Things Work Until They Don't

Authored by Tom Chatham via Project Chesapeake,

As the world begins its next adventure in financial chaos and rolls over to expose its soft underbelly of lies and deceit that have been perpetrated on the public, those that see the truth have been warning the people once again.

You can give people the truth but you cannot make them believe it. That is for them to come to grips with.

Trade wars are usually bad for all parties in the end but between the beginning and the end there can be some surprising developments. Human actions and delusions on the part of the public can produce strange results at times. All of our systems are based on trust. When that trust is lost, everything will come crashing down. Until then, things will go on.

If trade tariffs with China have the short term effect of creating American jobs, that could have a wealth effect by creating more disposable income in American pockets. That in turn can have a positive effect on the stock market and consumer confidence. Also, commodities are set to soar in price soon and this could carry the stock market up with it for a while.

Richard Russell once said he believed we would have a third leg in the current bull market before the bears take charge. He was right in the past and could be right again, only time will tell. This situation can not last long due to the enormous mal-investment built up in the system over many decades. A house of cards will eventually fall and the taller the house the longer and harder the fall will be.

One thing that could destroy the temporary high could be the destruction of the financial system due to loss of the reserve currency status and the replacement of the petrodollar system.

If and when that happens things will not be looking good for America for a very long time. China is taking actions that could result in just that type of outcome. Their new silk road initiative and oil trading system utilizing Yuan to gold will eventually have serious consequences for Americas standard of living.

Total debts and derivatives in the world amount to 30-50 times of world GDP. The bulk of this is derivatives and when they fail they will become worthless.

The 250 trillion or so in global debt will default when asset prices implode and interest rates explode. When the debt bubble explodes stocks could decline by as much as 95%. Interest rates could exceed the 20% rates we saw in the 1970’s.

In the last 100 years the value of major currencies have declined by 97-99 % relative to purchasing power in gold. The last 1-3% will follow very soon. When the financial system collapses due to losses from derivatives and stocks it will erase all of the savings, and retirement funds people were expecting to get at some future date. This will instantly impoverish the bulk of the population.

As the system collapses the banks will likely try to re-inflate assets by massive money printing which will only cause hyperinflation at some point. As hyperinflation kicks in the price of many assets like stocks, bonds, investment properties and art will likely collapse in real terms. Items like gold, silver and productive farmland will likely fare better.

Eventually deflation will carry all asset prices down as the world falls into a global depression, possibly for decades. All of these things will likely result in social unrest and wars as people become hungry and angry at a system they took for granted for so many years. The trust will be broken and people will look for something else to believe in.

One thing is for certain. People today believe anything but reality and that will catch up to them all very soon in a very painful way. Things work until they don’t. Our economy has been rolling along for decades on the stored wealth of previous generations but that is about to run out of steam very soon. When it does it will be a shock to all but a few.

You can ignore reality but you cannot ignore the consequences of ignoring reality.

Comments

King of Ruperts Land Cassandra.Hermes Thu, 04/26/2018 - 22:12 Permalink

You really need to break out of your mental prison. We are not sterilizing the planet to "save it". If you hate carbon so much, dig a deep hole at low tide and climb in and just wait there until you are permanently sequestered.

And by the by, "grabbing pussy" is part of the process by which humans propagate the species. I guess no one explained the "facts of life" to you. Or, did you miss that and just catch the anal lube lesson.

In reply to by Cassandra.Hermes

fishpoem King of Ruperts Land Thu, 04/26/2018 - 22:50 Permalink

If anyone is in a "mental prison," 'tis you, my friend. Perhaps you're not old enough to have noticed the spiraling downwards of numerous ecosytems since the end of WWII. The ocean, of course, is the big one. When it goes into death throes, our species will as well. I worked in remote areas in Alaska for years and have watched the changes. Melting glaciers and rising seas are concerning, but melting permafrost is the real issue. Permafrost stores massive amounts of methane gas. As the permafrost melts, it releases ever-larger volumes of methane. In terms of survival, that is far more dangerous than foolish pissing matches among Beltway scoundrels.

In reply to by King of Ruperts Land

wetwipe Wed, 04/25/2018 - 17:47 Permalink

Buy gold......

Buy silver......

Buy food....

Have a plan.... Time  "to get smart and streetwise" things are going to start to get real soon.

 

We live in truly hellish times.... Thank god for my support group on FaceBook.

Arnold Layne Thu, 04/26/2018 - 19:56 Permalink

A poorly conceived and written article that fails to make its point. 

