Socialism is needed to smooth the fitness curve. In a MadMax scenario (a world without socialism) the fitness curve steepens to the point that only those adept at violence (or in servitude to the violent) can survive.

This culling of the population would reduce adaption and progress in the long run as it forces relative uniformity on the population. The degrees of freedom in such a society declines.

This same principle on a lesser scale justifies limited social safety nets limited redistribution via taxation and some government assistance to the poor.

The problem is the progressive growth of socialism.  In combination with fractional reserve banking socialism becomes an inescapable vortex. The ability to debase the currency at will leads to unrestrained all consuming growth. Without a paradigm shift socialism will continue to grow unchecked until it starves and dies with tragic consequences for just about everyone.

What is needed is a negative feedback mechanism to check this growth. Perhaps a combination of sound money, elimination of fractional reserve, and outlawing government debt would be sufficient? In such a system the government would actually have to tax for every new program creating the potential for true opposition from those opposed to taxes.

Regardless such safeguards would never hold if the need for them was not glaringly obvious to the populace as a whole.  That condition won't exist until the current system collapses.

The math of optimal fitness requires anarchy to be contained and limited. The role of the state is to provide this constraint.

The need for anarchy to be contained can be shown analytically at its clearest in the simple example of a life form living on an extreme form of a fitness landscape which contains a single peak of fitness x > 1 with all other variations having a fitness of 1. With an infinite population there is a phase transition at a particular error rate p (the mutation rate at each loci in a genetic sequence). In Eigen and Schuster (1979), this critical error rate is determined analytically to be p = ln(x)/L (where L is the chromosome length). When this mutation/entropy rate is exceeded the proportion of the infinite population on the fitness peak drops to chance levels.

Life requires entropy to exist, but critically such entropy must be limited and contained. Entropy/mutation must not be allowed to exceed the error threshold. Error threshold was developed from Quasispecies Theory by Eigen and Schuster to describe the dynamics of replicating nucleic acid under the influence of mutation and selection.

If replication was without entropy no mutants would arise and evolution would cease. On the other hand, evolution would also be impossible if the entropy/error rate of replication were too high (only a few mutation produce an improvement, but most will lead to deterioration). Error threshold allows us to quantify the resulting minimal replication accuracy (ie maximal mutation/entropy rate) that still maintains adaptation.

The can be thought of intuitively as a balance between exploitation and exploration in genetic search. In the limit of zero entropy/mutation successive generations of selection remove all variety from the population and the population converges to a single point. If the entropy/mutation rates are too excessive the evolutionary process degenerates into random search with no exploitation of the information acquired in preceding generations.

Thus the optimum entropy rate should maximize the search done through mutation subject to the constraint of not losing information already gained.Any optimal entropy rate must lie between the two extremes, but its precise position will depend on several factors especially the structure of the fitness landscape.

It is also worth noting that at least with genetic algorithms natural selection tends to reduce the mutation/entropy rates on rugged landscapes (but not on smooth ones) so as to avoid the production of harmful mutations, even though this short-term benefit limits adaptation over the long term.


   
References:
Eigen, M., & Schuster, P. (1979). The Hypercycle: A Principle of Natural Self-Organization. Springer-Verlag.
Ochoa G., Harvey I, Buxton, H. Optimal Mutation Rates and Selection Pressure in Genetic Algorithms. Proc. Genetic and Evolutionary Computation Conference 2000
Clune J, Misevic D, Ofria C, Lenski RE, Elena SF, Sanjuán R. Natural Selection Fails to Optimize Mutation Rates for Long-Term Adaptation on Rugged Fitness Landscapes. PLOS September 26, 2008

Having walked this road myself I may be able to help. Anonymint's overall thesis is not something that is easy to instantly grasp and it is scattered in various places making it difficult to approach in a piecemeal fashion.

It is best to start with a secure understanding of our financial system as it truly is. The three links on finance below were inspired by Anonymint's overall insight and are less deep than Anonymint's writing making them a good starting point. Part I covers fractional reserve banking what it is and how it works in a modern economy, Part II covers the business cycle how fractional reserve leads to recurrent and cyclical booms and busts impoverishing the masses. Part III covers how fractional reserve banking leads to government capture and the eventual economic strangulation of the economy.  

