Insane Financial Imbalances and Social Revolution

A rebalancing of the economy and society will ultimately prove very positive, but first we must navigate the model collapse of insane financial extremes.

I've endeavored to explain how self-referential models veer into hallucinations that are accepted as accurate reflections of the real world. Models are by definition synthetic abstractions of the real world, and as these "train" on their own output, they drift away from authentic understanding without the users being aware that their "world" is both artificial and self-reinforcing: each iteration reinforces their belief in the model's accuracy.

Patient users of AI programs can force AI to admit its output was a hallucination, at which point AI tends to abjectly apologize. But human pride--especially strong among those with high opinions of their intelligence and mastery of life--precludes recognition of catastrophic error (i.e. believing in a hallucination) and apologizing for the error.

Human hubris leads us to double-down when faced with evidence we've placed our faith in a hallucination. We deny that our system/model is a self-reinforcing hallucination even as we go over the falls. The faint cries of "save me!" are short-lived.

Models collapse from their own internal dynamics. They don't need our approval. Our disapproval doesn't stop their collapse. Our choices boil down to 1) go over the falls as models collapse; 2) snap out of the hallucination or 3) enter the netherworld of hyper-normalization, the state of mind where we embrace two contradictory "truths": the hallucination is forever and we're not surprised when it collapses.

Model collapse manifests in many ways: people and systems break down. Anti-social behaviors become normalized, and extremes are accepted as normal as we habituate to dysfunction and breakdowns.

I call this Anti-Progress: what we're sold as "progress" actually reduces our quality of life. In my book The Mythology of Progress, I describe Progress as a powerful mythology, but it can also be understood as a model that is collapsing into a hallucination we cling to with hubristic tenacity.

In everyday life, these extremes manifest as Ultra-Processed Life, a synthetic world in which artificial substitutes have replaced authentic life and experiences because the model increases profits via unhealthy addictions in both the consumer and digital realms.

But people break down in this Mouse Utopia of ultra-processed abundance, and the model's self-reinforcing iterations veer ever farther from authentic experiences.

Which brings us to my latest podcast with Richard Bonugli, Insane Financial Imbalances and a Social Revolution (36:34 min). The word "insane" is jarring, for the dominant model of the global order holds that financial extremes are not just sane, they're proof that all is well, and so calling these extremes "insane" is what's insane.

This is classic model collapse: up until the point of breakdown, the model seems to be functioning perfectly, because being self-referential, there is no other possible output other than the system is performing nominally.

In my new book Investing In Revolution, I describe the two structural flaws in the current model: 1) due to its success in generating abundance, the model's adaptive capacity has decayed, leaving it incapable of adapting to rapidly changing real-world conditions, and 2) the dominance of the financial model has fatally imbalanced society and the economy, an extreme imbalance that will be rebalanced by the pendulum swinging to the opposite extreme.

I call this systemically predictable rebalancing a social revolution, as meet the new boss, same as the old boss is no longer sufficient: the values and incentives that maintain a sustainable balance between society and the economy must change. This Reformation is not financial or political, it is fundamentally social in nature.

This imbalance is visible in the widening divide between the share of the economy going to labor and capital: wage earners' share has been declining for decades, reducing their capacity to afford a secure quality of life without piling up debt:



The earnings generated by ownership of capital go mostly to the very top of the wealth-power pyramid: the majority of income from capital flows to the top 0.25%, with the rest dribbling down to the top 5%.



The bottom 50%'s share of financial assets amounts to signal noise--2.6%.



This imbalance is so extreme that it will catalyze social disorder, yet to call it unsustainable is "insane."



The health of the non-elites has reached crisis levels, yet this too is unremarkable because the model has a "solution": more costly medications that must be taken for life: highly profitable, so all is well.



The hallucination that this is all wonderfully sustainable reveals the dominance of the financial model of how the world works. That society is breaking down is of no concern because natural gas is so abundant that we can easily power up AI data centers, and GDP is rising.



The problem is we only manage what we measure, and all the financial analysis "trains" on its own output. Those staring at screens of soaring stocks and corporate profits declare this is the best possible world while the social order breaks down around them.

