Systemic Uncertainty, Meet Fragility

Life is inherently uncertain, but systems that were once considered certainties have increasingly become uncertain. Social Security is one example; recent polls reflect widespread doubts among Millennials and Gen-Xers that there will be any Social Security benefits left for them by the time they reach retirement age.

This doubt is fact-based; as the number of retirees swells, as Medicare costs soar ever higher and the number of full-time jobs paying into Social Security/ Medicare stagnates, these pay-as-you-go programs break down; Social Security is already paying out billions more than it collects from employers and employees.

Uncertainty is one thing, fragility is another. The socio-economic systems we rely on are also becoming increasingly fragile and prone to failure, for an entirely different set of reasons than those driving uncertainty.

Changing fundamentals drive uncertainty. The nation’s demographics and stagnant wages for the bottom 95% are extremely unfavorable for pay-as-you-go programs like Social Security and Medicare; their future is uncertain because the inputs and outputs are changing.

Fragility is a function of systems being thinned by cronyism, self-serving insiders, fraud, lack of transparency, lack of competition, monopolies, profiteering and a decline of quality. Systems that become too costly due to the above dynamics are hollowed out as everyone seeks some way to reduce the costs. Redundancies are stripped out, staff is slashed to the bone, senior managers with the most experience are pushed out to lower payroll costs, quality control is whacked, and inferior inputs are presented as equal to the higher quality inputs that they replace.

When these weakened systems are under pressure or face a crisis, they crumble. Shoddy materials fail, inexperienced managers make hasty, ill-informed decisions, the barebones staff is overwhelmed, equipment that wasn’t properly maintained to save money breaks down, and so on.

We’re assured by financial authorities and the media that our banking system is now monstrously resilient and robust, and it is impervious to financial crisis. You’re kidding, right? So when all the subprime auto loans go bust, and all the overleveraged commercial real estate loans go bust, and all the developing-world debt in U.S. dollars goes into default, and all the consumer debt issued to marginal borrowers goes bust, the hundreds of billions in losses are all going to be absorbed, no problem.

This is fragility writ large. You can bet the entire financial sector is making the same faulty, fragility-creating assumptions as a means of maximizing profits: only one auto loan in a hundred will go into default, near-zero commercial real estate loans will blow up, every dollar-denominated loan in the developing world will be paid in full, blah blah blah.

In other words, if we assume FantasyLand perfection of marginal borrowers–that once a global recession guts their opportunities to refinance and the income needed to service their loans, they will still magically make all payments in full and on time–the financial system is resilient.

Beneath the reassurances, the system is increasingly fragile because all the resilience has been stripped out of it to maximize profits in the current quarter. And as for the financial authorities–who believes the financial sector is serving the interests of the bottom 99.5%? Based on what evidence? Who believes the mainstream media is reporting the deteriorating fundamentals and the increasing fragility of our society’s core systems?

All we need is a few overlapping crises to reveal the structural fragility and lack of trust/certainty in our core systems. Profiteering, cronyism, self-serving insiders, a decline in quality, gaming the system, fraud, opacity, propaganda, and the erosion of competence all seem like good clean fun when the weather is calm and the sun in shining. But the true nature of our systemic failure will only be revealed when multiple storms arise and the system is pushed to the limit.

That’s the problem with fragility: everything looks fine on the surface until a crisis applies pressure. Then the whole rickety contraption collapses in a heap.

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  • ZARTAN

    You`re DEAD Wrong, Charles.

    However, if your type of thought were right; well “it would have all collapsed and burned long ago.” None of it is, or was, ever, sustainable. The US government should have been downgraded to JUNK for such long ago. However, nothing happens and the government can Credit Forever. America has Godlike Credit Status! Trillions Blown on Illegal War and Trillions more Given to Bankers!! FK the Medicare “Chump Change!”

    You never understood anything charles!! America ( rather, the US government) is God Status, and the US government can print money “forever” because nobody is going to risk Nuclear War, or worse, to disagree with america. So, its markets and banks are ROBUST, YES, as a Matter of FACT, the MARKETS WILL BE MAKING NEW HIGHS WHEN JESUS RETURNS, because they took all downside out of the equation. TRILLIONS upon TRILLION have been thrown at the Banks and the Markets you pigion headed FOOL, but never a word about that .. NO .. you anti-social clowns are only offended that someone got something and you didn`t! So, you all bemoan and lament without a GD clue, because you could all have “ANYTHING,” if ONLY YOU HAD BRAINS!

    Medicare and Welfare (SS) for OLD GEEZERS is Discrimination; So, I could give a RATS DICK if the whole thing went BROKE … I wish it would, but I know it will not. There is so much “Abuse of Medicare” that it is “social welfare” for ALL Hospitals, Doctors, and the Entire Medical Industry ALL OF WHOM would be Bankrupt without Government Medicare!

