When the illusion that the Status Quo can fulfill all its promises to everybody dies, the Status Quo starts the terminal slide to effective collapse.
Of the many lessons we can learn from Greece’s difficult path to rejection of debt-serfdom, the most important is perhaps the most obvious: no real change is possible until the Status Quo can no longer fulfill its promises, i.e. it effectively collapses.
The collapse of the Status Quo has two distinct features: the process is highly variable, and the process affects the social classes in different ways.
The process of collapse is neither sudden nor smooth. Things do not necessarily cease to function overnight; rather, the decline to effective collapse operates much like energy states in physics: systems decay and then drop to a lower energy level, where they are stable until further decay causes the next drop to an even lower level.
Pension payments provide a ready example. The pension payment is reduced, and the recipient tightens his/her belt and gets by. The next reduction (either outright or via inflation) forces drastic changes in consumption, and subsequent reductions reduce the pension to a supplement that cannot possibly support a retiree, much less their family.
The pension is still issued, but the promise of a pension that could support a household at a modest level of consumption has collapsed. Though the system for issuing pensions still exists, it no longer fulfills the original purpose.
In this sense, the collapsed pension system becomes much like the phantom legions of the late Roman Empire: the paymasters and officers still received the legion’s pay, but there were no real soldiers; the legion was a bookkeeping entry in a skimming operation, not a fighting unit.
The financial Aristocracy (i.e. the kleptocracy) in Greece avoided much of the pain of debt-serfdom. What’s the point of running things if you can’t distribute the pain to others? I addressed this is Greece at the Crossroads: the Oligarchs Blew It (January 27, 2015).
The powerless classes were stripmined first. Bamboozled into voting for the Kleptocracy in previous elections, the powerless lower classes felt the brunt of austerity for the simple reason the kleptocracy knew there would be no blowback, as long as a few shreds of swag were being distributed.
This highlights the critical role of complicity in maintaining a corrupt, venal and parasitic kleptocracy: the passivity and silence of recipients of social welfare are bought very cheaply, as these classes will fear the loss of the miserable coins tossed to them.
This fear is a potent form of financial terrorism: any resistance or protest might trigger the loss of the reduced social welfare benefits, and so the powerless choose to remain powerless rather than rise up and take the risk of bringing down the parasitic kleptocracy.
The statist bourgeoisie (a.k.a. state-funded upper middle class) were the last to lose faith in the kleptocracy, for the simple reason that their share of the swag was sufficient to maintain the facade of middle-class comfort. It was also enough to sustain the illusion that the kleptocracy’s abject kow-towing to the Lords of the European Central Bank (ECB), the European Union (EU) and the International Monetary Fund (IMF) would magically become a winning strategy for Greece, rather than a one-way ticket to permanent debt-serfdom.
When the kleptocracy lost a significant percentage of this top 20%, they sealed their fate. When the state apparatchiks, institutional functionaries, professionals, small business owners, etc. finally lose faith in the the Status Quo, the Status Quo is doomed, though it can stage a rear-guard action by brutally suppressing this class (see Venezuela for an example of this doomed defense of a failed Status Quo).
In the U.S., the top 10% are doing very well, the next 10% are getting enough to sustain the illusion that they may yet recover their former status and wealth, and the bottom 80% have been bought off with social welfare or the promise of social welfare. Some variation of these percentages are in play in Europe, China, Japan and the emerging economies that haven’t already imploded.
When the illusion that the Status Quo can fulfill all its promises to everybody dies, the Status Quo starts the terminal slide to effective collapse.
Unfortunately, no real change in the social order or power structure can occur until the effective collapse of the Status Quo has taken down everyone but the kleptocrats, their high-ranking apparatchiks and the piteously delusional.
Of related interest: Greece Just Blew Up the Empire’s Death Star of Debt February 2, 2015
Plantagenet on Thu, 5th Feb 2015 6:32 pm
Greece lied to the EU about the state of their debts when they entered the EU, and its been all downhill from there. Perhaps it would be for the best if Greece was booted out of the EU and forced to go back to the drachma.
I bet my next Greek vacation would be cheaper, anyway!
Davy on Thu, 5th Feb 2015 6:43 pm
Much more complicated than that Planter. Greece was raped and pilliaged by their government and investors. Some were global investors who got in on the spoils. The EU system is flawed and allowed Greece to fall into this trap.
Makati1 on Thu, 5th Feb 2015 7:06 pm
“The process of collapse is neither sudden…”
Well, it can be. I think the chance of a sudden crash is much higher than a gradual slow down. Why? Everything is on a knife’s edge. What could cause a crash?
1. A war breaking out in Europe that crashes the Western banking systems and cripples the rest.
2. China dumping their USTs on the market overnight for some reason, likely caused by a physical threat to their country from the West.
3. Something that takes out the Us electronic grid with an EMP burst, destroying the entire banking/commercial systems, transportation, communications, etc..