Finance Part I: Understanding the Parasite
Finance Part II: The Parasitic Cycle
Finance Part III: Divide, Conquer, Enslave

Once you understand the basics of the modern financial system you are ready to move on to Anonymint's more complex writings and ideas. I would start with

Understand Everything Fundamentally

Understand everything fundamentally covers the broader principle of collectivism and its dangers including the tragic consequences of our current economic trajectory. It also covers the principles of centralization and degrees-of-freedom in the economy. Next up is

The Rise of Knowledge

The rise of knowledge is in my opinion the very best of Anonymint's writing. In it he covers finance and why the role of finance and debt will progressively decline in the future. It is a compelling argument that describes how and why humanity will eventually and inevitability break free of the chains of finance and unrestrained collectivism and enter an age of knowledge.  
    
Anonymint's writings above are missing a discussion of the proper role of socialism in society. For this I would refer you to the Mad Max thread specifically posts 125-128 where we discussed the proper and gradually declining role of socialism in a future knowledge age.
 
Finally for extra credit you can read Information is Alive Here Anonymint defines knowledge and explains why knowledge and thought are not fungible.

Any body of knowledge needs a name if it is sufficiently complex and different from existing schools of thought. In this case that name is Contentionism

Thanks, I checked it out. There is definitely a ton there to go through.
I watched the James Rickards interview.

https://www.youtube.com/watch?v=3vwxGxmDOZk

The first 10 minutes was about ISIS and not all that interesting. However, towards the end Rickards  made several very interesting arguments

Rickards argued that China is acquiring gold not in an attempt to eventually back the yuan with gold but as a simple hedge against their multi trillion dollar US debt holdings. With this hedge if the US ever goes crazy with the printing presses then gold would do very well. If US is more conservative gold will do less well but the Chinese dollar reserves will maintain their value.
Rickards also argues that the next major crisis will involve the IMF bailing out the various world central banks via the issuance of SDR (Special Drawing Rights) a type of IMF fiat currency. The IMF have the right to issue these in their charter.
http://www.imf.org/external/np/exr/facts/sdr.htm   (Facts about SDR)
http://www.imf.org/external/np/fin/data/rms_sdrv.aspx  (SDR's value calculation)

It was a very interesting point. There is a real potential in a financial crisis for the IMF to use SDR's as a worldwide bailout. Will SDR's be the fiat world reserve currency of the future? It is certainly seems possible making it happen would require a Bretton Woods type agreement between the major world powers. It would also be the equivalent of simply kicking the can down the road one more time without solving any of the structural problems in the world economy. As that has been the approach used to date a future IMF SDR bailout seems quite possible.
I was impressed enough by the video that I have decided to buy Mr. Rickards book. Hopefully it is equally interesting.

James G. Rickards the principal negotiator in the 1998 bailout of Long-Term Capital Management by the Federal Reserve is also predicting a major downturn in 2015 with QE 4 by the USA in the first quarter of 2016.

http://www.bloomberg.com/video/fed-will-implement-qe4-in-early-2016-rickards-tvlUobS9Se~k2oS~o6nsEQ.html

As someone who sucessfully got the FED to cough up the first major corporate bailout his prediction about QE 4 carries some weight.

Untrue nothing prevents banks from making a conservative living via time deposits. Banks could make an acceptable return by matching capital from lenders to appropriate borrowers or lending out their own capital. Obviously there is no problem with time deposits having a 0% reserve requirement as said funds would be returned to the depositor only when the loan was paid back.

In any honest system, demand deposits would be subject to 100% reserve requirements. Anything other then a 100% reserve allows the banking institution to artificially inflate the monetary supply to its own benefit and to the detriment of all other holders of the currency.


Banks want minimize the reserve ratio. This allows them to maximize the extent of their theft. Of course the real trick is to make reserve requirements effectively meaningless so banks can operate unrestrained by such petty concerns. Fortunately for the banks this is something that they have already accomplished.

Historically that may have been true. Today's GOP works to transfer massive debt obligations to the state and taxpayer via corporate bailouts and accelerate the insolvency of the state. They also wholeheartedly support a fractional reserve financial system that gradually and progressively impoverishes the middle class. These policies lead directly to ever higher taxes when the Blue team takes their turn in the cycle of governance.

Cromnibus should open the eyes of anyone who believes there is a substantial difference between the Red and Blue team. The taxpayers just got put on the hook for trillions of dollars of future bank derivative losses. This law passed without much fuss through a republican house and a democratic senate.  Both teams are the same.

 


 

FDIC arose from public demands for protection due to bank runs that destroyed life savings and cratered the economy. These bank runs were a direct consequence of fractional reserve lending. FDIC was simply the wrong solution to the problem.

The 1930s was probably the last chance to avert a major economic collapse that is now probably unstoppable. Had we as a nation instituted the Chicago plan our economic situation today would be very different.


