We're in for a wild ride. Exponentially accelerating technological, cultural, and socioeconomic evolution means that every year will see more developments than the previous one. More change will happen between now and 2050 than during all of humanity's past. Let's explore the 21st century and ride this historic wave of planetary transition with a confident open mind.

Monday, November 30, 2009

Decline of Suburbia and Democratic Party Dominance

Since economically inefficient and socially stagnant nature of suburbia makes educated people flock to urban areas, Democratic party may become monolithic and dictatorial since elites are not as split anymore

United States is a huge country. That and favorable conditions led to an early and advanced car culture (Canada, Russia, China, Brazil had various restrictions stifling that, ranging from permafrost to outright ban on private property). The love for cars and the infrastructure that makes it possible has been a source of national pride for decades and brought envious glances from around the world. As much as smaller vehicles make sense in urban areas, anybody who has been to rural U.S. would immediately appreciate the benefits of increased horsepower and vehicles whose size would be considered military grade elsewhere in the Western world. When you take into account that most Americans lost their virginity inside cars, the psychological obsession with motor vehicles begins to make sense. It's no wonder that road trips hold a special place in the national consciousness and that advertisements for cars overly utilize freedom and sex appeal compared to how cars are marketed elsewhere (for more on this, check out advertising guru Clotaire Rapaille's Culture Code).

However, the unfortunate side effect of Eisenhower administration's emulation of Germany's Autobahn (rather than large scale development of high speed public transit as in France or Japan) also allowed the whites to not live together with non-whites. Non-whites (and the poor in general) were subsequently never fully integrated into the national fabric since those better off could now move away from the poor into suburbia. Unlike the Soviets ( who attempted national integration with their colonial subjects through mass education) or the British/French (who were geographically separated from non-white subjects), white Americans found a way to solve their disinterest of getting along through mass movements into the suburbs for which there was plenty of space for.

It has been common knowledge for decades now among social policy experts that a mixing of different classes is good for society as a whole. For instance, over a third of Holland's people live in affordable public housing since once you qualify to move in, they don't kick you out if your income greatly increases. Many professionals of course remain to take advantage of the savings. Class polarization along geographic lines is thus greatly reduced. In United States, the subsidies to highways (and the resulting creation of suburbia) have done more than just rot inner cities, deteriorate food quality, and create fertile ground for South Africa-esque gated communities. They have set the ground for inevitable reversal of suburbias becoming slums due to the sheer economic and logistical inefficiencies of suburban construction in general.

Interestingly enough, the two party system was preserved as rural whites and the remaining urban whites (often cynically using racial politics to bolster electoral numbers and influence) were balanced numerically. However, in the last 20 years a number of the following factors began to create an imbalance:

1) More than half of people now living in urban areas than rural ones
2) More people deciding to remain single and not having children (diminishing appeal of creating a suburban nest
3) Increase in the amount of people renting rather than trying to buy a home (the "American dream" so far has been achieved by only 1/3 of the population with a third flat out rejecting it for urban living and a third either desperately trying or slowly converting to the urban dream. The recent housing bubble and collapse is by far the best evidence of this. It will hopefully create a proper national attitude readjustment concerning what dream to pursue and what mode of living to support and encourage with laws, regulations, and incentives. People who rent are increasingly seen as at least co-equal to home owners by politicians)
4) Increase in secularization of United States that leads to a view of small town residents as backward religionists
5) Globalization and de-industrialization of United States leading to reduction of opportunities for rural areas and increase in opportunities in Urban hubs
6) Rapid increase in college access (for at least majority of the whites) creating a stronger educated class that abhors small towns and where educated individuals try to move out.

Considering that the population of this country doubled over half a century, the suburbs had to expand or at least rise in price. The demand from educated whites could not be readily satisfied due to sheer physical and financial logistics.This of course resulted in white migrations into the Urban areas once again resulting in gradual change in urban political leadership (notice NYC under republican mayors), increase in infrastructure improvements for new migrants due to wealthier tax base, and corresponding millitarization of police. The drop in crime in major urban areas in last 15 years is not due to some role model efforts of a mean spirited former mayor and cracking down on squeegee men but by outright displacement of the poor from the urban areas.