Even without those, I think the decline will be fast and maybe bumpy, but not take too many years to reach a level that humanity can survive on. We are NOT ancient Rome. We are Rome on steroids.
redpill on Thu, 5th Feb 2015 7:27 pm
This current crisis between the Greeks and the rest of the E.U. lacks that “kabuki” feel of crisis past. This time both sides really seem to be planting their feet and I think the E.U. would rather take the hit from a Grexit than risk the moral hazard that would arise in Spain and perhaps Italy should the Greeks get a haircut on their debt.
I think Tsipiras feels he has enough backing to give the ole F.U. to the E.U. and let the chips fall where they may.
Ah, interesting times!
Northwest Resident on Fri, 6th Feb 2015 1:45 am
We will all be “Greece” soon enough.
“Greece is only the poster child. The McKinsey numbers above suggest that “peak debt” is becoming a universal condition, and that today’s Keynesian central bankers and policy apparatchiks are only pushing on a giant and dangerous global string.”
http://davidstockmanscontracorner.com/chinas-monumental-debt-trap-why-it-will-rock-the-global-economy/
And China certainly looks like it is next in line.
“The head of China’s Dagong Rating Agency, Guan Jianzhong, had some very blunt words for the world’s investors and policymakers overnight. As ITAR-TASS reports, Jianzhong warned , “the world economy may slip into a new global financial crisis in the next few years… that is even worse than in 2008.”
A setback in the growth model focused on credit-based consumption may become a source of a new crisis, he said. (OUCH!!)
http://itar-tass.com/en/economy/775374
But of course, it isn’t China’s fault:
“This crisis was transmitted to the entire world through the policy of quantitative easing and the use of the (USA QE) printing press. All the countries had to pay for that,” Jianzhong said.
He’s probably got a good point there…
Greece went deeply in debt and continued to accumulate debt in order to hide their totally broke status, and to keep the party going for a little while longer. Sound familiar???
Davy on Fri, 6th Feb 2015 2:33 am
dON’T YA SLEEP nr?
You know I was wondering if our doom comes true if at some point our PO connection advanced to the next step. We will be coming on here comparing shit storm reports. You know reports on if there is gas at the pumps, grocery store stocking, reliability of the grid, traffic count, and social unrest.
I will be curious to see how long the net maintains for our shit storm reports. Economic abandonment will hit which is normal. Economic abandonment of fast food might happen for example. If people are not driving as much and the JIT food deliveries decline Fast Food will die on the vine. There is also going to be irrational abandonment. Irrational Abandonment can actually be economic abandonment that does not happen per economic conditions. We can look at the cell system and internet systems. They may become uneconomic per the economic situation but people refuse to let go of it until there is no choice.
Not that I am excited about these prospects. I have said this before friends I have a great life. I am following a passion. The thoughts of everything grinding to a halt are not desirable. Not only do I have much more to do I am very worried for my 7yr boys. Ideally this shit storm can happen with enough drag that we are not swept away. There will be enough time for people to adjust somewhat. I am basically hopping for the worst of the great depression because that will likely be the best of what a shit storm could involve.
Anyway, just up in the middle of the night for no good reason other than I woke up.
Northwest Resident on Fri, 6th Feb 2015 9:44 am
Yeah Davy, I sleep. Just not enough! That 1:45 A.M. post was actually done at 11:45 P.M. my time, so it isn’t as bad as it looks.
Watching global financial and geopolitical developments these days has become something like an intense spectator sport for me. Will BAU take a stiff uppercut to the jaw and go down hard for the final count? Or will BAU grind its way through the rounds, ever weakening but never suffering that decisive knock-out punch?
Hard to say. It could go either way. I’m done trying to predict which way it will go, but I tend to think (and instinctively feel) that we’re coming up on a point in time where all hell breaks lose.
In the meantime, I just do my job, live my life and do what little extra prepping type activity I feel like I need to do. It will be time to start planting some early crops in the next month or two, and I have a lot of compost to mix in to the soil — no big deal. Mostly, I’m just hanging out, keeping tabs on global financial and geopolitical developments, waiting for the hammer to fall. Which it will, eventually. Any time now…
GregT on Fri, 6th Feb 2015 11:21 am
“but I tend to think (and instinctively feel) that we’re coming up on a point in time where all hell breaks lose.”
Friday February the 6th, 2015.
+15C/59F, heavy rain, the local ski hills are probably done for the season this week. Tulips and daffodils are 4 inches out of the ground, rosemary is in full bloom, maple trees are in bud. Flocks of birds are returning in their spring migrations. I had four male Rufous hummingbirds on the feeder last night.
We normally have a cold snap at the beginning of February, it isn’t uncommon to have temperatures dip down to -15C/+5F for one to two weeks. There’s usually in excess of 200cm of snow on the local ski hills, and the flowers and birds shouldn’t be showing themselves for another 6 or 7 weeks. I have kept a written record of the return of the hummingbirds. They have historically always returned within one week of April the 1st, plus or minus.
Is this an anomaly? Or the new norm? Last winter was close to the same. This year was even warmer. If this is indeed the trend, which most certainly appears to be the case, the global financial and geopolitical developments are going to be the least of our worries within a decade, or two at the most.