    So, even if you do not like the Discriminatory nature of the GEEZER benefits, there is no denyting that they KEEP the Entire Economy Alive. Corporate America only FEEDS its FACE … So, Government has to pay the bills and keep things running. The US governmet can do all this, and more, only, it seems to have a major problem treating all people equitably. None of you idiots ( American People) seems to comprehend that FACT. There could be some truth to Americas Genetic Composition coming from EURO TRASH and Criminals!

    Only the American people –by REVOLT– Can bring the System Down. However, the American people are too dumb to know that Government is the MARKET. So … They will be happy Just to have work, least they be killed, because “we all know that SLAVES feel safe” so long as they have work. This lesson should have been learned at DACHOU! “Work Never Brings FREEDOM.”

    Harsh … YES, but People need a HARSH TALK. Those seeking to have their ears tickled will be RAPED! I am not a Rapist!

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  • Gary Youree

    The alpha species is always the most vulnerable to extinction, in all cases of natural disasters, but in that unlikely case – by its own hand by inward competition as a whole or by a subspecies of itself that takes its place as predator over the remainder of the species.
    After having dominated its environment by the means of survival of the fittest that got us to this plateau a continuation by the same process will cause this instinctive competition until there is one man left standing; from divides like religion or race, combined with the slight advances in technology as excuse to aggressively colonize until each successive empire collapses on itself, again using perceived divides to justify the competition.
    We have enough history and knowledge, repeated enough of the same behavior, to make use of our final adoption, consciousness, to know the path we are on ends with one man standing – or extinction.

    Consciousness shows us that continued competition makes an incredible waste of our resources and will lay waste to our host planet due to a global monetary system that demands continued growth, putting profits ahead of humanity, to further a competitive process that will always end with one man standing.
    Consciousness shows us that their is no superior race and our diversity is a major asset for the species. Simple examination, by use of our wasted asset, consciousness, tells use clearly that we are not only at war with ourselves – but with our host planet by the use of infinite growth as the weapon of necessity.
    Why are we not using our most obvious asset, consciousness? Why are we ignoring the science, logic, and common sense, that is within our reach to save our species?

    The reasons are taboo. The decision to use our consciousness; the accumulation of historical knowledge, science, efficient technologies, and logic, are in the control of a predatory subspecies consisting of a small number of psychopathic elites who prey on humanity as domesticated prey.

    History shows us many pattern examples. Hitler’s Germany being the most recent – even though it was operating within this age old conflict between the aware subspecies predator and humanity, the domesticated, largely unaware prey.

    Most conflicts have been instigated and manipulated by this macrocosmic divide – who profit off the majority of history’s microcosmic divides.
    While it may be difficult for most to see the big picture it is slowly coming into focus as the results of this largely hidden war of a divided species is showing up in unnatural disasters all over the planet in the form of climate change.
    The predator species, operating in collusion with the US elites and its military, is conducting shock and awe colonialism with all states with remaining resources. Those states depleted are left in smoky ruin. The states of NATO, many of which have more peaceful ideologies and humanitarian economic systems, were accumulated by previous conflicts manipulated by this predator elite – like WW1 and WW2. In these wars we can see the microcosms and how they were patterned by the macrocosmic predator subspecies.
    WW2 and Hitler’s aggressions show clearly the structure of the larger, controlling class. Financially underwritten by the financial power and banking structure of the ancient buildup of the psychopathic elites – who will soon succeed in its suicidal march to continue establishing cognitive dissonance over its domesticated prey – or the prey will shake the bonds of domestication and establish global consciousness for the good of the entirety of mankind – demanding technology be the tools that enhance humanity as its primary purpose.

  • ZARTAN

    You`ve got to be Kidding?

    Social Security?

    None of you pay enough into it to collect for the 20/30-years ,or so, that some collect if for, but they never stop paying. There are not enough people working “right now,” because there are 100-Million out of the workforce, but SS is still paying!

    Hint, Charles … You all Worship the US Dollar, therefore, they can print until JESUS returns and it will always be KING.

    I feel so sorry that the rest of you cannot figure it out, because if you could than you would be living like KINGS and not SLAVES. Keep worrying about YOUR DEBT, while the Bankers give Trillions in GRAB BAG to Bankers! Yea.. And, if you economists cannot figure it out, well, there is a reason you are still studying Economy!

  • Jed Grover

    The attached is a better presentation of our financial dilemma. The root of our problems existing for well over 100 years is our global central banking system and the “non elected” Federal Reserve Bank acting as Bail Out Manager. All of these terror and chaotic crisis acts as a mask creating “shock and awe” distractions.

    The treasonous US Congress passed what was called “Wall Street’s” Trouble Asset Relief Program (TARP) and should have initiated the conversion over to a public banking system for public good. They passed up once in a lifetime opportunity but instead we now prepare for this “corporate police state surveillance included” democracy as they call it. We are being extorted and raped and its all been legalized. Presidents have been murdered for trying to free us.
    http://www.globalresearch.ca/central-banks-as-engines-of-income-inequality-and-financial-crisis/5606469