"....I thought sympathetically of nature's having to make all those myriad frustrated decisions each time she made a bubble. I didn't see how she managed to formulate the wake of every ship while managing the rest of the universe if she had to make all those decisions. So I said to myself, "I don't think nature uses π. I think she has some other mathematical way of coordinating her undertakings."
—R. Buckminster Fuller, Your Private Sky
About 15 years ago I was lucky enough to see a one man play - a monologue portraying the life of R. Buckminster Fuller, the anti-establishment dreamer-mad genius most famous for geodesic domes.
What I remember was his realization that structural stability in nature could not be easily calculated using the mathematics of the time. Essentially, he was able to describe the natural stability of spheres using the geometry of triangles.
Later, his structural theories led to the discoveries elsewhere in the structure of spherical formations.
Buckminsterfullerene is the most common naturally occurring fullerene molecule, as it can be found in small quantities in soot. Solid and gaseous forms of the molecule have been detected in deep space.
And over the past weekend, it all came rushing back to me.
Of all the stages of child development, my young son now has the lung capacity required to inflate a decent-sized party balloon. What at first seemed like a harmless discovery quickly transformed into an absurd test of the limits of my comfort and patience. Ultimately, we all got a good lesson out of it.
Expanding at least two balloons beyond capacity to the point of explosion made a significant impression on everyone in the immediate area.
The force (and his surprise) of the explosion, served as an epiphany that mmediately had me pondering the financial bubbles we are witnessing today.
We must realize that financial or asset bubbles are not supported by the pillars necessary to transmit stability over a significant period of time.
Financial asset bubbles primarily portray the miracle that they can go on as long as they can or that they could somehow be expanded forever. The instigators believe there is no danger of bursting – only a child-like fear of deflation.
Fanstastic theorums suggest that these behavioral bubbles are supported by some tensile or tensegritive strength (within and without). Of course they are far from that.
One glaring example is the nature of how debt is now being serviced by more debt. Empty promises upon empty promises do not result in trust or stability.
These bubbles were constructed unnaturally - as a reaction to economic crisis. In fact, from a long series of financial rigging that goes back to the formation of the current central bank in the wake of the JPM-rescued panic of 1907.
Now it's simply become extreme. To wit:
$3.6 trillion in global debt is trading at negative yields, and why much more sovereign debt will very soon also reside in the terminal twilight zone of interest-bearing securities.
For The First Time Ever, Central Banks Will Monetize More Than 100% of Global Sovereign Debt
“Over the past two years we explained how in a time of ubiquitous central bank debt monetization, the amount of global sovereign bonds available for purchase - when taking into account CB purchases - has been declining at an ever faster pace, leading to a collapse in liquidity (something the TBAC warned about in the summer of 2013, leading to the Fed's taper and subsequent temporary halt of QE3), and - naturally - to soaring bond prices (and plunging yields). The latter has reached epic proportions recently, and resulted in $3.6 trillion in global government debt, 16% of total, that is now trading at negative yields.
But not even we had any idea just how bad it really would get. In other words, for the first time ever, "developed" central banks are now monetizing more than 100% of global sovereign debt issuance!"
And the debt bubble is simply the flip side of the currency bubble, because by definition all world currencies are based on debt. Therefore, it is necessary to insulate oneself however you can, no matter how elegant the solution.
It is literally a miracle that this multi-tiered financial bubble hasn't blown up yet. Although the form is inherently stable, the surface is not fragile.
What makes the system fragile?
Derivatives, demographics, and the lack of redundancy and concentration of deposits (liquidity) guarantee that the whole complex will burst with a pop heard around the world.
These financially-driven bubbles we face today are inherently unstable.It is only a matter of time before the sounding occurs.