I've just finished reading this book: The Big Reset by Willem Middelkoop. The author is Dutch and I've been following him for a while (on twitter) and was eager to learn what he had to say in his latest publication. The book was first published in English (so good news for you all) but I waited for the Dutch version to appear (lazy as I am). It has the benefit that it was already slightly updated as it includes some reference to the recent tensions on the Crimea. This may make you wonder what the book is about. Well it is about finances and more specifically about the Dollar as the world's reserve currency, how this has given the US a major advantage over the rest of the world, how the US has and is doing everything to keep their status and - this is the interesting bit - how this is all coming to an end. Hence the title 'The Big Reset'. Whilst I did not learn much new, it is still enlightening to read it all in one book which connects all the dots and makes you look at some events in a different way. If you think this book is about some wild complot theory you'll be disappointed. If you think you'll read about the upcoming financial armageddon, you'll be disappointed too. It does present you with many facts and does point to what may happen next. It is not so pretentious that it gives you a scenario of the world financial future, nor does it give a timeline of what will happen when. And that's good, if the author would have done that, he would have lost all credibility. But the facts do lead to a certain direction our financial future will take and understanding this is of utmost importance for our (individual) financial future. And, not unimportant, it is an easy read as it is written very fluently avoiding financial speak.
Look at this mind boggling infographic. Things like these are often used to show the speed of development and technological progress. But to be honest, it scares the hell out of me. Millions of people don't have access to drinkable water but we do have an average of 3 connected devices per person on this planet. What is wrong with us?
In the mean time, researchers found for the first time an Earth-like planet in a habitable zone around a star (see here). And it is close by, only 500 light years away which is neglectable in the infinity of our universe. The atmosphere seems to be all CO2 so breathing for us might be a problem. But as it will take a while before we get there, we'll probably have mutated by that time so that CO2 will smell like a fresh see breeze.
They found proof! They had to build a giant telescope on the South Pole to do it but if validation comes out
Image: Steffen Richter (Harvard University)
positive there is proof that the big bang inflation theory is no longer a theory.
We all heard about the big bang but very little does public know that some observations were contradicting the big bang. If our universe is 13,8 billion years old, why are some galaxies more than 13,8 billion light years apart? That is impossible if the speed of light is indeed the top speed in this universe. And why are temperature differences almost non existent at opposite sides of the universe? That's not something one would expect in a big explosion like the big bang either. So they came up with a tweak to the theory in the eighties that the big bang actually should not be seen as an explosion but as an enormous inflation within the first fractions of the second when the big bang occurred. They are talking about 10^-34 second. And to give you a bit of an image, compare it with someone flicking a light switch. First there is nothing, and then - click - the whole universe is there! The technical proof that confirms this theory can be found here. By the way it also provides evidence for gravitational waves which were theorised upon by Einstein 98 years ago.
But let's look at what it all means. There are many conclusions to make but two are particularly interesting.
Our universe might indeed be infinite! It may, and does probably, stretch beyond our horizon (we can't look further than 13,8 billion light years, ie the distance light travelled since the big bang, As the universe came into being in an inflation there may, and probably are, galaxies way beyond our horizon. Secondly, there are multiple, possibly infinite, universes! They may have different properties than ours (physical parameters may be different), but there are an infinite amount of universes. If you want to understand more about multiple universes and alternative histories I can recommend 'The Grand Design' by Stephen Hawking and Leonard Mlodinow.
I let your imagination run wild on what this means for us humans. In the history of the Earth we have only been around for a fraction of time, there are now more than 7 billion people on this planet, our solar system is just a dust particle in our galaxy, our galaxy is just a blimp in the universe that we can see, our universe is infinite and there are an infinite number of universes. So let's face it, we are not that important are we.
Whilst the world is holding its breath how Russians and Americans have raised the global chess game to another level, let's turn to something extraterrestrial.
I know a thing or two about crashes. No, not because I crashed so often myself (touch wood!), but because in a previous life I worked on car safety and attended a lot of car crashes. Watching a car slamming into a barrier at 64 km/h is a humbling experience, let me tell you that. To get the protection right, it's all about energy management. Well there was plenty of energy at the below crash. The news broke this week that last year on September 11 an estimated 4 foot-wide, 880 lbs asteroid hit the moon. It had an explosive force of 15 tons of TNT. I can't really picture how much 15 tons of TNT is. The energy upon impact gives me a better idea: 79,42 TJ (Terra Joule). Now that is a lot and the Spanish telescopes, part of Moon Impacts Detection and Analysis System (MIDAS), that recorded the explosion don't really do justice to it.
And I came across another top 15 list.
CNN's world's most scenic airport approaches. Have a look.
Of those selected my favourite one is Courchevelle. Only uphill landings and downhill take-off's I guess...
Just for the fun of it some more photos from Airliners.net
I took half a day off this week to join a speech from Barry Ritholtz. Those of you who don’t know him, Barry is world renowned in the economic and financial world. He has his own wealth management company, is a regular guest on Bloomberg tv and his blog (the big picture) is ranked by TED amongst the top 100 sites one has to know and it has more daily pageviews than USA Today.
