Americans still say they believe in free markets, democracy and financial rectitude. But only as platitudes and hypocrisies... the free market was one of the first casualties of the post-1971 fiat money period. In a free market, people earn money by working (income) or by saving and investing it (capital growth). But credit-based money needed neither work nor saving; you just had to know the right people.
Those of us who are libertarians have a tendency to speak frequently of “the New World Order.” When doing so, we tend to be a bit unclear as to what the New World Order is. Is it a cabal of the heads of the world’s governments, or just the heads of Western governments? Certainly bankers are included somewhere in the mix, but is it just the heads of the Federal Reserve and the IMF, or does it also include the heads of JPMorgan, Goldman Sachs, etc.? And how about the Rothschilds? And the Bundesbank—surely, they’re in there, too?
Government mandated fiat currency simply does not work in the long run. We have empirical evidence galore – every fiat currency system in history has failed, except the current one, which has not failed yet. The modern fiat money system is more ingeniously designed than its historical predecessors and has a far greater amount of accumulated real wealth to draw sustenance from, so it seems likely that it will be relatively long-lived as far as fiat money systems go. In a truly free market, fiat money would never come into existence though. Greenspan was wrong – government bureaucrats cannot create something “as good as gold” by decree.
Greece’s problem can only be truly solved if large scale debt restructuring is accepted and executed. But that would initiate a chain of events that would bring down the bloated zombie that is Wall Street. And it just so happens that this zombie rules the planet. We are all addicted to the zombie. It allows us to fool ourselves into thinking we are doing well – well, sort of -, but the longer term implications of that behavior will be devastating. We’re all going to be Greece, that’s inevitable. It’s not some maybe thing. The only thing that keeps us from realizing that is that the big media outlets have become part of the same industry that Wall Street, and the governments it controls, have full control over. And that in turn says something about the importance of what Yanis Varoufakis and Syriza are trying to accomplish. They’re taking the battle to the finance empire. And it should not be a lonely fight. Because if the international Wall Street banks succeed in Greece, some theater eerily uncomfortably near you will be next. That is cast in stone.
In Part 1, we described the world’s economy as one that is based on energy. The design of the system is such that the economy can only grow; shrinkage tends to cause collapse. If this view of the situation is correct, then we need an ever-rising amount of inexpensive energy to keep the system going. We have gone from trying to grow the world economy on oil, to trying to grow the world economy on coal. Both of these approaches have “hit walls”. Now we have practically nowhere to go.
When the illusion that the Status Quo can fulfill all its promises to everybody dies, the Status Quo starts the terminal slide to effective collapse.
As politicians know, dead people don’t vote. In fact, politicians today routinely steal from the dead... specifically the unborn. Children that won’t even be born for decades will inherit enormous debts that have been racked up today on drones, bombs, and wars that were waged in our era. President Obama’s most recent budget makes this abundantly clear...
Again and again through history, first you have the massive deflation and then government is forced to debase the money supply that finally reverses the economy sending it into a inflationary spiral. The second phase is when gold will rise. But you first have the deflation (that we are seeing now) that reduces tax revenues and then you have the inflation set in motion by rising costs (waiting in the background).
We will readily admit that one cannot know with certainty whether the bubble in risk assets will become bigger. However, it seems to us that avoiding a big drawdown may actually be more important than gunning for whatever gains remain. We don’t think it is a good idea to simply “take the blue pill” and rely on the idea that the effects of the money illusion will last a lot longer. It is possible, but it becomes less and less likely the higher asset prices go and the more money supply growth slows down. If no-one can say when, then the “blue pill” strategy has a major weakness. It means that things could just as easily go haywire next week as next year.
Wealth inequality isn't just a political issue - it's a survival issue. When a society hits a certain level of economic disparity, it is set on a path towards destruction. It happened to the Roman Empire, and it will happen to the United States.
This is the final stage of the collapse of the Roman Empire. When the state runs out of money, it historically attacks the people. In Rome, whole armies began sacking their own cities to get paid. The police are doing just that. Whatever they can confiscate goes to funding their own pensions. This is a national problem that will only get much worse going into 2020. We have nobody in Washington representing the people any more.
Around the world, unsustainable policies from the 20th century are beginning to fail in earnest. What will the future geopolitical landscape look like in their aftermath?
To say that gold is in a bear market is to misunderstand both gold and markets. Gold isn’t an investment that goes up and down. It is money in the most basic store-of-value sense. Most of the time it just sits there, and when its price changes in local currency terms that says more about the local currency than about gold. But when currencies collapse, gold shines.
"We are living in an aberrational world. It’s all driven by an orgy of money printing...it sure feels to me that we’re nearing the day that it spins out of control. By the end of this year or by the start of next year, without QE, the market is going down."
"To maintain your sanity, you need to turn off the hype machines of some of the financial media like CNBC."