Economics in the Future

[Yvonne]

I read a fascinating article on the KLM In flight magazine, which for me was confirmation of a theory I have had for some time.

The original article is copyright to the magazine, and to the best of my knowledge is not available digitally, but the authors website may have blogs with the same topic as his article.

http://rushkoff.com/category/economics/

The author is Douglas Rushkoff

Yvonne

[Dave A]

What we think of as “the economy” today isn’t real, it’s virtual.

Are your thoughts something along those lines, Yvonne? Or is it

We became more valuable for our borrowing power than our labor

I'm working on a piece suggesting the relationship between value and perception is far more significant than it's given credit for. Hopefully it'll be ready soon because the next newsletter is already overdue

[Yvonne]

Yes Dave!

The premise seems to be that the relationship between perception and true value has flipped! and whilst brand value and perception do carry a value, the trust in the stock market etc. will alter dramatically.
Borrowings will be a major negative perception in the value of shares.

Imperitive to have growth through profits, not borrowings, otherwise use of creative direct community win/win borrowings & investments.
In my understanding this will favor S.M.E.'s

So, no "paper" or virtual perception, just cold hard proven assets, and authenticated balance sheets.

Interesting, that the global virtual economy could have reached a tipping point, due to costs of banks etc. and the stock market middle men - could price themselves out of the market.
But why then are they the parties receiving the bail outs?
How interesting is it that even after all this, some financial institutions who received the financial bail out, in the U.S.A. have provided themselves with substantial bonus's even after they graciously were virtually forced to decide not to!, claiming they still require to retain the top financial advisers.
So the bailout has not been used to encourage lending, but to line their own pockets!
They failed, yet rewarded themselves!

The advice is that business will potentially fail because borrowing costs could not support the viable profit.

So, if this prediction has any truth in it, S.M.E.'S will potentially be far stronger if they survive the global recession.

Look forward to your article.

Yvonne

[Marq]

We have always created our own reality.

Whether it was in the early times of the diamond and gold rushes to the latest developments in the stock exchange and banking world, the fundamentals are always the same. The perceived value of an article is what we pay for it not usually the real value.

It also depends on where one is in the food chain. Earlier down the chain we look at the cost of an item and add a percentage mark-up. (Probably closer to being a true value). Higher up the chain we are asking the question as to what the market is most likely to buy the item for. A mark-up on the item always asks the question - what will somebody be prepared to pay for this?

I would guess a bartering system (something we may go to when the money system fails) would be a fairer value system. But it too will be determined on perceived values. My cow's milk vs your chickens eggs - which is perceived to be more valuable. Well it always depends on the answer to which came first - the chicken or the ....but I digress.

Its like the value of services based on time. What makes an attorneys time charge per hour more expensive than the accountants. The difference is that accountants do not know how to sell themselves and create the perception that they are a necessary force out there...either that or its because the godfather saw more value in trying to stay out of the chookey rather than keeping the books square and that is still the case today. Either way its back to perception....always been there.

So what makes it different today that the crash hurts more?

One of my takes on it, is that we have allowed the consultants, brokers and agents within the system to become too powerful by relying on their judgements and so called expert opinion without following up the facts and figures ourselves. The volume of information flow has become so great that we are unable to catch up and analyse the data coming in. Well that's another perception often created by these peripheral 'services'. You cannot and are unable to make a decision, they tell you. The majority of them I feel are parasites hanging onto the real business worlds coattails making uninformed decisions and creating panic when they need a sale and then smoothing things over with spin doctoring.

Your property has probably been valued by an 'expert'....a bored housewife who looked at the price of the property sold last week, next door, took off a few bucks cause she 'felt' your place looked tired and then added a few bucks because you have an additional longdrop in the garden. She needs a sale, the agency needs a sale, the bank needs to lend some money - lets make it all work out. At the first sign of trouble down here in Durban last year - the resident 'expert' with years of experience and knows all - said property prices will go down by 40% drop your prices now.. http://www.realestateweb.co.za/reale...1128&sn=Detail
Was it based on fact? No just that they needed some sales to get them through the next period. Did they create a panic? Probably. I enjoyed the comments on this article though - it shows that the general perception was probably not the same as his. I am not sure where we are in the property values game right now but I am still buoyant. Anyway back to perception...if we allow these 'experts' into our lives then we will reap the consequences - bad judgement and failed deals driven on by desperate groups trying to maintain control over something that they did not build or control in the first place.

Last time the agents came across this downhill scenario - they raised their fees by a percentage point. Same as the banks and we the general sheeple who did all the hard work and accumulated the assets just allowed this to happen. Not only did they get an increase by helping the market to adjust upwards, they upped their fees as well and got a double whammy. Same as the banks, same as the brokers - the percentage game on increased capital values and greed from this area along with their spin doctoring created our downfall. Now they moan and groan a bit about lost revenues but the real losers are the guys holding a reduced value asset.

Oh wait ...we will sell that as well if you want....hey we will even drop a percent off our usual fee if you want.........

Dave, I look forward to your views on this subject.