More Economic Statistics without Meaningful Context

The linked article here on increased consumer spending, and how it has helped boost GDP as a whole this last quarter, might indeed represent a harbinger of good times to come; even if one quarter doesn't by itself constitute a new long term trend. I would welcome that, if it were the case, as I'm sure everybody else would. And getting this kind of snapshot information now also doesn't hurt Democratic efforts to counter Trump's gloom and doom.

The problem here, as is quite often the case, is that we are given this snap shot without any corresponding context, or contrast, in which to be able to make more cogent judgments on what it might mean in a larger sense for the American economy.

For instance, though increased spending can certainly offer the prospects of better things to come we have to recognise that all spending is not necessarily equal; as in the difference between using disposable income as opposed to simply increasing one's debt load. Debt load now is still of some concern (see here, and here) even though debt, in and of itself is not necessarily a bad thing, but the long term prospects of being able to service it is definitely something to be concerned about.

Certainly in this regard a number of other questions must then be considered. On the one hand, recent statistics have also indicated that the number of households living paycheck (see here, and here) to paycheck is at alarming levels. Should the American population be buying a great deal more if this is still holding true? The article in question here also makes the following statement:

"...That rate of (spending--my edit) growth is probably unsustainable, but economists say a tightening labor market, rising house prices and higher savings should underpin spending for the rest of 2016..."

But why are we to believe any of these assumptions, most especially about savings when interest rates remain so low, or that actual wages for most of us still remain way behind the overall growth in productivity that happened in the last ten to twenty years? Or that other unexpected shocks will not occur?

Of course, other factors are also at play here, as in the significantly lower price for gasoline most of us now enjoying. That fact alone can certainly account for a sudden increase in available disposable income. And, for as long as it lasts, how can we all not only be pleased, but at least a bit more indulgent. But then we also know that, just as what goes up must come down in the physical world, in the world of economics what has been down is quite likely to go back up again; especially if it is a thing existing in finite quantities. As such how sustainable can spending trends be if they were indeed based on the current windfall of lower gas prices?

The real problem here is that putting any number out, whether it's bad or good, usually serves an interest other than actually informing you of what is really going on, and of course, both sides of our current political divide indulge in this kind of thing. Even worse, however, is how the media seldom makes much of an effort to put the numbers into a big picture context that would allow you to make better judgments on them. And then you add in the fact that the emphasis defaults to the narrow time frames of this or that single quarter.

Just remember this one thing. When you are presented with a particular statistic be ready to question how it actually fits within the bigger, ongoing picture.

Who's Powering U.S. Economic Growth? Consumers.

by REUTERS

See Also:

Millennials Cause Home Ownership to Drop to Its Lowest Level Since 1965

by DIANA OLICK, CNBC

Consumers Are Opening Credit Card Accounts Like There's No Tomorrow

by JESSICA DICKLER, CNBC

Supply Side Versus Demand, and the Folly of Market Based Thinking for Space Launch Development

I have always been a critic of supply side economics and, given its track record, for good reason. Simply creating investment incentives (whether through tax cuts, or investment credits), while at the same time holding wages down so that few can afford to actually buy anything in the first place, was never going to be a winning strategy.

I mention this now because the Ars Technica article linked below got me to thinking about the similarities between the old supply side argument, and the criticism of reusable space launch companies expressed by panelists at the recent American Institute of Aeronautics and Astronautics forum on propulsion (which had, as the article indicates, the provocative title, “Launch Vehicle Reusability: Holy Grail, Chasing Our Tail, or Somewhere in Between?")

The argument of the old guard seems to be that the high volume market needed to justify reusable launch systems just isn't going to be there in the foreseeable future, and the notion that, by simply creating such systems, you can then automatically create the demand is ludicrous.

Being a very ardent advocate of space development across the board, however, as well as an economic progressive, I find myself in a position where I can see where credible arguments could be made for both sides of the old guard, versus the new, views on which type of rocket system ought to be the best bet. Looking at this a bit deeper, though, it doesn't take one long to recognize that both arguments miss a more fundamental issue here: Namely that such critical infrastructure development simply cannot be left to any form of the whims of markets in the first place.