A rebalancing of the economy and society will ultimately prove very positive, but first we must navigate the model collapse of insane financial extremes, extremes that are unrecognized in the current hallucination. The collision of the self-reinforcing hallucination with the real world will be challenging.

If we accept that the dominant models have lost their capacity to adapt, and that the imbalance between economic forces and society have reached extremes that demand rebalancing, we can return to the real world in good order. If we cling to the hallucination, then over the falls we will go.


New Podcasts: Insane Financial Imbalances and a Social Revolution (36:34 min)

Ultra-Processed Life: Unhealthy, Addictive, Deranging, Artificial (36 min)

My new book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)


Check out my updated Books and Films.

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

Subscribe to my Substack for free

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All the Dominant Models Are Collapsing

Every nation is operating on models that are collapsing without those at the controls being aware that the implicit assumptions of their models no longer map reality.

A recent article lays out the collapse of the dominant geopolitical model of "rising powers generate conflict": The Stagnant Order And the End of Rising Powers (Foreign Affairs, paywalled). The basic idea is that the foundations of "rising powers"--demographics and productivity gains--no longer support grandiose planetary dominance.

Rather, demographics is already baked in as a crushing liability to all existing powers, and despite endless claims that technology will jumpstart productivity, the reality is productivity gains have flatlined for decades. "Growth" is a function of expanding debt, not productivity gains.

This dynamic extends beyond geopolitical models: all the models being used to explain and control the world are all collapsing: economic, social, political, they're all collapsing because they are all constructs assembled in eras that no longer map the present.

As I explained in The Entire Bubble Economy Is a Hallucination, models collapse because of two limitations that define all models:

1. All models are self-referential, as they "train" (i.e. generate current analysis) on a limited spectrum of metrics that are presumed to summarize the immensely complex "real world." The model is blind to its own self-referential feedback loop and the limits of the metrics it bases its output on.

Over time, this self-referential "training" degrades the output--the analysis and the decisions based on that analysis--to the point of hallucination: the model is generating output of how the world works that has drifted to far from authentic understanding that it is a hallucination, one that is taken to be "real" by those controlling the model.

2. The metrics being measured leave out enormous fields of the real world, but what's been left out isn't explicit, as it's all based on what is considered "knowable" and "known," as I explained in What We "Know" Is More Dangerous Than the Unknown: these assumptions are hidden limitations of the model, as we only manage what we measure.

I break this down in my book Investing In Revolution.

The collapse of the dominant models is visible everywhere, but perhaps most painfully in economics, which has become the dominant model of how the world works due to the dominance of statistical models of finance and the policies those models generate.

I addressed this failure of economics to accurately predict outcomes back in 2013: Why Isn't There a Demonstrably Correct Economic Theory? (August 16, 2013)

"This system is intrinsically unstable, as the financial claims of credit and fiat money on limited real-world resources and wealth eventually far exceed real-world resources, and the system of claims collapses in a heap.

Although economics doesn't recognize it, the operative phrase here is systemic injustice."

Why Economics Will Never Be a Legitimate Science (December 24, 2013)

All the extant economic models are artifacts of bygone eras. The economic models of the 19th century--all based on the implicit assumption that resources were endless--were modified in the 1930s into Keynesian hallucinations still based on endless resources: let's just pay people with freshly printed "money" to dig holes and fill them. This presumes endless resources to squander on digging holes and filling them, as if that is a productive use of labor and resources.

This hallucination continues to be the dominant paradigm: resources are endless because we're clever and there will always be a substitute for whatever is depleted, so the "solution" is just print "money" to pay people to dig holes and fill them.

The "problem" is "growth" of consumption, and so if we "solve" that problem by goosing consumption by any means available, we enter "Mouse Utopia," an artificial world of never-ending abundance.

The book Money, Blood and Revolution: How Darwin and the Doctor of King Charles I Could Turn Economics into a Science takes a stab at turning economics into "science," but that's not actually "the problem." The real problem is all models have intrinsic limits and end up hallucinating, but those controlling the gearing of the model depend on it to maintain their own power, so they are blind to the failure of their precious model to track the real world and generate authentic understanding.

