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Guest Post: One Dam Metaphor For The 2012 Global Financial System
Submitted by Charles Hugh Smith from Of Two Minds
One Dam Metaphor for the 2012 Global Financial System
What do you do when flood waters threaten the dam? If you're the Federal Reserve, you close the floodgates and let the water rise.
Metaphors have an uncanny ability to capture the essence of complex situations. Here is one dam metaphor that distills and explains the entire global financial system in 2012. The way to visualize the current situation is to imagine a dam holding back rising storm waters.
The dam is the regulatory system, the rule of law, trust in the transparency and fairness of the system and the machinery of perception management. All of these work to keep risk, fraud and excesses of speculation and leverage from unleashing a destructive wave of financial instability on the real economy below.
As legitimate regulation and transparency have been replaced with simulacra and manipulated data, the dam's internal strength has been seriously weakened.
Depending on how you date various rivers of financialization, water has been piling up behind the dam since either 1982, 1992 or 2000. In this metaphor, the water is comprised of multiple sources of destabilization: rising money supply, debt, speculation, leverage, fraud, shadow banking and lax regulation.
Common sense suggests that water rising to dangerous levels would trigger an official response of opening the floodgates to relieve the pressure. Unfortunately for the real economy, common sense has nothing to do with the official response of central governments and banks. Their entire raison d'etre (reason to be) is self-preservation and the preservation of the financial Elites that set the context and policy of the State and central bank.
In effect, the State and central bank recognize that it is highly dangerous to let any water out, lest the toxic waste of fraud, speculative incentives, excessive leverage, etc. corrode the spillway and cause the entire dam to give way.
The official rationalization for keeping the gates closed even as the water is rising to the very lip of the dam is that the flood water released might harm the real economy downstream.
The truth is less savory: letting any water out might reveal the vulnerability of the entire system to collapse and the complicity of the official State agencies and central bank in the decades-long process of piling up too much debt, leverage, fraud and speculation in the first place.
To avoid the exposure of their own complicity and incompetence, the officials would rather risk systemic collapse of the dam. The global exercise of masking the true risks in the system can be summarized as "extend and pretend," and for the the past four years, officials have promised that closing the floodgates and keeping all the toxic debt, leverage and fraud safely behind the dam is the "solution" to rising floodwaters.
That "solution" was temporary, and 2012 is the year that the water reaches the lip of the dam and starts spilling over. The only question for those in the real economy downstream is whether this spillage will be enough to relieve the mounting pressure or whether the dam will suddenly give way.
If the rivers of toxic debt, leverage and fraud continue flowing into the system, then the only way to relieve the pressure is to release more of the debt, leverage, risk and fraud than is entering the system. "Extend and pretend" does nothing to limit the inflow of toxic debt, leverage, fraud, etc., nor does it release any bad debt or shut down the sources of toxic flodwaters, i.e the shadow banking system and the Financial Elite perpetrators of fraud.
Will the dam of extend and pretend hold another year? Perhaps, but I suspect the toxic waters have corroded the spillways of trust and resiliency to the point that any official attempt to relieve the pressure will trigger the dam's collapse.
Either way, the dam collapses.
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Cryin' won't help you, prayin' won't do you no good,
Now, cryin' won't help you, prayin' won't do you no good,
When the levee breaks, mama, you got to move
Going to Chicago...sorry baby but I can't take you.
It's going down, going down now. Going down....going down....going down.
Learn to swim, see you down in Arizona Bay
the thing I hate about metaphors is when they're no longer metaphors
This current crisis is almost like a Keynesian liquidity trap gone bad, ya know?
"Going to Chicago"
It'll be a hoot to watch Bamy's boy Rahm show'em how real fascists take care of business.
Dazed and confused for so long its not true.
Armada Markets predicted that EURUSD will reach 1.0000 this year and probably lower as eurozone will collapse and cease to exist. Game over.
Trust and resiliency has been vaporized, Bitchez.
The Fed should investigate MF Global, they are the real experts in vaporization.
Can the collapse of the world's financial system wait until we fat, lazy Americans find out who's going to be the next American Idol?
lol
Oh that's easy: the gay one.
Now someone tell the people managing "The System" that it can collapse.
"Either way, the dam collapses."
You've been promoted to Admiral Obvious! Thanks Chuck, happy Monday!
Let me guess....
Rats leaving the sinking ship!
The tree of finance is torching!
Catch-22!
Need at least one Titanic reference, something mentioning the fall of the Roman Empire wouldn't hurt either.
The 100th anniversary of the Titanic is soon.
