tag:blogger.com,1999:blog-52005272367539638672024-03-14T04:36:49.897+01:00Brave New Waverobert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.comBlogger17125tag:blogger.com,1999:blog-5200527236753963867.post-65426154946813623142014-10-06T11:36:00.002+02:002014-10-06T11:36:14.949+02:00Robots and Job losses<div class="MsoNormal">
Currently there is a lot of discussion in the Dutch press
about the threats that Robots cause for employment. Minister Asscher (social democrat PvdA) started the
discussion by bluntly stating that Robots steal jobs. He is worried about the
dropping prices for robotic solutions and the competition this gives to people. Point is that if we want a growing prosperity (and who doesn't want that?) we need to grow output. </div>
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Of course due to robots some jobs will cease to exist. In the past the job losses were mainly in dirty, manual, very detailed or repetitious jobs. In the coming years we will also see job losses that require a mental skill but can be captured in a logarithm, thus in artificial intelligence. Every person should consider whether his career ambition will clash with robotics, because if so, he/she better chose a different job. </div>
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Let's look at a simplified
calculation example: if the EU has a GDP
of 12,5 trillion Euro and 500 million people and we ignore population growth;
and if we suppose that half the population works, at 40 hours a week, 50 weeks
per year, this means we have an average productivity of 50.000 Euro per worker per
year or 25 Euro per worked hour. If we
want to grow our prosperity, we have to work more hours at 25 €/h (which we should not
want, and this is limited by the # hours in a day) or this figure of 25 euro/hour needs to increase. A desired economic growth of 2% means that next year the added value of the average output should be 25,50 €/h and the year thereafter 26,00 €/h. </div>
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We can raise the added value output per hour 1) by
creating jobs with higher added value in services (by entrepreneurship,
stimulated by more schooling and better legislation) or 2) by producing more
valuable products (so investing in innovation) or 3) by increasing
productivity, i.e. producing the same products with less labor time. Increasing
the productivity can be done 3a) by working harder (which has a limit) or 3b) by
working more efficient (lean, good IT systems, less waste etc. etc, this also
has a ceiling), or 3c) by using robots. Robots allow a worker to produce the same
goods with less hours. This has no ceiling, as far as I can think of.</div>
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<o:p></o:p></div>
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So robotics is needed because the other tools available for increasing
added value (innovation, working more hours, working harder) all have limitations in size and they need a lot of time. Creating high added value service jobs in
large enough quantities will take even more time and also in services, robotics will be needed to help raise output per hour. More importantly: those other
tools do not help raising the value added in sectors that already exist, which sectors will constitute most of the economy for the foreseable future. </div>
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So the conclusion is that without
robotics there will be much less economic growth.</div>
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<o:p></o:p></div>
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robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-15029796838215759662014-04-24T09:13:00.002+02:002014-04-24T09:13:54.836+02:00The Stocks & Flows of the Homo Economicus
<br />
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<span style="font-family: Calibri;">Economists and sociologists debate whether the homo
economicus exists and make rational decisions based on profit maximization and
utility considerations or not. Critics of the neoclassical economic theory
argue that a lot of people seem to behave differently, that markets are not
always efficient, that power can play a big role, information is not available
and that people have group-behavior. (e.g. debate in FD on 12 and 24 april
2014). Nico Lemmens argues that group-behavior and consensus seeking, love and
emotion can still be rational from an ecological perspective. Sure. <o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;">What (neo-)classical economists and their opponents overlook
is the fact that there are stocks and flows involved here. The debate described
above is a debate with a linear world view. A happens thus B happens thus C
happens and all in the same proportion. Even when emotions are to be included
it is still linear: more love is more marriage. <span style="mso-spacerun: yes;"> </span>This is not realistic and therefore it does
not fit the empirical observations. <o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;">In Stock and Flow terms (hence “Flostock”) not only a
quantity of matter is a stock, but also opinions and feelings are stocks. Any
movement is a flow and linear behavior like selling or travelling is a flow. <span style="mso-spacerun: yes;"> </span>But there is also other behavior and that is
much less straightforward and non-linear. That is behavior in relation to the
speed of response to a pulse. A person or a group of persons can adapt their
opinion on a subject fast or slow. This behavior is rational, and rather stable
over time, and for large groups it is therefore predictable, but it is
non-linear. <o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;">Example: suppose a group of the population has a strong preference
for supplier A (say Apple) and a second group has a strong preference for
supplier B (say Huawei). Both preferences are stocks, with advertisements, coffee-machine
conversations, user friendliness, price comparisons and other experiences as
inflow. After a couple of years, the preference has become quite strong, a big stock.
You could call this stock customer loyalty. This stock has a memory, of course,
in fact it is a memory, and it generates a rather constant flow of buying products
of supplier A respectively B. Now one of the two suppliers introduces a new
toy, or one of the suppliers is found to be secretly spying on its consumers.
This new experience and knowledge is an inflow into the preference stock and
slowly changes its value. The speed at which it changes is a behavioral
parameter and could be referred to as customer inertness. So customer inertness
is the speed at which customer loyalty adapts to an inflow. Obviously if the
stock is large and the inflow is small, the change in preference will be small.
So a strong brand can survive a small PR mistake. <span style="mso-spacerun: yes;"> </span>When the preference stock changes in value,
the group will change its buying flow. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;">By the way, there is a second non-linear determinant of the
buying flow and that is the amount of products already owned by the group. This
is also a stock and let’s call that the pool of toys. The pool of toys will
make the buying behavior flow non-linear e.g. when saturation is almost reached.