Colonization of Brooklyn in areas such as Williamsburg is a fascinating example. Colonization as a term is not used lightly in this piece. First came the brave poor urban whites wanting to rent cheap space (much like the displacement of blacks from another further part of brooklyn, Brighton Beach, by Soviet immigrants for whom money was an issue). These individuals who would have otherwise preferred lower Manhattan:

1) could tolerate living next to minorities more than their more timid white counterparts from suburbia due to greater familiarity of the landscape
2) many were physiologically (ENFP, ESTP, ENTP psychological types most likely predominate the party scene at the edges of white settlements in Brooklyn) understimulated and were more free of the bonds of religion/tradition/ignorance

They used their newly acquired cheap habitats to throw wild parties and engage in large scale hedonism that would not be allowed in lower Manhattan. The contrast of educated hedonistic college graduates amidst populations of blacks with whom they had little in common slowly displacing previous residents through economics makes the term of colonization resonate. Of course once they settled the area, infrastructure improved from increase in tax revenue. This allowed other whites, older and more suburban to follow on their heels in increasing numbers. The L train connecting predominantly white lower Manhattan with Manhattan's expansion across the river is of course shiny and new.

The trend has interesting political implications. The political center rather than being split like before will move to the cities. It is unlikely that rural racist/religious will flip to being democrat again as in the 50s. The increase in  financial power of the cities and the influx of educated whites into the Democratic party creates a Democratic party that keeps growing stronger with time as the wealthiest 20-30% of population (who haven't fled abroad in search of employment) occupy what was once "inner cities". In effect, around some major cities the suburbia has moved into them. Long Island suburbia is thus creeping westward. Some cities perceived as unsalvagable like Detroit will be allowed to die and become decrepid shells like many Soviet cities now rotting in Siberia. Suburbia will not disappear of course and those too far away from cities will transform it into a more militarized gated community structure. Rise in gated communities in last 20 years illustrates this.

American cities will become more like France's, with immigrants and minorities being on the outskirts rather than the whites. This dynamic of the most powerful individuals dominating the political sphere from the urban areas will not escape the attention of non-white Americans for long. The tension within the newly powerful Democratic party and the imbalance of one party always setting the national agenda can be resolved in 2 scenarios.

A) Although we've seen rather pathetic recent attempts by the Republican party to re-assess their relationship with minorities, it is not impossible that they will transform themselves into a multi-ethnic political party years in the future and structure themselves more along economic populism. This would allow them to dominate numerically as white population declines below 50% in the 2020s and so on. If they do not do so then they will continue losing national election after election.

B) The uneducated/rural/religious and more blatantly racist core of the Republican party might not tolerate being part of a multiethnic construct and thus would not take into consideration a platform that attracts and integrates the minorities being driven from the cities. This will result in Republican party turning increasingly militant and radical and their continued failure at the national polls will shrink them into almost a third party status. At that point, non-whites disillusioned with situation in many urban areas (surely there will be some urban areas that integrate better with influx of education and resource redistribution) and the increasing radicalism of the Republicans can lead for a creation of a third party.
This is an open ended scenario that sees partial disintegration of Republican rural/suburban political power through loss of voters to Democrats, Libertarians, crypto-Fascist conservatives and conceivably some Hispanic-black coalition that tries hard to attract some poor rural whites with populism. Many midwestern states will continue Republican dominance unchanged and would resort to rabid state's rights calls to insulate themselves from the influence of the Democratic center. However, without significant numbers in Congress, the efforts of Republican state governments will not go as far as hoped. No longer would they be able to rally rural whites against the cities as the cities will become increasingly white and wealthy. It is possible that libertarian ideology would prevail by default in large swaths of rural areas due to its non-redistributive nature, dog eat dog survivalist ethic, and thus potential to reduce public conflict (even while further alienating ethnic groups from one another). Private money from cities would then have unhindered influence.
(Sidenote: the above scenarios assume there is no national break up, constitutional reorganization, or civil violence. This article was originally written in May 2009 and things have deteriorated dramatically since then. As mentioned above, although rural Republicans are not likely to switch to Democratic party, it is possible that psychological association of executive branch with steep downward economic spiral will lead urban whites to GOP in 2010 elections. Although I continue to believe that democratic majority will be strengthened through election of more progressives, even if urban voters flock to GOP in the next congressional round, the Palin crypto-fascist faction should still split the GOP allowing continuation of Democratic national center.)

