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2020 the “Worst Year Ever”–You’re Joking, Right?

2020 the “Worst Year Ever”–You’re Joking, Right?

So party on, because “the worst year ever” is ending and the rebound of financial markets, already the greatest in recorded history, will only become more fabulous.

Of the lavish banquet of absurdities laid out in 2020, one of the most delectable is Time magazine’s December 14 cover declaring that 2020 was the “worst year ever.” You’re joking, right? In history’s immense tapestry of human misery, it’s not even in the top 100 worst years.

Consider 1177 B.C., when many of the great civilizations of the Mediterranean Sea and Mideast collapsed, and the survivors struggled through a pre-modern Dark Ages. This book assembles what is known about this catastrophic era: 1177 B.C.: The Year Civilization Collapsed.

Then there’s 1644 A.D., when the Ming Dynasty was overthrown by the Manchu invasion, a series of self-reinforcing misfortunes stemming from extremes of climate (a.k.a. The Little Ice Age) that left millions hungry and vulnerable to disease and the predation of roving bandit armies.

The Little Ice Age and the famine, conflicts, civil wars, coups, revolts and rebellions it launched killed between a quarter and a third of Eurasia’s population. Entire villages melted away as starvation drove the survivors to desperation. The misery stretched from western Europe to China, and lasted for decades.

This fascinating history lays it all out: Global Crisis: War, Climate Change, & Catastrophe in the Seventeenth Century.

Though it is now relegated to a footnote in history, the Antonine Plague of 165 – 180 A.D. decimated the Mediterranean, Mideast, North African and Eurasian regions, toppling regimes that had endured for ages and very nearly brought the Roman Empire to an inglorious end. Roughly one-fourth of the population died as the novel disease was distributed along Rome’s numerous trade routes, which stretched from Northern Europe to Africa and India.

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

The Most Hopeful Scenario for 2021

The Most Hopeful Scenario for 2021

Choose wisely, America, or the options for a positive outcome will vanish like mist in Death Valley on a clear July afternoon.

From the point of view of evolution, the most hopeful scenario for 2021 is the sudden and complete collapse of everything that is obsolete, inefficient, ineffective and sclerotic. When obsolete systems and entities pass away quickly, the cost and pain are processed and absorbed quickly as well: enterprises go bankrupt and their assets are liquidated, failed ventures close, and schemes that didn’t yield the desired benefits are scrapped.

This is the evolutionary process. Whatever has lost its selective advantages will succumb to selective pressures and fade away.

The problem arises when self-serving insiders siphon resources to keep their obsolete, inefficient, ineffective and sclerotic gravy-train protected from selective pressures. Keeping a terminally ill human alive is an analogy: it’s possible to extend the life of a terminally ill person at enormous expense and effort, but the patient isn’t restored to their previous health or vigor–that is no longer even a possibility. They are no longer their previous self, and this is why people choose to avoid extraordinary interventions in their final phase of life.

Economically obsolete / terminal entities, on the other hand, always choose extraordinary monetary interventions to keep their gravy-train alive, even if they bleed the rest of the economy dry in the process.

If the buggy-whip industry existed today, Congress would grant it billions of dollars in low-interest loans, tax breaks and direct subsidies so those who made fortunes in the buggy-whip industry would continue to prosper, not from a productive activity but from subsidies and loans that ultimately weaken the entire economy and society.

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Give Yourself a Gift Next Year: Agency

Give Yourself a Gift Next Year: Agency

We think we’re powerless because we don’t have wealth and power over others, but nothing could be further from the truth.

To have agency is to have power over your own life and control of your assets, options and resources. There are a great many things that influence our lives that we do not control, but there are also many things we could influence in our lives but do not.

The conventional view puts great weight on the agency created by money, as an abundance of money enables people to do a number of things that people with little money cannot do: live comfortably in costly locales, buy a larger home, buy a second home, buy a boat, pay for college with cash, pay for expensive medications not covered by insurance, take extended vacations and start enterprises without ceding power to outside investors, to name a few.