The speed at which the group wants to reach saturation is also a behavioral
parameter that we could call customer eagerness. Customer eagerness is the
speed at which customers want to follow a trend. High eagerness will create
hypes, panic run-aways, bank runs and overshoots. Medium eagerness creates
fashion waves. Low but positive eagerness creates stable growth.<o:p></o:p></span></div>
robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-34252264987684857452013-12-27T14:38:00.003+01:002013-12-27T14:38:45.743+01:00No Capital Investments?
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<span style="font-family: Calibri;">The Economist wrote an article “More bricks, fewer bubbles” early December that said that no one
is quite sure why monetary loosening (QE) has so little effect on investment.
The answer is simple: capital investment is partially for replacement and
partially for growth. As long as industrial production is lower than the 2008
peak in industrial capacity, there is no need for investment in growth. </span></div>
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<span style="font-family: Calibri;"></span> </div>
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<span style="font-family: Calibri;">The considerations behind this are described in the Flostock Laws of Demand, which can be found on <a href="http://www.flostock.nl/publicity/flostocklawsofdemand.html">http://www.flostock.nl/publicity/flostocklawsofdemand.html</a> </span></div>
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<span style="font-family: Calibri;"></span> </div>
robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-19116103209266322932013-12-27T14:33:00.004+01:002013-12-27T14:33:56.912+01:00Stocks have a memoryStrange idea that a collection of goodies can have a memory. When you see pebbles on a beach, they don't look as if they have a memory. Yet I don't mean this in some sort of strange philosophical way: I believe stocks really have a memory, in the sense that a future change is already embedded in the stock before the future arrives. This can be the direction of the change, or the intensity, or the force.<br />
Maybe this becomes more easy to understand if you include some thermo: When I did not know the answers to a thermodynamica question as a student, I just filled in: "because then the system moves tot the lowest energy level", and that is still the best answer to many questions about why things are happening. <br />
The same is true for stocks with a memory: the stocks know there is a lower energy level and they would like to go there. A bucket full of marbles on a hill top that has just been toppled has a memory: the markbles "remember" that they will start rolling downhill. A bank account remembers it can deplete, so a credit card is burning in your pocket. When you start a holiday game with a full bank account, you know it is going to go down. A country full of youngsters knows it can expect revolution. A city full of hooligans knows it will see riots and drunkeness.<br />
More practically, if you are the manager of a warehouse with a certain inventory and your boss wants you to increase the inventory towards a desired level, ordering new products and going to the desired inventory is like going to a lower energy level. In this sense the inventory had a memory of where it would want to be. If you have ordered a new gadget and it is being flown to your doorstep by a drone, the pipeline of goods in transit (also a stock) has a memory of where it is going. <br />
An ocean full of warm water has a memory in the sense that the huricanes are already in the process of becoming. A class full of children has a memory of creating chaos. A chimney that has not been cleaned for a long time will ignite when the conditions are right. A car moving at a certain fixed speed has a memory in the sense that it will continue to do so untill it is stopped. So inertia is a form of memory. Kinetic energy is a memory property of a stock (e.g. the car). Potential energy is a memory. And a banking account has potential energy. A warehouse has the potential to order replenishments. An empty stomage has the potential to be filled by eating.<br />
<br />
Stocks have much more memory than flows. Flows stop flowing immediately when stopped. When eatign stops the flow stops. But the stomage can still be half-empty, so it remembers that more eating should be done. <br />
<br />
So stocks have a memory. <br />
<br />robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-20808004670485176502013-12-12T15:36:00.001+01:002013-12-12T15:38:06.647+01:00Bubbles are not bubbles<span style="font-family: Calibri;">Economic bubbles are always compared with soap bubbles,
but that introduces a misunderstanding, because economic bubbles are always
flows, never stocks, while soap bubbles are objects, so more like stocks. Soap bubbles "accumulate".</span><br />
<span style="font-family: Calibri;"></span><br />
<span style="font-family: Calibri;">People probably use the analogy because they have no better way of picturing a flow. In general it is difficult to </span><span style="font-family: Calibri;">draw a flow, any flow. When
you want to draw a river, normally you draw the banks, and the meandering. The trees next to it. When you want to draw
the wind, you show clouds or leaves, floating in the wind. Or you show a giant cloud with a face that is blowing stripes of wind from his mouth. <span style="mso-spacerun: yes;"> In the same way it is difficult to picture a stream of goods or a flow of money. Movement is difficult to catch and difficult to picture. An inflated flow is also difficult to picture. The picture is static, the flow is dynamic. The tulip mania and the south sea bubbles were not called bubbles in their time, because people did not look at them in a graph!</span></span><br />
<span style="font-family: Calibri;"><span style="mso-spacerun: yes;"></span></span><br />
<span style="font-family: Calibri;"><span style="mso-spacerun: yes;">Is a price bubble a stock or a flow? Price has a flow character, I believe, much more than a stock character. It depends on transactions, on demand & supply, typical flows. What about a sentiment bubble like confidence (e.g. in bitcoins)? Yeah, that is a stock and indeed a bubble, filled with thin air. When punctured it will deflate fast. But this is just the confidence behind the real bubble, which is price and transactions, so the real bubble that we talk about is a flow. Confidence itself is normally not depicted as a bubble. </span></span><br />
<span style="font-family: Calibri;"><span style="mso-spacerun: yes;"></span></span><br />
<span style="font-family: Calibri;"><span style="mso-spacerun: yes;">Another point where this analogy goes wrong is when an economic bubble bursts. In reality it means that a flow reduces fast in size. The feeling we get from the soap bubble analogy is that some protective shield (like the membrane of the soap bubble) is punctured with as result that some pressure escapes and pieces of membrane spat on the floor. In economic bubbles there is no membrane, and there is no escaping pressure. </span></span><br />
