About

The focus of this website is about emerging risks. I primarily focus on two key risks: financial and military.

The approximate universe of risks is defined in the World Economic Forum report called Global Risks 2012: Economic Risks, Geopolitical Risks, Environmental Risks, Societal Risks and Technological Risks. The main theme of this report is “Seeds of Dystopia.”

Do you notice how the western world was relatively stable since the end of World War II, but now has moved into an unstable state? If the longer we have stability increasingly means more stability in the future, then why has the world gone into so much turmoil? Why has the world suddenly become unstable? Could it be that stability brings problems?

Let me show you how tidal forces are pushing the world toward collapse. The global financial crisis represents only the latest example that something is wrong. The bad ideas, bad decisions and corruption extend to all corners of western society today, not just into financial matters. This is what extended stability brings. 9/11 was a glimpse of these problems in the area of national security.

Initially, it would appear that this is all crazy talk – talk of world collapse. The world just doesn’t collapse. That is correct. The world just doesn’t collapse. A forest just doesn’t collapse either. Things just don’t happen out of the blue. Gradually over a long period of time problems slowly build up. You probably can’t even see a lot of the problems, but they are there. As problems start to come out in society, they are quickly patched up. Then more problems come out, and they are quickly patched up too. Eventually, societies have done so much patching that the entire system becomes at risk. This all takes time. So your first sign of danger is a long period of relative stability. A new forest just doesn’t get wiped out, does it? It takes time in the forest for problems to build up, right? Fast forward a hundred years and it’s a different story, isn’t it? Societies work the same way. It has taken time since the end of World War II for all kinds of problems to build up. Massive debt is one such problem. This didn’t happen in one year. It took time to screw up our finances.

Now let’s take a look at some of the evidence that big changes are ahead. I am just digging a little deeper and looking at trends already in place.

According to the World Economic Forum (WEF) we are looking at the possibility of a systemic breakdown in our future. Tidal forces are at work sweeping us along in one direction.This is probably one of the most difficult things to understand. While you may point at this problem or that problem, it doesn’t matter. There is a problem with the entire system.

The WEF report notes our increasingly interdependent world has caused leaders in every sector of society to struggle with the velocity and complexity of change. “The resulting complexity threatens to overwhelm countries, companies, cultures and communities,” said Klaus Schwab, founder and Executive Chairman of the WEF, in a statement. Due to that complexity, there is an increased risk of systemic breakdown, Schwab added. As such, seeds of dystopia continue being sown.

Read more: http://digitaljournal.com/article/318144#ixzz1neiiBXrX

The Global Trends 2025 report suggests that the international system as we know it today – created out of the ashes of World War II – “will be almost unrecognizable by 2025?. The last international system broke-down during World War I – 1914 to 1918.  Trends in place today suggest major discontinuities, shocks, and surprises. In other words, we should not be surprised by great upheaval to everything we know. Read the following article to learn more: Entering the Age of Upheaval.

Currently, there is a great transfer of wealth from the West to the East. In particular, is the rise of China something we should worry about? The short answer is yes, you should be worried. Here is what historian Niall Ferguson had to say on this topic (The video is no longer available):

So no i don’t think we can simply say whatever that’s fine, it’s not fine. Leadership is passing to a society that is not based on individual freedom. That is not fine, and anybody who thinks its all gonna be okay doesn’t really understand historical process.

Transitions in the balance of power are seldom peaceful. That’s another important point i try to make in the book. We need to be very acutely aware of the dangers that lie ahead as this movement arrives when the u_s_ for the first time since the eighteen eighties ceases to be the dominant economy in the wall.

Niall Ferguson suggests that we have something to worry about in the rise of China. This rise will probably not go smoothly, because historically it has not gone smoothly.

To learn about the emergence of a new international order, check out some of these articles: New International Order.

Now we will discover what it would mean to have a transfer of power from West to East that is not smooth. Think nuclear war involving the US is impossible? The current US current nuclear arsenal is a shell of its former self.