So when I received an invitation to attend his speech I immediately put in my request for half a day off.
Now Barry threw a lot of interesting graphs at his audience but the one thing that made me think was something he said. In the late 19th century companies were laying down a complete railroad network across the States. These companies struggled for survival because of the high cost of the endeavour but everyone wanted to invest because the future was here. Until it all went ‘pop’, the bubble burst, companies went bankrupt and the infrastructure was bought up by others for pennies on the dollar. The buyers made a fortune as they had in their hands the basic infrastructure at a very cheap price upon which a whole new economy developed. Fast forward to the turn of the 20th century and companies were laying down fibreoptic cables across the country. A very high investment (100s of dollars cost per mile) but everyone wanted to invest because the future was here. Until it all went ‘pop’, the bubble burst, companies went bankrupt and the infrastructure was bought up by others for pennies on the dollar. The buyers made a fortune as they had in their hands the basic infrastructure at a very cheap price upon which a whole new economy developed (e-commerce, social networking, ...). Fast forward another decade. Debt was build up and everyone was out for a loan because investment was plentiful and a sure bet. Until it all went ‘pop’, the bubble burst, companies went bankrupt and ... Nothing. Here is the difference between the current crisis and the above big crisis. The railroad and fibreoptic crisis gave us, after the bubble burst, infrastructure at low cost upon which a new economy developed. When the bubble burst in 2008 it left us with debt. Conclusion: it will take a lot longer to recover from this crisis.
What made me wonder is where the next ‘useful’ bubble is. ‘Useful’ meaning giving us something to build on at low price. If I knew I would be in for some serious money making but I don’t know. However I am just wondering if green energy is not a good candidate. Windmill parks, solar parks, ... are developed with a lot of incentives and government support. Once this support falls away (due to austerity cuts), these new energy parks seem to run into trouble as they have too much debt and without the incentives, too few revenue to pay off the debt. So, if these go belly-up, the interesting bits will be up for sale at a cheap price. To those of you with deeper pockets than me, maybe this is worthwhile reflecting upon.
Off to space! This week China sent a lunar rover to the moon and SpaceX (from Elon Musk) put its first satellite into orbit. I include two pictures posted by Elon Musk on his twitter account.
Fascinating as it all is, it is dwarfed by these breathtaking pictures from Cassini. Talking about a big picture, they rarely come more beautiful than these! No one understands how that hexagon was formed on Saturn’s north pole. Researchers are running all kind of hypothesis to get a grip on it. Nature is wonderful isn’t it.
Let me ask you something: how much is a quadrillion dollars. Don’t say a lot of money, that’s too easy. How many zero’s does it have? 9? That’s a billion. 12? That’s a trillion. 15 then? Yep. 1 quadrillion looks like this:
1000000000000000
Why do I ask this question? Well let me answer that by asking you another question. How much is the Gross World Product (GWP)? (GWP = total gross world product = the value of everything we all together produce over a year). The IMF (and they should know) puts it at 72 trillion US$ at market exchange rates (see p 149 of the April 2013 IMF World Economic Outlook). That’s a lot. You also remember what brought the banks down back in 2008 (this weekend was the 5th anniversary of Lehman’s fall): the wonderful world of derivatives (like Credit Default Swaps) and too much exposure. The current estimates of the total global derivatives markets range from 700 trillion (estimate by The Economist in 2011) to 1,2 quadrillion US$. These are estimates because no-one really knows. Scary hu? Why does no one really know? Because derivatives are fictitious. It doesn’t really exist. It is not adding any value to the economy or the real world. I give you the Wikipedia definition which is clear enough: “A derivative is a financial instrument which derives its value from the value of underlying entities such as an asset, index, or interest rate—it has no intrinsic value in itself.”
Some claim however that these numbers are a gross exaggeration. In fact these derivatives “only” have a market value of 21 trillion US$.
A couple of remarks. Even if true, 21 trillion still is an enormous amount of non-existent value. But it isn't true. Last week the US Office of the Comptroller of the Currency published its quarterly report showing that just US banks hold 231 trillion $ in derivatives! JP Morgan is champion with 70 trillion$! The horror literature can be found here: http://www.occ.gov/topics/capital-markets/financial-markets/trading/derivatives/dq113.pdf
Secondly if the global derivatives market is 700 trillion and the “real” market value is 21 trillion, someone has used a rather big leverage... In fact the real value is only 3% of the total market (at the conservative estimate of 700 trillion). So what might you conclude? Well, when the derivatives market shrinks with a mere 3%, the complete underlying real value is wiped out and the whole system comes crumbling down on us. When this happens can we afford it? Well... no. The derivatives market is 10 times the value of everything humans produce during 1 year!
