BANK COLLAPSE 2020🧨Global Financial System Is A Big Rube Goldberg Machine - financialanalysis

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Thursday, January 2, 2020

BANK COLLAPSE 2020🧨Global Financial System Is A Big Rube Goldberg Machine

While pondering the current economy that is becoming more of a conundrum every day, I stumbled upon an analogy I would like to share. The global economy is like a giant "Rube Goldberg" machine. It is a ridiculously complicated contraption built to perform what should normally be a simple task. Rube Goldberg machines often mimic the real world in that they are goal-oriented with many parts coming together to complete a task.
In the real world, things are usually not intentionally designed to be complicated but the reality is that they just are. It is an understatement to say the global financial system is not a well-oiled machine. More often than we would like to admit various systems and parts are thrown or "cobbled together" in a haphazard way to get the job done. We tend to try and explain events in terms of cause and effect but in doing so the bigger picture has a way of getting lost. Often hidden away is the nature of the risk that results from complexity and systems becoming codependent upon others. Bestselling author Nassim Taleb who wrote, "The Black Swan" detailed in his book how when something is highly complicated highly improbable and unpredictable events can and do occur.
Some of this is playing out right now and can be seen in the Fed's key reversal in policy. In an effort to avoid a crisis the Fed has been forced to deal with a liquidity issue in repo rates since a sudden and dramatic surge began in September. While it is difficult to see the difference between QE and an injection aimed at maintaining liquidity, in this case, several reasons exist to believe this is not QE but something far more disturbing. While many of us predicted central banks had painted themselves into a corner and would never be able to bring down their balance sheets this could be considered as proof. Still, how this will play out is yet to be seen. 
History shows we often have no idea what is driving events until long after they have transpired and even then the picture is blurred by interpretation. The lens by which we peer at events is firmly controlled by those with an agenda. Even when control occasionally slips from their grasp such as when Donald J. Trump was elected President of America that does not mean the puppet masters have surrendered power it merely represents a temporary lapse in their dominance. An effort to be realistic brings us back to the fact that government, big business, and mainstream media hold the cards and control. With this in mind, it is disturbing to look at the individuals leading these various factions, such a look gives me little reason for faith or calm.
The Direction In Which Things Fall Does Matter,
Returning to the analogy of a giant Rube Goldberg machine it should help us realize the problem with getting a good handle on life is complicated by the massive number of variables built into it. If you take the economy, for example, guessing what a central bank might do is one thing, however, how do you make allowances for the money created to stimulate the nation's economy rushing out of the country at the tap of a button or companies using the money to buy back stock or pursuing a leveraged hostile takeover rather than investing in a new plant and equipment.
The argument could be made that central banks can stack the deck but when it gets too high and begins to fall they may not be able to control the direction or who it will crush. While history is important to remember it does not define the future. Just because a market or investors have reacted in a certain way in the past is no guarantee that faced with a similar situation their response will be the same or that once we hit a tipping point a self-feeding loop will not develop and take control. We have become very complacent and accepted the idea those in power will continue being creative enough to keep the economy moving forward and prolong current trends.
When building a Rube Goldberg machine the designer takes a great deal of effort to complicate the task in an entertaining way by adding far more steps than are necessary. This creates a machine with many moving parts, the failure of just one piece to perform as expected can alter the way events unfold. History is littered with many caution signs as to just how difficult it is to interpret current events and their possible impact on tomorrow. This makes it clear that looking in the rear-view mirror gives us a better image of events than predictions as to what might happen in the future. My point is, don't have a great deal of faith in our economic system because it is severely flawed and does not even meet the criteria of a well designed Rube Goldberg machine.

The Ethics Of A Gold Standard,,

The efficacy of a metallic monetary system is beyond dispute at least among real economists which eliminates just about 95% of whom are now engaged in the “profession.”  Money, which gold is, allows for specialization, the division of labor, and provides the means for mankind to escape from barter and, thus, a primitive existence.  Like free trade, money naturally integrates mankind both among and between peoples.
A system of central banking with an unbacked paper currency is the antithesis of a gold standard.  Manipulation of currencies by central banks, mostly through debasement, hinders trade, creates distortions, and ultimately leads to the dreaded business cycle.  Murray Rothbard aptly describes the baneful results of state intervention in the monetary system:
...government meddling with money has not only brought untold tyranny into the world; it has also brought chaos and not order.  It has fragmented the peaceful, productive world market and shattered it into a thousand pieces, with trade and investment hobbled and hampered by myriad restrictions, controls, artificial rates, currency breakdowns, etc.  It has helped bring about wars by transforming a world of peaceful intercourse into a jungle of warring currency blocs...
While the economic efficiency of a gold standard is important, the ethical case for it is more compelling and was the reason why gold, as money, lasted as a medium of exchange for so long.  Gold/money has to be created through honest-to-goodness production and exchange.  The often dangerous mining of gold takes labor, capital goods, and land.  Turning raw gold into coinage is another process which requires a high level of specialization and production techniques.  Both are honest and morally sound activities which make for the betterment of life all around.
The ethical standing of central banking and its issuance of unbacked currency as money through the printing press, stroke of a computer key, or via the expansion of credit cannot stand similar scrutiny.  By any appraisal, central banking is immoral.  Through the creation of money, banks stealthy transfer wealth to those who control the money supply and those closely associated with it.
The ability of central banks to create unlimited amounts of money and credit has been the greatest redistribution scheme ever conceived.  The process ultimately leads to class conflict as the wealth disparity between the politically well-connected and those outside that nexus invariably widen.
Under a gold standard, none of this would take place.
Because of their lack and often disdain for economic doctrines, in particular, monetary theory, “economic nationalists” (really “economic ignoramuses”) have wrongly focused on trade as a factor in the continued decline of the middle and working classes.  China’s supposed unfair trade practices was a staple of President Trump’s campaign rhetoric and has continued through much of his first term.
The focus on trade has deflected attention from the real cause of worsening economic conditions for American workers and the enrichment of Wall Street.  Despite the blatant transfer of wealth via the Fed’s policies of suppressed interest rates and money printing since the 2008 Recession, economic nationalists continue to applaud President Trump’s tariff policies while the President continues to browbeat the Fed to do more of the same even calling for negative interest rates and more Quantitative Easing.
The Left rightly speaks out of the vast and growing inequality of wealth distribution, but like those who espouse economic nationalism, they fail to understand the reason for why the societal imbalance has occurred.  One remedy they propose – a “wealth tax” – will not address the problem.  Moreover, their “soak-the-rich” schemes would snare in their plunder (not that Leftists particularly care) many of the wealthy outside of the banking and financial sector of their legitimate, just gains.
The case for honest money must be made on ethical grounds.  The current system must be exposed and shown for the scam that it is: a massive redistribution scheme enriching the political elites and their closely aligned business and financial allies. While it is undeniable that a gold standard would lead to enormous prosperity, its reinstatement would remedy one of the great injustices that plague the world – central banking!

