Notes and comments on Ecosystem Energy economics,Global Climate change, Planetary Overshoot and Coping Strategies Generating Resilience at the End of Growth living on a Wyoming Farm
For those of you that are not familiar with the Hindenburg Omen, here it is. It is an tool used by stock market technicians from I assume the Hindenburg School to call for a stock market crash when the number of 52 Wk highs and lows exceed 2.2% of stock market volume coupled with a rising 10 wk average. I gather the omen has poked up it's ugly snout from time to time lately. I leave it to the reader to decide on its validity. I have my own set of omens and they have been piling up like cord wood lately.
I try to be a big picture guy as the title of this blog suggests and prefer to look at trends beyond economics, politics and social change because we have a multiplicity of inputs influencing our civilization in a seemingly chaotic fashion. These inputs are subject to positive and negative feedback loops and other known and unknown variables which can render short term prediction unreliable or impossible in a particular specialized field like economics, but I contend that it is possible to develop a big picture view which can inform how we can live and plan for this uncertain future. Over in Germany, the Bundeswehr has been hard at it working on military contingency plans. Der Spiegel, an excellent German magazine obtained a leaked document with some interesting conclusions which wont surprise anyone with even a rudimentary understanding of the importance of oil to industrial economies. A link from theoildrum.com is here. I read the leaked report (not yet fully translated)and didn't learn any new facts to alter my weltanschuung(sorry, couldn't resist!), but I am pleased that there are think tanks in some governments that are in fact thinking. We have people in the US who have been sounding similar alarms to the Bundeswehr Think Tank but most have been outside the mainstream media and perhaps the Pentagon and DC think tanks just have better internal security. Similar documents may be out there and they just haven't been leaked yet. The leaked document has a few key points which I have iterated many times in the past and I will do so again. The key emphasis of this blog is the importance of the influence of petroleum to an industrial economy. I have hit this time and again and here it is one more time. Oil doesn't just influence our industrial economy. Heretofore cheap Oil energy IS OUR ECONOMY, or 95% of our economy. Oil not only drives virtually all transportation of people and goods but provides the chemical base stocks for the various polymers and products of our globalized lifestyle. With cheap oil energy already gone, it is pretty obvious that the cost to the entire world's industrial lifestyle will be going up.The wealthy industrial nations will be able to hang on longer than the poor nations as long as the oil exporters continue to accept our dollars for their oil. The entire globalized world economy runs on oil and it is obvious to this observer that barring some new cheap oil energy substitute, the industrial economy of the past 250 years will soon be drawing to a close. The leaked Bundeswehr study spends a lot of time listing mitigating strategies to this petroleum decline.
As the cost of energy goes up, the possibility of growth in our industrial economy will go down. At some point the ever rising cost of energy will force contraction in economies, in effect negative growth.This will mean the end of the current globalized industrial model. It think it is also obvious that it means the end of our debt based industrial model. Debt is credit advanced based upon the promise of future growth. With growth you can pay back the principal of the loan and the interest. If you have growth you can also use leverage to increase your profits. Without growth a debt and credit based economy is dead. Without growth, leverage is dead as a wealth enhancing tool. Ditto fractional based lending, securitized mortgages, derivatives and all the rest of the toxic garbage proffered up by our bloated financial industry. The end of cheap energy spells the end of our debt and credit based industrial civilization. Not the end of civilization mind you. A new civilization will rise to replace the current now flawed energy profligate version. We are at such an inflection point and it behooves all of us to start thinking about the changes we will need to make to our lifestyle to adapt to this new succession.
Well Pardner, let me give you a big wonderful Wyoming welcome to Uncle Ben's annual Economic Symposium(aka the K.C. Federal Reserve Dog and Pony Show).
I haven't been able to get a comprehensive guest list and of course no bloggers were invited. I assume my old Richmond buddy Kartik Athreya made sure of that:http://cal48koho.blogspot.com/2010/08/kartik-athreya.html.
