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Just How Ugly Is The Sovereign Default Truth? How Self Delusions Prevent Recognition Of Reality
- AIG
- Alistair Darling
- American International Group
- Belgium
- Ben Bernanke
- Black Swan
- Bond
- Budget Deficit
- Central Banks
- default
- Dylan Grice
- ETC
- Eurozone
- Failed Auction
- Fannie Mae
- Federal Reserve
- Freddie Mac
- Gambling
- Greece
- Gross Domestic Product
- Housing Bubble
- Ireland
- Italy
- Japan
- Monetary Policy
- NASDAQ
- Nominal GDP
- Norway
- Portugal
- Reality
- Reserve Currency
- Sovereign Debt
- Sovereign Default
- Switzerland
- Tax Revenue
- United Kingdom
When psychologists evaluate human behavior, one of the most prevalent observations regarding any activity is the all too often flawed basis of perceived versus realistic outcomes that dictates our every action. As imperfect creatures, we tend to construct theories that conform with our worldview, which are subsequently reinforced by our confidence (or lack thereof) in the future. This is true in any discipline: finance, politics, gambling, mating, etc. There is hardly a better example of this than the very basis of modern economic theory where assumptions about the validity of fiat currencies determine the actions of central banks, which in turn spill over into every aspect of modern society. Yet what if the very basis of core assumptions is wrong? What if every activity exhibited by humans in the post gold-standard world has a flawed assumption at its core? Austrian economists have, of course, claimed this for ages, usually seeing their efforts conclude with a dead-end as the attempt to change the status quo hits the brick wall of quadrillions of (arguably worthless) pieces of paper which dictate the status quo. However, with the recent turn for the worse, courtesy of sovereign bail outs (as confused as they may be) could the day of reckoning be fast approaching? With each passing the day an affirmative answer seems closer at hand. Today SocGen's Dylan Grice shares his perspectives on popular delusions, and why these may soon be coming to an abrupt end.
Dylan begins:
Behavioural psychology applies to central bankers, regulators and politicians as much as it does to investors. In promising to ‘fiscally retrench tomorrow’, finance ministers are exhibiting the behavioural phenomenon of overconfidence in their future self-control. The bitter fiscal medicine required to stabilise debt levels won’t become more palatable today relative to tomorrow until the bond market makes it so. It can only do this through higher yields. Thus, Ireland and perhaps now Greece lead the way. For the Japanese it’s too late.
Why should behavioural psychology be seen as something applying only to investors? "Behavioural" finance is a well defined sub-discipline in its own right. But where is ?behavioural? politics, ?behavioural? central banking, or "behavioural" regulation? Remember the Fed policy statements around the end of the 1990s? The ones that kept referring to the "technology-enhanced" rate of GDP growth? Wasn?t this herding around a bad idea the very same herding then fuelling the NASDAQ bubble?
Nowhere is self delusion more prevalent that in the workings of the Federal Reserve duo of Greenspan and Bernanke. The issue is that any weakness, or any affirmation of faulty policy by the head money printer, will immediately be seen as weakness that could destabilize the reserve currency format. For a monetary system based on flawed assumptions that would be the beginning of the end.
As the housing bubble inflated, Bernanke in a quite staggering display of logical sloppiness, concluded that the risk of a housing collapse in the future was small because there had never been one in the past ? Weren't they then guilty of "framing" their analysis in a way guaranteed to preclude an uncomfortable conclusion? If you don't expect to see something, you're less likely to see it. Similarly cringe worthy logic was used when sub-prime rolled over, and Bernanke concluded that there was no risk of contagion to the rest of the economy because... er... there had been no contagion to the rest of the economy yet... wasn't this textbook "recency bias" whereby the importance of recent events is over-weighted?
It probably was, and it probably demonstrates that central bankers are as prone to be as systematically silly as the rest of us. Indeed, just last year a study by yet more of Bernanke's "best and brightest" concluded that “monetary policy was not a primary factor in the housing bubble”. I don?t want to pretend I?m any kind of behavioural expert, but isn't this the well documented "attribution bias" by which people attribute positive outcomes to themselves, but negative ones to others?
So with nobody willing to take blame for the massive errors of the past 3 decades, and what's worse, nobody attempting to place the blame, we happily plough along as if nothing has changed.
So here we are today, with regulators rounding on investment banks, hedge funds and tax havens, apparently in denial of the reality that the problem was not the regulations but the regulators. After all, heavily regulated institutions like Fannie Mae and Freddie Mac were at the epicentre of the crisis (as was AIG, whose financial services business model was the facilitation of "regulatory arbitrage" around Basle capital requirements). Not that it makes any difference. The regulators are merely bowing to pressure applied by politicians whose understanding today is as flawed as Gordon Brown's was in the Mansion House back then. If this sounds like a rant then I apologise - it isn't meant to be one. We're all fallible and policy making is an impossible job. But that means policy mistakes are inevitable, and I believe we?re seeing one right now.
Before we get into the gist of Dylan's analysis, we present his example which brings the self-delusion bias down to the individual level.
Oscar Wilde said he could resist anything but temptation. But doing something you know you shouldn't is easier if you can convince yourself that this will be the last time you indulge, that you won't do it again. So we convince ourselves that since we'll be strong in the future, we can still indulge today. Whether it?s smoking, eating too much or going to the pub instead of the gym, we delude ourselves into thinking that we will take the more difficult path next time.
A few years ago, two economists actually looked at the issue using gym membership data. They found that in a club in which non-members could pay a no-strings fee of $10 per visit, people preferred to pay the $70 per month for unlimited access. And since members only attended 4.3 times a month on average, they ended up paying an average $17 per visit. The authors concluded this to be clear evidence of "overconfidence about future self control."
Investors understand the affliction all too well: a stock trades at £10 and we tell ourselves that we?re buyers at £8. But how many of us buy when it gets to £8? Some of us do, but most of us don't. Most of us (I can?t be the only one!) convince ourselves that it's going lower still: “I’ll buy at £7” becomes “I’ll buy at £6” and by the time it's back at £8 we're “waiting for a pullback” Each investor has their own way of circumventing this problem. But at root, such poor decision-making is a consequence of our fundamental underestimation today of the discipline and even courage we will require in the future.
The delusion problem becomes exponentially more complex when one adds in the concept of dependence and addiction, not so much to a substance, but to an idea.
Last weekend, the G7 "committed" itself to the path of further stimulus. As politicians are wont to do, they presented it as though it was somehow a difficult decision: "the position for most countries is to support the economies now, and get the budget deficit down as the economy recovers." said the UK's Chancellor, Alistair Darling, nodding earnestly. Am I the only one who heard a heroin addict steadfastly committing to his next fix?!
Well, it got me thinking about how much governments need to retrench to stabilise existing debt to GDP levels. And although I consider myself fortunate enough to have forgotten most of the economics I learned at university, one lesson which was useful, or in any case has stuck with me, is of the arithmetic behind government debt sustainability.
And when we begin to actually dissect numbers, as opposed to demagogic propaganda, is when we get into the meat of the problem.
There are lots of books containing lots of equations outlining lots of limits and theorems about the dynamics of government debt sustainability, but the basic intuition is that if I'm a finance minister mulling out how much money I should be borrowing, I want my GDP growth (and therefore my tax revenue growth) to pay the coupons on any debt I take on today. If the GDP growth rate equals that interest rate, the incremental revenue flowing into my coffers thanks to the incrementally higher level of GDP covers my coupon payments. I don't need to borrow any more money and my debt ratios are stable. But if the interest rate is higher than GDP growth, my incremental tax revenue won't cover interest payments. I'll be in deficit and I'll have to issue more debt to plug the gap and my debt ratio will rise. The only way I can prevent further debt growth is by running a primary budget surplus (i.e. a surplus excluding interest payments).
