Category Archives: Economics

Three paths, seven signs, and five investments

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James Rickards’s book, The Death of Money: The Coming Collapse of the International Monetary System, gives the signposts as to when the collapse of the dollar is eminent and which of three different paths the collapse will take. The three paths are:

The first is world money, the SDR; the second is a gold standard; and the third is social disorder. Each of these outcomes can be foreseen, and each presents an asset-allocation strategy best able to preserve wealth.

In the book he goes into detail on all three.

The signposts are (slightly edited for brevity):

  1. The first sign is the price of gold. Although the price of gold is manipulated by central banks, any disorderly price movements are a signal that the manipulation scheme is disintegrating, despite efforts at leasing, unallocated sales, and futures sales. A rapid price rise from the $1,500-per-ounce level to the $2,500-per-ounce level will not be a bubble but rather a sign that a physical buying panic has commenced and that official shorting operations are not producing the desired dampening effect. Conversely, if gold moves to the $800-per-ounce level or lower, this is a good sign of severe deflation, potentially devastating to leveraged investors in all asset classes.
  2. Gold’s continued acquisition by central banks. Purchases by China in particular are a second sign of the dollar’s demise. The announcement by China in late 2014 or early 2015 that it has acquired over 4,000 tonnes of gold will be a landmark in this larger trend and a harbinger of inflation.
  3. IMF governance reforms. This third sign will mean larger voting power for China, and U.S. legislation to convert committed U.S. lines of credit into so-called quotas at the IMF. Any changes in the SDR currency-basket composition that reduce the dollar’s share will be a dollar inflation early warning. … The acceleration of the baseline SDR-as-world-money plan.
  4. The failure of regulatory reform. A fourth sign will be bank lobbyists’ defeat of efforts by U.S. regulators and Congress to limit the size of big banks, reduce bank asset concentration, or curtail investment banking activities. … Absent reform, the scale and interconnectedness of bank positions will continue to grow from very high levels and at rates much faster than the real economy. The result will be another systemic and unanticipated failure, larger than the Fed’s capacity to contain it.
  5. System crashes. A fifth sign will be more frequent episodes like the May 6, 2010, flash crash in which the Dow Jones Index fell 1,000 points in minutes; the August 1, 2012, Knight Trading computer debacle, which wiped out Knight’s capital; and the August 22, 2013, closure of the NASDAQ Stock Market. From a systems analysis perspective, these events are best understood as emergent properties of complex systems. These debacles are not the direct result of banker greed, but they are the maligned ghost in the machine of high-speed, highly automated, high-volume trading. Such events should not be dismissed as anomalies; they should be expected. An increasing tempo to such events could indicate either that trading systems are going wobbly, moving to disequilibrium.
  6. The end of QE and Abenomics. The sixth sign will be a sustained reduction in U.S. or Japanese asset purchases, giving deflation a second wind, suppressing asset prices and growth. This happened in the United States when QE1 and QE2 were ended, and again in 2012 when the Bank of Japan reneged on a promised easing. However, as asset purchases are curtailed, a new increase should be expected within a year as deflationary effects develop.
  7. A Chinese collapse. The seventh sign will be financial disintegration in China as the wealth-management-product Ponzi scheme collapses. China’s degree of financial interconnectedness with the rest of the world is lower than that of the major U.S. and European banks, so a collapse in China would be mainly a local affair, in which the Communist Party will use reserves held by its sovereign wealth funds to assuage savers and recapitalize banks. However, the aftermath will include a resumption of Chinese efforts to cap or even devalue the yuan in foreign exchange markets to promote exports, create jobs, and restore wealth lost in the collapse. In the short run, this will prove deflationary as underpriced Chinese goods once again flood into global supply chains. In the longer run, Chinese deflation will be met with U.S. and Japanese inflation, as both countries print money to offset any appreciation in the yen or the dollar. At that point, the currency wars will be reignited, never really having gone away.

He goes on to point out:

Not all of these seven signs may come to pass. The appearance of some signs may negate or delay others. They will not come in any particular order. When any one sign does appear, investors should be alert to the specific consequences described and the investment implications.

And what I think is the most important section of the book are in the section Five Investments. This is his advice as to how to preserve your wealth in the coming collapse. Part of the reason for posting this is because a short time back one of my daughters said she wanted to discuss where to invest some money. I said I would be glad to discuss it with her, even though I did not consider myself an expert (by a LONG SHOT!). Before any discussion took place she proudly invested in Game Stop at, lets say, an unhealthy price.

Let the following be suggestions for my other daughters and the perhaps the first who invested before getting advise from her father.

