Ontonix:: how to correct ratings (or how to stop the manipulation)

When war is just too “dangerous” for the financial masters of the universe (even when their political puppets crave it) i.e. when the bankers aren’t able to effectively bankroll both sides, or the outcome is likely to be detrimental to their ability to retain power in a post-critical landscape – NOTHING to do with the number of innocent victims – their most effective means of waging war is to manipulate global finance!

We have already seen the US pursue a high risk QE strategy, aimed at retaining the, once mighty, USD as the currency of international trade, despite the fact that the American economy is shot (sic). In the unlikely event that one of the Middle East powers had attempted such bully-boy tactics they’d have been, swiftly, sorted out. So perhaps us Europeans should be thankful that we aren’t perceived as such a threat!!?

Nobody pays for a sovereign rating. It comes for free, at an agencies discretion. So, while the agencies decide to favour some countries, they try to discredit others. Ratings have become instruments of politics and strategy, and also weapons in an economic war. The lower the rating, the more it costs a government to sell bonds as it must pay higher interests rates. A downward rating spiral may kill even the healthiest of economies…

What rating agencies do not take into account is the resilience (the opposite of fragility) of an economy. A company/country can perform well form  a purely financial perspective but still be fragile. This new aspect of business can easily be taken into account. The same balance sheet, income and cash flow statements can be used to compute the resilience of a company to measure the resilience of its business structure. Once you have the conventional PoD rating and the Resilience Rating™, which ranges from 0% to 100% (100% means the business is very resilient and stable, 0% it is dominated by chaos) you simply multiply the two to obtain a Corrected Rating:

Corrected Rating = PoD Rating X Resilience Rating

This is clear in the image below, which puts together the two

Ontonix – Complex Systems Management, Business Risk Management.

How can “entrepreneurial spirit” and "creative destruction" flourish without nourishment?

Joseph Schumpeter reinterpreted (from Marx economic theory) and popularised the expression “creative destruction” to describe the process by which established ways of doing things are destroyed from within (by new thinking, tools and processes) – at this point the scientific community may draw attention to the 2nd Law of Thermodynamics: that a system tends toward entropy (chaos or disorganisation) and consider the state of our global economy.

Hugely expensive and experimental life support for “clinically dead” institutions, markets, currencies and flawed philosophies equates to – at best – stagnation and at worst starves innovators of the means to accelerate a new evolutionary phase: instead of “creative destruction” we have “destructive creation” in the form of more regulation! Read more of this post

FT.com: Financial institutions stare into the abyss

An illustration depicting the shaky situation of financial institutions

The world economy once again stands on a precipice. Finance ministers might want to look straight ahead, but investors are forcing them to peer down to the abyss.

As advanced economies slow sharply and emerging economies wonder whether inflation or recession is the greater threat, the need for finance ministers to find a way to achieve their ambition of “strong, stable and balanced” global growth has rarely been more urgent.

Christine Lagarde, the new managing director of the International Monetary Fund, has urged countries make necessary adjustments to restore confidence.

“I believe there is a path to recovery, much narrower than before, and getting narrower. To navigate it, we need strong political will across the world―leadership over brinkmanship, co-operation over competition, action over reaction,”

Could it be that it takes for the global economy to, once more, stand on the very brink of collapse before common sense prevails?

An institutional culture driven by Greed, Fear and Ego brought us to the edge and has been allowed to prevail as the people who created the problems were “trusted” to resolve them!

Trillions have been “wasted” on sustaining a false market, supporting failed Financial and Political institutions whose flawed philosophies and (morally) corrupt culture were exposed long before the 2008 collapse. They have been allowed to, essentially, micro (mis)manage – nationally and regionally – issues that required an holistic perspective (across domains), clear decisive leadership and macro management. Read more of this post

Paul Mason: Alien 2010 – will this toxic spillage burn through the Euro?

He always delivers value and this is no exception!

(c) Paul Mason 2010

In the original Alien movie (1979) there is a scene that illustrates the problem we’ve been facing since September 2008, and which is coming to a head now (I’ve produced a handy graphic opposite).

Somebody stabs the alien: but its blood is acid. It burns through the floor of one deck and one character realises: "that cr*p’s gonna burn through the hull!"

They run to the next floor, but it’s already burning through to the next deck. Finally it stops: the acidic properties neutralised through interaction with the metal decks, the air, the demands of Hollywood storytelling.In the global financial crisis the acid is toxic debt.

The first thing it hits is the real economy: output, trade and the stock markets, which tank in the last two months of 2008 at the same rate as during the post-1929 crash. The acid quickly burns through here.

via BBC – Newsnight: Paul Mason: Alien 2010: will this toxic spillage burn through the Euro?.

Britain at the crossroads: 50 years of Austerity or a platform for dynamic change

Let’s face it we’re broke…and I don’t just mean financially. We don’t actually make much any more and, even if we did, the smart Entrepreneurs wouldn’t still be here to fund a Public Sector paralysed by its own complexity. A “dumbed down” nation that has grown useless, fat and lazy in the image of the Welfare State that sustains it.

“Clinically obese” was how one expert described the UK Public Sector. We are told that the choices were Quantitative Easing or Austerity. We weren’t really given a choice. It was made for us by a Coalition Government whose preference is to “play Politics” because: they are just happy to have power; are intent upon denying the scale, nature and sources of the problem; lack a vision for our future…or just dosn’t have the balls to do anything except keep on making the people who are softest targets pay!

Why else would a Government choose to appease “the markets” and rating agencies whose roles in the crisis STILL are unpunished – what happened to Corporate Governance, fiduciary responsibility, compliance, etc? – whilst the opinions of ordinary citizens – VOTERS – are disregarded!? There are people of every generation whose lack of informed opinion or inertia allowed successive Governments to spin their way through years of mismanagement and excess. Watch out!  These people have found their voices and now have a common cause.

Read more of this post