As this is essentially a recant of the old cart and the horse conundrum, we have to move away from ordinary commercial thinking at the get go. Maybe a bigger launch market might be created by cheaper launch tech, but even if it did, would it necessarily be sufficient to what will be needed down the road? And, more importantly, would it be immune to inevitable market fluctuations? Can we afford to risk the continuance of critical transport, and in space development capabilities to the vagaries of market bubbles and busts?

I say this because I do firmly believe that, if our species is to survive long term, as well as to flourish, we must absolutely have well advanced launch infrastructure in place, and the sooner the better. Everything from getting toxic industry off the planet, to having viable options to respond to a number of disasters, coming from both on and off the planet, depends on this. And the thing is, to do this will require setting up demand creation seeds now.

And what would those seeds be? One very small step in that direction was the space station. Limited though it's science contribution has been, you still have to admit that such a thing puts in place an automatic need for launchers. The problem, of course, is that the vision to date has been so limited. Much more than a small space station is required, and by that I mean habitats on the moon (and/or Mars); significantly robust, nearly self sustaining, industrial parks that could be launch points for doing things we shouldn't be doing down here anymore, and for which the ability to get results back here would be integral. At that point, once you get people working up there in large numbers, a whole host of other possibilities become quite probable.

This is also where I have to admit my bias towards a completely different approach to space launch. Something that would, like a space elevator, bypass the need for rockets altogether. And that would be an ocean based, magnetic accelerator system. Something that would employ the world's first underwater suspended tunnel, starting very deep, and angled up at a shallow degree so that it could extend out at least 300 miles; a length for which the rate of acceleration could be kept at a minimum.

This is something I've talked about before, and as challenging as the engineering would be, in my opinion, an approach that would provide the best bet for both long term cost effectiveness, as well as inherent flexibility for accommodating increasing launch demand.

However we do it, though, the fact remains that it must be done. We simply have to get as many of us off this rock and living on as many others as we possibly can so that humanity can continue no matter what contingencies may come our way. And in that, it really doesn't take a rocket scientist to see how necessary this is.

Market doesn’t justify reusable launchers, expendable rocket makers argue

So what if SpaceX and Blue Origin are launching and landing. Can they profit?

ERIC BERGER - 7/26/2016, 8:30 AM

The Lack of Making Connections When the Commercial World Tries to Connect Us to New Products and Features

The Motherboard article linked below about the new security risks of an "Internet of Things" wants, at the very least, to imply that this is a new, and amazingly unforeseen, aspect of the brave new world of Internet product enhancements. Enhancements that have had marketers salivating at the prospect of new sales potential.

What we're really talking about here, though, is as old as Stuart Brand, and the notion of "Holistic Thinking" (epitomised by his Whole Earth Catalog). Back then, of course, the idea was introduced as a counterforce to our lack of understanding of complex, interdependent biological, and geophysical systems; especially as this related to the unbridled consideration that any aspect of those systems could be exploited commercially without much regard to the larger picture of their effects. And why, in any case, would commercial interests be so concerned when the whole point of commercial enterprise is to be profitable, after all?

But that's always been the problem, hasn't it. Get, in make your quick buck, and get out so you can go find the next 'big thing" to attract increasingly feature jaded buyers. Stated another way, one could simply point out that Capitalism, created back in an age of segmented, and abstracted, rationalism, was never intended for such big picture thinking at all. Why then would we be surprised at it;s lack of employing it now?

The problem now, though, especially with the advent of electrified interconnection of virtually all aspects of life, plucking one part of the web of so many different delivery, or servicing, or management, systems, is that the waves of effect spread out through them all, more and more, at the speed of light. And you are a fool indeed if you think any kind of market, free or otherwise, that is still based on human control, can be expected to respond to these kinds of challenges in anything even approaching a real time context.

