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Why Systems Fail

Why Systems Fail

Since failing systems are incapable of structural reform, collapse is the only way forward.

Systems fail for a wide range of reasons, but I’d like to focus on two that are easy to understand but hard to pin down.

1. Systems are accretions of structures and modifications laid down over time.Each layer adds complexity which is viewed at the time as a solution.

This benefits insiders, as their job security arises from the need to manage the added complexity. The new layer may also benefit an outside constituency that quickly becomes dependent on the new layer for income. (Think defense contractors, consultants, non-profits, etc.)

In short order, insiders and outsiders alike habituate to the higher complexity, and everyone takes it for granted that “this is how things work.” Few people can visualize alternatives, and any alternative that reduces the budget, payroll or power of the existing system is rejected as “unworkable.”

In this set of incentives, the “solution” is always: we need more money. If only we had another $1 million, $1 billion or $1 trillion, we could fix what’s broken.

But increasing the budget can’t fix what’s broken because it doesn’t address the underlying sources of systemic failure.

Those benefiting from the status quo will fight tooth and nail to retain their jobs and benefits, and so deep reform is essentially impossible, as the insiders and constituencies of each layer resist any reform that might diminish their security/income.

As a result, new layers rarely replaces previous layers; the system becomes more and more inefficient and costly as every new layer must find work-arounds and kludgy fixes to function with the legacy layers.

Eventually, the system becomes unaffordable and/or too ineffective to fulfill its mission.

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This Is What a True Liberty-Loving Politician Would Look Like

This Is What a True Liberty-Loving Politician Would Look Like

What would a real friend of freedom say if he was offering himself for political office?

In modern democracies, political cycles never end. As soon as one election is over, those seeking office are already running for the next election. Having recently attended a public forum of state-level candidates looking to the 2018 election, I wondered what a real friend of freedom might say if he was offering himself for such a political office.

Liberty Rhetoric, But Interventionist Policies

At a luncheon event several candidates running in the forthcoming Republican Party primary in South Carolina made their pitch as to why they should be their party’s nominees for state legislative offices in the next general election. They answered questions submitted by attendees at the lunch and made opening and closing statements about who they were and what they stood for.

They all clearly believed that growth needed to be harnessed within “reasonable” rules and regulations.

Not too surprisingly they all, in their respective ways, said they were “pro-business,” advocated lower taxes, a freer enterprise market environment, greater transparency, and more accountability for those in power in the state capital.

Why did each say they were running for elected office? They all had been in business but now wanted to “give back” and “serve” their communities.

What were major themes in many of the questions directed at them? South Carolina is a growing state where international corporations are opening more manufacturing facilities, and, as more people move to the Palmetto State, it has an increasing population to match. Those who submitted questions wanted to know what the candidates would do, if elected, to improve and widen road infrastructure to reduce increasing congestion, and how they would “manage” growth in the state?

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“Reform” won’t solve our biggest problems

“Reform” won’t solve our biggest problems

“You never cure structural defects; you let the system collapse.”

As I contemplated this proposition taken from a recent piece by Nassim Nicholas Taleb, I realized what profound implications accepting it would have for all those engaged in attempting to address our current social, political and environmental ills.

If it is true that modern capitalism is incompatible with effective action on climate change, if it is true that top-heavy, bureaucratic nations always eventually become captive to their wealthy citizens, if it is true that our centralized, complex, tightly networked systems in finance, agriculture, shipping and manufacturing are exceedingly fragile and prone to failure–if these all represent structural defects, then they cannot be addressed by tinkering or “reform.” Those in charge cannot be persuaded to “do something” which is contrary to the structural necessities built into these systems.

The choices then are: 1) Do nothing, 2) insurrection (for which you might be jailed or worse) or 3) start building a decentralized replacement. Since I’m discarding choices one and two, I’ll address choice three.

First, adopting choice three doesn’t mean we should abandon critiquing the current systems under which we live. Quite the contrary. Those systems are where future adopters of decentralized replacements currently do business. They are the Brand X against which new systems can and need to be compared.

Second, we have good evidence that small-scale governments can actually respond to climate change when large-scale governments can’t. Citizens of seaside communities experience the rising ocean waters first hand and have direct access to their elected officials as do those who experience droughts. And those cities have actually taken significant (but still inadequate) steps toward addressing climate change. It is counterintuitive that decentralized governments could act more quickly and effectively on issues of international scope than national governments until we see them in action.

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The Status Quo Has Failed and Is Beyond Reform

The Status Quo Has Failed and Is Beyond Reform

The truth is the usual menu of reforms can’t stop this failure, so we have to prepare ourselves for the radical transformations ahead.

That the status quo–the current pyramid of wealth and power dominated by the few at the top–has failed is self-evident, but we can’t bear to talk about it.This is not just the result of a corporate media that serves up a steady spew of pro-status quo propaganda–it is also the result of self-censorship and denial.

Why do we avoid talking about the failure of the status quo? We know it is beyond reform, and we’re afraid: afraid that the promises of financial security cannot be kept, afraid of our own precariousness and fragility, and afraid of what will replace the status quo, for we all know Nature abhors a vacuum, and when the status quo crumbles, something else will take its place.