Our culture only has eyes for the agency of money, as this narrow band of agency is ceaselessly glorified. Yet what’s striking is how little of importance money can buy. Not only can it not buy love, it cannot buy true friendship, trust, affection, community, emotional intelligence, wisdom, skills, purpose, meaning, health, confidence, creativity, conviction, self-discipline, resilience, self-expression, integrity, authenticity, faith or inner security.

What gift would you want for yourself in 2021? Whatever you identify as the gift you’d want to give yourself, the odds of obtaining it improve if you give yourself the gift of agency first. While money is a resource that can leverage certain kinds of agency, it isn’t the foundation of agency; the foundations of taking control of one’s life are internal.

I wrote an entire book about this process of taking control of one’s life: Resistance, Revolution, Liberation: A Model for Positive Change.

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What Would Happen If the Fed Ceased to Exist?

What Would Happen If the Fed Ceased to Exist?

Extremes get more extreme until risk breaks out; then the reversal will be as extreme as the bubble expansion.

What would happen if the Federal Reserve ceased to exist? We all know the answer: global markets would instantly collapse and the global financial system, now entirely dependent on Fed stimulus, intervention, manipulation, free money for financiers and endless printing of trillions of dollars out of thin air, would crash, leaving nothing but a steaming, fetid pile of corruption infested by the cockroaches scurrying around gobbling up the few crumbs left.

What would happen if the Federal Reserve ceased to exist? The Treasury would sell its bonds on the open market, where buyers and sellers would set the yield on the bonds. Private banks would take deposits and lend money at rates set by supply and demand.

We all know what would happen: yields and interest rates would explode higher in response to risk having to be priced in and every flimsy, worm-eaten enterprise that depended on zero-interest rates would collapse in a heap and every putrid, staggering zombie corporation would crumble to dust, and its phantom assets, illusions generated solely by the artificial spew of the Fed, would fall to their real value, i.e. near zero.

Let’s modify the question slightly: what would happen if the Fed’s policies stopped working? In other words, what if the Fed’s spew no longer created the illusion of risk-free gambling in bubble-valuation assets? What if risk raised its Gorgon-like head despite every intervention, every manipulation, and every foul burp of propaganda from the Fed?

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

One Little Problem with the “All-Electric” Auto Fleet: What Do We Do with all the “Waste” Gasoline?

One Little Problem with the “All-Electric” Auto Fleet: What Do We Do with all the “Waste” Gasoline?

Regardless of what happens with vaccines and Covid-19, debt and energy–inextricably bound as debt funds consumption– will destabilize the global economy in a self-reinforcing feedback.

Back in the early days of the oil industry (1880s and 1890s), the product that the industry could sell at a profit was kerosene for lighting and heating. Since there was no automobile industry yet, gasoline was a waste product that was dumped into streams.

Why couldn’t the refiners produce only kerosene? Why did they end up with “worthless” gasoline?

The answer is a barrel of oil produces a variety of products. While there is some “wiggle room” to produce more diesel and less gasoline, etc., it isn’t possible to turn a barrel of oil into only one product.

John D. Rockefeller became very wealthy by cornering much of the oil market in the 19th century. But he didn’t become fabulously wealthy until the 20th century, when the rise of automobiles created a market for all the “waste” gasoline.

Rockefeller became super-wealthy when all the products of each barrel of oil could be sold at a premium rather than just a portion of the products.

This reality has been forgotten: the price that can be fetched for a barrel of oil depends on the demand for all the products, not just a few of the products.

Those demanding an all-electric auto-truck fleet as a “green” alternative will re-create the dilemma of what to do with the “waste” gasoline. The world will still want fuel for all those container ships bringing all the goodies of a consumerist society, all those cruise ships visiting ports of call, jet fuel for all those exotic vacations enabled by 550 mile-per-hour aircraft, and oil-based lubricants, plastics and petro-chemicals, and so oil will still be pumped and refined, and almost half of it will be gasoline.

We can either use it or throw it away but we can’t magically turn a barrel of oil into only one product.

This is a topic worthy of your understanding, so grab a vat of your favorite beverage and turn off all distractions.

