Economic singularity

An economic bubble of any type, but especially a debt bubble, can be thought of as an incipient black hole. When the bubble collapses in upon itself, it creates its own black hole with an event horizon beyond which all traditional economic modeling breaks down. Any economic theory that does not attempt to transcend the event horizon associated with excessive debt will be incapable of offering a viable solution to an economic crisis. Even worse, it is likely that any proposed solution will make the crisis more severe.

The Minsky Moment

Debt (leverage) can be a very good thing when used properly. For instance, if debt is used to purchase an income-producing asset, whether a new machine tool for a factory or a bridge to increase commerce, then debt can be net-productive.

Hyman Minsky, one of the greatest economists of the last century, saw debt in three forms: hedge, speculative, and Ponzi. Roughly speaking, to Minsky, hedge financing occurred when the profits from purchased assets were used to pay back the loan, speculative finance occurred when profits from the asset simply maintained the debt service and the loan had to be rolled over, and Ponzi finance required the selling of the asset at an ever higher price in order to make a profit.

Minsky maintained that if hedge financing dominated, then the economy might well be an equilibrium-seeking, well-contained system. On the other hand, the greater the weight of speculative and Ponzi finance, the greater the likelihood that the economy would be what he called a deviation-amplifying system. Thus, Minsky's Financial Instability Hypothesis suggests that over periods of prolonged prosperity, capitalist economies tend to move from a financial structure dominated by (stable) hedge finance to a structure that increasingly emphasizes (unstable) speculative and Ponzi finance.

Minsky proposed theories linking financial market fragility, in the normal life cycle of an economy, with speculative investment bubbles endogenous to financial markets. He claimed that in prosperous times, when corporate cash flow rises beyond what is needed to pay off debt, a speculative euphoria develops; and soon thereafter debts exceed what borrowers can pay off from their incoming revenues, which in turn produces a financial crisis. As the climax of such a speculative borrowing bubble nears, banks and other lenders tighten credit availability, even to companies that can afford loans, and the economy then contracts.

"A fundamental characteristic of our economy," Minsky wrote in 1974, "is that the financial system swings between robustness and fragility and these swings are an integral part of the process that generates business cycles." (Wikipedia)

But a business-cycle recession is a fundamentally different thing than the end of a Debt Supercycle, such as much of Europe is tangling with, Japan will soon face, and the US can only avoid with concerted action in the first part of the next year.

A business-cycle recession can respond to monetary and fiscal policy in a more or less normal fashion; but if you are at the event horizon of a collapsing debt black hole, monetary and fiscal policy will no longer work the way they have in the past or in a manner that the models would predict.

There are two contradictory forces battling in a debt black hole: expanding debt and collapsing growth. Without treading again on ground covered in many past letters, let's take it as a given that if you either cut government spending or raise taxes you are going to reduce GDP over the short run (academic studies suggest the short run is 4-5 quarters). To argue that raising taxes or cutting spending has no immediate effect on the economy flies in the face of mathematical reality. Note that I'm not arguing for one approach or the other, just simply stating that there will be consequences, either way. The country might be better off with higher taxes and/or more spending, or the opposite. But those choices are going to have consequences in both the short and long term.

Second, there is a limit to how much money a government can borrow. That limit clearly varies from country to country, but to suggest there is no limit puts you clearly in the camp of the delusional.

The Event Horizon

In our analogy, the event horizon is relatively easy to pinpoint. It is what Rogoff and Reinhart call the "Bang!" moment, when a country loses the confidence of the bond market. For Russia it came at 12% of debt-to-GDP in 1998. Japan is at 230% of debt-to-GDP and rising, even as its population falls – the Bang! moment approaches. Obviously, Greece had its moment several years ago. Spain lost effective access to the bond market last year, minus European Central Bank intervention. Other countries will follow.

As an aside, it makes no difference how the debt was accumulated. The black holes of debt in Greece and in Argentina had completely different origins from those of Spain or Sweden or Canada (the latter two in the early '90s). The Spanish problem did not originate because of too much government spending; it developed because of a housing bubble of epic proportions. 17% of the working population was employed in the housing industry when it collapsed. Is it any wonder that unemployment is now 25%? If unemployment is 25%, that both raises the cost of government services and reduces revenues by proportionate amounts.

The policy problem is, how do you counteract the negative pull of a black hole of debt before it's too late? How do you muster the "escape velocity" to get back to a growing economy and a falling deficit – or, dare we say, even a surplus to pay down the old debt? How do you reconcile the competing forces of insufficient growth and too much debt?

The problem is not merely one of insufficient spending: the key problem is insufficient income. By definition, income has to come before spending. You can take money from one source and give it to another, but that is not organic growth. We typically think of organic growth as only having to do with individual companies, but I think the concept also applies to countries. The organic growth of a country can come from natural circumstances like energy resources or an equable climate or land conducive to agricultural production, or it can come from developing an educated populace. There are many sources of potential organic growth: energy, tourism, technology, manufacturing, agriculture, trade, banking, etc.

