It’s not the managers who are incompetent,
it’s the organization itself that is incompetent.
I received a number of interesting reader
responses to my previous entries on the incompetence of the Federal
Reserve and the Deep State:
Why
Is Our Government (and Deep State) So Incompetent? (March 6,
2014)
Some readers thought I was underestimating the
power of these institutions to pursue essentially unlimited
money-printing and related global strategies.
While I understand the apparent power of
unlimited money-printing and global Empire, my point (poorly
articulated the first time around) was this:
The incompetence of these organizations is
not a reflection of the competence or intelligence of their
managers–it is the intrinsic consequence of their limited control
of complex systems. If the system has reached the point of
being ungovernable, even the most brilliant and experienced managers
will fail because it’s not the managers who are
incompetent, it’s the organization itself that is incompetent.
If we boil down the Fed’s vaunted god-like
powers, they can be reduced to three levers: lower interest rates by
purchasing interest-bearing assets, creating the money to buy the
assets, and making free money (zero interest or near-zero interest)
available to the global banking sector via lines of credit.
That’s it. Everything else is
window-dressing.
Is it even plausible that any organization
can control an immensely complex economy with three levers? The
Fed’s three levers exert no control over how much money is borrowed
from the Fed or what insanely risky speculations and malinvestments
the borrowed money funds.
The Fed can’t even control if the free money
stays in the U.S.; by one estimate, fully 60% of the Fed’s free
money has left the U.S. for higher-interest carry trades and
speculations in the emerging economies.
The levers of power wielded by the
centralized Fed and Deep State are too clumsy and limited to control
a complex system at any useful level. The Fed, the Federal
government and the deep State are all the wrong unit size.
This
excerpt from Preparing
for the Twenty-First Century by Paul Kennedy (1993) explains
why:
The key autonomous actor in political and
international affairs for the past few centuries (the nation-state)
appears not just to be losing its control and integrity, but to be
the wrong sort of unit to handle the newer
circumstances. For some problems, it is too large to operate
effectively; for others, it is too small. In consequence there are
pressures for the “relocation of authority” both upward and
downward, creating structures that might respond better to today’s
and tomorrow’s forces of change.
All these centralized concentrations of
power have moved into the diminishing returns phase of the
S-Curve. As the unintended consequences of their efforts to
manage complex systems with their clumsy, limited tools pile up,
their profound failure of imagination kicks in and
they do more of what has already failed.
The structural incompetence of centralized,
wrong-unit-size agencies and central banks is global: the
centralized strategies of China, Japan, the European Union and yes,
Russia, too, will all fail for the same reasons: organizations with a
few limited controls are intrinsically incapable of managing complex
systems.
“Do you know what amazes me more than
anything else? The impotence of force to organize
anything.” (Napoleon Bonaparte)
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