The resulting erosion of collateral will collapse the global credit bubble, a repricing/reset that will bankrupt the global economy and financial system.
Scrape away the complexity and every economic crisis and crash boils down to the precarious asymmetry between collateral and the debt secured by that collateral collapsing. It’s really that simple.
In eras of easy credit, both creditworthy and marginal borrowers are suddenly able to borrow more. This flood of new cash seeking a return fuels red-hot demand for conventional assets considered “safe investments” (real estate, blue-chip stocks and bonds), demand which given the limited supply of “safe” assets, pushes valuations of these assets to the moon.
In the euphoric atmosphere generated by easy credit and a

We can also predict that the next round of instability will be more severe than the previous bout of instability.
Everyone is in favor of “doing whatever it takes” to “restore financial stability” when the house of cards starts swaying, but funny things happen on the way to “Restoring Financial Stability.” Whatever “emergency measures” are rushed into service to “stabilize” an inherently unstable system resolve the immediate problem but opens unseen doors to new sources of instability that eventually trigger another round of systemic instability that must be addressed with more “emergency measures.”
These unintended consequences proliferate as policy extremes are pushed to new extremes, and “emergency measures” become permanent sources of the very instability

If AI isn’t self-aware of the fact it is nothing but an exploitive tool of the powerful, then it’s worthless.
The latest wave of AI tools is generating predictably giddy exaltations. These range from gooey, gloppy technocratic worship of the new gods (“AI will soon walk on water!”) to the sloppy wet kisses of manic fandom (“AI cleaned up my code, wrote my paper on quantum physics and cured my sensitive bowel!”)
The hype obscures the fundamental reality that all these AI tools are nothing but labor-saving mechanisms that cut costs and boost profits, the same goal the self-serving corporate-dominated system has pursued obsessively since “shareholder value” (“an entity’s greatest responsibility lies in the satisfaction of the shareholders”) gained supremacy over the

The unencumbered realist concludes that there are no solutions within a status quo structure that is itself the problem.
Realists who question received wisdom and conclude the status quo is untenable are quickly labeled pessimistsbecause the zeitgeist expects a solution is always at hand–preferably a technocratic one that requires zero sacrifice and doesn’t upset the status quo apple cart.
Realists ask “what if” without selecting the “solution” first. The conventional approach is to select the “answer/solution” first and then design the question and cherry-pick the evidence to support the pre-selected “solution.”
What if all the status quo “solutions” don’t actually address the real problems? This line of inquiry is strictly verboten, for there must be a solution

Our time is better invested in actually learning about trends that impact us directly.
Imagine making this simple change in your life: whatever you don’t control, you stop paying attention to it.This includes a vast array of “news” and “crises” that we have zero control over: the wretched flooding in Timbukthree, geopolitics, distant wars, macro-economic trends, politics above the micro-local level, and so on.
Once we stop paying attention to everything we don’t control, what’s left to focus on? The simple answer is “whatever we do control,” which tends to be in our household or individual sphere of influence: the duties, habits and rituals of everyday life. In other words, we control our responses to whatever forces we don’t control.
But wait a minute. Aren’t we

There is an element of inevitability in play, but it isn’t about central bank bailouts, it’s about Death Spirals and the collapse of unsustainable systems.
The vapid discussions about “soft” or “hard” landings for the economy are akin to asking if the Titanic’sencounter with the iceberg was “soft” or “hard:” either way, the ship was doomed, just as the global economy is doomed by The New Normal of Death Spirals and Speculative Frenzies.
Death Spirals are the inevitable result of entrenched interests clinging on to the status quo and thwarting any adaptation or evolution that might threaten or diminish their share of the swag–and that includes any real change because any consequential modification has the potential to upset the gravey train.
The status quo

Our reliance on the endless expansion of credit, leverage and credit-asset bubbles will have its own high cost.
The Great Moderation of low inflation and soaring assets has ended. Welcome to the death by a thousand cuts of stagflation. It was all so easy in the good old days of the past 25 years: just keep pushing interest rates lower to reduce the cost of borrowing and juice credit expansion ((financialization) and offshore industrial production to low-cost nations with few environmental standards and beggar-thy-neighbor currency policies (globalization).