There are nuances and qualifications to this arithmetic, and limitations too, but in essence the fault line between sustainable and unsustainable debt dynamics can be summarised as: maintaining a stable debt to GDP ratio requires governments to run a primary balance proportionate to the difference between interest rates and GDP growth.
How does all this translate into quantifiable observations:
Before seeing how our governments compare, two qualifications are necessary. Firstly, the European estimates are distorted by the recent "convergence" within the eurozone which allowed periphery economies temporarily higher GDP growth rates and lower interest rates. This makes on-balance sheet debt loads appear more stable for those economies than they actually are. Secondly, the calculations show only those surpluses required to stabilise the debt loads which are on-balance sheet. And it's important to be clear about this. According to Gokhale, most government indebtedness is in the form of unfunded pension and health liabilities, which are unrecorded and effectively off-balance sheet (see chart below). I'll come back to these shortly.
But sticking with the on-balance sheet debt for now, the calculations shown in the following chart (over the page) use the equation in the footnote at the bottom of page 2 and give a decent first stab of who needs to do what.
The countries on the right are in the fortunate position of paying a rate of interest which is below their GDP growth rate. Provided interest rates don?t change from these (historically very low) levels, they can run deficits without increasing on-balance sheet debt. The US, the UK and Switzerland both currently fall into that category. Japan doesn't. With bond yields at around 1.5%, "trend" nominal GDP slightly negative, and on-balance sheet debt to GDP at around 200%, it should be aiming for a primary surplus of 3.3% in order to stabilise its ratio.
Now look at the next chart which shows the primary balances governments have actually achieved. I was surprised to find Belgium and Italy running such aggressive primary surpluses, but this is consistent with the broadly stable debt ratios those countries have seen recently. The US, the UK and Japan especially have been running pronounced primary deficits.
If we add both charts together we can compare the primary balances governments should be running with those which they're actually running, to get a better feel for the difficulty governments are going to have to face up to in order to merely stabilise their on-balance sheet debt ratios. The next chart does this. Those on the left have been running budget balances consistent with falling on-balance sheet debt to GDP ratios, while those on the right haven't. The US, the UK, Greece, Portugal and Norway (?) all fall into this latter category.
Eyeballing this chart, one might think governments "only" need a 3% underlying contraction of fiscal policy in order to right the ship. Wouldn't doing that over a number of years be plausible? Perhaps, but I can't find any examples of it having happened before. And while that doesn?t make it impossible it does illustrate both the political difficulty of following such a path, and the behavioural biases present in politicians? confidence that they will - if it is difficult to summon the political courage today, why will it be easier tomorrow?
And here is the crux: the black swan will be not so much a totally failed auction - we are confident the Federal Reserve will never let that be the precipitating factor for the next crisis. All that is needed is for interest rates to start going up. That's it. How much longer can money be printed out of thin air so that we can all buy each other's debt and prolong the fiat fallacy for another day or two?
But consider this: all countries, and especially those to the right in the chart, are enjoying exceptionally favourable financing positions, with government bond yields near unprecedented lows. Should anything push bond yields higher, even by just a percentage point, the onbalance sheet debt situation will become explosive. This is the situation in Japan where the 8% contraction required to rein in its already explosive debt ratio is politically impossible. And again, remember that the estimated 8% required contraction assumes the Japanese government can continue to fund itself at a 1.4% JGB yield, which is clearly unrealistic.
If the on-balance sheet position today looks dicey for the rest of us, the off-balance sheet numbers are far more worrying. The following chart shows Gokhale's estimates of the perpetuity surpluses governments would have to run to meet the current outstanding obligations which are both on- and off-balance sheet. The chart speaks for itself. Such fiscal deflation is clearly a political impossibility.
Apparently heroin addicts can become so drug dependent their bodies cannot withstand the shock of withdrawal, and failure to continue taking the drug triggers multiple organ failures. I just wonder how apt that analogy is to our governments? debt dependency today. As long as governments think that taking these difficult decisions to end the addiction will be easier in the future than it is today, they will never take the decision "today." At the very least, there will have to be a sufficiently large bond market "event" to force the issue.
Today we finally saw a crack in the 30 Year Auction. And as the crack belongs to an ever more brittle wall holding back trillions in debt just begging to be revalued to fair value, and to an unmanipulated supply and demand curve, more and more fissures in the smooth and fake facade of sovereign debt will soon appear, only this time not somewhere out of sight and out of mind like Greece, but in our own back yard. At that point the financial oligarchy will very much wish the Methadone had been administered sooner (roughly about March 2009, when we first suggested it). It will however be far too late, and the decades of self delusion will finally end.
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I just visited the web site and will spend some time this weekend reading. Thank you.
In Jung's defense, and by his own admission, he decided to stay within the established framework of society and to push consistently at the boundaries. The sum total of his work is astounding but he most definitely made compromises so as not to be branded a heretic. He admitted that this was the cowards way out, the softer easier way to be the maverick.
Some of Jung's last work shows us where he really wanted to go and it looks like Nehrer might be there as well. I'll know more when I read. Thank you.
Great work you have done by sharing them to all.
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Cognitive Dissonance,
If you find Carl Jung intersting, may I suggest
http://nehrer.net/
I'm quite sure you've never heard of him but Jung pales in comparison.
Thanks for a nice share you have given to us with such an large collection of information.
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Enjoy your posts immensley.
put any two intelligent sentences together and u get junked. Some dippydoo is junking the best posters! Whats up with that? Religious bias or what?
You are an imperfect being, created by an imperfect being. Finding your weakness is only a matter of time.
Great Article TD
The chart shows right there that social spending austerity measures won't do crap, and will have to continue having bigger and deeper cuts that in the end, save nothing.
What pushed us to these limits, of course, wars, bailouts, tax cuts, etc. Easy money has been the world's drug for decades. But not all countries had wars, but they did have easy money.
It is now cracking everything. As the charts show, it'll consistently require more and more to pay off.
All given the assumption of relatively cheap money going forward. Ouch when it isn't so cheap.
productive capacity embedded in worldwide GDP is massively overstated made all the more crippling by wage labor arb
Blaming tax cuts in our massively taxed society is nuts. Up until 1913, the US ran surpluses most of the time while collecting very little in the way of taxes. Since then, the federal govt has taken every dollar collected in taxes and spent $1.50 in return.
Hey fellow ZH'rs here is information on the most annoying SPAMMER there ever was, tired of him SPAMMING us on ZH?
Let's all return the favor.
iamned.com
http://www.youtube.com/watch?v=thJr-jDPwNE
Cetin Hakimoglu
2930 garber street
Berkeley, CA. 94705
Phone: 510-843-1013
Facebook http://www.facebook.com/profile.php?id=1177779152&ref=fs#!/profile.php?v=wall&ref=fs&id=1177779152
That is one seriously ugly troll.
It figures that he would be in Berkeley with all the other mental midgets.
Cetin the Cretin. Treat with Iocaine.
You're quickly becoming the most annoying spammer.
I figured out Marla's absence! I can just picture her wandering around Berkley with foam coming out of her mouth and a baseball bat clenched in her fists...
financial info from Berkeley...please...these are the folks that once considered changing Christopher Columbus holiday to a holiday to honor indigenous people but said they wouldn't change it because Italians would be offended...maybe if the guy had a site on over-processing techniques, it would be in the locales area of expertise..
I know already, this will be my print and read for tonight before I go to sleep.
Thanks TD.
printing and reading...how quaint
"overconfidence about future self control."
YES terrific article!
Nice. I often get caught up in a chicken and egg conundrum when I think about debt, the great decline, and peak oil. If the exponential function is a killer when it comes to debt, it's a mass murderer when applied to energy
I think the european version of the WSJ had an article today on peak oil. But not in the US curiously. I caught this comment to it on the oildrum:
"Whenever I suggest to people that there are limits to growth, I point out to them that, if 3% annual GDP growth requires a 2% annual increase in energy usage, that means that in a thousand years, we would require almost 400,000,000 times as much energy as we do now. I'm tempted to say that anyone who believes that such a thing is remotely possible cannot be considered a rational adult. However, as Prof. Bartlett has pointed out, "the greatest shortcoming of the human race is our inability to understand the exponential function." And even if one can get people to understand that there are, indeed, limits to growth, many of them will not care unless there's a good chance that the world will run up against those limits in their own lifetimes.
