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Tuesday, June 13, 2017

Even the Guardian gets it

This is one of the few times you will see me approvingly quote an article from The Guardian:
Even as their world came apart, the bankers clung to denial. By August 2007, the flagship hedge fund of Wall Street’s most prestigious firm was tanking fast – and what explanation came from the man at Goldman Sachs? “We were seeing things that were 25-standard deviation moves, several days in a row.” The bank was getting hit by events that were only meant to happen once every 100,000 years – and they were happening every day of the week. Given a choice between blaming their models or reality, Goldman’s bosses held the world at fault.

You know the rest because, a decade later, you and I are still paying for it. How the banks died, the world economy collapsed and most of us got poorer. How the financiers, mainstream economists and regulators were so detached from reality that they swore blind that such a catastrophe was impossible – even while it was under way.

Their reputation has never recovered. And as an economics journalist, I look across at politics and see the same process at work. Brexit, Donald Trump, Jeremy Corbyn: time after time, the political class has completely failed to understand the world they were governing, policing and analysing. Allow me to be blunt: our political crisis is also a crisis for our political class. And it is one from which I doubt they can recover.

At each major fork in the road, they have sped off down the wrong turning, while decrying the other as unimaginable. Each time, they have crashed.
That is because the maintream economic models, on which so much of the social policy of the last 45 years has been made, are wrong. But the wealth of too many powerful and well-connected individuals relies upon the continuance of the system built on those false models for anyone to make any substantive changes until the whole thing collapses. As it inevitably will, sooner or later.

For starters, all the bad debt needs to be written off. It will never be repaid. But writing off the bad debt means the bankrupting of almost every major bank in the world, and the financial elite would rather see the world collapse into disease, famine, and war than accept the just consequences of their idiotic actions.

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93 Comments:

Blogger bosscauser June 13, 2017 8:17 AM  

One of few common areas i agree​ with the left.
These people own us and are for the most part incompetent..

Gab.ai/GaryCauser

Blogger Joshua_D June 13, 2017 8:19 AM  

HANG. THE. BANKERS.

Anonymous Sad Upenn Engineer June 13, 2017 8:21 AM  

I think they understand full well.
They are just psychopathic.

I work as a software engineer in the upenn wharton library.
Everyday I get more wharton business people asking me about bitcoin and new e-currencies. The same people I hear talking about buying houses in new zealand, getting pilots licenses, and small cesna aircrafts.

They will crash the system, the moment they can be sure of their escape. I truly believe this is the only reason they haven't crashed the system completely yet.

I hope someone finds all of their bunkers and burns them.

Blogger wreckage June 13, 2017 8:23 AM  

They thought the economy ran on magic.

It runs on energy, like any other physical system. Efficient allocation and intelligence merely facilitate; lubricate the machine. They don't power it.

Anonymous Rocklea June 13, 2017 8:32 AM  

From the article:
"But one result of both Brexit and last Thursday is that the political class which used to dictate the “narrative” and set the agenda is having those powers wrested off it. What was it that Goldman’s executive said back in 2007? “It makes you reassess how big the extreme moves can be.” The political class should brace itself for many more extreme moves."

Extreme indeed. Note the use of "narrative" in quotations. The alt-right lexicon spreads.

Blogger Joshua_D June 13, 2017 8:34 AM  

I let my zeal for ending the bankers overcome me and forgot to add ... HANG. THE. POLITICIANS. ALSO.

Anonymous Rocklea June 13, 2017 8:40 AM  

Joshua_D, DON'T.FORGET.THE.MEDIA.

Blogger Lazarus June 13, 2017 8:50 AM  

10 years from now, the Guardian will proclaim open borders were a bad idea. Cutting edge journalism.

Blogger YIH June 13, 2017 9:00 AM  

Charles Hugh Smith (excellent economics blog BTW) has expounded on this issue:
Debt Has No Consequences? Color Me Skeptical
Recall that every debt is somebody's asset. Debt jubilees sound great to debtors, but not so appealing to insurance companies, pension funds, mutual funds, etc. that own the debt and rely on the income from that debt to pay pensioners their pensions, settle insurance claims, etc.
A meaningful debt jubilee would wipe out the pension and insurance sectors, not to mention trillions in IRA and 401K accounts invested in various debt instruments.

As he points out, it ain't just the banks that would get clobbered. Also, (to banks, investment firms, ect.) debt is an asset, there is a lot of debt out there that has no (or seriously compromised by depreciation, such as car loans or even multiple claims on it) collateral.
Take ''student'' loans, they financed a consumable that has been consumed. Write those off and someone (like all US taxpayers or the Federal Reserve) are going to have to eat that loss.

Anonymous Überdeplorable Psychedelic Cat Grass June 13, 2017 9:03 AM  

@3. One can only hope their bunkers and vehicles get destroyed. I'd love to see Zuckerberg's face as he tries to leave for New Zealand only to have his plane explode, thus leaving him stranded in California.

This blind faith in incorrect models reminds me of a family member who is a doctor: he refuses to believe that a friend of mine, an OB, is telling the truth when she says about 90% of OBs don't know how many sperm are in an ejaculation and they're all trained to prescribe the pill. He refuses to believe I think because he doesn't honestly believe an entire class of doctors could be poorly trained.

Blogger Johnny June 13, 2017 9:05 AM  

Although there are problems with economic theory, the major problems we have with banks is that the legislation is written to favor the larger banks. The main thing about writing off bad debt is that the banks are undercapitalized. Thus if they wrote the bad debt off they would all go bust and then the economy would go bust and we would have a new great depression.

