fragility Archives - The Automatic Earth

Grab Your Bits and Shoulder Your Kits, We’re Going In!

Mar 012020

March 1, 2020 Posted by Raúl Ilargi Meijer at 6:39 pm Finance Tagged with: apocalypse, bacteria, catalyst, coronavirus, default, fragility, HG Wells, hubris, narratives, Potemkin, quarantine, trust, virus 8 Responses »

John Waterhouse Diogenes 1882

This is a new essay from Alexander Aston. He describes how once the world has passed through the -narrow- bottleneck of the coronavirus and its effects on our societies, which are long overdue for a redo, and on the central bank-engineered distortions of the markets that are -make that were- supposed to be the foundation that allowed us to flourish, there will be a better world waiting.

I’m all for it, and I have no rational issues with it either, but when I read“..these are the moments at which humans are the most creative and most inspiring”, my warped mind can’t NOT think: ..yes, we’re moving towards a better world, and we’re terribly sorry that you didn’t make the cut..”

Here’s Alexander:

Dear Raúl, I hope you are well. Things are all right on my side. Submitted my thesis, am being examined by the heads of Archaeology for both Cambridge and Oxford, which is a huge, albeit intimidating complement. Otherwise, just watching the world come unglued, so I wrote you something to put up if you like it. All the best – Alex

“A mighty space it was, with gigantic machines here and there within it, huge mounds of material and strange shelter places.

And scattered about it, some in their overturned warmachines, some in the now rigid handling-machines, and a dozen of them stark and silent and laid in a row, were the Martians—dead!—slain by the putrefactive and disease bacteria against which their systems were unprepared; slain as the red weed was being slain; slain, after all man’s devices had failed, by the humblest things that God, in His wisdom, has put upon this earth.”

– HG Wells

It took until the first two months of 2020 for the long Twentieth Century to finally come to an end. One thing now seems absolutely clear, this will be the decade that the majority finally come to understand that things are never going back to “normal.” To be sure, the complex entanglements of institutions, narratives, cultural practices, and economic relationships that emerged during the previous century have been under immense strain these past two decades. Enormous effort has been expended to maintain the inertia of the global system, from the immense violence of imperial politics and regime change wars, to the more subtle violence of economic dispossession by a privileged elite that control the mechanisms of power.

A few years of relative, but diminishing stability were bought at great expense. Authoritarianism, rentier feudalism, political corruption, regional instability, distrust, anger, and disbelief have wormed their way into every facet of our global society. The cost of refusing to adapt, for the benefit of a very select few, is immense systemic fragility. It is fitting that the hubris, intransigence and bankruptcy of imagination in our modern political economy shall finally be brought low by a microscopic organism.

Some will read this and misunderstand me and believe that I am being apocalyptic about the physical illness brought about by the coronavirus. The virus is serious, and will have dramatic consequences, but it is no black death. The virus is a catalyst, something beyond our agency to control which is triggering cascading changes in a system that has been rotting for some time. As an archaeologist, if I found evidence of intensive and intersecting energetic, ecological and economic disruptions in society, what I would expect to find at the end of those stratigraphic layers is a new cultural phase.

That is, I would expect a very different kind of society and culture, albeit causally linked, from that which preceded it. Another way to frame this is that periods of systemic collapse and reorganisation generate new forms of social psychology, new narratives, beliefs and practices. A new epoch is here, and we will all quickly learn that we are very different kinds of people than we thought we were. Soon, things will start looking radically different from what we have known to be the order of things. States, institutions, practices and beliefs that once seemed permanent fixtures of our world will be swept away.

This may seem extreme, the momentum of history has not fully tipped us over the edge yet, which allows psychological space for defaulting to normalcy bias. The problem is that causality is not linear, and it does not operate at singular scales. What we are experiencing has been building for decades, but the synergy of these causal processes, their true emergent effects are about to become fully apparent. The virus is a spark, not the cause, and it is breaking down the last reinforcing bonds holding the global system together. If the ruling class had not been debasing our societies and parasitizing their citizenries for decades, our social resiliency to this pandemic would be much higher. High energy production costs, low demand, and low consumption have been masked by systemic financial fraud.

