Sunday, February 19, 2012

Coming soon to a country near you?

From Jim Rickards' @jamesgrickards Currency Wars: The Making of the Next Global Crisis. #currencywars

Rickards is speaking here about alternatives to Keynesian economic theory.
The most promising new school is complexity theory. Despite the name, complexity theory rests on straightforward foundations. The first is that complex systems are not designed from the top down. Complex systems design themselves through evolution or the interaction of myriad autonomous parts. [Explaining why restricting autonomy is the favored approach for administrative government mavens, AKA "Czars."]

The second principle is that complex systems have emergent properties, which is a technical way of saying the whole is greater than the sum of its parts -- the entire system will behave in ways that cannot be inferred from looking at the the pieces. The third principle is that complex systems run on exponentially greater amounts of energy. This energy can take many forms, but the point is that when you increase the system scale by a factor of ten, you increase the energy requirements by a factor of a thousand, and so on. The fourth principle is that complex systems are prone to catastrophic collapse. The third and fourth principles are related. When the system reaches a certain scale, the energy inputs dry up because the exponential relationship between scale and inputs exhausts the available resources. In a nutshell, complex systems arise spontaneously, behave unpredictably, exhaust resources and collapse catastrophically. When you apply this paradigm to finance, you begin to see where currency wars are headed.
On March 20 Greece has a bond payment of 14.5 billion euros ($18 billion) due. Close enough to the Ides of March for government work.

"[E]xponentially greater amounts of energy."

Source: PBOC, ECB, FED, BoJ (via Things That Make You Go Hmmm...)

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