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Long Periods of Drought … Followed by High Winds
Unlike economics, Wildland Fire Science is actually a science. Unlike economists, normal people actually know what the future holds. Debt matters, deleveraging is a bitch, and economist religious rituals ensure our destruction will be more severe and complete than any conceivable alternative. Beware the inevitable conflagration resulting from high levels of debt, followed by extended low interest rates.
One can get a college degree in Fire Science. Remember what it’s like to work in an actual professional discipline? Given a set of preconditions, experts in the field can utilize principles and understanding to deterministically predict a result within an acceptable degree of error. You know, Science.
Your local fire department typically deals with structure fires. There’s a lot involved, and it’s important. However, many of those principles, techniques, and equipment don’t translate over to the fundamentally different world of Wildland Fire Science. One professional may need to know more about electrical, chemical, and combusting metal fires, as well as dynamics within burning sealed structures; while the other deals with conflagrations that can go from zero to more than two thousand acres in a couple hours with changing behaviors in different biotopes and surface features.
Find a professional in wildland fire science. Speak the phrase, “Long periods of drought, followed by high winds.” A sane response by a seasoned professional in that field would be, “Oh, CR*P!”
A quick review:
Wildland Fire Science: A science.
Economics: Not.
The Yellowstone fires that burned more than a million acres in and around Yellowstone National Park in 1988 are an example of long periods of drought, followed by high winds. The Long Mesa Fire at Mesa Verde National Park in 1989 is another example, going from zero to over two thousand acres in a few hours, with 100-foot high walls of flames. Southern California fires in years with the Santa Ana winds are always a good example of “drought, followed by high winds”.
If economics were a science, or even a professional discipline, then every “expert” would similarly understand the corollary, “high levels of debt, followed by low interest rates”. Since economists (other than a very few, like Steven Keen) are too ignorant to say it, we shall say it on their behalf: “Oh, CR*P!”
It is hard to overestimate the significance of long periods of drought, which kills vegetation, increases fuels loading, and dries out even the largest diameter branches on the ground to the point that when they burn, they will do so completely, at high temperature, which can sterilize the soil such that no vegetation of any kind will grow on that spot for decades. Debt has the exact same effect:
Debt (Pro): Can increase productivity through leverage (if taken for productive activity, NOT for consumption).
Debt (Con): Always increases risk and decreases the risk-adjusted return on productive activities.
Debt is always a drag on productive activity, because it must be serviced. Debt tends to compound, unless future expenditures are significantly reduced (as debt principal and interest is repaid). Debt kills, as it increases risks associated with cashflow, and fundamentally changes the worth of productive activities (which must now be productive in excess of debt servicing and repayment). While it’s true that you might be better off by borrowing money for a productive venture, and later paying that debt off (i.e., leverage), you would have made more money if you already had the capital to do that venture without borrowing (because nothing would have gone to debt servicing).
Don’t forget the theorem: Deleveraging is a bitch.
Of course, these are “silly” arguments that apply to households, businesses, and any responsible (or accountable) institution. One might argue that they don’t apply to sovereigns (who never intend to repay their debt, but rather intend to forever “roll” their debt), or central banks (who merely print their way out of any corner in which they find themselves). While we might disagree on whether sovereigns and central banks can really operate like this over an extended period, we can all agree that past debt is always a drag on the present, even for sovereigns and central banks.
High winds merely amplify the speed and severity of what was already going to happen. Within any finite (relatively short) period of time, while it’s possible you won’t get a lightening strike, and it’s possible no camper will lose control of his campfire, increasing debt levels increases the probability that something is going to get started (e.g., it increases “fuels loading”). In time, probability dictates you will get that lightening strike, and you will get that out-of-control campfire. High winds ensure that inevitable event will spread quickly, and severely.
When debt levels are high, and have been high for an extended period, it’s the same thing as high fuels loading after extended drought. It’s inevitable that deleveraging will begin, and will be significant, even if you’re merely talking about the increasing roll-risk of existing debt. When those high debt levels coincide with an extended period of low interest rates, you can be assured that people have maximized their leverage, and dreamed up mechanisms for risk never previously imagined. When interest rates are high, there is at least a possible “pressure valve” of lowering interest rates (indeed, that’s what central banks for decades promised us was their job), and the cost of money helps ensure truly stupid ideas are not funded (because the money is expensive). However, with low interest rates, we are sure to fund even the most moronic bridges to nowhere, and there is literally no pricing pressure on stupidity (an infinite governmental resource).
