Winners Shall be Losers

Would that every citizen, prior to receiving suffrage or any other rights, be required to understand the judicial system in the United States of America.  Such literacy might serve as a poignant calibration on the copious fallacies underpinning many of our social impulses.  We may realize that, as egregiously demonstrated this week, the media-hyped Apple v. Samsung case was not a "win" for Apple or a "loss" for Samsung (stay tuned as I show you the context for this argument in the following post), but rather, a huge loss for society all around.  Apple didn't invent the tablet and its "winning" patents - declared invalid when first submitted to the United States Patent Office and issued only with pathetic horse-trading - do not represent the Constitutional intent from which they spring. 

Article I, Section VIII:  Congress shall have the Power: To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

Neither "Progress of Science" nor the "useful Arts" were served by the abuse of a Constitutional right (the only property right granted in the Constitution) perpetrated by both Apple and Samsung with their "rounded edge rectangles", their "rubber-banding screens displays" and their "perpetually moving finger slide-to-unlock" devices.  To be clear, the jury, held in willful ignorance on the error of the presumption that either party had valid, Constitutionally compliant patents, were correct in finding what they were asked to find.  Aided by an explicitly biased foreman who used an illegal standard of, "If this were my patent, could I defend it?," he led his juror colleagues down a path that is in direct conflict with the standard of obviousness and novelty set for the issuance of a patent.  Judge Lucy Koh's blatant, emotionally-charged abuse of the Judiciary, facilitated by her evisceration of complete consideration of the facts in a case with billions at stake around indecipherable claims and restricted evidence, created the illusion of justice while presiding over the miscarriage thereof.  And, with willfulness, she may add insult to injury by trebling the damages for an award in excess of Apple's ridiculous assertions.

Eager to create the stock market hyped illusion of winners and losers, headlines scream their adulation for Apple's alleged victory.  Investors, like the throngs in the ancient Coliseum filled with gladiatorial savagery, rise and applaud when they see the tyrannical emperor mete out faux justice.  But, behind this defiling of the goddess Justitia - not merely blindfolded but eyes gouged out - the throngs celebrate today only to illumine their crucifix-strewn Appian Way to a greater loss tomorrow.  We reward the proclaimed victor only to puzzle over the stench of the charred corpse of Constitutional intent.

First of all - this case is not over.  Appeals are likely.  Restraint of trade that would make the authors of the Sherman Act turn over in their graves is inevitable.  Reprisals are certain.  And both Apple and Samsung will undoubtedly face opportunist patent holders with equally un-Constitutional "innovation" estates who will seek to pile on to the abuse just rendered.  Jury Foreman Velvin Hogan (faux-inventor of an un-maintained, abandoned U.S. Patent 7,352,953 issued in 2008 for recording personal videos on a "disk drive") and Apple's CEO Tim Cook want us to think that this verdict is about teaching the elementary lesson that copying is wrong - incompatible with Apple's or America's "values".  Neither admit the reality that their complicity in the contravention of the Constitution is a more fundamental abuse.

In the fuller light of day, this case reminds me of a seemingly unrelated matter several years ago.  And, fair warning, the following may be the ONLY blog post you ever read in which I actually fully agree with former President George W. Bush, so you may want to print it out and frame it.  When Dubai Ports World sought to purchase Peninsular and Oriental Steam Navigation Company (P&O) in late 2005 and throughout 2006, they followed the law and came to the Committee on Foreign Investment in the United States (CFIUS) to seek approval.  With the acquisition of P&O, DPW would become a major port manager in New York, New Jersey, Philadelphia, Baltimore, New Orleans and Miami.  But eager to fan anti-Middle Eastern bigotry, Congress led by Senator Charles E. Schumer (D-NY), successfully blockaded the full deal ultimately letting the P&O U.S. port interests be transferred to AIG for an undisclosed amount.  In the name of "intelligence" and "security" and over President Bush's objections, the U.S. Congress decided to scuttle a transaction that posed no security risk.  Obviously, AIG's Global Investment Group's acumen for security exceeded that of a bona fide operator.

