates are down to 1920s levels. I am fairly certain that with concentrated effort it would only take 70 years total to completely dismantle the middle class and reverse all of the gains made in the post-war period. And I'm also fairly certain that this is the road we've been traveling along for some time now.

[c1ue]

Re: Hudson's 21st Century Outlook

Shiny! How right you are. Your point is well made. What I left out were the two words True Free. I should have written:

We must find true free market based solutions.

There are no true free markets, nor will there ever be.

This issue has nothing to do with the 'free market', and everything to do with what we as a society consider acceptable (and not).

[Chris Coles]

Re: Hudson's 21st Century Outlook

There are no true free markets, nor will there ever be.

This issue has nothing to do with the 'free market', and everything to do with what we as a society consider acceptable (and not).

Then in which case, and with the very greatest of respects, I have to assume that you have no experience of public auction rooms selling everything from low value furniture to very high value art. Have you ever bought or sold anything through an auction room? Try BBC TV Bargain Hunt
http://www.bbc.co.uk/programmes/b006nb9z Or again, Homes under the hammer
http://www.bbc.co.uk/programmes/b006v5kb

If you Google "auction rooms" or "auction houses" you will discover hundreds of them in the UK. In every marketplace bar finance, the rules are already set out, accepted and everyone works to them ..... all except finance.

My input is that if true free market rules were imposed upon banking and finance; all the very worst aspects of the current difficulties would immediately fall away. For example, the greatest instability has been caused by banks being able to provision a mortgage for a house to live in and then to be permitted to raise the rate of interest charged downstream of the the point of purchase, (equivalent to the hammer falling in an auction room), by the customer.

So, again with the greatest of respects, you are entirely wrong to say there are no true free markets; if you go out to look and interact with them, there are many; they simply do not exist in finance.

[c1ue]

Re: Hudson's 21st Century Outlook

Then in which case, and with the very greatest of respects, I have to assume that you have no experience of public auction rooms selling everything from low value furniture to very high value art. Have you ever bought or sold anything through an auction room?

I've bought thousands of items on Ebay and Craigslist.

I've also been involved in a business which specialized in helping buyers purchase FHA foreclosed homes - which were sold in an auction format every week.

From my experiences, the reality of auctions is that regulation, the auction company, the other bidders - all can exert all sorts of influence in a myriad of ways.

The notion that auctions are 'free markets' is equally an illusion.

My input is that if true free market rules were imposed upon banking and finance; all the very worst aspects of the current difficulties would immediately fall away.

Unfortunately, your belief runs counter to what empirical evidence suggests.

It is the de-regulation of banking and finance which has led to the TBTF banks, not the addition of new regulation.

[Chris Coles]

Re: Hudson's 21st Century Outlook

Ebay and Craiglist are not open face to face public auctions where everyone can see each other bidding.

"Abstract

This paper discusses the legal classification of online “eBay” auctions. The discussionhas key implications on the scope of consumer protection law as sale by auctions are,for example, excluded from the scope of the Consumer Protection (Distance Selling)Regulations 2000. The paper uncovers that online “eBay” auctions cannot always beconsidered as traditional auctions and that eBay, as an intermediary, is not to be

considered as an auctioneer." http://v-scheiner.brunel.ac.uk/bitst...0consumers.pdf

Neither am I suggesting new regulation, but the acceptance of existing regulation that is statuary law that has been in place for a very long time as we can see here: http://www.legislation.gov.uk/ukpga/Geo5/17-18/12
And here

http://www.legislation.gov.uk/ukpga/1969/56

Yes, I am certain that the unscrupulous will find ways to subvert the law; but in the end, it is the integrity of the business that comes to the fore and the market makes decisions as to who to trust. Then again, even the highest auction houses have to submit to the law.

