Is Social Media Actually "Media," Or Is It Something Else?

By placing search/social media in the bucket of newspapers, radio and TV networks, perhaps we've obscured their true nature as "Digital Marketing Mechanisms."

Language is a funny thing. If we don't have a word for something, in some way it doesn't exist. When we find a word in another language that describes this something, we borrow the word, for example schadenfreude from German and tsunami from Japanese.

If we use an existing word to describe something novel, we may mis-categorize it, in effect obscuring its true nature. For example, calling a whale a "fish" makes a certain kind of sense (an animal that lives in the sea), but it doesn't capture the fact that the whale is a mammal, not a fish.

Which brings us to social media, and the possibility that it isn't actually "media" at all, and we've obscured its true nature by mis-categorizing it as "media." This distinction isn't merely academic; it has significant real-world consequences.

Let's begin with the "media" that existed when the the US Constitution was drafted and ratified. "Media" wasn't a word in usage at the time, and what we understand today as "media" was understood as "the printed word" in newspapers, flyers, posters, periodicals and books. This is the origin of the Constitution's focus on "free speech" and the "free press": Congress shall make no law abridging the freedom of speech, or of the press.

The two concepts are intimately bound. Free speech includes public gatherings and oratory as well as all printed words, but the printed word attracts most of the legal wrangling around the meaning and limits of "free speech," a topic I explored in A Contrarian Clarification of "Free Speech".

The point of my post was that the constitutional definition focused on the government's restriction of free speech, not the private suppression or censorship of "free speech." As I explained, a private enterprise such as a newspaper is not obligated to provide a platform for everyone who wishes to exercise their "right to free speech." The newspaper can print whatever "letters to the editor" or "commentary" its owners / managers choose.

Now we have many other forms of media: radio, films, television and now the Internet, with its vast array of "printed" word, audio and video content.

In what we might call traditional media, the owners / managers publish / post content generated by their staff or other professional content creators: journalists, talk-show hosts, filmmakers, etc.

Social media is something different: all its content is created by its users. Yes, social media platforms have news feeds from traditional media, but this is a sideline to their core model, which is in effect a global message board that is open to any registered user. Unlike a Web1.0 message board / forum, whose audience was limited to the membership of the board / forum, social media platforms offer each user who posts content a potentially global audience.

The potential to build an audience of hundreds, thousands or even millions is addictively attractive, and so social media platforms (and their cousin, search) have billions of users.

This is novel. Is it "media" or is it something else? As I noted in my previous post, "free speech" is muddied when it comes to search and social media, as the government is limited by the Constitution in its capacity to restrict what's posted on social media, but there are few (if any) Constitutional restrictions on what private enterprises can restrict on their media outlets / platforms / search results.

Next, let's consider the revenues and data collection of traditional media and social media. Traditional media was limited to display ads in print, and the equivalent broadcast ads on radio and TV. These forms of media did not have the capacity/tools to collect reams of data on every user, and then use this data to sell adverts that target specific audiences--for example, surfers who have traveled to Southeast Asia to surf.

The resort on the beach in Indonesia will have far better results from adverts targeting surfers who have already demonstrated a willingness and ability to travel to Southeast Asia to surf compared to a broadcast advert that may theoretically reach a million people, of whom only a tiny percentage will be a target audience for the resort. The resort's marketing will pay a hefty premium for this data-rich targeted advert capability.

Search is also novel. Is it "media" or something else? Search engines purport to crawl the entire Web and present the most relevant answers / results to one's query. But this too is a data-collection revenue-creation mechanism, for the auctioning of search results--pay the search company money, and your product / service will be placed at the top of the search results--is lucrative.

This ability to target the audience based on detailed data collected on their web activity increases the value of the resulting advertising greatly. Consider the scale of digital adverts: the top three US corporations (Alphabet/Google, Meta/Facebook and Amazon) collect $320 billion in digital advertising revenues:



Compare this to traditional-media newspaper revenues: circulation revenue is about $11 billion and newspaper adverts, print and digital, total around $5 billion, for a total of $16 billion, roughly 5% of search/social media advert revenue.

Search/social media is free to users, but this "free access" is in effect a trade for the user data that generates a third of a trillion dollars in revenue. This "trade" also seems novel, both in form and in scale.

Would it be more accurate to describe search/social media platforms as Marketing Mechanisms that solicit user-created search/content to generate revenues rather than as "media" platforms?

The distinction is critical, for "free speech" is not a blanket carte blanche for marketing. If we remove search/social media from the category of "media" and create a new category Digital Marketing Mechanisms (DMM), then this new category necessarily requires a new regulatory structure and very different legal interpretations and protections of "free speech."

As we all know, it's very tempting for governments to "request" (or require) private-sector search/social media platforms restrict what's visible to the public to "approved" information. If a private-sector company restricts what it publishes at the "request" of the state, where are the Constitutional limits on state censorship? It seems they've been skirted by this "cooperation" of public / private power.

By placing search/social media in the bucket of newspapers, radio and TV networks, perhaps we've obscured their true nature as Digital Marketing Mechanisms, novel, complex devices more like a digital Antikythera Mechanism than an inert printed page protected as "free press."

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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Welcome to the Circular Firing Squad

If you find my scribblings upsetting, there's an easy solution: stop reading it. We'll both benefit.

I'm never more than one inch away from converting my site from essays to photos of kittens and puppies as the only means to gain respite from being hammered for my many failings as a human being. But alas, were I to do so, some readers would detect an insufferable air of elitist superiority in my selection of kitten photos, others would trash me for my worthless posts, and should I post a photo of a sad puppy, I'd promptly be denounced as a bitter old man.