The invitees were central bankers, university economists and other current and ex Fed folks and of course a large assortment of clueless neoclassical economic clowns who should have arrived dressed as the wizzards and sorcerers they in fact are. Ben in his keynote speech said"preconditions for growth in 2011 are in place." Like what for example Mr Bernanke? You mean 18% unemployment, 130% of GDP Federal debt to GDP if you include the GSE's Fred'sFannie,trade deficits heading to $700 Billion, collapsing housing markets, unfunded pension plans and soaring state budget deficits! Delphic obfuscator that he is, who knows what he is talking about. The obvious fact is no one really knows what to do about how to restore "growth." The possibility that growth as we have known it may be at an end has not yet occurred to them. Word has leaked out that there is dissension at Fedsville meetings as consensus seems to have collapsed. Even in the business and economic media the stimulusians slug it out with the austerians. Rabid stimulusians like Paul Krugman say the solution is more stimulus but not these trivial shovel ready sub-trillion dollar pittances. Paul wants the big bucks and he along with a lot of other great minds from Donald Regan to Dick Cheney have told us the deficits don't matter! But so far no one is paying much attention to Paul except NPR and PBS. In fact , one of the few speakers casting dissent out at Jackson Lake Lodge in his speech was European Central Bank President Jean-Claude Trichet who urged governments to cut their debt not expand it and a failure to do so would result in another "lost decade." Carmen Reinhart and her hubby Vincent did deliver a speech which might have been worth hearing. Carmen as you might know was co author of an important book "this Time is Different"http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691142165/ref=sr_1_1?ie=UTF8&s=books&qid=1283036244&sr=8-1 which analysed financial collapses over the past few centuries. Neoclassical clowns never look through the retrospectascope of history or even consider the possibility that it might be different this time. I doubt if Ben read has it. If he had, he would be having second thoughts about more stimulus like QE(money printing), peddling and trading mortgage securities for Treasuries, changing reserve requirements, fiddling with interest rates and so forth. Ben needs to look over the edge . If he did he would see that he is looking into a veritable Black Hole which has sucked into its maw all his bright ideas and trillions dumped into Wall street banks and all the other bullets from his six shooter. Ben says he has more bright ideas like buying long dated treasuries now that our old pals like China and Japan aren't.How that will restore growth to a country and a banking system that is bankrupt is beyond me. The American people are way ahead of the Federal and State governments. They piled up huge debts and are now not borrowing and not spending. They are paying down debt and saving. The national savings rate is up to 6% from negative percent a few years ago.Outstanding credit card debt is dropping. They are doing the only sensible thing. It may not be austerity but it is the next best thing. The American family has the massive advantage of far less complexity and not having economists advising them what to do. This is precisely what Mr Trichet told the Symposium but who knows if Ben and the Feddies were listening. If you always do what you've always done, if you always think how you've always thought, then you'll always get what you've always gotten. We are in a depression now and talking bobble heads never tire of asking : Is this a recession or a double dip recession? I say paraphrasing Gertrude Stein: this ain't no recession, there ain't gonna be a recession, there never has been a recession, that's your answer.
My friend F--- just returned from a trip to visit family and he described sitting in the Minneapolis airport being stunned by the mass of people waddling by. Not masses mind you but by the mass of the individuals! Being a very rational systematic fellow with a background in statistical analysis, he decided to try to model the population. His conclusion was that more than 75% of the population he observed were overweight. some alarmingly so. I listened with some skepticism but knowing that F--- has never been prone to exaggeration, I accepted his data on face value. I rarely travel by air for a myriad of reasons which should be obvious and as a result I am spared the spectacle of fast food courts and trinket shops all enclosed within the charming ambiance of a cattle car. F---, seeing my skepticism, emailed me statistics from the CDC which validated his survey which I will present shortly. The same day face book friend James Howard Kunstler published his Monday blog entitled: “What I did on Summer Vacation" in which he recounted a motor trip around northern New England. Here is a sample from his blog:
"We stopped for lunch in a clam bar, naturally. The dining room was populated by a new race of humanoid behemoths, great lumbering brutes the size (and shape) of giant sloths, only dressed in the raiment of clowns, downing heaps of battered fried things, purportedly of-the-sea -- except I honestly don't see how there can be anything alive left to catch out there with the industrial-strength trawlers scraping the ocean floor as if they were Zamboni machines grooming the rink at the Boston Garden. I would like to tell you that we ordered cucumber sandwiches but it would be a lie. We got the clam strips -- that is, clam rolls minus the rolls. For all I know, someone in the kitchen is shredding old Michelin inner tubes for the Fry-o-later, but it's all about the cocktail sauce anyway. There were more giant sloths wading curiously in the surf (still hungry perhaps?) as we crossed the border into Maine, where you really want to weep for your nation." Jim is known for his dark sarcastic humor , but I was taken that Jim had unwittingly provided a second data point. Now Here are the shocking statistics with an abstract of the CDC data as well as the link:
Some definitions are in order to enhance understanding and readability. Overweight is defined as a body mass index(BMI) 25 to 30. Obese as a BMI30-40, and morbid obesity as BMI>40. As an example a 6' male weighing over 300 lbs would be morbidly obese.
