Chaos theory is a relatively recent development, it wasn't really discovered until there computers fast enough to handle the data. When Ayn Rand wrote books there was no such thing as chaos theory. People knew that recessions, stock market crashes, riots, and other catastrophes happened but didn't know how to model them accurately.

So in the literature for laissez faire there is little understanding of chaos and how it works in a mathematical sense. It's only in the last twenty years it has become highly developed, and in the process changing the shapes of cars and planes since turbulence is chaotic. Many stock market programs look for chaotic patterns now.

So even relatively recent ideology on the right fails to take into account this enormous discovery. Some aspects of an economy cannot be simplified and don't work according to market principles of randomness. You can choose to disbelieve this but it is a fact nonetheless.

The biggest problem is that policy makers who don't understand this tend to sail too close to the edge, not realising that in terms of chaos this is leaving the economy and other policies open to catastrophe. Stresses on the economy like huge tax cuts and letting the rich people's percentage of wealth rise too much puts the economy dangerously close to the edge of a catastrophe, which can be seen in the rising number of bankrupticies which are smaller catastrophes.

In fact the economy is looking very dangerous according to chaos theory. One of the tell tale signs of a tipping point into chaos is a rhythm of up and down in indicators. That is, you start getting small bubbles and collapses which are happening for example in housing, and spurts in growth followed by declines.

These same kinds of patterns occur for example before prison riots, heart attacks, metal fatigue etc. I'm not sure if these are the same kind of pattern but they look very suspicious.

The same patterns are similar to what is happening in Iraq. A relatively even number of casualties there from day to day, while bad, indicates the resistence is mainly random and unorganised. The thing to watch for is spurts of high casualties followed by relative calm which is a chaotic indicator the lid may be about ready to blow off the situation.

In fact based on how it looks according to castrophe theory it looks like there might be an enormous escalation of violence in the next few months and I mean a large increase. The only thing that might hold the lid on is promises to withdraw and elections.

In terms of the economy I also think indications are it is in a chaotic situation where there are spurts of growth and decline which could be setting it up for a moderately worse situation in a few months time. I think there will be a couple of months of a false dawn and then higher unemployment and bankruptcies.

The chaotic indications also include sudden falls in the dollar, sudden changes in foreigners buying bonds to finance the deficit, occasional alarming jumps in the deficits and declines, sticker shock on the war indicating a fear of not being able to afford this (like a big bill coming into a struggling household), spurts of employment followed by layoffs, ups and downs in the stock market.

These last two are really guesses based on a pretty inexpert attempt to read the chaotic signs, a lot of people are in better situations to examine this than me. So call it a prediction and see how it turns out. these chaotic surges and declines do seem to be getting less and less than a year ago which is a good sign in terms of chaos theory though. The smoother things start to get the better the chance of recovery. The more jerky the recovery the more chance of catastrophic declines in some indicators. When you look at it this way the history of the last two years becomes more understandable.

The worst might well be over, though most of the damage has been caused by serious economic mismanagement as virtually every mainstream economist in the world seems to say.