“Bush Money” (and a comparison with Black Holes)

I am not an economist nor an astrophysicist. But I find both fields intensely fascinating, when embedded in their proper context – economy in the theater of international or “geo”-politics, and astrophysics when looking at the proper context of the innermost galaxy. In both there is an ephemeral understanding that can not be gathered from mathematical analysis. You can’t fully understand reality by speculation or theories alone, sometimes you have to look at physical reality and decide what is really happening. You can’t model it – you got to live it.

Maybe I am a cynic, but I happen see a similarity between the banking sector and astronomical singularities, i.e. black holes. I don’t ordinarily dream of banking ephemera, but I do have near-nightmares of the reality of black holes. Yet both have become detached if strangely frightening and awe inspiring realities.

Black holes form when heavy stars foul up their insides with fusion products. Essentially a star fuses materials in to heavier elements, thereby winning energy and gradually radiating that energy outwards. The heavier the star is, the atomically heavier substances generate to pollute its own source of energy. The first stages of fusion (i.e. Hydrogen) occur relatively slow – hydrogen fusion commences at a certain pressure and temperature so in effect the gas composing what we understand to be a star collapses to the point where it starts giving off heat. This heat just happens to have an immediate effect on the space where I happen live. That is why we can assess stars “in their proper proportion” to be beneficent to stuff that matters (i.e. life) and we can say the same about banks. Banks of a “modest” size, like stars, generate a very lasting and predictable amount of heat and are very stable. Average stars just don’t explode or collapse. They maintain an equilibrium of life-giving outflow. The same is true of banks. There is a desirability optimum for stars where a certain size generates what we might label a “goldilocks” zone of habitability versus time. For modest stars like the sun this is mostly a good thing, and the same apparently can be said for banks.

But when the universe came to be there (probably) wasn’t some divine watchmaker that decides to fine-tune the constants of reality to a degree where it was a certainty stars would emerge, maintain equilibrium and create the conditions for life. We as a species wouldn’t be here if there wasn’t a causal mechanism at work that creates stars. We are fortunate that’s the case but there is no one we can thank for the beneficient effects of either banks or modest-sized stars.

The sun “only” fuses hydrogen for a few billion years and then its core collapses (or condenses) to a point where coincidentally it is hot enough to fuse helium. This isn’t some grand design of someone, or some “invisible” hand at work. It mechanistic. Stars of a certain size just happen to run out of fusable fuel in their cores at a certain stage in life and then proceed to fuse harder using Hydrogen. Apparently the same can be said of banks. There may not be a reason other than a blind, arbitrary mechanism in economics that makes banks inflate at a certain latter stage in life and start messing up the place. It might be that there’s a certain insanity that gradually takes over the concept of what we call a bank, as the decissionmaking process stars to run out of initial resources, and it swells up, much like all sun like stars eventually do, and explode. The remnant of such a sun-like star radiates for all eternity, but so little energy it can’t keep a planet like Earth warm and plays little role in the bigger picture.

The problem emerges with very large stars and very large banks. Very large stars are able to incrementally generate ever hotter core collapse states (…) as to generate more vicious energy to be able to (…) fuse ever heavier elements. The really big stars go all the way, fusing as much as nature allows to be meaningfully fused and guess what – the bigger the banks and they start screwing around in a correspondingly volatile manner. With both we humans can say we can meaningfully benefit from the products of very big financial entities or respectively very large stars in some distant past, we can generally say we as average humans do not want to be anywhere near the big ones. The most big stars start failing around the time they start fusing to silicon to iron (and apparently they do that in a day!) and then collapse happens. Same happens with the most bloated gargantuan banks – they live fast, burn through their resources like there is no tomorrow and then inescapably detonate (and you do not want to be ‘closely associated’ when that happens). The goldilocks zone around the heaviest stars as well as the biggest banks may be spacious and gargantuan, but it lasts very briefly and is extremely fickle and variable, and they always detonate.