Instead of innovation, we have spent decades investing in a Potemkin economy. We are about to find out that, despite all our mathematical abstractions and sorcery, the hardcore material basis of our economies rules supreme. Simply put, one cannot shut down countries like China for months on end without powerful material ramifications. Supply chains are going to be severely disrupted, and this is going to implode the illusion of the financialised economy along with our disastrously entwined energy systems. People are going to have difficulty accessing everything from car parts to asthma inhalers, and this is going to shake their fundamental understanding of how the world works. People will be scared, they will be angry, and their final vestiges of faith in the system will begin to collapse.

The problem goes deeper than mere economic implosion, it goes to basic principles of trust and belief. Human history is a story of an incredible capacity to self-organise and work collectively. However, this requires collective attention upon shared forms of value, narratives and cultural practices that raise levels of trust necessary for stable social relationships to be organised. Faith in the promise of our societies has been severely eroded on all sides these past few years. People still believe in their societies, but just barely, and usually based on the misapprehension that either they can undo the damage or that their chosen leaders will solve all the problems.

Our narratives have been fundamentally shaken and fractured, but soon they will start collapsing and it is going to be very difficult to rebuild trust once they finally give. Our collective faith in the system will break down completely with the loss of the shared forms of value through which we incorporate ourselves into our social relationships and ensure our well-being; those things that glue our collective narratives together. This is when we will be most vulnerable to social violence, because we won’t know whom to trust, and we will be desperate to survive the upheaval. This is also when radically new forms of organisation will begin to emerge, as people build coalitions and communities to meet new challenges. These relationships will become the bedrock for new cultural relationships.

It is hard to tell exactly what happens, but there are a few predictions that are within reason. Prolonged quarantines could result in cascading defaults from the bottom up while severe supply chain disruptions have the ability to trigger institutional defaults. Likewise, the slowdown in air travel could potentially send Boeing into a complete tailspin. Regardless, we are liable to see massive deflationary pressures in everything other than essential goods. What’s more, the virus will probably devastate countries weakened by imperialist intervention and sanctioning. Places such as Syria and Yemen are very likely to see truly horrific outbreaks due to their obliterated social infrastructure.

The virus could also potentially collapse the weakened Iranian state. Ironically, the zero-sum logics of Empire have created conditions through which the pandemic can entrench and project itself. This raises another horrifying possibility, that certain sociopaths will use the synergetic fears of refugees and contagion as political weapons. This will only lead to atrocities against the most vulnerable. Furthermore, the fact that the Coronavirus has established itself in Italy, the most fragile of Europe’s major economies, is a harsh twist of fate. The shutdown of the country is likely to lead to major financial contagion in the Eurozone and place pressures upon core principals such as freedom of movement. Either the European Union will break apart in this process or it will transform into something very different than it has been.

Another likely outcome is that the American health profiteering system will finally be shown for the utter social failure that it is. The infection is liable to spread in a country where people refuse treatment because they are afraid of bankruptcy. Finally, if the virus is not contained, it could very well affect the U.S. elections. The loss of political legitimacy could make the country ungovernable given the social antagonisms surrounding the candidates. At the end of the day, our cultural logics have fetishized competition and treated our societies as zero-sum games designed to provide luxury communism for billionaires and debt slavery for the rest of us. It is not surprising that it is greed, selfishness and entitlement that are undoing our societies, we have failed the prisoners dilemma and now we are being sentenced.

