Towards a leisure society

In my inbox from an estate agent:

Hello all,

I have just taken on a beautiful house, 10 minute walk from Turnham Green tube.

I have attached some pictures, Please have a look. I have no other details and to be honest, the way the market is, it will be sold before I have them!

Excellent Condition Throughout  South Facing Garden  Period Property  Three Double Bedrooms  Two Bathrooms  Double Reception Room  Elegant Hallway  Cellar  Dining Room  Fitted Kitchen  10 Minutes Walk to Turnham Green Tube Station

I can possibly get some one off viewings.

Please let me know if you would like to view. My direct line is xxxx

Thank you 

Or will this time be different because we know the government will continue to backstop?

Reading Richard Dawkins’ Selfish Gene. Absolutely fascinating.

This from the updated version had me absolutely gripped:

A computer is a real machine, hardware in a box. But at any particular time it is running a program that makes it look like another machine, a vitual machine. This has long been true of all computers, but modern ‘use-friendly’ computers bring home the point especially vividly. At the time of writing, the market leader in user-friendliness is widely agreed to be the Apple Macintosh. Its success is due to a wired-in suite of programs that make the real hardware machine - whose mechanisms are, as with any computer, forbiddingly complicated and not very compatible with human intuition - look like a different kind of machine: a virtual machine, specifically designed to mesh with the human brain and the human hand. The virtual machine known as the Macintosh User Interface is recognizably a machine. It has buttons to press, and slide controls like a hi-fi set. But it is a virtual machine. …..

I now turn to the other background idea that we need to import from computer science, the idea of serial and parallel processors. Today’s digital computers are mostly serial processors. They have one central calculating mill, a single electronic bottleneck through which all data have to pass when being manipulated. They can create an illusion of doing many things simultaneously because they are so fast. A serial computer is like a chess master playing twenty opponents but actually rotating around them. Unlike the chess master, the computer rotates so swiftly and quietly around its tasks that each human user has the illusion of enjoying the computer’s exclusive attention. Fundamentally, however, the computer is attending to its users serially. Recently, as part of the quest for ever dizzying speeds of performance, engineers have made genuinely parallel processing machines.

One such is the Edinburgh Supercomputer, which I was recently priviledged to visit. It consists of a parallel array of some hundreds of ‘transputers’, each one equivalent in power to a contemporary desk top computer. The supercomputer works by taking the problem it has been set, subdividing it into smaller tasks that can be tackled independently, and farming out the tasks to gangs of transputers. The transputers take the sub-problem away, solve it, hand in the answer and report for a new task. Meanwhile other gangs of transputers are reporting in with their solutions, so the whole supercomputer gets to the final answer orders of magnitude faster than a normal serial computer could. I said that an ordinary serial computer can create an illusion of being a parallel processor, by rotating its ‘attention’ sufficently fast around a number of tasks.

We could say that there is a virtual parallel processor sitting atop serial hardware. Dennett’s idea is that the human brain has done exactly the reverse. The hardware of the brain is fundamentally parallel, like the Edinburgh machine and it runs sofware designed to create an illusion of serial processing: a serially processing virtual machine riding on top of parallel architecture. The salient feature of the subjective experience of thinking, Dennett thinks, is the serial ‘one-thing-after-another’, ‘Joycean’ stream of consciousness.

He believes that most animals lack this serial experience, and use brains directly in their naive, parallel-processing mode. Doubtless the human brain, too, uses its parallel architecture directly for many of the routine tasks of keeping a complicated survival machine ticking over. But in addition, the human brain evolved a software virtual machine to simulate the illusion of a serial processor. The mind with its serial stream of consciousness, is a virtual machine, a ‘user-friendly’ way of experiencing the brain, just as ‘Macintosh User ‘Interface’ is a user-friendly way of esperiencing the physical computer inside its grey box. It is not obvious why we humans needed a serial virtual machine, when other species seem quite happy with their unadorned parallel machines…..