And I can and do extend the metaphor beyond that. Beyond the point where superheavy stars detonate something sinister remains, and that’s what we call a black hole. If the sun would somehow be compressed to an equal mass black hole, Earth would obliviously stay locked in the same orbit for billions of years and would freeze to death. Black holes are just stagnant, one way streets in terms of their interaction with surrounding reality. They don’t give off anything and when you stray to close you get absorbed. The same can be said for the remains of large banks and financial institutions that persist beyond their catastrophic phase. They turn cold and uncaring, very condensed and nothing that strays close escapes in any meaningful fashion, unless it gets caught near for any length of time, in which case it gets slowly eaten alive and it’s death screams can be heard halfway the financial universe.

Black Holes apparently do have a maximum size. The one near the center of our (modestly sized) galaxy is a few million masses of the sun (…) and has its own irreversibly imprisoned entourage of stars. Again this metaphor extends for the most grotesquely predatory of financial institutions, much like the convolution of banks and governments. Supermassive Black holes as well as Super-top heavy “too big to fail” Financial Institutions can only grow as much food as they are served, and as long as they can feed can only become bigger and never smaller. But as they feed to spit out so much lethal debris and radiation it makes much of the known universe uninhabitable without considerable protection.

The world hasn’t been designed, much as we can say the cosmos hasn’t been designed. But still, if only for reasons of causality and logic, there are certain emergent and predictable properties to the size of phenomenon. We live in a reality where banks can expand far beyond a life giving size and can effectively collapse to death-emitting agents of one-way consumption and death, sometimes growing to a size where they keep whole local sections of reality captive in an icy and dark stranglehold. This is the metaphor we must now come to accept when it comes to the biggest “too big to fail” banks out there. There is simply no zone of habitability and long-term survival around these one-way-street monstrosities and if possible we should not allow their formation in civilized society.

In 2005 it was clear to me – I saw a localized financial institution turn from a volatile and high-mass body in to something explosive, and then collapse in to a devouring monstrosity. That happened in many countries world wide – banks going “black hole”. We as a society allowed these banks to expand and expand, feeding through their assets only to degenerate in gradually more toxic forms of acquisition and consumption, and finally these banks crossing over to the point where they’d contribute pretty much nothing to the world around them.

A good, modest sized bank provided a stable anchor, a central mass of reference, that allows its orbiting entities to persist in predictable and long lasting life giving environments. Too big banks are by their very definition and the way our geopolitical system operates simply agents of destruction and contamination it’s best to keep a safe distance from. The same, sadly, can be said for governments, but since these days governments tend to be in orbits around more massive banking sectors, rather than the reverse, we should point the finger squarely where the blame lies – too much mass at the center of reality.

In the early decade of the 21st century world wide banks started expanding far beyond a manageable size, and their mass turned governments in de facto satellites to feed from. At first the banks were bright beacons, but after they went nova they started feeding from their functionally smaller orbiting bodies, much like black holes do.

In 2015, going on 2016 we have become blinded by the radiance of too big to fail monolithical banks, and we do not dare speculate these monsters are going to go supernova and revert to geopolitical black holes before long. In a world where money can be created pretty much arbitrarily, banks allow they adjacent satellites to grow and expand far beyond a financially sustainable state – and when the satellites default, the black hole springs in to a process of one-way feeding based solely on the self-interest of the institution.

Money creation is much of the problem. Most people don’t have a clue where all this money comes from. Banks can “fairly easily” create money. Governments create all kinds of opaque but mostly symbolic rules to allow them to create money without democratic oversight or long term sustainability. These systems become the self-referential center of gravity for the local cosmos. But the real problems start when they run out of other people’s money – they explode and become financial sector black holes.