To the author:  your concluding sentence is a crude paraphrase of a statement by Ayn Rand.  Learn to give credit where credit is due.

itstippy Thu, 04/26/2018 - 20:08 Permalink

This guy is all over the place.  Currency collapse, hyperinflation, massive depression, skyrocketing commodities, plunging assets, etc.  He throws in the tired old image of a house of cards collapsing.  It probably all made brilliant sense when he wrote it, high as he was.

Krugg Thu, 04/26/2018 - 23:16 Permalink

The people assuming gold or other metals will be a safe haven are going to be in for a shock of their own when it also turns out to be worthless as well.  The new wealth will be those who have food, or can render a service that can be compensated with said food.  Nobody is going to give two shits about gold when there's no bread.

The powers that be are causing this collapse on purpose, it's not by accident but by design. The new global currency will be based off crypto tech, and it will be in the hands of the same people who are causing the current crisis. They're not setting this up so they'll lose, it's being set up for the final win.

 

Batman11 Fri, 04/27/2018 - 04:53 Permalink

What is the problem with the economics they used for globalisation?

The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at private debt, neoclassical economics.

That's it, it had the same problem it’s always had; it doesn’t look at debt.

Debt  ......  jam today, penury tomorrow.

They had the jam in the 1920s and they had the penury in the 1930s when they made the repayments.

We have the same thing everywhere now, the debt overhang that drags the economy down with the repayments.

Steve Keen saw 2008 coming in 2005 by looking at the US debt-to-GDP ratio.

https://cdn.opendemocracy.net/neweconomics/wp-content/uploads/sites/5/2017/04/Screen-Shot-2017-04-21-at-13.52.41.png

He has been looking at this for a long time and has now seen the same thing occurring everywhere

At 25.30 mins he has super imposed the debt-to-GDP ratios.

https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6

They used an economics that didn’t consider debt for globalisation; probably the worst decision in the history of mankind.

We’ve had the debt fuelled boom, like Japan in the 1980s, and now we get the stagnation like Japan since. The repayments on that debt can drag the economy down for decades as it has done in Japan.

https://www.youtube.com/watch?v=8YTyJzmiHGk

The US, like everywhere else better get used to the new normal of secular stagnation like Japan has been experiencing since the 1980s.

Japan did the debt fuelled boom first did and we followed (see the graph at 25.30).

Batman11 Batman11 Fri, 04/27/2018 - 05:07 Permalink

Adair Turner has looked at the situation prior to the crisis where advanced economies were growing by 4 - 5%, but the debt was rising at 10 – 15%.

This always was an unsustainable growth model; it had no long term future.

https://www.youtube.com/watch?v=LCX3qPq0JDA

Neoliberalism runs on debt and appeared to work because its neoclassical economists don’t even consider debt. Most of it went into real estate.

In reply to by Batman11

Scipio Africanuz Batman11 Fri, 04/27/2018 - 06:27 Permalink

That which is unsustainable, will NOT SUSTAIN! It grieves me that people everywhere, especially in the west, have buried their head in the sand. Some kind of miracle is expected and yet, the writing is CLEARLY on the wall - adjust willingly, take your medicine stoically, or be defestrated forcefully - but nobody reads anymore.

The shamans, the sensers, and the gazers, who know how to read the signs, are now considered mad.

The best laid plan of mice and men, sigh...

In reply to by Batman11

Scipio Africanuz Batman11 Fri, 04/27/2018 - 06:28 Permalink

That which is unsustainable, will NOT SUSTAIN! It grieves me that people everywhere, especially in the west, have buried their head in the sand. Some kind of miracle is expected and yet, the writing is CLEARLY on the wall - adjust willingly, take your medicine stoically, or be defenestrated forcefully - but nobody reads anymore.

The shamans, the sensers, and the gazers, who know how to read the signs, are now considered mad.

The best laid plan of mice and men, sigh...

In reply to by Batman11

Batman11 Scipio Africanuz Fri, 04/27/2018 - 14:50 Permalink

This economics benefits very powerful groups, they don't want to let it go, e.g. bankers, land owners, landlords, real estate and all rentiers.

A couple of fundamentals are missing that have very big implications.

1) It doesn’t understand how banks work or the monetary system

Banking theory has been regressing since 1856, when someone worked out how the system really worked.

Credit creation theory -> fractional reserve theory -> financial intermediation theory

“A lost century in economics: Three theories of banking and the conclusive evidence” Richard A. Werner

http://www.sciencedirect.com/science/article/pii/S1057521915001477

2) It doesn’t consider debt

3) The early neoclassical economists hid the problems of rentier activity in the economy by removing the difference between “earned” and “unearned” income and they conflated “land” with “capital”. The importance of the cost of living in economics had also gone as this exposed rentier activity in the economy. 

 

In reply to by Scipio Africanuz