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Musings Report #25 6-19-15 Greece and the Opaque Process of Collapse
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For those who are new to the Musings reports: they are basically a glimpse into my notebook,the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
Greece and the Opaque Process of Collapse
When I write about the demise of unsustainable systems, readers often ask me to describe the collapse I see as inevitable.
This is a tough assignment, as there are as many kinds of collapse as there are systems: fragile ones can collapse suddenly, and resilient ones can decay for years or even decades before finally withering away.
Certain features of modern life could collapse without affecting everyday life much--for example, the derivatives markets could stop working and the impact might be enormous on those playing financial games and those who entrusted money to the financier gamblers, but the consequences would be extremely concentrated in the gambler/speculator class and widely dispersed for the economy as a whole.
Other collapses--in food distribution, electronic communications, etc.--would have immediate and severe impacts on daily life.
My three primary models of collapse are:
1. Historian David Hackett Fischer's masterwork "The Great Wave: Price Revolutions and the Rhythm of History " (given to me by longtime correspondent Cheryl A.)
2. Thomas Homer-Dixon's "The Upside of Down"
3. The decline and fall of the Roman Empire (the process, not Edward Gibbon's epic 6-volume history, though I have read the abridged one-volume version)
Fischer's primary thesis is that society and the economy expand in times of plentiful resources and credit, and this increased demand eventually consumes all available resources. When demand exceeds supply and excesses of credit reach extremes, shortages, inflation and social disorder arise together.
Though we have yet to see inflation on a global scale, it is inescapable that demand will soon outstrip supply of essential resources and that the global credit bubble will pop, depriving the economy of the means to buy resources regardless of cost.
"The Upside of Down" describes the process of increasing complexity adding fixed costs to the system, and the way in which this diminishes returns: more and more labor, capital and resources must be devoted to maintain production. At some point, the yield is negative--costs are higher than the output.
At that point, systems start unraveling, and people simply abandon costly complex systems because the means to support them no are no longer readily available.
This is similar to John Michael Greer's process of "catabolic collapse," in which costly complex systems go through a re-set to a much lower level of energy consumption and complexity. The system stabilizes at that level for a time, and then as costs rise and resources dwindle, it goes through another downsizing.
The Roman Empire (along with the Tang Dynasty in China) is the premier historical template for slow decline/decay leading to an eventual collapse. Depending on how you slice it, Rome's Imperial decline took a few hundred years to play out. Unusually competent and energetic leaders arose at critical junctures in the early stages, and these leaders managed to stem the encroachment of other empires and "barbarian" forces and effectively make best use of Rome's dwindling resources.
By the end, Rome was still issuing a flood of edicts to the various regions, but there was no one left to follow the edicts or enforce them: the Roman legions existed only on parchment. The legion had a name and a structure, but there were no longer any soldiers in the field.
Greece is an interesting example of decline/collapse that is playing out in real time. Greece demonstrates the opacity of the process of collapse; it is not as clear as we might imagine.
We have conflicting reports out of Greece that demonstrate the swirling narratives and forces of decline and collapse: on the one hand, we read that medicines are unavailable, pensions have been slashed and many households are now below the EU poverty level in income.
But we also hear that the cafes in Athen are crowded, discounts are available everywhere if you're paying in cash, and that life not only goes on but is even pretty good in areas with income from tourists.
How do we reconcile these conflicting reports of everyday life? Clearly, the Greek economy has contracted, and millions of households have less income than they did before. But has daily life broken down? Have the institutions of public order collapsed? Not yet.
What is collapsing is public trust in those institutions' ability and willingness to manage the financial crisis and the political disorder that follows.
One primary reason for this loss of faith is that there is no good solution to the multiple crises in Greece. Equally obvious is the small circle of financial and political elites that benefited from Greece's entry into the Eurozone remains largely untouched by the crisis. When the status quo is rigid and unbending, the odds of sudden collapse rise: what doesn't bend will snap.
The process of collapse is thus heavily dependent on how the financial and political elites respond to the decline of resources and credit. If they manage the contraction skillfully and absorb their share of the inevitable losses, then the re-set will likely be successful and the pain short-lived.
If however the ruling elites cling to every scrap of their power and wealth, and begin fighting over the spoils while forcing the underclasses to absorb the losses of the re-set, the fragility of the system rises in direct proportion to the policy extremes being pursued by vested interests.
Summary of the Blog This Past Week
Future Shock and the Greening of America 6/19/15
Diversify Your Portfolio with Informal Credit 6/18/15
Financial Predators and Parasites Want to Live, Regardless of the Cost 6/17/15
What's the Real Unemployment Rate in the U.S.? 6/16/15
Our Phantom Economy 6/15/15
Best Thing That Happened To Me This Week
Harvested and stir-fried the first scarlet-runner green beans of the summer--great!
Market Musings: Apparent Stability and Risk
I have often commented on the links between risk and volatility, as the manufactured stability we see in markets today appears to reflect systemic stability while it actively heightens risk and volatility.
We know something is fishy when market sentiment hits extremes of fear every time the SPX declines an exceedingly trivial 1%.
Meanwhile, the divergence between declining MACD and the rising wedge of price continues to widen. Big declines occur when MACD drops below the neutral line, and the MACD has been descending in a series of lower lows and lower highs for most of 2015.
Price has lofted higher within an ascending wedge, a bearish pattern. Recently SPX broke down through the lower line of this wedge, and the recent manic pop back up is kissing the lower boundary as resistance rather than as support.
This is precisely what we'd expect as a long Bull market loses its vitality--rising wedges broken to the downside, weakening MACD and ADX, and former lines of support becoming resistance as the market slowly breaks down.
When will the SPX finally snap? Many punters feel it will never decline more than a few percentage points, as central bankers are now so wedded to a rising market. Lacking a driver for a new extended uptrend, MACD is suggesting the top is in and a summer of chopping around is upon us, as the Powers That Be struggle to keep the market aloft while internal distribution saps the pool of Greater Fools who have been supporting the uptrend.
From Left Field
The Drug That Bankrolled Some of America's Great Dynasties -- and the British Crown, too...
The Likely Cause of Addiction Has Been Discovered, and It Is Not What You Think -- the power of social bonds...
Dirty Jobs Star Delivers Devastating Rebuke about America’s Work Ethic -- nobody wants low-paying dirty work, even when it could lead to high-paying dirty work...
All Possible Humanities Dissertations Considered as Single Tweets -- much easier to read than the original turgid texts...
Measuring the Anthropocene -- is there a measurable human imprint in the geologic record that warrants revising the geologic timeline?
The Sweatshop Feminists: Global elites have appropriated feminist language to justify brutal exploitation and neoliberal development.
Reviving the Lost Art of Fixing: low-cost producers deliver poor-quality products on purpose. They can be neither opened nor repaired,
The American middle class isn’t coming back — it’s going to die with the Baby Boomers -- I find myself agreeing with this thesis....
How Your Brain Can Turn Anxiety into Calmness (video from UCSF medical school)
Why Technology Hasn’t Delivered More Democracy New technologies offer important tools for empowerment — yet democracy is stagnating. What’s up? (via Lew G.)
How To Make Custom Crackers From Your Favorite Ingredients (7:49)
In Norway, where college is free, children of uneducated parents still don’t go -- interesting how this works...
Transmission Line Upgrades Could Unlock The ‘Saudi Arabia’ of Wind -- lots of turbines already in place...
"To give anything less than your best, is to sacrifice the gift." Steve Prefontaine
Thanks for reading--
charles |
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