While deficit spending can help bridge a national economy through a recession, normal business growth must eventually take over if the country is to prosper. Keynesian theory prescribed deficit spending during times of business recessions and the accumulation of surpluses during good times, in order to be able to pay down debts that would inevitably accrue down the road. The problem is that the model developed by Keynesian theory begins to break down as we near the event horizon of a black hole of debt.

Facebook Deceivers preparing a new round of mobile revenues trick

While Wall Street has hammered Facebook's stock because of its "mobile problem" - it hasn't been making money on its fast-growing mobile user base - Sandberg calls mobile "a huge opportunity."

And Sandberg revealed that the new mobile app is "boosting engagement" more than the desktop service, saying that mobile users are 20% more likely to come back to Facebook on a given day.

Why it is bullshit?

SEC officer Jacobs wrote on March 22: “Please explain to us how you determined that your metrics are not overstated.”

Only eight days before the IPO, on May 9, did Facebook make clear in a filing that that daily mobile customers were increasing faster than advertising growth, potentially hurting revenue and profits. It was the strongest public signal that the IPO could fall short of its high expectations.

Read Facebook's May 9 amendment here.

The issue of mobile users is even more relevant today as Facebook, based in Menlo Park, California, announced on Oct. 4 it now counted one billion users worldwide, up from 845 million at the year’s start. More than half of them, or 600 million, access Facebook through a mobile device, a number that grew 41 percent this year.

In its initial filing, known as an S-1, the company said mobile usage of Facebook increased around the world and numbered 425 million “monthly active users” in December 2011. It acknowledged that it hadn’t proven it could “monetize” people using only mobile devices, where the absence of ads may “negatively affect our revenue and financial results.”

One concern, raised by several analysts, has to do with the rate at which Facebook will introduce sponsored stories to the newsfeed – both in the web and mobile channels. Right now the volume is low.

‘Excessive Expenses’

Jacobs responded on Feb. 28 by asking for a “more detailed” discussion of these key challenges. If the company’s attempts to monetize those mobile users fail, she wrote, then “ensure” that your disclosure addresses the potential consequences to revenue, “rather than just stating that they ‘may be negatively affected.’”

Vetter filed a revised prospectus on March 7, disclosing that Facebook’s monetization strategy could run up “excessive expenses.” Last year the agency pressed Groupon Inc. (GRPN) to abandon an accounting method that made the then-unprofitable daily coupon business look profitable by hiding certain marketing costs, a person familiar with the matter said at the time.

Her letters were addressed to Ebersman, who joined Facebook as chief financial officer in 2009 after holding the same title at drugmaker Genentech Inc. from 2005 until early 2009. A graduate of Brown University with a degree in economics and international relations, Ebersman replaced Gideon Yu, who left after Facebook said it wanted a successor with experience in running a public company.

Global Daisy expert vebinars and Direct Democracy

What is Global DAISY expert system?

DAISY is an Internet platform for organization of activities and interaction with well-known international experts and persons with high social level, which possess exclusive knowledge and information; the platform has a paying system for participation in a webinar and further commercialization of video content for wider auditorium.

The study conducted by international experts Edward Mushinsky and Artur Arakelyan (Daisy founder) found that the source of all the world's major crisis, is the fall in aggregate demand. 

Arising from this social dynamics led to the amplification of global currency, financial and political crisis. But at the heart of the changes are social information processes, the presence of a growing number of unemployed people. 

This lots of people in need of retraining, additional knowledge. They has not yet had its global opinion leaders. Therefore, Daisy founders has create a platform for experts with actual knowledge. Daisy project was based around the idea of ​​a new form of interaction between people around the world.

 For this, Artur Arakelyan has create a site signmanifesto.org 

The project "Sign the Manifesto" is a non-profit and does not represent any political party. It aims at the development of the principles of direct democracy and creating conditions for every citizen to realize his or her constitutional right to participate directly in the State governance. 

This Online resource provides the possibilities to create a new social mechanism of popular referenda and votes on key issues of society life. Due to the Internet, there are created ideal conditions for the integration, communication and cooperation between people. This will allow us to express our will in a more organized, integrated and secure way. This mechanism will allow public institutions to interact directly and clearly see what issues and problems are the most severe in the society. 

 The people’s signatures and their participation in the development of Manifesto can create the necessary "critical" mass and then the document would be impossible to ignore. Then it will be easy to find legitimate, legal status for compulsory execution at international and local level.

About Daisy project http://futurerating.blogspot.com/2012/08/artur-arakelean-and-expert-video.html

Artur Arakelyan and expert video communication on globaldaisy.com

Project:

Expert community and video-communication platform globaldaisy.com

Project owners:

Trans Personal Association and Artur Arakelean

Business-model:

revenue sharing .

All expert  must  be recommended according to their veracity.

The business-concept represents a huge possibilities for the cooperation and interactions between expert networks, educational organizations and others whose interests are focused on the a personal services like educational, psychological therapy etc.

Global Daisy is  new way for synergetic cooperation of independent expert, forming pension fund Daisy.

