Book Club Post

December 2017 Book Club (plus reflections on the Bitcoin bubble)

This week’s post is the fifth of a monthly series of open-discussion posts focusing on books I’ve written. Our theme for the present is Mystery Teachings from the Living Earth, and this week we’re discussing “The Fifth Law: The Law of Cause and Effect” (pp. 54-62). It so happens that just now the Fifth Law is particularly newsworthy, for a reason we’ll get to in a moment.

Here’s the Fifth Law, as it appears in the book:

Everything that exists is the effect of causes at work in the whole system of which each thing is a part, and becomes in turn the cause of effects elsewhere in the whole system.  In these workings of cause and effect, there must always be a similarity of kind between an effect and at least one of its causes, just as there must be a similarity of scale between an effect and the sum total of its causes.

That sounds pretty obvious, doesn’t it? Once you’ve read the section of the book we’re discussing, with its commentary on the way people like to ignore the Law of Cause and Effect when it comes to money, turn to your favorite source of financial news and read the latest on the Bitcoin bubble.

Yes, it’s a bubble. It doesn’t matter a lick whether or not Bitcoin or the other cryptocurrencies are brilliant innovations with a long future ahead of them; plenty of the companies whose stocks went up like a rocket in the 1920s boom also had a long and prosperous future ahead of them, and the people who invested in them in 1928 and 1929 lost their shirts anyway. The price of Bitcoin isn’t soaring into low earth orbit because of its actual prospects. The price of Bitcoin is soaring into low earth orbit because a great many people who think they can get money for nothing are cashing in their other investments and using the proceeds to buy Bitcoins.  Once the supply of suckers runs out, so will the bubble, and never—not one single time in the history of finance—has a bubble like this one ended without a messy crash.

We could get into a long discussion about the difference between money and wealth—they’re not at all the same thing, you know—and the way that people confuse an increase in the price of a speculative asset with the theoretical increase in wealth they could have if they could extract the value of that asset without crashing the price (which, of course, they can’t). Still, the section of Mystery Teachings from the Living Earth we’re discussing this week covers the basics of that; I’ve written more extensively about the same subject, too, in my book The Wealth of Nature and in the latest volume of the collected Archdruid Report essays, so I’ll let that pass for now, and put in a brief public service announcement instead:

If you have any money you can’t afford to lose in Bitcoin or any other cryptocurrency, you need to cash out and walk away, right now.

Don’t fool yourself into thinking that since you know it’s a bubble, you can time the market and cash in before the bottom drops out. Everyone thinks that. What will happen is that at some point in the weeks or months ahead—and it’s impossible to predict when—one of those sudden dips in price will keep on going down, and before you realize it’s not just another dip, you won’t be able to cash out without taking a serious loss.  Then it’ll go up again, but it’ll never reach its previous high, and right around the time you’re starting to think that the trouble’s over and you can take your profits, it’ll lurch downward again, hard. Rinse and repeat; by the time it bottoms out a Bitcoin will be worth maybe thirty or forty dollars, if it’s worth anything at all, and you’ll be bankrupt. (Shares in General Motors, the Microsoft of its era, sold for nine dollars and change once the 1929 crash bottomed out; some of the other hot stocks of the period ended up worth precisely zero, because the issuing companies folded.)

People are taking out second mortgages on their homes to invest the proceeds in Bitcoins. In a sane market, that doesn’t happen—and that kind of idiocy is the only warning you’ll get.

Let’s make this even simpler.

If you have money in Bitcoin, get out.


And if, dear reader, you’re sitting comfortably on the sidelines watching this latest example of our species’ propensity for giddy financial idiocy, I encourage you to get the popcorn popping, pour yourself a beer, and settle back with a copy of John Kenneth Galbraith’s brilliant and funny history of the end of the Roaring Twenties, The Great Crash 1929. I promise you you’ll find the parallels educational.

With that, we can return to the central theme of this week’s post, the current section of Mystery Teachings from the Living Earth. Questions? Comments? Discussions? Have at it—subject, of course, to the usual rules.


  1. Nice post and for myself an excellent example of your posts nicely rounding out what I have been pondering.

    I had just finished reading this article when the email announcing your latest arrived (Playing hookey from work today)

    One of the great problems with the way that I think (and I don’t at all feel that this is uncommon) is that because while I recognize that “there must always be a similarity of kind between an effect and at least one of its causes” I keep forgetting that the outcome is contingent on “the sum total of its causes” of which I can perceive only a portion.

  2. Wouldn’t the Fifth Law put paid to the Butterfly Effect, that is, the idea that some action creates effects that are disproportionate the size of the cause? Isn’t one of the tried and true techniques of dealing with systems to find leverage points where a small cause results in a large effect?

  3. I’m on the email distribution list of a globally renowned conservation biologist who spent almost all of his career being resolutely optimistic. In the last week he forwarded four pieces by experts that basically said, we’re fracked. One guy who had devoted his career to saving the last old-growth forests said we’ve failed, they’ll all be eaten up soon. Another said that global ecological collapse is imminent, to be followed by population collapse of course, and the only way to avoid it would be for the world immediately to start focusing on population control and (in pretty much these terms) LESS. I forwarded these to my spouse then had an argument with him because he observed correctly that that wouldn’t happen but seems to think that there’s therefore nothing the sane minority can do to make any difference. I’m afraid the effects we have caused may be coming home to roost faster than many of us have imagined.

  4. Back in my younger days when I was involved in somewhat dangerous sports like rock climbing, I used to say that I was more interested in gambling with my life than my money. (This came to me once when traveling thru Las Vegas to get to a climbing area nearby) For some bizarre reason (for our culture) I have zero interest in participating in bubbles or other get rich quick schemes (and no, I’m not already rich). It didn’t even occur to me to participate in the bitcoin bubble, though I’ve heard about it.

  5. Yes, bitcoin is in a pretty dramatic bubble. Seems like much of North America’s economy is bubbling at the moment. I can and have been watching bitcoin and shaking my head, since it is easy to avoid. Things like BC’s housing bubble, though… are consistently sideswiping those of the population who are paying rent, as well as those trying to buy a home to live in, and none of us renters signed up for this. So I worry about the housing bubble in a way I simply don’t care about bitcoin.

  6. If I may make a comment on bitcoin:

    I have a dear friend who has quite a stake in bitcoin currently. Having talked at some length about it and having urged him to sell his shares, he hasn’t budged. He has freely admitted that it is a speculative bubble and that it is a dark thing. My thought is that perhaps many people aren’t actually that interested in bitcoin or even making money; they are interested in gambling, and bitcoin is just a very convenient way of gambling right now. One can watch the fortunes rise and fall in real time, which must be utterly exhilarating. It doesn’t appear that my friend is actually into the money, so much as into the rollercoaster ride of the drama. Oh well; my heart goes out to him.

    Personally, I’m of more sedate tastes, and feel uncomfortable with the idea of unearned wealth coming from such a topsy-turvy place. Seems like the rush of it would cause psychic imbalances from all the crazed energy going into it. More importantly, I don’t like gambling at all. It gives me a vertiginous buzz like a non-smoker smoking a cigarette all at once; it makes my stomach twitch as if I were about to vomit. If I’m looking for what I imagine gamblers seek, I can cast a geomantic reading or pull some tarot cards instead! Then I get to learn more about intuition, refine my plans and don’t lose a dime.

  7. Bubbles like Bitcoin are precisely what JMG has warned us about here and elsewhere. But a more fundamental problem and even greater danger is that few of us have wrapped our heads around the implications of dropping the gold standard in 1971. Those implications are far from dire, as this entertaining and informing lecture makes clear. Let me respectfully suggest that readers of this blog take the time to digest how we’ve been conditioned to think in terms of outmoded economic models and thus keep asking the wrong question; namely, how can we afford to do what we should do?

  8. In the past.Bitcoin has a bit of usefulness as a way to transfer money in and out of a government controlled financial system. It was put to good use by the some in the latest financial crisis in Argentina and also in Cyprus. Used this way your local currency should be converted in to Bitcoin, transferred to wherever you are trying to get it then turned back in to the currency of choice in that local as quickly as possible. But as a store of value or speculative vehicle it has the same downside risk as the proverbial, ” picking up nickels in front of the steam roller.” The potential for loss is now so high it is even too risky to use as a way to move money.

  9. The interesting part of this story however is that Bitcoin really only looks like a microcosm of the larger market. This is not only true for stock but for bonds as well. The older equilibrium that existed had stocks and bonds moving up or down in more or less opposing fashions. Low interest rates meant a bond price boom but generally only occurred as central banks made low rates available in a recession meaning stock were low. As stocks rose with the economy interest rates rose and bond subsided. Now we have both permanent (seemingly) zero interest rates and a huge stock and bond boom. I’m not certain that there is anywhere to go to “get out” of the larger picture like there would have been before 2008.

  10. This comment relates more to the 5th law:

    If I may attempt to dray conclusions from some recent experiences: over the course of the past few months I wrote, and am still editing, two book length projects; a 37,000 word novella and an illustrated 35,000 word herbal. These are the longest and most coherent writing projects I have yet to do. They have me thinking of cause and effect, especially as it relates to Krishnamurti’s dictum that “truth is a pathless land”. Writing longer projects makes me see that writing is a powerful way of exploring this pathless land of truth. Of course there are landmarks; the works of Nicholas Culpeper, Finley Ellingwood, Matthew Wood and many others were very important landmarks in the land I traversed in the herbal, but the path I made between these luminaries was of course my own. Importantly, with these projects I finally understand writing to be a type of initiation.

    It appears to me that writing is closely allied to the experience of walking through uncharted terrain; it is slow and plodding and allows one to have a sense of satisfaction and ownership over the journey. While I was writing I was aware that I was in the process of birth; I didn’t have the distance of midwifing other’s ideas. No, I was pregnant with them, and their time was due. As such, the writing process was fraught with enormous spiritual dangers that I had to face alone. Overcoming these, the dangers became more like friendly guardian spirits rather than hostile entities. On the other hand, reading is like walking through charted terrain, and watching television or videos is similar to driving on “the information super highway,” or perhaps, increasingly, like a bad airport experience!

    These activities have a cause and effect relationship to the capacities they develop; walking builds muscle whereas driving causes atrophy. Writing tends to cultivate insight, perspective and a definite daring, whereas consuming visual media tends to promotes passivity, poor thinking, and mental atrophy. Of course, one can use the various activities as ways of compensating for the other, but there are hard limits to how much this can be done; there’s only so many hours in the day.

    So who we become is a process of cause and effect based on the sorts of choices we habitually make. Some choices develop an individual’s capacity, some degrade an individual’s capacity, and some are neutral. This is the cause and effect of choices, and is of such of immense interest to incarnate humans!

  11. In keeping with the chapter discussion, to my thinking bitcoin is a predictable effect of more comprehensive causes. The marketing around bitcoin is pretty much identical to that which has raised precious metals so high in the last ten years. Both are promoted as a safe hedge against dysfunctional markets and corrupt central banks. The more comprehensive cause is right there in the marketing: a rather significant consensus that “establishment” currencies and stocks are full of baloney and will roll over into a full on crash sometime soon. That thinking has driven up pricing on these hedges.

    But of course, you cannot hedge against reality (that would be another useful definition of insanity). If their fears are sound, the correction will certainly wipe out the utility of the hedge. A classic double bind in Bateson’s sense of the term. In this sense, Violet,your friend will not be able to resolve the dilemma because he is maintaining the contradiction himself.

    Finally, to the true believers in bitcoin, if all the hype is true, then bitcoin is indeed not a bubble but precisely the pin that will pop the larger ZIRP, QE, TARP, nightmare you are hedging against. And so also self contradictory… unless you really think you’ll be buying beers with bitcoin in Retrotopia.

  12. Dear JMG,
    Concerning cause and effect, could you elaborate on the connection, if any, between your quote above which emphasises the inter-connectedness of all things, and the Classical way of ranking causes as necessary, sufficient, proximate, distal or ultimate?
    One of the commentators above mentioned the “Butterfly Effect” which asserted that, theoretically, the flapping of a butterfly’s wings in one place on the planet could “cause“ a storm thousands of miles away and weeks later. Yes, this might be one of the storm’s causes, but surely not the proximate or necessary one.
    One of the tenants of Chaos Theory is that very small forces can have disproportionate effects. How does this square with your quote above?

  13. @RPC, No, not really. The movement of the butterfly’s wings can (in principle) determine whether or not the tornado happens in a particular future time and place, all other things being equal. We can say (in principle) that e.g. if the butterfly doesn’t flap its wings, the tornado weeks later will not happen the same way, or perhaps not at all. But that doesn’t make the butterfly wings the cause, as in, the sole cause. Every other butterfly and everything else that moves (or heats, moistens, etc.) the air during the weeks before the tornado also contributes, some of them (such as the air drafted by trucks along an interstate highway) likely to a far greater degree. So the one butterfly we single out as an example of the effect is very very far from the “sum total of all the causes” of the tornado.

    There are occasions where it appears that we can single out one very small cause for a major event. “For want of a nail… the kingdom was lost” expresses that idea. However, in that case too, the proverbial missing nail isn’t really the single cause. Why was the messenger so dependent upon that specific horse? Why was the message so important that the entire battle depended on it? Why was the outcome of that single battle so decisive in losing the kingdom? Why was there a war in the first place? We can easily imagine answers to those questions, which is why the adage is compelling, but all those answers are themselves causes for the loss of the kingdom too, with further contributing causes of their own, for which the missing nail bears no blame.

  14. JMG
    Cause and effect has been used as the basis for the material view of the world, except when prosecuted far enough we get into ‘probability’ (and, err … ‘God does play dice’). Mostly we are very bad at uncertainty and probability and ‘risk’ and our grip on reality gets out of hand. That can include a whole society, thinkers and researchers alike placing some very large bets on technologies and attempted explanations etc. (I’m not suggesting you are using the principle in this way.)

    Which brings us to …. bitcoin. Reminds me a bit of Albania when the population lost its savings. But bitcoin is not I guess big enough in numbers of punters – do we know what proportion of the population is sucked in? No ‘institutional’ investors I hope – it would be dramatic if banks, insurance, pensions and corporates were trying to be clever.

    Phil H

  15. John–

    The Law of Cause and Effect has been my working model of “karma” for some time now: every action has consequences and those consequences spread out into the world (and now, with my expanded understanding, I’d say “across the planes”) like the proverbial ripples on the surface of the pond. The immediate consequences are easy to spot, like the well-defined initial waves on the pond’s surface, but then those consequences begin bouncing around, interacting with themselves and other elements/actors, and one quickly looses the thread of direct cause (but the link is still there). These ripples unfold across space and time ( and planes!) and must be dealt with by ourselves, others around us, and/or our descendants. (The US’s decision two-ish centuries ago to make its bid for empire is a good example — we are dealing with the consequences of that collective decision now and will be for some time.)

    One take-away I guess I’d have from the law is not that one should try to avoid consequences (which is impossible) or become frozen into inaction for fear of future blow-back, but that one should very deliberately and consciously consider the possible outcomes of one’s choices and in general avoid rash/reactive decisions. (More or less the opposite of what modern industrial humans do today…)

  16. It may be amusing to note that economists and financial traders have a theory that deals with this. It’s called “the greater fool theory.”

  17. Re Bitcoin

    PSA for the historically-aware:


    (We now return to your regularly-scheduled programming, already in progress.)

  18. I’ll be able to do a proper meditation on the theme for the chapter and toss in some more on topic thoughts by Friday morning, I’m still catching up on the essays and the comments outside of the one or two I had time to contribute to when this blog was getting started so I’m still a bit behind on the book club conversations. I will, however, ask some questions on the Bitcoin bubble: what’s the best venue to watch the show from (bonus if there are regularly updating line graphs to visualize the plummet with)? I had a great deal of fun watching the Fracking boom and bust when it happened a few years back. I don’t know much about bitcoin, and last I heard it was pretty much only used by a few hacker types to make transactions of questionable legality and isn’t something you really hear mentioned outside of a certain subset of computer geek culture. Is that a bubble with enough of a hold on the rest of the economy to have any effects felt by anyone other than the tiny subset of the population that’s personally invested in that currency?

  19. Ignoring this law is also why a lot of people have nonsensical expectations about magic. For many of the things people try to use magic for, “change in consciousness” is simply not the right kind of cause to initiate the effect. Instead, it contributes to the size of the causes, and thus to the size of the effect (which can include passing the threshold for the effect to occur in the first place), but you have to have some of the right kind of causes in place as well (e.g. exercising and/or eating better if you are looking to lose weight).

    Of course, as you pointed out a long time ago, technology has this problem, too: many of the problems and predicaments we now face call for a change in consciousness, and “manipulating matter and energy” is the wrong kind of cause for that, though again perhaps they can contribute to the scale (e.g. advertising is a good example of a magical effect amplified by a technological component*).

    * Alongside the somatic and verbal components, naturally.

    (That’s a D&D joke. A really bad one. I’ll show myself out.)

  20. Just a few hours ago in a group text chat, one friend asked another if he was planning to buy a house soon. The second friend replied that for the time being he’s going to continue renting cheaply and put the money saved into more bitcoin. 🙁 at least he doesn’t have any dependents.

  21. What I find interesting about today’s topic of chains of cause and effect is how bad humans are at predicting how these will behave in everyday situations. One thing we are supposedly optimised for is managing social relations, but take a group of ten people and try and predict how they will respond to an action on your part and you may successfully predict what their first responses will be if you know them very well (a rare commodity these days), but the follow on secondary and tertiary effects are much harder to imagine. Is it that people are just too complex or does the complexity exist between them in the 10! possible interactions to consider at every step? Is lots of literary fiction and exercise in imagining plausible chains of cause and effect?

  22. I used to work in software development. During 2009-2011 I was assigned in Norway.
    I did use some of my free time to fiddle around with bitcoins, I mined some of my own. (11.5 of them)
    I got appaled when the market presented to me a astronomic rise from 0.1$ to 34$ / bitcoin during a few days.
    Due to the problems with cashing in and turning btc to money at that time, I had pooled my resources to a third party provider, mt-gox.
    I sold my 11.5 bitcoins on the way up at $26, and got around $300 in my account. I was very glad I timed a peak of a delusional bubble, since the price shortly crashed down to $1 and stayed there untill “recently”.
    Sadly, I didn’t bother with all the problems involved to pull my money out from my account at mt-gox and they subsequently got hacked and I lost everything.

    Well, not everything…. I have now been equipped with a incredibly strong immune system for the kind of insanity that has been going on lately! And that could be the best deal I have ever had!

  23. Over the summer, I bought a small, fixer-upper house in a solidly lower middle class neighborhood. Even though it was the mortgage is tiny and truly the most affordable dwelling available (a condo was not possible because the association fee disqualified me for a mortgage in my price range) it took three years of scheming and strategy to get it. My husband and I lived with relatives for two of those three years because money was so tight. We’re not young people and I own my own successful business. Nevertheless, getting the house took everything we had and then some. If my husband wasn’t extremely handy, like pro contractor-level handy, the place would not even be livable.

    Renting a studio apartment anywhere within thirty miles of where we work costs twice my mortgage, title, and taxes.

    In June 2017, median home prices surpassed 2006 levels.

    We are definitely in another real estate bubble.

  24. I have been thinking for some time that Bitcoin and the other crypto currencies are kind of like a digital virus for the financial system. A great amount of the overshoot our current civilization is guilty of has been enabled by a runaway symbolic financial system that has become disconnected from its underlying purpose of financing productive economic activity. In nature, disease helps thin out the deer herd much faster than dying by starvation which leaves the entire herd weak. The collapse of Bitcoin could serve the same purpose,taking down the most speculative corner of the “herd” much more swiftly than the regular route of bankruptsy, stock decline etc. I don’t mean to say that such as Bitcoin culling would leave the rest of the financial system healthier, it will just burn it off much more quickly leaving a bit more of the natural world intact from which to rebuild the earth.

  25. I think the Bitcoin mania is related to some of the things JMG has talked about here and in the Archdruid Report: the myth of progress.

    People who believe technology can fix everything get way too excited about new technologies, and because of this, they tend to overlook the limitations of new technologies.

    I recently watched a talk by Andreas Antonopoulos, one of Bitcoin’s main preachers, and he was almost saying that Bitcoin/Blockchchain will bring about a Utopia. He thinks that some of the oldest problems that have plagued civilized societies (corruption, cronyism, financial oppression, etc.) can be fixed by an algorithm because it is decentralized, and it enforces integrity in transactions without trust in third parties. All this reminds me how people used to talk about artificial intelligence, machine learning, and big data as the new technologies that would change everything like never before. You don’t hear much about these anymore, Blockchain is now the next big thing.

  26. Here’s my theory/metaphor on Bitcoin. A nuclear bombs works by smashing an atom. We can think of this as a metaphor for a financial bubble like bitcoin. It would level a small city but the world would otherwise still be standing. So if Bitcoin blows it stinks for those involved…. However there are thermal nuclear weapons.

    That is nuclear bombs with a two stage explosion the conventional fission explosion, that is Bitcoin blowing up. Then there is the fusion reaction that happens because a tank of hydrogen was shoved behind the bomb. This tank of hydrogen would be the United States/world stock markets/fake wealth etc.

    What I think is going to be interesting about Bitcoin when it blows is going to be these unknown tanks of hydrogen behind it, that could in fact yield a bigger explosion. A thermal nuclear weapon could take out half a state…. Chris Martenson and Howard Kunstler simply purport that the whole world is a tank of hydrogen at this point.

    I admit I smoke my shorts a little with them because I think they could be right to an extent. (Not an apocalypse but something world changing) And smoking shorts is fun if done right. xD I think a Bitcoin bubble burst could do a lot more damage than we think. Bitcoin is purported to be a kind of heat sink if a localized market melts down…… If we’re in a situation where we need such a heat sink then that says something profound about the state of the world economy. 4 months post eclipse.

  27. JMG, really good timing.
    Maybe my personal tale will be of interest to you. I’ve know about Bitcoin for many years now, and over that time got in some lively discussions about it. I’ve always said it wouldn’t amount to anything and that it wasn’t comparable to gold. Never bought any during that time.
    This year, however, when it reached around three thousand dollars a piece, I finally relented. I bought a few bitcoins, learned how to store them properly, and waited. My plan was to cash out as soon as it got to a mere five thousand a piece.
    Well, it turned out these things are quite addictive. I didn’t cash out. Instead, I kept pouring money after money on it. I installed widgets and apps on my cell phone that constantly told me how much was a Bitcoin trading for every five minutes. Never put myself in debt, though. That was money I had saved.
    About a week and a half ago, though, Bitcoin suffered a tremendous dip. It reached 17 thousand dollars one day, then dropped below 11 thousand the day after. That was also the day I decided to cash out as soon as it recovered past 15 thousand again.
    Thank the gods it did. Yeah, I got lucky.
    Never again.

    BTW, the “investor” community as a whole is a sad joke. Would you care to know which is the main investing strategy? Hodl. I didn’t spelled incorrectly: it’s a slang for hold. Meaning you just hold it, through the dips and ups.

    Meanwhile, one of the bitcoin enthusiast I used to have lively discussions with was hired as an advisor by a major investment agency here in Brazil. His first official pronoucement in that capacity? “Do not invest in Bitcoin now”. Yeah, sounds about right.

    Sorry for the long post!

  28. JMG: Excellent advice about Bitcoins. I spent 33 years in the IT industry. I know, as well as anyone, that the IT industry, in general, reached a point of diminishing returns in the early 2000’s, when the average laptop obtained as much computing power as the old IBM 360 mainframes.

    Speaking of hysterical psychoses, I have a nomination for your fifth Wednesday of the month column for January. Namely, the “sexual harassment” moral panic that is now happening. Claire Berlinski has written an excellent column about this: The Warlock Hunt.

    This touches back upon the subject of The Hysteroidal Cycle which I raised several months back. These moral panics seem unique to English speaking peoples (i.e., “Albion’s Seed”) in general, and to white Americans in the U.S. in particular.

