The coming month may be one that could go into the record books.  Kind of like 1720 did.  Or, as the Economic Fractalist tells us, 1807.

I like 1720, myself.

“The Bubble Act 1720 (6 Geo I, c 18), forbade the creation of joint-stock companies without royal charter, was promoted by the South Sea Company itself before its collapse.

In Great Britain, many investors were ruined by the share-price collapse, and as a result, the national economy reduced substantially. The founders of the scheme engaged in insider trading, by using their advance knowledge of the timings of national debt consolidations to make large profits from purchasing debt in advance. Huge bribes were given to politicians to support the Acts of Parliament necessary for the scheme.[5] Company money was used to deal in its own shares, and selected individuals purchasing shares were given cash loans backed by those same shares to spend on purchasing more shares. The expectation of profits from trade with South America was talked-up to encourage the public to purchase shares, but the bubble prices reached far beyond what the actual profits of the business (namely the slave trade) could justify….”

A Fractal Alternative View

To the Economic Fractalist’s credit, there is a case for 1807 which is when the U.S. Embargo Act came along – thus setting off what may be thought of as the U.S.’s first failed Trade War:

“Congress imposed the embargo in direct response to these events. President Thomas Jefferson acted with restraint, weighing public support for retaliation while recognizing that the United States was far weaker than Britain or France. He recommended that Congress respond with commercial warfare, a policy that appealed to Jefferson both for being experimental and for foreseeably harming his domestic political opponents more than his allies, whatever its effect on the European belligerents. Congress, controlled by the President’s allies, agreed, and the Act was signed into law on December 22, 1807.

The embargo failed totally.”

Of course, that failure took several years to cumulatively fail, but that’s because of the “wet noodle effects” in public policy.  IoW, you  do something, then discover that the linkages you thought were firm. are in reality quite sloppy.  Eventually, the noodle turns to mush from all the pushing.

The  Fractalist himself goes into more detail in the deeper-thinking (you’ll need both brain-cells for his) discussion  titled (yep, it’s a long one…): “ Validation of the Fractal Nature of the Global Asset-Debt Macroeconomic System: The Great Crash: 36/90/85 of 90 Days Fractally Self-similar to the US Hegemonic 1807 36/91/89 Year Fractal Series.

We might have offered something a bit more  pedestrian  for a wider (OK, stupider) audience.  Like “Trade Wars Blow Shit Up – with numbers.”  But you get the idea.

Extensible Thinking Dept.

We mention these two landmark economic events for a reason:  Fractals are an alternative to fixed-length economic cycles. Strict longwave (Kondratiev/Kondratieff) cycle fans (like me) will admit that Bubbles have echoes.

The South Sea Bubble began blowing up in 1720.  Tack on a K-Wave cycle length of 52-years and that brings us to the Crowning screwup.  Losing what would later become Here (America) when (we) Colonists went rogue in 1776.  See how useful this stuff is?

The  Fractalist’s case, however, explains cycle-length variability.   Sometimes, they are one length, like 52-years, then another maybe it’s 93-years.

Which is where this morning’s topic – the LCBMC (long chain business models collapsing) – comes from.

Cursed with Complexity

Humans are not particularly well-suited for multi-variate thought. 

Oh, sure, you might catch the  occasional glimpse of fourth-dimensional thinking.  While reading  Tertium Organum (P.D. Ouspensky’s indispensable tomb).  But, for the most part, our visual cortex operates in one of two modes:  Peripheral (as in whole-field vision) and Foveal (focus on the center of the visual field).  Your mind is a projectionist, right?

Complexity – damn it to hell, anyway – doesn’t stop at the simply binary-state suitable for our little bicameral minds (*after Jayne).  Complexity has spawned the “Long Chain Business Model.”  Design here, build there, assemble over yonder, ship direct, online sales, tracking….ubiquity~ it’s everywhere.

We also live in a remarkable period where not  one, but two types of long-chains are under attack.

Chain One Type Collapse

With the Trump administration trying to “get harder on China over trade” (we need the money)  China – in reaction – is continuying to expland in order to preserve growth. 

Last week, for example,  ABC ran a piece “Trade, technology and security at risk in US-China feud.”

China is taking the U.S. tariff moves as an  affront so they are off selling arms like never before.  As in “Serbian purchase of missile defence system shows ties deepening with China.”

Throw in some of the alliances wrought from China’s Belt & Road Initiative (BRIC) and you see stories like “China sidelines Pakistan govt, manipulates law to acquire control over democratic, economic system: Report,” as well.

China is pressing several key economic buttons at the same time:

  • Their expansion continues to the West (relative to Beijing).
  • They will find alternatives to the U.S. market.
  • In the meantime, the U.S. dollar is beginning to wobble
  • And that means “downscaling in America” which reinforces the decline in America global superpower claims.

