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Certainty, Complex Systems, And Unintended Consequences

Tyler Durden's picture





 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

When it comes to complex systems and unintended consequences, the key phrase is "be careful what you wish for."

A lot of people are remarkably certain that their understanding of how systems will respond in the future is correct. Alan Greenspan was certain there was no housing bubble in 2007, for example (or he did a great job acting certain).

Some are certain the U.S. stock market is going to crash this year, while others are equally certain that stocks will continue lofting higher on central bank tailwinds.

Being wrong about the way systems responded in the past doesn't seem to deter people from being certain about the future. Those who were certain there was no bubble in 2007-8 were wrong, and those (myself included) who saw the can being kicked down the road were wrong in not anticipating that global stocks would not just recover their pre-crash heights but go on to new nominal highs, based on the excellence of the can-kicking skills of central states and banks.

Complex systems don't act in the linear way our minds tend to work. Humans are built to distill a chaotic array of sensory data into a narrative that simplifies decision-making and risk assessment (for example, "us good, them bad"). We prefer our chains of causality to have a few big links we can follow without difficulty. We find systems with multitudes of ambiguous inputs tiresome and so we invent ideologies ("us good, them bad") and very occasionally, elegant mathematical statements that reduce the chaos of data to predictable causal chains.

We are built to cling very stubbornly to certainty once we reach a conclusion, because ambiguity and having to constantly change our assessments of inputs and causality are big drains on our energy and mental capabilities. It's "cheaper" in terms of energy and anxiety to just stick with the story we grew up with or the one we chose after a bit of looking at what our mates think/believe/claim is true.

Certainty has another advantage: it's more persuasive than hedged hesitancy. Leadership tends to fall to those without hesitation, the bold ones with the powerful rhetoric of certainty, confidence and optimism. We don't want the narrative muddled with hedges--maybe "them" are not necessarily evil, dangerous enemies, etc.--and so we shout down, ridicule or ignore those who are circumspect about how systems will respond in the future.

Politicians have of course mastered the art of distilling narratives to the desired state of certainty, confidence and optimism, and in repeating the story often enough that mere repetition lends it credence.

The problem is simplistic, linear narratives don't map complex systems. All sorts of unexpected and unintended things happen in complex systems when you change the inputs and try to control the output.

We have a name for systems where the inputs are all tightly controlled to yield a simplistic desired output: they're called monocultures, and monocultures are exquisitely vulnerable to unintended consequences and "leaks" from the outside world. Though monocultures look robust, they are actually quite fragile, because the natural feedbacks and redundancies of natural systems have been eradicated to make the desired yield the primary output.

This is why politicians cannot deal with either complex systems or unintended consequences. As a result, they have to act as if complex systems and unintended consequences don't exist.

Thus Federal Reserve Chair Janet Yellen sticks to the simplistic narrative that the economy is flourishing and so the Fed can "taper" its money-creation/asset-buying operation, but she is careful not to mention the unintended consequences of the Fed's monoculture: to mention just one, that since the Federal deficits are shrinking rapidly, if the Fed didn't reduce its $1 trillion a year program, it would soon end up owning the entire Treasury market.

Since there could be unintended consequences of that, the Fed chair doesn't mention the topic.

The narrative that printing money destroys the currency being printed is appealing on many levels. It makes sense, and history is replete with examples of just this narrative.

But the system isn't quite as linear as we might wish. If $10 trillion in dollar-denominated value is wiped out in write-downs triggered by marking phantom assets to market, and $1 trillion is printed, the system still lost $9 trillion. As correspondent David C. observed:

Destruction of dollar *value* means that surviving dollars become more *valuable.*

 

If stocks, bond, real estate, Beanie Babies, etc. decline in VALUE, it means they are worth fewer dollars-per-unit. This means that dollars are, by definition, rising in value per unit, and this absolutely confounds those who believe the next big thing is inflation/hyperinflation.