    I came of age when Ronald Reagan was first elected – just in time for the McMartin preschool moral panic (which, BTW, resulted in exactly NO criminal convictions whatsoever!). All of my adult life, the American people have been convulsed in one moral panic after another, like so many head of rampaging, spooked cattle. That was a major factor in my decision to move overseas.

    I have my own theories as to why these moral panics regularly happen approximately twice per generation in the U.S. However, I will be eager to hear your own views on this matter, before I say anything more. Thus, I am putting this subject in your hopper!

  29. Degringolade, good. That’s why the definition has those two elements. There are also people who get the issue of scale but miss the issue of similarity of kind.

    RPC, not at all. The butterfly’s wing can only set off the hurricane if all the other causes of a hurricane (high sea surface temperature, low wind shear, a mass of moist air in the right place at the right time, and so on) are already present. You might as well say that a match can’t start a forest fire, since a forest fire is so much bigger than the match; the match, of course, isn’t the only cause — and that’s why I specified the sum of all the causes when talking about scale.

    Dewey, I’ve been saying for years now that we’re past the point at which the decline and fall of industrial civilization can be prevented, but there’s still ample time to ameliorate it and get useful things through the troubled years ahead. In the short term? Yeah, we’re in for it.

    Longrow, yep. Do you happen to have some good figures on that?

    Dean, as someone who has zero interest in gambling — I can think of few activities I find more boring — I can only agree!

    Corydalidae, understood. Depending on how much money gets pulled out of the productive economy and thrown down the rathole of the bitcoin bubble, though, it may impact you anyway.

    Violet, I get that. I don’t even get the sort of buzz you describe from gambling. I once played a slot machine in Vegas — I was there for an alchemy conference, and you could get a card worth 20% off meals at the hotel restaurants, but you had to activate it by playing at least one round on the slots. So I did. I’ve rarely encountered a more boring activity. The machine was rigged (no surprises there) to pay off a little at first, in an attempt to hook you; I waited until my dollar had turned into $6.25, cashed out, and walked away. I’ve never had the least inclination to try again.

    Newtonfinn, fair enough, I have my own analysis of where current economic thought went off the rails, but I’ve already discussed that.

    Clay, yep. Move quietly and quickly to the nearest exit, folks.

    Dsj, there’s no category of investment vehicle that isn’t going to be shellacked sooner or later, but some things are more full of bubbles than others…

    Violet, that certainly corresponds to my experience of writing. As I work on the current novel, for example, it’s very much a matter of straying into unfamiliar territory and finding things there I didn’t expect!

    Michael, you’re welcome. If this sort of thing is prophetic, though, all you need to set yourself up in business as a prophet is simple common sense and a clear awareness that there ain’t no such thing as a free lunch.

    Redoak, no argument here. As I see it, the confusion between wealth and money is at the heart of both the precious metals and the bitcoin boom. In both cases people are trying to find a way to hoard tokens under the mistaken impression that this amounts to preserving wealth. It’s wryly amusing that we speak of “precious metals” — I can’t see that phrase without hearing “my precious!” in a Gollum voice. A lot of people are going to cling frantically to one or the other as they plummet into the Mount Doom of a speculative crash…

    Sandy, reread the Fifth Law as I’ve defined it, paying particular attention to the references to multiple causes and to the fact that the sum of all the causes — notice the plural — has to be comparable to the sum of the effect. The rest is left for you as an exercise. 😉

    Phil, cause and effect can be harnessed to materialism only if you insert the covert proviso that only material causes matter. As for just how general the mania is, that’s a very good question to which I don’t know the answer. I hope we don’t find out the hard way!

    David, good. Yes, that’s exactly the point — or one of them. The other takeaway, which is the one I was mostly trying to get across in the book, is not to expect an effect when you’ve done nothing to arrange for causes similar in kind and adequate in scale.

    John, amusing indeed!

    David, funny. You get this evening’s gold star with honorary overpriced tulip bulbs for that!

    Eric, good question. I just follow the occasional story in the doomosphere.

    James, I got the joke, but then I was playing D&D back when it was staplebound pamphlets (mumble, mumble, Grayhawk, Blackmoor, Eldritch Wizardry, mumble, mumble). As for your comment — excellent. Yes, precisely. There are all kinds of things you can do by changing your condition of consciousness, and they include things like getting financially comfortable, finding satisfying relationships, and most of the other things people think they can get by magic…but you have to start from the recognition that the one common factor in all your problems is you, and change the common factor!

    Nicholas, glad to hear it. If he’s smart enough not to take on any debt, he might even get out the other end without being ruined financially.

    Shane, the fact that cause and effect in the real world are too complex to predict just adds to the fun.

    Alnus, wisdom at that price is cheap. A sound investment, in fact…

    Kimberly, yep. I hope the house works out well for you!

    Clay, yes, but there’s another thing to keep in mind. As the real economy of nonfinancial goods and services has stalled and begun to contract, the elites — who seem to be incapable of understanding the difference between wealth and money — have tried to deal with it by inflating the money economy. Thus we have an immense mismatch between the money supply and the supply of nonfinancial goods and services. At this point one of two things has to happen — either the excess money supply is going to bleed into the economy of goods and services, resulting in hyperinflation, or something else is going have to erase a lot of excess money. If the Bitcoin bubble does it, all the better.

  30. Jose, excellent! Yes, I’ve seen the same thing. Did you know that when airplanes were first being proposed, it was seriously argued that they would bring an end to war, since from the air it’s just so obvious that borders don’t exist? Some of the people who peddled that drivel lived to see the first bombing raids in the First World War. The notion that this or that technology will make everything better remains glued in place, despite all the failures…

    Austin, it’s quite possible that the inevitable Bitcoin crash could end up triggering crashes in a variety of other asset classes, and lead to a depression. We’ll just have to see.

    Bruno, I’m really glad to hear you got out. Too many others won’t.

    Michael, I’m of two minds about the current sexual-harassment media frenzy. On the one hand, no question, it’s the moral panic du jour, and it’s being handled as cack-handedly as the mass media always handles things, with all the usual trimmings of self-righteous posturing and guilt by say-so. On the other hand, I’ve seen a lot of very sleazy people — not all of them men, by the way — coerce sexual favors out of other people in really unethical ways, and cause a lot of damage to individuals and communities by doing so. (The Neopagan scene has had some world-class examples.) So I think there’s more going on here than just a warlock hunt!

  31. Is Bitcoin just another Tulip Bubble or is its effect something more? Could it’s implosion be the cause of something that moves us further down the long descent? That is what I was getting at with my previous comment.

    On a side note:

    I was talking with a friend of mine earlier today. We were talking about our student loans and she is moving back to Massachusetts because there is no way she can make a living in a certain rust belt state. I majored in Eni-Sci, she in Biology. The state she moved to has a minimum wage of $7.50 and out of college students there are making $12.50. (That’s roughly the Massachusetts minimum wage.) I’m in the same boat. But I don’t have to pay all living expenses because I live at home. I mentioned to her how I wish I hadn’t gone to college because I knew this would happen. Cause and effect. The only reason I’m glad I went is because I met people like her.

    While we were talking I realized my artwork has taken me further post college than my degree. Her like interests have done the same for her. JMG I owe you a thank you for encouraging my creative pursuits two years ago on the ADR.

  32. Umm, JMG, I already read The Great Crash, 1929 (oddly enough, the used copy was a “smoker’s” book, so every time the scent of stale smoke wafted up, I was immediately transported to my grandmother’s basement), so I’ve been picturing my coworkers talking up their Bitcoin investments as flappers and dandies, complete w/extra long cigarette holders…

  33. Recent dinner-table conversation with some friends:

    Friend: “Do you think Bitcoin is in a bubble?”
    Me: “Oh yeah, absolutely. I wouldn’t touch that with a 100-ft pole.”
    Friend: “But they said it was going to crash a few months ago and the price went up even further.”
    Me: “It might crash tomorrow, or it might go up to half a million. That’s how bubbles are… wait until the music stops and see.”
    Friend: “Yeah, I guess you’re right.”

    Bitcoin turns out to be just another of these “innovations” that turn out to be what they are purportedly working to replace, except maybe even worse.

    They said, bitcoin will replace the inherently unstable central banking and the the financial system. Well, we now have a parallel Bitcoin financial system with exchanges, futures trading, etc., and it’s even more unstable than Venezuelan Bolivars.

    They said, streaming services will replace cable TV, being cheaper and with more choices. But now, with every streaming service scrambling for “exclusive” content and old-time content producers pulling their stuff into their own platforms (Disney, being Disney, is making three (!!!) services), you end up in an even worse situation where you have to practically subscribe to multiple services to catch up to the watercooler conversation. Good thing I have no TV and a barebones Internet package!

    They said, Uber is going to upend the taxi market and provide better availability, better service, cheaper prices, and higher driver earnings. Right now they are starting to become just as bad if not worse than the taxis.

    Don’t get me started with so-called “self-driving cars” and their much-ballyhooed “safety”…

    I can go on and on…

  34. Addendum to my previous comment:

    The digital currency exchange Coinbase is now preventing their users from trading in Bitcoin, Litecoin, and Etherium currencies.

    That looks like “capital controls” to me. I thought that could “only” happen to “fiat currencies” like Zimbabwe Dollars and Argentinian Pesos. Cue Bitcoin zealots proclaiming that if we used Bitcoin “properly” according to Satoshi Nakamoto’s “original vision” instead of using things currency exchanges, we would not have these problems.

    Funny how anarcho-capitalists sound exactly like their arch-enemies hardcore Marxists when their ideologies’ failures are pointed out to them.

  35. Lois McMaster Bujold, whose fiction I generally enjoy and used to gobble up when I was a teenager, once had one of her characters say something like, “When you choose an action, you also choose the consequences of that action.” Hmmm! I thought. That should have been obvious.

    Thinking about that quote helped me stop feeling quite so rained on about things that were pretty much totally my fault, and eventually led to a decrease in choices that led to such outcomes in the first place.

    As a corollary, I might add, “In order to choose an outcome, you must also choose the causes of that outcome.” This often leads me to realize that either the causes of something I thought I wanted are unacceptable to me, or that I am being an entitled little twit (in the latter case, it often then becomes clear what I need to do if actually willing to put in an effort).

    Of course, neither causes nor consequences are always as predictable as we’d prefer, but surprisingly often we know enough to be going on with, I find.

  36. John,

    What is so stunning about Bitcoin is that a number of commenters I follow who are usually rather level headed have swallowed this one practically whole (I’m looking at you, CHS). Maybe this is telling us something. As you have spent years explaining to us, it won’t be the apocalypse but there could be people starving in the street.

  37. As I was walking through the forest nearby, attempting to find a place to meditate among the farmed cedars and sparse undergrowth, I noticed a lone porta-potty. It struck me as odd. How did it come to be there when whatever guys still tend the trees habitually “go” wherever and whenever? The cause was not immediately apparent due to the flimsiness of construction materials used during Japan’s speculative bubble about 25 years ago, but as I proceeded further, I came to a grandly leaking water tank, with an electric line sagging dangerously toward pooled water, and then, a little further on, some large and fairly well kept summer homes along a paved road.

    The forest itself had played a role in that porta-potty’s position. As I returned, I noticed clumps of shrubs here and there, which upon closer inspection turned out to be the final remains of small, tacky summer homes put up by the hordes of speculators that had supported the real estate boom at its peak. Part of the deal they made was not to cut the trees, which the original land owner retained control over. Cryptomeria and cypress trees block nearly all sunlight from reaching the ground, thus the sparse undergrowth, and it is a very cold place to be in winter. But free from the sun’s rays and protected from the wind, the plastic porta-potty will still be there 100 years from now. The poorly tended trees themselves are the result of an earlier speculative boom, and worthless now, except maybe as firewood, if you can locate the owner and get his permission. But like many bubble victims, they are still waiting for the price to recover.

    The tacky summer homes owners stopped visiting them after the bubble burst. If you can locate one, he will be glad to sell his to you very cheaply now, but if you examine it, you find the land is essentially worthless, especially with the various legal conditions imposed on it.

    Thirty years ago I was working my first translation job for a securities company in central Tokyo. I still recall the bogus analyses I helped deliver about how the price-earnings ratio on Japanese stocks was okay because they had some sort of “intrinsic value” that the market was reflecting.

    A hard-luck friend of mine to whom we’ve provided food visited us a week ago, just raving about cryptocurrencies. In addition to successful (so far) speculation, he is using them to evade taxation. I’ve forgotten who it was that said when taxi drivers start giving you investment advice, it’s a bubble. I asked him about Mt. Gox, the exchange that got hacked, with lots of people losing their shirts. He explained that it had been an early mistake but that the great god of Progress (my words, not his) would ensure smooth running.

    @RPC, the butterfly, or the nail, is the necessary scapegoat when God can no longer be blamed among intellectuals for stuff that happens.

  38. I bought my bitcoin for about $900 back when it seemed like a fun thing to do with some kids who were miners on Reddit predicting big gains for cryptocurrencies. I opened an account, stored my paper wallet, registering on the blockchain and promptly forgot about BTC until this recent bear cycle of madness. I doubt that I will do anything with it. It feels stupid to sell something that isn’t real. It’s very interesting, though. Some of us just enjoy the novelty of this technology, bubble or not. Am I being duped by the progress mythos?

  39. Hi JMG,

    that’s funny, by coincidence I was just thinking of Bitcoin earlier this week, even though I have zero interest in it. Actually, less than zero interest – I almost feel a force repelling me from the whole concept of it. I don’t know anything much about what it is or how it’s supposed to operate.

    But I read a news article about this kid – maybe eighteen or so – who had made a fortune from it. They quoted him as saying he was excited about it (and something else which I think they called ‘ether??’) because he saw it as an exciting new opportunity for limitless growth. Yikes! They had a picture of him too, and just for a split second I got this image or idea that he had ‘the mark of the beast’ as per the Book of Revelation. Something profoundly not right about him. Definitely something to stay away from, I agree!

  40. Regarding the “enormous energy required to mine one Bitcoin,” Charle Hugh Smith provides a useful reality check. It turns out it does take an enormous amount of energy to mine one Bitcoin, but that pales compared to, for example, the amount of energy being used by unused electrical devices in standby mode. We’re melting the icecaps so our televisions will turn on when we press the button on the remote. His essay is at

  41. It would seem, from my limited knowledge of history, that whenever an economic boom reaches near its end point of over extension, some sort of insane investment bubble happens. Tulips, dot com stocks, railroads, FL real estate, etc etc.There seems to be some need for a focus for all the “investments” of the boom/bubble. No clue why that would be, especially since most are aware of the historical precedents; yet still it happens again and again. Bitcoins are no different, except that perhaps this may be the first time the the object of the bubble had no real substance or claim on substance behind it.

    Will it come crashing down this time too, most assuredly. That is one thing which you can count on. Of course picking when is the difficult part, but not necessary unless you have “skin in the game”.

    Will Bitcoin’s demise be the trigger which pops the overextended bubble which we call the rest of our economy. Very likely, but unknown at this point. But if it does, it will only be because of the multitude of other imbalances which exist in the economic system. If not, then likely it will be the other way around, the collapsing economy will suck the funding and mojo out of Bitcoin’s rise, as funds are suddenly desperately needed elsewhere.

  42. @ redoak:

    you write:

    “But of course, you cannot hedge against reality (that would be another useful definition of insanity). If their fears are sound, the correction will certainly wipe out the utility of the hedge. A classic double bind in Bateson’s sense of the term. In this sense, Violet,your friend will not be able to resolve the dilemma because he is maintaining the contradiction himself.”

    That is very profound! And it appears to me spot on; there are a lot of contradictions in this situation, of course. Green-wash frequent flier sort of scenario. Some bad faith, it would appear to me. Of course, he’s also very much a dear friend, warts and all. I wish him the best navigating the weeks ahead.

    @ JMG,

    I have some hang ups around money; sometimes getting paid gives me the same sort of buzz/vertigo as well, as does spending large sums, anything over $5. Literally I feel sick, as I tend to think of money as the portion of life I spent working to earn it. For me time isn’t money, money is time, which is a rather harrowing metric. I admire your physiological response of boredom!!

  43. I also wonder about the scale element of the Law. Not the distant Butterfly Effect but the proximate Trimtab Effect. A Trimtab turned away from the desired direction of motion causes a massive rudder to turn toward the desired direction. Similar in kind but different in scale. Yes? No?

  44. In which ways does this law apply to the relationships between humankind and the entities we call Gods? a rhetorical question but would love to read your insights.


  45. JMG,

    Did you know that there’s an as-faithful-as-legally-possible recreation of the original D&D rules called “Swords & Wizardry”?

    (The print version is $35, but the PDF is free.)

    I actually knew you’d played D&D (you made your own joke in one of the talks you gave on alchemy: you said your constitution “is not something you get by rolling 3d6”), but I’m not familiar enough with the White Box version to know if verbal and somatic components were already part of the terminology. A search of my copy of “Swords & Wizardry” didn’t yield anything.

  46. Austin, oh, I get that — but we’ll just have to see. I’m delighted that my advice was of use to you!

    Shane, I like it. Twenty-three skidoo!

    Carlos, no argument there at all.

    Jen, good. Very good. You’re right, of course — sometimes things blindside us, but far more often we know perfectly well when we’re doing something dumb.

    John, that’s actually very common in a sufficiently overheated bubble. I’ve recently been reading a Somerset Maugham novel, set in the years between the wars, and one of the minor characters is a broker whose ordinary caution gets swept away by the 1929 boom. It’s very plausibly written, and would update nicely to the present.

    Patricia, thank you! A vivid metaphor…

    Y. Chireau, if all you care about is the entertainment value, then by all means enjoy it. It’s the people who are convinced they ought to be rich, and are sinking more than their net worth into the bubble, that I’m trying to warn.

    Stefania, I get that. Definitely worth backing away from…

    RPC, I’ve always wondered about the kind of argument that basically claims that X isn’t bad because Y is worse. That doesn’t necessarily follow…

    Steve, basically, yes. Bubbles form because the economy is so overloaded that no honest investment makes a good return.

    Violet, understood! I’m probably more comfortable with it because my financial situation is, if not particularly lavish, at least comfortably stable.

    Gkb, er, if the trimtab were hanging in a vacuum, with no other causes contributing to its effect, could it do that? Come on, this is not a difficult concept: There are other causes involved. It’s the sum of all the causes that is of comparable scale to the effect, and the habit of fixating on one cause and ignoring all the others is not going to help you make sense of the world!

    Nando, I’ll leave that as something on which you can meditate. 😉

    James, no, I didn’t! I can’t remember for sure if the original, un-advanced D&D had the three components, but I seem to remember it. Thanks for the link to a blast from the past!

  47. Re the gambling thread: I had a dentist friend who was a recovering gambling addict having won and lost hundreds of thousands of $’s. He told me that the addictive thrill came only when he was in the losing/negative part of the cycle. Then it was the urgency of making up the loss, the risk of going further down the black hole that made him feel really alive, the huge relief of “coming back from the brink“. Because he has a highly paid professional, it wasn’t the money on a survival level that motivated him.
    Personally I’m rather risk averse, but I get small buzz out of certain risks I take in creative endeavours.

  48. Of course it’s not hard when you already understand it. It’s like the wolf before the concrete has set. Some of us (at least one) are not conceptually gifted and need haptic examples to grasp abstract ideas. So where does the scale component come into the picture? A trimtab is small compared to the rudder; the effort required to turn the trimtab is small compared to the effort/work required to turn the big rudder(itself useless if not actually in the water and resisting change from its inertial position). The force of the watery resistance varies directly by the surface area of the steering blades large and small, but it still looks to me like a small amount of human work to achieve a large effect on a human scale. Same with Lucretian swerves, gears, levers, wheels, block and tackle among other simple machines that seem to amplify small, easy motions to result in big effects. Or Wolfram rules, for that matter. If those are not examples of disproportionate scale, then what would be? If the problem lies in my focussing on the small amount of human effort needed to achieve the big effect instead of calculating total systems sum of physical forces then how does scale come into consideration at all? Dense R Us.

  49. I enjoyed your writing about the Fifth Law, but I’m finding it not as easy to put to use as the others (apart from staying away from Bitcoin). What are some of the best uses that you’ve found for the law of cause and effect?

  50. The blockchain technologies that underly bitcoin seem to be a different kettle of fish , the system experimenting with the possibilities of moving people in the west into cashless currencies which are in fact neo fascist technologies designed to divide and entrap people into digital tribes , the “chain” for each being held by its own unscrupulous zoo keeper. Heartening , though , to see many commentators alreadt making reference to the heavy reliance of this technology on internet technology , rendering it quite fragile and implausible and confirming its utility to the ADR educated reader as an illusory delusion . Meanwhile the Russians , Iranians and Chinese continue to extend their gold bullion middle finger at the senile western elites pushing this stuff.

  51. The Fifth Law begins, “Everything that exists…” Since Bitcoin is a virtual representation of money, does it really fall under the Fifth Law? I say, I dunno.

    Bitcoin in simple terms is a ponzi scheme. Only the early adopters (which are never John Q. Public) are allowed to “mine” vast numbers of cryptocoins on the cheap. One of the early marketing ploys of Bitcoin being outside the traditional banking system, and therefore more opaque to government tracking, is a lie. Blockchain technology has removed all privacy from transactions.

    Bitcoin is definitely a bubble, and may be getting pumped by the Central Banks for their own nefarious purposes (like the war on cash). Rather than get out completely, I would recommend selling off a portion to return, at a minimum, your initial investment. Then, based on risk tolerance, sell off at various targets, always keeping some amount that can be lost at the end – it may run much, much longer and much, much higher.

    Full disclosure, I do not own any Bitcoin. It never passed the smell test for me. It’s impossible to handicap. Unlike the ponies…:-)

  52. James and JMG: A number of people have, of late, developed an idea that older editions of the D&D/AD&D game had elements that made them distinct from more recent editions, and that what was changed has obscured types of fun that were in danger of being lost.

    There are a number of “as faithful as legally possible” games – generically called “retroclones” – that recreate D&D in various incarnations and with varying levels of faithfulness. S&W includes a couple of distinct innovations and exists in several forms (some much less expensive than the Frog God Games version), from “White Box” (and has the least expensive edition in White Box Fantastic Medieval Adventure Game) which recreates the game as it was before any of the supplement books and “Core” which includes the first supplement to “Complete” which includes the first two supplements and some of the third plus material from early magazine issues. Labyrinth Lord is a nearly exact replica of the line of D&D boxed sets produced for legal reasons alongside AD&D in the late ’70s and ’80s, with supplements that adjust it to come close to either the original White Box set or the AD&D rules themselves. OSRIC is a close replica of the first edition of AD&D, originally intended just as an umbrella to produce new adventures for the original AD&D rules that referred to the OSRIC rules for legal reasons. There are many others, and a number which include various rules changes to fit specific tones and themes of play, such as ACKS which includes detailed economics built into the system (with the math carefully hidden away so that it doesn’t get in the way of play) in order to provide some added focus on what is lately called the “endgame”: the phase of the game that was assumed in early D&D where the players would develop domains and command armies. Another such is Lamentations of the Flame Princess, which works toward a weird stories tone and a 17th century/30 Years’ War-era default setting by some subtle adjustments to the rules (for example, only characters of the fighter class gain any bonuses to hit as they rise in level, the spell lists and descriptions have been adjusted, and so on).

    In addition, the current owners of the game have released nearly all of the earlier editions in PDF format, and some of them through Print On Demand.

  53. I can see the butterfly effect being put to great use in magic. Wait until the elements and the associated forces are in alignment with your intention, and then bang, a little nudge sets it in motion.

  54. JMG, Bitcoin isn’t even worth anything as a currency. These days people are paying around 25 dollars in fees for a single transaction. And it takes at least 5 minutes to process. Could you imagine something like that as an everyday currency?

    Also, yes, it’s true, it consumes A LOT of energy. Here’s a link on it:

  55. “… there must be a similarity of scale between an effect and the sum total of its causes.”

    A man is lost in the desert. As he wanders aimlessly, he finds an old lamp. The man rubs it, and a genie appears, ready to grant three wishes.