We all prefer the comforting promises of vast central states. No wonder so many Russians pine for the glory days of the Soviet Union, warts and all.

But the central bank/state model has failed, and history can’t be reversed. The failure is not rooted in superficial issues such as which political party is in power, or which regulations are enforced; the failure is structural. The very foundation of the status quo has rotted away, and brushing on another coat of reformist paint will not save our societal house from collapse.

Yet those who benefit from our status quo (or hope to benefit from it upon retirement) naturally deny it has failed, for the reason that it has yet to fail them personally.

So we pretend to not understand that all unsustainable systems eventually collapse, and hope that the next central bank policy–negative interest rates, or bank bail-ins or helicopter money–will postpone it.

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The Coming Era of Financial Triage

The Coming Era of Financial Triage

Virtually every major program of every major nation-state is financially unsustainable going forward.

Though triage is typically used in a medical setting, we are entering an era when financial triage will increasingly be necessary on a household, enterprise and national level.

The term triage may have originated during the Napoleonic Wars from the work of Dominique Jean Larrey. The term was used further during World War I by French doctors treating the battlefield wounded at the aid stations behind the front. Those responsible for the removal of the wounded from a battlefield or their care afterwards would divide the victims into three categories:

Those who are likely to live, regardless of what care they receive

Those who are likely to die, regardless of what care they receive

Those for whom immediate care might make a positive difference in outcome.

financial triage is the process of sorting financial expenses/ programs that are unsustainable and cannot be “reformed”, those that cannot be saved except with systemic reforms, and those that will survive if simply scaled back.

On the household level, financial triage becomes necessary when one of the primary wage earners lose their jobs and cannot find a replacement position.

First to go are non-essentials such as cable TV subscriptions, eating out at restaurants, costly coffees from Starbucks, etc.

But scaling back these modest expenses may not restore the household’s income to expenses balance. The major expenses of transportation, housing and healthcare may have to be sorted into what can be cut and what must be allowed to expire in order to save the household from insolvency and bankruptcy.

A mortgage that exceeds the remaining wage earner’s income is an example of an expense that cannot be “reformed” away.

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When Collapse Is Cheaper and More Effective Than Reform

When Collapse Is Cheaper and More Effective Than Reform

Collapse begins when real reform becomes impossible.

We all know why reforms fail: everyone whose share of the power and money is being crimped by reforms fights back with everything they’ve got.

Reforms that can’t be stopped by the outright purchase of politicos are watered down in committee, and loopholes wide enough for jumbo-jets of cash to fly through are inserted.

The reform quickly becomes “reform”–a simulacrum that maintains the facade of fixing what’s broken while maintaining the Status Quo. Another layer of costly bureaucracy is added, along with hundreds or thousands of pages of additional regulations, all of which add cost and friction without actually solving what was broken.

The added friction increases the system’s operating costs at multiple levels.Practitioners must stop doing actual work to fill out forms that are filed and forgotten; lobbyists milk the system to eradicate any tiny reductions in the flow of swag; attorneys probe the new regulations for weaknesses with lawsuits, and the enforcing agencies add staff to issue fines.

None of this actually fixes what was broken; all these fake-reforms add costs and reduce whatever efficiencies kept the system afloat. Recent examples include the banking regulations passed in the wake of the 2008 meltdown and the ObamaCare Affordable Care Act (ACA).

Back in 2010 I prepared this chart of The Lifecycle of Bureaucracy: as bureaucracies expand, they inevitably become less accountable, less efficient, more bloated with legacy staffing and requirements that no longer make sense, etc.

As costs soar, the bureaucracy’s budget is attacked, and the agency circles the wagons and focuses on lobbying politicos and the public to leave the budget untouched.

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You Can’t Separate Empire, the State, Financialization and Crony Capitalism: It’s One Indivisible System

You Can’t Separate Empire, the State, Financialization and Crony Capitalism: It’s One Indivisible System

The great irony is what’s unsustainable melts into thin air no matter how many people want it to keep going.

Disagreement is part of discourse, and pursuing differing views of the best way forward is the heart of democracy. Disagreement is abundant, democracy is scarce, despite claims to the contrary.

If you think you can surgically extract Empire from the American System, force the State to serve the working/middle classes, end the stripmining of financialization, limit crony capitalism/regulatory capture and get Big Money out of politics–go ahead and do so. I’m not standing in your way–go for it.

But while you pursue your good governance, populist, Left/ Right /Socialist/ Libertarian, etc. reforms, please understand the system is indivisible: the Deep State, the Imperial Project (hegemony and power projection), the State, finance in all its tenacled control mechanisms (greetings, debt-serfs and student-loan-serfs), crony capitalism /regulatory capture, money buying political influence, media propaganda passing as “news”, and the evisceration of democracy (something untoward could happen if the serfs could overthrow the Power Elite at the ballot box–can’t let that happen)–it’s all one system.

