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Guest Post: Why Expansionist Central States Inevitably Implode

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The Expansionist State is on the path to insolvency and systemic political crisis.

The S-Curve usefully charts the gradual development, explosive rise and eventual stagnation and collapse of complex systems. Remarkably, natural phenomena such as the spread of bacteriological diseases and financial dynamics both follow S-Curves as they mature, stagnate and collapse. I have described the dominant dynamic of our era (1981-present), financialization, with the S-Curve: Financialization's Self-Destruct Sequence (August 16, 2012)
The S-Curve also helps us understand why the Expansionist Central State is doomed to inevitable implosion/collapse. This chart displays the key dynamics:
 
In its initial "boost phase," State investment in the low-hanging fruit of public infrastructure offers a high yield. Examples include rural electrification, the rapid expansion of the railroad system, the construction of the Interstate Highway system, and the publicly funded research and development of science and technology that enabled the basic protocols and software infrastructure of the world wide web.
 
These investments of public tax revenues acted as multipliers of private investment and leaps in productivity.
 
We can see in the chart that modest fiscal deficits when public monies are leveraging fast growth in the overall economy have little consequence, for tax revenues are climbing more or less alongside State expenditures as the economy rapidly expands.
 
The key dynamic in State spending is this: the allocation of public capital is intrinsically a political process, not a market or communal process. Thus politically powerful cartels and guilds will secure State funding for their vested interests, and potentially higher-value investments will go begging.
 
This is the opportunity cost of any financial decision: the opportunities left behind in the decision-making must be weighed along with the purported benefits of the chosen avenue of spending.
 
As the State expands its share and control of the economy, this political allocation of capital and national income also expands. As the State grabs an ever-larger share of the economy and extends its Central Planning to every layer of the economy, the "best game in town" inevitably becomes lobbying the State for funds and perquisites.
 
Private investment decisions start being made on the basis of State subsidies and tax loopholes rather than market-based metrics. This dynamic is especially pernicious: not only does the State increasing choose to fund projects with diminishing returns as a result of political allocation, the State's expansion of command and control distorts private investment as well.
 
The Expansionist State thus distorts the investment decisions of the entire economy, public and private. Households don't buy a home because it is a fruitful investment, they buy it to obtain the mortgage interest deduction. Corporations buy medical-supply companies because they see Medicare as low-risk cash-cow, and so on.
 
State expenditures cease to yield productive returns as spending increasingly goes to politically favored cartels. Did the billions of dollars spent on the B-1 Bomber in the 1980s yield a weapons system that provided leverage amd dominance? No, it was a horrendously costly and inefficient jobs project, with the defense cartel skimming millions of dollars off a program that had been terminated by those who realized the money would be better spent on other defense needs.
Has higher education improved dramatically as a result of the vast increase in spending on higher education? Has the health of American improved dramatically as a result of the vast increase in spending on healthcare? The answer in both cases is obviously no. Increasing spending simply increases systemic friction and unproductive skimming.
 
Central State spending has reached the point of negative returns: money is dumped into cartels but the yield on the investment is near-zero. This is the point of stagnation, where spending keeps rising but tax revenues are no longer keeping pace because the State has become an enormous drag on the economy.
 
Political allocation of the national income knows no bounds. Politically, there are never any limits. If tax revenues aren't keeping pace, then the State must borrow increasing sums of money to fund its spending. Politicians and their State fiefdoms/private-sector masters, the cartels of finance, defense, healthcare, education, construction, etc. are screaming for more funding; where it comes from is secondary to easing the political pain.
 
So the political class raises taxes on all but the parasitic class (finance) and wealthy cartels and corporations buy loopholes and exclusions to the new taxes. The burden falls on higher income households, who then have less to invest in the private sector.
 
We are at the inflection point indicated on the chart where the lines cross, just before the crisis: tax revenues are lagging spending in an enormous structural deficit; the State dominates the economy and its spending cannot possibly be contained, due to the political promises made to entitlement constituencies, fiefdoms and cartels, and the drag of unproductive State spending has sent the economy into systemic decline.
 
Each constituency, cartel and fiefdom is convinced that they are acting in their own best interests in demanding more State funding and subsidies. As a result, they are blind to the consequence of everyone becoming dependent on the Expansionist State: the collapse of a system that is now yielding a highly negative return on State spending.
 
When State spending is expanding faster than tax revenues (which are a function not just of tax rates but of economic expansion) and the underlying productive (non-State, non-finance) economy, then the gap can only be filled by borrowing money. This works until the interest on the fast-rising debt begins to crowd out spending on entitlements and other politically protected programs.
 
Progressives assume all State spending is productive; this is clearly a false assumption. Some State spending may be productive, but when it is allocated by a corrupting political process, the inevitable outcome is most State spending devolves to unproductive transfers from the politically weak to the politically powerful.
 
Tweaking tax policy or raising the debt ceiling will not change any of these dynamics.The Expansionist State is on the path to implosion (insolvency) and collapse, i.e. a political crisis. If we understand the core dynamics of the Expansionist Central State--the political allocation of scarce national income to favored constituencies and cartels--we understand why this process is inevitable.
 
