Shadow Banks, Shadow Economies

Like it or not, currency systems have long been part of civilization. The types of currency range from gold and silver coins to fiat paper bills to digital, decentralized algorithms. What a proper currency allows an individual to do is have a common method for acquiring the services of goods and services. Barter systems were out-competed by currency in the richest countries, although barter returns after disasters and in the informal economy.

Even the most basic barter system allows one to engage in economic activity. Thus, price discovery, or the ability to accurately determine the cost of a product or service, is a precondition for a vibrant economy. Instead, high frequency trading, short sales, and interest rate rigging reduce the foundation of capitalism to a rigged carnival game. This process has been ongoing for decades, and is unlikely to change, no matter what legislation gets passed (as loopholes can be added). Legal gray areas are often not a bug, but a feature of new laws.

In thriving economies, ecosystems, political, and agricultural systems, diversity is a sign of life. Thriving economies allow for plenty of competition, coexistence of large and small. Although some entities out-compete others, others can arise to fill the void. Thriving ecosystems, such as a forest or jungle, have more types of species than a lawn or parking lot. Thriving democracies have a variety of parties. While some parties may become the most common mainstream ones, it is not impossible for other groups to get elected. An agricultural situation with several types of crops (and multiple species of each) means that a drought or pest is unlikely to destroy all of them.

Instead, we face monoculture in all areas. Markets are rigged to benefit a few big firms. Ecosystems are disrupted at even the microscopic level. Electoral districts are gerrymandered to benefit parties and incumbents. Factory farming has replaced conventional farming as a source of food production. The problem with monoculture is that catastrophic failures become all the larger, as they are inherently brittle.

As these systems fail, others arise outside of the existing legal and political framework. This "black market," informal economic sector is today called System D, as discussed before. As things are banned by increasingly corrupt governments, System D is poised to grow. Furthermore, System D itself is the future of many "legit" firms. The "shadow banking" system comprises the majority of the world's currency reserves, existing in legal limbo in offshore accounts. Somehow, multiple times the planet's GDP in debt was wasted and frittered into this black hole. As something new arises, Ragnarok style, the darkness will turn into the new system.

The Supervillainy of Christmas

The modern Christmas tradition started as consumer goods became increasingly cheap, so that each year became a boost to the economy. A month before Christmas in the US, the Friday after Thanksgiving became known as "Black Friday" due to stores going from "red" debt to "black" growth. While there are amusing takes on Christmas consumerism, I will talk on other aspects.

Christmas, however, existed long before then. It originated from a number of pagan and heathen Winter Solace-based celebrations around Europe. One was the Roman holiday of Saturnalia, a drunken festival. Another was the Norse Yule. In the Norse celebration, the chief god Odin (appearing as an old man with a beard and red outfit) would fly around hunting monsters in his Wild Hunt. Children left out their stockings with carrots inside for Odin's horse Sleipnir, in hopes the All-Father would leave them gifts.

When Christianity spread, missionaries would adopt local symbols, customs, and traditions to "convert" the locals. Witness Odin becoming Saint Nick. Often times, the best way to assimilate a conquered people is co-opting their own traditions. The current incarnation of Christmas, for instance, has become synonymous with gifts, snow, and Santa Claus around the world. From Spanish colonization of the New World to Christians sending armed missionaries to convert at sword-point in the Dark Ages to countless other instances, Christmas itself has potential for supervillainy. Just imagine a world ruled by Santa, perhaps getting in touch with his Norse roots.

Democratizing Defense

 “If you think of yourselves as helpless and ineffectual, it is certain that you will create a despotic government to be your master. The wise despot, therefore, maintains among his subjects a popular sense that they are helpless and ineffectual.” -Frank Herbert

Most of human history can be recorded as an oligarchy run by a small few. This may have its roots in early settlements, where a warlord of some sort provides protection in exchange for the labor of others. This arrangement is known as feudalism, and isn't a good model for those on the bottom. However, this stagnant structure was prone to catastrophic upheaval, often brought about by a change in technology. Either the warlords use them to solidify their control, someone else out-competes them (often instituting a larger model of "feudalism" in the process of empire-building), or the technology gives the peons more power to demand rights and bargaining conditions (thus forming the basis of citizenship).