Of course even if the Chicago plan been implemented vested interests would likely have overturned it eventually. Sometimes people and societies have to learn lessons the hard way.

Martin Armstong misreports this as fact here
http://armstrongeconomics.com/2014/12/14/are-you-really-ready-for-the-world-to-be-ruled-by-bankers/
Armstrong was apparently misled by the the New Yorker article. Contagion likley made his error based on reading the erronous armstrong.


I would place this little error by Mr. Armstrong's into the Bayesian pile of data urging caution in regards to Mr. Armstrong's claims.
I imagine that only the very best snake oil salesmen are up to the challenge of selling timeshares to institutions for $5 to $100 million annually.

Note: I am not saying the armstrong is not legit only that caution is warrented.

Cross posting from the Politics & Society forum as it is relevant to the topic at hand

Yep the Blue team has it right this time. Cronmibus is a a massive taxpayer funded handout to the big banks we can only guess how many trillions dollars this windfall will net citibank and company.

Liberals (when they are not bought and paid for) can be counted on to oppose redistribution from middle class taxpayers to the banking elite. When the Blue team come to power, however, they are even more destructive as they tax the productive economy to death blindly redistributing in the other direction.

Both the Red and Blue team stand for the same thing, redistributing wealth from those that produce to those that do not. The only conflict between them is which parasitic aspect of society gets the spoils.








 


 

More of the same coming soon. Up next is probably a raid on government insured FDIC bank deposits.
There was a massive push this week to ram through the cromnibus spending bill. This bill effectively scraps the most significant portions of the Dodd-Frank requirements.

Dodd-Frank may be a pale imitation of Glass-Steagall but it did prohibit prevent banks from securing their most risky derivative plays with taxpayer insured FDIC funds. The law was passed in 2008, however 6+ years later this prohibition has not been enforced. As of December 1, 2014, a total of 104 Dodd-Frank rule making requirement deadlines have passed without coming into effect (37.1% of the total). This stall tactic bought banks enough time lobby bribe congress to revoke these requirements altogether. One can only imaging the favors promised/given to get this done.

Targeting FDIC funds has been the major play for a few years now. Back in 2011 Bank of America successfully dumped 75 trillion of derivative exposure on the U.S.
http://seekingalpha.com/article/301260-bank-of-america-dumps-75-trillion-in-derivatives-on-u-s-taxpayers-with-federal-approval
 
This latest round of shifting risk to the taxpayer was just more public and obvious. Perhaps an indication that that time is short? After all these derivatives have to be cleanly foisted onto the taxpayer before the next major downturn.  

I think we would agree that government will find this an easy choice and choose to raise taxes and confiscate wealth every time.


But Armstrong does not disclose his methods. It is easy to claim you have a superior computer model that tracks 32,000 variables. It is far harder to actually develop such a thing. Armstrong is also selling a product (investment advice) so there is a potential financial motive for convincing others he has something that does not necessarily exist.

Given his refusal to share his methodology the only way to judge his claims is via Bayesian inference ie recurrently updating the probability he is what he claims to be by the accuracy of his predictions. Confirmed independent records of prior predictions would be helpful here or lacking that a concise report of future predictions.

Another proponent of Kondratieff wave cycles is Ian Gordon at longwavegroup.com. Below is a chart of his overlaying Kondratieff waves over some economic metrics including the S&P 500.



Overlaying the traditional Kondratieff wave over modern times predicts a crash into winter or economic slump starting in 2000 and bottoming out in 2020. Interesting enough this matches up to with the burst of the stock market bubble of 2000.
However, in 2000 we had the FED with the ability to dramatically and artificially alter the economy via  11 interest rate cuts and a $200 billion injection into the economy through open-market operations. This is felt by many to be responsible for the subsequent housing bubble. When the housing bubble burst the FED again rapidly lowered interest rates. However for the first time in history they essentially hit zero and ran out of room.



At this point the FED transitioned over to quantitative easing as an alternative way to artificially stimulate the economy. Note the abrupt increase in Monetary base that occurred as a result.




If Kondratieff wave analysis is correct then we are perhaps 14 years post due for a major downturn. In this scenario the FED has artificially delayed/postponed this downturn first via artificially low interest rates leading to the housing boom and more recently doubled down with QE leading to our current artificial stock market boom.

It seems probable that each intervention causes further disruption malinvestment and damage to the underlying economy.

