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"Black Swan" Fund Creator Explains Why Central Planning Has Doomed Us All
In a must read Op-Ed in the WSJ, Mark Spitznagel, founder of "fat tail" focused hedge fund Universa, where Nassim Taleb has been known to dabble on occasion, explains the fundamental flaw with central planning, and specifically why "moral hazard" or the attempt to avoid the destructive part of natural cycles, is the greatest unnatural abomination ever conceived by man. His visual explanation should be sufficient for even such grizzled academics who have no clue how the real world works, as the Chairsatan, to comprehend why what he is doing is an epic abomination of every law of nature: "Suppressing fire, creating the illusion of fire protection, leads to the wrong kind of growth, which then invites greater destruction. About 100 years ago, the U.S. Forest Service took a zero-tolerance approach to forest fires, stamping them out at the first blaze. Fast forward to 1988 when a massive wildfire at Yellowstone National Park wiped out more than 30 times the acreage of any previously recorded fire." Another way of calling this, is what we have been warning about for years: delaying mean reversion does nothing but that. And when the Fed finally fails to offset the inevitable, and it will - it is a 100% certainty - the collapse and destruction will be unprecedented. Ironically, the only way the system could have been saved would be by letting it fail in 2008. Now, we are sorry to say, it is too late.
Spitznagel's Op-Ed from The Wall Street Journal
Christmas Trees and the Logic of Growth
The ubiquitous greenery of the season has me thinking conifers and stock market crashes. There is much to be learned from the coned evergreen trees that form vast forests across the Northern Hemisphere. As the oldest trees on the planet, the mighty conifers have survived threats of catastrophic extinction since the time of the hungry herbivorous dinosaurs.
The conifer's secret to longevity lies in a paradox: Their conquest has been largely the result of episodes of massive forest destruction. When virtually all else is gone, conifers show their strength and prowess as nature's opportunists. How? They have adapted to evade competitors by out-surviving them and then occupying their real estate after catastrophic fires.
First, the conifer takes root where no one else will go (think cold, short growing seasons and rocky, nutrient-poor soil). Here, they find the time, space and much-needed sunlight to thrive early on and build their defenses (such as height, canopy and thick bark). When fire hits, those hardy few conifers that survive can throw their seeds onto newly cleared, sunlit and nutrient-released space. For them, fire is not foe but friend. In fact, the seed-loaded cones of many conifers open only in extreme heat.
This is nature's model: overgrowth, followed by destruction of the overgrowth, and then the subsequent new growth of the healthiest and most robust, which ultimately leaves the forest and the entire ecosystem better off than they were before.
Pondering these trees, it is not too much of a stretch to consider the financial forests of our own making, where excess credit and malinvestment thrive for a time, only to be destroyed—and then the releasing of capital into markets where competition has been wiped out. The Austrian school economists understood this well, basing a whole theory around this investment cycle.
After the purge, great investment opportunities are created, from which prolific periods of growth emanate—provided that sufficient capital remains to reinvest into the fertile and now-open landscape.
Suppressing fire, creating the illusion of fire protection, leads to the wrong kind of growth, which then invites greater destruction. About 100 years ago, the U.S. Forest Service took a zero-tolerance approach to forest fires, stamping them out at the first blaze. Fast forward to 1988 when a massive wildfire at Yellowstone National Park wiped out more than 30 times the acreage of any previously recorded fire.
What obviously occurred was that the most fire-susceptible plants had been given repeated reprieves (bailouts, in a sense), and they naturally accumulated, along with the old, deadwood of the forests. This made for a highly flammable fuel load because when fires are suppressed the density of foliage is raised, particularly the most fire-prone foliage. The way this foliage connects the grid of the forest, as it were, has come to be known as the "Yellowstone Effect."
A far better way to prevent massively destructive fires is by letting the fires burn. Human intervention in nature's cycles by suppressing fires destroys the system's natural homeostatic forces.
Strangely parallel to the Yellowstone catastrophe was the start of the federal government's other fire-suppression policy with the 1984 Continental Illinois "too big to fail" bank bailout. This was followed by Alan Greenspan's pronouncement immediately after the 1987 stock market crash that the Federal Reserve stood by with "readiness to serve as a source of liquidity to support the economy and financial system," which heralded the birth of the "Greenspan put." The Fed would no longer tolerate fires of any size.
From a forestry point of view, the lessons were learned. In 1995, the Federal Wildland Fire Management Policy stated, "Science has changed the way we think about wildland fire and the way we manage it. Wildland fire, as a critical natural process, must be reintroduced into the ecosystem."
Herein are pearls of great wisdom for central bankers today. Central banks are creating a tinderbox by keeping alive many very bad investments, fertilizing them with everything from artificially low interest rates to preferential liquidity to outright securities purchases. As these institutions and instruments overrun the financial landscape, they hamper the economic ecosystem and perpetuate the environment of low growth and high unemployment in which we currently find ourselves.
Seeing periodic, naturally occurring catastrophes as part of the growth cycle requires thinking more than one step ahead, not only longer term but, more specifically, intertemporally. This is perhaps an insurmountable cognitive challenge, both to investors and central bankers in today's news-flash world. When contemplating the forest, we may intuitively understand nature's logic of growth. Yet when we look at the seeds of destruction we have sown through current monetary policy, it is clear we are lost in the trees.
Mr. Spitznagel is the founder and chief investment officer of the hedge fund Universa Investments L.P., based in Santa Monica, Calif.
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Conflagration cometh.