Should any one organ be ripped from the body, the entire body dies. The entire system defends each subsystem as integral as a matter of survival. As a result, the naive notion that big money can be excised with only positive consequences is false: restoring democracy places the entire system at risk of implosion.

No more bread and circuses, no more Social Security checks, no more state employee pensions–it all melts into air if any subsystem stops doing its job.

The system is interdependent. Each subsystem needs the others to function. I drew up a chart of the major components (but by no means all) of the system:

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The Real Enemy Is Within

The Real Enemy Is Within

Steve Mann / Shutterstock

If you are not dedicated to the destruction of empire and the dismantling of American militarism, then you cannot count yourself as a member of the left. It is not a side issue. It is the issue. It is why I refuse to give a pass in this presidential election campaign to Bernie Sanders, who refuses to confront the war industry or the crimes of empire, including U.S. support for the slow genocide carried out by Israel against the Palestinians. There will be no genuine democratic, social, economic or political reform until we destroy our permanent war machine.

Militarists and war profiteers are our greatest enemy. They use fear, bolstered by racism, as a tool in their efforts to abolish civil liberties, crush dissent and ultimately extinguish democracy. To produce weapons and finance military expansion, they ruin the domestic economy by diverting resources, scientific and technical expertise and a disproportionate share of government funds. They use the military to carry out futile, decades-long wars to enrich corporations such as Lockheed Martin, General Dynamics, Raytheon and Northrop Grumman. War is a business. And when the generals retire, guess where they go to work? Profits swell. War never stops. Whole sections of the earth live in terror. And our nation is disemboweled and left to live under what the political philosopher Sheldon Wolin calls “inverted totalitarianism.” Libertarians seem to get this. It is time the left woke up.

“Bourgeois society faces a dilemma,” socialist Rosa Luxemburg writes, “either a transition to Socialism, or a return to barbarism … we face the choice: either the victory of imperialism and the decline of all culture, as in ancient Rome—annihilation, devastation, degeneration, a yawning graveyard; or the victory of Socialism—the victory of the international working class consciously assaulting imperialism and its method: war. This is the dilemma of world history, either-or; the die will be cast by the class-conscious proletariat.”

 

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Pope Francis’ Appeal for the Future

Pope Francis’ Appeal for the Future


The Right has no applause for Pope Francis’s powerful encyclical Laudato Si (See, for example, David Brooks’s June 23 column) What the pope sees and his conservative critics do not is that the world economy is in crash mode, an accelerating train hurtling down the track and ignoring all the signs that say Bridge Out Ahead.

The instinct for self-preservation is strong: but in the human species, it seems, not strong enough. Like any good preacher, Francis tries to stir hope as he calls for radical reforms – and the reforms he calls for are radical – but the shrill of despair keeps peeking out at the brim of his Jeremiad.

Pope Francis. (Photo from Casa Rosada)

At no point in this eloquent cri de coeur is the pope playing Pollyanna, but at times he seems close to Cassandra who was blessed with the knowledge of the future but cursed with the realization that no one will believe her.

The oceans with their coral treasures and rich animal life are dying of acidity and poison. The pope asks: “Who turned the wonder-world of the seas into underwater cemeteries bereft of color and life?” Arctic ice is in a death spiral and ice sheets are melting in Greenland as well as in the Himalayan-Tibetan glacier that provides water to hundreds of millions. The portents are nightmarish.

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

 

The Lesson In China: Don’t Go Bubble In the First Place

The Lesson In China: Don’t Go Bubble In the First Place

There can be no mistaking that Chinese stocks are in a bubble. Since November 21, the Shanghai SSE Composite index has risen more than 100%. Going back to July 22, the gain is nearly 145%. Those dates are not random coincidence, as they mark specific points of PBOC activity. The stock bubble in China is certainly a monetary affair, but in ways that aren’t necessarily comparable to our own stock bubble experience (twice).

There is, of course, great similarities starting with leverage; in China at the moment there is no shortage, which is precisely the problem. It is quite precarious, though, in that the PBOC has at times shown far more open contempt for Chinese stock margin than the Federal Reserve or Bank of Japan ever did.

Stock forecasters in search of an early-warning system for the next Chinese bear market are zeroing in on the country’s record $358 billion pile of margin debt.

When that three-year build-up of leveraged positions starts to unwind, regulators will struggle to limit the selloff, according to Bocom International Holdings Co. and Rabobank International. Almost all of this year’s biggest declines in the Shanghai Composite Index, including a 6.5 percent slump on May 28, were sparked by investor concerns over margin-trading restrictions. The securities regulator announced plans Friday to limit the amount brokerages can lend for stock trading.

Unlike central banks here and elsewhere, the PBOC has a vastly different understanding and appreciation for asset bubbles, at least to the point that in 2014 and 2015 under reform it is not shirking responsibility for them. The Federal Reserve, in particular, had long been against any linkage between monetarism and asset bubbles, believing instead that they were fully contained under “market” irregularities (that has evolved, somewhat, under the relatively new Yellen Doctrine). I’m not sure the PBOC ever went so far as to completely delink its own activities from asset bubbles, but it at one point was clearly embracing of them even if reluctantly part of a greater government mandate.

 

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