David Graeber’s latest in The Baffler:
http://www.thebaffler.com/past/practical_utopians_guide

“Labor, similarly, should be renegotiated. Submitting oneself to labor discipline—supervision, control, even the self-control of the ambitious self-employed—does not make one a better person. In most really important ways, it probably makes one worse. To undergo it is a misfortune that at best is sometimes necessary. Yet it’s only when we reject the idea that such labor is virtuous in itself that we can start to ask what is virtuous about labor. To which the answer is obvious. Labor is virtuous if it helps others. A renegotiated definition of productivity should make it easier to reimagine the very nature of what work is, since, among other things, it will mean that technological development will be redirected less toward creating ever more consumer products and ever more disciplined labor, and more toward eliminating those forms of labor entirely.”

I started this Tumblr with the intention of Tumblring short, concise leisure-related curios whilst travelling in Japan — a country that I believe is experiencing the leisure effect.

It has now mutated into a full-on blog (due to my clear inability to be concise).

So I think I will start a separate personal blog on Wordpress — not focused around any particular theme — for my more long-form thoughts.

I will dedicate this Tumblr to what it was originally intended to be, a catalogue of leisure society developments in the world. Quotes, photos, links. Not much more.

There are two ways the banking universe can pan out as far as I can see.

One is the Gorton way, where everything is eventually collateralised and anyone with credibility or collateral can issue collateral-type obligations that turn into collateral money.

In this world banks are as good as the collateral they hold, and they can flourish if they can persuade the markets to accept new types of collateral when old forms run out.

The other is the Admati view which is about going towards a Fisher style full reserve banking plan. Banks can take all the risk they want provided they can persuade “depositors” to fully fund them in these ventures and to bear all the risk.

I like Admati’s view but also see some benefits to Gorton’s — which basically represents a truly liberalised money market.

The problem with Admati’s view is that we are basically reducing banks to venture capitalists. That’s fine. But if depositors are going to bear all the risk, it makes sense their upside exposure should not be capped to a specific return.

A much better system would be something of a sukuk system where the investors returns are linked to his effective ownership of the asset and thus its cash flow.

In Admati’s world the government regains control over money supply however, but in a way that can still stimulate new investments.

With Gorton’s world the problem is the ongoing fragmentation and explosion of shadow banking.

Everyone effectively becomes some type of lender, funding some form of collateral at the end of a chain.

The problem here is a) how good is the collateral really and b) what stops the collateral being relent into unwise investments creating too much money velocity?

If the collateral transpires to be unsound what stops the whole thing from suddenly becoming massively deflationary as well?

This is free markets banking with no checks or balances.

In fact the whole thing reminds me of the film Inception. A bank within a bank within a bank and so on.

The layering is everywhere. After all even PayPal is a shadow bank to some degree — though really it’s more akin to a zero yielding money market fund.

If anyone can issue units which guarantee some sort of return linked to some underlying collateral which may or may not be in their possession due to rehypothecation, u realise how quickly the money supply can be obscured from central source. We have layers upon layers of parallel money and currencies which are somehow loosely linked in value to the underlying currency of the realm.

But eventually the dream ends and we have to revisit economic reality.

And that’s fine providing the parallel units have encouraged the government to dish out enough additional currency (via interest to lenders) to cover all the interest liabilities of the private money market.

In short sovereign money — the ultimate liability of the system, and the dream upon all other dreams are based on — has to keep expanding to account for all the private promises of return.

Given that money is endogenous that shouldn’t really be a problem — providing output doesn’t fail.

But if there is a concentrated funding gap somewhere along the chain and the government refuses to materialise the money that the private banking world had materialised on its behalf… We have a problem.

(The government is likely to decline this sort of bailout on the basis it believes a funding gap has manifested because there isn’t the output in the economy to support the legacy money creation of the private institution.)

Indeed, in some ways Lehman happened because the government refused to materialise the money that the private banking world had over lent and lost.

It chose instead to punish the foolish investors who had made bad decisions — on the basis that it couldn’t be guaranteed to support bad lending choices and the investments of the already wealthy. And also on the basis that it believed these investors had not funded real growth.

