Robert Paterson's Weblog

How will this play out?

Foreclosures and unemployment are still rising.

Goldman, JP Morgan Chase and now B of A announce massive profits.

CIT and other lenders struggle with bankruptcy.

The Financial Sector gets more concentrated in fewer hands

The "stimulus" has not reached main street

Many of the jobs are not coming back.

Wall Street think that this is good news.

How does this feel to you? Is this progress or what?

Here is what the Wall Street Journal thinks - it will surprise you - via Arianna Huffington

Afghanistan - Steven Pressfield's Advice - TRIBES!

As our Afghan campaign enters a new phase and as casualties rise, it is surely worth thinking again about what might be success and so what should we do. A first step of course is to understand what we are up against. Here is Steven Pressfield offering his perspective in the concluding (5 of 5) videos on this very topic - It's all about understanding the Tribal Mind.

The state is losing it - As with the financial crisis - the Experts missed this

More shootings and killings in Vancouver this week.

Two people are dead, two others injured and one home is riddled with bullets following a wave of shooting incidents in Metro Vancouver Tuesday night.

In the second fatal shooting of the night, about an hour later, Vancouver police found a man in his 20s slumped over the steering wheel of his car in East Vancouver.

Surrey RCMP also handled two shooting incidents on Tuesday evening, but neither resulted in fatalities.

This violence in BC is directly linked to what is going on in Mexico. The gangs are sorting out who is going to run North America!

Mexico is under siege. The US and Canada are not immune from this trend.

Since the beginning of 2009 more than 1,000 people have been killed in drug violence. In 2008 6,290 people were killed, double the 2007 death toll.

Since 1993 the City has been known for the violent deaths of hundreds of women - ‘las muertas de Juárez’ (The dead women of Juárez). According to Amnesty International , since February 2005 more than 370 bodies have been found, and over 400 women were still missing. Most of the cases remain unsolved.

In the next three weeks the Mexican Government is sending up to 5,000 new troops and federal police to the country’s most violent city, Ciudad Juárez , where law and order is on the brink of collapse

Until recently the state had control of the key aspects of society - it controlled the use of deadly force and it controlled the money via its taxation powers.

Now gangs have better weapons and are not afraid to use them. (USA Today) Maybe more importantly, they have the money and will become the new "banking" system.

The financial crisis will accelerate the rise of the financial and muscle power of the gangs. Of course the "Experts" missed all of this as they did the collapse of the financial system.

In Italy the Mafia has become the only Bank in town. (Washington Post)

As banks stop lending amid the global financial crisis, the likes of Mauro are increasingly becoming the face of Italian finance.

"It's a fantastic time for the Mafia. They have the cash," said Antonio Roccuzzo, the author of several books on organized crime. "The Mafia has enormous liquidity. It may be the only Italian 'company' without any cash problem."

At a time when businesses most need loans as they struggle with falling sales, rising debt and impending bankruptcy, banks have tightened their lending to them.

Italian banks, which for years had been widely criticized for lending sparingly to small and medium-size businesses, now have "absolutely closed the purse strings," said Gian Maria Fara, the president of Eurispes, a private research institute.

Many experts say organized crime is already the biggest business in Italy. Now, Fara said, the untaxed underground economy is growing even larger. "Certainly I am worried," he said. "The banking system doesn't work, and the private one that is operating is often managed by organized crime."

The reality is that who controls the money and the violence controls the people - more and more  gangs have more money, better weapons and more will to use both than governments. As the financial crisis gets worse, their relative power will increase.

The answer is not longer sentences.

We have to start to see the root causes of their power - that our policies have made drugs so valuable and that our society has made taking drugs so much a part of how life works.

The clock is ticking. There may already be no way back for Mexico. What is our response?

Drugs - Cash - The risk to the state

Watch CBS Videos Online Here is this weekend's 60 Minutes piece on how the Cartel's are taking over Mexico. The power of the gangs is spreading to the US.

Last week Canada introduced tougher penalties for gangs in reaction to an escalation of gang murders in Vancouver and other cities in Canada.

The war continues to go badly in Afghanistan.