    The man wishes to get back home.

    The genie takes his hand, and off they set walking through the sands. After a while the man asks:

    – But can we get there, you know, quicker?
    – Of course, master – the genie replies. – Let’s run!

  56. Y. Chireau,

    I’ve no right to tell a stranger on the internet what to do with their sovereign property, but in the name of fellowship, I urge you to reconsider taking your money out. The entertainment value of the bursting bubble will remain about the same weather you’ve a large stake, a small one, or none. Whereas, even if you are set for cash*, I’m sure you can think of a cause, a group, or an individual worthy of charity who does need those resources. You’ll likely feel better about yourself and the world if you redirect your bitcoin-gotten-gains that way, rather than letting it all go up in digital smoke.

    *the colloquial meaning of ‘rich’ around here is anyone who can pay all their bills and have money leftover for this kind of thing; don’t take it personally. I almost wrote ‘rich’, but realized you might find that offensive — because nobody ever thinks they are rich.

  57. You can certainly sense the hysteria over Bitcoin right now. As you say, “In these workings of cause and effect, there must always be a similarity of kind between an effect and at least one of its causes.”

    This whole phenomenon is driven mostly by desire for riches and the dream of unending pleasure that such riches would supposedly bring. One thing that I’ve read about is that many who do suddenly strike it rich often see their existing self-destructive tendencies amplified several fold (especially with respect to alcohol and drug use). I’ve personally spoken to quite wealthy people who were utterly miserable and even neurotic despite having all the luxuries that common people often dream about.

    So, riches gained through greed often lead to misery (i.e., “a similarity of kind between an effect and at least one of its causes”).

  58. I was struggling with this law as I was failing to see that it is a “collection” of causes that will produce an effect. Nothing works in a vacuum. Seeing the causes as a collection is crucial and seems to me to bring into focus the idea of a whole system, where flows move in, around and through everything to maintain a balance and that there is only so far you can go with anything. If the balance is over tipped, then another different whole system is created with it’s own balances, flows and limits. Magnificent.

  59. From today’s Business Insider: “A ‘spectacular’ Miami penthouse is on sale. No cash, only bitcoin accepted”

    1 bedroom, 1 1/2 bathrooms, going for $547K.

    Cue up “I’m forever blowing bubbles…..”

    I don’t know which part of the story has me shaking my head: the bitcoin part, or what they’re getting for that price. There are places that size in Albuquerque renting for $547/month.

  60. “RPC, I’ve always wondered about the kind of argument that basically claims that X isn’t bad because Y is worse. That doesn’t necessarily follow…” Oh, I’m not saying Bitcoin isn’t bad; I’m just positing that its energy use is not the worst thing about it, so focusing on its energy use might not be wise.

  61. I just listened to an hour on the Nice Polite Republican network regarding Bitcoin. As I listened to it, various points kept bubbling up:
    1) Bitcoin is only a digital version of the limited edition DanburyMint® limited edition collectible plates.
    2) Bitcoin is reliant on stable electrical and internet grids. Most money in Puerto Rico was also reliant on stable electrical & internet grids. That seems not to have worked out that well…..
    3) Bitcoin and other crypto currencies are the final result of the growth of the tertiary sector of the economy. They are actually not part of the economy, since there are no goods, services or knowledge exchanged for the purchase price.
    Needless to say, none of these were noted on the radio, and I couldn’t get through on the phone. They chose to finish up with a caller who bought some Bitcoin last summer on the insistence of her son, and and which now had quadrupled in value. She really didn’t understand it, but the numbers on the statement couldn’t lie…..

  62. Since it seems like a lot of people are fixated on crypto-currencies (with Bitcoin being the leader), I thought a different example might be useful. The example is is the recent Senate election in Alabama.

    As a bit of background, there’s a management technique called “root cause analysis,” “cause-effect analysis” or other things, including being parodied as the “dead fish diagram.” The key concept is to go both wide and deep: that is, find all the immediate causes of whatever you’re analyzing, then find the immediate causes of those things, etc. until you run out of time, patience or coffee. Lean Manufacturing recommends drilling down at least five levels (the five whys).

    Election analysts talk about the “lean” of a state, county, district, polling company or whatever. That’s how much the usual election result deviates from the national average. Alabama “leans” 25 to 30% Republican. That is, a pure-vanilla Republican ought to beat a pure-vanilla Democrat by 25 to 30% more than the national average in the last Presidential election. So this time the Democrats oozed out a win by around 1%. What were the causes?

    There are two first-level causes. First, Democrats have been out-performing expectations by an average of 10%, as measured in the over 70 special elections in 2017.

    Second, a lot of Republicans either stayed home or wrote in something. (There were 1.7% write-ins, which was larger than the margin of victory.) At the same time, the turnout in the Black community (90% Democrat) vastly exceeded expectations. 538 posted a list of turnout by county ordered from most to least. The top was almost entirely blue, the bottom was almost entirely red. Why was this the case?

    Second level:

    First, a lot of Alabamans think Roy Moore is an extremist nut-case. The fact he was supported by Steve Bannon only emphasizes this. The polling before the sex scandal broke in early November shows this clearly – he was only running 5 to 10 points ahead of his opponent, while he should have been burying him by 25-30 points.

    Second, there was a massive, very well organized get-out-the-vote drive in the Black communities. It was spearheaded by the NAACP in some areas and by other organizations in other areas. It was well enough organized that it would have made the old Machine bosses envious.

    Third, the sex scandal broke in early November. This probably had an additional 10% effect by causing a lot of Republicans to stay home.

    Third level:

    The get-out-the-vote drive seems to have been driven partly by the Resistance. What, you may ask, is the Resistance? It’s a loosely organized collection of anti-Trump groups that are primarily composed of women. They coordinate through a central site that isn’t affiliated with the Democratic Party, much to the Democratic Party’s consternation. There are several times as many of them as there were Tea Party groups at the Tea Party’s peak.

    Another issue at this level is the sexual misconduct charges leveled against Roy Moore. This is in the context of sexual misconduct charges that have recently taken down a significant number of powerful men in a variety of industries.

    Fourth Level:

    Donald Trump is massively unpopular. The percentage of people who think he’s doing a good job has been running between 37.0 and 38.9 since mid-May, with two excursions into 36%, the first for only a few days, the second current. The percentage in Alabama, according to exit polls, is 48%. His base is rock-solid, but he doesn’t seem to have a huge coat-tail effect.

    Third wave feminism and womanist movements seem to be gaining steam as well.

  63. I figure that one of the bubbles will cause many of the others to deflate or outright pop at some point. Don’t know which one, don’t know when. It could be bitcoin, true. That bubble is particularly ridiculous, but I’d gotten the impression that the amount of money wrapped up in it is smaller than things like housing. It is pretty easy to avoid direct impacts of bitcoin, even if I could run into impacts from it causing other bubble collapses. Like if it busts BC’s housing bubble, people run low on cash and I lose my 4 hrs of work a week, or far worse, if a burst housing bubble causes the BC government to decide they have to claw back money from people on disability, or turf everyone but the worst off off of disability in the middle of a recession. Which is a recipe for people dying, by the way. Something is going to pop BC’s housing bubble eventually, so bitcoin isn’t something I worry about much.

  64. I think the stock market is in the same situation as bitcoin. I recently cashed out my tiny 401k and paid off my credit card bill that I’ve been trying to pay off for 5 years. I feel so much relief. I am certain that the stock market will not survive to my old age, it’s a racket, plus I hated having money invested in horrible corporations.

  65. @Jen: ““In order to choose an outcome, you must also choose the causes of that outcome.” This often leads me to realize that either the causes of something I thought I wanted are unacceptable to me, or that I am being an entitled little twit.”

    Conversely, it could lead you not to accept blame for outcomes with possible causes or contributing factors that you did not choose and could not readily control. E.g., if you live in a place with massive air pollution and you have a heart attack, you need not accept the assumption that your lack of Personal Responsibility(TM) must be at fault.

  66. It seems like the amen corner -regarding the inevitability of a BC crash – is in full swing here, so I’d like to play devil’s advocate as someone who kinda likes rooting for the underdog 😉
    A few years ago I decided to allocate 1% of my liquid assets into buying BC. Originally it was idle speculation on my part that there might be enormous upside and limited downside to my investment.
    Earlier this year I doubled my stake but this time the rationale was different. I believe there is a chance – very slim, but plausible nevertheless – that the US dollar loses it’s reserve currency status in the near future.
    But nobody knows the future. Nobody!
    We can only make educated guesses.
    Do I think that BC will go down in the history books as yet another tulip mania?
    Yes, quite possibly – maybe even likely, but not certainly.
    Therefore I remain hedged and -because this is not the kid’s milk money at stake – relatively unconcerned over it’s daily price gyrations and eventual destination.

  67. Yes but Ripple is different it increased 83% today. If my investments return more than single digests in a year I get nervous. We should seek slow, steady and sustainable over something for nothing. And who pays for this notional ‘value’, claims on others, the greater fool. How moral is that and how could one sleep at night knowing his fellow man has been duped or exploited. No less the environment, the natural world and our fellow animal creature on which we all interdependent.

  68. These bubbles form over and over again, so you can do extensive comparison of the factors that create them. It needs to be interesting and have some substance. Car manufacturing clearly matched those in the 1920s as did tulips in the 1630s and internet stocks in 1998. Bitcoin is clearly interesting and when you understand block-chain technology (which I only partly do) it seems to be a really powerful idea. It is the kind of idea that could become adopted as an important means of exchange but also that could be used for a variety of distributed information processing problems beyond use as a medium of exchange. But another key piece of bubbles is that it needs to be something new and not widely understood. If something is familiar, it is obvious that it can’t support a bubble. But with something not yet understood, the possibilities are beyond imagination!

  69. I’m curious how big the bitcoin bubble actually is… as the housing bubble showed with synthetic CDOs, etc., that a lot of shenanigans can be going on behind the scenes. I just googled how many bitcoins there are, 21,000,000. So at, make math easy, 15,000 per coin that’s 315,000,000,000. Did I count the zeros right? 315 billion will make a dent but I wouldn’t say that’s crippling compared to the trillions that disappeared in the 2008 crisis. It is certainly large enough to be a match though… or the fission explosion before the much bigger fusion one.

  70. Dewey which conservation Biologist you following? If I might ask. I’m always looking for good sources in regards to old growth forrest. I live a short distance from the only old growth forrest left in Massachusetts. We can thank the Poet William Cullen Bryant for these precious few acres.

  71. Hello JM! Just wanted to say that every week that I come here I get the impression that it’s one of a very small handful of extraordinarily well-run discussion communities, which produces a quality of thought the like of which I find scarcely anywhere else on the internet. My great thanks for what you do. Shostakovich’s First Violin Concerto on the radio right now as I write this. Glory! What a combination! 🙂

  72. “Come on, this is not a difficult concept.”

    I beg to differ. It is a difficult concept, I suggest, because notions (and often celebrations) of disproportionate effects pervade our culture, from traditional sayings (the straw that broke the camel’s back, the aforementioned missing nail, the shout that sets off the avalanche, the monkey wrench in the gears — which comes from a time when the gears in question were huge) to modern stories (the tiny fighter that blows up the mighty Death Star, the small piece of jewelry whose destruction shatters the Dark Lord’s vast armies, the additional “Yop!” of the littlest Who making the Whos heard by folks other than Horton). We even have the pervasive but disastrously misguided idea that the reason for voting in our elections is just in case our individual vote swings the outcome (“how would you feel if… yada yada… by one vote?”).

    None of those (or at least, not the real-world ones) actually contradict the similar-scale provision of the Law of Cause and Effect, but they seem to in the absence of sound whole-systems thinking. Some of the situations involve thresholds. The straw that broke the camel’s back is a simple one; it’s of course not really that “last straw” but all the straws the poor beast is loaded with that breaks his back. Similarly, some involve systems that are primed for a state change that can be triggered by something small. The forest before the fire and the snow slope before the avalanche have a lot of potential energy ready to be released. Some involve a system in a metastable balance, ready to “fall” one way or the other, such that a small influence can “decide” which. (The distinction between “cause” and “decision” might bear some close examination. The trim tab is a minor portion of the overall causes of the overall effect of the movement of the ship’s rudder, but a large factor in the decision of what the movement will be.) That shoe, horse, rider, message, battle, and kingdom: all of them must have already been at the very threshold of failure (or success) for the missing nail to have affected the outcome as it did. Many of the scenarios also involve opportunities for positive feedback. A lot of positive feedback has to happen, for instance, between the lit match and the forest fire, and also presumably between Luke’s “pew pew” and the explosion of the Death Star.

    The Butterfly Effect falls into a bit different category, though. Thresholds and metastable states were intuitively understood centuries before chaos theory, because the latter is quite a bit stranger. Your description of how the effect works appears to posit an already primed system, like the avalanche slope, that only needs a little butterfly flap at just the right time and place to set it off into a tornado. Not really. Chaos theory instead describes the butterfly’s flap as one of billions (or some huge number) of tiny details that feed into the state of a large and ongoing turbulent process that ultimately, a long time later, produces a tornado. Change the butterfly’s actions, or any of those billions of other details, and the outcome will be different. There’s nothing special about the butterfly (or its timing, position, etc.) and, unlike the match that starts the forest fire, no way to trace the butterfly’s contribution to the effect between the time of the flap and the time of the tornado.

    Anyhow, the pervasive misapprehension of disproportionate effects might be closely related to the polarity between imminent apocalypse and imminent utopia in present-day thinking. If one believes it only takes only one small new invention or scientific discovery to solve any problem, that also suggests that it takes only one small mishap to bring “it all” crashing down.

  73. Sandy, that’s fascinating. I’ve always been baffled by the way some people find risk intoxicating. Me, I’m in the opposite camp; I find risk unpleasant — I’ll take risks when necessary, but my gut-level response is to eliminate the risk as quickly as possible.

    Gkb, okay, you’ve got the trim tab on the rudder. You’ve also got the ship, with its engine pumping away at umpty-hundred horsepower, driving the ship through the water at a given speed. If the ship isn’t moving, doing something to the trim tab isn’t going to do a thing, right? So the trim tab is one cause, but the engine (and attached shaft and propeller) is a much bigger cause, and these two causes work together with the friction and other properties of the water — another very big cause — to produce the effect. Does that make it any clearer?

    Kfish, good. Any time I want to achieve something, I make sure that the causes I bring to bear to have that effect are of a sufficient scale, and at least one of them is a similar kind. I want to write a book, for example. That means that I have to set aside enough time for a project of that size (the scale) and put a sufficient amount of that time into actually writing, as distinct from research, sitting around dreaming up plots, etc (the kind). I want to get out of debt. That means I have to change the balance between income and expenditure (the kind) to an extent that frees up enough money to pay down my debts (the scale). It seems obvious when stated that baldly, but you might be amazed to see how many people set out to do something without paying attention to those two issues!

    Unaussprechlichen, yes, I’ve been watching that. Whether or not they’re planning to go to a strictly gold-based currency, it’s pretty clear that the emerging Russo-Chinese-Iranian alliance is positioning itself to pick up the pieces when US hegemony crashes and burns.

    Drhooves, fair enough. If people want to play Bitcoin in the same spirit they might play slot machines or what have you, hey, have fun; just don’t put any money into it you can’t afford to lose. Me, I prefer a comfortable seat on the sidelines and a bowl of popcorn, but your taste may vary!

    Faoladh, thanks for this! Count me in as one of the old-fashioned D&D players who felt that something essential got lost a long time ago. I downloaded the free version of Swords and Wizardry last night, and it was rather like saying hi to an old friend — oh, the Judges Guild hex paper of my youth! But I’ll check out the other options you’ve suggested; they sound equally fun.

    Peter, excellent. Yes, that’s precisely how it’s done — and a good grasp of the Fifth Law is essential for doing it.

    Bruno, of course it’s not a currency. It’s a speculative investment vehicle disguised as a currency.

    Migrant Worker, thank you. Very nicely done!

    Jeffrey, exquisite! Thank you. You’ve just earned today’s gold star for that analysis.

    Kay, exactly! Once you see your own actions as part of an existing collection of causes, most of which you can’t change, you can choose to time and position your actions so as to have the effects you want, and if things aren’t propitious, you can wait until the system tips over, and you can then act in a different context.

    Patricia, and since it’s in Miami, the garage will be boat access only within not that many years. I’d sell too…

    RPC, okay, fair enough.

    Peter, very nicely put! Danbury Mint plates…now that’s a keeper.

    John, good. And as you’ve shown, though not referenced explicitly, the causes of Moore’s defeat were on a comparable scale to the effect, and several of them (such as the get-out-the-vote drive) were of a similar kind.

    Corydalidae, understood. The question is entirely at this point what kind of contagion the collapse of Bitcoin will have; will it be an isolated crash, or will it drag down other markets? A lot of that depends on how much wealth gets sucked over into Bitcoin before it crashes.

    Radha, that strikes me as a very sensible thing to have done! Congratulations on walking away from the casino.

    Elroy, if you don’t mind losing your investment, I see no reason not to enjoy the ride. You might even get lucky and cash out before the inevitable crash. It’s the people who are putting second mortgages on their homes and leveraging themselves to the hilt to invest in Bitcoins that I want to warn.

    Carl, I ain’t arguing!

    Ganv, good. Yes, those are pretty sound generalizations.

    Austin, exactly — and of course a great deal depends on how much bigger the bubble gets before it pops.

  74. Rhisiart, thank you. I’m also delighted by the quality of the discussion here — and I hope other bloggers are listening. All you need is a courtesy policy and a willingness to delete deliberately offensive comments, and good conversation really does drive out bad…

    Walt, that’s dispiriting to consider, but you may be right.

  75. Hello John Michael, a few thoughts and questions, I hope you don’t mind.

    I assume you’re aware that Bitcoin has been through a few speculative bubbles and subsequent collapses already? First in March-April of 2013 (topping out at around $100) and then again in late 2013 ($1000). At both times the price settled at something like 20%-40% of its peak value, then eventually (a few months after the first bubble, a few years after the second, as we’ve seen this year) gathered steam for another bubble.
    While I absolutely agree with you about the fundamentals of Bitcoin, the fact that it’s in a speculative bubble, that it has ties to the larger speculative bubble of the global economy, and so on, I don’t see how you can know that the next collapse will be “the big one”, as “worth maybe thirty or forty dollars, if it’s worth anything at all” seems to indicate. I can certainly seem the price collapsing and then eventually going through an even greater bubble in a few years, without hitting sub-$1000 on the way. If there is one thing the current economic/financial, political and ideological climate seems geared towards creating, after all, it’s speculative bubbles. And I wouldn’t bet on fools and their money running out anytime soon either.

    Second, I’d like to offer my perspective on your slot machine experience in your reply to violet. While I obviously can’t say for certain whether or not the machine you played, or even the majority of slot machines in general, are somehow rigged, I’d caution against making that claim lightly. In my previous life I worked in the R&D department of a large slot machine manufacturer, and I know our machines were random (or as random as deterministic computers generally allow). However, I’ve lost count of the times I’ve heard (or read) gamblers claim that they aren’t, or that they’ve somehow “figured out” how the software works or can be tricked. As someone in your line of work must certainly know, noise is fantastic at throwing human pattern-recognition circuitry into overdrive.
    That the information needed to figure out the payout percentage our machines, such as reel layout and pay tables, was semi-public information didn’t matter. The math is obviously fairly complex, especially for modern video slot machines with several sub-games and so on, but in principle it was absolutely possible to do the calculations and find out that the machines didn’t need to “cheat”. Even with random reel spins the machines would on average pay out only 90% or whatever of what was put in.*
    That this was calculated independently and pointed out to those claiming rigged machines invariably failed to convince those who had already made up their minds.

    * That said, slot machine manufacturers absolutely do employ various less-than-random tricks to make the machines more addictive. A well known one is when a losing spin is purposely made to look like a “near miss”, where the winning figure was just one step away. Apparently this is as good at releasing dopamine as actually winning. Another trick is to introduce delays at critical moments to build suspense. This is all fairly overt stuff — you can go look at the patent applications.

  76. Hi John Michael,

    What do you mean bitcoin can’t achieve the oxymoron of sustainable growth? Hehe!

    You once mentioned a (I can’t recall the blokes name) Hungarian (?) professor (?) who declared that we lived in a magician state. And I reckon he was onto something with that astute observation.

    Well, I reckon bitcoin is an example of a magician economy! ;-)! It is strange to live in a world where we produce few material items and demand that others take our endless bits and bytes in return all the while suggesting that they are worth far more! There was an old fable about that trick involving clothes…



  77. I never understood how something such inefficient and wasteful could be made in the first place. The transaction cost of one(!) exchange can go as high as 20$(!!!!). That’s worse than sending your money via trained pigeon if you rised and fed the pidgeon yourself.


    Ps. I have a nighbour that just lost ~2000$ by buying the bitcoins three days ago and panicking due to last 48 hour of price falling. The market is full of people who can’t distinguish between hexadecimal and binary numbers, have no idea about anything computer related and still trow money into it. It will be financial slaughter.

  78. @gkb,
    Regarding trim tabs and rudders and disproportionate forces: The boat needs to moving through the water for the trim tab to have any effect on the rudder. The faster the boat moves, the more force is applied to the rudder and of course the more the rudder resists the effort of the trim tab to turn it. Its the movement of the boat through the water that is the necessary cause and that movement comes from the wind in the sails in the case of a sailboat, or an engine in the case of a motor boat. These forces are large in proportion to the small force needed to turn the trim tab, but that small force is multiplied by the larger force of the boat’s movement through the water caused in turn by wind or fossil fuel.

  79. Unaussprechlichen and John Michael:

    I’ve been watching recent economic maneuvering by the Chinese and Russians pretty closely. They are clearly laying the ground work for a post-dollar world economic order. One recent step has been to establish a oil-trading exchange in Shanghai using gold-backed yuan. The Chinese are putting a lot of pressure on Saudi Arabia to accept payment in yuan instead of dollars. The Russians and Chinese are already conducting bilateral energy deals in yuan and rubles. The petrodollar has been one of major factors propping up the US economy, so if alternative payment systems such as trading in yuan catches on, this could have far reaching effects.

    Russia Insider has done a good job of covering this story.

    (unsafe link removed)

    Oil trading in yuan is just the tip of the iceberg. The Russians and Iranians recently signed an agreement in which the Iran is supplying oil to Russia for re-export and in return the Russians provide an equivalent value in Russian made goods and services, essentially a barter agreement to end run sanctions against Iran. Meanwhile the Russians, Turks and Israelis are building a major oil export hub in the European part of Turkey. Oil and natural gas from not only Russia but Israel’s offshore fields will be sent to the terminal for export, which will be linked to the pipeline networks in southern Europe and will also have facilities capable of handing oil and LNG tankers. The US government harshly criticized Germany earlier this week for going ahead with a planned gas pipeline from Russia to Germany, while the Germans complain that the latest round of sanctions against Russia unfairly penalize European business interests to the benefit of their American competitors.

    Russia and China have been setting up the financial infrastructure for a post-dollar world, including alternative credit card and banking clearing systems that aren’t controlled by the US and its allies and the Asian Infrastructure Investment Bank, which was established up by China and Russia. Several major European countries, including Germany, France and the UK, have joined but the US and Japan have been excluded from membership. Like Bob Dylan said, the times they are a changin…

  80. A few more links on Chinese and Russian efforts to establish an alternative oil trading system and world economic order.

    When the Chinese and Russians make their move and dethrone the US dollar as the global reserve currency, the effects on the US and world economies will be huge.

  81. Since you mention the concept of karma in the explanation of the Firth Law, I wonder if you could comment on the many misunderstandings of karma loose in the West at present. Some of them are tied up in the New Age, others just seem to be free floating, but there does seem to be a distinct difference between the Eastern concept and what it has become in the West. Is this entirely a misunderstanding of the Hindu and Buddhist versions? Is is a result of trying to force one culture’s concepts into another culture’s frame? Some of this occurs on a joking level–references to “working off bad karma” when a misfortune occurs, or getting “good Karma” points for a good deed, but some of it seems more serious.

