Bad Models Result In Terrible Outcomes

Tyler Durden's picture

Authored by Chris Martenson via,

Recently I spent a month in Buenos Aires.  I went there to study the culture and the economy of a formrely prosperous land, filled with kind well-educated people.

One key lesson was this: Given enough time, bad policies will eventually ruin any advantage.

While not as bad off as it was in 2002, when the masses took to the streets banging pots and pans in protest of their nations ruined economy, the city of Buenos Aires is still clearly depressed. As are most of its people. 

More than that, all hope has been lost.  Every time a new politician is elected, things are promised to get better, but they don't. Argentina's current woes are the result of far too many successive political regimes that made terrible decisions. It's a clear as simple as this: Bad policies lead to bad outcomes.

As we learned in our interview with Daron Acemoglu on Why Nations Fail, what matters most for widespread prosperity is that the political and economic institutions be fair and inclusive. From the podcast:

It all depends on incentives and opportunities. If people have opportunities to become rich, to open businesses, be innovative, do things that are going to further their interests and at the same time the nation’s GDP (Gross Domestic Product) and they have incentives to do so, that’s going to lay the foundations of economic prosperity.


It sounds extremely simple but the thing is that most nations don’t provide those sorts of opportunities and incentives to their citizens and therein lies the big divide. How do we summarize those opportunities and incentives?


It's the institutions, the rules, formal and informal regulations, and organization of society that determines what sort of opportunities are available to different people, to people from different walks of life, and what sorts of incentives they function under.

In Argentina, after having been economically disappointed so many times, any sense of economic vitality and entrepreneurial spirit has long since disappeared. 

Old buildings there display a grandness in the quality of their architecture. Newer construction is clearly blocky, rushed, and low-grade. 

“Basuras” are everywhere. They're the street-side dumpsters located all throughout the city.  Sometimes I would notice people rummaging in them as I walked about during the day. But after dark, formerly middle-class people can be seen in the basuras, usually from the knees down with their feet waving in the air, as they rummaged through looking for anything of value to glean:

How did Argentina get here?  How did a nation -- once the most prosperous in the world on a per capita basis -- stumble to a place of forlorn hope and such diminished prosperity that economists sometimes joke that there are first world economies, developing economies, and Argentina?

The answer is: Poor policies.

A long succession of flawed governance, coupled to some crucial mistakes in apportioning the spoils of the land to too-few wealthy families at the outset, has seved to erode the prospects for nearly all Argentinians. 

Now rapid inflation is again back in the news. Having seen this movie before (and not that long ago, either) everyone dreads what’s coming next.

Argentina is instructive for us living in the rest of the world, because it is a real-time case study in how bad polices lead to bad outcomes.  And in applying this same logic to central banks, we can conclude: Bad models lead to terrible outcomes.

So we should all very much care when our institutions, both political and economic, are becoming less inclusive and more extractive (and/or oppressive). Because if we continue down that road far enough, eventually the majority of us will find ourselves similarly waiting for night to fall as we slink off to tip headfirst into a basura.

On Delusions & Rackets

The longer this massive delusion of the viability of perpetual economic growth goes on, the more entrenched I find myself in a foxhole half-filled with dread.  And I really don’t like it. 

I'm ready for meaningful change.  I want to be able to once again focus on the positive.  I want to find ideas and people in leadership positions in whom I can believe.  I’m sure you do as well.

I find myself thinking: Let's just rip the Band-Aid off already!  Let’s count the losses up now, apportion them fairly, and move on having learned some painful but useful lessons about living within one's means as a society.

But that's just fanciful dreaming. The powers that be are doing (and will continue to do) everything in their considerable power to prevent this from happening.

