Message to Policy-Makers: Stop Pretending

It's time to stop living beyond our means on the backs of our children and grandchildren.
The long-term costs of our profligacy will be borne by them (and yes, us) for decades:

Sudden Death Overtime

The world Ponzi is now in Sudden Death Overtime.

The widening gap between rich and poor will soon be shut...violently...

In related news:
HP Announces 27,000 layoffs - Shares up 7% on the news:

A Clockwork Atlas

Atlas is the mythical hero from Ayn Rand's magnum opus 'Atlas Shrugged'.  He is a metaphor for all of the 'great men' in the world who keep the planet running while the rest of us ne'er do wells do our best to stay out of the way or otherwise assist as best we can with their lofty travails.

Unfortunately, Atlas had to be let go, because it turns out he has been fucking the dog for oh say about the last many thousands of years.

Globalization is Dead

Updated  5/1/2012:  Of all my posts over the past 5 years, this one gets the most consistent hits, no doubt because it becomes ever more relevant with each passing day.  So, I am dusting it off and moving it to the top of the list again, as time is running out on the Grand Ponzi...

A Clockwork Orange

"...our wisdom, too, is a cheerful and a homely, not a noble and kingly wisdom; and this, observing the numerous misfortunes that attend all conditions, forbids us to grow insolent upon our present enjoyments, or to admire any man's happiness that may yet, in course of time, suffer change. For the uncertain future has yet to come, with every possible variety of fortune..." - Solon

Amazing to believe that this incredibly astute and honest observation was from 2500 years ago.  The majority of the "elite" running the present day Idiocracy never stop long enough to question the hubris of their own inane decisions - bad assumptions built on a pyramid of other bad assumptions.  Similar to conditions that attended during the Dark Ages after the Fall of Rome, science and culture are now entering secular decline, as subjectivity and theology are on the rise.  The only known antidote for anarchy is religion (i.e. mind control), and therefore we will soon receive both (anarchy/theology) in large doses.

We are on the verge of experiencing a monumental transfer of power from the 50+ Baby Boomer generation which has presided over the age of decadence, greed and hedonism that started in the late 1960s.  Consider this last forty year period the Age of Greed.  What we are now entering is the Age of Fear.  What is needed in this new age is a set of tools far different than those found valuable in the prior age.  Power in this age will be held by young men between the ages of 18 and 35 who have copious amounts of testosterone, an underdeveloped conscience, and tremendous cardio capacity, attributes amply exhibited in the UFC generation.  Historically, these have been the Wild Boys who have ruled (violently) during ages of turmoil, for obvious reasons.  The Boomers will quickly yield control albeit unwillingly, having long since grown soft and decadent.   These 50-70 year old over-fed comfort seekers raised during the longest stretch of prosperity in human history will be no match for the new younger breed that ironically the Boomers themselves will have raised.  In short, the Boomers were raised to believe in the triumph of optimism over reality, "vision" over commonsense. Poor qualities to bring to a knife fight.

Combined with the predilection towards messianism and religion described above, there will be new "Taliban" springing up everywhere across the globe.  Be they Muslim, Christian, Sikh or otherwise, they will all exhibit very similar goals and methods.  This process is already well underway not just in the Middle East, but here in the U.S. with the burgeoning militia movement.

The bottom line is that some people are prepared for what comes next, others, not so much...

Something Wicked This Way Comes

Something I mentioned in a recent post is the inherent yet unquantifiable 'event risk' which pervades the socioeconomic environment at this critical juncture. I mentioned the inevitability of a global currency crisis likely starting in Eastern Europe. However, in addition to the well known and oft discussed economic catastrophe we are facing, there is a wide array of other seemingly unrelated risks that will more than likely feed off of one another creating a lethal catastrophic firestorm of historic proportions. It turns out that the same greed, stupidity, laziness and denialism that got us into this economic catastrophe, played a starring role in several other simmering catastrophes as well - go figure...

Geopolitical/anarchic Risk:
Latent geopolitical risk has been simmering for quite some time in the usual places: Iran, North Korea, Pakistan etc. However, now other countries such as Mexico are seeing dramatic increases in violent crime as the fallout from the economic collapse causes various unforeseen dislocations. Even in my home country of Canada (British Columbia) there has been a spasmodic increase in gang-related crime the likes of which that Province has never seen. And then of course there are the myriad protests going on around the world fuelled by burgeoning unrest from the economic crisis. Expect those to become a lot more violent in the days ahead. Here in the U.S. the "tea parties" being staged as a protest against government intervention in the crisis are just the first signs of simmering anarchy and unrest in this, the most heavily armed country in the history of the world... And while we have just come through a relatively calm period from a human historical standpoint, as I have said before, expect that the ongoing explosion in economic volatility will produce a concomitant explosion in geopolitical anarchy, that we are only just now starting to witness...

Environmental Risk:
Thanks to decades wasted and billions spent on obfuscation and disinformation we of course are way behind the curve in addressing latent environmental issues. Expect that these too will find their way into the brewing catastrophic firestorm, as climatic temperature increases will bring rising sea levels, drought, earthquakes (from tectonic shifts, due to melting ice caps), tsunamis, floods and myriad other crises at a most inopportune time.

