Marc Faber's Jaded View of the Future

Marc Faber is popularly known as Doctor Doom, best known for his jaundiced outlook on US government deficit financing and the ballooning debt in the first world.

The video above is a 45 minute presentation on Faber's future outlook. In the scribd embed below, Faber presents a number of charts that illustrate various aspects of the problem.

50 Charts From Marc Faber

Ultimately, Faber is likely to be proven right in many or most of his views. In the short term, we are likely to see significant volatility in markets around the world.

Learn to be very light on your feet, when it comes to where you put your assets. Be prepared to move them quickly.

H/T Lew Rockwell

Massive Problems come with Massive Debt

Massive government debt is nothing to sneeze at. Particularly when the debt goes to pay off voters and political cronies -- with no possibility of ever paying off the debt. That is not merely "bad debt." It is catastrophic debt.

Here is a good look at central banks, and their pathetic attempts to deal with massive modern debt:

Because governments are in disagreement, bodies are taking their place that are turning into ersatz governments: the central banks. The ECB's decision to buy up unlimited amounts of the sovereign debt of European countries is a replacement for political solutions for which there are currently no majorities in the governments and parliaments of euro-zone countries. The decision by the American Federal Reserve Bank to inject hundreds of billions of dollars into the markets again to stimulate economic growth results for the inability of Democrats and Republicans to agree on a compromise between limiting debt and economic stimulus programs. Printing money -- or betting hundreds of billions once again -- is the last desperate response on both sides of the Atlantic.

What began four years ago with the bursting of a credit bubble in the mortgage market is being combated with more and more new debt in the trillions, thereby inflating the next, even bigger credit bubble.

The fresh trillions circle the world in the search for yield, but only a small part of the money flows into the real economy, where investments in new production plants produce lower returns. Instead, the trillions slosh back and forth, from one financial market to another, from the foreign currency market to the commodities market, and from the gold market to the stock market and back again.

Because these trillions are not reaching the real economy, the risk of inflation is currently smaller than Germany's central bank, the Bundesbank, and its president would have us believe. But every saver and everyone with a life insurance policy pays for the central bank's low interest-rate policy with low interest rates. When central banks keep interest rates close to zero for long periods of time, which they have done for years, they disadvantage ordinary savers and favor major investors, gamblers and banks, which can borrow at low rates and invest the money elsewhere at a profit. _Spiegel

As seen in the image, it requires more and more debt to generate less and less growth, over time. Governments and central banks get caught up in a tangled web feedback loop of out of control debt spending, with no clear way out.

Government officials "play at the problem" with no real intention of addressing the central concern: Governments have grown to an all-encompassing size and degree of control over their now-subservient societies. How can societies be subservient to governments when governments run on the surplus production of societies? Because governments have grown to be parasitic upon their underlying societies.

This story does not have a happy ending. But it will have to have an ending, because better stories will not wait indefinitely to be told.

A Lavish Lifestyle: A Struggling America's Haute Noblesse

The US is a nation struggling with economic uncertainty and cultural decline. While real unemployment is well above 10% and underemployment approaches 25%, America's new political nobility provides itself a lavish lifestyle in which previous president's and their families never thought to indulge.

President Obama has spent far more lavishly on White House state dinners than previous chief executives... current and former government officials said the documents obtained by The Examiner point to an unprecedented upsurge in White House spending on such events.

...A knowledgeable government official who made the documents available to The Examiner said the extravagant spending seemed unfair with so many Americans out of work.

"It just kind of takes your breath away to see the expenditure of money that has occurred since 2009," the official said.

Gary Walters, who ran presidential household operations for 21 years during Democratic and Republican administrations, before retiring in 2007, told The Examiner the costs reflected in the documents were "excessive. They are high." _Examiner

Not surprisingly, the government agency responsible for paying for these extravaganzas of the haute noblesse, is run by a US State Department official who also happens to be a business partner of the man who caters these exorbitantly costly events.

Of course, that is but one side of the story. The very costly vacations taken by the novo haute noblesse would make a billionaire blush -- if his vacations were taken at taxpayer's expense.

But to the novo haute noblesse, such costly pleasures are considered minimal perquisites, for the many duties required of them as official and unofficial figures of state. "If you cannot live well on other people's money, what good is becoming involved in government?" they are likely to ask.

And America drifts backward toward the autocratic rule which the founders of the original republic had tried to hard -- at such a high cost -- to escape. Welcome to the Idiocracy.

Americans Support Big Defense Cuts?

Over the past 3 years, US federal budget deficits have averaged over $1 trillion per year, and there is no sign of reduction in federal spending -- nor any sign of significant increased revenues -- for the next decade. Where should a more frugal government start to cut spending? Defense? Social Programs? Environmental Agencies? Interest on debt?

Here are projected annual increases in spending categories for the US federal budget from 2012 thru 2022:

Annual rates of increase in major spending categories budgeted for the 2012-2022 period were: Defense: 1.8% Non-defense discretionary: 1.6% Social Security: 5.8% Medicare: 6.6% Medicaid: 8.5% Net interest: 14.2% Total spending: 5.0%[6] _Wiki

You can see that the big losers in future budgets are defense and non-defense discretionary. Mandatory spending is skyrocketing.

http://www.truthfulpolitics.com/http:/truthfulpolitics.com/comments/how-the-federal-government-spends-money/
Given the above, it may seem odd that American voters are not more angry about government over-spending across the board. Instead, the ire of American voters is directed mainly toward defense budgets.

