Home » Posts tagged 'contraction'

Tag Archives: contraction

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

Professional Managers Are Driving Us Off the Cliff

February 16, 2023

“The old world is dying, and the new world struggles to be born: now is the time of monsters.”

― Antonio Gramsci

We live through transitional times. Transition from an era of growth to economic contraction. From a stable climate to something utterly different and chaotic. From a global hegemony to a multi-polar world. These are interesting times indeed, loaded with peril and doubt. Why are so many of us — especially those who should know better — are still in deep denial as to what is really going on? Why can’t our leaders change course when it is needed the most?

Photo by Taylor Floyd Mews on Unsplash

With every end to a civilizational cycle, there is a caste which has a lot to lose, yet remain unable to influence the course of events. These people are usually located just below the top tier of the ruling elite. They are the well payed, salaried individuals who serve the system loyally and receive tremendous privileges in return: getting all the access to the best of what this world has to offer.

In our current round of the popular game called civilization, replayed time after time with the same predictable results, this layer is happened to be called the “professional-managerial class” (or PMC for short). They are your high ranking academics, engineers, doctors, lawyers, economists, political scientists, project leaders and managers of multinational companies who run and oversee the system for the wealthy elite. I should know, I’m one of them.

This class has gathered immense power over the past few decades, and has managed to turn democracy into a technocracy (the government of society or industry by an elite of technical experts) — leaving little to none for the public to decide…

…click on the above link to read the rest…

#220. The human factor

January 25, 2022

#220. The human factor

CONTINUITY, CONTRACTION OR COLLAPSE

Over an extended period, but with growing intensity in recent times, there has been a discussion, here and elsewhere, about whether we can prevent economic contraction from turning into collapse.

This is part of a broader debate in which every point of view seems to begin with the letter C. The orthodox or consensus line is Continuity, meaning that the economy will continue to expand in the future as it has in the past, and is claimed still to be doing in the present. The main contrarian theme is the inevitability of Collapse. Those of us who believe even in the existence of a third possibility – Contraction – are in a tiny minority.

Of these three points of view, the only one that we can dismiss is continuity. The economic “growth” that we’re told can be extended indefinitely into the future isn’t even happening in the present.

Most – roughly two-thirds – of the reported “growth” of the past twenty years has been cosmetic. The preferred metric of gross domestic product (GDP) measures activity, not prosperity. If we inject liquidity into the system, and count the use of that liquidity as ‘activity’, we can persuade ourselves that the world economy has been growing at rates of between 3% and 3.5%.

The classic illustrative example is of a government paying one large group of workers to dig holes in the ground, and another group to fill them in again. This adds no value, of course, but it does increase activity, and therefore boosts GDP.

In this example, the obvious question is that of how the government pays for all this zero-value ‘activity’. The simple answer is to use borrowed money. Conveniently, GDP, as a measure of activity, calculates flow without reference to stock…

…click on the above link to read the rest of the article…

Rate of Contraction Exceeds the Global Financial Crisis

April 23, 2020

Rate of Contraction Exceeds the Global Financial Crisis

The US is suffering  the fastest deterioration in operating conditions for over 11 years.

Markit reports Output Contracts at Fastest Pace in Survey History amid COVID19 pandemic .

Key Findings

  • Flash U.S. Composite Output Index at 27.4 (40.9 in March). New series low.
  • Flash U.S. Services Business Activity Index at 27.0 (39.8 in March). New series low.
  • Flash U.S. Manufacturing PMI at 36.9 (48.5 in March). 133-month low. 
  • Flash U.S. Manufacturing Output Index at 29.4 (46.5 in March). New series low. 

Adjusted for seasonal factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 27.4 in April, down from 40.9 in March, to signal the fastest reduction in private sector output since the series began in late-2009.

Services companies registered the steepest rate of decline in the survey’s history, while manufacturers recorded the sharpest fall in sales since the depths of the financial crisis in early-2009. 

The cancellation and postponement of orders led firms to reduce their workforce numbers at a rate far exceeding anything seen previously over the survey history at the start of the second quarter. 