 

They simply can't see that if people become poorer (as their stocks, bonds, homes, etc. fall in value), and especially if the banks begin to fail in a wave too large to bail and take deposits into monetary nothingness, the most likely outcome is that those who retain access to dollars will see their dollars rises dramatically in purchasing power, the exact opposite of the last 82 years of experience.

 

I've encountered few people who can accept this paradoxical analysis.

 

Our fully fiat-money system enabled the embrace of illusions so pervasive that people simply can't see how much "value" today rests on cross-linked IOU's. When those IOU-dollars begin to evaporate in earnest, desperation for the underlying "asset" (a dollar, as perverse as that seems given that the dollar is backed by nothing and preceded by no production of value) should skyrocket."

As for China launching a gold-backed currency that acts as the reserve currency--it isn't quite as simple and tidy as it appears. Triffin's Paradox is based on a peculiar characteristic of a reserve currency: it serves both a domestic market and a global market, and the two have different dynamics.

A reserve currency must be available in size in global markets, which means the issuing nation must export its currency in size so others have enough of it to fill their reserves and grease their trade exchanges. The issuing nation can simply helicopter drop the equivalent of several trillion dollars of currency into other nations (something that hasn't been tried), or it has to run trade deficits, i.e. it buys more goods and services from other nations than it exports to them, and so it exports its currency to other nations to use as a reserve currency.

This means nations that run enormous trade surpluses can't issue a reserve currency, because they're not exporting currency, they're importing other nations' currency and having to "sterilize" it into their own domestic economy or buy something denominated in the imported currency.

There's another paradox. Let's say China became a net importer on a grand enough scale to issue a reserve currency. The one example we have of a nation issuing gold-backed currency that was also the reserve currency based on that nation running large trade deficits is the U.S. in the late 1960s. What happens in this circumstance is those holding the gold-backed currency decide to trade the currency for gold, and the issuing nation soon runs out of gold.

This sets up a paradox: net exporting nations cannot issue a reserve currency, fiat or gold-backed, for the simple reason they are importing currency, not exporting it for others to use as a reserve currency.

Any nation that does run a trade deficit large enough to enable a reserve currency and backs that currency with gold will see its gold reserves vanish as holders of their currency trade its currency for gold.

I have addressed a few of the complexities of reserve currencies and trade before:

The Impossibility of China Issuing a Reserve Currency (October 14, 2013)

Why the Shrinking Trade Deficit Will Choke U.S. Corporate Profits (August 8, 2013)

Understanding the "Exorbitant Privilege" of the U.S. Dollar (November 19, 2012)

When it comes to complex systems and unintended consequences, the key phrase is "be careful what you wish for."

 


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Fri, 02/14/2014 - 16:29 | Link to Comment zuuma
zuuma's picture

Hmmmm...

so I should stop buying gold & start burying FRNs in the backyard, now?

 

Seems Legit.

Fri, 02/14/2014 - 16:55 | Link to Comment Oh regional Indian
Fri, 02/14/2014 - 18:31 | Link to Comment Son of Captain Nemo
Son of Captain Nemo's picture

No.  A better idea would be to save your "FRNs" for the fireplace or your rear end when you get off the porcelain convenience!

Fri, 02/14/2014 - 19:28 | Link to Comment mickeyman
mickeyman's picture

Funny you should mention that. The new Canadian currency is exquisitely designed for your second choice. 

http://www.worldcomplex.blogspot.ca/2014/02/setting-up-people-for-hyperi...

Fri, 02/14/2014 - 19:30 | Link to Comment Son of Captain Nemo
Son of Captain Nemo's picture

God Save the Queen!

Fri, 02/14/2014 - 21:12 | Link to Comment Indian_Goldsmith
Indian_Goldsmith's picture

"""""Humans are built to distill a chaotic array of sensory data into a narrative that simplifies decision-making and risk assessment (for example, "us good, them bad"). We prefer our chains of causality to have a few big links we can follow without difficulty. We find systems with multitudes of ambiguous inputs tiresome and so we invent ideologies ("us good, them bad") and very occasionally, elegant mathematical statements that reduce the chaos of data to predictable causal chains."""""

