Guest Post: A System Doomed To Fail

Tyler Durden's picture

Submitted by mickeyman via The World Complex blog,

In the broadest sense, there are three types of systems in the world.

The first are simple systems which are characterized by only a few variables or agents, and which can be described by perhaps a handful of equations (or even one).

The second are systems which are characterized by disorganized complexity. These may consist of huge numbers of agents or variables, and their interactions cannot be described by simple equations; yet the overall system is well-described statistically through averages and can be described as being stochastic. Such systems are typically characterized by a stable equilibrium, provided there are no external shocks to the system. They are incapable of generating internal shocks or surprises. For example, you might consider the distribution of air molecules in a room. You may not be able to predict the motion of any particular air molecule, but you can be reasonable certain that the global population won't do anything unexpected (like all move into one side of the room leaving a vacuum on the other side).

The third type of system is characterized by organized complexity. As the systems above, one may consist of many variables or agents, each of which is simple, but the system's behaviour does not lend itself to statistical description because instead of the activities of each component dissolving into a background equilibrium, large-scale (even global scale) structure "emerges" instead of seething chaos. Along with these "emergent properties", common features of such a system include multiple equilibria, adaptive behaviour, and feedbacks. There is no simple way to describe its behaviour, as much of the system's history is bound up in its behaviour (what economists call "long memory").

Complex systems, for all their unpredictability are remarkably resilient. The resilience arises from the way in which this type of system interacts with its environment--through the individual actions of its simple components, the system is able to gather information about its environment and modify its operations to adapt. Yet this adaptation and evolution all occur in the absence of central control.

The above descriptions--and characterizations of three types of systems--go back to 1948. Unfortunately it appears that Dr. Weaver was too optimistic when he recommended science develop an understanding of the third type of system "over the next 50 years". Here we are 65 years later and we have made only basic improvements in our understanding of such systems.

What has gone wrong? I think it is partly due to the limitations of the Newtonian paradigm on which science has rested over the past few hundred years.

Back to Weaver. He asks,

How can currency be wisely and effectively stabilized? To what extent is it safe to depend on the free interplay of such forces as supply and demand? To what extent must systems of economic control be employed to prevent the wide swings from prosperity to depression? These are also obviously complex problems, and they too involve analyzing systems which are organic wholes, with their parts in close interrelation.

The Fed has answered.

Sixty-five years ago, economics was known to be a complex, organized system. Yet today, the Fed continues to set policy as if the economy were a stochastic system that could be sledgehammered into whatever equilibrium state is deemed politically expedient. I would further argue that the Fed has not managed to succeed even in hammering the economy into a desirable equilibrium, but rather has mastered the ability to create artificial statistics to "justify" its actions.

The system is doomed to fail, because the resilience of natural complex systems requires freedom of action for its individual components. We do not observe resilient complex systems with central control. Yet central control is the dominant ideology of our present political and economic systems. Total control, with a vanishingly thin veneer of democracy, ephemeral as the morning dew.

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Yen Cross's picture

      A trick question "gently wrapped" In Tyler Durden<>ness?

Landotfree's picture

The system is not doomed to fail, it was designed to fail.   Humans want something for nothing i.e. interest.   Attach interest to your medium of exchange, I do not care what the medium of exchange is as it is not possible for human to supply nor demand exponential growth.  

This is no experiment, it's the same thing that has been going on for 1000s of year, nothing will be different this time other than the size of the collapse.  Billions of unfunded walking liabilities are going to have to go.   

"The Architect - The matrix is older than you know. I prefer counting from the emergence of one integral anomaly to the emergence of the next, in which case this is the sixth version."

- The Matrix Reloaded

zerozulu's picture

If you consider all the factors, we are now living in DPRK.

SafelyGraze's picture

large-scale managed systems are, in fact, inherently bound by their own rules.

you just have to be smart enough to figure out what these rules are, by making a few observations and by thinking deeply and carefully.

at which point, you can reliably characterize their various statistical moments so that your risk exposure is safely hedged away.

myron, robert, john and the gang

hey, don't forget me!! -mister andreamitchell 

Canoe Driver's picture

Safely Graze, you are everything I like in an intellectual woman, and I am also deeply attracted by your avatar. Up arrow +10.

