ES -- DX/CL -- isee -- cboe put/call -- specialist/public short ratio -- trinq -- trin -- aaii bull ratio -- abx -- cmbx -- cdx -- vxo p&f -- SPX volatility curve -- VIX:VXO skew -- commodity screen -- cot -- conference board

Tuesday, August 12, 2008


capital betrayed

Panics do not destroy capital; they merely reveal the extent to which it has been destroyed by its betrayal into hopelessly unproductive works.

- Mr John Mills, Article read before the Manchester Statistical Society, December 11, 1867, on Credit Cycles and the Origin of Commercial Panics as quoted in Financial crises and periods of industrial and commercial depression, Burton, T. E. (1931, first published 1902). New York and London: D. Appleton & Co -- via London Banker

barry ritholtz today links to this presentation by chris martenson, who cites this article by kevin phillips. all of martenson's chapters are well worth viewing -- i've not seen a concise video series to match it for a layman's explanation of the dysfunction of the american economic model of the last thirty years, as well as the unsustainability of same. but in particular this vignette outlines something i mentioned in passing recently:

as with the much-maligned bureau of labor statistics' birth/death model or the u3-vs-u6 debate, there's no ad hoc political revisionism here. this is simply statistics at work, revealing some things and masking others. one can argue that some measures have been reconstituted with a political aim in mind -- the changed computation of CPI in an effort to be more parsimonious with social security payouts, for example -- but GDP methodology hasn't been altered here. no conspiracies, please.

martenson and phillips begin to provide a context for the reconstituted CPI, and the profound and massive self-deception with respect to GDP, national solvency and creditworthiness that it particularly has enabled -- one consequence of which has been one of the greatest credit bubbles in the history of western civilization if not mankind itself.

consider the words of john mills -- consider the capacity of the insidious credit crunch to "merely reveal the extent to which [capital] has been destroyed by its betrayal into hopelessly unproductive works" -- consider the migration of capital investment and spending in this society from productive enterprise like manufacture to consumer services and (worse) inefficent and "hopelessly unproductive" housing stock, financial intermediation and entertainment -- in the context of martenson's and phillips' exposition of the depth and breadth of the self-deception the dollar economy has been engaged in.

that cloud of deception is, i suspect, now slowly lifting.

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