Guest Post: Let's Talk About Facts, Not Fear

Tyler Durden's picture

Via Simon Black of SovereignMan blog,

[Editor's note: Today's letter is an excerpt from the edition of Sovereign Man: Confidential that will be published this afternoon.]

Let’s step away from the noise for a moment and look at the big picture. This isn’t about doom and gloom, or fear, but objective facts.

Undoubtedly, the Western hierarchy dominated by the United States is in a completely unsustainable situation. Across the West, national governments have obligations they simply cannot meet—both to their citizens and their creditors.

In the UK, national government borrowing is already 22% higher than at this same point last year, a record year for borrowing. Meanwhile, the UK’s budget deficit for August hit a record high.

In France, the new government of Francois Hollande passed a ‘historic’ and ‘austere’ budget that is still posting a deficit of 3% of GDP. That’s including a 75% tax on incomes exceeding one million euros.

In Japan, the government is mulling legislation that will fund 40% of the budget with ‘deficit-financing’ bonds.

In the United States, the government recently hit $16 trillion in debt about six weeks ago, after reaching the $15 trillion mark last November. It took 200 years to accumulate the first trillion in debt and 286 days to accumulate the most recent trillion.

Each of these countries has a debt level that exceeds 90% of GDP– the historic point of no return. More importantly, each of these countries also has to borrow money simply to pay interest on money they’ve already borrowed.

This is important because it makes the problems multiple. At the beginning of the 1780s, the French monarchy was spending around 30% of tax revenue to service its debt. Eight years later when the revolution began, they were spending 62%.

The next 26-years in France were filled with internal civil war, external war with Austria and Prussia, hyperinflation, crime, social unrest, and Robespierre’s genocidal dictatorship.

In the 19th century, the Ottoman Empire faced an even steeper financial decline. In just 11-years, the Ottoman central government went from spending 17% of its tax revenue on interest payments to spending over 52% of its tax revenue on interest payments. Then came default, in just eleven years.

In the US, debt service is also rising. According to the Government Accountability Office’s figures, the US government was spending 9% of revenue to service the debt in 2002. Throughout most of the last decade, in fact, the US government spent roughly 9% of its tax revenue on debt service.

But in 2009, the figure hit 9.75%, then 10.5% in 2010, then 11.5% in 2011. For the fiscal year that just closed on September 30, the Bureau of Public Debt reported cumulative interest expense of $375.8 billion on income of $2.45 trillion. This is a rate of 15.3%. See the trend?

But it’s not just debt burdens that are problematic. ‘Rich’ countries in the West are also rapidly debasing their currencies, spawning tomes of regulatory impediments, restricting the freedoms of their citizens, aggressively expanding the powers of the state, and engaging in absurd military folly from Libya to the South China Sea.

Once again, this is not the first time history has seen such conditions. In our own lifetimes, we’ve seen the collapse of the Soviet Empire, the tragi-comical hyperinflation in Zimbabwe, and the unraveling of Argentina’s millennial crisis. Plus we can study what happened when empires from the past collapsed.

The conditions are nearly identical. Is our civilization so different that we are immune to the consequences?

12 Lets talk about facts, not fear


Probably not. And the cycle that has befallen so many great powers before us– decline, collapse, turmoil, and reset– will likely happen in our time too.

But it’s not the end of the world. Not by a long shot.  It’s a complete reshuffling of the deck. A brand new game with brand new rules. And the old way of doing things (like printing money backed by nothing) will be resigned to history’s waste bin.

One of the things that we see frequently in history is that this transition occurs gradually, then very rapidly.

Think about the Soviet Union, which you may recall. One day, they were the greatest threat to the planet. The next day, the wall came down. It happened so quickly. It’s like what Hemingway said about bankruptcy– it happens slowly at first, then all at once.

Unfortunately we don’t know where we are along this path. And we won’t know until we’re over the cliff on the way down. Everything will feel normal until then.

22 Lets talk about facts, not fear


Argentina’s millennial crisis is a great example of this. Argentines woke up in December 2001 and everything still felt normal. Within a few weeks, they had defaulted on their debt, the currency collapsed, and people were out in the streets doing battle with the police.

But since we don’t know precisely when things may happen, it’s a sharp idea to take responsible action that makes sense no matter what, even if all of the world’s problems are miraculously solved. Things like:

- Owning gold and silver (and storing it abroad)
- Acquiring agricultural property overseas.
- Holding savings in a strong, stable foreign bank
- Looking at healthy economies for top quality investment and business opportunities
- Improving tax efficiency and asset protection with proper foreign structures
- Developing relationships with like-minded people
- Learning valuable skills
- Traveling a bit and exploring potential relocation options
- Increasing your digital privacy
- Considering dual residency and nationality options

All of these steps make sense no matter what happens. Yet, should the thesis hold, and we indeed find ourselves on the precipice, then you and your family will be in the best possible position. And that too is a fact.

