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Truth Is Being Suppressed By The Tools Of Money
Excerpted from Artemis Capital Management letter to investors,
Dorothy Thompson once said “peace is not the absence of conflict”. Never forget there is a form of peace and stability reinforced by a foundation of underlying volatility. Game theorists call this the paradox of the Prisoner’s Dilemma, and it describes a dangerously fragile equilibrium achieved only through brutal competition. The Prisoner’s Dilemma is the most important paradigm for understanding shadow risk in modern financial markets at the pinnacle of a multi-generational debt cycle unparalleled in the history of finance.
In their masterwork tapestry entitled “Allegory of the Prisoner’s Dilemma” the artists Diaz Hope and Roth visually depict a great tower of civilization that rests upon a bedrock of human cooperation and competition across history. The artists force us to confront the fact that after 10,000 years of human civilization we are now at a cross-roads. Today we have the highest living standards in human history that co-exist with an ability to destroy our planet ecologically and ourselves through nuclear war. We are in the greatest period of stability with the largest probabilistic tail risk ever.
The majority of Americans have lived their entire lives without ever experiencing a direct war and this is, by all accounts, rare in the history of humankind. Does this mean we are safe from the risk of devastating conflict on our own soil?
In 1961, at the height of the Cold War, a B-52 bomber carrying two Mark 39 thermonuclear bombs accidentally crashed in rural North Carolina. A low technology voltage switch was the only thing that prevented a 4-megaton nuclear bomb with 250 times the yield of the bomb dropped on Hiroshima from detonating on American soil. In addition to killing everyone within the vicinity of the blast, the winds would have carried radioactive fallout over Washington D.C., Baltimore, Philadelphia, and New York City. It is not inconceivable to imagine that, at the height of cold war, a weapon of that magnitude exploding randomly on the eastern seaboard would have triggered immediate accidental retaliation against the Soviets resulting in full scale Armageddon and the end of humankind as we know it. This is just one of many nuclear accidents during the cold war.
Peace has a dark side. Peace can exist due to hidden conflict in the Prisoner’s Dilemma.
Global Capitalism is trapped in its own Prisoner’s Dilemma; fourty four years after the end of the Bretton Woods System global central banks have manipulated the cost of risk in a competition of devaluation leading to a dangerous build up in debt and leverage, lower risk premiums, income disparity, and greater probability of tail events on both sides of the return distribution. Truth is being suppressed by the tools of money. Market behavior has now fully adapted to the expectation of pre-emptive central bank action to crisis creating a dangerous self-reflexivity and moral hazard. Volatility markets are warped in this new reality routinely exhibiting schizophrenic behavior. The tremendous growth of the short volatility complex across all assets, combined with self-reflexive investment strategies, are creating a dangerous ‘shadow convexity’ that will fuel the next hyper-crash.
Central banks in the US, Europe, Japan, and China now own substantial portions of their own bond or equity markets. We are nearing the end of a thirty year “monetary super-cycle” that created a “debt super-cycle”, a giant tower of babel in the capitalist system. As markets now fully price the expectation of central bank control we are now only one voltage switch away from the razors edge of risk. Do not fool yourself - peace is not the absence of conflict – peace can exist on the very edge of volatility.
The middle class is unknowingly trapped in the Prisoner’s Dilemma and this is perhaps our greatest non-linear risk as a nation. America is built on the promise of upward mobility but that promise is increasingly becoming a lie. Wealth inequality is at the highest level in 100 years and close to levels last achieved before the 1928 crash that led to the Great Depression.
Today the top 0.1% of households now control an equivalent amount of the wealth as the bottom 90%. Since 1973, real family income for the top 1 percent has grown over 150% while incomes for the lowest 20% of earners has remained stagnant. The median household income adjusted for inflation in 2011 was just below its level from 1989 and $4,000 lower than in the year 2000.
The illusion of a middle class prosperity has been sustained via low interest rates, consumer debt, and globalization. Instead of helping the problem, accommodative monetary policy has accelerated this pace of income inequality in the US.