 

Where did you learn all this ???

Fri, 02/14/2014 - 21:33 | Link to Comment old naughty
old naughty's picture

you used a set of five "quotes" and you only needed one. Is that your way of showing chains of multitudes of ambiguous inputs?

 

just asking...

 

 

(i used three ".", needed only one!?)

Fri, 02/14/2014 - 23:21 | Link to Comment MontgomeryScott
MontgomeryScott's picture

Oh, sorry.

I only came here because of the cool Spirograph picture teaser back on the home page. I knew lots of kids that had one (I never did, though, because I was too busy trying to figure out how Nixon's taking us out of Bretton/Woods caused the first gas crisis [and why, during that crisis at any one time, the Los Angeles Harbor had a MINIMUM of 65 fully-laden supertankers anchored, because they couldn't offload their crude oil, because every storage tank in the greater Los Angeles area was 100% full]. I figured it out, though. It had something to do with Pat's $16.00 dress. Wait, maybe it was Kissinger...). Then, I had my 11th birthday...

 

Sat, 02/15/2014 - 11:18 | Link to Comment Son of Captain Nemo
Son of Captain Nemo's picture

I_G

For the purpose of answering your question I'll say based on your own observations which I tend to agree with (at least I think they are the same), in human nature the necessity for dominance or control as in the rest of the animal kingdom is a pervasive one, and the general rule of providing a "multitude of ambiguous inputs", is usually but not always a deliberate scheme to enforce it, especially in being able to decipher (good from bad) intentions.

At the end of the day clarity on any subject(s) plays a critical role in understanding and guiding the objective as a clear thought will never lack a clear explanation.  Those who pathologically use prevarication or who obfuscate the truth with bad intentions eventually get caught no matter how powerful or clever they may think they are. Culture also plays a significant role in determining the scale of "how good" and "how bad" we are whether we like to admit it or not. 

Where did I learn it? 

Same place hopefully you learned it.  A nurturing family environment, good professors that knew the difference between destructive and constructive behavior and rules that attempt to judge that behavior equitably, fairly and honestly.

 

 

Fri, 02/14/2014 - 19:30 | Link to Comment aminorex
aminorex's picture

bitcoin

Fri, 02/14/2014 - 16:12 | Link to Comment Occams_Chainsaw
Occams_Chainsaw's picture

TPTB are actually getting the consequences they INTENDED.  Calling in the chips and wiping the middle class from existence is exactly what they have had planned and are doing.

Fri, 02/14/2014 - 21:44 | Link to Comment old naughty
old naughty's picture

so that's your way of echoing Certainty, Complex Systems, And Unintended Consequences ?

FRN came into existence around 1913...Tricky Dick ended Bretton Wood in 1971...no housing bubbles, no retail freeze, "no jobs, no cash, no hope"...so complex, so many millions still not believing...

And you (and I) believe no unintended consequences?

 

Fri, 02/14/2014 - 17:42 | Link to Comment kaiserhoff
kaiserhoff's picture

Good piece.  Economists refuse to learn from their mistakes.  People have options and react in ways that were not expected in their grand theories.  The real question is why they retain any credibility.

Fri, 02/14/2014 - 18:58 | Link to Comment Pseudo Anonym
Pseudo Anonym's picture

in a debt based system, an entity, such as the fed, prints its credibility; until they over do it.  but the real real question is what it takes for the individual put in charge of the fed to keep his/her credibility with private parties that own the fed and who plan to steal our assets and fruits of our labor throughout the printing process via the legal fiction called federal reserve.

Fri, 02/14/2014 - 16:22 | Link to Comment lordbyroniv
lordbyroniv's picture

 

 

 

HILLARY 2016 !!!!!!

Fri, 02/14/2014 - 23:22 | Link to Comment MontgomeryScott
MontgomeryScott's picture

I WOULD say 'FUCK HILLARY', but that's something a man does to a WOMAN. I still haven't figured out what IT is, yet.