Welcome to the circular firing squad. As a culture, we seem to have reached a permanently high plateau of extreme touchiness, a sensitivity to slight coupled with an urgent need to lash out not just at opinions but at those who present them, a touchiness which manifests as an irrepressible flood tide of righteous indignation: how dare you!

I've been bitterly denounced as an elitist for spending two days preparing a homemade Thanksgiving dinner for a few dozen guests, as only elites could possibly afford a home-cooked Thanksgiving dinner. How dare you prepare a home-cooked meal!

In what ward of the insane asylum is a guy who's spent his entire life on the tattered margins of the economy and society, a guy with absolutely no status, inheritance, family connections, elite credentials or position in the power structure--all the traits that characterize elite membership--be denounced for preparing a home-cooked meal to be shared with others? A guy who scraped by in genteel poverty on the crumbling edge of free-lancing. a guy who's only corporate gig was picking pineapple one summer for Dole Pineapple at 16, a guy who never worked for any government agency or anything remotely connected to the Power Elite, a guy with 50 years experience behind a worm-drive Skilsaw?

Back when I started my blog, I never expected to have an audience. Dummy that I am, I used my real name and called my blog Of Two Minds, expressing my willingness to change my mind and my general view that there was capacious open ground to explore between any two polar-opposite positions.

I should have hidden behind something like Insufferable Elitist, Worthless Writer or Bitter Old Man, or cut to the chase and called it How Dare You!

My critics overlook one of my deepest flaws: I'm overly civil. I was taught that saying horrid things about people you didn't know, and people you did know, was, well, horrid. Yes, I know: how dare you because only elites with an air of superiority are civil.

As for my air of superiority, I can't help it: I'm half Irish, with the rest being Scots and Norse / Norman. My sense of superiority is genetically hard-wired, along with my obstreperous, cantankerous, cocky nature. How dare you be half-Irish! Yes, well, please accept my apologies on behalf of my DNA.

All of which leads to an unsolvable mystery: how did this Insufferable Elitist, Worthless Writer and Bitter Old Man get 150 million page views on his own sites and a couple hundred million more page views on sites with large audiences such as Lew Rockwell, Daily Reckoning, Seeking Alpha and Zero Hedge (all terribly elitist sites, slithering with insufferable elites)? If you figure out how this Insufferable Elitist, Worthless Writer and Bitter Old Man got a third of a billion page views, please let me know. I agree, it makes no sense.

Clearly, somebody else far more deserving should have gotten the third of a billion page views. Or, horror of horrors, for unfathomable reasons, people want to read stuff composed by an Insufferable Elitist, Worthless Writer and Bitter Old Man. Believe me, I'm as mystified as you are. But go ahead and say it: How Dare You!

If you find my scribblings upsetting, there's an easy solution: stop reading it. We'll both benefit. I implore you to ignore my scribblings, for both our sakes: it will relieve my sense of guilt at upsetting anyone, and you'll be spared the tribulations of becoming upset.

I looked around for some photos of kittens and puppies, but rather than risk a copyright violation, I'm going with this from Hannah Arendt:



And because I'm an Insufferable Elitist enveloped by a vortex of Superiority, I'm adding this bit. Yes, I know: How Dare You!



Welcome to the circular firing squad. Civility is being shredded, but never mind, because civility is elitist.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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A Contrarian Clarification of "Free Speech"

A social media company has the right to decline publishing my opinion, but the government's ability to restrict what the social media company publishes is restricted by the First Amendment.

We all know what "free speech" means: it's our right to say whatever we want, whenever we want, wherever we want, as long as we're not libeling someone. Well, actually, no, that's not what "free speech" means. Here's the First Amendment to the Constitution of the United States:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

For an overview of the immense body of jurisprudence regarding the limits of "free speech," here's a good place to start: First Amendment Fundamental Freedoms Analysis and Interpretation of the U.S. Constitution.

In essence, the first amendment prohibits the federal government from "abridging the freedom of speech, or of the press," in other words, censorship. The Founders were seeking to limit the powers of the state to restrict pushback from the citizenry against state policies or decisions.

But this doesn't mean "everything is protected as 'free speech.'" For example, a drunk in a bar who shouts, "You're worthless, you suck!" at other patrons is not protected by the First Amendment.

"In Chaplinsky v. New Hampshire, the Supreme Court unanimously sustained a conviction under a state law proscribing any 'offensive, derisive or annoying word addressed to any person in a public place'... 'the use in a public place of words likely to cause a breach of the peace,' words 'by their very utterance, inflict injury or tend to incite an immediate breach of the peace. Accordingly, such utterances are no essential part of any exposition of ideas, and are of such slight social value as a step to truth that any benefit that may be derived from them is clearly outweighed by the social interest in order and morality.'"

Yet by some strange bewitchment, the "right" to shout "You're worthless, you suck!" online is now considered "protected" as "free speech." As the Court clearly stated, "free speech" is intended to protect an exposition of ideas as a step to truth, not content-free abuse.

The First Amendment does not obligate privately owned media to provide a forum for everyone to shout "You're worthless, you suck!" If the drunk wanders from the bar to the Heritage Foundation and demands they publish his "opinion," the Foundation is under no obligation to comply.

The newspaper is not obligated to print the drunk's "letter to the editor," nor is the radio station or TV network obligated to provide a forum for his "opinion."

