Chaos Theory Meets Game Theory:The Ticking Time-Bomb in the world’s Financial Markets
Submitted by Terence M. Blackett
During a recent online interview, globalist Bill Gates issued this grim warning: “It’s ‘a certainty‘ that we will have another financial crisis like in 2008 (maybe just a whole lot worst).” When pressed on what to do next, the Microsoft billionaire and vaccine peddler answered: “you should look to my friend, Warren Buffett instead for advice. Warren has talked about this and he understands this area far better than I do” he quipped.
Since the 2008 market crash, (11) Central American countries, (9) Asian countries, (7) European and (6) European Union nations have gone cap in hand to the International Monetary Fund. As of May 2015, monies owed to the IMF by the following (10) nations stood at a staggering $72.4 billion with the biggest borrowing countries being:- Portugal, Greece, Ukraine, Ireland, Pakistan, Jordan, Tunisia, Sri Lanka, Cote d’Ivoire & Kenya owing nearly 86% of the total amount the bank has lent to date. Out of all these countries the European Union, by far, is the greatest debtor with some 70% of the $84.57 billion already allocated.
Barbados has just recently entered a structural adjustment program with the IMF with a fiscal liability over the next six years or more (possibly decades) given looming interest rate spikes and balance of payments demands – somewhere just North of over half a billion dollars – adding to the global debt pile of useless paper currency (so-called fiat money) – digital currency created at the click of a mouse (OUT OF THIN AIR); run by Artificial Intelligence Algorithms and summoned up by the ‘gods’ of mammon and then printed from nothing (backed by no hard asset class such as gold) to then fill the voracious coffers of countries run by kleptocrats, liar politicians and megalomaniacs. Hard words you think?
We are witnessing in the (dis) United States of amnesia & paranoia, the richest 10% of AmeriKKKans owning some 75% of the nation’s wealth. Added to that specious equation, is the stark realization that a few hundred families – (400 to be exact), who make up the ‘Synagogue of Satan’ across the world, own almost 90% of the entire wealth on the planet. The (3) richest being AmeriKKKans – Bezos, Buffett & Gates (the 3 musketeers of predatory capitalism) who hold more wealth than 50% of the US population combined or 160 million people put together or one third of the 7.5 billion souls on the planets!
Yet so-called educated folks cannot see that this is not a functional, free enterprise (market) system. It’s an “ancient evil” masked as predatory neo-feudalism. It’s a failure of grassroots policy to design markets that value the dignity of work and pay an honest wage for an honest day’s work. As a result, an increasingly 2-tier world has evolved with the “Haves” dominating – insalubriously oppressing the “HaveNots” and what we are seeing worldwide is a level of inequality that have not been seen since the 1930’s or venture to gestimate since the Victorian poor-houses of England.
According to ‘The Guardian’, on the 10th anniversary of market crash – “The world’s richest people have seen their share of the globe’s total wealth increase from 42.5% at the height of the 2008 financial crisis to 50.1% in 2017, or $140 TRILLION (£106tn), according to Credit Suisse’s global wealth report. Furthermore, “The share of the top 1% has been on an upward path ever since [the crisis], passing the 2000 level in 2013 and achieving new peaks every year thereafter,” the annual report said. The bank said “global wealth inequality has certainly been high and rising in the post-crisis period.” Can this kind of monetary trajectory be morally sustainable in a world where one-third of its citizens live on less than a $1.00 a day? We must decide!
But the real problem in AmeriKKKa and in so-called ‘1st World countries’ in 2018 isn’t that a small number of folks have done stonkingly well – the real problem is how they’ve done it. At this moment, a series of events are occurring that could send European & AmeriKKKa’s economies into a tailspin. And according to Bloomberg’s latest report, these countries could be headed for an economic disaster bad enough to rival the Great Recession or even more cataclysmic, would see a return to “The Dark Ages” of feudal Europe.
Yet consumer confidence is riding high; jobs are supposedly plentiful with Britain having some 800,000 job vacancies unfulfilled, as Europe finds itself in the same quagmire, (as LIAR politicians argue over ‘immigration policy’), notwithstanding, you have a braggadocious “Orange Clown” in 1600 Penn Ave who speaks with a forked tongue, lauding his so-called accomplishments since taking the ‘White House’ and that things have never been so good in the US economy.
What the majority seems blissfully unaware of is that there is an almost $22 TRILLION ‘demon’ lurking in the room! According to the US Debt Clock, at the end of FY 2018, the gross US Federal government debt is estimated to be $21.48 trillion (not to mention staggering consumer debt at $12.7 trillion according to Forbes). So with a climbing aggregate US debt mountain approaching $40 trillion – all that is needed for a global seismological shock is some unforeseen calamity, which could includes a possible war with China, Russia and Israel over Syria and the alignment of Muslim countries against the proselyte Gentiles who now occupy that small slither of land called ‘Palestine’ (those who call themselves JEWS but as YESHUA said in (Rev 2:9; 3:9) “are the Synagogue of Satan”!
