Guest Post: In Praise of Flexibility

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

In Praise of Flexibility

This time may well be different, but not in a positive way.

Despite the unprecedented nature of the current financial/fiscal/debt crises globally, a remarkable number of observers evince great confidence in their diagnoses and predictions. Given the unpredictability of the many colliding dynamics, one has to wonder if their confidence is misplaced, or perhaps unduly derived from the intrinsically false precision of their models.

To mention just one example of dozens, if not hundreds, John Mauldin quoted London-based UBS analysts in his weekly E-Letter (free, and always interesting). The analysts peg the risk of a breakup of the European Union as "close to zero probability."

In my view, presented here many times, most recently in Why the Eurozone and the Euro Are Both Doomed (June 23, 2011), their "zero probability" is awfully confident about a complex situation that has no recent precedent--the Eurozone's inherent contradictions and the immensity of its debt and political black holes are truly unprecedented.

The analysts go on to estimate the potential losses per person in a breakup:

We estimate that a weak Euro country leaving the Euro would incur a cost of around €9,500 to €11,500 per person in the exiting country during the first year. That cost would then probably amount to €3,000 to €4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.

The number of assumptions behind this analytic exercise is as remarkable as the false precision of its predictions. What if the "weak" nation (their phrase, not mine) exiting the Union chose to assert its sovereignty and renounce the debts owed to the big European banks? What if its imports were aligned (by broad-based national consensus) with its exports? What if the people of that "weak" nation peacefully retired their parasitic financial Elites and bankers from power?

Even assuming their prepostrous estimates of losses were even close to reality, did they factor into their model the "value" to the "weak" nation's citizenry of freeing themselves from the jackboot of E.U. "integration," the code-word for the sacrifice of national autonomy and permanent servitude to the big European banks? Perhaps the citizens would gladly choose the "payment" of 10,000 euros in the present rather than pay 10,000 euros over time to the "too big to fail" German and French banks--a payment for which they receive nothing.

At least with a voluntary impoverishment, they win their freedom. The UBS analysts place zero value on autonomy and freedom, and a very high (and unstated) value on impoverishing the "weak" nations to preserve the financial Status Quo--what Zero Hedge rightly labels "Prevention of Harm to The Status Quo (TM)."

Meanwhile, to strengthen their implicit case for gradual impoverishment of "weak" nations via permanent servitude to German and French bankers (and a few Americans of course), the UBS analysts peg the cost of being bailed out to a modest 1,000 euros:

In comparison, the cost of bailing out Greece, Ireland and Portugal entirely in the wake of the default of those countries would be a little over €1,000 per person, in a single hit.

Notice how the UBS analysts carefully limited their calculations to the small economies. What are the costs to bailing out Italy and Spain? We can guess the number would be considerably higher, and thus less favorable to the "bail out the banks is the solution" scenario outlined by the UBS analysts.

Rather than strike a confident pose supported by estimates plucked from the air, we would be better served by a humility based on appreciation of ambiguity, contingency and the unknowable. What we do know is that assets have been misallocated on a grand, unprecedented scale globally, and that "moral hazard" has been introduced on an equally grand scale by Central Bank and Central State backstops, bailouts and guarantees of limitless liquidity.

We also know that the euro experiment is unsustainable, and the two choices universally offered by financial pundits--further integration (i.e. sacrifice of sovereignty), where officials from Brussels or elsewhere would assume collection of Greek property taxes, etc., in order to more effectviely stripmine the "weak" nations to serve the bondholders and masters of the big banks, or dissolution.

Perhaps there are future possibilities we cannot yet imagine. If so, it would be wise to not overestimate what is predictable, and wise not to evince a level of certitude that is impossible in a rapidly evolving, highly dynamic cauldron of festering risk and bubbling volatility.

In other words, let us speak in praise of flexibility, and avoid the siren songs of false precision and certitude. Let us confess that the situation globally and in Europe is unprecedented and thus intrinsically unpredictable; predictions based on the past or models plucked from the ether may prove to be not just inaccurate, but disastrously misleading to all those who put store in them.

A flexible outlook avoids the temptations of zealotry, which in these times often takes the form of stating what is "impossible" (i.e. near-zero probability) and what cannot possibly happen--even if it has already happened.

The only realistic prediction that can be made about the next few months is that events will be unpredictable. What we see, think and believe as near-certainties now may be undermined by events and new data. The greatest assets going forward may well prove to be flexibility, adaptability, humility and openness to low probability events suddenly transpiring despite previous estimates of their relative impossibility.