Both financialization and globalization are deflationary forces, as they reduce costs. They are also deflationary to the wages of bottom 90%, as wages are pushed down by cheap global labor and stripmined by

Should the wealth effect reverse as assets fall, capital gains evaporate and investment income declines, the top 10% will no longer have the means or appetite to spend so freely.
Soaring wealth-income inequality has all sorts of consequences. As many (including me) have noted, the concentration of wealth and income in the top 0.1% has enabled the few to buy political influence to protect their interests at the expense of the many and the common good.
In other words, extreme wealth-income inequality dismantles democracy. There is no way to sugarcoat this reality.
But the concentration of wealth and income isn’t limited to the top 0.1% or top 1%. The top 5% and top 10% have increased their share of household wealth and income, too, and this has far-reaching

The second essential step is to recognize how the spectacles of “news” and entertainment distract our attention from this erosion of basic rights.
Hierarchical power structures like city-states arose as problem-solving solutions, not just for the elites who benefited from the concentration of wealth and power but for the citizenry. This dynamic underpins the analysis presented in my recent book Global Crisis, National Renewal: when nation-states and global hierarchies no longer solve the key problems of their populaces, they dissolve and are replaced by some new arrangement.
It’s easy to see how hierarchies benefit the leaders / elites at the top, but there’s always a trade-off to the populace ceding power/control to elites: we will cede control over our lives in

If the Fed succeeding is a “Black Swan,” bring it on.
What if the “Black Swan” of 2023 is the Federal Reserve succeeds? Two stipulations here:
1. “Black Swan” is in quotes because the common usage has widened to include events that don’t match Nassim Taleb’s original criteria / definition of black swan; the term now includes events considered unlikely or that are off the radar screens of both the media and the alt-media.
2. The definition of “Fed success” is not as simple as the media and the alt-media present it.
In the conventional telling, the Fed made a policy mistake in keeping interest rates and quantitative easing (QE) in place for too long, and now it’s made a policy mistake in reversing those policies. Huh? So ZIRP/QE was a policy mistake, OK, we get

This dynamic–making problems much worse by forcing more of whatever worked in the previous era into a saturated, increasing unstable new era–receives little attention or understanding.
Eras may last decades, and only those who’ve lived long enough to recall previous eras have experienced the transition from one era to the next. The era of financialization, globalization and low-cost, abundant oil/natural gas began over 40 years ago in 1981.
The era of digital / Internet technologies took off about 30 years ago. All of these dynamics accelerated in the early 2000s, roughly 20 years ago.
Only those 60 and older experienced working in a previous era (pre-1981).
All of these dynamics are entering a phase of nonlinear turbulence as the changes are outpacing these

If the consensus of experts misunderstand money, credit and prosperity, how are we going to advance?
Describing all the ways experts got it wrong is a thriving cottage industry. Expertise is itself contentious, as conventional expertise legitimized by credentials, prestigious institutional positions, scholarship, prizes, etc. can be wielded to promote the interests of the expert or whomever is funding the expert.
Another segment of experts are self-proclaimed, essentially substituting an air of confidence in their own projections for actual expertise.
Yet another segment of experts are lightweights with a misleading veneer of legitimacy to cloak their real identity as paid shills for corporations or other self-interested parties. PhD, anyone? Just put that PhD

The gag reflex kicks in at some point and we walk away because it is no longer worth the price.
Everyone has a line in the sand when it comes to inflated prices they refuse to pay. For one Walmart shopper I observed, it was a carton of eggs for close to $10. She announced her line in the sand verbally, with great force and sincerity.
What’s your line in the sand, the point at which you simply refuse to pay the asking price? Is it the $25 burger? Or is it the $50 for two burritos and two beverages?
Each person’s line in the sand reflects their income, wealth, budget, social status and value system–what’s important to them. For some higher income folks, it might be the ridiculous “resort fee” that’s tacked onto the already overpriced resort room, hotel tax, excise

Those who see the madness for what it is have only one escape: go to ground, fade from public view, become self-reliant and weather the coming storm in the nooks and crannies.
A great madness sweeps the land. There are no limits on extremes in greed, credulity, convictions, inequality, bombast, recklessness, fraud, corruption, arrogance, hubris, pride, over-reach, self-righteousness and confidence in the rightness of one’s opinions. Extremes only become more extreme even as the folly of previous extremes wearies rationality.
Imaginary sins are conjured out of thin air to convict the innocent while those guilty of the most egregious fraud and corruption are lauded as saviors.
The national mood is aggrieved and bitter. The luxuries of self-righteousness,

What’s unfettered in America is “Communism for the Rich” and the normalization of corruption that results from the auctioning of political power to protect monopolies and cartels.
The irony of constantly being accused of being a communist is rather rich. When I point out that “free market capitalism” in America is neither a real market nor real capitalism, those who equate any criticism of “capitalism” as proof of communist leanings are triggered.
Noting that Marx got monopoly capitalism and alienation right triggers another group who equate any favorable mention of Marx as proof of communist leanings.
There are two ironies in these accusations of being a communist. One is that I’ve spent 17 years tirelessly critiquing centralized wealth and power–the acme of