The difficulty with fixing things is that the future can be fixed, but the present can not be fixed without a major taxpayer bailout. Because people want the present fixed when there is a publicly funded bailout, there just isn't enough support for changing the way banks operate to get it done. Thus we do it over and over. Every couple of decades a new bailout, and maybe sooner in our new economic situation.

And just in case you think it is capitalism:

Currency is a kind of debt, and when there isn't adequate backing it is an unfunded debt. In the old USSR, over issuing currency was their form of bad debt, and they kept prices in line by limiting sales. In a free market prices would have soared. An old joke was for a workman to say they pretend to pay us and we pretend to work.

China appears to have the same thing. Loans tend to be based on political preference and a big chunk of their debt is probably bad also.

For us the thing about debt is that it is often a covert form of deficit spending. Loaning instead of spending makes the level of spending look less, and if they never pay it back it is just spending.


Blogger ZhukovG June 13, 2017 9:05 AM  

@11: Someone should let the Maoris know that the flesh of the 'wealthy' contains powerful magic.

Blogger James Dixon June 13, 2017 9:06 AM  

> For starters, all the bad debt needs to be written off. It will never be repaid.

A thousand times. But how long before people finally realize this? My estimates run anywhere from 10-50 years.

> Recall that every debt is somebody's asset.

And an asset that's worthless is... The current debt levels can't even be supported, much less repaid. The WILL be written off eventually.

Anonymous basementhomebrewer June 13, 2017 9:08 AM  

YIH wrote:Charles Hugh Smith (excellent economics blog BTW) has expounded on this issue:

Debt Has No Consequences? Color Me Skeptical

Recall that every debt is somebody's asset. Debt jubilees sound great to debtors, but not so appealing to insurance companies, pension funds, mutual funds, etc. that own the debt and rely on the income from that debt to pay pensioners their pensions, settle insurance claims, etc.

A meaningful debt jubilee would wipe out the pension and insurance sectors, not to mention trillions in IRA and 401K accounts invested in various debt instruments.


As he points out, it ain't just the banks that would get clobbered. Also, (to banks, investment firms, ect.) debt is an asset, there is a lot of debt out there that has no (or seriously compromised by depreciation, such as car loans or even multiple claims on it) collateral.

Take ''student'' loans, they financed a consumable that has been consumed. Write those off and someone (like all US taxpayers or the Federal Reserve) are going to have to eat that loss.


This was never a get out unscathed scenario. I don't think most alt-righters are under the illusion that we are going to come out of this thing without personal sacrifice. If you are alt-right and don't realize that, then you came to be alt-right by accident rather than by thoughtful consideration.

The point is reality won't denied and the web of fiction has been spun so widely that we are all trapped in it. The longer the web is allowed to exist the more entangled we all become.

Blogger Bill Halsey June 13, 2017 9:13 AM  

"They thought the economy ran on magic. It runs on energy, like any other physical system"

Indeed.

Specifically the hydrocarbons in high concentrations embodied in oil, gas & coal.

Energy is the über resource; the absolutely essential element that's put in one end of the sausage machine to get a modern economy out of the other.

Blogger VD June 13, 2017 9:14 AM  

First, don't comment off-topic, AC. Second, don't try to attack Castalia authors here. If you want to criticise one of them, that's fine, but then do it on their turf, not mine.

Blogger Joshua_D June 13, 2017 9:18 AM  

Rocklea wrote:Joshua_D, DON'T.FORGET.THE.MEDIA.

OH YEAH. THANKS FOR LOOKING OUT. HANG. THE MEDIA. TOO.

Blogger Bill Halsey June 13, 2017 9:23 AM  

@5 ">But one result of both Brexit and last Thursday is that the political class which used to dictate the “narrative” and set the agenda is having those powers wrested off it.<"

"Note the use of "narrative" in quotations."

Good catch.

But the journalist missed that the power to dictate the narrative is not only being wrested from the political class, but also from his very platform: the MSM.

Every time I click on the Guardian's website (which I generally don't - to avoid giving them clicks ) I get a pop-up form begging me to contribute. Same with WaPo, the Telegraph etc.

Blogger Resident Moron™ June 13, 2017 9:24 AM  

@wreckage

You sound like a man who's reas Isobek Paterson's "God of the Machine"

If you haven't, I recommend it.

Blogger Resident Moron™ June 13, 2017 9:25 AM  

Isobel

Blogger Cecil Henry June 13, 2017 9:27 AM  

ALL Countries Are Selling Off Assets For PENNIES on the Dollar to Avoid COLLAPSE!



https://www.youtube.com/watch?v=mFqvkVqrtVQ

Blogger dc.sunsets June 13, 2017 9:27 AM  

It's a colossal game of chicken; he who stays in the game longer gets fabulously wealthy, and memories of 2008's "no-bid/no-escape" are gone.

If all the bad debts are written off, most of the promises of future cash flows to the Middle Class (and their bank account balances) disappear too.

This is inevitable, but no committee on Planet Earth has ever instituted such a plan.

It will happen spontaneously, on its own schedule, leaving us in the dark until the quake is collapsing skyscrapers.

Blogger seeingsights June 13, 2017 9:34 AM  

I went through academic economic journals during a one year period up to the economic crisis. In the over 100 Econ journal articles I went through, none of them predicted the coming economic crisis.
Reading journal articles can de disappointing. I was taught that one of the key things about science is it's predictive power. But these academic economists were without a clue.