On occasion a reader expresses discontent that I don't have a "comments forum" on my website, on the presumption that everyone paying to host a website is somehow obligated to also pay the expenses so everyone else can use their privately funded site as a public forum for their opinions.

What the First Amendment says is that government cannot restrict anyone from hosting a website, though what they post publicly is subject to Chaplinsky v. New Hampshire. Other cases reflect the Court's view that the issue with "free speech" is government actions that restrict free speech, not the right of privately owned enterprises to choose what they publish / post publicly.

My response to those expecting that a privately funded "forum" for their "opinion" is a "right": pay for your own server / website and then you can post whatever opinions you wish to. That's the limit of free speech: you're free to carry a sign in public places (with certain restrictions), publish your own newspaper, start your own website or media platform, or give speeches from soapboxes, but nothing obligates a media corporation to publish your "opinion" or provide an unrestricted forum for everyone's opinions.

In other words, a social media company has the right to decline publishing my opinion, but the government's ability to restrict what the social media company publishes is restricted by the First Amendment.

What obscures this distinction is the Big Tech platform's profit-driven fear of alienating the users they're trying to addict by clarifying what their "community standards" actually mean. It would be refreshing if social media / search platforms stated what they consider acceptable and unacceptable in clear, simple terms.

For example, "the owners and management of this site hold values generally described as (progressive, conservative, libertarian, etc.) and we have the right to decline to publish opinion and content that conflicts with our values." At least the political reality would be in plain sight rather than being cloaked by phony claims of neutrality.

It would be refreshing if a Big Tech corporation stated, "We retain the right to judge whether a comment or post offers an exposition of ideas as a step to truth or is content-free opinion of slight social value" instead of pandering to the claim that they're pursuing "free speech" rather than "free enterprise," an enterprise enriched by shouting "You're worthless, you suck!" as often as possible, to spur "engagement."

What the First Amendment clearly restricts is government censorship by proxy, that is, government "requesting" social media corporations limit what is posted based on standards selected not by the owners but by the government. I often complain about being shadow-banned, but what I'm complaining about is not the right of these platforms to refuse to publish my content; that is their right, just as it's my right to refuse to provide a public forum for everyone else to post their opinion.

What I object to is the mealy-mouthed, cowardly way the media giants hide their guidelines, out of fear of reducing their precious profits. But the First Amendment doesn't require media corporations to state their guidelines. Newspapers have the right to decline to publish opinions submitted by readers that the editors disagree with or don't want to promote, and there's no obligation for them to explain every refusal.

If we disagree with the media company's decision, then our "right to free speech" boils down to peaceful public protests or starting our own newspaper / website / platform / radio station / channel.

The concentration of media is another issue: there are negative social consequences of monopolies and cartels dominating media platforms. But that's a topic for a future essay.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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All The World's a Stage: Everything Is Fake

No wonder we're restless, teetering on the edge, frustrated by our addictions to fakery and excess, starved for what cannot be marketed or made profitable, so it no longer exists except in the shadows.

Everything is staged, and therefore fake. Given the near-zero cost of posting content in the digital world, everyone discovered that staging wasn't limited to high-end political events, parades and Hollywood sets; since all the world's a stage, everything could be staged, from every selfie on social media to every video on YouTube to every public display.

With staging comes spectacle, with spectacle comes self-serving artifice, and with artifice comes excess. The captivating idea of staging is by mimicking authenticity, we manifest an implicitly self-serving purpose: we stage the film to mimic "real life" to entertain the audience, and by this means reap a fortune.

By staging a political event, we rouse blood lust to serve our ascension to power. By staging a selfie in a swank bar sipping a costly cocktail, while home is a shared room in a squalid, overpriced flat, we serve our desire for a digitally distributed simulacrum of a status we cannot possibly achieve in our real lives.

Now that everything is staged, the competition to get noticed in a sea frothing with endless scrolls of "content" demands excess. Everything is now so sensationalized that we are desensitized to it all. As a result, everything distills down to self-parody, rendering parody impossible, for everything is already a parody of itself.

Mimicking authenticity to make the sale is now so embedded, so ubiquitous, that irony is also lost: we are living in a Philip K. Dick story come to life in which young women fabricating fake lives of glamor and luxury to boost their visibility are now competing with digitized imaginary young women that are idealized versions of the sexually compelling female.

Now that engagement is the coin of the Attention Economy realm, traditional media and social media have merged: everybody's competing for engagement because that's everyone's source of income. Never mind that the Big Tech platforms skim the bulk of the engagement revenues and a handful of influencers reap the majority of what's left; the mob is furiously dedicated to the task of picking up the pennies scattered in the sand-covered floor of the Coliseum.

In my view, engagement is the polite term for addiction, the core value proposition in Addiction Capitalism. As every dealer knows, there's no more reliable source of revenue than a junkie with a monkey on his back, and encouraging addiction to screens is astoundingly profitable.

The fevered competition for eyeballs / visibility has generated a self-reinforcing feedback of faking authenticity better than other spectacles. The goal isn't to present "real life," what would be the point of such absurdly uncompelling, boring anti-spectacle?

The goal is to stage the mise en scene so cleverly that it really looks real: the rural kitchen in all its handmade glory, the "real food" lovingly prepared with simple tools, or the high-wire emotions of the indignant, filled to the brim with passionate intensity, planning their role when the rough beast, its hour come round at last, slouches towards Bethlehem to be born.