Sat, 02/15/2014 - 02:31 | Link to Comment willwork4food
willwork4food's picture

Agreed, but she looks a little better than Janice which, admittedly is not saying much. But I digress. The author has a point. Look at it. Any gold based country WILL be saturated with withdrawls just to see if they're full of shit. The only way is for a basket global currency, yes fiat, which would trade freely on the open market. If one country has more gold, they would necessarily have more buying power and more value in their fiat. This could be orchestrated with a paper or cyber currency. Both scar me to death but that's what's coming .

Mon, 02/17/2014 - 10:32 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

"Any gold based country WILL be saturated with withdrawls just to see if they're full of shit."

You can have a currency based on the quantity of independently and regularly audited gold in reserves, and not have that currency be convertible to gold.  It's a similar concept to basing your currency on the GDP, except less bullshittable.   

Fri, 02/14/2014 - 16:23 | Link to Comment Bioscale
Bioscale's picture

The bankers know very well what they have been doing and why.

Have you ever seen a central banker saying anything about a sector being in "bubble" before it burst? Hardly. And they know well their central banks are responsible for most of the bubbles and economic troubles. Being a central banker means saying a lot of lies and doing a sofisticated manipulation of knowledge and media disinformation. They deserve to be hanged.

Fri, 02/14/2014 - 17:07 | Link to Comment Sean7k
Sean7k's picture

Exactly, CHS doesn't realize this IS a monoculture, presented as a complex system. There is nothing complex when you have control of all the levers and know which will be pulled and when.

As an aside, Arab women? They are trying to advertise for Arab women? Really? 

Fri, 02/14/2014 - 19:06 | Link to Comment Pseudo Anonym
Pseudo Anonym's picture

spot on

...this IS a monoculture, presented as a complex system

the central banking rip-off via fractional banking and confetti printing has been around for a while and has been tuned to perfection by hofjuden for the old aristocracy, monarchy and vatican.  the beauty is in its simplicity presented as a complex system beyond the grasp of the masses.  all ponzi schemes at their core are simple.

Fri, 02/14/2014 - 16:25 | Link to Comment q99x2
q99x2's picture

Fortunately the US markets have been separated from the complexity of the underlying economy. As financial products they are easily controlled by FED et. al. software.

Fri, 02/14/2014 - 16:23 | Link to Comment duo
duo's picture

Perhaps GOLD should be the reserve currency, not one country or another's fiat.

Fri, 02/14/2014 - 17:01 | Link to Comment Nick Jihad
Nick Jihad's picture

But US Dollars are so much more plentiful!  :-)

Fri, 02/14/2014 - 16:29 | Link to Comment disabledvet
disabledvet's picture

i still think the current "gold standard" (when Nixon closed the gold window) is still the American "consumer."

At some point such a system must collapse both because of a: there is a limit to how much cash is available to an American to consume but more importantly b: he/she might just stop consuming (what is going on now.)

Well...so incomes collapse (again)...but "assets" (equities, debt, housing stock...anything that can be borrowed against to raise cash) soar "to the moon."
Something has to give way here.
We've already had one reset in the totality of the commodity space last fall.
Amazingly "the horde" has gone in and started scooping up all those "on sale assets" without regard to say...why the got crushed in the first place (cough, cough...double dip...cough, cough) or worse "because me likes them. they're my PRECIOUS."

so sure...coldest winter in recent memory "releases the hounds"...to look forward to what again? "the summer driving season"?

who has any money to travel after this winter?

Fri, 02/14/2014 - 16:30 | Link to Comment q99x2
q99x2's picture

I wish for me and not the FED, Goldman Sachs and JP Morgan to be in charge of my fucking money.

I'm buying gold, silver and bitcoin and they can shove their reserve currency up their asses.

Fri, 02/14/2014 - 16:37 | Link to Comment Flakmeister
Flakmeister's picture

How ironic...

Here at the Hedge there is an endless parade of clowns that parrot simplistic "solutions" completely oblivious to the complexity that a modern technical society represents...

A common feature of these "solutions" is an implicit denial of the most basic human behaviours that have been bourne out over the full breadth of our recorded history....

But I digress...

Fri, 02/14/2014 - 16:51 | Link to Comment mumbo.jumbo
mumbo.jumbo's picture

I've encountered few people who can accept this paradoxical analysis.

 

maybe because it's obvious even for the retarded that when deflation looms then the farmers speed up the printing presses (or just add a few zeros to some friendly database entries).

 

and if the powers that be actually lose the ability to control the system, then thier fiat becomes toilet paper overnight and the liberated people will switch trading to using gold backed digital currencies.

 

after all this whole fiat money scam is about ripping people off, and price delation is the opposite of that.

 

Fri, 02/14/2014 - 17:02 | Link to Comment andrewp111
andrewp111's picture

This analysis explains why the global reserve currency should either be fiat issued by an international authority that can only be held by national governments (such as SDR's), or a commodity such as gold and silver itself.  Each has problems because a transition to either will create winners and losers, and current powers will be reluctant to accept the costs. There is also the question of what benefit each gives the users. The current dollar regime arose naturally as the USA was the strongest power after WW II. How would a change to a new reserve currency happen today? To go to SDR's, an international authority would have to declare that all nations are required by law to use SDR's as their reserve currency. Otherwise, it wouldn't happen since the SDR has no benefit for the users. If China became the global dominating power, it could impose its own currency as the world reserve. It could also create a dual currency system, where its external currency was the world reserve and its internal currency was used by its own people. It could also decree that UN Credits, or SDR's or whatever is now the global reserve. And gold or silver as reserve has problems because huge amounts of physical metal will have to be continually moved around. If you can't trust a national currency, could you trust a central bank to hold its gold for you? I think not. And why does there have to be a single reserve currency at all? The fiat of all major powers could function as reserves for someone else.

Fri, 02/14/2014 - 18:53 | Link to Comment Flakmeister
Flakmeister's picture

The problem with a commodity based currency is dealing with the "lumpiness" of its distribution and matching stocks vs flows.  For example, the stock of monetary gold is completely inadequate as the flows in the global oil market dwarf it... 

Unless you think it is good idea to have countries like SA, Russia and Canada to amass it all in a relatively short period of time. Or you could always devalue oil wrt to gold at gunpoint. I am sure that will go over well...

Finally, another way is to have a gold based currency would be to have one world government that will redistribute physical flows. And we certainly wouldn't want that, would we?

Sun, 02/16/2014 - 17:23 | Link to Comment LibertarianMenace
LibertarianMenace's picture

For example, the stock of monetary gold is completely inadequate as the flows in the global oil market dwarf it...

At current prices that are denominated in fiat currencies, this may be appear to be true. How about we extend the right to issue notes in competition, instead of the perverted monopoly we have now, and then let us all decide, you, me and everyone else as participants in the market for banknotes , as to what's actually inadequate and what's not?

Fri, 02/14/2014 - 20:54 | Link to Comment lewietheparrot
lewietheparrot's picture

I think that the 're-set' will be more of the same as it has always been.

A new fiat with fresh promises that will carry us to the 'other side'.

A global darling with bells and whistles.

When I read the comments here at ZH, it always amazes me at how TPTB ignore such sagacity.

Fri, 02/14/2014 - 17:21 | Link to Comment astoriajoe
astoriajoe's picture

Thankfully, gravity is a fairly simple system.

Fri, 02/14/2014 - 17:55 | Link to Comment Woodhippie
Woodhippie's picture

AND, it's not just a good idea.

It's the law.

Fri, 02/14/2014 - 17:50 | Link to Comment dearth vader
dearth vader's picture

>> The issuing nation can simply helicopter drop the equivalent of several trillion dollars of currency into other nations (something that hasn't been tried), ... <<

I beg to differ, it sure has been tried and it's been a great success. It was after WW II and they called it the Marshall plan. The US drowned the rest of the world in dollar loans and exported like crazy. I can still remember from my youth that all but everything bore this print, "Made in USA," toys, fridges, vacs, you name it.

