It is Obvious

Chris Rick has got altogether too much to say

Archive for November, 2011

Say it like it is

Posted by chrisrick13 on November 30, 2011

It is obvious: predictions carry risk

I keep hearing the words: Tory Cuts.  Apart from it being the coalition I find the simplification offensive.  The government is making cuts to spending because it has to, not because it wants to.  You could call them Labour cuts because they are a consequence of their profligate spending over the previous 14 years.

I also hear it said with derision that the deficit is not reducing and borrowing is going up.  Now you can’t have that both ways.  If borrowing is going up then the government is not doing cuts at all!  It is merely trying not to borrow as much as was borrowed by Labour.  Indeed you cannot stop a speeding train on a sixpence.  All you can do is put the brakes on.  For the first few minutes when the speed drops from 100mph to 99mph nobody notices much difference.  If the conductor comes on the intercom and informs you that the train is braking as there is a problem up ahead then you have a sudden interest in deceleration.

So Mr Balls blames all the ills of the economy on the actions of the government.  We all know that when a government acts in the economic sphere it truly is the speeding train.  It takes months or years for their measures to have an effect – that is the problem.  There is little that can be laid at the door of the government…yet.  Perhaps the biggest is that they have contributed 18 months of inaction to tag on to a similar amount of Labour inaction when they should have carried out bank reform.

So what can be attributed to the government?  One thing I can think of is that they have published a plan for deficit reduction and are sticking to it.  This has had the immediate effect of driving the cost of our borrowing below that of Germany.  It has bought us time.  So they had better not waste it.  They will.

For the biggest bit of fiction of the last few days I turn to the OBR whose figures the government uses to base its planning on.  We are one day away from December.  There is one month of the year left.  The OBR has reduced its prediction for UK GDP growth from 1.7% to 0.9%.  This is not a reduction but a halving, and it is being done 11 months into the year.  This is not a prediction.  I note that it now is nearly in line with what the independent observers have been saying for 11 months.

I should be smug as they have also just obeyed Rick’s law: half a ‘good’ number from an official source.

Their predictions for future years obviously have no credibility whatsoever.  Have you noticed that GDP growth numbers into the future always come out very close to 3%?  No matter you can apply Rick’s law and half them.  Expect 1.5% over the long-term.  Next year we will be having 0.35%.  That is good news for me.  If GDP growth is 3% then we will be doing twice what we are doing now in 23 years.  We will not manage that and it is relevant to me as I propose to still be here in 23 years.

It is obvious: predictions carry risk but only if you believe them


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Ohhhhhhh – you can’t touch me I’m part of the union, you can’t touch…

Posted by chrisrick13 on November 30, 2011

It is obvious: you should always strike

This morning I knew that if I heard anything on the strike it would annoy me, but it started well.  The BBC began their news with “Here is OUR main story…”  My emphasis and a subtle point but it is setting the scene that it is what they are choosing.  I could say that there are plenty more important stories out there today.  But that is irrelevant, they have given clarity.

Things went down hill after that.  First there was an interview with Francis Maude.  I don’t like him as I dealt with him over IR35 and, as you might expect, they dealt with us and it poorly.  He was challenged that they had not met the unions since November 2nd.  His response was that it was quite right they had not.  That was a top-level framework meeting.  Since then there were individual detailed discussions going on with the various pension funds that were highly technical.  There is not one pension fund for all the unions so there had to be many of them for things to proceed.  He said that a negotiation meeting had taken place yesterday on X pension fund, there was another tomorrow on Y pension fund and one on Z pension fund the day after.  I waited with bated breath to hear Dave  Prentis, the Unison leader, who was up next.  He could nail Maude if he had misrepresented anything.

The interviewer asked a fairly anodyne question which got a meaningless answer until he said, and I can only paraphrase: the pension fund money was being taken to pay off the deficit caused by giving the banks so much money.  The interviewer just passed on to his next question.

