09 January 2013

Consider it Fair Warning

In recent years, world-class investment gurus such as Jim Rogers, Peter Schiff and more, have been recommending that ordinary investors start planning to provide basic life necessities for themselves and their families, in the face of a potentially catastrophic global economic breakdown caused by suicidal government economic policies.

Post-Apocalyptic Trading Post

Such quasi-apocalyptic talk is not necessarily hyperbole. Consider it more in the territory of "fair warning."

Modern government economic policies from the US to Europe to Australia, are built upon tens or hundreds of $trillions of imaginary capital and wealth which does not actually exist in the real world. This "phantom wealth" resides mainly within the imagination. It is an article of faith and economic belief systems.

Whether there is a catastrophic and bloody economic collapse depends largely upon the psychology of the herd -- and what it might take to collapse the belief system and set off a stampede.

The combination of exponentially growing debt with an ongoing demographic collapse of core populations, casts ominous spells over the futures of most of the nations of the developed world. There is still time to change course and correct past mistakes -- but there is no political will to do so. And there is not enough "grit" in most modern populations to turn toward sustainable demographic and fiscal policies, even if a few politicians at the top had the backbone to promote such changes in policy.

The US is on a suicidal economic course to disaster. This is not a new finding, but the rate of economic decline has accelerated significantly in recent years, and is likely to accelerate even more over the next few years.

It takes almost $10 in new US government spending to achieve $1 in new GDP growth. That "return on investment" has been falling steadily as the type of new government spending changes away from the "infrastructure" category, inexorably over to the "entitlement" category. The same dead end trend is taking place from Australia to Europe to Japan to Canada.
Entitlements Overwhelm Revenues

As spending for entitlements overruns and overwhelms all sources of revenue, government borrowing to pay for both infrastructural and entitlement spending -- plus the interest on pre-existing debt -- explodes through the roof. Eventually lenders -- both foreign and domestic -- bail out of government bonds and notes. The government will no longer be able to borrow on open markets, and will be forced to print money to pay its debts and operating expenses.

Any student of history worth his salt understands what happens to the empire when it runs out of "gold," or whatever is perceived as real wealth to pay its bills and the salaries of its centurions, clerks, and PR flacks.

The Obama administration was given a magnificent gift in the form of the "fracking revolution." The economic growth that has occurred and will continue to occur as a result of this unexpected "gift horse" will help cover up and take the edges off the near term decline.

But the Obama administration's thick-headed and reactionary economic policies are poison to the economy as a whole. Real unemployment remains at historically high levels, dependency on government benefits continues growing to record levels, and there is only so much happy talk that the media can spread around to cover up what is essentially a crappy economic outlook.

Here is a brief summary of the "Ponzi Finance Scheme" that underlies the economies of modern developed nations.

Argentina has gone through this cycle multiple times, and is approaching the critical stage of yet another dysfunctional populist economic cycle. It is easy to sit back in one's easy chair before a fire in Munchen or Victoria, and "tut tut" over Argentina's perennial dysfunction and economic dunderheadedness. But when the dysfunction reaches your front doorstep, if you have not made preparations you will have a few other choice expletives forced from your lips.

It is never too late to have a dangerous childhood.

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4 Comments:

Blogger Matt M said...

Should you hold property because it might appreciate in times of hyperinflation? If so, should it be leveraged so you can pay off your debts in valueless dollars?

Or, should you invest in an ongoing enterprise that produces something that people are likely to need? i.e. food or electricity.

Thursday, 10 January, 2013  
Blogger al fin said...

Consider how easily governments can confiscate both property and ongoing enterprises. Look what Obama did to Chrysler bond holders.

The best property to have in hyperinflation is property that is very valuable, and which can be sold off in tiny pieces, incrementally, as needed -- but not before. Bartering and black markets may be the best options, depending upon how the hyperinflation develops.

Out of the way property with a good water supply, that can be used as a getaway and that can also produce food or other trade goods, would be useful to hold. But keep a low profile.

If you read the link to the doomsaying economists' predictions, you will see that they were all wrong in their predictions for 2012. But they were not factoring in the amazing economic effect of the fracking revolution -- an entirely non-governmental phenomenon.

Unfortunately, Obama and his minions are likely to perceive the unearned economic boost from fracking as a sign that they are doing a good job, and proceed to double down on stupid -- as they are wont to do. So that when the Obama economic boom is lowered in its entirety -- including Obamacare and everything else the dumkopf wants to do -- the sudden bogging down is likely to catch a lot of people by surprise.

Thursday, 10 January, 2013  
Blogger Lime Lite said...

The EPA is on a mission to ban fracking..... Good luck with that!

Thursday, 10 January, 2013  
Blogger al fin said...

The EPA is undergoing some remodeling at the moment. Obama's political handlers seem to have awakened to how close they came to getting booted out of power, if not for strings pulled, and unintentional help from unexpected quarters such as the fracking bonanza.

Obama has to try to keep the dimwitted greens happy, since he owes them much. But power trumps everything else, despite any noble words The One may have uttered previously.

Friday, 11 January, 2013  

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