Guest Post: Why Things Are Falling Apart... And What We Can Do About It

Tyler Durden's picture

Submitted by Gordon T. Long of,

To understand the reasons why our financial system, our economy and our present policies are unsustainable, we need to come to grips with two simple truths. First, the economy and government are an interconnected system. As such the party attempting to steer it does not have controlling power over it. The second fact is that “faster, better, cheaper” always wins, replacing the inefficient and unsustainable. This is the reality within which the system operates.

The present foundation of the system, and our economy, is Financialization. This is not by design but rather by Darwinian evolution. It has unfortunately, become the basic engine of consumer growth through its' leveraging of collateral into debt and phantom assets, such as derivatives and bubble valuations. The limiting fact to this system is that ever-rising debt and leverage is unsustainable, once household assets and incomes stop rising.

Uncontrolled financialization & unsound money, without historic exception, consistently leads to:

  • Malinvestment in the Private sector - In the private sector cheap money will naturally flow into high-risk, low-return investments. This leads to “McMansions in the Middle of Nowhere”
  • Crony Capitalism in the Public sector - In the public sector, crony capitalism secures low risk, high-return investments. This leads to “Bridges to Nowhere.”

The system in its present form has become too complex, fragile and insufficiently robust, that it is realistically unsustainable and un-governable. The unsustainable will collapse and be replaced by an arrangement that is sustainable. Creative destruction and “faster, better, cheaper” is the only sustainable system; the alternative is to cling to failed models until the system collapses.

"Any intelligent fool can make things bigger and more complex... It takes a touch of genius and a lot of courage to move in the opposite direction." (Albert Einstein)

Additionally, our economy and state are unsustainable for converging and disruptive systemic reasons, that go beyond the financial:

  • Demographics—our aging populace and the impossible entitlements promises made
  • Decline of Paid Work—automation and the Web are destroying more jobs than they create
  • Diminishing Returns of Centralization—the more power the State grabs, the more broken the system becomes
  • EROEI (energy returned on energy invested): energy may be abundant but expensive
  • Healthcare in Crisis—our health declines as we spend 2X more per capita than our competitors
  • The End of Consumerist Growth—if debt and income aren’t growing, neither can consumption
  • Globalization—the genii cannot be put back in the bottle

What We Can Do about It

“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries… and partly from the incredulity of mankind, who do not truly believe in anything new until they have had actual experience  of it.” (Machiavelli, 1532)

The better choice is to embrace technological and social innovations and “faster, better, cheaper.”, since it eventually wins, regardless of our preferences.

This means GLOBALLY accepting and INNOVATIVELY moving RAPIDLY towards a DATA System:

    D- Decentralized

    A- Adaptive

    T- Transparent

    A- Accountable

We don’t get to choose, it is the natural order!

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GeorgeHayduke's picture

For most all who see everything through an economic filter the final outcome is a destroyed planet and people in one way or another. Now all of them will tell you how their path is the path to Nirvana, but if you follow any of them to their logical conclusions, you're left with a pile of crap.

Most all of the economic models that have been created over the past few hundred years were developed in a world of increasing cheap energy supplies. IF that is no longer the case, relying on these models and putting full faith in them may prove to be the height of stupidity. We shall see. Adaptability will prove the most useful trait, but most folks prefer to cling to their beliefs.

Aurora Ex Machina's picture

Adaptability is a two-edged sword; the ability to adapt to any environment often leads to the "Grandfather paradox". No, not that trite one where you're your own grandfather, but the very real one where when your grandfather says: "I remember when this bay was teaming with more fish than you could catch, and the skies had flocks of birds from horizon to horizon, and there was no smog in the air". And, sadly, you're so adapted to your empirically experienced degraded environment, you don't believe him. Or rather, you lack the conceptual ability to even experience that belief.

I read something recently: we're hitting the last generations born without television, and the reached the point of the last generation born expecting a standard of living higher than their parents [hint: not the last one born, but the X's]. And, of course, we've long since passed the point where many Americans knew a quasi-pristine environment.


