Finally
After 5 years of insane malinvestment the world is finally – finally – seeing the fruits of its trillions of dollars of labor. The fruit of the $10 trillion of central bank money used to save the financial system is going to be… wait for it… yes… yet ANOTHER financial crisis.
I envisage the markets today as a spinning top as it beings to slow down, wobbling from side to side, this way and that. The volatility is making everything wobble, causing oil to go up and then down, stocks to go up and then down, until the whole world crashes to a terrifying slump.
This particular generation of humans – living off fractional reserve banking speculation and central bank bailouts – is the economically dumbest and yet most technologically advanced in history. We will have apps on our iPhones and on Google Maps to see in real time the collapse of our food supply, the nuclear radiation spewing from Fukushima, and the destruction of our retirement funds.
We will have the highest of high-end technology to view problems caused by the most basic and fundamental of issues – the global mispricing of assets around the world. This has NEVER happened at the same time all around the world. The swirling and spinning is occurring at an incredible pace because of globalization – but it would not happen if prices were set by something stable. Like… I don’t know… like gold.
This level of paper/government/bankster-induced mispricing hasn’t happened since John Laws France, China’s Cultural Revolution, or the madness of the Soviet Union. Who said communism didn’t win? Free markets have been killed. Strangled without so much as a whimper of protest from the populace.
Communism has in fact won without having to shoot one real bullet. It came slowly, behind the scenes, via central banking and the supposedly “capitalist” bankers – communists in suits.
Global central bankers planning their way to today’s complete and utter disaster. That seems like a communist “win” to me.
What $US10 trillion buys you today
You’d think US$10 trillion would buy you a lot. Sadly with today’s inflation it doesn’t buy much. Yes, it might buy you half the annual economic output of the EU or the US. Yes, it might buy you all the real estate – every square inch – of land in Australia and New Zealand (both commercial and residential). But it doesn’t buy you peace of mind.
Proof?
US$10 trillion has been spent by central banks to resuscitate world economies and move those economies from crisis to growth.
It didn’t work. Unemployment is still shockingly high in Europe, growth is dying everywhere (including China) and nothing – nothing – lasting has been achieved.
Oh and Greece and the whole Euro area are in existential crisis.
As I said, US$10 trillion doesn’t buy you much these days.
Next time let’s spend it on something worthwhile. Diamond encrusted guillotines for every fractional reserve banker in the world today. I reckon that would cost around $50 million, given the repeated use guillotines achieved in the French Revolution. Are you telling me that’s not better value?
Current economic policies cause domestic genocide
Governments around the world are still screaming that economic activity is causing “global warming” and we must consume less or we face a dystopian future full of rising water and blustery gales. But when we actually do what they say we must do, and consume less, that’s suddenly really really bad. They call it “hoarding cash”. This, for some unknown reason, despite being what they wanted to “cure” the global warming menace, is somehow all of a sudden “wrong” – and prompts the government to push us into bizarre wasteful Keynesian policies like cash for clunkers, where perfectly good cars were deliberately destroyed and put in landfill to encourage spending. I wonder how much cash for clunkers contributed to global warming by encouraging wasteful steel production and wasteful economic activity when perfectly good second hand cars were trashed for no reason whatsoever other than to encourage “spending” and excessive consumption to keep “economic activity” (and, presumably, taxes) staggering on a like a zombie.
Now governments around the world are stealing trillions in savings from pensioners, the middle class, the working poor, and putting it directly into the hands of already-rich bankers.
Surprise, surprise: now the bulk of the populace – the working class and middle class – don’t have the money or the incentive to grow families because of these parasitic insane policies. Governments are starting to panic about the collapsing tax base and starting to implement equally crazy policies trying to encouraging people to fornicate and populate.
All these problems – excessive consumption, wasteful misallocation of resources, depressions, impoverishment of the general populace, low birth rates – all these have one common cause: government interfering, government tinkering, government taking over the production of money, government banning competition in currencies (gold and silver have been confiscated by governments since the 1930s).
Hey Mr Politician – You screw me, I kill my own babies so they are not screwed by you in future.
That’s effectively what millions of people are doing in Japan and Western Europe. Through voluntary birth control they are making the active decision not to submit to being financial slaves, and not allowing their unborn children to be corralled into being the next generation of financial slaves.