Rentier's picture

System doomed to fail? Meaning Facebook? lol

Yen Cross's picture

 @ dick cheneys ghost  Thanks. It looks like the BTC changers don't like currency traders very much.


toady's picture

"Billions of unfunded walking liabilities are going to have to go."

So close...

Trillions of unfunded liabilities are going to have to go.

The leverage on the leverage that the banks have on EVERYTHING must be unwound.

Better change that trillions tp quadrillions.

The Rothschilds will NOT be pleased.

mickeyman's picture

I think you missed the point--think about the meaning of walking liabilities. There are only about seven billion of them.

OC Sure's picture

If this article boils down to Man vs. State and why tyranny fails vs freedom, then I have read this gist 1000 times over written in a much simpler read.

But I am wondering what you mean by this: "Humans want something for nothing i.e. interest."

Do you mean to say interest as in a rate of return on one's money loaned? If so, how is this something for nothing? That rate of return represents the value of one's time foregone without the loaned money. It is the amount that the loaner is willing to accept for parting with the loaned amount of money over a specific duration of time. It is the cost that the receiver of the loan pays to aquire this value of the loaner's time. 

Please read up on Noah Webster (The same guy who developed the dictionary) and his crusade against anti-usury laws. Without obtaining a return on one's loaned money, then why loan it in the first place? Without loans, how does capital form? It was not until anti-usury laws were relaxed that the seeds of capitalism could be sown.

acetinker's picture

OK, I'll bite.  If you loan me actual money, even if it's just paper tickets, you have every right to demand remuneration for doing so.

However, that is not at all how banking works- at any level.  Bankers create credits out of thin air and expect borrowers to pay them back with interest.  Notice that the "credits" required to pay said interest are not created in the initial transaction.  So, for the overall system to remain solvent, borrowers must continually increase their level of indebtedness.  This continual increase in debt is what economists call growth.

Eventually, you reach a saturation point where no one is able to borrow, and no one is willing to lend.  Thus, the debt-money system collapses, the Fed (insert your central bank, if different) steps in and bails out their favored institutions (which conveniently, they own), and proceeds in its true purpose- that is monetize (buy) up all meaningful real assets (that you and I created) with money they pulled out of the ether (their asses).

Are we clear?

OC Sure's picture

We are clear, acetinker. I don't think we disagree either.

I am describing how interest rates function as required by Capitalism, the type of capitalism that Adam Smith championed. You are describing how interest rates "function" in our current system of corruption, deception, and institutionalized theft which could be called anything except capitalism.

I even think that we could all agree, the original commenter too who disdains the something for nothingness of interest rates, that when we define our terms such that classic liberalism/capitalism does indeed reward savers and borrowers alike since the agreement between the two adds value to both parties (and indirectly to other parties not involved at all) as opposed to contemporary "banking" where the the advantage or value obtained is clearly a one way direction in favor of the decievers. 

As you point out and I agree, the key difference betweem then and now is that a powerful group of market participants has cornered the market on interest rates via money printing. This printing is the means by which the thieves steal value whereas in a stable, nonmoney printing environment, value is traded for value.


acetinker's picture

OC, didn't mean to sound harsh.  It's just that thinking about how money "works" makes me ill.

I don't think we disagree, either, but what you're describing is an honest money system.  The whole premise of debt-based fractional reserve currency is fraudulent on its face.  Nothing else really matters, does it?

OC Sure's picture

We're good.

I guess i was pointing out the original intent of how interest rates are supposed to work because if there is an opportunity to reset the Republic at some point then after any collapse the only alternative is an honest money system.

Best wishes.

viator's picture

Amen. A little antidote to all the central planing B.S. found here.


The Fed is the cause of wide swings and depresssions. That's how their COMPLEX SYSTEM works, but you're just a muppet so STFU.

gwar5's picture

FEDs' Great Leap Forward already failed. Statistics controlled to create illusion to influence economic behavior. More time for looting, controlled demolition of democracy. 


