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Archive for August, 2010

And, at the same time a three-dimensional outlook in a world in which the vast majority is limited to two-dimensions creates unfair dominance, if the knowledge and comfort in the extra dimension is used for control in some sense.

Consider the role of missiles, drones, satellites, airborne pollution. They are not birds freely flying across borders, but something else.

Powers that be use these to suppress or to harm. Corporations for example,  have either ignored that there was pollution exhausted in three dimensions (into the air and ground), or regarded themselves as sufficiently privileged to have permission to toxify or militarize the terrain of the birds, bees, wind.

I constantly grapple with a psychological “malady” that I am unwilling to undertake violence, or really even any incidental imposition on others, and that greatly inhibits my actions in the world. I don’t eat meat for example, and haven’t for 40 years. I can’t tell if I am uniquely principled and kind, or uniquely guilt-ridden and don’t care enough about anything to assert myself. (I do drive. For a year 18 – 19, I refused to. I was THAT principled.)

But, then I consider, “what if everybody did it”. If everybody or most were willing to kill to survive. If everybody or most were willing to fight for their property. If everybody or most were willing to lie for their advantage. If everybody or most were willing to go to war for an ideology, a religion, a national home.

THAT is the sea that we now swim in. That is the norm. We are willing to fly if it gives us advantage, to shell, to shoot missiles (projectiles, explosives or WMD’s), to employ drones, to pry with satellites, to lie in advertising, to propagate.

All of us.

We have to act. But, we have given ourselves permission to act without sensitivity, without self-control, taking up all of the space, leaving none available.

I do act. I do assert and I even do impose. And, I always have some feeling of discomfort knowing that. The best that I can do, is to try to be sensitive in my actions that are planned/designed, and to be sensitive in the moment.

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Chaos theory is a new area of math study that among other things attempts to navigate the areas where systems of logic conflict with one another.

The examples that I’ve been exposed to are physical, like an element reaching the boundary of a phase change, say like ice melting into water. The phase change itself represents the qualitative change from a material that operates under the relationships, rules, algorhythms of solids into a material that operates under the relationships, rules, algorhythms of liquids.

With phase changes, it is an either/or proposition. Either this material is a solid OR a liquid. There are composite/dissolved states, muds, but those separate out into solid components and liquid.

Waves hitting a beach is the other common example sited, in which there is either the presence of energy that maintains a distinct order, rule, algorhythm (waves), then hitting the threshold of the beach and changing to foam (random).

In ecology and more importantly to me, in psychology, collective psychology and social institutions, I consider one telling threshold to be the relationship of two dimensional norms, logics and three dimensional.

I personally see this playing out in political war, particularly presently in Israel/Palestine (that I think and write about frequently).

The two dimensional view is that every critical relationship happens on the ground. People speaking face to face, definition of property, borders, jurisdictions.

Who owns this property? (Two dimensions). What will influence us? (A line of communication in two dimensions, even through the blogosphere).

Most of our human lives are determined in two dimensions. We walk on the earth. Most of our thinking, even with our vanity that we are space age, and periodically fly in airplanes, or even just climb hills, is in two dimensions. Its a good thing. Its what we are largely.

But, a bird comes along, and drops what birds drop, containing a seed of a plant from another region. Or, a bee flies in with pollen.

Our self-c0ntained thinking is then confused. Even the presence of an influence that could have possibly crossed a land border is confusing.

In Israel/Palestine, I’ve often stated that shifting the theme to “loving the land” rather than “possessing the land” could make chaotic change. It would then have to recognize that others live there too, that two dimensional borders are an ecological imposition, that there are links that extend beyond the flat.

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In the economy, two important consequences of our odd 2010-2011 tax situation are occurring.

One results from the content of our tax laws themselves, and their relationship to the very rapidly changing profile of the American economy. The second consequence results from the failure of leadership to do the work of clarifying and reforming the tax law.