<span style="font-family: Calibri;"><span style="mso-spacerun: yes;"></span></span><br />
<span style="font-family: Calibri;"><span style="mso-spacerun: yes;">"So what?", you might say.</span></span><br />
<span style="font-family: Calibri;"><span style="mso-spacerun: yes;"></span></span><br />
<span style="font-family: Calibri;"><span style="mso-spacerun: yes;">This is relevant because the analogy sets us on the wrong foot: when we study an economic bubble, we have to see it as a flow, not as a stock. A stock responds to a pulse completely different from a flow. Most stocks are integrals of flows, that means they accumulate a flow or they bleed into a flow. Stocks are therefore much more inert and more stable over time than flows. This gives a false sense of stability to economic bubbles. </span></span><br />
<span style="font-family: Calibri;"><span style="mso-spacerun: yes;">An economic flow is always going from one stock to another stock, based on decisions by people (or based on algorithms in computers programmed by people). If people decide to do nothing, the flows stop immediately, but the stocks remain stable. When we would see economic flows as flows, </span></span><span style="font-family: Calibri;"><span style="mso-spacerun: yes;">people would easier understand that an economic bubble is always finite because the stock where the flow comes from is finite.</span></span><br />
<span style="font-family: Calibri;"><span style="mso-spacerun: yes;"><br />
So bubble is the wrong word.<br />
<br />
Is there an alternative? How should we call an inflated, a
swollen stream?<span style="mso-spacerun: yes;"> </span>A comparison with an
overflowing river that rises above its dikes is maybe appropriate. Maybe a dike in which a small breach is broadened by the overflowing river and a small stream grows into a giant flow.<br />
<br />
I don't
know. Any of the readers maybe? <br />
<span style="font-family: Times New Roman;">
.</span></span> </span><br />
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<br />robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-61862600240609767722013-12-05T11:42:00.000+01:002013-12-05T11:42:26.820+01:00How do you like your Gini?<u>The End of History</u><br />
Since the fall of communism, now more than 20 years ago, history as a struggle has ended according to Francis Fukuyama in his ground breaking book <a href="http://www.amazon.com/s/ref=nb_sb_ss_i_0_15?url=search-alias%3Dstripbooks&field-keywords=the%20end%20of%20history%20and%20the%20last%20man&sprefix=the+end+of+hist%2Cstripbooks%2C248&rh=i%3Astripbooks%2Ck%3Athe%20end%20of%20history%20and%20the%20last%20man" target="_blank">The End of History and the Last Man</a>. There are no serious people any more who claim that communism is a realistic alternative for free market, democratic capitalism. Since then a lot of commentators said that state capitalism, as practiced e.g. in Singapore and China, could be an alternative for democratic capitalism. This piece of History has not ended yet, so it is too early to tell which system will survive. But I don't believe in state capitalism. <br />
<br />
<u>Quatro Politica</u><br />
There are too many wrong investments in state capitalism and not enough checks and balances. The Trias Politica should be expanded to a "Quatro Politica", and the fourth power, Business, should also be handled as a separate force. The other three forces are needed as a counter balance to the overwhelming forces of global Businesses. Think e,.g, of the military Industrial complex for which <a href="http://www.youtube.com/watch?v=8y06NSBBRtY&noredirect=1" target="_blank">Eisenhower </a>warned us, the lobying forces in "<a href="http://www.amazon.com/Supercapitalism-Transformation-Business-Democracy-Everyday/dp/0307277992" target="_blank">Supercapitalism</a>" by Robert Reich, or -closer to home- the obscure funding behind some political parties in Holland. <br />
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<u>All parties in the middle</u><br />
Since the "end of history" in Europe, the fundamental differences between the old political parties are eroding. The importance of religion as a factor in politics had already been going down much longer. Now, communist parties are gone and traditional socialist parties have moved to the middel ground of the political spectrum. As a result the old and comfortable left-right or communist - capitalist split is gone. All political parties have difficulty positioning themselves to keep their voters loyal. <br />
<br />
<u>How do you like your Gini?</u> <br />
The <a href="http://en.wikipedia.org/wiki/Gini_coefficient" target="_blank">Gini curve</a> (Italy,1912) can be used for measuring the spread of income in a population. The population is sorted on income, than accumulated into a graph, with vertical cumulative income and horizontal cumulative people. This is the Gini curve and it always runs from the left bottom corner to the right top corner. Depending on the spread of income the Gini curve is more round or more flat. When everyone has the same income, the theoretical communist ideal, the curve is a straight line. Needless to say that it was not achieved in communism: this was one of the reasons the system failed. When 90% of income is earned by 10% of the population, the curve goes almost vertical in the beginning, then makes a turn in the top left corner and goes almost horizontal to the top right corner. This was the shape in the dark ages, when absolute rulers were exploiting there population.<br />
Economic discussion in parliaments everywhere is now dealing with the shape of this Gini curve. Representatives of lower income basically want a flatter curve, while free market adepts want a round Gini. Both try to argue that their view is best for society and for the economic growth as a whole. Venezuela and Cuba are trying hard to prove that a flat curve is wrong. A too round Gini has strong undesirable effects, such as extreme poverty and state debt. Ironically, recent American capitalism as well as the Russian oligarchy confirm this. The Gini-discussion is mixed with a debate about justice and equality, because there is probably not just one answer, but a reasonably large "sweet spot" for the ideal shape. Within that sweet spot the ethical discussion can be held. <br />
<br />
<u>What to vote?</u><br />
What now? The result is that voters no longer know what to vote, because the Gini discussion is boring and technical and has a lot of unknowns and make-believes. Voters do not vote for the nuance of the sweet spot: they start to float and do not give the final call on what to do. The alternative is let history sort it out, but it takes years before the effects of a change in Gini become visible. History as a judge is ruthless, but slow. History convicted fascisme after 20 years, and needed more than 100 years to disprove communism. Now History is already taking 30 years to evaluate state capitalism. <br />
<br />
<u>Unwanted by effects</u><br />