It is particularly difficult to get neoclassical economists to understand that energy could be a limit to growth because, in the model of economic growth to which they subscribe, energy consumption is not a driver of growth, but rather a result of growth. Subscribing as they do to such a model, to suggest that a 3% annual GDP growth rate might absolutely require some measure of growth in energy consumption would simply make no sense to them."
Whenever I see Bartlett's quote, I immediately reply that humanity's greatest shortcoming is residual predatory behavior that manifests itself in both psychopathic criminals and government officials.
ZH space monkeys certainly understand the exponential function and try to warn others. However, bankers & politicians, who also clearly understand the same limits, use this knowledge not to help, but to enslave the masses with their cheap promises of easy wealth & riches if they would only 'sign on the dotted line' or 'vote for X'.
Nice sythesis.
Our monkey impulses will be our undoing. But not before we manage to change the planet. That people don't have clean air and clean water right now never enters into their thinking. Even a lack of food will just make them angry, it won't change how they think about resources.
We've been trained by 8,000 years of growth. You don't unlearn that lesson in a generation.
Unless everyone dies, that is. Then yeah, maybe the survivors will have learned something. Maybe not, though. We're really thick-headed as a species.
cougar
Change the planet?
100 billion people couldn't change this or any other planet.
When the planet has had enough, it will just kick them all out.
A volley of a few nuclear bombs will change the planet real quick. Of course we change the planet.
Even the whole of the nuclear arsenal will induce a nuclear winter for perhaps 30-40 years in the temperate zone, you get some real interesting mutations here and there due to the high background radiation, the great die-off that seems to mark humanity's contribution to the Holocene wraps up, and human civilization gets reduced to about c. 600 BC or thereabouts for a while. Within a century, save for a few isolated patches here and there, much of the planet will be covered in jungle or forest or savannah that was repressed by human civilization.
Within a millenium, with no human-induced heating taking place, the overall dominant cooling trend of the sun during its current phase will re-manifest, and glaciers will begin pushing southward again, doing far more immediate damage to the forests than humans ever could. When the sun shifts into its next warming phase and the glaciers retreat again, it will be almost impossible to tell that we'd actually been there, save for some odd routings of rivers and a few unnatural islands here and there.
Nah, the earth will survive just fine without us.
That sounds like change to me :) I find that post-nuclear scenario strangely comforting.
The Svalbard Global Seed Vault, or the Doomsday Vault
http://www.croptrust.org/main/arctic.php?itemid=211
the planet will survive just fine, all our civilizations will be a subduction zone eventually, its our survival that is jeopardy
The fact that Nature is so incredibly resilient keeps me optimistic. However don't fool yourself that a single species can't have a substantial impact on an ecosystem. Look at the effect of invasive species have on domestic flora and fauna. I work in the sub-arctic where the snow goose population is changing the lush coastal marshes into barren mudflats. The effect of which will last for decades. Overall, in the big picture, yah you're right. The planet will do just fine.
Peak oil and the implications don't worry as much as this debt load.
There was a guy, I think hundreds of years ago, who predicted that, at the time, current capacity and population growth, the Earth would be unable to sustain human life. We would not be able to farm enough food to feed ourselves. He predicted that in a very short time period, we were doomed. What he did not see was the ability of technology to extract more from less. I wish my memory was better.
We will go farther with less. Oil depletion will not be a problem for more years than we can imagine.
Debt and debt service is coming to a head right now. Democracies don't work. Technology is eliminating jobs. Education is lacking. We are in the ebb of our society, but if we are strong enough, we will do what is necessary to fix it.
[but if we are strong enough]
Strong how? Militarily? Economically? Let me provide a short list of attributes that would be required for us to be strong:
1) Willingness to work hard for uncertain long term universal gains while suffering immediate short term personal discomforts and losses.
2) Deep understanding of the implications of human history;
3) Profound and abiding appreciation for the quality of all life in all its forms;
4) Everyone either a biologist, a teacher, a healer, or an engineer, or better still 2 out of 4.
That should be enough of a list. The point is we won't be signing up even for that limited list.
cougar
I was thinking more like bankruptcy, void any and all defined pension plans, make them illegal going forward, cut programs, cut military spending, cut taxes, balanced budget act, put McCain's special interest lobbying bill back on the table, make true financial reform measures that do away with derivatives and other non-regulated hokum, let Fanny and Freddy fail, audit the Fed. That's my off-the-top-of-my-head list, but your list is good too.
No no, our lists are the same.
Mine was traits.
Yours was deeds.
They are handmaidens, each to the other.
cougar
Believe it or not, it is possible to have a fully funded pension plan with reasonable assumptions about future returns etc. Should those companies which responsibly funded their pensions be penalized for the irresponsibility of others?
"There was a guy, I think hundreds of years ago, who predicted that, at the time, current capacity and population growth, the Earth would be unable to sustain human life"
There was also a guy sixty years ago who predicted we would run out of oil about now and told us we better prepare for it. Instead, we built our entire society on it, prepared for nothing, and denied its reality. Peak Oil and debt are not only inseperable, they exacerbate each other. Technology is nifty but it can not trump math. We will reach a limit, everything does: population, polution and resource. I agree with you (and others) that technology and less debt can help, but the key word is help. It will not cure the problem. Things are going to change. And because we have put off the preparation, the transition, however long it takes, is going to be painful.
"Technology is nifty but it can not trump math. We will reach a limit, everything does: population, pollution and resource. I agree with you (and others) that technology and less debt can help, but the key word is help. It will not cure the problem."
Unfortunately technology is the new religion, allowing people to disavow and disown any responsibility for making changes here and now. I've lost count how many times I've read an article or listened to a discussion or debate where, when it came down to brass tacks and the person, group or author was challenged to describe how we were going to overcome these internal and unavoidable limitations, I would hear the word "technology" uttered with rapture and devotion.
The "one", the "supreme" answer to all our problems, the single answer to all the unknowns, the mysterious force, the great attractor, the magic wand. Technology will solve all when it finally comes. Never is there any doubt that technology can solve our problems. It just will. It's not a fact, it's a faith based religion.
how we were going to overcome these internal and unavoidable limitations
We continue to do so. There are two powerful forces at work, and we can see them. One is innovation; remember the polluted 60's / 70's? I do. The other is education; the growth of populations so often decried by so many in the "carrying capacity" camp is solved quite simply by education and lifestyle. Japan is negative population growth; US would probably be if it weren't for illegals, which is why they're admitted, tolerated, and even encouraged.
It takes crises to force radical change; the industrial age gave way to cleaner technologies that cost more. Ten children in a farm family gave way to 2.1 kids in the suburbs.
SWRichmond,
I beg to differ regarding pollution. While some steps have been made to clean it up, what you're not taking into account is that the massive industrial pollution is/was exported overseas along with the jobs and industry.
Rather than industry spending the money to clean up the really dirty manufacturing industries in the developed countries, they simply sent the polluting factories and industry to China, Indonesia etc. Same with deforestation, strip mining etc etc etc.
And while I understand there is a strong force called innovation pushing technology ever forward, there is also a strong force preventing it from moving much faster than it could. It's called Greed. When companies look at the bottom line and see it's cheaper and more profitable to leave technology behind, they will actively prevent its use. Only when profits will be cheaply improved with technology will it be embraced.
As long as their is a backward undeveloped country or population that can be exploited using the cheapest technology available, there will be very slow progress. We must stop seeing the world through the 950 billion eyes of the developed countries and see the world through the 7 billion eyes that actually exist here.
