The Collapsing Hallucination

 

Every nation is operating on models that are collapsing without those at the controls being aware that the implicit assumptions of their models no longer map reality.

A recent article lays out the collapse of the dominant geopolitical model of "rising powers generate conflict": The Stagnant Order And the End of Rising Powers. The basic idea is that the foundations of "rising powers" - demographics and productivity gains - no longer support grandiose planetary dominance.

Rather, demographics is already baked in as a crushing liability to all existing powers, and despite endless claims that technology will jumpstart productivity, the reality is productivity gains have flatlined for decades. "Growth" is a function of expanding debt, not productivity gains.

This dynamic extends beyond geopolitical models: all the models being used to explain and control the world are all collapsing: economic, social, political, they're all collapsing because they are all constructs assembled in eras that no longer map the present.

As I explained in The Entire Bubble Economy Is a Hallucination, models collapse because of two limitations that define all models:

1. All models are self-referential, as they "train" (i.e. generate current analysis) on a limited spectrum of metrics that are presumed to summarize the immensely complex "real world." The model is blind to its own self-referential feedback loop and the limits of the metrics it bases its output on.

Over time, this self-referential "training" degrades the output - the analysis and the decisions based on that analysis - to the point of hallucination: the model is generating output of how the world works that has drifted to far from authentic understanding that it is a hallucination, one that is taken to be "real" by those controlling the model.

2. The metrics being measured leave out enormous fields of the real world, but what's been left out isn't explicit, as it's all based on what is considered "knowable" and "known," as I explained in What We "Know" Is More Dangerous Than the Unknown: these assumptions are hidden limitations of the model, as we only manage what we measure.

The collapse of the dominant models is visible everywhere, but perhaps most painfully in economics, which has become the dominant model of how the world works due to the dominance of statistical models of finance and the policies those models generate.

I addressed this failure of economics to accurately predict outcomes back in Why Isn't There a Demonstrably Correct Economic Theory? (August 16, 2013) "This system is intrinsically unstable, as the financial claims of credit and fiat money on limited real-world resources and wealth eventually far exceed real-world resources, and the system of claims collapses in a heap. Although economics doesn't recognize it, the operative phrase here is systemic injustice."

All the extant economic models are artifacts of bygone eras. The economic models of the 19th century - all based on the implicit assumption that resources were endless - were modified in the 1930s into Keynesian hallucinations still based on endless resources: let's just pay people with freshly printed "money" to dig holes and fill them. This presumes endless resources to squander on digging holes and filling them, as if that is a productive use of labor and resources.

This hallucination continues to be the dominant paradigm: resources are endless because we're clever and there will always be a substitute for whatever is depleted, so the "solution" is just print "money" to pay people to dig holes and fill them.

The "problem" is "growth" of consumption, and so if we "solve" that problem by goosing consumption by any means available, we enter "Mouse Utopia," an artificial world of never-ending abundance.

The book Money, Blood and Revolution: How Darwin and the Doctor of King Charles I Could Turn Economics into a Science takes a stab at turning economics into "science," but that's not actually "the problem." The real problem is all models have intrinsic limits and end up hallucinating, but those controlling the gearing of the model depend on it to maintain their own power, so they are blind to the failure of their precious model to track the real world and generate authentic understanding.

So we're told that all is well because GDP and the stock market are rising, and since we have lots of natural gas to power AI data centers, we're entering a "Mouse Utopia" of endless abundance. That these are all hallucinations is lost on those clinging to collapsing models as the means of maintaining their power.
That the hallucinations are sustainable is itself a hallucination.

That the inhabitants of "Mouse Utopia" are not focused on how natural gas and AI are going to make Utopia even more utopian is lost in the current model collapse: antisocial behaviors are accelerating due to the the artificial nature and exploitive structure of our "Mouse Utopia," but these realities aren't measured and so they don't exist in the current model's self-referential hallucinations.

All the dominant models are collapsing at once, and no nation is immune to the consequences, as every nation is operating on models that are collapsing without those at the controls being aware that the implicit assumptions of their models no longer map reality.

by Charles Hugh Smith at oftwominds.com on December 17, 2025

There are currently 164 million people employed in America. About 34 million of those are employed part-time. When you understand the working age population is 275 million and your friendly number fudgers at the BLS declare 103 million of them NOT IN THE LABOR FORCE, and hysterically declaring only 7.8 million Americans are unemployed, you understand what a fraudulent economy we have. The reported 4.6% unemployment rate is complete and utter bullshit. In reality, it is north of 20%. Welcome to the golden age.