But authenticity cannot be profitably milked for long; we caught on long ago. The transformation into sensationalized, self-parodying staging makes a mockery of authenticity, and as everyone crowds onto the world stage seeking visibility and the money the right staging brings, authenticity dissipates into dark energy, present but invisible, undetectable, a fleeting shadow lost in the churning wake of spectacle.

French philosopher Guy Debord's 1967 book, The Society of the Spectacle, sheds light on this transformation. (This is a PDF of the entire text.) "The vague feeling that there has been a rapid invasion which has forced people to lead their lives in an entirely different way is now widespread; but this is experienced rather like some inexplicable change in the climate, or in some other natural equilibrium, a change faced with which ignorance knows only that it has nothing to say."

This reminds me of a comment French writer Michel Houellebecq made in an interview: "I have the impression of being caught up in a network of complicated, minute, stupid rules, and I have the impression of being herded towards a uniform kind of happiness, toward a kind of happiness that doesn't really make me happy."

The ceaseless staging and spectacles have deranged us. The mood of the mob is fast becoming ugly; even the victors of the staged games are being booed. The attention span of the audience has dwindled to the point that few even wait for the outcome of the contest to scream for somebody's blood. The crowd is no longer satiated by gore or drama, and even the comedic interludes no longer mask the sense that the mob is one spark away from taking their rage and frustration out on each other--the vicarious thrills are no longer enough.

This is the fruit of relying on fakery, of believing that no one can tell the difference between authenticity and staged simulacra. The audience craves something real, and what's served up as "real" is just another self-serving mise en scene. No wonder we're restless, teetering on the edge, frustrated by our addictions to fakery and excess, starved for what cannot be marketed or made profitable, so it no longer exists except in the shadows.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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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, Gregory C. ($70), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, Norah D. ($70), for your magnificently generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, DaVinati ($70), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Thomas H. ($7/month), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

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17 Indicators of Global Recession Are Clanging

The smart money is selling, of course, for the clanging indicators are the dinner bell announcing the banquet of consequences has been served, and Nemesis doesn't want the meal to get cold.

Correspondent Wilson R. Logan kindly shared his list of 17 indicators of globally synchronized recession. In my view, each is an alarm bell clanging loudly. As Wilson put it, "recessions have vey clear indicators. We've all known it was coming and we've all had a long time to think about it."

For context, recall that the global economy is a tightly bound, highly integrated system, which means disruptions in one subsystem quickly ripple though the entire system. Disruptions tend to amplify one another, creating a cascading effect much like an avalanche: everything looks perfectly stable until the entire mountainside gives way.

This isn't presented as a complete list of indicators; there are a multitude of others. But this is certainly a comprehensive start.

Here are Logan's 17 indicators of global recession:

1) Tighter credit conditions. Banks see the recession coming and start to build a cash cushion, hoard liquidity, de-risk portfolios (the lessons of Bear Sterns).

2) Increasing REPO fails.

3) Volatility in the Japanese Bills market.

4) Near Term Forward Spread inversion.

5) Swap Spread Compression.

6) Term SOFR & EURIBOR calendar spread inversion.

7) 2-10 yield curve inversion.

8) Hours worked, total compensation falling.

9) Falling oil prices.

10) Factory gate prices falling.

11) ISM survey negative sentiment.

12) UofM consumer sentiment survey negative.

13) Increasing credit card debt.

14) Contango in the WTI Futures curve.

15) Falling value of loans to non-financial corporations (NFCs) (see 1).

16) Diverging GDP & GNI.

17) Labor hoarding.

(CHS note: for example, in Japan, if you want to quit your wretched, low-pay, abusive-boss job, you have to find a replacement first: 'They refused to let me go': Japanese workers turn to resignation agencies to quit jobs.)

Thank you, Wilson, for sharing your comprehensive list of global recession indicators. For additional context, let's turn to two charts.

The first is my inverted pyramid of debt and disposable earnings. This relationship between the cost of servicing debt and how much money is left after paying essential expenses (food, utilities, shelter, etc. or the costs of production) is scale-invariant, meaning it works the same for individuals, households, small businesses, global corporations and nation-states.

If the earnings left after paying essential expenses declines while the debt and cost of servicing the debt rise, the entity goes bust and collapses in a heap. For households, as inflation stripmines the purchasing power of their earnings, they increasingly turn to debt to fill the gap between the cash that's available to spend and what they desire to spend.

When interest rates are falling or near-zero, adding debt appears sustainable. But should interest rates rise, the debt quickly become untenable.



So-called Zombie Corporations have one neat trick to stay alive despite their decaying financials: they roll over their higher-interest debt into a larger, lower-interest debt. Since the sum needed to service the debt remains the same, they can go on their merry way until the next refinancing replenishes their cash-burn.

This is all very jolly until banks refuse to loan them more money, and interest rates rise. Again, this is scale-invariant: as long as the consumer can tap another credit card, the corporation can roll over its debt at lower rates, nations can sell more Treasury bonds, then all is well.

But once credit tightens and rates rise, the dynamic reverses, and bankruptcy is the only "solution" left. Insolvency and writing off all debt is a solution for the borrower/debtor, of course, but a catastrophe for the lender / investor, who receives pennies on the dollar, the rest being a complete and total loss of assets / wealth.

Next, let's turn to the "impossible," i.e. bubbles popping with extreme prejudice. How do we know a bubble is a bubble? If the deflation of the bubble is declared "impossible." For example, today's global Everything Bubble. Yes, yes, the Everything Bubble cannot possibly pop with extreme prejudice, it will expand forever because (insert Fed Put, AI, Martian Central Bank quatloos, etc.).