The feudal arrangement only lasts as long as people feel secure under the status quo. When the balance of power is tilted in the citizens' favor, this leads to good things. The English peasants skilled with the longbow, for instance, are one reason the Magna Carta was signed into law, starting a tradition/social contract that was only recently revoked.

Warfare has become increasingly complex and specialized over the industrial revolution, meaning that an militia of musket-wielding farmers was no longer in the same league as a professional military. Muskets gave way to repeating rifles and the machine guns and assault rifles. Personal transport expanded from a soldier's own feet to motorized cavalry and mechanized infantry. To compete against a professional army in a conventional war without a similarly equipped army of your own became an increasingly suicidal endeavor. And even if you had an army, you had to constantly spend money to stay ahead. This Red Queen hypothesis meant that even a healthy lead in military tech could be maintained only by increasing amounts of funding.

Of course, plenty of forces lack the technologies, personnel, and gear to fight a conventional war. That is the reason for the rise of guerrilla tactics in brushfire conflicts across the world. The successful guerrilla does not try to kill or drive out the enemy, but instead cause them to overreact and overextend themselves. If a cheap $10 bomb causes $10000 worth of damage, that's a huge "return on investment." The overwhelming complexity of modern infrastructure is likewise at fault, presenting a "target rich environment." Such is the cold calculations of 4th Gen Warfare.

We are "fortunate" enough to witness the hollowing out of governments over recent decades. However, despite what you may think, individuals are not powerless. There are methods of fighting back that involve no violence, no sabotage, and are perfectly legal (for now). The kleptocrats (government or corporate brands are merely the same thing now) want to you be afraid of everything: guns, scientists, terrorists, your own shadows, while the things worth being concerned with are outright ignored (or worse). The methods they use are "security theater," a sort of pantomime routine to try to preemptively subdue unrest.

The battle of the 21st century is to build up  "open source" solutions against centralized incompetence and corruption. There is a philosophical background to such a strategy. If attacked politically/economically/physically (as can happen to anything truly new, potentially threatening, or successful), there should be a deterrent to such an attack. Lawyers are the current weapon of choice, as lawsuits and public relations battles can make/break political careers and stock prices. There is also opportunities for political judo/jujitsu, such as using an enemy's threats to sue against them.

Nukes and "weapons of mass destruction" may serve in a similar role for nation states. During the Cold War, "Mutually Assured Destruction" kept the missiles in their silos and troops on the borders. Likewise, there is the ancient Chinese philosopher, Mo Zi. A sort of forerunner to rationalists and consequentialis, the Mohists focused on defense and making warfare uneconomical. This was one method, they envisioned, for forming fraternity and brotherhood among mankind.

To accomplish this, they spread knowledge of defensive engineering, machines to break sieges (as in counter an enemy's siege engines), and generally make war too costly. The economics of guerrilla warfare likewise scale towards the guerrillas or "insurgency" (whether armed or not). Protestors demanding a dictator stand down can bring out riot cops and soldiers, but the operating costs of the riot control outweigh starving citizens with nothing to lose. What happens from there is up in the air.

There is another topic I would like to touch in, in the wake of recent tragedies in the US and China. The mass shooting in CT and the school stabbing in China presented examples of the pathetic, deranged behavior of spree killers. While laws may prevent these demented individuals from acquiring weapons through legal channels, those so inclined will still find a way. There's a few cases of individuals using legal weapons to stop spree killings. I hold that all have a right to self defense utilizing lethal force if required.

I believe the motivations behind spree killers may often be stress, a perverse desire for attention, and feelings of desperation. A missing social safety net (which has been thoroughly gutted) can prevent individuals from getting the mental health help they need. (Also, crime and weapons-related deaths may be significantly reduced if the Drug War was ended, but that's another topic.) Renaming those pathetic killers as "Idiot #6" or "Moron #32" may also dissuade those seeking infamy.

Regardless of motivations, I am highly skeptical of any political efforts arising from tragedies. Politicians will ride a tsunami of blood to prominence whenever they can, from the PATRIOT Act rammed through Congress after 9/11 to other ill-advised bills. Firearms and weapons bans, even if they pass, are likely to be ignored by such idiots, and the ease of manufacturing firearms will not go away anytime soon. The lethality of firearms also cuts the other way, with even the elderly and disabled able to employ them against a would be mass murderer. Spree killers are a statistical outlier in firearms deaths in the USA, as even drug gangs come in second being shot by the police.