Americans of all stripes have had enough of massive Pentagon budgets and want significant cuts in defense spending, according to new survey data released on Monday.

In Republican and Democratic districts across the country, 74 percent and 80 percent of respective voters said they want less defense spending, the study found.

On average, voters indicated that they wanted a budget for fiscal 2013 that would be nearly 20 percent less than current defense spending.

With $645 billion enacted for total defense spending this year, the average voter’s preferred budget for next year, an 18 percent cut, would translate into a $116 billion savings—money lawmakers trying to balance the budget could sorely use.

“The idea that Americans’ would want to keep total defense spending up so as to preserve local jobs is not supported by the data,” said Steven Kull, director of the Program for Public Consultation, which conducted the survey with the Stimson Center and the Center for Public Integrity, a nonprofit investigative journalism group. Read more at http://globaleconomicanalysis.blogspot.com/#DVLKMb5AuvElZi3a.99 _NatJournal

H/T Mish

What voters do not understand is that defense spending has been decreasing as a proportion of total spending, for quite some time. The image below demonstrates how mandatory spending is growing, at the expense of discretionary spending:

Source

Mandatory spending is growing exponentially, and is destined to crowd out all discretionary spending including both defense and non-defense discretionary. So why isn't the skankstream media -- both news and entertainment -- informing the public about the truth of budget trends? Because media executives see no benefit to themselves in keeping the public informed. Yes, they are happy to indoctrinate the public to their own benefit, but objective information that is crucial to average citizens lives? Not so much.

US Federal Budget Doomed to Swamp US Economy

Spend-happy US politicians have put the US economy into a huge bind, and the clock is ticking down.

The US defense budget should certainly be given a good trimming, but the same thing is true for the US government budget as a whole. If things go on as under the current administration, the US will not be able to afford its defense infrastructure quite soon, anyway. It will be slashed, regardless, by necessity.

The US public is quite naive about the nature, extent, and rate of growth of US government spending. And so far, no one seems willing to paint a clear, broad, objective picture -- not even Mish.

Obama Misspoke: It's the Public Sector That's Doing Fine

President Obama recently claimed in the middle of a big press conference, that "the private sector is doing fine." Oddly, Democratic Senate Majority leader Harry Reid said exactly the same thing six months ago, when pressing to hire more unionised government workers. But really, just how would those two big-government diehards know whether the private sector was doing well? They are so deep up the government colon they wouldn't know a healthy private sector from an outer space alien invasion.

Obama and [Senate Majority Leader Harry] Reid have it precisely backward: It’s the public sector that’s doing fine. According to the Bureau of Labor Statistics, the unemployment rate for government workers last month was just 4.2 percent (up slightly from 3.9 percent a year ago). Compare that to private-sector industries such as construction (14.2 percent unemployment), leisure and hospitality services (9.7 percent), agriculture (9.5 percent), professional and business services (8.5 percent) and wholesale and retail trade (8.1 percent). As Andrew Biggs of the American Enterprise Institute points out, the public-sector unemployment rate “is the lowest of any industry or class of worker, even including the growing energy industry.” If the rest of Americans enjoyed the same unemployment rate as government workers, Obama would be cruising to reelection.

Meanwhile, the private sector continues to struggle under the weight of Obamacare, the spiraling national debt, the $46 billion in annual costs of the new regulations imposed by Obama, and the looming threat of “taxmageddon” — when, come January 2013, the private economy will get hit with hundreds of billions in higher taxes.

The result? In the first quarter of this year, private-sector GDP grew by a meager 2.6 percent. That is certainly better than the pathetic 1.2 percent growth rate last year, but compared to previous recoveries, it is anemic. When Ronald Reagan ran for reelection in 1984, private-sector GDP grew by 6.5 percent — 2 1 / 2 times the current rate. That’s why Reagan was able to declare “It’s Morning in America again” while Obama can’t.

Obama and Reid may think 2.6 percent private-sector GDP growth is “just fine,” but the 23 million Americans who are unemployed, underemployed or have quit looking for work don’t share their complacency. Unless Obama wants to put them all in government jobs (which he might), the only way to help these Americans find work is to reduce barriers for job creators in the private sector. The election will likely hinge on who Americans better trust to do that.

That is why Obama’s gaffe is so damaging to his prospects for reelection. It feeds a growing public perception — which is being actively cultivated by the Romney campaign — that when it comes to the economy, Obama is out of his depth and hostile to private business. _WaPo Opinion

This mentality of government uber alles -- an amorphous and swelling general dependency upon government for more and more essentials while at the same time as government budgets are being destroyed by out of control government union pensions, pay, benefits, and double dipping -- is killing state and local governments. Of course, if these regional governments could print money -- as Obama's and Reid's central government can -- they might be able to hold out against the taxpayer revolt a little bit longer.

The following video provides a counter-point to this ruinous mentality of government dependency and unlimited government growth. Meet Emily O'Neill, of the Center for Freedom and Prosperity (h/t Daniel Mitchell)



Some people believe it will take something on the order of a "civil war" to clean out the nests of vermin, vipers, and vultures out of all the regional governments.

At that point, it will be time to look to the central government. But before the central government can be reformed, Obama and his band of corrupt and merry radicals simply have to go.

Are Leftists Total Moo-Ons on Money?

