Error: Embedded data could not be displayed.




Covid Has Triggered The Next Great Financial Crisis

May 3, 2021

What's left are the 'fatal synergies' of soaring debt and leverage, diminishing returns on stimulus, the substitution of credit for savings and the coming deflationary tsunami that pops all the speculative bubbles.


Imagine a once modest but sturdy home built near a cliff to maximize the vistas. Over the decades, the foundation slowly degraded and the house moved imperceptably closer to the unstable edge of the cliff. Those who observed the slippage and the potential for eventual disaster were either derided as alarmists or ignored.

Given the enviable location and views, the home rose in value and a series of increasingly gaudy additions were added, completely obscuring the once-modest exterior with cheap imitations of long-lasting, time-tested materials (plastic trim and brittle fake-marble veneers). The foundations of these ostentatious additions were slapdash, shallow and poorly made, as the goal was not durability but appearance.

The low-quality additions accelerated the slide to the unstable cliff edge, and in 2019 the viewing deck broke away and crashed into the canyon below. The repairs were hasty and the residents were assured all was well--in fact, better than ever.

In 2020, the weak foundation of the gaudiest, lowest-quality addition crumbled. The response of the owners was to fill the widening crack in the decaying structure and spray on a new coat of paint. There--good as new, the residents were told.

But this was not true. The house is now teetering on the precariously unstable cliff edge. Ironically, the vast majority of the residents have moved to the game room, which is now cantilevered over thin air. The slightest movement will tip the entire decayed structure over the cliff.

That decayed, precariously unstable structure is the U.S. economy, and Covid was the catalyst that nudged the economy right to the edge. Gordon Long and I discuss the causes and consequences in our new video program, Covid Has Triggered The Next Great Financial Crisis (34:46).

Chief among the many causes is a very basic one that's easy to understand: America has consumed more than it has produced for decades, and filled the gap with imports purchased with borrowed money and currency created out of thin air.

As Gordon and I explain, this is a very well-worn path to instability and collapse: governments (which now include nominally independent central banks) have always responded to declines in productivity and affordable energy/materials, the expansion of a parasitic elite and excessive spending with the same bag of financial tricks:

1. They borrow more money, eventually borrowing more to pay interest on existing debts, greasing the slide to default and insolvency.

2. They defraud the users of their currency by devaluing the currency. In the old days, this was accomplished by substituting base metals for silver or gold in the minting of coinage. Eventually the coins contained only a trace of silver. Users soon caught on and the result was the coinage lost purchasing power, a.k.a. inflation destroyed the value of the officially issued money.

In today's fiat currency regime, central banks create trillions of new units of "money" with a few keystrokes, effectively diluting the value of all existing currency.

3. Desperate for revenues, governments raise taxes, which despite all claims to the contrary by political leaders, fall most heavily on the productive middle class. Since the parasitic elite will never accept any consequential reduction of their wealth or power, the higher taxes and economic stagnationthat result from these three policies crush the middle class, which was the engine of productivity and demand that enabled the parasitic elite to live large.

These are key dynamics in what Gordon calls the killing of the golden goose, the productive synergies that generate widespread prosperity and opportunity.

What's left are the fatal synergies of soaring debt and leverage, diminishing returns on stimulus, the substitution of credit for savings and the coming deflationary tsunami (53 min) that pops all the speculative bubbles, setting up the destabilization and cliff-dive of the entire decayed, flimsy structure--The Next Great Financial Crisis that cannot be papered over with more central bank legerdemain.

There's more in our 34-minute video program:




If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My new book is available! A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts (Kindle $7, print $17, audiobook now available $17.46)

Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.



Recent Podcasts:

Covid Has Triggered The Next Great Financial Crisis

My COVID-19 Pandemic Posts


My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).



Become a $1/month patron of my work via patreon.com.



Thousands apply for grueling jobs in Amazon warehouses, low-paid serfdom with only one purpose: increasing the profits of billionaires. Wouldn't it be beneficial if those people had an alternative source of paid work that served the interests of their family and community?

Many people dismiss my proposed alternative (CLIME) as too idealistic to work in the real world. Nobody says corporations are too idealistic to work in the real world, yet CLIME is a system of community owned and run corporations. The only difference between the two is the purpose and ownership.

CLIME: Community Owned Corporations

The world has entered an era of profound uncertainty. The Old Normal is gone for good, and the deck is shifting ominously beneath our feet. Now is the moment to ask: what would a fairer, more sustainable system look like? How would it be better for me, humanity and the planet?

Even before the global upheavals, our system was failing. Now that it's unraveling, it's time for a new arrangement that's actually sustainable on our resource-depleted planet that doesn't favor wealthy insiders. But those gorging on inequality will never accept reforms that strip away their unearned privileges, and so the only practical way forward is a Hacker's Teleology.

What's a Hacker's Teleology? A hack is a workaround in a kludgy, broken system-- a new way of connecting the dots. Teleology means the destination we end up reaching because that's where the dots lead.