And so the list of things in which I have lost faith in in the US is large and growing:

  • The rule of law.  Laid bare as a complete joke by Eric Holder under Obama, and now under Sessions/Trump. 
  • Financial “markets.”  These are now the playthings of machines that apparently cannot produce a single losing day for their owners as if they were legitimately money-making machines.  But pay no attention to the fact that central banks are pouring $200 billion a month into these same “markets.”   Further, try to ignore that it is the taxpayers on the hook for the “assets” the central banks are accumulating to legitimize the farce and remember to bust out your best ‘surprised face’ when the Wall Street machine operators get to keep their ‘winnings’ while taxpayers have to foot the eventual bill.
  • Politicians.  Always a suspect crowd, their complete fawning subservience to banks, bankers and corporate money in general has led to an even more profound, almost final collapse in public confidence in them.
  • Sick care.  Misnamed ‘healthcare’  this racket is so obviously a cesspool of corrupt, price gouging activities foisted upon desperate captive hostages in the throes of a medical emergency that it beggars belief that not one proposal out of DC has yet included the simple application of existing price-gouging laws that already protect you from hikes in the price of plywood during an approaching hurricane. 
  • Foreign policy.  Sure this is a complex sea of ever-changing interests and alliances but I am going to throw up if I hear one more State Department person talk about “democracy” in whatever country we’re bombing or secretly funneling arms into while saying nothing at all of Saudi Arabia’s grotesque violations of every principle that the State Department swears we hold dear.  Bombing and creating chaos everywhere is a really bad policy, yet it’s somehow gotten entrenched and I am beyond tired of it.
  • Environmental/ecological policy.  Anybody who thinks the US already went through and achieved something with the environmental movement in the 1970’s either hasn’t read the papers carefully lately, been outside in enough places, or both.  500,000 chemicals, many of them far more toxic than ones previously banned, have been released and done their damage.  Insects are now gone from thousands of square miles subjected to neotnicotinoid pesticides.  Obama’s administration punted as long as possible and then when the bad data was inescapable opted for “more study.”  Trump will be worse.  There’s another Silent Spring upon us.  Shame is too light a word.
  • Main Stream “News.”   Could it get any worse for the MSM?  Apparently it can.  Caught firmly between the proverbial rock and a hard place, those being declining viewership and public hostility towards their lies, the MSM response has been to double down and manufacture clearly fake news to serve a truly awful set of craven purposes.  At a time when we desperately need clear analysis and proper context, the MSM has stampeded off in a different direction.

I could keep going, but why bother?  This list of ridiculous awfulness will serve as a rocket fuel for the speed and the depth of the coming big reset when it finally arrives.

Don’t worry, there will be good news on the other end of the correction. But only once we finally get that Band-Aid pulled off.  We should already be imagining that next world, and everything that we want to find in it. Which is why we need to understand how to adopt better models than the ones we're currently navigating by.

Bad Models = Terrible Outcomes

The main predicament at the core of everything is that economics is the primary way we organize ourselves.  If your economic models are seriously flawed, meaning they will eventually fail, then your very society is at risk, as Argentina's neighbor Venezuela is currently demonstrating.  Money is a critical part of our social glue, it is a central part of the narrative that we live by, and this is why we find it so deeply disturbing when that narrative is obviously beginning to fall apart.

That feeling in the air right now?  The one making folks angry, hostile, anxious, and scared?

That’s just the herd appropriately sensing an approaching storm.

The big issue here is that the central banks have seriously flawed models that guarantee even worse outcomes for everyone.  This is no different than, say, if NASA were calculating a trip to Mars and used miles instead of kilometers for part of the atmospheric approach calculations and burned up a $125 million orbiter -- as indeed happened in 1999. 

Whether or not you have the right numbers, the wrong model will always give you a bad outcome. 

In Part 2: A Better Model For Predicting What Happens Next, we detail how today's bad models will literally destroy financial and economic markets for generations to come when that pesky thing called "reality" finally intervenes.  Debts do matter, because debts are a claim on future production.  As we have repeated over the years, GDP growth is now way below past periods of GDP growth -- leading us to conclude that future resource constraints will not only prevent the economy from ever again returning to its prior rates of rapid expansion, but force it to face the prospect of shrinking instead. Click here to read the report (free executive summary, enrollment required for full access)


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Looney's picture


For a second, I thought “Basura” is a Porta-Potty.  ;-)


Looney's picture

It’s a slow news day, so here’s an OT…   ;-)

Yesterday, the House passed a huge $696 billion defense spending bill for 2018

“Lawmakers voted 344-81 on Friday to pass the sweeping legislation.