Of course it’s not clear at all that the growth/output was not there. After all, the failure to support those bad investments initiated a major deflationary reaction — it did not keep the system balanced.

The systemic shock that followed was in some ways associated with the capitalist system’s realisation that returns were only possible by means of continued central government/bank money creation.

This was shocking because of a) misjudged inflation fears and b) a great misunderstanding about our real level of available resources and output.

The greatest shock to the capital system actually being the idea that the govt could print money to compensate for poor decisions without it leading to inflationary shocks — precisely because capitalist scarcities had by and large been overcome.

That’s not to say completely uncontrolled money creation should be encouraged. Even in a technologically abundant world there is always a risk money begins to outstrip output.

It’s worth remembering that what caused all the problems in Weimar Germany wasn’t as much the over issuance of money by the state but the over issuance of private parallel currencies by corporates to employees (often as payment proxies). These expanded the money supply in an economy plagued by external debt and scarcity to such an extent that rampant inflation was the only inevitable outcome.

These are not conditions that are easily replicated.

However, initiatives like bitcoin are our surest way to try and replicate them.

The ultimate irony with bitcoin, after all, is that even though it purposefully strives to be deflationary it’s much more notgeld than money.

If and when Bitcoin becomes so valuable and currency-like that deflation really is a problem, the low barrier to entry into the market becomes an issue. There is after all nothing stopping competing currencies from coming into the market when bitcoin supply becomes lacking.

As more currencies compete you just get the Notgeld problem all over again.

In some ways it’s even worse than notgeld because at least the german notes were redeemable for the goods and services of the corporates issuing the units.

There is no such guarantee with virtual currencies based on nothing.

A state-issued digital currency on the other hand (or one redeemable against real resources) is another matter…

There’s a report in my inbox which talks about the risk of Japan having exported deflation.

I like this idea and I have often talked about the idea of China having exported deflation as well.

But really it’s all about stealing inflation from the last remaining zones where scarcity prevails and where competition over scarce resources can yield interest on capital.

Remember money is a wealth allocation tool. When it concentrates in too few hands it causes deflation — until the moment the rest if society goes, hang on we don’t need money like we used to (thanks to a collaborative less selfish economy).

Japan has effectively said enough is enough. We shall create the inflation by diluting the units by which we allocate wealth. And we will do this (and this is important) in conjunction with government spending so that the new units can be redistributed outside the hands that hold the wealth already.

The fact that this is yen dilutive has the pleasant consequence of devaluing the yen. No wonder yen stocks are going up the world is about to benefit again from Japanese engineering and creativity which is going to look cheap and competitive in comparison to domestic goods and services.

Of course in the game of currency thrones this is unlikely to last too long, for it hurts Japan’s nearest like for like competitor which is actually germany.

Japan’s gain is Germany’s loss.

The natural reaction is to engage in competing currency devaluation.

Unfortunately German paranoia will prevent that for far too long.

And with bunds unable to penetrate below zero (though I’m not sure how long for) Germany’s loss will also be the periphery’s gain.

No wonder the spread between Germany and periphery is contracting.

But this is more about Germany’s weakness than the periphery’s strength.

And by weakness I mean inability to dilute money so that the wealth can be shared.

Slate has an interesting article talking about how Google’s ultimate goal is to create the Star Trek computer.
I can’t link to it because I am on a phone. But it’s here:
http://mobile.slate.com/articles/technology/technology/2013/04/google_has_a_single_towering_obsession_it_wants_to_build_the_star_trek_computer.html

Consider such a computer is built. Now remember that moment when Scotty goes to the 1980s to save a whale and tries to programme a computer vocally and sighs at how primitive keyboard input is.
Then consider what happens to language to differentiate from user and programmer input?
For those not initiated in C++ Star Trek operating system version does what the programmers utter begin to resemble a mysterious esoteric language? A spell that magically makes things happen?
Perhaps instead of keyboard input they use a wand, like with a Wii.
Perhaps malevolent hackers know the spells that can cause harm and anguish, and disrupt systems?
Both malevolent and good come from the same esoteric Hogwarts school of programming.
Technology and magic.. what’s the difference?
A magic flying broomstick - some sort of drone.
A magic mirror - an iPad.
A crystal ball - access to surveillance cameras.
A book of magic spells - a programming manual.
And so on…