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TheGermanGuy's picture

In 2009 we were standing at the edge of the abyss, since then we have taken a significant step forward.

Winston Churchill's picture


Into the valley of death they rode......


Ham-bone's picture

Record debt load enabled by record low rates = rising interest payments on the debt that must be permenantly counteracted by lower interest rates.  We, like Japan, will never see rising interest rates so long as the Fed exists.

economics9698's picture

Don’t forget the debt held by the public is 74.2%, and the total debt for 2012 is 104.8%.  Translation, the US federal government could renege on its social security and Medicare obligations in order to survive.  Obama would do this in a heartbeat if it meant more of “his people” getting another round of EBT cards.

Table 7-1

Fleecer's picture

"- Holding savings in a strong, stable foreign bank"

I'd love to see this list of banks....

jayman21's picture

yep - me too.  Today's friends can be tomorrow's enemy.

knukles's picture

We're Humerikuns n' histree don't hupply tuh us

redpill's picture

That's the problem, by the time these madmen are done the "safe havens" will be few and far between.  US Gov barely had to lift a finger and Switzerland eagerly rolled over and eviscerated their long-standing principles of banking privacy without so much as a second thought.  The US is one of the few countries in the world that forces its citizens to pay taxes on income earned abroad.  The noose is tigthening, and the message to the wanna-be Simon Blacks of the world is: "you can run, but you can't hide."

Before Panama rolled over for the US Gov, Simon Black was hot to trot on them, suggesting people should move there and get double citizenship.  Woops.  He doesn't mention them anymore.  Now it's all about Chile, which I agree looks like an attractive country in terms of economy, liberty, and geography.  But it was also the same country that was once ruled under iron fist by Augusto Pinochet.  The tide can always turn.  Maybe if you're a Jim Rogers you have the financial stability and mobility that means you can pick up and move to Singapore or wherever at the drop of a hat, but for most people, even those in the investment class, foreign relocation one time would be a huge undertaking, much less doing it every time the local political wind changed.

DoChenRollingBearing's picture

@ redpill

But, if you do it right (legally) you can hide...

Clashfan's picture

Meanwhile the TSA groper goons are going strong.

You know nothing's changed as long as the crotch grabbing child molesters are still on the taxpayer's dime.

disabledvet's picture

HSBC, Standard Chartered, JP Morgan/Chase, Bank of North Dakota.

Monedas's picture

No South American Generalisimo, no Islamic mullah, no Afrikan tribal chief, no Slavic peasant, no Teutonic fuhrer, no Asian tiger, no Democrat pedophile, no English labor slut .... has taken Communism as far as the North Koreans have !  They are truly in a class by themselves !  

DoChenRollingBearing's picture

+ 1

North Korea is the worst hell-hole on Earth.

disabledvet's picture

Don't knock it till you try it....

Jonas Parker's picture

But Obama's sure trying...

Stoploss's picture

It is human nature to allow recurring crises to arise, due to the arrogance of our species thinking "this time will be different".

It is not. It never was, and never will be.

The only variance is when the realization of exact repetition, becomes the inflection point for panic, to avoid certain catastrophe. That is the only skew. Since the events that lead to the inflection points are exact replica's on the whole, the only differences are how the end result is dealt with at that exact time in history.

The results are clear in the chart above, which also proves history not only rhymes, in fact, much to the contrary, it repeats...

upWising's picture

NO!! NO!!  NO!!!  A thousand times NO!!   Us Amercians ARE different! 

First, we have white skin and a red, white & blue flag.  THAT makes us different!

But above all, "Amercia is Jesus' Favorite Country! ©"

I know perfectly well that when Jesus comes back, he will come back to Amercia first, and he'll be wearing US Army Fatigues and drivin' a Black Hummer, and be protected by the Secret Service.  How do I know?  Because I know Jesus has always been an Amercian FIRST and FOREMOST and because in my Bible Jesus talks in Perfect Amercian English, not with a phony British accent.


knukles's picture




(face planted in hands, silently sobbing)

Whiner's picture

When The Author and Director takes the stage, the play is over. He inaugurates His own Kingdom. That's when men will want to die, but cannot. He will not bear a flag pin in His lapel, only scars in His hands, side and feet. No one will then be saved for the judgment is come. America, pass with the goats on His left to eternal darkness and fire. "I never knew you."

Go Tribe's picture

Yeah, well wait until the Avengers show up!

Cloud9.5's picture

Nope, that's the other guy and his cap will be blue.

max2205's picture

If everyone quit paying their bills for 2 months, the whole fucking thing would implode...ben or not

jerry_theking_lawler's picture

or don't pay your taxes until they are actually due....April 15th...

