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Musings Report 2020-28 7-11-20 The Wagon Train/Lifeboat Analogy
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The Wagon Train/Lifeboat Analogy
If you read any first-hand account of the mass migration across the American West to the gold fields of California in the 1850s, you'll find descriptions of the incredible litter left by previous travelers along the trail as they came to grips with the challenges of continuing with the heavy loads they started out with.
All manner of belongings that were viewed as essential at the start of the journey were soon recognized as inessential and dumped.
A few hundred miles further on, the bleached bones of pack animals became common, as the parched landscape did not provide enough feed or water to sustain oxen and other animals tasked with pulling the heavy wagons through the harsh landscape.
As the carcasses of dead pack animals thinned out, the last of what had been viewed as essentials were strewn along the trail: the tools for mining all that gold that awaited them in California.
Further on, abandoned wagons and carts became plentiful as axles and wheels broke and could not be repaired, and the impossibility of continuing with heavy wagons pulled by the last of the exhausted pack animals became obvious.
Groups which had started with overloaded wagons and numerous oxen were reduced to pulling carts by hand.
At this juncture, the crosses and mounds of hasty human burials became more common.
Despite the severity of the challenges and losses, the survivors had yet to even reach the Sierra Nevada mountain range which they would have to scale to reach the gold fields.
I think you see the analogy with the present: as this essay succinctly explains, the global financial system is mortally wounded, and nothing can stop the collapse of 40 years of Ponzi-driven asset valuations and the debt which was taken on to buy them. People and Jobs? Or Wealth? The Government Has To Decide Which To Prioritise, and There Is Only One Right Answer (via LaserLefty)
We have just started the journey, and everyone is still brimming with high hopes that the sacrifices will be light and the return to comfortable normalcy speedy.
Very few people have made realistic assessments of what is truly essential and what they might have to give up along the way.
Inflation--the decline in the purchasing power of wages and money--is akin to crossing a desert. Every day you have less of everything and have to carefully conserve what you have left. Those who fail to do so don't make it.
In the financially precarious landscape ahead, a single broken axle can doom any forward progress. There are very few redundancies or buffers in the financial system, and a 25% decline in the value of assets such as commercial real estate--never mind a 50% decline--will bring down the entire system.
As the author of the essay takes pains to explain, very few businesses can pay their high fixed costs and debts as their revenues and profits plummet.
Longtime readers may recall a Musings awhile back on the HMS Bounty and the ship's famed mutiny. (The reviled Captain Bligh was actually a compassionate leader by the standards of the day. The book that describes what actually happened is The Bounty: The True Story of the Mutiny on the Bounty.)
Bligh and as many loyal crewmen that could be stuffed into a small open boat (19 men total) were set adrift with few supplies--what everyone reckoned was the equivalent of a death sentence, as the overloaded boat's gunwales were just inches above the waterline.
In one of the most remarkable sailing feats in history, Bligh navigated the 23-foot boat 3,600 miles to a settlement in Timor in a 6-week voyage.
Only the most extreme discipline in rationing the little food and water enabled the crew to survive.
Virtually no one in the corporate media is acknowledging what's obvious to the author of the essay cited above. As a result, very few people understand the gravity of the situation that's unfolding beneath the rah-rah about "recovery."
I am calling the era we're entering the Greater Depression because the current economy / society are far more fragile and brittle than the economy / society of the 1930s, which was by today's standards decentralized and resilient.
Few people alive today had the chance to listen to the personal history of those who lived through the Great Depression as adults. When my grandmother died in 1989 at the age of 83, we found one savings passbook after another in her papers, each with a few hundred dollars in the account. Those who lived through the Depression's numerous bank failures had learned not to put all their financial eggs in one basket.
Her husband, my maternal grandfather, had supported his family with a low-paying small-town bookkeeping job he hated with every fiber of his being. When an opportunity to buy a small business in Los Angeles was relayed by his brother-in-law in the middle of World War II (1944), he was on a train to L.A. the next day.
The lesson here? If an opportunity presents itself, it may go to those who are willing to decide quickly and commit to it wholeheartedly--what the 19th century Danish philosopher Soren Kierkegaard described as either/or: among all the options, we have to choose either/or and commit wholeheartedly to our choice of life's purpose.
My paternal grandfather had been blessed with an inheritance that allowed him to live without working for a wage. (There are photos of him on the beach in Waikiki in the early 1900s, when only the wealthy could visit Hawaii.) He was able to self-fund his years as a lay missionary in El Salvador, where three of his four children were born.
A few years after the family returned to California, the Great Depression wiped out much of his inheritance, though according to my uncle he still had some dividend-paying shares of Standard Oil. My grandmother was forced to take a job as a nurse to support the family while my grandfather failed to generate much of an income selling life insurance--a luxury few could afford.
What I recall of my grandfather was his abiding bitterness and general air of misery. Looking back, I'm sure he felt that life had been unfair, robbing him of his easy carefree life as a trust-funder.
Whether we care to admit it or not, we're all trust-funders to some degree in a system that's dependent on multiple Ponzi schemes to sustain its veneer of wealth and normalcy.
As those crumble, we'll be left with fewer resources, which will require careful husbanding to get us across the financial wasteland ahead.
Highlights of the Blog
New Podcasts:
AxisOfEasy Salon #12: The Rise and Fall of the Neo-Feudal Network State
Posts:
You Are Now Leaving FantasyLand: The Losses Will Be Taken By Somebody 7/9/20
The American Economy in Four Words: Neofeudal Extortion, Decline, Collapse 7/8/20
What Will Be the Most Desirable Status Symbols in the Greater Depression? 7/7/20
What Makes You Think the Stock Market Will Even Exist in 2024? 7/6/20
Best Thing That Happened To Me This Week
The water spinach seeds sent by my friend Bart D. in Australia sprouted and appear to like their new home.
From Left Field
Coronavirus Brings American Decline Out in the Open-- interesting to see such dour content in the financial media....
The Neoliberal Looting of America: The private equity industry, which has led to more than 1.3 million job losses in the last decade, reveals the truth about free markets. -- see above comment....
NYC Rental Market Pushed to Breaking Point by Tenant Debts (via Richard M.)
San Francisco Rents Drop by Double Digits: 'Pandemic pricing' is leading to dramatic shifts in Bay Area housing costs, as some experts predict a 'tech exodus.'
Real Estate Prices Fall Sharply in New York
Steve Jobs's Advice Turned This Programmer Into a Billionaire--classic Jobs story....
French Municipal Elections: Macron Régime Shudders As It Fails To Win A Single City -- fragmentation and the decline of political parties writ large...
Pull Out Your Money Right Now (Bodhi P. Break, 1 of 7)
Do Americans Understand How Badly They’re Doing? -- or have we watched too many superhero movies...?
A Lesson on Elementary Worldly Wisdom As It Relates To Investment Management & Business (Charlie Munger's 1994 talk, via Maoxian)
The Power of One Push-Up: Several simple ways of measuring a person’s health might matter more than body weight--if only 20% to 30% of Americans can do even one push-up, this is an astounding statistic....
Reindeer at the End of the World (via GFB) -- Interesting long-form essay on the impact of the Soviet era and its collapse on Siberian ecosystems and communities.
"I also came of age in a world too precarious and unjust to continue with impunity."
"Five types of people you want to surround yourself with: the inspired, the passionate, the motivated, the grateful and the open minded." Richard Feynman
Thanks for reading--
charles |
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