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oogs66's picture

flexibility is key...false precision and certitude do work both ways....occassionally we get too bearish here and see no solutions or even useful attempts at solutions

Taku's picture

Speaking of flexibility, ANY "G-anything" meeting of ministers needs to be done via phone. Video conference, perhaps? Stop flying these guys on tax-payer dollars to the resort of the week.

Michael's picture

Does this mean my prediction for complete and total worldwide economic collapse on October 10th and 11th 2011 is a bit too optimistic?

topcallingtroll's picture

Michael you didnt predict it. You are the cause of it. The one who will make it happen. Remember?

Michael's picture

Please people. What you will see in the near term coming days in the markets is not the big one. You will have to wait till next month for that.

Michael's picture

Who were the last men in Congress who coined money for the US and regulated the value thereof before 1913 according to;

Article 1 - The Legislative Branch
Section 8 - Powers of Congress

I want names.

Bueller, Bueller? Anyone?

Michael's picture

I thought this would be a nice read fron the original, ;


04/18/11 Tampa, Florida – “9% Unemployment Rate is a Statistical Lie” is a pretty catchy title, and being the kind of vicious little rat that I am, and who suspects treachery and betrayal at every turn, I naturally take a look at it to confirm my worst suspicions.

The bad news is that it is, indeed, scary stuff! The article is by Greg Hunter of, who writes that John Williams of has calculated that “If unemployment was computed the way BLS did it prior to 1994, the true unemployment rate would be 22.2%.”

And while the prospect of more than a fifth of the workforce being idle is scary enough, inflation in consumer prices is even scarier, particularly to the aforementioned 1-in-5 unemployed. And while Michael Pento at Euro Pacific Capital does not mention the unemployed or their plight as concerns dealing with inflation in prices, he says, “In current economic analysis, inflation is largely in the eye of the beholder, and depending on how you choose to look, very different stories emerge.”

AnAnonymous's picture

Flexibility... Another piece of US cheap propaganda.

Certitude: one is sure. In this US driven world, sovereignty is not acknowledged to the weak, the weak exist to be extorted.

This US propagandist ignores this certitude and plays it as if a weak nation could get its sovereignty acknowledged in this US world order.

As if there was flexibility on this matter...

So no, Greece could not assert its sovereignty. If they try, there will be drastic paybacks for them to suffer.

That is the way it is in this US world order.

AnAnonymous's picture

Greece would suffer a lot from that move. Certitude.

They rely on oil imports to live. The US in this world order commands in what oil is traded. No compliance with US decisions over this point calls for military retaliation.

How much of oil would the Greek currency buy in case of a default, write off of debt? How much of it would the US allow it to be?

Would depend on how much US citizens are angered by the Greek move and how much they could benefit from starving the Greek of oil.

Made me laugh. This guy speaks about flexibility when the general trends are well known.

US citizens are expansionist and we are at the beginning of a world scale crisis in the capability of expansion.

Expansionists since they exist have always managed expansion crisis in the same manner.

It is written on the walls. The only question hanging is who is who, who is a member of the gang and who is not.

Will Greece be given the boot? Or not? One thing is sure, Greeks do not want to be given the boot. As your typical US citizen gang member would not.

xtop23's picture

 Im sure Russia would be more than willing to trade oil for some greek Au , Assuming they have any left.

 That would also more than likely result in yet another occupation of some sort ( under the guise of the UN and for purely humanitarian reasons of course ) and US marines growing fat on gyros.

topcallingtroll's picture

The greeks could default and assert their autonomy but there is no free lunch. They cant have their cake and eat it too. If they are willing to take back control of their country they will have to tighten their belts a little. If they want oil they have to produce something of value to exchange for oil, either directly or indirectly.

What will end is the lazy greek way of living off subsidy and OPM. They will be forced to grow up and work for their oil, not endlessly pyramid german loans for it.

Spirit Of Truth's picture

I deeply pray my own certitude is way off the mark, because, if not, it's almost time to get out of Dodge.  In terms of seasonality, the "Fall" hasn't even begun yet:

This isn't just Europe, folks.  The EU's troubles are but some of the probabilistic particulars in a tidal wave of mass fear and despair that's been centuries in the making. (So, at least, the Elliott Wave Principle suggests.)  Wave patterns in mass mood are primary, actual humans affairs are secondary.  These are "rhythms of energy" unfolding to efficiently (ugh!) do the work of creation and destruction, growth and decay IMHO.  Heck, it might even be a dirty bomb that drives markets lower next:

These are probabilitic particulars that we collectively experience (measure) from an underlying deterministic wave function. (Wave-particle duality on the human scale.  The underlying story, the entire four-dimensional "image" of our universe, is already written for "God" IMHO: Dow 12K & The Anomalous Motion Of The Planets)

Where we are now is at the epic turning point in man's misled SELF-CONFIDENCE. This "false faith" is subject to an inevitable upset revealing the true Author of HIStory. Tis' all about a global "conversion".


