What is really going on?

The question mark indicates the sad truth, that there is now officially so much chaos in the system that nobody has any clue what is going on. At this point, the traditional indulgence in the conspiracy theory is not even a possibility because nobody could be steering this ship of state at this point.

However, the light of hope shines brightest at this point, as the forces of control fail in the face of chaos. I've heard the conspiracy theory that some dark and foreboding committee of one hundred jewish followers of the articles of zion received from the last templar under direction of the marovingian or whatever (not gonna look it up, if you want to, you can correct me in a comment that I will probably ignore), that such a group wants chaos because out of chaos it can form the kind of order it hopes to form. However, this just won't work.

In chaos, by definition, things are unpredictable. Were things at all predictable, the situation would be merely complex, not chaotic. If it were easily predictable, it would be referred to as ordered. Anyway, what we have here in the US and most of the world, is chaos.

We have chaos in the weather, with potentially serious shifts in weather patterns, leading to thousands of victims. We have chaos in world politics, with things like wikileaks, moslem extremists and tea partiers to contend with. We have idiots running countries that may or may not have nuclear weapons, some of which are verging on being officially failed states. We have the west, having run this globe for a seriously long time, verging on bankruptcy and ruin, with a ruling class that is utterly clueless.

Out of this chaos comes some encouraging news. For instance, when the Democrats compromised with the Republicans over the taxes and the continuing spending bills, the tea party threw a hissy fit and newly chastised Republicans rescinded the compromise. Obama, ever the skillful negotiator, turned turtle and let them.

The only thing the politician is really afraid of is public opinion. Such a sudden change in behavior is impressive because it arises from a sudden change in opinion. The tea party isn't that old. It has grown out of a growing dissatisfaction with governance in general, and has evolved into a much better educated electorate that is not willing to tolerate back room deals and tons of waste. This electorate is starting to make noises about things that were considered fringe only a few years ago, such as auditing the Federal Reserve Bank.

Even more interestingly, much of the rest of the world is now making noises about a gold standard, of all things. Ten years ago, gold was considered a barbaric relic of earlier times, now selling for six times the value it used to sell for at its lowest price. People are noticing.

The hedonic adjustments the bureau of statistics makes to their inflation statistics are being ignored. Everyone can see their energy, food and fuel prices rise. Even if the price of consumer goods continues to go down, most of the population of this country spends most of their money on energy, food and fuel. As has been noticed before on this blog, activity is at the margin and any increase of a major cost can lead to a reduction in other expenditures, which can add up to a major reduction in economic activity. This largely explains what is happening now.

There may be economic recovery, but it is jaded. It is not broad-based, and it is not strong. The problem with any sort of recovery that would re-establish the roaring nineties is that the average consumer has been shocked hard and will not likely engage in such ruinous economic activity again, meaning that we should see debt ratios continue to drop. This is positive for the country in the long term, but in the short term can lead to a decade or more of deflation, which, if the government works at it, can be turned into proper stagflation, a la Japan's lost decade.

So, to avoid that eventuality, we have to see the electorate make their elected officials do the wise thing and not fight deflation, as deflation is a natural remedy for all sorts of monetary evil, and, in the long run, will lead to a much leaner, much more efficient, and much stronger economy.