  82. @Elroy, the one legged lumberjack – I’d like to point out that if we look at Bitcoin as insurance against a fiat currency collapse then what we are looking at in essence is something similar to 2008, where the insurance market for housing was something like an order of magnitude bigger than the actual housing market.

    So to your point abut hedging the against the dollar losing it’s status as a reserve currency. That’s not going to happen soon, because the powers that be will do everything in their power to prevent it rom happening. It will be gradual, probably with two systems existing side by side for a time as it was during the cold war. @Unaussprechlichen talked about Iran, China and Russia going back to the gold standard. I expect that pyramid to be the chisel that starts eroding away at the pile of sand the US is sitting on.

    That said,

    If Bitcoin is insurance against a collapse of fiat money systems it will make the problem worse not better, as the insurance market did in the housing bubble of 2008. The reason is that Bitcoin is all about confidence, like every other fiat money system. The difference is it’s privately owned not government issued. That Bitcoin is taking on a life of its own I think says the dollar and other government fiat money systems have reached a dead end; the only way forward is for fake, fake money to step in. Synthetic CDO anyone? 😉

  83. @Elroy, the one legged lumberjack – Going off the Ruso, Iran, Chinese, gold backed currency pyramid metaphor I talked about in my last comment. I don’t think we’re going to be told the pile of sand we’re sitting in is gone until we are eye level with the rest of the world. Eye contact is something we don’t do much of anymore, and we’re not going to see the punch/slap in the face coming. Some of us might get the erie feeling of standing shoulder to shoulder with the rest of the world again and I think that’ll be the only warning sign. The dollar to Yaun currently has a 6:1 exchange rate. That might be the simplest compass to watch to gauge where we are in the situation. And the simpler solution/hedge would be buying Yaun instead of Bitcoin.

  84. So, hi to JMG & other commenters here…

    Long time reader (since 2011) and first time commenter here finally drawn out to comment with a quasi-contrarian viewpoint because I am heavily invested in bitcoin. Also read a bunch of JMG’s books (I bought Learning Ritual Magic a little while ago, but my wife the devout Catholic freaked out thinking I was going to be summoning demons and the like and we have some peace for the moment after I agreed not to do any rituals from the book without first talking to her about it).

    But I digress.

    So I’m lucky enough to have no mortgage on my house and a decent stable job with health insurance and no debts, able to support the family and three kids. I follow tech news so I’ve known about bitcoins for years but I started thinking about investing over the summer and finally took the plunge in late September. Between late September and late November, I invested a total of about $50,000 in multiple stages. This is in Bitcoin and a range of other crypto assets including some rather obscure ones (I do a lot of reading in the space and tracking trends).

    The crypto portfolio is now worth about $150,000 and climbing – in 2.5 months. Which, frankly, is beyond insane.

    Yes, it’s a risk. I’m lucky to have no debt and no mortgage but $50k was basically every spare bit of cash I had as savings. I have nothing to spare now, except living expenses from my salary getting paid every two weeks. If it all goes south and I need the money – well, for short term, it’s credit cards. For the medium term I may need to take out a small mortgage on the house and pay it off over 3 years or so.

    Is that a risk? Absolutely. But the potential reward is that if the portfolio goes up even one more order of magnitude (from $150k to $1.5-2m), which may actually happen, I can quit my job and retire at 40 (our family expenses are not that high). It’s a risk worth taking to me. I’m sure a crash is coming – but if it doesn’t happen for another year or so, even an 80-90% crash will still leave me in profit (a 60% crash tomorrow will still leave me in profit!).

    To be clear though – I absolutely believe it is a bubble, and that the fundamentals do not match the current extreme valuations and hype. I also think there is going to be a crash (it will be the 4th and largest one by market cap till date – Bitcoin has averaged a crash every 18 months or so since 2010 including some brutal 80% type losses – the real question is whether it will recover and go past its previous highs like it has in the last three crashes). There are also plenty of outright scams and frauds.

    But I think the best analogy is not tulips or the South Sea Company bubbles (which left nothing of value behind) but the 19th century railway bubble or the late 90s dotcom bubble. Sure, there was a lot of hype, scams, and a price bubble soaring beyond fundamentals – but there was also some transformational underlying technology in both cases that changed the world – and if you were in the right companies you made a lot of money in the long term. Same thing – I think there is genuinely useful technology related to the blockchain and decentralized computing (which of course will be limited by the decline of industrial civilization and resource constraints JMG talks about, but still *useful*).

  85. Re D&D

    Just a quick comment on this side discussion. I, too, played back in the day before version numbers. Mainly the old AD&D books, but was introduced via the 1978(?) box set. (A key lesson: even with boots of striding and springing, a thief cannot dodge a fireball spell.)

    I’ve often thought of cooking up a variant of that original set and seeing if there’d be anyone around who’d be interested in an old-fashioned game. Ah, the sound of polyhedral dice on the tabletop!

  86. JMG: No problem, but James probably deserves more of the thanks for bringing the subject up. As an aside, back when we were talking about an RPG book for the Star’s Reach setting, I was hoping to focus it on a game like these (or possibly GURPS), but other people seemed quite set on using a more recent game system like Savage Worlds or FATE, so I quietly stepped away as I am not, for myself, interested in those games.

    Anyway, if you want to go down the rabbit hole of what has been done lately, this is a list of retroclones and related games that is fairly comprehensive, and includes links in most cases.

    Should I mention what’s been going on with Traveller lately? That’s another rabbit hole of its own.

  87. I recently picked up a USB Bitcoin mining stick, of an old and now-obsolete variety which was respectable back during the last, less spectacular BTC bubble in c. 2013-14. It lacked a cooling fan, and at first it got so hot (> 75 C) that it automatically shut off to save itself. I stupidly touched it and was rewarded with a burned thumb.

    After fiddling with the settings, I got it to run right below its limit. After 24 hours of mining, I had earned 10 satoshis, or 10^-7 BTC. If the bubble climbs all the way to geostationary orbit and it trades at a million USD to the Bitcoin, I will have $0.10. Or rather I would, if the minimum withdrawal wasn’t 0.001 BTC, which would take me several years – except for the fact that Bitcoin mining gets exponentially harder with time. In reality it would probably take infinite time to get 1 mBTC. But luckily the mining stick was easy to sell on eBay for the same price I bought it at.

    The mind boggles at how much processing power and energy is being used. Nowadays, over 80% of all new Bitcoins are mined in China, because the government subsidizes electricity (mostly coal of course) to such an extent that it’s not far from free, so as to keep their manufacturing costs down. Even at tulip mania prices, it’s difficult to break even in a place that isn’t subsidizing their energy at Chinese levels.

    Before this, I also had about 0.01 BTC in an account I had almost forgotten about, and cashed it in at $6300/BTC, taking away a little less than $60 after dealing with the exchangers. I’d have kept it until right about now if I had realized the SEC was going to be so stupid as to allow Wall St and Chicago to start trading futures contracts and hedge fund shares, right at the peak of the most obvious bubble I’ve ever seen.

    I’m sure some equivalent of AIG is just starting to sell derivatives, convinced that they have the risk management formula right this time. This bubble is too young to have much systemic risk right now, but if it keeps going for just a few more months and the “normal” financial system builds in derivatives in just the wrong way, it might end up being the pinprick that bursts the global “everything bubble”.

  88. Working up a D&D game for my husband, kids, and a friend, using 3.5, because that’s what I have from when we played back in college.
    I’ve never been the DM before. I think planning the world is more fun than playing was, but talking a bunch of newbie players through making their characters is a bit tedious.

  89. I know this thread isn’t really about bitcoin, but I feel something might have been a bit misunderstood here.

    When bitcoin crashes, that crash won’t represent the destruction of any kind of notional value, like an equity or property crash would, because, as far as I’m aware, loans have not been written with bitcoin as surety.

    In an equity or property collapse, fiat money that was loaned into existence disappears when margin loan contracts are reneged upon.

    A bitcoin collapse just results in a transfer of fiat currency from those who bought late to those who sold early. But no destruction of money, unless the bitcoin tokens are actually deleted, lost or otherwise unusable.

    There will be economic effects, but not because of the disappearance of money from the system.

  90. Peter, the way you tell that a really big bust is coming is to watch for the point at which a bubble (a) attracts attention from the general public, and (b) goes stark staring nuts in terms of price increases. That’s the sign that the bubble has finally started drawing from the lumpen-investmentariat, the mass of people who have absolutely no clue about investments but think they ought to become rich. It’s the involvement of the mass media and other organs of popular consciousness in the current Bitcoin bubble that makes me think we’re going to see a classic bubble-and-bust — 1929, if you will, rather than any of the previous up-and-down lurches in the 1920s boom.

    As for the slot machines, every single person I talked to who got one of the cards at that hotel during that conference had winnings outweigh losses for the first dozen or so pulls on the one-armed bandit, and then things reverted to the mean. As a veteran friend of mine likes to say, once is chance, twice is coincidence, three times is enemy action…

    Chris, Romanian, and he was a professor of comparative religion. Ioan Culianu was his name, and the book is Eros and Magic in the Renaissance.

    Erik, have you read Galbraith’s The Great Crash 1929? The spread of the obsession into popular culture is a standard feature of every really over-the-top bubble.

    Changeling, yep. It’s not a currency, it’s a speculative vehicle, and as usual, the parasites are closing in to extract as much wealth from the chumps as possible.

    Erik, yes, I’ve been watching all of this. I’m very glad that a significant fraction of my royalty earnings come from outside the US, and several of my publishers are located abroad; if the dollar collapses suddenly, I should still have an income.

    Rita, I’m not sufficiently knowledgeable about the Hindu and Buddhist understandings of karma — you’d probably have to ask a Hindu or a Buddhist to clarify those.

    BXN, ah, the siren lure of money for nothing! Still, it’s your money, and if you want to take that kind of risk with it, that’s your right. For the love of Pete, though, don’t let yourself be suckered into buying Bitcoin on margin, or otherwise using debt to finance your gambling habit; that way lies ruin. As for historical parallels, I don’t claim to know enough about the underlying technology to be able to tell whether it’s actually something useful or whether it’s another of those lavishly marketed technotrinkets that have the long-term value of a pet rock; nor, ultimately, do I care. As I noted earlier, the 1920s bubble included stocks in a good many companies that had long and profitable futures ahead of them, and this still didn’t keep investors from losing their shirts when the market tanked in 1929.

    Varun all of them.

    David, the heck with polyhedral dice. Give me 3d6!

    Nancy, Patreon has major problems, and is taking a larger and larger cut of donations. If you’d like to tip me, you might consider using the PayPal tip jar in the upper right hand corner of the blog; that’ll take all major credit cards as well as PayPal itself, and the fee is very modest, so I benefit more from the donations. Thank you for asking!

    Faoladh, thank you for the link! Traveller, too? Oh my. Now if anybody ever gets around to reviving Chivalry and Sorcery, I’ll be in gaming nostalgia heaven… 😉

    Grebulocities, yep. Right now it’s big enough to ruin a lot of lives. Give it another order of magnitude, the sort of thing BXN is betting his money on, and it could ruin nations.

    BoysMom, glad to hear it! Yes, teaching newbies is slow in the early phases, but it gets fun once they catch on and the bloodshed begins!

  91. @BXN

    If Danny DeVitto is to be believed, the most rewarding kind of gambling is that which is performed with other people’s money. (or something along those lines).

    With that in mind, I strongly recommend you to liquidate half your Bitcoin positions ASAP. In that way, you will still get paid handsomely for your investment so far, and you may continue to pursue you… ahem, daydreams ^H^H^H^H^H^H^H^H^H^H high-risk high reward strategy without risking the money you actually earned the hard way.

    One defect I notice in your otherwise sound analysis, is that you assume that a bitcoin crash will have no effect to your job and availability of income. While there is evidence that past bitcoin crashes have not produced contagion to the overall economy, you may notice how this time around there’s a bunch of non-geek people dumping money on it. That’s a tale tell sign that the bitcoin has outlived its usefulness as a wealth transfer scheme.

    At the end, it is your money. Do as you see fit.

  92. Dear Mr. Greer and the Commentariat


    Some preliminary reflections on the Fifth Law.

    This reminds me of my earlier reflections on Revolutions in general, but particularly those purporting to utterly transform society which so often end up becoming something worse than the regimes they topple.
    They indeed transform societies; destroying old power structures, elites and value systems, and put new ones in their place( and achieving arguably good reforms in the process).For good or for ill the ‘old days’ are gone forever and as far as I can tell even those who are disillusioned by the new regimes do not wish to return to those ‘old days’. Perhaps this drastic Effect is the outcome of all the zealous motivations of the people involved, the long-term economic, intellectual (and spiritual) trends, thus illustrating Similarity of Scale.

    What got me so confused in those days was why, despite the high ideals, and presumably honest motivations of at least some of the important actors, these revolutions ended up committing the same injustices as the ones they decried. Perhaps, the nature of the means they used (justifying malicious acts by the ends they hoped to achieve) ended up determining the character of those ends; illustrating a Similarity of Kind.

    Upon further reflection, it also occurs to me that revolutionaries usually see societies as machines whose defective parts can be replaced, rather than the whole system it actually is. With the lack of recognition of whole systems comes the lack of recognition of limits (especially the limits of what grand social planning can achieve in a world of living, breathing, stubbornly autonomous humans) and of unintended consequences as a whole.


  93. @ BNX: “But I think the best analogy is not tulips or the South Sea Company bubbles (which left nothing of value behind)”

    Excuse me? The trading companies of the time were responsible for the creation of the stock market, futures and all. They have been an absolutely essential driver of the development of capitalism and the concept of a middle class citizenry. The tulip trade came with leaps and bounds in the breeding of plants for specific purposes, which still pays dividends today. They are both Dutch inventions that utterly changed the world, at least as much so as, for example, the internet did.

    Now of course they have led to some rather nasty things, but so does anything taken to excess – even the internet.

  94. JMG: C&S has seen a minor revival, but not nearly as impressive as that of either D&D or Traveller. After a couple of underwhelming official editions in the late ’90s, the last of which was done without the cooperation of Wilf Backhaus, an unofficial edition in PDF that was a slightly edited version of the original first edition appeared from a company called Gamestuff. It was called C&S: Red Book, and was produced under license from Backhaus and the late Ed Simbalist’s game company, Maple Leaf Games. It was followed by six further editions (again, PDF-only) that expanded the original by providing additional campaign material, each with a unique name: Phoenix, Chimera, Gorgon, Manticore, Hydra, and Minotaur. The most recent came out last year (2016). If someone were interested in a print version, I’ve heard that Manticore was the last edition that would fit into a single volume of a Lulu POD book, but an industrious person might present Minotaur in two such books with some effort. Finding the PDFs requires some Googling around due to their unofficial nature, and the specific locations change on occasion due to the nature of file-sharing sites. Finding print copies would require getting the PDFs and doing it yourself or finding someone who has already done the work.

    Traveller went through a couple of official editions after GDW went out of business in the mid-’90s, called Marc Miller’s Traveller or “T4” and Traveller5 or “T5”, plus adaptations for GURPS and the “D20” system that developed from the third edition of D&D, and saw an edition come from a company called Mongoose. Mongoose recently published a second edition of their rules, which is the first official version of the game that I haven’t bothered to get, as I have heard nothing compelling about it. Recently, the original rules (now usually called “Classic Traveller”) have been made available through Far Future Enterprises, Marc Miller’s current game company. Mr. Miller prefers his most recent edition, T5, of course, and pushes it, but sells all of the official editions except the ones from Mongoose in PDF, and also has rights to a lot of third-party materials that have been produced over the years for the game. Some unofficial editions have been produced for other game systems such as the West End Games “D6” system that developed from their Star Wars game. In addition, a retroclone that comes pretty close to classic Traveller called Cepheus Engine is out there (available for “Pay What You Want”, which can be free if you like; you can also get it free to check it out and come back to pay for it later).

  95. JMG and all,

    This was a great example of effects and causes and the resulting effects. It seems that many people today, especially in America are chasing after easy money. Everyone, and their monkey’s uncle, seems to want easy money, and many seems to think they are deserving of it as well. This effect is cascading globally. While it is obvious that some countries are stepping up to claim the remains of the American Empire, the influence of America’s value for easy money is definitely obvious for myself while here in China. It’s certainly attracted it’s crop of foreign risk takers, but it has also left a mark on the nationals of the country. So naturally, I am curious what the results will be of the existing causes in America. Can you recommend some historical analogy to the current situation to get an idea what the fallout of the fallout will be?

  96. And a brief departure from the topic of this post, but thanks to Geoff Stratton for making a change to the comment box so that it is now accessable again for me without having to connect via proxy or VPN. For some months I wasn’t able to comment due to the comment box using some APIs? from Google, I think, unless I connected via proxy/VPN. Those often aren’t always options. So I wanted to express my gratitude for the recent programming change that was made.

  97. Cause & Effect?

    Let’s see… central banks around the world, responsible for creating fiat money from thin air, begin creating money and lending it for 0 interest or even negative interest.


    Stock markets around the world eschew price discovery in favor of trading valuations based on market caps (BTFD) and simultaneously go to pico-second trading on these same principles, resulting in eliminating human traders and small traders in general.

    Well, this large amount of fiat money has to go somewhere, and since the market is irredeemably controlled by whales, it is used to buy back stocks to tighten control of corporations and fatten the portfolios of those on the various BoD’s and big stock owners. The result is zero innovation or reaction to market dynamics outside of the stock prices…

    Fiat gold futures are played the same way, with zero discovery, as are various other futures.

    Then along comes Bitcoin, which any idiot with a computer can mine and obtain, and since trying to invest in a pico-second traded stock market is impossible, or a whale delimited and controlled PM market makes no sense…

    Oh! Let’s not forget this sloshing of nearly-free money through the world has blown the real estate market to the moon as well, pricing new home owners out of virtually all urban markets unless they go all-in on believing the price will always go up…

    The cause of this is the same as the cause of the brief upset we had in 2009 – and by injecting more money into the planetary markets, we kicked the can of reality in commerce down the road a decade or so.

    The cause is fiat issued from central banks – the effect is bubbling, creating foam and froth across the planet. You can float a boat in water, but when you aerate the water, everything will sink.

    The sea of finance is bubbling with vigor, and sirens have set up shop on every peninsula and island; only the most foolhardy of captains hoist canvas and weigh anchor in tides and times such as these.

    Yep – quite a great time to have a look at causes and outsize effects of complex systems JMG!

  98. BoysMom & JMG,

    Or you can take the simple (not easy) route, and settle with systems like ThePool (google it) which is very rules-light but heavy with participation, story and opportunities to influence the story for the players, while still retaining a delicious sense of advancement.

    To be more on-topic: A role playing game is a system in itself, where you can also see cause and effect. In systems that I prefer, the effort you put into the system corresponds (or even causes) you to enjoy the experience in exactly the same proportion, no matter the outward outcome the story has for your character. Though if a game master messes things up, the effort you spend is deflected by or absorbed into some arbitrary gimmick, and you feel cheated as the game master railroads the story into his preferred direction. Then too, I suppose, the effort is transformed into frustration (in equal strength), which can lead into all kinds of interesting places both within the game and outside of it.

    As there is the possibility of leak into the “real world” outside the game, there is proof that the game is never completely isolated from its surroundings, but is a part of yet another system.

  99. John–

    Falling into the category of cause-and-effect, apparently a conversation I had with my local library’s staff induced the library’s purchase of _The Retro Future_ for its collection. 🙂

  100. A quick note for those basing serious life decisions on the idea that the housing situation in BC, Canada is a speculative bubble like dutch tulips, 1929,, housing america 2008, bitcoin, etc. I’m sorry folks, but it’s not. It’s driven by wealthy people from an ancient culture that plays a way longer game than we do. They want the property for what it is, not so they can flip it.

    There is going to be no panic-driven selling here.

    The days of regular folks from the existing culture buying houses here are over for good.

    This is not a nativist rant. I merely point out what is. There’s nothing to be done about it.

  101. Thanks, JMG. My awareness of Dependent Origination made this chapter easy for me to follow. I see Karma as the explanation of the impact actions have as a result of that interdependence. I appreciate the fact that you explain it in terms of Spiritual Ecology. We are all interdependent denizens of a Big System. The Ten Thousand Things. I tried to tell my colleagues, who are head over heels into Bit Coin that it is a bubble that will pop. They looked at me like I grew a unicorn horn. Thanks for all you do, JMG!!


  102. The role playing thread here has a serious chance of derailing the discussion, but I cannot resist the following. First, while windows shopping the other day, I ran into this great site, a full collection of David Trampier’s “Wormy” cartoon series from old Dragon Magazine:

    The Trampier story is worth looking up. TSR really broke some hearts when they got too commercial.

    For all of you interested in role playing, you can do a lot worse than the folks over at Dragonsfoot:

    May all your dice be loaded!

  103. Now back to the substance of our assignment! The law of cause and effect tends to reinforce a linear and one directional notion of time. Time that runs sequentially from this cause to that effect bumping along down the long slow inevitable slope of entropy. My guess is this reinforcement has to be checked at some point later in the initiates training. JMG, can you share some thoughts on this consequence of consequence?

  104. I bought one Bitcoin back when they were “worth” $6. To the best of my knowledge it was stolen in the whole Mt. Gox affair. I often find myself wishing, with today’s high at just over $17k per Bitcoin, that I had invested more in Bitcoins, but then I remember that one $6 loss and realize if I bought 100 at that time I would have lost 100. Seems like it’s much easier to buy and trade them today, but that also means it’s much easier to lose your pants when they crash.

    Anyway, I wonder if these people would like to invest in a tulip bulb opportunity?

  105. In your chapter on cause and effect, you discuss the way that in order for a large scale effect to result from any seemingly small cause, other conditions have to also be in place. Due to the theme of this week’s discussion I focused a portion of my meditation on the internet, on the causes that led to the existence of the internet as it currently functions, and then carrying that forward to the various effects the internet is having on our world today. The social costs of the internet, have been becoming apparent enough over the past two years that they’re obvious to anyone who is paying attention. In particular, the internet seems to have a very similar relationship between society wide outrages and panics to the one between forest fires and dry, crackly underbrush to draw on the analogy you used in your book.

    However, the material costs and the cascading material effects of the internet are still a complete blind spot for our culture. We’ve spoken several times here on the future of the internet, and on the economic and material costs it takes to maintain it. Most people I talk to are shocked when exposed to the realities of the infrastructure that keeps us online. I’m sure you’ve been following the latest debate over net neutrality. One thing I’ve noticed with that debate is that all sides are talking about the internet as though it’s a resource to be distributed, rather than a form of capital that has to be produced and virtually nobody discusses the internet as an industrial product that consumes resources and generates waste. This traces back to the Bitcoin bubble you discussed above, since one of the most important possible effects it could wind up having is putting a crack in much of our cultural mythology surrounding the internet, and especially the pervasive myth of the “information economy.”

    One thing you may find interesting that I ran across this morning in my e-mail was an article from a usually very progress-minded newspaper that discusses the bitcoin bubble in great detail from an environmental perspective. The article itself has the sort of shrill activist tone and hand waving about the green energy future that I know you usually find tiresome but it’s also the first time I’ve ever encountered a mainstream publication being blunt and honest about the ecological costs and waste that the internet leads to. The fact that the rise of bitcoin is already generating this sort of commentary, and that the myth of the “information age” is already beginning to crack under various pressures as the costs (social and political instability, environmental impacts due to waste and resource consumption, etc.) become more and more apparent. The bursting of a speculative bubble in bitcoin, even if it only affected a handful of people deeply infested in the idea of the information economy could possibly generate enough bitterness to lead the end of much of the mythology surrounding the internet’s special place in humanity’s destiny.

  106. I grasp that the example I used is what Donella Meadows would call an intervention point in a poised complex system, where a tweak of minor effort can have major effect. I get that in metaphysical systems a concatenation of ambient circumstances acts as a contextual medium for, and conditioning precursor of, any given chain of causality. What I don’t get is the summation at ‘scale’.