Michael's picture

I understand your concern.

"Being There" Movie Trailer starring Peter Sellers and Shirley MacLaine

Caviar Emptor's picture

You could be right. Man's self confidence is never more than a veneer. 

Snidley Whipsnae's picture

Spirit of Truth...

Few individuals recieve new data, evaluate it, and adjust their perceptions accordingly...

Most of us recognize that we should adjust our thinking as new data becomes available, the problem is that it is human nature to resist change. In fact, change is right up there with death on the list of things that people fear the most.

It's almost a national sport in America to proclaim anyone that changes their views when new data is received as 'wishy washy' or 'waffling' on a given subject. When in reality those that evaluate new data and introduce new thinking should be held up as a good example of a logical human being.

Is there anything logical about a hide bound person?

"Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof." 
John Kenneth Galbraith 

nmewn's picture

"What if the "weak" nation (their phrase, not mine) exiting the Union chose to assert its sovereignty and renounce the debts owed to the big European banks? What if its imports were aligned (by broad-based national consensus) with its exports? What if the people of that "weak" nation peacefully retired their parasitic financial Elites and bankers from power?"

What revolutionary idea ;-)

AnAnonymous's picture

Not revolutionary, suicidal.

In this US world order, nations that are weak are not acknowledged as sovereign. They are to be farmed or extorted, as per US citizen natural behaviour.

topcallingtroll's picture

It has always been so even before america.
It is the natural order that rights are not granted. They must be vigilantly defended.

If you cant defend your rights as an individual or a country someone will come along and take them away from you.

AnAnonymous's picture

The US citizens capacity to vomit garbage is unmatched.

Before the US, the notion of rights was fussy. Before the US, nobody attached the notion of rights to human beings and they were not unalienable.

And the most important, rights are nothing natural. The natural order acknowledges no rights.

But it is the natural order that there are strong and weak.

If one civilization wants to build rights then something must be done so that the strong acknowledges the right of the weak.

Might be too hard to admit for someone who thinks that exponentials are linear functions though...

falak pema's picture

the new frontier : liberating the wives of trolls on the lol...while you lol away, speedy gonzales from across the border...

snowball777's picture

If they could align their imports thus, they wouldn't be weak.

AnAnonymous's picture

Just kicking the can... If indeed they are not weak, they are strong so...

This author just ignored a capital point in the US world order: if they are weak, they can not assert their sovereignty. Sovereignty of the weak is not recognized in this US world order.

It pushes that little certitude under the rug with no sublety, trying to get it out of the way by underlining not his words and stuff. Cheap conjuror tricks.

If horses had horns...

topcallingtroll's picture

Weakness is for losers and socialists, not for real men, nor real countries. Your country doesnt deserve recognition if your people cant man up.

Recognition must be earned, nwo or old world order. It is not given away for free.

AnAnonymous's picture

If that so, how does it comes so many US citizens are whining about their elite?

The US elite is strong, whining US citizens are weak, end of the story.

I dont give one month before the comment poster breaks his own shallow commitment. How? Because he is a US citizen.

And the US citizen nature is eternal.

topcallingtroll's picture


You are only free if you live within your means. Otherwise someone owns you.

AnAnonymous's picture

Comical. I havent read this comment before posting the previous one.

I dont have to wait one month.

By own shallow postulate, no, one is not only free if one lives within ones means.

One is free if one can get one's freedom acknowledged by others. So one can be free and not living within one's means.

If one lives in one's means and another stronger want to enslave one, well, it is done.

US citizens can not stand on their feet, US citizenism is such a mass of drivel, it has destroyed intellectual processes. It is not possible to think within the US citizenism's framework.

