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Thoughts from the Frontline

On the Verge of Chaos

November 23, 2014

“Great powers and empires are, I would suggest, complex systems, made up of a very large number of interacting components that are asymmetrically organized, which means their construction more resembles a termite hill than an Egyptian pyramid. They operate somewhere between order and disorder – on “the edge of chaos,” in the phrase of the computer scientist Christopher Langton. Such systems can appear to operate quite stably for some time; they seem to be in equilibrium but are, in fact, constantly adapting. But there comes a moment when complex systems “go critical.” A very small trigger can set off a “phase transition” from a benign equilibrium to a crisis – a single grain of sand causes a whole pile to collapse, or a butterfly flaps its wings in the Amazon and brings about a hurricane in southeastern England.

“Not long after such crises happen, historians arrive on the scene. They are the scholars who specialize in the study of “fat tail” events – the low-frequency, high-impact moments that inhabit the tails of probability distributions, such as wars, revolutions, financial crashes, and imperial collapses. But historians often misunderstand complexity in decoding these events. They are trained to explain calamity in terms of long-term causes, often dating back decades. This is what Nassim Taleb rightly condemned in The Black Swan as “the narrative fallacy”: the construction of psychologically satisfying stories on the principle of post hoc, ergo propter hoc.

– Niall Ferguson, “Complexity and Collapse

I see a bad moon arisin’, I see trouble on the way.
I see earthquakes and lightnin’, I see bad times today.

I hear hurricanes ablowin’, I know the end is comin’ soon.
I fear rivers overflowin’, I hear the voice of rage and ruin.

Don’t go ’round tonight, well, it’s bound to take your life.
There’s a bad moon on the rise.

– “Bad Moon Rising,” John Fogerty, Creedence Clearwater Revival, 1969

As a college student, I reveled in the sounds of the Creedence Clearwater Revival and its lead singer and songwriter, John Fogerty. Fogerty supposedly wrote “Bad Moon Rising” after watching the 1941 movie classic The Devil and Daniel Webster. The movie is a paean to freedom, the American dream, and the ability of a man, even one who has sold his soul, to find redemption. There is a scene involving a hurricane that supposedly…

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Fernando Berron

Nov. 24, 11:10 a.m.

Great article. Just 2 questions;
1) Let’s say that central banker keep on buying stuff that latter they “Write off” What does that mean? Or what are the mechanics on doing so… Who looses? The Fed? Does that mean something? Or because they bought all that debt with newly crated money is the “reset” Mr. Mauldin is talking about?
2) What countries have Dollar denominated debt? Because they are feeling a lot of pain by now. Do you agree?

Nov. 24, 2:03 a.m.

I believe that the Fogertys originated in County Tipperary; there were many in the area of Golden when I lived at Cashel in the 90’s.

Richard Guldi

Nov. 24, 1:57 a.m.

When you started mentioning bad moon arisin’, I thought you were going to discuss what fracking is doing to the world in light of the new earthquakes widely felt all over Dallas last weekend.  Although low magnitude, fracking invoked earthquakes may be delayed for many years,
may not end for years after injection ends and may occur many miles from the injection point. Property damage to your hometown Azel did not serve as a “wake-up” call.  Perhaps widespread property damage in Dallas will.  Azel is too small and its citizens middle class.  Influential political donors live in Dallas. They will wake up some day.

Eric Johnson 37216

Nov. 24, 12:48 a.m.

Thanks for everything you do John. Your site provides, by far, the best summary of what is taking place around the world every week. Looking forward to the next book. The last two were instant classics.

Matt Wilson

Nov. 23, 6:45 p.m.

Things are going to get worse before they get better. Will the world end? Well, it just might, and I’m not kidding.

From a complexity viewpoint, the world is stuck in the middle of a phase change - like going from water to ice. Things that used to work don’t work so well now and will continue not working well. In other words, things will never get better short of allowing a great depression.


Primarily because the people who caused all our problems in the first place got to keep their job. Had a true crash been allowed then a lot of those people would be out of a job.

What about the end of the world?

May I direct your attention to this article: Financial crisis and war -