A Much Bigger Threat Than Our National Debt

Tyler Durden's picture

Submitted by Bill Bonner via Bonner & Partners,

The markets are acting as though it was already summer. They are wandering around with little ambition in either direction. Meanwhile, we’ve been wondering about… and trying to explain… what it is we are really doing at the Diary.

We expect a violent monetary shock, in which the dollar – the physical, paper dollar – disappears. But why?

Credit Bubble, the Sequel

As you know, we tend to take the side of the underdogs… as well as half-wits, dipsomaniacs, and unrepentant romantics. But currently, we are standing up for the young, the poor, and all the others the credit bubble has hurt and handicapped. It’s not that we are saints or do-gooders. We are just trying to make a living, like everybody else.

But we come at it from a different direction than most. Almost all the movers and shakers have the same bias: They want to see the credit extravaganza continue.

The Federal Reserve has already “invested” (if that’s the right word for throwing phony money down the drain in a futile and jackass effort to hold off the future) $4.5 trillion to protect the balance sheets of the elite. This money has been amplified by zero-interest-rate policies to something like $17 trillion of stock market gains… and umpteen trillion in bond and real estate profits. Naturally, the people who own these things – and not coincidentally provide early stage funding for congressional and presidential candidates – do not want to see a new movie. They want to see the sequel, Credit Bubble 5. Then Credit Bubble 6. And so on…

And the show goes on! They buy their candidates. They place their ads. The newspapers they support voice their opinions. Their corporations wheel and deal on Wall Street, spinning off bonuses, fees… and even higher stock prices. And the pet economists appointed to run central banks do their bidding.

Eyes Wide Open

We’re not complaining about it. We’re just calling attention to it. Because we believe there is a lot of money to be lost by not recognizing what is going on… and perhaps a little money to be made too by following the plotline carefully. Most people do not recognize what is going on because they are paid not to recognize it.

As we’ve pointed out many times, no central bank is going to hire a guy who thinks it should mind its own business.

Few investors are going to dispute the happy ending. And nobody is going to be appointed secretary of the Treasury who quotes Andrew Mellon’s famous advice to President Hoover following the 1929 Crash to “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate.”

The credit bubble causes an extreme bias to the upside. Almost no one wants to see it end. Except us.

*  *  *

Is that because we are smarter or more virtuous? Not at all. It’s just that we are not paid to ignore things. And neither is any member of our team of worldwide analysts at Bonner & Partners – the small, independent publishing business behind the Diary. We are not beholden to the elite; we get no money from them. And our business model (and maybe our natural contrariness) tells us to open our eyes and try to see what others have missed. Yes, we own stocks. But capital gains take a back seat – far behind our desire to connect the dots.

Beating Mr. Market

Since we founded Agora Inc. – the parent company of Bonner & Partners – in 1980, we have published thousands of investment reports and recommendations. We now have analysts and economists in 10 different countries. Our advice and recommendations appear in French, German, Mandarin, Spanish, and Portuguese… as well as English.

Is the advice good? Do the recommendations always go up? We recently commissioned an outside accountant to study them. The conclusion? Some good. Some not so good. Some do very well – with several of our paid-for advisories outpacing the S&P 500 over the last 10 years.


Our personal experience is similar: Sometimes we do well. Sometimes we don’t.

This generally confirms what we know about the way the investment markets work: If you are lucky and work hard you can do a little better than the market.

But Mr. Market is always hard to beat. The Efficient Market Hypothesis – which tells us that financial markets do not allow you to earn above-average returns without taking above-average risk – may overstate the case. But probably not by much.

“Black Swan” Hunting

On the other hand, when we look at the big macro events of the last 30 years, we find our team does very well.

There were five major events that marked the period:

1. The collapse of the Soviet Union
2. The fall of the Japanese miracle economy in 1990
3. The bursting of the dot-com bubble in 2000
4. The attack on the World Trade Center in 2001 and the “War on Terror”
5. The financial crisis of 2008 and the subsequent non-recovery

These things are important because they were unanticipated. As our friend Nassim Taleb puts it, they were “black swans.” People weren’t ready for them. And most authorities said they wouldn’t happen.

