The Phaserl


The Global Economy Could Fall Farther and Faster Than Pundits Expect

by Charles Hugh Smith, Of Two Minds:

Systemic fragility doesn’t respond to central bank jawboning or Keynesian claptrap; unlike those “policy tools,” fragility is real.

The core narrative of central bank/cartel capitalism is centralized agencies have the power to limit downturns and extend credit-based “good times” almost indefinitely. The centralized power bag of tricks includes fiscal policies such as deficit spending to boost “aggregate demand” in downturns and monetary policies such as lowering interest rates to zero and buying assets, a.k.a. quantitative easing.

If we crawl under the barbed wire and escape the ideological Keynesian Concentration Camp, we find thinkers such as Ugo BardiJohn Michael Greer and Dimitry Orlov, whose work explores the dynamics of collapse, resilience and sustainability.


All three have added a great deal to my own (emerging) understanding of the many dynamics of collapse.

We can summarize the dynamics of collapse in many ways; here’s one: collapse is latent fragility manifesting. A familiar (and tragic) health analogy offers an example: a middle-aged man doesn’t appear ill, a bit thick around the middle perhaps, but neither he nor his intimates can see the fragility of his clogged arteries and blood-starved heart. Seemingly “out of the blue,” the man has a massive heart attack and passes from this Earth, to the shock of everyone who knew him.

Financial collapse isn’t “out of the blue,” any more than a heart attack is “out of the blue.” Actions and choices have consequences, and as resilience and redundancy are slowly stripped from complex systems, systemic fragility builds beneath the surface. At some difficult-to-predict point, a threshold is reached and the complex system fails.

In the financial realm, fragility builds as the system relies ever more heavily on marginal lenders, borrowers, buyers and investments for its “growth.” The current “recovery” (smirk) is completely dependent on marginal lenders (China’s shadow banking), borrowers (auto buyers taking subprime 7-year loans), buyers (corrupt Chinese officials buying $3 million homes in Vancouver B.C. with their ill-gotten gains) and investments (empty malls, empty factories, stock buy-backs, etc.).

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2 comments to The Global Economy Could Fall Farther and Faster Than Pundits Expect

  • BRF

    Economist Steve Keen has a working model of the present economy as she is practiced (“Minsky” he calls it) that includes all these parameters that Smith eulogizes here. The Keen modeling predicts Bernanke’s “Great Moderation” on through total collapse with input data from our present day economy. If we want some answers to questions on today’s human economy then Steve Keen has some logical and down to earth answers and solutions that might even get a pass from the power elites if they ever hope to survive themselves at any level.

  • Robert

    It baffles me why this bloke gets so much air-time. He’s the thinking man’s David Morgan. ” Well.. it could go up, it could go down, it could go sideways…. I could be wrong ( don’t forget the lipsmacks) and there you have it.

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