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The Demon-Haunted World

“We’ve arranged a global civilization in which most crucial elements profoundly depend on science and technology. We have also arranged things so that almost no one understands science and technology. This is a prescription for disaster. We might get away with it for a while, but sooner or later this combustible mixture of ignorance and power is going to blow up in our faces.”

  • Carl Sagan, The Demon-Haunted World: Science as a Candle in the Dark.

The White Sands Proving Ground sits in the Jornada del Muerto desert, southeast of Socorro, New Mexico. On July 16, 1945, it became the test site for the world’s first nuclear detonation. The Manhattan Project – the race to build the bomb – had started modestly enough six years earlier, but as it gained momentum would go on to employ more than 130,000 people and expend the equivalent of $26 billion in today’s money.

Among the scientists and military men in attendance, there was no consensus as to what the results might be. The physicist Norman Ramsey forecast that the bomb would fail to go off completely. Robert Oppenheimer predicted an explosive yield equivalent to 300 tons of TNT. The Ukrainian-American chemist George Kistiakowsky plumped for 1,400 tons of TNT. The German-American physicist Hans Bethe went for 8,000 tons of TNT. The Polish-born physicist Isidor Isaac Rabi chose 18,000 tons of TNT (he would win the bet).

But the Italian physicist Enrico Fermi proposed a different wager altogether. He darkly suggested two options: given that the atmosphere would ignite, would the blast destroy just the state, or would it incinerate the entire planet ?

Fermi’s prediction was not as outlandish as it sounds today. Earlier in the war, in the spring of 1942, German physicists approached Hitler’s Minister for War Production, Albert Speer, to discuss the possibility of their building a nuclear bomb…

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

Five ways to ensure that models serve society: a manifesto

Five ways to ensure that models serve society: a manifesto

Pandemic politics highlight how predictions need to be transparent and humble to invite insight, not blame.
Cartoon of scientists and policymakers inspecting the inside of a black box that is outputting a policy document

Illustration by David Parkins

The COVID-19 pandemic illustrates perfectly how the operation of science changes when questions of urgency, stakes, values and uncertainty collide — in the ‘post-normal’ regime.

Well before the coronavirus pandemic, statisticians were debating how to prevent malpractice such as p-hacking, particularly when it could influence policy1. Now, computer modelling is in the limelight, with politicians presenting their policies as dictated by ‘science’2. Yet there is no substantial aspect of this pandemic for which any researcher can currently provide precise, reliable numbers. Known unknowns include the prevalence and fatality and reproduction rates of the virus in populations. There are few estimates of the number of asymptomatic infections, and they are highly variable. We know even less about the seasonality of infections and how immunity works, not to mention the impact of social-distancing interventions in diverse, complex societies.

Mathematical models produce highly uncertain numbers that predict future infections, hospitalizations and deaths under various scenarios. Rather than using models to inform their understanding, political rivals often brandish them to support predetermined agendas. To make sure predictions do not become adjuncts to a political cause, modellers, decision makers and citizens need to establish new social norms. Modellers must not be permitted to project more certainty than their models deserve; and politicians must not be allowed to offload accountability to models of their choosing2,3.

This is important because, when used appropriately, models serve society extremely well: perhaps the best known are those used in weather forecasting. These models have been honed by testing millions of forecasts against reality.

…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…

What Will the Future Bring? Here’s How to Survive the Uncertainty

What Will the Future Bring? Here’s How to Survive the Uncertainty

We live in a very different world than we did back in January when the calendar turned to 2020 and everyone was anticipating the great things they’d accomplish in the brand new decade.

Only 3 months ago, we all had futures we imagined…

  • Kids graduating from high school or college
  • A vacation we were planning
  • A new job we were striving toward
  • Retirement so close you could practically smell the beach where you’d spend your golden years
  • The health and fitness goal you were finally going to achieve
  • A positive lifestyle change you were planning to make
  • A relocation to a new destination
  • The advancement of your relationship, whether it was a new one or one you’d been in for a while
  • A summer road trip
  • Getting a new pet
  • An empty nest and what you were going to do with that newly vacant bedroom
  • A new family member

Three months ago, we all had dreams, goals for the future, or at least some idea of what the upcoming year would hold for us.

