Chaos Theory & You

OK, this post is going to be a bit... strange. I'm a big fan of Chaos Theory, long before Jurassic Park made it famous and fashionable. I stumbled upon this article from dollardaze.org a while ago, and It's taken me several re-readings to make sense of it all. Well, more like it took me that long to properly digest it. I'm going to do my best to simplify it for you all, because it's such a complex topic, but it is such an important topic!. I'll begin with the groundwork.

Chaos Theory deals with vastly complex situations, and tries to make some sense of them. Not by reducing the entropy (another name for chaos) into simple rules and algorithms, but to embrace the entropy in the situation or system. Chaos Theory is like being a surfer, while a traditional mathematical view of the ocean would be done by floundering in the surf.

Chaos theory is used for such things as studying the solar wind, comets and asteroid projections, weather, and global economics. Our economy is what we call an open system. It's a chaotic system that effects the larger system around it. In this case the American economy affects the global economy.

And that is why I'm writing this post. Our economy can be seen as a living being. It consumes raw materials like energy, matter, and information, and expels it's waste to other economies, countries, etc. The American economy is an open system to use the chaos theory's terms. In the life cycle of this entity, as it ages it retains more and more of it's own entropy, until it reaches critical mass. This critical mass is when the entity cannot expel it's waste (entropy) into the larger environment. The reason our chaotic system has been stable for so long is because have been expeling our wastes into the greater economy. Now the global economy is a system as well, and at some point it's going to choke on it's own waste. The global economy is a closed system, ehtropy cannot escape it, it just moves around inside it.

Now, two things can happen when this entropic system reaches it's critical mass. Either it evolves to handle the new stresses and entropy, or it collapses... Scientists call this a Bifurcation Point. I'll use the same example that they used in the original article, a beach ball and a mountain. Imagine standing on a mountaintop with a beach ball. If you drop it so it is precisely on the tippity top then there is an equal chance of the ball rolling down either side. Chaos Theory states that there are a near infinite amount of forces acting on the beach ball which may push it to one side or another.

In our economy it might boil down to just one business closing (or remaining open), or one family losing (or keeping) their home from foreclosure. These seemingly insignificant events are what may be the final force to tip the economy one way or another. The bifurcation point is so precipitous that the day or even the hour when an event happens can be the final push to send the beach ball rolling down one side or the other.

Now you can think of our economy being that beach ball perched on the mountaintop. There are many forces acting on this economy but we have a stalemate for the time being. This is why so little has actually happened. Every action that the government has taken has been met with an equal, but opposite, reaction from somewhere else. This state doesn't have a time limit, but you can imagine that as time progresses more and more factors will affect it. Eventually our economy will evolve or crash.

Here is an excerpt from the article:

The U.S. is also emitting entropy to the rest of the world in the form of excessive amounts of dollars accumulated as foreign reserves in central banks around the globe. The world is rapidly approaching the point of unwillingness to accumulate more dollars with the realization that Obama is intent on creating trillion-dollar stimuli to keep the current financial disorder going, force-feeding the bulk of those dollars onto the world. This is inherently unsustainable. As long as the world is willing to absorb U.S. entropy, the system holds together; as son as the world balks at absorbing those dollars, its value would collapse and the global monetary system would reach a bifurcation point as dollar reserves depreciate rapidly and inflict losses on foreign dollar holders.

Currently billions of dollars are injected daily into the financial system. As a result, the dollar continuously loses value. Now it has become increasingly clear to everyone that this process cannot be sustained; but it cannot be stopped or reversed either. The dollar must inevitably collapse and cause total chaos throughout the global financial system. This will destroy the value of dollar savings and dollar-denominated assets and will most likely destroy the bulk of global financial system. In the best case, a new and improved monetary order will emerge from the chaos.

With my awareness heightened with the knowledge of Chaos Theory I can see how we have managed to survive as a country and as an economy. To put it simply we dump our waste into the global economy, where Russia, China and the Oil barons have willingly soaked it up. Now they have their own problems with their own economies, and these systems are not able or willing to soak up our waste.

Now we have reached several bifurcation points with our economy over the years. The most notable being the great depression. But the economic woes of the 1970's, the recession of 1982, the savings and loan crash, and even the .com crash were all bifurcation points from recent history. I'm thinking the crash of Russia's economy after Glasnost, took a bunch of global entropy with it, but it's just a guess.

So where does that leave us? This doesn't touch the inflation vs. deflation argument. All this means is we are either going to crash or we will pass a new series of laws and guidelines and so on and so forth so our economy manages to pull through. Doesn't mean the dollar will make it though this, we very well might switch to the Euro, or make a new currency, or even revert back to the gold standard (I hope). Even if the economy survives this bifurcation point, it just means there will be another down the road. An even bigger one.

As things are now, the slope of the mountain on either side is very steep. If we manage to press on, then the slopes become steeper and steeper with each bifurcation point. I personally don't see us surviving this one, I'm betting the whole economy goes down the tubes. The bigger question is how? That has the most impact to us in our daily lives and how to prep for the upcoming crisis.

Well that's enough to chew on for now. Take care everyone and keep prepping!