And in the next breath, if you then start to clamor for government intervention, as this linked article does, for an imposition of standards and enforcement of such, how can that then balance with the already existing, and quite contradictory, notion of "less is more" as far as government is concerned in the commercial world.

The fact of the matter here is that we are being presented with just one more example of how ill suited to the 21st century Capitalism really is. And I can assure you that time is not on our side as far as responding to that simple true is concerned.

The Internet of Things Will Turn Large-Scale Hacks into Real World Disasters

Written by

BRUCE SCHNEIER

We Pay More Here for Healthcare Because Money Rules Here to a Much Greater Degree

The Vox article linked below says a lot about what happens when the so called "Free Market" makes most of the decisions on what healthcare should cost in this country. And even as we pay more the outcomes one can expect here don't come anywhere near to justifying the outrageous prices (see here, here, and here).

But what can you expect when "Big Money" can game the tax code with "Inversion" strategies so that not only can they avoid paying taxes to a much greater degree, they can avoid the antitrust laws that would prevent ever more powerful companies from getting even bigger (as in the Pfizer/Allergan drug company merger).

And try as you might to reform tax law, or enforce antitrust legislation, "Big Money" always finds a way to get around, over, or just bull through such efforts over time. After all, they can afford to be patient, just as they can afford to keep many more employed fighting for their interests than the public sector can (why else would you always argue for smaller government even as you starve it with ever less taxation).

At some point, it seems to me, the rest of us are going to have to give serious consideration to the argument that a cost based economic operating model is just no longer viable. Not only because it puts too much power into the hands of too few players, or that it is actually obsolete, but because it really is toxic in so many ways to our health, as well as the health of the planet.

Think about it. Start talking to other people about it. Get them to do the same thing. It won't change otherwise.

America’s health care prices are out of control. These 11 charts prove it.

By Sarah Kliff and Soo Oh on July 19, 2016

Blocking These Insurance Company Mergers Would be a Good Thing...

...Given the Obama administration's spotty record on enforcing antitrust laws, however, one wonders whether the incentive here is really limiting corporate power; as opposed to, say, protecting the president's limited legacy of important legislation?

The reason for this is plain enough certainly. The Affordable Care act legislation is on thin enough ice as it is with regards to a few of the biggest players in the insurance world not wanting to play along, limiting profits as it does (oh those poor dears, making only modest money on a vitally important social need). Throw in a great deal more concentration of power in the industry and the prospects for the continuance of what was essentially a very good idea becomes even more problematic.

What this suggests, of course, is the Democratic party's continuing ambivalence towards truly limiting the power of "Big Money." Despite the lip service they give to it, as opposed to the Republicans outright worshiping, they know they still have to continue on with their secret love affair with it. After all, if they were really serious about it, wouldn't they have made a much greater emphasis of tax law reform (other than Hillary's own recent lip service -- see the same, first linked article, above)?

It was the practice of "tax inversion," after all, that made blocking the Pfizer/Allergan merger impossible, not to mention the collection of a ton of money that ought be owed to the government by a number of very large companies. Do you think Hillary will be making that issue a priority should she win the White House? Anything is possible certainly but the relative probabilities involved here wouldn't be much to encourage even a devout Liberal, much less the Progressives among us. And lets not even suggest there's a possibility that the other guy would take that issue on; despite all of that blather that a rich guy would actually help the powerless in this country.

The beatdown goes on I guess... Unless you started questioning the entire game itself. You know... Removing money, and everything that goes with it, as an issue in the first place?  Just a thought.

U.S. Moves to Block Health Insurance Mergers

by PETE WILLIAMS

Just in Case You Were Sceptical of the Rise of Sea levels Comming

The link below from Gizmodo indicates that Greenland lost something like a Trillion Tons of ice in the period of 2011 to 2014. And to give that some perspective check out this quote from the article:

 As geologist Hal Wanless of the University of Miami pointed out to me in a recent conversation, sea level was roughly 420 feet lower 18,000 years ago than it is today. At that time, atmospheric carbon concentrations were only 180 parts per million—100 ppm lower than they were at the start of the Industrial Revolution. Now, over less than two centuries, we’ve pushed the atmosphere permanently north of 400 ppm.