We are all in a giant mess now. The imminent collapse started when became ever more effective at lobbying politicians to ease banking rules with regards to speculation (=gambling) with their (mostly fictional) allotment of money. This allowed them to grow to a truly gargantuan size the world hadn’t seen before. As the financial manipulation (i.e. gambling) turned from merely esoteric to truly transcendentally metaphysical the system was set on a course where the system going nova was pretty much certain. All pretense is gone now and politicians move in and out of the banking sector through wide-open revolving doors, allowing Banks to legally and predictably reward politicans that had done their bidding for several electoral cycles. Even politically leftist principles make not a iota of difference in this system – if a politician isn’t in a predictable orbit, she or he doesn’t become part of the system in the first place.

So in the late 90s to early teens most governments world wide were forced in to ideological capitulation to this geopolitical center of gravity. Politicians grew fat on campaign donations and plush CEO positions in their latter careers, but at the center of the system is where the true benefits were enjoyed. And the bigger the mass of the bank, the bigger the reward. Shareholder preference didn’t matter one iota and service to the central mass became a generational or family business.

The problem with arbitrarily creating money is the problem of inflation. Things lose value relative to the amount of money in orbit, and with perceived escalating inflation of necessities (rent, food, medical care, education) you end up with serious electoral anger. So the political system had to resort to lying about inflation, and they ended up recallibrating the definitions of what constitutes inflation, or they sufficiently subsidized certain necessities to keep the electorate docile. Only a very small people who are ‘in the know’ enjoy the unbridled benefits of unbridled money creation, and their standards of living quickly escalated in to the grotesque. These effects rained down everywhere across the globe – especially people who had been close to Bush junior’s reign benefited, as these policies where often geared towards oil and oil-subsidiary (agriculture, mass retail, military, oil-producing, industrial et.al.) entities. The sky was the limit, even for investments doomed to fail from the start.

All around the world governments became increasingly desoriented – and some governments lost all common sense, especially when they were in close orbits around the bigger banks. Economy as a science simply stopped making sense, even to insiders.

George Bush ran a government that quickly became topheavy with banking, oil and military interests. Half his cabinet were people with longstanding backgrounds in primarily the oil business and very close ties with the Saudi. A decade before invading Iraq wasn’t regarded as a viable option by insiders, but they quickly changed their minds in the face of profits. The early project of invading the Middle East and the decission to topple a half dozen states had a rather jocular nameOperation Iraqi Liberation. The pricetag was estimated as “a few ten billion” but now stands at over three thousand billion US dollars. Whatever the case the geopolitical financial system reaped most of the benefits, by a wide margin, even though the real price tag was deposited with taxpayers.

After 2002 the US lowered interest rates to stimulate the economy. Problem with interests in a downturn is once you try increasing it, the economy immediately collapses in on itself, a process keenly similar to what happens in a Supermassive star. So in effect the new normal was the world wide access to particularly cheap money at a very low interest. America noticed with an unprecedented housing boom, and the effects rippled through the system with similarly cheap credit. In the early teens I became quickly annoying with adds for cheap credit everywhere, and people left and right taking on debts that any person of sound judgement would know would be eventually unsustainable. But banks had no issues with lenders defaulting at the time, since their lenders essentially were functionally imprisoned by any debt they agreed to.

This phenomenon is extremely corrosive to society at large in numerous ways. The onslaught of easy credit creates people who do whatever they can in terms of speculative transacting to rake the available money in and make it theirs. In Iceland bankers were rolling in money they in essence wasn’t “yet” theirs and the same sordid spectacle occurred most everywhere around the globe.

We can cue the date of the system turning in to a giant sucking black hole around 2008. The mass of the system was irreversibly destined for total collapse, and everything in orbit around it was sucked dry.