At the time of this transaction, I pointed out that the "win" for America was ultimately going to be our greater loss.  You see, the same United Arab Emirates (their name had a "branding problem" with the A-word) that allegedly made a reputable, trusted operator a "security risk" also serviced the U.S. Navy's 5^th Fleet in that cozy, placid backwater of the Persian Gulf and the Gulf of Aden!  Zim Integrated Shipping Services, Isreal's largest shipping firm referred to DPW as an entity they were, "proud to be associated with" while New York activists saw DPW as the enemy.  The Jebel Ali port - the most frequented foreign port for the U.S. Navy - was safely managed by the people who couldn't be trusted in New York.  But here's the kicker.  DPW knew that its "loss" was mitigated by two fully anticipated gains.  First, in the final P&O transaction, they would sell the U.S. port operations to AIG's GIG (now proudly owned by the U.S. taxpayer, fixed income investors, and pension holders) for between $783 million and $1 billion.  Second, they knew their provisioning and security contract with the Navy was up for renewal and, not surprisingly, they'd make up their economic loss by liberally charging higher fees to the Department of Defense (in other words, the U.S. taxpayer). 

You see, in a world where our consumerism requires that 80% of our goods originate in ports we neither own nor in which we oversee security controlled by "foreign" operators, we pretend that our local ports must be safe.  This paradox suggests that: a) in their off-loading, contents like dirty bombs, drugs, or weapons become unsafe; and, b) we've had an impenetrable success on controlling port activities to keep guns and drugs out of our nation.  By proving our duplicity - extolling fair competition in Doha (in an Arab country safe enough for trade negotiators) only to sully our national honor by clarifying that fair doesn't apply if you're Muslim - we lost the money in the transaction and permanently entrenched a geopolitical racism for which we suffer a perpetual, self-inflicted moral blight. 

How do Dubai Ports World and the Apple faux victory meet in the same critique?  The answers are quite alarming.

First, both of these cases are built on false pretenses that clearly undermine a greater societal good.  By celebrating an arrogant hegemonic pretext we punish the foreigner and then applaud our local "victor".  By creating an illusion of conflict using unsubstantiated assumptions of superiority derived from our national institutions (the faultless U.S. Customs and infallible U.S. Patent Office, respectively), we laud justice while besmirching our constitutional foundation. 

Second, we create Kangaroo proceedings to publicly humiliate foreigners and explicitly violate our own jurisprudence standards which we would find intolerable in any other venue.  While we gag disclosure of substantive information material to a considered review, we bias the public with a ruse.  Remember, in the Apple v. Samsung case, the jury was invited to apply trade-dress standards to a patent case courtesy of an activist judge.  In DPW, our "national security" interests in the Persian Gulf were somehow less relevant than they are in, say, Baltimore.

Third, our self-inflicted injuries cost in both economic and moral consequence.  Apple (and other U.S. manufacturers) will lose through reprisal actions in other countries.  Apple's desperate attempt to move into television - the only chance that investors could ever get real investment returns for it's stratospheric valuation - will be blocked by companies and countries who actually own the patents on TV and display.  To maintain or grow their business operations, U.S. contractors in the Gulf region found it necessary to abandon their U.S. nexus and relocate their operations (and their tax liabilities) to foreign countries harming direct and indirect economic national interests in the wake of DPW.  While lauding "innovation" and "intelligence", we displayed pure contempt for both in both instances undermining any vestige of credibility.  And, when we face a profligate patent issuance system (for example the explosion of patents in China), we will see our economic growth horizons curtailed for two decades while they apply our own ill-advised standards against our own export interests.  Courtesy of Chuck Schumer's Congress and Lucy Koh's courtroom, we've celebrated an impotent skirmish while entirely losing any claim to moral imperative.

