Musings Report 2018-26 6-30-18 When Long-Brewing Instability Finally Reaches Crisis
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Welcome to June's MUS (Margins of the Unfiltered Swamp)
The last Musings of the month is a free-form exploration of the reaches of the fecund swamp that is the source of the blog, Musings and my books.
When Long-Brewing Instability Finally Reaches Crisis
The doom-and-gloomers among us who have been predicting the unraveling of an inherently unstable financial system appear to have been disproved by the system's resilience and recovery since the 2008-09 Global Financial Crisis.
But inherently unstable / imbalanced systems can stumble onward for years or even decades, making fools of all who warn of an eventual reckoning / rebalancing.
Some unstable systems last for hundreds of years, and the eventual crisis doesn't necessarily resolve the instability. Slavery in America is one example of a system that endured despite its intrinsic contradictions and irreconcilable conflicts.
Those declaring in 1851 that the political compromises of the day were only pushing the eventual crisis forward in time were undoubtedly dismissed as negative doom-and-gloomers, and when the crisis finally broke into Civil War in 1861, the general expectation in North and South alike was for a brief and decisive conflict.
If we want to trace back the systemic instabilities and imbalances that culminated in China's revolution in 1949, we can start in 1900 with the Boxer Rebellion, which was itself a reaction to the Opium Wars of the 1840s that established Western influence and control in China.
But is this far enough back in time to understand the Communist Revolution in the 1940s? No, we must go back to 1644 and the demise of the Ming Empire, and perhaps even farther back to the Mongol victory over the Song dynasties in the late 1200s.
In the same fashion, we can trace the current crisis of global-finance Capitalism back to its origins in 1500s Europe.
The instabilities beneath the surface calm of the early 1900s erupted in World War 1, and those predicting a future crisis in 1919 were treated to an unparalleled decade of expansion, the Roaring Twenties, before financial gravity finally overcame the expansionary power of credit.
And so here we are in 2018, 25 years into an unprecedented technological and financial boom. Those of us who saw the 2008-09 Global Financial Meltdown as the inevitable flowering of systemic instability have been marginalized by an epic 10-year boom, much like the Roaring Twenties seemed to "prove" all was not just well, it was permanently terrific.
The seeds of the next financial crisis--more likely, a series of crises which never quite dissipate-- were planted decades ago in the globalization of the 1970s, the financialization of the 1980s and the promise of an enduring energy abundance due to fracking technologies in the early 2000s.
Economic booms are relatively easy to understand and launch: flood an economy limited by constraints on production and consumption with limitless credit at low rates of interest, and you reliably get a boom of investment, consumption and speculation.
But flooding an economy with cheap, limitless credit inevitably leads to excesses of leverage, risk and debt, and a systemic reliance on marginal borrowers and lenders for "growth"-- a credit-based "growth" which is destabilizing and unsustainable.
The boom turns to bust and asset bubbles pop, laying waste to fortunes and the confidence that bubble-based prosperity is our endless birthright.
The crisis of 2008-09 was averted for a decade, but at what cost? To buy that extra decade of illusory stability, the system has been pushed to extremes that cannot be unwound or reversed painlessly. Beneath the surface illusion of stability, buffers have been thinned to the point that a relatively modest-sized crisis will trigger a domino cascade that will bring down the entire system.
History has many examples of unstable systems "saved" by a stroke of extraordinary good luck (discovery of gold, the unexpected collapse of a geopolitical rival, the rise of a competent leader, etc.), and also examples of unstable systems not so blessed that were nudged into collapse by a crisis that could have been weathered with relative ease in more stable times.
Doom-and-gloomers reckon we've finally depleted our supply of "saves" while the immoderately cheery techno-enthusiasts reckon technology always conjures up another "save" when we need one.
My sense is we either get a crisis that can no longer be pushed forward with financial trickery or another systemic "save" emerges by 2024 - 25. I suspect we have 5 or 6 years at best before the present era is subsumed by either a systemic crisis or another systemic "save."
The system has been "saved" multiple times since the slow-motion crises and anomie of the 1970s. The technological candidates for the next "save" are many, but at this late date, questions of scalability and cost arise. Can the new whiz-bang "save" be scaled up fast enough and on a large enough scale to make a difference, and will it be cheap enough that a debt-riddled system can pay for it without tipping the system into collapse? We'll know which way it goes all too soon.
From Left Field
Bravo, amateur statue restorer in Spain. Originals are so overrated.
Mind the Trap Door -- epic market crash ahead....
Cryptocurrency Market Cap and Bitcoin Dominance -- interesting to see BTC's dominance rise again...
K2 with a Drone (15 min) -- some amazing footage here...
Shekhar Gupta: Losing the world, one country at a time -- dissenting POV re: India....
Bitcoin Bloodbath Nears Dot-Com Levels as Many Tokens Go to Zero -- mainstream financial media feasting on the carcass, something that typically marks the bottom....
Crypto Coin Graveyard Fills Up Fast as ICOs Meet Their Demise -- good riddance to scam-coins....
Credit-Card Wars: Today’s War-Financing Strategies Will Only Increase Inequality -- excellent point that will never get MSM coverage...
The 'supply-and-demand model of labor markets is fundamentally broken,' and that's why you're not getting a pay raise anytime soon
The Beat Generation in Its Natural Habitat -- photos from 1959...
Why Raising Kids Without Family Nearby Sucks -- the downside of endless mobility... the demise of the family "home" or "place"...
First U.S. Bumblebee Officially Listed as Endangered -- I'm always happy to see them feeding on our flowers... definitely far fewer now than a decade ago....
"The limits of my language mean the limits of my world." Ludwig Wittgenstein
Thanks for reading--
charles |
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