My joke 3 years ago that the EU might fall apart before Britain had left is starting to look semi-serious. I do believe that the world, especially Europe and the US, is one shock away from a major meltdown. This could be triggered by a a major political or economic event or triggered by irrational emotional contagion. Fasten your seat belts folks, the ride is about to get bumpy.
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When you say major meltdown, do you believe it to be in the same realm of the Great Depression – 1929-33 era or more of the Great Recession – 2008-09 era? Additionally, do you think that to be a fair comparison due to the vastness of the market today compared to the market in 1929?
I don’t doubt major political change is going to happen both in Europe and the US, but not in the fashion that the media is playing it out (in the US at least). I believe President Trump will be reelected and that will lead to major political party changes. The far left of the Democrat party will continue to physically fight and cause pockets of violence that will is being discussed today as the next civil war. The moderate Democrat today will a silent majority within their party that has been ousted by the far left leadership and will find independents and moderate Republicans to join with them in forming a new party (may keep names from legacy parties) and conservatives within the Republican party will continue. Far right folks in the Republican party will likely remain but be limited in size from the fighting they partake in within the “civil war”.
All that being said, is it not not surprising to see these things unfolding? Science continues to point to the fact that Natural Selection and corrective balances are part of a natural law of the world. If that is the case, we’ve been blooming as species and our economies have followed that trend. We have more people than the world can hold and while climate change activist will say the world is ending, is it really not just a correction to the population size? Now, that is a harsh thing to casually talk about if you truly value human life, but at the same time, our medical advances have prolonged life and caused the very factors that have lead to this cusp of major meltdown or shift in the environment. Will not these changes result in consequences of a society too far bloated? I wish for people to live free and healthy lives but we obviously done a poor job of planning for extended lives of the population and management of the benefits of a bountiful society and consequences of more space being taken on a finite plant.
I think much worse than 2008 or 1929. The reason I say this is a) there’s much more debt, a) the debt (risk) is now globally networked and c) the tools we used back in 2008 wonkt work so well now. Interest rates are close to zero, and have been for some time, so all governments can do it go to minus rates (you have to pay a bank to hold your money). QE surely can’t work again (it’s actually responsible for a host of problems including asset inflation and massive generational inequality, especially within housing). So what’s left? Taxing welath as well as incomes is one idea. Printing money to create inflation is another idea, which done in a modest manner would water down much of the debt. The really good news, I believe, that while painful a major crash is what we need to re-invent the system. To date all we’ve done is fiddle around the edges.
The question then becomes how does one re-invent a system? Is it simply a reboot with a few corrections or is it a complete re-haul of how it operates? History obviously teaches but what will we have learned and will society accept the necessary changes? Especially in regard to Liberty and Freedom? Could it not be suggested that the reason for collapse is too much government interference in the economy opposed to not enough?
I’m honestly surprised there wasn’t more political upheaval in the wake of 2008. Given the number of livelihoods wrecked and defining of debt downward that took place it seems reasonable for there to have been more populist anger. (Or at least populist anger that didn’t contort itself to defend the finance industry.)
Warren Buffet called it correctly by labeling derivatives “financial weapons of mass destruction”. Just finished reading Transaction Man by Nicholas Lemann. (Fantastic read!) He states in the book that in 2008 the value of all derivatives worldwide was $672 TRILLION.
I was speaking a while back with a coffee trader. When asked how many pounds the futures market trades versus actual, physical pounds of coffee are available, the response was 50 to 1. I’ve read of a similar ratio for oil and gold. Synthetic valuation is distorting the pricing structure of nearly everything. The creation of artificial measures of value opens the door to artificial disruption. (As opposed to the economic principle of supply and demand, where scarcity and want are drivers.) Until we uncouple from synthetic derivatives being the primary economic driver we will be subject to the whims of panic and misinformation.
Completely unrelated: Right up your alley Richard.
https://spectrum.ieee.org/the-institute/ieee-news/transhumanism-where-physical-and-digital-worlds-meld
Back to the gold standard among other things? Credit Default Swaps terrify me as does shadow banking in general.
PS Thanks for the link
Thinking back to this post in the midst of the COVID-19 impact. Interesting to see it is a pandemic driving it and not political upheaval.
I’d forgotten about that! It;’s not looking goppod for the EU. Italy and Spain seem (feel) abandoned) and it’s every country for themselves as far as I can see – where is the coordinated EU policy and rescue plan?
I am not too familiar with the EU’s typical response seeing as I have only recently started to explore international policy. Most/all of my history is as an American and thus US based policy. The most I could compare is the state verse federal response here. We do see a struggle between that and the most highlighted would be that between the President and New York Governor.
I think rescue plans in general during this are “the best we can with what we know today.” I am curious to see where all this leads. My own question would be – What changes in technology application in relation to personal liberty will be implemented and how does that change society as a whole? You recently posted two possible scenarios coming from this, and while I hope for the 2nd, I expect the 1st…
See this…
https://www.ft.com/content/19d90308-6858-11ea-a3c9-1fe6fedcca75