U.S. nuclear commander: Sequester may affect readiness in 6 months – http://goo.gl/sFFgr

China may have 10 times the number of nuclear weapons than current estimates. Russia is getting aggressively hostile to the US. Both Russia and China have threatened nuclear war over Iran. Several Russian leaders have implied nuclear war over western interference in the Middle East – Iran and Syria. This is the same Iran that Israel is threatening to attack. Russia has effectively threatened nuclear targeting or nuclear attack 15 times since 2007. China and the US are on the path to war over the South China Sea and East China Sea. One way or another it looks like the trend (tidal force) is in the direction of things getting worse, not better.

China threatens nuclear war over Iran:

On Dec. 4, according to a report in Press TV, a news network owned by the Iranian government, Chinese rear admiral and prominent military commentator Zhang Zhaozhong said, “China will not hesitate to protect Iran even with a third world war.”

Chinese Admiral Threatens World War to Protect Iran | Epoch Times

Russia threatens nuclear war over Iran:

Russia has given Iran its bear hug and warns Israel and the West that an attack on Tehran would be considered an attack on Moscow. The threat heightens the prospect of World War III in the event of a military strike on Iran.

“Iran is our neighbor,” Russia’s outgoing ambassador to NATO, Dmitry Rogozin, told reporters in Brussels. “And if Iran is involved in any military action, it’s a direct threat to our security.”

Russia: Attack on Tehran is Attack on Moscow – Global Agenda – News – Israel National News

Here I connect the dots going from western interference in Syria to nuclear retaliation on the US by Russia.

Russian Prime Minister Dmitry Medvedev warned on Thursday that military action against sovereign states could lead to a regional nuclear war, starkly voicing Moscow’s opposition to Western intervention ahead of a G8 summit at which Syria and Iran will be discussed.

Russia says action on Syria, Iran may go nuclear

How could there be a regional nuclear war if only Israel has nuclear weapons? Perhaps Syria and/or Iran will attack Israel prompting a nuclear response. Or something else happens.

Russia has warned of a ‘very big war’ causing suffering across the world if Western countries encourage anti-government uprisings in the Middle East and North Africa.

Foreign minister Sergey Lavrov said Western meddling would lead to ‘a very big war that will cause suffering not only to countries in the region, but also to states far beyond its boundaries’, the New York Times reported.

A ‘seriously worried’ Lavrov spoke yesterday at his annual press conference, where he said a military attack on Iran would trigger a ‘chain reaction’ to destabilise the world.

Russia warns of a ‘very big war’ if West meddles with Middle East | Mail Online

So we go from a regional nuclear war to suffering across the world through a big war. How is it going to get big? And how is it going to spread to states far away? Effectively, this is an implied nuclear threat from Russia, who has been making a lot of nuclear threats since 2007.

The latest concerns revolve around the calls for nuclear war coming out of Russia: Russian Threats of Nuclear War Grow Louder. Some of these threats are implied, and some direct, but they are getting louder. Russian anti-Americanism is becoming acute, and threat of a Russian revolution is becoming a concern.

Before the recent problems with Russia, there were the problems with China.

American strategy guru Paul Stares says: ‘If past experience is any guide, the United States and China will find themselves embroiled in a serious crisis at some point in the future. Will World War III be between the U.S. and China? | Mail Online

Take a look at the run-up to the attack on Pearl Harbor. Do you see the parallels between China and the US today?

The growth of Japan in the 1920s and 1930s and the alarm that it caused in the Pacific, its increasingly illiberality and nationalism, the enormous industrial and military progress that it had made in emulating European economies and Western armed forces, the concurrent impressions that a Depression-era America was a sinking rather than a rising power, and a general sense that the Japanese model was superior to the alternatives offer some general parallels to the current comparative status of China and America in the Pacific.

Pearl Harbor Considered

Historical Signs

Historian Niall Ferguson has some interesting theories which I follow in the Niall Ferguson section. For example, Niall points out that the 20th century signs of wars are based on the three E’s: Empires in decline, economic volatility and ethnic conflict. The American empire is clearly in decline. The current global financial crisis is causing volatility around the world. Finally, conflict in the Middle East between Israel and its neighbors completes the third E for ethnic conflict. When all three are present, like they are today, there is great danger of upheaval – war.

