“Terminal State of Broken”

Monty Pelerin / EconomicNoise.com

As markets continue to confound, it is useful to reflect on this quote from Jim Sinclair, particularly the last sentence:

The world has taken on a “virtual reality” with no reference to what really is. This is the biggest market power play of smoke and mirrors in history. It is happening because the financial system is in a terminal state of broken.

I could not agree more. This same view has been expressed since the inception of this website (over three and a half years ago). Mr. Sinclair’s wonderfully clever and colorful phrase,”terminal state of broken,” captures matters well. He used it with respect to financial markets, but it applies to much more.

The terminal state of broken also applies to government and the institutions contained therein. Furthermore, these areas have infected non-governmental institutions, especially those which derive their existence and/or success from a close association with government. These include the educational system, defense industry, highly regulated industries like medicine and finance and a host of others.

The common denominator in all of this is government. It is the modern day equivalent of typhoid Mary, infecting all that it comes in contact with duplicity, dishonesty and corruption. This “brokeness” now infects the very morality and civility of society. Institutional behavior provides the moral guidelines (or lack thereof) for society. Corruption, deceit and theft are not virtues, yet if they are practiced openly they cease to become vices.

Immorality in higher institutions weakens the social and moral fabric of a society. Incivility and coarseness is the least of the problems. Justice Brandeis commented on the “trickle down” effect of institutional behavior, focusing on that of government itself:

In a government of laws, the existence of the government will be imperiled if it fails to observe the law scrupulously. Our government is the potent, the omnipotent teacher. For good or ill, it teaches the whole people by its example. If government becomes a lawbreaker it breeds contempt for law: it invites every man to become a law unto himself. It invites anarchy.

Brandeis’ warning was early enough to head off our current condition, but it went unheeded. Instead, our “omnipotent teacher” chose to ignore ethics and morality as they stood in the way of the desire for power and wealth.

continue article here:

http://www.economicnoise.com/2013/05/23/terminal-state-of-broken/