The content of the tax law is that this is the last year that the Bush-republican era tax cuts apply. This is the last year of low tax rates across the board. This is the last year of 15% maximum tax rates on capital gains and dividends. This is the last year of literally zero estate tax. And, this is the last year of quite low marginal tax rates (slight increase anticipated). There are still conundrums about the state of the alternative minimum tax, which now has a temporarily higher exemption threshold, but without corrective legislation will untowardly affect many.

I personally regard the Clinton era tax structure to be basically fair. If the tax law did not change from that, adjusted for cost of living, it would be a wonderful basic structure. Adjustments would be necessary to the alternative minimum tax, and I would favor a higher than 20% maximum tax rate on long-term capital gains (maybe a reduced rate on new capital contributed, rather than on pre-existing securities), but restoration of the tax on dividends, estate tax, and reasonable progressive tax rates, make sense.

(I also personally favor replacement of all itemized deductions with comparable credits, in which every party’s charity, state tax payments, mortgage interest, is subsidized by the federal government at the same percentage rate.)

That is now the default law. The Bush era tax cuts will sunset at the end of this year.

The second problem is the oft-repeated republican accusation of instability of law. If the democrats simply asserted, “the Bush tax laws will sunset, period”, then everyone would know what the tax environment would be. The continual floating of new ideas, just as ideas, but not as determined agenda, makes everyone uncertain.

August of 2010 is a reasonable time to pass legislation applicable to 2011. It is an entirely unreasonable time to pass legislation applicable to 2010 (which is periodically introduced).

The New York Times today published an editorial entitled “A Real Debate on Taxes”, http://www.nytimes.com/2010/08/24/opinion/24tue1.html?hp.

They described the paralysis in Congress to address tax legislation at all. Major tax changes are significant and contreversial. They don’t happen in election years (current mid-term Congressional elections in full swing). They didn’t mention that tax law changes also don’t happen with a very weakened House Ways and Means chairman, Rangel.

I personally think that it is unlikely that the Congress will incorporate the concerns that I consider important, and will instead continue to tweak and pander to the very wealthy few investers.

The federal government, is now directly and indirectly very dependant on the aristocracy in the US, Europe, Mideast, China for investment capital and investment in federal bonds, overly dependant and moreso than at any time in a century.

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The conventional historical investment financial wisdom is upside down.

Over the last ten year period (long-term), stocks (S&P500) have returned a negative 2% return per year. Bonds have returned a 2% positive return. Money markets have returned 1.5% return.

The conventional wisdom is that the most risky investments (considering short-term changes in price) provide the most return on investment. Of stocks, bonds, and cash equivalents, stocks are by far the most risky and cash the least.

So, why over the long-term is cash under the matress generating a better return than stocks?

Aside from the important process of actually answering that question, noting that it is occurring has thrown the markets into confusion.

Bonds don’t generate value in the same sense that capital that is put to productive use for value-adding activities do (actually some corporate bonds do do that). They do fund important government activities, but they don’t result in profitable value addition. Bonds need to be paid back by tax revenues, which only come from individual and corporate income. (Some government services – libraries for example, generate experienced value. Most are an administrative cost of functioning as a society.)

In the context of normal business cycles, invested funds temporarily shift from at risk stock investments to bonds to weather the storm (and create the storm). But, in this business cycle, the funds are seeking to shift permanently to bonds. But, as that is impossible in the long run, the condition is troubling.

Yesterday, the New York Times reported that the phenomena of long-term investment shift from stocks to bonds is occurring (a little late, its been happening for two years). The new news is that the current bubble is in the bond market, and that it will deflate!! (Is a prediction news before it actually happens? YES.)

Large institutional investors are scared!!! Its July of 2006 all over again. I spent a weekend then with a hedge fund manager at a hotel near Portland, ME, who told me that the then reports of concerns over the mortgage market would come to roost, maybe in a year. It was KNOWN.

That’s what similar experts are saying now about the bond market, that at the first sign of inflation or default pressures (states are in tough shape), that the bond market will crash.

But, that leaves nowhere for money to go. It will go under the mattress, not put to use, not loaned to states.