The chief problem with money, as Walter Russell Mead observes, is that the Blue Model is running out of it. Once upon a time the money was just out there. The dollars were mooing and lowing like the buffalo on the Great Plains. The only problem was divvying it up. But now that it’s getting harder to come by, a whole host of professions based on the dollar hunting and skinning business is becoming endangered. Mead describes the situation in his vivid prose:

The dream machines of the blue social engineers don’t sail serenely across the azure sky anymore. Think of the various carbon exchanges and environmental planetary schemes; think of high speed rail proposals like California’s $100 billion train to bankruptcy; think of Obamacare. These days the experts, “social entrepreneurs” and smart young blue twenty somethings fresh out of the Ivy League whomp up social programs with as much verve and dedication as their New Deal and Great Society predecessors, but the new Dreamliners don’t take off. At most they roll around the runway, emitting clouds of noxious smoke; wings fall off, windows pop out, turbines misfire and the tires go flat. (Source)

Al Sharpton, by contrast, was trying to climb out of a deep financial hole. “The left-wing National Action Network Inc., headquartered in New York City’s Harlem neighborhood, owes at least $1,556,059 in federal taxes and $108,489 in New York taxes, according to the Nexis tax liens database. Tax agencies typically file tax liens only after taxes have become significantly overdue and other collection methods have failed.”

After Trayvon Martin was killed, the Chicago Tribune found the Reverend raising money for Trayvon’s cause. At a rally he shouted:

“I’m going to start off with $2,500,” Sharpton said, holding up a check. “Who’s next?”

Then Sharpton announced that television personality Judge Greg Mathis donated $10,000.

Several elected Florida officials were present, and each took a turn addressing the crowd before Sharpton was scheduled to speak. U.S. Rep. Corrine Brown was one of the first to address the crowd Thursday night. She rallied the crowd by yelling, “I want an arrest, I want a trial.”

The she asked the crowd: “What do you want?”

And the crowd responded, “We want an arrest!”

Doubtless Sharpton really wants an arrest. But given the parlous state of his finances, it would be understandable if he didn’t mind making a few bucks on the side as well. All across the board the Blue Model is experiencing what parliamentary systems call the loss of “supply.” Supply is a term used to describe money bills, either taxation and government spending, which is the lifeblood of politics. _BelmontClub

The article goes on about how leftists are having trouble raising money for political campaigns, for social activism, and so on.

But the place the money has really and truly run out -- where leftists badly wish to spend $trillions more which do not exist -- is in the US federal budget. Obama has had to borrow over $1 trillion every year in office -- an unprecedented and previously inconceivable breach of fiscal responsibility.

Contrary to leftist moo-ons, the largest portion of the US federal budget goes to entitlements, and the next largest is interest on the debt. Both segments of the debt are growing exponentially, as $trillion deficits are becoming commonplace under Obama.

So, will Americans drink the koolaid and re-elect Obama and his cronies? No one knows. But if so, the anchor of the global economy and global security will certainly begin to crumble. Slowly at first, then ever faster.

Leftists and money simply do not mix cleanly or sustainably. Leftists are moo-ons about money, particularly other people's money. And now, increasingly, the "other people's money" that they are spending will belong to generations that will not be born for several decades yet.

When is Democracy No Longer Viable?

Democratic forms of government are far from ideal even under the best of circumstances, but for most populations of the world ordinary democracy may not be viable any more.

The authors of the book "Beyond Democracy" maintain that democracy can't be fixed. They look at "13 myths of democracy" and explain why the things we think we know about democracy just ain't so.

Of course, Americans and other westerners have learned about the difficulties of encouraging democratic reforms in nations such as Iraq, Afghanistan, Libya, Egypt, Lebanon, and other nations whose traditions seem to be directly at odds with western democratic ideals.

But now we are learning that even the strongest of the social democracies of Europe may be unable to maintain their democratic traditions for much longer, for reasons of changing demographics.

Most honest and well read people understand the relationship between open commerce and prosperity and freedom. And a substantial proportion of these individuals also understand -- at least intuitively -- the association between a population's average IQ and educational levels and its ability to maintain prosperity along with rule of law and freedom.

But it is also fairly clear that democracy prospers best in societies where individuals can relate to one another, and where most individuals can and will pull their own weight. Democracy does not work well in a society of freeloaders, unless everyone is a freeloader and is willing to accept widespread national poverty and weakness in relationship to the outside world.

Diversity can also be a problem -- particularly certain kinds of diversity. Societies that are rich in low IQ diversity also tend to be poor in trust, high in crime, and in possession of democracies that are living on borrowed time. When "diversity" is used as a code word to promote affirmative action for low IQ populations, trouble is usually on the way.

All of that is made worse when government is made to be the central distributor of privileges, income, and success -- in exchange for votes and political support. Such a government will grow to the benefit of special interests and populist policies to the point of non-viability.

You may think of Greece, Italy, Spain .... But almost all of the nations of Western Europe, North America, and Oceania are slipping down that greased slope. All of them rapidly learning the limits to democracy in situations where demographic change will not allow the status quo approach to democratic government to continue on its current path.

US National Debt Infographic

[Via: Amazing penny facts about the US debt]
View a larger copy of the US debt infographic along with the code to add this infographic to your own website.
Forex Forum via Zero Hedge

It is difficult to imagine the size of the US debt -- which has grown exponentially since the inauguration of US President Obama.

There is no end to trillion dollar deficits as long as the Obama administration runs the executive, and the US Democratic Party runs at least one house of congress.

As long as US government officials cannot conceive of any parts of government which should be abolished or be cut in size, the destructive growth in government debt and public sector strangulation of the private sector will continue.

An ongoing demographic decline toward the Idiocracy is not helping matters. Dumb electorates elect corrupt governments. How could it be any other way?