    In a physical case, Brownian motion, salinity, and temperature of the water affect the momentary density, therefore weignt/mass/resistance of the water, so why not factor those into the sum along with everything else at a macro scale? Or in an amygdalal case, suppose you were scared by a cat’s face peering through the bars of your crib when you were an infant. Why not factor that minor incident into the whole stack of uneasy feline feelings that later ‘cause’ you to become psychically aware of a stalking bobcat in the backwoods when other people with you are oblivious? Infantile hyperalertness having sensitized you early on and helped attune you to the signature spirit of felines, etc.

    Maybe things are different on a metaphysical plane, how should I know? To sum some things and not sum some others—that is the question. Whether ‘tis nobler in the mind…..oops, forget that part. Thanks to Sandy (Nuku) and all the others for striving to enlighten my density.

  107. John, et al.

    More to the topic of bitcoin than the fifth law.

    John, you’ve outlined the layers of systems in previous writings (primary of energy and resource flows, secondary of goods and services, tertiary of finance). In the increased abstraction that has been developed in the tertiary system (e.g. futures, options, CDOs, cryptocurrencies, cryptocurrency futures, etc), have we gotten to the point of having developed a quaternary system? Or is the tertiary system simply very “deep” in terms of the levels of abstractions it can contain?

    And, I suppose it is worth asking, would the distinction between tertiary and quaternary matter in any practical way?

  108. BXN – My parents lost 350 grand when the dot com burble burst…. (They didn’t own any tech stocks either) Get out!!!! They never recovered from that… the second house they own as a rental property turned out to be a far better investment.

    That loss in the dot com bubble has crippled them/us since. Because if that investment had been banked, or stuffed in a mattress, any time these past eighteen years when either house needed repairs we wouldn’t have been scrounging to come up with the cash. My dad was out of of work for a year when he hurt his leg coaching my soccer team, that ate up whatever savings we had left.

    Sounds like you have a little more than a year’s worth of income there in Bit-Coin take it and run!! You have kids? Think of them. A rule of thumb I’ve found for dealing with cause and effect, if I have to talk myself into doing something, count on it going sour.

    As my parents learned in the dot com bubble just because you don’t have any tech stocks doesn’t mean you’re safe. My mother’s old ‘friends’ from her time at the old McDonald’s Corporate office in Hartford Ct. remain very wealthy, multi millionaire kind of wealthy, to this day because during the mid 1990s they became owner operators of the several of the McDonald’s restaurants in Western Massachusetts. My parents were happy with our house, they built it, and their lives didn’t want to move when the corporate office closed. I just think sometimes how a lot of the heart ache, and worrying could have been avoided if sustainability had been adopted earlier.

    Watching Bitcoin I feel like I’m watching that chapter of my life unfold al over again. Only from an adult’s perspective. I remember my Dad playing Mr. Pinchers with me while he watched nightly business report with Paul Kanga. I had no idea what stock were at the time……

  109. BXN – I’ll be a little less respectful of differing investment strategies than our host. I can’t imagine having all my savings put into one high-risk investment. That would be pants-wetting terrifying. If “I might get rich” is on one side of the scale and “I might end up destitute” is on the other, the latter will win every time. Americans who don’t have savings are one crisis, emergency, or layoff away from losing their transportation, health, job, housing, and/or kids. I am lucky to be among the minority of Americans who has six months’ net pay saved up, and I would not risk the security that gives my family for a mere chance of profit no matter how high. You could take your original $50K out, making yourself well protected against emergencies, and still have $100,000 left in it to pursue more gain. Please consider doing that.

  110. Graeme, no, you’re missing an important element of what happens in a market crash, Let’s say, just before the market tanks, you bought one Bitcoin for a price of $20,000.00; then the market crashes, and by the time you can find someone to take it off your hands, all you can get for it is $10,000.00. What happened to the extra $10k of value you had at the time of the purchase? It’s gone. Sure, the guy who sold you the Bitcoin has $20k, but your net worth went down in the crash without anybody else’s net worth going up correspondingly, and so the whole system is down $10k. Of course it’s down much more than that; if Bitcoin loses half its value, the whole system is down hundreds of billions of dollars, distributed among everyone who was holding Bitcoins when the bottom dropped out — and that loss of net worth can deal a body blow to the economy. That’s what makes bubbles so dangerous: when they crash, they erase a great deal of net worth from the economy all at once.

    Lordyburd, exactly. Another way of seeing it is that most revolutions start from the fallacy that an unjust government rules over people who are good and just. What revolutions show is that people get the government they deserve — that good or bad governments simply reflect the nature of human relationships in the societies they rule, and so the new government will inevitably repeat the abuses of the old one, because the people it rules haven’t changed.

    Faoladh, many thanks for this. I actually found a free PDF download of the new Rebirth edition, which looks tolerably good — that is to say, as spectacularly over-the-top as the first edition I used, but without the endearing typos. It’s a source of comfort, in an odd sort of way, that it’s still possible to play an RPG in which the dice rolls that create your character can give you a peasant who’s the illegitimate son of a village blacksmith, knows how to run a flour mill, and has an allergy to feathers. 😉

  111. Maybe it is only coincidence; maybe there is a Ecosophia reader on the staff of the Daily Show–but the Dec. 14th episode of the American news/satire show featured a skit about Bitcoin and other computer coinages. Pretty much skewered the idea while inserting the idea that ‘all money is fake.”

  112. Regarding revolutions and revolutionaries: I’ve had the misfortune to interview (as an academic) European self-proclaimed ‘revolutionary socialist’ terrorists. who went the whole hog and murdered and kidnapped to further their cause.

    The over-whelming impression they made on me was of great vanity and ambition, which they represented to themselves as ‘revolutionary zeal’: a total lack of self-awareness.

    Hence their insistence that what they did were ‘political acts’, not plain old murder. his of course goes back to Trotsky’s justification of revolutionary violence as morally acceptable.

    If such as these start revolutions and prosecute them, no wonder they often go so very wrong.

    The reinforcement of their delusions which comes from followers who idolise them doesn’t help.

    This is why I am fond of that great, ancient exhortation to ‘Know Thyself’.

  113. Redoak,

    Regarding your comment about the direction of time, etc., I would take a much broader view of causality. In the history of ideas, another (and arguably more common) tendency is to take things, rather than actions, as causes. Stepping back still further, in addition to the efficient causes which dominate modern thought, there are all the other types of causality which were once familiar to philosophers, scientists, and occultists—notably the material, formal, paradigmatic, and final causes.

    To take a rough first-pass at illustrating these, consider a house as an effect. What are the causes necessary for that house to exist?

    Well, without bricks, wood, nails, vinyl siding, windows, etc., we wouldn’t have the house. These are the material cause.

    Without the work of a team of carpenters, plumbers, and other construction workers, all those materials still wouldn’t be a house. The builders are the efficient cause.

    Without those materials being arranged in the right configuration, still no house. That arrangement is the formal cause.

    Where did we get the idea of arranging them in that way? The ideal pattern for what a/the house should be (which might exist in the mind of the architect… or in some more exotic plane) is the paradigmatic cause.

    Another answer to “why is there a house?” is its final cause: the purpose that it serves or the goal to which its existence is directed, such as shelter from the elements for the family who live there.

    All five of these answer the question “why is there this house?” in their own distinct yet meaningful way, and so they are all traditionally taken to be causes of the house.

    Finally, note that most of these causes are things that have to exist at the very same time as the effect exists, and at every moment when the effect exists. If there were no materials right now, then there would not be a house right now. Likewise, if the formal cause (their arrangement) were lacking right now, there would not be a house right now. The fancy name for the cause and effect having to be at the same time, rather than one after the other, is synchronic (as opposed to diachronic). Most (thought not all) interesting kinds of causality, it seems to me, are synchronic.

    Now, for extra credit, after working though these five causes with other artifacts, living things, and natural systems, you might consider meditating on these different kinds of causality as they relate to the four planes of existence our gracious host posted about last week… 😉

    Hope this is helpful!

  114. Prizm, that’s a very good question. My working model just now is the 1920s stock market bubble, which also sucked in a lot of overseas money and then gave the world the Great Depression in exchange. We’ll see if the Bitcoin bubble gets that big; it might.

    Oilman, nicely summarized. Yeah, that’s basically what we’re seeing.

    Oskari, different rules for different fools! 😉 I prefer a more elaborate rule system, and use that (when I was game master) to keep me from railroading things — when outcomes are heavily dependent on die rolls, if you’re an honest GM, you go with what the dice say even when it isn’t what you expected. My tendency was not to script campaigns in advance, but rather to make sure the notional space in which the campaign took place was rich in possibilities, and then let the players create their own story as they dealt with those possibilities.

    David by the lake, thank you!

    David V., if the PRC government decides to crack down on overseas financial holdings in an attempt to prop up the house of cards at home, or if that house of cards implodes, or if scores of other things happen, you might just find yourself surprised. That is to say, certainty is a bad habit in the middle of a bubble…

    Mac, that’s one of the advantages of knowing your way around an established spiritual tradition — you’ve got the kind of mental furniture that allows you to sprout unicorn horns, and then gallop away from crazy financial delusions!

    Redoak, thanks for this — another blast from the past. As for your on-topic question, it’s a matter of learning that linear causality, while real and important, coexists with several other klnds of causality.

    Brian, convince them they can get rich without having to work for it, and they’ll line up to buy your tulip bulbs.

    Eric, fascinating. No question, that’s a crack in the wall of denial!

    Gkb, you’re overthinking it. The laws are general principles, remember, meant to help beginners get a sense of the shape of natural processes in their own lives; of course they can be taken to extremes, and that’s no more helpful in this case than it is in the case of dubious investment vehicles… 😉

    David BTL, to my mind, Bitcoin is still tertiary economy, because it’s simply one more set of arbitrary tokens used to represent actual wealth. You can stack many different sets of tokens on top of one another!

    Rita, fascinating! That’s good to hear.

    Xabier, that doesn’t surprise me at all. Here in the US, I’ve spoken to radicals on both extremes of the political spectrum — the kind of people who will start killing other people once the other preconditions are in place — and your description would fit them as well.

  115. JMG, re BC housing market: Well, if you’re right, that’s nothing but good news for me, since that would mean I’d stand a chance of remaining in Vancouver (with a roof over my head, which I now require, having gotten kind of soft over the last year) after the skid row hotel I live in and the surrounding neighborhood get gentrified away, which I’d say based on the changes I’ve seen so far will take about three years, tops. So, I hope you’re right, but I personally remain unconvinced. I don’t buy that the PRC can be likened to a house of cards. I think it’s more solid than that. They’re busy building solid, peaceful international relations and trade in the Old World and elsewhere, and I observe that’s not what powerful but rickety nations, the US for example, do.

    As to the idea that the country that implemented the only attempt at population self-control I’ve ever heard of, only to have no one follow them, might for any reason stop it’s people acquiring property elsewhere, or how it would help the homeland if they did, well, I don’t quite get it.

    So, while I’d like to believe this is a bubble, I don’t have a way to yet. What are some of the scores of other things you mentioned? I know you’re a busy man, so I’m not asking for all of them or even a complete score, just two or three of the most likely things. It would give me great peace of mind to know that my belief is incorrect. Thanks!

  116. Thank you to everyone for your measured comments (in case you’re searching for your usernames: Austin, Dewey, Patino – and JMG of course).

    To Austin in particular (actually all of you) – thank you for the heartfelt nature of the advice – it’s really had an impact.

    I actually remember sitting with my dad too (early 90s) while he traded foreign currencies on margin as a side gig from his stable day job that had nothing to do with finance. Unsurprisingly he got wiped out in trading along with a large chunk of his savings. It didn’t hit us as badly as you were hit (my mother had a great job too and our lifestyle didn’t change – it actually improved because my mother’s career took off in a big way around the same time) but it did mean my dad had no choice but to take high-paying jobs out of town to pay off debt etc, and he wasn’t around much for my teenage years when he might have been if he hadn’t been wiped out trading. We have a great relationship now but I certainly wish I’d seen my dad for more than 6-8 weeks a year back then. I don’t want to do that to my kids.

    Funny, I literally haven’t thought of that memory (I distinctly remember sitting with him aged about 12-13 as he got a call from his broker asking for more money on margin and how worried he looked and how he had to leave me and rush off to see the broker) in over twenty years till I saw your post about sitting with your dad.

    Yes, $50k is around 75% of my annual income (can vary from year to year).

    As you’ve all suggested, the smart move is probably to take out 1/3 of the portfolio (my original investment) and play with the remaining 2/3s of “OPM” or “other people’s money”. If I take out 2/3s and leave 1/3 in there to gamble with, then even after tax, I will be able to keep my savings AND afford a sabbatical year in Europe that my wife and I have been dreaming about for ages and take the kids to give them the experience of living in another culture for a year.

    That was actually my plan back in September – to take out the original investment if/when it went 3x and maybe take out enough to go on sabbatical (as it now has). Even that is pretty lifechanging. Of course I did it to make money, but I never imagined on 23 Sep (the day I put in the first $10k) that on 15 Dec I’d be sitting on $100k in (paper) profits and have to make the decision so soon.

    But now I must admit there’s greed involved and a voice in my head saying “well this isn’t enough money to retire yet, why not ride this rocket a bit longer..taking money out will reduce the returns I can make on the remaining money..maybe I can wait till 5x instead of 3x..”

    PS – We are nowhere near the level where Bitcoin/crypto crashing is going to seriously damage the wider economy. All cryptocurrencies combined have a market cap of about $540 billion (bitcoin alone is about 55% of that – nearly $300 billion). To put that in perspective Apple, Google, Amazon, Microsoft, and Facebook each *individually* have higher market caps than the entire crypto sector.

    If bitcoin crashes tomorrow it will hit the early adopter sector hard, plus some “regular people” like me who’ve heard the hype and put a lot of cash into it. But the numbers are too small to hit the wider economy hard. You don’t have pension funds and big banks and that sort of person putting money in it (yet).


    One more order of magnitude on the bubble and we’re into dotcom crash/recession territory, and that could well happen. For comparison, the combined market cap of Internet companies was about $2.9 trillion at its height, and it crashed to about $1.1 trillion at the bottom, so there’s some way to go for bitcoin. Especially since that comparison does not take into account the inflation of the last 20 years, plus the fact that that was pre-Peak Oil (and therefore interest rates were higher and there were other legit investment options for money seeking return in a way that doesn’t exist now, leaving that money to chase bitcoin) – which suggests, that bitcoin and cryptos may well match and exceed the dotcom boom and bust.

    Also note that unusually for a bubble, bitcoin bubble is led by small investors and early adopters who are now multi-millionaires, NOT by institutional investment money which is only now looking to get in, so I think the bubble has a way to go for another reason.

    Oh and I think someone mentioned above: yes, derivatives are coming. Bitcoin futures started last week on a small exchange (the CBOE) and are due to start trading next week on the world’s biggest futures exchange (the CME).

  117. I know my response have nothing to do with bitcoin, but I would love to see some kind of discussion about death and the possibility of an afterlife. Sure this sounds like a morbid topic amidst of the circus, but in all seriousness this to me is the only guarantee in life. Seeing that life ahead seems to spiral into an inferno, is best to be prepare for the worst. ( on the side note I’m a millennial thinking about these things…so yeah not sure what that means)

  118. Thanks, JMG and all, for bringing up the topic of the absurdity du jour that is cryptocurrencies. And it looks like this “virtual money” is starting to have a real footprint in the “real world” in terms of energy.

    Science writer Eric Holthaus recently wrote in the American magazine Grist: “In just a few months from now, at bitcoin’s current growth rate, the electricity demanded by the cryptocurrency network will start to outstrip what’s available, requiring new energy-generating plants. And with the climate conscious racing to replace fossil fuel-based plants with renewable energy sources, new stress on the grid means more facilities using dirty technologies. By July 2019, the bitcoin network will require more electricity than the entire United States currently uses. By February 2020, it will use as much electricity as the entire world does today.”

    Something’s gotta give – and soon!

  119. @JGM,
    Re your reply to Lordyburd
    “Lordyburd, exactly. Another way of seeing it is that most revolutions start from the fallacy that an unjust government rules over people who are good and just. What revolutions show is that people get the government they deserve — that good or bad governments simply reflect the nature of human relationships in the societies they rule, and so the new government will inevitably repeat the abuses of the old one, because the people it rules haven’t changed.“

    I’ve just been reading a book titled “Mao, The Untold Story”, which documents Mao’s rise to power and the 70+ million Chinese people killed by Mao and his followers. (It also documents how Mao was saved by the Americans when his army were cornered by the Nationalists in Manchuria in 1947. Yes, without American pressure on Chaing to not annihilate the Red Army, the PRC would not exist today).
    One take-away from the book was how incredibly blood-thirsty the Chinese were, ordinary people willing to rat on their neighbours, to literally tear their neighbours apart in mass public denunciation rituals, etc.
    Stalin and Hitler kept their worst excesses hidden in Gulags and in other countries like Poland. But from the very beginning of his rule, Mao forced the public to witness and participate in these horrific public rituals of killing and humiliation, in the process terrorizing millions of mostly uneducated rural people. Perhaps they did deserve the dictatorship they got at the end of the “glorious people’s revolution”, given the nature of the way people in pre-revolutionary Chinese society treated each other, which sounded pretty heartless on the whole. BTW, IMHO the Chinese people haven’t learned much from all the suffering they’ve endured, and the current government they have, while not as outwardly harsh as Mao’s, is just as dictatorial at its core.

  120. David V., that’s probably going to take a post of its own to discuss, and explain why I consider the PRC very well positioned in the middle term, likely to slam facefirst into a major economic crisis in the short term, and toast — really, seriously toast — in the long term. I’ll put that on the get-to list.

    BXN, that voice of greed is a very insidious thing, and it will keep you in the market just long enough to lose everything you value. May I recommend a book that might help you put it in context? John Kenneth Galbraith’s The Great Crash 1929 is a very easy read — in fact, it’s a masterpiece of wry humor — and it focuses with laser precision on the thing that all speculative bubbles have in common, the collective psychology that leads otherwise sensible people to convince themselves that they’re being perfectly reasonable while doing things that will destroy them financially. I highly recommend it. It’ll take only a few hours of your time, and can save you from choices you will regret for the rest of your life.

    Johanna, did you by any chance read my earlier post on reincarnation? That may cover at least some of the ground you had in mind.

    Ron, that is to say, every exponential curve, taken far enough, ends in absurdity. Yes, something’s going to give.

    Sandy, you could apply the same comments to all the homicidal regimes of the twentieth century.

  121. @David Veitch
    Re: China

    I’m sort of with JMG on China. If we apply the 80-year cycle from Strauss and Howe (and later authors), we can start with Mao establishing the PRC in 1949 as the end of the Crisis War. Going forward brings us to 2029. If the cycle works like it seems to, sometime in the next few years China is going to experience a major financial collapse on the level of 1929 or 2008 in the US. (2008 was well managed, it still took longer to get back on our feet than any crisis since 1929.)

    Here’s John Xenakis’ generational profile of modern China. . Note that it’s been in a Crisis period since 2009 or thereabouts. The financial crisis and Crisis War are definitely due sometime soon.

    I’d definitely like to see what JMG has to say on it; I tend not do look that far into the future.

  122. Being a terrible gambler (i.e. never quitting when ahead, completely lacking a poker face), after reading Galbraith’s 1929 a couple of times, my sense of “gee, maybe I could make some extra money on Bitcoin” a few weeks back was enough to warn me off trying. Shortly thereafter I learned that a few acquaintances had bought in, while another had bought a special computer to start day-trading stocks. These are people who have done some lay reading or watched a couple you-tube videos and decided to get into whatever market they think they’re going to game.

    Since this whole phenomenon rests on the “greater fool” theory, we can rest assured that there’s an app for tracking the price of cryptocurrencies from just about anywhere. At least they got the name right…

    If it looks like a duck…

    And a couple commenters have discussed whether a Bitcoin crash would ripple widely enough to have a big impact on the financial economy as a whole. Well, don’t look now, but Bloomberg has a story about the first mechanism to add leverage and entanglement on a big scale (bigger than, say, taking the margin offers from Coinbase or other exchanges).

    How long before credit default swaps are being offered on CDOs made from leveraged loans backed by Bitcoins? And if cryptos are currently a $0.5 trillion fiction, what happens if they and their leveragers get another order of magnitude larger (per BXN’s suggestion), and then take a dive? That extra couple trillion dollars comes not from any actual value created by cryptographic computations, but from money pumped into the sector from banks, savings, pensions, and debt, all of which sucks money out of the rest of the economy.

    But at least no one has gotten through a post with “It’s different this time.” Have they tried, JMG?


    Related to the fifth law (and this week’s topic), perhaps the conjuring of so much money from thin air during boom times is a cause of sufficient scale and kind to account for the effect of so much money vanishing to the same place during busts.

  123. It seems to me that so many of our current problems are really the unintended consequences of poorly designed causes. So often we throw everything at a problem, hoping something sticks, when a nicely targeted, simple and elegant design will do the trick with fewer unintended consequences. In addition, you need to account for the fact that the target of a change will often push back against the cause, throwing the dynamic out and causing more unintended consequences.

    One example: I spent my early professional life as a management consultant, trying to apply technology to improve operational efficiency in business (don’t worry, I’ve long since repented). I remember working with transmission line crews for a large electric utility in the south east, with the goal of improving speed to repair downed lines and equipment. We threw all the usual management stuff at it – reorganized teams, re-positioned logistics, measured performance, changed incentives, added technology. All of it seem very reasonable and causative on the drawing board, but much of it bounced off the surface of actual reality because the targets of the intended change – the linesmen themselves – did not particularly appreciate being told what to do and in most cases they operated on the ground in ways that varied from the drawing board.

    Then, towards the end of that project, Hurricane Andrew swept through the region, taking down power lines everywhere. In the following weeks the improvement in speed to repair was breathtaking. Equipment was repaired several times faster than normal. What did the trick was inspired motivation/sense of mission, and a radical empowerment of crews to act – almost the complete opposite of management’s ideas of efficiency. It was quite a learning experience.

    We have made everything so complicated, unnecessarily so. Just as there is so much embedded energy in the mess we have made, there is also so much embedded action. Its going to take a while for all that karma to stop bouncing.

  124. One other comment – reading this book again makes me see more clearly the linkage between these laws and the Burkean temperament and philosophy, which I know you share…

  125. I’m going to have to disagree with you Sandy. All that suffering made my people a lot stronger, enduring and dynamic than its rivals. You wouldn’t have solid leaders like Deng Xiaoping and Xi Jinping if it wasn’t for the travails of the Cultural Revolution. Suffering clears the mind and the Chinese think a lot more clearly than other people having experienced the Century of Humiliation and the egregious cruelty of the West and Japanese aggression. This is reflected in the way China has conducted its relations with other people: assertively, with no intention of being swayed by foreign powers. Unfortunately, this assertiveness threatens other nations but I must confess that the Chinese are indifferent to the insecurities of others.

    Furthermore, Mao: The Unknown Story, is a particularly poor example of revisionist history done in the name of ideology. Juan Chang and Jon Halliday do not approach Mao Zedong or his legacy with any sense of nuance and they engage in poor scholarship and intellectual dishonesty to make their arguments. The truth is that Mao Zedong, like a lot of Chinese leaders, was a complicated man who undeniably accomplished great things but at great cost to the Chinese people. If you want a more complex reading of the man, I suggest Henry Kissinger’s On China. As Kissinger noted, Mao will probably be remembered as a sort of Qin Shi Huang type figure. Someone who unified and brought order to China, but was undeniably a despot.

  126. @BXN – the conversation you have generated and replied to has made me thoughtful. In particular, as it contains several recalled memories from childhood, and your mention of maybe taking a sabbatical with your own children, it has helped me recall a very interesting year (2004/5) in which I left my relatively well-paid office job, and together with my husband and two children (11 and 8 then) went on a trip that included a one month clinical experience gig in China for me, and four months of a very excellent time had by all. On return I spent several years growing my new clinical business as an acupuncturist. I want to say that my economic means have never returned to what they were in 2004 (I live in a rural area, austerity hit us all pretty hard from 2009 onwards, and I now am back working a second job since about 2011). My income in 2005 was 1/3 what it was in 2004. (now its about 70-80%). And from 2006 onwards we have steadfastly paid down debt, while refusing to incur any new debt.

