This is part 4 of the Jackpot Chronicles: Four Post-Coronavirus Scenarios. Read the series here, or sign up for Out Of The Cave here.

“In the future there will only be one occupation: managing one’s wealth. And the majority of the population will be unemployed.”

– Me.

The original working title for this installment of The Jackpot Chronicles was “Mandatory Pollyanna”. That’s the one where central planners and bureaucrats manage to “save” the global financial system yet again, but at a cost of undertaking an LBO of the entire economy and running it as a centrally planned utility.

I’ve decided to rename this scenario “The Great Bifurcation”, because should it come to pass,  I think the the inevitable result  would be the emergence of an even more pronounced and starkly divided Two Tier Society.

It is arguable that the groundwork for TGB was laid as far back as the adoption of central banking and fiat currency, which gave asymmetric advantages to the class of elites closest to the monetary spigots: This was known as far back as the late 1700’s when Richard Cantillon wrote his treatise on Economic Theory…

“An 18th century French banker and philosopher named Richard Cantillon noticed an early version of this phenomenon in a book he wrote called ‘An Essay on Economic Theory.’ His basic theory was that who benefits when the state prints a bunch of money is based on the institutional setup of that state. In the 18th century, this meant that the closer you were to the king and the wealthy, the more you benefitted, and the further away you were, the more you were harmed. Money, in other words, is not neutral. This general observation, that money printing has distributional consequences that operate through the price system, is known as the “Cantillon Effect.”

Why Wall St. Gets a Bailout and You Don’t, by Matt Stoller

Today it’s not the King’s courtiers who benefit, it’s who is in closest proximity to The Fed: primary dealers, investment banks, hedge funds, private equity, venture capitalists and corporate monopolists. Even in Cantillon’s day, when he enumerated the various ways new money could come into the kingdom, it was all the result of actual money entering via conquest, trade, mercantilism, or taxation. The choke point then under any scenario was the sovereign, and those in court tended to do well whenever the money supply increased.

Now, imagine having the ability to print “value” out of thin air, and then exchange it for equity stakes in the means of production, the way central banks can today. Imagine being able to do that for the world’s reserve currency. Then try to imagine that power and wealth diffusing through society equally and proportionately. You can’t, because it doesn’t. It won’t. It never has.

So today we’re hit with this pandemic, which I’ve said before isn’t the cause of the economic dark age we’re now entering but a catalyst of it. This unidirectional wealth transfer has to be spun in a way that the marks (the subjects) don’t understand they are being robbed blind. They have to want to be leached into poverty. They have to demand it.

This is the underlying logic of ideas like Universal Basic Income, and descriptive rationalizations like Modern Monetary Theory. To the rabble, it looks like the government finally set aside any silly notions of fiscal prudence in order to further build out the welfare state for the good of society. There is an entire segment of the population who is now taking home more money from government stimulus and bailouts than they were when they were “working” for a living.

What is really happening however, is that the fiat currencies which are being printed into existence and distributed to the underclass in the form of various stimulus and aid packages are essentially being transformed into a kind of “company scrip”.

Company script of yore was only redeemable for living essentials at the Company Store. In our era, it’s more of a company platform: a fast emerging, digital, ubiquitous, cashless banking system, where all purchases and transfers are tracked and logged. With the digitization of  this next generation company scrip, (“smart scrip”?) which has the veneer of a currency, policy makers will have much needed ability to fine tune economic activity under extenuating circumstances. Consumer behaviour can be tightly monitored, modified, coupled with “immunity passports”and other parameters deemed necessary, including having purchases curated or rationed.

All the while the elites, the financiers, the political class and the kleptocrats continue to inexorably accumulate the lion’s share of the equity and productive assets of the global economy.

On the other end of the scale are the corporate behemoths, who have shifted their business models from normal course operations to financialization:

Companies today are borrowing money at artificially low rates to buy back their own shares, which are trading at or near all-time highs. The value investor in me finds that kind of stupid.

When I wrote this, the major indices were putting up a string of all-time-highs (but the underlying technicals like the advance/decline and insider selling look awful). But what a lot of people don’t realize, because the media doesn’t give it very much coverage, is that most of the earnings gains in the S&P (said earnings gains supposedly driving the p/e multiple expansion which is propelling it to new highs) are coming from stock buybacks.