We live in a moment of radical historical change, but do not despair. Things will be difficult, but these are the moments at which humans are the most creative and most inspiring. We will see hard, sometimes brutal things, but we are also going to see new kinds of beauty brought into this world. We must hold on to that, we must hold on to a sense of vision and endeavour, that something better is still possible. More than anything, take care of each other. The future belongs to those who know how to cooperate best, how to share effectively, how to generate new forms of value, new narratives, new communities. We are at the end of the beginning and much will depend on our choices, our courage and our compassion in the coming years. I wish all of you luck and solidarity as we become Twenty-First Century people.

I know about Persia and Xenophon,
Egypt and the Sudan,
But I prefer to be caressed
By fresh mountain air.

I know the age old history
Of human grudges,
But I prefer the bees that fly
Among the bellflowers.

I know the songs that breezes sing
In the chattering branches;
Don’t tell me that I lie –
I do prefer them.

I know about the frightened buck
Returned to its pen, expiring;
I know that weary hearts die darkly
But free from anger.

– José Martí

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Coming Apart: The Imperial City At The Brink

Jun 182017

June 18, 2017 Posted by Raúl Ilargi Meijer at 1:00 pm Finance Tagged with: Alastair Crooke, Civil War, destruction, disrupt, elites, empire, fragility, Rome, Trump, Washington DC 6 Responses »

Thomas Cole Destruction of Empire 1836

The Conflicts Forum, directed by former British diplomat and MI6 ‘ranking figure’ Alastair Crooke, sent me another unpublished article by Alastair and asked if the Automatic Earth would publish it. But of course. Previous articles by Alastair published here are: ‘End of Growth’ Sparks Wide Discontent in October 2016, Obstacles to Trump’s ‘Growth’ Plans in November 2016 and What is this ‘Crisis’ of Modernity? in January 2017.

Here’s Alastair again:

Alastair Crooke: David Stockman routinely refers to President Trump as the ‘Great Disrupter’. But this is not a bad quality, he insists. Rather, it is a necessary one: Stockman argues (my paraphrasing) that Trump represents the outside force, the externality, that tips a ‘world system’ over the brink: It has to tip over the brink, because systems become too ossified, too far out on their ‘branch’ to be able to reform themselves. It does not really matter so much, whether the agency of this tipping process (President Trump in this instance), fully comprehends his pivotal role, or plays it out in an intelligent and subtle way, or in a heavy-handed, and unsubtle manner. Either serve the purpose. And that purpose is to disrupt.

Why should disruption be somehow a ‘quality’? It is because, during a period when ‘a system’ is coming apart, (history tells us), one can reach a point at which there is no possibility of revival within the old, but still prevailing, system. An externality of some sort – maybe war, or some other calamity or a Trump – is necessary to tip the congealed system ‘over’: thus, the external intrusion can be the catalyst for (often traumatic) transformational change.

Stockman puts it starkly: “the single most important thing to know about the present risk environment [he is pointing here to both the political risk as well as financial risk environment], is that it is extreme, and unprecedented. In essence, the ruling elites and their mainstream media megaphones have arrogantly decided that the 2016 [US Presidential] election was a correctible error”.

But complacency simply is endemic: “The utter fragility of the latest and greatest Fed bubble could not be better proxied than in this astounding fact. To wit, during the last 5,000 trading days (20 years), the VIX (a measure of market volatility) has closed below 10 on just 11 occasions. And 7 of those have been during the last month! … That’s complacency begging to be monkey-hammered”, Stockman says.

Former Presidential candidate, Pat Buchanan concurs: “President Trump may be chief of state, head of government and commander in chief, but his administration is shot through with disloyalists plotting to bring him down.

We are approaching something of a civil war where the capital city seeks the overthrow of the sovereign, and [to achieve] its own restoration. Thus far, it is a nonviolent struggle, though street clashes between pro- and anti-Trump forces are increasingly marked by fistfights and brawls. Police are having difficulty keeping people apart. A few have been arrested carrying concealed weapons.

That the objective of this city is to bring Trump down, via a deep state-media coup, is no secret. Few deny it.”

