The Framework for Predicting Our Financial Future
Wednesday, December 7, 2011
Executive Summary
- Exponential change ‘speeds up’
- When it finally happens, change happens quickly
- Collapse progresses from the outside in
- Complex systems will become simpler when energy is scarce
- We fool ourselves at our peril
- The rules will be changed
- If you can’t accurately assess the risks, don’t play the game
- Investing in a structural bear market
Part I: How to Position Yourself for the Future: Step 1 – Financial Security
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II: The Framework for Predicting Our Financial Future
Okay, assuming you have the basics covered, I now want to share with you my views on the markets and how things will unfold in the future. My assumption is that you have completed the full Crash Course (or one of the shorter versions) and are familiar with the exponential function and how it permeates our everyday life.
This framework is always subject to revision as new experiences and data points become available, but its central themes have been operative for me for several years.
Again, this body of work represents my personal observations, historical readings, and faith in the idea that cultures and laws may change but humans tend to behave in predictable ways. As always, I reserve the right to change my forecasts as new information becomes available.
Exponential Change ‘Speeds Up’
Understanding the nature of the systems in which we live is the centerpiece of our analytical framework. And at the heart of that is the concept that we live in a world dominated by exponential functions and curves.
In finite environments, exponential systems really speed up at the end. Everything seems to be going along nice and smoothly and then – blam! – all of a sudden everything changes.
If things feel like they are going faster and faster, that’s because they are. There are exponential curves in technology and information that can leave you in the dust if you turn away for just a few moments.
Resources are running out faster, driven on both sides by depleting supplies and rising demand. Oil exports are a perfect example of this, with many export countries facing both depleting oil fields and rising internal demand, which places a double pinch on exports.
Events are happening closer and closer together, leaving less and less time to process and integrate the impacts of those events.
by ao1 