I like your analogy between energy limits and debt limits, though I don't agree that we can muddle through (proclaiming progress) with energy limits but we can't muddle through with credit limits.
I remember forty years ago gasoline at 20 cents a gallon, and no pollution controls on anyone. It doesn't take a thousand years for a lot of change, yet the petroleum-based world is as alive as ever.
Clearly, extractive resources are limited and extraction is destructive and worldwide pollution and climate change are getting worse. I guarantee that you and your children will be long dead before we "run out of energy" or "drown in rising coastlines" or hit any other absolute limit in this area. Instead you will experience higher and higher prices for energy, more and more destruction, more and more pollution. If you are a typical person the fact that there is an absolute exponential limit on petroleum extraction will have no effect whatsover on your current lifestyle and decision-making process. Only current options, desires, and costs significantly effect current decision-making for the few who are even rational at all.
So, why is it hard to understand that politicians (and the people who elect them) simply treat credit like any other resource? Extract, extract, extract; get rich and stay rich; eliminate anyone who gets in your way. It's a very old model and it hasn't changed in any way. As for the future - well, Ronald Reagan so eloquently spoke for all of us when he said "Posterity? What has posterity ever done for us?"
Actually, I figure we're bumping against the limits of climate change now; the North Atlantic Conveyer is conclusively slowing and desalinating, and this may in fact be a significant part of the reason that both the Eastern US and Western Europe are currently covered in several feet of snow (here in Victoria BC, it's been about 40F (10C) and rainy since November). Nature abhors pushing the system too far out of whack, and she has a tendency to restore it in dramatic fashion.
Spend some time researching Peak resources, not just oil. Did you know that globally we peaked in our production of phosphorus about ten years ago, which has agricultural firms scrambling because phosphorus is vital for contemporary farming? Any switch to a more electically based economy is faced with very hard limits of rare metals, most of which exist primarily in China, and many of which have been seriously compromised. The problem we face is not a matter of running out of energy but of extracting that energy in a way that is economically feasible (in essence, taking less energy to extract than it provides in power). That's now becoming a very real (and very hard) limit.
The current crop of political leaders were elected in response to the political desires of the majority of the most well-to-do of the population (and in many cases of the population as it existed some time in the past), which is, by definition, conservative. The real change will come when the current economic-political system collapses, and new leaders (and quite probably new political organization) take the reins. Many won't necessarily be recognizable as leaders in today's formalized sense, but they will be the true pivots around which civilization will change.
There was a guy
An underwater guy who controlled all the sea
Got killed by 10 millions pounds of sludge from New York and New Jersey....
I stop buying peak oil when some sharp blog commenters showed me enough evidence to believe it was being foster, nurtured by shadow govt types...and of course, energy and energy prices is a great way to manipulate people and geo-politics....I suspect alt energy technologies are being quashed all the time.
On debt, not to be a heretic at ZH, but what happens when/if it crashes, it will hurt like hell, but could it mean we then can take out parasites, start from zero with no one with debt, and have assets prices, and commodity prices match peoples ability to pay...I think biggest loss in crash is trust that makes many transactions frictionless...lose trust and each transaction becomes costly...
The guy you're thinking of is Malthus, creator of Malthusian Theory, which was correct up until the time he published it, whereby agriculture began to change and that whole industrial revolution thing started to happen (from memory).
Anyone interested in the fallacy of the above post should read "The Ultimate Resource" by Julion Simon. You should too Davey. History shows the opposite. Technological innovation fixes this problem, over and over and over.
Financial innovation, on the other hand, I don't have as much confidence in.
Jean,
Please pull your head out of your ass, you are getting shit in your brains.
Okay, that wasn't very nice. I wanted your attention-- baad. Trusting vague random "technology" to bail us out is a death sentence and a cop out. This attitude is the one of the ways that we give ourselves permission to keep doing what we are doing and not change a thing. It is bailout mentality writ larger than large.
We have to educate ourselves and take responsibility for what we are doing. Faith is a killer. Faith should be strung up and eviserated. Hope is even worse. We are all dying on a long enough timeline, but must we take everything with us as we do it?
Fuck faith.
Fuck hope.
Wake the fuck up, I beg you.
Now you're talking! It's all about ACTIONS BABY. The future is merely a result of what we do or don't do NOW.
Focus on the actions, the rest takes care of itself. Stick hope and faith up your ass.
Funny, that's kindof the rationale we got from Paulson, Geithner, and Bernanke...Taking Bold Unprecedented Action. 'Cuz if we don't DO something...bad stuff will happen. Trust me.
In the 1950's, when I was a kid, the Technologists proclaimed the solution to limited petroleum was nuclear power plants. They had no interest in the small stuff like how much it would cost to set up "safe" plants or what the hell we were supposed to do with radioactive waste with a half-life of 100,000 years. Then the Saudi fields hit full production and, even with massive gov't subsidies, it became obvious that nuclear was a money-losing proposition (and we still haven't figured out what to do with the waste).
In the 1970's, when I was a young man, the Technologists proclaimed that new designs based on computer chips and battery power would cut our energy use so drastically that we'd never have to face limits of any kind. Then the price of oil collapsed and, with no need to conserve, it became obvious that exotic designs were a money-losing proposition.
Now that I'm an old man, the Technologists are proclaiming the stupidist shit I ever heard. For example: "We can tear up Jupiter and build a giant solar array around the sun and have more energy than we'll ever need hahahahaha!"
You're absolutely right, MC. It's up to each one of us to figure out how to deal with the civilization we were born into and take responsibility for our own choices without fantasizing technological rescue miracles.
I'm finding out that I really dig old men, at least the ones who learned something with their time on earth.
You might get an identity and come play with us... ;-)
The one technological achievement that I am grateful for is the flushing toilet.
amen...heard a guy who went low/no energy say the thing he missed most was not TV, other creature comforts but the washing machine...still things saved a lot of time until we decided wearing 5 different things a day was necessary
You have, without reflecting on the changes in ethics that have occurred over the years, made raised good points. I will comment a little on the ethics... Over the last 10 years, I have seen corruption in both the public (gov't) and private sector that would make any decent person's jaw drop to the floor. At the same time, I've been witness that we are living in a time when the masses live with a feeling of indignant entitlement. I suspect that this does not apply to the youngest generation, but (with exceptions) they don't understand how lucky they have been in that they have not had to work very hard for what they have. Generally, many have an expectation of an easy life combined with entitlement for sophisticated 'gadgets,' contrasted with the older generations' wealth entitlement expectation. This will change, and it will change very soon. Wealth combined with a sense of entitlement brings with it corruption of core ethics, the basis of which are required to have a functional society. It's interesting that what took hundreds of years to happen to the Romans, has taken only a few short decades, here. I expect severe deflation in the near future that will be so extreme as to break America's back. But it will drive a return to higher ethics and an appreciation of family and simple pleasures. And in consideration of all this, the above article does bring some clarity - it shows me the options of countries where can chose to live in, in the future. That's not to say that all countries that have over-borrowed have bad ethics, or those that have not over-borrowed have good ethics, but it is a starting point from which to start searching for a place to live where I will not have endure a crumbling infra-structure and inability to secure good and services because of a debased currency. Think about it - if the currency is trashed (which is what is happening to the US dollar), how are you going to buy raw materials or finished goods on the global market? You can't. But America is in trouble because it has exported it's manufacturing base. And if you can't by raw materials or goods and services, you are going to be living in poverty, which is to say you are not going to be able replace what you wear out, or fix what is broken. That is the definition of poverty. Good luck to all. For a few very small examples of corruption, check the following link by lorax2013: http://www.youtube.com/user/lorax2013#p/u/3/TQKhEp74NUM There are many many other examples, far more unbelievable, that I have been personally involved in and can not even begin to describe. If people knew the truth about this country, and about these people, they would be very scared - actually horrified.
