The S&P 500 rose or fell more than 5% on 17 trading days in 2008. You’d go back another 50 years to count 17 more. So you might say we’ve had 50 years of volatility in just one year.

Here’s a follow-up on John Hussman’s posting last week about the bailout. He’s still the clearest voice I’ve heard out there on the wrong thinking that underlies the $700 billion bailout deal, and what the right thinking should be. May a bit of this wisdom somehow seep into Washington. NOW!

UPDATE: Here’s another bit of clarity.

When the Bulls were winning NBA championships, you could step into any elevator in the city and feel the vibe, the anticipation, the density or pressure of everybody paying attention, focusing. Perfect strangers striking up conversations, everybody assuming that everybody else was thinking about last night’s win or this evening’s contest. I think it’s happening again, but it’s not about the Cubs and the World Series (at least not yet).

I go to the hardware store today and the old thai guy who runs the place totals up my bill for some boiler parts. Then, pretty much out of the blue, he asks me, “So, what do you think about this $700 billion bailout?” Earlier this week, I went in to get a blood test and the arm sticker has his computer tuned to CNN political reports. I walk into a meeting the other day and about the first thing out of my client’s mouth is basically, “Can you believe this Palin mess?” And I’m hearing this election, the financial mess, and even conspiracy theories raised in conversations in decidedly (at least until now) non-political offices. There’s somethin’ happenin’ here, I think.

Now add to that, the President gets on the TV (finally)… but says basically, “Hey, this is really bad.” I’ve never heard of such a thing. The president’s supposed to get on and tell us it’s all gonna be okay. But then, the funny thing is, nobody seems to trust the government anymore, so when the Sec’y of the Treasury says people should be very scared, nobody seems to panic. I see a lot of people paying attention. Watching and waiting. Nervous, maybe, but not panicked. Like we’re all watching each other more than the TV, to know if everything is okay.

Yes, we’re on this big financial edge, but I think we might be on the edge of something more. And more positive. No way to know. What it is ain’t exactly clear, or so the song goes. But suffice it to say that the world is SO very upside down right now that the Cubs could finish the regular season with the best record in MLB, and if they win the world series, there is just no telling what kind of crazy strange world we could be in.

For what it’s worth, here’s the best bailout plan I’ve seen.

The Federal Reserve’s rescue has failed. So says Ambrose Evans-Pritchard, International Business Editor, at Telegraph.co.uk:

The verdict is in. The Fed’s emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed.

Recent calls for “substance”, or more commonly criticisms of its absence, in Barack Obama’s speeches remind me of so many questions I’ve heard over the years about “How does open space technology lead to action?”

When 100 or 200 people create a working agenda of 50 or 70 cricital issues, take personal responsibility for leading those conversations, and pledge to bring back the notes to share with everybody — in about an hour — that IS action. We just have to know where to look.

As to the history of the Revolution, my ideas may be peculiar, perhaps singular. What do we mean by the Revolution? The War? That was no part of the Revolution. It was only an Effect and Consequence of it. The Revolution was in the minds of the People . . .
—John Adams

Many Obama supporters might simply be thinking differently about politics, partisanship, and policy. It’s a different set of priorities, that includes the process, and the personal experience of the process. Words like cult and messiah are popping up, I think, because it looks so mysterious, as many are voting on the basis of criteria that simply don’t exist for some others. Jeff Aitken has some interesting things about Obama and self-organization and another post that includes this:

Catherine Austin Fitts warns us that we have a stark choice: we support the centralizers or the decentralizers. We support a centralizing economic system (the “tapeworm” economy, which has sucked 10 trillion dollars out of communities into globalized concentrations of wealth); or forge a decentralizing, community economics when we pull our investments (and those of our community’s institutions, like pension funds) out of the tapeworm and put them to work in our communities. The government is not coming to our rescue when “peak everything” leaves us to our own relationships with farmers and shoemakers.