Peak Oil:
Peak oil will ultimately do more to reduce human consumption of fossil fuels than we could ever accomplish with a climate treaty. So from that standpoint, this is the one crisis that could ultimately bring great benefit to the human race, assuming that we survive the transition to viable alternatives. Expect the adjustment process from oil to renewable energy sources to be halting and turbulent to say the least. The price of oil will continue fluctuating wildly over time, accentuating the duration, severity, and frequency of economic recessions. Every time we look to be climbing out of a recession, expect the price of oil to leap ahead, thereby putting an automatic damper on economic growth. As growth slows, oil prices will eventually fall back again, thus putting the brakes on renewable energy projects that will be deemed economically unviable - just as many projects have now been shelved since oil fell below 50 (after having hit 150 only about 9 months ago). In short, it will be yet another repeating loop of short-sightedness and stupidity. Check - been there, done that.

Health and Disease:
Simply put, impoverished people can't take good care of themselves. And since the vast majority on this planet - including most in the heretofore 'wealthy' nations - will be poor, then expect preventive health maintenance to be reduced, putting us all at increased risk of sickness and disease. On top of that , health resources will be stretched and inadequate to cope with burgeoning pandemics, like the Swine Flu epidemic that is just now getting started. Suffice to say it's not a good time for the largest segment of our population (The Boomers) to be heading for retirement putting further strain on public health resources. It's also not so timely that we squandered the Medicare "trust fund" (i.e. the money coming out of your pay check every month) to pay for unaffordable tax cuts to fund conspicuous consumption and not one, but two ill conceived wars of misadventure....

Disaster Cocktail:
Put it all together and what do you have? You have a volatile cocktail of crises, each of which will accentuate and resonate off of one another in ways that policy-makers have not even begun to consider. After all, we have silos of "experts" fiddling around with the economy (rearranging deck chairs, really); health experts focusing on pandemics; scientists considering the environment; geologists considering peak oil etc. However, who is looking at the big picture? All of these crises are all coming together at the same time in both deadly and unforeseen ways. The economic connection is easy to make i.e. fewer resources to address any and all types of crises. However, how will geopolitical realignments affect the impacts of peak oil ? How will the environmental crises affect health and geopolitical stability? You get the idea.

The Complete Triumph of Laziness and Stupidity
Overwhelmed with unparalleled amounts of information, disinformation, propaganda and data in all forms, human beings have fallen back on blind faith and delusion as our standard mode of thinking and operation. Legions of "smart" people have told us that we can in no way predict the future and therefore it is a fool's errand to even try. I readily admit, there are many coincident crosscurrents that make absolute predictions virtually impossible, however understanding the general vector of human progress is not difficult in the least. So, while I can't say with absolute certainty what events will take place when, there can be little doubt to anyone with a shred of commonsense or honesty that the path we are taking on economic, environmental, energy and humanitarian related issues is spiraling downward. Yet we are constantly tempted by false prophets to believe that the laws of cause and effect have been suspended. Moreover, short-term side-effects can easily be obfuscated or rationalized away. Everyone from Nassim Taleb (Black Swan theory), Robert Prechter (EWI) - and countless others - have offered up sophisticated book-selling con jobs for why there are "unseen" forces at work (luck, social mood etc.) exerting absolute control over human destiny. Of course these theories only serve to contribute to the general sense of confusion and futility, thereby restraining our progress towards straightforward solutions to solvable problems. Worse, there are myriad others anchoring themselves to such pathetically glib fallacies as "we have been through worse before" and "the American economy always comes back". All I can offer as a fittingly glib rejoinder is "Past performance is no guarantee of future results". In short, the outcomes of cause and effect have not been permanently suspended, they have only been delayed such that the accumulated imbalances will only ensure that the inevitable devastating outcomes will be vastly magnified and uncontrollable...

Wave C Destruction
Finally, getting back to my favourite topic around the markets and economy, Prechter recently reinforced a critical observation the other day in the latest version of the "Elliot Wave Theorist", which is that 'C' waves, such as the one that we are in, are steeper and therefore far more destructive than 'A' waves. Recall under Elliot Wave Theory, the first leg down was 2000-2002, which was Wave 'A' in a 3 wave correction of the stock market (A-B-C) going back 300 years (i.e. the biggest correction we have had since the founding of the United States). Wave 'B' was a retracement rally that coincided with the George Bush fantasy years where people leveraged their homes like they were ATMs, we raided Social Security and Medicare to pay for a tax cut for the ultra wealthy, started two ill-conceived wars, and otherwise did our level best to prove that human beings are as dumb as a door knob. So, that puts us in Wave 'C', which started in October 2007 and has already brought the market lower than 'A' wave which ended in 2002. How do I know that Wave 'C' hasn't ended? Because if, Prechter is right (and I believe he is), then Wave C won't end until we retrace much of the stock market rise that has taken place since 1932 i.e. putting the Dow back below 1000. Accordingly to that theory which is by the way supported by all of the current economic data available (regardless of what your government is telling you)...then, once this little stock market rally ends (weeks, months from now - who knows?), we can expect the most devastating segment of Wave 'C' to begin in full force...