The result is that new parties come up around mono themes like age, animal rights, environment, euro- or xenofobia. Voters (who do not understand the Gini discussion and who no longer vote what the priest says) are shopping around for a nice face or a narrow interest or an underbelly feeling. Parliaments are no longer peopled by the best and the brightest, tried and tested in a long upward career of service to the country, but by opportunistic followers of populists who temporarily catch the limelight. This is not a good development, because it is making our democracy volatile. Maybe it is an unavoidable stage of development towards a true End of History. <br />
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<br />robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-77631847547694678702013-08-20T16:35:00.002+02:002013-08-20T16:41:39.929+02:00Capital goods are the first derivative of consumer goodsWhen analyzing product demand, a distinction should be made between
consumption goods, like toys and clothes and capital goods, like machines and
trucks. Capital goods can be defined as goods that are used to manufacture
consumption goods. Demand for capital goods can again be split in demand for
growth and demand for replacement. Demand for replacement of Capital Goods is not the issue here: we focus on Demand for Growth. Demand for growth means the production capacity needs
expansion. If the production capacity grows at a constant rate, growth-demand
for capital goods is stable. If production capacity is constant, growth-demand
of capital goods is zero. If there is overcapacity, growth-demand of capital
goods is negative, and because you cannot return machinery, it is zero. This relation is equivalent to the
mathematical expression that growth-demand for capital goods is “the first
derivative” of demand for consumption goods. This 4th Law of Flostock may seem trivial or
overly mathematical, but it has important implications. <br />
<br />
Growth demand for capital goods goes through a peak when the demand for
consumer goods merely goes through its inflection point (i.e. the point where the curve goes from stronger and stronger growth to weaker and weaker growth). Since the inflection point is much earlier in
the economic cycle than the peak of consumer goods, capital goods peak much earlier. So all companies that produce capital goods go through an earlier cycle than all companies that produce consumer goods. <br />
<br />
Labor in this comparison is also a Capital Good and there is supply of labor (hiring) for Growth and supply of labor (hiring) for Replacement. When consumer goods go through their deflection point, supply of labor for growth goes through its peak and starts going down. Supply of labor for replacement continues to take place untill the consumer goods go through their peak, then becomes negative and people are fired. Temporary labor suppliers like Randstad
always remind us that they are early-cyclic, therefore they are a leading indicator. This is true, but they are only a good indicator because it is easier to see a peak than to see an inflection point. For the rest temp labor is just the first derivative of the main cycle. <br />
<br />
China is another implication of the 4th law : China has grown strongly over
the last 25 years, but mainly in capital goods for the own industry and export
of consumer goods. When the export <em>growth</em> slows down (so it is still
growing, only slower), Chinese production of capital goods will decline. If China does not manage to get its population to increase their consumption fast, and it is unlikely that they will, the Chinese industry will decline. This has already started. If the export of consumer goods will reach its peak, so when export markets become saturated, growth demand for capital products will be zero (or negative). In addition, the Chinese industry is young, so there is not yet much demand for replacement. This means that both types of capital goods production will stop. <br />
<br />
On the other hand (because I don't want to stop with the word 'stop'), if demand for consumer products starts growing again, as it may be doing in the USA, Japan and Europe, growth demand for capital goods will once again see a strong growth indeed. robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-76455472124100772322013-06-05T11:57:00.000+02:002013-06-05T11:57:47.271+02:00The Hoarding Cycle
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;">In an economy that grows year-on-year, for centuries, the
total amount of possessions will grow too. There is however a physical limit to
what our houses can contain, <span style="mso-spacerun: yes;"> </span>so either
we stop buying and start saving, or we throw away faster, or we miniaturize our
possessions. The miniaturization then is especially the investment <span style="mso-spacerun: yes;"> </span>per cubic meter, so we can hoard more
cumulative income in the limited space of a house. An iPod takes up less space
than a CD-collection, which is again smaller than the same amount of music in
vinyl. An Xbox is smaller than a baseball, an e-reader is smaller than a book
case, a flat screen takes up less space than a classical TV-set and 100 euros
worth of jewelry in gold is smaller than 100 euros worth in silver. But at some
point the house is full and we have to throw things away if we want to buy new
stuff. Despite the miniaturization and throwing away, the result over the
centuries is that the amount of possessions increases. Let’s call this the
Hoarding Trend. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;">There is a big destabilizing effect of this amassment of goods:
people have so many possessions that buying many types of new goods is for a
large part discretionary. When a crisis hits, people may<span style="mso-spacerun: yes;"> </span>decide to postpone buying new things. <span style="mso-spacerun: yes;"> </span>The notorious Men’s Underwear Index describes
this phenomenon, but it also applies to many other material goods. Some
collections of material goods (“fleets” in Flostock terminology) will age fast and<span style="mso-spacerun: yes;"> </span>at some time will need replenishment, whether
the crisis is over or not, either because of wear or because of fashion (which
could also be seen as a kind of wear).<span style="mso-spacerun: yes;">
</span>This applies to cars, underwear, clothing in general and maybe it
applies to music as well. But it does not apply so much to furniture, home
decorations, books, kitchen utensils, sporting equipment or gardening. For
those categories of fleets of material goods fashion is not changing so fast
and a little aging is not directly visible (at least not for a middle-aged guy
like me </span><span style="font-family: Wingdings; mso-ascii-font-family: Calibri; mso-ascii-theme-font: minor-latin; mso-char-type: symbol; mso-hansi-font-family: Calibri; mso-hansi-theme-font: minor-latin; mso-symbol-font-family: Wingdings;"><span style="mso-char-type: symbol; mso-symbol-font-family: Wingdings;">J</span></span><span style="font-family: Calibri;">).
