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Collapse Part 3: No Institutional Path To Contraction
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Collapse is not an event, it is a process.
One poorly understood source of collapse is the lack of pathways to contraction and a reduction of complexity/cost. The only pathway that is clearly marked is the one to expansion--of production, debt, credit, government, income, benefits, costs and complexity: more agencies, more regulations, more committees, more staff, more of everything.
The path to less complexity, less debt, less production and a contraction of the entire system doesn't exist in most institutions.
Many dismiss any talk of collapse as mere fear-mongering. This is a legitimate issue to discuss, for if we focus exclusively on the lurid horrors of being killed by a shark in open water (for example) while ignoring the much higher risks of being killed by falling off a ladder at home, we have distorted the risks of accidental death and done a disservice to our understanding of various risks.
But collapse is not an event, it is a process. As a result, systemic collapse doesn't lend itself to statistical calculations of probability. Processes are driven by dynamics, not odds.
So those dismissing any discussion of collapse as mere fear-mongering are doing a disservice to our understanding of processes--or lack thereof. One interesting feature of collapse is that it can result from either a choking over-abundance of complex, costly processes or a complete lack of essential processes, conceptually and practically.
Which brings us to the process that is lacking virtually everywhere--the process of contraction: shrinking the system, income, headcount, complexity and being productive with less of everything.
The corporate world offers many examples of what happens when the process of contraction and reducing complexity does not exist: companies buckle, fold and go bust. The world's corporate darling Apple experienced this precise death-spiral in 1996-1997 before the company's board brought Steve Jobs back as CEO. (So tentative was the board that Jobs was appointed "interim CEO.")
Apple had only one path: expansion. More fiefdoms, more staff, more product lines, more models, more sales, more profits. The reversal from profits to losses marooned the company, for there was no institutional history of a vast reduction in products, fixed costs and organizational complexity.
Not only was there no institutional history of downsizing, there was no conceptual or practical pathway from unprofitable bloat and institutional failure to a leaner, flatter more productive system. Without an emergency infusion of cash from Microsoft and the appointment of a manager empowered to slash and burn fixed costs and re-set priorities and product lines, Apple would have collapsed.
The same can be said of the European Union. The bylaws of the EU (as I understand them) define the pathway of expanding the EU but not the pathway of forcibly shedding members. Member nations may elect to leave the EU of their own volition, but there is no mechanism in place for the EU to eject member nations such as Greece.
In other cases, systems are structured so any contraction leads to collapse. This is the nature of our debt/leverage-based financial system: any contraction in debt, credit or inflation will bring the system down because the system is predicated on the permanent expansion of collateral to support more debt and the expansion of income to service debt.
If either collateral or income declines, the system implodes:
This is not an event, it is a process. If debt and leverage expand while collateral and income decrease, the system becomes systemically more fragile and prone to destabilization. The financial system is dynamic and has multiple inputs; on its current setting, the system will become increasingly fragile. If alternative policies were put in place, it could become increasingly resilient.
Systems with no conceptual or practical pathway to contraction and reduced complexity/fixed costs are more at risk of collapse than systems with institutional pathways for successful reductions in debt, credit, income, fixed costs and complexity.
How many institutions have proven pathways for becoming smaller, leaner, and flatter in organizational structure? Very few, as the default setting for the past 60 years has been expansion and more of everything. Less of everything does not compute.
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Oh it'll be an event alright
I don't know....I've already eaten an awful lot of popcorn while waiting....
Tainter collapse.
I'd love to hear the downvotor's take on why Tainter's hypothesis is inappropriate. . .
My guess is the downvoter doesn't know Professor Tainter is a real person with a career's worth of well researched study of the collapse of many, many societies. Tainter's slow collapse is happening as we speak.
cliff notes version courtesy of Mako
- System starts
- System expands at the rate needed
- System peaks
- System unable to expand at rate needed
- System collapses
- System liquidates
- Rinse and repeat if choosen
The collapse won't be noticed
https://www.youtube.com/watch?v=RJm3cRRvPoM
Lol, omg these people.... That's Fooking Funny!
I would immediately think it is a scam or stolen property. Besides, who handles pure silver with bare hands?
In the fall of 2015 most businesses that do budgets will be planning for 2016. There will be three quarters of 2015 in the books. Profits will be down, sales will be flat. The economic forecasts, of course will say "Boom Ahead", but their numbers do not lie.
Businesses will right-size accordingly and restore themselves to profit growth.
After all, it's why they are in business in the first place.