Price-fixing scandal[edit]

In 2000, allegations surfaced of a price-fixing arrangement between Christie's and Sotheby's, another major auction house. Executives from Christie's subsequently alerted the Department of Justice of their suspicions of commission-fixing collusion.
Christie's gained immunity from prosecution in the United States as a longtime employee of Christie's confessed and cooperated with the U.S. Federal Bureau of Investigation. Numerous members of Sotheby's senior management were fired soon thereafter, and A. Alfred Taubman, the largest shareholder of Sotheby's at the time, took most of the blame; he and Dede Brooks (the CEO) were given jail sentences, and Christie's, Sotheby's and their owners also paid a civil lawsuit settlement of $512 million.^{[33][34][35] http://en.wikipedia.org/wiki/Christie's}

[c1ue]

Re: Hudson's 21st Century Outlook

Ebay and Craiglist are not open face to face public auctions where everyone can see each other bidding.

Au contraire - you can see every single bid in Ebay as it is made. The bid history shows exactly how much and when each bid was made; in the past the full user names were also published, but this was discontinued when people started spamming bidders as well as bidders/sellers conspiring to avoid Ebay fees. Now you can only see the first/last letters and rating - this is sufficient to determine when bid riggers are operating at least.

On Craigslist, you can see every other similar item offered, if not the bids themselves.

This is in stark contrast to the various private auction house bids where the records of whom bid, how much, and when are generally not even written down with the exception of the winner.

In this environment, for example, there is no way to tell if there is some pattern of consistent bid rigging - maybe a shill planted in the audience to pump up bids on particular items, or a 'non compete' pattern where a cabal pre-decides who wins what. The 2 aforementioned, among others, having been documented in reality by the FBI in real estate foreclosure sales, among other areas.

The point of which is, there is a purpose for government. It doesn't just exist to spend money and employ bureaucrats - there is a real function in regulation, and regulation as such must exist to rein in the more destructive behaviors the public - both individuals and corporations - engage in.

This fiduciary duty has sadly fallen by the wayside in many areas.

[Forrest]

Re: Hudson's 21st Century Outlook

I've read most of your book...I've gotten to the vanishing market credits that only survive for 30 days...I would presume that system is to ensure immediate clearance of all outstanding accounts within the market place, and encourage re-investment, but is there a consequent drop in value in those market credits over the 30 days before they become ineligible to be used as money within the market place? And if so, does that mean someone who can't get rid of his money fast enough by plowing it back into the market community...perhaps there are no commidities to buy, or artisans to hire...so that the market credits are sold to someone else who can use the market credits immediately for actual currency at a discount?

In regard to the market forces, are the Feudal lords going to relinquish even a portion of their current control of the market, and allow change? Or are they in the position where as long as the laws don't change...which they can most likely prevent...nothing will hurt them?

[stetts]

Re: Hudson's 21st Century Outlook

Shiny,
Good heavens--how ever do you think the CCC would work in today's US?? Back then, the beginning point was a near-staving population willing to work and task was lots of manual labor to build some infrastructure. For example, our farm had about 50' of a creek bank rebuilt with creosoted pilings. Pilings all dug in by hand, reinforcing cables all strung by hand, backfill all replaced with shovels and wheelbarrows. Today, you plan to take somebody with little skill, get them off the dole and couch and..then what? That same task is done with a trackhoe and maybe a couple skilled helpers and it's done in two days. If I owned that farm, I wouldn't even allow the CCC anywhere near my place since I'd figure they are just out looking for a place to rob later on. No thanks. As to the national forests, ever wonder why Weyerhauser can do a fine management job on their private land but government sucks? Just sayin'.
Take care. Stetts

[Chris Coles]

Re: Hudson's 21st Century Outlook

I've read most of your book...I've gotten to the vanishing market credits that only survive for 30 days...I would presume that system is to ensure immediate clearance of all outstanding accounts within the market place, and encourage re-investment, but is there a consequent drop in value in those market credits over the 30 days before they become ineligible to be used as money within the market place? And if so, does that mean someone who can't get rid of his money fast enough by plowing it back into the market community...perhaps there are no commidities to buy, or artisans to hire...so that the market credits are sold to someone else who can use the market credits immediately for actual currency at a discount?