History has a peculiar, disconcerting disregard for "likes," opinions and projections of infinite growth, and so it's clear that all bubbles pop. Bubbles pop with an eerie symmetry, falling at roughly the same time scale and rate as their ascent. Thus we can project the collapse of the Everything Bubble with some certitude.



Or we can dismiss the 17 indicators clanging loudly and base our confidence on eternal expansion of everything on the Fed Put, AI, or Martian Central Bank quatloos. Pretty much anything will do; all that matters is that a permanently high plateau of overvaluation and financial fantasy is presented as inevitable.

The smart money is selling, of course, for the clanging indicators are the dinner bell announcing the banquet of consequences has been served, and Nemesis doesn't want the meal to get cold.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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Isn't It Obvious?

And so here we are, exhausted by the divisions, the frustration, the rage and our loneliness in a sea of madness few even see.

Isn't it obvious? Of course it is. So what's obvious? That there are sharply different views on what's obvious.

Psychiatrist-author R.D. Laing noted back in 1967 as the Vietnam War raged that what was obvious to President Lyndon Johnson--that the war had to be prosecuted lest the Democratic party lose congressional seats in the 1968 election for being "soft on Communism"--was not obvious to those paying the price of the war as the collateral damage for the all-important political jockeying in Washington D.C.

As historian Peter Turchin has documented, the cycle of socio-economic-political disintegration-integration runs around fifty years, and so here we are. Turchin caught some flak for predicting the handbasket would start its slide into Heck in 2020, and voila.

A great many things are obvious, yet equally obvious is the chasm separating what's obvious to each of us. The chasm is literally bottomless, and there are no bridges across it, no common ground, and so friendships--the glue of sociability, the foundation of our well-being--are tossed into the chasm with infuriated abandon--how dare you!

Having lived through the last cycle of tumult, discord and disintegration, that we're in another such cycle is obvious to me, but not to others. That the end of the Debt-Speculation Super-Cycle is upon us is obvious to many of us, but hotly denied by the multitudes counting on The Everything Bubble never popping.

That mass media and social media have merged is obvious to me, but not to others. The source of income for all media players / content creators is now the same, and so the competition for "engagement" (i.e. attention, eyeballs, emotional vesting) is Darwinian on a heretofore unimaginable scale, a power-law scale in which the few winners at the very apex collect the vast majority of the winnings and the 99% trail off in the long tail, collecting the coins that roll off the table of the few.

By way of example, data collected by the Department of Justice on the 58,000 books published in a year revealed that 96% of books sell less than 1,000 copies, and 50 percent of all titles sold less than a dozen copies. (Source.) That's one heck of a long tail: 30,000 books--most infused with the hopes and dreams of the authors--each sold 12 or less copies.

This aligns with the Pareto Distribution, the 80/20 rule, which distills down (80% of 80% = 64% and 20% of 20% = 4%) to the 64/4 rule: the top 4% scoop up two-thirds of the winnings, and the 96% brawl over the remaining third.

In social media, as in the rest of the economy, the percentages are even less favorable: the top 0.1% amass the vast majority of the gains. The top influencers rake in millions, the selfie-posting multitudes pick up pennies--if they're lucky.

So what are the tools needed to win this Darwinian competition? Addiction, clickbait, emotional lassos and echo chambers: make the devices and endless scrolling addictive: you're a winner. Feature sensationalized clickbait headlines: you're a winner. Snare the unwary with emotional lassos: you're a winner. Espouse shared beliefs to fellow true believers with ecstatic enthusiasm: you're a winner.

So isn't it obvious where this is going? Put another way: is this savage arena a healthy environment? Or is it deranging to all who wander in and are lassoed with such ease? What happens to those lassoed, addicted, ensnared? This chart of loneliness illuminates the inevitable result of making derangement the most profitable activity under the sun.



As others have insightfully pointed out, every individual who tries to walk past the arena has 100,000 well-paid, smart, highly motivated hawkers cajoling them into enter the arena. Hey pal, craving a dopamine hit? Come on in, we got dopamine hits galore inside. You're gonna love it.

And so here we are, exhausted by the divisions, the frustration, the rage and our loneliness in a sea of madness few even see. Fortunately, I have the perfect antidote for you: click here, and you'll be delighted by an endless scroll of adorable kids playing with puppies and kittens. Your dopamine levels are going to low-Earth orbit, you're gonna love it.

Or if you have super-human powers, walk past the arena and keep walking.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


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We're Told This Is Progress, But It's Actually Anti-Progress

We need a new definition of Progress, and a reset of the mythology guiding our descent into "Anti-Progress".

There's a curious disconnect between our glorification of Technological Progress and our real-world experience. If we step outside the tent of relentless propaganda touting science-fiction fantasies come to life--permanent bases on the Moon, limitless energy from fusion, etc.--we find that rather than everyday life getting better--the core meaning of Progress--we find that everyday life is getting harder. I call this Anti-Progress--the opposite of Progress.

Buried beneath the thrills of science-fiction fantasies come to life, real life is characterized by the accelerating descent into Anti-Progress.

Consider a raw carrot. In the current system of Progress, the most important feature of a raw carrot is its low profitability. There is little that promotion, branding or "innovation" can do to persuade consumers to pay more for a raw carrot.

The most important feature of a raw carrot to the human body is that it is a natural food packed with nutrients and fiber. It is easy to store and transport and can be eaten raw or cooked. It can be eaten alone or mixed into stews, soups, salads and casseroles. A raw carrot is a healthy snack.

