Wednesday, September 16, 2015

Something’s Going To Break.............

Something's Going To Break

It has taken 8 years to pretend that we have fixed the malfunctioning heart of the world's financial systems but nothing has actually been fixed and now the clock is ticking and there is hardly any time left.

The number of red lights now blinking at us, largely ignored by those who are supposed to be flying this thing, is growing all the time. It is not that any one of them is a clear harbinger of the end but taken together they paint a dismal and coherent picture – of a system that is destroying itself.

Every political and financial system, every bureaucracy, public or private is originally set up to do a necessary job. And the duty of those who work in it is to make sure the system does 
that job. But when the challenges facing the system change so that the system begins to no longer be able to do its job, those in it have two choices: they can work for the greater good and help change the old system into a new one better fit to the new challenges, or they can ignore the problems, and forget the reason they and the system were created in the first place and instead seek merely to get as much as they can from the failing system before it implodes.

It seems obvious to me that is where we are today,  both politically and financially. 

We are living in very troubled times, we are living in a system, a machine, which we built and therfore can change, but we have forgotten this. Some time in the recent past we crawled inside our machine, closed the last hatch to the outside behind us, and then forget there was an outside. Our current so called leaders are the worst of us. They are the lords of the machine and they are sure that outside of their solutions there is only chaos.  We must all save the machine. Their power and wealth demands it.

And yet they do not know how.

A person who lives resolutely in a linear world, despite it being over a 100 years since we discovered that our world is not linear but non-linear, could say such a thing. In a linear world effects tend to follow their causes quickly and clearly. When things arenon-linear, however, effects can surface long after and far away from their cause.

Those on Wall Street 
held their collective breath during the recent plunge, waited for everything to fall down and after a couple of days, when they didn't he concluded nothing had broken after all. They looked at the on-going trend in events and saw they were much as before the inexplicable 'turbulence' and concluded that all was as before and the 'turbulence' was just 'one of those things'.

Ours is a non-linear world and we should remember that. Think back to August 9th 2007. That was the day when PNB Paribas suddenly closed three large sub-Prime mortgage finds. The world at large had not even heard of sub-prime. To little fanfare the ECB pumped €95 billion in to the markets to steady nerves. It was not enough. The next day, August 10th The ECB pumped in another €156 billion, the FED injected $43 Billion and the BoJ a trillion Yen.

Five days later Countrywide Financial haemorrhaged 13% of it value. 16 days later Ameriquest the largest specialist sub-prime lender in the US collapsed and on September 14th there was a bank run on Northern 
Rock. It was a turbulent time.

And then do you know what happened? Nothing. Something had happened but nothing appeared to be broken.  The linear pundits went about their crooked business. Six whole months later Bear Stearns collapsed. Its a non-linear world.

And I think we are going to be reminded of this 
 … again, very soon.

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