Longtime readers know I’ve focused on energy-oil markets for 15 years. Despite ups and downs in price, the oil market has been remarkably stable.

This stability is about to transition to chronic instability: wild swings in price, shortages, and social chaos in both producing and consumer nations.

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

Cycles, Systems and Seats in the Coliseum

Cycles, Systems and Seats in the Coliseum

The idea that debt, leverage, speculation, greed, exploitation and parasitic elites can expand exponentially forever is magical thinking.

Contrary to first impressions, I am not a doom-and-gloomer; I’m a systems-cycles-er, meaning I’m interested in where systems and cycles are heading.

Cycles work because we’re still running Wetware 1.0 which entered beta testing around 200,000 years ago and was released, bugs and all, around 50,000 years ago. Since the processes and inputs haven’t changed, neither do the outputs.

Nature is a mix of dynamic, semi-chaotic systems (fractals, etc.) and cyclical patterns which tend to operate within predictable parameters. Why should human nature and human constructs (societies, economies and political realms) be any different?

So longterm success breeds complacency, hubris, economic and intellectual sclerosis, draining political infighting and the overproduction of parasitic elites, to use Peter Turchin’s apt description. Consumption of resources expands to soak up every last bit of what’s available and then the supply of goodies plummets for a multitude of completely natural and predictable reasons (sunspot/solar activity, El Nino, etc.) and a host of unpredictable but equally natural semi-chaotic extremes (100-year droughts, floods, etc.).

Wetware 1.0’s go-to solutions to all such difficulties are rather limited:

1. Ramp up magical thinking. If a couple of human sacrifices ensured good harvests in the good old days, let’s slaughter a couple hundred now–and if that doesn’t work, then…

2. Do more of what’s failed spectacularly and slaughter a couple thousand fellow humans, because darn it, maybe everything will turn around if we just kill another couple dozen.

This requires ignoring the novelty of the current challenges and clinging to what worked so well in the past even as whatever worked in the past can’t possibly work now because circumstances are fundamentally different.

3. Seek scapegoats. It’s those darn witches. Burn a bunch of them and our troubles will magically disappear.

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

Welcome to the U.S.S.A.’s Banquet of Consequences

Welcome to the U.S.S.A.’s Banquet of Consequences

The incontestable incompetence of the USSA’s monopolies, institutions and agencies is about to take center stage in 2021.

When I mention that the U.S.A. feels increasingly like the U.S.S.R., a surprising number of people tell me they feel the same way. Welcome to the U.S.S.A.: United Simulacra States of America where everything is an absurdly transparent simulation with little connection to reality and dissent is crushed by an everpresent, ubiquitous narrative police state enforced by the union of Big Tech social media, search and other monopolies and the Savior Statedo what we tell you and you’ll get a piece of our endlessly spewed trillions.

My colleague Mark Jeftovic recommended an insightful book on the unraveling of the USSREverything Was Forever, Until It Was No More: The Last Soviet Generation.

It’s an academic book so there are the required servings of jargon and references to suitably opaque academic tropes, but beneath the conceptual clutter lies a profound analysis of how humans adapt to and navigate a system that has lost all authenticity and survives entirely on the ceaseless marketing of artifice: in other words, the USA today.

Of particular interest are the book’s personal accounts of dutiful Party members going through the motions of obedience as a means of enjoying their private friendships and lives. Joining the Party’s machinery was a way to meet friends who you recruited for your committee work. Everyone went through the motions but nobody actually believed any of it: you did homework while “listening” to the endless canned speeches, you went out for coffee while telling the Party functionary that you were on Party business, and you worked on parades and activities that were a bit of fun despite the dreary official purpose which everyone ignored.

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

2021 is Already Optimized for Failure

2021 is Already Optimized for Failure

One sure way to identify a system “optimized for failure” is if all the insiders are absolutely confident the system is “optimized for my success”.

I often discuss optimization here because it offers an insightful window into how systems become fragile and break down. When we optimize something, we’re aiming to get the most bang for our buck: maximize our efficiency, profit, productivity, etc., while minimizing our costs.