“Economic inequality has long been of interest within the Federal Reserve System” said Janet Yellen during a April 2015 speech. Yellen has repeatedly argued that accommodative monetary policy reduces income inequality by lowering unemployment. While it is true that unemployment has declined, her conclusion assumes that lower wealth inequality and lower unemployment are correlated in some kind of linear fashion. In reality, the wealth gap peaked the year before the Great Depression started when the country was close to full employment and the joblessness rate was only 2.08%. The point is that full employment with extreme income disparity can and often does co-exist. If we measure the average income in a hypothetical village of 100 people, 99 of which have minimum wage jobs, the last of which is Warren Buffett, who employs the rest, you have income disparity and full employment. To this extent, Yellen’s argument that lowering unemployment somehow decreases the wealth gap is illogical. During Yellen’s September 17th, 2015 press conference she alludes to a mysterious academic paper that somehow proves otherwise, but I looked everywhere and couldn’t find that paper. I do have a non-academic paper entitled “Common Sense” that takes a very different view.
Yellen’s treatment of the wealth gap problem is an example of mistakenly linearizing a non-linear problem. The Bernanke-Yellen Fed has achieved a linear decline in unemployment via exponential growth in the monetary base. When asset prices increase in a non-linear fashion the top 1% of wealthy families that own real estate, stocks, bonds, and have access to low rates will benefit disproportionately. When the middle class earns a dollar, they spend that dollar on goods and services that reach the real economy. When the top 1% earns a dollar that money is likely to be reinvested in assets.
As a result, we have seen non-linear inflation in asset prices but no significant inflation in real wages or core CPI. With no wage inflation, global central banks are inclined to continue their rotation of devaluation further exacerbating this mad cycle and encouraging an even greater income gap and vast political risk. The policies of the Fed have simply exchanged nonlinear expansion of the wealth gap in exchange for a linear decline in the unemployment rate.
What is clear is that Janet Yellen would make a terrible derivatives trader because she just does not seem to understand that you cannot hedge a nonlinear risk with the linear benefit. The current monetary experiment, left unchecked, will inevitably threaten the very fabric of our democracy.
The global economy is suffering from a cancer of debt-deflation, income inequality, and low growth. Instead of treating the root cause, policy makers have treated the symptom of asset price declines. Whenever the patient feels weak an increasing amount of policy drugs are required to maintain the illusion of stability to the point where the patient is addicted to the painkillers.
In all instances, policy intervention has generated a short-term market fix at the expense of addressing the longer-term fundamental problems.
The Federal Reserve has expanded its balance sheet $4.5 trillion to create middle class jobs but instead has incentivized asset bubbles and the highest wealth concentration since before the Great Depression. The European Central Bank and Bank of Japan are pursuing quantitative easing to drive up asset prices rather than addressing the core issues of structural reform and weak demographics that are causing their deflation. European institutions rely on last minute ‘bail-outs’ and quantitative easing to avoid debt default while ignoring the necessary fiscal and philosophical integration required to make a unified Europe a success. China is struggling to shift from an export driven economy to a consumption driven economy despite decelerating growth, total debt growing four times faster than GDP, and the valuation of the Shanghai Composite at levels comparable to 2007.
How does spending an estimated 10% of GDP, including $263 billion in direct stock market intervention, coupled with cheap real estate loans to build ghost cities, fundamentally address any of China’s real problems?
The root cause of the cancer is never confronted and as a result, the fundamental health of the patient does not improve. Neither the doctors nor the patient wish to face the reality that difficult and painful therapy is needed to destroy the cancerous leverage in the system. The inevitable result of this denial will be the death of the patient.
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Trump *is* money...incredibly stupid article. I thought ZH people were smarter than this.
That's the next article over. Might want to doublecheck what tabs you have open and what accounts you have signed in.
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I think if you keep pimping this idea on Zero Hedge as a cryptocurrency, I am gonna have to track you down, and bitch slap you into the middle of next week for being a pimp ass bankster schill bitcoin wannabe rat bastard motherfucker.
IF ZERO HEDGE HAD A FUCKING CURRENCY OF IT'S OWN, IT WOULD BE MINTED IN INCORRUPTABLE NON HYPOTHECATED NON DERIVATIVE NON MARGIN ABLE SILVER OR GOLD.