So in these categories people can postpone the rejuvenation of their hoard,
their fleet of possessions over a longer period. <o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;">So what is the point? Point is these material possessions
are a stock that in a crisis may undergo aging without changing in size, but
with a big change in flow. Example: <span style="mso-spacerun: yes;"> </span>Suppose the maximum life of a couch was 10
years before the crisis, so the fleet of couches had an average age of 5 years.
In the crisis people decide to wait longer with buying a new sofa and thus to
let it age to e.g. an average of 6 years. In that case the furniture retailers
see a 17% drop in sales. <span style="mso-spacerun: yes;"> </span>Underwear sales
dropped in the crisis, but you cannot postpone buying new shorts longer than a
couple of years, so sales must have recovered by now. So a crisis drives delays
in buying for stocks of possessions, which delays worsen the crisis. For goods
with a potential long life the effects are biggest. <o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;">
<span style="font-family: Calibri;">After the crisis, when consumer confidence returns, people
want to go back to the average age of their hoard and buy a bit more for a
while, creating an upturn in the economy and creating a new, young fleet of
stuff, ready to be aged again in the next crisis. This we can call the Hoarding
Cycle. The Hoarding Cycle waves around the Hoarding Trend. Question is whether
the Hoarding Cycle is driven by the long term economic cycle or the other way
around. And since the discretionary part of the possessions is getting bigger
over time as the Hoarding Trend curve goes up, the amplitude of the Hoarding
Cycle might be growing as well, predicting bigger crises in the future. <o:p></o:p></span></div>
robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-40491671564417730172013-05-27T17:44:00.001+02:002013-05-27T17:46:46.670+02:00Lehman Wave explains price swings in the Commodity Super CycleThe commodity super cycle, with a wavelength of 30 years, has passed its peak, according to several researchers including José Antonio Ocampo of Columbia University and the Worldbank. The peak was in 2007 and prices are now considerably lower. See e.g. FD of 25 May 2013. Expectation is that prices will continue to go down another 15 years. Interesting. <br />
<br />
What puzzles most researchers is that the strong dip after the bankruptcy of Lehman Brothers in September 2008 was followed by a new pricing peak which lay for various commodities between 2010 and 2011. Most of the researchers do not have an explanation for this effect. Michael Camachof of J.P. Morgan believes the cycle is not going down and the intermediate peak is the beginning of another decade of price rises. <br />
<br />
Maybe the following can help in this discussion: There has been a Lehman Wave that can explain the recent swings in the prices of the Commodity Super Cycle, both the extreme dip down and the rather strong recovery.<br />
<br />
The Lehman Wave was first described by us in <a href="http://www.flostock.nl/fileadmin/user_upload/PDF_upload/2009_December_BETA_Working_Papers_University_of_Technology_Eindhoven.pdf" target="_blank">a Beta publication in 2009</a> and can be defined as a global destocking wave that went through the industrial supply chains after credit became scarce due to the panic after the bankruptcy of Lehman Brother (hence the name). In the Lehman Wave, companies wanted to reduce their inventory to free up cash: the so-called <a href="http://en.wikipedia.org/wiki/Active_destocking" target="_blank">Active destocking</a>. Based on anecdotical evidence and common sense I have estimated the desired destocking at 10%. For suppliers at the beginning of the supply chain (the "commodity suppliers") the cumulative effect of all this destocking was an unprecedented dip in volume of 50% or more, with on most cases the deepest point around March 2009. When it became clear a bit later that the end market had continued to consume goods at an almost normal level, the supply chain discovered that they had destocked too far and started re-stocking, creating an upward peak in 2009/2010/2011, which sometimes led to severe shortages and stock-outs. <br />
<br />
From volume to price: obviously the supply/demand balance reversed between 2007 and early 2009 and reversed again mid 2010. Therefore I dare speculate that it is this upward volume peak of the Lehman Wave that created the intermediate price peak and I therefore propose to call it the Lehman Price Wave. Without the Lehman Price Wave the Commodity Super Cycle over the last 5 years cannot be understood.<br />
<br />robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-87104039199933292732013-04-23T15:03:00.001+02:002013-04-23T15:03:02.925+02:00Oysters are easier than rabbitsRecently scientists <a href="http://science.nbcnews.com/_news/2013/04/10/17687754-earliest-fish-stews-were-cooked-in-japan-during-last-ice-age-experts-say?lite." target="_blank">discovered that cooking pots</a> dated some 15.000 year BCE, i.e. from the last Ice Age, were used to cook fish. <br />Humans originated from Africa and spread all over the world, in various waves of interbreeding about which the scientists can endless debate. And my family spent many summers with the kids on the French Normandy coast. The connection is that it is easier to catch an oyster than it is to catch a rabbit. <br />While walking over the beaches and rocky stretches of the European coast line, it is possible to gather a lot of food with little effort, even for toddlers. Oysters, mussels, cockles, crab, fish, snails: they all live there in abundance and only need to be picked up. This is such an easy way of finding high value protein, that I dare say that our ancestors must have spread following the coastlines. People at that time did not have wasabi, lemons or soya sauce, but good fresh shell fish is tasty also without condiments. The clay pot confirms the hypothesis: in the period when the world was being populated, people foraged the beaches and ate what they found.