“That should be a huge red flag to people,” Wanless said. “That should tell people, hey look, we’ve really done it. We’re really going to initiate some serious ice sheet melt.”

Greenland Just Lost a Trillion Tons of Ice and Nobody Noticed

Maddie Stone

Preferential Treatment in Pyramid Scheme Prosecutions?

As the linked article below indicates, one has to wonder at why one company, Vemma Nutrition, which had only $200 million in yearly earnings, ended up being prosecuted for such Ponzi type operations. Another company, Herbalife, which is currently valued at $6 billion, was not.

The important thing to remember here is that the operating model used by both companies involved selling distributorships for the most part, as opposed to emphasising actual product sales which, as with the original Ponzi operation of not making money on actual investments, but just getting more investors to keep payments going, is the glowing icon of a pyramid scheme.

The old saying goes that money talks. One is left wondering whether, if the vocabulary concerns terms of the right denominations, it is also gifted of great persuasion as well. And if the regulatory process works in this fashion for pyramid schemes, what is one to expect of other financial rules oversight? As in fighting monopolies, insider trading, or price fixing?

Something to consider when you think about whether this country is truly governed by the rule of law. The laws are there of course, the problem becomes one of whether you can afford the right kind of persuasion.

A Tale Of Two Schemes And One Pyramid

They both sell nutritional products, and they both make their money mainly by recruiting new distrubutors. So which is the alleged pyramid scheme?

By Matthew Zeitlin

Heaven Forbid We Should find Something Helpful...

...That would take even a Small amount of their profits away. Worse that it would also make us feel good (literally and figuratively) in the bargain. Something that we could just grow in fact.

 It shouldn't surprise us of course. It all goes hand in hand with the idea that there should be no aspect of our lives that isn't a revenue stream for one conglomerate or another. Whether it be critical infrastructure, social interaction, or any form of personal need. If there's money to be made then it should be made... Just not by you so much though.

CHILL, DUDE

Why Big Pharma Is Fighting Legal Weed

33 diggs Washington Post Drugs

People are actually using marijuana as medicine, and pharmacuetical companies don't like that.

See Also:

'NO PURCHASE, NO POKÉMON'

In The World Of Augmented Reality, Who Owns Your Digital Space?

9 diggs PSFK Gaming

When a virtual space overlaps a real-world space, then whose space is it, and who controls what is created as a result?

The Commoditization of Science

One of the major collateral damage effects of information as both money and a commodity is that the science establishment here, and in other countries one suspects, suffers exactly what you'd expect when the process of finding useful, new, information becomes saturated with many of the contradictions that afflict society in general within electrified Capitalism.

The pursuit of knowledge for its own sake, within a context of wonder and curiosity, so that we can better understand, and appreciate, everything around us, is similar, I think, to the need of humans to interact socially in a host of more generally spontaneous, and organic ways; interactions that help us to not only better know our neighbors, but to also be able to find tolerant grounds for cooperation so that we have loving structure to live and grow within.

But then we throw money, and the absolute requirement for net gain, into all of the workings of our lives and suddenly you have a toxic kind of abstraction in not only what motivates to make choices every day, but also structures the forms of interaction that take away any pretext that there should be deeper kinds of needs that ought to be a part of what motivates us. Here all that matters is a ledger sheet of bottom line logic; a logic that dictates that the only question you should be asking yourself all of the time is whether what I do next will result in something that will profit the capitalizer, and myself, so that further profit can be obtained.

You need only read what the scientists who participated in the poll conducted for the article linked below had to say about what has happened to science to see the truth in this. It is disheartening for me especially as it only serves to remind one of the general metaphor of what is happening to life in general because of an economic operating system long past its use by date.

