When Systemic Uncertainty Meets Fragility - "Then The Whole Contraption Collapses In A Heap..."

Authored by Charles Hugh Smith via OfTwoMinds blog,

That's the problem with fragility: everything looks fine on the surface until a crisis applies pressure. Then the whole rickety contraption collapses in a heap..

Life is inherently uncertain, but systems that were once considered certainties have increasingly become uncertain. Social Security is one example; recent polls reflect widespread doubts among Millennials and Gen-Xers that there will be any Social Security benefits left for them by the time they reach retirement age.

This doubt is fact-based; as the number of retirees swells, as Medicare costs soar ever higher and the number of full-time jobs paying into Social Security/ Medicare stagnates, these pay-as-you-go programs break down; Social Security is already paying out billions more than it collects from employers and employees.

Uncertainty is one thing, fragility is another. The socio-economic systems we rely on are also becoming increasingly fragile and prone to failure, for an entirely different set of reasons than those driving uncertainty.

Changing fundamentals drive uncertainty. The nation's demographics and stagnant wages for the bottom 95% are extremely unfavorable for pay-as-you-go programs like Social Security and Medicare; their future is uncertain because the inputs and outputs are changing.

Fragility is a function of systems being thinned by cronyism, self-serving insiders, fraud, lack of transparency, lack of competition, monopolies, profiteering and a decline of quality. Systems that become too costly due to the above dynamics are hollowed out as everyone seeks some way to reduce the costs. Redundancies are stripped out, staff is slashed to the bone, senior managers with the most experience are pushed out to lower payroll costs, quality control is whacked, and inferior inputs are presented as equal to the higher quality inputs that they replace.

When these weakened systems are under pressure or face a crisis, they crumble. Shoddy materials fail, inexperienced managers make hasty, ill-informed decisions, the barebones staff is overwhelmed, equipment that wasn't properly maintained to save money breaks down, and so on.

We're assured by financial authorities and the media that our banking system is now monstrously resilient and robust, and it is impervious to financial crisis. You're kidding, right? So when all the subprime auto loans go bust, and all the overleveraged commercial real estate loans go bust, and all the developing-world debt in U.S. dollars goes into default, and all the consumer debt issued to marginal borrowers goes bust, the hundreds of billions in losses are all going to be absorbed, no problem.

This is fragility writ large. You can bet the entire financial sector is making the same faulty, fragility-creating assumptions as a means of maximizing profits: only one auto loan in a hundred will go into default, near-zero commercial real estate loans will blow up, every dollar-denominated loan in the developing world will be paid in full, blah blah blah.

In other words, if we assume FantasyLand perfection of marginal borrowers--that once a global recession guts their opportunities to refinance and the income needed to service their loans, they will still magically make all payments in full and on time--the financial system is resilient.

Beneath the reassurances, the system is increasingly fragile because all the resilience has been stripped out of it to maximize profits in the current quarter. And as for the financial authorities--who believes the financial sector is serving the interests of the bottom 99.5%? Based on what evidence? Who believes the mainstream media is reporting the deteriorating fundamentals and the increasing fragility of our society's core systems?

All we need is a few overlapping crises to reveal the structural fragility and lack of trust/certainty in our core systems. Profiteering, cronyism, self-serving insiders, a decline in quality, gaming the system, fraud, opacity, propaganda, and the erosion of competence all seem like good clean fun when the weather is calm and the sun in shining. But the true nature of our systemic failure will only be revealed when multiple storms arise and the system is pushed to the limit.

That's the problem with fragility: everything looks fine on the surface until a crisis applies pressure. Then the whole rickety contraption collapses in a heap.


ET (not verified) Wed, 08/30/2017 - 16:01 Permalink

Physical Gold and Silver will protect you when paper and hackable and deletable crypto cannot.

Cryptos stored on memory cards can also be destroyed.

HRClinton ET (not verified) Wed, 08/30/2017 - 16:55 Permalink

Re... "Solutions" Are Now Mutually Reinforcing Problems.IBID: (((Solutions))) Are Now Mutually Reinforcing Problems.Perhaps the author meant (((...))), but coded it as "..." for public consumption.  Prediction: Eventually the Problems will have to be solved with kinetic blades and Pb.  E.g. Am. Revolution 1.0.

In reply to by ET (not verified)

Peacefulwarrior Wed, 08/30/2017 - 16:05 Permalink

Fuck You Hugh, this article is obsolete and should have been written in 2007. This site, in the past dealt in real time optics and had brilliant insight. Now it is filled with us against them agenda's and old news written as if it's prophetic... Its Hard to watch things get old sometimes...

Kendle C Wed, 08/30/2017 - 16:06 Permalink

As long as the Pentagon is spending One Billion Dollars a DAY on their lame brain globe trotting schizophrenic war making, don't talk to me about cutting Social Security. Carve a chunk off their pork roast and shut the fuck up.

ET (not verified) Wed, 08/30/2017 - 16:26 Permalink

This is what will shut down crypto and crypto mining.

Trading with the Enemy Act.

Crypto will crash so hard and fast that many will be wiped out in seconds. The intrinsic value of nothing is Zero. The crash will be much worse than a few years ago.

