I want to return to the astrological metaphor that opened the finance chapter of The Chaos Protocols. You will recall that the slower moving outer planets were likened to the bond market, business cycles and capital flows between the developing and developed worlds. Ie they are reasonably regular, reasonably predictable and largely out of your hands.
The inner planets were likened to anything you can assert sovereignty over: your housing situation, nutrition, the reduction or sharing of energy and child care costs, and so on.
Looking at the economic outer planets, we continue to forecast:
- Further centralisation into fewer and fewer governmental and megacoporate hands. (Insofar as they are different at all, which they aren’t.)
- War and civil unrest continuing to climb, throwing unpredictable spanners in the already-collapsing global trade index.
- The continued strengthening of the dollar
- This dollar strength triggers
- First, a debt repayment crisis in foreign countries that borrowed in USD before it’s 25% jump: ie you borrow a hundred bucks because your currency was climbing against the dollar, meaning you’d end up only paying $90 back in local terms… now you have to pay $125 in local terms and you have to make the money to do that just as global trade grinds to a halt. There’s about ten trillion in dollar denominated debt outside the US.
- Second, an opposing force against the Federal Reserve’s desperate need to raise interest rates as the gap between the money US pension funds have and the money they need to pay out grows. Pension funds take your money and buy bonds, the interest on which is supposed to go toward your monthly pension payments once you’ve retired. This is also how Social Security funds itself -being forced by law to buy only US government bonds rather than run as an investment fund delivering the best return. (If it had been allowed to do this you would not pay a cent in Social Security as it would entirely fund itself.)
- Third -just as with non-US countries- a strengthening dollar means US debt becomes more difficult to pay off in the future because it is also nominally growing: A dollar is today is ‘supposed’ to be worth 80 cents when it comes time for the government to pay it off. Instead it will be worth a dollar twenty.
- The impact of increased regulation cost -healthcare and government compliance, mainly- and automation that have collapsed small business margins will continue. More and more Middle Class jobs are replaced with hospitality jobs -and these themselves will automate over the next decade. And the ones that don’t will be a nightmare. Read this amazing FT article, When Your Boss is an Algorithm. That world without sin, eh?
Percolata is one of the Silicon Valley companies trying to make this happen. The technology business, which Netessine advises, has about 40 retail chains as clients, including Uniqlo and 7-Eleven. It installs sensors in shops that measure the volume and type of customers flowing in and out, combines that with data on the amount of sales per employee, and calculates what it describes as the “true productivity” of a shop worker: a measure it calls “shopper yield”, or sales divided by traffic.[..]
Percolata provides management with a list of employees ranked from lowest to highest by shopper yield. Its algorithm builds profiles on each employee — when do they perform well? When do they perform badly? It learns whether some people do better when paired with certain colleagues, and worse when paired with others. It uses weather, online traffic and other signals to forecast customer footfall in advance. Then it creates a schedule with the optimal mix of workers to maximise sales for every 15-minute slot of the day. Managers press a button and the schedule publishes to employees’ personal smartphones. People with the highest shopper yields are usually given more hours. Some store managers print out the leaderboard and post it in the break room. “It creates this competitive spirit — if I want more hours, I need to step it up a bit,” explains Greg Tanaka, Percolata’s 42-year-old founder.[..]
Tanaka is forever fighting battles against the “incredible biases” of managers who want to tweak his algorithm’s carefully calibrated schedules. “The manager comes in and says, ‘Look, my favourite person is not working when I’m working, so I want to muck with the schedule’ and it’s like, ‘Oh my god, just by doing that you lost a few percentage points in sales!’” [Gordon: My teeth grind with rage reading this. Heaven forbid you work with people whose company you enjoy!]
Tanaka believes that retail jobs will eventually become so flexible in response to fluctuating demand that they become part of the gig economy. Wouldn’t it be better to just pay people more for the time they are actually productive, he asks? “That’s what Uber does; they don’t pay people for sitting in the car when there’s no one in the car.”