The percentage of total jobs in the Education and Health Services sector has grown from 4.8% in 1950 to 17.8% today. Wow!! We must be the smartest, healthiest nation on earth. Not quite. With 28 million teachers, doctors, nurses, and mostly administrators (aka overhead), our education system matriculates millions of barely functional idiots into society every year. Meanwhile, as a country, we are sickly, fat, lazy, dependent upon Big Pharma drugs, and spend more on healthcare than any country on earth.

Proof we have become a non-productive, debt dependent, government dependent, shadow of our former industrial powerhouse is the decline in the percentage of manufacturing jobs from 30.2% in 1950 to 8.0% today. We borrow and consume, when we used to invest and build. Trump can threaten, tariff the world, and make bullshit announcements about manufacturing jobs coming back, but they are not coming back. Any new manufacturing plants will be operated by robotics.

Even though the percentage of government employees (aka parasites) has remained relatively steady since 1950, we are stuck with 24 million blood suckers who contribute nothing to the country’s productivity. The average working schmuck has to pay outrageously high taxes to pay the bloated salaries and pensions of these government freeloaders.

And now some bad news for the formerly well paid workers in the Professional & Business Services sector, which had grown from 6.6% of total jobs in 1950 to 14.1% today. ChatGPT and the avalanche of AI tools are eliminating jobs in these sectors at hyperbolic speed. These are the same assholes who used to tell blue collar workers to “learn to code”. Well, now the plumbers, electricians, and construction workers can recommend they learn to be fry cooks at McDonalds, but too late, robots are taking those jobs.

The relatively stable employment situation over the last few years has been the only thing keeping this ship of fools from sinking. But, the increase in the fraudulent unemployment rate from 4.0% when Trump took office to 4.6% today shows the ship is taking on water and it won’t be long before millions are drowning under the waves of debt, delusion, and dumb decisions.

by Jim Quinn at theburningplatform.com on December 19, 2025

The global disruptions we have seen in recent years are frequently presented as a chaotic sequence of events: a ‘pandemic’, inflation, energy shortages and war. Little wonder that most people are confused. However, a structural analysis reveals a more deliberate controlled demolition of the 20th-century social contract.

We are witnessing a transition from a productive capitalist model, which required a healthy mass labor force, to what Yanis Varoufakis calls a techno-feudalist order.

The engine of this transition was a desperate financial stabilization strategy carried out by means of a public health event. As identified by Professor Fabio Vighi, the global financial system reached a point of terminal instability in late 2019, evidenced by the collapse of the US repo market (where banks lend to each other).

By freezing the real economy through lock downs, central banks performed massive liquidity injections to save the banking-finance tier. If that money had entered a functioning economy, it would have triggered hyper-inflation. By keeping the population at home, the elite performed a stealth bailout that preserved the dominance of the financial class by sacrificing the productive middle class.

However, a geopolitical reset also had to take place. For decades, Germany’s economy relied on three pillars: cheap Russian gas, high-tech exports to China and a US security umbrella. By late 2025, all three have been fractured. As Prof Michael Hudson notes, the ‘sabotage’ of the Nord Stream pipelines was a structural necessity for the Western financial elite.

If Germany continued to integrate with Russia and China, it would have created a power pole independent of the US dollar. The conflict in Ukraine served a purpose: it resulted in Germany replacing Russian pipeline gas and being forced into a massive build-out of liquefied natural gas (LNG) infrastructure and reliance on LNG from the US. Unlike pipeline gas, LNG must be super-cooled, shipped and re-gasified, a process that is inherently 3–4 times more expensive.

The result is that, in 2025, German industrial output is at its lowest since the 1990s. Heavy industries like BASF (chemicals) and ThyssenKrupp (steel) are relocating to the US or China. Meanwhile, Germany is pivoting from an industrial giant by betting on creating jobs in the likes of the green energy sector (including becoming a ‘hydrogen hub’), semiconductors and microelectronics, robotics and biotech and diverting its capital into a €150 billion annual defense spend.

At the same time, while Germany collapses, the City of London thrives on global volatility. Among other things, the City is the global hub for war risk insurance and energy brokerage. When a pipeline is destroyed or a strategically important shipping lane is threatened, the price of war risk insurance triples. The London insurance market (Lloyd’s) extracts these ‘risk premiums’ from the global economy.