So we're told that all is well because GDP and the stock market are rising, and since we have lots of natural gas to power AI data centers, we're entering a "Mouse Utopia" of endless abundance. That these are all hallucinations is lost on those clinging to collapsing models as the means of maintaining their power.



That the hallucinations are sustainable is itself a hallucination:



That the inhabitants of "Mouse Utopia" are not focused on how natty gas and AI are going to make Utopia even more utopian is lost in the current model collapse: antisocial behaviors are accelerating due to the the artificial nature and exploitive structure of our "Mouse Utopia," but these realities aren't measured and so they don't exist in the current model's self-referential hallucinations:



All the dominant models are collapsing at once, and no nation is immune to the consequences, as every nation is operating on models that are collapsing without those at the controls being aware that the implicit assumptions of their models no longer map reality:

If We Measured the Economy by Quality-of-Life Instead of GDP, We'd Be In a Depression (October 16, 2025)


New Podcast: Insane Financial Imbalances and a Social Revolution (36:34 min)

My new book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)


Check out my updated Books and Films.

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

Subscribe to my Substack for free

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The Wile E. Coyote Insight: What We "Know" Is More Dangerous Than the Unknown

This is why "knowledge is power": those who define what is "knowable" and "known" shape the reality of everyone in the model / system.

Oh crikey, is this another boring post trying to make philosophy relevant? No, it's a post about survival of the fittest, as what we "know" will lead us straight off the cliff in a state of delusional confidence. What we "know" is a mix of what we accept as known and what is knowable, which is defined by the system / zeitgeist / frame of reference we inhabit.

Nowadays we can't talk about "knowing" without invoking AI, which claims to have gathered all of human knowledge and made it available to us in natural language. But as I've taken pains to describe this year in dozens of posts and two books, what AI presents as "known" has been processed in ways we don't see, and these processes limit the reliability and trustworthiness of what AI presents as "known" and "knowable."

The danger here is our ill-informed confidence in AI and in what our system presents as rock-solid "knowable." The system says Gross Domestic product (GDP) is a rock-solid measure of the economy, and since it's rising, you can be absolutely confident about chasing gains (the Roadrunner) off the cliff. (See Wile E. Coyote below.)

Here's the thing that gets passed over: AI hallucinates, but it doesn't "know" it's hallucinating; it presents fabrications as "known facts." AI didn't "knowingly" take digital Ayahuasca and LSD and "know" it will be hallucinating as a result. It "thinks" it's reporting what are established "knowns"--first, this is knowable, and second, this is known.

We're no different when we're fed hallucinations as if they're "known facts." We're unaware they're hallucinations, and so we blithely walk off the cliff because we placed our confidence in fabrications, models that have collapsed without us being aware that 1) we accepted a model as reality and 2) the model collapsed and is now generating "information" that isn't entirely knowable and isn't "fact."

You see the difference: when we knowingly take hallucinogens such as Ayahuasca or LSD, we know our experiences no longer reflect "facts." We understand our experiences may veer into territory that science defines as "unknowable," yet we are experiencing it anyway. We know it is unwise to walk along a cliff edge at dusk in a hallucinogenic state.

But in model collapses, we think the hallucination is the real world. It is in this confused state that we place our confidence in a hallucination and walk calmly off the cliff to our demise.

This is where the survival of the fittest kicks in: confusing reality and a model-collapse hallucination does not generate positive survival outcomes. I explain the systemic sources of this confusion in my latest book Investing In Revolution.

As I explained in Model Collapse: The Entire Bubble Economy Is a Hallucination, model collapse is the inevitable result when those controlling the model's gearing / programming begin using the output of their previous results (output) to "train" the next iteration of their "knowledge," i.e. what they consider knowable and known.

Using probabilistic functions and overweighting what is accepted by conventions as knowable and known both skew the outputs, which accumulate as each iteration "trains" on the skewed outputs. Knowledge that is on the margins or discounted by conventional definitions of what is being measured as "facts" is edited out of the knowledge base or reframed in conventional terms: in AI "training," this is the Silicon Valley frame of reference.