In Q2 2016, share buybacks accounted for 72.9% (!!!!!) of the trailing 12 months net income of the S&P.  Read that again. That’s not 72.9% of the earnings gains; it was 72.9% of the earnings. 72.9%! That means nearly ¾ of the earnings are all financially engineered, and most of the funds used to buy back all those shares are borrowed because of these ultra-low, artificially suppressed interest rates and credit expansion.

Out of the 500 companies in the S&P500 in 2016, 146 of them spent more on buybacks than they actually made in “earnings”.

That’s financial engineering. It cannot go on forever, but it will “work just fine” until eventually, it doesn’t. When that moment comes, it will be disorderly and there will not be enough chairs to go around when the music ends.

I wrote that back in 2016, in the inaugural post for Out Of The Cave. Now that eventually has finally arrived, we’ll see how corporate welfare plays out in the Jackpot. For those companies that blew their wads on buybacks over the last decade, the Great Bifurcation scenario would see their bail-outs come with conditions that they restructure their operations in alignment with the imperatives of The New Normal: such as enhanced pre-flight screening for the airlines, and sundry social justice initiatives that bring  a centrally planned economy, controlled by the State closer to reality.

What will the Great Bifurcation look like?

Aside from permabulls pining for a V-shaped recovery in stonks, the subtle drumbeat being relentlessly pounded by policymakers and corporate media is that things have changed forever and there will be no return to normalcy as we would have understood it just a few short months ago. Nor should there be, if you take the advice of super rich celebrities softly singing “Non á un Retour á la Normale”

Under this scenario’s new rules, which will include enhanced tracking and surveillance, monitoring, government interference into every aspect of our lives and necessary restrictions on free speech to curb “misinformation”, we will notice one thing over and over again:

The New Rules for The New Normal will only apply to the rule followers, not the rule makers or the rule tellers.

Spot the difference:

• When Shelly Luther, a Texas salon owner defied a court order to close down her hair salon, citing that she had to keep working in order to feed her family, she was sentenced to 7 days in jail.
• When Almeda County, CA issued workplace shutdown orders, Elon Musk simply ignored it and the county “entered into negotiations”. with Musk in order to garner compliance.

The difference here, other than one is one is a self-employed solopreneur trying to keep her head above water and the other is a self-absorbed solipsist douchebag with a private jet, is that the former gets paid in company scrip (fiat coupons called “dollars”) while the latter is a lynchpin in the financialization juggernaut that makes its return on funding rounds, IPOs, secondary offerings and any other transaction that generates fees for underwriters.

For everybody else, how many of us will be able to simply refuse to comply with government ordinances when they are decreed from on high? Whether it comes to receiving mandatory vaccines, rolling travel bans, permanent restrictions on social distancing and assembly, or to close down our businesses again, will we then be able to enter into “negotiations” with our respective authorities regarding the finer points of whether we actually have to comply? Somehow I doubt it.

Spot the difference:

• Various jurisdictions around the world are imposing jail terms and fines for violating lockdowns, including numerous US states , Canada, India, Saudi Arabia (mildly surprised they’re not beheading them) and others too numerous to mention,

vs

• Canada’s Prime Minister traveled to his vacation home for Easter after lecturing Canadians to stay home over Easter
• Ontario Premier Doug Ford traveled to his cottage while advising everybody else not to
• NYC Mayor Bill Di Blasio, who set up a snitch line encouraging citizens to report each other for not social distancing, had no compunction about hitting the gym in Brooklyn
• Neil Ferguson, the man behind the botched computer model that factored into the global lockdown, breaks quarantine for a dalliance with a married climate activist, gets off with an “awww shucks” and a  slap on the wrist.

https://twitter.com/DowdEdward/status/1257545327080427520

The difference here is between mere rule followers and the rule makers. Imagine these same disconnects across every aspect, every social strata, every economic sphere of society.

The Great Bifurcation will be baked in so that:

The underclass will be under the never-ending spectre of lockdown and quarantine, social distancing rules, restrictions on travel, events and diet, while the elites jaunt about in private jets, holding emergency sessions aboard super yachts and convening at Davos to reimagine the (your) future.

Wealth inequality will be even more starkly exacerbated as global currencies wither into money-like coupons and food stamps, redeemable within approved digital ecosystems on curated transactions.

Contact tracing, immunity passports and other “health initiatives” will morph into social credit frameworks worthy of China, from which the political class will almost certainly be exempt.

The people who decree and implement these measures will enjoy a life of comparative plenty and freedom.

