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“Bubble” is commonly understood to describe a divergence between overvalued market prices and underlying asset values. And while price anomalies are a typical consequence, they are generally not among the critical aspects of Bubbles. I’ll start with my basic definition: A Bubble is a self-reinforcing but inevitably unsustainable inflation.

Bubbles, at their core, are fueled by Credit – or “Credit inflation.” Asset inflation and speculative asset price Bubbles are a common upshot. At their core, Bubbles are mechanisms of wealth redistribution and destruction.

The more protracted the Bubble period, the greater the maladjustment to underlying financial and economic structures. And the longer the Bubble inflation, the greater the wealth disparities and underlying social and political strain. While Bubble-related inequalities reveal themselves more prominently later in the up-cycle, the scope of wealth destruction only becomes apparent as the Bubble finally succumbs. As Dr. Richebacher always stressed, there’s no cure for Bubbles other than not allowing them to inflate. The catastrophic policy failure over the past 20 years has been the determination to aggressively inflate out of post-Bubble stagnation.

Bubbles can have profound geopolitical impacts as well. The inflation of Bubbles and corresponding booming economies promote the view of an expanding global economic “pie”. The inflating Bubble phase is associated with cooperation, integration and solidarity. The backdrop shifts late in the Bubble phase, as inequities and maladjustment become more discernible. Bursting Bubbles mark a radical redrawing of the geopolitical landscape. The insecurities and animosities associated with a shrinking economic pie see a rise of nationalism and “strongman” leadership. The backdrop drifts toward fragmentation, disintegration and conflict.

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

The Pandemic Is Deepening America’s Many Divides

April 30, 2020

The Pandemic Is Deepening America’s Many Divides

And so we’ve reached the precarious state of disunion in which the only thing the warring elites can agree upon is that the Federal Reserve should rescue their private wealth, regardless of cost or consequences.

America’s divides are proliferating and deepening by the day. The key political and economic divides predate the pandemic, but the pandemic is acting as a catalyst, creating new divides and exacerbating existing ones.

Let’s start with the politicization and subsequent polarization of re-opening the economy. In a reasonably sane, coherent society, this issue would be subject to common sense debates about risks, trade-offs, policies, responses to new data, etc.

But American society is neither sane nor coherent, so what should be a non-partisan debate was immediately politicized, to the absurd extreme that “progressives” must favor continuing strict lockdowns lest they be accused of being “conservative.”

The erosion of middle ground and the disappearance of de-politicized policy debates is a clear sign that a society is doomed to disintegration not just of the social order but the political and economic orders.

Author Peter Turchin has described the disintegrative stage in his book Ages of Discord, in which he modeled a Political Stress Index comprised in part of these three dynamics:

1. Stagnating real wages due to oversupply of labor.

2. Overproduction of parasitic elites.

3.Deterioration of central state finances.

The pandemic has catalyzed the oversupply of labor and the deterioration of central state finances, and illuminated America’s vast overproduction of parasitic elites, most of whom feed off various cartels and monopolies or the financial system, which has been saved yet again from gravity by the super-wealthy’s most important protector, the Federal Reserve.

The pandemic has created new divides that highlight existing extremes of inequality. Those Americans in poor health and in jobs that cannot be performed at home are at greater risk than healthy Americans who can work at home.

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

Rabobank: It Is Understandable Why Some Are Wondering When We Get Hyper-inflation And Currency Collapse

April 22, 2020

Rabobank: It Is Understandable Why Some Are Wondering When We Get Hyper-inflation And Currency Collapse

With so much liquidity being thrown into so many markets by so many so fast, it is perhaps understandable that some are wondering when we get inflation, hyper-inflation, and/or currency collapse. However, given we are riddled with World War Two analogies at the moment, allow me to do two Churchill impressions: “Never was so much owed by so many to so few” – and “Never was so much owned by so few.” (Yes, one does not need to read Piketty to know that wealth and income inequality under the Pharaohs was even more unfair than it has been trending under every US President since Nixon, but you hopefully get the point.)

In short, global debt levels are at records and rising – which is where some see the inflation coming from; and yet wealth and income inequality are also at staggering levels – and rising as mind-blowing liquidity flows not into many pockets but into relatively few.

For all of the staggering scale of fiscal stimulus packages–20% of GDP in Japan, 15% and rising in the UK, and who even knows in the US?–ask yourself this: is the ordinary working family feeling better or worse off right now? Unemployment is soaring but you are lucky enough to get furloughed with 80% pay – isn’t that a 20% pay cut? And is a pay-rise now waiting for you in 2021? And good luck if you own a small business as most of most of the fiscal packages we see are going out in loan support to larger firms. Yet if you give USD1m to a private firm whose revenue has collapsed by USD1m, is this actually stimulus at all? It leaves you at an expensive stand-still – and also means more debt to carry post virus, dragging growth lower.