American Collapse & The Great Impeachment Charade

In order to understand the great impeachment charade, it’s important to keep three facts about the strange bird known as the United States uppermost in mind.
The first is that the US is the ultimate law-based society, one whose structure derives entirely from a single four-thousand-word document created in 1787.
The second is that while Americans think of the Constitution as the greatest plan of government known to man, it’s actually the opposite: a grotesque pre-modern relic that grows more unrepresentative and unresponsive with each passing year. A pro-rural Electoral College that has overridden the popular vote in two of the last five presidential elections; a lopsided Senate that allows the majority in ten urban states to be outvoted four-to-one by the minority in the other forty; lifetime Supreme Court justices who can veto any law at variance with an ancient constitution that only they understand – it’s a broken-down old rattletrap in need of a top-to-bottom overhaul. Yet it’s so thoroughly frozen that structural reform is all but unthinkable.
The third thing to keep in mind is that as the constitutional system grows more and more undemocratic, the two-party system that grew out of it in the nineteenth century grows more undemocratic as well. The result is a bipartisan race to the right. Sometimes, the Republicans seem to be in the lead as Trump imprisons thousands of immigrants fleeing murderous conditions in Central America that the US war on drugs helped create. Other times it’s the Democrats as they beat the drums for imperialist war against Russia.
Take all these factors – xenophobia, mindless obeisance to ancient law, a president imposed against the popular will, etc. – mix thoroughly, place in a super-hot oven due to a growing imperial crisis, and impeachment is what pops out. The process itself is very old, a by-product of fourteenth-century Anglo-Norman law. (Impeachment derives from the Old French empeechier, meaning to ensnare or entrap.) The British abandoned it in the late eighteenth century when Edmund Burke wasted seven years impeaching an Indian colonial governor named Warren Hastings on grounds of corruption. (The House of Lords finally acquitted him in 1795). But then the Americans took it up and now, two centuries later, are immersed in the same brainless exercise.
The results were all too evident in mid-December when one Democrat after another took to the House floor to denounced Donald Trump for violating the ancient constitution by withholding lethal military aid from the neo-Nazis of the Ukraine’s Azov Battalion.
“We used to stand up to Putin and Russia – I know the party of Ronald Reagan used to,” declared Adam Schiff, the Democratic point man on impeachment, his voice quivering with emotion. The fight to defend the Ukraine is “about more than Ukraine. It’s about us. It’s about our national security. Their fight is our fight. Their defense is our defense…. And when the President sacrifices our interests, our national security for his election, he is sacrificing our country for his personal gain.”
This was the Democratic line in a nutshell. In order to safeguard the ancient republic at home, the US must pay foreign satraps to defend its imperial interests abroad.
Since no patriotic American could possibly disagree, any and all problems must stem from meddling by the evil dictator Vladimir Putin and his traitorous puppet in the Oval Office. Americans must therefore fulfill the ancient law by impeaching him just as the “founding fathers” would have wanted. Only then will peace and freedom return to the land of the free and the home of the brave.
It’s all quite ridiculous, but what’s even more bonkers is that millions of Americans think it’s true. Trump is meanwhile in his element. Now that Democrats have voted to impeach him in the House, he’d like nothing more than a lengthy trial in the Senate because (a) acquittal in the upper house is a certainty and (b) it will allow the Republican majority to put the torturers to the rack by subpoenaing everyone from Joe and Hunter Biden to Adam Schiff himself and declaring them in contempt of Congress if they refuse to testify. Senator Majority Leader Mitch McConnell has described an all-out Senate war as “mutual assured destruction,” and he’s right since, once unleashed, the ancient constitutional machinery will grind everything to dust in its path.
American politics will grow only more farcical. If Putin looms larger and larger on the world stage; if “the moment has come,” as the Times Literary Supplement recently announced, “for even the most hardened skeptics to admit that he is one of the most successful world leaders of our era”; if the US at the same time staggers from one imperial disaster to another even while descending into civil war – then it’s not because the Russian leader is particularly clever, but because the US is locked in an ancient mindset that is increasingly divorced from reality. It’s lost in a constitutional labyrinth of its own making, and impeachment is leading it deeper and deeper into the maze.

 


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