Mapping The Fugly Future with David Collum

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In the course of his info-scouting, Chris has conversations with many different thinkers. Some are well-known to you; others perhaps less so. An important objective of our podcast interview series is to expose our listeners to the variety of voices and points of view that Chris considers when developing the perspective that he brings to his reporting.

David Collum may be a new voice to many of you. Like Chris, David came to the field of macroeconomic study from a scientific background. Again like Chris, his published observations and predictions have begun to amass a readership built on respect for his emprical approach to projecting the future. For those of you unfamilar with David's work, we think you'll enjoy having this insider's ear to his recent recorded discussion with Chris, which covers a wide range of topics.

In short, David sees a world where market risk has been removed (through misguided government intervention), leading to perverse behavior. In many ways, we are repeating the sins of past empires - and he warns us that history has a much higher incident rate of soverign insolvency than we may want to believe.

Click the play button below to listen to Chris' interview with David Collum:

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In this podcast, David and Chris discuss: 

 

How our financial system has stopped pricing risk, creating dangerous asset bubbles and  bad incentives, and resulting in truly detrimental decision-making.

     

    We're not yet taking the rational steps to correct the system.

    As with our recent interviews with Joe Saluzzi, Jim Rogers, Marc Faber, and Bill Fleckenstein, David ends the interview with a look forward: History is repeating itself, and we are approaching an inflection point that will be forced on us by economic & natural limits. Real risks are increasing; the most concerning are a bond market revolt, resource shortages. and social unrest. Rampant inflation and taxation will likely define the next decade. At our current trajectory, if we don't take great steps to change our behavior, things have a high probability of ending poorly. 

     

     

     

    David B. Collum is a professor of Chemistry and Chemical Biology at Cornell University. In addition to his academic interests, Dan authors an annual macroeconomic assessment. He recently published his 2010 Year In Review: Fugly Gives Way To Muddling.

    This is a companion discussion topic for the original entry at https://peakprosperity.com/mapping-the-fugly-future-with-david-collum-2/

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    Wow what a great interview & content. Interesting only a 20% chance of a currency crises in the next 10 years if I heard this right? Guess a betting person would be wiser to go with the higher odds of 80% of it not happening.

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    Another reinforcing voice to what we all see.  Thank you Chris for introducing David to your followers.  Let us all  know the answer on whether the energy component  increase of other goods is taken out to calculate CPI .  
    We admire what you are doing.  We follow you daily along with a host of others, and as Canadians we keep asking when will Americans say " Enough!".  The blatant corruption in the system is astounding.  I agree with David that this kind of self aggrandizement has been seen throughout history - but sooner or later others caught in the behavior try to eliminate it. Sadly this universal story of human being’s  self interest is being played out on a grand scale this time around, affecting us all no matter where we live. 

    4

    “Fugly”??   Is that a technical term?Sealed

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    This past week has been difficult for me.  Didn’t know why until I read the summary of the interview:The odd state of seeing reality through a different lens than the majority. How does one tell when the minority opinion is actually the more accurate one?
     
    About 10 individuals I deal with are on board.  Everyone else thinks I am nuts.  The minority opinion is more accurate.  Period

    6

    Nate,
    We have all gone through that issue and we will all probably continue to go through that for some time to come.

    You are not alone.

    Yes, it is hard.

    Much evidence of crumbling is building now.  In some wierd sense, it’s encouraging.

     

    Hugs … dons

    7

    In the interview David noted that he was hedging his bets with regards to protecting his assets.  He noted physical metals, as one venue, but hinted at others that he would not mention. 
    Without divulging what he is doing and assuming that we do not know, does anyone have any insight as to what other mechanisms there are out there to keep one’s assets out of the hands of over reaching and very hungary government?

     

    8

    You will find numerous ideas about “assets” and “true prosperity” in the “what should I do” series.

    9

     
     Hugely enjoyable and informative interview… loved the humour !