When I first set out to open the debate on how we can create a workable system to deliver a marketplace for tranches of working capital, it seemed to me that an acceptable starting point would be to describe a system that is parallel to the existing fruit and vegetable markets, or again, fish or meat markets where the product always has a limited shelf life and the further you go into that limit; the lower the value of what you are trying to sell. That always, at some future point, the product would become valueless. So your assumption is correct, that would act to ensure clearance. My thinking is that the value then returns to the central bank that issued them in the first place. Yes, selling them on would also work.

Another aspect that has opened up is that, in discussing this with the Governors Office at the bank of England, Mervyn King advised that they could not set out to operate such a marketplace without the full permission of parliament. So, as such, there would need to be new primary law involved for the BoE to be able to follow through. It was that aspect that has taken my own thinking towards The Capital Spillway Trust being seen as a new and quite unique financial institution as it will not be taking any form of deposit from any individual; instead, it would be purchasing low quality financial paper from the existing financial system and converting that low quality into new vanishing bonds which in turn are only used as new equity capital and working capital placed directly into the hands of the new very small business founder for onward deposit into their new business bank account.

Very interestingly, the recent letter I received from Martin Schulz, The President, the European Parliament, second paragraph says: "I agree with you that the amount of dangerous products on the financial markets is still too high, and that the value of those assets could be used for much more productive purposes such as direct investments in the real economy".

So as you can see this is an aspect that is still evolving. It also might help if you go on to read the new PDF paper; Millions of Jobs for Europe which can be downloaded from www.chriscoles.com/page5b.html

In regard to the market forces, are the Feudal lords going to relinquish even a portion of their current control of the market, and allow change? Or are they in the position where as long as the laws don't change...which they can most likely prevent...nothing will hurt them?

The underlying debate created by Dan Amerman when he first highlighted the disparity between the "official" 8% unemployment figures in the US and the true figure in the region of 19% was that the long term effect would be disastrous for the US financial services industry. In effect, what is happening is that the number of long term savers making new deposits into the system has started to drop dramatically already. That in turn destroys their long term business model. http://danielamerman.com/articles/Hiding.htm So my view is they also have no choice but to seek a workable solution.

That in turn takes me right back to the beginning; this is not about job creation per se, it is all about how to; VERY QUICKLY; re-prosper the grass roots economy. As I see it, the only viable way is to use dodgy financial paper converted into vanishing bonds and use the value to allow every entrepreneurial individual to create new jobs. That the value comes out the back door of the system and is deposited back through the front door as new small business banking deposits.

[Chris Coles]

Re: Hudson's 21st Century Outlook

Shiny,
Good heavens--how ever do you think the CCC would work in today's US?? Back then, the beginning point was a near-staving population willing to work and task was lots of manual labor to build some infrastructure. For example, our farm had about 50' of a creek bank rebuilt with creosoted pilings. Pilings all dug in by hand, reinforcing cables all strung by hand, backfill all replaced with shovels and wheelbarrows. Today, you plan to take somebody with little skill, get them off the dole and couch and..then what? That same task is done with a trackhoe and maybe a couple skilled helpers and it's done in two days. If I owned that farm, I wouldn't even allow the CCC anywhere near my place since I'd figure they are just out looking for a place to rob later on. No thanks. As to the national forests, ever wonder why Weyerhauser can do a fine management job on their private land but government sucks? Just sayin'.
Take care. Stetts

Stetts makes a good point and opens the debate into another aspect. It will never make any sense to try and create artificial jobs; particularly by any form of local or national government. A true free market operates by a private individual seeing another supplying; anything; and deciding that they can compete against the existing supplier. Or, they have reasoned that they see an opportunity to deliver a product or service that does not currently exist.

That immediately opens another debate; local prosperity to pay for the new competitors product or service; or the lack of it.