- The inevitable break-up of the Eurozone as it cracks under the strain caused by Brussels harvesting the youth and future of Southern Europe -particularly Greece and Spain, where youth unemployment is already 50%. Talk about eating one’s own young!
So if you are a globalist central planner in a Soros-and-friends mould, you need to solve two things:
- You need to ‘solve’ a world where 50% unemployment is a reality in such a way that the peasants do not revolt all over your Martha’s Vineyard lawn.
- You need to make government debt nominally shrink rather than grow as we head into the future, so that you can raise more of it to give to your corporate friends to provide services that not only used to be run as public services, but were administered more efficiently at a local government level.
You accomplish this endgame of centralisation in the following way:
- Step 1. A digital currency -thus preventing hoarding and bank runs- and globally interconnected payment and taxation systems used to ‘fight terrorism’ ie – make sure the last few drops of your money can be shaken from the bottle. Despite some pushback, I’ve been banging this drum since the first trial balloons started appearing around 2012. From Jan 2017 the interconnected payment/taxation regulation comes into effect. This will allow them to dial up and down interest rates to force you to go out and spend. (ie. -5% interest on a savings account and no way of withdrawing your money. Gordon Brown suggested this during the last financial crisis.)
- Step 2. ‘Optimise’ government wealth transfers -food stamps, Social Security, unemployment payments- into a single wealth transfer.
Both of these steps get us 75% of the way toward what is the latest trial balloon, the so-called Universal Basic Income.
Without question, government wealth transfers could do with a huge amount of optimisation. I remember a Catherine Fitts example that seems germane: If you have a problem with your foodstamps you call up the private company that the government has contracted the programme out to and speak to someone in a call centre in Mumbai which is a job that was taken out of the country to save on cost that you yourself could have done which would mean you wouldn’t be having a discussion about foodstamps because you wouldn’t be on them, which would save the cost to the government that the eliminated job caused.
But if that were a job run by a state government then how would the private company make enough money to pay for Presidential candidates to come and give them speeches? There is no reason why government money shouldn’t provide a positive ROI in the real -and particularly local- economy. At the moment it doesn’t so that private companies can grow fat delivering a negative ROI service. This is centralisation.
The trouble with a UBI, of course, is that dumping trillions of dollars into the real economy will just mean everything goes up in price by precisely the number of trillions of dollars dumped in. That’s inflation. That’s what it will be used for. It will make their real assets skyrocket in value and make their debt payments essentially moot as they can just print up more dollars.
And in order to ‘solve’ for this inflation, more government money will be given to private food and energy producers to ‘reduce the cost to the end user’. Do you suppose these subsidies will go to your local market gardener? Or will they go to some Big Agri, GMO monster? What does the entire history of government subsidies tell you will happen?
That ‘multi-tier’ approach to a UBI will then spread out to everything else you wish to buy: See what happens to your monthly health care payments if you try to buy cigarettes. Or even if you try to buy ‘discretionary’ or ‘not from a UBI-approved vendor’ food when you have a gas bill due.
So what we will get in the medium term is multiple, non-monetary payment and barter systems on a local level, a thriving black market -already seen in the secondary market for foodstamps- which will lead to further and further restrictions from centralising authorities as they try to clamp down on these desperately-needed loopholes.
And what’s that in the sky? Trial balloons.
The idea is to put machines to work for us, but empower ourselves to seek out the forms of remaining work we as humans find most valuable, by simply providing everyone a monthly paycheck independent of work. This paycheck would be granted to all citizens unconditionally, and its name is universal basic income. By adopting UBI, aside from immunizing against the negative effects of automation, we’d also be decreasing the risks inherent in entrepreneurship, and the sizes of bureaucracies necessary to boost incomes. It’s for these reasons, it has cross-partisan support, and is even now in the beginning stages of possible implementation in countries like Switzerland, Finland, the Netherlands, and Canada.[..]
