Central-planning manipulation “works” by closing all the safety valves of market feedback, creating a dangerous but politically appealing illusion of stability and “growth.”
If we see the economy as a system, we understand why removing or suppressing feedback inevitably leads to financial crashes. The essential feature of stable, robust systems (for example, healthy ecosystems) is their wealth of feedback loops and the low-intensity background volatility that complex feedback generates.Sponsored Ads
The essential feature of unstable, crash-prone systems is monoculture, an artificial structure imposed by a central authority that eliminates or suppresses feedback in service of a simplistic goal–for example, increasing the yield on a single crop, or pushing everyone with cash into risk assets.
Resistance seems futile, but the very act of suppressing feedback dooms the system to collapse.
As the ongoing territorial row between Japan and China continues with no end in sight, the nations’ joint economy is often said to be the greatest victim. With many Japanese companies, most notably in the auto industry, pulling their manufacturing operations out of China and moving to other locations in Asia, so as not to get caught up in political tensions, many say that China still holds too many of the economic cards, what with its lockdown on producing so many of the world’s goods. But one analyst believes China may see a revolution in the next 10 years, triggered not with violence and weapons, but rather an economic deterioration.
What does “within 10 years” mean? It doesn’t mean 10 years from now. It could be 10 years, but it could also be a few years from now. One bad sign indicating it is closer is the number of protests each year.
Japan’s rescue attempt is already self-destructing their economy. The battle to raise inflation is killing what little appeal Japanese Government Bonds once had, while Japan’s dependency on debt means it has little choice but to pay the higher cost. Over 55% of the Japanese government’s expenditures goes to service debt or pay for social security. With a debt dependency ratio close to 50%, Japan essentially must borrow just to pay for these non-discretionary expenses. As rates rise and the population ages these non-discretionary expenses are expected to rise, thereby increasing the amount of debt required.
Accelerating inflation expectations, rising debt costs, growing social expenditures, declining investor appetite and high dependency on borrowed money could lead to a spiral in which Japanese bond yields rise very quickly, borrowing rises dramatically and the Yen falls precipitously. This situation would be financial Armageddon for Japan as it would no longer be able to pay for its basic obligations without fully monetizing its debt. The country would default on its debt and obligations to its citizens, either outright or by way of hyperinflation. The country’s economy would implode and massive financial institutions would likely collapse.
Faber: “What was the trigger of the ‘87 crash when markets fell 21 per cent in one day? What was the trigger of the Nasdaq crash in 2000? What was the trigger of Japanese crash of 1989? What was trigger of 2007 crash that brought global stocks down 50 per cent? We don’t know these things ahead of time, but something will always move markets up and something will always move them down. I would guess at the present time, given markets from the 2009 lows have in many cases increased by as much as 100 per cent, that they are no longer very cheap. …. Something could come along, geopolitically or otherwise. I would be very careful being overweight equities. I still have 25 per cent in equities and 25 per cent in corporate bonds.”
“In the 40 years I’ve been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality … Asset markets are in the sky and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up.
“Something will break very bad.”
Canada’s relations with its aboriginal people are also at a crossroads but, fortunately, one of the potential paths forward promises a more auspicious outcome than Mr. Allen’s doomsday scenario.
A more pessimistic report, by Douglas Bland, suggests that Canada has all the necessary “feasibility” conditions for a violent native uprising — social fault lines; a large “warrior cohort”; an economy vulnerable to sabotage; a reluctance on the part of governments and security forces to confront aboriginal protests; and a sparsely populated country reliant on poorly defended key infrastructure like rail and electricity lines.
Cracks are showing in Russia’s leadership as a slowdown in the economy is beginning to cause rifts at the heart of the government, with one academic telling CNBC on Thursday that the economy poses the biggest threat to the country’s leadership.
Richard Edgar Pipes, professor of Russian History at Harvard University, told CNBC that there was a danger that prolonged weakness in the economy could harm Putin, whose popularity among the Russian electorate has been waning for some time.
“The Chinese government has in recent months sent a number of unusually strong signals that it is concerned about financial risks in the economy,” the
Nomura economists said.
“We believe China faces rising risks of a systemic financial crisis and that
the government needs to take action quickly to contain such risks.“
The dangers posed by cyber and nuclear attack have supplanted terrorism in the table of threats facing the United States, according to the country’s intelligence and military chiefs, who warned of gaps in the nation’s defences.
They painted a picture of mounting risk to the US economy and the country’s infrastructure from cyber-attacks and highlighted weaknesses in precautions against a nuclear attack.
“The international community cannot afford to tolerate such activity from any country,” he told a meeting of the Asia Society in New York. “As the president said in the state of the union, we will take action to protect our economy against cyber-threats.”
The remarks were the administration’s first public acknowledgement of China’s large-scale computer hacking that has involved government entities, including military cyberwarfare units. Administration officials previously avoided criticizing Beijing for the hacking that has included theft of both government and defense secrets and proprietary corporate data stolen by hackers who broke into computer networks.
Why are so many people leaving the United States right now? Over the past couple of years, an increasing number of Americans have decided that moving to another country is the best way to prepare for the collapse of America. According to the U.S. State Department, an all-time record of more than 6 million Americans are now working or studying overseas. Of course many of those that have left the country do not believe that the U.S. economy is going to collapse, but without a doubt there are an increasing number of preppers that believe that now is the time to “escape from America” while they still can. And certainly there are a lot of reasons why the U.S. is becoming less appealing with each passing day. In addition to our economic problems, crime is on the rise in our cities, our liberties and freedoms are being eroded at a frightening pace, political correctness is wildly out of control, and our corrupt politicians continue to make things even worse. But is life really that much better in the rest of the world? The sad truth is that life in most other nations is more difficult than it is in the United States. Yes, there are some nations that are relatively stable and that look promising at first glance, but the truth is that moving to another country is never easy. If you plan to do it, there are some hard questions that you need to ask yourself first.