As of today, many Americans are distracted by the many troubles and pressures of international commitments and economic crisis to pay attention to United States taking many of the trappings of South American countries. Although the country is too big to have all of the elites concentrated in the cities, their increase in globalized urban hubs will, for the first time, create a concentration of corporate power behind one party. Urban areas are also easier to defend and logistics of food transport become streamlined. The Democratic party could very well resort to empty promises of equality, progress, social responsibility, and every man woman and child needing an education to preserve an image of a multi-ethnic construct. Reality on the ground however will make it easy for it to not fulfill any of the promises. The great educational gaps between the races, lack of national ethnic integration, the backwardness and biases of southern evangelicals will make it hard for people to hold Democrats accountable. After a while it could very well be that the Democratic party will stop pretending about whose interests it defends and having shed American international commitments abroad (and promises to spread freedom and equality), United States would transform into a Brazil-esque entity. Decadent hedonistic urban individualism with vast swaths of the rural population left behind (even more so than before if that can be imagined). White flight is a radical concept and a symptom of a rotting nation without national unity (last time we saw white flight was in post-colonial spaces such as Africa and Central Asia where Russians found it intolerable to live with one formerly dominated group but found it easier to remain within the Baltic space where they are hated perhaps even more).

Solutions to this are few and they have to be relatively radical:

1) Rapid shedding of our imperial ambitions and commitments abroad to save money to dump into infrastructure rather than acceleration of Soviet type decline and rot due to the executive being browbeat by military leadership
2) Utilizing the Internet to augment education ( and thus bypass some of the gridlock for education reform) to provide Hispanic and black children a nationally standardized pre-K to High School materials that can be taught at home 
3) Voting restructuring to allow a more proportional representation in congress. Our government is too weak and divided to make major changes even under a committed intellectual like Obama. Hopefully, he isn't our version of Tony Blair. His stand on Afghanistan tomorrow will reveal a lot about the nature of his character. Major surge in Afghanistan will demonstrate a fundamentally weak character and the specifics of the possible surge will show the current strength and ideological orientation [nationalist/internationalist] of military leadership

Internet as it stands now is not enough to create a common culture for Americans. However if nothing radical is done and south-American style impudent corporate power begins to finally rule with the backing of a relatively homogeneous cultural/political group of elites and their white educated supporters (undivided as they were last few decades) then social tension will continue to increase. Then we will have education provided more forcefully years from now by an American version of Hugo Chavez. The experience of Brazil has shown that a large multi-ethnic country becomes dictatorial once their oligarchs and the educated begin to cluster in urban cosmopolitan hubs. It may sound silly now with Obama's troubles to think that Democratic party can become so monolithic but in the absence of a national split up into smaller federal unions, this scenario is not out of the question. Many countries in the Western hemisphere (notably Cuba and Brazil) provide valuable information as to what can occur.

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Tuesday, November 24, 2009

Myers-Briggs Personality Pluralism

Greater harmony, productivity, and general happiness to be had from better study of differences between neural breeds of Homo Sapiens (hardwired brain differences resulting in diverse personalities and modes of function).

The year is 2009 and it has been over a century since popular consciousness has widely accepted the fact that humans are just another type of animal. Curiously, even as humans are increasingly accepting of political and cultural pluralism, there is still insufficient focus on how pluralism in general arises from differences in breeds of humans. Populous mammals like dogs and cats have a number of breeds that cluster by physiological external differences like size and internal neural differences like aggressiveness, friendliness, and task specialization. Humans of course are no different (even if their neural computers are able to run remarkably advanced virtual simulation and symbol manipulation programs).