Winston Churchill ET (not verified) Wed, 08/30/2017 - 16:26 Permalink

Legal tender laws,capital controls etc etc.There are myriad ways to clamp down on them already on the books.The fact they haven't tells you more than you need to know.Without real privacy, not just encyption,because sigint is more than enough to know everything,its a false solutionto the wrong problem.Thanks for playing and developing FedCoin for them.TPTB are evil,not stupid

In reply to by ET (not verified)

Umh Wed, 08/30/2017 - 16:17 Permalink

Bright people tend to do slightly better than others. Why don't they do much better? It could be because they are 'smart' enough to take on intelligent risk? A problem is that intelligent risk is frequently confused with obfuscating risk and they are not the same thing. Haven't we all seen the manager that comes in promises everything will be alright while changing a lot of things and then leaves before the results come in?

TrainReck Wed, 08/30/2017 - 16:22 Permalink

Systemic Failure has already been revealed and it's called the Great Financial Crisis circa 2008. Nothing was ever fixed. It was just glossed over by the greatest transference of wealth in the history. Fragile knows no boundaries when you've got a unlimited ability to create debt by manufacture of the world's reserve currency. This in turn has allowed Japan & Europe to follow the same blueprint of failure. Yeah all of that mentioned is real but who cares because it really doesn't matter in the Big "Scheme" of Things.

lasvegaspersona TrainReck Wed, 08/30/2017 - 16:36 Permalink

I dis agree. No real wealth has been transfered yet. That will happen when the paper representation of wealth fails.Hyperinflation is the real tide that goes out and reveals the naked.Picture Bill Gates with millions of worthless Microsoft shares and a retirement fund full of bonds.Now picture the guy who has a mortgage and is able to pay it off more easily.Paper holders lose, owners of real things win.Ask the French, The Argentinians, the Zimbabweans, the Romanians, the.....

In reply to by TrainReck

Alananda Wed, 08/30/2017 - 17:03 Permalink

Doom porn -- True and tested ZHers know the difference between "doom porn" and legitimate warnings, the longest lived one being (((End the F(e)ED))).  I say no more for now.

Soundgardener Wed, 08/30/2017 - 21:55 Permalink

Thanks for the CONSTANT FUCKING REMINDER that Life, the Universe, and Everything is totally, utterly, terminally fuck-assed beyond repair (check), humanity’s in the last stages of CTD (Circling the Drain) before The Inevitable Great Flush (check), and most of us are going to starve to death* (check), but if I may, er, make a suggestion, Mr Turden? When you need to scratch that itch, and pontificate about how closely mankind is mirroring the story-arc of the Planet of the Apes movies—either directly, or by proxy, e.g. through syndicated content such as this—why don’t you just copy and paste some platitudinous, preaching to the choir, templated / single-sourced fear-porn horse-shit? I've drafted an example of what I mean below, if it please Your Lordly Durdenatuion. THE ZERO HEDGE MANIFESTO / MANTRA (EXPURGATED VERSION) AKA "IT BEGINS" (1) Everything is terminally fucked beyond repair—we’re headed directly into the heart of the sun, and circling the drain at the same time (metaphor physics). (2) The fractional reserve / central banking / Sovereign Debt Ponzi Clusterfuck WILL ex- / implode, soon, pissing on everyone’s chips. Permanently. Forever. Nothin will ever be the same. May Dog have mercy on your Bowl. (3) The Government, media, private sector, left and right wing political establishments (foundations, think tanks etc), and most of the population, are uninformed, misinformed, deluded, confused, uninterested, full of shit, fucking nuts, broke, hooked on drugs, or all of the above. The rest are demon-possessed satanic reptilian pedofile AI-clone psychopaths hell bent on immanentizing the eschaton as quickly, unpleasantly, and amusingly as possible.PS: If it's not clear GOD OBVIOUSLY DOESN'T EXIST (you won't find two people who even agree on the meaning of the word; not surprising given it's (a) fictional, and (b) self-contradictory many, many times over, haha ;) Cheers,The Central Scrutinizer * Codex Ailementarious, Article 21, FEMA, Morgellons, HAARP, Nibiru, Satanic Freemasonic / Jesuit / Jewish infernal triangle, AI / Skynet / Singularity, Satan, Iblis, Moloch, Blackstar, Ephesians 2:2, Antarctica Hollow Earth Pizzagate reptile-world portal, Millennial SJW MGTOW autism / negative sperm count / libido and all that. 

DelusionsCrowded Thu, 08/31/2017 - 01:57 Permalink

I believe that the real decline of the West is being driven by multiculturalism and political correctness MC & PC . The argument is simple the more chaotic a state becomes the harder its it to maintain it . Lets think of this like a leaking dam . This is especially true when the MC state is based on elevating low IQ groups into positions of authority throughout ALL organizations and bureaucracies .
Many (most ) Western States have reached a point of intellectual decrepitude via PC , that even to point out this obvious obvious problem brings howls of anger and protests , from so called intelligent people . Group Think , trained behavior via show trials . Reminds us of the Bolshevik catastrophe .
Lets consider a microcosm , any company with a PC commissars , just reflect for a moment if you are a person of talent in this company and you are constantly passed over for promotion due to racial and sexual quotas by people obviously less talent and you are not the only one .
And the unqualified person who is promoted becomes insecure , especially if they have already been university indoctrinated to have a racial chip on their shoulder , they see threats in discussions of things they should but don't understand , how easy it is to imagine its racist . How easily it becomes to kick down with dirty angry looks and make it known : kiss ass . Whilst promoting your own racial coterie into positions around you , for security .
So now we have disaffected groups sprouting , who perhaps will act with willful negligence , especially when there is money to be made .

All the wishful thinking in the world , all the smiley yes faces won't change peoples true motivations .
Communism was and is a failed experiment . Why in the hell is the Western peoples being led back into this stupidity.