MsMom,
Okay, I agree with both of you simultaneously, because I agree that promises of salvation-innovation are fucked! Our infrastructure is crumbling and we are sending out ~40,000,000 food stamps a month. Huge WTF. Promises broken for decades - payback is a bitch (you corrected my generational rants, sincerely - we are in this together).
However, Davey also has a point I want to discuss, and that is in regards to energy needs. Not 1,000 years from now, but 100.
Imagine viewing this in 1900:
http://faculty.uaeu.ac.ae/myagoub/Remote2/World_Light_Night.jpg
There is innovation. LED lights, for example. I almost felt like rigging up my LED Christmas lights using my car cigarette lighter just to fuck with the drivers/passersby - and I figured the drain was too low to give a shit - I have a huge subwoofer in my trunk anyhow that never left me asking for a "jump" somewhere.
In a thousand years we could rival the stars! But, alas, the truth is I am one of those non-religious millennial types: this shithouse is about to burn down. If we had only been more vigilant to watch for the psychopaths...they got us this cycle, too. See you at the post-collapse town meetings.
I am WaterWings
Young men are kinda awesome too! Emphasis on man as in responsible adult male.
I have the impression you may not be partnered just yet. You know what I found out? A man who can hear my truth, and not think I am trying to hurt him or head game him, and can handle it and work with it, is about the sexiest thing in the world. When my husband can hear hard stuff and instead of taking it personally, he steps up to bat and we deal with it together, it takes my breath away. He makes me want to be a better person, to meet him where he has the courage to meet me. It's all about trust.
In that town hall meeting we will show up at together, I will issue you that same challenge, neighbor, if I am still alive, if I am not scared out of my wits and need time to heal. I want to be an old style neighbor, who knows and cares about you, who has your back, and it's pretty easy because I know you have mine. And we can make the hard decisions because we know what has to be done.
I'm off on a tangent, but not really. "Love is the plan. The plan is death." I stole that line from a female science fiction author who had to write under a male name to get her work taken seriously. We have wandered way too far away from what we can be. I think some of us intuit that it is in there, waiting for the call, to do and be better than what we have created here.
Peace, Wings.
besides the excellent financial smarts and economic critiques here at ZH, there are some of the best general comments here...WW, Ms, CD etc...big fan...I roam the political, financial web, but keep coming back here too often because of the great, diverse posts and comments ...
;-)
That would be James Tiptree, Jr.
Great stuff!
OK. Have less, be more.
Needs first, wants maybe.
Care and share.
We have to change ourselves to change society.
Americas motto has been MORE and something for nothing as well as BUY now , pay later.
Our leadership is lacking in imagination ,honesty and foresight.
Yup, Ms.,
Add me to your fandom as well - some very nicely said thoughts.
I'm a computer programmer, trained as a physicist, and have authored a number of books about computer technologies, both at the trade press and academic level. I suppose I should be a big technology booster, but frankly, I'm not. I hope the Internet survives because I think it may be the one thing that helps to keep us cohesive as a society when everything else goes to hell in a handbasket, but I'm not really optimistic there either.
Technology induces efficiency - that's all. This means that in the best case scenario, you need to expend much less energy to accomplish specific takes. In the worst (and far more common) scenario, increased efficiency usually means that you do far more of some thing with the same or more energy. Apply that to computers (which perform intellectual work) and that means that you need far fewer people to do the same thing, leaving entirely too many people scrambling to do something that will pay to keep roofs over their heads, gas in the tanks and food in their pantries. Apply it to energy production and you end up continuing to increase your use of that resource even as you use it up faster. Some day it will run out, but with technology, that some day approaches even faster than it would have before.
Wind, solar (both passive and pV) and thermal gradient all have the potential to provide energy, but without radical changes to our transportation and distribution infrastructure they won't be able to supply the energy needs for the population as they and it exist right now. Fusion might, in about forty years time, but to date maintaining a magnetic containment field for the requisite time to extract energy remains fiendishly hard, and you are in essence replacing one finite resource (oil) for another (deuterium), which will relatively abundant is fairly expensive to extract from water. Of course, the other potential source for deuterium is, you guessed it, oil and other methane-based hydrocarbon chains.
Nope, not optimistic at all.
Good comments. Everyone forgets that solar depends on oil, too.
So many things do. As Kurt points out, our agricultural system is totally dependent on oil plus other peak resources. Permaculture techinques may be the only way we will survive this
Bah. Simon's premise is that all resources are effectively infinite, that scarcity drives up the price which increases resource discovery and gathering, etc.
Only a techno-Utopian or spendthrift industrialist could believe such claptrap.
There are shortages of just about everything today, including potable water and clean air, in these cases the results of active destruction for profit. Only rich nations seem immune to shortages, and that is a temporary situation resulting from 100 years of global domination. Which dominion is ending even as we debate the matter.
When Simon chides ancient people for thinking the world was about to end, he should note that their perception of the world was literally wrong, but they did not know this. People thought the earth was flat, had an edge, and was full of devils and sea monsters. They were fenced in and shortages looked lethal.
Then desperation drove them outwards and they found the world was larger still. It was a one-time thing; you do not discover the New World twice in the same universe.
Today, the world is the world. There are no edges to challenge. There are no beasts to fight back. We've taken it all, under our heel and into our stomachs. No illusions remain, no false gods, and so there is no corner into which we can squeeze our hungry and ailing multitudes.
Whatever was the game we were playing, it's over. Need to find another game that understands and accepts that there are limits, and that limits are good.
All this blather about endless growth and resources shipped in from Mars are the post-industrial suicidal ramblings of the deranged.
cougar
Cougar the reason why we are not buzz light years is... they cut the capital to these programs in the late sixties - the new hip monetarists sold us this pup and he ain't barking no more.
The reason we are not Buzz Lightyear is because attaining that would violate several fundamental laws of physics, or else consume amounts of energy on a level that would stagger the imagination. Improvements in energy production or reclamation are merely incremental improvements, while every new advance in technology requires an order of magnitude more energy than what came before. Compare making a wooden abacus with making a laptop computer. Staggering.
Dreams are just that. And they can be fun. But they are only dreams. The real things that changed our world were never any one's dream. They were there in the stones and waters and the skies, and we found them.
What will we find next? Don't know. But we will not dream it and you will not recognize it when you first see it. That much we know from history.
cougar
Ok Cougar we went from wood to coal to oil and then we got sacred when fission came along which was understandable.
The transition to each stage required a greater amount of capital and innovation.
If I demonstrated a Watt steam engine to a medieval monk he would think it was magic ,also that society did not have the accumulated capital that came from the renaissance and reformation to afford to build such a device as it required advances in material science etc.
Things were getting very dicey in the early sixties so there was a intelectual rebellion against greater power in our lives , it is not that we could not do it - it was because we were frightened of our power.
Monetarism decided for us that we did not need to build more capital as we had enough for our needs - these were the intelectual trends of the day with Rachel Carsons silent spring at its apex.
Civilian nuclear programs were run down year after year , people watched soap operas rather then men walking on the moon - our consumption increased dramatically as we ran down all future programs.
We became children again wrapped up in our own self importance with our Walkman , personel computer, i pod.
Well once again we have to get out of the foetal postion and stand tall.
We are better then this , better then this pessimistic fatalism that has infected us all.
Build it and they will come.
I admire your optimism. You are perhaps right that we have become self-absorbed, and this is a source of mischief, and if we could only break through there is more we could accomplish.
Perhaps.
If there is more, it is simply locked inside us. Getting at the good spirit within would address both our concerns I expect.
It would be nice if the system both survived long enough to see that day, and also was humane enough to allow people to do what needs to be done. We'll see about that, won't we?
Cheers,
cougar
I ain't a optimist Couger ,I am preparing for the worst but if there was a change of policey and direction on the lines mentioned above - a enlightenment if you will I would sell my PMs tomorrow.
There is a stagnation not of energy but of thought in the west , a vicious spiral of decay and petty envy that is getting deeper and deeper.