Now if you do the math: 73%!!! A nation of Giant Sloths.
The news that spooked the markets today was existing home sales plunging 27% in July which of course "surprised most economists." If I read or hear another phrase that economists flubbed another easy ground ball, I'm going to pull an Elvis and shoot the TV with my .45. This graph will be familiar to anyone following the housing market and is of course Bob Schiller's famous plot of housing prices adjusted for inflation over the past 120 years.(click to sharpen and enlarge). As you see housing prices are reverting to the mean...FAST!For 110 years housing prices yielded about 1% above inflation and in one horrific decade they exploded upward about 90% and are now in freefall as the graph portrays. This rise was coincident with the repeal of the Depression era Glass-Steagall Act separating investment banks from traditional banks, the development of derivatives,securitization of mortgages, crooked lending practices and abundant credit offered to anyone with a pulse. This was the last gasp of a 60 year housebuilding and buying binge called by James Kunstler as the "greatest misallocation of resources in the history of the world."
And now it's over. Housing as an investment has been dealt a death blow, probably for a generation. This fall has put the taxpayer on the hook for over $5 trillion in obligations related to Fannie and Freddy, a bizarre hybrid of the worst features of crony capitalism and bungling government bureaucrats who now along with the FHA own over 90% of a mortgage market riding down the backside of Schiller's graph. As prices drop, losses mount at Fred's Fannie and it aint over till it's over. And it ain't over. Over 40% of homeowners are bereft of equity or underwater on their mortgages.One in 7 is facing foreclosure. Supply of existing houses is at 12 months. Nothing that our bungling politicians are doing has had any effect except propping up the unpropable, the unsustainable and the unworkable with a dreary succession of failed and foolish schemes purportedly to help the home buyer but secretly propping up the failed insolvent banks with money while spouting platitudes,
lies, and promises. Larry Summers a few months back said the economy was reaching "escape velocity." Barak a week or so said "The economy is on track." Are these guys delusional , incompetent or just pathological liars? What seems to be self evident is that this deflationary depression is deepening as the malignant web of leverage continues to unwind as debts vaporize , jobs disappear and moronic politicians posture and finger point.
In previous blogs I have piled opprobrium upon Neoclassical economists, the high priests who whisper in the ears of our politicians and corporations. In my attempt to try to tease out the influence of these priests , I have discovered some surprising historical facts from the early days of economics. In my previous blog I provided some of this early historical background, as well as mentioning some of the concepts underpinning neoclassical economic theory, the theory governing our contemporary political and economic life. There are of course many variations upon what passes for neoclassical economics and my tacit if poorly expressed assumption is that my perception of neoclassical economics is of a linear construct. The laws and assumptions of neoclassical economic theory rest upon that assumption. George Sugihara, a biologist at Scripts Institute who has an interest in Chaos Theory writes:"A nonlinear system can exist in one configuration for a long period of time during which it is well understood, but it can switch gears suddenly, due to the interdependence of a multitude of shifting variables, and seem to become a totally different system governed by new laws. Superficially, everything has changed, but on the deepest level,nothing has." Hyman Minsky, an economist who studied the nature of financial crises had a famous expression"stability breeds instability." I have not read any of Minsky's articles in which he stated whether he thought of economics as a linear or a non linear discipline but I have concluded that his famous quote implies that economics is anything butlinear.
Chaos theory was first described by Henri Poincare in the 19th century when he was grappling with what was called the “Three body Problem.” In physics, the problem refers to measuring position, mass, velocity, momentum of certain particles or masses and then trying to devise a method to calculate the position of these particles in the future thought to be governed by classical Newtonian laws and laws of gravitation. He was unable to devise a successful method.