None of this overcomes its terrible, unfixable flaw: it doesn't lend itself to Progress, i.e. boosting profits. The Progress solution to this inherent flaw is to process the carrot into a product that can be marketed as an advance (i.e. Progress) in convenience, novelty, status and engagement (i.e. dopamine rush / addiction), attributes the consumer will pay more for.

A few shreds of the carrot are cooked into mush and added to a concoction of potato starch, sugar and low-quality fat that is dyed with artificial colors to match a carrot's color and marketed as a "veggie snack" ("contains real carrots!").

The nutritional value of the product is nil and the health consequences of consuming what is basically a greasy sugary confection are negative. The list of chronic diseases incurred by a diet of such highly processed food is long.

This engineered snack, deceptively marketed as "veggie" to deceive parents into assuming it is a "healthy snack," is immensely profitable, and so the system cheers the soaring sales and profits.

The engagement/addiction aspect of this product is especially pernicious, as it is specifically designed to hijack the human brain's reward centers much like a powerful drug. Its mouthfeel and heavy doses of sugar, salt and fat activate our hard-wired predilection for what is scarce in the hunter-gatherer diet: salt, fats and sweets. Eating this snack generates an immediate reward: a pleasurable dopamine rush. Bet you can't just have one.

Not only is this confection devoid of nutrition, it's designed to be addictive. As every drug dealer knows, there's nothing more profitable than an addiction that generates reliable demand.

This describes not just addictive drugs and processed foods; it describes the whole of consumerism, which carefully cultivates addiction as the defining dynamic not just of Progress but of every-day life.

Should any consumers lodge a complaint about the deceptively advertised "veggie snack" with the agencies tasked with protecting public health, they will find the corporate lobbyists have neutered public influence by spending whatever sums of money are needed to buy the compliance of regulators, what's known as regulatory capture.

The product is declared safe and anyone complaining about the deceptive packaging is told that it's up to consumers to choose what to buy or not buy: caveat emptor, buyer beware.

This process of boosting profits by masking the negative consequences is not just rational in the system of Progress, it's the only path: any CEO who chooses not to maximize profits and buy political influence is fired for incompetence.

This reveals the pathological nature of organizing an economy and society around promoting a mythology that equates expanding consumption with Progress.

Anyone who describes the system as it truly is must be marginalized with an accusation of violating the American taboo against negativity. Not finding a silver lining is an unforgiveable sin: just as you must cheer technological Progress, you must be relentlessly positive. An entire library of cheery slogans is at the ready to ensure the proper dose of positive spirit has been administered, no matter how insincerely. If life gives you lemons, make lemonade.

So when we move to the response to the diseases generated by a diet of addictive processed foods--the immensely profitable market for pharmaceuticals that alleviate the symptoms of the diseases caused by consuming processed foods--we find a happy marriage of profits reaped by generating lifestyle diseases and an equally profitable alleviation of symptoms.

There are numerous subsidiary winners in this Anti-Progress profit bonanza: university research funded by corporate interests, lobbying firms handsomely paid to dig regulatory moats, politicians harvesting campaign contributions, think-tanks paid to distribute the apologists' favorite cover-story, "the free market," speculators scheming to cash in on a heavily hyped initial public offering (IPO), and so on.

Once we tune in to the siren songs of Progress, we hear them everywhere. The smart phone is a wonder, for what could be better than having shopping, hyper-addictive games and social media at our fingertips, an addictive device that enables access to a wealth of other addictions?

Just as the consequences of consuming the "veggie snack" are hidden, so are the consequences of glorifying addictive technologies as Progress.

Healthy human life is constructed of relationships between individuals, families, communities, the natural world and the moral universe.

Our economic system of Progress severs all these links as impediments to expanding consumption and profits via addiction, obsolescence, insecurity and narcissism. From the perspective of a healthy human life, these are the perfection of Anti-Progress.

How can soaring rates of diabetes and prediabetes be Progress? Clearly, this is Anti-Progress.



How can soaring rates of disability be Progress? Clearly, this is Anti-Progress.



How can soaring rates of metabolic disorders be Progress? Clearly, this is Anti-Progress.



How can soaring costs of basic healthcare insurance be Progress? Clearly, this is Anti-Progress.



How can soaring rates of teen depression be Progress? Clearly, this is Anti-Progress.



How can increasing loneliness be Progress? Clearly, this is Anti-Progress.



While returning to the Moon and AI apps are touted as "proof" of Progress, real-world life is most accurately described as snowballing Anti-Progress. We need a new definition of Progress, and a reset of the mythology guiding our descent into Anti-Progress. That's the topic of my new book, The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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Can We Rein In the Excesses of Financialization Without Crashing the Economy?

Or we can let the bubble implode under its own weight and have a plan ready to clean house when the dust settles.

Thanks to recency bias, we tend to think the world has always been more or less as it is today. Tectonic shifts beneath the veneer of everyday life escape us unless we make a concerted effort to peel back the veneer of normalcy.

For example, consider the rise of finance as the dominant force in our socio-economic / political status quo. Statistics give us a rough picture of the dominance:

In 2023, the finance, insurance, real estate, rental, and leasing industry contributed 20.7% to the United States' gross domestic product (GDP). This is higher than the long-term average of 7.29%. In 1947, the finance industry made up only 10% of non-farm business profits. By 2010, the finance industry made up 50% of non-farm business profits.