On the Game of Thrones like origins of property rights:

“In ancient North China a new kind of giant had developed long, long before Roland’s time a three-componentparts giant, i.e., the little man, with a club, mounted on a horse — who could and did overwhelm the big, onfoot, tribe-leading shepherd. This new composite giant, the horse-mounted bully, could divert to his sole advantage as much as he wanted of the life-support productivity of the on-foot peasantry.

(Pays = land; ped = foot = ped ant = pays antry = peasantry = combination of on the land and on foot = pa y of lands = pa of patriot = pa of pagans = patois = po-gan, pa-gan peasantry.)

The horse-mounted, clubwielding bully asserted — as do the twentieth-century racketeers — that he owned the land on which the shepherds were grazing their sheep or the farmers were growing their crops. There was no way in which the shepherd could realistically contradict the bully.

Each night, many of the shepherd’s sheep disappeared until the shepherd agreed to “accept” the horse-mounted bully’s “protection.” This was the origin of “property.”

The most powerful amongst the leaders of gangs of horsemen became the emperor. The emperor rewarded his henchmen with deeds to the land in proportion to the deeds at arms they performed for him. There is no historical record of religion founders who have been so bold as to assert that God had deeded land to anyone.

History shows that religious leaders have, however, frequently complied with their king’s instructions to plant a cross or other symbol of God’s approval of their king’s sword-accomplished vast landsseizure and ownership-claiming. Over thirty thousand years ago, these prehistoric horsemounted “landowners” began expanding their territory northwardly and westwardly beyond the Himalayas into Mongolia and then ever westward into Europe.”

(IK - also why gun rights are so embedded in the US constitution. A desired cold war effect on a micro level. If we all have guns and a chance to protect from the oppressive authority we are all freer than those peasants who can’t. Except that nothing changes because property becomes determined by who has the biggest gun and who has the means to form a cartel.)

From Grunge of Giants:

“My two completed lifetimes and my third of a third lifetime have found the great majority of “savvy,” well-todo individuals I have met convinced that there exists an inherent inadequacy of life-support on planet Earth, and therefore that their own successful survival as well as that of those whom they cherish depends upon their cleverly learning more and more about how to be legally selfish and thereby to accomplish personal economic advantage by anticipatorily depriving others in directly undetectable ways.

These ways are legally and socially accepted practices of deceiving and cheating the public — e.g., by altering the scoring system and the official “game rules” of the accrued monetary equities of other humans through zoning laws, “etc.” x 1010 ways. Price manipulation is most often defended as being governed by supply-and-demand variables, i.e., by what the traffic will bear” and not by time-energy costing, which science finds to be exclusively operative throughout all the constant energy-transformings and interchangings of Universe.

This legal deprivation of other humans to one’s own personal advantage is most simply accomplished through increasing rents or prices of a cup of coffee or a secondrate cigar (both of which have escalated during my lifetime from five cents to fifty cents). The powerful social precedent for price-advancing has been initiated by nonperishable mine and oil-well owners and those other prime industrial producers, the physical cost of whose products, measured in ergs of energy per hour and pounds of coal or petroleum per pound of manufactured goods, has steadily decreased.”

What I wasn’t able to articulate properly tonight regarding what was really important about the day’s Eurozone/EU deveopments…

1) I’m not really an expert on British politics but it seems to me David Cameron’s Merkel visit is a bit of a distraction. The two have come together because of mutual political interest. Merkel has an election and must look strong. If she can keep David Cameron sweet she wins easy brownie points, but I don’t think it’s really her priority. Nor do I think compromises would be made. Cameron gets a chance to seek amendments. Don’t imagine there’s much more to it than political theatre.

2) Cyprus is better off leaving the euro and issuing its own currency. If a bunch of wayward criminals can attract $2bn to back a currency based on nothing but a black economy, then the potential for Cyprus is clear. And not because of its ties to Russia.