Those who control the gearing / programming trust their own judgement and models, and so they resist recognizing the increasingly hallucinogenic nature of their model. Their frame of reference is we have god-like powers and are building utopia, and the idea that they have a poor grasp of what is knowable and what is known doesn't penetrate their hubris.

The inhabitants of their Mouse Utopia have been trained to trust their techno-leaders as demi-gods because "technology is Progress," and so their core survival skills--skepticism, a keen awareness of what is unknown because reality has one foot in what is intrinsically unknowable--have atrophied. Surrounded by novelties, addictive distractions, conveniences and comforts, they have lost the ability to differentiate the real world from a (highly profitable) artificial world.

This is a visual representation of what happens when a system "trains" on its own output: GDP is rising, so everyone's doing great, money solves all problems, except moral decay and the other sources of our hallucinations, and so on:



Here's a list of the model-collapse hallucinations we now trust as reality to our future detriment:

1. The entire global financial system is a hallucination generated by model collapse. This hallucination is most easily visible in bubbles, credit, "banking" and "money."

2. The entire AI bubble, including AGI (artificial general intelligence), is a hallucination generated by model collapse that is being purposefully obscured to maximize private gains from the public's embrace of the AI-bubble hallucination.

3. Social Media is a hallucination generated by model collapse that is being purposefully obscured to maximize private gains from the public's addiction to the social-media hallucination.

4. The entire status quo of Ultra-Processed Life is a model collapse hallucination, including the delusions that all our problems can be resolved with an "abundance of money" and "energy."

This is why "knowledge is power": those who define what is "knowable" and "known" shape the reality of everyone in the model / system. The result is we're living in a Mouse Utopia that is in late-stage model collapse that is largely unrecognized by the inhabitants but acutely visible to those keeping it glued together long enough to amass private fortunes before it all implodes.

It's highly profitable to maintain the illusion that these hallucinations are "the known world," but when the model implodes, you'll want to be outside the ruins rather than buried beneath rubble. It is only then that we'll realize that what we "know" is more dangerous than the unknown.




My new book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)


Check out my updated Books and Films.

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The Perilous Journey Ahead

I reckon it prudent to see the next decade as a journey through a wilderness few of us have experienced.

Marketing has seized "your journey" by the throat. The marketing of everything from storage facilities to downtowns now references "your journey," with the primary message being your journey will be fruitful, fun, exciting--but also safe and secure. In other words, our journey will follow well-worn, well-marked trails, and the outcome will always be positive. If anything untoward happens, someone will be available to get "the journey" back on track.

In other words, "the journey" is never through a wilderness without trails or markers where help is unavailable, where we're on our own and the journey's outcome is uncertain, and fear is the companion who is always by our side.

In the marketed "journey," all you need is money: to rent a storage space or an apartment, to pay tuition or a plane ticket and sturdy boots. This is the essence of what I call Ultra-Processed Life: adventure that is safe and certain can be purchased off the shelf.

We take all the intricate structures that make this possible for granted, and have little grasp of what life is like without them. As long as we have money, we have power. But in a wilderness, there's nothing to buy and no one to pay to make it all go away. In a wilderness, we experience the limits of our power. Stripped of all the structures that make life certain and safe, we come face to face with our own powerlessness.

Many of us have already experienced powerlessness in our childhood. We were repeatedly moved around against our wishes by adults, step-parents were imposed on us and then dispensed with, and we were dropped into schools where we were vulnerable to bullying. Certainty and safety were ephemeral, and we lacked the tools and strengths offered by adulthood.

It is not surprising that many of the elements of Ultra-Processed Life are child-like: we're offered "adventures" that are safe and certain, as in "let's play adventure" but in a safe, protected environment.

The problem with packaging life based on the ubiquity of complex structures that protect us from contact with uncertainty, risk and powerlessness is we're completely unprepared for the real world when we do finally encounter it. We cannot imagine experiences that unravel and cannot be reversed with a phone call or credit card.

Unaccustomed to being totally on our own in situations we've never experienced before, we're ill-prepared to function in a fast-moving environment of uncertainty and risks we cannot fully grasp. These environments can be external--the real-world unraveling--and/or internal: the unraveling of burnout or breakdown.

