Robot Combat Arena

This comment byJames Kunstler on the American stock market is both true and priceless:

Once upon a time, the stock market was a place where people with capital went to look for productive activity to invest in -- say, a company devoted to making soap flakes, an underpants factory. Now the market is a robot combat arena where algorithms battle for supremacy of the feedback loops. Thursday's still-baffling fifteen-minute "crash" was an excellent demonstration of the diminishing returns of technology. People too-clever-by-half, aided greatly by computers, have now gamed the investment indexes so successfully that these markets no longer have anything to do with investment -- they're just about shaving micro-points of profit at high volumes by micro-milliseconds off mere differentials in... math! This is truly quant heaven, a place where only numbers matter and there is no correspondence to anything in the real world. In other words, last Thursday's bizarre action was a warning that the American stock markets have flown up their own aggregate a**.

Why would anybody not heavily medicated stay invested in the stock markets? Well, the answer must be that they're not. The few still hanging around are the institutionals with nowhere else to go, the pitiful pension funds or the pathetic college endowment funds desperately chasing "yield" in a world where once-sturdier instruments yield zirp-o -- and these poor chumps are getting played and played out. The only other remaining marketeers are -- you guessed it -- the too-big-to-fail banks, the Federal Reserve, and possibly the US Treasury itself playing front-running games and algo stunts and black box buy-ups, and carry-trade rackets, and -- let's not forget -- outright swindles.

We tend to forget that all this hugger-mugger once had a relation to real economies. The basic truth about real economies -- at least the industrial-strength ones -- is that they cannot be successfully managed on the basis of revolving debt in the context of no growth -- and no growth is exactly the bottom line of the peak oil story so revolving debt is finished for now.