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NOTE: One may wonder why I quote Prechter's charting of the markets while I dismiss his social mood theories. He believes that prevailing social mood (which is cyclical) drives events whereas I believe events primarily drive social mood. While I can go so far as to believe that social mood is a contributing factor in human "change", I am not so fatalistic to believe in an exogenous (uncontrollable) theory of human progress/regress. That said, regardless of how we got to this pivotal juncture - events driving mood or other way around, the inevitable outcome is agreed to be the same...

Chaos and Anarchy

Don't like Armageddon? How about Chaos and Anarchy? Because long before we get to any crazy end-times scenario, the "thin veneer of civilization" will be stretched to its breaking point and then a whole lot further.

As I've said before, we are now witnessing in real-time, the utter failure of governance at all levels. From the Federal Government to State, Local Governments, the Judiciary, Federal Reserve and all regulatory bureaucracies in-between, they have all become frozen and incapacitated by the unfolding financial crisis. These are bureaucracies that have grown increasingly incompetent over the decades and have no chance of ever becoming effective, well-run institutions.

Democracy has been totally undermined by special interest groups. On the right you have the Military Industrial Complex, the Christian Fundamentalists, Ultra-wealthy tax dodgers, and fanatical gun owners. On the left you have Gays/Lesbians, Abortion Advocates and Ambulance-chasing lawyers looking to sue anyone at the drop of the hat. Some choice.

Obama v.s. McCain? It really doesn't matter. These guys spend 80% of their time campaigning and 20% of their time pretending to make decisions and passing still more useless laws taking away yet more freedoms. Two years of making false promises followed by two years of broken commitments followed by two more years of false promises - an endless cycle of hype and deceit. None of these career politicians (Obama, McCain, Clinton etc.) have any experience actually DOING anything. They are career sales people who have never been on the hook to delivery anything of substance.

The current debate about Iraq (stay in vs. get out) is out of our hands. Historically all governments have had to make a choice between "guns and butter". The Bush Administration chose both guns and butter, which means the next administration won't have the choice of either. Again, the Chinese control U.S. fiscal and monetary policy. All signs (weak dollar, rising interest rates) indicate they are growing weary of sponsoring the U.S. fantasy. Once they pull the funding, the war will be over. Those who think we have a choice in the matter don't understand history, economics or even basic math.

The Government is thoroughly corrupt and untrustworthy. They publish a 4% inflation rate when the true inflation rate is running at close to 10%. They adjust the stated inflation rate because they don't want to pay full benefits that are indexed to the rate of inflation. Also, if they announced true inflation of 10%, that means inflation-adjusted GDP is negative! i.e. We are already in a recession and have been for many months. Thanks to understated price increases we been conned into thinking the economy is still strong.

Crime and anarchy are on the verge of exploding. The social safety net that was put in place following the Great Depression has been whittled down and dismantled. Social Security and Medicare are completely unfunded Ponzi Schemes - IOUs from one generation to the next, based on the assumption that each successive generation can support the previous one. Unfortunately the designers of these programs were not forward thinking enough to predict declining birth rates or baby booms, like the one that occurred almost immediately after the system was put in place. The irony of the situation is that the Baby Boomers need the next few generations to fund their retirement, yet the Baby Boomers have raised the most incompetent, helpless, entitled generation in the history of the planet! How can your kids fund your retirement when most of them are still living at home? Thirty-five year-olds playing with their XBoxes, wondering what they want to be when they "grow up".

Hard-core conservatives will tell us that we need to privatize Social Security i.e. put the money in the stock market. The stock market is the biggest casino in the world. When people are down on their luck, the last thing they need is to have their sole remaining safety net be subjected to the vagaries of the stock market. When the economy is down, people lose their jobs, the stock market collapses and charity dries up i.e. all income streams are 100% correlated to the downside - Does anyone get this? A public Social Security system was SUPPOSED to be non-correlated with the business cycle. Replacing a bad public system with an even worse private one, is the kind of leadership we get these days.

The fact remains that most people are in denial about the crisis unfolding all around them, because they don't want to confront the reality that our entire way of life is a consumption-oriented fantasy propagated by cheap natural resources and massive debt. Hundreds of years ago the developed nations secured early control of Third World natural resources through war, colonization/imperialism, bribery/corruption and exploitation. Now that a few of these countries (China, India) have bootstrapped themselves up to the big table, we are finding out that there just isn't enough to go around. Therefore, it's time for all of us to wake up and downsize our lifestyles to the new reality, before the new reality is rudely crammed down our throats.

As for Chaos and Anarchy, like it or not, those two features are coming soon to a neighbourhood near you, just as sure as God made little green apples and mankind made Hornady 9mm. Batten down those hatches, because here comes Katrina x 100...