When Complexity Becomes Chaos

financial chaos

Modern achievements, especially in medicine and technology (fueled by cheap energy), have made the human experience longer and easier.

Yet, at the base of it all lays the irrational man, still flinging immorality from the cages of his ongoing existential dilemma.

Despite the existence of natural governors, humans are still prone to abuse of power for the sake of power alone.

Unsound money and finance are not immune. They are fuel for the fire. They play an evermore powerful role in the rationalization of this age-old abuse.

Whatever you want to call the system that makes the modern civilization go around, there are four basic sub-systems at work here:

Finance
Politics
The Media/Academia
Energy/Economy

These four areas are in a constant state of fluctuating overlap. We can separate them just enough to observe the interactions. I'm lumping energy in with what I see as the “raw economy" experienced by most people.

Finance is enormous. Way beyond anything the world has ever seen.

Finance is sector of the economy. But it is so big that it wields influence as if it were a separate entity.

Politics will always be around. It could be worse. In a real crisis, a political vacuum can lead to much worse than we see. More extremes.

For now, the political system and finance are about as enmeshed as they could be. Finance is more influential. That system runs the show.

(Did you see what former CFTC commissioner Bart Chilton decided to do this week? He joined an HFT lobby organization - full reverse. He is now playing ball for “the enemy” of the type of trading he so publicly criticized.)

Big finance creates the illusion of money and power. People bow down to the paper millionaire. Even if most are empty, having long parted with their soul.

The media is the grease that lines the conduits. It is the bread and circuses. Most people have no clue. They find it irresistible and impossible to criticize. It is nearly taboo to go toward the “fringe" and really ask tough questions.

One way to characterize the 'real' economy is to note the difference between the gross domestic and gross national product.

The key distinction is that "national" refers to activity that occurred within the borders. GDP includes all production, including that which occurs for multi-national corporations doing business overseas.

Obviously, GDP overstates production in a fundamental way and, therefore, is a case where the propaganda-fueled media overlaps, essentially ignoring a vast mirage of activity.

Yes, there are many other examples which show how academia has rendered the way we measure real economic activity a farce.

The real economy is stifled below the mass of propaganda and wealth destruction - massive capital misallocation from the socialization of risk and the emergence of two tiers of justice.

If you measure the real rate of inflation, combined with actual labor force participation, the result is a misery index. And it is beyond any historical comparison.

Real suffering. Water, water everywhere, but not enough to drink.

Can you imagine if suddenly, policy makers or politicians began referring to actual data? It's bad enough that emergency "finance" continues to go on despite the forward guidance hoopla. The confidence game would end overnight.

The rise of finance is a direct result of unsound money.

Unsound money has been the basis of monetary policy for longer than anyone alive can remember without consulting a scant few history books which dared to tell the real story - and made it past the academic filters.

Policy comes down from academia, filters through politics/government and is "trumpeted" by the cheerleading media.

Like a shark, the financial system must keep moving to stay alive. As with a Ponzi, it needs a steady supply of ready and willing suckers each step of the way.

When things slow down, liquidity tightens. Too much sludge in the system, rates rise, investors become nervous. A butterfly flaps its wings. And the largest bank is some peripheral union goes bust.

The competition for good collateral for the overnight lending is a crucial arena.

To keep people buying debt, the marionette must work overtime. Few care or notice, so long as the general direction works for the paper jockey.

The recipe for faith and calm:

  • Equities, housing go up.
  • Bond curve flat.
  • Dollar stable but not too high either.
  • Volatility must stay low.
  • Data points need to be benign.
  • Not too much "official" inflation.
  • And precious metals must be kept in check.

Throw in a renewed conflict, or a false flag, any distraction that makes it politically palatable to "do more, to justify intervention when there is no chance of protest.

Any one of the ingredients above could be lost; some more likely than others.

Any of them could create a freeze. A freeze, by definition, would create the inflection point.

Not as much a crash. An implosion. Everything stops. Accidents begin everywhere.

Force majeur could come along with a spiking VIX, a tanking DOW, falling dollar, or the bond market cracking.

A deflationary - hyperinflationary crash overnight to keep the political machine running.

Psychic pain grows deep where a hedonistic imperative churns beneath the surface.

Money for nothing and finance run amok is the promised halcyon. Hot air from the same old immorality, obsession with power that has plagued man for endless cycles.

The ancients knew the importance of expansion from a rootedness.



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