Chasing the dots … Digital Doo-Doo!

WORLD governments are stupid! Trillions of dollars into financial toilets only to see the not-so-stupid financial world flush these funds straight to their own accounts then to lend sparingly at massive interest spreads. Great business! They feed taxpayers’ cash into their investment arms to ‘invest’ (read speculate) in stocks, commodities and paper assets (remember oil and food prices?). Governments now replicate errors that got us into this mess; over leveraging and lending to bad bets.

Bad bets? The US ‘Stress Tests’ on the 19 banks with US$100 billion assets show that more than half are insolvent under conditions that were once thought extreme; not now. Bailout cash is nearly finished. With trillions absorbed but the required credit to consumers and business has not happened.
What happened is the (not unexpected) boost to markets over the past two months and has put money in well-hidden pockets of speculators; what has not happened is a reduction in corporate debt and parallel increase in shareholder (equity) funding. Corporate gearing is debt heavy, resulting in crippling fixed-cost liabilities.
Back at the media ranch the financial fast-talkers are, in line with their corporate owners’ wishes, manipulating news such that even disaster seems like major success. Product sales decline, billion-dollar losses, job market collapse and mega bankruptcies become market motivators. The media empires have their own interests to look after; they pay the piper.
What cannot be avoided is that world productive capacity, largely funded by debt, massively exceeds requirements. Container movements, air cargo, packaging, car sales, housing volumes and monetary flow indicators for ‘liquid money’ all show the same story; business has slowed by 25%.
Those brought up with break-even charts, supply, demand and price curves and had drummed into them that financial success came through minimising fixed costs, maintaining flexibility by a balanced mix of variable, semi-variable and incremental input costs; then bust and boom cycles were managed through control of variables. All before electronic calculators, let alone spreadsheets! Paper, pencil and eraser; slow but at a speed relative to the times. But manageable.
So enter the desk computer and ‘what if’ to our hearts content; increasingly complex models of interactive price scenarios and stacked break-even charts. Fun and fairly safe as ‘file transfers’ and electronic trades were still embryonic. The world had physical communication barriers; software was home generated and participants were a few geeks.
Then came designer software, file transfers, Internet, electronic trading that shrank the world overnight. The small-time geeks were superseded by the growth of the service industry; governments wanted growth; the new geeks gave it to them by creating more and more money. Unfortunately few understood the new financial vehicles; even worse, financial bosses failed to appreciate overall implications, even Greenspan of the US Federal Reserve! Bonuses ruled!
Little spreadsheets grew into a complicated mix of diverse and ill-understood financial monsters. Debt became good but as a fixed cost, reduced management control options. Breakeven positions became more inflexible; globalisation limited choice further. One hiccup sent the cards crashing.
Now? The current joy ride is over. Joblessness and dollar pain will rethink the digital world. A broader understanding of priorities will emerge. Pace will slow to a controllable level. Yes, as an early geek I realise that enthusiasm for the digital world caused us to forget the real world of the analogue.
Sorry about that, but it was fun. So back to real understanding and less over-specialisation. Out with pencils, paper and erasers. Digital Doo-Doo is a tool, not a master. Hang on for the ride. Glad I am Namibian!