This is, effectively, “voluntary” financially and economically-induced domestic genocide.
Only in 100 years will people work out what’s happened. By then it will be too late.
Do you doubt me?
See this article here:
The thing that many of these countries have in common, Japan, Denmark, etc., is a rapidly declining birthrate.
A declining birthrate is disastrous for an economy, particularly for an ageing place like Japan.
Ironically, the oldest person in the world turned 117 years old yesterday—and no surprise that she’s Japanese. In fact, Japan is home to one of the oldest populations in the world and has one of the longest life expectancies.
Curiously they also have one of the largest pension programs in the world. You put all that together and you have fewer and fewer young people paying more and more of their income to support a disproportionately large population of retirees who are living for decades after they stop working.
Each one of these governments is trying to find a solution to fix this unsustainable fiscal problem.
In Denmark they seem to think that people aren’t going on vacation enough. In Japan they think it’s a problem of sexual desire. But in actuality it has everything to do with cost of living.
Month to month, year to year, it’s hard to notice the subtle changes in costs of living and standards of living, but after a long period of time it’s easy to look back and remember how things used to be.
You used to be able to support a family on a single income. You used to be able to afford medical care and higher education.
It’s often said that the greatest expense that someone will have in their life is his or her home. That’s total nonsense.
Now, I’m not saying it’s not worth it, but the biggest expense most people will have is family, and particularly children.
And after years and years of suffering through pitiful, destructive policies that have chronically made people less prosperous, it’s no surprise that they’re coming to the conclusion—you know, we can’t really afford to have a child right now.
There are consequences to conjuring money out of thin air. There are consequences to destructive policies.
So destructive in fact that central bankers and politicians even have the power to make a population disappear.
How ironic that they try to fix their own problem by trying to introduce themselves into our bedrooms.
Food contamination
I have been predicting economically-induced food debasement and food contamination problems throughout the Western world for at least three years, on this very blog. Indeed, just in recent months!
And now Australia has been hit – shock horror! – with a major food contamination scare involving Hepatitis A in imported frozen berries from China. Why? Apparently because Chinese businesses are trying to “save money” by putting human faeces directly into soil used for growing food! Yum YUM!
Unsurprisingly this isn’t a good idea from a food hygiene/food contamination perspective.
No one predicted these kinds of issues arising in Australia. No one points out this is inevitable due to perverse incentives embedded within our current monetary and economic system. These things apparently just “fall from the sky” as random events.
That’s complete bullshit. I predicted them here on these pages. There will be more scandals and crises. It is inevitable. It is part of the monetary system. It is part of the perverse incentives inherent in a system that produces paper-pushers and computer desk jockeys trading paper rather than encouraging (and providing reasonable financial returns to) real people producing real stuff (like real food).
David Graeber calls this the glorification of do-nothing paper shuffling and I agree.
When you have this kind of completely screwed up monetary system there will inevitably be created more and more psycho-nerd autistic bankers on the one hand, and fewer and fewer real, caring farmers on the other.
These are economic problems with economic causes and economic solutions, not random events or problems amenable to political solutions.
Solve the money problem and you solve resource allocation problems and you solve the food crisis. That crisis is here. And it’s going to get much, much worse.
In the madness that is locked in to the stupidity of the mainstream, no one can hear you scream.
I know correlation isn’t causation, but do these graphs look suspiciously similar to you?
OK I admit defeat
OK this insane QE is completely out of hand.
Stocks and bonds are being bought directly by central banks around the world. The US Fed stops QE only for its colonial slave Japan to take up the task on its behalf on the day US QE ends. This will never end.
The mainstream story is that Europe is in a slump because they didn’t try QE. Rubbish. Most of the “benefit” of QE flowed to European banks if you look at the numbers.
What does this mean for investors? Well, in the short term, stocks and housing are still good bets despite insane valuations and low yields because the monetary mandarins will clearly do everything in their considerable power to prop them up.
Inequality is a major short and long term issue. Food is a major long term issue. Water is a major long term issue.
But who is looking at the long term? Not me!
Building blocks of logic
Just as a quick mental note to myself in relation to this article that I’ve been working on for, well, around 10 years….
1. FRB causes malinvestment in two dimensions. It promotes overinvestment in “higher order” goods (ABCT). And it promotes Ponzi speculation in housing (Minsky).