Where is my marksman for both of them!  That statement is wrong on so many counts I can barely bring myself to discuss it.  You can’t pay off a deficit.  A deficit is merely an accounting of the difference between spending and income.  The banks have not been given any money.  It might be a mighty long time before we get it back, but the money put into banks was in return for assets.  The banks have been lent a lot of public money…and are paying a heavy cost in interest payments that are helping keep this country afloat.  The pension funds are not being raided to give money to bankers.  The pension funds do not have enough money to meet their obligations.  These are promises made many years ago in a different world.  Either the government puts money in or the workers have their pensions reduced.  If the government puts money in where does it come from…you and me.  It carries a body count if other services are reduced.  So we have to put £50bn into government pension funds.  This one will hurt.  When I come round to collect all that money that has been spent on your behalf I’ll have to add £2,000 for those pension funds.  Have you got it ready?

Prentis, and I find it difficult to give him an honorary title, then re-iterated that they had not met since November.  At last the interviewer stood up to be counted and mentioned the detailed meetings.  Prentis dismissed them as irrelevant and insisted that meetings at his level were the only important ones.

My wife surfaced from the bedroom and had a good go at taxing the bankers to pay for all this.  I agreed with her that we should hit them with an immediate tax of, say, 10% – teach them a lesson and help drive the business to Frankfurt – what need do we have of, what is now the biggest industry and contributor to HMRC, in this country.  If there are 10,000 bankers in the City getting a million pounds each then the 10% tax will bring in £1bn.  The pension shortfall is more than £50bn.

It is obvious: you should always strike…when you know very well what you are striking for

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Posted by chrisrick13 on November 29, 2011

It is obvious: I’ve got a bunch of deckchairs

I tried.  I really did.  I even put the Hoover on instead of having a lunch break.  Still I heard a bit of George Osbourne’s speech.  Unfortunately I heard Ed Balls’ as well.

I don’t need the detail.  You don’t.

Our economy was left in a mess by Labour.  Criminally so.  (The Conservatives have done the same often enough in the past.)  The famous note left in the treasury that they had spent all the money sums it up.  That money was not spent well.

Along with that we all personally borrowed and spent.  It gave us an economy with good growth for many years.  (Who says growth is a universally good thing?)

The Coalition have no hope of fixing things without the nation suffering a lot of pain that occurs in the form of reduced living standards.  Alas rather than us all seeing 5% sliced off, it is very uneven.  Those losing their jobs see 80% sliced off.  Those in demand see pay rises and increased or maintained living standards.

So the government could only ameliorate things.  This is a difficult thing to defend.  Things are bad but they would have been a lot worse with, in this case, Labour in power.  The trouble is that this can never be proved even if it is true…and it is.

The big thing is that George has a plan and is sticking to it.  He is going to work hard to reduce deficit and maybe one day even debt.  As a result the smart bunnies sitting at trading desks in the bond markets have decided that they are still ready to buy UK debt.  Were he to waver then they would immediately tack on tens of billions to the UK interest bill.

However the UK had been buying a lot of long-term debt at very good prices.  So were he to switch to another plan then tomorrow’s small £X billion debt auction might cost many times more in interest but only 10% or so is rolled over each year.  There would still be time.

While we watch our economy descending into the abyss we can stand and watch others going at faster rates across the other side of the canyon.  At least we won’t have won the race to the bottom and there will be less distance to fall.

It is obvious: I’ve got a bunch of deck chairs – I think there is still time to rearrange them.

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Iron now while the strike is hot

Posted by chrisrick13 on November 29, 2011

It is obvious: strike now

The strike tomorrow is relevant to family Rick as the only family worker is a teacher.  My wife does not get a teacher’s pension so striking for better conditions on a pension is not something she is particularly bothered about.  Her boss moved from Croydon with her to Waltham Forest so they are going to have a meeting at his house in the morning rather than travel over there.  Then I have to collect the remains from the pub in the early afternoon.

The government is reducing teacher’s pensions because they thought it a jolly fine idea to stick a spike into them to ginger them up a bit.  They also thought that by alienating lots of teachers it would improve their election chances next time round.  They also thought that a days unpaid leave would give them some well deserved rest and an opportunity to build some new skills or improve old ones.  It is a win-win situation.

