Wednesday, 13 April 2016

The 5 phase of the global crisis

Since 1984 (in Denmark and in the 1960ties in e.g. the USA) the globalization has gradually but with accelerating speed reduced the industrial production in “The Old Industrialized Countries” and simultaneously their companies has become internationalized.
As the prevailing economic theories did not enable an adequate understanding of what was happening, it was believed that the successful international expansion of national companies was a sign of success for those nation states too.  It has now been proven that it is only the activities taking place within the national economies that benefit said country.
Due to that misconception, very loos economic policies were continued resulting in a bubble. When the bubble burst in 2008 we saw the FIRST PHASE of the crisis where especially the financial sector but also the business community in general was severely hit.   
All ideas of successful national growth based on “nonphysical production” were suddenly abandoned and focus was reoriented to just saving the old industrialised economy. That was done through the national states (FED, ECB and all the other central banks) taking over the risk and some of the “bad loans”, and through the unprecedented low rates of interest the bubble economy was then in fact continued. That was the SECOND PHASE.

Due to the fact that the old industrialized countries – especially in a time of crisis – still were the most reliable economies, their currencies did not tumble, but due to their gradually decreasing spending power they could not import quite as much from China and the other newly industrialized countries as before. This resulted in a slowing down of the mainly export oriented growth in e.g. China. This was the THIRD PHASE.
Due to the national banks enormous and continued outpouring of liquidity (especially the ECB and FED) an open crisis was still prevented. Those three phases resulted never the less in a global downturn, depressing raw material prices, especially the price of oil that had seen a sharp production rise due to new shale oil technology. That was the FOURTH PHASE.

Before the crisis China, and the other newly industrialized counties and raw materials producing countries and firms had seen a huge rise in their wealth. That surplus had in great part been reinvested in the old industrialized countries. Now that the crisis has hit China and others, two opposing trends are emerging . On the national and cooperate scale investments are being withdrawn from the old industrialised counties to compensate for the economic reductions. On the individual scale capital are pouring out of China and other second and third world countries to safe havens in the old industrialized countries.  Those two opposing trends are still being played out, but as they both are the result of the continued downturn the inevitable result will be that the negative effects will spill over to the old industrialized countries, that by now has stretched their ability to intervene.  That may be called the FIFTH PHASE of the economic and production crisis

As said major crisis has still not been recognised but are explained as isolated events – economic crisis - China crisis - oil crisis - raw material crisis - corruption crisis - tax evasion crisis – and so on, the next phase the SIXTH PHASE where the general societal level in the old industrialized countries will be further reduced resulting in political troubles. 
Such a development will probably (officially) also come as a great surprise to the economists and the politicians.

The SIXTH PHASE has already materialized in the form of BREXIT protest votes, the Trumph candidacy, and the chaotic political situations in the Mediteranian countries of the EU!

For a deeper understanding of the basic economic mechanism go to:
“The fundamental causes of the crisis”
“History is repeating itself”

Thursday, 6 March 2014


Classic Greece faded away, the Roman Empire collapsed eventually, and now "The Old Industrialized Countries" are sliding down the same slippery slope after 600 years of unbroken progress!


The Classic Greek city-states flourished on the basis of production of goods and seaborne trade. The success was so great that the next natural step in the expansion of their activities was the establishment of colonial towns out in their markets in southern Italy, northern Greece and the Black Sea region. The consequence of this development was that the satellite cities / colonies gradually established their own production of goods to trade in their home markets and in even more distant regions.
In the beginning the people of the Classic Greek city-states were closely linked to the people of their colonies and everything was still ok.
As a result of the colonies development of their own production they gradually bought fewer goods from their Classic Greek city-states and also became more and more independent. Due to this development the Classic Greek city-states thus lost the economic surplus that was a precondition for their high cultural and societal level and consequently went into decline.
The success of the colonies resulted in the continuation of a wide spread (less sophisticated but very vigorous) Hellenistic culture. The peak of this development came after the conquests of Alexander the Great and the subsequent Hellenistic state formations.

