The global Depression scenario is now dominant. Here are some of the drivers:
- An utterly complete regulatory capture of the US government (the advent of the Obama administration has done nothing to change this). Regulatory capture is when monied interests take control of the government institutions that are supposed to regulate/control them. In OODA terms, this is a loss of control over the critical orientation phase of decision making loops. As a result, a vast looting of the government’s coffers is now in process.
- The D-process (de-leveraging and deflation) feedback loop is now entrenched. This is a neat term developed by Ray Dalio of Bridewater Associates (Barron’s interview). The D-process is what happens (rarely) when too much debt is accumulated. Excess debt must be eliminated before growth can return. In the US case alone, excess debt load is $20-25 Trillion. Since global governments are unwilling and/or unable to wipe out the world’s creditors (they’ve been captured), the process will drag on and on. Stimulus and bailout packages, constructed in a way to protect the wealth of the world’s creditors/rentiers (looting), won’t work. It will only prolong and deepen the failure as the D-process feedback loop intensifies.
- A large number of countries from Japan to Spain to Latvia are already in depressions. These failures will serve as a drag on the entire global system, catalyzing the feedback loops of the D-process.
John Robb
February 9, 2009
THE DEPRESSION SCENARIO IS HERE
[In selecting the QOTD I was tempted by “Dude, wtf? is it time to arm ourselves or join the mormon church?” in the comments to the above quoted post. But the main post won out.
Others (probably a crackpot, but who knows what could happen) are advocating the cancellation of all debt.–Joe]
One does hope Mr. Cane has heard of the law of unintended consequences; or of second order effects.
Oh my….cancel all debt? Sounds great, if you are a debtor. But what if you are a creditor?
I started to prepare an elaborate screed against this kind of muddle headed thinking. But honestly, Joe, I am too tired. What this gets us to is a barter economy. As a trivial example…what about the wages your employer owes you for two weeks work? That’s a debt. What about your pension plan? That 12 month CD you bought? For that matter…any mutual fund is a debt. Any savings at all, in fact, held in anything other than gold or other tangible goods.
It’s slightly less stupid than the folks who say “The government should just give everyone a million dollars.” But not by much.
The stupid…it burns!
Yes. I know. But it’s crazy talk in the halls of Congress and the Whitehouse with this “stimlus” package too. Government is not know for the brillances of their solutions to problems. Especially if those problems were created by government to begin with.