Blogger Koanic June 13, 2017 9:35 AM  

And there we have it.

Those two paragraphs explain why it's no globalism for honest men.

Blogger wreckage June 13, 2017 9:38 AM  

@22 the later they admit there's a lot of bad debt, the less damage it will do, to an extent, anyway. They are holding their breath and hoping that steady as she goes plus organic growth will dilute the poop before it is necessary to swim for shore.

In the meantime we're on a leaky boat in an open sewer.

Oh, and the environmental lobby has banned pitch and bilge-pumps.

Blogger wreckage June 13, 2017 9:41 AM  

@19, I have not, just a paper I saw up on Next Big Future that said that if you assign energy 10 times its substitute price, most economic models actually start working properly (ie, are predictive).

It might be coincidence, but it got me thinking: as a complex system, the economy ain't spiritual. Its constraints must be material. The Left are wrong that it runs on the agony of the oppressed, but the Right are wrong about it running on -=INNOVATIVE AND AGILE=-. It must run on energy.... or on magic.

Blogger James June 13, 2017 9:47 AM  

"HANG. THE. BANKERS."
"HANG. THE. POLITICIANS."
"HANG. THE. MEDIA."

Don't forget:
"HANG. THE. FEDERAL JUDGES."

And for good measure:
"HANG. THE. LAWYERS."
"HANG. THE. LGBTQRSTUVWXYZ COMMUNITY."
"HANG. THE. FILL-IN-THE-BLANKS."

Anonymous Rocklea June 13, 2017 9:50 AM  

Buying rope futures now...

Blogger Joshua_D June 13, 2017 9:54 AM  

Johnny wrote:Although there are problems with economic theory, the major problems we have with banks is that...

we have a debt based, fractional reserve banking system where the Banks create debt currency out of thin air.

Blogger Joshua_D June 13, 2017 9:57 AM  

James wrote:"HANG. THE. BANKERS."

"HANG. THE. POLITICIANS."

"HANG. THE. MEDIA."

Don't forget:

"HANG. THE. FEDERAL JUDGES."

And for good measure:

"HANG. THE. LAWYERS."

"HANG. THE. LGBTQRSTUVWXYZ COMMUNITY."

"HANG. THE. FILL-IN-THE-BLANKS."


NOW WE'RE MAKING SOME PROGRESS!

Blogger swiftfoxmark2 June 13, 2017 9:58 AM  

I wonder, are the globalists trying to create the economy as outlined in Frank Herbert's God Emperor of Dune?

I mean, they've enacted "free" trade policies that require most countries to produce specific goods while importing other goods they need (like food). They have encouraged women to enter into traditionally masculine institutions such as law enforcement and the military, which would make those institutions more subserviant and less inclined to rebel. And they seem to be interested in setting up their own religious institutions in the name of science and the State.

On top of that, our technological advancement has mostly stagnated in the past few decades. And we are seeing our cultures, especially in the West, merge together in the spirit of degeneracy.

It's like the globalist are a bunch of scifi nerds who took the things they watched and read way too seriously.

Anonymous Grayman June 13, 2017 9:59 AM  

@3. Sad Upenn Engineer

I hope someone finds all of their bunkers and burns them.

Just bury the entry/exit. For kicks run the exhaust of your truck into their air intake for a day…. Then you can safety peruse their stockpile.

@4. wreckage

It runs on energy, like any other physical system.

Look at an economy from a thermodynamic (entropy/enthalpy/work) perspective and the games they are playing are out right obvious suicide.

@12. ZhukovG

et the Maoris know that the flesh of the 'wealthy' contains powerful magic

And their skulls contain gold….

@14. Basementhomebrewer

This was never a get out unscathed scenario.

We are all bankrupt many times over, every single one of us… With 100 trillion in derivatives (but they net out to 0!!!!) and a single counterparty failing suddenly makes that 100 trillion REAL obligations. And trillions in additional debts that are booked as assets. They only assets/wealth that actually exists right now is what you can physically hold whether that’s food, lead, precious metals, etc.
What really bothers me is that “we” are happily enslaving each subsequent generation to support the current/previous generation’s overconsumption. It will end and not well.

@22. dc.sunsets
If all the bad debts are written off, most of the promises of future cash flows to the Middle Class (and their bank account balances) disappear too.

And for those of us who are actually productive this would be a net win even considering the initial period of chaos caused by the phase shift. It would remove the massive parasitic drain on the productive and you would probably see massive creative, productive growth while simultaneously seeing massive dies-offs in nonproductive populations.

Blogger Nate June 13, 2017 10:08 AM  

This comment has been removed by the author.

Anonymous Just another commenter June 13, 2017 10:08 AM  

THe banksters would rather see the world die in war, famine, and death than write off bad debts and collapse, becaus they believe they will not be affected by the former, but are certain the later will affect them.

THAT is how much trhe elites care about you.

People have been too comfortablew for too long. They will die before they believe what's right before their very eyes.

Blogger wreckage June 13, 2017 10:08 AM  

I'll take the chaos now if it means my kids are free. That's what makes me sick in the guts. They're not spending on my tab. I don't have one. My kids though...

Blogger Nate June 13, 2017 10:09 AM  

"But writing off the bad debt means the bankrupting of almost every major bank in the world"

Feature. Not bug.