Ron Paul supporters needed!!! Please sign the petition at www.ronpaulblowback.com!! Help stop the media bias against Ron Paul!!
'Help stop the media bias against Ron Paul!!'
Why? Last I checked corporate media was the most hated thing in America. It can only help.
Wow now RP. Wow! All the time. be interesting to see.
But as to this excellent article, re-gurgitating the obvious @ $2,000 a word + 2% of ad revenue....
The post six-sigma world was obvious to some of us a loooong time ago.
I'd written this in May 2008:
v We always speak of six-sigma as a statistically improbable outcome in any normal distribution. I firmly believe, we don’t live under the same bell curve that all our assumptions are based on. We live in a four or even five sigma world from our current code assumption set. Worthy of pondering.
v Macro economic trends: The US Dollar is under severe, sustained pressure. If true impact of “Real” inflation is accounted for, the canary has already fled the coal mine.
v China is staggering under its own curious set of circumstances of a large population set “herded” into rapid “development” mode, much like India. Most of the “gains” are hype. Credit, cheap and plenty until recently (private equity had moved it into the right hands in preceding years), being the sole driver (flogger?) of growth.
v The sub prime mess (and all its attendant tentacles of cause and effect in the world financial systems) is scary with just the lit fuse sparking. When it really goes off, all bets are off. Talk of lack of understanding of higher order cause and effect.
v Energy prices are reset in the public mind at dizzying rate (12 dollars a barrel of Brent Sweet Crude is not such old memory), currently 130 dollars a barrel. Associated inflationary impact is hitting the
majority of the world’s population.
v On a similar somber note, a discussion on our world’s geo political situation. Every major war in history was a resource war as is every major conflict today. There is a relentlessly hawkish bias in the global dialogue, with too many vested interests in the war – pie. Oil, minerals, territory / markets and now water. Also, in large theatre wars, multi-generational trauma creates multi-generational conflicts. Grim but true.
v An increasingly nuclear world adds the requisite potential for a runaway reaction! Our world is ever increasingly polarized with ever greater potential for conflict.
ori
/fractal-animal-hypnotic/
It's not that the Feds doesn't understand this phenomenon -- it's just that they are fearful that these "relatively" small fires can wipe out the special place that the USD holds in global financial system -- all these desparate measures are an attempt to hold on to the USD's pre-eminent position which requires them to tolerate the harmful behavior of their spawns (the large US banks). It's anologous to PTB tolerating the behavior of their depraved children in PTB's desire to hold on to power...
Central Planning:
Federal Reserve Bank, Federal Bureau of Intelligence, Central Intellgence Agency, Pentagon, Home-Land Security, US Federal Government.
Central Planning = Central Control = Zero Freedom = Empire.
Ron Paul 2012 = No More Empire ! ! !
FREEDOM !!!
You appear to have naive belief that one man can change the course of history -- you are in for a rude shock!
But you believe in magic, yes?
oreye
The magic is the remaining vestiges of free market (largely underground at this point). The time line of the downward spiral is ultimately a function of the persistent viability of innovation via the remaining free market as it provides the lifeblood from which requisite productivity to maintain the statist government can be siphoned. Time to play dead... and then spring on their damn throats when they hold a mirror to our mouths.
God's cycle, i.e., the Elliott Wave pattern, remains undisturbed by man:
http://thespiritoftruth.blogspot.com/2011/12/bob-prechter-on-breakout.html
One man can change history especially if he is a top leader....just ask Germans about Hitler.
Ron Paul's not changing....he merely represents the growing sentiment amongst responsible citizens that both democrats and republicans are hurting rather than helping America.
What sort of liberal vote for Bush's bankster bailouts and wars?
What sort of conservatives vote to spend tax money on Bush's bankster bailouts and wars?
Because you think Hitler was a self-made man? Notwithstanding his advisors and manipulators, where did his funding come from?
Oooh.... right.
We may be at least 100% sure, that he wasn't supported by jewish bankers from New York, and no one who helped him has managed then to get elected into presidential office.
"no one who helped him has managed then to get elected into presidential office.
Right. Had to leave that plum for the kid and the grand kid.
http://www.guardian.co.uk/world/2004/sep/25/usa.secondworldwar
Maybe not one man, but Dr. Paul has created a movement which is greater then one person.
Maybe so, but ALL the other candidates are tools of empire, oligarchy, and oppression.
Ron Paulsy is like the the broken clock...right twice and way wrong otherwise!!
Typical Ad hominem bs from a troll. You have the floor. State your case. Make your argument.
twice a day beats not at all. vote for ron paul: something good (end the endless wars, jail the banksters/reorganize the tbtf, restore the constitution) rather than nothing good (obama).
I think you hit the nail on the head. Bernanke is not dumb, just morally corrupt. He fears that the USD will lose reserve currency status and that he will in turn lose power. The problem with politicians and their appointed clowns in The Fed is that they desire power more than they desire to do what is noble.
CORRECT, they KNOW it's insolvent at all levels and if anything like 2008 again , it's GONE OVAH KAPUT KABLOOIE!
Libertarian and damn proud of it...BUT.... Persoanlly... RP is tooooo far for me.
To sit back and say that America should be completely isolationist is frankly naive.
The last time we did that resulted in something called WWI and WWII... With that said.... should we pull out of our interests in most of the world??? Yes... over the next ten years... but to leave a VOID where once was the most indisputed power can only lead to more cronyism and long term side effects for us to deal with.
I'm all for shooting a hostage... breaking a leg.. taking a leap of faith if you will because our system is so corrupt it must fall to be rebuilt.