Seize Mars's picture

I just read this article three times. I still can't figure out what it is saying.

maxmad's picture

sounds like Greece is getting the belt!

defencev's picture

Precisely. If someone has nothing to say, why he just shut up? Guys, there are very few people in public domain who have the vision to make predictions. Even these rare and precious people are just more frequently right than wrong. The vast majority of so called forecasters are just produce pure garbage (and you need to be careful to distinguisn between just idiots and charlatans who try to sell you their BS). It is not accidental that the very same group of jerks try to demean any kind of science. These are F...cking illiterate, stupid, miserable idiots....

Snidley Whipsnae's picture

"I just read this article three times. I still can't figure out what it is saying."

Stay loose...

Roger Knights's picture

"I just read this article three times. I still can't figure out what it is saying."


1. Just because the numbers don't add up to justify an exit from the eurozone doesn't mean it won't happen anyway.

2. It's possible to add those numbers up differently.

ISEEIT's picture

To conserve.

It is WTF time.

ISEEIT's picture

If you do, make sure you 'buy' it short but with a crazy high ceiling.

caerus's picture

i'm all for ex could put both legs behind her head...wait, what?

rufusbird's picture

Yes, but can she do it while she is standing on her hands?

falak pema's picture

the view from the grand canyon must be awesome at sun up.

slewie the pi-rat's picture

neither one of chs's "minds" is functional after what he's been putting out for his "readers" the last few months.  one side sez stf up!  the other sez you stf up you shitforbrained moron! 

so he's trying to do what one amateur (yet highly effective) "psychologist" suggested well over 1/2 a century ago:  "move his brains"

if you think "like a bowel movement?" you are 100% correct

hopefully, chs will remain constipated for the next year and spare us his "ideas" which i must say, are quite entertaining...


slewie the pi-rat's picture

hey, gwar!

i shldn't be so tuff on chs. 

i read everything tyler puts up from him, and mauldin, too, whom i get offa goldSeek every sunday and whom i believe when he sez he has over a million "friends" whom he has garnered thru his writings over the years. [wow! 3 whom's in 1 sentence!] and, like chs, i questioned his call on the EU, too, but john m. is a way more "establishment" than i and prob'ly chs, too, it seems 

he (j.m.) has been a perennial fan of "muddling thru" or as we usta call it in poli sci:  disjointed incrementalism

recently, he's not so confident of muddling thru the ongoing, ever-increasing "muddles", tho, and has been homest enuf to say so if i understand him correctly.  i haven't read his new book "end game" which is doing quite well in sales; at least he has seemed pleased

the problem i have w/ mauldin is that i don't believe he has come to terms w/ the thesis that our goobermint has been "captured"

i'm not sure chs has, either, altho here he speaks if the eurozone & (paste)  the jackboot of E.U. "integration," the code-word for the sacrifice of national autonomy and permanent servitude to the big European banks (end paste), and the idea of "moral hazard" he does not (dare?) to call out the banksters and the corpo-fascist elite criminal conspiracies and tell people they better wake the fuk up and try to stop the juggernaut(s) of the NWO

these two gentlemen do not seem to grok that the chaos in which we find ourselves is almost certainly by design and that even tho people are not generally very fuking happy or optimistic, less than 10% (can't prove that #) are able to break free of the propaganda prison of "ideas" and less than 10% of those are able to perceive their own conditioning to be "normal" even if they can see the propaganda

most "psychology" is an effort to adjust to the "normal".  there is also psychology which attempts to adjust to the "real" but almost everyone is so confused about "nature & nurture" that they can't even get started

so, we have green and red arrows, trolls, adbot-trolls, a fabulous publisher, and, from what i gather, abt 98.6% of this here fight club just wants to get along, make friends, and hasn't yet realized that t.d. actually requires them to throw their tv's out the damned window and see if they can make it w/out the fuking things...

X.inf.capt's picture

hey pi-rat, thank you those questions earlier. i did respond. again, thank you again for your service.... it maycome in handy sooner than we think......fair winds....

slewie the pi-rat's picture

hey, thxz, dai wi 03!

if you're referring to where you posted the stuff abt what yu were doing w/ the homeless vets and the food bank, i'll try to go back & find it, ok?  if other, pls advise

glad you didn't take offense and t.y. for the t.y. and ditto 2 you

X.inf.capt's picture

yep, thats the one. no prisoners!!!

slewie the pi-rat's picture

i found it, X!