We all lost this week.  Samsung executives were correct in saying that the U.S. consumer will lose in the short term vis-à-vis technological options today and chilling innovation options tomorrow.  But the greater loss to the general public is the reinforcement of an institution - the U.S. patent system - that promotes counterfeit "invention" as a necessary utility for masquerading trade biases.  And, like the DPW case, the quintessential casualty is the collective admission that our much celebrated successes are not based on absolute merit and quality (under such a standard, our greatness would be, well… less great) but rather based on our conspiracy with our social institutions and their manifest ignorance.  Should we actually seek to play on a level field - one where knowledge and transparency were unqualified standards - we'd find that our capacity for collaboration and competition would be atrophied or entirely paralyzed.

Do yourself a favor.  Use your iPhone, Galaxy IIIS, HTC, or Nokia and Blackberry if they survive their own, self-inflicted corporate suicides to liberally infringe bogus U.S. patents, and Tweet, LinkedIn, Facebook, hyperlink, re-post, digg, or do whatever else you do to share this post with all your friends.  In our name and preying on our ignorance, this system will persist until We the People call for a More Perfect Union.  That won't happen in passive diffusion but can only emerge if we recognize that there's no honor in hollow victories.  While Justitia may be blinded for the moment, do her a favor and hold her hand so we can safely cross the road to more suitable future. 

Euthanizing Entrepreneurship

euthanise:  vb  to kill painlessly to relieve suffering from an incurable illness

entrepreneurship:  n  the act of owning or managing any enterprise, usually with considerable initiative or risk attempting to make a profit

The San Francisco International airport seems like the perfect place to call for the euthanizing of entrepreneurship.  I was dangerously close to writing an equally inflammatory missive on abolishing "leadership" but there's something about the fog of the San Francisco bay that seems to justify the unveiling of the mists that have blinded economists and the public for far too long.  In a week where the Romney-Ryan campaign has once again rolled out the diaphanously clad muse chorus calling for the removal of tax burdens from the business owners who employ so many (an economic argument for tax relief for the upper class that has never been empirically linked to job creation any more than federal stimulus creating employment on the liberal side of the aisle) it's even more important for serious minded people to discontinue their laudatory support for a fundamentally flawed principle.  "But," you might ask, "why do you see entrepreneurship as an incurable illness in need to merciful death?"

The answer requires us to take a small journey.  And while, more suitably disrobed if we journeyed into the world of the French mercantilist Richard Cantillon, an early proponent of the ill-fated John Law, and Adam Smith (Wealth of Nations, 1776), we must visit them only to remind ourselves that both applied explicit individualism to suggest that the heroic mercantilist or industrialist is a success in his mastery over resources and labor and his sociopathic impulse to maximize profits by constantly managing scarcity just above the unsustainable breaking point.  Profits, they argue, are to the rentiers and capitalists and never to the general benefit of society.  It's more helpful for us to frame our argument with the modern progenitor with our entrepreneurship addiction, Joseph Schumpeter.  Schumpeter, ironically in harmony with Karl Marx and John Maynard Keynes, all forecast the collapse of capitalism (see, my title isn't far off the mainstream) in a day when the role of the intellectually adept "entrepreneur" and his executive skill will, " be harnessed to the service of the community on reasonable terms of reward."

Whoa!  Hold your proverbial horses!  You mean to tell me that the patriarchs of our economic system actually saw a future when industrial democratic institutions would be so invaded by corporatism that the public would actually "revolt" in a fashion in which workers would foster adaptive, self-regulatory, autopoietic endeavors?  Absolutely!  And that time is upon us.

What's wrong with entrepreneurship (and its sociopathological cousin, leadership)?  The answer is simple but the permutations of its consequence are quite challenging.  Ever since the U.S. Small War Plants Corporation Act of 1942 and its first off-spring, the U.S. Small Business Act of 1953, the United States has attempted to lead the world in the fostering of risk-taking ventures.  While we've focused on the individual, who against all odds, creates enterprises filled with successful stories of vast wealth creation - most celebrated in the 60 mile circumference of my momentary nexus - we forget that none of the monetary successes were formed without:

a) anti-competitive wartime procurement excesses (a tax tariff taking from the public budget and distributing to enterprises and their capital providers);

b) tax relief for the capitalist in the form of capturing enterprise (LP) losses to offset investment income (also a cost to the national general revenue for the benefit of a few); and,

c) tax-deferred pension liquidity which legally pumped fiduciary capital into speculative enterprises (remember that VC didn't really find its footing until it had pension side-car investments).