Hedgetard55's picture

What a load of horshit this article is. Am I now supposed to believe that Ben did NOT save the global financial system by printing trillions of dollars? How then did he get that Man of the Year award from Time? 


Ok, to be serious, did anyone ever find out what Ben had to do that kept him from Jackson Asshole last year???


Hedgetard        As stated in the article, all of those asshats moved quickly to one side of  the room, creating a vacuum and thus the Bernank could not get in.  Who writes this crap?

frankTHE COIN's picture

The Banks went from holding a Mortgage to maturity, to the MERS System, Pass the Mortgage and collect a fee, Bundle them with known Toxins, Securitize them as CDOs, CLOs etc, Sell them to a Greater Fool and ....wait for it...Don't get caught with any of this Shit on their Books.
How did that work out For them ?

toady's picture

It worked out well for them. Record profits & bonuses, 2nd yacht, etc.

A lot better than a firing squad or being skinned alive, as I had originally thought.

czarangelus's picture

I'm reading The Prague Cemetary, a fictionalized account of the writing of the Protocols of the Elders of Zion. And once again I find myself wondering whether the following is the most pressing question of human history;

Who is in control of what and to what extent?

Is the current system nothing but a mad, anarchic scramble by criminals to stuff as much into their pockets as possible before burning it all down? Or is there a vast conspiracy pulling strings and levers of all kinds in order to put the agents of the conspiracy into an unimpeachable position over the common man? The systemic theft seems far too perfect and far too organized to be the random actions of individuals. But it's also hard to imagine a conspiracy controlling the media, banks, war machine, Catholic and evangelical theology, schools, et c. and aligning them to push the same agenda across the board.


czarangelus        If you OWN the media, banks,war machine etc. what's not to understand?  Same agenda Because it's all about them. If you are aware of the goal of the elders, then where is the surprise?

jimmytorpedo's picture

I would like the TPTB to come to my horse farm.

They would say,

  "Okay, Zeek, you're a good obedient boss, you are in charge of the geldings. Abbey, you're a big ass cold blood mare, you can be in charge of the mares. MJ, you are a bad ass stallion, you be in charge of the stallions and get first choice to breed all the mares when they're in heat. We will have two round bales put out a day and everyone can eat what they need  We're going to leave you all alone and trust you to check back once a month and everything will go as we planned."

Meanwhile, Zeek will have all the horses who like to have fun hanging with him. Abbey will dominate all the submissive horses and the stallions will run in and breed whoever they can catch. Some will starve, some will prosper, but eventually it will become an organized complex system which you could never imagine or plan for. It will not be organized the way the TPTB thought or hoped for.

Air molecules in a room may appear to be dis-organized but that is only because you are not able to comprehend the laws by which they organize themselves. When human desire is infinite (and often kinky) the laws of organization are likewise, infinite and incomprehensible. Central planning only works with Berlin walls, capital controls and constant threat of state sponsored violence.

smacker's picture

I think it's a mixture of both systems you describe.

There certainly are plenty of criminals grabbing as much as they can while they can and - in light of events in recent years - before it implodes.

But there also plenty of elites conspiring to surround themselves with ever greater power and control and to pass as many laws as they deem necessary to protect themselves from the people they control.

The above groups have many things in common and many people belong to both groups, if only on transient issues.

The conspiracy is not as perfect as you might think though. Plenty of examples where criminals in one section get wiped out by criminals in the other due to conflicting aims.

Canoe Driver's picture

This particular conspiracy theory ignores the realities of human stupidity, widespread ignorance, extreme greed, and gross incompetence. You need to factor these in, at the very least.

I am also reading Prague Cemetary. How far into the book do you have to read before the Garibaldi garbage ends?

czarangelus's picture

Right up until the Parisian garbage begins. ;-)

It takes a certain kind of mind to enjoy Eco's books.