thxz for the personal stuff

fyi, i wasn't 11b;  went to MP skool outa basic, but when i got "stationed" stateside, i had too much education and had also tested extremely well.  i was shy of 23 y.o. when drafted, but had completed my MBA, and when da boyz read my 214 they set me up pretty nicely in a fun job trying to control a shitload of this, that and and the do-re-mi with a set of books i kept by hand ('69)

i was ED from that day till i ets'd outa VN, where i was also quite autonomous and free, and travelled constantly, mostly in the delta, b/c nobody else liked it down there, it seemed. i worked directly for a bird man and was required to report directly to an 06 when i went in and out of many and varied commands all over the country, whenever my 6 wanted one guy to do something, rather than a "team".  everyboldy else worked in groups but i never got very good grades @ "works well w/ others", even as a child.  my first "job" in country i lit up a captain who was my "team leader" when i refused to carry his luggage to the chopper in the pouring rain as midnight approached, and the next day, i met the col (06) for the first time.  we chatted. the 03 wanted my sp5 rank and slewie court-martialed and the 06 wanted 1 independent "trouble shooter" & thought i might just do.  when he went home, my new 6 accepted the situ, so after a coupla weeks learning certain "ropes" from an e7, i worked alone, with a great security clearance and orders allowing me to be anywhere, anytime, with any weapons.  after the second week, i never carried any weapons.  ever. i was too fuked up all the time to risk it, and i never really wanted to shoot anybody, anyhow.  still don't.  my tour was like travelling w/ the grateful dead, only slewie was the travelling band, plus whoever i ran into who wanted to boogie, which was damned near everybody

so i just did my job, came home, and kept partying.  i quit drinking 2X for over a year, but didn't like being sober that much, but finally got past that in the late '80s, almost 25 years ago.  i quit smoking weed too, for 11 years, but went onto a new love, fried potatoes, and gained 50 lbs!  from 6'1" 190 to 240 and finally decided to try the chronic again and see if i started losing weight.  it worked! 

now i ride a bike 50-80 miles a week, partly b/c my old tercel overheats and has been parked since feb, since who knows why?  i'm starting to figure out how to figure out how to figure out how to fix the fuking thing, but any vehicle past 1980 is practically incomprehensible to me.  and many others, as it turns out 

this evening as i was out enjoying a fab sunset and the harvest moon rising, i'm stopped at a light and a guy in a white p'up toots his horn and rolls down his window.  i figure he's gonna ask directions or something.  he says, "how old are you?"  "why?" "well," he sez, "i've got a buddy who is 50 and he won't ride a bicycle b/c he says he's too old, so i was wondering how old you were."   "65"  "hey! good for you!"

and as the sun set slowly in the west, the light changed and i beat him off the line so bad i was well across the street before he went flying past me, with the fuker floored, and i had the thought: i wonder wtf is gonna happen, next?

falak pema's picture

you'll turn 66 and head for route 66! Good riddance to a pesty rat...

X.inf.capt's picture

m.p.'s are cool, never had any problems with 'em when i was in.

glad to here your not drinking or smokin'' ' i havent drank since since i was 19. was addicted to ouzo and redheaded girls, well, gave up the ouzo.

all i can say about the bad times 'down range', it came down to this, we did our jobs, in the 'storm' i found out about war, i didnt like it, but i still did my job. when i came back, transfered to the NG, 160th inf reg. 40th ID. in cali.  thinkin' they wouldnt send us back (it was still pretty hot then) and still had to finish obligation from SMP in rotc. well, we got activated for the L.A. riots...that was not cool, but man, it was i know what the ptb will do to stay in power....anyways, back on subject......we did our jobs, we didnt like it, but we did it anyways, and thats why im proud of serving.

fair winds, pi-rat

gwar5's picture

Everybody should go to a Gander Mountain store, or any other Outdoor Store. Look at what they have and figure out how the whole camping thing works. Seriously, they have some pretty cool stuff these days. At least you'll know in your head what is possible and it'll be a load off your mind. You can be homeless and still live like a King (of the road).


Those LED headlamps are the bomb! I use them in Nicaragua at night anyway because electricity is so uncertain.


X.inf.capt's picture

one of our local army surplus dealers just got a big rush on field gear. people got nervous when those national guard soldiers got ambushed in that IHOP about 30miles south of here. this is not good.....

topcallingtroll's picture

I am seriously thinking nicaragua is the up and coming place.

Cheap. Fairly safe if you speak Spanish and know the culture. Great place for a landowner to live like a feudal lord and hot chicks for almost free.

I like the old fashioned latin america where everyone knew their place and a rich landowner was respected and defended provided he took good care of his serfs and was loyal to them.

Maybe I can get the best of both worlds, old and new latin america, by getting in on the ground floor in nicaragua.