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Musings Report #3 1-16-16 How Systems Break: First They Slow Down
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How Systems Break: First They Slow Down
As longtime readers know, trying to understand our current situation in terms of systems is in my view the most insightful way to analyze complex modern life, and to project how and when unsustainable systems will finally unravel.
The unspeakable reality is that virtually all the primary financial systems we believe are permanent and indestructible are actually on borrowed time. One way we can judge this decline of resilience is to look at how long it takes systems to recover when they are stressed, and to what degree they bounce back to previous levels.
A compelling article on this topic is well worth reading:
Nature's Warning Signal: Complex systems like ecological food webs, the brain, and the climate all give off a characteristic signal when disaster is around the corner.
"The signal, a phenomenon called “critical slowing down,” is a lengthening of the time that a system takes to recover from small disturbances, such as a disease that reduces the minnow population, in the vicinity of a critical transition. It occurs because a system’s internal stabilizing forces—whatever they might be—become weaker near the point at which they suddenly propel the system toward a different state."
Recent email exchanges with correspondent Bart D. (Australia) clued me into the Darwinian structure of this critical slowing down and loss of snap-back (what we might call a loss of resilience).
Dominant systems do not operate in a vacuum; beneath the surface dominance of one system are many other systems that are suppressed by the dominant system.
As the dominant system weakens/slows down, these largely invisible systems can expand to occupy more of the ecosystem. An example in the financial realm is barter: in a system dominated by central bank/state issued money and digital transactions, barter still exists but on a very modest scale.
When central bank/state money loses its value and utility (due to hyper-inflation, etc.), then barter expands rapidly to fill the vacuum left by the demise of the dominant system.
The ecosystem example illustrates is how critical transitions occur: as the dominant system slows down, other systems fill the spaces that are opened up by the weakness of the dominant arrangement. At some point, the balance or equilibrium of the ecosystem is disrupted and a new balance of other dynamics become dominant.
In human systems, this process can be at least partially conscious: we can see the dominant paradigm weakening, and start developing other systems that can compete for the openings in the financial/social ecosystem.
Alternatively, we can cling to a state of denial, and the dominant system will be replaced by archetypal systems that are not necessarily positive. I opt for conscious development of alternatives that can compete transparently for dominance as the status quo slows, weakens and is replaced by more resilient, sustainable systems.
Summary of the Blog This Past Week
Could China's Housing Bubble Bring Down the Global Economy? 1/14/16
Can We See a Bubble If We're Inside the Bubble? 1/13/16
Are We Entering an Earnings/Sales Recession? 1/12/16
The China Syndrome: The Coming Global Financial Meltdown 1/11/16
Best Thing That Happened To Me This Week
Hard to pick this week; breakfast at Zippy's with G.F.B., family meal with ahi-limu poke, fried ahi (tuna), homemade mango chutney and vindaloo, and a homemade peach pie.
Market Musings: The Bipolar Market
The past few months have been characterized by major downdrafts and manic post-crash rallies. It's as if the market is increasingly bipolar, swinging from euphoria to depression every few days.
If we assume participants actually influence the market (as opposed to a market in thrall to central banks, Plunge Protection Teams, etc.), we would describe this bipolar behavior as evidence the market can't decide if the U.S. economy is OK and all is well, or if the global recession will impact U.S. corporate profits, lending and sales.
If we assume a handful of central bankers control the market, we have to wonder if they lost control (hence the sharp declines), or if these panic-fear episodes are as planned as rallies.
If the market were completely within the control of a clique, why would they engineer sharp declines, and fail to push the markets to new confidence-restoring highs on the rebound?
Perhaps what we're witnessing is a market that has lost its risk appetite, and the best the clique at the top can manage is controlled declines and retraces that generate a semblance of bullish vigor, lest the bid disappear entirely as everyone hits the sell button.
It's important to note that the only safe position is cash--to not play the market at all. Catching the bipolar swings is not as easy as it seems in hindsight; those who exit early and stay out have the lowest level of risk going forward.
From Left Field
Why Firms Are Fleeing the US -- to escape taxes
I've given up on fixing the economy. The economy is not broken. It's simply unjust. There's a difference.
Bernie Sanders’ well-meaning calls to rein in the banking industry by restoring the Federal Reserve’s function as a "regulatory agency" reveals the Left’s inability to grasp the true causes for today’s financial woes. We are not witnessing capitalism gone wrong -- an otherwise egalitarian currency system has not been corrupted by greedy bankers -- but, rather, capitalism doing exactly what it was programmed to do from the beginning. To fix it, we would have to dig down to its most fundamental code, and rewrite it to serve people instead of power.
Apploitation in a city of instaserfs: How the “sharing economy” has turned San Francisco into a dystopia for the working class
The Truth About Finance: Finance and global capitalism are inseparable.
Throwing Rocks at the Google Bus - figuratively speaking...
How do people or companies with vested interests spread ignorance and obfuscate knowledge? Georgina Kenyon finds there is a term which defines this phenomenon.
It comes from agnosis, the neoclassical Greek word for ignorance or ‘not knowing’, and ontology, the branch of metaphysics which deals with the nature of being. Agnotology is the study of wilful acts to spread confusion and deceit, usually to sell a product or win favour.
More Big Ship Deliveries Set to Boost Overcapacity (via Joel M.)
Sources of Growth Examined and Found Entirely Lacking -- solid analysis...
I'm sorry, I can't face being a doctor any more --UK doc...
The Next Great Famine: Seven hundred years ago this month, people across northern Europe saw a comet in the sky and feared the worst. They were already running out of food. It had rained too much in 1315—sometimes every day for weeks at a stretch.
Doctors Unionize to Resist the Medical Machine (via Joel M.)
Even Insured Can Face Crushing Medical Debt, Study Finds (via Joel M.)
Stunning Photos From China's Creepiest Modern Ghost Town -- these ruins will become tourist attractions--eventually...
"If you have no confidence in self, you are twice defeated in the race of life. With confidence, you have won even before you have started." Cicero
Thanks for reading--
charles |
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