I read a little bit about a conspiracy theory once... apparently the Titanic set sail with a handful of people who were opposed the creation of the federal reserve. Namely, Benjamin Guggenheim, Isa Strauss and Jacob Astor. Seemed plausible enough to me when I read it. The ship did sail after the meeting at Jekyll island and before the Fed got thrust upon us. I don't know enough to know much about the dissenting points of view at the time (who had them and how they either lost the debate or were silenced).
The movie would have been way better if Cameron had focused on that!
That will be the storyline to Oliver Stone's remake. Must... keep... the song... out... of... my head.
Even if it does get in your head, I am sure that your heart will go on...................
pods
Hollywood has always been a magic show, which is to say a shell game, or like the sign in the Hollywood hills, an icon of sorts presenting an idea from a great distance, with body parts laying in the bushes underneath (see recent news)
Titanic's about to go down
Most of the sheeple will drown
The Romans learned fast
That the circus can't last
When the Ring Master acts like a clown
I know you're the monarch of 'ricks
But try something else just for kicks
Visit #RonPaulHaiku
Give them something new
And add 5-7-5 to your rhyming mix!
Haiku has never been in 5-7-5 form; that is some weird American old wives tale.
Not really. It was an attempt at translation of Japanese sounds into syllables. But traditional haiku in Japan does follow a 5-7-5 format (not syllables per say, though) for teikei haiku, but not for jiyiritsu which is more free form.
Right
You are going to have to compile your limericks into a book, your starting to read like Nostradamus...
Thanks for the compliment Hulk. No books in the offing, but Twitter has a nice compilation of my latest limericks/tweets.
"The Romans learned fast
That the circus can't last"
I read Gibbon's when I was a kid - stuck at Granddad's farm with not many books, and not much TV, it was not something a 11 year old would normally read, but it was eye-opening.
Something I've wondered ever since : Were there Roman Survivalists?
I mean, any ex-Centurions who look at the situation and said, "This is going to collapse. I, Mogumbus Guruos, am going to build me a manor house out in the middle of no where and hunker down..."
Don't forget about the Black death of the middle ages, always a good one.
yes but they're offering the rats 15K each for their trouble, (speaking of that Italian Cruise ship) and hope that will make them forget how the old adage Women and Children First! was perverted into First Class Come to the Head of the Line! Reminds me of the joke Ann Richards told about GW Bush being born on third base and thinking he hit a triple. He Fell Into the Lifeboat..
Where is Barnes-Wallis when you need him?
If you open your window now you can probably hear 633 squardon in the distance.
Apple and IBM are currently holding the major indices up for now. The afternoon could be interesting. Typical action for market tops of the past. We shall see.
"Global economic crisis like Chinese Penis Trap. The harder man pulls, the harder man stuck."
Neoconfucius
I suspect the dam will break sooner than later. Europe just played their last card with Greece, and were promptly told to go pound sand. The demand that Greece give up their sovereignty was not well received, and I think they are now preparing for insolvency and a return to the Drachma. When that happens, expect Portugal then Spain then Italy to do the same. The Euro is in it's death throes and there is nothing they can do to halt the inevitable.
When this metaphorical dam does break, the damage will trqavel around the world. The derivatives alone are enough to "vaporize" many trillions in imaginary money.
true that!
+1
The Fat-lady just ordered Rosetta Stone: Japanese.
The elites dont give a damn about the dam! They want us all fucked and depressed so that we can fuck/kill one another....
Everytime they are in deep mess, they try to ignite wars... so if we are drawning because of the flood, we better take those cock sucking mother fucking elites down with us.
Amen!
Hello Israel/Iran and the US Navy.
Syrian Terrorists blow up GazProm gas pipeline
I know its not on topic, but this is the top post at the moment
http://presstv.com/detail/223887.html
This analogy came up a few weeks ago by pakled 2087382
My response 2087430
Point;
The dam can reach high level but the water is still flowing into tributaries call liquidity traps. This excess water means nothing to the economy if it doesn't flow out of the private sector faucet.
Dam Good analogy ...
It's not your survival they're engineering, it's theirs !
There is no levee!
pods
[Done in my best Keanu]
This brings to mind the qestionable content and construction quality of the Center portion of the Three Gorges Dam.
Anyone want to wonder what real estate prices are downstream from that thing?
Ooops!
Trouble is these bastards are extending the dam upwards!