2. Both forces combine to underprice water and land for farming.
3. The Fed has every major market manipulated so the “truth” doesn’t appear. The truth appeared in 2008. What did it show? Much lower stock and house prices. Much higher oil and commodities prices. To suppress these price signals is to suppress investment in these industries and guarantee future undersupply – all in the name of saving the financial system.
4. If this continues we will NOT have a financial crisis. We will have an environmental or food or water shortage crisis. Note: This will not cause explosive food prices. It will cause increased food contamination and food debasement scandals.
The warning bells have been silenced. So the alarm will go off too late.
Best quote to sum up the end game:
The hint of what comes is seen in the devastating situation in Venezuela, whose tragedy few are paying attention to. They are exporting their essential products (beans, rice, oil) in order to raise hard currency and to prevent a domestic currency collapse. The same will be done in the United States. The early example of exported essentials is of hayfeed for livestock, heading to China from US farms on a growing basis.
There may be a God
Now that Krugman is out of Princeton perhaps the Fed will be out of the US? Too much to hope for….
I have despised this guy for years. Finally he’s getting the ostracism he so richly deserves.
Trust
In 5 years of watching this chart (daily) I have never – never – seen this:
What does this suggest?
First, see those tiny little movements before today? That’s called MANIPULATION.
Second see that big jump today? That’s called “When the ball can no longer be held under water by the biggest manipulators in the world aka the central banks.” There’s no news that would cause the jump. It’s just that the ball is getting too big to hold under water anymore.
I said this would happen eventually. When trust breaks.
Sadly the Chinese don’t trust each other. They will end up trading in gold and silver. And their idiotic rehypothecation-ponzi-lying will (ironically) bring down the Western monetary system. Why? Because the West lies but only strategically on the big matters. Small people don’t lie day to day. So Nixon can close the gold window and people continue trusting the system for another generation. It’s been 43 years since August 1971 when the gold window was closed.
In China everyone lies. Big and small. No one can be trusted. So the game blows up much quicker in China. That’s why to survive people will ask for gold in China. And that’s why the game will end, even if the Chinese government and the West don’t want it to.
When (not if) China blows up what are the consequences?
But what are the consequences?
A lower $A. A housing bust in Australia.
I’ve been waiting for the next 2008. It’s gotta come. With the system we have it’s inevitable every 5 years or so. So we’re overdue.
Looks like China is going to be the “blow up” candidate this time around.
Ayn Rand
OK, she was a little kooky and doctrinaire, but she had insights and was a clear thinker. To quote Ayn Rand:
When you see that in order to produce, you need to obtain permission from men
who produce nothing; when you see that money is flowing to those who deal not in
goods, but in favors; when you see that men get rich more easily by graft than
by work, and your laws no longer protect you against them, but protect them
against you, you may know that your society is doomed.
We are DOOMED.
The terrible “twos”
Bitcoin is around 2 years old and is going through the same growing pains any 2 year old endures.
Mt Gox has blown up. But note – Bitcoins are still trading at reasonable prices on other exchanges, which is quite surprising given the publicity over Mt Gox.
And note that Mt Gox apparently ran a fractional reserve system. So even with Bitcoin the gremlins and shysters appear.
What to do?
1. Be careful what exchange holds your bitcoin, just like being careful about which bank holds your cash.
2. If you have substantial holdings of savings in bitcoin, I’m amazed. You don’t have better places to park and grow your money? Like a Caribbean island?
Bitcoin will still be around. Just like fiat money is still around. It’s “true” value (after the attacks and the government propaganda and the hysteria have died down) is yet to be determined.
The lesson?
Never buy in the middle of a bubble. Buy at the beginning or at the end. Bitcoin looks good value now. So does Argentina. So does Ukraine.
UK property and Australian properties do not.
The quintessential “politician”
Am I crazy or is the whole world crazy?
How often have I been screaming that fractional reserve banking creates perverse incentives to concrete over precious arable land for suburban homes? How often? How often have I predicted environmental disaster – not because of climate change – but because of insane banking practices? How often?
Well, here it comes. How maddeningly predictable.
Every time fractional reserve banking has gotten out of control there have been dust bowls. Why? Because fertile land was concreted over for speculative land development which then takes decades to re-balance.
