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THIS is where our Monetary System is Headed

Freaking Heck's picture




 

By: Chris Tell at http://capitalistexploits.at/

 

 

I've never been trapped in a fire before and trust me, I have had plenty of opportunity. Yes, I was THAT kid, the one who played with fire. The trick was, and still is to steer clear of the flames, to anticipate what and where. Fire is however notorious for doing what it wants and once its out of control even the best firefighters don't stand a chance.

  Each day that passes we come closer to the arrival of a monetary fire that threatens to dwarf anything in our collective living memories. Watching the Australian bush fires in New South Whales recently made me think of our monetary system. Funny that.

The Australian bush has been burning long before the Brits began exporting their best and brightest to the “lucky country.” Right now the fires are raging. It was inevitable. Like the business cycle nature too abhors excess and steps in to correct it, clear the dead wood and prepare for rebirth.

What is often forgotten is that nature has evolved to rely on bush-fires as a means of reproduction and new "birth." Fires are an integral part of the ecology of the planet's surface. Humans can try and prevent these inevitable fires by “controlled burnings”, clearing out much of the dead underbrush, but it's not foolproof.

The fires now raging in New South Whales are in part due to an extensive build up of dry brush which is likely overdue a good burning. The longer the dry bush remains unburned, and the more that accumulates the greater the risk of an inevitable fire. The result will be much greater than that which would have preceded it should a fire have taken place sooner. This is a basic, easy to understand law of nature.

Financial markets are NO different. The dry brush of excessive credit, monetary stimulus, rampant fraud, and government interference, which has caused the largest sovereign bond bubble the world has ever seen, has not been cleared or burned to allow for regeneration. In contrast we've actually been ADDING to it, doing the exact opposite of the "controlled burn."

The market, like nature, has attempted to correct these excesses many times, only to be met with central bankers fire hoses spraying liquidity at ever increasing volumes and velocity. As the outbreaks of financial fires increase so too do the tools and technologies used by the central bankers. This postponement of the inevitable leads to massive mis-allocation of capital. monetary bsae

That's a lot of dead wood buildup there

The above graph shows all the dead wood build-up. Quite a bonfire awaits us.

It is possible that the fires will continue to be contained, central bankers promise that this is indeed the case. We DO know however that it is not possible to contain it forever. This time is not different...or is it?

Let's compare what's different this time around in Australia and the world's monetary system?

  • The bush fires have invaded the suburbs. So too have the monetary bush fires directly impacted most western "suburbs".
  • The “tools” available to the firefighters are more advanced than at any time in human history. The tools that are at the disposal of central bankers are more “advanced” than at any time in human history.

What's happening in New South Wales right now provides us with an instruction manual for how to proceed forward in a world of monetary madness. We need to BURN THE UNDERBRUSH. Simply hoping that the fires will fail to erupt simply defies history and mathematics. "Hope and Change" be damned.

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The likely outcome is that we're heading deep into asset confiscation mode. Government meddling will fail, it always has and it always will. The playbook from throughout history tells us that governments will steal anything and everything from the most productive before they default.

This happens either overtly (taxation, fines, penalties, asset seizure) or covertly via destruction of currencies (quantitative easing). Everything not nailed down is up for grabs. Don't say you weren't warned! If you need an example look at what's happening in France. Hollande is insane, but he's not unique.

As such, aside from structuring myself in order to protect what I have, which I hope I've done, ensuring that what I invest in going forward is structured properly is just as important. It makes no sense to invest intelligently only to have some thug steal the proceeds because I failed to set myself up to deal with the inevitability just mentioned.

So, how are Mark and I choosing to allocate our capital:

  • Investing in private equity. We like businesses where we can get to know and deal directly with CEO's and management, and where we are not at the whim of black box trading systems, plunge protection teams and assorted other “firefighters”. This is by far our most overweighted asset class. If you want to know more about how we do this, drop us a line.
  • Trading the volatility created by these madmen. Our friend and colleague Brad Thomas, the new editor of our Trade Alert service, "The Capex Options Alert" is our guru in this area. You can get to know Brad a bit and sign up for this complimentary service for a limited time HERE.
  • Continuing to buy and store physical precious metals. This just seems a long-term no-brainer.
  • Investing in agriculture. A guy's gotta eat, right!
  • Select real estate. Maybe some premium scorched earth in New South Wales, Australia. After all, the risk of a devastating fire is now significantly reduced! But seriously, a nice piece of land where you can escape the madness and "grow your own" if need be.