I just don't believe that ron paul is the man to do it.
Unfortunately I don't know of anybody who is that has a remote shot of winning...... but mark my words... if Obama gets a 2nd term... we may not be having an election the next cycle around.
Ron Paul is too extreme for a libertarian? What the fuck?
No, RP is too extreme for a sock-puppet spreading approved Republicrat propaganda.
WWX is coming no matter what.
Take a shot and try to avoid it.
Either that or collapse from within as the SOviet Union did in trying to show how tough and militarily superior they were.
The US is even worse off as we are trying to prove how tough and superior we are to your "enemy" who if you goofballs are to be believed doesn't care and wishes to die.
How stupid is that.
A military build chasing it's own tail until self exhaustion.
yeah, that's some strategy there dude. Heh, I sunk your battleship!
"the last time" -----bwhaaaaa---- you know that "last time" the world looked nothing like it does now. Those who are trapped by history will never see the bus coming.
Deer in the headlites time.
I also disagree with a totally isolationist policy, but you don’t have to agree with everything a candidate believes and it might actually be better than a totally interventionary (made up word) policy.
Be wary of how you throw around the term "totally". I wouldn't describe Dr. Paul's policy as total isolationism. Not meddling in the affairs of others is not a new concept. Warnings about same are abundant in the writings of famous politicians and statesmen. Having a tolerant immigration policy is not isolationist, for example. Belief in FAIR and FREE international trade is not isolationist. Beware...
It must also be pointed out that the foreign policy of non-interventionism that Ron Paul advocates, and which is erroneously and misleadingly mislabeled by warmongering statists on both the political right AND the left as "isolationist", is precisely the same foreign policy currently followed by EVERY other nation on earth --- and somehow, it more or less works.
No, the last time we weren't isolationist resulted in WWI . The Treaty of Versailles ending WWI resulted in WWII. Get your history right!
The last time we did that resulted in something called WWI and WWII
I guess I would ask for an explanation of why American isolationism resulted in WWI and WWII?
Not saying our unwillingness to get involved did not prolong or make things worse, but to assign responsibility to those policies is a point I do not get.
There are those who think our involvement in WWI actually was a negative, not sure I agree, but a case can be made.
sschu
"To sit back and say America should be completely isolationist is naive"? Really? Here are just a few examples of America minding its own business.
Invaded Canada twice Invaded and conquered Mexico Invaded and conquered Hawaii and the Phillipines Over ten separate invasions of South and Central American countries Attacked Korea and China 1880 to 1907 Forced Japan to submit to "gunboat diplomacy" Has a bad habit of attacking or overthrowing governments that aren't part of the world wice central bank cartel.... Libya, Iran, Iraq, Afghanistan etc Your knowledge of history, gained from thousands of hours of television watching is laughably absurd. Your use of the word "we", as if you are actually part of the grand plan of empire building is beyond naive and enters the realm of pathological delusion. And I have maqrked your words sir....You want a dictator.
Jim Rogers discusses the biggest problems facing US Economy in 2012
http://djia.tv/jim-rogers/biggest-risk-for-the-us-economy-in-2012/
is it true that the RP I'm thinking of loves above all a highly testo charged black jew as his main political supporter in next election?
That's the ideal american supporter profile of this RP that I dream of!
If it is, it means O'bammy doesn't fit the bill. I know he isn't a jew...for the rest...
In fact none of his own tribe, from Bachmann to Newt, fits the bill. Michelle, 'cos she's a woman, Newt, 'cos he isn't cute.
I wonder if our RM is a jew; cos he does fit the bill, with his Zulu stuff.
Maybe, I'm being tongue in cheek. I'll have to ask the head shrink of Zh : Cog Dis.
No media bias intended. In fact I find the real RP very truthful in WORD, even if he is on a planet of his own with a lot of guys from ZH. For matching DEEDs to words we'll have to elect him first...
The RP I refer to is not necessarily the RP you look up to. All resemblance, of my Holographically constructed candidate, to real persona alive, is purely fortuitous.
Good thing we have the MSM to explain to us that:
Ron Paul can't possibly win...because only the VOTERS support him.
He doesn't understand modern economics...because he thinks it's a BAD IDEA for our money to be backed only by our faith that the government will control its spending.
His foreign policy is too radical...because he thinks we should find out if a country is really a threat to us BEFORE we invade it.
Maybe they would also like to convince us that he's invisible too...because nobody can see him when the lights are out!
I understand the foreign policy issues with RP but guess what? Who cares about foregin policy. How can we help the world if we can not help ourselves. So imo you can throw the foreign policy in the garbage. We don't have the money to help others and at this point our advice with current leadership is like a 4 year old with a coloring book.
MSM says Ron Paul will destroy the Iowa caucus...he must be a bad person. Already spinning the bullshit about the illegitimacy of an Iowa win.
http://www.politico.com/news/stories/1211/70674.html
well as I said long ago and has been proven over and over they have a small amount of truth, iowa is useless.
it is nothing like the majority of amerika.
i have signed it
DENIAL – FACTS = Irrational Strategy
Try selling that to people in a democracy. Not gonna work.
What democracy?
You're right, forgot the inverted commas.
You know, the "democracy" we live in that is effectively a popularity contest where the winner is determined by how good they look and speak and how much hopium they can provide the populace.
For sure. TeeVee nations we have become. People get "edumacated" by the likes of celebrities. So, we have politicians instead of statesmen.
more than campaign funding? Corporatocracy =$trillions of it = Sockpuppet reps.