     

     I find it interesting that a hard science background seems compatible with accurately seeing the fundamentals of a situation as opposed, to say the blinkered, professional orthodox, modern economist…  (notable exceptions - eg Steve Keen)…

     

     

     

    10

    [quote=Nate]This past week has been difficult for me.  Didn’t know why until I read the summary of the interview:
    The odd state of seeing reality through a different lens than the majority. How does one tell when the minority opinion is actually the more accurate one?
    About 10 individuals I deal with are on board.  Everyone else thinks I am nuts.  The minority opinion is more accurate.  Period
    [/quote]
    The hardest part for me (as I’m fortunate enough to have a certain critical mass of people in my life who Get It – enough to keep me from wondering if I’m raving nutters) is to look the people who think I’m nuts in the eye and feel compassion.  Not an easy thing to do.

    11

    Thomas is my pseudonym. I am the guy in the interview (Dave). With that out of the way, I have found that personality type dictates people’s receptivity to new (sometimes disturbing) ideas. I seem to be prone to embrace them (possibly to a fault). Others will embrace ideas that challenge their notions of the world with difficulty at best (especially when it requires declaring that one or more experts must be dead wrong). Often we feel a missionary zeal to share our new-found epiphanies with others who do not wish to hear them. CM was so moved that he created the Crash Course. Wow! Many of us just become tedious to friends and family is my guess. 

    12

    the best one yet.  It really drew me in, it was if I was there enjoying a coffee or a beer. 
    More please!!

    13

    [quote=Nate]This past week has been difficult for me.  Didn’t know why until I read the summary of the interview:
    The odd state of seeing reality through a different lens than the majority. How does one tell when the minority opinion is actually the more accurate one?
     
    About 10 individuals I deal with are on board.  Everyone else thinks I am nuts.  The minority opinion is more accurate.  Period
    [/quote]
    Many on this board and similar boards will feel the same way.  I just want to shout at people to wake the F*** up and take a look around.  I do talk about this stuff from an economical/business stand point and when people do talk about this stuff to me, I relate the government finance to their own personal checking/current account and ask them what would ahppen if they ran a deficit of 50 euros every month.  The aways conclude that they would ultimately have a issue, my response is then, how can the governement be different from you or me if they keep having to borrow?
    I’ve pricked a few peoples interest by talking about gold, silver and oil prices over the last few years, their interest has been triggered by basic greed, sorry, I mean investment realisation.  They ask how did I know which then takes me back to the checking/current account conversation with the added fiscal stimulus stuff.
    In a conversation with a work colleague I made the point to her that what she saw as being blindly obvious, others were simply blind to!  I think the point fits for many many people
     

    14

    This was a wonderful podcast.  I was listening to a conversation between two very knowledgeable people, and not an interview.  It was very refreshing to get such good information in a pleasant way
    Here is the link to David’s report that Chris posted previously.  https://peakprosperity.com/forum/david-b-collums-2010-year-review/50352

    Travlin 

    15

    This was an absolutely wonderful interview. 
    Listening to two scientific thinkers discuss reality and the defects in economic thinking by the (non-science non-reality thinking)  money marketers, provided stark contrast that illuminated an important difference which indicates the problem we face and  the solution. 

    On one side are the educated scientist and technologist, who approach the world fundamentally via constant reality checks that are honored and obeyed.  The other side are marketers, who make up stories, believe those made up stories, then become excellent (and wealthy) in sales.  Wall street lacks reality checks.  The money marketing people there contrive their own reality which is tested by how much money they skim from us.  

    Our basic problem is that decision makers and managers are dreaming (not trained in science or technology: the business of understanding and manipulating reality) but are divorced from physical reality.  In the case of economics, that means real wealth.  Every economic decision must be predicated and must honor and have a goal to create or  preserve real wealth.  Economics is not a science.  (where would it fit? between chemistry and physics? or perhaps it fits more easily between chess and the game Monopoly by Parker Brothers?) It is a discipline with a purpose to create wealth. It relies on physics, chemistry, and mathematics and has some logic, which some point to as evidence of “science.”   Scientists on the other hand are trained to pay attention to wealth that is seen touchable, etc. as facts, which cannot be disobeyed.  We need this reality, or science perspective by all politicians and all economists. That is the fundamental problem and also the reason why  Chris and David easily can see the problem  where others cannot.  Every discussion and every decision  should concern real wealth and should have as a goal the creation and conservation of real wealth.  Energy, food, clothing, shelter, creation of free time, safety etc is the business of civilization and also is the purpose of economics.  Anyone (politician, banker etc) who cannot follow this true meaning of economics should be removed somehow.  The solution to our problem is how to remove these people from controlling our world and to put the engineer, farmers etc back in charge.

