Of Two Minds – The Illusion of Stability, the Inevitability of Collapse

Imagine being at a party celebrating the vast wealth generated in the last ten months in stocks, cryptocurrencies, real estate and just about every other asset class. The lights flicker briefly but the host assures the crowd the generator powering the party is working perfectly.

Being a skeptic, you slip out on the excuse of bringing in more champagne and pay a visit to the generator room. To your horror, you find the entire arrangement held together with duct tape and rotted 2X4s, the electrical panel is an acrid-smelling mess of haphazard frayed wire and the generator is over-heated and vibrating off its foundation bolts. Whatever governor the engine once had is gone, it clearly won’t last the night.

Beneath the illusory stability of rising GDP, the extremes of debt, leverage, stimulus and speculative frenzy required to keep the phantom wealth bubble from imploding are all rising parabolically. Every attempt to return to an economy that’s not dependent on debt-asset bubbles and unsustainable expansions of debt and monetary stimulus has triggered a global market crash which can only be saved by doubling, tripling or quadrupling the previous levels of debt and stimulus.

This is why collapse is now inevitable. Parabolic blow-off expansions generate instabilities that cannot be suppressed by doing more of what’s failing; that is called run to failure for a reason: the only possible outcome is systemic failure, i.e. the collapse of the phantom wealth bubble, a collapse which will bring down the entire machinery of bubble-blowing.

Of Two Minds – The Illusion of Stability, the Inevitability of Collapse