What is going on? I think that what is going on is that the drug trade delivers so much cash that those who are in it can buy whatever they want. They buy politicians and police. They buy weapons. They can intimidate anyone. Would you give evidence? And so they buy control.

They threaten the state - any state.

As we are seeing in Mexico and Afghanistan, we are losing against this power.

So what to do?

How could we make the trade less valuable? Ironically, the more we attack it, the more valuable it becomes.

In 1933, Roosevelt repealed prohibition. The Mob lost a huge amount of power.

What if we bought all the production in Afghanistan? What if we treated drugs like alcohol?

Would this not take most of the money away from gangs and give it back to the state?

Could this be worse that what we face now?

Are you thinking like Umair Haque?

I love his mind:

Where do new rules come from? Here are five questions every decision maker should kick off 2009 by asking - and five results summarizing some of the new rules we've learned over the last year at the Lab.

***

What is the role of marketing in a world where consumption must slow?

In the 20th century, marketing was the pusher of a consumption addiction: Madison Ave's game was to create perceived value by "differentiating" the same razors, blades, and toothpaste. At the Lab, we've found that companies who create perceived value are significantly less profitable and more vulnerable than companies who are rethinking marketing to create real value. Think (the awesome) Nike Plus.

What is the role of distribution in a world where consumption, savings, and investment will accelerate in volatility?

In the 20th century, advantage was attained by seizing or building distribution channels. At the Lab, we've found that value chains built on inert channels are significantly less profitable than value chains built on circuits - two-way channels, where context flows in one direction, and goods in the other. Think (the totally radical) Threadless.

What is the role of production in a world where consumption becomes savings?

In the 20th century, economies of mass scale led giant, evil corporations to a cost advantage. The flipside was a world of homogeneous, mass-made widgets overflowing from bleak exurban shelves. At the Lab, we've found that scarcity pays: companies who can rescale production at the micro-level are disproportionately more profitable and powerful. Think (the industry-reshaping) Zara.

What is the role of strategy in a world where the game is no longer about winning more consumption than rivals?

In the 20th century, strategic thinking helped players "win" wars fought against rivals - the most strategic player "won" the greatest relative share of consumption (market share, mind share, etc). At the Lab, we've found steeply diminishing returns to orthodox strategy - because, like actual war, it destroys tomorrow for today. The 21st century demands a rethink of what's "strategic" - versus what's merely selfish. Think (the eminently anti-strategic) Google.

What is the role of innovation in a world where greater investment will flow to reinventing moribund industries?

In the 20th century, innovation was about processes, products, and services: that's why most boardrooms are still investing in lower-order innovation. At the Lab, we've found that higher-order innovation - business model, strategic, and management innovation - is associated with significantly more powerful and durable value creation. Think Apple (reinforcing simple product innovations, like the iPod and iPhone, with disruptive new value chain designs, via iTunes and the Apps Market).

Here's a final thought.

The need for boardrooms to to reconceive and reinvent business was never more urgent than it is today - because the clock is ticking. The new rules we've discussed at length over the last year or so aren't the only ones out there: there are plenty more in store for radical innovators. But the time to do so is now: by the end of 2009, our expectation is that organizations that aren't powered by at least 2-3 new rules will start going slowly but surely extinct.

This is the only kind of thinking that is going to help enterprises survive and thrive.

Have you noticed that even the pundits are worried now? Here is the normally boosting WSJ:

Economists Kenneth Rogoff of Harvard and Carmen Reinhart of the University of Maryland have a particularly grim view of the economic outlook.

In a fascinating new paper that Mr. Rogoff presented this weekend at the annual meeting of the American Economic Association, they offered some sobering details on what has happened to other countries in the aftermath of severe financial panics like the one the U.S. is now experiencing.

Their bottom line: If history is any guide, the housing market might not bottom until 2010, a stock market rebound isn’t in sight, the unemployment rate could exceed 11% and government debt is about to soar.

The work is an extension of long-running research by the two professors on the history of financial crises. In past work, they compared the U.S. situation to financial crises in developed countries. This time, they are adding in the experiences of developing after concluding that severe emerging-market crises aren’t all that different from crises in developed markets.

