WHEN DOES CHINA PULL THE RUG?
Remember how we just discussed the funding of the profligate US government? Let’s take a look at how bad things are. Here’s the current budget deficit.
The blue is good and the orange is bad. You can see a lot of orange, and after 2008 things have been decidedly “orange.”
Since there is no actual cash in the piggy bank the US government has to borrow it. Meanwhile, debt spirals higher. Total US debt now tops $90 trillion with unfunded liabilities clocking in at $169 trillion.
Folks tend to forget that a government doesn’t produce anything. It merely sucks up resources from the productive and redistributes those resources. The most “productive” governments manage to do this with the least amount of friction or capital stripped from the system, while allocating the resources the most efficiently. And since governments are awful at both of these things, the most “productive” governments are those who do the least, instead leaving it to the private sector to cater to the wants and needs of society.
In any event, the ever-continuous intrusion into citizens’ lives while “providing” for them things such as education, healthcare, pensions, and myriad other things which governments should have no hand in cost money. A lot, especially when the allocation of resources is not governed by the cruel hand of the market. Profligacy abounds in these situations, and so as the debt spirals out of control so does the printing of money.
One reason I have been saying that the probability that a debt reset is in the offing is because the numbers are just too egregious to be managed at this point. Median income per household in the US in 2020 was $67,521. Now consider that when doing simple math by taking US debt and dividing it by citizens we clock in at $778,000 per citizen (not per household). Now, not all citizens are contributing to the pie so to speak. Babies, for example. A more accurate take therefore is dividing this number by the number of US tax-paying citizens. When doing so we clock in at over $2 MILLION per citizen. Do you understand now how hopeless this situation is?
So there are now only two solutions I can think of. One is a hyperinflation of the currency and the other is a debt reset.
This brings up other probabilities. Those in power know that a hyperinflation would likely see them being replaced. History shows us this is true. No, rather they will try to self detonate the system, have an enemy to blame it on (Covid, Russia, etc.) and retain control… or dare I say gain even more control. This is what the entire WEF plan is all about. Right now they’re still using the mask of democracy, but as we’ve seen in the last two years this is merely a mask. Leaders all over the world have been bought and pressured or murdered (Magafuli) when not complying. The corruption is now increasingly brazen and blatant. The energy put into masking it grows weaker each day while the excesses and theft grow more egregious. Surprised? You shouldn’t be. This is the fourth turning. Lucky us, heh?
Something else to consider is that while the Biden administration is sending tens of billions of dollars to thugs in what is arguably THE most corrupt Eastern European country (ostensibly to fight a bad man), they can’t actually afford it. The US military may well be the largest in the world, but as is the case with all militaries it requires funding. Cut off the funding, and no army can or will fight. This is true even if gender confused soyboys in San Francisco champion “taking it to Putin” while placing Ukrainian flags in their bios… right next to their pronouns.
And that means that the acceleration of the collapse of the US government and indeed the European Union (who are just as broke) is being accelerated.
What you choose to own in such a coming storm is going to be critical if I’m even half accurate. At risk of sounding like a prepper, which honestly makes a ton of sense, I continue to believe that energy at its base level is a no-brainer, if only because every single thing that makes our lives more comfortable, more easy is some derivative of fossil fuels. And as mentioned many times here, the supply is just not coming online. Then moving down the chain of needs, naturally food/agriculture and in this space fertilizer is in critical shortage. So that. Precious metals just as a hedge against total collapse in currency markets, though I don’t think we’re there yet.
It’s interesting to see that although we’re not “printing money” in our portfolio we are positive while most everything is getting a good thumping. There really has been only two places to hide in this crash. Greenbacks and commodities, especially energy. Maybe this deep value bottom up analysis coupled with a macro top down analysis has some merit to it.
How Our Fund Is Frontrunning The Economic Madness In 2022 And Beyond
- Copper - Copper prices have to rise to address a huge supply deficit looming on the horizon.
- Shipping - Shipping is vital for the functioning of the modern world, yet is priced for bankruptcy.
- Eastern Europe - Position for the long-term trend of capital moving from the West to the East with Polish and Russian equities markets.
- US Dollar - We’re bearish on all paper currencies, but believe that the USD will outperform all others.
- Base Metals - Clean energy targets require more battery metals than the existing global supply.
- Off Shore Oil & Gas - Offshore oil investment has been smashed, yet consumption continues to grow.
- Rare Earth Metals - A play on geopolitics and a cycle that should see a repricing of these commodities.
- Uranium - The looming supply deficit promises to pay handsomely when the market inevitably reprices.
- Gold - Gold sees the perfect storm; the turn of a cycle, supply issues, and lack of faith in sovereign currency.
- Coal - Modern society is dependent on coal, with supply continually growing. Is there a more hated investment?
- Personal Defense - Order is breaking down in the US, and the unrest is giving us an opportunity to position for asymmetry.
- Agriculture - Lockdowns and monetary stimulus have ensured food prices will rise, providing deep value.
- Natural Gas - Supply and demand dynamics coupled with dependency from the US provides a great opportunity.
- Plus much much more...
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