The Adams quote comes from Fitts, and I’ve added her Coming Clean process, toward a financially intimate world, to the Practices Roll in the sidebar. If self-organization and Open Space are less centralized, more intimate, then is it fair to say that Obama is running a more intimate campaign and proposing a more politically intimate government? Not just “for” the people, but more “of” and “by” than ever before?

Susan Walker quoted historian John Brooks last week in The Daily Reckoning:

[It] came with a kind of surrealistic slowness … so gradually that, on the one hand, it was possible to live through a good part of it without realizing that it was happening, and, on the other hand, it was possible to believe one had experienced and survived it when in fact it had no more than just begun.

He was writing about how it felt to live during the Great Depression, 1929-1933. She was writing about US housing markets these days. I wonder if it might not apply more broadly than that.

At what point does not knowing become worse that any one of the possible outcomes? Isn’t that the moment when the next big things really get to begin? The moment when we finally decide? And what if some billions would decide all at once?

Bloomberg’s Caroline Baum sums it up the recent market movements pretty well yesterday:

Copper up, stocks down, bonds down. No, wait, it’s copper down, stocks down, bonds up. Can someone please help me get a handle on these inter-market relationships?

As I think about movements and relationships, in markets and in open space meetings …and organizations …and communities… I notice that I can indeed understand, or at least explain to myself, why things are happening. I can know, too, what is is happening now, and even what is happening next. The challenge is knowing what to do — because these two kinds of knowing, what is happening and why it’s happening — seem to happen in two different sides of brain or, perhaps more accurately still, in brain and in heart. Brain can’t really calculate what comes next. And heart can’t explain it.

What Julie Henderson calls “mutuality” is a practice in letting other(s) be as real to us as we are to ourselves. Chris Corrigan and I have been teaching Open Space and Inviting Leadership as the practice of being mutually aware of self and group, or self and organization, letting body be source of information about how I am as well as how “we” are. Today I’m remembering that this same sort of mutual awareness scales down, to where I can know what is really happening and why it is happening, simultaneously. When I can do this, I make better decisions, wise and kind, in markets and meetings.

What’s that you say, “Kind decisions? In the currency markets?” Ah yes, even in something as apparently solid, objective, measurable as trading, there is room for kindness. So easy to second guess oneself, destroy confidence, grow fear, lose focus and money and more. And, of course, it’s always dangerous to argue with a market.

Watching global market turbulence this last week, looking for clues. This bit from John Hussman, Why the Fed is Irrelevant, rings even truer today that when he wrote it in 2001…

…if you look at the statistical evidence, the relationship between monetary growth and inflation is very weak. Instead, our research indicates that inflation is primarily the result of growth in unproductive forms of government spending (basically defense spending, entitlements and other expenditures that fail to stimulate the supply of goods). The evidence both from the U.S. and other countries clearly demonstrates this relationship.

As Milton Friedman has noted, the burden of government is not measured by how much it taxes, but by how much it spends . The impact is particularly severe when growth in entitlements is high and growth in productivity is low. This is why inflation exploded after the late 60’s, and why it came down after the early 1980’s. This is why the Germans suffered hyperinflation after World War I when its government decided to keep paying workers who had gone on strike.

Always and everywhere, rapid inflation is produced by excessive creation of government liabilities without a corresponding increase in the amount of goods produced by the economy. The Fed doesn’t control this. It doesn’t even matter much what form the liabilities take. If the Germans had decided to issue bonds to striking workers instead of money, bond prices would have been driven to ridiculously low levels, driving interest rates to extremely high levels, creating an unwillingness to hold non-interest bearing money, resulting in a rapid deterioration in the value of money, and hyperinflation just the same.

Uh-oh.

Here are two things I read today about money. First the bad news via Bill Bonner’s Daily Reckoning newsletter…

The U.S. Treasury Department also comes up with a number for how much Americans actually owe, thanks to federal deficits. Are you sitting down? It’s a chunky number: $750,000 per household. That’s what you get when you take the total commitments of the feds - $49 trillion -and divide them by the number of families.

