Why "This Sucker Is Going Down"

Once the contagion starts spreading, loose money won't put the fires out.

As the nation's political and economic leaders struggled to contain the 2008 financial meltdown, President George W. Bush famously summed the situation up: "If money doesn't loosen up, this sucker will go down."

Eleven years into the loose money recovery, this sucker is finally going down for reasons that have little to do with tight money and everything to do with the inconvenient fact that none of the structural problems have been addressed, much less actually fixed.

We live in a bizarre world dominated by magical-thinking, a world in which the Federal Reserve creating more dollars out of thin air is supposedly the solution to everything, while all the knotty structural problems--unsupportable pensions and entitlements, unsustainable dependence on debt to fund everything from infrastructure to a new iPhone, a sickcare system that is bankrupting the nation, a higher education system that is looting an entire generation for diplomas with marginal market value, a runaway National Security State that burns trillions on unwinnable wars and lies about it--are left untouched because they're, well, difficult, and it's so much easier to say that looser money will solve everything.

Alas, loose money has created a new set of metastasizing problems that will bring this sucker down: widening wealth-income inequality, the only possible result of our system of creating and distributing new money to banks, financiers and corporations; soaring systemic leverage that few see, much less understand; and perhaps most perverse, yet equally unnoticed, loose money has widened the gap between the real economy and the top layer of arcane finance to the point there is literally no connection at all.

The happy story about debt-dependent capitalism is that thriving companies borrow money from our wunnerful banks to invest in new factories, research, software development, etc., hiring millions of top-notch people--top-notch!--at generous salaries to boost productivity and make the entire nation wealthier.

Alas, it's all a fraud. What actually happens is banks "invest" the new money in faster High Frequency Trading (HFT) computers so they can skim even more profit from the rigged "markets." Productivity increase: zero. Social benefits: zero. Economic benefits to the nation at large: zero.

Virtually all the loose money created by the Fed is socially useless financial activity, enriching the few at the top of the wealth-power pyramid who own the financial machinery of repo's, derivatives, FX swaps, leverage, and all the other tricks of the financial trade that has completely disconnected from the real-world economy.

The conventional media constantly hypes the fantasy that trade deals matter, holiday sales matter, employment numbers matter--none of that matters. The big money is made by gaming the financial system, buying regulatory approval, i.e. legalized looting, funneling a few measly millions to craven politicos who have zero understanding of how the nation's financial system actually works, and then running a monstrous skimming operation behind the complexity thickets of "modern" finance, which all boil down to the same toxic concoction that's destroyed economies throughout history:

-- The unlimited greed of those at the top.

-- No real oversight or limits on financial gaming of the system.

-- Abundant central-bank loose money to fund speculative activity in rigged markets.

-- 100% socially useless financial activity.

-- No limits on leverage, so every $1 of financial legerdemain can spawn a $100 dollar bet.

-- Total dependence on debt to fund the government, consumer spending, corporate buy-backs-- everything.

This sucker is going down, and sooner than we think. The Fed can create trillions out of thin air and give it to banks, financiers and corporations, but they can't force them to actually invest in the nation's real economy or even buy the assets the Fed so desperately wants them to buy, i.e. stocks.

The banks and financiers have used the Fed's trillions to enrich themselves for eleven years, and nothing will stop their legalized looting except a collapse of the entire machine. The great karmic irony is they've rigged and gamed the system so rapaciously, absolutely confident there's no end to the loose money, that they've overlooked the increasing fragility of the entire system they've ruthlessly exploited.

Once the contagion starts spreading, loose money won't put the fires out. The idols and false gods (The Fed et al.) will fail most spectacularly, and the karmic fury will not abate until the every last skim and every last con has been consumed.

My recent books:

Will You Be Richer or Poorer? Profit, Power and A.I. in a Traumatized World (Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Wendell D. ($25), for your outstandingly generous contribution to this site-- I am greatly honored by your steadfast support and readership.

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The Taxonomy of Collapse

The higher up the wealth-power pyramid the observer is, the more prone they are to a magical-thinking belief that the empire is forever, even as it is crumbling around them.

How great nations and empires arise, mature, decay and collapse has long been of interest for a self-evident reason: if we can discern a template or process, we can predict when the great nations and empires of today will slide into the dustbin of history.

One of the justly famous attempts to lay out the stages of expansion, zenith, decline and collapse is Sir John Glubb's 1978 The Fate of Empires. Succinct and deeply informed, Glubb's essay lists these stages:

The Age of Pioneers (outburst or Boost Phase)

The Age of Conquests

The Age of Commerce

The Age of Affluence

The Age of Intellect

The Age of Decadence

The slippery slope to collapse--decadence--is characterized by greed, corruption, irreconcilable internal political rifts, moral decay, frivolity, materialism--hmm, sound familiar?

All of this fits the S-Curve model which I've described here many times, for example:

But what triggers the collapse of a weakening but still functioning empire? For that, I propose a taxonomy of collapse. A taxonomy is a system of classification that groups organisms or types that share characteristics and origins.

What taxonomy of collapse does history suggest? I would start with:

1. Bolt from the blue: a fast-moving, unexpected crisis that overwhelms the usual defenses and responses of the empire. An invasion by previously unknown forces with superior technology and/or organization fits the bill: the Mongols in Eurasia, the Spanish in the New World, etc.

Extremely contagious and previously unknown infectious diseases like plague and smallpox are also bolts from the blue, devastating populations with no immunity. It is estimated that 80% or more of the population of North America died from exposure to smallpox and other European diseases, in many cases long before the victims had ever seen a European, as the diseases spread much faster than the invaders themselves.

A drought that never ends is another unexpected catastrophe that quickly depletes food stores.

These bolts from the blue can strike at the same time: one reason why the small-in-number Spanish forces conquered vast empires in the New World was the empires had already been fatally weakened by diseases introduced by Columbus decades earlier.

2. Irreplaceable declines in essential resources. Food tops the list, as a decline in calories leads to weakened immune systems and heightened odds of pandemics spreading and a subsequent drop in the number of workers needed to support the empire's vast infrastructure.

The book The Fate of Rome: Climate, Disease, and the End of an Empire makes a compelling case that the Western Roman Empire centered around the Mediterranean suffered from a slow environmental transition from an unusually wet era that enabled grain to be grown in previously marginal areas to a drier era that no longer supported the immense grain harvests needed to feed the empire.

Other forms of depletion can also sap the empire of essentials: forests are cut down, silver mines are tapped out, nearby sources of slaves (labor) are no longer available, and so on.

The imperial machinery that is accustomed to there's always more somewhere refuses to trim its expenses, elites refuse to lessen their skim, and since the fat of elite excess is retained, eventually the muscle of military power and trade decay, leaving a hollowed out empire on the edge of a precipice awaiting one final kick into the abyss.

3. Reversal of fortune. Military misadventures top the list, as invasions of nearby competing powers are in effect last-ditch gambles to acquire desperately needed wealth and resources to prop up the status quo. When the imperial army is defeated and destroyed, there are no longer sufficient resources and recruits to rebuild the army.

4. Internal civil conflict: civil wars and political conflicts that break out into society and the economy end up consuming the last of the empire's seed corn, just like an invasion of a bordering empire that fails. Once the conflict is resolved, there are no longer enough resources left to support the imperial infrastructure.

Like Nature, History offers a near-infinite variety, but just as Nature fits into taxonomies of organisms, history can be shuffled into its own taxonomy, however messy and imperfect it might be.

These triggers of collapse can overlap, of course, accelerating the final decline. All complex hierarchical systems are intrinsically fragile and prone to disruption; we don't see the fragility or vulnerabilities until the decline has reached the terminal phase. The higher up the wealth-power pyramid the observer is, the more prone they are to a magical-thinking belief that the empire is forever, even as it is crumbling around them.

