Sunday, July 13, 2014

You Want a Solution? Try Not to Get Hurt When It Collapses, Then Start Over

Once the deadwood piles high enough, the random lightning strike ignites a fire so fast-moving and so hot that it cannot be suppressed, and the entire financial system burns to the ground.

In discussing our broken healthcare system with a 22-year college graduate, I opined that Obamacare hadn't fixed anything that was broken. She observed that real reform was impossible due to vested interests and the only real solution was to "start over."


People constantly ask me for solutions to our all-too visible ills. You want solutions? Here's the solution for every systemic, structural problem we face: Avoid getting hurt when it collapses, then start over.

Over the nine years I've been writing this blog, I've offered dozens of systemic solutions, and have reprinted dozens more submitted by readers. For example:

Boomers, Prepare to Fall on Your Swords (June 2005)

The "Impossible" Healthcare Solution: Go Back to Cash (July 29, 2009)

Want to Reduce Income/Wealth Inequality? Abolish the Engine of Inequality, the Federal Reserve (January 28, 2014)

Nobody likes these solutions because they disrupt everyone's place at the feeding trough. People get deeply offended when their place at the trough and their complicity in a corrupt, inefficient, wasteful, fraudulent and unsustainable system are challenged.

And furthermore, all these solutions are impossible.

As a result, my work draws untold numbers of negative and derogatory comments and commentaries, "Charles is f**king crazy" being one of the kinder ones.

A relative handful of insiders who refuse to drink their institution's KoolAid are courageous enough to call it like it is, and these few confirm that the key sectors and institutions of our society and economy are hopelessly corrupt, inefficient, wasteful, fraudulent and unsustainable.

Healthcare: broken. Medicare: broke and broken. Higher education: broken.Welfare: broken. Corporate subsidies/welfare: broken. Taxation: broken. War on drugs: broken. The legal system (tort, criminal justice, patents, etc. etc. etc.): broken. Defense procurement: broken. National security state (to anyone who's glanced at the U.S. Constitution): broken. The Imperial Presidency: broken. Congress (i.e. lobbyists and campaign contributions): broken. The financial system: broken.

Do I have to go on? Every major system is fundamentally broken, yet we persist in claiming it isn't broken and only needs a few policy tweaks because our self-interest is served by keeping our place at the feeding trough intact, never mind the consequences.

We're collectively horrified and frightened by the notion that the whole travesty of a mockery of a sham is precariously perched on a financial house of cards and so we desperately attempt to marginalize the informed critics, whistleblowers and truth-tellers.

So let me ask you one question: did silencing the informed critic ever solve any fundamental problem? The answer is no: the only possible way to avoid collapse is to listen to the informed critics and whistleblowers. This is a scale-invariant truth: it's the same for marriages, families, communities, enterprises, institutions, nations and empires.

I welcome informed criticism, because we learn from failure and fair criticism. I receive thousands of emails every year and do my best to read each one and respond to as many as my over-scheduled workload allows (alas, very few).

The critiques I've received fall into a few camps:

1. The Complexity Excuse: All large complex bureaucracies are inefficient, wasteful and corrupted by vested interests and powerful constituencies--it's the nature of the organization. As a result, there's nothing to be done; real reform is impossible. The rules will always be complex and therefore open to being gamed by insiders and monied Elites.

The implicit conclusion: we are powerless, so let go of all ideas of reform. Just enjoy your life and quit tilting at windmills.

Fine, but let's not forget that whatever is unsustainable will collapse and vanish from this Earth. To say that large centralized bureaucracies are intrinsically inefficient, wasteful and corrupt suggests an obvious solution: the only real solution is to get rid of all centralized bureaucracies entirely.

That is of course "impossible" until the financial firestorm burns down the forest loaded with deadwood, and suddenly all sorts of things that were "impossible" are not just possible but painfully obvious.

2. The Self-Serving Excuse: This is the best possible system, given the alternatives.Those toiling inside these institutions are naturally drawn to defend them as the "best possible system" because to question their role in a broken system is to question their identity, security, self-image as a good person and their role in perpetuating a broken system.

As immortalized by the insider's insider, Larry Summers: Insiders also understand one unbreakable rule: They don’t criticize other insiders.

