The Financial Bailout Won’t Work: Butterfly Effect

THE ECONOMY OF THE US is going to crash and burn.  The prospective bailout of the financial markets by Congress won’t work.  Previous posts have stated why Chaos Theory applies to the financial and mortgage crisis today.  Chaos theory applies to all natural complex dynamical systems like markets, ecosystems, and weather.  For over 18 months the US financial system has been demonstrating a condition known as Negative Dynamical Volativity/Stability.  This is known in mathematics as the Butterfly Effect.

The dynamics of the financial and mortgage markets are sensitive to initial conditions (fragile).  This sensitivity manifests itself as an exponential growth of instability from the initial change of condition.  The cause of extreme instability is both architectural structure flaws, and flows (of money) over time.

The analogy is an airplane with a structural design failure.  As corrections are made to control the aircraft over time, there is increasing amplitude of failed control.  Without correcting both defective structure (regulations and organizational architecture) and the flow (of money) the market crashes.

The current crisis cannot be controlled without both organizational (institutions have disappeared that provided the structure with stability), regulation, and restoring the flow of money-liquidity.

Congress and Wall Street is ignoring the fact that an entirely new mortgage financing structure must be created instantly, institutions providing credit suddenly dead replaced, AND liquidity provided to be effective in creating market stability.  Congress is providing only bailout liquidity.

There is a high probability the economy of the US is gong to crash and burn within the next four months.  Fasten your safety belts.

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