Five Things You Need to Know: We've Been Here Before... and We'll Be Here Again
Also, a look at what's at stake with the debt ceiling deadline approaching, the downside of dollar repatriation, and more.
1. We've Been Here Before... and We'll Be Here Again
This may strike you as very familiar:
"Because of today's terrific speed-up of information moving, we have a chance to apprehend, predict and influence the environmental forces shaping us - and thus win back control of our own destinies. The new extensions of man and the environment they generate are the central manifestations of the evolutionary process, and yet we still cannot free ourselves of the delusion that it is how a medium is used that counts, rather than what it does to us and with us. This is the zombie stance of the technological idiot."
In other words, the increasing speed of information flow, new media, how we respond to it and how it affects us is far more important than the content of the medium, which is certainly true of Twitter and Facebook and others. It's something I've written about frequently (see: The Crisis of Non-Linearity, The Increasingly Intangible Crisis, and The Crisis of the Real). Most of the content of Twitter and Facebook can easily be dismissed, but the impact of the mediums and the emergent networks transcends the content.
And then, from the same source:
"All our alienation and atomization are reflected in the crumbling of such time-honored social values as the right of privacy and the sanctity of the individual; as they yield to the intensities of the new technology's electric circus, it seems to the average citizen that the sky is falling in."
Indeed, not a day goes by that we aren't bombarded with news that the sky is falling in (see below, for example). Our technology, the immediacy of our access to information and data, both informs and intensifies our electric circus. Only yesterday, the Casey Anthony verdict turned into a Twitter circus immediately, the content of the trial and the verdict itself superseded by a bizarre publicity failure (or possibly a success if there truly is no such thing as bad publicity) by the baked goods company Entenmann's as well as a tweet about the verdict by the famous-for-being-famous celebrity Kim Kardashian; the content of the trial verdict, which she was expressing her disbelief over, was shattered by the implicit self-referential echo back to the OJ Simpson trial, for whom Ms. Kardashian's father helped win an even more famous not-guilty verdict.
But I digress.
The reason I bring up the new media quotes above are to direct you to the interview from which they were taken, and more important, to point out when this interview took place... March, 1969. Yes, 1969. A Playboy magazine interview with Marshall McLuhan. We've been here before, it seems. And we'll be here again.
2. The Downside of USD Repatriation
One thing I should have elaborated on in yesterday's discussion of the potential for a one-time tax break to allow US corporations, such as Apple (AAPL) and Microsoft (MSFT), to bring their billions of overseas dollars back home is the potential negative impact on foreign banks (see American Companies Have Billions in Cash Trapped Overseas).
One reader named Richard described the impact this way:
[T]he introduction of a tax break for repatriated US dollars will have serious consequences in Europe and may precipitate a banking crisis. A good portion of the money finds its way into the interbank market and repo markets generally via the bigger institutions (BNP, DB etc) or money market funds. These in turn finance the medium and smaller banks via unsecured or repo lending. There is already stress in these markets due to the exposure uncertainties around the peripheral sovereigns and the undercapitalization of European banks in general. Even if we assume only 10% of the offshore money comes back -- which seems small -- taking USD 150 billion out of the money markets will cause shock. You noted that the Fed has renewed the expiring US dollar swap facility with the European Central Bank ahead of its August expiry. Secondly, this would create a USD squeeze of pretty big proportions and would trigger liquidation of levered positions. So, banking stress plus forced deleveraging equals risk off in a big way and I think that would overwhelm any positives from expectations of money being returned to shareholders, jobs being created etc.
3. Chart of the Day Reveals Government's Hard Choices Ahead
Assuming you are not among the top 10% of earners in the country, the economic elites who have benefited most from the stock market recovery, then the probabilities are higher that you know what it's like to have to make tough budgeting choices on a month-to-month basis. What will you give up this month? Morning coffee? Lunch? Maybe summer camp for one of the kids? Cable TV? The choices can be difficult.
As the August 2 deadline draws near, this terrific interactive from Bloomberg Government shows what is at stake without an agreement to raise the statutory debt ceiling. Bloomberg estimates that $172.4 billion in receipts and $306.7 billion in bills come due after August 2. So what gets paid and what doesn't?
On the chart below I made some hard choices. I decided not to pay "Other" agency expenses, I cut out funding for the Small Business Administration, axed Veterans Affairs programs, halted military active duty pay, eliminated tax refund payments, funding for the US Department of Housing and Urban Development programs and even made the tough decision to stop Temporary Assistance to Needy Families and nutrition services and Education Department funding. Incredibly, that still let a shortfall of $14.5 billion. What goes next? Unemployment benefits? Good luck with that. Federal salaries and benefits perhaps. Or interest payments on Treasury securities. Certainly not defense vendor payments; it's bad enough we already cut active duty pay for military personnel. Social security benefits? You and anyone whose name even remotely resembles or sounds like yours will never win another election in your lifetime (thanks, baby boomers!). Medicare and Medicaid? Same thing.
As you can see, it's quite the dilemma. Of course, with social mood where it is, none of this is very surprising. Is it coincidental that we have simultaneous NFL and NBA lockouts, a government shutdown in Minnesota with other states poised to follow later this year? The question is whether social mood is too negative to allow for a compromise. Increasingly, the answer seems yes.
4. How We Transact... It's Going to Change
Money is a concept that's been with us for 5,000 years, and it's never been designed to be anything but a burden. You come into my coffee store and order a cappuccino, and I hit the Cappuccino button on the cash register and see that it's $3.24. And I take your credit card and type "$3.24″ into the credit card terminal. I swipe your card and give you the credit card receipt to sign. Then I take that back and staple it to the cash register receipt and give it back to you, along with your credit card. Then you take back the credit card and throw the receipts away. And meanwhile, at the end of the day I have no idea how many cappuccinos I sold because it's really difficult to access that information. It's completely useless."
-- Jack Dorsey, speaking in Wired, about his new company, Square, created to "shake up the credit card industry."
5. The New Influentials Revisited
The site director for Mindful Money, which earlier in the year published research about financial commentary, "Social Media: The New Influentials," has just launched a new site called Finance Blogs, an answer to all of the questions the company received from readers asking to recommend finance sites. They've listed over 380 sites, Minyanville among them, and opened it up for reader comments and voting. If you find Minyanville useful, please vote for us, and if you don't you can at least get recommendations for other sites to read.
Follow Kevin Depew on Twitter @kevindepew
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