High levels of debt, followed by extended low interest rates… Are these morons serious? This is an inviolable principle, if these economic imbeciles actually treated seriously their “field of study”. Aren’t these central planners supposed to be “adults” who dress themselves, tie their own shoes in the morning, and make themselves cold cereal before they go off to work to destroy people’s lives? What the hell are they thinking?
This is like surgeons in the 1840’s strutting around, “Hey, we’re surgeons, and our brains are HUGE, and hand washing is stupid, because we’ve never heard of these things called ‘germs’!” Surgeons continued to kill over a quarter of their patients for decades, including women delivering babies in hospitals, until the 1880’s when Pasteur extended Koch’s germ theory of disease. The murderers had no idea they were killing literally every one they touched, and were even so bold as to ridicule, show hostility, and discredit anyone who suggested hand washing was a good idea. Poor Holmes. Poor Semmelweis.
Our central planners in our central banks are religious nuts. They show none of the attributes of professionals in a disciplined field of study, and all the attributes of brain-dead zombies performing ritualistic incantations (like the banks they pretend to manage and regulate). Our treasury departments are equally insane. They refuse to wash their hands as they un-invitedly break into each of our homes to devalue our currency, and ensure sovereign defaults worldwide. They have muddy feet too.
“We’re economists, and our brains are HUGE, and we can have free lunches FOREVER because we’ve never heard of this thing called ‘debt’!” There’s no possible way to engineer a setup for more complete destruction. Murderers. Morons.
Being charitable: Economists have a different world view from “normal” people.
Being non-charitable: Economists are literal economic and common-sense morons.
By artificially forcing interest rates too low for an extended period, economists are literally fanning the flames of stupidity. When deleveraging begins, the rates will rise sharply, causing a feedback loop that explodes the conflagration of debt unwind to the point where it will annihilate everything in its path. Can this be avoided? Not anymore, with Captain Jackass at the helm ensuring that little old ladies can no longer live on their fixed income CDs. We’ve already had our record levels of leverage and our extended period of low interest rates.
It’s a good thing economists don’t have any professional standards, or they would be guilty of professional incompetence. It’s a good thing they remain unaccountable to society, because their actions are criminal negligence.
When a fire science professional screws up, someone usually dies, and the professional goes to jail. When an economist screws up, people lose everything they have spent a lifetime accumulating, people starve, nations fall, we go to war, and millions die. Economists will then pretend to tweak their theories and go on book tours.
How hard is this to understand? With high fuels loading, you will get a fire. We hope and pray the acreage burns when we have high humidity and low winds, to ensure it doesn’t burn too hot and too fast. That helps ensure the destruction is not *so* complete that nothing remains. It’s silly talk to say you won’t get a fire, because that immediately disqualifies you from any sensible participation in the discussion with actual adults.
With record high debt levels, you will deleverage. We hope and pray the deleveraging occurs when you have a relatively healthy economy (ha!) and relatively high interest rates (ha!), to ensure leverage remains only for productive activities (ha!) and deleveraging starts with non-productive activities (ha!).
We are in a period of record high debt levels, followed by an extended period of record low interest rates. Oh, CR*P! At this point, because of the debt levels and leverage, raising interest rates is impossible (nearly all sovereigns would default instantly with even a one or two percentage point increase in interest rates). CR*P! CR*P! CR*P! Even today, we are held together only through accounting fraud collusion among private institutions, central banks, and sovereigns. (Yes, we’re talking about go-to-jail fraud.) CR*P! CR*P! CR*P! CR*P! CR*P! CR*P! Still, we can be assured that defaults will inevitably happen, and interest rates will inevitably rise. These private institutions, central banks, and sovereigns are all toast. Pathetically, they all earned it.
The ship has sailed, and we are betrayed by the economists. Central banks and sovereigns the world over utterly failed in their job, not that they were ever qualified to do the job they pretended to perform. We will get a spark. Some happy camper will be irresponsible with his adult beverage around the too-big campfire. When the spark happens, a million acres burning across Yellowstone will look like a cute evening of nostalgic fun.