    When looking at the history of science, (the progress of civilization) the same problem has always been the key obstacle.  The scientist perspective has been a check on the leaders who take wealth and power from others but cannot understand or dont care about the creation of real wealth by others. Almost all of our wealth and quality of life has come from science and technology development that opposed the status quo.  Scientists  (Chris and David) always end up challenging this status quo. Perhaps the new role of scientists in our future is to provide this  focus on reality and to train others to focus on the real world, a world of objective observation of physical reality. Money only has meaning and is secondary to this primary work.  According to this view, economists  are running around chasing dreams (and taking our money and wealth), while the scientists and engineers are focused on what is important.  There must be a way to get the country focused on reality (creation/preservation of real wealth) again.  I note in this context that the managers of China today are engineers, and not "economists"or political organizers (our country) who are living in a dream world.  We need engineers and other science trained people to run our system.  That is the basic problem.  That is the solution. I cannot help but notice this while listening to the two scientists’ discussion of the problem.

    16

    Motsy:
    Wall Street is loaded with scientists. I think the problem when you compensate these folks in a way that rewards gaming the system you simply have created a gigantic rat experiment in which they are conditioned to press the bar and get the reward. The fact that Wall Street makes the bulk of its money by trading against its own clients certainly doesn’t help. I personally believe it traces back to the Federal Reserve and the current structure of the credit system.

    Dave

    17

    Surviving Crisis in Cuba: The Second Agrarian Reform and Sustainable Agriculture

    September 20, 2005

    When trade relations with the Soviet Bloc crumbled in late 1989 and 1990, and the US tightened the trade embargo, Cuba was plunged into economic crisis. In 1991 the government declared the “Special Period in Peacetime,” which basically put the country on a wartime economy-style austerity program. An immediate 53 percent reduction in oil imports not only affected fuel availability for the economy, but also reduced to zero the foreign exchange that Cuba had formerly obtained via the re-export of petroleum. Imports of wheat and other grains for human consumption dropped by more than 50 percent, while other foodstuffs declined even more. Cuban agriculture was faced with an initial drop of about 70 percent in the availability of fertilizers and pesticides, and more than 50 percent in fuel and other energy sources produced by petroleum.

    http://www.landaction.org/display.php?article=337

     

    18
    I have found that personality type dictates people's receptivity to new (sometimes disturbing) ideas. I seem to be prone to embrace them (possibly to a fault). Others will embrace ideas that challenge their notions of the world with difficulty at best (especially when it requires declaring that one or more experts must be dead wrong).
       Yup.. the old Milgram Experiment.. or as my old Physics prof put it.. "Conform, or think ?"  http://www.blackwellpublishing.com/products/journals/aag/AAG_Oct04/aag_45508.htm  Fairly obvious which route Chuck Prince took.... (dance stopping ? - "not my department says Werner Von Braun..."  )     Thanks for the pointer to Mark Gilbert btw.. ! He's good..  http://www.bloomberg.com/opinion/gilbert/        
    19

    I recall when Prince assured the world that Citigroup was “fully hedged”. My first thought was “by whom? The Klingon Empire?”

    20

    On page 15 of the pdf version of his blog post David says this:
    “If Rogoff and Reinhart are correct, we will default on our obligations aborad using deflation - the eat and dash model - and default on domestic obligations through inflation.”

    Can someone explain how we can do both at the same time?

    Thanks

    By the way, it is worth reading the blog post even if you listened to the podcast…