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What's America's Fragility Score?
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
By this measure, the U.S. scores very poorly: 4 out of a possible 5 on the Fragility Index.
There is a certain logic to the idea that stability is a good predictor for future stability: if a nation's economy and governance are stable and devoid of disorder, this trajectory of stability will be durable, right?
Well, actually, no. Nassim Nicholas Taleb and co-author Gregory F. Treverton argue in their essay The Calm Before the Storm: Why Volatility Signals Stability and Vice Versathat "the best indicator of a country’s future stability is not past stability but moderate volatility in the relatively recent past."
Taleb and Treverton list five sources of systemic fragility:
"For countries, fragility has five principal sources: a centralized governing system, an undiversified economy, excessive debt and leverage, a lack of political variability, and no history of surviving past shocks. Applying these criteria, the world map looks a lot different. Disorderly regimes come out as safer bets than commonly thought, and seemingly placid states turn out to be ticking time bombs."
These principles are drawn from Taleb's work on fragility and anti-fragility as described in his book Antifragile: Things That Gain from Disorder.
These five factors function as a rough rating system to measure a nation's fragility.Nations with near-zero scores in all five factors are anti-fragile (i.e. durable and able to weather crises) and nations with high scores in all five are fragile, i.e. prone to instability and failure when faced with crisis.
Let's list all five sources of fragility:
1. centralized governing system
2. undiversified economy
3. excessive debt and leverage
4. lack of political variability
5. no history of surviving recent systemic shocks
How does the U.S. stack up? Let's go through the list.
1. Highly centralized power structure/governance: yes. Apologists can claim that government is decentralized via state and local governments, but this ignores the reality that virtually every policy of any importance is set in Washington by a relative handful of politicos, lobbyists and technocrats of the Deep State.2. Undiversified economy: no. Despite the corrosive and venal dominance of the state, Wall Street/bank finance and the unproductive bubble-blowing FIRE economy (finance, insurance, real estate), the U.S. economy remains diverse.3. Excessive debt and leverage: yes. One glance at this chart says it all:4. Lack of political variability: yes. Despite the frantic claims of partisans, the Demopublicans/Republicrats are in essence one ruling party with a few cosmetic differences to fire up their proles and partisans: If You Really Think It Matters Which Party Controls the Senate, Answer These Questions (November 6, 2014)5. No history of surviving recent systemic shocks: yes. Some will argue that the U.S. weathered the global financial meltdown of 2008-09 and so that counts as a recent shock, but I would counter that the Status Quo's "fixes" were either half-measures that rewarded the banks for their perfidy or fake reforms that added costs and rewarded vested interests, i.e. were actually counter-productive: financial "reform," ObamaCare, etc.
All the Status Quo did to resolve the crisis was print $4 trillion in new Federal Reserve money, borrow $8 trillion in U.S. Treasury bonds and offer guarantees of $23 trillion to banks that should have been liquidated. Absolutely no real structural changes were made to the Status Quo power structure of the nation.
While 9/11 was a shock, was it equivalent to Watergate or the Vietnam War or the civil rights movement? I would argue that 9/11 was not equivalent because it did not divide the nation politically or challenge it economically.
From this perspective, it could be argued that the U.S. has not had a systemic political or economic crisis for 40 years. That is not recent; it's two generations ago.
Printing and borrowing trillions of dollars does not qualify as weathering a crisis. Clicking a few keys to create or borrow trillions only papers over the systemic issues that were the sources of the instability.
By this measure, the U.S. scores very poorly: 4 out of a possible 5 on the Fragility Index. The stability we see now does not guarantee stability in the future; rather, it presages disorder and instability as the "just borrow/print another couple trillion" fixes fail to repair the systemic rot.
Duct-taping a failing Status Quo together with borrowed trillions is not anti-fragility.
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Like Citi would be more stable because of it's size and broad based lines of business. It's shit.
Citi would be more stable if they went back to being a bank instead of being one of the gods of the marketplace. I figure that they are on the list of sacrificial lambs to be slaughtered to keep GS afloat during the next shit bath.
Let's talk about the fragility score of the oligarchs. I have commented here in other threads regarding the speed with which the NYPD pussied out in the face of a single armed bad guy who simply wanted to kill them. This behaviour is not limited to NYPD. The people in charge are so self-focused they cannot function outside their own "special" realm. Plus, you cannot kill an idea.
Props to zerogov: http://zerogov.com/?p=3836
The Taliban and the Haqqani Network and hundreds of resistance organizations scattered throughout Afghanistan have thrived and multiplied under the debt carpet-bombing of trillions by the Western military industrial complex to crush a rebellion that is still alive and well. Exhibit A is the evaporation of the very expensive post Hussein Iraqi army at the hands of the road-borne light infantry threat of the IS or ISIL. In itself, an unexpected send order effect of arming and training guerrillas to harry the Syrian dictator. A dozen years and trillions of dollars in American mentorship, and the vaunted Iraqi army folds under the slightest pressure as it is hollowed out by irregular Fourth Generation forces.
American arms and the military machine emanating out of DC have a curious reputation. Vaunted as the most powerful and technologically sophisticated military on Earth, yet consistently bested by irregular forces in all but the instance of the brief and strategically limited Gulf War in 1991. Yet even that war was simply a harbinger, like WWI of WWII, of worse things to come.
I recommend reading the article.