In this book I connect the dots of my own life experiences to show how a sustainably fair way of organizing human activity would work. In telling my story, I'm also telling our story, because we all share our limited-resources world and the same aspirations for fairness, belonging, getting ahead and a say in our future.

So let's get started on an arrangement that actually works for all of us--and our world. Read excerpts of the book for free (PDF).

The Story Behind the Book and the Introduction.

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet 20% and 15% discounts end September 30 (Kindle $7, print $17)



Recent entries:

Covid Has Triggered The Next Great Financial Crisis May 5, 2021

Insights into Risk: Taleb and Tyson May 3, 2021

Which Lifeboat Will You Choose? April 30, 2021

America Is Exceptionally...Kleptocratic: Wealth/Power Inequality and the Slide Into Disorder April 29, 2021

Warning Light Flashing Red April 27, 2021

What's Yours Is Now Mine: America's Era of Accelerating Expropriation April 26, 2021

The People Have Lost Faith in the State, and the State Has Lost Faith in its People April 23, 2021

The Only Way to Get Ahead Now Is Crazy-Risky Speculation April 21, 2021

America's Fatal Synergies April 19, 2021


April 2021 entries       March 2021 entries       February 2021 entries       January 2021 entries

2020 Archives by Month

Archives 2005-2020







Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency. All contributors are listed below in acknowledgement of my gratitude.

Thank you, Skip B. ($500), for your beyond-outrageously generous contribution to this site -- I am greatly honored by your steadfast support and readership.

 

Thank you, Sudheer B. ($25), for your resoundingly generous contribution to this site -- I am greatly honored by your steadfast support and readership.


               


      go to Kindle edition


     


     



Of Two Minds Site Links

home     musings     my books     archives     books/films     policies/disclosures     social media/search     Aphorisms     How to Contribute, Subscribe/Unsubscribe     sites/blogs of interest     original music/songs     Get a Job (book)     contributors       my definition of success       why readers donate/subscribe to Of Two Minds     mobile site (Blogspot)     mobile site (m.oftwominds.com)


HUGE GIANT BIG FAT DISCLAIMER: Nothing on this site should be construed as investment advice or guidance. It is not intended as investment advice or guidance, nor is it offered as such.... (read more)

WHY EMAIL TO THIS SITE IS READ BUT MAY NOT BE ACKNOWLEDGED: Regrettably, I am so sorely pressed for time and energy that I am unable to respond to the vast majority of emails. Please know I read all emails, but I can only devote a very limited number of hours to this blog and all correspondence....



Contributions

Contributors and subscribers enable Of Two Minds to post free content. Without your financial support, the free content would disappear for the simple reason that I cannot keep body and soul together on my meager book sales alone.

Become a patron of my work via patreon.com

How to Contribute, Subscribe/Unsubscribe to Of Two Minds

one-time subscriptions

SPECIAL APPEAL TO READERS OF OFTWOMINDS from longtime correspondent Cheryl A.:

I don't recall exactly how I discovered Of Two Minds in late 2005, but it is hard to express how grateful I am that I did. As a result of the insight I have gained from the information Charles has shared over these past 9 years, I have been able to navigate this turbulent period much more successfully than most of my acquaintances. I'm sure that those of you who visit OTM with any regularity have similarly benefitted in numerous ways.

The addition of the weekly musings has been an extra bonus for supporters that has provided further insight into the markets, as well as the world around us (often providing a much needed smile).

I have no doubt that those who generously contribute to this site recognize the value that it offers. I hope that those of you who visit, but have not yet contributed, will consider doing so. Your support is essential in helping to maintain such an important resource.

Thank you, Cheryl, for this vote of confidence. I can only promise that I will continue to do my best.

"This guy is THE leading visionary on reality. He routinely discusses things which no one else has talked about, yet, turn out to be quite relevant months later."
--Walt Howard, commenting about CHS on another blog.

"You shine a bright and piercing light out into an ever-darkening world."
Jeremy Beck




Or send coins, stamps or quatloos via mail-- P.O. Box address


Contributions in any amount are greatly appreciated.



Subscriptions to the Weekly Musings Reports

Subscribers ($5/mo) and those who have contributed $50 or more annually (or made multiple contributions totalling $50 or more) receive weekly exclusive Musings Reports via email ($50/year is about 96 cents a week).

Each weekly Musings Report offers five features:
1. Exclusive essay on a diverse range of topics
2. Summary of the blog this week
3. Best thing that happened to me this week
4. Economic commentary
5. From Left Field (a limited selection of interesting links)

At readers' request, there is also a $10/month subscription option. (Everyone at the $10/month rate has the opportunity to add another person to the Musings email list for free.)

What subscribers are saying about the Musings (Musings samples here):

"What makes you a channel worth paying for? It's actually pretty simple - you possess a clarity of thought that most of us can only dream of, and a perspective that allows you to focus on the truth with laser-like precision." Jim S.

The "unsubscribe" link is for when you find the usual drivel here insufferable.

How to Contribute, Subscribe/Unsubscribe to Of Two Minds

 
 

PayPal members can also subscribe to the weekly Musings Reports with a one-time $50 payment.