American food for thought (literally). I have a first edition Thoreau somewhere.


Nature and God -- I neither knew
Yet Both so well knew me
They startled, like Executors
Of My identity.

Yet Neither told -- that I could learn --
My Secret as secure
As Herschel's private interest
Or Mercury's affair --

SelfGov's picture

At first glance I was ready to dismiss the article because it didn't mention EROEI.  Then, to my suprise, I find it bolded.




"EROEI (energy returned on energy invested): energy may be abundant but expensive"

Ghordius's picture

"Globalization—the genii cannot be put back in the bottle"

History disagrees. Twice.

Spastica Rex's picture

Inevitability is a commonly use rhetorical device in the USA. It's really annoying.

edit: and you'll never escape it, so might as well get used to it.

Kilgore Trout's picture

"Fast, Cheap, Good. Pick two"

F. Bastiat's picture

Low expectations aren't exactly helping things.

Spastica Rex's picture

The Buddhists say that low expectations are the key to happiness. Or something like that.

F. Bastiat's picture

It certainly appears to be correct in your case.

alfbell's picture

God is an imaginary friend for adults.

alfbell's picture

When you talk to God, you're praying.

When God talks to you, you're schizophrenic.

Abrick's picture

If cheaper, faster, better, is the only sustainable option, better learn Mandarin. There is an old adage about that saying, you have your choice of two. People have unfortunately chosen cheaper and faster, over better for the last 40 years. So this is where we are. Once we realize that balance between these criteria is a necessary component of decision making there will be hope.

gnomon's picture

All in due time and nine-tenths of the world's population.

Things always have a way of working out.

bunnyswanson's picture

“I watched in amazement as a few hundred members of the Texas Academy of Science rose to their feet and gave a standing ovation to a speech that enthusiastically advocated the elimination of 90 percent of Earth’s population by airborne Ebola....”
After he finished his address, the audience burst into applause.

Executive director of the Society for Amateur Scientists, Dr Shawn Carlson, later warned in The Citizen Scientist (April 2, 2006):

“I believe, with the terrible experience of the bloodiest century in human history behind us, that all men and women of conscious in the 21st century must be proactive in our opposition to genocidal or apocalyptic philosophies, before they have the chance to inspire some new champion with the will to take their conclusions to the next step.

“When the professional scientists have lost their sense of moral outrage at such ideologies, then it falls to America ‘s great community of citizen scientists to be the conscious of science.”
John Ballantyne


Natives are stirrng.  "There is No Place Lke Home" is quite evident after millions of people have lost theirs.  There is a far easier way to deal with this.  The "Lazy Man's Approach" is what you advocate, you devil you.

Sacrifice is not what has made the "decision makers" who they are.  The trickery is an assault on our intelligence.  Polite society keeps us from saying, who the fuck do you think you are?

Creed:  My Sacrifice -

David99's picture

FED is the biggest criminal on this planet.

ZH is only doing good job and reporting correctly. Tyler is a real true person though I have never met him. FED+BOE+ECB+BOJ are the biggest manipulators and JPM +GS +20PD's act on their behalf in this Ponzi Casino. It is all rigged Ponzi Casino. JPM & GS do maximum manipulations from London as no regulators are looking what is going on daily. London is the best place to manipulate Ponzi Casino as no regulators as they are watching porno. Manipulations of highest order without any regulations as every one has been purchased and regulators watching porno. In last 10 trading days, Rio Tinto manipulated by +25% gain and regulators watching porno. JPM doing it. It is just Casino and nothing else. Regulators are watching porno, don't know how Rio Tinto is manipulating daily. On LSE, there is no checks and balances and maximum manipulations daily by Rio Tinto. The market is Casino and the biggest manipulated stock is Rio Tinto and JPM is pulling up daily and no regulations for Rio Tinto in London

honestann's picture

The present foundation of the system, and our economy, is Financialization. This is not by design but rather by Darwinian evolution.

What absolute, complete, total BS.

Financialization is exactly equal to, and a consequence of, fiat money and central banking, which is 100% artificial manipulation.

Give us a break!