Again, I have edited for brevity. Read the book for more elaboration on why he makes these recommendations:

  1. Gold. An allocation to gold of 10 to 20 percent of investable assets has much to commend it. The allocation should take physical form as coins or bullion in order to avoid the early terminations and cash settlements that are likely to affect paper gold markets in the future. Secure logistics, easily accessed by the investor, should be considered, but bank storage should be avoided, because gold stored in banks will not be accessible when most needed.
  2. Land. This investment includes undeveloped land in prime locations or land with agricultural potential, but it does not include land with structures. As with gold, land will perform well in an inflationary environment until nominal interest rates exceed inflation. Land’s nominal value may decline in deflation, but development costs decline more rapidly. This means that the land can be developed cheaply at the bottom of a deflationary phase and provide large returns in the inflation that is likely to follow.
  3. Fine art. This includes museum-quality paintings and drawings but is not intended to include the broader range of collectibles such as automobiles, wine, or memorabilia. Fine art offers gold’s return profile in both inflation and deflation, without being subject to the manipulation that affects gold. Central banks are not concerned with disorderly price increases in the art market and do not intervene to stop them.
  4. Alternative funds. This includes hedge funds and private equity funds with specified strategies. Hedge fund strategies that are robust to inflation, deflation, and disorder include long-short equity, global macro, and hard-asset strategies that target natural resources, precious metals, water, or energy. Private equity strategies should likewise involve hard assets, energy, transportation, and natural resources.
  5. Cash. This seems a surprising choice in a world threatened with runaway inflation and crashing currencies. But cash has a place, at least for the time being, because it is an excellent deflation hedge and has embedded optionality, which gives the holder an ability to pivot into other investments on a moment’s notice. A cash component in a portfolio also reduces overall portfolio volatility, the opposite of leverage.

Rickards further advises:

On the whole, a portfolio of 20 percent gold, 20 percent land, 10 percent fine art, 20 percent alternative funds, and 30 percent cash should offer an optimal combination of wealth preservation under conditions of inflation, deflation, and social unrest, while providing high risk-adjusted returns and reasonable liquidity. But no portfolio intended to achieve these goals works for the “buy-and-hold” investor. This portfolio must be actively managed. As indications and warnings become more pronounced, and as greater visibility is offered on certain outcomes, the portfolio must be modified in sensible ways.

The book was written in 2014. That is at least close to seven years ago. Before investing substantial assets please become informed using more recent and diversified sources and use your best judgment.

Quote of the day—James Rickards

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Global markets today seem irresistible to central bankers with plans for better times. Planning is the central bankers’ baleful vanity, since, for them, markets are a test tube in which to try out their interventionist theories.

Central bankers control the price of money and therefore indirectly influence every market in the world. Given this immense power, the ideal central banker would be humble, cautious, and deferential to market signals. Instead, modern central bankers are both bold and arrogant in their efforts to bend markets to their will. Top-down central planning, dictating resource allocation and industrial output based on supposedly superior knowledge of needs and wants, is an impulse that has infected political players throughout history. It is both ironic and tragic that Western central banks have embraced central planning with gusto in the early twenty-first century, not long after the Soviet Union and Communist China abandoned it in the late twentieth. The Soviet Union and Communist China engaged in extreme central planning over the world’s two largest countries and one-third of the earth’s population for more than one hundred years combined. The result was a conspicuous and dismal failure. Today’s central planners, especially the Federal Reserve, will encounter the same failure in time. The open issues are, when and at what cost to society?

The impulse toward central planning often springs from the perceived need to solve a problem with a top-down solution. For Russian Communists in 1917, it was the problem of the czar and a feudal society. For Chinese Communists in 1949, it was local corruption and foreign imperialism. For the central planners at central banks today, the problem is deflation and low nominal growth. The problems are real, but the top-down solutions are illusory, the product of hubris and false ideologies.

James Rickards
2014
The Death of Money: The Coming Collapse of the International Monetary System
[See also Book Review: ‘The Death of Money’ by James Rickards which concludes with:

Rickards book is packed with cutting edge analysis and rational perspectives on pretty much every topic the world citizen has to know about. As of this moment, there is no other book offering explanations and solutions to the most pressing problems the world is facing, making “The Death of Money” an absolute must read.

I’m only about 25% into the book and find it fascinating. I found the market intelligence and financial war sections particularly interesting. Rickards and others worked with the CIA to design and implement a system which could have predicted the 9/11 attack a few days before it happened based on the shorting of airline stocks by people in the social networks of the hijackers. It also has other uses related to insider trading.

“An absolute must read”? I probably wouldn’t go that far, at least not based on what I have read so far. But it’s highly recommended.—Joe]

Quote of the day—John Rubino

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If you’re over 40 you’ve lived through at least three epic financial bubbles: junk bonds in the 1980s, tech stocks in the 1990s, and housing in the 2000s. Each was spectacular in its own way, and each threatened to take down the whole financial system when it burst.