Diverse economy = Blackmarkets. We're good!
If "hot illegal cash flows" = "diverse economy", then "yes".
Finance, retail, and services are the entire economy. Very little manufacturing very little resources. Good food production though and a big (though shrinking) energy business. Is that diverse? Not very in my estimation.
But really, for fragility, ask how self-sufficient is the economy, are its accounts with the rest of the world in balance? The answer of course is a resounding no. 4 straight decades of enormous trade deficits with the rest of the world. If the balance of financial or military power that supports these ongoing deficits ever shifts (an inevitability in time), the US economy will look pretty fragile pretty quickly I'd wager.
Score should be 5.25. Extra credit for the level of reckless sociopathic behavior in USA
I would also score the U.S. economy as not being very diverse.
FIRE, retail and services are most of it. And the service economy, although large, includes a lot of small, marginal, sole proprietorships.
Some of the largest manufacturing companies; autos, for example, are not economically healthy. The medium and long term future of aircraft manufacturing is sketchy.
And the 900lb. gorrilla in the middle of the room is the public sector which doesn't count because it doesn't generate exportable value added product; government, health care, most of the education system.
Yes, in terms of surviving hardship in a centrally planned, price-fixed, oligiarchy, the people of the East have considerable more experience. In terms of your 900 lb gorrilla theory, I'd argue that there are some useful government efforts in science and engineering.
If you ask me, the real useless fucks are in all forms of banking, finance and other useless paper-pushing....
FUCK EM!
ZoroAustrian & TrumpXVI have given some interesting points for consideration here. We have lost Manufacturing and can not restart manufacturing of textiles, cheap household items, furnishings, kitchen ware, and many essential items in the short term.
I don't see great efforts to Stockpile Resources or Commodities under a National System either. Fuel, Oil, Refining Oil, Food, Meat, water, Lumber, Metals, Chemicals, Heirloom Seeds, there are many essential items traded on futures markets and potentially could be bought up by foreign investors or Nations.
And yes, we have lots of Employees who don't produce anything in the economy. Sure we need teachers. But do we need DHS? Do we need millions of people in tax Preparation, Accounting, Tax Lawyers, Financial Lawyers, Offshore Financial Specialists, Lobbying, ...
If you Simplify and Streamline Regulations, Laws, Rules, Court Rulings, Create Benchmarks for Courts regarding Corporate Powers, Corporate Liability, Health Care Liability, Accident Liability... you can shrink employment for litigation and Engineering of Financial Products while freeing up Court Time, Civil Lawsuit Bottlenecks.
Why do we need 3-5 years in Litigation? Why do we let the wealthy Corporations and other Entities tie up Courts for years since they are powerful and have armies of Lawyers??
Stream Line Government, Courts, Financial Instruments, and Accounting & Financial Ratings. Simplify.
Of course this would mean Sweeping Reforms. So Lobbying would be against this.
6. Total control by the Wall Street mafia.
We know it's not sustainable, been that way for YEARS!
complacency with familiarity, the familiarity of complacency.
Still studying this, but last night was reflecting on how many current Regimes are engineered for stability, and Status Quo.
Often in the West we choose one figure to take the blame while the power to Legislate has been farmed out to other unknown figures (Largely to the Electorate, like the Jekyll Island type).
China is a little different since power resides in a group of Communists who select a Premier which has proved to be very Stable and provide a Staus Quo.
Even Russia has this same Stability under Putin for a very long run.
US President is a Right Wing war monger with plenty of Socialist Programs within a Military Republic which backs Financial Cartels and Kiretsu type National Corporations. The Feature of Open Borders and Borderless Corporations must be raised with Slave Trade/Slave Labor with Global Free Trade Treaties.
It seems with MIC power and War, we see Treaties used to Leverage Corporate Power and the power of Elite and Wealthy.
This must be a Post-Modern Era of Declining Freedom and Individual Rights. Corporate power to Avoid Auditing & Transparency & True Financial Reporting as Assets are Targeted, Funds are Targeted, Employment Entities are Targeted... to Loot and transfer wealth to Executives and Investors. And of course the Central Banks are Enlisted to support what is basically like British Aristocrats stealing Wealth from Peons.
NATO, Think Tanks, Foundations, PACs, Israel, Banks & Banking Institutions like BIS, IMF, WB, and most Economists... just seem to support wars and financial suppression.
So go ahead and blame the leader of the government, but don't pretend you don't know there are hidden powers Lobbying & Writing all the new Legislation.
Brought to you with the same precision as the Misery Index.
Fully agree, Charles.
We know the US ratings agencies aren't up to much after 2008.
So what do the relibale Chinese ratings agencies think?
US A-
Russia A
"While 9/11 was a shock, was it equivalent to Watergate or the Vietnam War or the civil rights movement? I would argue that 9/11 was not equivalent because it did not divide the nation politically or challenge it economically."
While most people were rightly shocked by 9/11, I would hardly say that it hasn't divided the nation. At first, it clearly provided an opportunity for the government to get consent of the emotional to 'do whatever it takes' in responding to it. However after the initial emotion of the event wore off, people started to question the government's overreach in response to it, in addition to the official story. They also questioned the official rationale for why the terrorists did it in the first place, which we were led to believe was because 'they hate us for our freedom.'
Well, they need no longer hate us for our freedom, because American's have only a perception of freedom remaining.