The extraordinary successful ‘manufacture’ and ‘parachuting-in’ of Macron into the French Presidential election by the French élite, precisely has given to the globalised Deep State (including their US counterparts), renewed confidence that Europe and America’s slide towards ‘populism’, is indeed a ‘correctable error’. European élites now can barely contain their revived schadenfreude at the Brexiters’ and at the Populists’ presumed discomfort (see here).

Thomas Cole Consummation of Empire 1836

But despite the palpable danger to the integrity of the political system itself, Stockman notes, “it is no inconsiderable understatement to suggest that the S&P 500 at 2440 is about as fragile as the ‘market’ has ever been.

Any untoward pinprick could send it into a tailspin … Doug Kass said it best in his recent commentary: “Over history, as we have learned, a Minksy Moment develops when investor sentiment becomes complacent after long periods of prosperity and the data is ignored, and doesn’t seem to matter anymore, as I wrote in “It’s a ‘Bohemian Rhapsody’ Market: Nothing Really Matters … to investors.” In short, the market has become ‘zombie’ (in the sense of residing within a psychological defence mechanism – as, when to contemplate the alternative – simply is too threatening to the psyche) [emphasis added].

Daniel Henninger, in a Wall Street Journal op-ed, writes: “Donald Trump’s election has caused psychological unhingement in much of the population. But the Trump phenomenon only accelerated forces that were plummeting in this direction before the 2016 election…

“Impossible to miss, though, is how jacked up emotional intensity has become in American politics. The campaign rallies of both Mr. Trump and Bernie Sanders often sat on the edge of violence. Reporters describe political town hall meetings as full of “angry” voters. Shouting down the opposition in these forums or on campus has been virtually internalized as standard behavior. Refusal to reason is the new normal. And then, the unreason is euphemized as free speech.

Explaining away these impulses as a routine turn of the populist political cycle is insufficient. Something more permanent is happening.”

It is not, of course just the markets which are threatened by unperceived risk. Trump shall not be forgiven for challenging the sacrosant meme of a world divided between (good) ‘liberal’ democracies (led by the US and its European allies) and (bad) illiberal autocracies (led today, by President Putin’s Russia): by snubbing Nato and withdrawing from the Paris climate agreement, Professor Michael Klare writes, “we’ve been told, President Trump is dismantling the liberal world order created by Franklin D Roosevelt at the end of World War II”.

Thomas Cole Destruction of Empire 1836

An offence, it seems, against something somehow sacral: recently, US comedienne Kathy Griffin posted a video of herself holding the bloody, severed head of Donald Trump. “But that wasn’t the end of it” Henninger notes. “We may assume that as Ms. Griffin was creating her video, the artists at New York’s Public Theatre, were rehearsing their production of Julius Caesar, the one in which Central Park audiences watch ‘Caesar’ as a blond-haired Donald Trump, who is pulled down from a podium by men in suits, and assassinated with plunging knives … Whatever once fastened the doors of people’s minds to something secure and stable has become unhinged.”

Mike Vlahos (Professor at the US Naval War college and John Hopkins) tells us that, as a military historian and global strategist, he became curious to know just why it is that ‘world systems’ do ‘come apart’. His first, intuitive sense was that their collapse generally was brought about by some massive external force such as war, pestilence or famine, and by the concomitant mass migrations of peoples.

But when he and his students completed their research, he concluded that though these factors had often played an important part, they were not the prime cause of the system coming apart. Rather, he identified a number of key triggers:

· The élites became stratified, and politics frozen
· The peoples’ allegiance became taken for granted, at the same time that the élites chose to ignore threats to the peoples’ way of life
· Social mobility declined, and change is fiercely resisted
· Rather, élites work to maximize their wealth and status.
· Elite authority becomes excessively militarized – and justified as ‘saving civilization’.

He concludes from this study, “the situation that we inhabit today […] here in the imperial city in Washington DC, is that it is absolutely hollowed out … it is incapable of offering anything to its own people, the American people … I think we have reached a point where there is no possibility of revival within the current system that exists. The current system is set upon … is determined to eat itself out in a kind of civil war that is coming, and at the end of that, it will be done, will be finished”.

“The Methoni, one of the great nations of the late Bronze Age, had this same problem with the élites and the 1% that we have today, and they were overthrown. That’s 3300 years ago, and it keeps happening again and again. And the very structure of the decadent relationships in late periods where élites refuse to accommodate, refuse to adapt, refuse to be sensitive to needs of the larger whole of society, means this has to happen. There has to be an overthrow … for things eventually to get better, to be renewed. In other words, you can’t renew from within”.

Is this the situation today? The pre-conditions that Professor Vlahos relates, in terms of élite hubris, self-regard, and disdain for the real concerns of people are there (the polarization of US society at the US election provides the empirical evidence for this). And Stockman, in calling Trump the ‘Great Disrupter’ plainly implies that he might be precisely the ‘externality’ (coming from outside the élite) – that might tip things ‘over’. This surely is what Stockman means when he warns about ‘the present risk environment’ being extreme.

Of course, the usual retort is that Trump offers no coherent alternative conceptual vision for the future, but only seized successfully upon a number of key insights: the power of cultural nationalism, the pain felt by the casualties of globalism, the impact of a hollowed-out US economy, and the need to put America first. This is true. These insights do not constitute a vision for the future, but why should one expect that, from the ‘Disrupter’? His ‘agency’ is that of catalyst, not that of final ‘constructor’. That comes later.

Thomas Cole Desolation of Empire 1836

So, from whence does ultimate societal renewal come? The classic answer is that after ‘disruption’ nothing much is left standing amidst the (metaphoric) ruins of whatever stood as the reigning ‘modernity’. Historically, renewal was effected through a communal ‘reaching back’- beyond the roots of whatever represented the contemporary crisis – to delve back, deep into the archetypal cultural history of a people. The rummaging in collective memory, allows a narrative to shape, about why the present ‘hurt’ befell its people, and to bring forward, transformed into contemporary meaning, some ‘solution’: a new meta-historical understanding.

Plainly, this (a type of spiritual renewal) is not President Trump’s ‘bag’. (Steve Bannon’s the more so, perhaps?)

What does all this mean in practical terms? First, it suggests that most of us still prefer not to address the stark reality that “the objective of this city (DC), is to bring Trump down, via a deep state-media coup” and the bitter political trench warfare, which this portends. We prefer to rest in complacency, (as zombies for now), until a crisis squarely hits us – in a personal way.

Secondly, thoughts of an easy return to the status quo ante (such as via Vice-President Pence standing-in), is problematic (Macron’s election in France notwithstanding). Since the élites (all of them), have, in their ‘war’ against ‘populists’ and deplorables, totally lost legitimacy and authority for a substantive part of their populations. And they will not – cannot – adapt. For, that is their nature. This is the moment, Professor Vlahos notes, when a system – i.e. US operational governance – begins to ‘come apart’. Individuals, cabals within government, whole departments of state, look to their own self-awarded ‘authority’, rather than to that of the government as mandated by the electorate.

Thus we have this past week, the Senate voting 97-2 to impose further sanctions on Russia. Another wrench jammed into Trump’s foreign policy wheels – and explicitly conceived to paralyse and impede the President.

Thirdly, the intent is – like some Amazonian reptile venom – to ‘bite’ him with so much innuendo and assorted investigations and further allegations, that Trump, like the reptile’s victim, remains awake – but incapable of moving a muscle: A true zombie, in fact, as the reptile feeds on its living corpse.

Fourth, this zombified US President, will shortly face the requirement to negotiate with Congress an exit from a bubbling financial sphere soaring upwards, whilst a moribund real economy trails downwards – under pressure from the fast-approaching debt-ceiling deadline. The Senate’s slap at the President’s face with the Russia sanctions vote suggests it is more likely that he will be tossed another spanner: this time aimed at the wheels of the ‘Trump reflation’ programme.