Hey, no offense, but if this is true, I don't know why I just shouldn't kill you and double the amount of stuff I have. Yeah, there may be a limit, but by getting rid of half the people on the planet, I've just doubled it.
In my opinion, it's actually preferable that people believe in innovation and the sorts of "game-changing" technology Simon referred to. Otherwise, it's all about getting a bigger piece of a fixed pie and that's an even uglier game. Sure, you can try to convince me that I should just be happy with what I have, but has that ever worked in the past, outside of small, religiously-oriented communities, who put an emphasis on either renouncing the world in favor of spiritual enlightenment or putting their hopes in the next world.
Once a civilization comes to see life "materialistically" and in terms of "growth", the idea that they can go back to living within a notion of fixed limits is naive. I can tell you right now that you will never convince me to live within your notion of "fixed limits". Period. Like I said above, in an extreme case, given the choice between living within your limits and killing you (of course, speaking generically), I'd kill you. I wouldn't have to think twice about it.
Not really, 'peak energy' is simply still one step removed.
A key, base condition for growth is science/technology/engineering capability and progress. That directly drives energy production (including food energy, etc) and efficiency and that in turn is a necessary condition for economic activity.
I think there is a good chance we have already hit the peak for science capability, and it is downhill from here. Consider something like a gas turbine for electricity generation. Todays state of the art turbine is vastly better than one 50 years old. Unfortunately the laws of thermodynamics tells us we have hit the limit, it cannot be made better. In 50 years a gas turbine will be about the same.
The same is now true in many, many other disciplines. Truely the only hope now is some kind of new basic enabling discovery, or a further understanding of core physics (eg gravity). When that will happen cannot be predicted and is not strongly related to societies 'need'.
Thanks for mentioning that.
Reading "The Ultimate Resource II", the real permabears seperate from the realists!
MsCreant, effectively some random technology has consistently bailed out humans since they stopped being pure hunters and gatherers...
Cougar, actually Simon never states resources are endless, but the things we can do with them are endless, *when* we invent less resource-intensive technologies.
Anonymous, do you believe solar cells work? Then how can there be peak energy as long as the sun still shines?
Progress wont happen by watching and waiting, we need to focus and allow real, productive competition. (And even then it never does allow everybody to squander resources at will!)
Solar cells depend on oil for their existence/production processes. Can't get around it.
Keep trying to improve the tech, but don't depend on it, get ready for the worst.
More precisely they depend on energy. It is true it might be beneficial to produce solar cells/solar thermal collectors (how much energy is used for heating?) before we run out of existing cheap energy sources.
But that is a question of peak stupidity, not peak oil/gas/uranium.
Plastic = oil
Game/set/match
if you have enough energy you can make plastic from water and coal (or carbon-dioxide).
oops.
You are still depending on fossil fuel to produce your solar cells. Coal is not forever, either.
But more importantly, I wonder how close the ROEI for solar cells produced in this manner is to 1:1? How much energy is "enough?"
I don't know how to find the answer to that.
They say a ratio of even 1:3 (one energy unit in, 3 out) will make an energy producing tech economically unfeasable.
I think we should always be ready for setbacks and declines and that assuming tech is always going to save us and support infinite growth is unreasonable.
Bernanke:Monetary-Policy // Fat Kid:Cake
It all comes down to peak oil.
Planetary real physical wealth has peaked, therefore the expansion of the fiat ponzi has reached an end. Lack of recognition of this is why they can't see that the past century of expansion built on oil (and several centuries before it on other fossil fuels) is not a useful model to follow. Since this is not recognized the decline of industrial societywill be a series of falling of cliffs rather than us finding a nice easy path down
+1 yup yup. we've been living on borrowed sunlight. do not underestimate the enriching power of having a second sun at your immediate command.
Don't worry, when the fusion genie is let of the lamp there will be enough suns for everyone.
You seem to know a lot about fusion. Ever heard of the material science problems associated with the neutron flux at the walls of the reactor? Problem is we can't find anything to make these reactors out of that doesn't quickly turn into dust, and therefore need replacing every few weeks. Its far from clear that this problem can be solved...
Don't hold your breath while waiting for fusion to arrive.
There are some hints that we could hit a second credit crisis. Some early warning signs of another global financial crisis include surging government bond yields, a slumping dollar, and the end of the bear market rally in the U.S. Hat tip to: http://www.iamned.com
I knew you were a Brit - no 'Mericans positioned in the anarchist/libertarian quadrant can write this well.
I'm an American and I resemble that.
:>))
It is also undeniable that "deniability" is an embedded universal human characteristic, trait, genetic as surely as our eyes and ears.
And why is this so?
Why hasn't it (deniability) become a prehensile tail or devolved into extinction?
Because, at least up till now, it has worked.
Fancy that.
When faced with threat most mammals do one of three things:
Fight
Flight
Freeze
Denial is a freeze strategy. Sometimes when you freeze, the threat just goes away. This one won't. Which will it be, fight? Flight?
No where to run to Bayybe. No where to hide....
I thought it was:
Adapt
Migrate
or
Die
"At that point the financial oligarchy will very much wish the Methadone had been administered sooner (roughly about March 2009, when we first suggested it). It will however be far too late, and the decades of self delusion will finally end."
Awesome!! Perhaps ZimBen should keep this on his desk as a daily reminder of things to come. Off topic, am not nearly as clued as all of you here. Can any one tell me what might happen to corporates of those soverigns that do default.
TIA
Excellent, if you didnt see it yet, I guess you will like this documentary, 'The century of the self':
http://video.google.com/videoplay?docid=6718420906413643126&ei=vFl0S_6GI...
+10
Reinforced by the boob tube; there was no escape for young minds. The evolution to “It is not what you do (produce) but what you have’ that determines your worth. During the 30’s teaching was a respectable profession. Bankers were to be respected for their probity because otherwise people didn’t want to deposit their money. I don’t know about the texture of the 20’s, but my sense is that the “Roaring 20’s” were mostly in the major population centers, didn’t last very long and not much found in middle America.
The way out is education. And I don't mean in marketing or economic sciences that are too soft. The environment where university teachers can promulgate economic models based upon standard stastistics without realizing that humans are communicating animals must not only go away but be scorned as incompetient. There is lots of room for mathmatical analysis, but it should be focused on what goes in and what comes out with separate subroutines for the various derivative multiplier effects. Trend analysis, in all its forms, depends upon the
I would like to be more optimistic for the near term but I fear that the body politic likes to party too much. IN Congress, old soldiers out, new soldiers, who must have time to learn to work there, in.
education is hope again.
Get ready for a big war.
The U.S. declared permenant war on 9/11. Iran is next.
Who is it going to be this time? Eurasia? Or how about Oceania again?
for someone sitting on liquid 100K each of USD, CAD and INR, decisions are becoming very difficult...
oh to have such pain...good luck, I see your tough spot, but can't feel it..
How long do we have left? 6 months, a year, a couple?
I'm not looking forward to the other side of this.
Yeah I hear ya, I actually think once everything happens it will be better. Just getting there and getting it done will be the extremely painful parts.
.
"How much longer can money be printed out of thin air so that we can all buy each other's debt and prolong the fiat fallacy for another day or two?"
Well, ain't that the ULTIMATE QUESTION?! And the answer seems to be right in the article as well: "... we tend to construct theories that conform with our worldview, which are subsequently reinforced...." Does anyone see the masses bailing out of the fiat system? No. Party on!
So...Gun? check Gold? check Ammo? check Food & Shelter? check
Now, let's load up on some SPYs and ride the behavioural roller coaster! Or is it time to short?! BWWAAAHAHAHAH!!!!
[sorry started on the Scotch a little early...]
So long as we're working the behavioral psychology angle, perhaps we should pause, identify the enablers and enabling behavior, and intervene.
Alas, this approach oft ends with the drug addict running out of the room. (The jets are fueled up the island homes are stocked with booze.)
[he could resist anything but temptation.]