All of this is why it’s those most knowledgeable in the AI field who are now actively sounding the alarm for basic income. During a panel discussion at the end of 2015 at Singularity University, prominent data scientist Jeremy Howard asked “Do you want half of people to starve because they literally can’t add economic value, or not?” before going on to suggest, ”If the answer is not, then the smartest way to distribute the wealth is by implementing a universal basic income.”
Heh. ‘Simply’. Done! Future saved! These are the people Taleb refers to as experts “who couldn’t find a coconut on coconut island”.
And that second paragraph describes exactly why these morons who lack the emotional intelligence to discern between human and artificial intelligence will get it wrong. Note she used ‘starve’ -which brings in my subsidised food prediction- and ‘can’t add economic value.’
Here we hearken back to what Dr Reid was talking about in the context of animism and how the current power structure views us as resources. The globalist UBI model falls into the same basic, materialist error that the rest of the socialist fan fiction falls into: just add enough money for subsistence and we’ll all become psychologically fulfilled impressionist painters and jazz aficionados like in Star Trek.
A century of psychological research demonstrates that providing and participating in value creation is at the core of mental and emotional health. And we have about fifty years of multi-generational welfare in places like the outskirts of Glasgow where some families haven’t had a job for three generations that shows the disastrous outcomes of simply tipping in a subsistence level income and ignoring them forever. Drug abuse and crime are rife and the area has the lowest lifespans of western Europe. (Crime rates do not correlate with a lack of money but with a lack of meaning. In ‘working poor’ areas, crime rates sit at the national average. In high unemployment areas they are well above it.)
So rather than actually improving the economy by
- Putting out the dumpster fire that is the American health care industry and replacing it with something like the NHS (cheaper than delivering a UBI!)
- Spending slightly less on military adventurism
Both these boondoggles -and the rest of the centralising boondoggles- will be kept in place with a UBI that makes the asset-owning 0.1% even richer while you stay about the same.
Catching the right trade winds
I want you to watch these videos in order. Firstly, it’s fascinating to watch Martin Armstrong describe the lack of money for government services that is coming next year -which is correct- and then listening to Catherine describe the precise amount and where she thinks it is going. Both these videos -in sequence- elaborate on the slow moving planets listed above.
Combining these models, between now and 2020, we have:
- Break-outs of ‘hot’ war, possibly a fullblown world war.
- A dramatic rise in the dollar and non-government US assets beginning now-ish -give or take an election wobble or two- but kicking off in earnest next year.
- Sometime from late 2017 to late 2018 there will be a change in how global currencies work on the scale of Bretton Woods as a result of the huge imbalance of the sky-high USD and assets from point two versus the rest of the world.
- Part of this solve will involve a UBI beginning its roll-out sometime between 2018 and 2020.
I put the likelihood that the deployment of the UBI will be a disaster at 90%. If you sit around waiting for it in the hopes it will solve all your problems your situation will be as dire as it is today, if not a little worse. If it doesn’t happen then we’re looking at the emergence of multiple, local, on-book/off-book exchange mechanisms anyway as the final vacuuming up of economic dynamism into centralised hands is completed.
So, one way or another, you have to catch these trade winds and just how you do it remains the same as it is in The Chaos Protocols or on this blog from around 2012:
- Radical cost reduction via optimising your living situation.
- Asserting sovereignty over nutrition and health via growing your own food or participating in local farming co-op schemes, as well as… legalish replacements for Big Pharma opiates wherever possible.
- The development of rare and in-demand skills, particularly over the medium term, and especially without getting into ruinous debt along the way.
- Demonetising and decentralising what you can.
- Positioning your investments so that they benefit from the dramatic economic changes that will happen between now and 2020, rather than have them adversely effected.
Charles Hugh-Smith -a previous podcast guest- has some similar/related suggestions in a guest post on his blog.
Taking these steps makes you antifragile to the emergence of a UBI. If it happens, you win. If it doesn’t happen, you win. You do not need to know how fast the trade winds are blowing to tell in which direction they will take you.
So set sail.