I believe that self defense starts with oneself. Self protection, whether by weapon or martial art, is the last ditch effort if all others fail. Self defense is a variety of techniques one can use to prevent harm to oneself and one's body. Chief among them is common sense: be aware of your surroundings, don't walk into the bad parts of town at night, travel in groups, tell friends where you are going, and so on. Another one is that if you encounter such a situation where you are attacked, flee. Even if you have a weapon. Always assume your enemy has a better weapon and more skill with it, and he's got friends with weapons on the way. This is why "duty to retreat" makes sense tactically as well as legally. A method of self protection, whether a concealed pistol or krav maga, is for when running fails. This is one reason I practice parkour in addition to martial arts and shooting.

Knowledge, in the form of common sense and training, is the basis for a democratizing self defense. The protagonists of "Cryptonomicon" by Neal Stephenson create an online database on waging defensive warfare and the like. In an upcoming novel of mine, a character trains in the fictional discipline of EAST (Evasion-Assault Survival Training), a combination of parkour, krav maga/combatives, and combat shooting for when firearms are available. In the setting, it was developed by a group of Mohist-inspired martial artists and military vets. They post instructions and strategy online, free for all.

While one cannot always defend oneself in the manner one envisions (if ever), having skills and equipment and not using it is better that not having it at all. A smart self-defender will not go into a back alley and call out every shady character for a fist fight. That's behavior more worthy of a Darwin award than anything else. As the interests of the social/economic elite and general public begin to differ, we'll have to start doing more stuff on our own. So best get used to it now.

Return to Space

No supervillain blog would be complete without touching on space travel. While humanity took baby steps to the moon and sent a few robots across the Solar System, the end of the Cold War saw a decline in government-funded interest in space flight in favor of financial speculation. Despite the international economic corruption tumor, some billionaires and firms have good plans.

Elon Musk, for instance, wants to build a city on Mars. Advancement of 3D printing and similar technologies means that on-site manufacturing (e.g. sending robots to build a colony before people show up) are one thing that's improved since humanity's last trip into the void. Others have also announced a return to the moon. Some of the people involved were involved in the Apollo program, so they have experienced individuals there.

Whether these efforts will get off the ground, or be dragged down by a society increasingly wracked with collapsing infrastructure and poverty, remains to be seen. I wish them luck. We've spent far too long wasting our non-renewable resources on suburban sprawl and financial fraud. Let's get back up there. Our species depends on it. Besides, what evil overlord can resist a lunar death ray?

The Coming Era of Supervillainy

Multiple converging trends indicate that someday, evil overlords and criminal masterminds straight out of popular culture and into the news. There are multiple types of supervillains we can discuss here, often with significant overlap between the categories. Many are as old as society itself, while others wield abilities undreamt of by previous generations. As long as human society exists, there will be crime and malcontents of some sort. There will always be those who use power for their own ends, ignoring the cost to others. Such an environment is neither conduciveto representative government nor human benefit. 

The supervillainy of the era represents the return of a system that is as old as history. This socio-economic model is neither capitalism nor socialism, but instead something much older: feudalism. Parasitic elites at the top use warlords and peasants to support their lifestyles while peasants and serfs toil beneath them. Those outside of the system are outlaws, having no legal representation to the feudal order. 

The fundamental components are already in place, and the momentum is already leading there. I will discuss three categories of potential supervillain that could thrive in such a system: the Corrupt Elite, the Empowered Individual, and the Underworld Entrepreneur. There is significant overlap between these categories in some cases, but I believe these could be the main archetypes that tomorrow’s supervillains may gravitate towards. These are just my takes on how they may arise, what their strategies may be, and how they may deal with threats. 

--The Corrupt Elite: The robber baron, the corrupt politician, and others who abuse power and wealth for their own benefit are among both the most transparent and easiest to loathe. However, as long as even the elite have “skin in the game,” they realize working with others (the positive sum game) is better than just ignoring them. Power and wealth often go together, and history is full of politicians who help wealthy friends loot others’ wealth (via often taxes on lower classes, no-bid contracts, and bailouts for their associates). The term “kleptocrat” is most apt for these individuals, as their primary goal is to use the state apparatus to encourage rent-seeking. 