Get your shit together, and change your direction while you still have an ass to kick.
Jesus, fucking kids these days. You all think technology is a miracle. All it is is electrons that can be made to go poof any fucking minute now.
if i blew up your phone right now, you would look like a cow at the slaughterhouse just at the moment the bolt gun goes off - " How could you do this to me ? What'll I do now ? "
Improvise. Adapt. Overcome. Triumph over adversity.
And, mint a fucking coin out of noble metals, or I will make you look like a one legged man at a nut kicking contest.
i stopped reading when he told me the crash was in 1928. ok so it's a typo. it's a bad one.
great collage illustration though.
What's that...not Trump? Truth? Oh...never mind.
I didn't see the term MAD (money-as-debt) anywhere in here.
Therefore, back to the drawing board, Artemis Capital Management.
I don't see the downside.
All we need is a flux capacitor
why are the bearish ETFs being shutdown?
Like which?
mistake my ass
The current monetary experiment, left unchecked, will inevitably threaten the very fabric of our democracy.
Which means that all is going according to plan.... Order out of Chaos, baby ....
God I laugh every time I see your name.
Today we have the highest living standards in human history
Whoaa! Hold it right there. Citations please.
maybe world wide. maybe.
certainly not in the u.s. the median u.s. family peaked about 1972.
Bill Bonner (via Business Insider):
The end of the economic world has begunRemarkably, the average American working man earns less today than he did a half century ago
http://www.businessinsider.com/end-of-economic-world-has-begun-2015-10
Phish 2014 10 31 HALLOWEEN SET 2 - Chilling, Thrilling Sounds of the Haunted House
https://www.youtube.com/watch?v=4yKaZVKeF2A
.
bonus track.
Umbrella
https://www.youtube.com/watch?v=u8fo8Wv49Iw
.
John Prine : Blue Umbrella
https://www.youtube.com/watch?v=Af6_XP1IxNM
.
....
john prine : You've Never Even Called Me By My Name
https://www.youtube.com/watch?v=_ap-GLcEixs
.
"money".
John Prine & Nanci Griffith : Speed Of The Sound Of Loneliness
https://www.youtube.com/watch?v=c2e9wWFg-pI
DAMN RIGHT the truth is suppressed--just look at this spectacular history that is rarely seen!
http://ShowRealHist.com/RealDow.gif
http://ShowRealHist.com/
Re: "When asset prices increase in a non-linear fashion the top 1% of wealthy families that own real estate, stocks, bonds, and have access to low rates will benefit disproportionately."
If that's the case, then the problem will be self correcting when the Fed bubble busts.
In the 300's AD, the Roman Britains of the Empire were living a life style unprecedented outside the environs of Rome itself. Hundreds of large country villas with attached working farms propsered across modern day England. Hundreds of years of peace, after the rebellions of conquest were settled. Generations of people were born grew up, grew old and died, never seeing war. An economy of agriculture and foreign trade filled the market places. Cities prospered and had all the trades and businessmen of prosperity. The locals themselves were ill adapted to war, because the very odd barbarian incursion might raise hell, but the legions would always come and settle the issue.
The people were totally out of touch with reality surrounding them. Nobody saw it coming. Even as Rome was pressed by invasions as was Gaul, Britian held out as an Island of peace and wealth. Nobody was even the least bit prepared for the day the legions pulled out to go home. When they left, the native Romano British had no legions, no field armies, little more than militia with few skills took up the Roman walls and forts. Since nobody saw it coming, the end result was waves of invasion from all quarters. North, West and East were soon aflame. When it was finally all over, most cities were dust, those that survived were wooden huts and a few wooden chrurched. A thousand year reset backwards was finished. You can not always progress, there are barbarians. These seek to loot, not work. Look around you today. How many looters do you see circling the civilized workers and their nations? Germany, Sweden, Britain, Netherlands, Denmark are just a few who do not see it coming. But nobody is standing at the borders, they have been thrown open by liberals and leftists. Thge liberals and leftists think if you hand the barbarians enough free stuff, and give them homes and money, that all will go on as before, only a little more Multicultural.