Just Because You're Paranoid Doesn't Mean They're Not Out to Get You

There have always been multiple strains of anti-government paranoia in the US, which tend to wax and wane depending upon the policies and reputations of the particular presidential administration in office. Depending upon the ideology of the anti-government group and the ideology of the presidential administration, some of these groups are more likely to be ignored, and others more likely to be prosecuted, at any particular time.

At this time, theUS FBI is turning its brightest spotlights away from run of the mill violent gangs and organised crime, onto a movement known as the "Sovereign Citizens" movement. The "sovereign citizen" is more of a loosely knit network composing a wide range of ideologies, personalities, and outlooks. They read a range of books which converge around the idea that their own government is out to get them. In other words, they are paranoid. So how will such a group -- the vast majority of whom are generally non-violent loners -- respond when the US federal government neglects career criminals in order to go after the separatist loners, specifically.

How do paranoid people typically react when they are made the targets of criminal investigations, night-time no-knock raids, and are otherwise framed as public enemies number 1? One might remember the 1990s, and the ill-conceived and deadly government raids on places known as "Ruby Ridge" or "Waco." Something tells me that the people in charge of US federal law enforcement at this time, learned nothing from the bloody disasters that took place 20 years ago in "flyover country USA."

The FBI did not choose to focus on the "sovereign citizens" by happenstance. Although most of the "sovereigns" would like nothing more than to be left alone by what they see as an over-intrusive government, as with any large movement a few of the sovereigns are violent criminals, by nature. Ideological activist lobbies such as the Southern Poverty Law Center (SPLC), have long focused upon what they see as right-wing separatists.

Under Obama, the SPLC is enjoying significantly greater influence within the US federal government. News coverage of the sovereignty movement has picked up lately, perhaps signaling a pre-election intensification of federal government focus on this particular anti-government group -- just one group out of a wide range of anti-government groups representing ideologies from the left, the center, the right, and any number of other philosophies and religions.

The sovereignty movement makes a fine target for Obama's FBI, since such a movement would have no friends among Obama's political supporters and financers. It also makes a fine target for the news media, since it is unlikely that most mainstream journalists, editors, or producers are acquainted with or sympathetic with any sovereign citizens. Even Wikipedia is unable to provide more than a superficial, insubstantial article dealing with the sovereignty movement, but opts instead for a boiler-plate, officially approved 1st grade level primer exposing "all those bad people." There are no links to any spokespersons of the movement itself. There are no objective estimates of the actual size or influence of the movement. It is the type of Wikipedia article that shames the brand for its lack of encyclopedic nature.

So if even Wikipedia has lost its objectivity over the "sovereign citizens," and the US FBI is being led around by the short hairs in the grip of the highly ideological SPLC, what can we expect between now and the US presidential election in November?

Well, anything that distracts attention away from the dismal and worsening economic condition of tens of millions of formerly middle-class Americans, can be seen as a good thing by the Obama administration. "Law enforcement as circus entertainment" is a grand political tradition of diverting distraction dating back centuries at least. Mr. Obama's situation as he approaches his most difficult political contest, suggests that he will not be reluctant to pull the trigger on a large scale clamp-down on the sovereign citizens -- as a form of political theatre and political distraction.

And what effect would such a clamp-down have on the wide ideological array of anti-government paranoids? It would have a mixed effect. But political strategists supporting the US President cannot help but hope that something will dramatic -- but not too dramatic -- will happen. Something that can be spun in the media to the president's benefit. Something closer to Ruby Ridge than to Waco, with no mothers shot dead while holding their infant in their arms, this time.

Perhaps I should put it bluntly: The ignoramuses in Washington think that they can provoke a limited violent response from an already well-demonised, putatively right wing "extremist" group. They believe that they can contain the popular blowback to manageable levels, while discrediting their political opposition in the general election by linking them to the extremists. But are they reading the public mood correctly?

It is more than possible that the Obama organisation could successfully win the next election, by enlisting federal law enforcement in a scheme geared to induce an explosive reaction from the violent fringe of a paranoid fringe group. Congratulations, Obama people! You have won another election. Now, what do you do to contain the growing damage from the methods you used to win?

President Obama's war against the US energy sector and the US private sector in general, has not been exactly subtle. Mr. Obama's antagonism to many of the US Constitutional protections against government power granted to citizens, is not a well kept secret. These "anti-constitutional" and "anti private sector" tendencies of the current US president are well known to large numbers of North Americans. Those who approve of such tendencies are more likely to support Obama in November. Most of those who disapprove will go no further than to vote against the president.

Of course, if the president's organisation manages to inflate the paranoia of all pro-constitutional Americans -- and not just those few fringists who go so far as to declare themselves "sovereign" -- they will have a somewhat different situation on their hands leading into the lame duck 4 year final term.

No one doubts that Mr. Obama will continue to run up $trillion deficits as long as he is president, thus making the economic future of the country ever more unstable. No one doubts that Obama will keep trying to contain US energy production if he can, thus continuing to cripple US commerce and industry. And those are just the president's better qualities.

When the president decides to get serious about "setting things right," when he feels he has nothing left to lose and everything to gain by going after his lifelong enemies and demons, that is when the paranoids will truly come out to howl at the moon. And when that happens, you might want to take cover.

Just because you're paranoid, doesn't mean they're not out to get you.

Cross-posted to Al Fin blog

Celebrating Perversity: Rewarding Waste and Dissolution

Risk is a necessary part of life. Risk and scarcity are the challenges that cause animals to develop shrewd and wise strategies of survival.