I want to die before there’s a full blown environmental crisis because I won’t be able to take it when all the commentators blame capitalism or climate change when that’s not the real cause.
Oh, and by the way – flooding in London in 2014 and Brisbane in 2011 was substantially caused by over-development, leaving stormwater to flush down poorly planned sewage systems, rather than be soaked up on farmland where the water used to find its proper home.
I hate the stupidity of the majority. They deserve to die but they won’t, they will continue to steal from the productive minority until all the farmland is bitumen-fucked to death.
Gold is coming back. Big time.
Who is laughing now, eh?
Gold has been best asset to hold since QE Taper. It will be the best asset to hold when the world goes Greek. You can take that to the insolvent bank.
Work in government. Then run.
The best strategy when living at the end of a fiat money cycle has always been the same – get as high up in government as you can. Put your savings in a farm far far away. When the whole economy blows sky high because your (and your fellow parasite’s) bloodsucking on tax proceeds kills the host, run.
Exhibit 1 – End of fiat money. Tick. Washington (and Canberra) biggest median incomes in the US (and Australia). Tick. Washington by far the most optimistic people in America. The parasite is happy but the host is dying. How long will that last? As long as China doesn’t pull the gold pin, that’s how long.
The Likeness of God
I am posting the most succinct and eloquent summation of this blog I could possibly write. Pity I did not. Read it and weep my friends, read it and weep…
The Likeness of God is to Create not Consume. Ingenuity and innovation are hallmarks of our human creativity. Curiously, those marvelous characteristics unique to mankind, which have delivered the most astoundingly advanced technological productivity gains ever conceived, are now fast displacing a multitude of relatively menial jobs previously attended to by human beings, who having been anchored to unsatisfying and unfulfilling laborious routines, were less able to enjoy the free time and space certainly required to become more creative enlightened beings themselves.
Surely, the simple answer to our current macro economic dilemma, namely low growth with vanishing jobs, is to once again call upon our God given human ingenuity and innovation, so as to quite simply redesign and rearrange the furniture in our grand house more adeptly. If we so choose, we can freely create more, we can joyously labor less, and we no longer must be slaves to the degradation of excess consumption. See how that works?
A word of caution, getting there will not be plain sailing and rather tempestuous I’m afraid. Change will be vigorously opposed and resolutely resisted, particularly by those who have attained much power, privilege and affluence, as they have been conditioned to measure and value their own success, sense of significance and acquired tenure in the presently established order of society. They will understandably do all in their power to defend and cling onto an organized societal system and set of values, where they have clear vested interests and which has seemingly served them so well, no matter how obviously clear it is that the world around them is increasingly becoming unglued before our very eyes. The desperation of the QE monetary policy dependency itself, is but a misguided manifestation of the dangerous hubris and arrogance that puts forth and fiercely holds on to an obtuse refusal to acknowledge and accept the reality of the inevitable change in the winds that is now howling so vociferously upon us.
Purposely degrading this Nation’s hard earned reserve currency status, which was so honorably passed on to us by previous generations who built this great country from the ground up with their virtuous and industrious blood, sweat and tears, only to then implement a disgraceful monetary policy that deliberately steals from future unborn generations in order to facilitate living standards beyond our means, so as to sustain an unearned, undeserved and unprincipled culture of grotesque illegitimate debt financed over-consumption, can only be characterized as a deplorable unconscionable abomination of Biblical proportion.
We physically finite mortals just so happen to inhabit a physically limited globe also made up of finite resources, inevitably, the days of unlimited growth and excess mass consumption must be expeditiously put behind us. To artificially sustain this decadent overindulgence via unsustainable debt financing is absurdly short sighted lunacy which borders on sheer insanity. Either we adapt or we die, same as it ever was.
This free choice which has been divinely granted to us is entirely ours to make.
Bastiat’s seen and unseen
Better fire fighting services, or the Grand Prix?
Tax payers dollars carefully allocated or squandered?
Who decides?
Genocidal Economics
It should be a new subject taught in all Ivy League colleges. Particularly wherever Bernanke and Krugman go to teach.
Or Genocide Economics.
Take your pick.
Bad Idea 2014: Have Your City Host an Event
Melbourne has died over the last two decades as a functioning flourishing city. It goes from “event” to “event” like a circus roadshow, with the cronies and hangers-on partying and getting drunk on public funds, while the middle class collapses on mortgage repayments, drug addiction or casino gambling.