The above is neither a recommendation nor an endorsement of any particular asset class or strategy. Obviously everyone's situation is different, and we don't know yours. Some could probably do just fine with a couple hunting rifles, some ammo and a nice piece of land to grow food and run a few livestock. Albeit that's not going to work for urban dwellers.

The bottom line is that we are just encouraging you to consider how to prepare for a monetary firestorm. Do it your own way, use common sense, but just don't be the dupe who ignores the obvious.

- Chris

"So just as I want pilots on the planes that I fly, when it comes to monetary policy, I want to think that there is someone with sound judgement at the controls." - Martin Feldstein

 

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Wed, 10/30/2013 - 11:56 | 4104941 nofluer
nofluer's picture

the B-52s didn't form until 1976 and Vietnam ended in 1975

Really? Then how did the NVA shoot down 3 of them the night of Dec 19, 1972 during Operation Linebacker II when the USAF launched a 100 plane raid? Ooops... the skipper of the ship I was serving on on Yankee Station must have been wrong...

Wed, 10/30/2013 - 14:45 | 4105751 RafterManFMJ
RafterManFMJ's picture

I'll never believe the B-52s have been shot down; they may have shot up a few times, but  hey, they're musicians!

Wed, 10/30/2013 - 14:44 | 4105747 fedupwhiteguy
fedupwhiteguy's picture

he was making a funny!!!

 

http://www.youtube.com/watch?v=leohcvmf8kM

Wed, 10/30/2013 - 14:45 | 4105746 fedupwhiteguy
fedupwhiteguy's picture

dang it! dup itis!!

Wed, 10/30/2013 - 14:45 | 4105744 fedupwhiteguy
fedupwhiteguy's picture

.

Wed, 10/30/2013 - 08:28 | 4104209 dontgoforit
dontgoforit's picture

Worse.  Drones with hollow points.  No collateral damage to infrastructure.

Tue, 10/29/2013 - 18:24 | 4102969 lasvegaspersona
lasvegaspersona's picture

Question: if the dollar is going to zero and all derivatives (gold derivatives included) and the only remaining physical gold (that anyone will part with) is the 872 tons in GLD: what is each of those 28,000,000 ounces worth to central bankers who currenctly hold (soon to be worthless) treasuries. 

Hint: China alone holds $1.28 trillion in treasuries, Japan almost the same, in total there are several trillions more.

As they say, do the math...

Tue, 10/29/2013 - 21:28 | 4103442 Buck Johnson
Buck Johnson's picture

China is trying to parlay their treasuries into stuff they can own and use because they know that the US won't be able to pay them.

Tue, 10/29/2013 - 17:48 | 4102889 AGAU
AGAU's picture

But what would whales be doing in the Australian bush?

Wed, 10/30/2013 - 02:06 | 4103900 theliberalliberal
theliberalliberal's picture

only they know the secret source of ambergris 

Wed, 10/30/2013 - 08:27 | 4104206 dontgoforit
dontgoforit's picture

Gonna' be a wailing world.

Tue, 10/29/2013 - 21:23 | 4103425 bilejones
bilejones's picture

It's a weight reduction thing, the fires melt the excess blubber right off.

Tue, 10/29/2013 - 20:24 | 4103277 Freaking Heck
Freaking Heck's picture

JP Morgan has a surplus in London so they're exporting them down under.

Tue, 10/29/2013 - 20:00 | 4103212 Unique Snowflake
Unique Snowflake's picture

They're new south whales. Much tougher than the old northern whale we're used to. Evolutionarily adapted to Australian bush conditions. Or created by God, much like the banana was created for humans. Who knows? Be hard to fit one on the barbie, is all I'm saying.

Wed, 10/30/2013 - 12:29 | 4105090 gmrpeabody
gmrpeabody's picture

Perhaps IN the barbie...

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