The 7 biggest problems facing science, according to 270 scientists

by Julia Belluz, Brad Plumer, and Brian Resnick on July 14, 2016

A Contrast of Themes from Wired and Others

In one breath we're told of such awesome power that the very way we view what is a special day or not is at the touch of one entity. And in the next we glimpse the taking away of infrastructure because communities can no longer afford to maintain it; even as another powerful entity creates infrastructure for its own purposes. What do these have in common?

It is the enshrinement of cost as the holiest of hollies; either as what the lessening of what we have to pay for baubles of whatever type, or for the provision of service infrastructure someone else pays for, and us thinking there is no social cost involved.

And in this twist of cost bait and switch we fail to see how it creates its own dynamic of wage suppression so that everything that is socially beneficial is either done away with, or given over to the interests of parties who gain in ways we simply close our eyes to. We close our eyes and fail to consider that what is at the very essence of a "cost" based form of economy is an operating model that we could do away with if we would but see not only what it is actually doing to us, but that there is an alternative made possible by the very technologies that have made that model obsolete in the first place.

Prime Day Shows Amazon Is So Powerful It Can Make Up Its Own Holiday

Cash-Strapped Towns Are Un-Paving Roads They Can’t Afford to Fix

Google’s Project Fi Is One Step Closer to Unifying the World’s Wireless Networks

Information Infrastructure and How it is Created and Maintained


See Also:

WHAT ALL THOSE STUDENT LOANS ARE FOR

Why Is College So Insanely Expensive In The US?

21 diggs Explainer

Actually, it's a pretty good deal. All things considered, the average college degree costs $500,000.

PRIME MOVER

Jeff Bezos Is Hurtling Toward World Domination

28 diggs newsweek.com Technology

Today, the question is not whether Amazon can survive but whether we can survive without Amazon.

Even Third World Wages Can't Compete Against Automation

Millions of garment workers in Asia can be expected to be made jobless by automation. If even their low wages can't compete there what does that say about the prospects of even high wage level workers here?

Robots are set to take the jobs of millions of Asian workers in the coming years

By Marc Bain

Information Infrastructure and How it is Created and Maintained

The linked piece from The Village Voice here is quite telling on two counts in the context of "Information as Gold."

The main emphasis, in relating New York's new "LinkNYC" WiFi and VOIP kiosks, funded entirely by a linked series of now Google owned companies, is that the big apple is giving big business yet one more, immense, way to collect citizen data; data related not only to link tracking and areas of personal interest, but to very specific physical correlations; something the authors are quite right in being concerned about; especially given how loose the supposed privacy guarantees are shown to be in the piece.

For myself, however, important as the idea of "them knowing more about us than we will ever know about them" is, there is also another issue at stake here: The continual chipping away of the notion that channels of information transfer should be publicly created, and publicly owned, sets of critical infrastructure. The subtext then being that only the commercial sector has the resources, or even the rightful domain of operating such channels.

This started, of course, when the leasing of the "Public's Airwaves" to corporate interests became so automatic, and so broadly encompassing, that it is now no more than vestigial legacy. It then gained momentum when hardline channels moved away from mere analogue phone conversations to the digitization of all things carried on copper or optical cable. The investments in these physical links became ever more the property of the investors as much as the "Common Carrier" links that used to be seen as absolutely in need of public regulation. So now the regulation part is become ever more problematic as the economic power of the holders of these investments grows.

Paul Atreides from the Dune novels made the famous quote: "he who controls the spice controls the universe." He made that comment because the spice, with its effects on perception, had become so essential to how that fictional universe operated; especially for the Spacing Guild and their ability to fold space and make inter solar travel possible.

The analogy is pertinent here precisely because information itself is so vital to not only how we make day to day decisions, but on how we conceive of what is both possible and proper. So much so that altering the quote to "he who controls information flow controls our perceptual universe."