You cannot remove risk from the world, but you can obscure it, or shift it from one person to another, or from one group to another. If you force persons of thrift and wisdom to bear the burdens of those who are prodigal and shortsighted, you will certainly grow a large new crop of fools and wastrels.

It almost seems as if modern public policy is designed to accomplish exactly that.

... the federal government has chosen to side with the wasteful, unprincipled and debauched who borrowed what they couldn't pay back, all at the expense of the good and moral. You can't make things like this up, and sadly this is not a dream. The federal government has sanctified promiscuous activity with the money of others through a $25 billion settlement foisted on banks that "will provide financial relief to an estimated one million at risk borrowers." The message: go heavily into debt, claim some lender abused you, then wait for the government (meaning all of us whose tax dollars support Leviathan) to compassionately save you.

The economic argument behind this most shameful of settlements predictably defies basic logic. Though economies work best when prices reflect market realities, housing to the political class is sacred such that a true correction whereby those who overextended themselves vacate their houses on the way to a market bottom won't be allowed to happen.

The broad economy will of course suffer this governmental error. For one, an investment in housing, quite unlike capital committed to technology or medicine, will not cure cancer or make us more efficient. A true bottom that releases investment capital from this dead money sector would on its own prove an economic positive.

Second, as evidenced by the inability of certain homeowners to make their mortgage payments, they're likely in many instances to live in depressed parts of the United States. Not only would putting their houses back on the market happily move the cost of housing down (that's the government's stated goal after all), it would also release these individuals from the ball-and-chain of quazi ownership such that they're free to pursue the best economic opportunities around the country irrespective of locale.

Third, if mortgage holders are to get relief, then someone, somewhere is by definition getting ripped off. Savers are society's ultimate benefactors for savings paying the freight for our economic advancement, but here savers will suffer a haircut so that the ghastly errors of borrowers can be excused. The message to savers is to not bother delaying consumption so that future innovators can access capital; instead, spend with abandon with an eye on borrowing excessively knowing full well that the government (again, meaning us) will underwrite your mistakes too.

Particularly offensive within this sad exercise is the notion that we must backstop the borrowing mistakes of the housing greedy because their mortgages are "underwater." Specifically, due to a shift in market sentiment that has made the mortgages for some more expensive than the house they're in, we're expected to cushion that blow. The next time investors in the stock market buy shares on the margin that plummet in value, will we cover those errors too? _RCM

Danger of Collapse Contingent on Obama Policies Continuing

First of all, a healthy growing economy means increasing complexity (green curve). This means that the critical complexity (blue curve), which measures how much complexity a system can sustain without imploding, increases. Every time a system is in a state of crisis or transition both curves become bumpy (see the bump corresponding to the dot com crisis in 2000). The magnitude of the bumps indicates the severity of the crisis. What is apparent from the plot, however, is that the current crisis is the most severe in 25 years – it sets the clock back 10-12 years, when we registered similar values of complexity. However, what is more alarming is the slope of both curves – it is negative and with a value not registered before. Basically, a negative slope points to a shrinking economy.

Complexity Trends

The second alarming point is that when the complexity of a system reaches its corresponding critical threshold (critical complexity) the system in question becomes very fragile and therefore vulnerable. Its structure becomes weak and unable to absorb any increases in uncertainty, inefficiency, and especially, shocks. In the case of the US, this is precisely what is happening. If we take a closer look at the last few years, extrapolating trend, we see that the curves will meet around 2017-2018. This situation is illustrated below. _Forbes

American Collapse Under Obama Policies
There is a maximum level of complexity above which society breaks down, and there is a minimum level of complexity, below which society breaks down. If a society is designed properly it is able to increase in complexity as it grows, maintaining a safe margin between the upper and lower limits of workable complexity.

What does this mean? It means that over the next 5-6 years the complexity of the US will reach unmanageable levels and the entire system will essentially be out of control. Obviously, this statement is based on the assumption that no major adjustments and/or (extreme) events take place to change the trend line. However, it is also true that current crisis is exposing the inability of modern politics to react to disruptive events. Consequently, the assumption seems to be pretty realistic. Moreover, very large and complex economies are characterized by immense inertia, which means that changes of any nature require a very, very long time to effect.

But the most alarming point is this. In our analysis we are not looking only at the economy of the US. The analysis is holistic. It embraces also the society, environment, education, the health system, etc.—in other words, “everything.” This means we’re looking at the US as country, not just as an economy. In our previous blogs we have pointed to the fact that even though many parts of the global economy are in a state of crisis, this is not a crisis of the economy. It is a crisis of values, morals, of living beyond one’s means, and many other elements, which ultimately, are reflected in the state of the economy. In fact, the economy and the society are one and must be analyzed as such. Everything is interconnected. The economy is only one important part of a huge and dynamic network, which we understand very poorly.

Our result is most alarming due to very this fact. You can bailout a bank or a carmaker, but how can you “bail out an entire country”? _American Danger of Collapse Under Obama

Obama's policies have been based upon a radical vision of transforming America from a resilient private sector based society, to a brittle and unsustainable public sector based society. Obama's agenda is good for the few who are able to siphon away wealth and power from the contracting private sector. It is also good for the enemies of America whose global schemes had been hampered by American power.

Here is an interesting look at "what will break and what won't" from Nassim Taleb in The Economist:

The great top-down nation-state will be only cosmetically alive, weakened by deficits, politicians’ misalignment of interests and the magnification of errors by centralised systems. The pre-modernist robust model of city-states and statelings will prevail, with obsessive fiscal prudence. Currencies might still exist, but, after the disastrous experience of America’s Federal Reserve, they will peg to some currency without a government, such as gold.