The decline of America is real this time, says Foreign Policy magazine. If you only knew one thing, then the fact that the US empire has gone into decline would be it. The decline of an empire is a sign of bad things to come, like war. The Congressional Budget Offfice says the US could face a European-style debt crisis.

Both Russia and China are under threat of revolution. Russia has moved to a pre-collapse state similar to the one that occurred right before the collapse of the Soviet Union in 1991. The return of Putin to power is one reason that Russians are starting to leave the country in droves. The exodus is so large, “it’s comparable in numbers to the outrush in the wake of the Bolshevik Revolution.”

China is “In Danger” of collapse according to the 2011 Failed Sates Index.

Why would anybody want to start a nuclear war? Because they think war is inevitable anyway, and waiting will mean a much more unfavorable outcome. For example, both Russia and China are very worried about the missile defense system in the West. It is surrounding both Russia and China. Initially, it will not be much of a threat, but later it could potentially neutralize much of their second-strike capability if upgraded.

The rise of China almost certainly means conflict with America. There is a good chance this conflict will lead to war. Historically, when an empire runs into conflict with a rising power, then war has occurred 6 out of 7 times.

Let us not forget that China and Japan are on a collision course over the Senkaku Islands in the East China Sea. This is happening right now. Also, a few months ago it was China on a collision course with the Philippines. In each case there was concern that the US might get into a war with China. This would quickly escalate into a nuclear war.

Does China Want War? [A Collection of Articles]

Empire Rivalries in History

Will the rise of China lead to war with the US?

Great power rivalries in history:

1. Spain versus Holland in the 16th century. [War]
2. Holland versus England in the 17th century. [War]
3. Britain versus France in both the 18th and 19th centuries. [War]
4. France and Britain versus Germany in the 20th century. [War]
5. Germany versus Russia in 1914. [War]
6. Germany versus Russia (Soviet Union) in 1941. [War]
7. Soviet Union versus the US and its allies in the Cold War after 1945. [No War]

When an empire runs into conflict with a rising power, the probability of war is 6 out of 7. Conflict and war can be avoided when both parties are democratic like America vs. Britain, which resulted in no great power rivalry.

The Cycles

The US runs into a crisis period every 80 to 100 years according to “The Fourth Turning“. In 2005 we entered another 20 year crisis period. “Winter’s Coming for the Boomers” is an article that discusses the theories in “The Fourth Turning”. Each new crisis period is due to the impact of crises on the generations over an 80 to 100 year period. Each new generation increasingly forgets the lessons from the past. Since smaller collapses (recessions and wars) tend to be suppressed, eventually the country must experience a large crisis. You can read more stories here.

The next section explains why the future moves in cycles.

Looking into the Future

As any society moves one day into the future it is heavily influenced by history. History being all the prior days that people can remember. History provides a feedback loop for each new day. Events of each new day pile on all the prior days and provide the influence for yet another day.

It turns out that a lot of systems move into the future in the same way. For example, forests, sandpiles, earth movement, financial markets, societies and more. These types of systems exhibit Self-Organizing Criticality (SOC). They automatically go from a stable state to an unstable without any help. Then they just collapse.

If you track the collapses of forests (fires), sandpiles, financial markets, earthquakes, wars and attacks within wars, they all follow the power law distribution. Count the number of collapses of a given size within a given period, and plot the results on a log-graph. You will get an almost perfectly straight line. For example, a plot of attacks within wars is a straight line with a slope of -2.5.

What happens to a forest if you try really hard to put out every fire – you suppress all collapses? Eventually the forest builds up to a pre-collapse state that is so big that the next fire will be unstoppable.

Why?

The forest never stops growing and expanding. Because the system never stops, suppressing a collapse means that the future builds on an unstable base.

Suppressing collapses in forests, sandpiles, economies or societies (war) produces the same result – bigger collapses.  Suppressing collapses makes the system unstable and prone to bigger collapses. Eventuality the system will experience a collapse so large that it is unstoppable. The policies of most countries is to suppress economic collapses (recessions). This explains why the West is in trouble now, and why China will soon be in big trouble.