Well that sort of sums up the entire 5 million years of human evolution. We've never been able to say "no" to anything ever not once.
Greed seems to be an evolved trait right along with empathy and altruism, and we have a gene (or suite of them) for selfish-ness. From what I understand the prevailing cultural anthropology of greed suggests that at one time early in our species development we hit a wall, hard. Some severe resource crisis. Then, those altruistic willing to still share were impoverished, and the greedy got all they needed. Guess who reproduced. Not surprisingly every generation since has been greedy to a degree, greed remains an impulse, and during any lesser crisis the greedy do slightly better and create yet another generation of offspring just as greedy as their parents.
There is no cure for bad impulses like that except death on a massive scale.
The interesting thing about mass death is that you get to reset the genetic dice back towards altruism; what comes up on the roll is really random after you go through a narrow slot of destruction, save that the survivors are perhaps more altruistic than the ones that tried to keep everything to themselves, and died alone. Altruism tends to be useful during massive, rolling disasters that destroy those that cannot pull together. Greed might not be as important an impulse after the next die-off. Something to look forward to, that.
cougar
Lies and greed are good survival traits. Altruism seems great but a society with that trait in abundance will lose to a society that is driven by greed. Ultimately the greed based society may destroy itself but it will take down the altruism society first. Greedy people can work towards a purpose as well and pull together, simply look at the current oligarchy. Sure they may do some backstabbing and double-dealing but ultimately they are allied in their quest for the serfs money and power over them. In my humble opinion resetting the clock as it were would only further accentuate the greed as survival became harder not easier. Not unless the mass death also ushered us into a paradise of abundant resources. But I could be wrong, just idle speculation.
That is a common conception of the problem. But it is based on a thousand years of plenty, and no massive die-off. Please review "population bottleneck":
http://en.wikipedia.org/wiki/Population_bottleneck
The idea is that resource contention leads to greed because it influences who reproduces, driving reproduction towards those with the most resources.
In contrast, a population die-off wipes the slate clean. The survivors are chosen at random, but in a communal animal like humans those that can share in survival tend to survive better. The greedy are either killed for their provisions, or left to die alone with their "wealth". Imagine the hardened survivalist hunkering down in his bunker alone with all his MREs and 5,000 rounds of ammunition; you wait until he has to take a pee, kill him, and take his stuff. He doesn't reproduce (well he wasn't likely to anyway, nuther story...) And if he puts up a fight, just go around him. He's cut himself off, he's extinct, couple years you get his MREs because he's dead of exhaustion. See also: http://en.wikipedia.org/wiki/Mitochondrial_Eve
When communities are corrupt but intact, the greedy survive better because they are better parasites. When communities are nuked, the altruistic have an advantage because they alone can survive without a host, and can even create a new community from scratch when conditions improve, meanwhile the parasites have either been reformed or have starved to death.
Fun stuff, evolutionary biology.
cougar
I've read into evolutionary bio and find it interesting but I have to disagree about you society premise. Greed is good for survival. To me altruism is harming oneself for another with no gain, that leads down the path to genetic extinction. We see it in the animal kingdom but only in systems where you have limited breeding pairs such as ants and bees, and all the colony is extremely closely related genetically. Fits in well with the concept of the selfish gene. Otherwise the creatures position themselves for the "best" life as in meals and reproduction.
Also I'm curios about you concept of he "altruistic" as a band of killers, in the survivalist example. If you are meaning altruism as the in the "family" bond whether it be real or by affinity sure but true altruism is silly in a survival situation because of the unknown greed in the other person. Look at the prisoner's dilemma. An altruist person in the prisoners dilemma is doomed every time.
Also it may have only been a thousand years but we are moving forward all be it slowly. Are you familiar with the Red Queen Effect? http://en.wikipedia.org/wiki/Red_Queen This applies to us as individuals as well. I see no reason why a motivated person who is "greedy" but is also able to work in groups as the greedy can will not survive as well as the "altruistic" who will give us themselves without thought of return. So perhaps we will be rid of the lazy greedy for a while, but the hardworking greedy are tenacious.
We might be arguing over the definition of altruism. If you mean that a person can work in a group well and make sacrifices for the greater group that they to will benefit from, then sure they will do fine. But if you mean altruism in the sense of giving without thought of reward then they will die out when things get rough. The greedy can still survive in a group system, I find it hard to think that they would not move in the interest of themselves and their tribe. Humanity will not be free of greed until there is no limit to resources or energy, so never.
And yes evolutionary bio and psych are great topics :)
[ If you mean that a person can work in a group well and make sacrifices for the greater group that they to will benefit from]
YES.
Altruism does have at its base "giving" but the giver operates on the assumption of return on investment (sound familiar?) and lacking return, seeks a better relationship. Happens all the time.
Contrasts with greed, which is about acquisition only.
Now this part is really important:
Greed can only work so long as there is a host. Greed takes -- but from something. Greed operates only within civilization where wealth is able to accumulate. Greed finds it, and takes the accumulation for itself.
Greed dies when civilization collapses. It dies almost instantly, either because there is no accumulation to raid, or there is no host, or the greedy individual fails to plan ahead for base survival and/or reproduction. The greedy tend to be heavily into abstractions, after all. That's their gig, it's where they operate. They own abstraction.
The altruists might not fair a whole lot better, but they contain within their working relationships and systems of cooperation the opportunity to recreate the very thing that was lost; civilization.
These concepts are strikingly simple but seem utterly alien. You just have to understand that you are right now operating within a greed-supporting system, and you have never known anything else, but something else does exist.
Are we headed for "something else"? Well that does seem to be the question. And notice, if we are then it is probably due to greed.
And so, we close the loop.
I don't expect any of this to find a receptive audience at ZH. I didn't set out to educate anybody and seldom bother. The topic here seems to have taken on a life of its own, and I've went along. But these are stark realities that other fields have to address, and they now overlap with finances because the greedy have broken the host.
Wasn't my idea, I just happen to understand the damage that has been done.
cougar
So let me ask, you seem to think that greed is all about taking. I will polity disagree and can see greed in excessive production and saving but lets assume that you are correct and it's a taking.
Now you also say that greed would die in a collapse of society. Am I to take you mean that there would not be looters, no one seeing to take form another? I must polity disagree. Greed would be WORSE then before. Why, because people already driven by base desires would be further fueled by anger of what they lost and a desire to live. Now they would most assuredly take from others, and even justify it in their mind that "They had it coming" or some such. At least until there is truly nothing left to loot and humanity is safely in the stone age. But should humanity go back to the stone age what would stop society form evolving in much the same way as it did before?
When I was in fifth grade, Sister Mary Ernest (true name) said class, you should all try to be good because if you are, then you will be rewarded and go to heaven. I raised my hand and said but Sister if we are all being good just to get to go to heaven that's not really being good. We should be good just to be good and help other people. Sister Mary paused for a minute, looked down and said "shut up davey." Altruism and greed only reward each other when they are balanced. Tip too far either way and you are only punished in the end.
Poor Davey and all his classmates.
And Davey never shut up, either. Good grief can't you people make your points in one or two crisp sentences?
Hey. Hey!
Clinny.
Don't be such an bean-counter.
Keep posting.
Have to bean count. I just can't read so much.
You are referring I believe to the onset of collapse. At that point people have a twisted sense of values based on years (or generations) of want. They then act irrationally. Imagine someone in post-earthquake Haiti lugging a 50" HDTV around with no power and no transmission stations, just to have it because he always wanted one, and you get the idea. Obviously that won't continue for very long.
Then looting for food and real survival starts, but right away everyone understands this is a race to the bottom. Smart people will start to pull together even if it looks like criminality. And when the canned goods and MREs are gone, what then? You'll need to plant crops, fence animals, raise barns and homes. Create forms of council and governance, provide support for the less able in the community. The greedy just won't have a place here because they are parasites by nature, and the guy with the 50" HDTV will probably realign himself with the future, or he won't and live outside the fences. His choice.