In the Mediterranean region new powers developed. The Phoenicians had success with maritime commerce, and Rome gradually incorporated the communities on the Italian peninsula in their economic and political system. With the coastal areas on the Italian peninsula already colonized the Roman expansion strategies became for a long time land oriented.
In order to develop dynamically a society must have a political system that reflects the economic forces and their fluctuations. As the Roman expansion strategies on the Italian peninsular included full economic and political integration of the annexed communities that were on the same developmental level as Rome, the republic continued to thrive.
The subsequent expansion of the Roman Empire outside the Italian peninsular however was equivalent to the Classic Greek city-states colonial expansions. The novel element being that Rome continued to exert economic and military power over the colonies / provinces.
The provincial governors were de facto local dictators who were not held accountable for the development of their provinces but only for delivering taxes to Rome and maintaining the military grip over their province.
The unique quality of the commercial dynamics is that everyone involved has a direct personal (and political) interest in cooperation and development, while an economy driven by tax collection and military power just motivates those involved to rake-off society.
The consequence of the shift was that the commercial interests on the Italian peninsular became of less and less importance thereby changing the political balance in Rome from democracy to dictatorship / imperial rule.
Gradually Rome itself was reduced to being the administrative center without real economic and political significance. The military ruler, the emperor who controlled taxes and loot were in possession of the real power.
Although the empire expanded it became more and more obvious that the societal dynamics had been lost and that a gradual societal decline of Rome had begun.
Long before the final collapse of the Roman Empire, the dissolution trends were evident, and at the end the ruling emperors did not even trouble themselves with manifesting their power in Rome. Rome itself had by then lost even its symbolic value!
 The mechanism leading to the decline of the classic Greek city states, that production and trade moved away, was thus also the cause of the decline and final collapse of the Roman Empire.

Just as the decisive shift of the development of the Roman Empire took place long before the economy showed any sign of crisis, the crucial shift for “the Old Industrialized Countries” took place several decades ago.
In the U.S.A. the internationalization started after World War II, but it did not really make an impact before the 1960s. From the 1970ties and onwards it has been evident that the standard of living for the middle class American had stagnated, and that a gradual economic polarization were taking place.
A polarization that resembles that of the Roman Empire. The super rich get richer and the income of the majority of the population stagnates.
In Europe that development started later, in Denmark the shift occurred after 1984, where the foreign exchange restrictions were lifted and it thereafter became "an official national project" to move production and companies abroad! Initially this new development was slow, but gradually as more and more companies had success with that strategy, the development accelerated. The Danes reasoned (and unfortunately still believe) that what is good for the companies are good for the national economy. By now it has been independently documented that it is only those company activities that are situated in a country that are beneficial to the country.
Because of the lack of understanding of the above described economic and developmental mechanism, the international success of national companies were taken as proof of national success, and great were the surprise when the bubble burst! 

Just as the expansion policies of the Classic Greek city states and of Rome looked like huge successes, but in actual fact were the beginning of the decline, the internationalization successes of “the Old Industrialized Countries” are actually the beginning of the end of their 600 years long economic and societal flowering. A more detailed description of the mechanism can be seen in:

The belief that globalization would result in increased national economic growth has unfortunately proved to be unfounded. The internationalized companies naturally place their activities where it is most profitable and will rather employ cheaper foreign labor and experts than expensive “Old Industrial Countries” labor and experts.

It is still "The Old Industrialized Countries” national task to maintain a well-functioning society, education, infrastructure, hospitals and other welfare services and defense, but the production and economy needed to meet all these economic demands are with increasing speed fleeing the “Old Industrialized Countries”.

Due to the prevailing economic understanding expansionist economic policies were unfortunately used leading to the financial bubble.
 What looked like economic progress was in fact growing recession in Denmark and in the other "Old Industrialized Countries" too. 
  As stated above, this is not primarily an economic crisis, it is " The Old Industrialized Countries” production crisis, that have had and will continue to have growing economic consequences.
In fact the present economic policies are a continuation of the bubble, but now it is being financed by the FED and the ECB!
This is not a business community crisis it is the crisis of the “Old Industrialized national states”!

Sunday, 29 January 2012

Comment to: The Yin and the Yang of Corporate Innovation

Thank you for the above mentioned introduction to present day "state of the art" innovation.

The very successful fundamental dynamic mechanism of the capitalistic system is founded on the systems ability to motivate the individual through (economic) self interest.