The suppression of war in countries works the same way. Countries that don’t directly experience war for a long time get lulled to sleep. Eventually a country will become susceptible to defeat – the big collapse of society. The US and the West are in this boat.

If all collapses for a system are suppressed, then it should run into a major crisis at a given frequency – cycle. For example, a forest should have a massive fire every set number of years, or more likely a range of years. The forest may get wiped out every 90 to 100 years. We see this same phenomena with the US.

Note: If the future builds on history, then why does forgetting history cause a collapse? History is defined by our memory. More recent history gets much more weight. Distant history may be completely forgotten, and with those memories the lessons learned. Bad behavior will gradually start to build upon itself as historical lessons are forgotten. You can create new lessons by allowing the suffering from smaller collapses.

The information below is the latest update:

Read on to discover why there are signs of bigger things coming. The unravelling of the world is already starting:

Indeed it is. The international order is unraveling. Russia is of course smashing the post-Cold War order by seizing Ukraine, and blowing up the global architecture of nuclear non-proliferation. Let us not forget that Ukraine agreed to give up its nuclear weapons – the world’s third biggest arsenal at the time – in exchange for a guarantee by the great powers in 1994 that its territorial integrity would be upheld. Russia was one of the signatories.

China is laying claim to large parts of the East China and South China Seas, and has established an air identification control zone over the Japanese-controlled Senkaku islands.

China and Japan are one blow – or misjudgement – away from outright military conflict. …

Fire-sale of US Treasuries is a warning of acute stress across the world – Telegraph Blogs

As part of the unraveling, could we be looking at a war between NATO and Russia?

With the 100th anniversary of the outbreak of World War I this year, who could have imagined “that war could become a genuine possibility in a country which shares a border with the European Union?” Schulz told the opening of the summit of the 28 EU leaders.

Ukraine crisis returns specter of war, EU chief warns | 1913 Intel

One thing is clear: Putin is not going to stop with just taking the Crimea.

Q: Does the West have to fear Putin?

A: Angela Merkel says that Putin has lost touch with reality. This is what it looks like from the viewpoint of a typical European politician, but it’s wrong. Putin does not behave like a normal statesman. The West should see the world with Putin’s eyes and understand his logic.

Q: What is Putin’s logic?

A: He is driven by personal and political power and has unleashed hysteria in Russia about becoming a new empire. This puts global security at risk. He will carry on until he is stopped.

“Crimea is Only the First Step”: Former Putin Adviser | The XX Committee

The driving force behind Putin’s actions is revolution, or more correctly the worry about a revolution in Russia.

Russia Must Stop U.S. Expansion in Ukraine | The Moscow Times

“Nobody in Moscow has any doubt that what happened in Ukraine will be repeated in Moscow in two or three years.”

It seems that the West simply does not like Putin. He is a huge obstacle who prevents them from achieving global hegemony. For this reason alone he must be broken. Nobody in Moscow has any doubt that what happened in Ukraine will be repeated in Moscow in two or three years. Without Putin, there will be few world leaders left who have the power or courage to stand up to Washington. When this happens, the entire world will have to quickly accept the new reality.

Russia Must Stop U.S. Expansion in Ukraine | The Moscow Times

The Third Russian Revolution | Atlantic Council

Make no mistake: On the current trajectory, Russia won’t be immune to many of the forces that provoked the so-called colored revolutions in adjacent states and even the misnomered Arab Awakening.

A third Russian revolution is unfolding. The only questions are when will that revolution reach a critical mass and, most importantly, will the forces of autocracy or pluralism carry the day?

In the two decades since, Vladimir Putin has emerged as the Ironman of Russia. In the process, Russia has been described and viewed by many as a kleptocracy ruled by the few who have pillaged national wealth for their own benefits.

Under what Republicans and Democrats alike in the United States see as a government of and by thugs, human rights have been violated; dissidents and members of the media arrested; and opponents of the Kremlin subjected to purges and show trials leading to long prison sentences.

