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Augmented Reality: SP500 = 2075

Dan McReavy - 04/12/2014 08:28 CST

Denver, Colorado, United States

We live in interesting times.

Japan is running a current account deficit, selling the yen against the world's currencies on an unprecedented scale and taxing savers in a historic fight against the forces of lower prices.  The perversity of the global financial system pushes to new highs as spendthrift is the dominant moral imperative.   The social costs are real and the unsustainability of these collective actions is predictable, so what gives?  None of the diverse policy actions deployed since 2008 make any sense in isolation, but, collectively, what are abstractions up close are quite clear from a distance.

The consolidation of global financial policy and the complicity of most major participants --countries and corporations-- points to a monumental effort at consolidating global power.  It would seem the bet is that any financial losses will prove to be mere paper losses and the cost of human life is just an investment in a Progressive future.

China has been mysteriously quiet as they now employ the strategy of not interrupting your adversary while he destroys himself.  What one would know if he was paying close attention is that the Chinese are supporting Russia through massive oil and gas trade agreements while also putting the final touches on a financial infrastructure to let the Yuan float and compete as an international reserve asset.  With Russia prepared to fight for its place at the global decision-making table, the Chinese are showing wise restraint by letting their northern neighbors confront the Progressive Western policies at this time.

Working in the background, the Progressive-fixer and former Deputy Chief-of-Staff for US President Barack Obama, Jim Messina orchestrated a modern election performance in 2012 through real-time quantitative analysis and real-person interventions in critical voting districts to win President Obama reelection.  Currently, Messina is supporting the 2015 reelection campaign of the British Prime Minister and Leader of the UK Conservative Party, David Cameron, as Progressives attempt to forestall the rise of the UK Independence Party and the demise of the European Union.

Despite the different moniker and official status as a political party, the UK Independence Party shares many of the same conservative values as those people labeled as US Tea Party sympathizers.  The major value they share is that their countries have over-diversified themselves -- spread themselves thin so to speak -- and need to go back to the basics of what saw them rise to countries of international prominence.  The basics are simple concepts like balancing a budget and not slicing the societal pie too many times with low immigration standards.  Suffice it to say, these conservative parties are concerned for their fellow countrymen.

The impetus for society is trade and complex trade begets complex government.  The trouble with a society measured in the billions of participants --population-- is that it requires substantial energy to support and even more energy to move goods and services great distances around the world.  This inherent demand for energy is why Russia and Iran aren't isolated and why a non-state actor like ISIS is no doubt conceived and supported by countries who are bound by their stated commitment to the United Nations Security Council to not attack other "democratic" countries.  The alternative, and eventual outcome, will be military campaigns exploring the grey areas of international law.

The trouble with laws is that they are necessarily rigid --and they must be if they are to be just!  The trouble with lawmakers, however, is that they are in the business of making laws and their performance has come to be judged by the laws they add to the books.  The trouble with International law is that there are billions of people the lawmakers are attempting to subject to the expansive body of laws with little sensitivity for the spirit of nature's laws.

Nature's laws are not the product of political machinations or democratic scoreboards, they are what they are and no individual or government can supersede their authority and judgement when we stray from them.  The trouble with nature's laws is that they aren't so rigid and nature will tolerate some violation without punishment.  We also don't know all of nature's laws and we have to discover them through trial and error of our experience.

As Japan's leaders follow the financial policies of US and European leadership, the global social order has become more dangerous and vulnerable because the natural risk-relationships between assets and asset-owners are being disguised through distorted prices.  Lloyd Blankfein was wrong when he stated that he was doing "god's work" because GOD doesn't intervene on prices and doesn't need to make allocation decisions because He created a system to reflexively create what needs to be created and destroy what needs to be destroyed.

There is a game of who can hold their breath the longest going on between the Progressive Establishment and those respecting historical traditions and holding conservative values.  On one side, the Progressive Establishment believes it can disguise prices and maintain relative social order longer than their opponents can hold on to tradition.  The problem with this perspective is that historical tradition and conservative values are timeless and the people who treasure tradition are not the product of political organization, but of historical reflection and and an awareness of contemporary circumstances.

After tens of trillions of dollars worth of government interventions around the world since 2008, all we have to show for it are higher financial asset prices while living standards have continued to stagnate or decline.

This is it folks; the financial markets don't get any better than this.  The good news is that asset prices will get much better if you consider them from the perspective of price affordability.  As Russia demonstrated at Crimea back in February, the international social order is no longer acceptable and things are going to change through force if circumstances necessitate.  The recent events in Ferguson, MO are also symptomatic of what lies under the surface in America.  Putting aside the arguments for and against the actions of each of the participants in these events, the outcome is that neither side is satisfied with the current state of affairs and all sides appear ready to fight for their perceived rights.

Jeremy Bentham already tried to quantify social decision-making with his social algorithm and society ruled that path out centuries ago.  Life isn't a numbers game even if numbers add up.  Life is every bit about the quality or lack of quality one experiences along the way.

Keep a firm grip on your wallet, finish the food on your plate and keep your head straight as the world works toward a resolution to the persistent imbalances that plague society.