The implications stand to improve the psychological quality of life and raise consciousness for billions of people. Although short sighted knee jerk idiots may think implications will automatically cause a return to forced eugenics (as practiced by countries like Sweden, USA, and Germany in the first half of the 20th century) or measurement of skulls to filter potential criminals, such proclamations point more to the pessimistic nature of those who make them. Scientific inquiry and further development of concepts known to be true have historically brought more net positives (raised the living standard of the human herd by allowing them to live longer and do less labor through technology) than net negatives such as destructive wars (brought on more by non-democratic political arrangements than technology used to wage them). Advancing study of implications from humanity being comprised of numerous unequally distributed breeds is worth the risks. Treatment of different breeds and self esteem of individuals within each breed stand to improve if there is strong emphasis that each breed is logically as important as the other in its social usefulness (although social usefulness should never be the only or even main criteria in social sciences or policy).

Right now we have a world where the German Shepards, the Pitbulls, the Poodles, the Border Collies, and the Golden Retrievers are all rightfully treated the same but they suffer from the problem of more numerous breeds (as well as the most vicious/cunning ones) determining what breed is the universal ideal for a human. Each person judges all others based on what the one judging is good at physiologically. A very empathic person judges others based on empathy. A conservative one judges the rest on how good of a conservative they are. Same applies to all the others be they a partying hedonist, an introverted scientist, an artist, an athlete, or a social butterfly with highly developed taste buds ("how can others eat that crap!?").

This is a very natural problem to have for humanity. Since every person subconsciously wants to expand personal power in all directions, for thousands of years, the strongest or more numerous breeds have tended to not just make their personalities and ideas into universal law for others but to actually buy into their own lies that everybody else should strive to be like the rulers. Even societies with caste systems were not immune as seen by India's inegalitarian caste valuation (warriors over farmers) and transformation from a caste system with social mobility to the entrenched stagnant system we now mentally associate it with.

A previous article touched on how Myers-Briggs personality test is a good quick way to get a glimpse of what neural breed a person is, how numerical predominance of some breeds helps preserve status quo, and how the differences in neural architecture split and unite people a lot more than externally visible characteristics like skin and hair color. If we use a typology system like Myers-Briggs, it soon becomes obvious that although breeds can form natural dominant coalitions (SJs) and (SPs), there will still be a lot of socially tangible differences within each coalition. That is enough to pose a serious problem not just for rare breeds like INTJs but common ones as well.

That problem is depressed self esteem from comparison of one self to those breeds that thrive in whatever socioeconomic system exists at the time (and whose mode of being are widely emulated for this reason) and from feeling alone and excluded since no breed exceeds 15% numerically. Whether it is an athlete, an artist, or a scientist, they are always outnumbered which leads to wishing that everybody else (or themselves) was different. Even within dominant pro status quo coalitions of SJs and SPs, a difference, between an ISTJ and an ESFJ for example, can be so great as to make them not get along well at all. This problem is heightened for NF and NT coalitions. Depression and various neurotic behavior thus results on a large scale. When a person says that nobody understands them, the case often is that vast majority (90%+ people) really don't fundamentally understand them. How can a German Shepherd understand a Chiwawa and vice versa? Only mutts provide the imperfect understanding bridge.

The often failed emulation of the most able to "make it" (or seen as more able) may be a more serious threat to the health of people's ego, their self respect, and their pride. Just as an emotionally cold and aggressive person may feel distressed when living in a hippie ENFP/INFP/INFJ/ISFP commune, a naturally empathic and kind Golden Retriever will feel distressed and alone in a society that values warrior Pitbulls. Similarly, when the types who make it in United States financial sector (children of the rich, psychopaths, and some of the more cunning SPs and NTs), a vast social pressure is created to pound in square pegs in round holes and be more like what is deemed "successful". It is no different than if soldiers were in charge and we all had to admire wars and go to bootcamps to be seen as having the right stuff.

As for psychopaths, their natural ability to blend in (so they can live off the herd better) makes them strong candidates to make it in any system. A super inegalitarian monetarist imperial system like our own is an extra juicy jungle to thrive in. Proportionally to psychopaths' population (1% for the true clinical ones and up to 6% for the subclinical ones), they are overrepresented on Wall Street and in prison (8% and 20% respectively for clinical ones).