Anonymous Grayman June 13, 2017 10:11 AM  

@DC

Just for fun you can model a basic economy as a series of heat engines. You can use the basic carnot heat engine as a crude model. The debt leverage games immediately become clear as being insane. The neat thing is you could get some big brains together ( the math does start to get messy) to build the detailed model of overlapping/feedback cycles and you could model entire economies, monitoring them in real time the same way you would a power plant ( PID controls for the win!!!!).
With that approach the minutia of what you or I do with our resources (energy) is irrelevant and similar to how some math problems are very difficult or impossible to solve in Cartesian coordinates but trivial when converted to polar coordinates.

Anonymous normally a lurker June 13, 2017 10:22 AM  

@23
https://www.youtube.com/watch?v=3ThHrqlGdSk

If a bunch of guys making cutout flash animations manage to anticipate recessions better than the vast majority of economists that says a lot about economics, doesn't it?

Anonymous Grayman June 13, 2017 10:22 AM  

DC

The benefit of thermo models of economics is it takes the vodoo out of the "dismal science". Its fully testable/falsafiable in real time, hence why the mainstream wont go near that.
As an engineering student I worked with a few classmates on a rough model and when we showed it to the econ professors they actually got upset. If a few undergrads were able to do that getting the bigbrain HFT guys on something useful such as a full thermo model of econoomic should have soome very big pay offs. If nothing else you could then activly model various economies against one another to determine which one you want. You could activly simulate captialism vs communism vs pure free market, etc.

Blogger Doom June 13, 2017 10:30 AM  

Bill Halsey wrote:@5 ">Every time I click on the Guardian's website (which I generally don't - to avoid giving them clicks ) I get a pop-up form begging me to contribute. Same with WaPo, the Telegraph etc.

Hmm... sounds a lot like a "conservative" mag that has been doing that for years. The first time, in the early 2000's, they sent me a request, it was only for $5k, if I didn't mind. I canceled them after a bit more harassment. I guess Soros et. al. have gone skinflint to institutions which have lost all power to persuade. And those institutions are so ruined they can't get back in the graces of real people, and start delivering products anyone will buy. So sad... literally though. I'd love to be able to read real news with a cuppa in the morn, or even just on Sundays (plus have the paper for cleaning windows and some other sich). As is, the paper is a net loss just by buying it even just for paper. It supports what must die.

Hmm? Oh... grumbling again. I'd make my own paper but I am mostly dead. Just waiting around for the last tick of the ticker.

Blogger mushroom June 13, 2017 10:36 AM  

swiftfoxmark2 wrote:I wonder, are the globalists trying to create the economy as outlined in Frank Herbert's God Emperor of Dune?

I mean, they've enacted "free" trade policies that require most countries to produce specific goods while importing other goods they need (like food). They have encouraged women to enter into traditionally masculine institutions such as law enforcement and the military, which would make those institutions more subserviant and less inclined to rebel. And they seem to be interested in setting up their own religious institutions in the name of science and the State.

On top of that, our technological advancement has mostly stagnated in the past few decades. And we are seeing our cultures, especially in the West, merge together in the spirit of degeneracy.

It's like the globalist are a bunch of scifi nerds who took the things they watched and read way too seriously.


Paul Krugman wrote a couple of years ago that his favorite novel is Asimov's Foundation trilogy. They think they are Hari Sheldon.

Blogger Heian-kyo Dreams June 13, 2017 10:36 AM  

All those who paid off debt are going to feel like real suckers 10 minutes after collapse.

All of us know it's coming but not the timing. Too bad, you could be sitting on a stockpile if you knew.

Blogger Doom June 13, 2017 10:39 AM  

Grayman,

"As an engineering student I worked with a few classmates on a rough model and when we showed it to the econ professors they actually got upset."

My guess is, at this point, economists are supposed to be blind. Why? Because, for the economy to continue to work, no one can be allowed to know how it works. It would become absolutely clear, in very short order, that there isn't an economy. It's... all mischief and mayhem. They are robbing and stealing everything blind, even while there is almost nothing real there. A fiction. Things would become too obvious, the bad actors would become absolutely visible, and the bad actions would be unmistakable. I say go for it, but with a group who can keep their heads down and their mouths shut... until you are taking over silicon valley. Hell, buy it and rent it back to the barons there. I'd pay to see the looks on their faces.

Anonymous Chris June 13, 2017 10:47 AM  

Well, of course. It's ALWAYS somebody else's fault!

Blogger praetorian June 13, 2017 10:51 AM  

All those who paid off debt are going to feel like real suckers 10 minutes after collapse.

Paying off your debts is a dagger in the heart of the system.

Paying off your debts is never a bad idea.

Blogger ((( bob kek mando ))) - ( Give us this day our daily bait, that we may crush our enemies, see their weaksauce driven before us and hear the lamentations of their women, thank you Baby Jesus, Amen ) June 13, 2017 10:52 AM  

3. Sad Upenn Engineer June 13, 2017 8:21 AM
They will crash the system, the moment they can be sure of their escape. I truly believe this is the only reason they haven't crashed the system completely yet.


https://www.youtube.com/watch?v=djEKllJJukk&feature=youtu.be&t=1m40s



5. Rocklea June 13, 2017 8:32 AM
Note the use of "narrative" in quotations. The alt-right lexicon spreads.



the Alt-Right never innovated that definition of "narrative", which has been in use at least since the advent of the Marxists.

ie - "who controls the Past, controls the Future. who controls the Present, controls the Past" ( which is a description of Narrative Control ) is from Orwell's "1984".