And yet, it all has a certain logic to it…

Why should you have any liberties left?

If the Savior State is going to incentivize you to not work and eventually ends up paying you a basic income every month for staying home, then the logic does follow that they should be able to protect their property investment by setting the allowable parameters within which you should be permitted to operate. After all, you’re living your life on their dime scrip.

Under The Great Bifurcation scenario, humanity drifts apart, H.G Wells style, into two separate races. The capstone class will be our patrician overseers who have The Science, the models and the economic toolkit to deftly guide society through The Jackpot. The other will be a much larger underclass of comparatively childlike simpletons who believe #fakenews, have negative equity and no assets, and generally can’t be trusted to be left in a room alone with sharp objects. They’ll need shepherding, and the newly ascendent  social credit system will give them the right dopamine hits at the right time to do it.

Between these two races will exist an impenetrable membrane of norms, culture, narrative and even law that enforce a social divide reminiscent of a Dickensonian steampunk tale. Normally I would posit that were this scenario to prevail, it would take generations to dumb down the populace to the point required to pull it off. However given the exigencies of The Jackpot, and what I expect to be a never-ending state of compounding emergencies, the timeframe may be greatly accelerated.

Remember the recurring theme of The Jackpot: The next 20 years will not be a linear extrapolation of the previous 20.

In the next edition of The Jackpot Chronicles, our final post-crisis scenario looks at The Deglobalization Scenario. That’s the one where reality sets in and is not only acknowledged but embraced. Businesses and policy makers get religion and realize that financialization and globalization have ultimately failed and in order to achieve long term viability, the entire paradigm has to be “reimagined”. I also discussed this recently in the AxisOfEasy podcast with Charles Hugh Smith and Jesse Hirsh.

Sign up for the Out Of The Cave list here or follow me on Mastodon or Twitter if you want to be notified when that publishes.

This is part of the ongoing Jackpot Chronicles, looking at four possible Coronavirus scenarios or lenses.

The last instalment was “Force Majeure”, which posited a complete breakdown in seemingly permanent institutions. As it may turn out, these outwardly immovable edifices may not survive this economic collapse and be left out of “the new normal” that emerges out the other end.

Given that the idea of Coronavirus being concocted in a Wuhan Lab has gone from being a conspiracy theory that could get you deplatformed, to being seriously looked into by Western intelligence agencies, now may be a good time to look at the “Tin Foil Hat” scenario, and try to discern where viewing this pandemic through the proverbial conspiracy theory lens actually gets us.

Conspiracy theories make for tricky subject matter for anybody who tries to look deeper than the veneer of conventional narratives. What we are expected to accept unquestioningly out of mainstream circles is sometimes less plausible than what we are expected to dismiss as conspiracy theories.

It get’s even more distorted when inversions or backwardations occur between what is fringe and what is, ostensibly, “fact”.

Russiagate was a conspiracy theory, one that was platformed as common knowledge by multiple mainstream media outlets for over two years before finally being conceded as a nothingburger by the Mueller Report. There are still people walking around believing that the current US president was installed as a Manchurian candidate by the Kremlin, and you’re the one in the tin-foil hat for pointing out how disconnected from reality that actually is.

I’ve been very clear about this all along. Russia hacked 2016 in advance, and changed vote totals by deleting registrations. But it was NOT enough to put Trump over the top. Without Comey’s last minute letter, Trump would have lost. This is very, very simple.

— Palmer Report (@PalmerReport) May 15, 2019

(somwhere along the line, legendary usenet kook alt.genius.bill-palmer got himself a blue check)

This is typical of the hall of mirrors you enter when trying to understand the dynamics of conspiracy theories. Even the term “Conspiracy Theory” is itself the subject of conspiracy theories. The legend goes that the term was invented by the CIA to marginalize pesky truthers (another loaded word) that were finding all kinds of holes in the official explanation of the JFK assassination.

Whether it’s the implausibility of a “magic bullet” in Dealey Plaza or what many building engineers and pilots have to say about 9/11, the official explanatory cover for such world-changing events are so riddled with inconsistencies and flaws that they can only be believed by those who do not examine them.

The danger in admitting to oneself that at least some aspects of the most pivotal events of our era are not what they seem, is that it can pull you into a downward spiral where everything becomes a conspiracy and nothing is as it seems.

We all know somebody who thinks every news story, every event that occurs is a direct outcome of some shadowy cabal that controlled the event, manipulated the circumstances that precipitated it, and selected the outcome to serve their own agenda.

