Avalanche Theory of Debt Cascade Failure

More from the The Concepts of Money and Capital thread on TAE.


Quote from Skipbreakfast

I don’t think the Fed has any illusion it can truly replace all the credit currently in existence, should credit actually start evaporating exponentially. In truth, the Fed doesn’t believe it will need to do that–it naively believed it could reverse the tide before such catastrophe. Maybe even the Fed is starting to wonder if things are now out of hand, however.

The deflationists have persuaded me that the trickle of credit destruction soon becomes a torrent and the CBs are simply overwhelmed. They will have to change tact and embrace deflation at some point, by shoring up their own assets, once it suits them to do so.

One thing I think is not grasped well is the concept of Cascade Failure, best exemplified by an Avalanche or Toppling Dominoes.

What we have here is a MOUNTAIN of debt, which although it has been exponentially increasing at an obvious pace over the last decade, has in truth been growing exponentially right from the beginning of this supercycle, best pegged IMHO to the chartering of the Bank of England in 1692.

All through the ensuing years, one economy after another has been subsumed into this ever expanding Ponzi scheme. The whole Bizness isn’t REALLY managed by Da Fed, its managed by the Bank for International Settlements (BIS) in Switzerland. Da Fed is simply the most powerful among many client Central Banks in this schema.

The snow falls over many years on a Mountain, and in fact you can to extent control Avalanches by setting them off on purpose periodically when you see the instability growing. So in fact it is likely that many of the prior depressions which followed events like the bursting of the Tulip Bubble or the failure of Credit Anstaaldt were to an extent “controlled explosions” which briefly brought down the snow and then collection began again.

This iteration is somewhat different, because in each of the prior iterations after the avalanche there was still surplus ENERGY to access, first by the theft of the New World from its original inhabitants, and then progressively moreso first through the Age of Coal which took us from around 1750 through to around 1900, then the Age of Oil which took us from 1900 through to present day.

The monetary pyramid here through this entire time has used as its Capital the ENERGY accessible from the thermodynamic application of fossil fuels, through a whole variety of neat inventions during the time period. So every time a new invention like say Edison’s Light Bulb appeared on the scene, vast amounts of new Credit was issued to build such things as a nationwide electric grid. In reality of course, none of these things could ever pay off, they always only existed through constant credit subsidization. It was possible to do this by seriously underpricing the cost of energy, putting off the Day of Reckoning hopefully long enough to come up with the Holy Grail of something like Fusion Power, with the “promise” of limitless and clean Energy. However, despite all the years of experiments with Superconducting Supercolliders and the like, Fusion Power remains basically a drawing board type idea to this day, though all the time we get reports it is “just around the corner”.

Anyhow, without such a last minute rescue by the Fusion Power Cavalry here, the Credit Mountain of Money built around accessing ever more amounts of energy per capita will come down, and the AVALANCHE is just beginning here. As I wrote in prior posts in this thread, there is little worth buying here anymore, because just about EVERYTHING is based on continuing sources of energy to power it. Even Farms are based on this in the current model. Much of the production off the Great Plains “Breadbasket” of the world depends on irrigation water pumped up from the Ogalala Aquifer. That pumping is mostly done with diesel pumps, and while you might substitute some with Windmills, the depth now that has to be pumped from is probably too great for a Windmill to handle except in a Tornado, in which case the Windmill is destroyed anyhow.

What you have here as a result is a Cascade Failure of IMMENSE PROPORTIONS, a Credit Collapse Avalanche such as the world has never seen in all of recorded history. IMHO, our Iluminati Masters of the Universe are running around now like Chickens with their Heads Cut Off trying to figure out how best to protect their own “Wealth”, when in fact that wealth is ALREADY GONE. It’s floating around up there in the atmosphere as moelcules of CO2. THAT is where all the “Capital” is now, and it’s not terrifically useful Capital in this form.

I suspect the various CBs will continue to print in concert here for a while longer, and the Funny Money will slosh around in Bank Reserves keeping the TBTF from going under immediately. In the end though, they will CAPITULATE to reality, and the reality is that a MOUNTAIN of Snow collected up here since 1692 is ALL going to come down the Mountain at the SAME TIME. You cannot stop this avalanche from coming down, all you can do is to RUN AWAY. RUN AWAY FAST! Run away NOW. Get just as far away as you reasonably can from the center of this collapse, the Big Shities all over the world built upon Credit and the Thermodynamic energy of Fossil Fuels. They are DEATH TRAPS.


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