CROSSROADS: Two Sets of Solutions as the Status Quo Crumbles – By Charles Hugh Smith

Source – charleshughsmith.blogspot.ca

– “…The “solution” that can’t possibly work is the continuation of the status quo. There are only two pathways as the status quo arrangement destabilizes, decays and decoheres: 1) a doomed nostalgia for “solutions” that are no longer attainable (for example, Cargo Cults of “endless growth”) or 2) an alternative set of solutions that are sustainable because they are localized, networked, democratized, opt-in and self-funded”:

(Two Sets of Solutions as the Status Quo Crumbles – By Charles Hugh Smith)

We are about to start a painful learning process about what is “impossible” and what is inevitable.

Two charts illustrate Why Our Status Quo Failed and Is Beyond Reform: this chart of the S-Curve of financialization, leverage, debt, central planning, regulatory capture and globalization–that is, the engines of modern “growth”–depicts the inevitable stagnation and decline of these dynamics as overcapacity, debt saturation and diminishing returns take hold.

This chart illustrates the status quo’s insistence on doing more of what has failed spectacularly: since all this worked in the boost phase, the central planning Cargo Cult’s “leadership” is convinced it will all work magically again, if only we do more of it.

Alas, this is magical thinking. One might as well paint radio dials on rocks and expect the rock to magically turn into a functioning radio.

The chart of the Seneca Cliff illustrates how the S-curve of “growth” can continue expanding even as the foundation weakens. As the foundations of real growth weaken– productivity, collateral, social mobility, etc.–the system become increasingly fragile and brittle. But this fragility is masked by the appearance of stability until a crisis cracks it wide open.

Normalcy crumbles into instability, and people and systems accustomed to stable supply chains and political stability struggle to maintain their grip on income streams and resources as abundance slips into scarcity and dependence on central planning becomes a liability of learned helplessness.

The S-curve:

Seneca Cliff:

There are two sets of solutions as stability and financialized “growth” slide into instability and DeGrowth.

1. Acquire skills that will be increasingly scarce and a network of collaborators, customers and suppliers who value/make use of these skills.

2. Create a new mode of production that doesn’t rely on central banks, states and global finance to function: in effect, a decentralized, localized networked system that exists in parallel with the centralized hierarchies of the current mode of production which is centralized, industrialized, globalized, financialized, neofeudal, neoliberal, neocolonial, and dependent on ever-expanding leverage, debt, central planning, regulatory capture and fossil fuel consumption.

I describe the first set of solutions in my book Get a Job, Build a Real Career and Defy a Bewildering Economy.

The second set of solutions are the subject of my book A Radically Beneficial World: Automation, Technology & Creating Jobs for All.

Ultimately, these two sets of solutions are two facets of the only solution: a more sustainable, just, efficient, decentralized, transparent and opportunity-for-all mode of production.

Naysayers love to claim that these solutions can’t possibly work for the usual array of reasons, which boil down to 1) my identity is dependent on poking holes in others’ solutions or 2) my status and livelihood are dependent on the status quo continuing exactly as it is now or 3) an unexamined faith that the current mode of production is the only possible mode of production.

Note to naysayers: the “solution” that can’t possibly work is the continuation of the status quo. There are only two pathways as the status quo arrangement destabilizes, decays and decoheres: 1) a doomed nostalgia for “solutions” that are no longer attainable (for example, Cargo Cults of “endless growth”) or 2) an alternative set of solutions that are sustainable because they are localized, networked, democratized, opt-in and self-funded.

We are about to start a painful learning process about what is “impossible” and what is inevitable. Once it becomes self-evident that the current mode of production is not sustainable, we’ll have no choice but to try more sustainable modes of production that are not just more efficient but that offer greater stability, opportunity and social mobility.

Related…

Is China About to Go “Scorched Earth” on the US Dollar?

China’s currency, the Chinese Yuan, remains pegged to the US Dollar. So when the US Dollar strengthens, the Chinese Yuan strengthens to.

For an economy as rife with garbage debt as China (shadow banking debt is over 200% of GDP), this is a DISASTER.

With that in mind, consider that the US Dollar is now at 99.

Whenever the US Dollar reaches these heights, China fires a warning shot at the Federal Reserve by aggressively devaluing the Yuan.

And this in turn causes a stock market MELTDOWN.

Buckle up, because as I write this Monday morning, China just began to aggressively devalue the Yuan AGAIN.

Over 99% of investors have missed this. They continue to focus on what stocks do in the day to day. But a big move is about to hit the markets.

Gold has picked up that something MAJOR is afoot. It’s exploding higher against EVERY major currency.

Below is Gold’s chart prices in $USD, the Japanese Yen, and the Euro. Gold has BROKEN OUT big time in $USD and Euros. It’s about to do the same in Yen.

Gold has figured it out. SOMETHING MASSIVE IS COMING. And it’s coming from Every. Major. Central. Bank.

(www.phoenixcapitalresearch.com)

Related…

Calm Before The Storm – Coming Out Of The Voldrums

Implied volatilities – the market’s best guess at short-term-future uncertainty – collapsed last week across every asset class from FX to equity. For now, as Bloomberg’s Richard Breslow notes, markets seem comfortably calm amid the real storm of macro, micro, and geopolitical risks, but many of the same ‘calm’ markets are at critical technical levels putting them all “in play.”

Also sprach Draghi: an ECB meeting for all and none, but as Bloomberg’s Richard Breslow explains, the bottom line is that he said little, promised less and the markets survived just fine. There was little clamoring for, nor palpable financial condition stress requiring, immediate action — and he obliged. He bought himself full optionality for December at no cost. Under the circumstances, it gives an interesting twist to the moniker Super Mario.

So in this brief window of opportunity, asset prices will be able to sort themselves out without some new central bank push. It’s worth watching where the natural forces of markets take things. And what technical levels hold or give way.

There was no announcement of a QE extension. Lots of people warned that could lead to bond mayhem. Result? A bull flattener led by core Europe. Periphery yields shrugged the whole thing off. Spain’s 50-year offering went off without a hitch.

Earlier this week, bund yields “spiked” to the 200-day moving average, before falling back. Watch this level (currently 9.4bps). There’s either a core scarcity issue or there isn’t. Do we really need the ECB to tell us how many bunds are out there?

In fact, as a reminder, keep an eye on the 200-dma for every major sovereign 10-year. All are in play.

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Which is even more concerning given Peter Tchir’s “Scariest Chart fro Bond Yields”…

While the market seems to fixate on VIX and the implications of VIX for the equity markets, the Treasury VIX often languishes in obscurity, but for only the 3rd time in its existence (it was created January 2013), it has closed below 3.95 (the red circles on the chart).

Each of the last two times that the Treasury VIX closed below 3.95, 10-year Treasury yields headed sharply higher.

* * *

Equities are interesting because they’re not interesting. Not flying, but most certainly defying all rumors of their imminent demise. They’re in well-defined ranges. Wait for a breakout to get excited and play the range. It’s worked over and over. And that’s with talk of taper, BOJ on hold and the Fed teeing up December. Impressive.

People are bulled up on oil. WTI is trying to hold above $50 — A feat it has struggled with. That’s the pivot and it’s close. If it can stay up here, should the dollar go bid, it would be a powerful sign.

The dollar looks strong against the majors, sideways versus emerging markets. Tells me this isn’t a dollar move.

As countries back away from deeper negative rates, they’re getting the weaker currencies they wanted in the first place. Monetary policy fantasists might want to take note

http://www.zerohedge.com/news/2016-10-24/calm-storm-coming-out-voldrums