Internally though firms never the less expects employees to perform optimally and creatively for a fixed salary and pep talk! That is parallel to how the feudal system was functioning!

As long as a firm is spurring enthusiasm and attracting the best and most creative employees such a model functions well.

When firms (however great) no longer do that, even massive investments in R&D do not pay off! As can be seen with GM, IBM, Microsoft, Nokia - and so on. 

As you will see

 there exists a much more dynamic approach which takes several crucial human factors into account.

Firstly the present mental barrier against giving the creative employees a fixed % of the proceeds derived from their creative achievements has to be overcome.

The apps. marketplaces are primitive forerunners of such a development

Secondly the inventive process has to be split so that the creative do not have to bother with developing their ideas into products or marketing those products.  

Tuesday, 29 November 2011


Comment to

It is fine to learn from past historic events, but unfortunately this is not a 1930tieth crisis and the major problem is not the most indebted Southern European countries but the fact that all the Old Industrialized Countries continue to be uncompetitive. In that situation there is no chance of a speedy recovery and to continue to prop up everybody and everything will just weaken those countries that we expect to help us out of the crisis some time in the distant future!

A part from the fact that this crisis by now has lasted almost 4 years where the suggested remedies have been tried and retried without producing the desired results it is important to understand the real cause of the malady.

There is a lot of focus on what we should do in the present disastrous situation, but it is conspicuous how little energy is used to understand the fundamentals. It is just assumed that we have been overspending!
It is thought inspiring that on the basis of that assumption the best remedy should be to continue spending by bailing out even the most inefficient countries that furthermore have cheated!

By now it should be obvious that something is fundamentally wrong. Up to the point where the crisis emerged the Old Industrialized Countries had had growth rates of 2 – 4 %. If all the unveiled “overspending” shall be accounted for it will amount to much more than 4 % a year since the last dotcom crisis! The implication of this is that ALL the Old Industrialized Countries have had huge and growing deficits for years. Such deficits does not build up in ALL the Old Industrialized Countries at the same time without there being a fundamental flaw!

Friday, 25 November 2011

Wishful thinking!

writes as if Angela Merkel is in a position to save the Euro. Angela Merkel lives in one of the truly democratic countries where it is the Bundestag and the citizens that decide what is best for the country.
Although stopping the absurd propping up of unwilling and uncooperative Southern European countries will have grave consequences, it is hard to imagine that the German electorate will sacrifice their own rather stable position in order to continue the dubious attempts to maintain a status quo situation.

It is not only the South European countries that are in trouble. All the old industrialized countries including Germany are in trouble. Apart from the present attempts to construct a viable solution through a new treaty, the focus should be redirected from the “howling and screaming money industry”  to  the much graver problem, namely that the old industrial countries no longer are able to earn enough money to maintain their present socio economic position.

The fundamental and much graver problem, that even the best functioning European countries no longer are competitive, are getting too little attention.
The cause of the economic crisis has up till now primitively been explained as the result of too much spending, how can anybody be satisfied with such a primitive explanation?!!!
The economic crisis and the production crisis are in reality two sides of the same coin
until that is understood and accepted no real cure can be implemented!

Wednesday, 17 August 2011

Comment to: Four Things to Fix

Wishful thinking!

If insight and good will were the dynamics of development, the human race had reached the perfect nirvana ages ago!

It is important to have visions and suggestions, but the driving forces of society are fundamental mechanisms. Even if you understand those fundamental mechanisms, it is only possible to change the direction of society if such a mechanism is in a balanced state where a small push can make it alter cause.

In France at the time of the Revolution the feudal forces had been so oppressive that it resulted in a brutal revolution, and short after a regression to dictatorship (Napoleon). 
In Denmark the intelligentsia of the nobility saw what was coming and started a process where the land laws were changed and the peasants freed from serfdom. No violent revolution took place and instead a modernisation process was started leading to one of the most societal advanced countries in the world. 
The positive development in Denmark was instituted by changing the fundamental flaws of society and subsequently a dynamic process developed making way for a massive popular cultural and educational ideology that contributed to changing the feudal society to a modern democratic society. 
Had the fundamentals of  landownership not been changed to the satisfaction of both the nobility and the peasants, a smooth and non violent transition would not have been possible.
To understand the fundamental mechanisms of today go to.