I’m probably not alone in noticing a sharp decline in revenues from standard business activities on the internet — whether that’s from advertising, affiliate sales, or direct selling of products and services.

All the weather vanes are swinging south and, with forecasts that the credit crunch could last for two more years, may stay that way for some time.

How can we buck this trend and not only hold our own, but actually come out ahead? We should look at professional investors, especially the big, successful ones.

The Warren Buffetts and George Soros’s of this world build large cash reserves during bull markets. Buffett has a war chest of tens of billions of dollars and is looking seriously at Britain and Europe for bargain buys during the downturn. There are plenty of them.

For those of us with more modest resources, Soros perhaps is a better example. He it was who sold sterling “short” during the currency crisis of 1992. He is reported to have earned over a billion dollars in a few weeks.

Effectively he bet against the pound’s ability to remain in the European tied currency system — then called “the snake” or ERM — in the face of massive speculation against it.

He was right and did Britain a huge favour by scuppering the crazy political experiment. We owe it to him that the UK is not in the single currency, the eurozone, right now.

So what is “short selling” and how might it benefit internet businesses?

When you “buy long” on a stock or investment, it means buying it for an expected increase in price. But when you go short, you are anticipating a fall.

Short selling is also the selling of a stock that the seller doesn’t own. When you short sell a stock, your broker will lend it to you. The stock may come from the firm’s own inventory, from one of its clients, or from another brokerage firm. The shares are then sold and the proceeds credited to your account.

Now here’s the rub. At some point you must cover the short by buying back the shares and returning them to the broker. If, as you’ve gambled, the price drops, you can purchase them at a lower price and pocket the difference, minus brokerage fees. For example, if you could have predicted the ups and downs of the Microsoft-Yahoo skirmishes recently, you would have cleaned up.

Of course, if the price rises, you lose. Essentially this is about winning in a falling market. With money currently chasing every store of value, like gold, oil and certain other commodities, funds are draining away from many assets and valuations are falling — just look at your house price.

Talking to a trusted broker about short selling may well be a way to replace lost sales in medium-sized internet businesses. With falling markets set to continue, turning logic on its head may be the only way to stay afloat if things get really bad.

Any investment takes a lot of nerve of course — and single-mindedness. A few months ago I was intent on going long on gold. However, another call on my cash intervened and I forfeited the many thousands of dollars I might have made on the spectacular rise in the gold price to around $1000 an ounce.

Going short is one way to survive in a falling market. As sailors say, “any port in a storm.”

Note: This post is not intended as investment advice or to influence your investment choices in any way.

That old pendulum is swinging again and at a speed that threatens disaster for banks and economies alike.

During the Thatcher decade (1980s) the politburo socialism of the 1970s was jettisoned all over the world — apart from in isolated outposts like Castro’s Cuba. Both the Berlin Wall and the Soviet Union crashed to oblivion, and Mao’s China turned to its own version of capitalism.

That long swing to market dominance over centralized control has continued for nearly 30 years. Until now.

It’s about to go into reverse because of the vast mountains of debt built up in the system — an indebtedness that threatens to bring down the whole financial setup, investment and retail banks, and the “real economy” too.

Bank regulators are even now sharpening their swords ready to cut into the once-impenetrable jungle of bonus-led speculation and rampant hedonism that defines the financial markets, once the Rolls Royces of any respectable country.

Should we allow the pendulum — which more and more resembles the scythe of the Grim Reaper — to retrace its path back to the 1970s? Have we learned nothing?

Let’s just glance at the current situation in the markets. A spokeman for French bank Société Générale, itself a victim of the speculation culture, is deeply pessimistic, “We expect global equity prices to fall by up to 75pc from their peaks as a deep global economic downturn unfolds over the next few years.” A 50pc collapse in earnings is on the cards, made worse by an “Ice Age derating of equities”.

A 75pc fall in stocks matches Japan’s Lost Decade in the 1990s when they fell around 80pc.

The danger is that ultra-low rates will fuel another credit bubble which will put the real problem — huge debt levels — off for another turn of the screw, when it will surely be even worse.

Ambrose Evans-Pritchard of the UK’s Telegraph believes, “The capitalist system is now so deformed by debt that it requires ever lower interest rates to keep going. It survives on perma-bubbles. Monetary rigour at this late stage would endanger democracy. How did we ever let matters reach this pass?”

The UK regulator — the Financial Services Agency (FSA), which failed dismally with Northern Rock, has just published a report on the affair which highlights the problems regulators have. The FSA simply lacked the up-to-the-minute expertise on the newest financial instruments of the people it was regulating. To make matters worse, it was grossly understaffed for the job it was asked to do by government.

Rather than going back to the Dark Ages of government control and draconian restrictions, it would be better to do a deal with the banking system to co-opt top bankers for a year to the regulators. They could be paid identical salaries and averaged bonus equivalents as the banks pay out. They would then return to their institutions to keep up with new developments.

This would be expensive and would probably cause outrage in the public sector, but it would be far cheaper and less demoralizing than turning the clock back to the bad old days of politburo socialism.

The depredations of the Sarbanes-Oxley Act in America, following the Enron collapse, is a measure of how to overdo regulation. Let’s learn from the past in order to safeguard the future.

In the meantime the vast columns of red ink splashing across the economies of the world will unwind fitfully and very painfully for years. There is no alternative.