You see, whenever someone came up with an idea for a new business, the default to calling it an entrepreneurial venture was not exclusively to create jobs.  As evidenced over the past 30 years, most of these ventures fail and if you follow the propaganda, you're told that this is "risk".  But that fails to address the fact that by creating huge churn in small "failures", the tax loss benefits accumulate without ever being detected.  The reason why venture capital has thrived with its ludicrous "invest in 10 deals to win in 1 or 2" is to cover the reality that the investor actually can "win" in all the deals as long as they're jammed into the right corporate equity structure to tax-harvest the losses.

Entrepreneurship, and its formal indoctrinated training regimes, have celebrated the individuated illusion of Cantillon, Law, and Smith.  It has been predicated on the illusion that the alleged creative or inventive act and its steward is the de facto basis for an individuated enterprise.  Two errors.  First, truly disruptive "invention" happens less frequently than we'd like to think.  Most of the time, "invention" is a term applied to an individual's impulse to think that they've stumbled upon something that is "new".  Yet that newness is, most often, an illusion created by selective ignorance.  Readers will note that in their recent trial, both Apple and Samsung introduced (and vigorously tried to conceal) evidence that neither party actually invented the tablet mobile device though both vigorously defend their patents on the same!  Second of all, this impulse fails to discern the difference between a standalone enterprise versus a utility.  Facebook (rapidly becoming emblematic of the worst of IPO delusions) is a great example.  Facebook provided a compelling utility which, like the telegraph, linked people who had previously been disconnected.  However, in an effort to create an enterprise, Facebook followed the already exsanguinated advertising business model into a commodity maelstrom from which it is unlikely to emerge.  Had it seen itself as a transactional disintermediation platform, an HR head-hunter,  or a collaborative engineering enterprise application, it may have had better success (e.g. LinkedIn).

Failing to discern the difference between artifact generator (a standalone enterprise providing productivity units to consumers) and a utility (more suitably linked to users), neither the management nor the capital formation can be suitable (except for the broken tax-loss harvesting models!)

We don't need more businesses.  We don't need more entrepreneurs.  We need more citizen collaborators!  We need, what Keynes envisioned, those who apply their executive skills for the benefit of the community.  This does NOT mean that we kill the notion of profits, wealth creation, or the like.  To the contrary, it means that we reduce the redundant frictional cost created by multiple inefficient disparate units and reward maximizing the complete utility of all of our multi-dimensional assets and CAPEX.  The more wealthy enterprise is the one that can most efficiently maximize its utilization of resources, goods and services for the highest number of redundant purposes.  Profit is derived not from managed scarcity and destructive obsolescence but rather lengthening the productive life of all value bearing units.

And by the way; these endeavors will not be commanded by the most flamboyant salesman or self-promoter.  They may as likely be coalesced by the reflective person who, in contemplation, can come up withmultiple use options that frenetic growth at all costs thinking can never apprehend.  

A Picture Worth $4.5 Million

Kodak CEO Antonio Perez and CFO Antoinette McCorvey got an early Christmas present from U.S. Bankruptcy Judge Allan L. Gropper.  The U.S. taxpayers - including thousands of employees of the once great iconic American company - got a lump of coal (with no hope of a carbon credit for not burning it this winter during those long, snowy Rochester nights).  And, for those of you who struggle to put the interlocking pieces of the jigsaw puzzle together, this is a case where the assumption that somebody, somewhere is looking out for "us" has been proven horrendously flawed.  