The fucked up part is that when the dam breaks, is when the government takes total control. I'm really not looking forward to the FEMA re-education camps. Kinda makes me think this is all going to plan of TPTB. What better way to get people totally dependent on government and set them up to accept a one world currency, than to create an economic collapse. Or maybe my tinfoil hat is just getting too tight.
now i would say that a more appropriate metaphor would be Bernanke stopping the leak in the wall with a lighted stick of dynamite. he wants to flood the world in the hope that the water will flow out evenly and fairly to every one (when you throw money out of helicopters you assume that the money is distributed equitably to those on the ground, which is one reason I assume BB is a Marxist economist)
He's as cute as a bug...a tick really
the dam is regulation, and the difficulty arose because we failed to use the dam, we failed to regulate, moderate, and encourage savings (water) the government has been running the river right through as though the dam doesn't exist.
the water, or money, is a neutral commodity, its only when it rushes through without any effort to channel it that malinvestment occurs. the people alongside the river are doing pretty good but the water and the electricty from the dam aren't getting to the people.
electricity (and by extension money) is similar to water, engineers often use that analogy, but the comparison breaks down when you talk about mopping up liquidity. in an electric circuit there is nothing to mop up, there is only the flow. Bernanke says, i can lick inflation in fifteen minutes, which is to say he can turn the dam back on. his problem is the circuit isn't working, there is no power or water going to the right places.
the other thing about circumventing the dam is that occasionally you have floods. but of course the Fed is entirely confident it can turn on the dam at any time. and if we turn on the dam, who's house gets the power, and how much. its usually at times like this in history when ground changes in the distribution of wealth remain hidden, until the economy starts up again we realize, this isn't the same economy we had before we turned the dam off (outsourcing of labor, 99% vs 1%,massive expansion of the welfare state) and most important we don't know what the value of money is, (so we worry and hold gold against the time)
if the dam represented current "regulation," it would be completely permeable. The system and its "rules" are a sick, corrupted joke
Water overtopping the dam does not decrease the pressure on the dam, but it does undercut the face of the dam as it descends. Dams are designed to let water through, not over. The imminent danger here is that water can't be released fast enough through the dam to prevent overtopping, which is already undercutting the face, which will inevitably lead to catastrophic collapse. Time to head for high ground.
Long beaver
I believe the dam is made of all the stuff people find valuable.
The base layer is made of stuff that people need like food and energy, some consumer crap too.
The next layer is made of the real currency, gold. It's a bit bigger, but it can be balanced by the layer below.
Next layer up is paper money. It's too big. If it grows much more, it could topple.
Above that, derivatives. That layer is huge but invisible. Really tippy this far up the dam.
Damn. Just raise the height of the dam.
wet after the burst and dry for many years once the water is wasted. We wake up once its all over. "I didn't think it would happen" then becomes next song. What happens after that is called people's manipulation; as before. But by whom? Logically those who manipulated before should have to pay for their crimes. But will they?
And will their successors learn the true lessons? That is what civilization is about; unless we've lost it.
Ridiculous. Nothing is going to happen, it's just insane to think...
...hey, where'd all this water come from?
Hey, who stole my boat?
...And why are my shoes now make out of concrete?
Continuing on the metaphor set above.....Why is it that we even have a dam? The dam is nothing more than monetary delusions (as in the monetary system itself) that represent the non-functional nature of the economy that is not needed at all for the downstream real economy to function.
A Credit System (American Credit System [Hamiltonian]) would be a return to the real American economic structure that FOCUSED on the physical economy. The dam represents the imperial monetary system we imported from Britain (and exactly that which we broke away from) that we built on top that is entirely unecessary.
The Credit System feeds the real economy. The monetary system, is only the bullshit we built on top, which has little if any purpose, which only serves unproductive purposes and risks the entire waterway.
Yes we need a return to Glass-Steagall, 1933 style, not the weakened version we finally scrapped. Once this dam goes down, the way to revitalize the real economy underneath, is to go back to the system that nurtured the real economy underneath to begin with. The American Credit System, and it's credit uttering power (not federal debt to banksters) to pay for actual projects, that create actual wealth, that allow the real economy, and thus real private businesses to flourish....instead of the monetary system that steals, defrauds, risks all, and has no ability to cope with dwindling resources, because the capital expenditures needed to extract more, or create resources (fusion for energy, fusion arc for creating base elements for resources) is antithetical to the quick buck fraud. It'll never happen, because the monetary system, has no way to fund what we need. Thus not only do we get a paper collapse, but a physical collapse as well (eventually).
Impeach Obama
Glass-Steagall
American Credit System (for credit utterance to fund REAL physical economy wealth)
here, feed your anger
http://jessescrossroadscafe.blogspot.com/2012/01/moyers-journal-how-did-...