The Rhythms of Revolution
3rd October 2020
Zman looks under the covers.
People who work with large complex systems understand that you don’t always know what will result from even the smallest change in the system. Usually this lesson is learned the hard way, by making some small change that seems simple, only to find out it caused serious downstream problems. Large complex systems are often highly dependent on initial conditions. Those small changes to the initial state, after they branch through the system, can have a huge impact.
This was a point wiser heads made about the Covid panic. The American economy is a wildly complex nonlinear system. The people in charge of it, the Federal Reserve, have mastered just one small set of inputs. This is why they are so cautious about tinkering with the money supply. They understand that beyond small changes in interest rates, they really don’t know what will happen. Through necessity they have figured out how to buy up distressed assets to keep the asset bubble inflated.