WRONG!
the u.s. certainly has assimilated quite a few "barbarians" (ok irish, italians and slavs) and seemingly profited.
but it is a fine line and without rising incomes it could get more than a bit apocalypsey.
beautifully said, jack, thanks.
Please Don't Bury Me John Prine
https://www.youtube.com/watch?v=JfBdMXhpQnU
"All we have left is PsyOp & Ponzi."
-Miggy
The premise of this article is quite flawed, ... in that it presumes that the FED does not intend to produce exponential inequality and collapse in the fabric of america. After 7 years, it is clear that the FED and Washington fully intend to destroy america before the next election, and it appears they may achieve this goal.
The premise of this article is quite flawed, ... in that it presumes that the FED does not intend to produce exponential inequality and collapse in the fabric of america. After 7 years, it is clear that the FED and Washington fully intend to destroy america before the next election, and it appears they may achieve this goal.
The article is articulate, but shallow in its perspective and all too obviously foregone conclusion, that the end of the dollar and the nation as we know it, are at hand due to improper central bank actions taken to address what is portrayed as a macro-economic crisis destined to send humankind back into the Stone Age, violent class warfare, or worse. This sort of stimulating reading is common fare on the alternative media press end of the Internet. It is however, also being cast upon the waters of ideas where similarly alarmist protestations are batting near zero as they go through dress rehearsal for Armageddon yet again with no resulting end-of-times. The story really, is as old as history itself. Even the Bible preaches Armageddon. How different is saying, "I read it in the Bible." to saying, "I read it on the Internet, on ZH."? Not too much really.
I am going to suggest, there are some minor idea truths represented in all such works being posted on the Internet. They must be read, when they are written well enough to stomach them. But, reading them is not the same as lending to them the clairvoyance they pretend. I have never attempted to read more than a couple of paragraphs in the Bible.
Reality, I am being forced to say again though, is infinitely complex. Predicting the future is a pasttime wrought with laughable examples of the folly of pretending the human mind is capable of juggling the infinite. That's not to say, we should not listen to the doom-sayers and the soothsayers. It is to say, it's difficult to lend them much credence.
But there is something to be said for how increasing modern complexity threatens humanity, and clearly, and much more importantly, not just in economics. Humanity can survive this ongoing economic depression.
The A-bomb is coming up soon enough on being 100 y.o. technology. And while certain ethnic groups are inclined to enrapture the genius of the A-bomb physicists, those guys didn't even have electronic calculators, let alone real computers. There are kids in their junior year in high school who are doing bigger science today.
And the much wider spread of technolgical invention going on today, is an even more pressing concern than just nuclear physicists and the common big-bellied Keynesian economists. Everywhere we read about scientific breakthroughs, breakthrough that if we read between the line, are changing the landscape of technologies that threaten mankind. We are men, just men. And yet, scientists worldwide are discovering, inventing and throwing the switches on experiments that have possible results that are dangerous even in the hands of Gods. We are not Gods.
If any of you fucking doped-up ZH morons have gotten this far, I congratulate you. And I will reward you by truncating the moral lecture with one last little snip from what I think about.
What if there are an infinite number of ways to reset the whole damned Universe with quantum mechanics? No physicist will say it publicly, but there probably are at least many, if not an infinite number. I am inclined to the infinite, because everything else is infinite in this Universe. The "spooky actions at a distance" known to occur in quantum mechanics warn us, scientists are fucking around with something doubly-exponentially more powerful than nuclear physics. Our boys probably have already figured out some pretty effective ways to win a war, that are top secret, but ready to be pulled out at a moments' notice. Don't believe it? Well then, if your grandfather is still alive, go ask him if he would have believed, prior to the war, that an A-bomb would have ended WWII. Agriculture was still horsedrawn as WWII began, kids.
Everywhere we're at the threshold of discovering that we are not Gods, that by-in-large we're all just as ignorant as the avergage ZH reader. And whom here, would you trust with the power of a God?
Class dismissed.
Class dismissed?
That was a rant, not a lecture.
i'm not so sure. he did congratulate us.