...The world will face severe biological and electronic pandemics, another gift from globalisation.

Religious practice will experience a revival, seen as a conveyor of robust heuristics, cultural values and rituals. Science will produce smaller and smaller gains in the non-linear domain, in spite of the enormous resources it will consume; instead it will start focusing on what it cannot—and should not—do. Finally, what is now called academic economics will be treated with the same disrespect that rigorous (and practical) minds currently have for Derrida-style post-modernist verbiage. _Economist Taleb

There is more at the link above, but what is interesting to Al Fin analysts is how Taleb underestimates the perfidy of the current leadership of the USA, and other leading nations. Modern leaders are much like the captain of the doomed Costa Concordia. They will steer the ship onto the rocks, then take the first opportunity to abandon ship, passengers, and crew to whatever fate awaits them.

If Obama's policies can be reversed, the US private sector can likely recover in time to help bail out the other failing economies of the world. But reversing the policies of a massive and unwieldy government such as the US government, is difficult -- if not impossible -- to do over a short time period. The best we can hope for is mitigation. But will it be enough?

Wait and see. Hope for the best, but prepare for the worst.

Slow Motion Collapse of the Welfare State from the US to the EU

Walter Russell Mead has written an important essay on the collapse of the welfare state, which he refers to as "the blue model." It is worth reading in its entirety at the link after the excerpts below:

The blue model is breaking down so fast and so far that not even its supporters can ignore the disintegration and disaster it now presages. Liberal Democrats in states like Rhode Island and cities like Chicago are cutting pensions and benefits and laying off workers out of financial necessity rather than ideological zeal. The blue model can no longer pay its bills, and not even its friends can keep it alive.

...Demographic change is accelerating the crisis of the blue social model, as retirement and other social benefits come under increasing pressure. Social Security and Medicare are covering a steadily growing percentage of the population. Younger workers no longer believe these systems will be in place for their old age. They are at least partly right. Without major change, the current Medicare system cannot last. Beyond that, a general crisis of the pension system threatens to reduce the income of older people even as government is less able to take up the slack. Defined benefit retirement programs have largely disappeared in the private sector; state and municipal pensions threaten to bankrupt some cities and states, and they are forcing officials in others to choose between drastic service cuts and breaking pension commitments to retirees. _Walter Russell Mead American Interest

The welfare state contained the seeds of its own death, just as the Russian Soviet system did. As humans give up more and more of their autonomy to an ever-bloating bureaucratic system, more and more of the internal systems which made them human begin to decay and become vestigial. Eventually most citizens are unable to grow out of the dependency stage of childhood. Birth rates collapse along with family stability. The very future of the society fades away with the declining competence and courage of its citizens.

he real crisis today in the United States is the accelerating collapse of blue government, not blue private industry, which is a phenomenon largely behind us. We are witnessing a multi-dimensional meltdown that affects our lives and politics in many ways. Three elements of the blue government meltdown in particular are worth mentioning.

The first is the government’s role in providing the benefits associated with the blue system. When we talk about “runaway entitlement programs”, we are talking about commitments by the government to provide retirement and other social benefits that originated as part of the blue system social contract. Workers could retire as early as 62 with a combination of Social Security and private pensions. These costs are now exploding according to the immutable logic of demographic and actuarial facts, and it is clear that the government can’t pay them into the future.

The second crisis is that the government is now the last “true blue” employer in the country. Federal, state and local governments are often staffed by lifetime civil servants whose jobs are protected by law and by some of the last truly powerful unions in the country. All the Reagan Administration and like-minded state governments ever managed to do was to slow the growth of government, not reduce it; government at all levels today accounts for a larger share of U.S. gross national product than it did in 1981 (and that was when government did a lot more in regulating the economy). It has become incredibly expensive for governments to do anything at all, and they are poorly equipped to respond nimbly to the fast-changing conditions of America today. _American Interest WRM

Read (or at least carefully skim) the entire essay.

Having allowed governments to control the economy via monstrous budgets and central banks, the private sectors of western nations have become almost completely dependent upon government caprice. As the core populations which allowed these societies to advance slowly shrink away, so does any chance of ultimate recovery from the welfare state's collapse, when it comes.

Europe has gone through a similar process, and is somewhat advanced along the downward pathway:

Europe's demographics also aren't on the side of growth. Populations across the developed world are graying, but Europe's low productivity growth means that its future labor shortfall will be especially acute. It doesn't help that Europeans draw social security benefits earlier and more easily than their developed-world peers. Pension commitments will strain national budgets even if Angela Merkel gets her way on handcuffing euro-zone public debt.

Which brings Messrs. Gill and Raiser to the other serious drain on European growth. Big government, by their calculation, shaves about two percentage points off growth once public spending passes 40% of GDP. Some welfare states are better-run than others—think Sweden and Germany—but the World Bank report highlights a few important connections between the welfare state and growth.

Today, European governments spend more on social protection than the rest of the world combined, thereby entrenching powerful disincentives to work and enterprise. Social protections have also come at huge direct cost to taxpayers. _WSJ

And so we see European nations on the verge of economic collapse, one by one, like dominoes. The same thing is occurring in the US, but on the city and state level -- for exactly the same reasons.

The welfare state is dying, and defiantly threatening to take down the rest of the world with it. Is it any wonder that many of the less intelligent global economic analysts look to China and India as the last great hopes for the future of global civilisation?