I’ll bet none of us even considered on New Year’s Eve that we’d spend the first half (at least) of the year dealing with a deadly pandemic. Heck, I sat on a balcony in a little seaside village in Montenegro, toasting the new decade with a friend and some Jack Daniels, watching fireworks over the Adriatic Sea, and planning what European destination I’d be heading to next.

It probably never crossed anyone’s mind that there’d be some crazy new virus that nobody had ever heard of which would leave us under the equivalent of house arrest for months. Few of us imagined that suddenly, over the course of just a few weeks, more than ten million Americans would suddenly become unemployed.

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

When Certainty Frays, Capital Gets Skittish

When Certainty Frays, Capital Gets Skittish

The net result is capital is impaired in eras of uncertainty.

As we look ahead to 2019, what can we be certain of? Maybe your list is long, but mine has only one item: certainty is fraying.

Confidence in financial policies intended to eliminate recessions is fraying, confidence in political processes that are supposed to actually solve problems rather than make them worse is fraying, confidence in the objectivity of the corporate media is fraying, and confidence in society’s ability to maintain any sort of level playing field is fraying.

When certainty frays, capital gets skittish. Predicting increased volatility is an easy call in this context, as capital will not want to stick around to see how the movie ends if things start unraveling. The move out of stocks into government bonds is indicative of how capital responds to uncertainty.

The coordinated efforts of global central banks to backstop and boost markets also backstopped confidence in the banks’ monetary policies. Regardless of the long-term impact of the policies of quantitative easing and repression of interest rates, capital could count on the policies remaining in force and act accordingly.

With the Federal Reserve apparently ending the Fed Put and normalizing interest rates after a decade of near-zero rates, certainty about global central bank policies and the impacts of those policies has dissipated.

With valuations at historic highs and real estate rolling over, confidence that gains are essentially permanent is also fading. Buying at the top and holding onto the asset as it loses value is a predictable way to destroy capital, and so capital’s willingness to exit is rising, as is its preference for deep, liquid markets such as U.S. Treasury bonds, markets where big chunks of capital can be safely parked until clarity and confidence return.

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

Why buy gold now? Because I don’t know

Why buy gold now? Because I don’t know

From 2000 through 2012, the price of gold increased every year, rising from around $280 an ounce to nearly $1,700. It was an unprecedented run.

Then, in 2013, gold took a nose dive, losing over 27% of its value.

It was widely reported that the Swiss National Bank, the former bastion of monetary conservatism, lost $10 billion that year just on its gold holdings.

As you probably know, central banks hold a portion of their reserves in gold. The practice goes back to when central banks actually had to have gold on hand to trade in and out of paper money (or even trade for goods and services).

And central banks still hold reserves in gold today, even though they don’t need it to transact like they used to.

So that begs the question, did the Swiss National Bank actually lose $10 billion? It still had every ounce of gold in its vaults. And gold, after all, ismoney.

Plus, the SNB wasn’t holding gold to speculate…

Today, central banks hold gold as a hedge against fiat money. These are the guys with their fingers on the printing press… so they know exactly the effect they have on money.

And right now, banks are buying up gold hand over fist. Central banks currently hold 20% of all the gold ever mined—33,000 metric tons.

And JPMorgan Chase says they’ll buy another 650 tons this year and next.

Why?

Gold is for the I don’t knows.

And right now, there are a LOT of I don’t knows.

Markets have been going crazy over the past few months.

After a record bull run for stocks, we are now seeing massive volatility with the Dow regularly jumping 500+ points in a single day. Just yesterday, the Dow fell a whopping 800 points.