No, at this point, there is no way out. Thanks a lot, you friggin’ central planning feeble-minded morons! Unlike you, normal people can actually do the math. Even now, you economists won’t recognize your utter failure in your “field of study”? You pretend to use big words, but it’s easy to recognize them as merely confused baby-mumblings. Clearly nobody should have let you wear “big boy” pants. In the true mark of immaturity, you won’t even admit to the increasing stench from the pile of brown stuff in your underwear. Who the hell do you think will actually have to clean up that mess?
Mammas, don’t let your babies grow up to be economists.
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As a wildland fire professional and amateur doom economist, I couldn't agree more. When I think of the "garbage-in-garbage-out" nature of the long- and short-term fire behavior modeling I routinely do, I am simply amused by the idea of economics as a science. Milton Friedman and his followers will someday be reviled as the soulless, discompassionate killers that they really are. In other words, they'll be revealved as shills for the wealthy in the class war that's rapidly coming to a head. There does seem to be a lot of fire in Greece these days, but it's not the kind I would care to predict. Fire on the landscape, with all the nuanced effects of thermodynamics and surface winds, is far more predictable than people are. And maybe, just maybe, we will begin to reward those who DO NOT simply act in their own self-interest.
imo the revelation of friedman you speak of is already well begun in naomi klein's "the shock doctrine" (next real life installment coming soon to a sovereign debt market near someone).
Just wanted to add that, while I'm a fan of some of Klein's work, her thinking is just as muddled and confused as any on the matter of economics. She does a great job of exposing the hoodlums and their master plan, but her remedies are amateur and would only lead to more pain down the road.
Free, open markets without government intervention are the ONLY way. No, shut-up, you're wrong. FREE AND OPEN MARKETS WITHOUT GOVERNMENT INTERVENTION ARE THE ONLY WAY.
I am Chumbawamba.
Your post mirrors my internal monolgue verbatim.
Exactly!
In Trying to Stop the Inevitable Deleveraging Process, the Government is Only Making It WorseI heard it once, "teach a parrot to say 'free trade' and you now have an economist."
"teach a parrot to say 'free trade' and you now have an economist."
You also have a former President with a Harvard MBA.
F'ing A! And that moron Pelousy is the lit cigarette to start the conflagration.
Really economics is a great profession "The government is always right! Now where is my paycheck" they might as well hire bums and invalids to do the job. It's not hard to parrot what Uncle Sugar is saying. Though in your example it might also fit in that these economists are willful arsonists. They pour gas everywhere while chain smoking, and when the fire does break out they scream for more gasoline to put the fire out.
The real painful thing is the bad ideas never leave. Like you said they have a minor tweak and are presented to a new generation of believing suckers. I know to many professors that have said "Oh it won't happen this time, he learned form the past". the only thing they learned fro teh past was how to cover their ass.
Mikla, overall a great write-up & analysis, but I think you have one more step to take in your journey of discovery before you reach full enlightenment.
To understand banking, you need to understand the welfare state. To understand the welfare state, you must understand the warfare state. In this context, economists are nothing more than those who deliver shock & awe upon our "enemies". In other words, they soften up the enemy (in this case, that would be us) so that the actual invasion/occupation can take place with minimal casualties.
To complete the analogy, the MSM provides the necessary propaganda in which to pacify the newly 'conquered' peoples so that they are reducing to passively accepting the new order in which they find themselves.
The masterminds behind this entire game are like generals who plan & execute battle directives only after they have been extensively war gamed. In this particular instance, the mathematics behind fractional-reserve lending are not in dispute, therefore the end game could be, and has been, always easy to determine.
We are nearing the next stage in this saga. Please understand that economics, at least to those on the inside, has never been confused as a science. It is merely a useful device in advancing the interests of those who play with people's lives on a global macro scale.
Very well put.
So sad that I agree with your statement. We agree that economics today is merely a rationalization tool to move the sheep around.
I did not want to complicate my assertion with things like fiscal v. monetary policy, separation of the treasury from the central bank, fractional reserve lending, etc., because I want to make a very simple assertion, which is two-fold:
For any economists out there, your rebuttal MUST start with the phrase, "We've shown economists made the world better by [insert your unsupported bullshit here]".
In short, I'm calling them out: They continue to claim their "societal tweaks" will keep giving us new, good, free stuff that we wouldn't have gotten except for their HUGE brains. I call bullshit.