Fri, 02/14/2014 - 23:24 | Link to Comment MontgomeryScott
MontgomeryScott's picture

Also, it happened in Iraq after 'victory' was declared.

Fri, 02/14/2014 - 18:18 | Link to Comment falak pema
falak pema's picture

Here is a good article to understand the state of things : 

The present economic crisis stems from the gradual disintegration of 'national capitalism', embodied in national currency, from the early 1970s onwards. It needs to be properly understood as a moment in the history and anthropology of money.

For more read here : A Crisis of Money: the demise of national capitalism | openDemocracy

 

And this about the CHina vs USA stand off :

In recent years, China has become a major actor in the global economy, making a remarkable switch from a planned and egalitarian socialism to a simultaneously wide-open and tightly controlled market economy. Against the establishment wisdom, Minqi Li argues in this provocative and startling book that far from strengthening capitalism, China's full integration into the world capitalist system will, in fact and in the not too distant future, bring about its demise. The author tells us that historically the spread and growth of capitalist economies has required low wages, taxation, and environmental costs, as well as a hegemonic nation to prevent international competition from eroding these requirements. With the decline of the economic power of the United States, its current hegemonic role will deteriorate and the unprecedented growth of China will so erode the foundations of capital accumulation—by pushing wages and environmental costs up, for example—that the entire capitalist system will be shaken to its core. This is essential reading for those who still believe that there is no alternative.

The Rise of China and the Demise of the Capitalist World Economy Paperback

 

by Minqi Li http://g-ecx.images-amazon.com/images/G/01/amazonui/sprites/aui_sprite_0...); background-size: 400px 600px; display: inline-block; vertical-align: text-top; margin: 5px 0px 0px 0.385em; width: 7px; height: 5px; opacity: 0.6; background-position: -90px -5px; background-repeat: no-repeat no-repeat;">  (Author)
Fri, 02/14/2014 - 18:43 | Link to Comment Fishhawk
Fishhawk's picture

The bankers will require some form of money that they can manipulate, so as to continue their boom-bust harvest cycle.  Clearly the dollar is suffering some serious rejection by the ROW, as they have seen the hegemon for the true leviathan than it desires to become, and they want no part of it.  Through actions such as FATCA (claiming ownership of US citizens wherever they may be on the planet), spying on pretended allies, and actively destabilizing foreign governments all over the world, the US is now being seen for what it is, the greatest terrorist organization ever assembled by wicked men.  So, what will replace the dollar?  Why does the world need a reserve currency?  Who decided that?  Countries can trade with each other on whatever terms they choose, hence the proliferation of trade agreements based on yuan and rubles.  When two parties decide to engage in a trade, the ROW does not need to inject its ugly face into the deal.  Let all currencies float, and let gold be freely traded in all currencies.  It will sort itself out without any help from SWIFT or the IMF.  But, but, how will the gnomes of Zurich justify their egregious crimes without control of everyone's money?  Perhaps we are seeing the collapse of the world ponzi initiated by Bretton Woods, and the major change in attitude needed to begin to dismantle the NWO meme of 'free trade.'  True free trade can be done in any currency.

 

Fishhawk

Fri, 02/14/2014 - 18:42 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

Let's look at the Fed, most Fed governors couldn't remember what they had for supper three days ago and we trust them with tinkering with our economic system? That's rather odd....

Fri, 02/14/2014 - 18:57 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

Also, what the dollar will be worth once everything starts to unravel, is anybody's guess.....

Fri, 02/14/2014 - 21:21 | Link to Comment Winston Churchill
Winston Churchill's picture

Not much judging by what happened with the pound.
At least there the UK govt had the cover of
wartime rationing to hide the impoverishment that rapidly onset.
Probably why rationing didn't end until 1950 in the UK.
After eleven years no one remembered what life had been
like before it started.

Fri, 02/14/2014 - 21:38 | Link to Comment Dollarmedes
Dollarmedes's picture

"...since the Federal deficits are shrinking rapidly, if the Fed didn't reduce its $1 trillion a year program, it would soon end up owning the entire Treasury market..."

