This page has been archived and commenting is disabled.

When A Money-Printing Butterfly Flaps Its Wings In Japan, This Is What Happens In Greece

Submitted by Tyler Durden on 05/21/2013 09:25 -0400

Since the BoJ enunciated its actions on April 4th, the world has decided that consuming risk assets (the riskier the better) is the path to salvation. While it makes perfect sense that some level of inspiration for a global recovery makes sense (though hardly) given Japan's actions, it beggars belief that the most broke of broke peripheral European nations would see equity moves of such magnitude. On the 50th anniversary of Chaos Theory (more on this later today), it is perhaps worth remembering its central lesson – that complex interrelated systems create unexpected outcomes from seemingly benign inputs. It appears the complex inter-related world in which we live is becoming more and more chaotically unstable at the margin and this current euphoria does not approximately determine the future. There are more than enough variables out there – the butterflies flapping away – which can change outcomes in an instant.

Chart: Bloomberg Briefs

- advertisements -

Tue, 05/21/2013 - 09:28 | 3583640 LetThemEatRand

Radioactive money printing butterflies have a tendency to turn into Mothra.

Tue, 05/21/2013 - 09:44 | 3583684 spine001

First Congratulations Tyler for bringing chaos theory to the media!!! Because I was super duper pist off that its basic principles were being ignored by ALL, despite my rantings about its relevance to what it going on since 2007!

Radioactivity follows chaos theory

Nuclear plant control systems follow chaos theory

Nothing escapes its incredible simplicity and complextiy at the same tiime

The economic system follows chaos theory, wich by having humans in the middle of the differential equations makes the solutions even more unpredictable, if that were possible, which it isn't.

The key secret, beautifullly illustrated by the flap of the wings of a butterfly is that YOU CAN NOT PREDICT THE TRIGGER!

There was an economist which recognized this Kahneman with his "Theory of perspectives" wihtout knowing what he was talking about, he explained to his peers that economists "THINK" that they understand something when in reality they only have an "ILLUSION" that they do, that their brains have constructed simplified models of the reality that they lived to give them a sense of control, when in truth they had no clue about what happened or why. Which is exactly what you can prove mathematically with chaos theory.

Until next time,

a happier Engineer

Tue, 05/21/2013 - 09:55 | 3583718 Going Loco

John Mauldin nailed this years ago in his piece on fingers of instability - one of his most popular pieces. In unstable complex systems you simply cant predict where the avalanche will start or what will trigger it.

Tue, 05/21/2013 - 09:58 | 3583727 spine001

For those who want to read some basic but at the same time overwhelming and easy to follow explanantions of what we are talking about you can find a free book here:

http://www.wolfram-media.com/products/nksipad.html

Tue, 05/21/2013 - 10:25 | 3583859 Oracle of Kypseli

One other simple way to explain this is with the "heard mentality." Where the Buffalo can be pulled in one direction or another but once they get spooked Benny and the inkjets will not have a chance in hell to bring stability.

Head for the bottlenecked exits

Tue, 05/21/2013 - 12:19 | 3584372 HF Critic

Wolfram is a kook. Nutty theories and abundant lawsuits. Tyler please don't tell him my real name as I'm sure he'll sue me too for this comment!

Tue, 05/21/2013 - 11:01 | 3584023 Voicefather

"The avalanche has already started. It is too late for the pebbles to vote." - Ambassador Kosh

Tue, 05/21/2013 - 11:51 | 3584257 HF Critic

Just picked up the book "Ubiquity - Why Catastrophes Happen", which is what Mauldin cites in his piece.

Tue, 05/21/2013 - 10:11 | 3583788 tango

Spine, Great comment. Chaos theory, human unpredictability and variants are the worst enemies to central planning. Chaos theory highlights perception, still the most important factor in economic determinations. One reason these brain models fail is that they are far less complex than the real world. This also explains the popularity of belief in the supernatural and conspiracy theory - by far the easiest "answer" to any problem.