When there is less difference, financially and ideologically, between the top and bottom of society, there is a greater chance each member realizes they’re “all in it together.” This is why I believe the health of the middle class and related metrics like “median household income” are better indicators of social and economic health than just GDP. As the middle class collapses, stratification, crime, and instability also increase. The elite become increasingly isolated, building their own infrastructure and segregated enclaves while letting everything elsefall apart. Look at the American infrastructure. 

While barely half a century old, it’s already collapsing to below Victorian levels. Overreliance on cars and suburbs, as opposed to logical urban planning and mass transit (public or private), additionally made the USA extra-vulnerable to oil price shocks. There was actually a conspiracy behind this that makes the tinfoil hat crowd seem sane. Oil, tire, and car companies conspired to replace streetcars with buses. By the time the case had made it to court, the damage had already been done. The fact oil and gas companies have such financial and political power is hardly surprising. 

Many Corrupt Elites do not content themselves with merely minding their own business. Many will crackdown on the “peasants” for espousing views they disagree with, turning police forces into their personal illegal spying agencies, and enforcing their personal whims upon others with a “nanny state” approach. While police forces and crackdowns are their preferred tools for now, advances in drones, automation, and surveillance technology will mean the need for “manpower” for running their regime is greatly reduced. So maybe those police and official pensions are ripe for kleptocrat seizure, once drone and robot technology has become sufficiently advanced. Like Dr. Doom, they are “legitimate” overlords of states and territories with no shortage of robot henchmen.  

--The Empowered Individual: As stated before on the blog, new technologies can empower individuals for good or ill. However, unlike comic books, it is extremely rare for a “lone genius” to produce paradigm-shifting technologies wholly by themselves. However, the production costs and increasing ease of fabrication makes many disruptive technologies more available.

This means that while a single mad scientist is unlikely to destroy the world, the potential for disruption increases. Autonomous, decentralized networks are a far more likely incarnation for the deployment of disruptive technologies and techniques. From non-violent activist groups to armed insurgencies (and everything in between), the successful techniques used by one group are likely to be copied en masse by others. By the time a countermeasure has been found, others will likely have moved on to different tactics. Especially savvy groups might combine tactics for maximum effect, a sort of fourth generation warfare (4GW) analog of combined arms theory. 

Empowered Individuals may be motivated by a number of things, but Corrupt Elites are natural targets for them. Activists may seek the removal of a corrupt official, protest the favors given to a crooked businessperson, or seek redress for government misconduct. Not all EIs may have ideological or "moral" reasons for their activities. As people become desperate, there is always the risk of the depraved spree killer. As stated before, Dr. Brin has a great way to deal with them, denying them the infamy they seek. Like the character "V" in Alan Moore's "V for Vendetta," they cause ideologically disruption against centralized power and infrastructure for good or ill. Or like Batman's eternal nemesis, the Joker, engage in destruction for its own sake.

--The Underworld Entrepreneur: Crime of the regular sort has always been part of the economy.

As such, there have been individuals and organizations that out-competed their rivals to dominate their market. In the underworld, this means the most adept at violence and ruthless behavior can dominate their fellows. Whenever something is banned in the regular economy, black and "gray" markets may emerge to fill the demand. 

The effects of Prohibition and the "War on Drugs" have encouraged organized crime to thrive. Not only are drug-related shootings the dominant type of firearms crime, but prisons have been shoved full of non-violent offenders who have little to lose by going deeper into crime. Many street gangs use drugs to fund their own activities, and battle other gangs for control of turf they can use to sell drugs with. Typically, the police target the largest gang, often the "victor" of the gang war. After the police act, there is typically a power vacuum as other gangs or factions within the gang start the cycle over again. 

No matter which gang dominates the streets, the long term winners are the drug cartels that supplied the drugs in the first place. Some groups, like the Mexican drug cartels, have such wealth and power, they have built their own infrastructure. Not only do they possess significant munitions, logistics networks, tunnels, and other methods to smuggle drugs, some even built their own communicationsinfrastructure and armored vehicles. They maintain international smuggling networks to move their product, and are a force to be reckoned with in their home country (and beyond). 