The Daisy Fund is the center and the basic core of social network, which sustain, develop and co-ordinate the whole network.

Facebook future is global currency, Artur Arakelyan opinion

According to an opinion of Global Daisy CEO Artur Arakelyan 
Facebook must accelerate expansion on payment systems market. In order to to restore the confidence of investors, Zuckerberg have to focus on mobile payments.

The latest Forrester Research report released Tuesday pointed out that 46% of all U.S. bank account holders will be using mobile banking to keep track of their funds.

Mobile payment future

Since so many people are talking about mobile payments, many are also expecting banks to grow their signature apps to include mobile payment options as well, but since there are so many of these individual apps, it will take some API adoption on the part of the banking app developers.

Cash is going to be a thing of the past if mobile and Web payments continue to work their way up the ladder in commerce. 

Research out this summer from Gartner says that this year will see more than $171.5 billion in mobile payment transactions. That's a whopping 60% increase on 2011′s $105.9 billion.  This means that 212.2 million people (up 32% from 160.5 million in 2011) are using some form of mobile payment service. 

And while the technology is out there to offer near-field-communication between smartphones and POS systems, it is Web transactions and SMS services that are making up the bulk of these digital transactions. 

Banks obviously want to be cut in on this rather than out.

Gartner sees digital mobile transactions reaching $617 billion by 2016 — but these factors in a slight slowing-down in growth to 42%.

SMS, Gartner research director Sandy Shen notes, is still the primary method used in making payments in developing markets, while in more developed markets, most transactions are made via mobile Internet portals. 

One API provider, WePay, just announced today that it is working to gain more adoption but not only lowering the fee it charges per transaction but also boosting its API so that retailers can accept payments more easily without building the infrastructure from the ground up. It seems like banks may be the next investors in mobile banking tech. In fact, I predict some banks will start snapping up promising mobile payment companies any month now. Just you watch

Read more at http://vator.tv/news/2012-08-14-mobile-banking-will-impact-46-of-bank-account-holders?utm_content=futureeurope%40gmail.com&utm_source=VerticalResponse&utm_medium=Email&utm_term=Mobile%20banking%20will%20impact%2046%25%20of%20bank%20account%20holders%20%20&utm_campaign=VatorNews%20-%20Facebook%20director%20Peter%20Thiel%20ready%20to%20sell%20shares%3F%20Is%20Groupon%27s%20mainstay%20product%20fizzling%20out%3F%20Resetting%20Education%3A%20Tapping%20into%20the%20classroomcontent#HxPpmbei2gPx6zdF.99

An foresight manifest by Peter Thiel colleague

WHAT HAPPENED TO THE FUTURE?

By Bruce Gibney

A.

INTRODUCTION

We invest in smart people solving difficult problems, often difficult scientific or engineering problems. Here’s why:

The Problem

We have two primary and related interests:

1. Finding ways to support technological development (technology is the fundamental driver of growth in the industrialized world).
2. Earning outstanding returns for our investors. ¹

From the 1960s through the 1990s, venture capital was an excellent way to pursue these twin interests. From 1999 through the present, the industry has posted negative mean and median returns, with only a handful of funds having done very well. What happened?

http://www.foundersfund.com/the-future

Thiel vs Schmidt

Thiel and Schmidt are on opposite sides of the political spectrum. Thiel is a libertarian; Schmidt, a Democrat. Both men are brilliant and articulate with very different visions of the future and the part tech plays in it. Thiel did most of the smacking.
Thiel:
Thiel says VCs since 1999 have failed to create really innovative tech. He quoted a page from his Founders Fund website: "We wanted flying cars. Instead we got 140 characters."
"You do a fine job as Google's administrator of propaganda," Thiel said to Schmidt. Moderator Adam Lashinsky, a Fortune writer, chided Thiel. "You said you were going to be nice."  Thiel responded, "I said you do a fine job." The audience laughed.
"Google is not a tech company," Thiel said, arguing that Google does search and people think that no one else will come up with better search. "So investing in Google [is] betting against innovation."
India, China and other developing nations have "zero need for innovation. All they need to do is copy things."
Thiel on Google's "world-class monopoly" in search: "It's quite legal to have a monopoly as long as you don't abuse it."
"We've outlawed everything in the world of stuff and looks like Wall Street-style finance is in the process of getting outlawed. The only thing left is world of computers. If you are a computer, that's good," said Thiel. He added, that's also good for Google, where "they like computers more than people."
Thiel admitted that Google is doing more than lots of other tech companies like Microsoft on innovation, like self-driving cars. But says Google still has too much cash. "Google has $30 billion to spend and no idea how to spend it on tech."
As for the Arab Spring, "You can say Facebook and Twitter" caused it, Thiel said. Schmidt interrupted: "I didn't say that!" Thiel continued, "But it was the price of food. People were about to starve. Eric goes around and says .. let them eat iPhones."


Read more: http://www.businessinsider.com/peter-thiel-eric-schmidt-fortune-brainstorm-2012-7#ixzz210Rtq4qi