The sandpile non-linearity seems a variant on Nassim Taleb's argument that VaR and all the other self-serving models finance economics has used for the last 20 years utterly ignore the statistical possibility of a Black Swan. Your picture of all those bankers cheerfully pumping their own little pieces of poison every day into a system they don't know the limits of, each iteration strengthening their model and therefore their conviction that all is well, reminded me of Taleb's parable:

'A Turkey is fed for a 1000 days — every day confirms to its statistical department that the human race cares about its welfare "with increased statistical significance". On the 1001st day, the turkey has a surprise.'

But it also feeds into the ideas of Joseph Tainter, whose 'diminishing returns from increased complexity' theory I came across in refined form on John Robb's Global Guerilla blog. The grains of sand added each day by your bankers are not the same as they were a few years before; they are further sliced and diced and interconnected via yet more financial 'innovation' from the same 'useful model' factory which produced VaR etc, so that each addition doesn't just destabilise due to the extra weight, but to the extra interconnection and complexity of association. Each successive layer of sand (or derviatives) may early on tend to increase the 'efficiency' of the system, but is also with each iteration increasing its fragility too.

As little as ten or fifteen years ago, we didn't have this giant global pile of sand, we had a Mexico pile and an Argentina pile for example, and if one of these piles had a landslide, the other piles would be if not unaffected, certainly only mildly changed at the margins, the centre holding just fine. This is built-in system 'slack' or redundancy, which is anathema to efficiency mavens and economies of scale experts and therefore to the bottom-line watching bean counters, but which in retrospect is not a bug but a feature of the olden days that we would do well to consider emulating to some degree into the future, as a prophylactic against that lethal side effect of globalisation, which we might call 'having all your eggs in one brittle basket'.

That incoming wave has three parts – peak debt, peak oil and global warming.

Perhaps the economy is the same in this regard? Doomed to lurch on, from crisis to crisis, but never fundamentally changing?

Of course – an incoming wave (an external event) changes the whole picture….

Thank you. We are a community – of resistance and dissent. I can't think of any group I would rather be a part of right now.

You, it seems to me, are engaged in that task. To square the circle in economics. Not the often absurd economics of the academic traditions but the economics which we have to understand and work with because it runs our lives … which either we are befuddled by or we try to wrestle with and try to understand even if you hate the subject. We are not trying to understand this because it is joyful knowledge.
It is anything but joyful knowledge. We are in crisis ..But in its truthfulness we all, I suppose, take a kind of grim solace. There is a kind of inner pleasure in being part of this thinking resistance you have been conjuring up in this blog.
For you are right about it being a forum too. The comments themselves are a vital part of whats going on here. You are certainly that kind of philosopher… the kind who needs to refine the insights he has with debate and interaction.

Because we cant avoid trying to understand how this crisis is being created we need to come to it with a fresh vision. You have the ability to see … and lead us along, not so much to a view of things in the sense of an opinion but… to the view of things as they are.
Its like you have been lifting up the skin and we then get to see the seething energy beneath. At times its like the Botany of Banking!

Maybe we are t a point in History when Thinking This Through. really making the effort to see it, is the most important thing that we can be doing right now. A model of what is happening and what hides behind the constant flickering information gauze. We have to learn to observe it with just this kind of knowledgeable scrutiny…

These are facts but they are not easy ones, at least, not for many people. Economics or Banking makes most people want to just change the channel fast.
But its like we …I mean your growing band of readers…know that this education ..this Re Education you are helping to provide is vital and in the truest sense of the word. If Debt is becoming a new form of public slavery.
To not understand becomes a total dereliction of our civic duty. It is to walk blindly into a future they are preparing for us.. because perhaps as groups of humans we can be manipulated, are not quite as clever as we like to think. As groups we get herded. They must think so anyway. Somehow we have to disabuse them of this belief.
Knowledge of this kind is power. They lose a vital power by us gaining knowledge. They lose the power to mystify. Thats the task you have set yourself here and I can't think of a more important one.

The banking system will be resized into a few banks per country. Depositors will make deposits. Banks will make profits but far more slowly. Lending is absent for decades. Prices will fall and no one will give a government sanctioned answer until they can see the light at the end of the tunnel. Just as in Japan.

But the legal system and trust in civil society will have corroded! Cynicism will be universal and the damage made worse as the BIS has said.

Let us not forget however that we are not dealing here solely with renegade banks. Banks are but the instigators of a socio/economic system devoted to allowing them to do what they are doing. But they of course need the political and commercial collusion of a complex civic, judicial and executive framework that runs deep.

Not all banks are created equal of course. As an enterprise, a bank is no worse than any other endeavor. What is indisputable though, is that there is a select elite of banks that stand above the entirety of society (nationally and globally) and they are the Primary Dealers.

The primary dealers can only operate through the willful negligence of a complex network that has been nourished and put in place over many decades.

If that were not the case, jails would be overflowing with business executives and politicians.

Someone in these pages commented that they were ready to give their life to get back liberty. It does not have to come to that.

Our job is to inform the greater public that the system that is oppressing and exploiting them is itself vulnerable to the very dynamic that foists misery upon all: LEVERAGE.

Leverage is our friend. We must educate the young and the activists that we can take our liberty back and it need not come at the cost of our lives. It may result in some jail time in the near future but for the time being we could bring the political system to its knees with a little material sacrifice.

https://www.youtube.com/watch?v=r4k77vjeEL0&feature=player_detailpage