The bill authorizes $696 billion for managing the nation's vast military enterprise in the 2018 fiscal year, nearly $30 billion more for core Pentagon operations than President Donald Trump requested.

A couple of year ago, while hunting down two ISIS excavators in Syria, we ran out of Hellfire missiles. It takes 4-7 years to deliver the missiles, or anything else for that matter, thanks to the fucked-up acquisition process at the Pentagon.

The Air Force is in a pitiful condition, too - only 4 of 36 active-duty fighter squadrons are ready for conflict with a near peer competitor.

Also, the $22 billion piece of shit, a.k.a. USS Zumwalt, breaks down in the middle of the Panama Canal.

On top of that, according to RealClearDefense: “U.S. production of tanks has fallen to the lowest level in living memory. A grand total of 12 Abrams main battle tanks per year are coming out of the nation's last remaining tank plant in Lima, Ohio.”

My point is that we keep touting our military budget, soon-to-be at $700 Billion, equating it to our “military might”, but there’s nothing mighty about it. At least 80% of the $700 Billion is just a legalized theft, fraud, and abuse to keep the Military-Industrial Cunts happy.

Trump, instead of beefing up the Pentagon’s budget, should’ve cut it in half. Oh, well…  ;-)


Manthong's picture


..that thumbnail..

MH-17,  US Nuland/Ukranian Kiev Nazi disaster, right ?


Manthong's picture


Well, Chris,

We can import a whole bunch more afro-muslims and everything will be fixed.. according to the prophet.

…actually, I like your stuff.

Jubal Early's picture

Chris Martenson is about like Illargi or Yves from Naked Capitalism.   Or even Kunstler.  They can be 100% right in everything they write, but still completely miss the target because they are racism deniers.  They deny the existence of the worst kind of racists, and it doesn't even show up on Martensons list.  Here it is:

1.  Anti-white racism.  Every ethnic and religious group across the planet have united in an anti-white jihad in order to milk the wealth from the whites and force them to be a lower caste of slaves.  These groups have been joined by white feminists and the various flavours of white sexual perverts, male and female, in a war of genocide against white Europeans.  That so many of those committing the genocide are self-hating whites themselves is proof of how hopeless the situation really is.  (At this point I could attach any number of graphs illustrating the demographic collapse of the once great European peoples).

GUS100CORRINA's picture

Bad Models Result In Terrible Outcomes


Below is a VERY SOBERING data point that shows how bad models result in terrible outcomes. 

If you take a look and the US DEBT CLOCK data and the rate of change of that data, one very quickly draws one conclusion: America's financial path is NOT sustainable for very much longer. Why? Below is just one reason that answers the question why.

US Federal Spending is rising at a staggering $428,253,120 per day

US Federal TAX Revenue is only rising at $129,857,760 per day.

So the US Government at the federal level is spending about $300,000,000 more per day than it is taking in via TAX revenue.

EXCUSE ME ... Say what????

This data is right off of the web page.

May America R.I.P.  My message to both the U.S. SENATE and U.S. CONGRESS: You are fired!!!! Note that I did not look at the rest of data that included state financials as well as liabilities. Yes, bad models do have terrible outcomes.

Have a great weekend.

Manthong's picture


..and your point is?


indulge me ... this is so pathetic it is humorous.

Wahooo's picture

That's an astounding amount of money to be spending every day. Just incredible. Makes me realize that reality isn't real.

SeuMadruga's picture

I wonder if peak oil theory is also based on bad models ...

Is-Be's picture

So big money is disappearing from the MIC budget?