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

The Prophet

February 10, 2020

The Prophet

Oh how I miss George Carlin. Yes he was mainly known as a stand up comedian, but he was more than that, much more. He was a social critic, he challenged that status quo, he dared to go where society wasn’t prepared to go: Look at ourselves critically. He did it with biting humor, masterful oration and a directness digging into core truths that were not only uncomfortable at times, but needed to be heard and said.

His voice has fallen silent as he passed away a few years ago and I’m sorry to say: We don’t have anyone like George today. I didn’t agree with everything George said and I don’t need to, nor does anybody else, but his talent was to make us think and to view the world with a different perspective and yes he was a prophet.

He saw long ago where this was all heading. The political charades and manufactured dramas that are sold to the public as choice, the illusion of choice as the agendas have long been in play.

“What do they want?” he asked. “More for themselves and less for everybody else.”

He spoke of the owners of this country, the owners that control everything, the media, what to believe what to think, and the great business and lobbying interests that spend billions of dollars lobbying for ever more benefits for themselves.

And lobby they do:

And boy did they succeed. Under the mantle of populism and draining the swamp they got themselves the biggest tax cuts in corporate history, a historic killing:

Wall Street celebrated and celebrates to this day.

Wealth inequality skyrocketing for years and now trillion dollar deficits as far as the eye can see and debt through the roof:

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

Dissatisfaction with democracy reaches all-time high

February 10, 2020

Dissatisfaction with democracy reaches all-time high

A new report by the recently established Centre for the Future of Democracy at the University of Cambridge has found that dissatisfaction with democracy has reached an all-time global high. Westminster-style democracies (the UK, Australia, Canada, New Zealand and the US) typically fare particularly badly in terms of democratic faith, with the proportion of citizens dissatisfied with the performance of their democracy doubling since the 1990s. In the UK, this proportion increased by around a fifth since then.

The global financial and economic crisis and growing within-country regional inequality are of course important factors behind decreasing satisfaction with democracy. But the Centre’s report also suggests that ‘satisfaction with democracy is lower in majoritarian “winner-takes-all” systems than in consensus-based, proportionally representative democracies’. The antagonistic and adversarial mentality inherent in the outdated First Past the Post voting system found in majoritarian, Westminster-style democracies contributes to polarisation and tribalism, making citizens less willing to compromise and to accept the mandate of rival political parties or viewpoints. By contrast, New Zealand is the only Westminster-style democracy to have avoided the trend of ever-increasing public discontent, likely as a result of having introduced a fairer voting system in the 1990s.

These findings highlight the perilous state of our democracy, with ever-deepening citizen dissatisfaction and disengagement

These findings highlight the perilous state of our democracy, with ever-deepening citizen dissatisfaction and disengagement, but sadly they do not come as a surprise. Edelman’s annual trust barometer found that trust in institutions is the lowest it’s ever been in the UK – we’re penultimate in their league table of trust, just one spot ahead of Russia. Similarly, a BMG poll for the ERS in December 2019 found that 85 per cent of people thought democracy could be improved ‘quite a lot’ or ‘a great deal’, with 80 per cent of people feeling they have ‘not very much’ or ‘no influence’ over decision-making.

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

Civil Unrest Is The New Normal Out There

November 18, 2019

Civil Unrest Is The New Normal Out There

This is getting ridiculous. Every few days another country blows up, as their citizens take to the streets with little warning and no apparent interest in a quick settlement. Here’s the first part of the “War…Civil Unrest” section of today’s DollarCollapse.com links list. As you can see the peasants have grabbed their pitchforks and besieged their betters on four continents over a wide range of issues, which implies that the stated cause in each case is just an excuse.

DollarCollapse.com links list civil unrest

The real grievance is the sense that an unresponsive elite are sucking up all the available wealth, leaving the vast majority with (at best) zero upward mobility and at worst a return to the servitude their parents only recently escaped. To test the truth of this, watch what happens when a chastened government caves on the initial issue — and instead of heading back home the protesters ramp it up.

Who even remembers what pulled France’s Yellow Vests into the streets? The Macron government has spent months apologizing and offering big new spending programs aimed at the protesters’ stated concerns. Yet today’s headline is about water cannons and flipped cars. Hong Kong repealed the law that ignited its riots back in June, yet today the story is protesters shooting police with arrows (!) and Chinese soldiers deploying to help “clean up the streets.” Uh huh.