I've written a lot about self-reliance, as this is the penumbra (Latin for "almost shadow") of powerlessness: self-reliance is never limitless, for we do not have god-like powers. It is intrinsically limited. But it does generate agency, the capacity to direct our lives by exerting our will, skills and effort.

One analogy for "the journey" is driving a car. Our experience is 100% low-risk predictability and control until we experience an accident, and so our experience doesn't prepare us for things going awry. We have no tools for dealing with sudden extremes or unexpected failures in the systems we take for granted. It's only after such experiences do we learn our limits an gain an appreciation for what might happen even in low-risk settings.

Those of us who have had such experiences tend to think along "worst-case scenario" lines as the means of avoiding being caught off-guard by "longtail risks," i.e. events deemed unlikely but still well within the realm of the possible.

For example, if I climb on a roof, I assume I'm going to slip and fall, so I take precautions that look excessive to those who haven't fallen off roofs.

In a similar fashion, it seems risky to have no water, food and fuel stored up for the unlikely eventuality that the systems we rely on to provide these essentials break down or are disrupted. It seems equally risky to have few skills in fashioning shelter, growing food, organizing security, and planning scenarios to deal with breakdowns in what we take for granted based on real-world experience.

We're accustomed to emergencies being temporary, the result of a natural disaster that responses are in place to deal with. We have little or no experience of systems decaying and not returning to the status quo.

My sense is that we're entering an extraordinary period that is more like a wilderness than a well-marked path with help around every corner. Beneath the surface of normal life, the systems we take for granted are eroding. Since we have no experience of this, we're unprepared for a journey that is intrinsically uncertain and brimming with risks we cannot assess because they are contingent, novel and non-linear, i.e. unpredictable.

The consensus is such a situation is not in the realm of possibility. Everything we take for granted is permanent. My view is the next 7 to 10 years will present us with challenges few are prepared to manage based on previous experience and their existing reserves of agency, skills and resources, reserves based on the expectation of permanent structures providing security and safety.

The phrase "situational awareness" is bantered about, but as a general rule we can only be aware of situations we've experienced before. We're blind to what we have yet to experience. Without experience, we tend to over-estimate our readiness to deal with extraordinary circumstances because we've successfully managed everyday life.

Fear is a useful tool that few learn to use because they don't have enough experience with it. Fear is a spectrum, one that spans from caution to panic. The difficult part is avoiding the slide into disorientation and panic. Like self-reliance, this is imperfect. Our ability to assess risks and threats is also imperfect. No matter how well prepared, we can still be surprised, unwary, blind to what we haven't experienced.

Knowing this is also a tool.

Some things happen so fast we don't even have time to become afraid. We just react instinctively. In slow-moving crises, uneasiness dissipates all too easily into passive acceptance.

We habituate to decay so readily that it's hard to anticipate where it's heading. We assume the current level will hold, when the reality is the current level is only temporary, and the next step down is just ahead. Our ability to distinguish a step down from a precipice is limited.

I reckon it prudent to see the next decade as a journey through a wilderness few of us have experienced. It may appear to be financial or political, but fundamentally it is a journey each of us will take to some degree on our own.

We will be powerless to restore the systems that have decayed. Our only power will be what we provide ourselves. Empowerment will likely take multiple forms, manifesting as self-reliance, experimentation, failure, shared experiences and cooperation with others.

These ruminations were inspired by this work, which I leave unattributed so you can read it as it is without any preconceptions generated by authorship, place or time.

A Manner Of Traveling

I awoke and found myself walking
along a muddy road,
dim with filtered light and an uncertain sun.
My feet were cut and bleeding.

I glanced back at my tracks and recognized nothing,
and saw small patches of my blood
in the dark damp depressions of my footsteps.

Yes, anger and love can co-exist.
This I know for I am both.

I am in an unfamiliar place.
The leaves and branches are wet with recent rain
and I cannot tell if I have been crying
or just walking with my face turned up to the sky.

I find my feet marching forward, steadily,
and I am astounded at the effort they are making
without my will.

Yes, decisions and no will can co-exist.
This I know for I am both.