My recent books:

Will You Be Richer or Poorer? Profit, Power and A.I. in a Traumatized World (Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Brian M. ($10), for another marvelously generous contribution to this site-- I am greatly honored by your steadfast support and readership.

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Suppressing Dissent Guarantees Disorder and Collapse

The frantic efforts of am exploitive elite to eliminate dissent only accelerates the regime's path to collapse.

Regimes that are losing public support always make the same mistake: rather than fix the source of the loss of public trust--the few enriching themselves at the expense of the many-- the regime reckons the problem is dissent: if we suppress all dissent, then everyone will accept their diminishing lot in life and the elites can continue on their merry way.

What the regimes don't understand is dissent is the immune system of society: suppressing dissent doesn't just get rid of pesky political protesters and conspiracy theorists; it also gets rid of the innovations and solutions society needs to adapt to changing conditions. Suppressing dissent dooms the society to sclerosis, decline and collapse.

Dissent is the relief valve: shut it down and the pressure builds to the point that the system explodes. Regimes that no longer tolerate anything but the party line fall in one of two ways: 1) the pressure builds and the masses revolt, tearing the elite from power or 2) the masses opt-out and stop working to support the regime, so the regime slowly starves and then implodes.

Here in the U.S., the suppression of dissent is the work of the corporate media and the Big Tech monopolies: Facebook, Twitter and Google.  As Mark St.Cyr and I discuss in a new no-holds-barred podcast (1:08 hours, 4 segments), Big Tech is effectively suppressing dissent via shadow banning, de-platforming and de-monetization:

-- shadow banning: the audience who gets to see your content is throttled back to a fraction of your pre-shadow-banning audience. The mechanics are shrouded in secrecy, Stasi-style.

-- de-platforming: the Big Tech monopoly declares you persona non grata for a supposed violation of their Kafkaesque Terms of Service and bans your content from their platform, effectively silencing you.

-- de-monetization: your content is still officially on the platform in truncated form, but the flow of advertising revenue is turned off: you're welcome to post content but you will no longer be able to make any money from it. Enjoy!

When you crush dissent and spend a full year cracking the skulls of protesters, you end up with, well, France's general strikes. I covered the yellow vest protests in some depth a year ago: France in a Nutshell: "The Government Stopped Listening to the People 20 Years Ago" (December 12, 2018)

France's Ghosts of '68: General Strike vs. Macron and the Technocrat Elites (January 16, 2019)

Here in the U.S., the crushing dissent gathered momentum when all dissent was lumped into the tarpits of "fake news" and "Russian propaganda." What better way to throw the baby out with the bathwater than declare any dissent from the approved party line "fake news" and/or "Russian propaganda." The catalyst was a completely fake "list of Russian agents" assembled by an unidentified source called PropOrNot in 2016.

The Washington Post and other corporate media outlets immediately published the baseless accusations without bothering to seek the identity of the accusers or establish any sort of objective standards to judge the validity of the accusation. It was pure Orwell, as I explained at the time: The Washington Post: Useful-Idiot Shills for a Failed, Frantic Status Quo That Has Lost Control of the Narrative (November 27, 2016)

In police-state fashion, Big Tech took the list of accused (including this site), declared all those named guilty and promptly shadow-banned, de-platformed or de-monetized us all without coming clean about how they engineered the crushing of dissent.

In classic Stasi fashion, the mechanics are all black box: the accused are never confronted with their accuser, never provided with the evidence of their "crime," and never given an opportunity to defend themselves against the false accusation.

Everyone on the PropOrNot list was declared guilty until proven innocent, but there was no way to prove our innocence. Kafka, meet Orwell: a completely opaque, privately owned Stasi (Facebook, Twitter, Google) does the elites' dirty work, concealed behind the impenetrable bureaucracy of algorithms, secret guidelines and Terms of Service which can be interpreted in whatever way serves the gatekeepers' interests.