Why is this happening now? Because artificially easy money enriches the people who own the stocks, bonds and real estate that rise in value when interest rates go down. This expands the already painfully wide gap between rich and poor and turns the already high level of background resentment into a powder keg. Then it’s just a matter of a provocation. And there’s always another provocation coming.

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

Household Leverage Ratios By Wealth Distribution

September 12, 2019

Household Leverage Ratios By Wealth Distribution

We are just starting play with the wealth distribution data and will have much more coming your way. What we have seen so far is shocking.

The distribution of wealth has deteriorated significantly over the past 20 years and is now so skewed toward the top that average U.S. household wealth is close to $1 million, though the median household wealth is only around $70k.

In fact, the aggregate level of wealth of the bottom 50 percent peaked in Q1 2000, the height of the dot.com bubble, and is down almost 10 percent in nominal terms. Whereas, the aggregate wealth level of the top 1 percent is up almost 120 percent over the same period.

If I brought a number or a forecast like that to my manager when I was a very young economist working on the World Bank’s capital flows model back in the day, he would say,

“You are forecasting revolution.”

Note the relative leverage ratio of the bottom 50 percent. For several quarters after the GFC the bottom 50 percent, not all households but in aggregate, were technically insolvent, where debt levels were greater than the value of assets ( > 100 percent on the chart).

These data put the current political climate and debate around debt forgiveness in context. They also reflect the two-speed U.S. economy.

Stay tuned for some more shocking data.

Long pitchforks.

The Pivot Point

May 18, 2019

The Pivot Point

The massive economic shock following the banking collapse of 2007–8 is the direct cause of the crisis of confidence which is affecting almost all the institutions of western representative democracy. The banking collapse was not a natural event, like a tsunami. It was a direct result of man-made systems and artifices which permitted wealth to be generated and hoarded primarily through multiple financial transactions rather than by the actual production and sale of concrete goods, and which then disproportionately funnelled wealth to those engaged in the mechanics of the transactions.

It was a rotten system, bound to collapse. But unfortunately, it was a system in which the political elite were so financially bound that the consequences of collapse threatened their place in the social order. So collapse was prevented, by the use of the systems of government to effect the largest ever single event transfer of wealth from the poor to the rich in the course of human history. Politicians bailed out the bankers by using the bankers’ own systems, and even permitted the bankers to charge the public for administering their own bailout, and charge massive interest on the money they were giving to themselves. This method meant that the ordinary people did not immediately feel all the pain, but they certainly felt it over the following decade of austerity as the massive burden of public debt that had been loaded on the populace and simply handed to the bankers, crippled the public finances.

The mechanisms of state and corporate propaganda kicked in to ensure that the ordinary people were told that rather than having been robbed, they had been saved. In the ensuing decade the wealth disparity between rich and poor has ever widened, to the extent that this week the BBC announced the UK now has 151 billionaires, in a land where working people resort to foodbanks and millions of children are growing up in poverty.

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

Unrealistically Great Expectations

May 9, 2019

Unrealistically Great Expectations

Our expectations have continued ever higher even as the pie is shrinking..

Let’s see if we can tie together four social dynamics: the elite college admissions scandal, the decline in social mobility, the rising sense of entitlement and the unrealistically ‘great expectations’ of many Americans.

As many have noted, the nation’s financial and status rewards are increasingly flowing to the top 5%, what many call a winner-take-all or winner-take-most economy.

This is the primary source of widening wealth and income inequality: wealth and income are disproportionately accruing to the top slice of earners and owners of productive capital.

This concentration manifests in a broad-based decline in social mobility: it’s getting harder and harder to break into the narrow band (top 5%) who collects the lion’s share of the economy’s gains.

Historian Peter Turchin has identified the increasing burden of parasitic elites as one core cause of social and economic collapse. In Turchin’s reading, economies that can support a modest-sized class of parasitic elites buckle when the class of elites expecting a free pass to wealth and power expands faster than what the economy can support.

The same dynamic applies to productive elites: as I have often mentioned, graduating 1 millions STEM (science, technology, engineering, math) PhDs doesn’t magically guarantee 1 million jobs will be created for the graduates.

Such a costly and specialized education was once scarce, but now it’s relatively common, and this manifests in the tens of thousands of what I call academic ronin, i.e. PhDs without academic tenure or stable jobs in industry.

This glut is a global: I’ve known many people with PhDs from top universities in the developed world who have struggled to find a tenured professorship or a high-level research position anywhere in the world.

In other words, what was once a surefire ticket to status, security and superior pay is no longer surefire.

No wonder wealthy parents are so anxious to fast-track their non-superstar offspring by hook or by crook.