The current funding of the teacher’s pension is not enough to meet the promises made in the past, in a very different world.  They were promises made in good faith assuming a stable, ordered, exponentially growing world (sic).  They cannot be met other than by the government putting money into the pension fund.  Many billions would have to go into the fund.  Were it £10bn (and it is more) then I’ll need £100 off you.  I’m coming round so much to take money off you nowadays, perhaps it would be better if you set up a standing order.  I am passing it all on to the government…honest.  I’m thinking of taking a small percentage as a management fee.

Perhaps it might be a good idea to put it to one of the union leaders: the government will have to put money into the pension fund to maintain the current levels of benefit so where should it come from?  Perhaps the NHS budget, maybe the education budget, the ambulance service, police, cancer research, social services.  These union leaders are demanding money for their members.  It will have to come from some other union’s members or maybe just those that do not have a union?

Don’t forget that borrowing money to spend now and pay back later, no matter how good the cause carries a body count.  So will any subsidy by government of the teacher’s pension fund.

Just thought.  The strike is estimated to cost £1/2bn.  That is cheap – only a tenner.  I can get that when I collect the teachers’ pension fund contribution off you.

It is obvious: strike now while you can

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The meaning of life

Posted by chrisrick13 on November 29, 2011

It is obvious: good news

I have been infected by reading some philosophers.  I’m sure that they say in a thousand pages what could be said in ten.  Occasionally I come across interesting words though often I feel there is something in what they say but I’m blowed if I can work out what it is.  I just read one who said that a circle is all the points equidistant from a stationary point all in the same plane.  I suppose a sphere is all the equidistant points but more definition might be needed.  This is basic geometry.  Then he goes on to say that if you draw a circle on paper you have something less and something more.  The line has thickness and is made of graphite.  It has colour.  It is not perfect and as it is drawn on paper it is not all in the same plane because paper is rough.  I have to agree with him…so what?  No women philosophers so far…perhaps they have better things to do with their time?

I read today that Hilton Hotels are going to build a load of hotels and create 1,500 jobs.  They did not say that there also will be a some temporary jobs building the new hotels.  But there is imprecision in those words.  There will be 1,500 new jobs in the Hilton organisation.  If one of their hotels that sleeps 200 people in an area where there are habitually 1,000 people in hotels each night, then if it fills its beds the hotels already there will lose 200 person-nights.  They will likely shed some workers or stop trading.  The number of people employed in hotel work in the area will not increase.  Hilton may be more efficient than the others, it might pay less or work them harder.  So the amount of hotel worker money in the area might decrease.  If all the hotels keep all their staff and Hilton employ more staff, then by one mechanism or another the wages of the hotel staff will decrease.  A step on the way down to a dollar a day wages.  What would be interesting is would be a statement that somehow the money was going to magic’d up get 200 extra people paying for hotel rooms in the areas where Hilton is going to put its hotels.

Nationwide published its house price survey showing a surprising strength as houses increased in price by 1.6% over the last year.  At the time when inflation (RPI) has been 5.6%.  Thus the value of the houses in real terms have reduced by 4% or about £6,600 for an average house.  Add in the running costs and your house has cost you a great deal.  I know it is where you live and the government has done all it can to keep the interest costs low but wouldn’t you have been better selling and renting?  You would have an extra £10,000 plus of buying power.  The point is that while it is better than house prices going down, it is not un-qualified good news.

It seems to work the other way with bad things.  Inflation at 5.6% (I like to use RPI because few of us live under the railway arches at Charing Cross) and wage inflation at 2% (ish).  So we are all poorer by 3% a year.  I say all because it is an automatic reducer of the amount that we spend…in adjusted terms.  So at a time when the government is trying to increase the enemy (growth) they have colluded in getting high inflation which give them a 3% handicap before they start.  Given that we are saving more and not borrowing and spending as much there is another 1% or 2% handicap.  That we have any growth at all is a miracle.

While I am at it I hear that the government is failing because it is not increasing growth.  I agree with the second half of that statement.  We can grow in a number of ways.  One is to make stuff and persuade johnny foreigner to buy it.  This at a time when said johnny foreigner is cutting spending and trying to get us to buy more of what they produce.  Another way is to build stuff from natural resources, consume it ourselves and raise our standard of living.  Trouble is that we don’t make ‘stuff’ any more.  I’m not sure how a government can get growth.  It can improve things by becoming more efficient which mostly means doing and spending less.  Anything else it might do means inefficiently meddling and reducing growth.  Putting thousands of people on the payroll, directly or indirectly does not do it.  So the next time you hear demands for growth ask them (in your mind) ‘how you going to do that then’?