In the 1980s, for example, the CIA believed the Soviet Union was going from strength to strength. Until 1990, investors were betting heavily on a continuation of the Japanese boom. Same thing for the dot-com bubble. It was accompanied by the most delirious “this time it’s different” talk we’ve ever heard. And on the morning of September 11, 2001, nobody expected such a dramatic attack on Manhattan – especially not the people we paid billions of dollars to stay on top of it.

And Fed chairmen Alan Greenspan and Ben Bernanke both admitted that the 2008 global financial crisis was unforeseeable. But the crash in real estate and finance of 2008 wasn’t unforeseeable at all.

In 2003, my Agora colleague Addison Wiggin and I wrote a book called Financial Reckoning Day: Surviving the Soft Depression of the 21st Century. The foreword to that book, penned by our friend Jim Rogers, summed up our thesis:

As this book you hold in your hands demonstrates, artificially low interest rates and rapid credit creation policies set by Alan Greenspan and the Federal Reserve caused the bubble in U.S. stocks in the late 1990s.


Now, policies being pursued at the Fed are making the bubble worse. They are changing it from a stock market bubble to a consumption and housing bubble.


And when those bubbles burst, it’s going to be worse than the stock market bubble, because there are many more people involved in consumption and housing. When all these people find out that house prices don’t go up forever, with very high credit card debt, there are going to be a lot of angry people.

And our analysts were all over the story years before the crisis hit. (As one reader commented: We are often very early.) As for the other big events, our analysts were on top of three out of four of them. The only one we missed was the attack on the World Trade Center. In the interest of full disclosure, it is also true that we saw many other things coming – such as the Y2K computer glitch in 2000 – that never happened. Still, we were able to see many of these events coming when so many others – including those responsible for keeping an eye on them – failed.

*  *  *

How We Get to Hyperinflation from Here

How did we do it? Our customers pay us to notice things that others are paid not to notice. Bear markets, crashes, credit contractions… governmental, technical, and social catastrophes – nobody wants to look carefully for these things. Nobody wants them to happen. They make people poor, not rich. And yet, they do happen.

It seems part of nature’s system that mistakes are punished, errors are corrected, and “bad” things happen from time to time. But like forest fires, they have a useful purpose: They clear away the dead wood and allow future growth.

Currently, we are predicting a credit crisis – much worse than the 2008 meltdown.

No one wants it – especially not the deadwood. But we put a high probability factor on this forecast. It is unavoidable… even if we don’t know exactly what form it will take.

And we believe it will be foreshadowed by something even rarer and more unexpected – the disappearance of cash dollars.

Just to be clear, our prediction is that the “Ice Age” of low rates and low growth for a long time – as predicted by many analysts and economists – won’t happen.

Instead, a crisis will cause a crash on Wall Street. The banks will go broke. The credit system will seize up. People will line up at ATMs to get cash and the cash will quickly run out. This will provoke the authorities to go full central bank retard. They will flood the system with “money” of all sorts.

The ice will melt into a tidal wave of hyperinflation.

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Deathrips's picture

Silver Buy it!!!

Hyperinflation effects all using the currency that has lost public confidence.

The less dependent on the system the lesser the impact on your life...the more dependent you are, the more it will effect your life.

Long Food, Water, Lead and Delivery, Fungible Reserves....and Guillotines!!!

Lock Fischer and Bernanke and Yellen in a room till their last breaths..........



Comte de Saint Germain's picture

More fearporn = A Much Bigger Threat Than Our National Debt

ZH = fearporner

kaiserhoff's picture

Lots of crazy sweeping assumptions here.  Inflation yes, but tons of deflation to wade through first as China, Japan, and Europe go under first.

Do these Dudes know what is going on in Latin America, Russia, Eastern Europe?

The dollar will fall, but it will be the last to fall.

THX 1178's picture

Yes, but interconnectedness and instant internet communication might suggest that the dominoes will fall quite rapidly- and that the public sector problems will spread to the private (govt-> banks) quickly. What matter is the order of things if it all comes crashing down in 5-10 days?

kaiserhoff's picture

Good point, and I hope you are right, but there is that safe harbor thingy.

I think a safe harbor is farm land and PMs, but the big money boyz think it's the Swissy and the Yankee Dollah.

Much hinges on derivatives, and whether any of that crap is enforced.  I don't think it can be, but we'll know soon.