Catherine Austin Fitts would not be surprised.

There are more things in heaven and Earth, Horatio, than are dreamt of in your philosophy.

Falcon49's picture

What about the billions in new weapons deals recently announced....?

gregga777's picture

Unless you have worked within the War Industry you have no idea how truly disfunctional it is.  

Falcon49's picture

Speaking of a "fucked-up" acquisition process...under normal situations it usually takes 3 or 4 years just to get it on contract. Every time they go through an initiative to improve or fix the process it gets more FU.  Standardizing the process (one size fits all) and automation actually increased the it is implemented in such a way as to negate or subvert the benefits you would derive from standardization and automation.

assistedliving's picture

not so Looney at all.  Trump/Rep. increase Defense spending and cuts Healthcare, Education and Environment.

To this ZH'er; that is the difference between Dummycraps and Republicraps.

Social programs (bad) vs. Warfare programs (worse)

That's it

Wahooo's picture

I'd probably do alright in Argentina. I very rarely buy anything new.

doctor10's picture

most of the US Government remains stuck in the 20th century.

Its financial and behavioral deficits are holding back the rest of the world from entering the 21st century

Tarheel's picture

this artile belongs on vox or mic, not ZH. We see through this mindless drivel.

FBaggins's picture


Bad policies? Cleaning up someone else’s house?

DavidFL's picture

Atta boy Chris - collecting data on socio-economic strata of dumpster divers in Argentina. Perhaps you could share with us the methodology used to determine these divers were "formerly middle-class" people?

Is this the same Chris Martenson who told us repeatedly we are running out of oil - and here we are with a world awash in petroleum. Rachel Carson?


ElTerco's picture

God was drunk when he created Argentina.

Ryan Langemeyer's picture

Uhhhhhhh.... NO. It's a beautiful country with lovely people. Please visit the places you disparge before doing so.

ElTerco's picture

Have you ever lived there? I lived there for almost a year. In fact, it was only because I lived there that I came to this conclusion and I'm betting many or even most Argentines would agree with it. There is an odd juxtaposition of cultures and ideas. Nothing makes sense when held next to each other, and this is especially so where the government is involved.

It's also fitting to include God in the motto since article two of the Argentine Constitution states: “The Federal Government supports the Roman Catholic Apostolic religion”

Deep Snorkeler's picture

Year 2030: More Valuable Than Gold

1. Unopened bottle of drinking water

2. Canned food

3. Warm jacket

4. Good hat

5. Good shoes

Note: there are no dumpsters to dive.



earleflorida's picture

they should just stop sniffing the glue

Able Ape's picture

Politicians EVERYWHERE will try ANYTHING because they are NOT held ACCOUNTABLE.  That is a recipe for disaster.  If they fucked up and GOT 20 years with no parole, they would be much more careful or perhaps would NOT try to do anything which is also a blessing...

GRDguy's picture

Bad policies benefit the financial socipaths who lie and steal from the 99% everywhere.

People are just too stupid to defend themselves against those who lie, steal and murder.

It's the financial sociopaths you shoulld find in the gutters, not ordinary people.

Ryan Langemeyer's picture

Thank you.... you just described President Macre of Agentina perfectly. He's a sociopath of the first order, and taking his orders from Washington.

The USSA, on the otherhand, is a soicopaths paradice. Good luck to all you folks living there.

GoldHermit's picture

Mathematics taught me two main things...

The more complex the model, the more likely it is to cause trouble.

The earlier you feed bad data into a model, the further the outcome will be from reality unless you have a bad model or get incredibly lucky.

The Fed puts bad data early on into their complex model. They are the problem - free markets are the answer.

Zarbo's picture

The thing I've noticed about models is they always get tweaked once the real stuff they "model" actually happens.

GoldHermit's picture

Oh they certainly do! I still tweak my financial models from time to time.

any_mouse's picture

Advice from a fellow who visits a nation and he thinks the trash bins are called "trash", and the plural is trashs.