First, a few facts.  Antonio Perez is a model for the failure of the U.S. public company leadership paradigm.  After over two decades at HP, his wholesale abdication of candor and critical thinking as CEO steered the once great brand into bankruptcy and, all the way into his Captain Edward Smith impression (think April 14-15, 1912 and an iceberg), he evidenced a complete disregard for any sense of stewardship.  Not surprisingly, while he presides over the demise of his company and in the face of illiquid pension commitments and countless bank covenant violations, his demands for his 'bonus' are an offense to all sensibilities.  In 2006, Mr. Perez foolishly bet on film's slow demise rather than it's meteoric fall.  In a world where he could have easily added telecommunications to digital cameras, he steered Kodak into the teeth of the commodity printer business where Kodak had no advantage.  Despite having no finger on the innovation pulse of the company, he explicitly chose business strategies where Kodak had the least proprietary lead.  And, ironically, in its death, he misled bankers, the markets, and now the Pension Benefit Guaranty Corporation (PBGC) assuring them that the very patents he ignored in management would be the safety net to cover Kodak's financial woes.  Wrong again.  Turning to charlatans - a favored source of confirmation for his delusions - he was certain that bidders would value the digital imaging patents at nearly $2.5 billion.  When the 'market' leaked its opening bids - bids not from manufacturers but from patent litigation protection rackets - they were down by an order of magnitude.

Citigroup has a lot to lose.  With its collateral interest against its $950 million loan to Kodak, it would love to see more than a few hundred million from these patents.  And the pension liabilities for the workers for whom Perez had (and continues to evidence) contempt are becoming more and more likely the unlucky windfall for PBGC.  The trouble is, the PBGC, lured into the same illusion of the value of patent protection racket fueled speculation and advised by the same court jesters who misled banks and investors, has blindly ignored its fiduciary obligation to the public and the Kodak pension holders, and has chosen to take a path of willful ignorance to its own detriment.  Best of all, they did so in writing!

Which leads me to the reason for choosing this topic for today's blog post.  I have pointed out the egregious error of the corporate model shielding individuals from liability.  Perez can be reckless in his tenure as CEO, crash the company sticking it to the creditors and pension holders, and, all the while insist that he is necessary to preside over the autopsy for the murder!  Nothing like having the perp explain the crime scene.  And his bonus, approved this week by the bankruptcy judge, is viable because his employment is worth more than the thousands of jobs erased by his mismanagement. 

Perez is at the helm and the ship is on the ocean floor.  He sank the company.  His shield from responsibility - courtesy of the nature of corporate law - gave him license to his reckless behavior.  And in its collapse, the system propping up this social contrivance is demonstrating that it provides NO oversight to interdict or remedy against incompetence.  Nothing about his role required him to think strategically.  Nothing about his selection as CEO was based on any evidence that he could build a new future for an iconic, technologically advanced brand.  No, he was 'credentialed' by title, not by evidenced innovative thinking.  And he now is added to the annals of the throngs of those credentialed by virtue of being in large corporations who are neither wise enough to discern their own capabilities, nor accountable enough to dismiss themselves when they're in over their head.  And nothing about a liability shield serves any benefit - either to these ill-placed leaders or the companies that they destroy.

We'll be paying for Perez's carelessness.  PBGC will inherit illiquidity and, one way or another, the assets of a great brand will be squandered and We the People will be left holding the bag.  This was an avoidable collision.  And if we're going to get it right, we need to start by holding our leaders accountable - at every level.

So here's a crazy idea.  Occupy Wall Street Occupites are seeking their idea of economic justice.  Citigroup was misled into a credit facility by an opaque financial condition reported by an incompetent CEO.  Both parties stand to lose big time!  So why don't both parties evidence their Common Wealth by working together to shed light on - and reverse the bankruptcy abuses by - the veiled corporate malfeasance being evidenced by this week's endeavors.  If we're serious about getting it right, then let's bury some axes and start pulling out the weeds!