4. wreckage June 13, 2017 8:23 AM
They thought the economy ran on magic.



they knew full well the economy does NOT run on magic.

they also know full well that convincing YOU that the economy DOES run on magic is an excellent way of getting you to accept figments of imagination in exchange for real, physical wealth. refer back to the Peterson vid on sociopaths.

https://infogalactic.com/info/South_Sea_Company



17. Joshua_D June 13, 2017 9:18 AM
HANG. THE MEDIA. TOO.



dude.

you'll have blood coming out of Megyn Kelly's where ever.

and how is it that somebody hasn't yet said
HANG. THE. MARXISTS.


Blogger cheddarman June 13, 2017 10:53 AM  

As a Christian, imo I need to pray that God would judge this current economic order and cause it to fall. The people that run this system can create money our of nothing to fund the destruction of the West.

Blogger Tino June 13, 2017 10:58 AM  

A debt is an asset if a *real* asset had been loaned in the first place. If you have $100MM and write $1B of paper, yes, somebody is carrying the $1B as assets, but there is not in any real sense the other $900MM out there. It's all make believe accounting that vanishes as a write-off on the first call. Compare this with having $1B in real asset, loaning out $900MM holding $100MM in reserve. If all goes to hell, there is still $1B in reality, just in different hands as opposed to a pyramid collapse wipeout.

Anonymous Grayman June 13, 2017 10:59 AM  

@43 doom.

That was many years ago. I'd definitly have to brush up on my calculus before going back down that road. The overall concepts are easy relativly speaking, the hardest part is identifying the individual elements and what sort of thermo proces to model them with.
For example, the human body isnt technically a heat engine but you can model it as one using the right frame of refernce and correlations. In the example of the human body the carnot heat engine equivialnt (carnot model of the human body) has the "hot resevoir" at about the temperature of the sun due to modeilng molecular energy transport as thermal enegry transport. But it does work.

FYi a carnot engine is basically how your car engine runs. Generating "work" through the transport of thermal energy through compression / expansion cycles. you need a "hot" resivior and "cold" resivior" to run a carnot engine. In your car, the "hot" is the temperature of the fuel burning and the "cold" is the ambient air temp.

A thermo based economy run on block-chain would be a god-damned work of art!!!!

Blogger Dirk Manly June 13, 2017 11:01 AM  

Johnn - the Soviet ruble exchanged at official window was 14 to $1 U.S.
After the Yeltsin government let it float to find its actual value, it exchanged at 28 000 to $1 U.S.

Anonymous Grayman June 13, 2017 11:06 AM  

@48 Tino

compare this with having $1B in real asset, loaning out $900MM holding $100MM in reserve. If all goes to hell, there is still $1B in reality, just in different hands as opposed to a pyramid collapse wipeout.

There are so many overlapping claims (rehypothication!!!) that in many cases there would be multiple valid claims on any given physical asset. This happened directly with the collapse of MF global. Multiple parties with “legally valid” claims on the same precious metal asset. There are other mechanisms as well that generate this effect, look at the REITs, those are a frickin blackhole of tangled claims that no one wants to touch or look to closely at.

Blogger James Dixon June 13, 2017 11:09 AM  

> Just for fun you can model a basic economy as a series of heat engines

You could, but since each person is an independent engine and they all interact in multiple ways the scale rapidly becomes too much to handle.

Anonymous Grayman June 13, 2017 11:10 AM  

@48 Tino

....you effectivly have "virtual leverage" throughoout the financial system such that if claims get called to any large degree it may very well come down to "possession is 9/10ths of the law"

Blogger James Dixon June 13, 2017 11:13 AM  

> and how is it that somebody hasn't yet said ... HANG. THE. MARXISTS.

That's effectively what they have been saying. They're just dividing them up into subcategories.

Blogger Tino June 13, 2017 11:17 AM  

@51 @53

Was simplifying to max. Your points are well-taken. The current financial system results in multiple claims to the same real asset. This is a deep-root problem and it extends even to the 'hidden' level of Sovereign Private Placements and Treaty Redemptions on vast assets loaned the United States post-WW2. Motion of money in that hidden strata is why the financial universe hasn't collapsed. The accounting you see publicly is a mere fiction of cooked books. I despair of this knowledge ever being shown publicly in its totality. Without including this in the models, the world is nothing but an incoherent mess of rationalizations.

Anonymous Grayman June 13, 2017 11:21 AM  

@52 james

That problem is easily avoided. At a high level and in simplified terms you adjust the boundary conditions of the individual elements. There are many problems in engineering that are impossible to solve with one set of boundary conditions and trivial if the boundary conditions are adjusted properly.
A rough example.... I don’t care how many cylinders an engine has. If I know the operating parameters of the overall engine I can model it thermodynamically, each cylinder running at somewhat different efficiencies etc. is irrelevant if the proper boundary conditions are chosen.
Three are entire engineering courses on this in relation to reactor design, PID controls and thermo. To geek out for a moment, the cyclic nature of societies and markets makes perfect sense and is expected once you have studied the modeling of thermodynamic systems and PID control theory. The math starts to gets a little rough (partial differential equations) but you gain an understanding of the world in an entirely different view.

Blogger Tara Li June 13, 2017 11:25 AM  

"You know the rest because, a decade later, you and I are still paying for it. How the banks died, the world economy collapsed and most of us got poorer." - we were never actually as rich as we thought we were. The collapse simply exposed the lie.