THX 1178's picture

Weimar-style inflation is inevitable in the United States, especially as major economies start to disengage from the dollar. I predicted this at least six years ago. It is only a matter of time. Here is the basic sequence of events I see coming: FDIC insolvency, Treasury default on T-bills and all Treasury notes, the end of the dollar as the global reserve currency, hyperinflation, insolvency and bankruptcy of the Federal Reserve which is a privately-owned bank. That will be followed by the eventual collapse of the United States government. All of these things are inevitable in my opinion and could happen in full in as little as three years. The dinosaurs refuse to accept this because they won't question a monetary ecosystem which they created and which has allowed them to thrive from the Garden of Eden until now. Those who wish to survive and understand the issue will do whatever they can to disengage from a Titanic that is clearly sinking by building local lifeboats, tailored to their local needs.

-Michael C. Ruppert (RIP) in 2009 i think

walküre's picture

Greeks mulling over elections to vote on eternal debt slavery or default

Markets are still pretty calm when this is probably the biggest development in this ongoing saga for a while now.


kaiserhoff's picture

Don't you think a lot of this is just denial?

Focus on Greece so you can ignore the real problems of Italy, Spain, France, etc...?

walküre's picture

we're all in denial

the ponzi has to end somewhere... for some it ends sooner than for others

Greece is in a pickle but because of this highly scrutinized event, the people understand that debts cannot ever be repaid and liabilities are not serviceable ad infinitum

interest rates are the least of our worries, really

I'm actually going to spend a longer time in Europe this summer and fall. Boots on the ground in France, Spain, Portugal and Italy. Greece is not on my list. Looking for cheap land in a nice climate with a small abode. The more remote the better although that is hard to find now.

kaiserhoff's picture

Good man.

Keep us posted;)

farmerbraun's picture

Good thinking, but FFS, why the Northern Hemisphere for the land-holding?

mickeyman's picture

If the lineups form to withdraw cash, then all the accounts will be converted into equity in the bank. But it will be a special class of share that can't be sold until 2035. But it will pay a dividend, so long as you keep borrowing.

jal's picture

Let's talk about something really important.


The USA is spreading death.




US anthrax scare widens to 51 labs in 17 states


In addition to the US labs, samples were sent to facilities in Australia, Canada and South Korea.


Anthrax entered the US national consciousness in 2001, when shortly after the 9/11 attacks, letters containing powdered anthrax arrived at news organizations and the offices of US senators. Twenty-two people were sickened and of those, five people died.


Cynicles's picture

Cannot buy silver with money thou doth not have.


CClarity's picture

And what will TPTB make the medium of exchange?  

Not cash.  Credit on an iphone?  Bitcoin? Shells?  Who you know?  Barter?  How do you expect to transact?

Ajax_USB_Port_Repair_Service_'s picture

"How do you expect to transact?" Easy. Convert PM's into whatever is the fiat DuJour.

Cynicles's picture

Are you suggesting people convert silver to tyranny?

Laowei Gweilo's picture

well, that's one way to get rid of all the high liability value of student debt lol :P


i won't be crying exactly if millionaires' millions suddenly can only buy them cranberry juice and pickles

kaiserhoff's picture

Yes.  It would be a great equalizer and reset, which is why it is so unlikely.


Laowei Gweilo's picture

hahaha yeah i was about to say something of the like but i thought it'd get too many downvotes since it'd be a little to anti-gold anti-silver :P but... yeah... in what fucking world are the billionaires going to let their billions become worthless. they'd buy up all the land, silver, and gold if it ever came close to becoming a reality so they'd still be the 'richest' 1% :P


whether it's FIAT cash or land and farms or gold and silver or guns and nickles... the 1% set policy and the 1% will ALWAYS find a way to be the wealthiest 1% regardless of what standard wealth uses... they'll always have 99% of the cash or 99% of the gold or 99% of the guns


hyperinflation or deflation or recession or booms or whatever won't change that


only pitchforks and gallows will :P


but that sounds like an aaaawful lot of work for most americans :P cant we just blog about it so we can get back to The Voice and American's Got Talent?

Cynicles's picture


The proletariat should be so (even half) lucky 

FIAT CON's picture

just like the titanic


readmylips's picture

when you say 'millionaires', you do realize you mean the owner of the company you work at, and the owner's of the companies most people work at, right?


death to the givers of jobs!