Chaos theory as I understand it, deals with the observation that small differences in initial conditions can have widely varying outcomes in chaotic systems. In a stable, linear system which can reach equilibrium, such widely varying outcomes would not be expected to occur. The existence of chaotic outcomes appears to have begun with Henri Poincare in 1870 and references to the chaotic outcome phenomenon cropped up over the next 90 years. In 1961 a meteorologist by the name of Edward Lorenz working on an early digital computer was trying to develop a weather simulation. He inputted his data , ran his simulation over 7 days and printed out his results. He ran the simulation again and decided to run his simulation in the middle of his time period. To save time running the simulation again he used his printout data. To his surprise his results were totally different. This puzzling result made him look at his methodology. He noticed that his inputs were to 6 digits after the decimal but his printer would round off the inputs to only 3 decimal places . Why would that make any difference? In a linear system capable of reaching equilibrium, it wouldn’t have but it became apparent to Lorenz that weather was not operating under those rules..He3 dubbed it the Lorenz attractor operating under rules termed the Lorenz Oscillator which was a description of system which evolved over time spitting out data in a chaotic non repeating pattern. This was later referred to as the “Butterfly effect,”. This was a metaphor for chaos theory and referred to the title of a paper given by Lorenz at the American Association for the Advancement of Science in 1972 entitled” Does the flap of a butterfly’s wings in Brazil set off a tornado in Texas?”. It referred to the notion at the flap of a butterfly’s wings might be enough of a disturbance in the atmosphere to change distant atmospheric outcomes. Chaos Theory was initially confined to the fields of physics and mathematics but has been expanded not without controversy into widely varying fields including medicine, meteorology, evolution and even politics, economics and finance.
I have stated in previous blogs, the abject failure of most economists to predict accurately the behavior of markets despite dazzling mathematical models. In my mind, the reasons for this failure must lie with a failure of their assumptions, methodology and their models. This failure may be occurring because the system they are trying to model is not the system they think they have been dealing with. If the system is a non linear complex system, their results and predictions are doomed to failure. It is my contention after reviewing the opinions of economists writing outside the mainstream that neoclassical models and methodology need to be modified or abandoned. These new ways at looking at economics include names such as ecological economics, biophysical economics and complexity economics. I am just a humble beginning student struggling to wrap my mind around this problem but here is my current notion: The economy is an example of a complex, adapting, dynamic, non-linear system subject to both positive and negative feedback. Seemingly random changes in variables, however small can lead to widely different outcomes. The bad news from a policy making standpoint obviously is that if economics is a chaotic system, predicting its future behavior may be a fool’s errand. The good news is that if this notion becomes accepted, a lot of the high priests, fools and dimwits spouting nonsense and misinformation might eventually be discredited and disappear.
Readers of this blog know that I hold most mainstream economists in contempt. Not a day goes by when you hear or read comments like "(such and such bit of economic data) was Greater(or lesser) than economists estimates." Even Milton Friedman, a mainstream economist in his own right said that economic theories should be judged by their track record in predicting events "rather than by the realism of their assumptions." Measured by Friedman's yardstick, the utility of their predictions has been minimal for decades. Few if any mainstream economists saw the last two bubbles in technology and housing including virtually all of the Federal Reserve economists, those in the Presidents cabinet and in Treasury as well as in economic think tanks. Their clumsy and self serving measures to "fix" the situation they missed has by some measures, made the situation worse and I and many more informed and intelligent observers have pointed out. Why has this been so? What is it about their predictions and measures has rendered their value to society so utterly useless? Even with Cray computers and complex econometric models and formulas, these economists advising our politicians and corporations have blown it. I have struggled to try to discern what factors have led these folks to be so consistently wrong and one of my first clues was some remarks by Niall Ferguson at the Aspen Ideas Conference this summer which I again provide a link to:http://www.aspeninstitute.org/video/aif-2010-financial-crisis-will-it-lead-americas-decline.