I have not looked deeply into Martin Armstrong’s guilt or innocence. Honestly, I don't really care that much so lacking the time to research it I will defer judgment. I do however, have a major major problem with how Armstrong was put in jail for 7 years without a trial by jury. This form of judicial tyranny is not as rare as one would think. Here are some other examples.

Man serves 14 years for contempt of court for refusing to transfer money he claims he did not have to his ex-wife
http://seattletimes.com/html/nationworld/2009449357_apusjailhousemillionaire.html

Woman sentenced to just shy of a year in jail for talking back to a judge.
http://www.dailymail.co.uk/news/article-2548787/Woman-talks-way-spending-300-days-jail-contempt-court.html

Man sentenced to 20 years in jail for refusing to testify in a murder trial
http://articles.chicagotribune.com/2011-10-07/news/ct-met-long-sentence-20111007_1_appeals-court-witness-murder-case

The common theme of all of these cases is that the individuals were placed in jail by a judge without a trial.
Just a refresher lets take a look at the 5th and 6th amendments to the US constitution.

Fifth Amendment
nor shall any person .., be deprived of life, liberty, or property, without due process of law.

Sixth Amendment
In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed, … and to have the assistance of counsel for his defense.

It is very dangerous when the supposed enforcers of the constitution are themselves ignoring/failing to acknowledge the protections granted by the constitution.

Skepticism is a very appropriate response. I am about as far from an expert on this topic as you can get but here is what I have found
in my own quite limited research.

Question #1 Is there any actual solid statistical analysis to show these Kondratieff cycles really exist.

I found this very interesting statistical analysis of Kondratieff waves.
https://escholarship.org/uc/item/9jv108xp#page-1

These authors did a tremendous amount of work on Kondratieff waves or K-waves and world GDP dynamics.
Their analysis supports the existence of a K-wave with a period of 52-53 years with a level of evidence or p value between 0.04 and 0.05.  
With data like this it cannot be argued that this is something totally made up. Advocates of K-waves may be wrong in their assumptions
or analysis or they may be wrong in arguing that any cyclical behavior seen in the past is predictive of the future but there is at least some
data to indicate that K-waves are real.

Question #2 Does K-wave analysis actually predict war

Here I have struck out. I have not found any source nearly as compelling as the the statistical analysis on GDP dynamics. I cannot answer your question
about the war cycle graph because I have not found a solid enough reference to back it up.  

Cross posting this here as it is also relevant to this thread

There are two interesting issues surrounding Mr. Armstrong.

1) That he was held in jail without being charged or convicted of a crime for seven years by a judge for being in "contempt of court"
2) His claim (to date unverifiable) that he has perfected or at least vastly improved on Kondratieff Wave analysis via computer modeling.

The first issue is simple judicial tyranny. It should bother any US citizen that someone can be held in jail for seven years without being charged, tried, or convicted of a crime. However, I am most interested in Armstrong's claim to have perfected Kondratieff Wave analysis.  

I would note that Armstrong is far from the first to promote the use of very long term cyclical modeling of the economy. Modeling of this type can be traced back to Nikolai Kondratieff who identified four stages of cyclic behavior and identified the as spring, summer, autumn and winter. Kondratieff calculated that a complete cycle or wave lasted for approximately 53 years. He published his theory in 1925 in his book "The Major Economic Cycles". Kondratieff overlaid his wave on world history and projected it forward.



Kondratieff also noted that those same 53 year economic cycles could be relied upon to mark major world conflicts. Below is the 53 year war cycle that was derived from his work and nestled within that a 17.7 year war cycle.






The best discussion of Kondratieff Wave analysis that I have come across was published by Grant Williams in his superb article The Consequences of the Economic Peace
(Note clicking the link will prompt you to sign up for the newsletter this can just be closed to proceed to the article)

So what happened to Mr. Kondratiev? He was accused by the soviets of being a member of a "Peasants Labour Party". Convicted as a "kulak-professor" and sentenced to 8 years in prison. In September 1938 during Stalin's Great Purge, he was subjected to a second trial, condemned to ten years without the right to correspond with the outside world and executed by firing squad on the same day the sentence was issued.
 

Happy birthday Economic Devastation thread.
A year has flow by very quickly.

Surprisingly 12 months later this thread remains the #1 Google search result for the phrase "Economic Devastation"



On this one year anniversary post I want to give a plug to zerohedge.
When the comment above was posted I had not heard of zerohedge.
This comment caught my eye I started reading it.

Zerohedge is now probably the only news page I check on a daily basis and I highly recommend it to anyone who was even remotely interested in this thread.