Anonymous Jeff June 13, 2017 11:28 AM  

""HANG. THE. BANKERS."
"HANG. THE. POLITICIANS."
"HANG. THE. MEDIA."
"HANG. THE. FEDERAL JUDGES."
"HANG. THE. LAWYERS."
"HANG. THE. LGBTQRSTUVWXYZ COMMUNITY."
"HANG. THE. FILL-IN-THE-BLANKS."


Given that a certain (((group))) controls almost all the above fields, ovens would be more effective than ropes.

Blogger Tara Li June 13, 2017 11:29 AM  

And debt should *NOT* be considered an asset - especially not one that can be bought and sold. I borrow money from Joe next door, and not Sally on the other side - it's because I trust Joe not to abuse the power over me that that debt entails. If Joe goes out and sells it - I have no idea who potentially suddenly has power over me.

Blogger Johnny June 13, 2017 11:30 AM  

Dirk Manly wrote:Johnn - the Soviet ruble exchanged at official window was 14 to $1 U.S.

After the Yeltsin government let it float to find its actual value, it exchanged at 28 000 to $1 U.S.


I am unaware of when that happened, but shutting down the old communist economy caused severe financial disruption. A hell of a mess and they were probably into that when they let it float.

If I got it right, when the reunited Germany the East German currency got set one to one with the West German currency. Way overvalued and a typical example of an overly generous political handout. If I remember correctly, an election year promise by Herb Kohl

Blogger pyrrhus June 13, 2017 11:47 AM  

Kind of like the Climate Change scam...The more the model fails to predict anything accurately, the harder the elites push it and attempt to stifle any dissent....

Blogger CJ June 13, 2017 12:01 PM  

... If I remember correctly, an election year promise by Herb Kohl.

Herb Kohl was the Wisconsin Dem Senator. Helmut Kohl might have handled the DDR reunification better, but he looks like Bismarck or Adenauer compared to what they have now.

Anonymous BBGKB June 13, 2017 12:03 PM  

That is because the maintream economic models, on which so much of the social policy of the last 45 years has been made, are wrong.

Importing 3rd world refugees onto welfare was actually a proposed democrat plan to revitalize Detroit. By their model importing people onto welfare grows the economy just like illegal aliens & blacks using ambulances as free taxis. They can't understand that an economy needs more than just welfare recipients

10 years from now, the Guardian will proclaim open borders were a bad idea. Cutting edge journalism

10 years from now the Guardian might not oppose the death penalty for suicide bombers.

I'd love to see Zuckerberg's face as he tries to leave for New Zealand only to have his plane explode, thus leaving him stranded in California.

Even better his bodyguards take over his bunker and cast him out. There is a guy renting the ability to take an inflatable power boat out of NYC for $90,000 per year, I am pretty sure if the power is out none of his customers will be able to leave. I wish I realized how stupid the elite were before him.

http://www.zerohedge.com/news/2017-03-10/preppers-stuck-cities-elite-chartering-getaway-boats-case-manhattan-emergency

"HANG. THE. LGBTQRSTUVWXYZ COMMUNITY."

If you want to trigger jewish lesbians put the G first. I am pretty sue the hanging will be contained in the gayborhoods.

Buying rope futures now 6 months of emergency food incase they try to crash the system on purpose would be a better first buy, ropes are reusable.

Paying off your debts is never a bad idea

Not accumulating debt is even better. I don't know which bothered me more the first time I saw someone use a credit card at McDonalds or when I saw someone use the food stamp card at Taco Bell

Blogger bw June 13, 2017 12:06 PM  

These people own us and are for the most part incompetent..

Contradiction.
Funny how their luck is always good for them and bad for you as they have progressed. So much luck it's almost unbelievable.
Certainly they should have had some bad luck due to incompetence in your favor at least a few times over the last Century.
The Politicos are compromised, degenerate slut whores who don't need to know much, don't want to, and don't care, as they are simply Admin. They are not "the Owners".
It is obvious by now the most degenerate Admin are purposely promoted as a business model.

As for "the Owners", taking trillions in private gains on winning bets that doesnt serve the people vs offloading losing trillion dollar bets to the people may be Evil, but it's hardly imcompetence.
Nor is their demoralization techniques and propaganda for the general masses, all brought about by the control of money and finance and their globalist corporations.
Defenitive and obvious control cannot be persistent incompetence.

Blogger Cail Corishev June 13, 2017 12:29 PM  

It's like the globalist are a bunch of scifi nerds who took the things they watched and read way too seriously.

Yes. If the globalists themselves aren't, then certainly many of the people who support them and try to make their fantasies come true are. See: every Star Trek nerd who votes socialist because he takes the "we've evolved beyond currency" Federation as a serious possibility.

Blogger TM Lutas June 13, 2017 12:33 PM  

I don't want to be a banker, but if one would, I would definitely move my money into a new bank that aggressively called out its peers on their irresponsibility and only lent out to responsible debtors. I would hope that everybody else interested in this forum would do likewise.

It would be a revolutionary move that would be perfectly legal.

Blogger praetorian June 13, 2017 12:41 PM  

I don't want to be a banker, but if one would, I would definitely move my money into a new bank that aggressively called out its peers on their irresponsibility and only lent out to responsible debtors. I would hope that everybody else interested in this forum would do likewise.

If it were legal, I would like to found a bank with no duration mismatch between savings and loans: all loans would be against money secured for the duration of the loan (e.g. CDs)

This would eliminate the core problem of reserved banking: multiple people have claims on the same dollar at the same point in time.