Chris Williamson, Chief Business Economist Comments

  1.  “The COVID-19 outbreak dealt a blow to the US economy of a ferocity not previously seen in recent history during April. The deterioration in the flash PMI numbers indicates a rate of contraction exceeding that seen even at the height of the global financial crisis, with jobs also being slashed at a rate far exceeding anything previously recorded by the survey.” 
  2. “The large swathe of non-essential business that has been shut down temporarily amid efforts to contain the virus means the blow has been most heavily felt in the service sector, and especially for consumer facing companies in the recreation and travel industries. Those companies still actively trading meanwhile reported the steepest drop in demand seen since data were first available, and are also struggling against twin headwinds of staff shortages and supply chain delays.”

…click on the above link to read the rest of the article…

The Real New Deal

March 8, 2019

The Real New Deal

Wassily Kandinsky Succession 1935

While we’re on the issue of the Green New Deal, here’s an article by Dr. D. with an intro by Dr. D., one he sent me in the mail that contained the actual article, and that I think shouldn’t go to waste. I hope he agrees.

Waste being the key term here, because he arrives at the same conclusion I’ve often remarked upon: that our societies and economies exist to maximize waste production. Make them more efficient and they collapse. 

Ergo: no Green New Deal is any use if you don’t radically change the economic models. Let’s see AOC et al address that, and then we can talk. It’s not as if a shift towards wind and solar will decrease the economic need for waste production (though it may change the waste composition), and thus efficiency is merely a double-edged sword at the very best. 

Here’s Dr. D. First intro, then article:

Dr. D: [..] of course there are a thousand things I can say, but I wanted to make just this one point:  that the economy as we know it is prohibited from contracting by its own system structure.  One thing I couldn’t expand on is that I believe it is almost entirely unconscious.  People like AOC, the Aspen Ecological Center, these people have in the back of their minds “What is possible” and “how things are done” and “can I sell this or will people turn away.” 
 
As I say, the idea of saying, “Everything will be perfect, just live like a Zen Monk” is a non-starter.  Why, I don’t know, as it’s very pleasant and quite provable. 

 …click on the above link to read the rest of the article…

Too Good For Too Long

October 13, 2017

Shutterstock

Too Good For Too Long

Over-extended systems contract quickly & violently
I’m writing this from my home in Sonoma County at the end of an intense week of witnessing firsthand the devastation caused by the many current fires burning in northern California. While it’s hard to focus on anything other than the moment-to-moment developments of this still-unfolding disaster (which I’ve been chronicling here), it’s already clear that the implications for my part of the state will last for many, many years to come.

It’s amazing how instantly the status quo where I live has changed. The world my neighbors and I lived in when we all went to bed on Sunday night simply no longer existed by the time we woke up on Monday morning. Lives have been lost. Entire neighborhoods — thousands of homes — have burned to the ground. Businesses, hospitals and schools are now shuttered.

Having now experienced this personally — on top of watching news reports over the previous weeks of similarly abrupt “before/after” transitions in Houston, Florida, Puerto Rico, Mexico City, Las Vegas and Catalonia — I have a new-found appreciation for the maxim that when it arrives, change happens quickly — usually much more quickly than folks ever imagined, catching the general public off-guard and unprepared.

We humans tend to think linearly and comparatively. In other words, we usually assume the near future will look a lot like the recent past. And it does much of the time.

But other times it doesn’t. And that’s where the danger lies.

The Cruel Math

In 1987 a Danish physicist named Per Bak released a landmark paper introducing the concept of self-organized criticality. Bak observed that complex systems draw stability through an ongoing cycle of corrective collapses that keep the overall system from becoming too over-extended.

…click on the above link to read the rest of the article…

The IMF and All The Other Losers

October 8, 2016

The IMF and All The Other Losers


Andre Kertesz Bumper cars at amusement park in Neuilly-sur-Seine, near Paris 1930
I read a lot, been doing it for years, about finance and affiliated topics (a wide horizon of them), which means I’ve inevitably seen a wholesale lot of nonsense fly by. But for some reason, and I think I know why, Q3 2016 has been gunning for a top -or bottom- seat in that regard, and Q4 is looking to do it one better/worse.