Captain Debtcrash's picture
Captain Debtcrash (not verified) Jun 3, 2015 5:08 PM

I don't know that it will be a hyperinflation. I think they will ban cash and push rates severely negative or go to an E dollar system.  I don't think these will cause hyper inflation, bubbles yes, unforeseen consequences yes, but probably not hyperinflation.  Possible though.

walküre's picture

The Soviets tried banning cash. The ruble was worthless, so they banned all the cash that had some value. Black markets will always function on cash and the cops take cash bribes.

Sure, bring all your cash into the worthless banks only to see it confiscated.

Cash will always have value.

HenryHall's picture

Paper instruments, including cash, can be revoked.

Genuine Copper, Silver, Palladium, Gold or Platinum coins will always have value.

indygo55's picture

Yup, people will figure it out and I mean fast. There will be a black market in 24 hours. There will be those who will take advantage for a while then prices will stabilize although higher. People will always figure it out, some way faster then others. Silver coins will rapidly be understood as money and the word will travel like wildfire. When the system goes down people will wake up and panic. The alert aptitude will go full bore and the distractions will be forgotten as the desire to eat and drink clean water will come front and center. 

walküre's picture

I wasn't attacking metals. But common folks will use paper to exchange for goods and services. That won't go away. Zombie banks are full of digital money that cannot be redeemed.

They can't ban cash. They can try but as I said above, there will always be demand and reason for cash.

kchrisc's picture

It will be supernova-inflation.

As confidence in the dollar wains, trillions printed and residing overseas will come flooding back into the DC US. From big holders, to smaller "mattress stuffers," there will be a rush to exchange dollars for something, anything, of value. Ditto internally.

As a result the DC US will employ capital flows on inbound cash.

At the same time, foreign claimants on hard DC US assets will come to take up their claims. Food and other commodities will then begin flowing to other parts of the world that are able to pay with real wealth, manufactured goods. Most Americans will be out of work, but for those lucky enough to have a job, they will see the prices of goods, and food, skyrocket well above their meager pay.

Now since the Zionists engendered the whole thing via their plunder, and grifting banksters, they will be waiting like vultures circling overhead; Ready to swoop in for the spoils left on the carcass.

Liberty is a demand. Tyranny is submission..


Gold, guns, grub, and ground, or goose egg.

Oscar Mayer's picture

HaHa, joke's on you. There are no "trillions" printed and held overseas.

It's all CREDIT, and its continued existence is totally dependent upon the solvency of the institutions that maintain it.

kchrisc's picture

The people that hold those 1's and 0's, and green certificates, think they are real, and desire they stay so. They care not that they came into existence via debt, as many acquired them via hard work and risk.

When they realize the real situation with the dollar, there will be rush on the exits into hard assets.

Liberty is a demand. Tyranny is submission..

NoDebt's picture

I just had a thought.  A little more than a year from now Obama will start issuing presidential pardons, as do all 2nd term presidents.  Mumia is definitely going free.  Hillary might need one by then (wishful thinking).  Whoever is left in Gitmo, yes.  

Who else?  The mind boggles.


kchrisc's picture

I sure hope that he pardons that poor guy Corzine.

Liberty is a demand. Tyranny is submission.

CaptainObvious's picture

Yeah, Mumia will probably be pardoned.  I can see Obammy pardoning Assata Shakur too, so that asshole will be on the first plane back to the US from Cuba.  Any other cop-killers of color need to be pardoned?  Obammy's got an app for that.

Achilles Heel's picture
Achilles Heel (not verified) Jun 3, 2015 5:11 PM

1. The collapse of the Soviet Union
2. The fall of the Japanese miracle economy in 1990
3. The bursting of the dot-com bubble in 2000
4. The attack on the World Trade Center in 2001 and the “War on Terror”
5. The financial crisis of 2008 and the subsequent non-recovery

These things are important because they were unanticipated.




Is this guy a fucking moron?


ALL of those things were amongst the most 'telegraphed' happenings of the past century...


I'll make an 'exception' to 9/11, ONLY because, at the time, hardly any American I knew just what EVIL it's own government and it's Israel connection was capable of... But it's become abundantly clear thereafter...