And yes, IMHO the damage they do is on purpose (although lots of it is simply because they are morons).
Finally, as I allude in the article, I have respect for the concept of economics. I just don't think that should ever be trusted to economists, who happen to be economic morons.
For example, if surgeons today never washed their hands, I could similarly say, "I have respect for the concept of surgery, I just don't think that it should ever be trusted to surgeons, who are moronic murderers."
That's really the fundamental reason economics is not a "real science." It isn't because it isn't really encouraged to be. It's a slave to politics and isn't encouraged to be objective.
Economists have made the world better because one was named "Ludwig von Mises" and another was named "Milton Friedman."
Names like that never existed before we had economists?
Nominally I agree, this is true of the vast majority of economists, but there are some good ones out there so we cannot claim all are bad. I'll point to the boys at Mises.org as some of the good ones. I know their call for sound money and natural market set intrest rates would work wonders. Sure they are maligned, mocked, hated, and ultimately ignored by the mainstream economists and the MSM but they know the score and what needs to be done. You have a lot of bad apples but there are still a few good ones that are not rotten.
But really it boils down to who is paying the bills. Most economists get money from teh Gov or central bank, it's hard to bite the hand that feeds you. Just like some scienitest might be tempted to falsify data to make sure grant money keeps coming in. A lot of people are prostitutes but instead of their bodies they sell their integrity.
True, there are actual "professionals" that IMHO behave "professionally". For example, I'm partial to Steve Keen (economics professor at University of Western Sydney, Australia), who IMHO behaves as a proper academic (e.g., data and validation-driven).
However, IMHO most of the economics profession itself is fundamentally "screwed up". It focuses on social engineering and social policy, without any of the prerequisite synthesis, understanding, validation, and measured degrees of freedom. For example, I also am partial to Hayek and Mises, but I have a hard time separating their economic discussions from their social/political/generational discussions. It becomes more sociology with an economic bent.
While I agree they have much to say, I'm unwilling to promote even their work to an economic "discipline" or "science". It lacks deterministic conclusion with computable degrees of freedom, and depends much on culture and recent generational experiences/values.
What I see in "economics" today is sociology, psychology, public policy, and plain-old-fashioned governance control. I actually see very little logic, very little data, and very little "testing" of ideas people seem to dream up in the hotel lounge. IMHO, whatever is going on in the field of economics, it is NOT economics.
Scientist: I conclude that doing THIS causes THAT to THIS degree of variation.
Policy wonk: Therefore, people shouldn't ever be allowed to drive cars.
Economists today are mere policy wonks, and not very good ones, since most are simply morons.
"For example, I also am partial to Hayek and Mises, but I have a hard time separating their economic discussions from their social/political/generational discussions. It becomes more sociology with an economic bent."
Fwiw, the Austrians make the point that economics is driven by human action and therefore does not lend itself readily to mathematical analysis, since individual self interest is a variable that can't be quantified with any exactitude. There are too many ways that a given condition is perceived by a collection of individuals. Imo they do have better conclusions than the Keynesians. Most economists nowadays use the notion that central planning by an omnipotent state will work. Garbage in--Garbage out. At least the Austrians have a logical conclusion based on cause and effect. So what if you can't build a mathematical equation to describe it. A valid conclusion does not necessarily need math.
For better or worse you cannot separate sociology from looking at economics. Human behavior is economic behavior. All of our actions have economic consequences. By writing this am consuming energy and bandwidth and time that I could be used for working ot improving myself, by writing this I am making an economic choice all be it a small one. My writing this changes my production and therefor my economic value. Think about any human action and you will be able to attribute an economic consequence if you are willing to look below the surface.
The big lie is that we can break economics into charts and models. They have never worked and will never work. Most modern economists talk of aggregates because they cannot predict human action. And they will never predict it unless we find ourselves living in an Asimov novel. I do not hold that economics is a science like physics or chemistry, because it involves people it brings in the unpredictability and downright craziness of people.
Very smart people for a very long time have tried to build models to predict the future and they get burned. I don't think LTCM purposely went up in flame. It was hubris to think that economics was a hard science and the nirvana of risk free money had been achieved. As we cannot turn economics into a har science let us not hold all of them to that standard. However we should call them out on their claims that it is a science. It is no more a science then psychology or sociology and holds many of the same quackery adn insane ideas.
