Understand Everything Fundamentally

Historic and recent scientific developments add to our understanding of how the entropic force from physics may govern everything in nature, including ecosystems and economics. This can be applied to fundamental analysis of potential political outcomes, macroeconomics, and paradigmatic epochal shifts, e.g. the current shift from the industrial to the knowledge age.

The following actionable points will be explained.

• Due to Coase's theorem, the EU crisis (and China and USA) will resolve in more gold and silver fiat price inflation, not the deflation of unsocialized defaults. This will continue until the global financial system is backed with gold.
• Passive investing (bonds) are peaking and when the global reserve sovereign bonds ultimately die, i.e. US Treasuries, the 'wealth' in the current system will disappear (or be severely devalued or constrained to devaluation by capital controls), and the global financial system will be restarted with gold backing. Thus, the only way to short US Treasuries in the end game, are physical precious metals.
• We are entering the end of the passive capital intensive industrial age, and the beginning of a knowledge age. This will require changing your thinking about what 'investing' means.
• Resource shortages are the symptom (effect) of society's ubiquitous pooling of capital, and not a fundamental cause of the current crisis. Resource needs will be resolved by the coming knowledge age. Arguably, this pooling of capital was perhaps necessary during the capital intensive industrial age.

Europe will not disintegrate

Coase's theorem says that an inefficient internal order will continue for as long as there remains an unavoidable frictional barrier insulating it from the more efficient external possibilities. The fundamental reason the EU crisis will not result in a disintegration of the union, at least not until its people significantly abandon collectivism, is that organisms which are unable to comprehend the mechanism by which they are consuming resources faster than their ecosystem can replenish, thus are unable to stop the mechanism before they perish. So the implosion of the friction and thus the order only occurs when they perish, because they will continue to repeat the mechanism which they do not understand to be a cause of their suffering. This can be verified in a petri dish, as an organism will reproduce until it consumes all of its food or oxygen. Due to the lack of a pre-frontal cortex, it is unable to comprehend the connection of reproduction to unsustainability. Unfortunately, even though humans have a pre-frontal cortex, they do not comprehend that debt, insurance, bonds, fractional reserve money, and centralized governance, cause the demand (and thus production) of resources to be overconcentrated in sectors of the ecosystem that create a less productive future. In the next section, I will explain that these financialization mechanisms cause collective failure and thus demand ever increasing centralization (i.e. "too big to fail"), because from their inception they all pool capital. Thus they are always collectivism.

"It amazes that otherwise bright people can't understand the simple concept that economic collapse doesn't convert collectivists into anarchists."

Thus the people are blind to the mechanism which is enslaving them and reducing their prosperity. Thus, since they will not change the mechanism, centralization of governance will grow stronger from the current financial crisis, and will diminish only when the involved organisms perish. Entropy is continuously culling the center of the bell curve so that knowledge can advance. I make no political judgment when I state factually that these mega-death cullings take many forms, e.g. abortions kill 42 million annually, it is reasonable to assume birth control probably more than that, some statistics claim that governments and wars have killed a couple 100 million in the past century, totalitarianism (the political end of pooling resources) kills millions, drugs and medications probably kill millions, cancer rates are double in the 'developed' world (the countries with financialization), and arguably GMO food may add to that. I am not making a political judgment on reproduction, rather to state the fact that actuarial economics are constrained and politically intractable without a sufficient population of youth. And as will be explained with the entropic force, it is the antithesis of knowledge formation, to a have uniform (replicated) social action.

"Currency wars are like [...] slap wars, trade wars is where the knives come out."
"Currency wars > trade wars > hot wars."

Europe is predominantly retirees (low or negative birth rates exacerbate this), that own various european country bonds via their retirement plans. If interest rates go up, the bond values decline, and their retirement is toast. The politics is to appease subconscious denial, which is why you see Merkel talking tough and simultaneously making gradual steps towards centralized printing and fiscal controls. The savers want to penalize the non-savers, under some illusion that they can convert the non-savers, but they don't accept culpability for causing the problem with a collectivist form of saving. If the collectivist non-savers were converted to collectivist savers, then who would borrow? Illogical.

Thus, the savers are blind to the fact they too are collectivists. Productive europeans (e.g. Germans) want to have a fixed interest rate return by loaning money to less productive sectors who can buy their exports. Now they want to deny they are subconsciously in support of money printing, because they also don't want their fixed income to disintegrate (even though it will be debased either way). Due to the psychological phenomenon of 'false attribution error' (i.e. blaming the stone that one tripped on, a form of cognitive dissonance), they want to be the victim who will spank and control the bad PIIGS, via increased centralized control. Neither the savers nor the borrowers are the victim, they all are collectivists and being culled by the entropic force. Note, Germany's debt ratio is as bad as the USA and Canada.

Fiscal centralization to come next (link explains how), with copious money printing and centralized rationing (i.e. austerity and/or price controls). The recent health care legislation in the USA, is price controls and rationing. The only prosperous fix for health care, was to eliminate insurance a priori so that individuals could maximize and individualize their preparations for aging. I will explain that pooled savings, i.e. insurance, is collectivism and thus automatically wasted.

My outlook is optimistic, in that those who understand how to avoid collectivism, facilitate maximum knowledge formation and efficiency of market fitness, will prosper and (they and their offspring will) survive entropic culling.

This essay continues at my own site.

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