France offers an illuminating example of this path to implosion and collapse, but every Expansionist Central State from China to the U.S. is also on the same path. France, the Hidden Zombie in Europe (Mish).
 
I describe these dynamics in more detail in my book Resistance Revolution Liberation: A Model for Positive Change.


New video with CHS and Gordon Long (25 min.): 2013 Themes:

 

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Tue, 01/15/2013 - 12:50 | 3154314 Supernova Born
Supernova Born's picture

Sweet. Let's hope so.

Tue, 01/15/2013 - 13:00 | 3154356 slaughterer
slaughterer's picture

OT but the Russell 2000 is really crushing small cap shorts right now with a gigantic bullish divergence.  "Jan effect"

Tue, 01/15/2013 - 13:26 | 3154418 the mad hatter
the mad hatter's picture

intriguing. how then, is the s curve reset?

forests have fires that sweep through forests overcrowded with dead trees to make way for new life. the nutrients stored in the dead tree trunks are returned to the earth which nourish the seedlings. what is the forest fire of political systems?

Tue, 01/15/2013 - 14:16 | 3154452 Supernova Born
Supernova Born's picture

Great Q. Looking for quote from a general concerning those with the will to fight vs. those who have lost it.

Tue, 01/15/2013 - 13:52 | 3154514 The Phu
The Phu's picture

Tommy J said it best: "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants."

Tue, 01/15/2013 - 14:34 | 3154662 Flakmeister
Flakmeister's picture

No doubt while he was planting his own seed of liberty....

Tue, 01/15/2013 - 13:52 | 3154516 Urban Roman
Urban Roman's picture

Depression famine epidemic insurrection ... war.

Tue, 01/15/2013 - 15:08 | 3154794 DeadFred
DeadFred's picture

I've worked with this in bacterial cultures in the past. First the explosive exponential growth phase, then the plateau phase, and finally the terminal phase as the culture dies from swimming in its own excrement. You can restart the culture if you take a small sample early enough and add it to new nutrients but that route has risks since any scavenging contaminant organism (e.g. TBTF bank) could outgrow the desired strain in the end phase. It's best to go back to the saved starting culture for a fresh restart. It's hard to describe how bad the culture can smell toward the end.

Moral: Throw out the TBTF banks, the nanny-state and restart with the Constitution and free markets.

Tue, 01/15/2013 - 13:27 | 3154422 trav777
trav777's picture

this was a stupid article

Tue, 01/15/2013 - 13:51 | 3154511 Panafrican Funk...
Panafrican Funktron Robot's picture

Agree, once again, a pretty simple failure to understand the difference between real and nominal yield.  Anyone shorting markets on the basis of a fall in real yield is going to die.

Tue, 01/15/2013 - 13:10 | 3154379 Buckaroo Banzai
Buckaroo Banzai's picture

Um, yeah, we all "hope so". Problem is, Expansionist Central States tend to kill a lot of their own people as they implode.

There isn't anything good about this.

In related news, it looks like Cuomo's gun laws are getting done. Republicans rolling over en masse. Interesting "feature" of the new law: mandatory life in prison without parole for anyone who kills a First Responder. Because we gotta protect the "First Responders" who "respond" to reports of certain types of illegal equipment, don't you know.

There are some sick, evil people in charge in New York State.

Tue, 01/15/2013 - 13:30 | 3154432 Supernova Born
Supernova Born's picture

"There is nothing wrong with you that painful and expensive treatment can't prolong."

Accepting hospice doesn't make a terminally ill patient a quitter.

Tue, 01/15/2013 - 12:51 | 3154315 Snakeeyes
Snakeeyes's picture

Great chart!

Look at the real GDP of the US, Germany, France and Spain. All the central bank stimulus is wearing off and its down hill from here

http://confoundedinterest.wordpress.com/2013/01/15/game-of-thrones-gold-...

Tue, 01/15/2013 - 13:51 | 3154510 Anusocracy
Anusocracy's picture

When those in control of a country's economic system are thieves. they will destroy it. That means government.

Free markets work because those who produce must please their customers, not use them as objects.

In today's world, there is more slavery  than ever before. But, like those in early America, the slaves are comfortable with it.

It feels right.

Tue, 01/15/2013 - 12:54 | 3154329 Shizzmoney
Shizzmoney's picture

How long can this Neo-Feudalized Central State last, however? 5 years? 20?3

I'm getting too old for this shit, and I'm 30!

Tue, 01/15/2013 - 12:59 | 3154345 Cognitive Dissonance
Cognitive Dissonance's picture

It can last a whole lot longer than you or I think it possibly could.

Maximum frustration for all involved......except of course for the top 5%. 

Tue, 01/15/2013 - 13:05 | 3154373 Ying-Yang
Ying-Yang's picture

Charles... your chart looks like my lifetime testosterone levels. Heh.

Tue, 01/15/2013 - 13:32 | 3154444 zapdude
zapdude's picture

Exactly, CD.  By all rights, things should have imploded long ago in 1933, or in 1971, or in 1987, or in 2001, or in 2008...  The laws of economics can be suspended, or rather the consequences for violating the laws of economics can be delayed, far longer than the informed observer believes possible.  This suspension / delay is possible by deception of the masses by the few in control of most of the world's wealth. 