Tue, 05/21/2013 - 09:50 | 3583700 SafelyGraze

"It appears the complex inter-related world in which we live is becoming more and more chaotically unstable at the margin "

amen!

glad you are seeing things our way!

and it is for just this reason that we need to go ahead and move forward with a single-payer centrally-administered financial/economic/legal/enforcement/judicial/educational/medical system.

hugs,
tptb

_{please hold still while we embed these items subcutaneaously. for your security}

Tue, 05/21/2013 - 10:36 | 3583905 LeisureSmith

Even worse.... KrugMothra.

http://www.zerohedge.com/contributed/2012-09-02/dr-krugmans-weird-stimulus

Tue, 05/21/2013 - 09:28 | 3583641 LawsofPhysics

Greek bonds up something like 300%, who would have guessed? I mean aside from the TBTF banks that bought these bonds of course.

Tue, 05/21/2013 - 10:01 | 3583741 spine001

Some humor:

..."who would have guessed?"...

John Corzine! But as they told the nobel price winning loser investor that went bankrupt being right. In the market you can be right for longer than you can remain solvent! LOL

Tue, 05/21/2013 - 09:29 | 3583643 q99x2

Awh push the head to the speed of pain, its the power of the Few.

Tue, 05/21/2013 - 09:33 | 3583654 asteroids

The one thing these market can not do over the long run is defy mathematics and the laws of thermodynamics. There will be a loser, but for short periods of time, you can get weird winners, like Greece.

Tue, 05/21/2013 - 10:07 | 3583768 spine001

I suspect that you will have a lot of fun reading

http://www.wolfram-media.com/products/nksipad.html

the behaviour of these systems is completely independent of thermodynamics, but I understand what you mean and I don't mean to say that you're wrong, quite the contrary, only to suplement what you say with a lot more devastating and inexorable characteristic of the system that they are unsuccessfully attempting to control. Something that it is on and in of itself impossible, with disregards of whether you are violating some fundamental rule of the system or not (like thermodynamics), when you try to control it and indeed violate thermodynamics, you are not in our (the people who have worked in practice controlling systems using chaos theory) eyes not only laughable but negligent or simply said a very dangerous stupid person that will not last long, but that could destroy the system he/she is attempting to control.

Until next time,

Engineer

Tue, 05/21/2013 - 10:12 | 3583794 LawsofPhysics

"the behaviour of these systems is completely independent of thermodynamics" - Riiiiigggghhhht, turn off that big fusion reactor in the sky and let me know how things work out for you/us.

Tue, 05/21/2013 - 09:37 | 3583664 q99x2

This comes under the heading, "Modern Price Discovery Mechanism" at the Wharton School of Business Library. You'll also find in the same section, "How Bernake Set Out to Destroy the World."

Tue, 05/21/2013 - 09:41 | 3583675 fuu

When did Zimbabwe's market finally crash? Not finding a good stock market timeline.

Tue, 05/21/2013 - 09:43 | 3583683 Dr. Engali

You mean a 35 % return in less than 2 months isn't reflective af a booming economy with a youth unemployment rate of 64%? Maybe the market is pricing in a bunch of broken shit.

Tue, 05/21/2013 - 09:47 | 3583695 disabledvet

very interesting. i still subscribe to my "heavy metal/Borg thesis" when we're talking QE. "your alerting them (the industrial concerns) to your presence." Germany under the Nazi's is your model (not in a good way of course) namely "to subsume them." this is pure conjecture but i believe the only way QE has worked in the USA is because the dollar is the world's reserve currency. i don't think this should be tried elsewhere...obviously it DIDN'T work in Japan when they did "but a young man trying to apply his dissertation to the real world took note." I would imagine that young man to be Ben Bernanke. so sure...Greece and Japan equities are surging...but where are they going to come when they need to start "rationalizing" said State "once they get their house in order." it ain't Wall Street. That's the Pentagon brothers and sisters. that's "the dark side of team work" as they say. that's one thing financial independence..."a personal economy" if you will...does buy you that. http://en.wikipedia.org/wiki/United_States_one_hundred-dollar_bill Franklin got the hundred...but didn't get Independence Hall. Look at the consequences.

Tue, 05/21/2013 - 09:52 | 3583708 yogibear