The paper is refreshing because it’s straightforward — it isn’t overloaded with Greek formulas and questionable regressions. Instead, they look at what happened to 22 economies ranging from Indonesia in 1997 to the U.S. in 1929 after a major crisis. (Most of the countries are from the past quarter century, though strangely, they lump in Norway from 1899.)

They find that unemployment rises by 7 percentage points on average after a severe financial crisis and doesn’t peak until four years after the crisis. The jobless right bottomed at 4.4% last year. If history is a guide, it could rise above 11% by 2011.

They find that housing downturns last six years — meaning a recovery is still about three years away. Moreover, stock-price declines last three and a half years and total 55%. That would put the Dow Jones Industrial Average below 6500 before this is done. Moreover, government debt reaches 86% of gross domestic product –- or $12 trillion. This last data point on government debt is particularly sobering. Despite all of the hope that policy makers are putting on fiscal stimulus, it’s not like it hasn’t been tried before.

The Greatest Tragedy of our age - We rejected this

Much of we face today - stems form failing to follow his lead

A Sombre Reminder at Year End - The Price of Afghanistan

Source icasualties.org

What is the Mission? It can't be "democracy" - how does a soldier deliver that?

What is the Mission? It can't be defeat the Taliban/Afghans - no great power, not even Alexander the Great has done that?

What is it?

Lockerbie - 20 years on - Minos Kulukundis

What could be worse? My niece and nephew used to take this flight home from school often.

20 years ago my pal Minos Kulukundis was on the flight. Thinking of you today Minos.

Mumbai - Looks like 911 - Provocation drives the result that they wanted

I am confounded by most of the commentary. It's all about technique, what should have been done, what should be done.

Why are we not talking about why it was done?

It was surely done to:

• Derail closer relations between Pakistan and India
• Take Pakistan off the Frontier and onto India - make it easier for the Taliban
• Destabilize Mumbai and re-ignite religious tension and so undermine the States of both Pakistan and India
• Force India to overspend on security
• Undermine the new Obama presidency

So they win - if these things happen.

Looks like they are winning already. Of course the "people" are angry. They are the "lever" that the terrorists are pulling - that why they did what they did.

Why can't we see this?

Terror - Mumbai - 911 - The Emotional Battlefield

As a boy, I used to box. I was a thin boy and faced much heavier and stronger opponents. I learned though that if I could get a good punch in early to my opponents nose that he would invariably lose his temper and flail away at me. I usually won those fights. My opponent had allowed his anger to blind him.

I see a pattern here between 911 and the events unfolding in Mumbai as I write these words.

The choice of targets are deeply symbolic and are designed to provoke the emotional immune system that reinforces the collective fears and prejudices of the host. It's an attack on the immune system.

The aim is to so provoke, by the selection of the target and by the manner of the attack, as to have the host lose all sense of proportion for its response. So like an auto immune disease, we then destroy ourselves by our over reaction.

The simmering distrust and hatred between Muslim and Hindu boils over. The selection of British and Americans keeps Obama from offering the hand of peace. The choice of targets ruins the Indian Tourism industry for an extended period.

This is the Art of War in action. They are using our own energy to destabilize our own world.

If the general is not victorious over his anger and sets them swarming like ants,

One third of his officers are killed

and the walled city not uprooted

This is the calamity of attack

Art of War Chapter 3 - The Denma Translation

Look at what 911 did along these lines. We have lost much of our liberties and the use of law itself. We have lost much of our moral compass. In waging war on a peacetime society, we have lost much of our economy. In giving up so much of our power to the executive, we have unbalanced the constitution.

The challenge is that democratic states like America or India are especially vulnerable. We can rely on some hot head to call for vengeance and the people to rush to agreement. It was the same in 1914 - Belgian Babies and later crucified Tommies - were stories that created the will to fight a total war.

Can the leaders see the risk of being manipulated and hold back from creating a storm of rage in India?

One hundred victories in one hundred battles

is not the most skillful

Subduing the other's military without battle is

the most skillful

I pray that wisdom supersedes mere reaction.