Not sure what TPTB are waiting for -- amassing larger hoardes of gold for themselves, full implementation of a global control-grid for the masses, alien invasion, etc?

My personal belief is the next global financial crisis, which is probably on a slow boil right now, will lead to a psuedo global currency and will take us all much closer to a global government at the expense of individual liberty.

I wonder what percentage of Roman citizens were prepared and aware of the empire's vulnerable state when the city was finally sacked?  My guess is many, like today, had been lulled into apathy through bread and circuses and a vested interest NOT to view reality as it actually was.

Tue, 01/15/2013 - 14:12 | 3154577 MachoMan
MachoMan's picture

You have the global powers that be winning the argument, but what is necessary for this to happen?  (1) Permanent collusion among the world's largest players and states [what does game theory say about this?]; (2) the tribute payments to the mob (the masses) continuing and continuing in a manner that keeps up with the effects of monetary prolifigacy...  e.g. the collusion referenced in (1); (3) a cheap and abundant energy source other than oil that is harnessed and realizeable by the world at large (thereby stemming the rise of localization); and (4) a security apparatus that is technologically advanced enough to act as a force multiplier in the millions.

I think the push towards centralization will continue until the entire charade collapses... real world centralization will not materialize as you see it.  In reality, we already have a single world government and a single world currency...  this has proven to be quite a failure. 

Tue, 01/15/2013 - 14:46 | 3154707 zapdude
zapdude's picture

All good points and I agree. 

To summarize: 

  1. In order for TPTB to pull off their grand scheme, they must have a significant level of control over global factors (you provided a good starting list) and unshakable consensus amongst their internal factions.  I believe they don't have these, since these are mere mortals and are not omniscient or completely aligned in their deep evils, and therefore will ultimately fail. 
  2. However, they are convinced they can overcome these shortcomings and will try to achieve their goals in global domination nonetheless, and in the process, millions (or billions) will likely die.  I believe we will see, perhaps soon, a fully unmasked attempt at global control beyond what we're experiencing today.  The State will strangle the Individual as it rots from within.  Instead of winners and losers, it could become "survivors" and "victims".
Tue, 01/15/2013 - 15:16 | 3154795 MachoMan
MachoMan's picture

Not a dispute here...  although, I think the focus is largely western...  there will be many locales, as now, that literally have no idea nor care about the machinations of power and control...  likewise, there are similar pockets even in the CONUS.

The thing about less subtle measures for control is...  they tend to cause immediate reactions not necessarily contemplated by the implementing faction.  This is why subtle control is always preferred...  you can much more closely predict the reaction with much less risk should it fail...  and, if done correctly, have significant plausible deniability should it fail.  Not so much with heavy handed authority...

If you do see more heavy handed measures for control, then we're really, really close to the end...  at this point, given the level of understanding regarding manipulative practices, if they opt for the heavy handed approach, they're incredibly desperate... 

Tue, 01/15/2013 - 14:59 | 3154775 Dick Buttkiss
Dick Buttkiss's picture

Right, CD, for if the USG is good at anything, it's extending and pretending.

But methinks there's a Black Swan out there getting ready to flap its wings.

Tue, 01/15/2013 - 12:56 | 3154336 nobusiness
nobusiness's picture

Is every penny coming out of AAPL going into the Russell 2000?  bullshit

Tue, 01/15/2013 - 12:57 | 3154340 Flakmeister
Flakmeister's picture

As if what is ultimately wrong with western civilization can be fixed by collapse of a few entities....

It goes much deeper than that....

Tue, 01/15/2013 - 13:16 | 3154391 mayhem_korner
mayhem_korner's picture

 

 

Only in a liberal's mind is massive and growing central state a "western civilization" concept. 

Tue, 01/15/2013 - 13:23 | 3154414 Flakmeister
Flakmeister's picture

Do you also play a clown on other websites?

It is remarkable how often you demonstrate that you have no grasp of what other people are talking about...

Tue, 01/15/2013 - 14:01 | 3154538 mayhem_korner
mayhem_korner's picture

 

 

Just trying to bring accountability to unsubstantiated, broad-brush statements.

Tue, 01/15/2013 - 14:07 | 3154565 Flakmeister
Flakmeister's picture

You should seriously consider looking in the mirror....

Tue, 01/15/2013 - 14:17 | 3154597 mayhem_korner
mayhem_korner's picture

 

 

Why don't you explain what you meant in your original comment on this thread instead of projecting onto me?  Would do more for your credibility than attacking others.

Tue, 01/15/2013 - 14:49 | 3154678 Flakmeister
Flakmeister's picture

Buddy, you started with slurs, you left the high ground (not that you have *ever* held it)  If you chose to make an intelligent comment and not some knee jerk bullshit then you might have gotten the response that you seem to desire...

As for the meaning of my statement, if you cannot figure it out or at least fix your bearings on what direction I was heading then I suggest that you STFU and try to engage someone at your level of discourse or at very least learn to be polite...

Tue, 01/15/2013 - 14:29 | 3154628 falak pema
falak pema's picture

dominant western civilization concept of this age : Pax Americana morph.

Does that make it less "liberal" and more digestible?

Your emphasis on accountability acquires cogent meaning in this train wreck; but we've seen so many of those in the past! 

So history rhymes or repeats and its the same nucleus of western civilization concepts/value systems and their blatant betrayals that essentially runs the world since 1492 days. 

Tue, 01/15/2013 - 14:56 | 3154749 mayhem_korner
mayhem_korner's picture

 

 

What you're really saying is the "western" concept has essentially been upended by central planning.  That statism has uprooted the basic tenets set forth by John Locke and codified by the Framers and debated in the Federalist Papers.  The penultimate distillation of "western" ideals was that which is reflected in the Constitution and Declaration.  The authors went to every length they thought possible to warn against yielding individual sovereignty to the state.

So "history rhyming" as you say is to argue that the "western" ideal has (again) fallen prey to another ideal - one espoused and lobbied for by liberals who subscribe to consolidation of power in a central regime.  You have made my point - thank you.

Tue, 01/15/2013 - 15:15 | 3154810 Dick Buttkiss
Dick Buttkiss's picture

Yes, mayhem, but the Federalists (more aptly named Hamiltonian Centralizers) won with a Constitution that was easily subverted to their purpose, their precious central bank having to go through a few fits and starts before it finally gained a foothold and then took control.

And yes, it's going to be ugly as the world's major powers, all expansionist states, reach their inflection points, and poof!, to the canyon floor, in classic Wile E. Coyote fashion.

This put history on the side of a massive devolution of political power, however, and in the case of the US, this means that power will devolve back to the constituent states via nullification and secession, the former having already begun the process (not just with drug decriminalization but with reverse criminalization of federal intervention -- http://thenewamerican.com/usnews/constitution/item/14187-wyoming-bill-would-nullify-obama-gun-control-jail-feds -- while the latter merely awaits a sufficient level of default on the USG's $222 trillion in unfunded welfare obligations -- http://www.theburningplatform.com/?p=38718 -- for the American people to say to their Union what the Soviet counterparts said to theirs: "No more."

The state can kiss my ass.

Tue, 01/15/2013 - 16:22 | 3155103 falak pema
falak pema's picture

ave caesar, the original western icon! 

Don't blame it on the sons of democracy!

Your perception of western civilisaton begins in 1776...a bit short! 

And, today we are back to Caesar or what preceded : a Senate of Optimates; thats what they called the corrupt neo-cons in those days, the two hundred families who built the empire. It led to one who had fewer scruples about crossing the Rubicon into dictatorship than the club...

History may rhyme again. 

Your current (and past) perception of history is distorted. Oligarchy is not democracy. And we are in oligarchy. 

Tue, 01/15/2013 - 17:19 | 3155442 mayhem_korner
mayhem_korner's picture

 

 

neo-cons?  Your colors are gushing, Brutus... I wonder where liberals would be without labels and revisionist history.

By the way, "we" - which I assume you mean to be the U.S. - was never a democracy nor ever intended to be a democracy.

Tue, 01/15/2013 - 13:00 | 3154355 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Couldn't this whole mess be modeled with a certain degree of accuracy using a Lotka-Volterra predator-prey type system of equations? When you get right down to it credit and debt should be able to be substituted for predator and prey.

Tue, 01/15/2013 - 13:08 | 3154378 mayhem_korner
mayhem_korner's picture

 

 

You leave no possibility for the intervention of discernment.  While it may be rare, it is not extinct.

Tue, 01/15/2013 - 14:46 | 3154708 Flakmeister
Flakmeister's picture

Eh? Do you even know what he was talking about?

Tue, 01/15/2013 - 15:36 | 3154893 Titus Flavius C...
Titus Flavius Caesar Vespasianus Augustus's picture

I assumed that by predator he meant the drone.

Pretty sure that's the only way that query makes any sense, dude.

Tue, 01/15/2013 - 13:16 | 3154392 forwardho
forwardho's picture

Or even bacterium within a finite amount of growth medium.

Tue, 01/15/2013 - 14:05 | 3154550 Urban Roman
Urban Roman's picture

There is always a numerical solution for L-V, but it does not always end happily for the Attofoxes. +1.

Tue, 01/15/2013 - 13:02 | 3154361 Peter Pan
Peter Pan's picture

It appears that governments have outlived their usefulness in the sense that their expenditure now produces a one off GDP return only to be followed by a string of negative returns due to their expenditures not providing ongoing positive cash flows but only interest expense on the greater debt created by deficits.

Tue, 01/15/2013 - 13:11 | 3154381 Waterfallsparkles
Waterfallsparkles's picture

More and More People have decided to live on the Government.  Either thru Welfare or Disability.  After all everything is taken care of for them.  Including housing, energy assistance, food, health care, etc.  They do not have a worry in the World.  They believe that the Money comes from the Government.

Who can blame them.  No one thinks that the Money they get comes from someone else paying into the Government.  Just from a Wealthy Government that prints Money at will.

As more and more People feel that it is not worth it to work and live pay check to pay check and pay into the Government for their Money to be given away to those who do not go to the effort to Work they will stop working and get on the Free Money Train.

Tue, 01/15/2013 - 13:40 | 3154472 Titus Flavius C...
Titus Flavius Caesar Vespasianus Augustus's picture

Way to take your eye off the ball.

The tax breaks by large corporations, in which many of them get multibillion dollar tax breaks and/or pay absurdly low effective rates, is much more a theft of the wealth of the middle class than all the SSDI phonies in the country.  Naturally, the real crooks would prefer to distract you with the prospect of the proverbial welfare mother having kid after kid and getting paid to watch The View.

Meanwhile, military contractors from Lockheed to Halliburton are absolutely ass-raping you.  They are building supercarriers too expensive to actually put into the dangers of naval battle, over-priced, ineffective jets, and $10 cans of Coke for the troops.

So while you're complaining about the easy targets you are fed, folks that effectively cost you pennies, you are being taken for hundreds, as military-industrial complex and bankster semen paints your colon an unenticing off-white.

Jesus, dude.   Get your head out of your ass.

 

 

 

 

Tue, 01/15/2013 - 15:12 | 3154808 Panafrican Funk...
Panafrican Funktron Robot's picture

Example:

$85 billion a month in treasury and MBS purchases.  These purchases are a tax, that we plebs are made responsible for paying.

This is a $1.02 trillion dollar tax on an annual basis.

The banks are the direct beneficiary of this tax.

Meanwhile, income security payments total $402 billion on an annual basis.  

Tue, 01/15/2013 - 15:40 | 3154914 Titus Flavius C...
Titus Flavius Caesar Vespasianus Augustus's picture

the treasure purchases are basically a direct tax.  the mbs purchases are an indirect tax in the form of keeping home prices artificially high to protect the banks which are now gobbling up homes by the tens of thousands, in order to rent them out to the people they foreclosed on - ofter after making tens of thousands in payments to a bank that created the money to loan it to them for their mortgage... by fucking loaning it to them.

The truth is so strange, the average bear probably can't and won't believe it.

 

Tue, 01/15/2013 - 13:17 | 3154395 pods
pods's picture

Lotta words and fancy graphs to show that debt currencies issued at interest always implode.

pods

 

Tue, 01/15/2013 - 13:26 | 3154420 Cognitive Dissonance
Cognitive Dissonance's picture

Dude.......I assure you that this time it's different.   :>)

Tue, 01/15/2013 - 13:38 | 3154461 Skateboarder
Skateboarder's picture

It actually is, not for the better but for the worse, because of the 'advanced technology' (as compared to previous civilizations) and the means of chemical pacification on a population-scale we have today.

Not to be a downer, for I have only the highest of hopes for a free dawn to come... but we is fucked son. We. Is. Fucked.

Tue, 01/15/2013 - 14:19 | 3154605 MachoMan
MachoMan's picture

I'm not sure that this vision will be successful this boom/bust cycle, but you may be right for the next round.  The residual technology (and experiment results) will be available for whoever decides to pick up the torch of control next go round.  The control mechanisms become more and more subtle...  and the boom/bust cycles become longer and longer.

However, that said, no one can predict how the cookie will crumble in the bust.  Anything can happen...  although, from induction, I think you are correct...  but it IS NOT a given.

Tue, 01/15/2013 - 16:27 | 3155153 marathonman
marathonman's picture

After 2008 I realized that yes, our whole monetary system is a Ponzi scheme.  And yes I have only the highest of hopes for a free dawn to come, but I'm not counting on it.  These fuckers controlling us won't allow another Lehman type event.  They will print, they will steal, and yes they will kill anyone and everyone that gets in their way.  I unfortunately agree with your assesment.  We. is. fucked. 

Tommy J, Where are you now?

Tue, 01/15/2013 - 13:58 | 3154529 August
August's picture

Correct.  Now, at last, we have Nobel Prize winners advising the powerful.  Top men!

Tue, 01/15/2013 - 13:46 | 3154493 Titus Flavius C...
Titus Flavius Caesar Vespasianus Augustus's picture

Presumptions of infinite growth intersecting with consequences of finite resources - and entropy, in the forms of waste, theft, misallocation, and opportunity costs.

 

Even if our money were literally silver and gold coins, the same forces of greed, stupidity, and love of power would eventually fuck it up.

 

fiat paper just accelerates it by overlaying the prima facie absurd idea that you can keep loaning money into existence at an accelerating rate while extant capital is increasingly allocated to compound interest.

 

Compound interest has brought down more than 1 empire.  and it's tended to enrich the same group of money changers over and over.

 

Tue, 01/15/2013 - 13:20 | 3154405 busted by the b...
busted by the bailout's picture

Don't hold your breath.

You will grow old waiting for "the collapse".

Tue, 01/15/2013 - 13:34 | 3154435 trav777
trav777's picture

Sigh.

How long did it take for Rome to collapse?

Foolish humans.  Hell, there were massive die-offs and extinctions, some of which killed 90% of the species on the planet, and they took place over 100s of 1000s of years.

They're "punctuation" in the geological record but they endured over a timescale incomprehensible to humans.  The collapse of empires rarely occurs in any kind of human instant; even Russia is still there, their institutions still exist, life goes on.

It ISN'T a collapse; it is a deflation.  You are living in it right now.  It's happening all around you.

Tue, 01/15/2013 - 13:35 | 3154454 Dr. Richard Head
Dr. Richard Head's picture

I'm not, sure I do know it wasn't built in a day.  Hope that helps.

Tue, 01/15/2013 - 14:06 | 3154561 busted by the b...
busted by the bailout's picture

Anything that occurs over "100s of 1000s of years" is not a collapse; it is a decline.  Imo, this joker is always selling / predicting an economic apocalypse that is going to come crashing down around our ears, in our lifetimes, not over 100s of years.

Also, the "deflation" we are experiencing is the result of deleveraging of a private sector debt bubble, not the spending of an imaginary progressive "expansionist central state".  (Btw, was the B-1 program a progressive program?  I don’t think so.  Federal spending is not limited to one ideology.)


“Fear the collapse”, like sex, sells.  Buy the book!

Tue, 01/15/2013 - 15:18 | 3154826 Panafrican Funk...
Panafrican Funktron Robot's picture

Case in point, I was watching a PBS show about the Neaderthals, and from the introduction of the invasive competitive species (homo sapiens), it took 30,000 years for them to go extinct.  That is a sudden collapse in the earth's timeline.  

Then again, homo sapiens are probably an exercise in "this time really is different".  We could very well collapse on a much shorter timeline.  The introduction of "civilization" to our species being the "poison pill".  

Tue, 01/15/2013 - 13:21 | 3154407 Titus Flavius C...
Titus Flavius Caesar Vespasianus Augustus's picture

I think that, more simply, over time, there is an increasing misallocation of capital, by and to favor the wealthy and the entrenched political interests.

Notwithstanding what many posters on this board might seem to think - Romney's efforts at Bain were destructive, not productive, serving mainly to squeeze capital out of corporate systems to deliver that capital to people who already have an excess of it, and aren't productive themselves.

 

I'm not saying wealth is necessarily bad, at all, but when the biggest sector of your economy in terms of growth consists of coked-up fatheads trading around debt, and making absurd loans and hiding the risk thereof...  well, everyone doing productive work is essentially paying a tax to the unproductive, non-contributing cunts who "grow" the "economy" by expanding the amount of debt.

 

Why is anyone who is not a fucktard Keynesian surprised by this?

 

The state, of course, is the province of the wealthy.  Capital is misallocated, as are diplomatic efforts  {see Lobby, The Pro-Israel}.  Add to that the old-fashioned tendencies of above-the-law agencies to maintain military occupations to cover their drug business, or the banks who like to start wars to fund both sides.... and over time you get a system where the center can not hold.

 

America in its current form is doomed, of course. 

 

The much more important question is who will be putting the pieces back together.  

 

I suspect that those destroying the country on purpose  [because, you know, Bernanke knows what he's doing - this is deliberate, kids....]  already have a scheme in place, already know that The People will demand change, and they will provide it.

 

They already did this recently.  Who was more perfect a sham messiah than the one term eloquent senator from Illinois?  Surrounded by the likes of Rahm Emanuel and Axelrod and Lew...  for goodness sakes, could it be more obvious who was controlling that puppet's strings?

 

sometimes the best place to hide a 'conspiracy' in the true sense of the word is right out there in the open.

 

Rantus terminum.

Tue, 01/15/2013 - 13:22 | 3154410 Waterfallsparkles
Waterfallsparkles's picture

As the Government continues to punish Hard Work with even more and more Taxes.  People will learn not to work so hard.  To make less to keep the Tax Bracket down and to cut all non essential expenses.

So, live a very modest life.  Below your means. Buy a smaller House, buy a very small efficient car, start to eat more rice and beans, cut out all expensive cuts of meat, cut down on your cabel, downsize your cell phone to a $10. a month pre paid phone, keep your heat at 60, or buy a wood stove and cut up wood.

Why make a lot of Money for it to be taken away and given to those who chose not to work?  Or to give to Foreign Governments as Foreign Aid.  Or to give to Corporations in the form of subsidies.  Or to fund Wars overseas that are not Wars.

Change your deductions to 9 dependents and lower your income as a protest to higher Taxes and Government mis spending.

Tue, 01/15/2013 - 13:40 | 3154473 rlouis
rlouis's picture

ye ol' USSR quote: "They pretend to pay us and we pretend to work."

Tue, 01/15/2013 - 14:13 | 3154589 trav777
trav777's picture

that life sounds like it sucks

Tue, 01/15/2013 - 14:48 | 3154720 Flakmeister
Flakmeister's picture

To some it will seem like the good ol' days....

As far as sucks go, it all depends on your value system....

Tue, 01/15/2013 - 15:25 | 3154854 Panafrican Funk...
Panafrican Funktron Robot's picture

There's something to be said about "fuck it, let's eat steak on credit".

Tue, 01/15/2013 - 14:52 | 3154742 joego1
joego1's picture

I don't see any reward at the end of the tunnel for making a shit load of money at this point of the game. The great equilizer will fix any of that.

Tue, 01/15/2013 - 13:38 | 3154462 yt75
Tue, 01/15/2013 - 13:46 | 3154476 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

The Leftists in charge - Obooba & Co - are accelerating the expansionism of the state to get to the edge sooner, producing a sufficient sense of fear and desperation to enable them to manage to employ their 'solution'.  Their solution is an adaptation of a business strategy, the 'roll-up', whereby economies of scale are theoretically attained by rolling-up, combining into one, numerous small business entities, such as, say, drug stores, into a larger entity. 

The roll-up strategy, applied to nations, produces the Leftist's Dream, the New World Order.

Tue, 01/15/2013 - 14:41 | 3154685 Peterus
Peterus's picture

If they would actually integrate globe into one country - we would be trully screwed for decades.

There is already a lot of wiggle room to keep on playing, even though the wallet is empty. If people had nowhere to escape to (now with serious immigration restriction it is already limited) we could have relatively stable world-wide North Korea. Government as remote from people as possible, with effectively infinite power and no outside threats to force some fitness onto it. All the bandits would be in one gang, sometimes backstabbing individuals but united as a group.

Tue, 01/15/2013 - 18:40 | 3155747 Freddie
Freddie's picture

This is pretty much was the EUSSR and Washington DC are.

Tue, 01/15/2013 - 13:42 | 3154478 kchrisc
kchrisc's picture

This article hits the nail on the head even before it gets started:

"Remarkably, natural phenomena such as the spread of bacteriological diseases and financial dynamics both follow S-Curves as they mature, stagnate and collapse."

That isn't "remarkable" because that is what all in government are.

Tue, 01/15/2013 - 13:48 | 3154501 the not so migh...
the not so mighty maximiza's picture

S for shit, and leave off the last s for savings.

 

Tue, 01/15/2013 - 14:08 | 3154555 IamtheREALmario
IamtheREALmario's picture

Interesting. There still might be a bigger picture.

My conclusion from listening to the interview is that for the rulers of the world to be successful, they need to find something productive or something fulfilling to do with all of the people. They create militaries and wars, but that is not productive. They create bureaucracies and spy networks, but that is not productive. They create an entire environment of conflict so that people can be employed to both create and resolve the conflicts.

Why the f*ck don't we use the people to start building pyramids all over the world ... and maybe, just maybe that was our predecessors answer before the flood... but even that did no help to save us.

So, with increasing automation and technology fewer people are required to service the basic and even luxury needs of the population. How many times can the deck chairs be arranged. How many diseases can be created and how many people are required to find the cures. We need more crises so that we can have more solutons.

When all else fails and an entire portion of the population is dormant, just put it on life support with food stamps ... at least that will employ a few people to administer the system, same with education, same with FDA, same with HSA, same with EPA.

Obviously the last resort for incompetent rulers of the world is to kill off a bunch of people so that the problem of having to keep them busy and productive goes away. An alternative might be just to turn the people loose and let them do whatever they will do, but is that the action of a responsible "god" (intentionally with the little "g")? I have long believed that the most stable and productive environment is one where it is most distributed. Not only can people contribute important productive things to their smaller group but more labor is required to maintain all of the groups than when things are centralized and mass produced. The growth and centralization paradigms seem to be in direct conflict with stability... contrary to what we have been led to believe.

Tue, 01/15/2013 - 14:30 | 3154646 Peterus
Peterus's picture

Post-scarcity has been done to the death for over 150 years. Each time it is "completely new situation", "total game changer" etc. It is not.

Human want is practically boundless. I would like to have my own faster-than-light spaceship for example... I don't get it, as there many wants more urgent than turning entire population of Earth into institute of researching and building this spaceship. Even disregarding physical goods I have number of goals I could pursue - but have to choose only a few of them. Involuntary unemployment is entirely an effect of social policy. Economy is not about providing minimum of food, water and shelter. Leisure time, satisfaction from accomplishment etc also factor in it. Even if machines do all non-creative jobs more effectively than humans it will only free that labor to creative work.

---

Rulers want the fruits of 7 billions people cooperating in possibly market-based environment thinking they are free and quite happy. At least willing to work hard without slave driver supervision. Having a huge share of that would be their best outcome. They had it pretty close with democracy obscuring boundry between farmer and cows, keeping cows happy and systamatically milking them. It seems that age is about to end. Will they just let it go and see where the chip fall? Or will they take of the glove from iron fist and grab us by our throats?

I'd say they might have some genocide. Not so much as to reduce population, but to instill some real, primal fear in survivors. If 2 billions were to die, the other 5 would gladly take a bowl of rice and not bitch about not having new iphone, or slow internet connection. Capital destroyed by current malinvestment and WW3 would be painfully rebuilt over a few generations and the game could go once more - with rulers never loosing control, never risking public prosecution - though taking some minor risks in the war.

Tue, 01/15/2013 - 14:49 | 3154721 joego1
joego1's picture

What if for a start we give people an incentive to grow some of the food they eat?