    If I had imagined such an outcome beforehand, it would have frightened me badly. But going through it was – just life as she is lived, and here we are to tell the tale. I have never once wished to go back. The lives of all of us, I reckon, are richer, and closer, and much of this is due to the months of travel we did together through China, and other countries. We all “have” these memories and are shaped by these experiences in a way that “having” material stuff doesn’t reach. And we know more about our personal strengths, skills and powers.

    I would ask you (and maybe other people listening in), to ask yourselves (ie, think about this for *you*, not for *me*) what does “money, more money” mean to you. It may be something highly symbolic – like “a secure retirement” or “being able to say no to X” or “being able to build Y” or “being able to go on an adventure with the kids” or something like this. I would encourage you to consider if there is an alternative path to whatever it is that you are just now symbolically “hanging” on the prospect of a “win” in bitcoin.

    For one thing, speculative vehicles DO mean playing with OPM (other people’s money) which is really the same as OPL (other people’s lives) instead of tracking a path that you can walk with your own two feet. If Other People sponsor your “win” with their losses, there will be Raspberry Jam (TM). If Other People help you “lose” with their win, there will be resentment and pain. Either way, you have diverted yourself away from the real THING that you are seeking, and placed it in the hands of Other People. Be it security, adventure with your kids or whatever. While watching Bitcoin’s arcane movements, you could have been making a steadier and more direct pathway towards those goals – a pathway charted by means of your own and your family’s resources, skills and powers, and from which you can take a genuine sense of accomplishment.

    Anyway, whatever you do, and whatever comes, claim it. Be well.

  127. @ JMG and Xabier, in politics the question “can the ends justify the means” has been a good yardstick for me.

    JMG: “In these workings of cause and effect, there must always be a similarity of kind between an effect and at least one of its causes, just as there must be a similarity of scale between an effect and the sum total of its causes.”

    Some of the discussion of “causes” in here is a bit over my head, but it seems to me that one of the “causes” of the future we will get is ME. Therefore I need to make myself and craft my choices and actions (in as much as it lies within my power) resemble the kind of future I would like to live in. (Recognising of course that I am not the ONLY cause, but one of many). If I want, say, a future in which personal autonomy is respected, there is no possibility at ALL of creating it by using means that destroy others’ autonomy, whether by physical injury or otherwise. And, etc.

    I suppose in considering this further, politically, my own actions and choices, can never achieve a “similarity of scale” to the future that humanity together (or at cross-purposes) creates, and certainly not to the future that humanity and all other wilful beings will create. (I imagine that some people with aspiration to rule have imagined their acts COULD match the whole of a society “in scale”). However, if I have a vision of the KIND of future I would like to “vote for” then my “vote” has to be cast via the means I choose in living my life and interacting with others, such that they are of a “similarity of kind”.

    I will say, that this law is not t all as easy or as obvious as it might seem… 🙂

  128. JMG & Oilman
    Couple of points about joined-up global dysfunction, including the high-tec thin-air bitcoin non-investment: i.e. consequences as symptoms:
    Firstly, my opinion is that world aggregate economic growth this last 10 to 20 years has depended on Chinese coal production’s bigger-than-vast expansion; to put it another way, it has depended on the backs of China’s coal miners bringing to the power stations the means to enable economic growth.( I guess their own wages / ‘purchasing power’ could be about that of British miners circa 1947.)
    Secondly – and I have an outsider’s view – given this last five years rapid expansion of US oil production after decades of decline of the conventional kind, if petroleum still had the energy to drive-up affluence in an industrial economy, the USA should have seen a gusher of prosperity. Absence of such seems to prove something. Actually, as in the 1930s, the US has been accumulating serious 3rd World poverty. JMG has remarked on this consequence these last few years. The numbers seem bigger than bitcoin. We wait for … what?
    Phil H

  129. JMG and barefoot, understood regarding other modes of causality, good point. My question above was pointed more at pedagogy than “physics” (to borrow the category assigned by Aristotle’s epigone) and particularly at best methods for confronting our cultural rootedness in a kind of narrowly conceived material and efficient causation. Perhaps I’m just jumping ahead to the 6th law, but if not please comment further.

  130. @ JMG

    Slightly OT, John, but speaking of your work…you had previously mentioned that the 3rd WoH novel was in queue for a possible (late?) winter release. Any update on that?

    More generally (and more on-topic), we are, of course, witnessing in the various specifics we’ve been discussing here the effects of our collective decisions as a society, past and present. (That is, the law of cause and effect, but from the other side of things.) Our lack of understanding of the linkages (or, perhaps, conscious refusal to understand the linkages) leaves us flailing about and betting our future on fantasy-driven gambles (bitcoin, fusion, etc). Nothing I’ve said here isn’t inherently obvious, but it is amazing to realize how little of it has made it out into the broader awareness. (Or perhaps it has, but the reaction has been one of panic and denial.)

    Again, my appreciation for the discussions here on this forum. I look forward to our community’s conversations every week.

  131. John Roth, JMG: Thanks for the feedback about the PRC and it’s fortunes. I sure hope the ‘seriously toast’ prediction is false, but of course the universe will deal out what it will, regardless of hopes or wishes. I look forward to the post on it, if that should happen to appear here.

    That’s all sort of tangential to the reason I spoke up, which was that I saw some folks refer to the BC housing situation as a bubble, and I think it’s wishful thinking to view it that way, and that it would be a waste of time waiting for it to pop.

    That’s it though. I felt I should issue a cautionary note about it, and that being done, I will no longer hammer on this point. Thank you very much!

  132. Last night I had a dream that helped me to understand how the 5th law relates to some of the politics of our time:

    At my house there was a party that resembled a high school reunion. Now, the town I grew up in was very wealthy and ‘liberal’. At the party I made some conversation with a classmate and then there was a bit of a ruckus; two South Asian women in saris said something to the effect of “we aren’t white!” and ALL the women, around a hundred of them, cried “me too!” and stood up, made a circle, began chanting and screaming, ecstatically, about their oppression. It felt like a carnival, and I was struck by the pleasure they had in their noisy outrage. It was a little spontaneous Megalasia of throwing off the chains of oppression! Afterwards when the the brouhaha died down a woman gave a speech on “they/they pronouns; what they are and why you should use them”. Two shaggy male friends came, one greeted me as ‘Barbara’ (?!) and asked me “do you want to ride on my back?”
    “Where to?” I responded
    “Where I always go — away from here!” he said gesturing to the pale winter sunlight coming in from glass doors.


    This dream struck me with the reality that the scale of the current hysteria on the political and social left are directly tied to the scale causes. That is, the betrayal that the wealthy have inflicted on the working classes, the wage classes. There is a huge amount of oppression that the salary classes actively support and enact to keep jetset and cushy. These actions and history creates, through the psychology of repression and projection, an equal scale of vigorous screaming about oppression. This then ties together the law of balance with the law of cause and effect, since the repression and projection are psychological balancing measures. In fact, the law of balance and cause and effect appear to me to have much in common as they both help account for causal tendencies.

    Upon waking, I reflected that within my experiences of these salary class spaces women tend to, also, have power over the men in their more intimate circles. Men typically being viewed in these salaried spaces as an inferior kind of being, at least amongst the recently college educated. It makes sense too then, that within these spaces, women would be the more prone to this sort of hysterical outburst, since they benefit not only from the oppression of the wage class but also from the shared understanding that men are lesser. In my experiences in these social spaces, a woman’s word almost always trumps that of a man’s, at least when things get heated. As a trans person, I’ve stood on both sides of these lines, and so have a unique perspective. Salaried class folks have across the board treated me as more intelligent, competent, accomplished and even worthy when they think of me as a trans-woman; from hardline atheists to conservative Christians to woo-woo New Agers and everything in between. What is important, in my experience, is their economic station rather than their professed beliefs. I’m aware that this goes against certain feminist narratives, but I trust experience, especially often repeated experience, over theory.

    Lastly please let me express, that I don’t hate the social justice folks at all. Many of my friends fall on this side, and they are my friends, wart and all. I feel compassion for the ways they are clearly lacking balance, not through a personal fault of their own, but simply by acting as a microcosm to certain collective neuroses.

  133. Well Actually, do Chinese people generally view the Maoist period as suffering? Does that imply that they view it as something that was just done to them by others? Is there any sense there that “What revolutions show is that people get the government they deserve — that good or bad governments simply reflect the nature of human relationships in the societies they rule, and so the new government will inevitably repeat the abuses of the old one, because the people it rules haven’t changed.”

    I’m interested in how the horrors of many countries in the 20th century shape their current cultures. Germans, Russians and Japanese, for example, took very different approaches in coming to terms with what they or, now, their ancestors, did. But in the west we don’t hear much about how Chinese people feel about their past, at least not an uncensored version.

  134. I feel the dividing line between middle class, upper class and poor is a very, very, very thin one. If you own your house, have no debt, you’ve won. I think about the Hobbits in LOTR they’re born winers in that regard; things passing from one generation to the next. “There has always been a Baggins under this hilltop and there always will be.” Anything else you get you save in some way that there is no risk of it disappearing. People take risks because they do jobs they hate and are subconsciously looking for a more meaningful life. 250k in liquid assets, and a roof over your head, will pretty much let you do that, very comfortably for about 10 years, that’s what retirement is all about. It’s a about actually living life. But at that point you’re life force is dwindling.

    I look at the Hobbits in LOTR and I think that’s how I want to live. Have a garden, a small house in the ground. Things passing seamlessly from one generation to the next. How can things pass seamlessly from one generation to the next if housing is a commodity to be gambled? How can things pass through time if community and family are regarded as social constructs that hinder growth?

    Thinking of the stock market as a savings vehicle, in any way, for retirement, just saving etc. is a flawed one. That’s what happened to a lot of people’s bank accounts in 1929, speculative investments on the part of the banks. Everyone with a 401K now seems to be in the stock market now. Treating the stock market as a retirement vehicle inflates stock prices.

    If my parents didn’t own their house outright, then year Dad hurt his foot, I think 2002 it was, we’d have been on the street. What was left from the dot com bubble burst was just enough to cover that year, hospital bill etc. If there’d been a mortgage on top of that…. (The rental house, my grandfather’s old house, at that point was net 0 paying for itself but that was it.) My grandfather retired by selling his house to us and moving into a trailer park. That’s an option most people don’t have. I look at why my Grandfather did that and I have to wonder about the sustainability of modern property taxes.

  135. Steve, no, and I find that fascinating. Every previous time I’ve pointed out that a speculative bubble is a speculative bubble, I’ve gotten a flurry of denunciations from believers. This time, none. It may be that the new blog hasn’t yet registered among the bubble-blowing brigade, or some other factor. As for the fifth law analysis, exactly; you’ve got a cause of the right scale (the amount of imaginary wealth gained during the boom is on the same scale as the amount lost during the bust) and of the same kind (fictional gains are of the same kind as fictional losses.)

    Mark, excellent! Exactly; one of the consequences of the law of balance is that every action (for example, imposing an efficiency program on linemen) has an opposing reaction (for example, the linemen refusing to cooperate).

    Scotlyn, none of these laws are simple. They just look that way. When you’re considering yourself as a cause, by the way, remember that one person making changes is a cause on the same scale as one person having a happy and successful life… 😉

    Phil H., good. The reason that the increased oil production in the US hasn’t yielded prosperity is that it’s purely an increase in gross production — nobody’s subtracting the energy cost of extraction and processing, to get the net energy production. My working guess, based on a range of factors, is that our net energy production — output minus all direct and indirect energy costs needed to produce the output — has been sliding since long before the fracking boom, and only the smoke and mirrors of banking have kept that from becoming apparent.

    Redoak, at this point if we could get people to accept that causes have effects and effects have causes, I’d be willing to put up with an overly linear, materialistic sense of causation! So many people have surrendered to Tinkerbell logic — “if you want something enough, it must be true” — that even basic linear material causality would be an improvement.

    John, I suppose we’ll have to ask them.

    David, so noted! Remember that not all bubbles pop quickly. Modern industrial civilization is a bubble; these days, in fact, it’s basically a Ponzi scheme, in which accelerating drawdown of fossil fuels and other resources, and the exclusion of waste costs from the balance sheet, is used to cover up the unecomomic nature of economic growth. (Did you know that none of the world’s top twenty industries could make a profit if they had to meet the costs that their waste output imposes on the rest of the economy?) That hasn’t kept it from running all out for three hundred years, and the crash is probably still a ways off.

    In the same way, I think it’s very possible that China’s economy will suffer a really messy reset in the next decade or so, which will result in many overseas assets being sold at fire sale prices; further on, they’ll get that straightened out; and then over the longer run, they get to deal with the downside of being the global hegemon in an age of accelerating decline, and will likely end up in one of the periods of political collapse and fragmentation that punctuate Chinese history so regularly, made worse by the impacts of excruciatingly bad management of their ecosystem and the broader consequences of a biosphere in extreme instability. But that’s a good long time out yet.

  136. With regards to Vancouver and Toronto housing prices, they’re a bubble, but they’re an interesting class of it, since the governments involved are very likely trying to prop them up (even while say they are doing the opposite), since otherwise…. Where does the money for the governments (federal and provincial) come from? I don’t think it’s a coincidence the bubbles started and are increasing with the slow death of the forestry and automobile industries.

    Back on topic: I find it interesting to note that this rule seems like it should be very obvious. The full implications of it aren’t, but the notion actions have consequences should be very, very easy to grasp. Does the fact our society insists that’s not the case occur because people don’t want to deal with the consequences of the future they are making, or is there some other reason so many people scream that actions don’t have consequences?

  137. Hi John Michael,

    Speaking of cause and effect, I’m also in two minds about the current sexual-harassment media frenzy. The reason for that is because I feel that we do our community no favours when we pretend that such people do not exist. The thing is that such folk do actually exist, but because so many people take such an abstract view of predators that they have absolutely no idea how to respond when they actually encounter one in the real world. My wife sent me a link to a short story about a very strange dating encounter:

    Cat Person – a story by Kristen Roupenian

    The story is uncomfortable, but at each stage in the process of escalation (some may call it grooming), the young lady resorted to abstract interpretations of the guys behaviour rather than taking a cold hard look at what the guy is actually up to. The story is clearly a cautionary tale, but far out, so many aspects of our lives involve abstract illusions being chucked over the top of a very gritty reality, that it just seems weird to me.

    It is also worth pointing out that the guy sees the young lady as an object – and this is also another form of abstract thinking.

    These sorts of encounters are a direct result of the many different aspects of the culture that we live in.

    Of course, I also feel that people obtain benefits from fixating on those abstract interpretations of reality, and perhaps that is part of the reason why so few people want to consider (or heavens above, actually address) that situation. It is not good.

    Thanks for the book reference, and that one is now on the “to get” list.

    I was thinking about this matter yesterday as I had another close encounter with a fox, but I was prepared this time. Predators occasionally perform useful functions in eco-systems, and the fox is certainly training me to be sharper.



  138. JMG: Thanks for your thoughts. No argument about any of that, just a question about the twenty industries. Do you mean they couldn’t meet the costs of a complete cleanup, that they couldn’t meet the costs of the half-“donkeyed” cleanup that is currently done, or something else?

    (For our purposes, ‘cleanup’ means making good the costs to the rest of the economy, whatever form that may take, including actual physical cleanup.)

  139. Rita, I’m not sufficiently knowledgeable about the Hindu and Buddhist understandings of karma — you’d probably have to ask a Hindu or a Buddhist to clarify those.–JMG

    I am not a Buddhist, but I am friends with the abbess of a Buddhist monastery, the Venerable Thubten Chodron, who has written a book called, Buddhism for Beginners. Chapter 8 is called, “Karma: The Functioning of Cause and Effect” which is in line with our main discussion.

    Some abbreviated excerpts:

    Q. What is Karma? How does it work?
    A. Karma means action, and refers to intentional physical, verbal, or mental actions. These actions leave imprints or seeds upon our mindstreams, and the imprints ripen into our experience when the appropriate conditions come together…All results come from causes that have the ability to create them…The seeds of our actions continue with us from one lifetime to the next and do not get lost…

    Q Is the law of actions and their effects a system of punishment and reward? Did the Buddha create or invent it?
    A. Definitely not. According to Buddhism,there is no one in charge of the universe who distributes rewards and punishments.We create the causes by our actions,and we experience their results. We are responsible for our own experience…

    Q. Does the law of actions and their affects apply only to people who believe in it?
    A. No. Cause and effect functions whether we believe in it or not.Positive actions produce happiness and destructive ones result in pain whether we believe they will or not.

    Link to the book:

    Link to Sravasti Abbey:

    Hope this helps.


  140. JMG:

    The reason you’re not seeing anyone disputing that Bitcoin is a bubble is that this is the current belief on Wall Street, by a margin of around 80%. I wouldn’t be tremendously surprised to find out that the US financial authorities are putting contingency plans in place for how to deal with it when it pops.

  141. The amazing lack of bitcoin believers here, I believe, indicates that people following you, especially in the book club, are well aware, thanks to your efforts and skill at explaining the situation, that modern society is an incredible ponzi, and here comes yet another really clear example of the sort of hysteria we can expect as things really heat up and the true believers get desperate.

    On the other hand, regarding wider society, don’t look now, but there’s a guy threatening to eat his own privates if Bitcoin doesn’t make it to $1 million by 2020:
    Let’s just hope that the bubble doesn’t burst too soon, giving people time to forget what he said, because I really do not want to miss out on this.

  142. Hi John Michael,

    Just thought that I’d add the missing point that a lot of people believe in those sorts of social abstractions, because otherwise they may have to consider the awfulness that perhaps social progress has not been as great as they imagine. #justsayin! hehe!

  143. JMG,

    Since people are placing their votes for the next 5th Wednesday, I wanted to add my vote. I would like an article on how to produce your own food. Any advice for improving self-sufficiency would be greatly appreciated.

    Thanks for everything you do,


  144. Dot, I think you’ll find that most Chinese (at least the mainlanders) view Mao’s legacy and the Maoist era as 70% good, 30% really bad. Under his leadership, at least 40 million people died from his policies. At the same time, the population of China grew from 500 to 900 million, life expectancy and rates of literacy went up, infant mortality went down, and the status of women improved. Meanwhile, the People’s Liberation Army busily kept themselves engaged in war after war, fighting to regain the dignity and reputation of the Chinese people after having been forced to swallow one crushing defeat after another during the Century of Humiliation. Having taken all of that account, I can understand why many Chinese view Mao ambivalently and where there are still an extraordinary amount of Chinese who revere him.

    Mao aimed to bring China back from a nightmare low that we couldn’t even imagine. Quick example: The Taiping Rebellion, a 19th century religious/communistic rebellion by southern Han Chinese against the foreign Manchu.

    My feelings on this matter can be best summed up by the War Nerd, also known as Gary Brecher in this fantastic quote:

    “This rebellion, which has a lot in common with 20th c. Chinese communism, eventually failed, mostly thanks to British military aid spearheaded by Gordon, the Khartoum Gordon—but it taught the Chinese everything anyone could ever want to know about suffering and death. It was a classic total war, with no mercy for anyone. The death count is uncertain, but 20 million is a low estimate. The high estimates hover around 100 million. Nothing in our history, not even the worst days of the Civil War, even come close to it.

    Even when pre-Mao China wasn’t going through huge rebellions, the level of what you could call “ambient violence” in the form of famine, infanticide, and local warfare was higher than anything experienced by any English-speaking American since we started this franchise. So when he talks about suffering, he doesn’t mean running extra laps or doing pushups after school. He means half your family dying early, generation after generation, while your country is humiliated over and over.

    Mao’s war comes out of that nightmare. His project, even if it was phrased in Marxist terms, was to bring China back to greatness and push away the foreign colonizers. To accomplish that, he and his cadre really felt that a few hundred million casualties were not too much.”

  145. @Dot,
    Re your question on how some Chinese people view the Mao years: You might view the documentary “From Mao to Mozart: Issac Stern in China”. In general I’d say that those who actually suffered under Mao, and there were tens of millions, if they survived and are still alive, would view the period under Mao as one of great suffering. I’d also guess that many of their descendants have the same view, but may not feel free to express it. As for the rest, and the current generation, it seems to me that in post-Mao China, the prevailing response is to bury the past as much as possible, re-write history, and in the immortal words of the country’s legendary leader Deng Xiaoping “To get rich is glorious.”
    I’m not an expert on China or Mao by any means, maybe, as Well Acutally suggests, Henry Kissinger would be a better source of information and perhaps its true that “Suffering clears the mind and the Chinese think a lot more clearly than other people“.
    In any case I, like you, find it interesting to contemplate the differing responses of a country’s citizens to living through murderous regimes. Murderous regimes differ in many ways, but they also have many aspects in common, one is being “indifferent to the insecurities of others“. Another is the use of terror, overt or covert, against their own people, and justifying the use of terror as “promoting unity and bringing order“.

  146. @ Phil H & JMG…

    The oilfield is basically split into classes of specialists, like most other industries. The money flows to the trader class, whether they are trading stock options or oil. Those guys make huge bank for doing very little, and have simplistic qualifications, such as MBA’s.

    The rest of us actually contribute to finding and producing oil, and getting it to the refinery. After that, it isn’t even considered oil – it is broken up and sold as various products.

    Us ‘boots on the ground’ see shale oil wells come online. We see massive tank batteries fill up and trucks take the oil away. And we also see these same massive tank batteries taken down and moved within a year or two, and replaced with zero or much smaller tank batteries. To go from 16 tanks needed to contain flowing oil to two tanks sucking oil with a pump jack in a year or two is one rapidly depleting resource base.

    As a well known geologist said, “Shale oil isn’t a revolution – it’s a retirement party.” We refer to shale oil companies as “hamster wheels” in the drilling end of the business – because shale wells deplete so fast you either continuously drill or you die off. That is why investors have been looking at the rig count for these companies, rather than at their production numbers.

    I warned folks that sometime in 2018 we are likely to see a price spike. Collapse of demand due to further economic slowing caused by other factors could push that spike into 2019 – honestly, the current world economy is so full of dark pools of free money trying to find an ROI that it is impossible to predict much of anything with accuracy.

    The truth is that when oil booms, the rest of the economy suffers – because it is driven by oil. And oil only booms when the price is rising.

    @ patriciaormsby…

    Be aware that the guy you are referring to has long been a dog lover, and one of his dogs is named Dick. Words can have so many meanings…

    @ David Veitch…

    Speaking from my industry, we couldn’t clean up even half of what we have screwed up, even tripling the price of oil. I think what JMG is saying here, is that offloading waste and damage onto the commons is an integral part of any successful modern business plan. It’s what banks require (risk avoidance) in order to lend money, in many cases. It is solidly built into the fabric of every business, and especially into “green” businesses…

    I’ll go long on the point of view, and state that the entire Oil Age has been a bubble, and the Coal Age a concurrent one. It took a few generations to get the bubble growing, and likely will take a few to see it deflate.

    Unintended consequences – does that phrase jog thoughts in anyone here WRT our topic?

  147. @ JMG & Austin of Ozmerst…

    I think taxes are a way of abrogating our responsibility for the commons. They are an integral part of civilization, which forces taxation and ostensibly uses taxes ‘for the common good’. Until humans find another way to unite that does not involve ‘fairness’, taxes will be present – because the reason for them is to portion out a ‘fair share’ to the 3rd party (government) that is supposed to be providing care and improvement of the commons.

    Example: 6 farmers live on a road that leads to town. The road is abysmally rutted and run down. The direct beneficiaries of an improved road are these same farmers. They have 2 choices in current civilization: 1) spend the resources to fix the road, shared amongst themselves or 2) petition the government to improve the road at everyone’s expense, because getting their products to market is essential and it is only “fair” that their customers pay a portion of the expense as well, as the road is a public one and others use it to travel.