So it is 2015 now, and much of the world is in orbit around a massive one way consuming financial system. The pervasive problem is what I’d call a monstrous bubble of Bush Money – money that just sprang in to being because the Bush presidency and -advisors didn’t have a clue of, or didn’t give a damn about long term consequences of an endless avalanche of cheap money. We are now stuck with an upper caste of human beings that own or have immediate access to a grotesque amount of money that is completely at odds with the equilibrium of geopolitical financial stability. Global economy is set around the expectations of human beings and if these expectations (let alone necessities) of these people aren’t met, there is generally hell to pay.

Banking is now a fully established black hole, a toxic mass at the center of our consensual reality. I can not emphasize enough how awful this situation is, and how much worse it is set to become. Certain elites have money, but they full well realize that if they decide to actually spend it it will trigger enormous inflation and the system might conceivably implode – so they tried to invest, park or otherwise secure this money against it losing value.

We are now in a world hovering on negative interest rates – i.e., a world very close to the tidal shear of a supermassive black hole. Several of the more secure and cautious financial institutions in Europe are now actually asking money of their clients to secure their money – which is a very loud clarion call by the financial world saying – invest it or lose it.

The problem isn’t that money is destroyed anywhere in the system. The problem is no money is destroyed anywhere. It is far easier for a rich person to secure return on their money than someone poor is able to. This has essentially created the biggest game of musical chairs ever seen on the planet. Everyone is either trying to invest or launder or otherwise secure the actual value of the money they are absolutely certain is theirs. Closer to the Singularity we see that the rich get richer exponentially and their money increasingly does not trickle down in any meaningful manner. It trickles to the common centers of gravity, and increasingly that’s the banking black hole at the center of it all. Predatory business practices become the new normal and if you aren’t making billions you are regarded as a loser. Ask Trump, he’ll remind you over and over. In this climate governance is completely recallibrated about serving the interests of sponsors and the world is in a mad scramble for deregulation, no matter the consequences.

The world we are in is absurd by any previous metric. Very few things make sense. Economy was always a bit of a soft science by epistemological standards, but now it has become slapstick science. Even the archpriests of economy can’t come up with solid predictions.

We are in a world with so much money the actual expenditure of that money would be catastrophic. A lot of the Bush Money is still more or less hidden in the margins but it has to come out sooner or later. In essence all that money is desperate about becoming institutional, legit, “real”. But the Banking black hole is at the dead center trying to vacuum it all up.

So the world showcases us ever more absurd examples of people keeping all that money afloat. Examples are investors literally “parking” oil tankers offshore speculating on better oil prices. Or these people launder their money in to absurd tech IPO’s. And there’s still a very strong pull towards real estate over-investment, with nightmarish consequences for people who pay a normal rent.

What does this spell for the future? I’d say nothing but trouble, and trouble coming in a format we haven’t seen before since forever. The Bush Money we see haunting the world’s financial ivory towers is nothing short of a potential inflation nightmare for normal people – i.e. inflation in rents, food expenses, health care, student debts, energy prices. You can not think of an example and you constantly see shock waves of bubbles inflating and deflating all over the place.

The hard pill our collective societies need to swallow is that most the fundaments of 231st century modernity have become virtual. Fictional. Synthetic. Artificial. Contrived. Our food is a mad scramble for hyper efficiency (and hence extremely disruption-sensitive) and cost reduction. Hence our food production is risking creating one of the most terrifying health consequences imaginable. The same mechanisms are at work literally everywhere.

And the problem is that “we”, i.e. people of modest incomes and political power, are on the hook of things go wrong. If the housing market convulses one way or another the system has become geared to immediately dump all negative consequences with the endless masses of functionally powerless taxpayers.

Most people do not realize where all this is unavoidably headed, but I predict you – when it starts really unraveling (as opposed to the relatively few minor crisis we had in the last 15 years) we will see a lot of very angry people, and a very panicky government reaching immediately into the fascism toolbox.

The only bubble I see inflating in the immediate future is one of re-democratization. That essentially comes down to using (taking) all that rogue money as reaction mass to escape the gravity of this monstrous black hole and as a humanity lay out a trajectory to a more manageable and placid system.