Apart from the fast increasingly brainless political ‘discussions’ that don’t deserve the name, in the US and UK and beyond, there are the transnational organizations, NATO, IMF, EU and all those things, all suffocating in their own hubris, things I’ve dealt with before in for instance Globalization Is Dead, But The Idea Is Not and Why There is Trump. But none of it still seems to have trickled through anywhere that I can see.

The end of growth exposes the stupidity and ignorance of all but (and even that’s a maybe) a precious few (of our) ‘leaders’. There is no other way this could have run, because an era of growth simply selects for different people to float to the top of the pond than a period of contraction does. Can we agree on that?

‘Growth leaders’ only have to seduce voters into believing that they can keep growth going, and create more of it (though in reality they have no control over it at all). Anyone can do that. So ‘anyone’ who’s sufficiently hooked on power games will apply.

‘Contraction leaders’ have a much harder time; they must convince voters that they can minimize the ‘suffering of the herd’. Which is invariably a herd that no-one wants to belong to. A tough sell.

…click on the above link to read the rest of the article…

The Boundaries and Future of Solution Space – Part 2

August 16, 2015

The Boundaries and Future of Solution Space – Part 2

The Psychological Driver of Deflation and the Collapse of the Trust Horizon

The collective mood shifts rapidly from optimism and greed to pessimism and fear as the bubble bursts, and as it does so, the financial system moves from expansion to contraction. Financial contraction involves the breaking of promises right left and centre, with credit instruments drastically revalued downwards in the process. As the promises that back them cease to be credible, value disappears extremely rapidly. This is deflation and the elimination of excess claims to underlying real wealth.

Instruments once regarded as money equivalents will lose that status through the loss of confidence in them, causing the supply of what retains sufficient confidence to still be regarded as money to collapse. The more instruments lose the confidence that confers value upon them, the smaller the effective money supply will be, and the more confidence will become a rare ‘commodity’. Being grounded in psychology is the primary reason that deflation cannot be overcome through policy adaptations which are inherently too little and too late. Nothing moves as quickly as a collective loss of confidence in human promises, and nothing destroys value as comprehensively.

The same abrupt change in collective mood will also drive contraction in the real economy, but more slowly, since the time constant for change in the real world is much slower than in the virtual world of finance. This process will also result in broken promises as structural dependencies fracture when there is no longer enough to go around. There will be wage and benefit cuts, layoffs, strikes, strike-breaking, breaches of contract, business failures and more on a huge scale, and these will fuel further fear, anger and the destruction of trust.

 

…click on the above link to read the rest of the article…

Collapse Part 3: No Institutional Path to Contraction

June 24, 2015

Collapse Part 3: No Institutional Path to Contraction 
Collapse is not an event, it is a process.

One poorly understood source of collapse is the lack of pathways to contraction and a reduction of complexity/cost. The only pathway that is clearly marked is the one to expansion–of production, debt, credit, government, income, benefits, costs and complexity: more agencies, more regulations, more committees, more staff, more of everything.

The path to less complexity, less debt, less production and a contraction of the entire system doesn’t exist in most institutions.

Many dismiss any talk of collapse as mere fear-mongering. This is a legitimate issue to discuss, for if we focus exclusively on the lurid horrors of being killed by a shark in open water (for example) while ignoring the much higher risks of being killed by falling off a ladder at home, we have distorted the risks of accidental death and done a disservice to our understanding of various risks.

But collapse is not an event, it is a process. As a result, systemic collapse doesn’t lend itself to statistical calculations of probability. Processes are driven by dynamics, not odds.

So those dismissing any discussion of collapse as mere fear-mongering are doing a disservice to our understanding of processes–or lack thereof. One interesting feature of collapse is that it can result from either a choking over-abundance of complex, costly processes or a complete lack of essential processes, conceptually and practically.

Which brings us to the process that is lacking virtually everywhere–the process of contraction: shrinking the system, income, headcount, complexity and being productive with less of everything.

The corporate world offers many examples of what happens when the process of contraction and reducing complexity does not exist: companies buckle, fold and go bust. The world’s corporate darling Apple experienced this precise death-spiral in 1996-1997 before the company’s board brought Steve Jobs back as CEO. (So tentative was the board that Jobs was appointed “interim CEO.”)

…click on the above link to read the rest of the article…

 

 

 

 

Olduvai IV: Courage
Click on image to read excerpts

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress