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This Is a Financial Extinction Event

This Is a Financial Extinction Event

The lower reaches of the financial food chain are already dying, and every entity that depended on that layer is doomed.

Though under pressure from climate change, the dinosaurs were still dominant 65 million year ago–until the meteor struck, creating a global “nuclear winter” that darkened the atmosphere for months, killing off most of the food chain that the dinosaurs depended on. (See chart below.)

The ancestors of modern birds were one of the few dinosaur species to survive the extinction event, which took months to play out.

It wasn’t the impact and shock wave that killed off dinosaurs globally–it was the “nuclear winter” that doomed them to extinction. As plants withered, the plant-eating dinosaurs expired, depriving the predator dinosaurs of their food supply.

This is a precise analogy for the global economy, which is entering a financial “nuclear winter” extinction event. As I’ve been discussing for the past few months, costs are sticky but revenues and profits are on a slippery slope.

Businesses still have all the high fixed costs of 2019 but their revenues are sliding as the “nuclear winter” weakens consumer spending, investment in new capacity, etc.

Despite all the hoopla about a potential vaccine, no vaccine can change four realities: one, consumer sentiment has shifted from confidence to caution and from spending freely to saving. This is the financial equivalent of “nuclear winter”: there is no way to return to the pre-impact environment.

Two, uncertainty cannot be dissipated, either. There are no guarantees a vaccine will be 99% effective, that it will last more than a few months, that it won’t have side-effects, etc. There are also no guarantees that consumers will resume their care-free spending ways as credit tightens, incomes decline, risks emerge and the need for savings becomes more compelling.

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

What killed the dinosaurs? (hint: probably not what you used to think)

What killed the dinosaurs? (hint: probably not what you used to think)

In Walt Disney’s movie “Fantasia” (1940), dinosaurs were shown as dying in a hot and dry world, full of active volcanoes. Recent discoveries show that something like that might really have happened and that the idea that the dinosaurs were killed by an asteroidal impact appears to be incompatible with the available data. Rather, it seems that the dinosaurs died out because of the global warming resulting from the emission of large amounts of greenhouse gases from volcanoes. In several respects, it is not unlike what’s happening today to us.

I know what you are thinking: these silly scientists; first they tell us that an asteroid killed the dinosaurs, now they tell us that it is not true. So, how can we believe them when they tell us that humans are causing global warming? 

On this, I have to tell you something: science is a mighty truth-seeking juggernaut. Yes, individual scientists are not immune from mistakes, political biases, and human failures, but, on the whole, science manages to filter away bad ideas and keep the good ones. The case of the extinction of the dinosaurs is a beautiful example of how well the mechanism works. 

As you will read in the article below, the non avian dinosaurs, it seems, went away not with an asteroidal bang, but with a volcanic whisper. They were killed over several tens of thousands of years by the global warming created by the emission of gases from the giant basaltic eruption known as the “Deccan Traps”, today located on the Indian subcontinent. To be sure, the discussion is far from being settled and many scientists still favor the impact theory (e.g. Peter Ward and Joe Kirschvink in their recent book “A new history of life“). Personally, I am no specialist in these matters but, if I did my homework well (and I think I did), my impression is that the data overwhelmingly favor the volcanic hypothesis over the asteroidal one.

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

 

 

Olduvai IV: Courage
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Olduvai II: Exodus
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