"If any of you fucking doped-up ZH morons have gotten this far, I congratulate you."
Same person as you... "me."
March 10th 2008 @ 11:00am Bear Stearns time New York shitty was just such an instance of 'spooky action at a distance', GiveupReality. The Quantum Mechanical reset of 'the economy' manifested in that first hour just like the Bible infers in the 'theif in the night' parable. I agree with you that the universe can be reset on a quantum level. You are a real thinker, methinks, but if you really want to become a mature contemplative you will have to get over reading blurbs of the Bible and decide to sit down and read the whole thing from front-to-back like you would a book about history. One cannot call themselves 'learned' if you don't read the Bible. It is an historical document of antiquities IMHO. It is certainly worth a read front-to-back so one at least knows what is contained in the Bible.
I read quite a bit, literally stacks of books month after month. The older the better, generally speaking. I haven't had a TV since my ten inch B&W was stuck with the verticle hold not quite doing the job more than a decade ago. The last thing I remember watching on TV was Bryant Gumbel talking about the planes that our government flew into the Twin Towers. I also remember seeing Lee Harvey Oswald held up by two men, handcuffed as he was, so he could be shot point blank more than once by Jack Ruby. I was twelve then, and it seemed all too obvious to me what was going on. But, I have just never had the momentum behind me to read the Bible. And I don't have one on hand.
I suppose I'll find the time eventually. But I know from experience that none who have read it agree about what it says or means. So, it's nothing I'm ever going to venture either make or express an opinion on. Life is too short. If there's a heaven and a hell, I'll be going to hell. I've been an unrepentant sinner my whole life. These days, that's the only thing that will ensure you remain middle class.
I've read everthing Twain ever wrote though. LoL (Twain) And I expect I'm one of very few who has actually read all the way through, word for word, Kant's Critique of Pure Reason. Kant unfortunately lost his mind in the end. There are truths we can know. But not what most think, and very little like what Kant thought. The only truths available to us are moral truths about our necessary place in this world, and these must be surmised. Everything else is illusion, if not pure delusion.
It's funny how right human beings can convince themselves they are. Not funny, as in hilarious. But just strange-funny.
The doper crowd here is like that, vocal morons and worse than religious fanatics that go door to door annoying those who are too polite to say, "Get the fuck out of here, and don't ever come back."
Everyone has my permission to utter that phrase in earnest any time they want. It doesn't always work. But it can make life a little more pleasant, when it does work.
If you did not enjoy reading metaphysics you would not have read Kant. The Bible is pure metaphysics so I am positive that you will enjoy reading it if you read it entirely. It takes no time at all to read the entire Bible when you dicide to read the whole Bible over a couple of months or so. Just start from page one and don't stop until you have read the whole story. Guaranteed you will find yourself enjoying the book. And when you are finished you can honestly say that you read the Bible front-to-back. When I read the Bible [King James version] I had finished my B.A. Experimental Psychology and was looking at all my great grandfather's old books that I inherited and I realized that my great grandfather was into theology BIG time so I started reading his books and wound up reading the Bible in the midst of reading his library.
I have studied Kant, and I have read Critique of Pure Reason. Kant was difficult somewhat as I remember it. He is good preparation for Psychophysics, Information Theory, Cybernetics, et cetera.
post more because your perspective is interesting. cheers
growth, a simple term. these economist types
would like you to believe it means they have the
the right to steal everything from everyone to
facilitate this "obvious essential component of
the monetary and financial prerequisite" as they
demand.
they fly by mere maintenance of existing structure
and function to "growth", and steal everything in
the fog, man. it is criminal and state, it is too
criminal to consecrate or prosecute. it is what it is
till it turns to dust or less.
.
John Prine : Paradise (2010)
https://www.youtube.com/watch?v=bDCsc3CU5ww
.
failure will fall where it stands, count on it.
just fuckin' smash the whole scam.
David Icke spoke of this 20 years ago
God is Truth. Only Satan's Spawn oppose Truth.
Mathematics does not care if the 'truth is being supressed'.
When you're up to your neck in deception, obfuscation and lies, honesty can be a very dangerous thing.