The chart below of non-bank financial institutions' assets as a percentage of GDP (Gross Domestic Product) tells the story: prior to the era of financialization, non-bank financial institutions' assets trundled along for decades at around 40% of GDP. Recall that "non-bank financial institutions" is shorthand for the mechanisms of financialization, which is the globalized commoditization of everything into a tradable financial instrument.

Labor, capital, risk, currencies, commodities, income streams, real-world assets--everything is converted into a financial doppelganger that can be arbitraged and traded for profit. The actual use-value is no longer the "value" being "created;" the "value" is "created" by generating an entirely abstract financial shadow cast by the collateral of the real world.

This transmogrification of the global economy into a fully financialized shadow-world took off in the early 1980s when financiers were first given access to unlimited credit and the other tools of financialization. Non-bank financial institutions' assets soon soared from 40% of GDP to 140% of GDP, and in the final blow-off phase of hyper-financialization that we're experiencing now, these assets are 200% of GDP-- five times the pre-financialization era levels that were deemed "widespread prosperity" (the Trente Glorieuses, the 30 glorious years of shared prosperity from 1945 to 1975).

The wealth generated by financialization and hyper-financialization isn't shared; it's concentrated in the hands of those with access to credit and and the other tools of financialization, currently epitomized by private equity.

This excerpt from a post on promarket.org illuminates the reality that financialization isn't cost-free to the economy:

"Epstein and Montecino argue that the total cost of the financial system is comprised of rents, misallocation costs, and the costs of the 2008 crisis. Such costs can be divided into two types: transfers and inefficiencies. When combined together, Epstein and Montecino estimate that they total to $688bn a year, or 4 percent of GDP. Cumulatively, from 1990 to 2023, this number would add up to $22.7 trillion."

Adjusted for inflation, this sum totals $30.2 trillion in today's dollars--larger than America's entire GDP of $27 trillion.

The larger point is that an economy that's dependent on the distortions of financialization for its "growth" and profits is not a stable system; the gross imbalances generated by the distortions undermine its stability, and the system collapses under its own weight once the imbalances destabilize society and the real-world economy.

I had an interesting conversation with a very successful Millennial entrepreneur (A.C.) on this problem: how do we reduce the destabilizing excesses of financialization without crashing the economy? A.C.'s concern was the immense suffering that would result once the speculative bid of financialization collapsed, something he felt was inevitable if even the most modest restrictions were put in place, for example, restoring the Glass-Steagall separation of commercial from investment banking.

That the suffering caused by the implosion of the Everything Bubble will reach every level of society is self-evident and should concern us all. But we must also place all finance-economic questions in the context that we inhabit a moral universe, not a purely mechanical or digital system like a clock or a computer.



In the moral universe, the question is: "what is the right thing to do now for future generations?" The self-evident answer is to deflate the financialization bubble, defang its predatory tools, and take the lumps now rather than dump the ever-expanding destructive consequences on the next generation. This can be viewed as our civic / moral duty.

We also discussed an alternative strategy: wait for the inevitable collapse of the bubble and then clean the nation's financial house of both the wreckage and the causes of the catastrophe, financialization. Either way, the implosion of the Everything Bubble will occur and the suffering will be great. We can try to deflate the bubble slowly via restoring the Glass-Steagall, etc., but given the extremes of speculative excess, even modest reforms might trigger the collapse.

Or we can let the bubble implode under its own weight and have a plan ready to clean house when the dust settles. This is the result of letting greed, corruption and fraud run amok for decades under the phony guise of "creating value:" Once the bill comes due, those responsible will wring their hands, blubbering that they were simply "doing God's work." Yes, well, you can tell the preacher on Devil's Island, where you'll be living out your retirement.

Can we rein in the excesses of financialization without crashing the economy? Sadly, no. Now that the economy is dependent on the speculative excesses and distortions of financialization, there is no way to avoid the banquet of consequences that has already been served and is only awaiting the seating order. But we can do what's right, and take the pain now rather than let it pile even higher before it implodes on the next generation's watch.

New podcast: How Asset Deflation Could Play Out (35:37 min)

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

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


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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Thank you, Ken ($70), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, Stuart L. ($7/month), for your magnificently generous subscription to this site -- I am greatly honored by your support and readership.

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A Hard Rain Is Going to Fall

The core skill going forward--frugality--is largely a forgotten skillset. Time to get busy while we still have time.

There are core systemic dynamics that are impervious to technological or financial gimmicks, and as they play out, a hard rain is going to fall:

1) The credit-business cycle. The credit-business cycle has been pushed forward for the past 15 years, and arguably for the past 24 years. The last "real recession"--the organic contraction of credit and risk-taking that drains the excesses from the economy and financial system over the course of several years--occurred 43 years ago in 1981-82.

The mechanism for pushing this essential cleansing is moral hazard, the disconnection of risk from consequence by unprecedented central bank monetary stimulus and central state fiscal stimulus. The net result of moral hazard is the excesses of risk and debt are rewarded and expand to even more precarious heights, ensuring the eventual downturn will be far more destructive than had the system been allowed to fully re-set in 2000-02 and again in 2008-09.

2) The reversal of financialization and the collapse of the Everything Bubble and the wealth effect. The commoditization of credit, leverage and speculation is a boon when first introduced to a credit-starved economy, but once the productive investments have been made, financialization continues expanding into extremes of debt, leverage and speculation.

Central banks have used one trick to keep the expansion going: they dropped interest rates to zero, enabling borrowers and speculators to borrow / leverage more with the same income. This expansion of credit boosted assets to extreme valuations as all this new "money" chased a limited quantity of assets. The credit-asset bubble increases the value of the collateral--the house, the stock portfolio, etc.--which then supports additional borrowing / leverage.

The payoff was not just putting off the credit cycle--the credit-asset bubble generated a massive wealth effect for those who owned the assets before the bubble multiplied their value. The top 10% who own 93% of all stocks have seen their net worth expand by tens of trillions of dollars, enabling their spending to account for roughly half of all consumption.

The resulting extreme of wealth-income inequality has social repercussions that are not yet fully realized, but the pressure on those left behind is mounting.

Interest rate cycles are multi-year affairs, generally running between 15 and 40 years. The current cycle--from 1981 to the present--is extremely long in tooth, reflecting the financial repression of interest rates over the past 15 years.

Nothing lasts forever, regardless of what policy is applied. Interest rates are rising and will continue to rise.

This means that central banks' favorite trick to put off the credit cycle--lowering interest rates to zero--is slipping out of reach. This means that central banks will no longer be able to keep the credit-asset bubble inflated. It will deflate as interest rates rise, unpayable debt is defaulted and risk emerges in force.

Once the credit-asset bubble deflates, the wealth effect reverses, and consumption plummets as all those who rode the bubble higher are now poorer. The net result is the economy slides into recession.

Central states have piled up such a mountain of obligations and debt that their ability to stimulate the economy out of a much-needed cleansing of bad debt and speculative excess is limited.

So neither central banks and central states have the capacity to push the credit cycle forward any longer. The games have all been played and now the bill is due and payable.

3) The reversal of globalization. central banks were given the one-time luxury of lowering interest rates to zero by one dynamic: the emergence of China as the global exporter of deflation and a new "credit impulse." As the developed economies shifted production to China, costs declined and profits soared, fueling the stock market bubble and offsetting the inflationary pressures generated by expanding credit and fiscal stimulus.

China has now matured to the point that it no longer exports either deflation or the credit impulse. Now the inflationary pressures of expanding credit and fiscal stimulus are not being offset, so they're finally manifesting globally. There is no replacement of China's one-time gift of deflation and credit expansion, and so inflation and interest rates will rise.

Throwing more money into the system will only accelerate inflation and interest rates. That game is over: checkmate.

4) The limits of scale. The latest technological advance on the lab bench rarely scales up: vaporizing plastic waste is nice, but the cost and inherent limitations of this "advance" mean it will remain a curiosity, not a global solution that magically eliminates the 400+ million tons of plastic waste that isn't recycled, out of the 450 million tons of plastic produced annually.

Even when a new technology may make financial and practical sense, the time and money required to scale it up t useful levels are significant. Consider the "next big thing" in nuclear power, Small Modular Reactors. The first one is slated to come online in 2030, but such projects are typically plagued by cost and time over-runs in the early stages of development.

If the goal is to build 100 such reactors, how log will that take, and how much capital will it consume?

Will it take a decade? or two decades?

The point here is we're entering a credit cycle recession with the infrastructure we have, and improvements will be incremental, time-consuming and expensive, draining capital from consumption, in effect deepening the recession. This is the dynamic I endeavor to illuminate in the 1970s, when vast sums of capital were invested in pollution mitigation and the upgrading of the nation's industrial base, with only modest payback in the near-term. The real benefits only accrued decades later.

A similar upgrading of the nation's industrial base is starting, but it will be a drain on consumption for decades to come.

5) The downsides of centralization. Optimizing profits has relentlessly driven centralization on every scale: a handful of corporations dominate every sector, and facilities--from slaughterhouses to chemical storage--are geographically centralized, inherently increasing the risk of "normal accidents" triggering catastrophic losses. This reality was explained by Charles Perrow in his book The Next Catastrophe: Reducing Our Vulnerabilities to Natural, Industrial, and Terrorist Disasters.

Decentralizing the economy increases costs, reducing profitability and pushing prices higher. This is the cost of resilience and redundancy. The cost of centralization is invisible until it's too late.

6) Climate extremes. Setting aside the debate about causal factors, that extremes of weather are increasing in number and intensity globally is placing agriculture and infrastructure at greater risk of cascading, non-linear avalanches of consequences. Centralization adds to these risks.

Add all this up and we have a recipe for global recession in which inflation and interest rates rise, The Everything Bubble pops, possibly violently, the wealth effect vanishes into thin air, consumption plummets and job losses soar. Central banks and central states will not be able to push the credit cycle (i.e. recession) forward any longer, and if they try to do so, they will only make the decline more severe and painful.

I often post this chart of the S-Curve to emphasize that cycles are organic and cannot be reversed or pushed forward forever. Pushing them forward has only increased the bill that must now be paid.



Our hubristic faith in the god-like powers of technology and central banks / states creates an illusion that the credit cycle turning is the result of a "policy error," when in fact it's just the way systems function. We've created extremely fragile, centralized systems optimized for profit, and operated on the false premise that all systems are infinitely controllable given the right technology or policy.

The result of our hubris is that the turning of systemic cycles will be more disruptive and painful than was necessary, as a direct result of our attempt to manipulate / rig the system to suit our expedient, short-term desires.

A hard rain is going to fall, and we serve our best interests by preparing for the coming storm.

The core skill going forward--frugality--is largely a forgotten skillset. Time to get busy while we still have time.

New podcast: How Asset Deflation Could Play Out (35:37 min)

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