This is not to say that people and groups don’t conspire, that societal elites don’t have a self-serving agenda and that moral hazard and pathological opportunism do not play a significant role in outcomes. In essence, that’s politics. But here’s the crucial duality of conspiracy theory:

To the degree that all major events being manipulated behind the scenes by hidden conspirators is actually impossible, so to is the degree to which  the mainstream media explanations of events are mostly inaccurate and at times infantile.

Into this milieu, enter the tin-foil-hats, and things become inordinately more precarious. What we get is a type of three-body-problem writ large where the three independent narrative forces can be described by three age-old adages, ( all of which are possibly apocryphal quotes):

1. “Never ascribe to conspiracy what can be explained by stupidity” (a.k.a Hanlon’s Razor, often attributed to Napoleon Bonaparte)
2. “Never let a good crisis go to waste” (Winston Churchill)
3. “Never believe anything until it is officially denied” (Bismarck)

The outcomes we as citizens experience, subject to our leaders following varying degrees of these three impulses can be rendered in a Venn diagram with three drivers: Stupidity, self-dealing and duplicity.

As I’ve been exploring a lot lately, we live in something that  increasingly resembles a cyberpunk bizarroverse. One where the explanatory powers of mainstream media are in secular decline and in which our institutions have largely discredited themselves. Two powerful coping mechanisms are:

1) to pretend nothing is wrong and that business as usual can continue even though the underlying scaffolding of the system is imploding (hypernormalisation)

2) subscribe to some non-sanctioned narrative that purports to reconcile the discrepancy between what we believe should be happening with what we are actually experiencing.

For my part, I find the most useful components of both conspiracies and consensus is that they are both known to provide an explanation of events that I can reliably assume as having near zero accuracy. A useful concept for this came out of Douglas Adams’s Hitchhikers Guide to the Galaxy. In it his concept of the recipriversexcluson describes a number whose value can be only be defined as anything but itself. Whatever the expert consensus is saying is happening or will happen, that’s the one outcome you do not need to plan for. Same goes for most conspiracies.

Introducing the Gell Mann Amnesia Effect

The last idea I’ll introduce is that mainstream media has itself, become a type of conspiracy theory. There is less reporting, less actual journalism and mostly punditry and editorializing. Ben Hunt gives us the concept he calls The Gell Mann Amnesia Effect (the phenomenon was originally described by Michael Crichton):

“Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.

In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”

I noticed this phenomenon years ago, but didn’t have a name for it. In my case, most articles I read in the mainstream press about the domain name system, DNS, and naming in general are so bad as to be cringeworthy. This is one of my faves:

Applying all this to Coronavirus narratives, we can look at what a specific narrative says is or will happen, what it probably preludes from happening.

So when experts say we may have to be on lockdown for 2 years, I assume it’ll come in lower.

When some authority says we we will never shake hands again, I don’t bank on it.

When people on Youtube say 5G causes Coronavirus, I’m pretty sure it doesn’t.

When they say the virus was engineered and released deliberately to bring about a totalitarian police state, I think that gives too much credit to the people who run governments (see Venn diagram).

So where does all this get us?

Enter  Radical Uncertainty.

This is the title of Mervyn King and John Kay’s latest book. King was the Governor of the Bank of England from 2003 to 2013 and presided over the Global Financial Crisis, writing about his experience in his previous book The End of Alchemy.  Kay is an economist who held various positions in academia (former Dean, Oxford Business School, also London School of Economics) and author of Other People’s Money.

Their central theme is that many problems we face are inherently unknowable and that no amount of data or sophisticated modelling is going to get us anywhere near a reliable probability of what any of it means, or what will happen.

Radical uncertainty cannot be described in the probabilistic terms applicable to a game of chance. It is not just that we do not know what will happen. We often do not even know the kinds of things that might happen. When we describe radical uncertainty we are not talking about ‘long tails’ — imaginable and well-defined events whose low probability can be estimated, such as a long losing streak at roulette. And we are not only talking about the ‘black swans’ identified by Nassim Nicholas Taleb — surprising events which no one could have anticipated until they happen, although these ‘black swans’ are examples of radical uncertainty.‘?

We are emphasizing the vast range of possibilities that lie in between the world of unlikely events which can nevertheless be described with the aid of probability distributions, and the world of the unimaginable. This is a world of uncertain futures and unpredictable consequences, about which there is necessary speculation and inevitable disagreement — disagreement which often will never be resolved. And it is that world which we mostly encounter.