Fragmentation is likely, widespread hardship is possible, and war is not out of the question. Hope for the best. Prepare for the worst.

50 Years of the Most Lavish Welfare State Comes to This?

The mass criminality in the big cities is merely a speeded-up and concentrated version of life on most large estates – fear, intimidation, cruelty, injustice, savagery towards the vulnerable and the different, a cold sneer turned towards any plea for pity, the awful realisation that when you call for help from the authorities, none will come. _Peter Hitchens

At times like this, one must ask the question: what is the purpose of the welfare state? It seems as if the outcome of the welfare state is a helpless dependency on government handouts, and a growing resentment against the shrinking numbers who try to succeed on their own. This resentment against both authority and against those who actually work for a living, has grown so strong that it explodes into open violence from time to time.

All that is missing for it to grow into full-scale insurrection, is larger numbers of rotten members, and a catastrophic event of opportunity that could serve as the trigger for an all-out rebellion.

Just look and see how many shops are protected with steel shutters, how many homes have bars on their windows. This is not new.

As the polluted flood (it is not a tide; it will not go back down again)...washes on to their very doorsteps, well-off and influential Left-wingers at last meet the filthy thing they have created, and which they ignored when it did not affect them personally.

...The great majority of the looters, smashers, burners and muggers have not been arrested and never will be. Our long-enfeebled police were so useless at the start that thousands of crimes were committed with total impunity.

Now we know why they don’t call themselves ‘police forces’ any more. But they aren’t ‘services’ either, for they certainly don’t serve us or do what we want them to do, preferring to arrest us for defending ourselves. The criminals, who are cunning without being intelligent, all know this. They will wait for the next chance.

...The loping, smirking, shuffling creeps who eventually appeared before the courts were the ultimate losers – the ones who came late to the looting and who were too slow or too stupid to run before they were put in the bag.


Ransacked: Looters targeted many shops

And what courts they are. In the one I sat in last week, self-confessed thieves are courteously addressed by magistrates and clerks as ‘mister’ and asked politely to stand up or ‘accompany the officers’ back to the cells or – more often – out into the street on bail. In the part of the dock reserved for those already free on bail, nobody has bothered to clean up the scribbled and disrespectful graffiti.

Why should anyone respect or fear this chamber of indifference? The wall-hangings behind the magistrates are scruffy and scratched.

There is no sense of awe or determination or of much purpose. There is only a strong sense of going through the motions for the sake of appearances.

Nobody is directly punished for what he has done. Excuses must first be sought, and indulgence arranged where there should be cold rage. There will be ‘social inquiry reports’ and ‘youth offender teams’ who bustle smilingly in and out ready to start work on yet another ‘client’.

...the more encounters you have with our justice system, the less you fear it. A few ‘exemplary’ sentences – none of which will be served in full, or anything near it – will only help to spread the word that arson, robbery, violence, spite and selfishness are not punished here any more. Indeed these are the things we are now famous for around a world that once respected us.

And that is why we have many more nasty surprises waiting for us, here in The Country Formerly Known as Great Britain. _PeterHitchens

A welfare state might have survived if the UK had been sitting on a Saudi Arabia of light, sweet crude oil. But even Saudi Arabia is beginning to discover the follies of unchecked welfare-ism. The kingdom is also facing the threat of insurrection.

For the UK, the rebellion is coming from multiple directions. But every front of the coming rebellion will have been fed, watered, and kept alive by the welfare state.

Norwegian Tragedy: Violent Outbreak of Simmering Culture War?

Explanatory Note: As a population gets progressively squeezed and harried by destructive political policies and top-down cultural dictates, it is inevitable that some weak links will break. Some unstable minds will come completely undone and commit unforgiveable acts such as what was done in Norway last week. The cause and the blame rest on multiple shoulders, indluding those of the authors of the dysfunctional and counter-productive policies and cultural dictates which helps push the unstable ones over the brink.

The growing polarisation of societies sometimes referred to as "The Culture War" is becoming more difficult to deny, in the wake of the tragic outbreak of violence and mayhem in Norway last week.

Norway has long prided herself on her tolerance to Islamic immigration and global jihad, and has gone out of her way to protect Muslim terrorists such as mullah Krekar. Despite the fact that all the rapes in Oslo over the past 5 years have been committed by outsiders -- non-westerners -- the leaders of Norway have papered over any problems that violence-prone outsiders may have been causing. The leaders of Norway considered themselves safe from Islamic violence, for that reason. But these same national leaders -- appeasers of violent men -- had failed to calculate the potential for a violent blowback from more traditional Norwegians, members of the core Norwegian population who prefer the country to go back to the way it was before the influx of non-assimilable outsiders.