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

We are Living with Maximum Uncertainty – Catherine Austin Fitts

We are Living with Maximum Uncertainty – Catherine Austin Fitts


Financial expert Catherine Austin Fitts has said for years that the economy was not going to crash, but be on a “slow burn.” How long can they make this heavily indebted game last? Fitts says, “Our problem as investors is we don’t know. If you look at all the information we need to make an intelligent assessment, we don’t have access to that information. I have said many times this is a military question. Who has the biggest weapons and who has the ability to deliver force and control? So, we are living with maximum uncertainty. . . . Clearly, we are headed into a new currency world that’s part of a new control system, but the answer is we don’t know when. My fear with many, many commentators is they are underestimating the power and endurance of the system. I am always getting yelled at because people think I am pro-empire. I am not saying I am pro-empire or I am for the things they are doing to keep it going.”

Fits adds that things are so uncertain that “the old system could go five years or five months.”

On introducing a new dollar, Fitts says, “Even if they do introduce a dollar backed by gold, it’s going to start off with a small market share. They are very unlikely to do a big bang thing. These guys are prototypers.”

There is no doubt wealthy people around the world are buying gold. Why? Fitts says, “The reality is . . . in the worst case scenario, gold is a store of value because it is respected globally as a currency or money without the backing of a sovereign government. What is the global currency that has backing without a sovereign government, and gold and silver are one of the few.

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

Do Not Waste One More Second

Do Not Waste One More Second

Do not waste one more second of your time on this earth, for the insects are all dying, and the ice caps are vanishing, and the oceans are filling with plastic.

This could all be gone very soon, so don’t waste it. Don’t take any part of the crackling miraculousness of this cacophony for granted, because there are missiles being targeted, and there are vast battle plans being drawn. You could look outside your window tomorrow morning and see a mushroom cloud on the horizon, and you will regret letting life’s preciousness slip through your fingers.

We do not like to think about death. We say, “I will think about death some other day. Today I must busy myself with mental chatter about nonsense and the avoidance of feeling my feelings. I would love to stare into the white skull of the human condition, but my schedule is chock full of escapism.” We push death aside, and push death aside, and push death aside. And then, one day, death pushes us aside.

One way or another, the end is coming. But if you truly, deeply engage here, you can live more life in a week than most people live in an entire lifetime. By that I do not mean that you can have more experiences, I just mean that you can experience far more moments with far more depth and clarity than someone who’s just drifting through life on autopilot. One week fully and consciously appreciated contains more lived life than an entire stay in this world from cradle to grave when it is taken for granted.

And of course you will also have far more amazing experiences than someone who isn’t directly interfacing with the moment.

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

Uncertainty is the Mother of Volatility

QUESTION: Well you called this year the political year from hell. You got that one right again. Between trying to figure out the politics in the US, we have Britain in turmoil and Italy trying to figure out if they should stay or go. Hungary becoming more defiant and Sweden swinging to the right. You are the best at forecasting this sort of crazy stuff. You got BREXIT right and Trump’s victory. I can see your model looks at the economics and predicts a response that becomes political change. So what does this all mean?

KD

ANSWER: Regardless of your political persuasion be it for or against any of these political issues, the importance is really the impact upon CONFIDENCE. If you are for or against Trump, we still have one thing in common. We just want stability and some sense of the future to bank on. For example, if Trump were to go down, the impact upon the world market could be very dramatic and how we then stage ourselves to survive this type of financial chaos is critical. It is the same situation in Europe. If Italy pulls the cord to get out, the Euro cannot survive. What I hear from Behind the Curtain is that the ECB may be forced to cut its bond purchases by 50% and there are even those demanding Quantitative Easing MUST end by the end of the year. Draghi has DESTROYED the bond markets in Europe. Stopping QE will result in interest rates going up dramatically.

As I have said, Trump is the Counter-Trend or FALSE move. I fear what comes afterward be it now or in 2020.

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

Axiom of Uncertainty

Axiom of Uncertainty

It’s simple. Given that there might well be an absolute nature/structure of the universe and our perhaps fundamentally limited cognitive position/abilities within it can we be certain that we can be sure about the true nature of anything? Can there be fundamental forces, matter, and material relationships of which we will never know?

While unanswerable in principle, the mere possibility of such an epistemological situation has many consequences.

Firstly, it considerably lets out the air out of our current secular hubris.