Such an apocalypsus could have damnable reverberations with ripple effects powerful enough to impact everyone on earth, from the vast fortunes of the top 1%, to the retirement accounts (401k’s) of everyday Americans, to European social welfare programmes, as well as, every man and woman of working age, who owns a mortgage or have a modicum savings nest-egged in some predatory capitalist institution – it could ALL be gone in a whiff & a poof!
Sadly, many are not prepared to weather this oncoming storm, having never learned how to protect themselves and their loved ones by hedging assets, diversifying portfolios and as the good ‘ole time bajan folks reminded us to store away for a rainy day.
We’ve all heard the ‘ole folks quote Scripture: “Go to the ant thou sluggard, consider thy ways and be wise…” Regrettably, it will be too late for many in developing economies like Barbados, when your liar politicians are “completely useless” – unable to pay wages to public servants; the supermarket shelves resembling Venezuela & Zimbabwe; riots, protests and bedlam erupting in every town and village across the land and bloodshed etched upon the paradise canvas of our great land.
This now brings us to the praxis of our discussion because many within the gambit of economic theory and political science somehow believe that they can “model” themselves out of the harbingers of chaos, anarchy and bloodshed. What a joke!
As this piece touches on the paradigm of chaos theory (as espoused by the late MIT professor Edward Lorenz), authors Dimiti N. Chorafas & Robert Trippi et al in their book “Chaos Theory in the Financial Markets” suggest that all is not peaches and cream. Chaos theory purports a revolutionary approach to understanding and forecasting the behaviour of complex systems, as in this case, financial markets. The theoretical penchant employs (no pun intended) ‘nonlinear mathematics’ to identify and understand the underlying rules of evolving complex systems which can deduce far-reaching insights and anomalies into the causal dynamics of financial markets.
Chorafas et al’s book examines a corollary of new paradigmatic perspectives which provide and posit new panoramas on financial market analysis and forecasting. They examined the conceptual framework of chaos theory and the role mathematical modelling plays out in providing forecasting data; how the use of nonlinear equations and fractals forecast currency markets (e.g. FOREX TRADING) and how genetic super-algorithms has provided a hotbed for AI through complex neural networks.
In essence, Chorafas & co. believe that as have been stated earlier, post-antediluvian man somehow possesses the algorithmic capacity to model himself out of any financial crisis, with the right technological appendages. For some, that is too simplistic an anthropocentric value-laden hypothesis that is as 100% accurate as weather forecasting, for which the ‘godfather’ of chaos theory Lorenz would be spitting in his coffee and rightly cringing over such unproven theoretical positions unsubstantiated by any critical data analysis.
In the vortex of variables, Clyde & Osler writing in The Journal of Futures Markets, Vol. 17, No. 5, 489–514 (1997) cited that as far back as 1992, it was reported that “the results of a Bank of England (BOE) survey of foreign-exchange chief dealers in which 90% of those surveyed said they used technical analysis in making decisions. Most respondents reported using both fundamental and technical analysis, with a bias toward using technical analysis for shorter horizons and fundamental analysis for longer horizons (Taylor & Allen ).
As a result, nonlinear predictive analysis lends credence to the fact that if trading is to be a profitable exercise, specific fundamentals must be understood. A balance of trade, industrialized mechanics, exploitation of data processes and the use of intellectual properties which produces what many believe are accurate ‘models’ which can interpret future financial trends over the short, median and long term.
The question then arises: ‘Did no one see the market crisis of 2008?’ For the few who were blasting the claxon for two or three years before (like Harvard Professor Niall Fergusson), why were the pundits on Fox News et al paying deaf ears to the warnings and insincere lip service to the subterranean seismology which led to the collapse of (first) Lehman Brothers, followed by a raft of other major banking institutions which all went belly-up and had to be bailed out and bailed in by taxpayers dollars?
Hence, a commonsense approach dictates that small emerging 3rd world economies cannot continue to borrow their way out of a financial bottomless pit or use burdensome taxation measures as a means of funding state enterprises or to fuel tax receipts. Many such economies are still stuck in a pre-industrialized Victorian age model, when in fact the world has morphed beyond a post-dotcom era to what many are describing as an electronic civilization based on “Artificial Intelligence”, a worrying hyper-reality of change which guys like Elon Musk tried to describe as a pre-Cosmo-Industrialization era based on Civilization 2:0 (a topic being currently explored for a post in the near future).
Chaos theory elucidates this brave new world frothed with unimaginable perils lending very little room to bad decisions on the part of liar politicians, predatory capitalist entrepreneurs and other leaders who are still stuck in a vortex of mindless greed and self-obsessed pseudo growth through market casino gambling, baseless algorithmic trading and a market model that is a house of cards built on shifting desert sand.
Many believe that the IMF is not the lender of last resorts and that this is a fundamentally flawed theory when the biggest and brightest amongst us understand the basics of chaos theory. The modular tectonics of the IMF lends to an outdated model also (using the words of the Archbishop of Canterbury recently regarding predatory lending and vicious venture capitalism), he opined that these concepts are “rooted in an ancient evil”. Europe, more than any peoples on earth should understand that evil as the model below shows when analytically taken beyond face value.