<br />I estimate, without any scientific proof, but based on many walks along the coats, that a group of hunter-gatherers consisting of a single family can find enough food along the European coast within a days’ walk. That means they cannot stay long at a single location, but have to keep moving. If I would have to do this I would walk north in spring and south in the fall, with the birds. European coasts have plenty of opportunity to do this. This must have stimulated a rapid spreading of humans over the fringes of the continent. Only later the centers were populated, when hunting had been improved and people were able to catch rabbits, deer and wild pigs . <br />Interestingly, if we ignore some islands for a second, there is only one long European coast line: this must have been like a 2-way narrow Neolithic highway, on which bands of foragers constantly bumped into each other, trading, exchanging, fighting and intermarrying. The chance of meeting someone if you are both following the coast is 1000 times bigger than when you spread over the center of the continent. They all must have known each other... This could also be the reason that Neanderthalers were absorbed by incoming waves of new humans. <br />In stock and flow terms: the stock of humanity in Africa flowed into the Eurasian continent. The passage way were the coastal areas. The feeding capacity of the beaches determined their traveling speed. Bigger groups had to travel faster. Only when the beach highways became too crowded, and stocks of cockles, mussels and crab depleted, people had to move inland to forage. <br />According to the European committee, there is <a href="http://ec.europa.eu/research/infocentre/article_en.cfm?id=/research/research-eu/sea/article_mer27_en.html&item=Environment&artid=7348" target="_blank">89.000 km coastline</a> in Europe. <br />Assuming a family eats 100 to 150 meter of coast line per day, and it takes 1 year to replenish the stock of crustaceans, one family needs about 5 km coastline, permanent. This means that Pleistocene Europe could feed about 20.000 families, say 1 million people, on its beaches. robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com3tag:blogger.com,1999:blog-5200527236753963867.post-88703734595154904342013-04-22T11:23:00.000+02:002013-04-22T11:23:15.943+02:00Target to create oscillation
<br />
<div class="MsoPlainText" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Courier New";"><span style="font-family: Arial, Helvetica, sans-serif;">In many industrial companies, December is a not a good month. The sales volume for these companies has an oscillating pattern over the whole
year, with month-to-month differences that can be as big as 20%. Demand in
December is the lowest of the year because of the Christmas holidays, and
because in December demand is reduced by </span><a href="http://en.wikipedia.org/wiki/Active_destocking" target="_blank"><span style="font-family: Arial, Helvetica, sans-serif;">active de-stocking</span></a><span style="font-family: Arial, Helvetica, sans-serif;">.
</span></span></div>
<div class="MsoPlainText" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Courier New";"><span style="font-family: Arial, Helvetica, sans-serif;"></span></span> </div>
<div class="MsoPlainText" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Courier New";"><span style="font-family: Arial, Helvetica, sans-serif;">Managers have targets for running their business, and for
many managers that includes a target<span style="mso-spacerun: yes;">
</span>–strange enough if you look at it— to have a low level of working capital at the end of
the year. The easiest way to achieve that target is to reduce the stocks.<span style="mso-spacerun: yes;"> </span>The target is not to have a constant low
working capital: it only needs to be low at the end of the year; This is obviously for reporting
purposes: it looks good and tidy in the annual report.<o:p></o:p></span></span></div>
<span style="font-family: Arial, Helvetica, sans-serif;">
</span><br />
<div class="MsoPlainText" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Courier New";"><span style="font-family: Arial, Helvetica, sans-serif;">A calculation example of the effect: If your
customer on average has 60 days of stock, and the customer decides to reduce
his working capital with ten percent, in December he buys less product for the
equivalent of 6 days' sales, creating an additional 20% (6 days divided by 30 days)
dip in your already low December volume.<span style="mso-spacerun: yes;">
</span><o:p></o:p></span></span></div>
<span style="font-family: Arial, Helvetica, sans-serif;">
</span><br />
<div class="MsoPlainText" style="margin: 0cm 0cm 0pt;">
<span style="font-family: "Courier New";"><span style="font-family: Arial, Helvetica, sans-serif;">As a result, in
January stocks will be too low for normal operations and fast replenishments
need to be ordered. This creates a hurried peak in January demand, often resulting again
in lower February orders.<span style="mso-spacerun: yes;"> </span>So the
working capital target is responsible for a considerable part of the
oscillating pattern: after a normal November, it creates a deep dip in
December, a peak in January and again a dip in February.<span style="mso-spacerun: yes;"> </span>The target thus contributes considerably to
inefficiencies in the chain.<span style="mso-spacerun: yes;"> </span>But you get
what you ask: lower inventory.<o:p></o:p></span></span></div>
robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-77613410730065834162012-12-22T19:20:00.001+01:002012-12-22T19:20:16.586+01:00<u><strong>Depardieu is creating a stronger Europe</strong></u><br />
<br />
Gerard Depardieu, one of our most famous and successful actors, has moved to Belgium to avoid sky-high taxes that were recently announced by the new socialist government of Francois Hollande. Depardieu was criticised from all sites as not patriotic and only interested in money. <br />
<br />
I believe Depardieu is a high profile example of a trend that will strengthen the European Union. Free movement of people in the EU allows people to avoid too high taxes, go to where jobs are, get together with like-minded people, to start a business and to do whatever they want to do. We see this with Polish plummers in Belgium, Dutch bankers in London, French engineers in Eindhoven, English pensioners in Spain. And French millionairs in Belgium.<br />
<br />
In the Middle Ages, the fractionated landscape and political situation in Europe made it impossible for the ruling aristocracy (the "rent seeking elite" as Fukuyama calls them) to suppress their serfs too strongly. If the serfs were dissatisfied they could leave and seek another lord for protection. Or they could go to one of the growing cities and be free. Tilly described this eloquently in 1990. <br />
<br />
This lack of oppression, this impossibility to dominate the people in absolute terms is what allowed freedom, democracy and prosperity to develop in Europe, for the first time in history. The free movement has been interrupted for maybe two centuries (the great period of the nation states about which Theirry Baudet is so enthusiastic, but which I would call mainly bloody) and is now coming back.<br />
<br />
The free movement of people in the European Union will force the governments of cities and states to compete for the preference of the 500+ million people that have a choice to go and live where they want. These governments will have to provide good living conditions, education, culture, logistics, security, employment, and all the other things people want. If they don't, or if they raise the taxes to a much higher level than other states, people will vote with their feet. <br />
<br />
This is a competitive situation that the USA does not have: conditions between cities or states are much more equal there. And Asia is different because they do not have the free movement, the level playing field, rule of law and all the other things Europe has. This internal competition for talent will give a whole new dynamism to Europe.<br />