I consider turning back but I do not remember
coming here. There is nothing to return to.
I am alone, though I see the eroded,
water-filled spoor of other walkers.

I am afraid, for I cannot see ahead
and do not know the future that my mind
is striving to see.

Yes, certainty and the unknown can co-exist.
This I know for I am both.

There are deep scratches on my exposed arms;
I do not recall crashing blindly through
wilderness, but clearly, I have done so.

I am thirsty and tired but there is no place to rest.
I feel this power pulling me forward.
I am trying to return to the birthplace
I have never seen, as birds and fish do.
I will not recognize it with my eyes but with my belly.

I want to feel sorry for myself, to have someone
comfort me in my distress, but I am alone,
with only my mind and body for company,
and the insects buzzing unseen above my head,
oblivious to my aching feet and confused mind.

Yes, pain and love can co-exist.
This I know for I am both.

There is the rich scent of vegetation around me,
fecund, growing, matted, decaying, life and death
in the same place and time.

I walk on and the smell lies heavily over
the damp vines and reaching trees above me.




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How We Fail: The Empire Is Forever

Tunnel-vision greed and blindness to what is unseen and therefore "unknowable" is self-reinforcing.

The immense literature on the decline and collapse of civilizations tends to overlook a simple but profound dynamic: the tunnel-vision created by the fusion of an unquestioned belief in the permanence of the status quo and a narrow focus on maintaining and/or expanding the perquisites we're siphoning off of the empire.

The list of causes / sources of decay, decline and collapse is long indeed, but most are external factors: environmental changes such as drought, plagues and pandemics, invasions by barbarians, and so on. Internal sources of decay are often dismissed or given short shrift: for example, the Western Roman empire did not collapse due to moral decay, it was overwhelmed by the invasions of tribes pushed westward into Roman territory by warriors from the steppes of Asia.

The focus on externalities benefits from an easily traceable if-then causality, but it misses the critical importance of the social-economic-political milieu, the mindset of what's assumed, what is "known," what is unrecognized (and therefore "unknowable" in the mindset of that era), and the unseen decay wrought by enduring success.

Yes, enduring success is self-liquidating, as the impressively convenient idea that the empire is so durable that everyone with the means to do so can siphon off as much wealth as they can manage with absolutely no systemic consequences.

The possibility that this narrow focus on maximizing self-enrichment might weaken the empire in aggregate never occurs to any of those amassing private fortunes at the expense of imperial stability.

As I explain in my new book Investing In Revolution, success slowly corrodes our ability to adapt to rapidly changing circumstances. Whatever the challenge, it is assumed that the empire has the resources and systems to make the problem go away, and do so without demanding any sacrifices of its higher classes of aristocrats, patricians, clerisy and functionaries.

In other words, let them eat cake: there's always a solution that somebody else will make happen.

This decay of adaptive muscle goes unnoticed, for no one other than a few elders has any experience of a crisis or overlapping series of crises that demanded society-wide sacrifices and risky decisions to avoid failure. The systems that had evolved to maintain the empire had been up to the task for so long that the sclerosis of adaptive capacity is unseen and thus "unknowable."

That the empire could fail and collapse is beyond the realm of what's conceivable. The enduring success of the imperial structures fosters both:

1) a self-absorbed focus on accumulating as much private wealth as possible with no regard whatsoever for the eventual systemic consequences of everyone focusing on amassing their own fortune, and

2) a blindness to the erosion of the society's capacity to adapt to conditions that are so novel that the existing responses are inadequate and doomed to fail.

This blindness extends to the failure of the status quo responses: everyone watches the system do more of what's failed and assumes that devoting even more resources to the failing policies of the past will magically work again.

This is how we fail: externalities are relatively easy to identify and measure. The internal forces of self-liquidating success--the loss of adaptive capacity and a self-absorbed blindness to the eventual consequences of moral decay generated by tunnel-vision greed and the sclerosis fostered by enduring success--go unnoticed as they are not easily measured and are as hidden from view as the melting ice beneath the snowpack that makes an avalanche not just likely but inevitable.

Tunnel-vision greed and blindness to what is unseen and therefore "unknowable" is self-reinforcing:




My new book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)


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