Science and technology have given us what is perhaps a false impression of our own cognitive and technical omnipotence. While we rightly marvel at what we have achieved during the last five centuries, it does not necessarily give us the right to think that we can, even theoretically, master and understand all that there is.

Would it be so far fetched to think that the human mind, both as it is now and will be in the future, will always be limited in what it can know?

Although we cannot even judge the actual probability of such a proposition it should nevertheless give us pause while constructing brash anthropocentric scenarios which inflate our own importance within the universe.

If we stop to consider the possible theoretical implications of this axiom of uncertainty we will quickly realize that we may never know more than a part, even just a small part of existence past, present, and future.

Of course that does not mean we should stop trying to know all we can.

On the other hand, it does mean that we should be far more circumspect when offering explanations about everything whether scientific, political, or religious.

In each of these domains, we may, it might turn out, be far off the mark.

Yet, the deeper point is that according to the above axiom we can never know for sure.

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

Oil Prices Tear Higher On Middle East Tensions

Oil Prices Tear Higher On Middle East Tensions

Marcellus gas rig

Oil prices rose on Tuesday ahead of the API data report, fueled by Middle East tensions and dwindling crude output in Venezuela.

(Click to enlarge)

(Click to enlarge)

(Click to enlarge)

(Click to enlarge)

– U.S crude oil exports averaged 1.1 million barrels per day (mb/d) in 2017, twice as high as 2016. It was the second full-year since the prohibition on crude exports had been lifted.

– Canada remained the largest buyer at 29 percent of total U.S. exports. But a notable development was the emergence of China as a major buyer of U.S. crude, representing 20 percent of the total.

– Breaking it down by product type, crude oil only accounts for 18 percent of total petroleum product exports, with hydrocarbon gas liquids (HGL) and distillates each accounting for 22 percent.

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

Worst Case Scenario: What is It?

This article provides insight as to the way the Fed and all central banks think.

A worst-case scenario is a concept in risk management wherein the planner, in planning for potential disasters, considers the most severe possible outcome that can reasonably be projected to occur in a given situation.

The book Worst Case Scenario Extreme Edition provides hands-on strategies for surviving an elephant stampede, a 16-car pile-up, a mine collapse, and a nuclear attack. Discover how to take a bullet, control a runaway hot air balloon, break a gorilla’s grip, endure a Turkish prison, free a limb from a beartrap, chased by a pack of wolves, or buried alive.

Alas, the book does not cover worst case Fed scenarios brought about by Fed policies.

Insight into Central Bank Thought Processes

The following video explains the way the Fed thought in 2006 and thinks again today regarding “worst case scenarios”

Please play the video. It’s a real hoot.

The alleged “stress tests” in Europe and the US are bogus.

Currently, the ECB believes Italy will never leave the eurozone and the EU cannot break up.

The Fed does not believe they have blown another bubble.

The interesting thing is the Fed is the very purveyor of bubbles. They do not see it and never will.

The result is bubbles of increasing amplitude over time.

Fed Uncertainty Principle

Let’s do another flashback,. This time to April 3, 2008 to my article Fed Uncertainty Principle.

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

“What Happens When The Market Can No Longer Pretend”: Charting Today’s Minsky Moments Dynamics

“What Happens When The Market Can No Longer Pretend”: Charting Today’s Minsky Moments Dynamics

Back in July, Deutsche Bank’s derivative strategist Aleksandar Kocic believed he had found the moment the market broke, which he defined as a terminal dislocation between market and economic policy uncertainty: as he wrote 4 months ago, it was some time in 2012 that markets “lost their capacity to deal with uncertainty.”

It was also some time in 2012 that traders and market participants realized central banks have not only taken over the market, but have no intention of ever leaving as the alternative is a crash that wipes out 8 years of artificial “wealth effect” creation and puts the very concept of fractional reserve and central banking in jeopardy.