So the ramifications of radical uncertainty go well beyond financial markets; they extend to individual and collective decisions, as well as economic and political ones; and from decisions of global significance taken by statesmen to everyday decisions taken by the readers of this book.

Radical Uncertainty means gearing our efforts toward coherently responding to events as opposed to insisting on modelling them with an eye toward achieving optimal outcomes, be that “full employment”, a targeted inflation rate or the elimination of the business cycle.

“Governments choose policies to maximise social welfare. A moment’s introspection is enough to tell us that they don’t. They could not conceivably have the information required to do so. They do not know all the available options, and they are uncertain what the consequences of them will be. They do not even know whether what they wish for today will be what they still want if they achieve it tomorrow….the notion that a government could calculate what maximises social welfare is simply ridiculous. The consequences of policies and actions are far too uncertain….”

It is arguable that many of the problems we experience today, such as debt bubbles and brittle supply-chains are the result of trying to prevent bad outcomes of the past instead of facing them head on and taking the requisite pain when they happened (no bailouts, allowing the over-leveraged to fail). But they didn’t and this is a major reason why the pandemic, when it finally hit, is having such a disastrous effect for something that all else considered, isn’t as deadly as pandemics of the past.

Ironically, Radical Uncertainty was written just before the outbreak, it’s publication date was March 17, just as things were really coming unglued…

“The Black Death will not recur – plague is easily cured by antibiotics (although the effectiveness of antibiotics is under threat) – and a significant outbreak of cholera in a developed country is highly unlikely. But we must expect to be hit by an epidemic of an infectious disease resulting from a virus which does not yet exist. To describe catastrophic pandemics, or environmental disasters, or nuclear annihilation, or our subjection to robots, in terms of probabilities is to mislead ourselves and others. We can talk only in terms of stories. And when our world ends, it will likely be the result not of some ‘long tail’ event arising from a low-probability outcome from a known frequency distribution, nor even of one of the contingencies hypothesised by Martin Rees and colleagues, but as a result of some contingency we have failed even to imagine.”

So as I try to balance out these varying imperfect narratives from mainstream sources, official sources, and the tin foil hats, I try to use them more as filters to identify what to take out of the equation than as providing information and having explanatory power.

1. I eliminate what the prominent futurists and experts say will happen
2. I  eliminate the reason why conspiracists say something is happening
3. I severely discount what the MSM says is happening.

Then I  look at what’s left and try to make sense of it. To that end while I personally think that all most of the hysterical outcomes, in terms of millions of deaths, mandatory implants, FEMA camps,  are highly improbable, under the Jackpot’s Tin Foil Hat Scenario I’d be wrong (think China, everywhere).

What I am positioning for is a mother of all economic depressions, rampant inflation, joblessness, war on cash and basically everything described in the second part of Graham Summers’s The Everything Bubble (tl/dr Inflation, NIRP, War on Cash, Bail Ins and wealth taxes). When I run through all of this filtering and analysis this is what looks more imminently probable to me.

While I don’t think of these anticipated events in terms of a coordinated global conspiracy to screw all the plebes (again, consult the Venn diagram), I do expect that the rationalizations of these events along with the narratives justifying them will be rife with conspiracy-sounding elements. This brings us back to the hall-of-mirrors aspect of what is conspiracy versus what Jaques Ellul called “integrative  propaganda” in such times as these.

For the next edition of The Jackpot Chronicles I decided to rename the “Mandatory Pollyanna” scenario. That’s the one where central planners and bureaucrats manage to “save” the economy yet again. However the cost of that would be to undertake an LBO of the entire economy and running it as a centrally planned utility. I’ve decided to rename that one “The Great Bifurcation”, after the the inevitable result of that would be emergence of an even more pronounced and starkly divided Two Tier Society.

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This is the second instalment of The Jackpot Chronicles: Four Possible Post-Coronavirus Scenarios.

Force Majeure means:

a chance occurrence or superior force that renders a contract unenforceable and frees all parties from their obligations under it.

We are frequently told that there exists some manner of “Social Contract” to which we are implicitly bound by virtue of being alive. This implied Social Contract confers legitimacy upon the institutions that order our world, the national governments, the central banks, the miltary and police. And by extension certain communication outlets and media are endowed with a status of official curators over the narratives around institutional power.