Unfortunately, though, we are still bound by the dictates of an obsolete economic operating system, and it is that system, in making everything a commodity, and thus virtually every interaction, in one form or another, a part of the game of "net gain." So, if there is a cost, and what doesn't these days, then there must be someone willing to pay that cost. If hyper competition, and unbridled thirsts for profit, combined with the ever diminishing worth of human skill as a commodity, are then thrown into the equation, you end up with "Big Money" being the only ones still able to pay for ever more aspects of critical infrastructure. You then need only to keep that process going for a while to get people conditioned to the idea that this is really the way it was always meant to be. This is, in fact, what is now right and proper.

Is there any wonder then why increasing numbers of us have such increasingly divers disconnections from reality (the diversity, of course, coming from what remaining competition there is in both ideas and market shares)?

How Google Is Transforming NYC Payphones Into Data Goldmines

15 diggs villagevoice.com Technology

New York City is erecting new internet monoliths that provide free phone, Wi-Fi, and charging — but all that glitters isn't gold, except for Google.

Floating Airports have to Happen...

...Because we're going to need floating cities as well.

And if you doubt that just ask yourself where all of the displaced millions of people are going to go once sea levels rise to even half of their full potential, given the further melting of polar ice caps.

Floating airports: Could they finally become a reality?

By Miquel Ros, for CNN

Updated 6:36 AM ET, Mon July 4, 2016

An Important Aspect of How the Post Capitalism City State will be Largely Self Supporting

Agricultural composed of enormous amounts of land, as well as the corresponding amounts of water and chemicals to make it viable, have always presented a big problem in my mind as regards the viability of nearly self sufficient city states; assuming, of course, such states being relatively limited in size. New thinking in how to approach the growing of what we need, however, offers ample fodder for alternatives.

This is important not only because of physical limitations, but also because of the desirability to be as efficient as possible in all areas of citizen managed production of whatever basics you might want to consider; especially as one broadens the scope of what constitutes efficiency. You  need only to remember that the alternative I've envisioned for Capitalism is expressed as an effort based economy, as opposed to a cost based economy, to understand why efficiency is important.

As such, you can see why new developments on the agriculture front always give me hope for what will be possible in the future where we are both the managers, and the workers, of our community's production capabilities.

The Future Of Farming Will Involve No Soil, 95% Less Water, And Trippy LED Lights

How Many Times Must Reforms Fail...

...Before we accept the fact that monied influence can't be extricated from government. The only sure way to change the way this always plays out is to change the very nature of the game itself. Not only must we move away from the obsolete economic operating system we have now, we must also change how we govern ourselves. There is simply no other way to go about this.

The lobbying reform that enriched Congress

Nine years after Congress tried to halt the revolving door, the influence industry is larger and filled with former members. This wasn't an accident.

By Isaac Arnsdorf

07/03/16 07:44 AM EDT

Playing a Zero Sum Game with Critical Health Issues

Republican insanity, which is usually no more than the basic insanity of Capitalism taken to new extremes, has found one more issue on which to showcase itself: The Zika virus.

Instead of talking seriously about what may well become a ticking time bomb of heart breaking tragedy down the road (with babies, and families, dealing with birth defects nobody is aware of yet), they are playing the game of "to spend money there you need to take it from other health programs we don't like."

Heaven forbid that they might actually consider bringing in more revenue by raising taxes; an approach, by the way that would save untold millions in the long run with the potential prevention treatments that stand to be developed (if you can do no more than look at this from the cold perspective of "costs" alone). No, they would take money from planned parenthood, just to name one of their "poison pills," added to make it seem like they trying to present some kind of legislation at all.

The problem, of course, is that taxes are simply another cost that would lower the profits of those who already make huge sums. Just as paying an actual living wage would raise costs and also lower profits; which begs the real question: How much of a profit is reasonable? Even more to the point, how much of profit derived from investments that don't actually create anything (other than more money), as with the various forms of speculation, is reasonable? A reasonable question after all as they are always quick to question the value of wages that are supposedly too high.