If any country can leave the Eurozone without shock it’s Cyprus. It has a viable economy that can underpin it and a budget that was never really a problem until now.

Its problems are tied entirely to external liabilities, which now threaten the collapse of GDP and future budget balance. Default taboo, however, isn’t what it used to be. This isn’t 2011. Chances are that a default now, and the issuance of a new currency, would improve the chances of a recovery that makes the rest of its debt liability sustainable.

I’m with Paul Krugman.

Cyprus has the chance to be the experimental zone for a new economy without so much of a dependence on commercial banks. Cooperative finance can also stabilise the system and Cyprus has plenty of that. We also have capital controls already in place, which would ease the transition greatly.

Almost every social and political taboo has already been broken. Eurozone exit, if well signalled, would not have to be a shock. And it wouldnt need to cause a terrible precedent for the rest of Europe either. Cyprus is not Spain.

It’s also one of the newest entrants to the zone, and has much less invested in defending the system.

Culturally it’s a much more cohesive society anyway and even has the memory of much greater strife and pain imprinted in its collective consciousness compared to anything like this. Point is, worse things have happened in Cyprus. They know what pain is, and are likely to come together and make a new currency work.

An independent cy-euro has worth. It would be volatile, but its value could not go to zero. The sun, the beaches, the infrastructure wouldn’t disappear because of default. A cheap currency is even desirable if the country is to redevelop its tourist industry.

As for external liabilities and more specifically import cost exposure. If there was ever a time these could bartered, it’s now. There’s even the chance to stabilise a cyprus currency by collateralising it with redeemability against natural gas.

Gold also better used as collateral to back a new currency than sold into a descending price market.

It’s about wealth allocation, and selling goods to cyprus still very much makes sense because the small island economy has something it can offer in exchange.

Cyprus’ financial services industry meanwhile could reinvent itself it as a support system for a new collaborative banking and digital payment system.

Most importantly a new Cy-euro should be issued as digital cash directly by the central bank. Cy-coins would effectively be backed by the collective wealth of the island (both people and resources). The allocations could be decided on in a way that echoes current allocations on the domestic side. Foreign capital invested in Cyprus could have the choice of cy-euro compensation, or nothing.

We’re talking essentially about the issuance of stock in Cyprus Inc. Think of it like the makings of an acquisition currency in conventional corporate M&A, where stock is used to purchase the stock of another company.

With cyprus you’d effectively bring to market an IPO in Cyprus Inc. A highly risky but fundamentally viable national corporate. Once the stock would set a stable price they could use it to buy back their underperforming euro-denominated debt.

Think of it like the central bank doing a euro recall. You as a citizen would hand the euros you have to the cbank and in return you would receive an equal value of cyprus units. Potentially collateralised in natural gas on top of that.

The euros would also be used as quasi reserves/collateral/fund/equity to back the newly issued shares — probably by being invested in its own euro-debt. The parallel units however would not be pegged. This would not be a cyprus euro ETF.

Most likely the new units would trade at a discount, but as the economy stabilised there would be a chance for that gap to be closed as more people demanded cy-coins to transact with cyprus.

These are very rough thoughts, but it seems to me that hyperinflation has to be inevitable.

The real euros which represent the cyprus economy in the system, would not be extinguished you see. In some ways it’s the collateral that’s backing the euro which would be diminished, diluting the value of the euro relative to other currencies.

How the new parallel currency performs relative to the euro is unclear. Defence of the new units’ value would be difficult but not impossible.

Think of it like an ETF which has 1000 units in issuance (each worth 1 euro) and which is collateralised with 15 stocks collectively worth 1000 euros.

If one of those stocks (worth 10 euros) leaves the basket, but no units are absorbed and destroyed to compensate for the value of that stock, the unit price gets diluted. It’s worth (reatively) 0.990 on an international basis.

The unit is actually the euro. And cyprus still ends up with euro reserves, made up of its own private and sovereign debt.
Capital controls would help immensely as well.

The hurdles are mostly legal.