    Farmers, ever a frugal bunch, petition the local government. Taxes go up incrementally to pay for this road, but – they never go back down! Instead the government uses these taxes for “other items”. Wash, rinse and repeat over a decade or three and you have government using every single request for assistance as a means to fatten their purse, and thus their control and their bureaucracy. It isn’t a long leap to see where every farmers wagon requires a “road permit”, nor where a single broken wagon on the side of the road requires that wagons be inspected to insure they do not break down and impede traffic.

    That, option #2 above, is what currently makes up modern “civilization”. And it is why even if you “own” your land, failure to pay the tax man means he will bring the local sheriff and take your land away – because it is “only fair” that everyone shares the tax burden.

    Unintended consequences?

    LOTR is a nice tale, but tale it most assuredly is…

  148. JMG “When you’re considering yourself as a cause, by the way, remember that one person making changes is a cause on the same scale as one person having a happy and successful life.”

    Yes, as to scale I can certainly see that one person making changes is a cause on the same scale as the effect of one person “having… a life”… It may be a happy and successful one or may not be, it seems to me, depending on the changes made.

    On the other hand, although, as a cause, I myself am of the same scale as the effect which is my life, I do not think I am an isolated cause and effect bubble. It seems to me that inasmuch as *some* aspects of my life have causes outside myself, lying in actions of others, *some* effects of my actions are experienced by others, also. There is an interactive balance here, such that we are both causes and effects of ourselves, but also causes and effects of other selves (not all of them human).

  149. OK, perhaps against my better judgment, I’ve decided to lay out a couple of points for consideration in defence of the cryptos:
    1) Is bitcoin a bubble? Probably, but historically bubbles go thru certain phases. In my opinion, we’re in the boom stage, and not the euphoric stage. If 90% plus of the comments on this board were enthusiastic and supportive of BC, then that alone would be my cue to head for the exits.
    2) Is bitcoin destined to displace the US dollar as the reserve currency? Again, probably not, but we might want to be open to the possibility – albeit a distant one – that the current system of colored bits of paper printed and backed by national governments, might actually be unwinding before our very eyes.

    If BC pops in the near future then obviously I’ll be very disappointed, but not destitute. Life goes on. I think we all gamble financially, whether we realize it or not.

    Happy holidays to all.

  150. @Scotlyn – thank you for that. Your sabbatical sounds very similar to what we want to do, although our kids are a bit younger and we’ll be away longer.

    Re John McAfee and the bitcoin bubble – he runs a bitcoin mining company so has some pretty hefty vested interests. He’s a very interesting man though – founder of the eponymous antivirus company (long since sold out of it) – very colourful life since then – murder/extortion allegations, on the run in South America, re-emergence in bitcoin.

  151. I was not trying to be extreme, only to understand similarity in scale. Trimtab, small; other forces, BIG; effect of small on BIG = not hugemongous but still larger than ratio of small to BIG, hence amplified as an effective cause of the ship being steered. Whether viewed as a material, efficient, formal, eidolonic, or final cause, the trimtab still looks small in relation to all the other causes and to have a disproportionately large effect. So, I think you all are saying this appearance of dissimilarity in scale is an illusion of analytic perspective and narrowed focus. Or, in other words, the trimtab is 50 cents and all the other causes are hundreds, even thousands of dollars; hence, it contributes far less to the total ‘cost’ of the effect than the sum of the greater forces.

  152. Great article John.

    I have studied the crypto-currency issue a lot over the preceding 6 months and broadly agree with you that it is in a speculative bubble, specifically bitcoin.

    Bitcoin does have some uses and the underlying blockchain technology could have potentially game-changing disruptive impact over the next decade, but none of that negates from the point in hand which is bitcoin has become a speculative mania and will collapse at some point in the future.

    I would also argue that the other less known crypto’s are not at that stage and a small number have the potential over the next 5/10 years to become major players, for example Ripple and Ether. Of course, the majority of cryptos in existence are junk.

    I did invest in a range of cryptos earlier in the year and recently sold out of my bitcoin with a big profit and STRONGLY recommend that anybody else consider doing the same (or at least sell enough to get back their deposit and reasonable profit). I would like to thank you for pushing me to sell as it crystallized my growing concerns that the bitcoin world has gone totally bubble-esque.

    I have written about crypto-currency on my blog:

    Regarding oil, I see PP has written a great new piece on why a oil supply crunch is looming within the next 2 years or so. I recommend everybody reads it –

    It looks likely to me that a oil supply crunch will pop the global economic “recovery”/bubble by 2020. Interesting times are coming it seems.



  153. My meditation this morning was on the topic of this law, and I had a major insight with regards to the myth of progress: in order for history to have an inherent positive direction, then the law of cause and effect can’t apply fully: there has to be something that will keep either the negative causes or effects from occurring. From what I’ve seen, the usual way to this is to ignore the negative causes, and do your best to pretend they don’t exist, while once obvious enough, insisting that they won’t have the obvious effects.

    This “skill”, once practiced on the scale of global politics, then becomes easy to apply to personal life, which thus helps explain why so many people keep running face first into self-inflicted disasters.

  154. note of caution to everybody:
    The article on Russia Insider on bitcoins submitted by someone above is a dangerous link. Some sort of malware attempted to lock up my ipad while I was reading the article. Don’t go there!

  155. Sandy, I think it is very common in stable, prosperous, free nations to find the words “unity and order” threatening. Realistically, there are much worse things than having to put up with an oppressive, heavy-handed government. The people of the Middle East are learning that the hard way. Western intervention in those lands and the ham-handed attempt to install democracy by the Americans have lead to nothing but failed states and the rise of terrorists who are far more savage and cruel than the previous regime.

    Libya immediately comes to mind. The Western bombing campaign left behind a lawless country, unimaginably over-armed and under-democratized, with a dispossessed population struggling to survive in conditions of civil war and violent chaos. People are being sold into slavery, last I heard. Ideals like freedom and democracy are nice, but a lot of people will settle for being able to go to bed with a full stomach and having streets safe enough to walk at night without fear of molestation.

    In the coming decades of long decline ahead of everyone on earth, I fully expect there will be more than a few people living in formerly democratic nations who will long for law and order, even if it is imposed by despotic warlords.

  156. Well Actually, thanks for that. To bring it back to the week’s theme at least a little bit… it sounds then like most Chinese view the problems of pre-Mao China as being caused by foreign colonizers? Then it follows that Mao is just seen as an almost unavoidable reaction. Do you think that that was the sole cause or did the nature of human relationships in Chinese society play any causal role at all? Although of course the two aren’t completely separable.

    Does the fact that communism itself was a foreign ideology bother people at all? I always find it odd how an ideology as rooted in Europe, modernity, industrialism, urban life, Christian utopias and the Enlightenment was adopted so readily by people in such completely different cultures. Oddly it could never have happened without European imperialism. Pol Pot without the Sorbonne would be unimaginable.

    The pride thing is interesting. Irish people had similar feelings of humiliation as a result of British colonization and, as it sounds like is the case in China, most believe Irish culture has now found its confidence again. I don’t buy that for a moment. We simply swapped being a hard colony of Britain to a soft colony of the US and now spend our time desperately trying to prove we’re just as progressive as every other good American client state. There’s a lot of shame underneath that brittle façade. Equally, it’s hard to reconcile the claim that Chinese people are indifferent to the insecurities of others with this still intense focus on humiliation, dignity and reputation.

    Sandy, I’ll check that out thanks. Yes it does strike me that burying the past is a response more common in Japan, China, Cambodia and maybe Russia and certainly compared to the self-flaggelation that the Germans wallow in. I’m not sure there’s anywhere that’s found a healthy halfway house, which is pretty disturbing really. Are you saying that Well Actually was justifying the use of terror in service of unity and order or just that it’s something totalitarian states do?

  157. Dear John Michael Greer,
    I read your book, Mystery Teachings from the Living Earth, with admiration and I found your chapter on the fifth law so clear that I cannot think of anything to add or question. But I would like express my appreciation for the way you handle this blog’s comments section. It is refreshing to read both the comments and your responses without having to scroll through the sort of trollery one finds in just about every other blog, YouTube channel, and newspaper, etc. I am often genuinely astounded how many boggers, some of whom I otherwise respect, approve for publication comments that are grossly, even agressively rude. It seems to me that such bloggers have confused insisting on basic courtesy with censorship. They are not the same thing. A verbal mosh pit repels thoughful comment and degrades any conversation to more rudeness, and silence. I salute you. Kind regards,

  158. Hello JMG

    I’d also really like to know how you see China’s future. I’m particularly intrigued by how China might become toast. I certainly agree that China will have massive problems in the long term, but I suspect they might have the sense to give up their global hegemony before it drags them down.


  159. Hi JMG, thanks for taking the time to answer.

    In terms of notional value, or money that people think they have (access to), you are undoubtedly correct. This is exactly what happens in any speculative asset bubble (shares, property, precious metals, tulips etc.). Bitcoin is being used as a speculative asset the same as any of these.

    I was talking about money supply specifically (but I’m not sure which one, at least M2, maybe M3 or MZM). Since the money supply mostly increases as a result of expanding total debt (and contracts when debt disappears – either by repaying it or reneging on it), asset bubbes really only have an effect on the broader money supply when loans have been written against the notional value of the asset. This typically is the case for property, and margin lending for shares (and for tulips?) but I’m not aware that any loans have been written with bitcoin as surety. Money disappears when the notional value of the asset collapses and those who took out loans to buy it, can’t repay them.

    There are undoubtedly will be economic effects from the bursting of the bitcoin bubble, not least that the holders of bitcoin will suddenly feel a lot less wealthy and less likely to spend in the economy, but as far as I can see the net effect so far is (I was about to say “wealth transfer” but of course what I really mean is) money transfer. Not money destruction as such. Loans would be required to do that.

    Money destruction is a big deal with the way our economy works at the moment. And money’s the worst kind of magic – extremely difficult think clearly about or even understand what it is (not wealth, as you’ve pointed out). I’m still trying to see it clearly for what it is. The effect of it often seems to be voluntary enslavement.

    Wealth destruction continues apace with deforestation, topsoil loss, non-renewable resource destruction etc. etc.

    And, not trying to speak for anyone else, but from my point of view with the monthly cycle of topics / fifth Wednesdays, please write what you want to, when you’re inspired to write it.


  160. Oilman: I have no doubt that all that is true. Actually, in reconsidering the question you just answered, I realize it’s a bit silly of me to speak of a complete cleanup, because no means exist to do such a thing, no matter how much resources or manhours we want to dedicate to it. I’m not picking on your industry in particular here so much as industrial civilization as a whole. We will not any time soon be able to tackle such problems as vacuuming up the Asain Brown Cloud, scrubbing the atmospheric co2 back to preindustrial levels, restoring extinct species, re-enlivening the Great Barrier Reef, refreezing the slush piled up on Greenland, or capping the open soda pop that is the Arctic.

    So I’m kind of embarrassed that I even asked about a total cleanup. 🙂

    On another topic…

    As a result of this discussion, I’ve been wondering if I totally misunderstand what ‘bubble’ even means. I thought it referred to something where the price of the item during the up phase is driven totally by speculation, and concludes in panic and ruin when the -speculation- ends, not anything to do with the bubble item itself, such as the depletion of it. Two people have said to me recently that industrial civilization is a bubble, and as far as I’m concerned it’s not, it an algae bloom, which doesn’t make it any better, mind, just that its a different thing. Or in my mind it is, anyway. I haven’t resolved the question.

    Now I get to the point: So, I Googled ‘bubble’. The first result bears pointing out here: it was the news that bitcoin just passed 20 grand, some two or three days after it I read about it passing 10 grand.

    Which is to say that for anyone who can’t afford the losses, the time to sell all that schist is right the frack now!
    As our host points out, there’s not even any DENIAL about this one. Don’t wait for the music to stop, grab a frackin chair!

  161. JMG,
    Based on the comments here, you do not have much faith in the future of the dollar. Do you have any thoughts on the future of the Euro? Is Europe also suffering from an immense mismatch between money supply and the supply of goods and services?

  162. JMG, all of this discussion of money vs wealth, speculative investment vehicles, income from abroad, and so forth, raised a question for me: for those of us who are not gambling, and who are lucky enough to be working at jobs that still pay decent money (engineering, in my case), trying to be frugal and to save enough over the next 3 or 4 years (presuming economy manages to keep levitating its way along for that period of time) to invest those savings into some real wealth, like land from which some level of livelihood may be derived (while learning green wizardry skills along the way), do you have any suggestions as to what prove a better storage mechanism for those savings aside from the US dollar?

  163. @Well Actually, thank you for putting that into perspective. The Russians feel a similar ambivalence toward Stalin. One good thing about him as a leader, in addition to successfully stopping Hitler, was that he rejected Trotsky’s idea of global revolution. We all know what was bad about him.

  164. Re: bitcoin. I predict that, a few years from now, it will be commonplace to hear “Well, yes; we lost a ton of money in our S&P Index fund. But look on the bright side: we didn’t put it into *bitcoin*.” 😉

  165. @ Lathechuck…

    That Peak Prosperity is really quite the gimmick, packaging things you can find free on the net and then charging you for it. It’s great gig, and as Barnum said, “There’s a sucker born every minute.” I am not being snarky here, but just looking at their content, it is readily available at other spots freely, especially WRT oil and energy. They cater (IMO) to people who are too busy or lazy to search for their own answers. That is a rich vein to mine for fear porn merchants. There is only rarely something of high value behind a paywall, and if there is, it doesn’t stay behind that paywall long.

    I don’t need convincing, nor do most in my industry and certainly not most of the critical thinkers that frequent this blog – you included. I just happen work in the middle of all this and so I deal with it daily. It doesn’t take very much science to imagine that if you pump toxic, NORM laden chemicals underground into permeable formations – they will migrate. Geology is deep time, and thinking that because you put this sludge here in this rock that it is safe forever is stupid. Not ignorant or foolish – stupid. It is even dumber to imagine that lubricating dry faults is not going to cause them to resettle at a lower coefficient of friction – hence quakes in areas near fracking, not from fracs but from disposal wells.

    I work in drilling, and I have seen many things ruined, people injured and killed, watched the best laid plans go completely awry and sideways leaving nothing but rubble in their wake. Bankers with zero interest rates and lots of money to loan are what made shale oil possible, not the technology.

    A caveat on graphs and statistics is always in order. If you cannot discriminate between median and mean instantly, then graphs should be shied away from.

    There is always the data that is simply not included – which is always at the discretion of the author. THAT is the most egregious error people are often taken in by, especially in areas they are not familiar with. This is also one of the most common uses of graphed data – you just grab the data that makes your point and voila! Instant fear porn. A graph is a TOOL, and like most tools can be made to function as a bludgeon. Somehow, JMG manages to convey his points succinctly and elegantly without graphs – how does he do this?

    @ David Veltch…

    Don’t worry about all that cleanup – Mother Nature can deal with it. Man may not be able to, but the planet certainly can. If the Permian, Cretaceous and Younger Dryas events didn’t end life, then humans certainly will not. Even in the shadow of Chernobyl, life goes on; not in exactly the same way, yet it doesn’t cease. That is one thing that geology will teach you in spades.

    Life will continue to defy the 2nd Law of Thermodynamics…

    And you, along with anyone else here, should feel very free to “pick on” my industry. As with most others, it isn’t exactly a bastion of wholeness. I will be glad to accept blame where it is due, and to explain errant notions and assumptions about my industry. Most people have a very simplistic view of our business. So I’ll just say that we make the only large movable structures visible from space with the naked eye – so not really a dumb industry.

    @ Rationalist & Oz…

    Fiat money is fiat money. Bitcoin is not money, but may/can be converted into money. Bitcoin is currently waylaying the commons, as people use work computers and government computers and malware distributed on computers to mine bitcoins. One has to wonder how much electricity is being burned through right now in pursuit of bitcoins. I have to admit that watching the craze is reminiscent of watching lemming videos.

    My grandfather (deceased) was born in 1898, and was a bank executive and president. He worked in two different banks during his life, right through the Great Depression. His money went into buying real estate after he had paid off two mortgages; one for a home and one a vacation spot. If he had extra, he bought silver and gold coins, and utility stocks because they paid dividends. We inherited some of his coins when my parents passed away a few years back. Grandpa sold off the real estate to live on after he retired.

    One of his favorite things to tell my Dad (who loved to trade stocks) was: “Son, if you cannot hold it in your hands or stand on it, then what have you done with your damned money?” I still remember him saying that around the fat stogie he was always chewing on…

    I would say, based on when he lived and what he did, that his advice might be considered useful wisdom at this juncture.

  166. Dot, I may be biased but I can’t help but think that most of pre-Mao China’s problems were because of foreign invaders rather than any sort of psychological defect inherent in the Chinese people. China went from being the wealthiest nation on earth to the one of the poorest after being carved up by the Western powers. Terrible famines were caused by the opium addictions inflicted upon the rice farmers that were the backbone of Chinese society. The British, when confronted by these terrible famines caused by their actions, decided to adopt the same policy they adopted toward the famines inflicted upon the Irish and the Indians; that is, to do nothing at all. You do have a point about the fragility of the Chinese people’s self-esteem though. It is difficult for a people to go from being the undisputed hegemon of East Asia to being mocked as the sick man of Asia.

    patriciaormsby, that doesn’t surprise me at all. I’ve seen a Pew Research poll that indicates that 58% of adult Russians view Stalin’s historical role in a very or mostly positive light. Mao’s hometown of Shaoshan, continues to be a popular tourist destination, as does Mao’s Mausoleum in Beijing. These people aren’t brainwashed or stupid, they probably know all about the awful things these men did. Nevertheless.

  167. Hello Well Actually

    “In the coming decades of long decline ahead of everyone on earth, I fully expect there will be more than a few people living in formerly democratic nations who will long for law and order, even if it is imposed by despotic warlords.”

    Absolutely! I’ve only ever lived in stable, prosperous, free nations so I’ve only ever known democracy and I quite like it, but I’m pretty sure there will come a time when I’ll be willing to give it up in favour of safe streets and regularly going to bed with a full stomach.

    There certainly are much worse things than putting up with an oppressive government. China is currently getting much criticism for its recent increase in censorship, but I suspect, especially given our host’s prediction of economic crisis soon, what they’re doing is they’re preparing for imminent large scale turmoil. Should anybody want to foment anything, there’s no shortage of potential issues – most notably, there have apparently been Xinjiang jihadists fighting in Syria alongside various militant groups, and they’re starting to return to China.


  168. @ gkb,

    I think the points you mention are not as relevant to the causes and effects as they are to things being in balance.

    One of your examples, a pulley or block and tackle system, either works by spreading a force over a longer distance and time (or shortening it) to reduce the amount human muscles have to expend at once, (which is perfectly and prpotionally covered by cause and effect) OR, they work by providing a counterweight, so a small force creates a large result.

    When large forces are perfectly balanced against eachother, a very small force can upset that balance and produce apparently disproportionate results. The excess “disproportionate” energy was potential energy that had been stored in this balance, held in check by an equal and opposing force.

    Your boat was going straight because the forces pushing left and right were perfectly balanced. The trimtab upset that balance and tipped the scale in one direction or the other. Yes the trimtab is a cause. So are the other forces acting on the ship, and the most important is the momentum already pushing it forward—- THAT was in balance, until that balance was upset. IIRC, balance is covered in the 3rd law.

    Hope that helps your understanding

    Jessi Thompson

  169. I pulled out Green Wizardry this morning, and made amused note that since my first, aborted attempt at it, when I stopped at the instructions to obtain a book from the appropriate technology movement, I’ve added The Art of Memory, the Rodale Herb Book, Foxfire 1, 2, and 4?3, and some very much modern books, The Knowledge and the Good Guide to Compost, as well as a really solid Latin book to my collection.

    Since the bookshelves are groaning, perhaps it’s time to pick up again!

    On a less than happy note, it occurs to me that a major reason why slavery and indentured servitude went out of law and fashion in the West is the easy availability of machinery to perform labor (yes, I am doing laundry). We probably ought to prepare ourselves for these to make a comeback, and the current student loan non-payment situation is ripe for just such a proposal. We might see the predecessors of such in the current programs where by working in certain government determined fields and locations for a decade one’s loans may be forgiven if one has made all the payments during that time.

  170. “That’s dispiriting to consider, but you may be right.”

    Heh, that’s usually my line.

    It seems to me that the myth (can I call it that?) of disproportionate effect goes back a ways in American culture. Here’s an example, courtesy of Longfellow (via Hackett-Fischer):

    And beneath from the pebbles, in passing, a spark
    Struck out by a steed that flies fearless and fleet:
    That was all! And yet, through the gloom and the light,
    The fate of a nation was riding that night;
    And the spark struck out by that steed, in his flight,
    Kindled the land into flame with its heat.

    The spark and flames are metaphorical, of course. But even so, Longfellow’s famous poem turns Paul Revere, in reality a quintessential social organizer carrying out a small portion of a widespread coordinated plan he helped to design toward an end that was widely and enthusiastically shared, into a figure of pure effect, acting spontaneously and (save for an anonymous lantern-hanging friend) alone.

    Longfellow had a reason: he was recruiting for the Union cause in the Civil War. Motivating individual action toward a common cause, often against short-term self-interest, is a perpetual problem (aka, couched in different terms, the Prisoner’s Dilemma). The myth of disproportionate effect is a useful tool for that end. Only you can prevent forest fires!

    On the flip side, it’s a cliché of lone gunmen and disgruntled bombers, from Booth to McVeigh, to be deluded that their solitary acts would be the long-awaited spark for sudden and complete revolutionary change.

    I don’t think there’s much question that failing to apprehend all the causes of an effect goes hand in hand with failing to apprehend all the effects of a cause, as a major import of the shortage of sound whole-systems thinking. The question is how to counter it. “Which straw broke the camel’s back? All of them.” That seems like a good starting place.

  171. Oilman: Yeah, that’s pretty much where I draw such comfort as I have from: Taking the long view of things. The unease about deep time that apparently other Western people feel doesn’t touch me at all. I didn’t even know about the unease until I read about it here.

    Not that anything on the minuscule timescale of the lifetime of the Earth counts as deep time, as far as I’m concerned. It’s the days after the Earth is a slight portion of the metallicity of the white-dwarf sun that bother me. Nothing to be done about it though.

    Haha, here’s a thought. I don’t know where you’re at regarding the ideas here about how things other than various types of animals might be persons. I find it quite easy to accept the idea that the whole Earth, including the biosphere, is a person. Here’s what I’m getting at, and as funny as I find it to be, I don’t mean this as a joke: Suppose she had some ability to influence the course of evolution, and she decided her current collection of critters didn’t suit her much anymore, and she wanted to empty out a schistload of niches to let other things grow into them?

    What sort of species might she try to bring about to create that result? And, it’s working pretty good, isn’t it?

    Thanks for the licence, but I will probably not be criticizing your industry anytime soon. I’m not anthropocentric enough for that. 🙂

  172. Hi JMG

    I bit out of context but today is a metaphor that shows quite well where the world is headed to: the Orange Emperor, as Julian The Apostat that want to resurrect the old Faith and the Greatness of the Empire, again is threatening scythians (russians), persians, Qin people (chinese), and some other barbarians tribes, in the same day a Amtrak train crash and fall down on an interstate highway and the biggest airport of the empire in Atlanta suffered a complete black-out for 12 hours trapping thousand of people in the dark, just some small samples of the crumbling infraestructures of a crumbling empire

    We are living in very interesting times (but probably not fun)

  173. SMJ, For China, I’m betting on topsoil destruction, drought due to climate change and overpopulation as the long-term recipe for disaster.

  174. @Dot and Well Actually,
    I find this thread very interesting, and I hope its not too far off topic (though it is about causes and their effects).
    Re your comment: “Are you saying that Well Actually was justifying the use of terror in service of unity and order or just that it’s something totalitarian states do?“
    I’d rather not speculate on what Well Actually meant by his statement (I invite him to answer that question) but yes I quoted him because promoting unity and order as justification for the use of terror against one’s own people is just what totalitarian states do.

