Expectations Tension Friction And Solutions

August 14. 2008. Oslo, Norway.

The Norwegian central bank did not raise interest rates yesterday, rates are kept at 5.75%. Inflation is rapidly on the rise, but they choose to hold on. The global recession might help them in the last minute, or they might be forced to raise rapidly this fall.
We believe the deflationary forces are mainly outside the consumer price index, just as the inflationary forces where outside it in the boom. So we fully expect prices to rise quickly, inflation. Especially when it comes to housing rent the central bank will be caught naked, it will rise sharply forcing the bank to raise interest. They might even be forced to change the rules of the game and exclude rent “for extraordinary circumstances” or due to “new models” or some other shameless act of backing up the system. Ultimately central banks must play the game, inflating to keep the masses happy, or they would loose their independence. Too funny.

Small countries are interesting to watch now as some are experiencing troubles ahead of the bigger ones. On Iceland the Icelandic Krona has taken a head plunge, recovered a bit, but still way way down. We predicted this back in 2005 after visiting the saga island. Prices on the island where ridiculously high. The problem was, and is, that the economy is so small that single factors pulls the currency up and down at will. The central bank, and even respectable economists on the island I spoke to insisted that the “Iceland boom” was for real. They insisted that Icelanders worked hard and saved, took smart risk and built capital. Now it turns out it was all a debt game, as we suspected, all along. Backed up by the Iceland central bank, ultimately the Icelandic tax payers, reckless speculators where able to issue bonds massively on the international markets. They lent money massively to go on a buying binge in Northern Europe. Buying up Scandinavian banks, U.K. retail outlets and so on with borrowed money. It had to end in tears, and we are now seeing this happen. When easy money evaporates it is gone, there is only leveraging from then on. The Icelanders have not seen the worst of their hangover yet. The Icelandic banks are going to collapse, first their foreign assets will be sold, then the banks themselves will be sold or nationalized. The taxpayers are going to pay, one way or the other. Iceland is a microcosm of what will happen on a larger scale elsewhere, worth studying.

Gold touched down on USD 814, that is some fall from 1037. The dollar has risen some 8-10% against major currencies, but that is still only half of the gold fall. There might be a floor for gold here, the fact that the dollar has bounced up suggest that this is a ladder stop on the way down. The direction is still downwards, but the bounces are inevitable and unpredictable.
If you are not yet invested in gold you might want to start accumulating some now, carefully, very carefully. Anyone should hold 30-50 one ounce gold coins for personal safety. Start accumulating now, then most investors should have 10-20% of their savings in gold, start accumulating carefully, more carefully than with your coins. Gold could just as well fall to 600 as rise to 1000 again. Should gold fall further you accumulate some more, should it rise you sit and watch for a bit. The point is to enter into your gold investments at relatively favorable prices. You will hopefully keep the gold for life, let us hope you will never need to use it.

The media is reporting that the elderly are realizing that their golden years might not be so golden after all. They have started looking for retirement jobs. This will be a huge wave in our time, elderly people looking to keep and income and be productive into their golden years. Society as a whole will need to find ways to have the elderly be productive. Through the internet, and part time employment, it should be possible to keep the elderly productive on 20-50% employment well into the 70 ties and 80 ties. The important thing is to never go fully out of the workforce, stay connected to the job. Keep and let them keep their office even after they retire. Invite them to corporate training seminars and social events. Stay in touch with the retired workforce and keep them in the loop.

If you can figure out a way to harness the potential there is in the baby boomer’s as they retire, you are onto something. They do posses wast valuable knowledge, they will have buying power as well as political power in our time. The solution is somehow in making their contribution enjoyable for them. I believe the solution is somehow in using the internet. A social model, social benefits combined with part time work.

Like coaching younger employees.
Like codifying their knowledge in internet databases.
Like the elderly helping other elderly, exchanging services.
Like doing minute tasks for the younger generation to free up time for productive work.
Like enabling transactions, lowering transaction cost.
Like teaching the kids.
Like being mentors in a meaningful way for the kids.
Like enabling security, surveillance.

The problem is that the baby boomer’s are experting to get their pension benefits for free. They think they deserve it. While the solution must somehow be tied to the elderly being paid to perform a valuable service as long as they are able to deliver. This transition will come at tremendous social tension.

The baby boomer’s retirement benefit expectations do not add up. Something has to be done, because it has to. I mean it, something really has to be done to align expectations and reality. There is tremendous social tension coming up shortly, and opportunity for solutions.

Until tomorrow.

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