 

Interesting, in light of the GOP's greenlighting of the deficit for Obama through 2015. Perhaps this was a pre-condition of Yellen reversing the taper?

Fri, 02/14/2014 - 22:56 | Link to Comment surfsup
surfsup's picture

Complexity is usually a sign of magician's trick... Nothing is complex in truth...  For 300 years many have attempted to make things "appear" complex so that the simplicity of the thing is side stepped.  Its simple; Einstein hit older age and was extremely depressed having simply allowed his gregarious urge to better his growing comprehension of the Universe and realizing the Speed of Life is not limited by the speed of light.  E=MC sq thus was a frame of reference construct or effect of a particular perception -- he eventually recognized the artificial box he and other's erected -- the complexity he chose to add to that which was simple...  Its also simple the mandatory education system propelling such artificial complexities has its prime root in creating obedient war like behavior as evidence by the well documented Prussian Elitist Military control freaks back of it's origination.  The offspring always carries the signature of its source be it an employee of a corporation or an atom in a biological system -- top down influence seeminly complex yet utterly simple -- inexorably applies.    That s why shit only works until it doesn't -- not from complexity but from simple shifting away from previously un recognized operative concepts which simply drove the conceptual Field of any given system...   Hence, why awareness is the most powerful force in the Universe and always will be as the "greater fool" attempts to navigate the stormy waters of contrived complexity placed there for his demise or his cathartic Illumination.   

http://upload.wikimedia.org/wikipedia/commons/4/49/Hieronymus_Bosch_051.jpg

Sat, 02/15/2014 - 11:42 | Link to Comment moneybots
moneybots's picture

"Complexity is usually a sign of magician's trick... Nothing is complex in truth...  For 300 years many have attempted to make things "appear" complex so that the simplicity of the thing is side stepped"

 

Baffle them with B.S.

 

 

Fri, 02/14/2014 - 22:57 | Link to Comment surfsup
surfsup's picture

.

Sat, 02/15/2014 - 09:17 | Link to Comment Pullmyfinger
Pullmyfinger's picture

The following is fallacious reasoning:

"This sets up a paradox: net exporting nations cannot issue a reserve currency, fiat or gold-backed, for the simple reason they are importing currency, not exporting it for others to use as a reserve currency."

This may seem reasonable to anyone accustomed to thinking in purely fiat terms. This, for example, accurately describes what happened to the US after it defaulted to a purely fiat currency in 1971. But the author is not taking into account what happens when the currencies you are importing are ALSO gold-backed. This reflects the reality of the trading system now being rapidly set up by the BRICS and, in particular, China, who will indeed soon introduce a gold-backed yuan (in conjunction with other commodities-as-money), but will ONLY be trading with countries who have pledged to do the same.

Wait for the global currency Reset: coming soon to a country near you. Did this guy never hear of mercantilism?

Sat, 02/15/2014 - 11:06 | Link to Comment moneybots
moneybots's picture

"Alan Greenspan was certain there was no housing bubble in 2007, for example (or he did a great job acting certain)."

 

Greenspan knew there was a bubble and admitted to it last year.

 


Sat, 02/15/2014 - 11:10 | Link to Comment moneybots
moneybots's picture

"... and those (myself included) who saw the can being kicked down the road were wrong in not anticipating that global stocks would not just recover their pre-crash heights but go on to new nominal highs, based on the excellence of the can-kicking skills of central states and banks."

 

China has kicked the can down the road as well and their market is not at new highs.  Japan has been doing the same for decades and the Nikkei has never reached 40,000 again.

Sat, 02/15/2014 - 11:34 | Link to Comment moneybots
moneybots's picture

"If $10 trillion in dollar-denominated value is wiped out in write-downs triggered by marking phantom assets to market, and $1 trillion is printed, the system still lost $9 trillion."

 

Did the 9 trillion ever really exist, or was that a phantom of credit?

 

A 100,000 $ house becomes a 10,000 $ house.   90,000 $ disappeared, but the house did not disappear.


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