    Since I come from Jewish ancestry on both sides (some of whom were early Russian Zionists), I am also interested in the fact that the “Stern Gang“ used terror against the British administrators of the Mandate, Palestinian inhabitants, and those Jewish settlers who didn’t agree with the use of violence as an instrument to create the state of Isreal.

    “Lehi, “Fighters for the Freedom of Israel – Lehi”), often known pejoratively as the Stern Gang, was a Zionist paramilitary organization founded by Avraham (“Yair”) Stern in Mandatory Palestine. Its avowed aim was to evict the British authorities from Palestine by resort to force, allowing unrestricted immigration of Jews and the formation of a Jewish state, a “new totalitarian Hebrew republic”. (from Wikipedia)

    Many of that gang ended up as leading politicians in the new state. The painful experiences of the Jews throughout history are often used as justification for the aggressive policies of the state of Isreal. The effects of the violence used in establishing the state of Isreal are cascading down the years.

  175. I came across this today: WALKTHROUGH: How traders ‘pump and dump’ cryptocurrencies ( With respect to the myth of progress, the two bloggers I follow with some frequency are JMG and Fr Stephen Freeman, an Eastern Orthodox priest. What’s remarkable is how consistent the view from the societal fringe is, the convergence on important points, even if one is coming from a druid and Freemason and the other from an orthodox Christian. Here is today’s installment from Fr Freeman: . What’s interesting to me are the specifics of each blogger’s arguments. They might coincide or they might not (obviously!), but in either case they provide concrete arguments for thinking about just what exactly is wrong with the myth of progress, as well as how it came to be this way in American society. What’s also interesting is that the pummeling of the modern secular view is not exhausted with one argument. There are so many rich historical and conceptual veins to mine in doing this. Both men are highly literate, both culturally and historically, not to mention linguistically (in this context JMG can count Latin and and Fr Freeman can count Greek, which allows each of them to get back behind things), making what they write all very instructive, and I think important: this isn’t just one person’s or one tradition’s considered point of view; it is common to two otherwise different ways of looking at the world, and one that is stressed repeatedly.

  176. Will, excellent! You’ve caught onto one of the main driving forces behind the soaring price of real estate: local governments doing everything in their power to keep the bubble going. That’s partly because they benefit from rising property tax intake, and partly because it keeps the middle classes happy to think their assets are increasing in price.

    Chris, granted. “Predator” is a label like “fascist” — nobody has a clue what it actually means, so their facility in flinging around the label does nothing to make them less vulnerable to the actual phenomenon.

    David, it means they couldn’t cover the costs their actions directly inflict on others. I’m not sure exactly how that fits your definitions.

    John, that makes sense. The people on Wall Street have got to be worried that the Bitcoin bubble will pull too large a collection of greater fools away from the current stock market bubble…

    Patricia, thank you. I think I’m going to coin a new term for people who are going all in on Bitcoin: “sausage grillers.”

    Chris, and of course that’s a crucial point. Abstractions are a great excuse not to notice what’s in front of your face…

    Jessi, so noted.

    Oilman, that’s what I’ve been hearing about shale oil from a bunch of other sources, too. As for the price spike, a lot depends on what happens to the current crop of financial bubbles. One very real possibility is that, as in 2008, speculators could jump into oil, send the price through the ceiling, and then bail out as the price crashes, just as the impact of costly oil hammers the broader economy. Fun times!

    As for taxes and fairness, hmm. I can think of quite a few societies in history that had zero interest in fairness, and still had taxes; you may be mistaking rhetoric for reality…

    Scotlyn, of course! One person making changes in her own life is also on the same scale as another person experiencing change in his life, and since you always have a galaxy of other causes at work, the changes you do can have what, with a nod to GKB, I’ll call a “trim tab effect” on a broader context.

    Elroy, fair enough. I’d argue that we don’t yet know where in the bubble cycle Bitcoin is — it may still have a ways to climb, and it may not — and trying to time a bubble is a very traditional way to lose your shirt. With regard to the US dollar, it’s far more likely to be replaced by the yuan than by a speculative asset like Bitcoin, but we’ll talk about that more later on.

    GKB, exactly. The trimtab is given the power it has by other causes. Imagine a fifty-ton rock poised at the top of a ridge, so that it could roll down either side; a very slight push either way can decide which way it goes. That slight push, though, would mean nothing without the far greater forces that hauled the rock up to the top of the ridge!

    FI, many thanks! I’m glad to hear you got out of Bitcoin in time. We’ll see whether other cryptocurrencies turn out to be valuable or not; some of the stocks that boomed and went bust in 1929 turned out to be very worthwhile in the decades that followed, others didn’t. For the time being, it seems to me, sitting out the bubble and then scooping up paying investments once the crash happens is a better move.

    Will, two for two. Yes, exactly.

    Phil, now surprise me.

    Michelle, thanks for the heads up.

    Millicently, thank you. It occurred to me in the early days of my blogging that it really wasn’t that difficult to make a space for intelligent conversation on the internet; all you have to do is establish basic standards of courtesy and appropriate behavior, and enforce them by not letting anything through that violates those standards. The results have been good enough that I’d encourage anybody else with a blog or a forum to try the same thing. It does take a little time, but that’s balanced by the fun of whacking trolls with the thing they hate most…


    Or as Dr. Bronner’s soap bottles don’t say, but should: “Delete delete OK!”

    SMJ, so noted!

    Graeme, okay, fair enough. Money supply is important, but it’s not the only game in town. You’re right, though, that once loans get involved, we move into much more serious territory. I wrote this post because I’d read a news article mentioning that people are starting to take out second mortgages on their homes to buy Bitcoin. Once we start seeing a significant amount of Bitcoin trading on margin, doom is near at hand — and we may; one way this could play out is that trading on margin could become standard, Bitcoin and other cryptocurrencies could go zooming to preposterous heights in the first two-thirds or so of 2018, and then crash and bring on a massive recession because so much debt has been built up and so many other asset classes get sold at fire-sale prices.

    Rationalist, the Euro’s problems are different, in that it’s an instrument of wealth transfer that enriches Germany and a few other countries at the expense of the rest of the Eurozone. (I’ve commented more than once on how ironic it is that Europe spent the first half of the 20th century fighting to stop German hegemony over the continent, and then spent the second half of the same century giving Germany every one of its wartime goals except overseas colonies and a victory parade down the Champs Elysees.) I see the Eurozone fracturing over the next twenty to thirty years, and an assortment of national currrencies taking its place; the fine details of what happens to the Euro as a store of wealth during that change will depend on historical contingencies, and thus can’t be predicted.

    Oz, I have no idea. We’re moving into a time of supreme instability, where any given asset could remain stable, appreciate, decline, or implode without warning, due to impacts from outside the economic system. A wide distribution of assets, and as little debt as humanly possible, are probably your best bet.

    Lathechuck, yep. I won’t be surprised if “bitcoin” becomes a figure of speech meaning something that isn’t worth what you spent on it…

    BoysMom, it sounds to me as though you’re making good use of my suggestions. As for slavery, it’s an interesting fact of history that it becomes a major factor only when the demand for labor is much higher than the supply — as in colonial America, where there was far more work to do than there were people to do it. In a massively overpopulated world of the sort we live in, where you can get people to work for very little, it doesn’t pay for itself except in very narrow niches.

    Walt, yes, you can call it a myth. That’s a very good point.

    DFC, yep. Another way to think about it is to see the US today as an equivalent of the Austro-Hungarian Empire in 1910 or so, apparently one of the world’s great powers, but actually a ramshackle, disintegrating mess ready to fall to bits from one good solid shove.

    Squalembrato, I’m not at all surprised. Any religious tradition strong enough not to capitulate to the idolatry of progress will provide a useful standpoint for seeing history clearly.

  177. I was sent a link to a Zerohedge article today by a cryptocurrency addict down the street from me. I read it, and it seems that the hedge fund guys are latching onto bitcoin in pursuit of something resembling a good ROI. This madness has metastasized into larger pools of money and computing power. If it keeps growing and spreading, the cliff dive will be spectacular, and as JMG indicated above, could spread to affect other things – like the oil business, which cannot survive without hedging in the shale plays.

    @ JMG…

    Has there ever been a static economy outside of Japan that you have read of? The Easter Island example comes to mind, but Japan didn’t go that way. I’m thinking it would of necessity be an island culture – since every cubic mile of this planet is pretty well overrun with humans, leaving no physical frontier, outside of (maybe) Siberia.

  178. @ JMG and fellow members of the commentariat:

    I have never had any security issues with links from Russia Insider, including the one I shared earlier. So far as I could tell, it was a safe link. When I looked online, I could not find any reports of other people experiencing issues with malware from visiting that site.

    However, given the problem that The Other Michelle reported, I respectfully request to our host that the link in question be removed as a precautionary measure.

  179. Weren’t people buying stocks on loans in 1929? You know how they got rid of the class action lawsuit several years ago? My theory on that is that they did so to allow fraud to happen in the markets, allowing for preposterous heights. The tell in the housing bubble was that the valuations didn’t match the value of of each mortage bond in the CDOs. If the valuations never again have to match reality then it’s going to be that much bigger a house of cards when it does come down……

  180. To add to the conversation about Mao, I had an interesting conversation over drinks a few months ago with a Chinese person who is younger than 25, and only left China within the last three years. Of course I eventually asked him about what Chinese people are taught about Mao and the Communist revolution. According to him, Chinese teenagers are taught that China was in a very bad situation, and although Mao and the Red Guard did awful things, it was for the good of China even though the modern Chinese government is not Maoist by any stretch of the imagination. I believe (although I am picking this up from people who I have not personally spoken to) that Russian high schoolers are taught similar things about Lenin & co.

    Squalembrato, thank you for the link to that blog.

  181. BTW, I’ve now divested myself of my initial capital in cryptocurrencies, and enough extra to cover the transaction fees. If it keeps going up, awesome. If it all goes to an overly-warm place in a woven carrying device, it’s no skin off my back.

  182. Regarding the bitcoin bubble, if it has the power to start the next depression, it has my respect. Regarding the establishment of a new reserve currency, I fully expect US media to hysterically spin this six ways to Sunday, but, the bottom line is, Russia, China, and other up-and-coming powers probably feel the current Western, US led order is just too unstable–bitcoin and all the other unsustainable bubbles ready to burst as prime examples. Most US media are making the mistake of treating China as if it were a democracy regarding the economy–that they wouldn’t want to disrupt their financial system too much. But China is not a democracy, and it’s government has repeatedly proven that it will do whatever it takes to establish its power, and any damage to the people is just collateral damage. It’s the cultural difference between the extreme individualism of the US vs somewhere like China where the national interest comes first.
    As far as Canadian real estate and immigration, Canadians must realize that their government is using both of these as diplomatic tools to curry favour with the up-and-coming powers in the world.

  183. Hello Dot

    Oh absolutely China will have plenty of each of those, plus many others. I think the rest of the world will be suffering similarly though, so China may not be more toasted than other nations (notably except Russia – there it’s a miniscule population and huge amounts of land, of which more will become habitable as climate change proceeds). But there is the possibility that China’s authoritarian government will put in place the right draconian measures to make the best of a bad situation. I think if the survival of the culture is at stake, that might make them think in terms of the very big picture, rather than just their own personal wealth. I think at some point in the next 50 years they will start restricting population growth again, hopefully it will be through encouraging smaller families rather than through anything involving death.

    Full disclosure – I’m ethnically Chinese, born in Singapore, brought up and currently living in London, UK, never been to mainland China.


  184. Oilman, okay, watch this space. The more investment money flows into cryptocurrencies, the bigger the boom-and-bust cycle will be. As for static economies, well, a lot depends on your definition. I don’t think there’s ever been an economy that was static in the sense that it had no business cycles and no change from generation to generation; there have been many economies that were static in the sense that they didn’t grow or contract noticeably year over year for very long periods. Early medieval Europe is a good example of the second class; the prevailing economic theory was that there was a “just price” for every good and service, which wasn’t set by the market — it was simply the price everyone charged, and it stayed the same for generations. That’s fairly static!

    Erik, so noted and duly deleted. Your other links are still up.

    Austin, yep. It’s called “buying on margin,” and it’s still common practice. There’s no better way to wire a self-destruct button into a speculative bubble! As for the abolition of class action suits for investors, well, yes, that was a useful wake-up call for those who think that markets in today’s America are there for anything but con games.

    James, glad to be of service. 😉 Yes, I’ve heard of Pokethulu; there’s also My Little Cthulhu: Friendship is Madness, for our Brony readers!

    Shane, I suppose you could help the next depression along by investing heavily in Bitcoin…

  185. “As for slavery, it’s an interesting fact of history that it becomes a major factor only when the demand for labor is much higher than the supply…” What do you make of the reports that slavery has made a return in Libya, where the sub-Saharan migrants are the new slaves? I would think the situation would be the exact opposite of an under-supply of labor…

  186. @JMG: “As for slavery, it’s an interesting fact of history that it becomes a major factor only when the demand for labor is much higher than the supply…. In a massively overpopulated world … where you can get people to work for very little, it doesn’t pay for itself except in very narrow niches.”

    This is certainly true, and yet it seems to be one of those truths whose opposite is also true, because it was reputedly the Black Death that broke the back of serfdom in England and northern Europe by killing a third of the labor pool, making labor scarcer relative to demand and more costly, which gave the working class more ability to move/escape and find work and so more clout.

    We have, of course, some effective slavery in the U.S. today in the form of manufacturing and other businesses run by/in the private prison industry. I don’t know how profitable it really is, compared to the alternatives of outsourcing or paying the lowest possible wages to desperate free workers. However, it seems profitable enough to the private prison corporations that they put a lot of money into purchasing legislative opposition to criminal justice and drug-war reform efforts.

  187. Thanks John.

    At the moment, there is very little leverage (I understand) in the crypto-sector and my reading is that a lot of money, including hedge funds, will be going into the alt-crypto sector next year more then Bitcoin.

    As I brought my portfolio of crypto’s earlier this year, I suspect there is ample room for serious price growth in the coming months to come. The one to watch is Bitcoin which is now in a mania and will likely collapse in value, maybe next year, and how that will impact the wider space.

    Either way, I have already guaranteed a return of my deposit and a profit so pretty relaxed about my personal stake in the sector.

  188. @ Shane W

    About the industrialization of China, is the same path that others countries made, in fact it is a military project, similar to that of Russia after the shame of the Crimean war against two industrial powers (France and UK) with the Stolipin reform. Or the case of Japan, the shock after the “incident” of Commodore Perry and others bombing campaign by european powers made with total impunity in the “sacred” soil of Japan. Or again the case of the soviet forced industrialization under Stalin before WWII, because they know they will be european colonies soon if they do not take this step and build an industrial base quickly, and they prove to be right when the Whermacht attacked (I am sure it would be the UK or USA or Japan or all together that will attack the USSR if not Germany, cause it is a very rich country in resources and manpower to grab and enslave)

    In fact almost all the industrialization programs are national military programs to avoid to be crushed by the occidental powers and their “Humanitarian Operations” à la Lybia or Irak or Vietnam or China (in the begining of XX century) or African occupation in the XIX, etc…..

    Mao tried to improve the industrial production by the Great Step Forward, producing steel in home furnaces, with the target to produce the same amount of steel as UK, a total desaster

    Deng Xiaoping instead use the famous occidental greed to make the occidental companies transfer their know-how and build the plants for them, and now China produce 8 times more steel than USA + UK togheter, now they feel much more safe from occidental military plunder (as North Korea with their nuclear step forward)

    “It does not matter if a cat is black or white, so long as it catches mice” (Deng Xiaoping)

  189. Regarding the whole moral panic underway over sexual harassment, I watch from a distance w/unease. For one, I’m totally opposed to the whole “affirmative yes” before doing anything. Most of the things I enjoy involve implied consent, and I prefer a man to take charge of things. Within the community, there are two veins–“safe, sane, and consensual” and “risk aware consensual”, and while there is currently a level of tolerance for unconventional sexual interests, I’m always ill at ease that this current moral panic will spill over and cause misunderstanding about people who like to play on the edge of things and uncover things best left covered to the public @ large.
    Regarding China and its environment, to me, it seems the most sinister of the up-and-coming powers. India, Brazil, and Russia all seem less authoritarian and more responsive to their people, and seem generally overall happier places to live than China. I’m not so sure of China as hegemon, either–I don’t see it wielding the power the US or the Soviet Union had. I see it more as possibly the most powerful of the up-and-coming powers, but India, Brazil, and Russia are all forces to be reckoned with, particularly in their own parts of the world, and will not be bulldozed or bullied, IMHO.
    As I’ve said before, it’d have been much better if we’d just taken our lumps and went into depression with the housing bust in ’07 (banks write off the mortgages, homeowners keep their homes, moral hazard returns w/a vengeance, credit dries up). I think future historians will view the whole ZIRP, quantitative easing as a mistake that just exacerbated the problem and made the resulting depression that much worse. All I can see that it has done is metastasize unsustainable bubbles all over the economy: tech, education, healthcare, stock, housing 2.0 are all bubbles JMG has mentioned that are either popping or will pop in the near future. As for Bitcoin, if it can trigger the larger tech bubble to burst by spooking people about anything tech related, all the better.
    Sometimes, I wonder if Canadians realize that their government is following a time-honoured tradition going back to Loyalist British North America times of conciliating the world’s superpower and ensuring that there is zero space between them and said superpower. First, Canada was part and parcel of the British empire, then, after the British began conciliating the US, Canada became the “51st state”. Now, it seems they aspire to be the next province of China or states of Brazil & India. Regarding foreign investment and immigration, the Canadian government is using them as diplomatic tools to curry favour with the up-and-coming powers–offering the best and brightest of said countries the ability to come and live a first-world lifestyle in Canada. Not that I fault Canada at all for this policy–they’ve done very well in terms of standard of living pursuing this policy, and it’s already putting a floor under them while the US is going into freefall–if only we could conciliate up-and-coming powers the way Canada does!

  190. Maybe OT at this point, and potentially off-topic (don’t know really!), but looking for a little advice from anyone who knows their way around card oracles better than I do (which is probably quite a few of you), especially the Carr-Gomm Druid Animal Oracle, which is the only one I have, so the only one I use…

    A trifecta of events concerning my wife’s (and your wife’s, JMG) hometown 2500 miles away popped up yesterday, and the timing seemed auspicious, since my wife and I had a rare evening to ourselves without the kids at home. I’m not sure the Spokane conflagration has anything to do with the card we pulled, perhaps just a strong enough signal to make us pull one for guidance, but I’m open to outside interpretation.

    Anyway, I had a premonition of The Cow at dinner, before we decided to pull a card. Didn’t mention it – just seemed random at the time. But when my wife suggested pulling a card, she shuffled and had me hold the deck and meditate on Spokane in my own way before she pulled the card. The Cow (Bo) came up. Actually, The Cow jumped out of the deck at her sideways. Then when we opened the book it fell open to The Cow. We read it and didn’t get much relevant insight right away, so she held the deck and meditated on the subject at hand, and had me shuffle the deck and pull a card. The Cow popped up again. Then the book fell open to The Cow again when I took it. (It’s never fallen open there before, just for the record.)

    We read it again, and started coming up with some ideas of what the oracle was trying pretty hard to tell us, then closed the book and talked about it for a little bit. Wanting another look we grabbed the book and this time it fell open to the last pages describing The Cow, not the opening page with the picture.

    Boy, I couldn’t be more pleased with the way the signs have gotten a lot louder since I asked for that earlier this year!! For the ultra-dense like me, maybe that’s just what it takes…;)

    So, can anyone (JMG? You other divination gurus?) tell me more about Bo The Cow, who represents The Goddess, Motherhood, and Nourishment? It’s been a very interesting week, and now this on top of it. Does anyone see a tie to the subject of this week’s discussion? Which has been excellent, btw, thank you all!

    Tripp out.

  191. Some last-minute thoughts on cause and effect as related to teaching and learning- I’ve been thinking about this one all week. Teachers entering the profession realize pretty quickly that they are only one cause among many of their students’ educational outcomes. This can seem depressing, especially when teacher evaluation schemes pretend that this is not so. But countering this depressing force is the realization that the effects of your work are unpredictable, potentially remaining unseen (by you) but nonetheless powerful, sometimes only revealing themselves years from your causative action. You never know what seeds you are planting.

    Pondering the Fifth Law here has made me realize that part of the mysterious nature of teaching is that it can be hard to judge the scale of the cause (the idea you are presenting) as each student interprets it. Seemingly small ideas can unfold in a student’s mind to create large effects (and unfortunately the opposite can also be true- important concepts sometimes barely seem to make a dent for some learners!). Part of the skill of teaching is learning to recognize those ideas in your subject area that can create these seemingly disproportionate responses- I’m now thinking of them as trim tab concepts.

    –Heather in CA

  192. Very late in the week, so probably not going to be seen by many people. Anyhoo..

    As a foreigner resident in China, there’s much I could say about the topics people have been mentioning. However, I don’t think it would be safe for me to do so, so I won’t.

    Nevertheless, here’s a data point I found interesting, just to give an idea of the sort of things that are happening beneath the radar: Zambia Revokes Appointment of Chinese As Police Officers. It bears contemplation, I think.

  193. @Shane W, I don’t know much about India, nor about China. But I’m fairly sure that Brazil is not going to become a world power anytime in the next decades or so. Brazil has huge problems of its own. Think about the worst possible situation you Americans will likely face in the coming decades, short of civil war, and you will picture Brazil. As of this moment, the country is a dysfunctional democracy, much more so than the US presently is. Corruption is widespread, there are felons in Congress (I don’t use the word as a slander – I mean actually convicted men), crime ridden cities, a fragmenting culture and an obnoxious habit of copying the worst cultural trends from abroad (as surprising as it may be, there are alt righters, libertarians and true SJWs in Brazil, indistinguishable from those in the US). The two major candidates of the next presidential election are a highly divisive and corrupt public figure and a neofascist ignoramus. Other than that, about half of the states in the union are suffering economic contraction and slow and grinding demographic shift. A gallon of gas costs about $5 (that’s dollars for you) and climbing in most states.
    Brazil is the poorer, messed up distant relative of the US.

  194. For those who might find it difficult, as I did, to envisage the ‘just price’ way of costing services, there is an illustration of this in the wonderful book ‘The Wheelwright’s Shop’, describing life in such a workshop in late 19th century rural England.

    The author, Sturt, who had to take over after the sudden death of his father after over-exertion assisting his blacksmith, found that the prices charged had more or less frozen at those applying a century or more before – the ‘just price’ expected by all the farmers.

    At no point, since it was first worked out, did the actual cost of labour and materials enter into calculating it.

    A book well worth reading for its literary and human qualities,although perhaps not by those who think that trees should be inviolable, given the nature of the craft…..

  195. Shane W, according to polls done by the Pew Research Centre, 86% of a Chinese surveyed approve of the direction their country is going. Here are other places for comparison:

    Brazil: 44%
    Canada: 55%
    Russia: 37%

    You can check these numbers at

    Sometimes it seems like there are many people who would speak for the Chinese but not many who are interested in what we have to say. The unpleasant truth is that the Chinese government enjoys greater legitimacy than most democratic nations.

  196. @Tripp,

    I don’t know the Druid Animal Oracle deck from an Oracle database, and I don’t know anything about your personal profile except what I can read in your comment, so this might be way off base. But a possible answer leaps out at me anyhow: to tell your wife to stop teasing and just give you the news.

    (And yes, in that case, there would definitely be a tie to the subject of this week’s discussion.)

  197. While dramatic undulations are a certainty, and many of the speculative madness (including lots of stories of ordinary folks losing their shirts) are also a near certainty, I think it’s important to add a layer of analysis to the bitcoin/crypto phenomenon that considers its trajectory as a technology adoption curve, rather than an investment. Assuming “a” digital currency will continue to exist while some version of civilization’s status quo does, it is entirely possible that a tech adoption curve is the most accurate lens to view bitcoin et al through.

    On a separate note…been quite awhile. Always a delight to reading your work.

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