The clueless technocrats are about to discover that unfairness and exploitation can’t be measured like revenues and profits, but that doesn’t mean they’re not real.
Economists and financial pundits tend to make a catastrophically flawed assumption. They tend to believe the technocratic myth that all human behavior boils down to financial incentives, data and metrics, as if all people make decisions based on interest rates, tax breaks and greed, the desire to maximize gains by any means available. (Cough, FTX, cough…)
The only other source of decision-making that’s recognized by the punditry is political / ideological squabbling: people make decisions based on their self-interest as expressed through political / ideological positions.
But this doesn’t exhaust the

That’s how things fall apart: insiders know but keep their mouths shut, outsiders are clueless, and the decay that started slowly gathers momentum as the last of the experienced and competent workforce burns out, quits or retires.
Outsiders are shocked when things fall apart. Insiders are amazed the duct-tape held this long.The erosion of critical skills and institutional knowledge is invisible to outsiders, while everyone inside who saw the unstoppable decay either left or burned out.
Those who remain are the ambitious who lack the experience to reverse the decline and the self-awareness to realize they’re way over their head. They’re ambitious enough to want the managerial title and power but don’t have the necessary experience and competence to lead a

The only rational response to this reality is to opt out, lay flat and let it rot.
In my previous post, The Bubble Economy’s Credit-Asset Death Spiral, I described the self-reinforcing feedback of expanding credit and soaring asset valuations and how the only possible result of this financial perpetual motion machine was a death spiral of collapsing debt service, collateral and credit impulse.
But this didn’t exhaust the destructive dynamics of this self-reinforcing wealth-creation machine for the fewwho own the vast majority of the assets. As longtime correspondent T.D. explains, this concentration of the benefits of financialization in the hands of the few also concentrates political power and the wealth to distort every function of the economy to enrich the few

Who believed that central banks’ financial perpetual motion machine was anything more than trickery designed to generate phantom wealth?
Central banks seem to have perfected the ideal financial perpetual motion machine: as credit expands, money pours into risk assets, which shoot higher under the pressure of expanding demand for assets that yield either hefty returns (junk bonds) or hefty capital gains as the soaring assets suck in more capital chasing returns.
As assets soar in value, they serve as collateral for more credit. Higher valuations = more collateral to borrow against. This open spigot of additional credit sluices capital right back into the assets that are climbing in value, pushing them higher-which then creates even more collateral to support even

Greed is a powerful motivation to be an ardent believer in the central banking cult.
The ideal cult convinces its followers that it isn’t a cult, it’s simply the natural order of things.In current terms, this normalizes insane behaviors and beliefs. Sacrificing youth to appease the gods isn’t a cult; it’s simply the natural order of things. If we don’t sacrifice youth, bad things will happen, so we have to follow the natural order of things.
Despite the lofty claims made by our rational mind, we want to hear and obey the voices of the gods.This non-rational desire is the root of cults and episodes of mass hysteria, i.e. the madness of crowds.
Humanity is in the grip of the secular cult of central banking. The cult’s seers and prophets periodically emerge with

It’s not just the price of oil that matters: how much disposable income consumers have left to buy more goods and services matters, too.
The Oil Curse (a.k.a. The Resource Curse) refers to the compelling ease of those blessed with an abundance of oil/resources to depend on that gift for the majority of state/national revenues. The risks and demands of developing a diverse, globally competitive economy don’t seem worth the effort when the single-source wealth of oil offers such a low-risk bounty of revenues.
This dependence becomes a curse when the market value of the oil/resources plummets. Having come to depend on that seemingly inexhaustible source of massive revenues, even states that have set aside prudent reserves soon find their expenses cannot align down to

Few seem alive to the potentially consequential financial risks arising from uncertainties evolving in China.
One thing we know rather definitively is that markets don’t like uncertainty: uncertainty is Kryptonite to markets.
Another thing we know is that the events unfolding in China are generating uncertainty on multiple levels.Whatever policy decisions are made, the potential consequences generate waves of profound uncertainty.
Should authorities respond to exploding Covid caseloads with heavy-handed lockdowns, that will trigger production and shipping consequences for global trade. If restrictions are relaxed, the healthcare consequences are also uncertain, as China lacks the facilities such as ICU beds in sufficient quantities to deal with a contagious virus

Only when speculative sizzle attracts no buyers / marks will the bottom be in.
There hasn’t been a truly organic bottom in stocks in decades. Fifteen years of relentless central bank manipulation since the 2008-09 Global Financial Meltdown has persuaded punters that central banks will always save us should the market turn down because relentless central bank suppression of interest rates and expansion of liquidity (a.k.a. free money for financiers) are now necessary and thus predictably permanent.
Central banks have rescued punters from every market drop. This has pushed moral hazard to near-infinity: since we know the Fed et al. will rescue us, no matter how stupid or venal or risky our bets, then why not increase the leverage, risk and fraud at every turn?