Suppressing dissent guarantees disorder and collapse. Ironic, isn't it? The frantic efforts of an exploitive elite to eliminate dissent only accelerates the regime's path to collapse.

Mark St.Cyr and I discuss these topics as only those who've been suppressed can in our recent podcast. (1:08 hours, 4 segments)

I've addressed the critical role of dissent and the suppression of dissent many times; here's a selection of recent posts:

The Essential Role of Volatility, Stress and Dissent (May 24, 2014)

When It Becomes Serious, First They Lie--When That Fails, They Arrest You (March 16, 2015)

The Demise of Dissent: Why the Web Is Becoming Homogenized (November 17, 2017)

The West's Descent into 'Cultural Revolution' (January 18, 2019)

Which One Wins: Central Planning or Adaptive Networks? (February 19, 2019)

The New Orthodoxy: Blasphemy, Heresy and the New Inquisition (September 19, 2019)

My recent books:

Will You Be Richer or Poorer? Profit, Power and A.I. in a Traumatized World (Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Guy T. ($5/month), for your superbly generous pledge to this site-- I am greatly honored by your steadfast support and readership.

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Costs Are Spiraling Out of Control

And how do we pay for these spiraling out of control costs? By borrowing more, of course.

If we had to choose one "big picture" reason why the vast majority of households are losing ground, it would be: the costs of essentials are spiraling out of control. I've often covered the dynamics of stagnating income for the bottom 90%, and real-world inflation, i.e. a decline in purchasing power.

But neither of these dynamics fully describes the relentless upward spiral of the cost basis of our economy, that is, the cost of big-ticket essentials: housing, education and healthcare.

The costs of education are spiraling out of control, stripping households of income as an entire generation is transformed into debt-serfs by student loan debt. The soaring costs of healthcare are a core driver of higher costs in the education complex (and government in general), and to cover these higher costs, counties raise property taxes, which add additional cost burdens to households and enterprises as rents rise.

Rising rents push the cost structure of almost every enterprise and agency higher.

Then there's the asset inflation created by central bank ZIRP (zero interest rate policy) which has inflated a second echo-bubble in housing that has pushed home ownership out of reach of many, adding demand for rental housing that has pushed rents into the stratosphere in Left and Right Coast cities.

The increasing dominance of monopolies and cartels has eliminated competition in sector after sector. Monopolies and cartels skim immense profits even as the value, quality and quantity of their products and services decline: The U.S. Only Pretends to Have Free Markets From plane tickets to cellphone bills, monopoly power costs American consumers billions of dollars a year.

Thanks to their political influence, monopolies and cartels have legalized looting, raising prices and evading anti-trust regulations because they can pay whatever it takes in our pay-to-play political system.

Let's look at a few charts that illustrate the relentless rise in costs:

Do you reckon these two charts are connected--soaring costs and ballooning administrative payrolls?

Student loan debt is soaring above $1.5 trillion, guaranteeing profits to lenders and debt-serfdom to the students exiting with degrees that are in over-supply, i.e. possessing little scarcity value in an over-credentialed economy:

The echo housing bubbles in many locales exceed the nosebleed valuations of the previous bubble:

And how do we pay for these spiraling out of control costs? By borrowing more, of course:

Even at low rates of interest, the cost of servicing skyrocketing debt increases, leaving less net income to support additional borrowing.

What will it take to radically reduce the cost basis of our economy? A fundamental re-ordering that breaks up all the cartels and monopolies that push prices higher even as they deliver lower quality goods and services would be a good start.


My recent books:

Will You Be Richer or Poorer? Profit, Power and A.I. in a Traumatized World (Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Robert C. ($5/month), for your splendidly generous pledge to this site-- I am greatly honored by your support and readership.

Read more...