Doom & Gloom

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Here is the first half of this article:

2021 is Already Optimized for Failure - Charles Hugh Smith

One sure way to identify a system "optimized for failure" is if all the insiders are absolutely confident the system is "optimized for my success".

I often discuss optimization here because it offers an insightful window into how systems become fragile and break down. When we optimize something, we're aiming to get the most bang for our buck: maximize our efficiency, profit, productivity, etc., while minimizing our costs.

To maximize our goal, whatever it is--profits, power, whatever-- we strip away redundancy and buffers because these add costs and don't boost our desired output. They create resilience, i.e. the ability to survive disruptions, but the logic of optimization is relentless: get rid of all extraneous costs, because resilience doesn't boost the bottom line.

This trade-off--trading resilience for optimization--looks brilliant when everything goes according to plan. But when events veer outside the narrow parameters of the optimized system, the system breaks down: supply chains break, safety procedures fail, and so on.

Even more consequentially, optimization strips away anti-fragility, Nassim Taleb's term for the ability to not just survive disruptions but emerge stronger and more adaptable.

What happens when inflexible, sclerotic systems optimized to benefit self-serving insiders encounter chaotic turbulence or conditions outside the expected parameters? They collapse because the system is optimized for failure. Put another way: when a system is optimized to benefit insiders at the expense of resilience and anti-fragility, it is effectively optimized to fail because life is not programmable to a steady-state, predictable stability.

In the rest of the article, he brings up three points, the second of which is the Federal debt. That one got my attention.

I've been hearing about the Federal debt since forever, but we are still marching on. Recently the total debt has been growing by leaps and bounds. It used to be that the government would borrow money by selling bonds to people both inside and outside the country. But recently the biggest buyer appears to have been the Federal Reserve which seems to be tied to the Federal Government, but not controlled by it. That seems fishy, but let's not get distracted.

If the Federal Reserve was actually using money it had in its possession to buy these bonds, that would be one thing, but now it is just creating more money out of thin air. This in not necessarily a bad thing, it's been creating money out of thin air for a long time. The economy has grown so much in the last century we needed more money just to keep operating.

But this recent large growth of the Federal debt has got me a little concerned. I suspect that one of these days this whole house of cards will collapse, but I cannot predict when that may happen. It might be next week or it might not happen for a hundred years.

Via Tyler Durden at ZeroHedge