Try selling that to people in a democratic republic that was taken over by drug dealing racketeering inbred banksters and blackmailed politicians. Still not going to work. But its gonna be exciting...different...The two headed baby Jesus Emanoel is now one.
USA is not a democratic country, it's a republic.
Well, I'll be damned but I just wrote a little something about this. Central planning is for the nationalistas. Nationalism v patriotism...the subtle differences. One is for the aristocracy, the other term is reserved for the serfs. http://thecivillibertarian.blogspot.com/2011/12/nationalism-v-patriotism...
We must prop up the deadwood at all cost.
Even the Forest Service policy is flawed. Letting fires burn should include areas where fools built houses. Insurance companies would soon learn to exclude some areas of the country from coverage if the Forest Service let fires burn as Mother Nature fully intended. That's picking and choosing who benefits and who doesn't. Oh, I forget. The Federal Government would step in and provide that insurance, like they do for people who build on naturally moving beach front property. Silly me.
Fed publishes detailed reports on where the 16 trillion went today: http://tradewithdave.com/?p=8860
Dave Harrison
www.tradewithdave.com
I'm already well aware of where it did NOT go!!!
Yeah. Tinder box with a thermo nuclear bomb in the middle. That's about right.
Pfftttt. You can't print water. Ben's got this one figured out.
Von Mises: "Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump."
State planning always works. Ask the Soviet Union.
Fed are doing another 5 year plan, Comrade.
Fed reacts rather than plans.
It's all about cycles. We can run but can't hide from them. Heck, this whole Mayan 2012 thing (funny as it may seem) is really about cycles. Ancient civilizations lived and died around various cycles - and they built incredible monuments to mark/track such events. Modern times are no different in this regard.
Central planning isn't the problem. Central theft is the problem.
Actually human stupidity and hubris is the biggest problem.
recurrent, and insistent, like primal urge. But I prefer primal urge.
TO: Tyler
Your coment admits defeat.
For human nature will inherintly never change.
Tyler's comment admits nothing. It is a statement of fact.
to fight greedy, unprincipled primal urge you can cut off "his" nuts; you can't do that to hubris. Its hundred headed.
YES
"Your coment admits defeat"
......................
Not really. Tyler's comment is simply facing the fact that human nature is the one true certainty of human life in the past, the future and today. Look on human nature as a constant to be applied to all of history and economics and a great deal will be illuminated that seemed obscure.
yes enjoy your goose and gander with bubbly!
the beauty about hubrus is that by definition it contains a rather special payback mechanism ;p
Hubris is followed by?
http://en.wikipedia.org/wiki/Nemesis_%28mythology%29#Fortune_and_retribu...
Well, gosh........homo sapiens ARE a failed species ya know.
You are Mr Smith from the Matrix?
ergo central planning in complex environments
"human stupidity and hubris is the biggest problem"
Especially when combined together at our Central Planning Committee.
Merry Christmas Tyler. Thanks for another punch-drunk year.
Farmer's, Rancher's and Timber owner's drag, burn and thin there land's. The TBTF and Fed is looking like the weed or sucker vine that need's to be pruned or sprayed this coming year.
humans learn best during troubling times.
humans already learned quite a bit about political systems, monetary systems, free market myths, wall st., etc. last 3 years of depression.
Yet corrupt status quo are trying hard to prevent any progress by using force and fear.
Greed will always destroy a good idea.
How long can they keep this shit ball going?.............i cant wait much longer......
Cancer takes a while to metastisize but we are definitely stage 4
"How long can they keep this shit ball going?"
Longer than you can remain solvent if you fail to exercise patience.
"i cant wait much longer."
And, your choices are what?
But only a thief would have the desire and ambition to centrally plan an economy.
The reason central planners fail is simple: Their philosophy is a violation of natural law.
a tinderbox of debt
waiting for lightning to strike
Carole King:: It's too late, slewie
Yes, many many forest fires begin with lightning.
THE KING : GREAT BALLS OF FIRE!
Don't be "Chi", slewie. Thunder and lightning, I tell you it's frightening:
http://www.youtube.com/watch?v=1OesC__us80
You just gotta hand your will over sometimes and honor the invisible hand (of the market) or else.
Still doesn't explain "why Europe?" tho. I would have agreed with The Street that Europe was best positioned to sail clear of the American wreckage. Instead they have become Ground Zero. The implications cannot be overstated enough. "Europe" is the ultimate in "government business." there's no such thing as a "strained relationship" over there. They're either "all out peace" or "all out war." throw in an explosive hello from Al Qaida in Iraq and I can see "shoot first ask questions later" suddenly becoming the mantra of our failed "Gilded Age Redux."
They'll still gun the market higher anyway.
The author is right. This is going to be world changing, life changing, and very very difficult for middle class people like myself. Egon von Greyerz did an interview the other day and made a good point that there are only two choices left. One is to allow the banking system to implode, which would be catastrophic and earth shattering. The other is to delay the implosion for as long as possible which inevitably leads to hyperinflation. Hyperinflation on the scale we are talking when it comes to the United States is of epic proportions. In either case, I'd say 95% of the population will be left with absolutely nothing and it will be a struggle for them to even survive. When you think about it the Mayan prophecy does not seem far fetched in today's economic environment. We are indeed talking about the end of an age of humanity here.
bullshit.
bankster bullshit.
dishonest bankster bullshit.
