Sunday, May 1, 2011

Butterfly Effect a flawed argument; Credit Card Effect better




I think the 'Butterfly effect' has a flaw, or is at least misleading.

It suggests two attractors: the (flying) butterfly - which is governed by aerodynamics, and the (blowing and turbulent) typhoon - governed by thermodynamics. 
Chaos theory suggests that each and every attractor demonstrates 'chaos' in a system; that a system (an attractor) in isolation will experience chaos - without any other influences.

The real butterfly effect maybe more like.. 'the flapping of a butterflies wings could explain the presence, or existence, of the large (747) jet aircraft flying today - which is aerodynamics; or the heat emitted from the butterflies breath, could explain the typhoon, which is thermodynamics.
What do you think?

The credit card effect - one persons credit card debt could bankrupt a country - or the world.
Dangerous debt burdens migrate from the small scale  - individual  - to the large scale - country - through moral hazard bail-outs.

This is the perfect fractal in action: note the principle or idea is the same and that scale is irrelevant.


Today it is countries that are getting bailed out.

The perfect storm.

2 comments:

  1. " I go broke, and so is everyone else in a similar situation. "

    This isn't a description of one person's cc default bankrupting the world per se.

    I do however understand what you mean, and completely agree, FWIW.

    Currently this situation is being ignored courtesy of fraudulent accounting practices and massive currency issuance to recollateralize those debtors deemed TBTF.

    re: Butterfly effect, you are pointing out that the butterfly in question has an effect on at least two different systems.

    Perhaps the credit card effect does too: the availability of actual value present in tangible goods and services in exchange for claims upon them (currency and defacto currency such as credit); the psychological confidence the users of this system have in these claims to secure their "share" of these tangible values.

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