The Financial Times goes on to note that it took 204 years for the U.S. government to accumulate its first $1 trillion in debt. Now, it adds that much every 18 months. George W. Bush has added more debt than any president who ever lived. In fact, he’s added more debt than all the presidents who ever lived…combined.

…and then the good news, via Penny at BALLE-BC, an excellent (even nine years later!) YES! magazine interview with Bernard Lietaer, usually credited as the architect of the Euro…

…in France, there are now 300 local exchange networks, called Grain de Sel, literally “Grain of Salt.” These systems - which arose exactly when and where the unemployment levels reached about 12 percent - facilitate exchanges of everything from rent to organic produce, but they do something else as well. Every fortnight in the Ariege, in southwestern France, there is a big party. People come to trade not only cheeses, fruits, and cakes as in the normal market days, but also hours of plumbing, haircuts, sailing or English lessons. Only local currencies accepted!

I wonder if we have any such currency communities springing up around Chicago… and what gifts, skills and goods I might offer in such exchanges. What good will fancy clothes and advanced degrees be in these local marketplaces?

UPDATE: Lietaer in Ode Magazine, as well.

UPDATE: more on money beyond peak oil

My last post posited the possibility of investing in people and relationships as the new gold. In the West, I think we tend to devote ourselves to amassing personal stocks of money and assets, emphasizing our piles of toys, house, stocks, and gold over the care and feeding of our webs and flows of connections, our people, the other gold.

Since I wrote that post, I’ve discovered the story of Martin Macy, in the San Francisco Chronicle. Here’s a guy who worked 41 years as the mail delivery guy in a bigger and bigger law office. Over the years, he became renown for his devotion to his co-workers, the firm, and to kindness as practice, the kind of guy who reports to work at dawn and brings doughnuts for the lawyers pulling all-nighters. When he was canned for efficiency reasons, some of his old friends and colleagues got together and are well on their way to creating an annuity that will support him for the rest of his life.

Invest wisely!

I’ve been reading the mania about gold. In the last couple years, gold stocks, funds and the real stuff have rocketed upward. Gold now trades at a 25-year high. Now what?

When some of us were musing about a new rush for gold in the year or so after 9/11, I wondered why anyone would buy it. Can’t eat it and can’t burn it for fuel. I saw the relatively self-sufficient farmers I knew as really having things figured out. They knew where food came from. And heat. With those two things come health and hearth, family, neighbors, and the rest of what sustains life. Buy farmland, and learn to use it. Now that’s real security, or so it seemed to me then.

Now, in one of these gold newsletters, I catch this as justification for the meteoric rise of metals prices: “…people still need something to trust.” Isn’t that interesting? So I understand all the economics of these markets. I understand why the dollar will decline, why Saudis and Chinese and others will buy gold instead of some other fiat currency. I understand the history of gold as money. But how do we know that this isn’t just the next big inflationary mania, except that the supply of gold grows slower than the supply of paper money, dot.com stock options, and two-bedroom condos. Can we ever find real security?

No matter if the dollar crashes, gold is still worth something. It’s more real than other fiat (faith-based) currencies. But there’s just not enough of it to go back to the gold standard is there? And no way to go back further to gold coins in the marketplace. How will I use gold to buy bread?

Looking ahead then, it seems gold can only be another mania. And then, what to trust? Perhaps if we finally discredit the ultimate stock of wealth, we can get on with focusing more clearly on the flows of wealth. What will each of us do in the next several years, for the people right here in our own neighborhoods, that will secure our retirements in human-scale and personal ways?

Might these bubbles in tech stocks, bigger emptier houses, dollars, gold, pension plans and the rest of wealth accumulation make some sort of opening to trust in the flow of energy, rather than the stocks? Might we rediscover how to move in local community markets, and trade that in for what we have learned to grab in global financial markets?

One of the things feeding global gold prices are exchange traded funds, which allow small investors to buy gold bullion in lots of 100 shares, like we already buy stocks. So what would a similar investment vehicle look like at the community level? What would make precious, but hard-to-deliver, stuff like healthcare and education, more easy to invest in? How might we structure a mania in community assets and investment?