We need to hold our nerve and steady the pendulum.

Banks are pulling back from the industrial securitization of risk that has blown up so spectacularly in their faces.

So called collateralized debt obligations (CDOs) are the supermarket sausages of the financial system — nobody knows what’s in them, and most prefer not to.

In the old days, banks took the risk of lending money on themselves and ensured that borrowers would be able to pay it back over time. Securitization means that they can lend to any Tom, Dick or Harriet, package up the debts into large parcels of small slices from many borrowers, and sell them onto other banks and finance houses.

When house prices are rising fast, and rates are low (thanks to the Iraq war — see yesterday’s post), there will be no problem. How quickly the weather can change.

Now there’s a rush back to caution and traditional virtues — and not before time.

The Private Equity industry is currently holding its global jamboree in Germany. What a difference a year makes. Just months ago (pre-August 9, to be precise) the Private Equity barons were borrowing billions to take over all manner of companies, many blue-chip, and some national strategic giants. Now the sources of funds are drying up and the world has become a much more anxious place.

Not so long ago, securitization of talent was the goal for what HG Wells called “originative intellectual workers” — the kind of people who work from a laptop and a cell phone, hot-desking from place to place. They were advised to raise money on future earnings by selling shares in themselves. Specialized markets were to spring up, something like the London Stock Exchange’s AIM market, to flog these things to admirers with more money than sense.

I suppose if you turned into a Bill Gates or the Google guys your investors would be happy — but how many of us do?

The whole notion of securitization is targeted on bypassing the present reality in favour of an unknown future, using other people’s money — often their pension funds or insurance pots. In essence it’s no different from betting on racehorses.

Now the bubble has burst and cold realism has dawned, even for the godlings of private equity and their blood brothers, venture capitalists.

The beneficiaries will be China, and the sovereign wealth funds of Asia, including the Middle East. Western financial centres have permitted power to pass from settled democracies under the rule of law, to the potentates of totalitarian regimes whose oil deposits or cheap, exploited labour will soon allow to rule over us in many covert ways yet to be revealed.

And why? The abandonment of risk management in the cause of easy pickings.

Who will hold the banks to account?

Nobody — it’s too risky.

As we’ve been saying here in Syntagma for some months, a long, deep worldwide recession now looks more likely than not. Opinions are hardening among key players, principally in America and Britain.

Davos : the great and the good are assembling here amid world crisis

Yesterday, the Wall Street Journal proclaimed : “U.S. warning signs point toward deep recession”.

Most economic analysts regard the stock market as an early indicator of economic conditions in a year or 18 months time. London’s market has lost more than 13 percent of its value in just three weeks. Wall Street was closed yesterday, but will doubtless catch up today.

The current consensus is that 2008 will be bad, but 2009 could be much worse. The second decade of this century may resemble the 1930s in the worst-case scenario.

Problems continue to pile up. Banks have been writing off around 14 percent of the 2006 batch of collaterallized debt obligations (CDOs). This percentage is currently being upgraded to 19 percent, ensuring more pain to come. The total exposure by banks could be as much as $500 billion.

Making matters worse, the insurance companies, or Monolines, that underwrite possible defaults, are also in trouble, with two of the biggest in the U.S. said to be close to Chapter 11 status (a form of bankruptcy protection against creditors).

Moreover, the very banks relied upon to rescue Western institutions, like the Bank of China, are also said to be exposed to the U.S. sub-prime slice and dice fantasy.

Another crushing problem — now endemic in developed countries — is the level of personal debt. A typical person now spends one-seventh of their income on debt repayments, compared to around 10 percent a decade ago. In Britain alone, household debt is running at an unprecedented £1.4 trillion ($2.75 trillion). Add to that the massive levels of public spending in recent years and it’s clear this can’t be sustained for much longer.

The principle of “moral hazard” means that sooner rather than later everyone has to face up to their debts and start paying them off. There are no lenders out there now who will aggregate them at a lower repayment level. The adjustment to lower debt levels is desperately needed.

Unhappily, it will represent very hard times for many, some very poor indeed, and a massive writedown of Western assets, many transferring to Asia. The loss of that income in future decades will materially affect the West’s ability to dominate as it has done in the past.

Many businesses are also going to be in deep shock this year and next. Those that survive will have low levels of debt, and shares in safe hands — not bankers, buyers or lenders who are desperate for cash to rebuild shattered balance sheets.

So, is a recession a good outcome or is it as disastrous as it seems? On one level it’s totally disastrous, especially to those innocently caught up in the credit crash. It’s also bad for the reason that we’re being pulled down by voracious greed. Greed by the banks for giving NINJA morgages (no income, no job, no assets) and then selling them on in bits and pieces. Greed also by the banks that bought them. And greed by consumers in running up such heavy debts in the good times, leaving little to repay them in the bad.

However, this can also be seen as a necessary correction to a self-inflicted train wreck. Moral hazard demands a reckoning. Our Faustian deal with the Devil has a repayment package at its fulfilment. Soon, we will know the worst.

Update : The Fed has just cut American base rates by an unusually large 75 basis points or 0.75 percent, a sign that Bernanke is serious about taking a machete to rates to head off a recession.

The White House has also indicated the President may increase his upcoming fiscal stimulus (tax cut) from the $150billion already announced.