What other insights might history offer? Two, perhaps: Professor Vlahos, during his discussion with John Batchelor, the latter points out that, even at the very moment that the hub of the Roman Empire already had fallen apart, the collapsing Empire was celebrated the most, when it was imitated at the furthest edges of Empire: by the peoples of Gaul and Germany, for example. Are we not seeing the same today, in Europe, as Merkel and Macron vow to keep the liberal, globalist values of the American Empire alive — at the edges of the American Empire — in Europe?

And lastly, the constituency that historically led renewal? Professor Vlahos: “The Roman legions, the Czarist armies, the German Imperial armies and the Ottoman armies”.

The Pentagon élites should note well.

Debt Rattle December 8 2014

Dec 082014

December 8, 2014 Posted by Raúl Ilargi Meijer at 11:36 am Finance Tagged with: asset sales, BIS, China, debt, deflation, fragility, Japan, leveraged loans, LNG, oil, power 3 Responses »

Russell Lee Front of livery stable, East Side, New York City Jan 1938

• Japan’s Economy Is Worse Than Feared (WSJ)

• Japan’s Recession Deepens as Election Looms for Abe (Bloomberg)

• China Trade Data Miss Forecasts By A Wide Margin (MarketWatch)

• China Trade Data Paints Dreary Picture Of Economy (CNBC)

• The Two Main Threats That Are Shaking Global Firms: China And Deflation (CNBC)

• Oil, Gas Bloodbath Spreads to Junk Bonds, Leveraged Loans. Defaults Next (Wolf)

• Canada’s LNG Export Dream Is Dead (Oilprice.com)

• Dollar Surge Endangers Global Debt Edifice, Warns BIS (AEP)

• Sudden Swings Expose Fragility Of Financial Markets: BIS (Reuters)

• International Lending To China Soars In 2014: BIS (Reuters)

• Why The Dollar Is Still King: BIS (CNBC)

• Why The World Is Like A Real-Life Game Of Global Domination (Guardian)

• Citigroup Panicked Over Fraud at Chinese Ports (Bloomberg)

• The Long Slow Inexorable Demise Of America’s Working-White-Male (Zero Hedge)

• ECB’s Loans Offer Clues In QE Guessing Game (Reuters)

• Bank of England: Half A Million Housebuyers Face Mortgage Arrears (Guardian)

• Bank of England: UK Banking To Double In Size, Reach 950% of GDP (Guardian)

• Keep An Eye On The Fed’s Accelerating Asset Sales (CNBC)

• Bill Gross: You Can’t Cure Debt With More Debt (CNBC)

• The Most Essential Lesson of History That No One Wants To Admit (Beversdorf)

• Uncork the Central Bank Bubbly (StealthFlation)

• Taming Corporate Power: The Key Political Issue Of Our Age (Monbiot)

“The key economic figures come just six days before general elections ..”

• Japan’s Economy Is Worse Than Feared (WSJ)

Japan’s economy contracted for the second straight quarter in the July-to-September period, revised data released Monday showed, serving as a bitter reminder to Prime Minister Shinzo Abe that the nation’s economy remains in the woods two years after he came into office. Gross domestic product shrank an annualized 1.9% in the third quarter from the previous three-month period. The government last month estimated that the economy shrank 1.6% in the third quarter after a 6.7% plunge in the second quarter, indicating that the economy had entered a recession.

The key economic figures come just six days before general elections, which Mr. Abe is framing as a referendum on his economic policy program known as Abenomics. Recession or not, Japan’s economy is in a funk. Private consumption, the most important pillar of the economy, has shown little sign of life after a one-two punch of a sales tax increase in April and inflation caused by the yen’s 30% fall against the dollar. The consumption slump had led businesses to slash production and capital investment, further undermining economic growth.