Subclinical psychopaths can just be some breeds (ESTP/ENTP/ENTJ/INTJ backgrounds seem like good general prerequisites) whose T function and lack of empathy is so high as to make them exploit the herd (rather than improving it as has been the trait most admired in leadership by history) without a second thought. In fact it may be unfair to even have the concept of a "psychopath" as it represents just another breed of human that is adept at preying on fellow humans with elaborate disguises. Psychological pathology after all, represents mental "sickness" and mental "sickness" is just majority's flawed way to single out and focus on fringe breeds and individuals whose backgrounds make it extra difficult for them to make it. Not one breed is logically and generally more normal/abnormal or maladaptive/adaptive than the other since "normal" and "adaptive" is the bell curve average for a particular society.

Understanding these physiological differences can allow people to have more pride in who they are and develop towards a truly pluralistic and more compassionate society. Human breed science doesn't have to be a nightmare world. People like Foucault, Rousseau, and Kaczynski have made strong and effective arguments on how the more technologically advanced society becomes the less free we are. We need to understand these concerns and consequences of progress in social sciences but we can't turn the clock back since luddite solutions are not just impractical but inhumane.

Understanding that there are different breeds of Homo Sapiens (with often different needs and modes of thought) can allow society to:

1) Treat, help, and nurture each type better so as to make healthier hyperspecialized types. We can have healthier and better artists, cops, scientists, etc.
2) Treat, help, and nurture mutts better so as to have better ambassadors and communicators between the strongly specialized breeds
3) Develop better science as to which breeds work best with each other so as to prevent, mediate, and solve social conflicts
4) Help identify and isolate predatory humans better so as to lessen their abuses, reduce the number of their victims, and integrate them into society more productively
5) Strengthen proportional representation democracy and bring more harmony to the herd while preventing unhealthy caste structures from reemerging
6) Increase efficiency, productivity, and general happiness of society by allowing individuals to make full use of their strengths and be more proud of their neural architecture

Lets fully embrace what science has been telling us so we can graze on this planet with less confusion. A confused herd will make a poor recipient for when the singularity arrives. Lets end with a pro-mutt quote to balance the article and emphasize perils of too much specialization.

"A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects."

-Robert A. Heinlein

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Thursday, November 19, 2009

Hoover Presidency and Obama

Hoover, a capable technocrat dealt with a deepening depression by trying to improve status quo fundamentals rather than trying to bring new fundamentals into being. Obama, a year into his presidency, does the same but worse.

Timing is everything. When a Republican held on to the presidency during 1929-1933 period of deepening international depression, half a century of Democratic party governance followed (with last vocal remnants arguably stamped out in 1994). Population's psychological association of Herbert Hoover's GOP with worst financial catastrophe in memory and inability to substantially remedy anything (during a 4 year downward spiral) was total.

These days, Hoover's name lives in infamy even though he was a brilliant and very capable micromanaging technocrat. Just like Carter, he was overseeing macro scale global decline and similarly to Carter, did not have the will to radically break from the status quo establishment modes of thinking. The reason for them not breaking with the past too rapidly is that grand declines happen over a period of years with a number of positive reversals. The gradual nature of decline allows the psyche of the political leadership to adjust to increasingly worsening reality (which would otherwise be intolerable if decline occurred in say, 2 weeks instead of 2 years). For example, after Great Crash decline of 50% from 381 to 198, the Dow recovered 33% of the losses by summer of 1930. That was the first of the great sucker rallies that continued until the ultimate bottom and socioeconomic emergency in 1933.

Hoover's administration did not have as many data metrics as exist now (concerning homelessness, hunger, etc) concerning true economic situation on main street. For guidance, they thus overly relied on the casino gambling chart for the rich (that is Dow Jones) even more than Obama administration today.

Here's how that chart looks today:

The current sucker's rally got the gambling chart up to almost 60% in 2009 from its post crash lows. Internet trading advances allow more players with better communication to participate. This means even greater potential for volatility in general (large negative and positive reversals) than in 1930s. When Hoover was in office well into the year following the collapse, his chart looked like this:

Does not look all bad right? Perhaps it looks as if some nuts and bolts need to be tightened by a gifted team of technocrats and the great bubble machine will be up and running again? Although the time for relatively radical measures (FDR style attempts to preserve capitalism) was perfect, these measures would have been politically impossible and were not seen as needed. The rest is history. As tax revenue for government to do anything increasingly dried up, Hoover had less and less tools at his disposal. His administration was in the classic gambler's dilemma of hoping for a reversal while riding an incredible wave all the way down.