Niall all but accused them of faulty assumptions and models. So his remarks put me on the trail of the history of modern economics and a study of their traditional assumptions and their cherished laws and models. Adam Smith in his 18th century Wealth of Nations was of course the seminal work on economics but it was the economic thought of the mid 19th century authors who laid down the basis for what we call classical economics which has been modified and expanded by a host of economists. But one striking fact virtually leaped off the page in my research. To understand how their economic theories came about, you have to know something about Mid 19th century physics. The physicists of the time were struggling to explain using Newtonian precepts the new discoveries made in heat, and light and electricity , matter and energy and the mysterious forces governing the behavior of these magical discoveries. Physicists like Faraday and Helmnholtz were struggling to form a unified explanation of the relationships between matter and energy, a struggle that continued into the twentieth century with Planck, Bohr, Einstein and a host of others but in the mid 19th century, the field was new and the concepts raw and only partially formed. Into this maelstrom of fascinating ideas stumbled our classical economic forefathers who wondered if the same mysterious forces of energy holding matter together in equilibrium might also be a unifying energy force governing the equally mysterious forces governing wealth relationships among peoples. The absurdity of such a quaint notion given what we know about physics today seems comical, but at the time prominent economic thinkers such as William Stanley Jevons in England(pictured above), Vilfredo Pareto in Italy, and Leon Walras in France and others felt that such a unifying link united two different fields might exist, might even certainly exist. These budding economists developed the notion that something they called Utility, which they defined roughly as economic satisfaction and well being, pervaded economic intercourse in much the same way that the nebulous physical force of energy pervaded all space. Perhaps energy and utility were not just analogues. Perhaps they were virtually one and the same, just existing in different fields?!! Religion and philosophy was added to the mix as these thinkers started looking for more analogous relations in Physics with economic concepts of labor, capital,money, resources and so forth. These nascent economists recognized that mathematics was a powerful underpinning to Physics and it was just a short step to then realize that for economics to become a science, that mathematics would have to be added to the mix. Physicists at the time debated the concept of equilibrium of forces that hold matter and energy in balance and so this concept of equilibrium had to be part of economic "science." They developed the notion that markets were closed systems and non market resources outside of a market system were "externalities"to such a market system. Inputs like money and resources, outputs such as goods and services flowed in a closed circular system along with consumption and distribution. If there were general laws governing physics, would there not be general laws governing economics? Eric Beinhocker in a book published in 2006 entitled:
Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics
points out the influence of the new and controversial theory of evolution upon the evolving theories in economics. In fact ideas of evolution and natural selection posited by people such as Malthus may have influenced Charles Darwin and the idea of economics being an evolving system continues well into the 20th century. Thorstein Veblen and Alfred Marshal, Joseph Schumpter and Freidrich Hayek all explored the relationship between economics and evolutionary theory. But Mainstream economic thinkers were more comfortable with the idea that the economy was alike a rubber ball rolling around inside of a bowl, eventually coming to rest in equilibrium at the bottom of the bowl and there the economy would rest until some new externality acted upon the ball sending it to a new equilibrium. The idea that economics might be a complex system always evolving never really took hold in traditional classical economics but at long last, some of these newer notions of how the economy really functions are starting to appear and be discussed by folks like Fergusson and Beinhocker at Harvard. In a forthcoming post I will attempt to explain some of these new attempts to elucidate how economics really works and whether these new ways of thinking might help economics improve its dismal track record assessing risk and predicting future economic events.
As promised in the last blog, I have been trying to bone up on some of the unwashed, unappreciated bastard children of conventional economics, such as Biophysical Economics and Complexity economics but I am still a ways from writing that blog. What's keeping me from my task at hand are stories that just keep blowing my mind. Yesterday I stumbled upon an article in the journal Energy Policy by Roger Stern in which he attempted to estimate the cost of maintaining aircraft carriers in the Persian Gulf for a 30 year period starting in 1976. Here is the link:http://www.princeton.edu/oeme/articles/US-miiltary-cost-of-Persian-Gulf-force-projection.pdf. By the way our 5 deferment patriot is standing in front of the newest Ford Class carrier which will set us back $9.3 Billion and that doesn't include the 60-90 aircraft normally carried which run as high as $60 million for a new F-18. For those 30 years, the cost of "Force Projection", the catchy phrase used was $7.3 TRILLION!! Obviously that figure will be going up. What did we get for our policing of the oil lanes besides 30 years of oil? Was that a rational use of our money? Can we afford another 30 years of policing? Obviously not. Truth to tell, we can't afford even one more year. We are bankrupt. The empire is kaput but like one of those mammoth 1000' carriers , once you step on the brakes, it will take many miles to stop.
Bloomberg carried an editorial by Lawrence Kotlikof, one of the few prescient economists is the business. an excerpt:
Aug. 11 (Bloomberg) -- Laurence Kotlikoff, an economics professor at BostonUniversity, talks about the state of the U.S. economy. Kotlikoff speaks with Erik Schatzker on Bloomberg Television's InsideTrack." (Source: Bloomberg)
"Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”
But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
Double Our Taxes
To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act. " Here is the link:
http://www.bloomberg.com/news/2010-08-11/u-s-is-bankrupt-and-we-don-t-even-know-commentary-by-laurence-kotlikoff.html Did you catch the IMF phrase that the US will need a permanent fiscal adjustment of 14% of GDP? If you're not on the floor by now, you should be. Here is the math: We have a $14 Trillion GDP. 14% of that is about $2 Trillion. Federal revenue is just a bit more so the IMF says we will in effect have to double the taxes of everyone who pays taxes!!! Is there anyone,any politician out there talking about this impossible hole that the US finds itself in? (Deafening silence).
How are you going to double the taxes of the middle class? They don't have any freaking jobs and given the fact that the corporations have off shored all the decent jobs, their children wont have any freaking jobs. And in case you missed it, we are in a depression. So that leaves the corporations, but most of them don't pay much in taxes. Oh I know, Mitch McConnell whines that US Corporate tax rates are the highest in the world(not true) so the GOP wants to cut taxes for the fat cats. You remember, trickle down, create jobs..blah...blah...The real truth is that the US has a nominal tax rate of 35% for the biggest corporations but because those corporations wrote the corporate tax laws, US corporations enjoy an effective real tax rate of only between 14 and 18% depending upon which source you cite. Any many of the very biggest like Goldman Sachs and GE pay less than 5% in most years and it is those tax breaks that have destroyed middle class jobs for the last 30 years. Middle class income adjusted for inflation has barely budged since 1973, up only 10% in 35 years. But the richest 10% has seen their income up 90%. A CEO in 1973 earned 23 times mean income. Today he earns over 300 times mean income. So if you double what Goldman Sachs paid in corporate taxes in 2008, that only takes you to 2%! And if you double what GE paid, it doesn't even take you to 1%! To get an idea how GE managed to pay virtually no taxes, you would have to go through the estimated 24000 pages of their tax return. The is no chance under the current tax code that you will be able to double taxes on companies that hardly pay anything anyway. It would be far better to lower the nominal corporate tax rate to say 15 or 20% under a flat tax scheme with zero deductions but GE and GS would squeal like piggies and mobilize their hundreds of lobbyists to kill that idea in a NY minute. So maybe it's time to summarize this difficult spot we find ourselves in the summer of 2010: 1. The US is functionally bankrupt as are many of the states. There will be no way to pay the retirements promised or expected for state and federal workers let alone current levels of Social Security, medicare, and Medicaid entitlements. 2. The banks are bankrupt or would be if accepted accounting rules were again used. Obama and his Keynesian economic gang took 2000 pages to pass reform legislation which the banks were thrilled with. All they needed to do was reenact the Glass-Stiegal act which ran to 40 pages. We are virtually guaranteed another banking collapse. The financial markets are a rigged suckers game with traders in control. The May HFT(high frequency trading) meltdown in which it was revealed that HFT is over 70% of all trades on the NY Exchange was enough to make this sucker sell most of his stocks and mutual funds. 3. The corporations control the three branches of government but their very attempt at control has destroyed confidence in the
political system by the American public. We now have a co opted dysfunctional political system engaged in internecine polarizing debates, full of sound and fury and signifying...NOTHING.
I think we are looking at a very complex economic and political system teetering on the brink needing only a traumatic event to tip it over into collapse. What form it will take is any body's guess but it could be another misguided military misadventure such as an attack upon Iran by our over extended military or by Israel. The trigger could be another attack upon US infrastructure by middle east extremists who feel they have nothing left to lose. A coup against the House of Saud could do the trick as well as any number of natural catastrophes. The financial default of a major state such as California might provide an inflection point.
It behooves all of us to be preparing for the possibility of a collapse. In a future blog I will try to offer up some ways in which we as individuals can protect ourselves from the consequences of a political and financial delamination.