If every central bank, every large bank, every large financial institution completely collapses... the result will be WONDERFUL for the poor and middle class. Will there be confusion for a while? Sure. Will they end up vastly better off in fairly short order? Absolutely, positively, certainly YES. To remove predators and parasites from the backs, necks and butts of producers is 100% purely positive, even for producers who don't produce very much.
A Testing Ground for Engineering Financial Collapse
http://globalresearch.ca/index.php?context=va&aid=28272
For the most part you can file it under: Not Applicable.
Hungary, Weimar, Yugoslavia, these are much closer but you should understand that no country has the same issues.
'All happy families resemble one another, each unhappy family is unhappy in its own way. '
Leo Tolstoy
Attack of the Tapeworm (not yet rated on IMDB)
http://www.youtube.com/watch?v=kDhBo43GYCk
Certain things in life you just can't avoid. Sadly, the banker elite crowd don't subscribe to this. they think they can tinker with everything and make it right. The God Complex infects them all.
http://vegasxau.blogspot.com
A man was sent to prison for 2 weeks because he didn't attend for jury service, yet the banksters and ChairSatan have lied and committed fraud and instead got more bonuses and NO punishment.
Where is the justice in that?
answer: money = justice
what does that tell you about US justice system?
Speak to lawyers about what they think within the sytem.....
yeah, America is not all that as elites have you believe.
US law is some shit elites made up as they went so that they can govern over labor because they know best.
I do not know much about how law works but I do know who it favors. My 2 cents is law favors the corporations and the strongholds that control them. The law today is not for you or me to win, its for the elite to cash in on every corner we turn. A judge is nothing more than a protector of the banker. Thats how I see it and thats why we have a fubar system. Esquires were never meant to hold office yet they do and thats why we are facing adversity. Again I am not the smartest guy so I may be wrong its just how I see the judicial system.
Merry Christmas everyone and stay positive even though it can be hard.
Lovely metaphor. Let's extend it a bit and note that there is a tendency among people who have made millions, either as financial parasites or predators, to build their mega-castles right in the middle of these forests, usually at the highest elevation possible - after clearing away anything natural that might interfere with the view of course. Then following on their heels are the vast armies of serfs who plunk down their 'mobile homes' in the middle of less scenic but still heavily timbered territory so they can share the dream of 'living in nature' with the rich guys whose houses they clean and whose tables they wait. Inevitably (this is entirely predictable after all, largely because it has happened multiple times before) someone tosses a cigarette out the window of their pickup, or a backyard barbeque gets out of hand, or a pyro-manic does his thing, and thousands are burned out. The mansions on the hilltops often go first - wildfire having a strong tendency to move uphill, and we are treated to bewildered couples wailing over the ruins of their multi-million dollar homes having "lost everything". Sob. Then comes the equally pathetic shots of the smoldering ruins of entire trailer parks - also full bewildered people searching for their crispy cats and dogs. And every single one of them is asking "Why me God?"
It's easy. You made a stupid decision, for whatever reason, and as soon as the trees grow back and the fire is forgotten, another generation of equally stupid people will move right back in. It is a cycle, and by their nature cycles repeat, and are unstoppable. Of course the rich people on the hilltops have insurance, so they can move on to another as-yet unburned place and repeat their stupidity, whereas the poor suckers in the trailer parks below wind up living in toxic FEMA trailers somewhere in East Jesus Nebraska for the rest of their lives.
I have seen the future, and it looks like the forest fire of all forest fires just waiting for that tossed cigarette or insane arsonist.
"Of course the rich people on the hilltops have insurance, "
Uh... they have CD swaps and your grandchildren will be paying for the parasites' losses.
If insurance wasn't a scam, Buffett wouldn't be in it. No competitve market for our man Warren.
Everyone has a job in a social hierarchy:
Have Nots = get out of misery poverty brings
Have Somes = get out of labor and become rich labor owners
Haves = keep wealth and power over labor within family
rich people insurance is their exclusive business relationships with other rich people...and that insurance is not for sale.
Interference just in financial markets? Mankind started interfereing with Nature the day he discovered fire, built his first shelter, took his first medicine to prolong his life. and isn't that the basis of the present economic distress? People living so long as to exhaust state's coffers, jobs that could be done by people are delegated to machines. So the final conflagration will be either a pandemic for which mankind has not developed any resistance (because of living too long and therefore not procreating fast enough and also because of propping up the weak instead of let them die) or due to devastating war (for resources). But what's the solution? We cannnot go back in time. Just run forward faster and faster with hopes to beat nature
No, the real problem is that the irredeemable credit of central banks is the very bad investment.
The fires in 1988 were indeed important in helping restore a natural balance to the parks ecosystem. The re-introduction of wolf packs also helped immensely by pushing the fat cats (elk) back on their heels. The world's financial system needs a good dose of both.
I like these posts. Tail issues are interesting and relevant, but it is hard to make money this way. That said, Boaz Weinstein and some others made a killing at it recently.
I think that a better approach is to view return distributions as nonconstant, changing from fat tails to thin tails and back again.
The issue then becomes positioning for extremes when others don't, and positioning for a normal boring world when others anticipate extremes. Once fear really gets going, it invariably overestimates downside risk. Once greed really get in gear, our repsonse is very impulsive like when a teenager has a crush on a girl. Mispriced tails are the game.
This reduces to the age-old simplicity of buying cheap and selling dear if you actively trade and betting on the center if you passively invest.
Good luck, knowing the croupiers (dealers) JP Morgan, Goldman Sachs et al., control the spin of the roulette wheel.
Nothing these folks did kept cocoa from multi-year lows. Or stopped yield curves from flattening all over Europe.
Maybe they don't care to do anything. I don't know. But I can take advantage of these events whether they are by design or the product of time and chance.
So, you're a jackal feasting on rotted remains. Great.
There are some people I'd want having my back -- you're not one of them.
I take advantage of opportunities that present themselves. Where they come from isn't my concern. There are things I would like to change about the world, but that is separate from the task.
If the world was free of central banks and had unfettered markets, I would love it, but that crap is an illusion and always has been. Being angry or denying it is energy you can waste if you wish. I'm not going there.
Merry Christmas.
And a prosperous New Year to you! A suiting sentiment, doncha think?
JR,
Like, as in, forever? You seriously overestimate the capabilities of what are mostly Wizards of Illusion.
jm,
Everything in your post suggests that you've never really had a 'tail event' impact your comfortable day-to-day. Methinks you'll soon grasp such things more clearly and worry less about 'making money'.
I've seen my share of extremes in life.
One should prepare as best as you can for the bad stuff that you can do something about and take high-percentage shots on risk.
Extremes are one thing. Conflagration is another, my friend. There is that Twain quotation about it being not so much about things you didn't know that struck you down, but things that you knew for sure that just aren't so.
Well, I'll testify to the other side of that being just as true. It will be the best of times, it will be the worst of times.
My experiences with extremes make financial matters look like a joke. They toughened me up and unfortunately make me rather impatient with whining and weakness. Not saying you are whining or weak.
I do take money seriously, as it relates to mine and those who trust me. But should some conflagration come down, well there's no telling what exact shape it will take. We do have history to gauge, if one is willing to look closely. But that is another matter.
GM, I seriously hope I “overestimate the capabilities of what are mostly Wizards of Illusion.” I’m dealing with a Bernanke “Wizard of Illusion” event right now that could, in the very least, turn my dark hair white, not to mention my pockets inside out.
This is perhaps an insurmountable cognitive challenge, both to investors and central bankers in today's news-flash world.-- Mark Spitznagel
Exactly. There are no guarantees in capitalism, but there are in central planning – it always fails.
“The foundation of the Bank of England with its privilege of creating money, meant that wealth and power gradually passed into the hands of the financiers and the speculators with disastrous results for the landowners and countryside.” – An Agricultural Testament (Oxford Press, 1943), Sir Albert Howard.
JR
I guess one question is, why this in the WSJ ?
Your point is well taken. With Central Planners' access to the wealth of the nation, it comes down to when the straw breaks the camels back. On that point I go schizo.
Merry Christmas my friend.
The same here, Kayman. I looked twice to verify it was the WSJ.
Spitznagel’s op ed is in the WSJ, IMO, because Murdoch's WSJ is trying to protect itself by having two viewpoints, to give the impression of airing all sides.
As to the when of that last straw, I too on that point go schizo. As I see it, it’s too complicated, nebulous, because of all the intrigues, unknowns, fraud and tangles, to recognize that straw. No one knows; yet one little tiny piece of straw, like a Celente in the gold pile (they picked on the wrong man, a man with an audience), could be that straw…
The great destruction from the great Yellowstone fire is an excellent comparison to the upcoming monetary system meltdown, I think, leading up to that straw. What happened in Yellowstone Spitznagel likens to politics overriding physical principles. And so the “planners’ fought and doused the fires so the people and insolvent financiers and corporations would be happy. That happened also in Los Padres National Forest in California. Instead of letting nature’s fires clear out the underbrush, so much brush and undergrowth accumulated under the no-fire policy that when the fire finally came it was so hot it even burned the rocks – melted everything.
Central planning is politics overriding a free market, except in this case the central bankers are letting the rest of us go bankrupt – we’re the rocks. Eventually, it’s going to wipe them out, too. Not even Bernanke knows which straw will break the camel’s back. He’ll just wake up one morning and it was the straw that broke the camel’s back. Remember that old saw that a man could lift a cow if he started when the cow was a tiny little calf? He just goes out every day and lifts the calf until one day he's lifting a cow. The problem is, one day he goes out and can’t lift it. That's Bernanke. In short, central planning theory doesn’t work, it’s arguing against nature.
I ramble, Kayman. Your words invariably sing through the intellectual chaff like silver bullets, hitting target, quotable with the best from down the centuries. Every time! You are among the greats! Kayman. Merry Christmas, for auld lang syne….
Ron Paul.
For those thinking this is just media bias these were newsletters he published and a fund he touted to wackos. He was clearly attempting to play on paranoia and tout his position as a washington insider with connections in order to make money from subscribers.
He walked off a CNN interview rather than explain whodunit if it wasnt him.
If he didnt write his own newsletters then tell us a list of people who migjt have done it so they can be found and interviewed.
He is finished. We need a new standard bearer.
Top,
He was interviewed on I believe FOX about a week ago, I caught the tail end. He did say that he did not write the write the letter's.
Ron Paul has the strongest support from minorities of all the candidates. And these charges have been dealt with in his campaigns and put to rest. And now, with so little to go on, the Big Gun Media are scratching for anything they can find. The newsletters are a nonstory and anybody who looks at the situation knows it. Antiwar.com columnist Justin Raimondo has looked at them and here’s his take this week in We Shall Overcome:
The “Ron-Paul-is-a-racist-loon-and-conspiracy-theorist” argument – This is the last resort of the Republican Establishment, as represented by the punkish Lowry and the oleaginous Ponnuru, one the editor of National Review and the other an associate editor of that bastion of neoconservative orthodoxy.
Roger Ailes and his wrecking crew hope to cash in on the “research” of one Jamie Kirchick, at the time a government employee who worked for the misnamed “Radio Free Europe,” whose piece in the New Republic last presidential election cycle cited a number of newsletters put out under Paul’s name that are supposedly “racist.” If you read the actual newsletters, however, rather than the media’s interpretation of their content, what you quickly realize is that there is nothing necessarily “racist” about any of it, as I showed here: four sentences out of thousands might be considered offensive.
In any case, Paul clearly did not write these newsletters, and – if I know him, and I do – in all likelihood didn’t even read them. He’s said so not once but several times over the years, and that should be the end of it – but not for bottom-feeders like Lowry, and his ilk, who thrive on dirt. After all, these are the same people who appointed Jonah Goldberg editor of their online edition when his only claim to fame was being the son of the woman who first discovered the semen stains on Monica Lewinsky’s dress. That’s where these people are coming from.
The same scumbags who put out the Willie Horton ad, and who have gloried in describing President Obama’s “Kenyan anti-colonialist mentality,” are now launching an “anti-racist” campaign against Doctor Paul – the one Republican candidate who not only calls for ending a “drug war” that targets blacks but who also stood up against the Muslim-hating gay-bashing crazies on the stage at those Republican debates. This is the ultimate proof that we have indeed slipped into another dimension – Bizarro World, where up is down, right is left, and a gentle and good-natured Doctor who has stood up for the underdog all his life is a “racist.”
To add another twist to this tortured tale: here we have the Republican Establishment taking its cues from the Obama administration and its apologists, who never hesitate to hurl phony charges of “racism” at its opponents when backed into a corner.
As my mentor, the late Murray N. Rothbard, used to say to me at moments such as these: Are we to be spared nothing?!
The onslaught of pure hate unleashed on Paul, coming from both sides of the political spectrum, is rooted in his foreign policy views…
NOTES IN THE MARGIN
I have to add this fascinating detail about Jamie Kirchick, whose article in the New Republic gave birth to the newsletter “scandal.” Kirchick is a militant interventionist who today works for the extremist Foundation for the Defense of Democracies. Among his other works of note is an article that first appeared in the Advocate, a gay magazine, in which he advocated the creation of a “gay brigade” within the US military that would somehow “prove” that homosexuals aren’t “effeminate” and could carry on the fight for “freedom” around the world. What a porno shoot that would make – the Village People meets the Bush Doctrine!
Kirchick’s fake outrage at Paul’s alleged “racism” seems odd for someone who faithfully echoed the same bigoted belligerence that led TNR publisher Peretz to compare Palestinians to animals. We never heard a peep from Jamie about that, but then again Peretz was his meal ticket.
http://original.antiwar.com/justin/2011/12/20/we-shall-overcome/
Everything you wrote is true, but there are still many people, even intelligent, well-meaning people, who have completely bought into the propaganda coming from both parties and the media on the alleged dangers posed by nations in the Middle East. They actually believe they are being kept safer by the U.S. keeping a heavy hand upon the Middle East. Their denial of the true nature of the situation stems from fear, a fear of being attacked again, which the politicians use against them every chance they get in order to promote their aggressive foreign policy. Ron Paul would take that mindset from them, and they don't like it. They think, "How could this one old man be right and everybody else in government and on the news be wrong?" They are unaware of how deep the rot has gotten.
Umm, if they buy into that, then by definition I would say they are not "intelligent, well-meaning people". They are sheeple.
Yes, they are sheeple. But I don't believe all sheeple are necessarily stupid or evil. They simply haven't yet been able to break free from their perception of the world which has been ingrained in their mind since infancy. They identify very strongly with societal norms, trustworthy power stuctures, and familiar mental constructs. Breaking free of such a perception is impossible for some unless the world itself comes crashing down around them. And when that happens, what they used to believe will crumble and they will develop a new perception of the world. It won't be easy for them. You need to be there for them during that time to guide them in their understanding.
You've just defined STUPID.
Yes, most people today ARE incredibly stoopido. However, even stupid people hesitate to go below a certain depth of stupidity (albeit an incredibly low level), which appears to be what he was trying to say.
Also, since an enormous percentage of people have been brainwashed since birth to trust authority, the mere fact of RonPaul actually being president would AT LEAST make the legions of stoopidos sit up and scratch their heads when "the president" says "almost everything you've been told your entire life is wrong".
Also, I really don't think those of us who are legitimate smartie-pants can quite figure out the dynamics that would play out with RonPaul as president for 4 or 8 years (especially 8 years). Can you? I can only guess. But I sure would love to sit back and see what happens.
The problem with Ron Paul? Here's a few. He is 76 and his vision is good for only the next ten feet. If President he would create only more failure. But, he won't be prez - not with a legacy of anti-semitism real or imagined. He's toast. And if he gets the nomination, how's another 4 of O sound?
The arogance of the PTB knows no bounds.
Ron Paul has more brains, knowledge and integrity than one million people like you added together.
What's wrong with the Willie Horton ad? 100% true and pretty tame 23 years in the rear view mirror.
the problem with Libertarianism is that it is too soft on crime. Permissive societies are fine, but the 1% who prey on people have to be severely punished. Im talking Gulag, so when and if they are released they understand not to fuck with law abiding people's rights and liberties.
Extremism in the defense of liberty is not a vice
Goldwater
Whose definition of "crime" are we using?
Is everything that is not "lawful" an actual "crime".
Who is the final arbiter?
What/who defines "victim"?
Are there always victims in a crime?
In what historic era was a current "criminal act" not considered criminal?
As a person I know in law enforcement says, by the time you've woken up in the morning you've already broken a half-dozen laws.
There is only one definition: crime is everything that big government says it is.
Then I am against about 99.999999% of what you define as "crime". To be more clear, 99.9999999% of actions deemed as crime are not crime at all... but those arresting and prosecuting and punishing for those 99.999999% of non-crimes are guilty of crimes (kidnapping, assault, theft, etc).
Seems to me that whatever Ron Paul's flaws he is no doubt being 'swiftboated" by the usual suspects - Harold Simmons of nuclear waste dump infamy and the Cock brothers ( sorry - Koch) of we-make-junk-and-stuff-it-down-your-idiot-throats infamy, among others. These people know how to pull levers and punch bottons and they will keep after him like the Jackels they are until he is down and bleeding and then they will tear him to pieces.
I like Ron Paul and will probably vote for him if given the chance but I also think he would be a disaster as President not through any fault of his own but because his constituency are the powerless and the alienated (that's me too by the way) and so he would be an isolated president without power.
In the end, it will be good that Ron didn't become president. The entire system will completely collapse with or without him in power. It's better that it collapse with an establishment stooge in power so they can't blame it on Paul. Paul's campaign is primarily one of educating the public in an attempt to reignite the fire of liberty in the collective mind.
I agree. Seeing any interest in RP at all is encouraging. I feel if he was at the helm, blame would rest with his (new) policies rather than the failings of those that got us here.
This is where the Groucho Marx line can be paraphrased ("I'd never belong to any club that would accept me as a member").
Given the near or complete inevitability of a economic maelstrom, any candidate who wants to preside over that is a blind fool, a masochist, or has delusions of grandeur...all of which should eliminate him or her from consideration for the job. Put another way, I would never vote for anyone who actively sought the position of President.
decades of Central planning worked so well in Soviet union, china, and some other coutries that they are envie of the capitalism now.
CNBS just told us, central planning will collapse in 160 days. LOL
a larger problem than the suppression of financial forest fires, is the belief that there hasnt been a forest fire in 80 years so why would there be? Ie. we base societies institutions on a straight line non repeatable part of the curve.
The only problem is that the people that say "let the destruction happen" are the same ones that will demand the unemployed find a job with 25% unemployment, will demand austerity and cuts on welfare/support for the less fortunate.
You can't have it both ways. Provide people a safety net and such things are more palatable.
Of course the ones that are benefitting from all of these "economy-saving" measures aren't the unemployed or the unfortunate.
Battery Charge - you are low on power. Yes there would have been 1 or 2 years of asset deflation and high unemployment, but that is the way the sysytem is supposed to work to perevent the risk takers from having no downside (TBTF).
Those bank CEOs should have been fired and penalized financially. The system would rebuild, but with a stronger underpinning and a new view toward taking outsized risks.
Today we stil have high unemployment and trillions more in debt. To control the indebtedness one does not simply borrow more money.
Re charge that battery and begin to think clearly.
“the only way the system could have been saved would be by letting it fail in 2008.”
Total nonsense.
The “system” was “saved”.
The system was saved the only way it could have been saved, by huge transfers of wealth upward, continued militarism, and huge transfers of bad private debt to the public domain in 2008.
rw- So you are saying that the Paulson 3 pager, giving unlimited taxpayer $$ to failing and over risked banks...was the correct solution?
Pull yourself toward yourself Sir. Banks should have received liquidity to protect depositors and ensure counterparty delivery. BUT then the banks and their CEO's should have been financially penalized for their risk taking, not given QE2,3 etc..
That should have been the framewrok for the solution.
Stop sipping the Kool-aid.
It was the "correct" solution to save the "system" run by banksters, war profiteers, and militarists.
It is illogical to claim that that "system" of global petrodollar extortion and financial swindling would have been "saved" by its collapse.
The main reason that illogic is promoted is to now persuade the peasants that a bit of shock doctrine "austerity" for them will fix everything.
You further are confusing what is (correct) best for the system's elite few, with what would be (correct) best for everyone else.
The only thing anybody should have received is what they bargained for.
As was perfectly stated in the movie "Patton" however: "gentlemen, I understand we can still lose this war."
Turning more of my fiat into gold today! Saw this site on TFmetals this seek, comparegoldprices.com. Great resource for checking live gold product pricing...just fyi.
Merry Christmas
god bless you mark for channeling murray rothbard and other justly famous economist - joseph schumpter anyone? your analysis was precisely correct for understanding the doom we face.
of greater importance, however, is that avoidance of boom and bust in the first place which the central politburo and its chairsatan control through the ungodly and fucktarded fractional reserve system which is rife for abuse (and must necessarily be abused) if for no other reason than banksters love their friends....of course there are mechanical reasons why central planning is the incubator and keeper of consols - the foe of sound money....
fuck the fed! and the bankster-mic-yale-cia cabal controlling it....
How many black swans did we have in 2011? Buckets full. Once a week at least an economic and/or political alarm was raised. Panic! But here we are at the end of 2011: still alive, no default in de eurozone, no Comex/LBMA default, JPM still there, no banking crisis, eurobanks even saved by the ECB!, the euro lives still strong, no bankruns, no civil war, no collapse, even some growth in the US and UK. China no crisis. Told you sooooooo. Merry Christmas and a happy 'lots of white swans' 2012.
Boring world we live in.