There is an even larger dynamic in play. As I explained here recently, the economic pie is shrinking, not just the pie of gains that can be distributed but the pie of opportunity.

Torches and Pitchforks

April 1, 2019

Torches and Pitchforks

The front page of our local paper struck a chord:

The subject of wealth inequality has been on my mind ever since I started writing Slope fourteen years ago. I’ve written countless posts on it, and even dedicated a SocialTrade page to it, but a quick summary of my disposition could be boiled down to a few personal points:

Although I didn’t know it at the time, my childhood was in an era of relative wealth equality in the United States, pretty much the most even playing field in its history;
Average folks like my Dad made $35,000 per year; the “rich” people in town made $50,000;
The houses of the average and the rich were pretty much the same, although the rich had Buicks instead of Fords and could afford maids who came to clean the house each day; but that was about it.

My own adulthood, of course, is like a different universe. Normal people live in $7 million houses. Rich people live in $25 million houses and have other residences scattered around the planet. The difference between rich and poor in my youth was a short hop; in my current life, it’s a chasm.

My view is that the increasing disparity between rich and poor has, for decades, largely been non-disruptive to society as a whole, principally because the lower classes have been placated enough, by way of the proverbial bread and circuses, not to cause any waves. Sure, there have been little movements here and there, such as Occupy Wall Street, but they have attracted fringe groups and fizzled out in weeks, if not days.

The aforementioned SocialTrade page is packed with charts like the one below, which shows just how hosed the lower classes are, but again, the rich are pretty much getting away with it with no consequence.

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

Blain: Global Reset Looms As “Inequality Bonfire Burns Out Of Control”

March 14, 2019

Blain: Global Reset Looms As “Inequality Bonfire Burns Out Of Control”

Via Shard Capital’s Bill Blain,

“Education is the most powerful weapon which you can use to change the world.. ”

In the headlines this morning: https://www.morningporridge.com/stuff-im-watching

So much stuff going on.. it’s shaping up to be a very interesting weekend.

But, let me start with a diversion…

There is a story of the Great Scottish King – Robert the Bruce. Having been defeated by the English multiple times, his family captured and executed, (or in the case of his daughter, left suspended in an open cage thru the winter), his army was scattered, the clans turned against him, on his own and without any support – he was on the verge of giving up. As he contemplated a bleak future, he watched a spider struggle to construct a web in the dank cave he was hiding in. The beastie failed again and again.. Finally, Bruce reached his decision. If the Spider succeeded, he would carry on.

He went on to become Scotland’s Greatest King.

Try, Try, Try again…? Perhaps Scotland will pull an unlikely win at Twickenham on Saturday? She-who-is-now-Mrs-Blain did warn me not to “bore everyone about Brexit…”, but needs must.

Even though a No-Deal Brexit is ruled out in the short-run, where do we go from here?

Or, perhaps, Theresa May is set to surprise us all. She really doesn’t know when to give up. The scuttlebutt round Westminster is she’s going to take her Brexit agreement back to the House for a third time – and is currently scaring the Rees-Moog loonies with the threat of a long extension leading to NO-Brexit and second referendum, and the Remoaners with the threat of a short-extension leading to No-Deal Brexit. At least 70 Labour MPs want to avoid a second referendum and could, perhaps, vote with her.

Of course, my above simplistic analysis ignores the EU.

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

We Don’t Need A New Deal: We Need A Whole New Deck

January 26, 2019

We Don’t Need A New Deal: We Need A Whole New Deck

The gap between the earth’s wardens of wealth and the nearly eight billion humans under their control has grown wider and more dangerous but is beginning to be understood by some as a systemic problem and not simply a matter of evil leaders and villainous followers. When people see and feel their futures ranging from problematic at best to non-existent at worst, we get the resultant turmoil and changes taking place in nations moving in many directions at once but all of them against established power over things as they are.

Whether votes are cast in elections labeled democratic though still under minority control, or issues are subject to mob rule of one extreme or another, they are producing governments at least rhetorically dedicated to change even if often dangerously confused or in merely cosmetic form. Nevertheless, those demanding change beyond simply continuing the rule of market forces under minority control are starting to move up and into more commanding roles in governments. Unfortunately, and especially in America, many still operate as though political change amounts to the candidates skin tone, religion or sex, neglecting the philosophy between their ears by concentrating more on the genitals between their thighs.

Thus we have working people going to the polls and electing representatives of wealth operating against their interest but rhetorically speaking of change, which may mean reverting to earlier forms of capital private profit which still leave the public good in poor condition, or worse, sinking into megalomaniacal rule under populists (?) promising to dump even more wrath on those at or near the bottom.