Even outside of "regular" criminal activities (gun-running, drug smuggling, etc.), there is an entire market ecosystem outside of official channels. This is known as System D. The original term comes from a French word, "débrouillards" (meaning "clever"), but I believe an apt English translation is "Devious." Not all parts of System D involve organized crime of the regular sort. System D is a broad category for all "informal" economic activity, from kids selling lemonade to African marketplaces selling fresh food to even services like trash removal. There's even real estate provided by System D.

System D is the world's fastest growing economy outside the USA (and possibly inside it). As more things are banned, regulated, or restricted by increasingly desperate and cash-strapped states, the black and gray economies can only grow as more and more people turn to alternative economies. As 'legit' economies falter, the laws of supply and demand reach new equilibrium independent of existing policies and laws. Even "legit" companies can inadvertently be drawn into System D by proxies and "technically" legit deals.

As discrete method of payments like encrypted cybercurrencies (such as BitCoin) and unofficial exchange/logistics networks (such as the Islamic world's "hawala" practice) combine, a new type of underworld entrepreneur may emerge. The survival criteria for continuing to operate in System D are being sneaky enough to avoid law enforcement and/or having the wealth/political clout to evade accountability. This not only means it is possible an organization like SPECTRE from James Bond may emerge, but statistically probable. 

A real life Blofeld or Moriarty may lord over a distributed network of crime like a spider in a web. They may supply Empowered Individuals with illicit goods, be targets of them, or may compete with Corrupt Elites (or perhaps even make the transition into "legitimacy"). A UE may likewise benefit from automation, as it removes the need for human operatives in crime networks to a significant degree. (Such an idea is the basis of a new novel a friend and I are working on.)

So there you have some of the archetypes I believe may emerge in the future. Of course, if strange vigilantes arise to match real life supervillains, then things may get very interesting real fast. For the rest of us, however, the quality of life is likely to suffer greatly. There are many reasons why places with roving warbands are not pleasant to live in. At the same time, living on the whims of a neofeudal overlord are little better. That is why I believe in living in a resilient community less dependent on an increasingly unhinged world system.

Waiting for Naglfar

We are watching our world die. The world is sleepwalking into an environmental, financial, and political Ragnarok. Like the Norse apocalypse, our own tribulations include rising seas, savage wars, and the death of the old order. The Arctic Ocean may be ice free in a few summers from now, raising sea levels around the world. More alarmingly, this will increase the moisture in the atmosphere, allowing the effects of climate change to snowball exponentially. There is also the possibility that the methane clathrates in the Arctic will burst forth like Lovecraft's Elder Gods, sending Earth's climate into uncharted territory. The methane released could greatly accelerate the greenhouse effect, a Surtur's flaming sword of runaway climate. 

Don't hold your breath for any sort of political solution. The major nations have no interest in curbing emissions, even at a time it would be prudent to kick their fossil fuel addictions. Fossil fuels themselves are becoming harder to retrieve, with a diminishing rate of returns. Some types of gas and unconventional oil, for instance, have a negative rate of returns on energy invested. The processes to recover them are environmentally disruptive, and require increasingly scarce water resources to retrieve. Wilderness, aquifers, and farmland are turned into septic cesspools as a result of the toxic chemicals blasted into the ground. It is only through massive government subsidies to fossil fuel companies and use of eminent domain to seize private property that such activities are possible. It is not unlike a desperate junkie in need of a fix slicing their skin to find traces of their drug. 

Alternatives to fossil fuels likewise cannot sustain the status quo. Fossil fuel companies wish to inhibit competition as long as possible. Big Government-funded "green jobs" are unlikely to do much, as the individuals responsible for the pollution (public and private) have little interest in fixing it. Technical problems with energy storage, including rare earth supplies for batteries, have yet to be fully addressed. Despite some promising developments, deploying the new infrastructure would require money that no longer exists. Even in a newer, low cost infrastructure was developed, governments tend to prefer cozy relationships with centralized oil companies rather than a competitive market of decentralized firms. 