This intention was confirmed last week when as Kocic again wrote overnight, it became clear – once again – that Central Banks’ main agenda “is management of the risk of policy unwind” which has two different aspects, especially for those who still believe there is such as a thing as a “market.” Kocic explains:

  • On one hand, it is reassuring that Central Banks are cognizant of severity of the risk and are showing appropriate flexibility in adjusting their reaction functions to incorporate these realities.
  • On the other hand, this is less good because it does not allow the market to reposition and, thus, normalize. By soliciting feedback from the markets, Central Banks are further encouraging bad behavior making things potentially worse by postponing the resolution further into the future.

This is also the “nightmare scenario” envisioned by Eric Peters: a world in which central banks inject more and more liquidity and “stimulus”, and yet inflation does not rise, resulting in greater and greater financial inflation, i.e., asset bubbles, and a Fed chair who is confused about the “mystery” of inflation.

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

Systemic Uncertainty, Meet Fragility

Systemic Uncertainty, Meet Fragility

That’s the problem with fragility: everything looks fine on the surface until a crisis applies pressure. Then the whole rickety contraption collapses in a heap..
Life is inherently uncertain, but systems that were once considered certainties have increasingly become uncertain. Social Security is one example; recent polls reflect widespread doubts among Millennials and Gen-Xers that there will be any Social Security benefits left for them by the time they reach retirement age.
This doubt is fact-based; as the number of retirees swells, as Medicare costs soar ever higher and the number of full-time jobs paying into Social Security/ Medicare stagnates, these pay-as-you-go programs break down; Social Security is already paying out billions more than it collects from employers and employees.
Uncertainty is one thing, fragility is another. The socio-economic systems we rely on are also becoming increasingly fragile and prone to failure, for an entirely different set of reasons than those driving uncertainty.
Changing fundamentals drive uncertainty. The nation’s demographics and stagnant wages for the bottom 95% are extremely unfavorable for pay-as-you-go programs like Social Security and Medicare; their future is uncertain because the inputs and outputs are changing.
Fragility is a function of systems being thinned by cronyism, self-serving insiders, fraud, lack of transparency, lack of competition, monopolies, profiteering and a decline of quality. Systems that become too costly due to the above dynamics are hollowed out as everyone seeks some way to reduce the costs. Redundancies are stripped out, staff is slashed to the bone, senior managers with the most experience are pushed out to lower payroll costs, quality control is whacked, and inferior inputs are presented as equal to the higher quality inputs that they replace.
When these weakened systems are under pressure or face a crisis, they crumble. Shoddy materials fail, inexperienced managers make hasty, ill-informed decisions, the barebones staff is overwhelmed, equipment that wasn’t properly maintained to save money breaks down, and so on.

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

Uncertainty and the Humility of Forecasting an Unknowable Future

Uncertainty and the Humility of Forecasting an Unknowable Future

While we’re being reassured that all these grandiose promises are resting on trends that are as reliably predictable as the tides, the next easily predictable crisis will very likely reveal the trends are speculative bubbles that will predictably burst in a devastating reversion.

Certainty and uncertainty come in a variety of flavors. “Certainty” seems rather definite, but lurking beneath certainty is the more scientifically verifiable notion of probability: the probability of outcomes can be high enough to qualify as certain and low enough to qualify as unlikely.

We can’t know with perfect certainty that our neighbor hasn’t invented a death-ray and may decide to test it on us due to that simmering feud over his dog Fluffy’s antics on our yard.

But we can make an assessment of the probability of this occurring, and conclude the probability is low with a high degree of certainty.

This assessment should change, of course, if we hear strange noises in his shop and notice shrubs in his back yard are now charred in peculiarly symmetric circles–and we learn he previously worked at a national lab on high-energy weapons but was dismissed for pursuing crazy ideas about developing handheld death-ray devices, i.e. phasers. (Star Trek fans, please raise a cheer.)

This brings us to a critical distinction between low-probability events, i.e. known unknowns a.k.a. highly unlikely “long-tail” events, and unknown unknowns, a.k.a. “black swans” made famous by author Nassim Taleb.

What is a known unknown? Death qualifies as a known unknown: we know with a high degree of certainty that the vast majority of living things eventually die (even cancer cells die once their host dies)–but the timing of their individual natural death is inherently uncertain, due to the great number of inputs, variables and causal factors intrinsic to life.

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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