My view is that the primary underlying problem is a lack of prosperity to allow the potential new customer to pay for the new supplier. Without additional prosperity available to enable payment of the price for supply, all you can achieve is a reduction in the available prosperity to pay less for the additional suppliers. Many years ago, 1970's, I sat in on a conference where a man from of all places, Liverpool City Council, (too distant in time to find a link), made the case for what he described as "The Platform Effect". That the economy is like a railway platform, there are only so many people that can stand on any given size of platform. If you try and add more people, either they each have to use less of the area, (less of the value of the economy in each transaction), or you have to build a bigger platform. Which is why I keep quoting Adam Smith.

The real underlying problem is not employment; it is a lack of underlying prosperity to pay for the products created by any new jobs. Trying to add government borrowed money spent as false jobs particularly where a large proportion of the money is spent by government to provide official oversight of the spending is not going to provide that answer.

Yes, in the 1930's, as Stetts points out the work was done by hand and all those hands were paid good money which invigorated the economy. But then, the private sector job creation mechanisms were fully functional with many prosperous individuals OUTSIDE of the financial services industry right there to invest into many new businesses. Today all the prosperity is in the "markets" and the investment mechanisms are not operating at anything like past levels.

[c1ue]

Re: Hudson's 21st Century Outlook

Shiny,
Good heavens--how ever do you think the CCC would work in today's US?? Back then, the beginning point was a near-staving population willing to work and task was lots of manual labor to build some infrastructure. For example, our farm had about 50' of a creek bank rebuilt with creosoted pilings. Pilings all dug in by hand, reinforcing cables all strung by hand, backfill all replaced with shovels and wheelbarrows. Today, you plan to take somebody with little skill, get them off the dole and couch and..then what? That same task is done with a trackhoe and maybe a couple skilled helpers and it's done in two days. If I owned that farm, I wouldn't even allow the CCC anywhere near my place since I'd figure they are just out looking for a place to rob later on. No thanks. As to the national forests, ever wonder why Weyerhauser can do a fine management job on their private land but government sucks? Just sayin'.
Take care. Stetts

The CCC wouldn't work today, but it has nothing to do with skill set or willingness to work.

The issue is that in the 1930s, people were unemployed but were largely debt free. Thus cost of living was primarily for food, clothing, and other items of consumption. Minimum wage goes a long way in that context.

Today, however, the cost of living is primarily debt: either housing mortgages/rent, college debt, car debt, consumer loan debt, etc.

The sad reality is that even a $20/hour job cannot pay for a $150K house loan - not if you have to actually eat, much less save up to send the kids to college someday.

As for what the a 'new' CCC could do - your creek bank rebuild would not be high on the list. There are all sorts of bridges, dams, roads, and what not that could use work - even if it might be less efficient than a professional could provide.

After all, they aren't getting worked on now anyway.

Hoover dam would probably have not been built if 'professional' labor was used - it would have cost too much. But Hoover dam's electricity is still being used today - literally decades later.

[Chris Coles]

Re: Hudson's 21st Century Outlook

The CCC wouldn't work today, but it has nothing to do with skill set or willingness to work.

The issue is that in the 1930s, people were unemployed but were largely debt free. Thus cost of living was primarily for food, clothing, and other items of consumption. Minimum wage goes a long way in that context.

Today, however, the cost of living is primarily debt: either housing mortgages/rent, college debt, car debt, consumer loan debt, etc.

The sad reality is that even a $20/hour job cannot pay for a $150K house loan - not if you have to actually eat, much less save up to send the kids to college someday.

As for what the a 'new' CCC could do - your creek bank rebuild would not be high on the list. There are all sorts of bridges, dams, roads, and what not that could use work - even if it might be less efficient than a professional could provide.

After all, they aren't getting worked on now anyway.

Hoover dam would probably have not been built if 'professional' labor was used - it would have cost too much. But Hoover dam's electricity is still being used today - literally decades later.

Thank you c1ue, a different viewpoint of exactly the same problem; a lack of available prosperity.