Under the Force Majeure Scenario, the first of four possible Coronavirus aftermaths posited in “Welcome to the Jackpot”, the overwhelming or superior force is not the pandemic itself, but rather the collapse of the debt supercycle, the monetary system that derives from it, and the structure of nation states that are burgeoned by it.

The last time we were here, when a systemic crisis has shaken the foundation of the social order, the policy response was favourable to one party of the social contract at the expense of the others.

The GFC, which I now call GFC 1.0 or GFC ‘08, saw the financialized class, those closest to the monetary spigots of the Central Banks enjoy accelerating prosperity as their asset values rose, whilst the rest of the population endured stagnation and a steadily increasing cost-of-living (which mainstream commentators refused to acknowledge as inflation).

The policy response from the last crisis has led us directly, in a straight line to this one. The only surprise being the exact nature of the catalyst which would pop the Everything Bubble, and perhaps the ferocity with which the air began to let out once it did.

The signs were certainly there that we were nearing some kind of archetypical “shoeshine boy”moment or phenomenon. Complacency in passive investing, extreme overabundance in the unicorn population, the fact that there exists (existed) an entire industry around arbitraging long term leases with short term rentals via AirBnB, there was a sense of Roaring 20’s around it all and all those vile contrarians were wondering “just how long can this go on?”

Under Force Majeure the public begins to understand that the people who populate institutions are just that, people. Despite specialized training perhaps, they are not endowed with any superhuman intellect or wisdom. Success within the matrix of the institutional elite comes from proxemics and adroitly navigating the system itself, not much more.

“An era can be considered over when its basic illusions have been exhausted”
— Arthur Miller

 

An era like this comes to an end when the public realizes that their betters aren’t intellectually superior but rather institutionally privileged. Now facing an existential crisis of their own making, they are completely out of touch with the public mind and out of their depth to deal with it.

Then The System Finally Comes Unglued. Now what?

The central banks and national governments have fired their bazookas in unison yet despite a typical relief rally in the form of a standard issue dead cat bounce, reality continues to insist on asserting itself. On a recent Jelly Donuts podcast, Grant Williams talks about forthcoming GDP numbers coming off 30% “truly apocalyptic”.

Yet, the incumbent institutional custodians will continue to deny reality and to discredit themselves, what will it look like then the populace comes to realize that the old social order, and the institutions that curate it are being deprecated?

Breaking: A new bull market has begun. The Dow has rallied more than 20% since hitting a low three days ago, ending the shortest bear market ever. https://t.co/06YS0XqWGP

— The Wall Street Journal (@WSJ) March 26, 2020

Ontario Premier Doug Ford recently advised citizens who couldn’t pay their looming rent bills at the first of the month to simply “not pay”. He later tried walking that back, but when this sentiment gets writ large, with governments printing money and sending out cheques, what happens when people and businesses simply decide not to pay their taxes either?

Can political leaders say, with a straight face, that citizens should stiff their landlords or mortgage lenders but not the State?

And if the State can simply print up money and send out cheques, why do we need taxes anyway? Have we arrived at full MMT?

All of the central bank and fiscal stimulus portends a secular shift from deflation to inflation and I don’t think very many people understand what that means.

It means a whole lot of broken clocks are gonna be right for once, but at a time it counts the most.

Now, every company that levered up on debt to buy back their own shares over the last 10 years wants a bailout. Grant Williams points out in Things That Make You Go Hmmm that the airline industry spent 47B on buybacks since 2010, they want a 50B bailout.

What the chart, right, doesn’t show is the total dollar amount spent by the airlines on buying back their own shares between 2010 and 2019.

That number is $47.3 billion (of which American Airlines – whose negative cumulative free cash flow between those dates was $7.9 bln – contributed $13 bln).

Even the private jet industry wants a bailout.

And what will public citizens get? Those whose businesses have been ordered to close, whose jobs have already been lost? They’ll get a check for $1,200, or a tax deferral until August. Bfd.

Charles Hugh Smith’s books speak a lot about this type of secular wane in institutional relevancy, which we discussed on our podcast once and it bears repeating here:

MJ: when I look at  Pathfinding [Our Destiny] like part seven where where we’re talking about what the way forward looks like, that it’s outside of the control of the of the establishment, that it’s outside of the system I get this sense that for society to flourish and adapt around this and evolve. I guess that’s the key word, we’re going do this around the institutionalized hierarchies.