The Third Russian Revolution | Atlantic Council

The possibility of war with Russia is not the only thing you need to worry about. There is also the possibility of war with China.

Though the islands in dispute in the East and South China seas are in many cases barren and below water during high tide, as Aristotle wrote, conflicts arise “not over small things but from small things.” The assassination of the Austrian Archduke Franz Ferdinand that sparked World War I was one such small thing. Claims in the Pacific, however petty, if they are tied to vital interests, can lead to war. Indeed, the primordial quest for status still tragically determines the international system — just as it did prior to World War I. And these islets have become, because of their very barren abstraction, logos of nationhood in a global media age.

The Guns of August in the East China Sea

Many analysts say that both sides need to be careful or there is the real risk of escalation, and even nuclear war. But there is a problem. Currently, only one side is being careful (the US and NATO). The other side (Russia and China) does as it pleases.

All you have known your entire life is relative stability. How is it even possible to think about a nuclear war? Come and let me turn your world upside-down. Please answer this question for me: If the longer you have stability means the longer it will endure, then how did the Arab Spring happen? And all throughout history empires have risen and fallen. Why is that? Could it be that long periods of stability bring big problems?

Let’s look at how the world has moved into the new abnormal.

The New Abnormal

One by one different countries are stacking up on the edge of a cliff. First there was Japan who has been stuck economically at the cliff for 20 years. More recently the US and the EU have moved up to the edge. Now China is moving up to the edge.

Forget the new normal. Five full years after the financial crisis, we’ve entered a period of increasing global uncertainty and instability that’s almost certain to trigger a new crisis.

[Published on June 17, 2013.]

Ian Bremmer and Nouriel Roubini Unveil the New Abnormal | Institutional Investor

Watch a video on this topic here: http://video.cnbc.com/gallery/?video=3000176315

At Davos, they are calling it the “new normal:” At Davos, Crisis Is the New Normal – NYTimes.com

There is dangerous positive feedback and moral hazard present in modern democracy, under which far too many people “demand” ever bigger government but contribute only sloth and indolence.

The Commentator – Democracy’s positive feedback and moral hazard

What is happening is that country after country is doing everything possible to suppress the big collapse and maintain stability. All the problems that caused the big crisis in the first place are left in place continuing to grow. By suppressing the big collapse countries are stuck in the middle of a phase transition where things don’t act normally due to the build up of bad ideas, bad decisions and corruption. This is the new abnormal. Only a big crash can fix the problems, but leaders won’t let that happen.

The global economic system has slipped into the new abnormal. There is talk of war. But what does this mean? Please check out a little history:

1. Financial crisis in 1907, and World War I in 1914.
2. Financial crisis in 1929, and World War II in 1939.
3. Financial crisis in 2008, and World War III in 2015-2018?

In A System Collapse Framework for Societies I explain why after a long period of stability a shock in one area implies big problems in other areas as well. Even if they are unrelated. It has to do with the rate of growth of bad ideas, bad decisions and corruption. A big financial shock after a long period of stability suggests that that society is just loaded with hidden problems that have spread everywhere. For example, nobody in the West has had the slightest worry about a nuclear war for a long time. It’s just about impossible, they say. US leaders got the bright idea to gut their nuclear arsenal to such an extent that they can now only retaliate one time. But that’s not enough because the enemy leaders can survival along with their military and about 10% of the population. Now the US nuclear deterrence is questionable.

Historically, what happens when a superpower is approached or passed by another country, like the US vs China? The probability of war is at least 75% and could go as high as 100%. Right now conflict in the East China Sea between China and Japan is threatening to escalate:

Chinese think tank warns of military clashes with Japan
Why Japan and China could accidentally end up at war | FP Passport

We are looking at the serious possibility of a a major military conflict between China and Japan within a few years or less. The US will almost surely get drawn into this conflict.

War in the Middle East is also threatening to escalate into something much bigger:

Will conflict in the Middle East trigger the next great power war? | Foreign Policy

When a forest is old and ready for a massive fire, sooner or later it’s going to happen. The same concept applies to societies. Sooner or later something big is going to happen after a long period of relative stability. That is where we find ourselves today.