To maximize our goal, whatever it is–profits, power, whatever– we strip away redundancy and buffers because these add costs and don’t boost our desired output. They create resilience, i.e. the ability to survive disruptions, but the logic of optimization is relentless: get rid of all extraneous costs, because resilience doesn’t boost the bottom line.

This trade-off–trading resilience for optimization–looks brilliant when everything goes according to plan. But when events veer outside the narrow parameters of the optimized system, the system breaks down: supply chains break, safety procedures fail, and so on.

Even more consequentially, optimization strips away anti-fragility, Nassim Taleb’s term for the ability to not just survive disruptions but emerge stronger and more adaptable.

What happens when inflexible, sclerotic systems optimized to benefit self-serving insiders encounter chaotic turbulence or conditions outside the expected parameters? They collapse because the system is optimized for failure. Put another way: when a system is optimized to benefit insiders at the expense of resilience and anti-fragility, it is effectively optimized to fail because life is not programmable to a steady-state, predictable stability.

2021 is already optimized for failure in key ways:

1. The mRNA vaccines have not been properly tested to answer essential questions such as: can a vaccinated individual retain enough of the virus to infect an unvaccinated individual?

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Prepare for Winter

Prepare for Winter

Realism must precede optimism or the optimism will collapse as the tsunami of reality comes ashore.

It’s time to prepare materially and psychologically for a winter unlike any other in our lifetimes.

Here’s the view from 30,000 feet:

1. The stock market and the general zeitgeist of optimism have soared based on expectations that the real-world economy and efforts to suppress Covid would also track a V-shaped recovery.

While GDP did make a V-shaped recovery, GDP (gross domestic product) is a measure of flows and consumption, not a measure of the socio-economic “balance sheet.” GDP measures the money flowing through accounts but not the “assets” of a functioning society: functional institutions and infrastructure and the well-being and security of the citizenry.

Thus GDP soars while the real-world economy and society are hollowed out by economic inequality, declining health, financial insecurity, rising prices for essentials, dysfunctional institutions and decaying infrastructure.

Simply put, GDP doesn’t measure what’s important; it creates destructive incentives to squander resources and borrow staggering sums to support more consumption. This systemic flaw in what we measure has long been recognized by mainstream economists such as Joseph Stiglitz. Measuring What Counts: The Global Movement for Well-Being (Joseph E. Stiglitz et al.)

So the recovery of GDP doesn’t mean the real-world economy has been restored to pre-Covid settings. GDP is a deceptive metric that’s masking a free-fall in our well-being, security and social cohesion.

2. Just as GDP is a deceptive measure of the economy, counting Covid fatalities is equally deceptive: a declining death count is good news, of course, but that ignores the other effects of Covid, particularly organ damage and “Long-Covid” debilitation, not just in people with pre-existing conditions and the elderly but in healthy middle-aged and even some young people.

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

What We Don’t Elect Matters Most: Central Banking and the Permanent Government

What We Don’t Elect Matters Most: Central Banking and the Permanent Government

We’re Number One in wealth, income and power inequality, yea for the Fed and the Empire!

If we avert our eyes from the electoral battle on the blood-soaked sand of the Coliseum and look behind the screen, we find the powers that matter are not elected: our owned by a few big banks Federal Reserve, run by a handful of technocrats, and the immense National Security State, a.k.a. the Permanent Government. These entities operate the Empire which hosts the electoral games for the entertainment and distraction of the public.

The governance machinery controlled by elected representatives is tightly constrained in what it can and cannot do. It can’t do anything to stop the debasement of the nation’s currency, which is totally controlled by the Politburo of the Fed, nor can it do much to limit the Imperial Project, other than feel-good PR bits here and there.

The president wields vast powers but even the president is powerless to stop the debasement of the nation’s currency and the enrichment of bankers, financiers, corporations, etc., who fund the campaigns of the gladiators, oops I mean politicians.

If we set aside the term Deep State and simply call it the unelected machinery of governance (Permanent Government), we get a clear picture of its scope and power. Presidents, senators and representatives come and go, but the machinery of Empire grinds on, decade after decade.