There is one exception to the nowhere for money to go theme. That is communities that develop social capital useful for their communities, will be able to construct islands of relative security.

A few responsible things to do. If your mortgage is with an international bank or third party, refinance with a local bank that uses its capital to fund local value-adding business. Then, expedite paying off the mortgage, pay an extra $200/mo in principle.

The effect of that is to reduce your debt load if the economy really does go way south, and the funds that you pay off will be more available for the local bank to lend out locally.

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Personal or entity’s goals are individual, digital.

But, social goals are collective, and apply very differently at different social scales. What social scale, what objectives, do we work at?

Socially, is there sufficient attention to each social scale to ensure balanced healthy life, all things considered? Or, do we favor particular social scales and neglect others?

One of the primary roles in society is of leadership. We lead and we defer to leadership. The role of leadership organizationally is described most often as a set of facilitative and managerial skills, organizing teams for corporate, or administrative purpose.

Leadership is of a specific organization, specific set of relationships, objectives. In the modern world leadership or management structure is often an engineered solution, not all that different than medical engineering (my now engineered body) or space heating (my soon to be engineered internal physical environment).

Actions are undertaken by individual entities, each with limited responsibilities and scope. Individuals, businesses, organizations, governments, each with self-appointed or socially-delegated purpose and objectives.

In math, physics and now market economics, the intersection of individual goals and behaviors in large numbers, with the apparent construction of a greater whole, is described as the science of “chaos” or “chaos theory”. It is a distinct discipline with enormous consequences, as it is descriptive of reality. (“Game theory” is also a discipline attempting to reconcile individual behaviors to patterns in a larger scale.)

“Chaos theory” has been formed to try to understand practical difficult questions, like what happens when a material undergoes a phase change, say when ice (which doesn’t move and exhibits the laws of solids) becomes water (which does flow and exhibits the laws of liquids). Or, when flowing water in definable group algorhythms of rivers or in ocean waves, becomes chaotic foam when a wave breaks on a beach. Chaos theory addresses the transition periods, when the logic of solids changes to the logic of liquids.

There are analagous questions in social behavior, for example in the “practical” extraction of commodity gains through arbitrage (relationships of reciprocal equilibriums of perceived market value of commodities).

In that context, “chaos theory” is only a practical developed skillset to pursue the “greater good” of a selected entity, at some specific social scale, a social scale that is smaller than the whole, some “tribal” definition of social good, good for some “we”.

The scientists, the elaborators of the new math of “chaos”, don’t distinguish what scale of “we”, the study is to be applied at.

They don’t articulate that the science should only be offered to the use of individuals to pursue their own rational self-interest. They don’t articulate that the science should be offered primarily to the use of individual enterprises to pursue their corporate self-interest. (Corporate meaning the aggregation of individuals’ self-interests, and in the legal modern world, primarily the self-interests of owners.) They don’t articulate that the science should be offered primarily to responsible social servants creating regional or community social/economic health.

So, what social scale constitutes “the greater good”? What are we part of?

The current western economy has two reference scales, the individual and the global marketplace. By convention, families are accepted as a component of individual goal. But community is not, region is not.

Community and region are designated representation in governments, but that delegation is temporary and conditional. The representation shifts between the common political polls of obligation to pursue the collective good, vs obligation to pursue parochial good of specific constituents. Its not reliable to consider what might be the common good of a community or a region.

What is it that we are? What is it that we are a part of?

In contrast to the currently sanctioned social roles/scales of individual to global marketplace, I contend that the focus of governance and economy should be more decentral. Regional economy is the optimal economic scale, facilitating economies of scale but also accountability of producer to consumer.

We’ve literally killed that economic scale. We now have chains that are interchangeable, selling products that are interchangeable, region to region. There is now limited customization of services to end users, and limited customization for regional needs or preferences. Littleton, NH is now no different commercially from West Palm Beach, FL, as absurd as that sounds.

 Local, state and regional governments are not permitted to enforce law that conflicts with interstate commerce, and now federal law is not permitted to enforce law that conflicts with international commerce in many ways.

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