"Basura" is what goes in the container.

Ryan Langemeyer's picture

Thank you. I was going to correct him about that.

I was disappointed in the article because I live next door to Argentina and have watched what has happened there. The author dropped by for a few minutes (okay, maybe a few days) and came up with "profound insights". It actually sounded like the same kind of pablum that is spat at Venezuela, after twenty years of destabilization by the USSA CIA/DIA/ and all of the other IAs. Anyone who leaves out the constant attacks on Venezuela when describing the situation there is blowing smoke for the Neo-cons.

Back to Argentina. The policies of the Right wing governments in the 1990's brought Argentina to its knees. The following years were rebuilding years by the Left. Macre was Hilary's favorite. She even said on their election night, and I quote, "We're wining in Argentina". WTF is that about except that yet another "soft coup" had taken place in South America, and the Clinton's (supposedly Democrats and "liberal") loved it.

This article is just another swing at progressive governments all over the world. I live in one, love living here, and would never, and I mean NEVER live in a country run by the Neo-cons, for any reason. 





Falcon49's picture

The important thing is .... that any country that has or controls key resources or has strategic value remains or becomes a vassal state.  Thus, the empire is secure and grows.  The term that is commonly bantered about that justifies any and all actions to support this process is "national interest". 

HopefulCynical's picture

America: Come for the Mig Macs. Stay for the diabeetus.

Rick Cerone's picture

Intentional bad models lead to evil solutions.

FreeEarCandy's picture

Here is the problem. We are born with nothing and we leave with nothing. That is the reality. Everything we claim or attempt to possess must be defended or enforced. This truth causes violence to enter the system. 

We can argue if a claim is right or wrong, but if one decides it is right, then one has embraced the violence that goes with the enforcement of the claim. 

That is the reality of our circumstances.  In that we are born with nothing and we leave with nothing, I wonder if we are at war with reality or each other?

gregga777's picture

The Demo-Marxist and Repussican Party political parasites, to use Nicholas Nassim Taleb's terminology, "Have no skin in the game."  How so?


  • The rule of law.  We and their masters are above the law prompting everyone down below to say, "F*** the law, too."
  • Financial “markets.”  Why worry about what the Goldman Sachs Feral Reserve System is up to.  We "earn" our money by receving bribes for doing favors for insiders payed out of the fiat currency created by pressing CTRL-P.
  • Politicians.  No talent?  No problem.  We political parasites and got rich through bribery.  (See Harry Reid, Diane Feinstein, Nancy Pelosi, George H. W. Bush, Geroge "The Younger Moron" Bush, etc.)
  • Sick care.  It's a good thing that we exempted ourselves from ObungholeCare.  So why worry that it's ruining small and medium businesses and the deductibles are so huge that most people can't use it anyway.  It was designed as a generous gift to the Sickcare Industry and the American Witch Doctor's Association anyway.
  • Foreign policy.  Don't have a strategy.  Just make war on everyone.  But, we never, never put ourselves or our children at risk of coming home in a body bag, missing limbs, brains turned to mush by IEDs or with PTSD.
  • Environmental/ecological policy.  We just take the bribes and look the other way as Monsanto's toxic brews drives honeybees to extinction and GMO foods poison everything and everyone.
  • Main Stream “News.”   Don't worry.  The Jewish CONporate Mainstream FAKE NEWS Media will support the Jewish neoconservatives, a very important source of bribes, drive to exterminate Russian Orthodox Christianity with thermonuclear war. 
  • The Ongoing De-industrialization of America: Hey, we never have to worry because we'd never be caught dead working anywhere anyway.  How we propose to maintain the American Empire without industry never seems to cross our puny moronic brains.  
  • The People Despise Us: Well, it's a damned good thing that we have all those bodyguards who are allowed to carry pistols with big magazines to protect us in Washington, DC.
  • Bad policies have bad outcomes: Hey, we're just doing what our masters bribe us to do.  Don't blame us if the nation is being flushed into the sewage.