Stock Tips Investment's picture

The debt problem is huge in Japan and the major economies of the West. However, the issue is more complicated attack the origin of this debt: the government deficit. Governments can balance their books through three mechanisms. Raise taxes, cut expenses or a combination of both. Any of these mechanisms will lead to a reduction in economic activity. That means, slower growth or recession. It means fewer subsidies, less support to critical sectors such as health and pensions. Finally, mean, lower quality of life. In the West, no one seems willing to take this cost. What is the solution? ... Reread the post.

disabledvet's picture

Overhead is considered "an asset" for accounting purposes. And who never gets rid of anything? The Government. This thing was a set up for the oil monopolists from the get go. Move along!

knukles's picture

I keep tryin' to get my wife to give away a whole household of shit and she won't do it either.
Can I get a grant for that?

Go Tribe's picture

No, but you can be on a TV show.

Ignorance is bliss's picture

Can't we just print our way out of deficits?

Parrotile's picture

Particularly apposite comment - remember that the Charge of the Light Brigade was organised by a High Command that really couldn't give a damn about casualty numbers - to them the "Lower Ranks" were just cannon fodder.

Notice the similarities in thinking between the (Politico-financial) High Command, and the rest of us right now?

We - the productive workforce, and the small (by their standards) investor class - we are "their" Cannon Fodder enabling their ultimate acquisitive Globalist gameplan.

And - they are winning hands down, and in reality, there isn't very much we can do about it under the present "contrived for their benefit" circumstances.

The Planetary "Working Population" are at a fork in the great road of time - do we submit to Global Serfdom, paying an ever rising tribute to "Those in Power", or are we going to see the equivalent of a Global Civil War? For the majority the final outcome - death - will be the same, but at least the second option might provide a more stable, more civil future for the survivors, and their dependents.

FEDbuster's picture

Haven't seen any "Always Falling Prices" ads from Walmart lately?

disabledvet's picture

"free shipping." wait till Oracle by the largest manufacturing equipment supplier of all time called "Hewlett Packard." Stay long soybeans if they do...

tickhound's picture

LOL, funny, but not sure everyone got it.  Like, "everyday is better than the next."

Gully Foyle's picture

I'm starting to think these collapse posts aren't designed to save us. That they are created to manipulate the GENPOP into acceptance of the artificial crisis.

One big PSYOP the majority are buying into.

Lowered fucking expectations at it's best.

Now we understand what the plan is. We have a rough estimate of the timeline, real fucking soon.

So bend over kiddies cause we all gonna take it up the ass.

On the positive side it too will pass, in a decade or so.

CPL's picture

Does it look like TPTB have their shit together?


No they do not.  What you are seeing is panic in expensive suits pretending they can steer a train.

DoChenRollingBearing's picture

I agree CPL.

It is up to each us to protect ourselves and our families.

disabledvet's picture

So Government really is "the problem and not the solution" as Ronald Reagan famously stated at his inauguration.

Overfed's picture

Reagan sure changed his tune after they shot him.

sharonsj's picture

No, the corporations are the problem and the government is their slut.

upWising's picture

"panic in expensive suits pretending they can steer a train."

Worse yet, the 'suits" are in the locomotive of the train which happens to be in the back of the train pushing.  The suits are looking out the "front" window (which is facing backwards), completely befuddled by why the train is going "backwards" and they are trying to find the "clutch" or the "gear shift" or SOMETHING, all without scuffing the Guccis.  


Panafrican Funktron Robot's picture

Simon says:

"And the old way of doing things (like printing money backed by nothing) will be resigned to history’s waste bin."

Interesting to write an entire article about history repeating itself, and then ignore the reality that history will continue to repeat itself.  "This time is different" is never really true, is it?

disabledvet's picture

Yep. "Rumplestilksen." Again. There is no substitute for Gold Money. Period.

Ignorance is bliss's picture

I think Simon meant to say no printed currency without something to back it within our lifetime. We have to wait a few generations before the lesson is forgotten once again.

Skateboarder's picture

Ready the torches and pitchforks.

Midas's picture

Uh, you forgot to mention your place in Chile.

ParkAveFlasher's picture

Last week I went out and cleaned out the watch counter at Lord & Taylor.  Thanks for preppin' me, bro.

Simon Black: ZH's rendition of the Rick Roll.  hey Banzai, when do we get, "Hitler Finds Out The Guest Post He Just Clicked Into Is By Simon Black"?

Unprepared's picture

"It’s a complete reshuffling of the deck. A brand new game with brand new rules. And the old way of doing things (like printing money backed by nothing) will be resigned to history’s waste bin."


Bullshit. The history lesson will be forgotten few years afterwards. Humans crave for a status quo and will settle for the first opportunity to settle on one, regardless of how good it is.

Gully Foyle's picture


That has to be the funiest wrong headed thing I ever read.

Dude it's all FUCKING DIGITAL!

You don't need to back that with anything.

At least with paper you could wipe your ass or burn it.

Unprepared's picture

At least I'm not delusional about it.