It would eliminate the need for a reserve ratio. That, plus making founding a bank easy, but with partners *personally liable* to depositors, would make for an interesting banking system.

Blogger James June 13, 2017 12:51 PM  

Jeff wrote:""HANG. THE. BANKERS."

"HANG. THE. POLITICIANS."

"HANG. THE. MEDIA."

"HANG. THE. FEDERAL JUDGES."

"HANG. THE. LAWYERS."

"HANG. THE. LGBTQRSTUVWXYZ COMMUNITY."

"HANG. THE. FILL-IN-THE-BLANKS."


Given that a certain (((group))) controls almost all the above fields, ovens would be more effective than ropes.


Ropes are recyclable. Wouldn't want us to upset the Greens by using fossil fuels, would you? On second thought, HANG. THE. GREENS.

Blogger Duke Norfolk June 13, 2017 12:54 PM  

YIH wrote:Recall that every debt is somebody's asset.

This is one big thing that a very large majority of people don't understand (or studiously avoid thinking about). A huge percentage of the "wealth" in this world is now made up of debt. But debt is just a claim on the future productivity of people and can and will be defaulted on. And then all that "wealth" goes up in smoke.

So how much of the world's wealth is real? Got me. But most of the other wealth is grossly overvalued real estate and corporate equity. So when that gets repriced to something more sane a whole lot of billionaires will be turned into millionaires; and so on down the ladder.

Blogger praetorian June 13, 2017 1:02 PM  

For Ilk that are interested, it is worth reading up on the Chicago Plan that Fisher, etc. had after the great depression:

https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

I would rather see a more sophisticated duration curve matching mechanism for private loans, but it's a good read none the less, and would be a huge improvement over what we currently have.

Anonymous Grayman June 13, 2017 1:04 PM  

Somewhat OT but hilarious for the "feelz" this will trigger:


/pol/ is going to troll the world again. They're making a BitCoin clone called NiggerCoin.

http://8ch.net/pol/res/10066524.html

Blogger swiftfoxmark2 June 13, 2017 1:06 PM  

Heian-kyo Dreams wrote:All those who paid off debt are going to feel like real suckers 10 minutes after collapse.

All of us know it's coming but not the timing. Too bad, you could be sitting on a stockpile if you knew.


Yeah, that's not how it works. When the collapse happens, those in the upper echelons of power and influence will avoid most of the problems inherent in it.

But all you debt zombies will have to pay up one way or another. More than likely, all your stuff will be taken as repayment.

Think about what happens when you die with tons of debt and little assets. The creditors get first dibs on your "wealth" over your children. Same principle, but you're still alive.

Anonymous Mr. Rational June 13, 2017 1:35 PM  

@26  The real irony is that the USA has enough energy, not in the ground, but in tanks and drums, to run the entire country for several centuries... and we currently have not one device capable of making it useful.  (Most of this energy is in the form of depleted uranium (99.6+% U-238).  A much smaller but still hefty amount is in the form of used LWR fuel.  There's some thorium inventory too, but it's down in the noise.)

Instead of using it, we're paying speculative prices for hydrocarbons.

Blogger VD June 13, 2017 1:50 PM  

Just for fun you can model a basic economy as a series of heat engines. You can use the basic carnot heat engine as a crude model. The debt leverage games immediately become clear as being insane.

I'd be interested in seeing that model. Email it to me, if you don't mind.

Blogger Tom Kratman June 13, 2017 2:15 PM  

Frankly, we have the most highly credentialed, least competent - indeed, utterly incompetent, and quite possibly most corrupt ruling class in human history.

Anonymous User June 13, 2017 2:30 PM  

But writing off the bad debt means the bankrupting of almost every major bank in the world

Maybe not? It's not as if there are vaults that should be full of gold and aren't, it's all make-believe numbers on a computer already. Assuming the people running the system are moral, wise, and have good intentions (hoho) then there's no reason a jubilee has to create mass financial instability. No more than roughly 2% of the population needs to be affected if the proper function of the inter-bank payment system is held invariant by reasonable rules.

Blogger Lucas June 13, 2017 2:59 PM  

The debt was not meant to be totally paid.

Blogger Robert What? June 13, 2017 3:06 PM  

As the beloved InstaPundit says: worst political class ever.

Blogger Johnny June 13, 2017 3:14 PM  

Duke Norfolk wrote:This is one big thing that a very large majority of people don't understand (or studiously avoid thinking about). A huge percentage of the "wealth" in this world is now made up of debt. But debt is just a claim on the future productivity of people and can and will be defaulted on. And then all that "wealth" goes up in smoke.

Well actually debt is secured by an expectation of repayment plus an asset. Borrow money to buy a car? The borrower expect repayment but will seize the car should it be necessary.

Because debt is a claim on assets, you can't count financial assets and material assets at the same time. An accurate summation of wealth becomes either a summination of the material assets (actual land buildings, chattel, etc). Or if you count financial assets they have to be subtracted from the material assets.

Total wealth = all the stuff

or

Total wealth = financial assets + (material assets - financial assets).

Blogger StatesRights June 13, 2017 3:18 PM  

Once order is restored after the collapse. I am thinking Nuremberg 2.0. To hide an international criminal will be considered an act of war.

Blogger James Dixon June 13, 2017 3:42 PM  

> If I know the operating parameters of the overall engine I can model it thermodynamically...