I was reminded of this by an interview I saw last weekend and a presentation. Throughout history numbers with 15 zero’s have not been uncommon to the man in the street. In November 1923, the American dollar was worth 4210500000000 German Mark (that’s 4,2105 trillion German Mark). So you needed 4210 of these notes to exchange them to 1 US$ (picture courtesy of Wikipedia):
Now, the presentation I saw gave some numbers of the very top rich, the 0,1%. These are quite fascinating and are for the US but the same happened all across the world:
1970 1% were worth 10% of national income
Today 1% are worth 20% of national income
Today 0,1% are worth 8% of national income
In 1992, the total Forbes 400 list (400 wealthiest people in US) represented a wealth of 300 billion US$.
Today this is 1,7 trillion US$.
What does this teach us? Get used to a lot of zeros. The richer are getting a lot richer, fast. Inequality is rising (fast). For the Taleb aficionados (like me) this is Extremistan to the extreme (and you know what happens next).
In other news, Dijsselbloem (head of the Eurogroup) spoke before his turn (again), when addressing the European Parliament week before last, stating Greece is in need of another rescue plan. The warning was taken over by the IMF and Moody’s last week. In the mean time almost unnoticed, Slovenia liquidated two banks (Pro Banka and Factor Banka). The Government seized the institutions to prevent what they fear could otherwise have been a deposit run. And the oldest bank in the world, Italian Monte Pascchi, is in critical need to raise 2,5 billion €. Commenting on Reuters one investment banker described the chances of success like this: "There is no chance on the planet that they can raise [this] in 12 months... they are heading towards nationalization”. The capital raise equals the current entire market value of the bank. So the Italian state is likely to have to come to the rescue which means a repeat of the Cyprus experience (remember that template-which-wasn’t-one “exceptional-case-that-will-never-be-repeated-again”). This also means that bondholders AND depositors would be drawn into a bail-in (for deposit holders above 100000,- €)! Also last week Dijsselbloem added that Europe should ensure bail-ins are done in the right way by states (to be understood as 'by confiscating depositors' savings'). See here for the EU’s law that will be adopted by year-end legitimising the bail-in principle based on the one-off-special-never-to-be-seen-again-case of Cyprus: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/137627.pdf
Over to some fun! Embrear posted this video about a floating book it sent to selected potential customers for its Lineage 1000. I would love to get a copy as well (no I am not in the market for a Lineage 1000).
As for the aviation part there is no contest with Virgin Galactic’s successful test flight demonstrating all technical mission phases in one single flight for the first time:
We homo sapiens are a strange lot aren't we. No one blinks when ten thousands of civilians are slaughtered with guns, bombs and mortar attacks. A couple of hundred die in a gas attack and the world calls it monstrous and suddenly some countries happily switch to the punishing mode under the motto: 'let us stop the killing with gas by bombing them'. Did anyone, anyone, actually come up with a plan to stop the bloodshed? Or am I too naive and is that not the intent. And whatever happened to learning from history or from past mistakes? Those with their fingers at the button should realise by now that you can't bomb a country into democracy. At least the UK Parliament put a stop to it for now.
With many great thinkers and philosophers contemplating if the democratic system has passed its expiry date, let me remind you all that the UK's vote is the second time in a year that a national Parliament has stopped (at least for some time), what seemed to be an multi-national given. The first time was when the Cyprus parliament voted down the first full bail-in proposal that all Cypriots should pass on part of their savings to save the banks and the country. My respect to those Parliaments who vote using their common sense and not their political agendas.
Those who want to understand the Middle East, see attached summary by KN Al-Sabah published this week in the FT:
Now over to something completely different. This is a headline from Wednesday in the New York Times:
"Researcher Controls Another Person’s Brain Over the Internet".
Que????
Yes indeed. Researchers at the University of Washington have successfully connected two human brains over the internet. One researcher moved the hand of the other researcher by just thinking about it whilst their brains were, via EEG's, connected to each other through the internet. It's the first time they experimented from human to human, but it worked before between rats and it worked from a human to a rat (a human moved the rat's tail just by thinking about it, the article doesn't say what the rat's retaliation was...). Read the full article here: http://bits.blogs.nytimes.com/2013/08/27/researcher-controls-another-persons-brain-over-the-internet/?smid=tw-share&_r=0
I'm sure this can lead to wonderful applications that can dramatically improve the life of paralysed patients but would I want my brain to be connected, let alone controlled, by someone else's brain? No thank you. My thoughts are purely my own. This world is getting crazy.
Whilst listening to the news this week I couldn't help thinking about a song from The Machines back in the eighties. The Machines were a Belgian band (don't worry they sing in English). The song that I've been humming all week is: 'I See the Lies in Your Eyes' (only the title is relevant as it is actually a love song).
And now we need something beautiful to offset these dark thoughts. How about a picture of a Venus eclipse of the Sun? Courtesy of NASA we have this amazing photo with the Sun imaged in three colours of ultraviolet light by the Earth-orbiting Solar Dynamics Observatory, with the black circle being Venus. Enjoy it as the next Venusian solar eclipse will occur in 2117.