We exported our jobs and now – as the job numbers later this week will show – recovery options are bleak.

The long-chain models are in trouble. 

In the manufacturing business model:  Design in Cupertino, CA, export to China to build, import to US to sell, and market via American media.  Too many risk exposures to count.

Rinse and repeat for all offshored products like televisions, appliances, many autos, batteries.   All in trouble thanks to the Tweeter-in-Chief.  (Dear Melania, can you hide his keybopard, please? thanks)

The longer the business model chain, the more “left-field” influences (like trade wars and tweets) can gum up the works.

Chain Type Two Collapse

As if the Trade War wasn’t a bad-enough botch (lessons from the Embargo Act of 1807 notwithstanding) along comes the modern Plague.

And with it, we see the domestic long-chain business models shuddering.  Who will go to restaurants?  Blam!  One-third of those jobs will disappear.

You see all the grounded airplanes?  Bound to crater real estate in Seattle when people figure out Boeing will have to lay off people.  Toss in wildly left-wing government in Seattle, and we can see a rerun of the 1972 “Will the last person to leave Seattle turn off the lights?” 

Might take a year – maybe three – to arrive, but there’s a damn 52-year K-Wave cycle coming due in the PNW in 2024.  Seattle has once-again laid down on the freeway.  Watch them get run over – again.

Will that impact Seattle businesses?  Sure!  It should be clear to any damn fool (I’ll volunteer to say it) that with commies on the Seattle City Council, Amazon will likely need to move key (read: taxable) operations to tax-friendlier locales.

Duh.  Commies don’t understand golden geese, very well.

America’s Downscaling to Come

We haven’t played this part of history perfectly.  Still, Elaine and I have “downscaled on our terms” rather than being caught-up in digital mob rule (DMR).

People taunted me for years “How can anyone take an “economist” seriously who lives in a trailer in the woods?”

That’s slowly changing.  Urban-dwellers – living under emergent communistic enclaves like Seattle – may come to appreciate a sustainable lifestyle, plenty of open spaces, and the accompanying tax-advantages of rural life.

No stadium?  Then no stadium taxes.  See how this works?  Public underwriting of sports (via cheap facilities) is just one example of electoral stupidity.  But we don’t have all day.

Be warned, though:  Stupidity is contagious and persistent.

Idiotic Distractions

While the grown-ups ponder things like “permanently disappearing jobs” and “downscaling” before the rest of America catches on, distractions continue.

The MSM continues eating up division, pandering glitter, and promoting pseudo-drama reduced to  lowest-common-denominator standards.  Result?  Media focus designed for immediacy values of persons having an IQ of 100, or less.  There are choices, but dumb is a habit many people can’t break.  Takes work.  Thinking.

The “OMG Factor” is  not how a strategic human consumes information.  Which is why  Peoplenomics Wednesday will be “Back to the Threat Board.”

Climate is NOT on it.  Impact of “free money” compounding?  Now Ure talking.

In the meantime, here’s what the knuckle-draggers are being served:

On one voice of the left, we read Trump’s to blame for everything: “PACs hit Trump for ‘police state,’ racism and Covid in ads targeting Black voters.”  He’s also responsible for the potholes on city streets, and your fan belt breaking, too.  Like, we’re so sure.

Still, playing the race card pays ad dividends which is why stories like “What Has Changed Since George Floyd?” make the rounds.  Clicks and cash, people.  Clicks and cash.

Off center stage, the U.S. rush (Bill Gates, et all) to build a CV-19 vaccine is likely to be eclipsed by foreign projects. 

As inferred in “Russia gears up for mass vaccination against coronavirus despite international skepticism” and “Russia Aims to Produce ‘Millions’ of Virus Doses by 2021.”  Of, course, in order to work, it may require several shots a year and we decline, thanks.

Notable: UK virus cuts are expanding: HSBC to speed up 35,000 job cuts as profits slump.  We’ll see similar cuts (and speed-ups) coming to America, too.

In our “news if you live there” file:  It’s summer, guess what happens in the left-coast mountains?  (Like you need help on this one, right?):  “Firefighters Struggle To Contain Blaze In Southern California.”

G20 Hyperinflation

Just another Monday.

We don’t see collapse of the global markets today.  Already the spendthrift Fed has jacked futures up another 86  107 points on the Dow.  Europe is up as well.

As we bemoaned last week:  Investing today has been evolving into a “choice of stock swindles” more than a “sound investment decision based on dividends (rent paid on your money).” 

Your only hope of making money in most stocks (“equities”) is to find someone dumber than you.

By the look of the early slog, that will continue to be easy again today.

Write when you get rich,