For more information about why the US is in trouble, please read this PDF file here. I put my old About page into that PDF file.

There appears to be some kind of democracy super-cycle lasting in the neighborhood of around 250 years. Corruption gradually takes hold over this period of time until the democracy is strangled.

Behind dysfunctional government, is democracy itself in decay?

It took only 250 years for democracy to disintegrate in ancient Athens. A wholly new form of government was invented there in which the people ruled themselves. That constitution proved marvelously effective. Athens grew in wealth and capacity, fought off the Persian challenge, established itself as the leading power in the known world and produced treasures of architecture, philosophy and art that bedazzle to this day. But when privilege, corruption and mismanagement took hold, the lights went out.

In Athens, democracy disintegrated when the rich grew super-rich, refused to play by the rules and undermined the established system of government. That is the point that the United States and Britain have reached.

Is American democracy headed to extinction? – The Washington Post

Turning the World Upside-Down: The rise of modern-liberalism

“It isn’t what we don’t know that gives us trouble, it’s what we know that ain’t so.” – Will Rogers

Let me show you how modern liberalism turns the world upside-down. The reason I am showing this is so you will understand why liberals are not worried about a nuclear war, and why they are disarming the US. Here are my rules for how the modern liberal thinks:

1. All outcome for an individual, group or nation can be no better or worse than any other.
2. If an outcome is found to be better, then they must have cheated.
3. If an outcome is found to be worse, then they must have been victimized (by #2).
4. The amount a victim lashes out is directly proportional to the victimization.

Please note that all liberals deny that they think this way. Think about how you speak English. You don’t need to apply the rules of grammar because you know them so well. However, people learning English must apply the rules of grammar until they get the hang of it. So too with the rules of modern liberalism. You will end up at the correct result in the eyes of liberals if you apply the above rules.

The rules show how the modern liberal ends up punishing success and rewarding failure. If you do the right thing and actually get ahead, it won’t be long before liberal polices will start punishing you.

If Russia and China are behaving badly, then it is only because the West treated them badly in the past. They are true victims and will lash out proportionally to their victimization. It is impossible for Russia and China to attack the US with nuclear weapons because that would violate rule #4 – proportionality. This explains why Obama isn’t worried at all about a nuclear attack. The US, Europe and Israel are the bad guys. If they would just disarm and play nice then things will get much better. Or they will get obliterated, but whatever.

If you are not worried about a nuclear war, then perhaps having so many nukes is an accident waiting to happen. Never mind that there has never been an accidental nuclear war. The way to peace and happiness is through disarming. And disarm they have. The once mighty nuclear arsenal of the US is mostly gone. What remains is old and disintegrating, and much fewer in number. US nuclear launch crews suffer from incompetence and rot. They give the US the ability to retaliate only one time.

Of course, the modern conservative (like me) sees modern liberal thinking as utter insanity. So the build up of really bad ideas since the end of World War II is putting the West in great danger.

Here are some more ideas about modern liberalism:

THE LAWS OF MODERN LIBERALISM

  1. Indiscriminateness – the total rejection of the intellectual process – is an absolute moral imperative.
  2. Indiscriminateness of thought does not lead to indiscriminateness of policies. It leads to siding only and always with the lesser over the better, the wrong over the right, and the evil over the good.
  3. Modern Liberal policies occur in tandem. Each effort on behalf of the lesser is met with an equal and opposite campaign against the better.
  4. The Modern Liberal will ascribe to the better the negative qualities associated with the lesser while concurrently ascribing to the lesser the positive qualities found in the better.

THE COROLLARIES

  1. The Modern Liberal may have personal standards but he must deny them and militate against their use and those who use them in the public arena.
  2. Modern Liberals do not and cannot seek to better themselves or society. Instead they must lower others and society to their level.
  3. Modern Liberals have secondary policies that are meant only to somewhat mitigate the greater suffering that their primary policies created or exacerbated.

KinderGarden Of Eden: How the Modern Liberal Thinks

Me

My name is Matt. I am an actuary. My primary role is risk management.

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Monitoring emerging risks.