When you see a circle next time, remind yourself that it isn’t as much as you might have come to believe it.

It is obvious: good news/bad news

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Good news

Posted by chrisrick13 on November 27, 2011

It is obvious: I have a lot of time on my hands

You know me: one for good news.

Belgium is an interesting place.  They have not followed the current model of replacing a democratic government by one appointed by…I’m not sure who.  They don’t have any government!  They seemed to be bumbling along quite reasonably until Dexia.  I say until, but Dexia has been what it is for quite a while.  I can better describe it as until Dexia had to come clean.

Indeed the ‘coming clean’ is what we are all waiting for.  Banks are a big one.  European governments are another one.  The trouble is that once someone does come clean, someone else has to and another and another and very quickly the truth is out.

No matter, Belgium has had its credit rating reduced.

Hungary has just had its debt downgraded to junk levels.

Italy and Spain are paying record rates for their new debt and the price of old debt is forecasting higher levels.

The Irish are feeling aggrieved.  It has gone very quiet over there.  They have taken on all the bank debt and are suffering.  They ‘took one for the team’.  Indeed they did.  Now the population are in no mood to take any more.  Indeed they are starting to mutter about an improvement in their rescue terms given what they see on offer to other nations.  Do not forget that this is the nation that refused to ratify both of the recent European treaties and had to be asked a again so that they could get the right answer.  I wonder how many of the Irish rue the day they were persuaded to vote ‘Yes’ second or even first time round.  I also wonder what chance there is of getting the Irish to vote ‘Yes’ to anything in the future?  Perhaps if it came with a free £100bn gift they might.  Of course if they got that then everyone would demand one…Germany would have to dig deep to find that kind of money.  So you can be sure that there will be no more treaties requiring national ratification for a long time to come.

That is just a sample of the big things that are happening.  It is only a sample – there is much more out there.  The best is last.  Martin Weale has been interviewed.  He is a member of the MPC.  To remind you, this is the bunch of jokers whose sole task in life is to maintain inflation at 2%.  It sits at over 5% at the moment and they are doing nothing about it except QE which is generally accepted to have an inflationary effect.  I will quote him from the BBC interview:

It might be prudent to wait to see that the sharp fall in the inflation rate which we have been forecasting actually happens before making any further decisions

There are two observations I would make.  First: is this just a hope, something you are crossing your fingers and wishing for?  Or is it something you have evidence of and have been working towards.  Second: given the BoE record on forecasting there is a cast iron guarantee that inflation will not fall.

Again, I looked for good news and didn’t find any.

It is obvious: I have a lot of time on my hands.  Maybe I should fill it with a job.

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Posted by chrisrick13 on November 26, 2011

It is obvious: I am a squirrel

Today in my local shop I wandered into the adult section.  This was eye opener!  I am, of course, talking about Sainsburys and their breakfast cereals.  In there I found Allbran and Porridge.  I was too shocked to try the children’s’ section.

Some long time ago I had 5 friends round for us to indulge in our favourite hobby.  I am tired of the banter so you will have to imagine what it might be…though on occasion it involves whips and leather.  My wife had made us two marmalade cakes for the Saturday and gone out shopping.  (Now, there is something I would not own up to in public.)  The first one was simply magical and went in minutes.  However there was something wrong with the second one.  I could barely cut it and nobody could get their teeth into it.  I hammered it into a number of bits that resembled large lumps of gravel and lobbed it on to the back lawn.  We thought to have a giggle at the birds trying to eat it.  First up was a squirrel though.  He grabbed a piece and must have sat for 5 minutes trying to eat it.  In the end he scampered to another part of the lawn, pulled up some grass and buried it.  He spent the morning doing that to our huge amusement.  There are still bits down there today.

For many years our house has been a subject of interest to property developers.  This enabled me to avoid re-decorating for much of that time.  Several years into the process we decided to empty our lofts so that in the event of a sale we could move quickly.  I recommend that you move house every few years solely to force you to consider the stuff that you keep and to have a jaundiced view of it under the pressure of a move and dump it.