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

The Recession Will Be Unevenly Distributed

January 10, 2019

The Recession Will Be Unevenly Distributed

Those households, enterprises and organizations that have no debt, a very low cost basis and a highly flexible, adaptable structure will survive and even prosper.

The coming recession will be unevenly distributed, meaning that it will devastate many while leaving others relatively untouched. A few will actually do better in the recession than they did in the so-called “recovery.”

I realize many of the concepts floated here are cryptic and need a fuller explanation: the impact of owning differing kinds of capital, fragmentation, asymmetry, opacity, etc. ( 2019: Fragmented, Unevenly Distributed, Asymmetric, Opaque).

These dynamics guarantee a highly uneven distribution of recessionary consequences and whatever rewards are generated will be reaped by a few.

One aspect of the uneven distribution is that sectors that were relatively protected in recent recessions will finally feel the impact of this one. Large swaths of the tech sector (which is composed of dozens of different industries and services) that were devastated in the dot-com recession of 2000-02 came through the 2008-09 recession relatively unscathed.

This time it will be different. The build-out of mobile telephony merging with the web has been completed, social media has reached the stagnation phase of the S-Curve and many technologies that are widely promoted as around the corner are far from profitability.

Then there’s slumping global demand for mobile phones and other consumer items that require silicon (processors) and other tech components: autos, to name just one major end-user of electronics.

The net result will be mass layoffs globally across much of the tech sector.Research is nice but it doesn’t pay the bills today or quiet the restive shareholders as profits tank.

The public sector is also ripe for uneven distribution of recessionary impacts.Local government and its agencies in boomtowns such as the SF Bay Area, Seattle, Los Angeles, NYC, etc. have feasted on soaring tax revenues and multi-billion dollar municipal bonds.

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

What can we do?

December 18, 2018

What can we do?

At the University of Minnesota Dr. Nate Hagens teaches an honours course called “Reality 101: A Survey of the Human Predicament.” Hagens operated his own hedge fund on Wall Street until he glimpsed, “a serious disconnect between capitalism, growth, and the natural world. Money did not appear to bring wealthy clients more well being.” Hagens became editor of The Oil Drum, and now sits on the Board of the Post Carbon Institute and the Institute for Integrated Economic Research.

Reality 101 addresses humanity’s toughest challenges: economic decline, inequality, pollution, biodiversity loss, and war. Students learn about systems ecology, neuroscience, and economics. “We ask hard questions,” says Hagens. “What is wealth? What are the limits to growth? We attempt to face our crises head on.”

Some students feel inspired to action, and some report finding the material “depressing.” One student shared the course material with a family member, who asked, “So what can I do?” The student struggled to answer this question, and the listener chastised her: “why did you explain all this to me, if you can’t tell me what to do?!”

A fair question. One that, as environmentalists, we often get asked. At the request of Dr Hagens, here is my list:

What can we do?

I have been asking this question all of my adult life. As I’ve witnessed the crisis intensify, I’ve experienced feelings of panic, anger, and helplessness. Nevertheless, I also feel at peace. I love my family and friends, I enjoy life in my community, and love my time in the natural world. Here are some of the ways I believe we can deal with anxiety about the world and take action:

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

The Big Picture

December 17, 2018

The Big Picture

Humanity has a lot of problems these days. Climate change, increasing economic inequality, crashing biodiversity, political polarization, and a global debt bubble are just a few of our worries. None of these trends can continue indefinitely without leading to a serious failure of our civilization’s ability to maintain itself. Taken together, these metastasizing problems suggest we are headed toward some kind of historic discontinuity.

Serious discontinuities tend to disrupt the timelines of all complex societies (another name for civilizations—that is, societies with cities, writing, money, and full-time division of labor). The ancient Roman, Egyptian, and Mayan civilizations all collapsed. Archaeologists, historians, and systems thinkers have spent decades seeking an explanation for this pattern of failure—a general unified theory of civilizational collapse, if you will. One of the most promising concepts that could serve as the basis for such a theory comes from resilience science, a branch of ecology (the study of the relationship between organisms and their environments).

Why Civilizations Collapse: The Adaptive Cycle

Ecosystems have been observed almost universally to repeatedly pass through four phases of the adaptive cycle: exploitation, conservation, release, and reorganization. Imagine, for example, a Ponderosa pine forest. Following a disturbance such as a fire (in which stored carbon is released into the environment), hardy and adaptable “pioneer” species of plants and small animals fill in open niches and reproduce rapidly.

This reorganization phase of the cycle soon transitions to an exploitation phase, in which those species that can take advantage of relationships with other species start to dominate. These relationships make the system more stable, but at the expense of diversity.

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

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