Black Swans and Austrian Teddy Bears

At the bottom of an earlier post there's a little discussion about a couple of books I've been reading that contain some overlapping themes

The first is Nassim Taleb's The Black Swan

- Black Swans being large-impact, hard-to-predict, random, unplanned and rare events beyond the realm of normal expectations.

The second is Naomi Kein's The Shock Doctrine: The Rise of Disaster Capitalism

- Disaster Capitalism being the corporate exploitation of people in the wake of disasters or upheavals

The big problem I have with both Taleb and Klein is that they both do a stand-up job of peddling that absolutist, stochastic, 'shit just happens' world view which is so useful to those people who gain the most when things get fucked up

Klein pays nowhere near enough attention to the possibility that many of the disasters and upheavals she refers to were staged, or at least anticipated

Taleb quotes events like the 9/11 attacks and stock market crashes as being examples of unpredictable, Black Swan events, when there's copious evidence that they were anything but. One person's Black Swan; be it due to deceit, dissonance, indoctrination, or plain incompetence, is very often another person's Bleeding Obvious.

Even the majority of natural, as opposed to man-made, disasters cannot fairly be described as Black Swan events. The people who live in places like New Orleans, Mexico City, Los Angeles or Naples know full well that their cities are inevitably going to get creamed sooner or later, and very possibly within the span of a human lifetime. The fact that many of those people engage in denial doesn't change the predictability of that creaming

Property Hot Spots of the Future #17 - Napoli

As such, both Klein and Taleb and the output of many others given prominence in the supposedly alternative, dissenting media, is paving the way for a truly useless, profoundly ineffective analysis of the ghastliness which many of us believe may be begining to overtake our world

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At the heart of the ghastliness which many of us believe may be begining to overtake our world lies the imminent (?) collapse of the dollar and related currencies

The Imminent (?) Collapse of the Dollar Story goes something like this...

• Forty or more years ago America abandoned the Gold Standard and embarked on a policy of paying for its imports with increasingly devalued, worthless dollars
  
  
• America simply printed as many worthless dollars as it needed and exchanged them for imported stuff that was actually worth something
  
  
• This was made possible by the fact that everything sold on global markets was priced in dollars, so everyone around the world had to hold stocks of this intrinsically useless paper to buy essential commodities
  
  
• Any time anyone comes anywhere to buying and selling essential commodities with anything but dollars the Americans blow the shit out of them
  
  
• There are now so many useless dollars in circulation globally that the entire system is about to choke catastrophically. The Russians, the Chinese and others have had enough and are about to walk away from the whole stinking mess

On-line economician Peter Schiff tells a story about five Asians and an American stranded on a desert island. One of the Asians is responsible for fishing, another for hunting, another for growing vegetables, and so on. The American's 'job' is to eat a big fuck off meal prepared by the Asians every night and leave them enough crumbs to survive through to the next day...

Schiff is one of a loose group of bearish, Libertarian, Austrian School Economicians much beloved by Internet Loons, including my goodself

Other members of this elite club include Jim Rogers, Jim Puplava and, of course, Maaaaaaaax Keiser

(and Michael Hudson and F W Engdahl, sort of)

All of these guys have, to one degree or another, predicted that...

• The dollar and other fiat currencies of non productive countries will tank

• There will be a commensurate and massive rise in the dollar price of tangible commodities such as oil, wheat and gold

As it happens, commodities did rise and the dollar did fall earlier this year - to accompanying cries of 'this is it!', 'this is it!' from the little dollar bears

but it wasn't 'it'

The US dollar has subsequently strengthened massively and commodities, commodity-based shares and commodity-based currencies have dived to the floor

Any private investors following the advice of Schiff, Rogers, Keiser and Puplava will have lost up to 50% in two or three months. Anyone who follows their podcasts can't help but have been entertained by listening to Schiff attempting to placate one of his investors who called up after losing half of his life savings or the sound of Keiser melting down into a pool of despair and babbling about buying into dollars a few days ago




It's not that Schiff, Keiser, et al are actually wrong about the future

• The dollar and associated currencies are fucked

• The prices of things we can't do without - oil, food, water - will go up in a big, scary, unaffordable way

• The prices of things we can do without, or need a loan to buy - houses, cars, plastic tat will fall
  

Their problem is that the secret of good economic commentary, as with all forms of comedy, is



... timing



These guys have got their timing wrong because...


1. They underestimated just how crooked supposedly free markets are.

The Chinese increased their oil imports by 46% in September and bullion traders around the world cannot meet demand, yet the reported market price of oil and gold have fallen dramatically. Conclusion? The markets are bent


2. They are attempting to comment in real time about insanely volatile markets

The poor quality of market information available to mere mortals and the volume of market 'noise' is such that only a completely bow-tie wearing berk would attempt to extrapolate daily moves out into the future. The Internet deserves a lot of blame for the rise of this kind of commentary


3. They are nowhere near Loony enough

A lot of people have heard the famous Jefferson quote...

"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."

...but don't seem to have understood its implications.

The process Jefferson was talking about 200 years ago is deliberate and managed. Switches between inflation and deflation are only nurtured when it suits the people doing the managing and they are not in the business of telegraphing when that would be.

Years of inflation have already ensnared the bulk of people in debt. All that remains is to mop up the minority of people, mostly Baby Boomers who until a few months ago were expecting a nice, cushy retirement, who actually put money aside over that time

And those who placed their money in the markets have just lost 40-50% of their savings

Those who've kept away from the markets and are holding cash instead can look forward to a 0% interest rate, whilst prices are rising 10%+, as their reward

Once the savers have been rogered good and proper, that's everyone in the bottom 99.99% of society accounted for, then all the money our governments have released to the shadow banking system can be unleashed to buy everything that's worth buying unopposed

A massive transfer of real wealth will then take place and a glittering future of supercharged debt-serfdom secured

And even if some ordinary people manage to avoid mortgaging their lives away and actually retain some savings, there will still be plenty of tricks left in the toybox to deal with them

None of this is too far off now but I won't be picking any dates

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