I pulled out much stuff that I had last seen 23 years ago and then only briefly as I transferred it from the loft of the previous house to this one.  Much of it is still around, but at least it has been in our living space and some of it has been ejected after tripping over it many times.  That process can turn something you treasure into something you hate and then it is gone.  I think we are on a downward spiral.

I have all my financial records going back many years as I said in an earlier blog.  This will enable me to take on HMRC to try and recover money.  Of course keeping these record is clear evidence that I am autistic, have OCD (Obsessive Compulsive Disorder) and have tendencies to be a mass-murderer or serial killer.  Check with my wife for the latest diagnosis.

I had many SF books that I gave to charity shops convinced that I was giving away thousands of pounds worth of rare books.  At least a good cause got them.

As part of this process I had a rummage through the garage.  A lot of useful bits of wood were wrenched from my forlorn grasp and dumped on the skip.  These did include the leg off the antique French armchair that I was saving to stick back on and a mystery scrolled bit of oak that I now realise came off the antique grandfather clock.  So they did cost.  I checked the half empty cans of paints and chemicals left over from various DIY adventures.  Fully half of them rattled when shook.  As for the rest I know now why they could find no WMD in Saddam Hussein’s Iraq.

I found 4 of the flat 4-way multi-plug extensions with short leads.  In one of them I have now assembled 4 rows of the cubic multi-plugs.  That is 16 for those of you who are mathematically challenged.  In my defence I have to say that I inherited many from my sons before they fled the country and at one stage I was running 8 old PC’s doing grid computing on cancer and smallpox research…but 16?

This is the problem.  I buy stuff because I need it.  When I am done what do I do?  Obviously I keep it.  Then the next time I need it I have so much stuff there is no way I can find it.  The problem is that I know I have one and will spend a couple of hours searching before stomping off to the shops to buy another.  I am in a bad humour as I know that I now own two of whatever it is when I only rarely need one.  Often the first, which has been in hiding, comes out when it knows it is safe and it now has a companion it can talk to on the long dark nights in the garage.

I have had an idea though.  I am going to create a list of stuff that I have.  This not so I can find it next time.  I will copy this list to my neighbours and friends.  At any time if they need one then they can borrow mine.  I will warn them that if I need anything my first action will be to check with them if they have one I can borrow.

It is obvious: I am a squirrel they only lose their nuts whereas I think I’ve lost my marbles

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Poor little Euro

Posted by chrisrick13 on November 25, 2011

It is obvious: the Euro is not to blame

I spend a short time each day trying to find out what is going on in world finance.  It is very difficult to verify what I read.  Also everyone has an agenda and so the ‘information’ has to be read with that agenda in mind.

Today I did not have to search far to find:

My hope is to find someone who will be giving out good news, but I don’t think there is anyone.

A credit crunch is different to a sovereign debt/default spiral.  The latter might cause the former though it jolly well should not because everyone I have read could see it coming.

The article details the next credit crunch.  Note that it does it from the perspective that it is already here.  Banks are not lending to each other.  A good reason is each bank knows its own position and would not consider lending to another bank in the same position…in which they know they all are!

The banks will not make their ‘positions’ public knowledge.  This is because it is sensitive information that will affect their positions adversely – they say.  However were the bank in a good ‘position’ then it would be hugely advantageous to them to declare it.  All the money in the world would flood to them.  That they don’t declare their holdings or ‘position’ is an admission that they are bad.  Catch-22 is on the march again.

So it is entirely possible that there will be another credit-crunch long before the Euro faces up to a sovereign default, probably by a PIIGS (BFH…).

I really had not considered that one.

It is obvious: the Euro is not to blame – people are to blame…all of us

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Financial crisis solved!

Posted by chrisrick13 on November 25, 2011

It is obvious: HMRC acts very quickly

I am today not in a good humour.  I normally am as you can tell from my blogs.

I do self-assessment tax returns.  This is not because I’m a rich ba****d but because I run my own company and am a company director.

Four days ago I got a threatening letter from the HMRC.  The first line was that they had contacted me previously – no they had not.  I owed a small amount of money but when I tried to pay it online when I filed my tax return it would not accept the money.  I thought to wait for their demand.  The letter said it was being handed over to their debt collectors.