Tasty Sandwich's picture



PDF:  The Collapse of Complex Societies by Joseph A. Tainter

(265 pages; takes some time to load)  The Collapse of Complex Societies


Offthebeach's picture

Also great is James Grants, Fall of Roman Empire.

blindman's picture

@.."The system is doomed to fail, because the resilience of natural complex systems requires freedom of action for its individual components."
the alteration ....
"The system is doomed to fail, because the resilience of natural complex systems requires freedom of action for its (sentient) individual components."
COMMENT: WE DO not observe sentients.
just a guess.

Obama_4_Dictator's picture

I agree it's doomed to fail...but it could, and I stress could, last much longer than anyone dares to think....

The Gooch's picture

All the world is a stage. 

Fake money. Fake celebrity. Fake laws. Fake leaders. Fake faith. Fake grandeur. Fake wealth. Fake humanity.

The system is cannabalizing before your eyes while the next "natural reset" is an absolute certainty.

May we live in interesting times.

Yen Cross's picture

   Free<> Will, Skateboarder made an very important comment last week.

     In his "Youth" he mentioned the 'visable (3) deminsions' of life!

  He also mentioned the complete mis-undestandings of other dimensions.

     Skateboarder is a smart person!

The Gooch's picture

Skateboarder is a wise person.


LibertarianMenace's picture

This is the primary reason for the fatal conceit.

It's like an antacid for those afflicted by excess greenhouse gas and other assorted modes of statist flatulence.

DonGenaro's picture

Wanna see how well central planning works ?

Find an ant hill and take over.

BuddyEffed's picture

"Wanna see how well central planning works?"    Like taking a large anthill where the ants freely roam and forage, and for the sake of argument arbitrarily breaking it up into two different areas defined and separated by a depression in the hill, and then taking over and restricting the bridge that the ants have built that spans the depression to obstruct their mobility?  Funny how that morphed into a hornets nest instead.

besnook's picture

the fact is, if you were astute enough to understand the fed strategy from the beginning( i was on 7 second delay) you made a lot of money the last 5 years. the fed has achieved almost everything it has set out to achieve. if it saves europe then the bankers will be doing god's work, having achieved the impossible. if the fed saves the usa then the bankers must be god incarnate, the messiah, the second or first coming whichever.

so what is the fed doing now? they are tapering even though they insist they are not tapering. they are letting the ten year yield float pretty high for the news out there. it is as if the fed managed to get mortgages to touch 5% by manipulating the ten year bond and will now take the yield back down but for a much higher low than the last takedown......and the markets will give up 10-20% while that happens, an actual, almost real market.

Kirk2NCC1701's picture

Given that ALL of man's philosophies, religions and superstitions spawned centuries or millennia ago, they all fail to model the reality of the Third system.

Time to bury these ancient "dinosaurs of worldviews" and start fresh.

History shows that this will take time, as the adherents to the old systems basically have to die off, as is always the case for any new religion or radical economic, political or (sometimes) even scientific theories.

Reaper's picture

Fools believe they can wisely chose who to trust with Central Planning and implementation.

Kirk2NCC1701's picture

"God" and "The gods" were the original Central Planners, and monarchs throughout the ages have leveraged this to their benefit, by claiming "divine right": "God said so".

Fuck me, I wish that a starship captain had it that easy. This line of "persuasion" works well with primitive culture/societies, who are easily impressed and intimidated by a celestial show of "Shock & Awe", but doesn't fly with advanced ones or with my bosses at Starfleet. ;-)

vie's picture

I hear Lucifer was the first one to fight the Central Planners.

q99x2's picture

I've been reading these doomed to fail articles for a long time now. Can't we have some Satanic death chants or sacrificial sermons to spice things up a bit.

LibertarianMenace's picture

Hedge karaoki? I'd like to buy the world a coke...

Bastiat's picture

Jamie Dimon thinks the system is really simple:  we take everyone's money and rule the world.

AnAnonymous's picture

Such a funny 'american' article.

'Americans' are human beings
Human beings are centralized systems

StychoKiller's picture

Central Control cannot fail, so long as we have this guy's charismatic and fearless leadership!