The European Union is structured so that there must either be increasing centralization of power or the whole thing collapses. Same with the American union unfortunately, though it did not start out that way. To keep power decentralized in a nation the thirteen doorways of centralization from "Localism, a philosophy of government" must be kept shut. Too bad for the citizens of the EU that they did not have that book as a guide when they built the thing. The article reminded me of this passage...
"Since decentralization of power is the central tenet of localism, it only stands to reason if there is a procedure to remove a member state from the union by the other members and the central government, there must also be a procedure by which a member who wishes to leave the union and take back the authority it once delegated to the general government may do so. Relationships should ultimately be voluntary, not a matter of coercion.
I would suggest that the procedure for a member state to dissolve its bond with the union be spelled out in advance. There ought be two paths to leave, either a super-majority of the population approves a measure in a way that takes a relatively short period of time or a simple majority can approve it in a way that takes a long period of time, such as a decade. The details might vary among the co-sovereigns.
Deciding in advance on what the rules would be for an exit establishes the principle that an exit is an option and could save a lot of needless conflict later on. Many states who joined the American Union thought that since there was no mention in the Constitution of the Federal government being granted the power to force states to remain in the Union, that each state retained the power to leave anytime they chose. They found out the hard way that some things in a contract should be spelled out in advance, such as how each party may terminate the agreement."
http://www.amazon.com/dp/B00B0GACAQ
Charles! I read your blog regularly. You are good. Yes, Sir, in The Plan B, this is how civilization will try to consolidate try to survive. Everyone on this forum would also understand it .. even "How stuff works" website gets it. I am just trying to figure out if the death of Humanity has already occurred because cell still think that the body is alive long after the soul is gone.
http://just-a-thought-from-thinair.blogspot.com/2015/06/how-civilization... (has a link to how stuff works)
http://just-a-thought-from-thinair.blogspot.com/
But, who will then answer to the same old question : What happens to the tenth and why?
Like it or not we live in an economy that is centrally managed. It is managed to not collapse and if there was a contraction (and there likely has been) it would not be acknowledged. Yet, a free economic system must have cycles. Or, at least historically, it has had cycles. Since 1999 (repeal of Glass Steagall) that has not been allowed. The result is distortions and an economic system which is not free and as a consequence a society that is not free. To keep this up there has to be more and more control, more and more central planning and more and more regulation of our every day lives. Technology has made this control possible, but there are limits. I would say we haven't passed those limits yet.
Torsion is a principle of deflecting torque by twisting on an axis. a house (a cube or rectangle) receiving a high wind may attempt to twist to deflect the wind, its not a deliberate intelligent act, just a principle of force at work.
if the wind decreases the form will return to its default cube or rectangle, if the wind increases the form will shatter enough to allow the wind to pass through which may destroy the structure.
Our social-legal institutions are undergoing the same stresses caused by the economic/demographic storm, they are twisting from the torsion, results like courts calling corporations human beings, ie persons, demonstrate the twisting and bending of our social fabric as it attempts to compensate.
eventually either the stress diminishes, the structures sucessfully modify shape sufficient to endure or they collapse.
If we've lived long enough and paid attention we can surely see the twisting, but no one knows how strong is the fabric or how intense the economic storm.
All we can do is watch for signs of structural fatigue and get out of the way, there is no effort supportable by the political/economic system to repair the social fabric whilst the storm is in progress.
We are at the mercy of the dim, the demented and dubious as they flounder the ship of state onto the rocks. I just marvel at how twisted the world becomes before it collapses.
There are only 2 forces that can change the course, a rapid depopulation event that leaves lots of cheap resources available, or a bonus event that adds additional resources or energy to the system, like the discovery of the new world increased the coffers of spain and england and others, or the discovery of the large oil fields allowed for the 20th century's profilic expansion of standards of living.
otherwise we're boned.
"It is managed to not collapse and if there was a contraction (and there likely has been) it would not be acknowledged."
This is what I call "the story". Most of us living in the past 50 years of the USA realize that the country is now less productive than it was before. Even the insane masters of the universe acknowledge this if you talk to them in the bar, out of the earshot of PR mics. That is contraction. The angst that is the foundation of our current culture is exactly this: we are being told that we are making progress when everyone knows we are contracting. This fucks with people's heads in a major way. Witness our consumption of psychoactive drugs (both legal and illegal). Our society is so warped that many can survive psychologically only through chemical alteration. Defending a culture that is damaged to this level becomes more difficult by the day.
Mankind has been forming organised civilizations for about 5,000 years.
How many ancient civilizations exist today?
History suggests continual cycles of expansion and collapse are the norm.