<br />
<br />
<br />
robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-55955577792550164042012-12-17T23:32:00.001+01:002012-12-17T23:33:07.488+01:00<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><strong><u>Is School Killing an unavoidable by-product of freedom?</u></strong></span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><strong><u></u></strong></span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">New discussion in the USA about the recent massacre in Newton CT where 20 young school children and 8 adults were massacred by a lunatic with a sort of M-16 automatic assault rifle that he took from his mother (after killing her). </span><span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">A tweet today stated that the number of people killed in the USA by gunfire since 1970 is bigger than their losses in the last 4 major wars. </span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">There is so much info on the net that it seems as if newspapers stockpile murder and gun statistics for release after a massacre, like they prepare obituaries of famous people.</span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">The NRA is silent for the moment, but will speak up again when people, horrified by yet another bloodbath, propose laws to restrict the free availability of weapons. The NRA has political cloud based on weapon carrying voters and based on political contributions by the weapon producers. First amendment? Nonsense: it is a skewed prisoner's dilemma: every gun-toting idiot, sorry, every responsible father believes he can better survive armageddon and defend his family form anihilation by their gun-toting idiot neighbours, sorry, from the responsible, but gun carrying fathers next door, when he has the biggest gun. </span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Today the NYT published ideas from readers to solve the problem: most of them were aimed at arming the teachers or barricading the schools. The US is becoming more and more attractive as a country of destination. The land of the free, home of the brave. </span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">It is probably impossible to convince the "frontier" people of the US, the descendants of the old colonists, that one can live a good life without an assault or riot gun, even without hunting rifle (you búy your meat? argh). Popular opinion on gun laws has become even more liberal the last ten years. We have to assume that it will be impossible to contain the voters, so any politician proposing anti-gun legislation will loose his seat. </span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">From a more practical point it is probably completely unfeasible to collect 280 million guns that are out in the streets. Pandora's Box was opened and cannot be closed again, even if the majority would want that. Although: by collecting one million weapons each year, and no sales anymore, the problems can be solved in the year 2293.</span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">A third point is the money behind the political campaigns and behind the lobbying in Washington and elsewhere. As long as the NRA & weapon producers can buy their votes, no proposal for legislation will be accepted. It would require a very courageous president in his second and last term to take on such a challenge. </span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">So unfortunately the most likely outcome will be that guns will stay. Maybe Obama will succeed in banning the most atrocious assault rifles, together with missiles and hand granates. But this will not prevent the next lunatic from taking his freedom rights in his own hands and killing the next, albeit maybe smaller, group of innocent bystanders. </span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"></span><br />
<span lang="EN" style="font-family: "Calibri","sans-serif"; font-size: 11pt; line-height: 115%; mso-ansi-language: EN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span>robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-24204285200030685532012-12-17T22:54:00.000+01:002012-12-17T22:54:08.731+01:00<strong><u>The European Union was not built in one day...</u></strong><br />
<br />
Many people and especially columnists who need to fill their pages are anxious and even impatient about the progress that is being made in the European Union. They criticise politicians who haggle and deal and make compromises, but who also delay and wait and postpone. There is a crisis and the journals want a solution now!<br />
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Point is that Europe is an experiment. It is the first time in history that 500 million people voluntarily come together and give away part of their authority and authonomy to a central government. They all do that because they know that the alternative is continued war. Europe has a recorded history of more than 3000 years of continuous war fare and probably longer. This is what formed our continent. This continued fight without a clear winner has made us free (see e.g. Tilly). This is what created chivalry, serfdom, the renaissance, democracy, enlightment, the industrial revolution, capitalism and ultimately: an affluent society and freedom. The rest of the world looks upon Europe with envy (yes, also Kishore Mahbubani and also the USA).<br />
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But this experiment is going too fast. The politicians in Europe and certainly the journalists are more eager than the voters. Voters are not ready yet to give away all their local connections for the greater good of 500 million "others". People are conservative. They need to get used to the ideas and they need to see the benefits of change before they agree to further change. In the middle ages they voted with their feet and left feudal lords to join the free cities. In the same way the voters should get enough time to realize that the European vision is worth following. <br />
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So politicians should take their time. If we cannot agree this decennium, we will agree in the next. Or the next. <br />
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Giving away authonomy should be a careful and slow process. <br />
robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-7133403996726800102011-12-05T23:02:00.000+01:002011-12-05T23:07:55.729+01:00Drones got Monti in the Italian Government<div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span style="font-family: Calibri;">When Xerxes invaded Greece, he was beaten by the Greek phalanx, the disciplined line of hoplites, armed with a spear and a shield. The hoplites were highly motivated because they defended their home turf, their own small farms. They were land owning peasants, with enough money to buy their own spear and shield. <span style="mso-spacerun: yes;"> </span>The Athens had changed their laws to give everybody land, and created a (sort of) democracy in doing so. <o:p></o:p></span></div><br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span style="font-family: Calibri;">For long time, the most dominant factor on the battle field had been the chariot, which necessitated an aristocrat to ride it, because a chariot is expensive and needs servants to drive the horses and maintain it. As a result, according to William McNeill in the great book “The Rise of the West”, society in those years was aristocratic. In the Middle-Ages, the most formidable war machine in Europe was the heavily armored knight on horseback, again necessitating an aristocratic society. Due to the introduction of the fire weapons, and unavoidable, under Napoleon, mass conscription, war was made available for the masses again and power depended on the biggest and best organized armies. No coincidence that the ancient regime was wiped out and a constitution and democracy were introduced. The first world war was the pinnacle of mass armies running against each other, and saw the introduction of general voting, including women. <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div><br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span style="font-family: Calibri;">The last 100 years saw the introduction of the combustion engine and huge firepower, atomic bombs, satellites and computers. This has brought technology into the battlefield. Precision bombardments and laser guns. Internet warfare. At this moment an arms race in space is taking place. A late fad is the un-manned airplane, the drone, that spies on the enemy and occasionally can kill too. <o:p></o:p></span></div><br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span style="font-family: Calibri;">This suggests that the dominant power now is technology. As a result we will see technocrats pulling the strings. The far majority of the Dutch House of Parliament now has a university degree. Kyoto protocols based on academic climate models determine our industrial policy. Governments don't dare to make a decision without think tanks calculating it in models into 3 decimals. The<span style="mso-spacerun: yes;"> </span>appointment of the new Greek and Italian technocrat governments, to solve the financial problems, is just a step. </span></div><div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><br />
</div><div class="MsoNormal" style="margin: 0cm 0cm 10pt;"><span style="font-family: Calibri;">Nerds rule the world! <o:p></o:p></span></div>robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-3752550911510684362011-11-08T18:02:00.001+01:002011-11-09T11:33:25.533+01:00Chinese Housing Market is in troubleA Construction bubble has fuelled the economic growth in China over the last 15 years in the same way it has in Ireland and Spain since the Euro and as it did in Japan in the eighties. When the bubble bursts, it will hurt.<o:p></o:p><br />
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The prices of houses in China have already reached a peak and have now started to go down. In response buyers will delay purchasing in the expectation that prices will go down further. This will become a self-fulfilling prophecy if sellers cannot pay the cost anymore and have to reduce prices to find buyers. <o:p></o:p><br />
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Dropping prices will be a strong incentive for construction companies to stop building, also because there already is a large reservoir of unsold houses in China. Construction is 10% of the Chinese economy (acc Mr. Wei Yao of Societe Generale). In addition, following a dip in construction all supplying industries will loose turnover (for many a substantial part of their existence). Especially the upstream companies, at the beginning of the supply chains, will see a significant dip because the whole chain will de-stock. This supplying industry is a much bigger part of the economy than the 10% mentioned by SG. <br />
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Dropping prices will also give strain on the banking system if the value of the houses drops lower than the mortgages. A Chinese banking crisis will be felt throughout the world. And dropping housing prices will reduce Chinese end market consumption, affecting all other industries as well. <br />
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The Chinese government might want to keep their trillion in the pocket to solve these problems, in stead of investing it in Greece or Italy. <o:p></o:p><br />
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The only consolation is that housing prices in China have gone so high that many ordinary people cannot afford a house. So if the prices drop 50%, a whole new market may emerge.robert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0tag:blogger.com,1999:blog-5200527236753963867.post-57679222648780581942011-11-08T18:01:00.000+01:002011-11-09T11:50:18.351+01:00Wirtschaftswunder?Newspapers are writing about the German recovery as if it concerns a new Wirtschaftswunder. Nonsense. Germany has gone deeper in the crisis than most other West-European countries because they have such deep supply chains, with a lot of capital goods that are very cyclic because they fluctuate around demand in other busineses. Another reason for their strong dip is their large automotive sector, with deep supply chains.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgh4AJOd-39Fv3bkXT8aH_xwp4uN_O6MvKRH_QczB50rmxjDv527qFcutqtvY-Ua-w5pbyDTm5ye8VHPd2PMUaWQdsnJTuVGkgMeztZsFhSFx-UAGC1CguAvxVhYLybBppDoMuPJfv8i9GE/s1600/Germany+growth.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgh4AJOd-39Fv3bkXT8aH_xwp4uN_O6MvKRH_QczB50rmxjDv527qFcutqtvY-Ua-w5pbyDTm5ye8VHPd2PMUaWQdsnJTuVGkgMeztZsFhSFx-UAGC1CguAvxVhYLybBppDoMuPJfv8i9GE/s320/Germany+growth.png" t8="true" width="320" /></a></div>The long German chains have responded to the crisis by <a href="http://en.wikipedia.org/wiki/Active_destocking">active</a> and <a href="http://en.wikipedia.org/wiki/Re-Active_destocking">reactive de-stocking</a>, and when the de-stocking was over, by an elastic response in re-stocking, which I have called the Lehman Wave. The Lehman Wave is causing the steep recovery that is mistakenly seen as Wirtschafstwunder.<br />
The strong recovery of the automotive sales has helped here too, and caused another, this time upward bullwhip effect in the chains.<br />
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We can be optimistic about the German economy: when the whole Lehman Wave is behind, and the curve is down again, the Germany industry will be at a higher production level than the industry in many other countries due to the particular situation of construction in this country. In Germany, construction has been declining slowly but steadily since 1990 and therefore it completely avoided the bubble that took place in countries like Spain and Ireland and to a lesser extent in UK and the Netherlands. Construction is now more or less on the level it was in 2007 and stable. This will give a solid new base for the economy in the coming years.<br />
Robert Peelsrobert.peelshttp://www.blogger.com/profile/12899318833430677300noreply@blogger.com0