This is a simple story repeated over and over. It’s just that Melbourne’s brain dead politicians always do the dumbest shit, in the most inane way possible.
Here is the academic answer to why one-off events in your city is a bad idea:
I’ve long hated this sort of boosterism practiced by chambers of commerce and economic development corporations. Behind all the localized rah-rah stuff is nothing more than a bunch of politicians and local corporatists lobbying for prestige products that do nothing to improve the local economy, but instead cost many millions of dollars for heavy-handed policing imposed on a city where local businesses do not benefit, and are in fact made worse off by the heightened security and tax bills.
Quite so.
Pity Melbourne (and Greece) didn’t get the message earlier.
Now I understand!
I was wondering why there were seismic shifts in the tectonic plates. $A down. Emerging markets pummelled. Stocks plummeting.
China’s credit fuelled boom is collapsing. See here.
Economists like to say there is a “disorderly” breakdown at the end of a credit-fuelled boom. I like to say the Ponzi scheme stops and the shit hits the fan when everyone realizes asset prices are about to collapse and someone is going to be left holding the bag (of debt).
China is about to collapse.
OK, well it all makes sense if that happens. US bonds will go up. Gold will go up. Everything else will die.
Simple.
I was wondering what was going on. Now I know.
Back to sleep everyone….
2014 – The Year of the Chicken Coming Home to Roost?
I know 2014 is supposed to be the year of the Horse, but I’m beginning to suspect it’s the year of the Chicken Coming Home to Roost.
Tick.
QE to the coke-snorting Wall Street bankers still around $75 billion a month (making it over $16 trillion in central bank support to bankers – enough to feed every poor child in the world since 2008), resulting in the biggest government intervention in world history, distorting every market in the world, causing surpluses and deficits in markets everywhere.
Tick.
World fucked by Fukushima. Government politicians oblivious to reality and butt-covering bureaucrats blind to their own madness.
Tick.
This is a recipe for another wild ride in 2014.
Hold on tight. Currencies are going to go everywhere. Where this ends up nobody knows. But the shit is close to hitting the fan and when it does, duck for cover.
A$ dying
Something is going on. Developing countries’ currencies are dying (see Argentine peso). A$ decline is relentless. Chinese banking system is in some trouble (to what degree only God knows). The US is still agitating a brain dead irradiated and polluted Japan to pick a fight with China.
I feel something is brewing. Perhaps a “hit” on China to force the money (and gold) back to “safe haven” US?
Nothing to do other than get some money into US$ and some money out of A$. Nothing crazy but definitey I see the $A continuing to decline in this environment.
The long wait
I have been waiting precisely 12 years for complete financial collapse. I have felt bad for most of that time, impatient for collapse. During that time I only felt “myself” in 2007-2008. I went to work happy. Everything was collapsing around me. The world was turning in its right orbit. Bankers were getting their just deserts. They were afraid. Oil was up. Food was up. Asset prices were collapsing except gold, which was skyrocketing. The world was recalibrating in precisely the direction it needed to go, precisely the direction it should go, precisely the direction I predicted it had to go.
Then the government really took control.
QE has been going five years now. Five long years. Trillions have been used to prop up banks. Trillions that could have saved millions in poverty. Trillions that could have built cities entirely living off solar power. Trillions that could have been deployed in countless more exciting and more productive ways than giving bankers on Wall Street the money to blow it on hookers and coke and Patek Phillipe watches and vintage cars and art.
Remember when Superman turned the world the “wrong” way on its axis to turn back time? Well the world has been pushed by government and the bankers the “wrong way” for five years now. And I’ve increasingly become disillusioned and depressed. Stocks have shot up, but yields have collapsed because they really don’t earn much money. Unemployment has skyrocketed but the political establishment seems as secure as ever, with the Occupy Movement now a distant memory, the flame having been snuffed out with police thuggery and violence. Property madness is again fashionable. Bonds have not collapsed. Gold, oil and food are all down. Down!
Basically every asset that should have gone down went up and every asset that should have gone up went down. It took them 4 years to get control of gold, but they eventually killed that price signal too.
What’s left from the carnage?
Bitcoin. Farmland. Fiji property far far away from the madness (or some other island of your choosing).