The current economic depression may be even worse for United States than the last one in a number of key respects.

1) There is a lot less industrial capacity to fill up than there was in 1929

2) Unemployment after 2008 crash rose a lot quicker than after 1929 crash. By same unemployment calculation standards used in 1929, we are approaching 25% real unemployment already whereas it took 4 years in 1930s for it to get that bad then. If we mimic the Hoover era descent as well as we did the crash (half the gains gone bringing Dow back to 1996 level within months), we'll reach real unemployment of over 50% by 2012. Argentina, with half of its population below poverty line is a good recent example of what we can expect once the dollar default occurs (regardless of the form it takes).

3) Other great powers DO have often greater and often newer industrial capacity to outcompete us even if there is a political decision in Washington to use state capitalism to climb out of the depression using China-esque mercantilist system and industrial exports.

4) The government debt and budget expenditures (proportional to the size of the economy) are greater than in 1929

5) Ethnic divisions are a lot greater than in 1930s due to the number of white Americans being below 70% of population versus being over 90% in 1930s. This may hinder government acquiring enough political will to engage in real nationalist safety net provisions.

6) Modern American oligarchs are internationalists and have better means and will to move their wealth and themselves abroad if needed

My full article outlining the historical context of diminished means to climb out of the hole compared to before and some means left to Obama administration's disposal can be found here.

Obviously 80 years of technological progress means that welfare provisions will be a lot more tangible once social mindset turns towards providing them. This depression will be a lot more physically comfortable than the old one just because gadgets and developments in social sciences advanced greatly. This however does not eliminate the psychological pain born out of comparisons, thwarted expectations, interpersonal alienation (due to better communication technologies versus in person contact), and collapsing national morale of people who fancy themselves as citizens in a "superpower".

History would have been neatly repeated politically if McCain got elected. The resentment based oligarchic GOP socioeconomic structure (that Nixon first hinted on and that Reagan entrenched) collapsed under its weight in 2008 under GOP president. McCain's poor neural circuits and inability to generally surround himself with prudent people (although he did use Romney for financial advice in Sep and Oct 08) means that he would have dealt with the downward spiral even worse than Obama.

(sidenote: Of course it's possible he would be too old to care about politics as usual and would have started emulating his hero Teddy Roosevelt by turning on Wall Street. Such speculation about the "real" McCain or "real" Obama coming out when in power is useless. It's enough to keep in mind that crisis would continue deepening under the watch of another GOP leader).

It may sound ridiculous to think McCain would have accomplished even less than Obama by now but we must remember that even Hoover, the technocratic wonder boy, couldn't do much. McCain's sheer presence and belligerent posture would cause greater capital flight out of the country and quicker movement from dollar as a world reserve. Bailout to first class passengers (Wall Street) leaving the slowly sinking ship would have continued.

So now we have a rather interesting situation that just when the GOP has totally burned itself out and is in the process of disintegration, the people are associating their tangibly felt decline in living standards with the newly ascendant democratic party. Although this does not mean the democratic party will not keep winning in next elections (due to GOP infighting and shrinking economic pie with which to reward supportive factions), its potential to emerge as a monolithic long term juggernaut is greatly diminished.

Exasperation with both political wings of the oligarchy leaves people without a scapegoat for their psyche and opens the door to radicalism and rise of regional (rather than national) power centers. It remains to be seen if the key members of the international community will find it worth their resources to step in to bail United States out (to prevent potential long term geopolitical headaches stemming from social unrest in a state with many nuclear warheads and to profitably pick the bones of the country in the process). Although the bailout infusion has delayed the dollar default, it just made its consequences worse once it arrives.

On a more cheerful note, here's a political cartoon from 1930s.

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Tuesday, November 3, 2009

Credit Rating Agencies Are Financial Weapons

World needs new international credit rating mechanism since biggest credit agencies are US based and thus are pressured to distort their reporting on Western nations. 