Larry Summers to Elizabeth Warren in 2009: “Insiders Don’t Criticize Other Insiders”(Liberty Blitzkrieg)

What is so incredible about the quote above is that it essentially proves correct everything I and many others have been saying about how “things work” in America these days. The statements above describe a petty, childish oligarchy of arrogant fools. This small club of people call all the shots and do not listen to “outside” ideas whatsoever. This is why nothing changes. This is why the same people are recycled through positions of power over and over again no matter how badly they screw up and how many millions of lives they ruin. This is why there is a two-tiered justice system in which the rich and connected never go to jail, while the average citizen can have his home raided by police for a parody Twitter account. This is why the 0.01% have been able to loot all of the nation’s wealth while median inflation adjusted wages have been declining for 40 years. 
The reason is because the “status quo” in America consists of a deranged, immoral, arrogant, selfish fraternity of inept children who protect each other at the expense of everyone and everything else. Until the status quo gets the boot, this nation will continue to decline. Forget reforms, the entire status quo needs to be tossed aside once and for all. The insiders must be turned into outsiders.

3. The same Elites have been running the country for X number of years. This is a variation on the Complexity Excuse and it leads to the same implicit conclusion: we are powerless, so let go of all ideas of reform. Just enjoy your life and quit tilting at windmills.

You want solutions, but you don't want anything to actually change? Sorry, you can't have it both ways. Let's jettison all the distracting complexity--the 2,000-page laws, the 40,000-page tax code (or is it 80,000 pages? Does it really matter beyond 1,000 pages?), the arcane financial games that keep the whole fraud afloat (Quantitative Easing, reverse repos, credit default swaps, shadow banking, rehypothecation, etc.)--and distill the choices down to their essence:

1. Embrace your place at the feeding trough of the Status Quo and put your faith in its sustainability, regardless of its inevitable warts. Denounce critics and defend the Status Quo with some variation of the three primary justifications/excuses.

2. Position yourself to avoid getting hurt when the unsustainable mess collapses in a heap of financial over-reach and fraud.

Interestingly, nobody actually believes a few policy tweaks will reform/fix what's broken. Virtually none of the thousands of emails I receive present a few policy tweaks as credible "fixes."

We all know the system is broken and the proposed policy tweaks aren't fixing anything, but human nature being what it is, we hope our place at the feeding trough will somehow survive unscathed as the financially unsustainable house of cards collapses around us.

In essence, we all know the system is broken and can't be reformed, but we play along with the illusion out of self-interest.

There is a peculiar self-referential quality to our predicament. The only way to enable meaningful reform is to listen closely to informed critics, whistleblowers and truth-tellers.

But we choose to crucify whistleblowers, mock and denigrate informed critics and marginalize/demonize truth-tellers as threats to our place at the feeding trough.

So meaningful reform is impossible--even if vested interests woke up to the fact that their favored place at the trough is precarious.

This entire dynamic has been articulately laid out by Thomas Homer-Dixon in his seminal book The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization: I highly recommend this work and another long-view book that illuminates the dynamics of our impending financial implosion, The Great Wave: Price Revolutions and the Rhythm of History by David Hackett Fischer.

You want solutions? Just do nothing, and the whole rotten financial contraption will collapse, very likely within the next decade. I prefer the analogy of the forest fire:The Yellowstone Analogy and The Crisis of Neoliberal Capitalism (May 18, 2009).

Vested interests are threatened by the losses generated by small financial fires, so these are systemically suppressed. As a result, the fallen deadwood piles ever higher, creating more fuel for the next random lightning strike to ignite.

Once the deadwood piles high enough, the random lightning strike ignites a fire so fast-moving and so hot that it cannot be suppressed, and the entire financial system burns to the ground.

So go ahead and keep defending the Status Quo as the best system possible, or believe Elites will keep suppressing fires forever because they're so powerful, or whatever excuse, rationalization or justification you prefer. It won't matter, because the firestorm won't respond to words, beliefs, ideological certainties, reassurances or official pronouncements. It will do what fires do, which is burn all available fuel until there's no fuel left to consume.

As I noted last week in A Reader Asks: How to Find Shelter from the Coming Storms?,Centralized systems such as governments and global corporations are either bankrupt and don't yet know it or are bankrupt and are well aware of it but loathe to let the rest of the world catch on.

If you want to believe this is the best possible system and it's sustainable, be my guest.

Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
go to Kindle editionAre you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.

And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.

I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

Test drive the first section and see for yourself.     Kindle, $9.95     print, $20

"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers (25 minutes, YouTube) 

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