I still believe gold and silver and oil and foodstuffs will come back but I have to get past government price controls to believe and I have been reminded these past three years just how powerful government is. If you have to make a bet between the government and the people bet against the people and with the government every time, at least in the short run.
Gold and silver and oil and food and farmland will all come back. But I don’t know whether it’s soon. And I don’t know whether the collapse will be in my lifetime.
Murray Rothbard was right, but didn’t see gold touch $500 before his death.
I hope to survive to see my dream come true – financial collapse, gold exploding as money again, and the wiping out of the financial centers of the world.
I can only hope and dream. And pray.
People don’t want to know, so the game continues until it all falls apart
If you’re on a train and the train driver can’t see two feet ahead of himself, get off that train.
Our “leaders” cannot see one foot in front of themselves, let alone 2.
QE is a joke. The economy is most manipulated in world history, arguably more manipulated than Soviet Russia in its heyday. Surpluses (iPhones, drugs, hookers, fiat money) are everywhere. Deficits (arable quality land, quality food, gold and silver) are everywhere.
This cannot end well. We are too far down the rabbit hole to get out now.
But no one wants to know.
Fukushima nuclear disaster means decades of human disaster on a scale unprecedented in human history
How long have I been screaming about the cover up? How long have I been saying this is worse than Chernobyl?
Note: I am basing these conclusions on the science and reputable academic reports. Not on hysteria. The simple fact for anyone who knows anything about spent fuel rods is that if the water doesn’t keep cooling those highly toxic spent fuel rods and they go into meltdown then the emission of plutonium and other highly radioactive substances could damage life on the planet for hundreds of years. Hundreds of years.
Let me be clear about the implications should this 50/50 situation turn bad:
1. West Coast US will be depopulated as people suddenly realise thyroid cancers and health issues are skyrocketing. Bald eagles are already falling from the sky.
2. Fish will be off limits. How many people eat fish? Tuna is already down 95%. A whole food chain is being destroyed as the human population continues to explode. How does that work in the long term? Answer – it doesn’t. Poverty and starvation rates have to increase. Crime and lawlessness will have to increase. Greece 2.0 around the western world, especially West Coast US.
3. Economic growth will crash as people realise the implications for the whole of the west coast of the US. And Japan. People will try to emigrate. To Australia. To Argentina. Anywhere to get away from the risks.
This is all so predictable. It’s slow because the cover up is so massive. But as it leaks out, so will the population.
Best article of 2014
Anyone can blow a bubble. The question is can you provide a framework for sustainable growth?
The two are incompatible.
The idiot central planners can’t see that making billionaires on Wall Street is not the same as wealth creation. Or feeding the population.
Any government can make a group wealthy. Zimbabwe did that.
Few governments can create an environment where general wealth increases sustainably. Singapore. China. Australia.
Who else in today’s world?
Not many.
2014, 2013
13 was an unlucky year for my predictions, I admit.
Gold was down. Badly.
I’m certainly not surprised and I wasn’t buying this year, so it’s no big deal for me. But it still hurts to see its largest price drop in 30 years. Admittedly the last couple of years have seen it go up the most in 30 years. So it is nothing if not volatile.
Three years into the decade, I still have the following predictions for investment:
1. Gold and Silver.
2. Residential property. In Sydney, and in pockets of the US.
3. Bitcoin.
4. Selective growth stocks. Like Freelancer. Dominos. Flight Centre.
5. Banks. Until they blow up.
So it’s steady on banks and fiat money until the whole thing blows up and then it’s farmland and gold.
I can’t tell you when this bubble will burst so a little bit in banks and a little bit in gold and lots in your mortgage is the way to go.
See you in 2014.
Bitcoin as barometer
The huge volatility in Bitcoin is not a sign of the volatility in Bitcoins as such – it is a sign of the volatility of fiat money which can be created out of nothing with zero effort.
In this world, some suckers work. Others counterfeit.
The counterfeiters know they counterfeit, so they buy selectively and they buy long term assets to avoid being caught.
Bitcoin has no futures market and no derivatives market, so fiat pumpers have to buy to control.
That is what is pulling Bitcoin this way and that. Fiat pumpers buying and dumping.
Where will it go? I don’t know. Am I buying? On the dips, yes.
2020 Speculator 