Become a $5/month patron of my work via patreon.com




Extra-Special Bonus Aphorisms:

"There is no security on this earth; there is only opportunity."
(Douglas MacArthur)

"We are what we repeatedly do." (Aristotle)

"Do the thing and you shall have the power." (Ralph Waldo Emerson)

"Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius and a lot of courage to move in the opposite direction." (E.F. Schumacher, via Tom R.)

"He who will not risk cannot win." (John Paul Jones)

"When we drink coffee, ideas march in like the army." (Honore de Balzac)

"Progress is not possible without deviation." (Frank Zappa, via Richard Metzger)

"Victory favors those who take pains." (amat victoria curam)

"The man who has a garden and a library has everything." (Cicero, via Lee Bentley)

"A healthy homecooked family meal and a home garden are revolutionary acts." (CHS)

"Do you know what amazes me more than anything else? The impotence of force to organize anything." (Napoleon Bonaparte)

"The way of the Tao is reversal" Or "Reversal is the movement of Tao." (Lao Tzu)

"Chance favours the prepared mind." (Louis Pasteur)

"Success consists of going from failure to failure without loss of enthusiasm." (Winston Churchill)

"Where there is ruin, there is hope for treasures." (Rumi)

"The realm of gratitude is boundless." (CHS, 11/25/15)

"History doesn't have a reverse gear." (CHS, 12/22/15)

Smith's Law of Conservation of Risk: Every sustained action has more than one consequence. Some consequences will appear positive for a time before revealing their destructive nature. Some consequences will be intended, some will not. Some will be foreseeable, some will not. Some will be controllable, some will not. Those that are unforeseen and uncontrollable will trigger waves of other unforeseen and uncontrollable consequences. (July 8, 2014)(thanks to Lew G. for retitling the idea.)

Smith's Neofeudalism Principle #1: If the citizenry cannot replace a kleptocratic authoritarian government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only.

The Smith Corollary to Metcalfe's Law (The Network Effect): the value of the network is created not just by the number of connected devices/users but by the value of the information and knowledge shared by users in sub-networks and in the entire network. (CHS, 4/6/16)

My Credo of Liberation: I no longer care if the power centers of our society--the distant, fortified castles of our financial feudal system--are changed by my actions, for I am liberated by the act of resistance. I am no longer complicit in perpetuating fraudulent feudalism and the pathology of concentrated power. I no longer covet signifiers of membership in the Upper Caste that serves the plutocracy. I am liberated from self-destructive consumerist-State financialization and the delusion that debt servitude and obedience to sociopathological Elites serve my self-interests. (Thank you, Klaus-Peter L., for reminding me)

"We've become a culture of excuses rather than solutions: solutions always require sustained effort and discipline." (CHS 4/9/16)

"Fraud as a way of life caters an extravagant banquet of consequences." (CHS 4/14/16)

"Creativity = problem solving = value creation." (CHS 6/4/16)

"Truth is powerful because it is the core dynamic of solving problems." (CHS 7/21/17)

"We live in a system of human emotions that masquerades as a science (economics)." (CHS 1/1/18)

"Always remember, your focus determines your reality." (George Lucas)

"Diversity is for poor people. Sameness is for the successful." (GFB)

"When power dissipates suddenly, it dissipates completely." (CHS 7/14/19)

"Disobedience is the true foundation of liberty. The obedient must be slaves." (Henry David Thoreau)

"Markets cannot price in the value of non-monetized natural assets such as diverse ecosystems." (CHS 7/14/19)

click here for more Extra-Special Bonus Aphorisms.





Error: Embedded data could not be displayed.
   

Terms of Service:
All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.

Our Privacy Policy:
Correspondents' email is strictly confidential. This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative) If you have other privacy concerns relating to advertisements, please contact advertisers directly. Websites and blog links on the site's blog roll are posted at my discretion.

PRIVACY NOTICE FOR EEA INDIVIDUALS
This section covers disclosures on the General Data Protection Regulation (GDPR) for users residing within EEA only. GDPR replaces the existing Directive 95/46/ec, and aims at harmonizing data protection laws in the EU that are fit for purpose in the digital age. The primary objective of the GDPR is to give citizens back control of their personal data. Please follow the link below to access InvestingChannel’s General Data Protection Notice.
http://stg.media.investingchannel.com/gdpr-notice/

Notice of Compliance with The California Consumer Protection Act
This site does not collect digital data from visitors or distribute cookies. Advertisements served by a third-party advertising network (Investing Channel) may use cookies or collect information from visitors for the purpose of Interest-Based Advertising. If you do not want any personal information that may be collected by third-party advertising to be sold, please follow the instructions on this page: Do Not Sell My Personal Information.

Regarding Cookies:
This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative) If you have other privacy concerns relating to advertisements, please contact advertisers directly.

Our Commission Policy:
As an Amazon Associate I earn from qualifying purchases. I also earn a commission on purchases of precious metals via BullionVault. I receive no fees or compensation for any other non-advertising links or content posted on my site.



   
   
   
    home     email me (no promise of response, sorry, here's why)     mirror site