Sustainable or not sustainable? That is the question

We are in Paris at the Paris FreedomFest, a gathering of free thinking individuals discussing issues on liberty. What stands out is the continual emphasis on how little we actually know, the emphasis on the fallibility of the affairs of the world. In this world there are those who believe they know, and how wants to mold the world in their supposed knowledge. Then there are those who take the humble approach that we probably don’t know that much, and that we should arrange our affairs accordingly. Unfortunately, in today’s political environment the doers have the advantage – the whole structure of democratic political society is rigged in their favour.
The political need to exercise control is accelerating. In the U.K. more law text has been passed in the last 10 years than in all of previous history. This shows an astounding belief in being right and being on top of things. Political control and whish for detailed legislation has reached a point of increasing acceleration, this is new. Our humble belief is that the political class no longer cares about principles, honesty and integrity. There is a level of resignation. It is a game. A game, period. And they just play the game. This is the natural end stage of the Keynesian focus on the short term. What else can increasingly short term thinking lead to, other than cynicism? How long before the end game? Not long, in our humble opinion.

As to the markets the big question is if the bounce, the reflation of the bubble can be sustained. There are people on both sides. Our belief is that regardless of sustainability, 1,2,3-5-20 years, this reflationary bounce is extremely fragile, and that any one event at any time can pop it – sending the markets downwards in a tailspin. But then again, the 1945-2007 bubble was always fake and fragile – but still went on for way way way longer than we thought possible in the first place.

What seems certain at this point is that most of the reflationary potential is already taken out. If you got into the market on March 5, then good for you (who can honestly say they did that anyway?). But, at this point, now? I would advice caution, extreme caution. Gold passed USD 1000 last week, and is still trading above as of this morning.

Still, if there is another inflationary bubble – there will be ways to play it.

- The US bond market is obviously in a bubble, interest rates are way to low. Shorting bonds will be a killer sooner or later.
- Banks will wobble for years to come, creating several shorting opportunities.

And then there is the game of getting in the water and surfing the wave itself. To incorporate and start lending money from the commercial banks. If you have the stomach for that, it might be possible to ride it again, but keep your eye on the shore at all times.

We prefer to stay on gold until we see where this is heading.

Paris, France
September 14. 2009
Hans Jørgen Lysglimt

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One Comment

  1. Ola Mikalsen
    Posted 6 October, 2009 at 12:51 am | Permalink

    I want to thank the blogowner for the tip about about Henry Hazlit’s book Economics in One Lesson. Halfway through it, I must say it has confirmed many of my suspiciouns about the economy, and it made me understand why we can never get enough public health care. To me it was clearvision revealed.
    I was puzzled about an ever increasing Norwegian health budget that didn’t have any results to display. The more we do, the more is left to be done, because there’s always someone else lining up to get treated for something, which they are entitled to by the promises made by the politicians layed down in the wellfare state. And we do a lot, the production is skyhigh. As a mear production regarded, we have steadily increased the number of patients treated for every year. Despite this fact, more people than ever have lined up for some kind of treatment. So really, public healthcare gets us nowhere but in equity. The equity in Norway is covered up by the oilfund money poured into the budget, thereby increasing it every year.
    Working as a nurse in intensive care at the local hospital in Trondheim, Norway, I have looked for material that could defend slowing down the enormous activity, if only to stop exhausting the human resourses in the system. An accumulation of completely dependant (very old) patients would off course represent a greater workload that may drive the nursing staff into early exhaustion and retirement. Many of these patients will just continue living a life in some nursing home lacking the proper staff, being treated with indiferance or only receiving basic care, meaning being served a meal thrice aday, but not being allowed a shower more than once a month because there’s no time for it.. Clearly, the medical-technological advansement has outstepped the nursing resourses because an intervention made by the doctor lasting for a couple of hours could increase the nursing demand tenfold…for a decade. I’ve realized that for many of the patients, receiving surgery or any other health service on the public’s expence, simply is throwing money out the window. We are only prolonging their dependancy. If anyone’s creating a bubble in Norway today, it have to be the public health care sector.
    What made me start thinking like this, was the statement from one of the nurses in the cardiothorassic ward about that ward in particular was the only ward that made any money out of the hospitals many sections. How could this be?
    Off course this was just another nonsens, no-innsight statement after examining the basic objective. Money was passed across the county line for patients belong in another county without a hospital capable of performing bypass surgery. The public had already redistributed money from the private to the public sector. The private sector carried the burden exclusively. Unfourtunately, among many of my colleagues in the public sector, this is a point difficult to explain. The question is how could we work ourselves into this bubble of no ending public demand for health care and public spending?
    In the early youth of the wellfare state in the 50′s, Angina Pectoris couldn’t be treated. One could mend the pain with Morphine, but bypass surgery, valve-surgery and Percutan Coronary Intervention (PCI) was not available to anyone. It was not invented yet. That meant the patient simply died, hopefully not in pain, but the cause of the illness could not be treated. Back in those days his wife would have received a little public widow-pencion before dying ten years later herself. By not offering treatment, the brutal reality is that this course kept public spending low. As the new treatments mentioned above became available and known to the public, they started asking for it. All kinds of available treatment throughout every specialty in the field of medicine. Increased demand, increased staffing, increased public spending, increased taxes, you know the story…..
    Any contradictory opinions to this matter would follow the ethical trajectory where health care workers would say stop the treatment because people must be allowed to die in peace, free of tubes, lines and catheters. Loosing sight of objectivity can be harmful, due to the fact that rality is in operation without us noticing it. The reality is that the treatment of patients cost money, the patient claims my labour. In the public healthcare, you might feel the taxes, but you never see the bill. A drug addict permitted bypass surgery is hardly any investment, but difficult to reject for the doctor bound by his oth and the wellfare state intention of serving everybody the same meal. We have strolled down a path to civilasational breakdown with our equal treatment of people and redistribution of wealth. Nothing is more clear to me than that trajectory if Barack Obama will have his medicare realised. In todays global economy we cannot avoid being affected by it. It seems to me that Sam Vaknins diagnosis of Obama as a narcissistic character is coming full circle. Vaknin predicted Obama could be harmfull to the american public by doing to much at the same time, viewing himself as a superhuman. Fighting two wars, policing the mexican border and introducing medicare at a time when former comptroller of the GAO David Walker warns of a ”tsunami of public spending” might serve Vaknins prediction true, to everybody elses misfortune.