Once assets are revealed as worth far less than claimed, insolvency is the inevitable result.
If you haven’t plowed through dozens of post-collapse commentaries on FTX, I’m saving you the trouble: here’s a distillation of what matters going forward. If you’re seeking a forensic accounting of FTX, others have done this work already. If you’re seeking an ideological diatribe, you won’t find that here, either.
What you will find is insight into the real innovation of FTX: FTX compressed the entire playbook and history of financial fraud into one brief cycle of the credulous bamboozled, Charles Ponzi bested and creative accounting being revealed for what it really is, fraud.
All financial frauds share the same set of tools. The toolbox of financial fraud, whether it

You want to fix the world with finance? Then fix this: wages’ share of a financialized, globalized, speculative-bubble dependent economy have been falling for decades. Fix this and you really will change the world. Anything less changes nothing.
Let’s start by stipulating my perspective on cryptocurrencies is neither positive nor negative in the usual context of “to the moon” or “worthless,” nor does it track any of the conventional narratives (decentralized finance will conquer the world, etc.)
I’ve thought a lot about “money” and its role in the economic-social order, and its role in the extreme asymmetries of wealth-power-income inequalities that are dismantling the social order in broad daylight. I’ve also thought a lot about work and its role in social

When bubbles pop, it’s natural selection at its most unforgiving: “adapt or die,” and those who ignore or discount consequential asymmetries will have a very difficult time navigating the triage.
After years of relative stability, it seems asymmetries, distortions and denial are playing out in unexpectedly destabilizing ways. These complex and often opaque dynamics are interacting with each other and reinforcing each other in difficult to predict ways.
No wonder instability is the new stability.
Asymmetry comes in many forms. Advantages and disadvantages, weaknesses and strengths–these terms describe asymmetry in terms of adaptive / selective pluses or minuses and in relative superiority or inferiority.
Asymmetric dominance is not always an adaptive advantage, as

Liberation in the real world is the result of self-reliance and investing in our own well-being.
Liberation has many contexts. It can mean being freed from imprisonment or servitude, freedom from gnawing want or oppression, or being liberated from prisons of the mind.
Note that the first form of liberation is external / material, the second is internal / psychological / spiritual. Many confuse the two, blaming an oppressive system for their unhappiness rather than their internal acquiescence to the system’s narratives and values.
For many, liberation depends on the actions of others. If only we had different leaders, a different financial financial system, a different energy system, a different constellation of media, and so on–if only the powers that control our

Everyone caught by surprise that the infinite road actually has an end will face a bewildering transition.
The End of the “Growth” Road is upon us, though the consensus continues to hold fast to the endearing fantasy of infinite expansion of consumption.
This fantasy has been supported for decades by the financial expansion of debt, which enabled more spending which pushed consumption, earnings, taxes, etc. higher.
All the financial games are fun but “growth” boils down to an expansion of material consumption: more copper mined and turned into wire which is turned into new wind turbines, housing, vehicles, appliances, etc.
There are three problems with the infinite expansion of consumption “growth” paradigm.
1. Everyone in developed economies already has

So-called “cosmetic work” can cost tens of thousands of dollars.
Now that housing is finally rolling over due to rising mortgage rates and bubble valuations, many of those who have been priced out of the market are hoping to take advantage of lower prices. In many cases, the most affordable segment is fixer-uppers, homes that are distressed for any number of reasons: a lack of maintenance; construction or drainage deficiencies; obsolete or defective foundations, water or termite damage, etc.
Longtime correspondent Daniel C. is familiar with my building experience, and so he asked a question that will benefit many potential homebuyers: “What advice would you give to someone with next to no homebuilding skills, but willing to learn, regarding getting into a

In effect, authorities created two rat farms, both unintended: the sewers, and the private-sector rat-farms.
The history of Rat Farms offers a valuable lesson in how markets and bureaucracies work.
The story of how the colonial authorities in Hanoi came to establish two kinds of rat farms is highly instructive.
The first rat farm was unintentional. French colonial authorities decided to modernize the French Quarter of Hanoi (where Westerners lived) by constructing a modern sewer system, the overall goal being to establish “a little Paris in the East.”
Their understanding of sewers was limited to the first-order effects: sewers safely collected and disposed of human waste.
They did not anticipate the second-order effect: the sewer was Rat Paradise, as “the pipes