Someone has studied the rise and fall of civilizations:
http://www.rexresearch.com/glubb/glubb-empire.pdf
They often take a very similar path which seems to reflect human nature.
You won't be surprised to find we are in the end phase, "The Age of Decadence".
Precisely.
People arguing this is just fear mongering are essentially stating the cycle of civilizations doesn't apply here.
People arguing this is just fear mongering are essentially stating the cycle of civilizations doesn't apply here.
Exactly. Athens defeated Sparta at first, but as Athenian liberty descended into licentiousness, Sparta eventually won.
Rome was all powerful, but once the 'elites' descended into orgies and vomitoriums, the end was nigh (though it took 2 or 3 centuries; things move a bit faster today.)
France had glory under Louis XIV; under Louis XVI, it had parties, orgies, and a revolution.
It doesn't repeat, but it rhymes.
The global depletion of critical resources and easily accessable energy stores, super-concentrated population centers, and the wide-spread proliferation of modern WMDs should make this collapse look a bit different than the localised collapses in the past.
This is the pinnacle of human technology. No other future civilization of humans will have oil and coal. Depending on how much damage all the radioactive waste causes, and whether we have global thermonuclear war, things will decline far more steeply than ever before. It could be a long time before there is a 15th century equivalent civilization.
To state the problem in the simplest terms possible, debt must be tied to good collateral. Debt should be backed up by good collateral and only be issued for endeavors that produce something of value, and the end value must equal or exceed the amount of the loan plus the interest on the loan in order for a society to prosper. Certainly, a percentage of loans will fail to achieve this result, but that percentage should be, if at all possible, held to a minimum.
It is wrong to say that the existence of debt is dependent upon constant expansion of the system. It is the issuance of debt which expands the system. Without buisiness investment, there is no expansion.
I suppose business expansion could be funded by retained earnings to some degree, but it appears that most businessmen prefer to play with other people's money.
But what happens when mountains of loans are given out when there is no resaonable expectation of repayment, no expectation that the money will be used to expand a business, or no valuable collateral to seize in the even of default? Or when mountains of debt gets issued to fund completely unproductive endeavors such as frivolous personal consumption? You end up with a lot more money sloshing around in the system, but nothing of value being produced as a result. This creates the illusion of prosperity for as long as the debt is not written off, but, instead, rolled over continuously. Under those circumstances, one migh conclude that a lack of growth collapses the system because the debt cannot be repaid absent that growth, but one would then have not looked back far enough in the chain of causation. The collapse is caused by the issuance of the stupid loans in the first place, not by the lack of economic growth resulting from the loaning of money to entities who never intended to use those funds to produce anything in the first place.
Of course, if you are a banker working within a fractional reserve lending system, there is continuous pressure to make more and more loans. You might start out with stringent collateral requirements, and airtight business plans submitted during the loan process, but you eventually end up sending out pre-approved credit cards to newborns and cats.
"It is wrong to say that the existence of debt is dependent upon constant expansion of the system"
I believe he is saying that a 'system' based on debt is dependent upon constant expansion of the system.
However, speaking of simple debt, if there is no expansion to pay the interest on the original debt then the debt will not be paid.
I'd love to know whether Banks have already instructed their IT departments for new software development work for replacing the Euro with their old Legacy currencies.
I suspect NOT .
no programming needed.
just simple reconfiguration.
"Collapse is not an event, it is a process."
A cycle phase turns 1 degree at a time. A cycle does not move from 90 degrees to 180 in an instant. At 180, however, the cycle is pointing straight down. Downward pressure starts slowly, then builds into a waterfall decline, as the pressure becomes too great to hold back the final phase of collapse.
This accurately describes the market/economic climate prior to August 2008, when Mr. Putin introduced a massive dose of black swan uncertainty into the mix, by suddenly invading Georgia. IMHO, every 'process' has to have a trigger mechanism to get it going. Jesus, a gasoline powered engine has to have the spark from a plug. The emerging supercriticality of an A-bomb has to have that detonator.
If the Russians didn't contemplate this in '08, they certainly have it down now. Especially, since the post-'08 Western response was to paper-over the events with even more 'fat-liter'.
Salah
Collapse is an event, if you're the 911 commission
see, it "just happened" and now its down, no point in figuring out why or how...now here's this nice little protective piece of legislation we had handy...
In the game of Jenga its a vertical constuct with limited pieces stacked on each other. The stack is dependant on all peices and will eventually come down. Now the game of blocks a wall can be built. In this type of construct recyceling blocks is possible.
Basically we are building the wrong construct.
What we realy have is a pyramid costruct. It is actually very stable but has well defined limits.