Dark Knight's a-Rising: An Anti-Archimedean Theorem

How do you lose $756 million in market cap in less than an hour?  How do you go from being a stalwart utility for over $20 billion in trades each day to having 24 to 48 hours to survive without a capital infusion or a buyer?  From flash crashes to Knight Capital's $440 million "computer glitch" this past Wednesday, the Financial Industry Regulator Authority's (FINRA) official statement that the firm was "in compliance" with its capital requirements is not much of a fig leaf when Knight's reported cash-on-hand at the end of the second quarter of 2012 was $365 million.  To the somewhat mathematically inclined reader, this would imply that there's a considerable gap ($75 million) between the actual loss and the firm's capital position to cover it.  Not to worry, clients and the public were to be reassured that FINRA and the Securities and Exchange Commission (SEC) were "monitoring the situation."

Based on analysis that we conducted in the middle of the last decade - an inquiry triggered by the ill-conceived conversations about having individuals replace Social Security with privately managed investment accounts - by 2007 the majority of stock market transaction activity was being performed by algorithms and machine implemented trades.  In short, quantitative machines and their slavish formulas had taken over.  Knight Capital's recent fatal "glitch" is a symptom of an ominous super-bubble that is being ignored at our collective peril.  With the world's GDP dwarfed by the notional monetary 'value' of financial instruments and counter-party trading agreements (including the staggering trillions of dollars of alleged 'value' in sovereign-manipulated capriciously created currencies) our entire financial system is one 'glitch' away from Fukashima-style  'critical'.  We've witnessed MF Global, Facebook's technical NASDAQ flop (I'm not referring to Zuckerberg's seduction of investment bankers who should have injected a bit of adult supervision in the now vacuous social cobweb), Peregrine Financial, and the expanding LIBOR rate-fixing collusion where trillions of dollars of transactions have been a 'glitch' away from creating and destroying the equivalent of the GDPs of countries.  Yet somehow, We the People are supposed to be content with a few anonymous government agencies "monitoring the situation."  These are the same 'regulators' who have become the cast for what should be the next white collar forensic CSI reality TV show - one best suited for a role in Batman:  CSI:Gotham City.  They seem to only show up after the dead body is rotting and do nothing about the perps who are preying on unsuspecting victims in broad daylight.

Recently I had the opportunity to listen to a Private Wealth Management team from one of the world's largest financial institutions make a presentation regarding investment recommendations for a high net worth client.  The client had amassed considerable financial wealth building two corporate enterprises - enterprises that were quite lucrative and were acquired by even larger companies.  The team was quite confident in their proposed asset allocations pointing to quantitative data to assure the client that he was taking on 'acceptable' levels of risk with 'reasonable' expectations for returns.  As I looked at the fine print in the presentation materials, I noticed a correlation between two highly dissimilar asset classes which, by their very nature, should be uncorrelated.  Willing to accept that I may be missing something, I inquired about the anomaly. 

"We used historical data to build these models," was the dismissive reply.

"Then I would like to see the data," I responded.

"We've never had a client ask for the raw data," one of the bank's team said.

Within 24 hours, data in hand, not only did I find the error but I also found that the 'data' wasn’t actual data.  You see, where there was information missing, the same regression that was used to model future performance was used to guess what could have happened in the past.  In other words, they were taking 20-30 years of data and, rather than dealing with the absence of measured observations in the uncomfortable (albeit, transparent) way where confidence has to be lowered, they simply projected their assumptions backward to smooth out the future prognostication.

This particular Private Bank group advises billions of dollars of high net worth client accounts and nobody had ever asked for the data?  I wish I was incredulous but, regrettably, I'm not.  We've become accustomed to a world of 'experts' who must - we think - be paying attention.  We can't understand the symbols, the numbers, the math so, we tell ourselves, it's beyond our capacity to critique. 

Which leads me to an Inverted Alchemy first; an anti-Archimedean theorem:

The rate of acceptance of a financial product is inversely proportional to its transparency while the catastrophic potential of the same is a log function of the number of people who purport to be incapable of understanding the product.

Knight Capital and LIBOR rate rigging are but two of the myriad of proofs of this proposition.