Rank	Country of origin[14]	Population (2001)[15]	Population (2011)[16]
1.	Poland	6,432	60,610
2.	Sweden	23,010	34,108
3.	Pakistan	23,581	31,884
4.	Iraq	12,357	27,827
5.	Somalia	10,107	27,523
6.	Germany	9,448	24,394
7.	Vietnam	15,880	20,452
8.	Denmark	19,049	19,522
9.	Iran	11,016	16,957
10.	Turkey	10,990	16,430
11.	Lithuania	378	16,309
12.	Bosnia-Herzegovina	12,944	16,125
13.	Russia	3,749	15,879
14.	Philippines	5,885	14,797
15.	Sri Lanka	10,335	14,017
16.	United Kingdom	10,925	13,395
17.	Kosovo	0 [17]	13,303
18.	Thailand	3,738	13,293
19.	Afghanistan	1,346	12,043
20.	India	6,140	10,096
21.	Morocco	5,719	8,305
22.	China, People's Republic of	3,654	7,895
23.	United States	7,253	7,853
24.	Eritrea	813	7,728
25.	Chile	6,491	7,708
26.	Netherlands	3,848	7,251
27.	Finland	6,776	6,626
28.	Iceland	3,756	6,022
29.	Ethiopia	2,803	5,805
30.	Romania	1,054	5,670
31.	Latvia	385	4,979
32.	France	2,350	4,289
33.	Burma	63	3,350
34.	Palestinian Territory	64	3,340
35.	Croatia	1,863	3,327
36.	Macedonia, Republic of	789	3,244
37.	Brazil	824	3,017
38.	Serbia	0 [17]	2,987
39.	Ukraine	399	2,918
40.	Estonia	342	2,871
41.	Bulgaria	842	2,693
42.	Hungary	1,666	2,599
43.	Spain	1,382	2,577
44.	Slovakia	207	2,498
45.	Lebanon	1,613	2,476
46.	Italy	1,265	2,230
47.	Congo, Democratic Republic of	276	2,183
48.	Syria	860	2,163
49.	Ghana	1,355	2,116
50.	Canada	1,120	1,680
-1		-1	-1

Wikipedia Immigration to Norway
Norway is a very small country, and relatively homogeneous when compared to the US. Outsiders have a large impact, particularly when unassimilable culturally, and when present in large numbers. Norway's politicians and media can sweep outsider rape of Norwegians and other violence and crime under the rug for so long before blowback occurs.

Politicians such as the leaders of Norway and Sweden often believe that their own people have become too civilised to lash out violently against what their leaders are doing to their societies. Such politicians feel that the power of the laws, the courts, and a general culture of obedience to authority and political correctness will be enough to keep their people submissive to whatever societal changes the leaders may choose to inflict upon them.

The recent bloody tragedy in Norway suggests that there may be a bit of the berserker Viking left in Scandinavian populations, despite the long effort of regressive progressives to tame the spirit of individualism and independence among their core peoples. Regressive progressives of the western left have been generally successful over the past few decades, in using the weapons at their command -- including general control over popular media and news media -- to control their populations in the face of a wide range of provocations. But just as the female domestic partner may use her mastery of language to dominate her male partner for a long period of time, in some cases the other party may resort to his particular skills and competencies to fight back. That is just one example of when domestic violence can occur -- sometimes in a decisive way -- at the end of a long and somewhat lop-sided exchange.

Norway's sad example of bloody domestic violence appears to fit into the above mold. Norwegian citizens who object to a large scale re-arrangement of their country, have been brow-beaten and forced into submission by laws, courts, and politically correct society. They have had essentially no recourse to the course their leaders have set for their nation. But historically, humans have used violence to settle disputes far more frequently than they have used laws, courts, and the use of societal disapproval.

Governments which forget the lessons of history -- that they govern at the consent of their citizens or they do not govern for long -- will be reminded of those harsh lessons sooner or later.

Inside the continental United States, the borders of the "culture war" can be seen by looking at a national election map at county-level resolution.  The red counties lean away from the regressive progressive agenda.  The blue counties lean toward the agenda of government dependency, and shifting the balance of power away from citizens and toward central government.

Civilisations rise and fall based upon the ability of its citizens and organsations to work together toward a common stability, lingua franca, culture, security, and markets.  If the forces of dissolution and neo-tribalisation become stronger than the forces of cohesion, the civilisation will tear itself apart.

What happened in Norway is the sign of a society in the process of tearing itself apart.  The government of Norway, and other leftist European governments, will attempt to double down on the use of laws, courts, media, and popular culture and political correctness, to take advantage of the rare violent episode from the Norwegian nationalist side.   Taking that path will drive their country even deeper into the maelstrom of polarisation, and closer to large scale bloody confrontations.

Marginalising Norwegian traditionalists will result in a hardening of both sides of the culture war.  It will push the crimes of non-western immigrants even further under the media carpet.  It will make it easier for violent jihadists to plan and execute acts of intimidation and murder.  But it is what the dysfunctional Norwegian government -- and the governments of other dysfunctional European nations -- are likely to do.

Despite all the denials, the culture war is very active.  But until now, it had not been particularly violent, except on the part of government agencies enforcing political correctness.

In the US, after the violent Oklahoma City reaction to the government's Ruby Ridge and Waco adventures, came 9/11. After the US Clinton administration had declared "right wing terrorism" as the true enemy, and let down their guard against dangers from global jihadist supremacism, the jihad stepped into the breech and took advantage of the regressive progressive self-blinding. Let us hope that a similar catastrophe does not befall Europe, in its headlong rush to blame its own traditionalists for all of Europe's growing problems of immigration-spawned violence.

More: The perpetrator of the bloody Norwegian massacre also intended to attack oil and gas platforms and a BP oil company base. The man has written a 1500 page manifesto detailing his grievances and his terror plans of vengeance. Fortunately there are not many persons at this extreme in Norway or any other modern nation.

Some persons who have committed mass murders in the past were later found to be suffering from brain tumours or other serious diseases affecting their mental states.

Despite the outlier nature of this event and this perpetrator, the tragedy should be seen as a warning call to the Norwegian government and other European governments who are pressing the politically correct multicultural agenda against the best interests of their native populations. It is often the outliers -- the canaries in the coal mines -- that tell us that something is going wrong. If European governments cannot interpret the meaning of this event appropriately, they are in for a world of pain.