But they pale next to what’s happening today. Where those past bubbles were sector-specific, which is to say the mania and resulting carnage occurred mostly within one asset class, today’s bubble is spread across, well, pretty much everything – hence the term “everything bubble.”

When this one pops there won’t be a lot of hiding places.

John Rubino
February 8, 2021
Is This The Biggest Financial Bubble Ever? Hell Yes It Is
[I wrote about complex systems and emergent behavior last night. Our financial markets are another example of emergent behavior. The rule sets are large and complex but behavior still emerges that some may claim can only be explained by a conspiracy. But, again, no conspiracy need exist.

There is a financial bubble about to pop. Simultaneously there is a growing mass delusion about the existence of millions of “extremists” who must be “canceled” or even killed. And there is a pandemic (real or imagined, it doesn’t matter much in the context here) that are all contributing to epic shear forces in our society.

Prepare accordingly. It’s going to be a bumpy ride.—Joe]

Quote of the day—Brandon Smith

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Conservatives and moderates MUST start to physically separate from the political left. We must remove ourselves from the blood sucking parasites that have attached themselves to us. This allows us to remain free to think and speak as we like, and it takes all power away from leftists to hurt us by disrupting our means of making a living.

Secession is a more extreme measure, but it WILL become necessary if leftists refuse to accept that we are no longer participating in their games of fear and subterfuge. Leftists are collectivist by nature, and collectivists see people as property. Walking away is not an option in their minds. So, though we might successfully separate, this would only be the beginning of the battle.

The important thing is to first make sure that conservatives KNOW that there are places they can go where their civil rights are valued and defended. If conservatives feel completely isolated and alone, many will give up, go dark and pray they are not discovered. This is unacceptable.

Brandon Smith
January 20, 2021
Biden’s Presidency Will Be A Catalyst For Secession – And Perhaps Civil War
[See also my previous QOTD from this same article with particular attention to the “scapegoat Olympics” comment.—Joe]

Quote of the day—Janet Yellen

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Would I say there will never, ever be another financial crisis? … Probably that would be going too far. But I do think we’re much safer, and I hope that it will not be in our lifetimes, and I don’t believe it will be.

Janet Yellen
Federal Reserve Chair
June 27, 2017
Yellen: I Don’t See a Financial Crisis Occurring ‘In Our Lifetimes’
[I wonder, given the current state of things, if she would like to update that assessment. Or is that that she has a rather low expectation of our lifetimes?—Joe]

Quote of the day—Jim Quinn

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They believe they have contained the spark with their fraudulent election victory; installation of an empty senile vassal as their conduit for the great reset; having their media mouthpieces propagate the falsity of a right wing white supremacist insurrection at the Capital; crushing dissent by censoring the truth through totalitarian social media conglomerates; proceeding with an impeachment farce based on Trump telling his supporters to peacefully protest the fraudulent election outcome; and threatening to destroy the lives of all vocal Trump supporters.

I am highly doubtful they have contained the spark. I believe there are smoldering embers just waiting to be stirred into a conflagration which will engulf the entire world in a fiery purging of the existing social order, which has exhausted itself and needs to be cleansed.

Jim Quinn
January 25, 2021
FOURTH TURNING DETONATION
[That is a plausible assessment.

So when and how will this conflagration happen?

I’m not seeing it happen unless there is a major trigger like hyperinflation or door-to-door gun confiscation, that sort of thing.—Joe]

Quote of the day—Brandon Smith

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What we are witnessing right now is the final phase of a collapse scenario that was more than a decade in the making, and Biden is about to help finish the job.

Biden will no doubt seek to hyperinflate the dollar in the name of offsetting the losses and keep things afloat for a short time, but the real agenda will be to trigger price spikes in goods as well as eventually killing the dollar altogether. No amount of stimulus will stop the crash that has already been set in motion; the bailout measures from this point on are Kabuki theater, a show put on for the masses to make us believe that the government and the banks “did everything they could” to save us. The elites have no intention of stalling or stopping the collapse; their “great reset” demands it.

One’s initial assumption would be that Biden would then take the blame for the economic crisis, but it appears that the establishment is going to set up a Herbert Hoover narrative and lay all the blame squarely on Trump and conservatives. In the past I have noted that Trump’s trajectory was very similar to Herbert Hoover’s, in that he was a business mogul and Republican that pushed for corporate tax cut policies and also extensive tariff’s.

