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The Next Recession Will Be Devastatingly Non-Linear
The Next Recession Will Be Devastatingly Non-Linear
The acceleration of non-linear consequences will surprise the brainwashed, loving-their-servitude mainstream media.
Linear correlations are intuitive: if GDP declines 2% in the next recession, and employment declines 2%, we get it: the scale and size of the decline aligns. In a linear correlation, we’d expect sales to drop by about 2%, businesses closing their doors to increase by about 2%, profits to notch down by about 2%, lending contracts by around 2% and so on.
But the effects of the next recession won’t be linear–they will be non-linear, and far more devastating than whatever modest GDP decline is registered. To paraphrase William Gibson’s insightful observation that “The future is already here — it’s just not very evenly distributed”: the recession is already here, it’s just not evenly distributed– and its effects will be enormously asymmetric.
Non-linear effects can be extremely asymmetric. Thus an apparently mild decline of 2% in GDP might trigger a 50% rise in the number of small businesses closing, a 50% collapse in new mortgages issued and a 10% increase in unemployment.
Richard Bonugli of Financial Repression Authority alerted me to the non-linear dynamic of the coming slowdown. I recently recorded a podcast with Richard on one sector that will cascade in a series of non-linear avalanches once the current asset bubbles pop and the current central-bank-created “recovery” falters under its staggering weight of debt, malinvestment and speculative excess.
The Intensifying Pension Crisis (37-minute podcast)
The core dynamic of the next recession is the unwind of all the extremes:extremes in debt expansion, in leverage, in the explosion of debt taken on by marginal borrowers, in malinvestment, in debt-fueled speculation, in emerging market debt denominated in US dollars, in financial repression, in political corruption–the list of extremes that have stretched the system to the breaking point is almost endless.
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Nonlinear Complexity – Too Much for Most People to Comprehend
QUESTION: Dear Mr. Martin Armstrong.
Good day to you Martin. I know you are a very busy man, but I still like to send you emails time to time, hoping that you may read my email and respond to me. In regards to your recent post about the theory of Non-linear intervention, I was quietly amazed at the fact that I recently had the same idea as yours.
In my math class, my teacher taught us a different way to solve quadratic equations, and it was completely done by original algebra rules, not with the formulas we used to be given in high school. My math teacher said that most teachers do not use this method other than using special case formulas because its non-linear solution and that messes up people’s brain.
Also in my Economics class, we are learning about the basics of supply and demand and here we again use the straight linear method, such as ceteris paribus. I was sincerely curious to know if that is true for everything we do.
You have shown me a clear path in every aspect of this world. But I have a question about the Euro, I too have lost so much money by just looking at the fundamentals and execute trades and now I have learned that the fundamentals do not matter the most to move the market unless its very significant incident. (is that correct?) For instance, the Euro rallied whenever there was a chance to go up, and as a person who was only looking at the fundamental side, it was very odd and frustrating for me to watch it go up, but on the other hand, the technical communities were chanting a song that EUR/USD will spike to 1.2000 and so it did. I am still a fool who cannot read the market.
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Fourth Turning: Crisis of Trust
Fourth Turning: Crisis of Trust
“Imagine some national (and probably global) volcanic eruption, initially flowing along channels of distress that were created during the Unraveling era and further widened by the catalyst. Trying to foresee where the eruption will go once it bursts free of the channels is like trying to predict the exact fault line of an earthquake. All you know in advance is something about the molten ingredients of the climax, which could include the following:
- Economic distress, with public debt in default, entitlement trust funds in bankruptcy, mounting poverty and unemployment, trade wars, collapsing financial markets, and hyperinflation (or deflation)
- Social distress, with violence fueled by class, race, nativism, or religion and abetted by armed gangs, underground militias, and mercenaries hired by walled communities
- Cultural distress, with the media plunging into a dizzying decay, and a decency backlash in favor of state censorship
- Technological distress, with cryptoanarchy, high-tech oligarchy, and biogenetic chaos
- Ecological distress, with atmospheric damage, energy or water shortages, and new diseases
- Political distress, with institutional collapse, open tax revolts, one-party hegemony, major constitutional change, secessionism, authoritarianism, and altered national borders
- Military distress, with war against terrorists or foreign regimes equipped with weapons of mass destruction”
The Fourth Turning – Strauss & Howe – 1997
September 2015 marks the seventh anniversary of this Fourth Turning Crisis. The economic, social, cultural, ecological, political, and military distress propagates by the minute as the globe is besieged by economic turmoil, increased human suffering, and endemic corruption of the political and ruling classes. The Federal Reserve/Wall Street created global economic implosion was the spark which catalyzed this fourth Crisis period in U.S. history in September 2008. Neil Howe in a 2012 essay assessed the beginning of this Fourth Turning and why 9/11 was not the catalyst:
“Pending stunning new developments, I believe the catalyst occurred in 2008. It’s a date that is looking better and better as time goes by. The year 2008 marked the onset of the most serious U.S. economic crisis since the Great Depression.
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