A great many people and places in America don’t matter to the Fed or the Permanent Government, and so they’ve been abandoned to their fates. The darlings of the Fed and Empire are clustered in Silicon Valley and other urban hubs where the technological and financial machinery of global hegemony are fabricated and maintained.

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ALICE Doesn’t Work Here Anymore

ALICE Doesn’t Work Here Anymore

What the political class and the Financial Nobility don’t yet grasp is that ALICE will never go back to her insecure, low-wage job, ever.

Meet ALICE: Asset Limited, Income Constrained, Employed, at least she was employed until the pandemic presented impossible choices between taking care of her children and their education, and her aging parents, and keeping her demanding, low-wage job.

Though it doesn’t fit in with the cute mythology of “capitalism” that apologists love to promote, ALICE wasn’t working to get ahead–she was working to barely survive in an economy where wages have stagnated for decades and recently lost ground at an alarming rate as costs for everything from rent to childcare to utilities have soared while her hours have been cut.

This is the neofeudalism I’ve often described here: the modern-day equivalent of the landless (i.e. owns no capital) serf is a landless (i.e. owns no capital) debt-serf with student loans, an auto loan and credit card debt and income that is constrained by globalization, financialization and the scarcity of high-paying work that isn’t reserved for insiders and the privileged few who chose their wealthy, well-educated, socially connected parents wisely.

Lacking capital and any realistic means of acquiring any, the debt-serf has only labor to sell, and in a globalized world in which everyone selling their labor is competing globally for work producing tradable goods and services, ordinary labor has lost purchasing power for the past 45 years (see charts below).

The dominance of Big Tech monopoly platforms has created new fields for the exploitation of ordinary labor in the low-paid gig economy and fulfillment centers. The traditional neofeudal fiefdoms (retail outlets, hospitality and restaurants) have been hit by the pandemic pullback in consumer spending, and the other low-wage fiefdoms (fast food and domestic service) have been in structural decline for years.

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Why We’re Doomed: Our Delusional Faith in Incremental Change

Why We’re Doomed: Our Delusional Faith in Incremental Change

Better not to risk any radical evolution that might fail, and so failure is thus assured.

When times are good, modest reforms are all that’s needed to maintain the ship’s course. By “good times,” I mean eras of rising prosperity which generate bigger budgets, profits, tax revenues, paychecks, etc., eras characterized by high levels of stability and predictability.

Since stability has been the norm for 75 years, institutions and conventional thinking have both been optimized for incremental change. This is an analog of natural selection in Nature: when the organism’s environment is stable, there’s little pressure to favor random mutations, as these can be risky.

Why risk big changes when everything’s working fine as is?

Absent any big changes in their environment, organisms’ genetic programming remains stable. Unlike natural selection’s process of generating random mutations and testing their efficacy and advantages over the existing programming, human organizations quickly habituate to stable eras by institutionalizing incremental changes as the only available process for reform / change.

Radical reforms are not just frowned on as 1) unneccesary and 2) needlessly risky, there is no institutionalized process to propose, test and adopt radical changes because there is no need for such a process.

Nature has such a process: punctuated equilibrium. When faced with a rapidly changing environment, organisms face intense evolutionary pressure to adapt or die. Mutations which confer a significant advantage in the new environment become part of the species’ genetic programming as those with the adaptation bear offspring who carry the advantageous adaptation. Those without the advantageous adaptation die and those with the adaptation thrive and multiply.

Once the environment stabilizes in “the new normal,” the evolutionary pressure lets up and the species returns to the stability of relatively few changes in its genetic programming.

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Has Our Luck Finally Run Out?

Has Our Luck Finally Run Out?

We are woefully unprepared for a long run of bad luck.

Long-term cycles escape our notice because they play out over many years or even decades; few noticed the decreasing rainfall in the Mediterranean region in 150 A.D. but this gradual decline in rainfall slowly but surely reduced the grain harvests of the Roman Empire, which coupled with rising populations resulted in a reduced caloric intake for many people.