THX 1178's picture

Unbeknownst to the experts, academics, authorities, and the general population... to the microscopic fraction of humanity that is informed and competent, yes they were obvious.

bbq on whitehouse lawn's picture

There was a Trade Center bombing in the 90s, so even that was telegraphed. If you paid attention.

Achilles Heel's picture
Achilles Heel (not verified) bbq on whitehouse lawn Jun 3, 2015 6:03 PM

I'll easily concede that, but as I suggested earlier, it only became OBVIOUS after the fact.

BoPeople's picture
BoPeople (not verified) Achilles Heel Jun 3, 2015 5:56 PM

You are right. Silverstein decided to not attend his normal breakfast, the Israeli citizens received pager alerts, a ton of Wall Street incriminating evidence was destroyed when building 7 was "pulled". No, nobody had a clue.

OK, the article has zero credibility. They are just telling us what we want to believe to try to gain credibility.

Bring on the next schmoo ...

Achilles Heel's picture
Achilles Heel (not verified) BoPeople Jun 3, 2015 6:09 PM

I took care to qualify my earlier comment...


'INSIDERS' knew... Nobody else really did (at the time)...


Nowadays it's become fairly easy for the next mezzanine of 'folks' (who aren't 'INSIDERS') to spot these things... But I'd still say more than 90% of sheep are not only totally clueless, but will look at you crosseyed if you even try and awaken them from their dreamworld...

disabledvet's picture

We've had a lot of blow ups since taper was announced.

The entire coal industry for example.

Not like Shakeshack has been terrific here either.

Lot of reputations being destroyed yet again in pursuit of "the big first day pop."

With still no recovery to speak of I have a hard time getting excited over "huge moves down in the bond market."

kchrisc's picture

"A Much Bigger Threat Than Our National Debt"

Who is "our?"

Liberty is a demand. Tyranny is submission..



Seize Mars's picture

From your website, "...recessions occur every 4 to 8 years in a society with capitalism and little regulation.  And since the last one was in 2008…"

Uh, dude, we don't have capitalism, and we don't have "little regulation." Recessions are caused by central banks.



bid the soldiers shoot's picture

a tidal wave of hyperinflation   (clears throat)

Swing low sweet Chariot 

coming for to carry me home!"

BoPeople's picture
BoPeople (not verified) Jun 3, 2015 5:49 PM

*** Instead, a crisis will cause a crash on Wall Street. The banks will go broke. The credit system will seize up. People will line up at ATMs to get cash and the cash will quickly run out.***

This is what should have happened the last time, but was prevented from happening for two reasons:

1. China was intentionally being built up and the job was not complete. If we had allowed the crash to come in 2008/9 then China would have crashed and burned, forcing the Chinese to find a scapegoat.
2. The criminal cronies did not want it to happen. They thought they could burn a couple of their not-so-welcome cronies (Dick Fuld and Jimmy Cain, etc) and then go on to greater heights of control fraud. And they were correct, with a useful-idiot academic at the helm of the Fed.

IMO, If Wall Street is allowed to burn, then it will be intentional so that the people are forced to look for a strong leader who will take control and make everything right.

Personally, I believe you guys are wrong. I believe that there will be a man-made catastrophe that may even wipe Wall Street off the map... just as the destruction of building 7 and the missile hit on the Pentagon wiped away so many concerns from minds of the criminal cronies.

There are always clues to what they plan because their greed compels them to have laws passed to protect them while they screw others. A perfect example are the passing of Gramm-Leach-Bliley and the Commodity Futures Modernization Act of 2000 just before the 2001 crisis. Now they have passed laws against the use, transportation and holding of cash... so there will be a cash crisis. What else are they doing?

bid the soldiers shoot's picture

small beads of perspiration suddenly appear

Now they have passed laws against the use, transportation and holding of cash


Feel it Reel it's picture
A Much Bigger Threat Than Our National Debt are Lawyers....Yes, Lawyers are the problem...Think about this 50-55% of The House and Senate are Lawyers, highest ever in the history of the United States. For the most part Lawyers offer nothing to society with few exceptions...Lawyers sue in order to make money or should I say extort money...Think about it....Lawyer can not or even know how to run a business....The politicians are Lawyers...it's really that simple....Stop electing Lawyers...