Also a couple words on Warren Buffet's recent moves

Moody's consideration this week to upgrade the credit rating of Burlington Northern Santa Fe is a wonderful example of why the world needs an international UN supervised credit worthiness system. The reason why BNSF's ratings may go up is because of Warren Buffet's decision to fully invest into a vast railroad network covering 2/3 of United States (stretching from the key region of Texas to China's port middleman of California). As the world's second richest man and one popularly considered to be the best investor, Buffett's moves are always carefully watched and analyzed. Although calling BNSF acquisition a possible boost to Obama's policies is a bit of a stretch, the 79 year old billionaire's purchases usually resonate deeply in the investing world.

Since Buffett's Berkshire Hathaway is a key owner of Moody's,  one of his assets is about to rate up the value of another. That would be news if such conflict of interest wasn't so common as to be the norm. What has been less noticed and talked about is Buffett's recent gradual sale of his stocks in Moody's itself. The biggest shareholder in the world's biggest credit rating agency (Moody's has 40% of this market and thus the power to acquisitions cripple entire countries through rating them down and reducing capital investment flow) decided to quietly start decoupling himself from it.


The era of investigators investigating themselves is coming to an end. Moody's, Standard & Poor's, and Fitch Ratings together control majority of the world's rating market and are all based in United States. No surprise that United States continues to have the best triple A investment rating even though its macroeconomic situation and debt resemble something seen in the third world. USA's current and former satellite nations (although Germany is moving out of its satellite status now that its ever growing public debt is protected by Euro as reserve currency) benefit the most from this political protection. Japan has been famously running a public debt for years that is far above the 60% per GDP that is generally considered the safe limit in public discussion.

We're familiar how downgrades and upgrades by US credit rating agencies have been the matter of life and death for numerous countries in the past 50 years. The quality of life for endless millions of people around the world was dependent on the "expert" analysis of these corporations and the investment money it can bring. This applies to countries that aren't colonies or special friends. Moody's couldn't logically downgrade and weaken Cold War allies regardless of their macroeconomic fundamentals. Although Japan is in the same public debt company as Zimbabwe, nobody is screaming against investing in it. Naturally, the same US gov based restraint prevented the agencies from predicting the financial collapse of 2008.

Powerful countries like China cannot enter the English speaker dominated rating market since a Chinese credit agency would be in the same position when it comes to full analysis. The mere fact that people wouldn't believe a Chinese version of Moody's yet continue to listen to the big 3 in US as if it means anything (at least in regards to rating for countries as a whole) is another demonstration of the faith based nature of economics. An argument can be made that the Western world as a whole suffered decreased economic growth due to the politically motivated self restraint of the agencies whose job is to see what's worth investing in and loaning money to. Proper introspection couldn't be achieved.

It would be ludicrous for the agencies to rate each other's effectiveness or have a US government body do so. Even finding general real numbers behind any country's macroeconomic situation from IMF, World Bank, or CIA World Factbook is impossible since these organizations serve oligarchs and governments in the Western world. If IMF wasn't disproportionately influenced by US it would have prescribed the same bitter treatment to its master as it does for many countries in the world (such as fighting large scale corruption within key economic sectors). We continue to see the ridiculous spectacle of morbidly obese countries telling everybody else to get healthier (which they actually did if one looks at anemic GDP growth in the West compared to the rest of the world).

If capitalism is to remain in the years ahead then there needs to be a very robust international UN controlled credit rating agency. It has to be under UN supervision with transparency and input from all the nations and not just be an act of creation by G20 (recent switch of world's economic control from G9 to G20 just expands the ridiculous notion of a few rich nations deciding global economic policy instead of UN).

It remains to be seen whether Buffett has the intention of fully selling off his share in Moody's (and is just doing it gradually to not cause a stir) or if he still thinks there is utility in this insanely powerful organization. As for his investment into railroads leading to and from California ports bringing Chinese goods, we will soon see if that is a sign of faith in the growth of China or US. Buffet has often said that just like a great company, a great country can survive a period of mismanagement. It may very well be that he is old enough to actually have a bit of a nationalist sentiment but any investment he makes in GE or American infrastructure may be part of a bigger picture. His investment into production of electric cars in China certainly shows he thinks Chinese may beat us in this field (and this country has a lot of natural resources to transport by Warren owned rail to the ships departing for Chinese factories).

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