Tue, 01/15/2013 - 14:08 | 3154569 sschu
sschu's picture

Pretty graph, maybe true.

How about some empirical evidence to support the theory?

I think we have reached the point where the return on marginal debt is negative, I have seen analysis to that effect.

sschu

Tue, 01/15/2013 - 14:27 | 3154637 Clesthenes
Clesthenes's picture

Your observations raise the question, ‘Is destruction of the system (or Western civilization) avoidable?’

Of course not.  Criminal and useful-idiot classes bought government debt because they expected to reap enormous booty with impunity.  Since government debt is the mechanism by which a generation of tax consumers financially cannibalizes following generations of taxpayers, the only way it works as planned is by following generations to cannibalize themselves.

And, rest assured: it will happen.  Following generations (and we are among such) will either submit to crushing taxation (that is, crushing poverty); or, they will resist and inexorably be driven to crushing poverty.  And, it will never occur to them they had a different choice.

And so, those who respond with ignorance will end as a mass of rotting slaves, available to any chance warlord, and wanted by none: the ultimate insult.

So, the main question now is: “Who will suffer prescribed losses… those who plotted and perpetrated this pending holocaust… or those who were duped/shoved into it?”

Yes, such criminal and useful-idiot classes have been held accountable in yesteryears; but not by the propaganda that enslaves all.  They won’t tell you how to protect yourself from their plunder.

There is only one source for the knowledge that you need (so far).

There are many problems that must be dealt with, for example, “How will you protect yourself from roving gangs of starving men… or Mossad/CIA/FBI death squads?”

Sure, you have a cabin in the countryside and you’re loaded with guns, gold and food.  As soon as word spreads, you’ll be surrounded by a horde of hungry men.  You display your gun; they back off fifty yards.  Night comes; a clod of dirt bangs on your roof; you fire a shot; silence for an hour.  Another clod lands on your roof; you fire another shot; silence for an hour.  The routine repeats till morning.  It’s a standoff the next day.  The following night is a repeat of the previous; you’ve had no sleep for 48 hours.  Another standoff the following day; another night.  Now, 72 hours without sleep.  How long can you last?  Now you learn that if you ever close your eyes, you lose everything.

It’s so easy: a man loaded with guns and ammunition, a stash of silver/gold and food for six months; and he’s defeated by a brainless horde armed with nothing more than clods of dirt or pebbles.

Now, you don’t have to worry about those death squads; their work has already been done.

I suggest that you’ll do much better armed with lessons of English rebels who brought down judges and tax collectors, bishops and kings who thot they had a divine right to impose taxes/debt on other men without the latters’ consent; men who, 150 years later, would guide American rebels.

It’s a tough choice… isn’t it?

Tue, 01/15/2013 - 14:56 | 3154753 Peterus
Peterus's picture

Solitary family in the woods is no solution. All the prosperity humanity ever created was a product of widespread cooperation. Directed by prices - millions or billions of individuals can keep this going. Family in a cabin, even with some starting set of tools and lots of knowledge will be able to maybe sustain themselves alive but this is it. This is not interesting problem, we need society - and that is just it. I'd rather look at what conditions must be met to build fascist State where government rule is absolute. They can't just kill everybody - who's going to be ruled? And how will soldiers keep on killing after massacre takes even their families and friends?

Rulers need some form of consent. It can be very apathetic or driven by fear, but must be given by vast majority. They can't send in a battalion to some village every week for minor violation of their laws. At some point infantry will just desert them, they will run out of food even for the soldiers etc. They need production going - on whatever level that will be managable after the crisis - and fruits of it ready for distribution. With population of USA and some western countries deeply corrupted, with sense of entitlement and lack of basic self-suficiency (not on man for himself - but just producing something really useful for society) - they have a shot. But it's nowhere near clear how it plays out.

Tue, 01/15/2013 - 15:39 | 3154911 Panafrican Funk...
Panafrican Funktron Robot's picture

"reap enormous booty"

Sorry, couldn't get past that phrase.

Tue, 01/15/2013 - 14:31 | 3154652 kralizec
kralizec's picture

Fricken collapse already!  I ain't gettin' any younger!

Tue, 01/15/2013 - 16:00 | 3155005 orangegeek
orangegeek's picture

Looks like another business cycle model.

 

Kondratieff nails it best.

 

http://www.kondratieffwavecycle.com/images/kondratieff-wave2.jpg

Tue, 01/15/2013 - 17:08 | 3155395 besnook
besnook's picture

this is a complication of very simple dynamics. looking at the history of fiat currency the temptation has been, in every case, to print more than is prudent resulting in hyperinflation that destroys the financial status quo and the .gov. in every case printing is "necessitated" by the needs of .gov. minsky had it right. a society grows to the limits of it's ability to borrow and print and then collpases when the red reset button is pressed as the last possible solution is forced upon the economy.

 

the other thing history teaches is globalization since the first empire has meant war is signal of every pending collapse. now that the world has truly been fully integrated this war will be the war of wars, the mother of all wars, a true war to end all wars, the final reset.

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