SYSTEMIC SHOCKS
A top-level conclusion from my book Brave New War is that security in the future, from economic to physical to environmental to social, will be measured by our responses to a never-ending series of global systemic shocks derived from a plethora of sources. Unfortunately, we are likely to fare badly. The reasons for this are simple, the global system is:


Too Big. Simply, the system's scale is far beyond the ability of nation-states, or a community of nation-states, to manage when it suffers a breakdown. In the case of the current financial collapse, the global shadow banking system (a globally inter-networked collection of unregulated financial products) is approximately $450 trillion, as compared to a US GDP of $15 trillion or a global GDP of ~$60 trillion. Put another way, the financial liabilities of the highly leveraged Deutsche Bank are 80% of Germany's GDP and Barclay's liabilities are 100% of the UK's GDP. As the leverage underlying the shadow banking system unwinds and more banks fail, the scale of the loses experienced will rapidly exceed nation-state budgets.


Too Fast. The speed at which shocks spread in this globally interconnected system is faster than the response time of governmental institutions (tight coupling). In this financial crisis, the cascade of failure in the system spreads at the speed of information networks and computer automation in trillion dollar increments. The upshot is that the government's impacted will likely take hasty measures, like the 3 page Paulson plan in the US, without the analysis, orientation, or synthesis necessary to produce high quality results.


Too Complex. The system's function is beyond understanding. This is due to a lack of data (opacity either due to the nature of the system or by design as in the shadow banking system), the number of variables or connected systems, a lack of long term historical data on its operation in its current configuration, etc. The result is that efforts to mitigate the system's excesses produces pyrrhic victories (where the corrective action produces negative outcomes, like how efforts to ramp biofuel production impacted food prices). Worse, due to the system's complexity and the lack of an effective means to address its excesses, we are reduced to treating symptoms of failure (as with the Paulson plan) and even then under violent debate.

Epilogue

The inevitable outcome of systemic shocks at this magnitude will be an inevitable delegitimization of the nation-state as our trust in the ability of leaders to take effective corrective action evaporates. Further, nation-states will expend the majority of their resources on hasty and relatively ineffective corrective actions, which will make them collectively more prone to damage in the future and which will preclude the investments required to mitigate future crises. The cycle of delegitimization and resource depletion will continue until the nation-state is unable to respond at all to future calamity (the scale of this financial crisis is such, we may as well forget about any chance of early action to delay or prevent global warming, peak oil, water scarcity, food shortfalls, pandemics, etc.). In short, we will see a proliferation of hollow states.


NOTE: Due to the networked design of our global system, small events can be amplified into global shocks -- either through unmitigated positive feedback loops or a breakdown in the system's core assumptions.

What if 700 billion isn't enough, would any one have any issues after investing so many billions, investing another 300 billion the following year? And what if needed another 50 billion every 6 months?

What's 700 billion plus interest?

So here's the question. If 700 billion is added to the system, why would that prevent a collapse of the economy? How would it prevent it? Would it prevent it for a month, a year, a decade? How long will it prevent it from happening?

As for how long it would prevent it, I guess until these companies get all their assets locked up in questionable debt again.

One thing I'm not entirely sure on is why everyone is convinced it has to happen right now!  Seems like this is the kind of thing where taking the time to do it right would be a good idea, but those in favor seem to want it now, now, now! 

Socialism is bad, it doesn't reward anyone for taking a risk.

Did y'all know that Hershey failed at least twice before he started to put milk in his chocolate?  Once he succeeded he started to grow and in 1900 sold his company for a cool mill, which was a large sum then and moved.  Under socialism his company, as soon as it became large enough, would be gobbled up by the government.

Why bother taking the risk?  You can see this in what the world thinks of the socialist countries.  England and Canada are jokes.  When was the last time you heard a good idea come out either one?  All socialism is is communism for bleeding hearts.

Source: © Center for Global Development and Carnegie Endowment for International Peace. From “Ranking the Rich,” Foreign Policy, May/June 2004. Reprinted with permission.

I just tier of all the welfare mommas and dog-like daddys sucking up all my hard work is all, telling the government they need help while they drive lexuses and wear Apple Bottom jeans.  While I have to decide hot dogs and mac and cheese for how many days intermixed with spaghetti and have to buy from Good Will or Wal-Mart clearance racks.

I have thought about that.  Did you know that until 1862 we didn't have any income taxes?  Instead we taxed only "sinful" goods and some business transactions(1).  Also make sure you read down on what Reagan did to the tax system.

I understand that the government needs money to do civil services that benefit all, but how does welfare benefit all?

I don't want half a billion going to Alaska every year by Alaska's Senetor who is now being investigated for fraud.

Oh and my wife works at a local school and sees it all the time, and I have seen myself.  I see it everyday as I drive my semi around making deliveries.  And as a final example, my wife's cousin's baby momma won't marry him because she is getting to much in benefits.  She doesn't work a full time job, she works two jobs, but one of them pays her under the table so she doesn't get caught.  I drives me absolutely bonkers and she and I have had a few heated arguements over it.