The usual response to this, of course, is that return is necessarily a function of whatever the market will bear. When you can have a system that plays both automation, as well as the cheap labor of "free market legislation," against human skill as a commodity, however, you rig the setup from the get go. The result being that not only do ordinary folks resist more taxation (for the simple reason they can barely afford the basics of life in the first place), but those make sure that the commodity of money never falters in its value can smugly claim they don't want any more either. A lovely way to keep a certain kind of symmetry going, even as more people, and more babies, get sick.

Revenge may be a dish best served cold, but Capitalism is where cold is a way of life.

Zika Virus Budget Battle 'No Way to Fight an Epidemic'

by MAGGIE FOX

See Also:

New Zika Studies Reveal Invisible Damage to Babies

by MAGGIE FOX

Capital Flow Only for the Sake of More Capital Flow

This post concerns an article in Nautilus by Bob Henderson about the intricacies of, and dangers inherent in, the networks that handle Credit Default Swaps; something that involves already confusing layers of abstraction in CDS instruments, with even more confusing considerations of how the way the parties involved in these interactions are actually linked with each other; referred to as network topologies. The design of such interactive systems is important because not only can there be significant inefficiencies, but also because bad design can make the system as a whole a great deal more subject to catastrophic failure.

This sort of thing is even more important (with a capital I) because of the unbelievable amounts of capital that are now wrapped up in CDS instruments; as in about $493 Trillion. Whereas total global GDP for 2015 was only $77.9 Trillion.

The issues that Mr. Henderson brings up here are interesting, as well as more than little difficult to follow, because they do point to the complexities of this process, even with new arrangements with "hub and spoke" designs to limit the risk of failures. All of that, however, is not what really concerns me. No... What really gets me shaking my head is why so little discussion is proffered on why such transactions are allowed in the first place.

Money chasing money via various forms of speculation is hardly new of course. Certainly currency speculation has been around for a long time. And then you have futures trading on stocks, which themselves, once money as been received by the issuing institution, are just abstractions of ownership where, unless dividends are issued more than rarely, are also instruments that exist to be speculated on (where the ongoing profits thereof benefit only the speculators directly).

With Credit Default Swaps, however, we have entered a whole new realm of abstracted profit generation, and to appreciate that you have to take a step back and remember how Capitalism first justified itself.

Initially, people who had accumulated capital accepted the risk of putting some portion of it into an entity that would either provide a service, or create a product that the rest of us could purchase; and to to complete the virtuous circle, people were employed in making that service, or product happen, thus providing the spending power to keep the whole thing going.

More and more, however, holders of capital want to lessen risk, and in an ever more competitive, not to mention more volatile financial world, risk becomes a great deal more complicated to assess. As Kevin Phillips has written in "Wealth and Democracy" there has always been an historical tendency of great economic powers to eventually fall into the trap where established wealth no longer desires the taking on of risk with actual productive ventures, and instead turn to paper instruments with which to support itself with. With the advent of electrified experience retrieval, however, and the technological change that has been a part of that, "disruption," as well as uncertainty, are a way of life now far more than they ever were in the past.

Even more confounding, though, is the fact that, through both the insane avoidance of all costs possible, as well as ever increasing automation related to that, a viable middle class is disappearing; providing fewer and fewer consumers able to buy any part of the ever increasing capability to produce that global Capitalism has created now.  Which, of course, adds more instability and uncertainty so why wouldn't a holder of Capital turn to abstracted instruments that don't actually produce anything? And also want to take out insurance policies on those instruments so as to make sure their ass is covered not matter what (supposedly).

And thus do we have the makings of a not so virtuous circle where the only thing that keeps increasing is the counters profiting from the movement of debt instruments from one holder to another, and the fail safe, side bets placed just to make sure. If that isn't insanity for the rest of us I certainly don't know what is.

Can Topology Prevent Another Financial Crash?

New regulations are applying network science to restructure global finance.

BY BOB HENDERSON