The City’s brokers treat geopolitical instability as a volatile asset class. Even as British households are crushed by energy bills, the financial center remains profitable by extracting wealth from the very chaos that foreign policy helps to manufacture.

Moreover, the City of London has secured its position as the indispensable middleman of the transatlantic energy pivot. While the physical gas originates in the US and is consumed in Europe, the financial and legal architecture of this trade is almost entirely managed in London.

Commodity brokers and exchanges like ICE (Intercontinental Exchange) in London have seen record volumes in LNG futures and derivatives. These are financial bets on the future price of gas. As volatility increases, the fees and commissions extracted by London-based traders and clearinghouses skyrocket.

More than 90% of the world’s marine insurance, including the specialized, high-premium coverage required for LNG tankers, is underwritten through Lloyd’s. By enforcing strict war risk premiums on any ship entering European waters, London effectively imposes a private tax on every molecule of gas that replaces the lost Russian pipeline supply.

This ensures that while European industry is struggling with high energy costs, the City’s financial firms extract a massive toll from the logistics of the replacement supply.

Of course, the structural readjustment of economies leads to huge social tensions. This is where the ‘Russian threat’ comes in. It has been elevated to an all-encompassing internal narrative used to manage domestic dissent and to galvanize the public to rally behind the flag. The bogeyman serves a vital psychological function by converting the growing anger of the impoverished into a patriotic duty to endure hardship.

Under this regime of ‘permanent emergency’, any industrial action, protest or systemic critique can be branded as malign foreign influence or subversion, allowing the state to use new, expansive policing powers to suppress internal friction.

To justify the redirection of billions in tax revenue away from failing public services and into the military-industrial complex to create ‘growth’ in a failing economy (a desperate attempt to revive a collapsing neoliberalism—see chapter two here), the state must maintain a high-decibel level of existential fear. In the UK, the Defense Industrial Strategy 2025 explicitly frames militarization as an engine for growth, using the specter of a Russian invasion to legitimize a state-subsidized transfer of wealth to high-tech defense contractors.

By manufacturing a permanent state of war-footing, the elite ensure that a main pillar of the economy is the one that directly serves the security of the state, while the population is told that their dwindling healthcare and pensions are a necessary sacrifice for national survival.

In this respect, we also see the changing status of the human being. In the industrial era, the state ‘subscribed’ to the working class, investing in the NHS and education because it required a fit population to drive production. Artificial intelligence, robotics and economic decline increasingly make much of this labor force redundant.

As capital may no longer find the reproduction of labor desirable or profitable, the state withdraws its subscription. The visible rot in the NHS is the result of deliberate divestment. (The UK private health insurance market has surged to a record £8.64 billion, a nearly 14% year-on-year increase.)

If the worker is no longer required for production, the state views healthcare as a ‘non-performing cost’ to be liquidated.

When a population is no longer an asset but a fiscal liability, the state moves from care to managing exit. It’s no accident that we have seen calls for the rapid legalization of assisted suicide across the West. It might also help to explain the prescribing of midazolam and do not resuscitate orders in care homes during the COVID event. Data shows that the UK government purchased vast quantities of midazolam (two years’ worth of stock in just two months) in early 2020.

In 2025, official impact assessments noted that legalizing assisted dying would result in “considerable cost savings” for the NHS and state pension system—estimated at up to £18.3 million within a decade for pensions alone. The Terminally Ill Adults (End of Life) Bill Impact Assessment (May 2025) officially quantified the ‘benefits and pensions’ impact. It estimated that by year 10, the state would save roughly £27.7 million per year in unpaid pension and benefit payments due to assisted deaths.

By accelerating the ‘off boarding’ of the non-productive elderly (whatever happened to the COVID era marketing slogan of ‘saving granny’?), the system wipes billions in future pension liabilities off the state balance sheet.

Moving forward, what can we expect? We will see the elite continue to roll out the narrative of permanent emergency under the guise of climate crisis and Russian threat to provide the ideological discipline required to justify a boosted austerity. Meanwhile, digital ID and central bank digital currencies will create a system of total surveillance. In this emerging system, the citizen is replaced by the ‘managed subject’, whose access to the economy is contingent upon a social credit score.

by Colin Todhunter at theburningplatform.com on December 23, 2025