The money that could have been used to fund and develop alternatives has essentially vanished from the real economy. Kleptocratic central banks and political insiders continue to print money to sustain the pyramid scheme of speculation markets. The majority of trades on most stock exchanges are performed by software rather than humans, often used to rig trades to favor an increasingly fat few. Euros, dollars, pounds, and other currencies are being increasingly devalued with rigged and low interest rates, which penalize savers and reward speculators. Like a rigged casino game, the world economy ensures most people who play lose. Financial emergencies (often declared by the same people who started them) are used to seize the remaining assets in the name of debts that cannot be repaid. 

Globalization overcame the feedback mechanisms able to stop it. Crime and black markets have likewise become globalized. One of the fastest growing economies is not a country, but an informal economy known as "System D." While System D includes "conventional" criminal activities (e.g. smuggling and protection rackets), it includes alternative and informal transactions of all sorts. "Technically legal" gray markets, digital currencies (such as BitCoin), and barter agreements all have grown. In areas where the economy has effectively collapsed (such as Greece), barter and informal agreements handle services from protection to waste removal to food production. Revenue-strapped governments eagerly try to reign in such transactions, but to little avail. 

Attempts to ban such transactions will likely raise black market prices and empower criminal syndicates due to the "Prohibition" effect. Militarization of the police force, surveillance technologies, and the loss of rights are the logical side effects of heavy-handed government crackdowns. One need only look at the War on Drugs to see how quasi-military tactics have backfired. Ironically, in areas were state power has weakened, non-state groups from guerrillas to crime syndicates may take the place of states in the role of service providers. Many drug cartels, for instance, maintain logistics networks that could smuggle anything from illegal aliens to weaponry and even their own communications infrastructure. Political disruptions can result in these groups becoming the de-facto government. When the Soviet Union collapsed, the Russian Mafia was already the effective power in control of the streets. When Rome fell, many regions had already began to rely on local feudalism. 

Fear and panic are reported on by media firms and echoed by politicians. The realities of the elite and non-elites increasingly differ, despite (or perhaps due to) the attempts of politicians to hold onto the status quo.  This type of instability could easily be exploited or redirected into domestic opponents or foreign enemies. Resources from fuels to water to arable land become increasingly scarce, desperation reignites potential for conflict. From trade sanctions to shooting wars, "zero sum" foreign policy is seen as increasingly acceptable. From massive crop failures in the USA to glacial melt-water disputes between India and China, food and water become increasingly valuable. The parasitic kleptocrats and corporate socialists loot as much as possible before heading for foreign tax havens and private holdouts. When events similar to this happen in historical cultures, it simply means the former elites are the last ones to starve to death. 

 Those who oppose such policies can easily find themselves the targets of well-honed intelligence and dissident monitoring infrastructure. With drones and a lack of political transparency, targets can be executed from around the world. Even if actual assassination is impractical, character assassination and agents provocateur can easily sabotage attempts to form alternatives. With a dystopia worthy of a science fiction novel, the system ironically destroys any chance it has for genuine reform and survival. The resulting crash simply is delayed and made worse by shooting messengers. 

Alternatives to the highly-centralized consumer state are present. Power, food, water, production, and defense are things which would be more ideal as decentralized networks rather than hyper-professional bureaucracies. However, popular culture remains fixated on trivial politics, escapism, and propagation of the status quo for as long as possible. The solution is not the "doomsday bunker" mentality. Even rationed supplies cannot last forever, and a small family group is easy prey for a large group. Instead, form connections that matter. Replace "zero sum" with "positive sum." Strive for self-sufficiency whenever possible: in food, energy, water, production, and other methods. Aquaponics, desktop manufacturing, and home energy have all become cheaper, and will likely continue to do so. Resilience is a golden ideal, and will help as the world becomes unstable. Do not rely on Big Government or Big Business for employment or salvation from the problems they helped create. Find friends, family, and those you can trust. The reward is a genuine community you care about, rather than a hideously complex system built upon fraud and ignorance. 

We may draw some parallels to Norse mythology. A ship of dead men's nails, Naglfar, manned by the treacherous Loki, would start the final battle. With the endemic unethical behavior in once-trusted institutions, one failure could cause others. The venomous death throes of the old order, like mythic serpent Jormungandr, could destroy much of what we are used to. However, Ragnarok brought an end to a doomed world, so that new one could arise. The fever dream will eventually pass, although the transition will be difficult. It is better to strive and fail than to passively wait for Naglfar. Even the fallen warriors ended up in Valhalla.