This weakened their immune systems in subtle ways, leaving them more vulnerable to the Antonine Plague of 165 AD.

The decline of temperatures in Northern Europe in the early 1300s led to “years without summer” and failed grain harvests which reduced the caloric intake of most people, leaving them weakened and more vulnerable to the Black Plague which swept Europe in 1347.

I’ve mentioned the book The Fate of Rome: Climate, Disease, and the End of an Empire a number of times as a source for understanding the impact of natural cycles on human civilization.

It’s important to note that the natural cycles and pandemics of 200 AD didn’t just cripple the Roman Empire; this same era saw the collapse of the mighty Parthian Empire of Persia, the kingdoms of India and the Han Dynasty in China.

In addition to natural cycles, there are human socio-economic cycles of debt and decay of civic values and the social contract: a proliferation of parasitic elites, a weakening of state finances and a decline in the purchasing power of wages/labor.

The rising dependence on debt and its eventual collapse is a cycle noted by Kondratieff and others, and Peter Turchin listed these three dynamics as the key drivers of decisive discord of the kind that brings down empires and nations.

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

The Empire of Uncertainty

The Empire of Uncertainty

Anyone claiming they can project the trajectory of the U.S. and global economy is deluding themselves.

Normalcy depends entirely on everyday life being predictable. To be predictable, life must be stable, which means that there is a high level of certainty in every aspect of life.

The world has entered an era of profound uncertainty, an uncertainty that will only increase as self-reinforcing feedbacks strengthen disrupting dynamics and perverse incentives drive unintended consequences.

It may be more accurate to say that we’ve entered the Empire of Uncertainty, an empire of ambiguous borders and treacherous topology.

A key driver of uncertainty is the Covid-19 virus, which is a slippery little beast. Nine months after its emergence on the world stage, discoveries are still being made about its fundamental nature.

Humans crave certainty, as ambiguity and uncertainty create unbearable anxiety. This desire to return to a predictable “normal” drives us to grasp onto whatever is being touted as a certainty: a cure, a vaccine, a fiscal policy to restore the “Old Normal” economy, etc.

But none of these proposed certainties is actually certain, and those touting these certainties are non-experts who latch onto an “expert” opinion that resolves their need for certainty and predictability.

What we want, of course, is a return to old certainties that we’re familiar with. In the context of pandemic, the model most people are working from is a conventional flu pandemic: a certain number of people get the virus and become ill, a certain number of then die, and those who survive resume their old life.

But there is mounting evidence that Covid-19 doesn’t follow this neat pattern of “the dead are gone and everyone else picks up where they left off.” Counting the dead as the key statistic completely ignores the long-term consequences of Covid-19 that include permanent organ damage.

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

“Inflation” and America’s Accelerating Class War

“Inflation” and America’s Accelerating Class War

Those who don’t see the fragmentation, the scarcities and the battlelines being drawn will be surprised by the acceleration of the unraveling.

I recently came across the idea that inflation is a two-factor optimization problem: inflation is necessary for the macro-economy (or so we’re told) and so the trick for policy makers (and their statisticians who measure the economy) is to maximize inflation in the economy but only to the point that it doesn’t snuff out businesses and starve workers to death.

From this perspective, households have to grin and bear the negative consequences of inflation for the good of the whole economy.

This narrative, so typical of economics, ignores the core reality of “inflation” in America: it’s a battleground for the class war that’s accelerating. Allow me to explain.

“Inflation” affects different classes very differently. I put “inflation” in italics because it’s not one phenomenon, it’s numerous phenomena crammed into one deceptively simple word.

When “inflation” boosts the value of homes, stocks, bonds, diamonds, quatloos etc. to the moon, those who own these assets are cheering. When “inflation” reduces the purchasing power of wages, those whose only income is earned from their labor suffer a decline in their lifestyles as their wages buy fewer goods and services.

They are suffering while the wealthy owners of soaring assets are cheering.

The Federal Reserve and federal authorities are not neutral observers in this war. The Fed only cares about two things: enriching the banking sector and further enriching the already-rich.

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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