True, but I think that's largely because of how the morons practice economics. While predicting individual and aggregate human behavior may be stochastic beyond that for which we can ascribe a reasonable confidence interval, the thrust of economics could rather have been data and model driven, thereby removing individual and aggregate human behavior as the fundamental concept.
Economists miss the fundamentals, and instead spend all their time on concepts that are not key. Economists are distracted with the big sparkly thing (human behavior), and thus ignore their actual job (credit and debt and cycles). If I were fully lobotomized to become an economist, I wouldn't care how a person or a group felt this morning, or whether they like walks on the beach. I would compute that they cannot service their debt, no matter what was their mood or what they had for dinner last night, and I would focus all my attention on repercussions from debt default (since that is unavoidable).
Economists are morons that spend all their time on the wrong stuff (mostly bossing us around). See my comment above regarding Steven Keen -- He's doing the heavy lifting for his entire field, and I don't need to share his religion to agree with his conclusions.
Agreed that economic charts and models are mostly a waste of time. However, that's because they were made by and interpreted by morons. I think you *can* have good ones, but that's hard to do (the author can't be a moron).
Most economists are morons.
Academics today are far dumber than they were in the past. Keen likes Minsky, but unfortunately Minsky didn't have the tools (computers) to do what he wanted. Minsky assumed people someday would be smarter and could do the actual work.
Fast forward: We now have smarter tools (computers) and dumber economists.
Most people are simply not smart. Thankfully, nearly all people are smarter than economists. I hear that nearly half of all people nowadays are below average. Those are the ones working at the Federal Reserve.
Very good point on the distinction between hard- and soft-science. Mathematics is a hard science (inviolable principles), while Sociology is a soft science (patterns that tend to be created). Today, economics is neither.
I actually think economics could eventually become a hard science, but I'd even be happy if they would act like a soft science: ANY science. You know, SCIENCE: idea ==> test. They don't do that because they are morons, and they are too stupid to realize they are morons.
Ironically, if you're too stupid to realize that you're stupid, the only way to fix that is to actually become proficient in the field in which you are stupid, so that you can become smart enough to realize how stupid you are. Dear Lord, economists are stupid.
thank you for your careful distinction, particularly with regard to hayek and von mises. even when you agree with their policy prescriptions you do see them as policy prescriptions. nice earlier mention of "religion" as a major component of modern "economics". what else could describe greenspan's all but undying belief in the beneficence of unregulated financial markets despite all the evidence of his lyin' eyes?
I do generally agree with their policy prescriptions -- but that's public policy. It's somewhat based on logic, and past experience in policy success and failure, but I hesitate to actually call it economics. (This is a debatable point, where it's conceivable I could be convinced, where the devil is probably in the details.)
However, in illustration, let me run to the other side of the boat: Steven Keen has put together mathematical models that shows what happens if you have *no* money, and *only* credit. He shows the cycles that result. Those cycles happen to map to what we see in the real world, FAR better than any other model proposed. No policy proposals, no preaching, no philosophy, no theoretical expectation of individual or aggregate human behavior, nothing taken on "faith".
Rather, it is merely a framework that shows what happens when these certain rules exist. THAT'S ECONOMICS (a testing of economic ideas).
Economics can be more stuff too (not just modeling), but it needs to be more sensitivity analysis, and less philosophy.
So yes, I agree that Hajek and Mises offer much for policy prescriptions that I would support. However, my support is because we have experience with past successes and failures in public policy, not because I find the argument to be principally "economic".
How can you say Greenspan had a belief in free markets? Simply because he said he did? If Hannibal Lector claimed to respect human life and that he would never harm a soul would you have him over to dinner? A man is judged by his deeds not words! And Greenspan's deeds show he would have fit in well in the Soviet Politburo.
So November is the Mother of All Wild Cards? Do the fibs and how many deviations are we talking about here?(Rickards explanation of their 'synthetic bell curve' would take it - all of what you all speak - on the steep part of the WTC airline attacks.
Aren't we talking about a correction that takes us back to where this country started three centuries ago? Middle America clearly feels its back to the wall. When I talk about dry powder it's coming in the form of a mouse click.
Middle America is talking a new game now. When there is one last chance to get it right....anyone have a chart from the 1700's?