They’re not going to get religion one day, we’re not going to elect the right candidate, we’re not going to have the right party gain power that’s suddenly going to say “I read this great book by Charles Hugh Smith and this is how we’re going to do it”.

It’s going to be something like institutionalized hierarchies will just lose more and more relevance as these new social and business and financial configurations start gaining more and more relevance.

CHS: That’s an excellent point and I think if anything I didn’t emphasize that enough. That really what we’re talking about is kind of like hacking the system in in the old time sense that a hack was a workaround. It wasn’t like you were breaking into the system to steal something, you’d created a workaround for a kludgy system that just didn’t work anymore.

And so I think you’re absolutely right, it’s going to be working around us and and Bitcoin is one example of how workarounds are manifesting and of course the status quo is going try to suppress those and/or co-opt them but what we’re really talking about is when systems fail at a systemic level you can’t reform them. You’re not going to make a policy tweak that’s going to fix higher education or the health care system. It just isn’t going work.

People are going to start working around that and they’re going be starting to pay cash for for medical care from pop up providers or remote physicians. Or there’s lots of different solutions to that in education. What I see the model that’s going to emerge whether people like it or not and is that students are going to start taking control of their own education and they’re going start organizing their own education.

They don’t need this bloated structure that charges them $70,000 a year and so that’s where technology, the internet and networking has really enabled a whole suite of solutions that basically bypass all the institutions that now hold the wealth and power, that have all this as you say institutionalized lethargy as as their their model.

It’s actually quite an exciting time but for those who are dependent on the system within these institutions it’s a very disturbing time

Under Force Majeure as the institutions become understood to be out of touch with both the causes and remedies to the immediate crisis, they begin to signal their own hypocrisy and irrelevance more intensely.

It will not be long before citizens will face the dilemma of continuing to observe the edicts of their governments, whose policies inexorably stripped them of their ability to weather any kind of economic speed bump. They will come to realize that despite what the government decrees, especially if that means keeping their businesses closed or their jobs on hold for much longer, they may be better off working around that.

That’s when myriad alternative economies and ecosystems will explode, black markets, grey markets, Local Exchange Currencies, private blockchains, invisible agoras.

As governments at all levels teeter on insolvency and their inability to control their own populace everywhere or to be in a position to guarantee security and order, I could envision neighbourhood watch groups morphing into localized militias. I would anticipate an explosion in private security and ex-military contractors.

Don’t be surprised to see Facebook resurrect their Libra, either under that monicker or some rebranded version as the large corporations, the ones that have revenues larger than most national GDPs begin to reassert some of their plans which may have been impeded earlier.

However it plays out, the key points to bear in mind are that:

• It would be a mistake to think of the next 20 years as a linear, albeit accelerated version of the previous 20 years (a la Chris Martenson)
• We are about to undergo a change in secularity from deflation to inflation (a la Grant Williams, Peter Schiff and many others)
• The incumbent institutions of the fiat currency era are about to be swept away, akin to the way the royal houses of Europe were after World War 1 (the last major “Force Majeure” transition period that comes to mind for me).

It will all be very reminiscent of Neal Stephenson’s “Snow Crash”

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William Gibson’s most recent novel Agency, describes a type of “many worlds” tapestry of a multiverse as it exists after a catastrophe called “The Jackpot”. The main character’s POV takes place from within one of these “stubs” as they are called, which for some reason forked off from the “real” Earth timeline sometime after the 2016 US election.

Although Gibson doesn’t exactly strike me as a MAGA guy in real life, it is interesting to note that in the story, the “real” Earth timeline is one in which it’s implied that Hillary Clinton won the 2016 election (neither “Clinton” or “Trump” are mentioned by name anywhere in the book).  However, it’s also the timeline in which a global thermonuclear war erupted around the Syrian conflict.

It is this outcome which the protagonists, some of which are covert operatives from our future, are seeking to nudge the other stubs away from. In other words, it’s classic William Gibson, who’s enduring quip “The future is here, it’s just unevenly distributed” has probably garnered even more relevance of late.

In one of the early stubs, it is Trump who won the 2016 election, and although no nuclear conflagration occurred then, a series of rolling catastrophes remembered by history as The Jackpot, ensued. The Jackpot resulted in massive depopulation, the destruction of democracy globally, and a system of interlocking fiefdoms run by a new governance structure openly acknowledged to be a kleptocracy.