I was contemplating this while winging my way northward across the east coast of Australia.  Courtesy of Qantas' liberal distribution of The Australian, I was inundated with accounts of the grim reality facing a country built on extractive industries.  There was the cover story of the myriad of contractors who are experiencing job losses as BHP and other miners contract their production in the face of a global economic slowdown.  There was the rather brazen article about BHP's CEO Marius Kloppers' decision to voluntarily forego his $4.7 million employment bonus in the face of the firm's nearly $3 billion write-down of U.S. shale gas assets acquired from Chesapeake Energy.  Generosity and leadership, eh?  You cause your firm to spend $4.75 billion and within two years more than half of that money is lost and you generously forego a bonus?!  Oh, and my favorite line in the article: "Mr. Kloppers told The Weekend Australian that he had taken the decision to forgo his bonus because, at the end of the day, there had to be accountability."  WHAT?

So how does Knight Capital, LIBOR rate-fixing, Private Bank derision of client intellect, and BHP's write-down come together to teach us anything other than the complete impunity with which we allow the titans of finance and industry to act with total contempt for humanity and the earth?  Quite simply.  All of these are the end product of a social evolution which is leading to calamity.  We have become enslaved with the terminal product of our digital hegemonic illusion in which 'computers' can 'out-think' the human intellect.  And in so doing, we have also blurred the line between investing and speculative trading and have become intoxicated at the casino of productivity decoupled returns. 

While I'm not a huge fan of most Occidental scientific theories - including the most recent Higgs Particle nonsense that confirms that our understanding of physics holds provided that there's no gravity, friction or any of the other observable forces in nature - there is no question that a bit of thermodynamic constraints would do us some good.  Perpetual growth is not appropriate.  In the body we call it metastatic cancer and it's deadly!  Assuming that we can extract anything at a rate exceeding its replenishment means that someone somewhere is going to have to pay dearly and by pay, I mean certain loss.  And believing that a computer - programmed by humans using binary (yes, the lowest complexity possible) code - is somehow less susceptible to catastrophic error than sentient beings (including algae) is assuredly a recipe for disaster.

"What is an individual to do?", I've been frequently asked by people who struggle through Inverted Alchemy each week.  The answer is really quite simple.  Invest Yourself.  Not in things that are too illusive to understand but in things that make sense.  If farmers, grocers, service providers, utility providers, or businesses in your community are in need to capital to help them sustain and grow their enterprises across normal seasons (actual or business cycle), invest with them and ask for a return that is suitable within the scale of their productivity.  Take the time and effort to understand how the enterprises on which you depend work and provide Integral Accounted assets to support those that you see as valuable.  If your local bank (or even your behemoth bank) lends money to businesses to help them operate successfully, see what programs they have which can link you to others in your community to help originate, sponsor, or sustain local enterprises at rates determined by the enterprise's productivity; not some arbitrary interest rate.  And if you have an appetite for global opportunities, invest your time, resources, and inquisitiveness to diligence the same.  And, most importantly, having done all of this, if you get to a point where what you're seeing doesn't make sense and you're being asked to just "trust an expert", run, don't walk, away. 

For in the end, there's no Batman out there winging his way to our rescue from our own self-inflicted wounds.  If you have a 401(k) or mutual fund, there's a decent chance that some of BHP's missing billions actually came from your account.  But, if you paid no attention to the fact that money paid through you was invested in BHP, than you didn't lose it, you threw it away.  And the same helplessness that leads to the belief that the system's to complicated to understand is setting us up for even greater disruptions.  To be sure, between now and then, we could see governments and corporations create distractions: cyber attacks blamed on Asia; a mine killing and maiming troops deployed with the 5th Fleet in the Persian Gulf and East Africa blamed on Iran; grid failures or electromagnetic interference that brings down computers and systems blamed on our villains du jour.  Some of these could delay the inevitable reconciliation but these deferrals won't fix anything.  We must reclaim our expansive capacity to think and collaborate, deploy it in a scale commensurate with the confident reach of our knowledge, and embrace our own responsibility for a system created poorly in our most profane image.  Do nothing and you're one 'glitch' away from collapse of the matrix which entangles so many.  Be an informed participant and you'll be at liberty - fully alive and devoid of any need of rescue.  Then, who knows, it may be a sunrise instead of a dark night!