The Financial and Political Big Picture


From STONELEIGH
The Automatic Earth

As The Automatic Earth has grown and continued to catalogue the on-going financial crisis, it has been getting increasingly difficult for readers to find our view of the big picture in one place. Since it has been exactly one year since we issued our first primer guide, and several new primers have been added in the meantime, it seems an opportune moment to offer an updated distillation of our worldview.

The Resurgence of Risk, which appeared at The Oil Drum Canada in August 2007 provides the background to how we came to be in our present predicament. It is by far the longest of the primers, and its purpose is to explain in some depth the nature of our credit bubble, the role of ‘financial innovation’, the distinction between currency inflation and credit hyper-expansion and the mechanism by which value disappears as a bubble deflates.

For further explanation of the ponzi nature of bubbles, the spectrum of ponzi dynamics underlying many economic phenomena and the implications of this for where we are headed, see From the Top of the Great Pyramid.

This ties in with an earlier piece from The Oil Drum Canada, Entropy and Empire , detailing the progression of hegemonic power from empire to empire, as each rises, over-reaches, falls and passes the mantle on to its successor.

The political picture is further developed in Economics and the Nature of Political Crisis, with a more specific look at Europe in The Imperial Eurozone (With all That Implies).

When bubbles reach their maximum extent, they invariably deflate. Our explanation as to why this is inevitable can be found in Inflation Deflated, followed by, The Unbearable Mightiness of Deflation, a rebuttal to inflationist Gary North. An Interview with Stoneleigh provides a more recent and more comprehensive piece on deflation and its consequences.

We dispute classical economic theory and the received wisdom as to the nature of markets. Markets are not objective, mechanical and rational as the Efficient Market Hypothesis would have you believe. Our explanation of markets as human phenomena grounded in destabilizing positive feedback can be found in Markets and the Lemming Factor (with kudos to Robert Prechter, who has been developing the hugely important theory of socionomics for many years).

We have a number of articles on specific aspects of our current crisis. Our view of real estate can be found in Welcome to the Gingerbread Hotel. Employment is covered in War in the Labour Markets.

The Special Relativity of Currencies and Dollar-Denominated Debt Deflation address our view of currency inter-relationships and the value of currency relative to available goods and services.

Our view of the intersection between peak oil and finance can be found in Energy, Finance and Hegemonic Power and Oil, Credit and the Velocity of Money Revisited, and our view of the future of power systems is explained in Renewable Power? Not in Your Lifetime and A Green Energy Revolution?.

Our take on the future for gold can be found in A Golden Double-Edged Sword, and our view of -global- trade is covered in The Rise and Fall of Trade.

Our predictions for the future in a nutshell are available in point form in 40 Ways to Lose Your Future .

Our prescription for facing the future is presented in How to Build a Lifeboat .

This is our attempt to convey what we as individuals can hope to do about it for ourselves, our families and friends. We cannot avoid living through a Greater Depression, but we can take action, and, being forewarned, we can hopefully avoid many pitfalls. We can attempt to avoid becoming part of the herd that is determined to throw itself off a cliff.

Finally, our most theoretical piece, Fractal Adaptive Cycles in Natural and Human Systems, connects ecological and socioeconomic cycles through an analogous framework, drawing together the work of CS Holling, Robert Prechter and Joseph Tainter. The big picture is of crucial importance as we have reached, and passed, the pinnacle of a golden age. We are moving into an era of uncertainty and upheaval such as none of us have hitherto experienced but all of us must try to navigate successfully.

We at The Automatic Earth will continue to provide what assistance we can with that process. The TAE world tour continues, with a view to turning virtual communities into real ones. By popular demand, we will shortly be making available a recording of one of these presentations.
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