Yes. Now, each of the 300+ million engines in the US has slightly to extremely different operating parameters. They interact with the other engines both within their vicinity and ones they contact in other ways. Those interactions further change their operating parameters. Good luck with your calculations.

Please note that I'm not saying you can't make approximations that will produce useful results. I'm saying don't expect miracles. Recognizing the scale of the problem is the first step to determining what is and is not feasible.

Blogger James Dixon June 13, 2017 3:50 PM  

> Frankly, we have the most highly credentialed, least competent - indeed, utterly incompetent, and quite possibly most corrupt ruling class in human history.

Not being a true student of history (and I still know more than 90+% of people, which tells you how badly off we are), I'll have to take your word for that. But you and Vox are two of the people I'd trust to have the knowledge to make that declaration.

Blogger JimR June 13, 2017 3:53 PM  

You can think of the economy as a heat engine, and I think it's a useful metaphor. But model it? nah, I don't buy it. Such a model would have never predicted the Tulip balloon for one thing.

Could you extract some useful info? probably. But a realistic model? nah.

Blogger Annie DiPiombo June 13, 2017 4:13 PM  

As Michael Hudson has been saying for a decade now, "debts that can't be repaid, won't be repaid".

Anyway, New Zealand can have the hedge fund guys that survive. Someone has to stick around here to rule the ruins.

Blogger Resident Moron™ June 13, 2017 4:14 PM  

'Frankly, we have the most highly credentialed, least competent - indeed, utterly incompetent, and quite possibly most corrupt ruling class in human history."

Why?

Why, Tom?

Because we have the most powerful political class in history, and power corrupts.

If we want less corruption we have to take away the power.

Blogger Heian-kyo Dreams June 13, 2017 6:28 PM  

"Yeah, that's not how it works. When the collapse happens, those in the upper echelons of power and influence will avoid most of the problems inherent in it.

But all you debt zombies will have to pay up one way or another. More than likely, all your stuff will be taken as repayment."

I'm not a debt zombie and do save quite a bit. Sold a repo house in the ghetto last month and packing to move to whitopia-ish. Our new house is way more expensive that the ghetto house by virtue of not being surrounded by broken glass.

Here's the sucker scenario: pay house off quickly, then the dollar hyperinflates a month later. With my next paycheck, go buy a single can of tuna. Six months later receive a paycheck equal to the original mortgage which will buy 3 cans of tuna, should any exist. REEEEEEEEE and starvation intensifies.

Anonymous Snidely Whiplash June 13, 2017 7:03 PM  

What makes you think, if the dollar hyperinflates, you'll have a paycheck?

Anonymous Simplytimothy June 13, 2017 8:26 PM  

Sundance at TCT has been documenting Trump's actions on routing around the "to big to fail" banks by legislatively empowering small banks.

Here is his latest update on it:
https://theconservativetreehouse.com/2017/06/12/treasury-department-releases-first-report-on-current-u-s-financial-system/

Looked at from the perspective of "Big Fork"..i.e a.parrallel system operating under moral principles, it is good news.

Blogger Snidely Whiplash June 13, 2017 9:46 PM  

What on Earth leads you to believe you will have a paycheck in the event of hyperinflation?

Anonymous Ken7- June 13, 2017 10:12 PM  

Too many people look for easy and unearned credit from the Santa central bankers. After the economic collapse, Santa is going to rip off his mask and reveal that he is really Satan.

The Beast is right on schedule.

Blogger Heian-kyo Dreams June 13, 2017 10:39 PM  

@Snidely Whiplash

Might as well fantasize big. A paycheck AND a can of tuna.

Anonymous Mr. Rational June 14, 2017 12:06 AM  

Jeff wrote:Given that a certain (((group))) controls almost all the above fields, ovens would be more effective than ropes.
Ooh, BURN!  Great comment.

Tara Li wrote:debt should *NOT* be considered an asset - especially not one that can be bought and sold.
Wait.  If Joe borrows $1000 from me, you're saying I shouldn't be able to sell that debt to James because I suddenly need money?  That's what you're saying when you say debt shouldn't be an asset.

An asset is something you can expect to pay back in the future.  If loans to other people are not expected to be paid back, there's no point in lending.  Not for homes, not for cars, not for anything.

Can YOU afford to live if you can't borrow money for capital assets?

If Joe goes out and sells it - I have no idea who potentially suddenly has power over me.
They only have more power if they can call the loan on terms that Joe could not.

James wrote:On second thought, HANG. THE. GREENS.
They're fake environmentalists anyway.  They are anti-nuclear crypto-shills for the coal and gas lobbies.

Resident Moron™ wrote:If we want less corruption we have to take away the power.
Genius from the Resident Moron™.

Blogger Serge_Tomiko June 15, 2017 1:05 AM  

I thought Vox finally has abandoned libertarianism and come to understand that money is a political concept. Why are we reading this?

The problem is not the debts per se. Sovereignties have always granted the right to create political capital in the form of money to banks forever. The problem is the ruling sovereignty is not creating enough debt free money (i.e. fiscal deficits) to cover the interest attached to money created as debts.

Writing off debts, as in a debt jubilee, is what you did when you didn't have computers or advanced economics.

Reduce taxes for a period on the middle class, or even eliminate them entirely, and the problem with resolve itself.

What is funny is the lie of the scarcity of money is what bankers have always used to hide the fact that they have always created money from nothing.

I suppose we could have a debt jubilee, but this would be very difficult to manage and would be needlessly disruptive.

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