What was wrong with the Stone Age? It got us where we are today, not a bad hack. I think going back is happening, not sure how far we'll fall. What is on the other side? I don't know. But if we get there are all we'll only get there together.
cougar
I disagree shameful, each methond of survival in society is benificial for a time. Its like in fencing, the only way to counter attack a straight line of attack is whith an angled attack, the only way to counter an angled attack is with a straight line.
The same is true with economics the only way to profit in a dishonest economy is to be honest. The way to profit more in a honest society is to be dishonest. At least that is the way I see it.
That factors into the evolutionary arms race, but greed is all about self preservation, and attaining survival and replication. Can it go to far, sure but in most instances it will be restrained by other things like fear.
Wait, so are you really telling me "The same is true with economics the only way to profit in a dishonest economy is to be honest. The way to profit more in a honest society is to be dishonest." Really?
So is Goldman and the looter crew honest? Or do we live in an honest system, with transparency? Explain to me how the system is honest and Goldman and other oligarchs are dishonest or that the system is dishonest and Goldman and company are honest.
Really the best survival trait is pretty universal, adaptability. They do what they can get away with. If there was a death sentence for fraud or fraudulent accounting they would not be doing this. This is partly about greed but you must remember other factors such as fear are also in play in evolution. Most tricks work very well, they simply are refined over time. Nature has not decreed that a cheetah get slower and prefer to sneak up on it's prey. Nature takes the existing system and the tactic that is working and drives it forward till it excels or totally fails. I can only imagine the same is true for humanity.
[Nature takes the existing system and the tactic that is working and drives it forward till it excels or totally fails. I can only imagine the same is true for humanity.]
yes yes of course.
Now -- be afraid.
For they are about to destroy your habitat. Without that, you have nothing. The greedy will tell you "hah I have the most toys, I win" but they won't win. And if that is the only game we can play, then my guess is we are not going to be playing it much longer. Game over. Reset. What would you like to play next?
cougar
I am saying we live in a dishonest environment and the only way to survive as a business going into the future is to be honest. Although starting a business in this kind of environment means going undergound (black market) being that the establishment has a monopoly on business.
Brilliant!! I concur.
my addiction to reading postings on ZH is taking up all of my time, yes i am greedy.
Most likely nature will find a way.
Isn't it interesting that only in the last five hundred years have we managed to challenge the ability of our environment to sustain us?
Not even 500 years. More like 100 years. A few generations. And you can chalk it up to the intersection of technology (starting with steam) and the discovery of fossil sunlight.
Most of the the people who have ever lived on this planet are alive today. And most of those, are not doing so well.
cougar
-Cultural- Anthropology. It's a meme. Not a gene.
Okay fine, be that way. I'm talking about the intersection of the two; culture driven by inborn desires and behaviors. Culture can be a manifestation of what we crave spiritually, physically, notionally, etc. Much of this is biological in origin (reproduction) even if we then bend it into abstract cultural systems (prostitution/politics).
cougar
Agreed. But the relationship isn't iron clad. Respect for individual space is a cornerstone of Japanese culture (hence the paper walls) and is in direct opposition to the biological drives you mention. My point is that culture, while influenced by biology, is not determined by biology. Ie: Meme's don't have to be, and can't be bred out of the gene pool. They will change the way all ideas do. Because they have to.
btw, the anonymous was me posting from an iphone.
Some one honored you by junking your statement above. I just wanted to say that your statement looks right on to me, so I'm going to junk it also.
I am junk #2, in honor of you.
Thanks. I usually take "junks" in that spirit, myself.
First they junk you. Then they think about what you said. Then you win.
cougar
well done, extremely well thought out and presented with clarity.
Giving politicians access to the treasury pretty much guarantees they will find the moral justification to loot it.
Sounds like we need a little Judicial discipline.
How Ugly?
How about Larry Summers ugly. Did you really have to ask?
Great post! Love to see the graph comparisons, looking for the leper with the most fingers.
all this talk of Austrian economists.. yet they use the Euro too..
you would think that they all walk around with bags of Gold & Silver
?? Didn't know the use the euro in Heaven.
woot I get flagged as junk for calling out Austria for not SHOWING the world how its done instead of just BOASTING about it.
hypocrites is all I'm saying
The Austrian philharmonic is worth 100 euros legal tender - I think it is the highest ,so in the unlikely event of gold going below 100 I will take a weekend trip to Vienna and enjoy the ambiance while getting shitfaced drunk
You do know that Austrian economics doesn't have anything to do with Austria per se, beyond the fact that its main proponents were born in that country...right? Or is your satirical content going way over my head?
its like the pope living in a country that threw out all the catholics
so where are these gypsy economists having any influence on a government level?
(trick question...all governments want an inflatable fiat currency)
Hugh Hendry's first words to Joe Stiglitz mirror the frustrations of those of us who are witnesses to a world gone mad.
http://www.youtube.com/watch?v=E4MAifsp-8E
"Um... Hello... Can I tell you about the real world?" Genius.
Here it is .....
The sooner that they all default.... the better....
Get rid of the IRS
Get rid of the FED
Start fresh....
....................................
The US was never meant for entrepreneurs or any of its citizens to pay more than 60% of what they earn ...or else be hunted down with jail time....
How would one like to wake up tomorrow with a REAL CURRENCY
And NO IRS
To be replaced by a simple 15% consumption tax on tangible consumables....no other taxes....
Ask yourself this question....
Which economy would be much larger in 10 years ?
An economy whereby all small business pays more than 60% of their revenues in govt. obligations....or 15% of the tangibles that they consume....????
And the tax take to do govt. projects from the sole 15% consumption tax would dwarf the tax take from both the current and proposed systems ....
What is the US waiting for ?????
Would it not be great ....
No Fed
No IRS
No IMF
You know the drill....
Time to wake up ?????
Hello ....Anybody home ?????
Of course it would be great.
But to accomplish it there will be blood.
Good luck recruiting the teachers, firemen, policemen, etc. The entire public sector will be on the other side of your barricade.
It'll be great, for sure! The firemen will ask for cash (gold?) upfront before they put out the fire, the police will ask the mugger if he's willing to match your bid to be protected...
Dude, we need all the bucket-carrying hands we can get, but! get yourself a decent firearm so we don't have to run to your aid after you have finally realized that new psychopaths are born every minute.
Blunt objects/pepper spray: good for irrational, physical inferiors
.22-.50 caliber (in ascending yardage/damage): good for irrational, physical superiors
Blue - yes, there were, at least here on the West Coast. I refinanced my house a month and a half ago and locked a 30 year fixed at 4.7. I had many options as to who to go with as well, it was a matter of who was giving me the least closing costs.
good articles: http://www.iamned.com
While the analysis may be accurate it is not relvant to current policy.
We have seen no indication that this administrion intends to solve this problem.
What they have demonstrated is a willingness to kick it down the road and leave the problem for someone else.
nice post .. the austran economist use the euro to,, and your smoking what,, the whole system is fraud with arsonic keynesian clap trap thrown in// well thye all do not walk around with bags of gold and silver
had they they would be up 300-400 percent of a failed fiat system .
always nice to see .. the na sayers .. walking around with bags of spit
'had they' lol that's my point. just because i am critical of one side does not mean i support the other
i know your simple black/white mind can't process that
so many get so worked up about so little.
Please allow an analogy. The moon orbits the earth on a 5 degree sinusoidal. Consider the moon to be the USD plus pegged currencies. At the nadir, currencies opposed to the "moon" will be at their apex, and vice versa.
All along the orbital path, relationships between currencies adjust.
Quit bunching your panties....moon and earth will keep on spinning for a while yet.
40muleteam borax
Until the moon disappears. Which is basically what we're all getting at.
Sorry, but no, I do not allow that analogy. Models predicated on such simplistic (and incorrect) certainties are part of what got us into this mess.