All of that is moot as they had made a mistake and owed me money!

I have now just finished my sixth call over the last few days on expensive 0845 numbers.  Many of those calls lengthened by long waits at the beginning.  At least it is no longer Greensleeves.  I think that the government is going to clear the deficit off my phone bill.

However the timeline is that I cleared the amount owing (about £350).  I delayed but I didn’t want to have all my records turned over to a debt collection agency.  So I paid.

Then I chased the mistake.  They owed me £430.  They gave in on this quickly and are sending the £83.

So I contacted them about the £350 which I now want back.  Yes I can have it back…but it will be 42 days before I can get it!

This error was expressed as an underpayment from previous years.  Given that I pay (when I owe money) with a cheque…because if you don’t then they set the dogs on you…I could not owe from previous years.  This is how the system works.

I think that they have deliberate error in there.  Why?  Because now that I go back I see that there is an underpayment every year on my tax return.  The system is so complex I just assumed that it was some adjustment that I did not understand.  Nope – it was an error on their part.  I could earn a lot of money today.

My wife complains that I have all my financial records in storage back to when I was a student.  Maybe today they will start to earn their keep.

So if you have under-payments from previous years check them carefully.  You might not have underpaid and HMRC might just owe you.

It is obvious: HMRC acts very quickly – except when it is to your benefit

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Posted by chrisrick13 on November 23, 2011

It is obvious: nothing changes

A long time ago when I weighed a deal less than I do now and had knees that worked properly I ran 5 London Marathons.  I ran one without any training due to injury: I was not going to miss a hard-to-get slot.  If it came up during conversation people would marvel at my feat.  However I was not so impressed.  I would reply that if the phone rang and in a thick Irish accent someone would say “This is the IRA” (which sets the timeframe and now would be an Arabic accent saying “This is al-Qaeda”) and would go on “we don’t like you, but if you run a marathon for XXX charity in five months time we won’t shoot you” then it would not matter who you were or what shape you were in…you would run it.

I was motivated.  Does not matter what the motivation was – I had it.  I have had other motivations in the past and look back at some of the things I have done in amazement.  I can’t imagine how I managed them.  The simple answer is that I had motivation then that I do not have now.

So it is with many things today.  I have recently been re-sensitized to energy in general and oil in particular.  I am convinced that while we might not run out of oil in my lifetime that we will move to a state where demand exceeds supply.  This will happen even with the coming world recession.  The market will operate and prices will go up to depress demand.  Except that national interests might take over and other actions be taken to guarantee supply beyond market forces.

You can read much about oil and its prospects – I do not need to repeat the arguments here.  What is beyond doubt is that there is a limit.  What is in debate is how much there is and how much can be grabbed.  For example Saudi Arabia is, to say the least, coy about how much it has.  Some net exporters are expanding their consumption and might soon not be.  Oil, while it has not run out yet, could be in short supply very suddenly.  What would that mean for us?  It would mean a lot of pain of one sort or another: energy costs rise so much that we cannot heat our homes, no petrol/diesel for private use or severe rationing, rolling power cuts every day.  What would be our response?  The whole nation would focus on acquiring alternative energy.  Just about anything the government demanded funds for would be given.  In a few short years (10+) we would become self-sufficient in energy.  Life might be pleasant (or not) but it would be different.  Those 10+ years would be full of motivation.

I can’t avoid economics.  So far we have borrowed a lot of money and spent it.  I hope you think you got value for money over the last 20 years.  Largely because of debt the world economic system has a few problems.  But what is the effect in this country?  There is a lot of entertaining news coverage.  ‘Johnny-foreigner’ seems to be suffering in lots of places around the world due to his profligacy – quite right too.  In this country?  A few people have stopped working and get their income directly from the government instead of via a salary.  But nobody died out there to mis-quote McEnroe.  I hear a lot of words as I have already noted but see little action.  So it is a matter of waiting for something to cause large pain to lots of people.  Then there will be action.

What I find painful is that it is possible to prepare to act even if action is not possible until the pain arrives (bloody democracies), but we don’t.

It is obvious: nothing changes until enough people suffer enough pain

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