The monetization of diabolical levels of debt will never be sustainable regardless of the game theory employed by econometricians and others. Debt remains debt until it’s either paid or written off which bring us to this concept of ‘Game Theory’ and how slick academics who believe that this theory is a framework for hypothetical social situations among competing actors and it is the science of strategy and manoeuvres, or at least the optimal decision-making of independent and competing actors in a strategic setting.
The ‘godfather’ of game theory Nobel Laureate Lloyd S. Shapley believed that the process of modelling specific strategic interaction between two or more players in a situation containing set rules and outcomes through observational analysis. In Allen & Morris, a piece entitled “Game Theory In Finance” cite that “the focus of Keynesian macroeconomics on uncertainty and the operation of financial markets led to the development of frameworks for analysing risk. Keynes (1936) and Hicks (1939) took account of risk by adding a risk premium to the interest rate. However, there was no systematic theory underlying this risk premium. The key benchmark theoretical development which eventually led to such a theory was von Neumann & Morgenstern’s (1947) axiomatic approach to choice under uncertainty. Their notion of expected utility, developed originally for use in game theory, underlies the vast majority of theories of asset pricing…” The market has proven since 2008 that there are inbuilt limitations in their mathematical framework model which makes the theory applicable only under special and limited conditions removing safeguards invariably when massive flux and volatility slams into the markets.
Another warning was issued a few days ago when Marko Kolanovic, JP Morgan’s head of derivatives and quantitative strategy who holds a Ph.D. in theoretical physics believes that the United States is heading for another period of massive volatility with social unrest not seen in 50 years. He believes that the US is hurtling towards what he calls the “Great Liquidity Crisis.” He believes at the foundation of his prediction is the growing network of computer trading algorithms which will force dramatic drops in stock prices. Kolanovic sent out a 168-page report to his JP Morgan clients that included near 50 financial analysts and economists perspectives on the coming crisis and how they should hedge their wealth from future shock.
No amount of computational mathematical modelling or theoretical physics will allay the fears and lack of confidence in the market when the ‘penny’ drops and although Kolanovic believes that the time has come for a “rotation into value” they are sceptics who believe that the penchant for game theory is past the post and we are now in uncharted ‘bubble territory’.
Recent reports coming in suggest that Argentina’s Peso fell off another fiscal cliff after the resignation of the Governor of the Central Bank one day after it emerged that the IMF’s record $50 billion bailout of Argentina is just not big enough, and the country will need an additional $3-$5 billion in additional rescue funds. Market reaction was swift and can be seen from the graph below:
So in 2018, stagnation in developed economies like Argentina sees many in the working class communities believe that the ‘game’ is up as it has played itself out and the winners are always the elites who control the means of production and dictate who lives and who dies – how much is borrowed and who pays it back.
James Rickards in his bestselling book, “Currency Wars: The Making of the Next Global Crisis”, ominously cites the words of Moses found in Genesis 47:15, “And when the money failed in the land of Egypt, and in the land of Canaan, all the Egyptians came unto Joseph, and said, Give us bread: for why should we die in thy presence? For the money faileth.” If the wisdom of Ecclesiastes 1:9; 3:15 is certain: “What is happening now has happened before, and what will happen in the future has happened before, because God makes the same things happen over and over again…”
Jim’s book is worth a read for those with the stomach to imbibe “TRUTH” and not the rarefied air of socioeconomic & poLIEtical spin! As with any severe market crash will emerge unrest and war between nations for the scarce resources and this is where game theory will eventually meet chaos theory and vice versa in what can only be described, (at the end of the second decade of a new millennium) – as apocalyptic theory in the making (a paradigm few, if any academics at all are willing to grapple with)!
Rickards, Maloney, Berwick et al are all calling for what Kolanovic terms a ‘rotation into value’ with most if not all seeing gold reaching as high a $50K an ounce with other measured forecasts as high as $20K per ounce! Fiat currency is in its death throes, on life support. Reckless borrowing to prop up unsustainable living standard is not only oxymoronically archaic but patently decadent. Debt based thinking is a bottomless pit for which the Devil holds the key. Onerous taxation is an albatross around the necks of the poor and disenfranchised. Wealth inequity will only lead to pitchforks and bloodshed as the vultures are already circling. The time has come for truly radical thinking if that is even at all possible given the vagaries of dystopic malaise by our so-called leaders and the penchant for maintaining a defunct status quo.
In conclusion, Bajans (like all others) are yearning for better days ahead but whether that will be even possible this side of heaven is highly debatable. The International Monetary Fund will prove to have not been the answer after the dust settles and the smoke clears. The weight of evidence is overwhelmingly stark. The underlying problem can be summed up in this passage of Scripture: “Where there is no vision the people perish” and although hope abides and faith remains constant in a world of flux and fluidity – only ‘The Creator God’ knows the end from the beginning and how the next few years will evolve, as we enter the 3rd decade of this new Millennium, which will prove to be both fascinating and nail-bitingly ominous!
Till then, #StayTuned!