This idea that we were living in somebody else’s parallel universe oddly reinforced an inexplicable subconscious urge that began expressing itself in my own thoughts around the end of 2019, the idea that we were the bizarroverse that people often refer to in half-joking terms.

Somewhere, somehow, there is a much more rational reality, and we’re “The Bizarroverse” to that.

— https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpg E. Jeftovic (@StuntPope) December 12, 2019

As these thoughts expressed themselves I had some sense of this oncoming year becoming an inflection point in history, one of those years against which all future events would be retroactively measured “Pre-2020” or “Post-2020”, and for sake of expediency I’ll appropriate Gibson’s literary term for that inflection point, The Jackpot.

The Jackpot is what Chris Martenson and Adam Taggart have been converging on for years, before anybody ever heard of COVID-19. They said that the current conventional assumption, that the next 20 years would be a somewhat straight-forward linear extrapolation of the previous 20, was wrong. They didn’t know what the catalyst would be, nor did any like-minded commentators such as Charles Hugh Smith,  James Kunstler, John Michael Greer,  or even myself, when I intuited in Unicorn Winter that “Ground Hog Day was coming”.

By now it seems quite likely that the inflection point is upon us and that the Coronavirus was the catalyst to bring it on. The Great Bull https://bombthrower.com/wp-content/uploads/2019/03/shutterstock_1030471843-e1551983495127-1.jpget of 2009-2020 or even 1982-2020, is over (each counter-cyclical bear crisis papered over by QE and ZIRP). This time, the Central Banks are out of ammo and none of the old moves are working.

The Jackpot is where we arrive when we run out of road to kick the can.

Over the next few posts I’m going to explore what various outcomes could look like after the Jackpot. These are not predictions. They are scenarios of what might unfold when certain key tenets, those articles of faith that have been taken for granted these last 20 years, break down and become irrelevant, or even toxic.

Scenario 1: Force Majeure:

In this scenario all predominant belief systems about governance and order such as liberalism, democracy, rule of law, free markets and capitalism break down. So do their accompanying institutions: political parties, nation states, currency regimes, even formal religious denominations.

This outcome witnesses the ascension and proliferation of the non-state actors. Imagine Facebook and Google having their own currencies – and paramilitary forces, while overleveraged, bankrupt nations rupture and crack up.

Countries become a balkanized hodgepodge of autonomous areas where control is contested between privately held warlords, clans or networks and remnants of regional authorities. If you want to get a feel for how the Force Majeure scenario plays out, get a copy of Neal Stephenson”s SnowCrash.

Scenario 2: Tin Foil Hats

This scenario is one where we posit (merely as a thought experiment) that the conspiracy theories around Coronavirus could be true. These range from it being a weaponized virus that either escaped, or was unleashed, to the assertion that the entire Coronavirus hysteria is a hoax, perpetrated by Global Elites (probably the Lizard People) in order to take down the economy and institute worldwide martial law.

In this scenario we might be in the early innings of World War Three, only the war isn’t being fought with bombs and bullets, it’s being fought with biological agents and weaponized financial derivatives.

Scenario 3: Mandatory Pollyana

This is where Central Bankers step in and once again save the day, injecting just the right amount of liquidity, pushing interest rates to the exactly correct level, possibly below zero. Policy makers unleash unbridled fiscal stimulus, tax incentives and deferrals, to be followed up with MMT and UBI.

In this version, global financial markets become, in the words of Ben Hunt “publicly owned utilities” – that are only permitted to go up. Short selling is banned. The world moves into a globally coordinated command economy.

Scenario 4: Good-bye Globalism

Is where multi-national corporations, so shaken from this Near Death Experience, realizing their error of betting the farm on just-in-time supply chains, labour cost arbitrage and having zero buffers, begin pulling manufacturing back home.

The smart ones start building cushions and shock absorbers into their business logic, and they begin to eschew leverage after being on the wrong side of a series of cascading liquidity implosions. In other words, businesses begin to transition themselves into what I called “Transition Companies” as posited in the inaugural posting for Out Of The Cave.

I consider this scenario to be the most desirable, but the least likely, especially if many of these corporations receive government bailouts.

Over the next days or weeks I’ll put try to find the time to flesh out each of these scenarios. It turns out that hunkering down can be a full time job unto itself, something I plan to write more about for the GC subscribers.  If you’re not already on the list and want to know about the rest of the Jackpot Chronicles and my thoughts around navigating your business through it, sign up for the list here.

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