Brandon Smith
January 20, 2021
Biden’s Presidency Will Be A Catalyst For Secession – And Perhaps Civil War
[I’ve been listening to the book When Money Dies: The Nightmare Of The Weimar Hyper Inflation. There are a bunch of takeaways which I think are relevant to our current situation. The ones I have taken note of so far include:

  • The government was, in a sense, without options because of increasing obligations which they could not pay for. The option of defaulting was “too terrible to confront” and they could avoid the confrontation in the short term by printing more money. Our situation more than parallels theirs.
  • The volume of paper became so large people carried their money in baskets and wheelbarrows. People would have their baskets and wheelbarrows stolen and the thieves would leave the money behind.
  • Things moved quickly. A cup of coffee was priced at 5,000 Marks when you sat
    down on the table but was 8,000 Marks after you drank it and went to pay for
    it.
  • One of the things that slowed the increase in the currency supply was the physical creation of the paper bills*. Our digital money will not have these restrictions on the rate of increase.
  • Some people did well in this environment. Among these were people in businesses where their costs were upfront and product sales were much later.
  • People in union jobs with effective striking power producing essential goods were able to avoid the worst of the situation.
  • People in the services industries, include doctors, lawyers, etc. did poorly.
  • People in government jobs and on pensions were the worst hit. They had nothing to barter with and no effective ability to go on strike.
  • Certain areas (I’m thinking these were something like an equivalent of our counties) issued their own currencies with exchange rates based on a quantity of grain or fuel.
  • The masses of the people, including well respected economists, did not understand why it was happening. They needed someone or something to blame. Jews became the “winners” in the scapegoat Olympics.

We live in interesting times.—Joe]

* The capacity of the infrastructure for producing and distributing the currency was exceeded. With the denomination of the bills increasing at an exponential rate even the limits on things like the speed of the design of the bills was exceeded. The ability to produce and delivery the paper to the printers, get it through the printing presses, and distribute it to the banks exceeded the truck transportation capacity.

Quote of the day—John

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The main idea of MMT is that since government creates money there are exactly no limits to how much money government can create.  Back when money was backed by gold (say, with one ounce of gold being worth $20) there was a physical limit – by definition you couldn’t have more $20 gold coins than you had ounces of gold.  MMT says, “Hey, since Nixon took the world off of the gold standard, we’ve been making up this money stuff anyway.  So let’s go all in.”  This is not exactly like a drunken 21 year old with Mom and Dad’s credit card in Las Vegas.  Not exactly.  The credit card has a credit limit.

John
January 20, 2021

The Post That Gave The World Bikini Economics: Why MMT Is A Bad Idea.
[It would appear that the U.S. is in the process of testing MMT.

We live in interesting times.—Joe]

Ghosts of the Constitution, past, present, and future

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Yesterday I posed this quote from someone:

The constitution is the conservative equivalent of a gun-free zone.

I followed up with this deliberately very open ended question:

Now, can we use that insight and turn it into what needs to be done next?

The comments indicated everyone took a much narrower view of things than I had. One even took bizarre break from reality saying that my post meant I, “decided to go full-on Brownshirt/Blackshirt/Silvershirt” regarding the election. What? I wasn’t even talking about the election. How did they get there? Did they think they were able to read my mind through the Internet? That was really weird.

Here is what actually happened.

When I read the quote it was like first few nanoseconds of the big bang. Out of nothing there exploded a whole universe. It was like how some people describe their first LSD experience. I’ve never used LSD so I wouldn’t know for certain but that is my best analogy for how it affected me.

There were three comments (here, here, and here) which accurately touched an extremely small fraction of that universe that I saw unfold. And it was all about the past and the present. I was hoping for something more about the future as I was pretty sure I had explored enough of the past and present and satisfied myself that there wasn’t a whole lot more to be learned from those domains. I could be wrong about that so I present that part of my expanding universe for comments, corrections, and additional observations.

But what I really want is for people to think about and suggest a solution to the problem that can be implemented in the near future.

The Past

The authors of the constitution could have set up a separate branch of government which had the job of enforcing the adherence to the original intent. If not this then at least explicitly given the Federal courts some independent enforcement capability and protection from court packing. This may not have been practical or even possible but an attempt in this direction might have made some difference.

This attempts to address the issue, as McChuck, in the comments said, “The Constitution failed because it had no “OR ELSE” clause.”

At numerous critical times there were fairly clear cut issues before the courts which probably, at least a simple majority of people decided the Constitution was inadequate for the present circumstances. And rather than go the long route and get an amendment to the constitution through the process the courts allowed a short cut. This short cut was then used for things not nearly so clear cut. The short cut became a super highway with no restrictions.

I haven’t done the research but a couple very early, reasonably well known examples of such “clear cut issues” were the Lewis and Clark expedition and the Louisiana Purchase. Where does the constitution allow that in it’s enumerated powers?

There are probably hundreds if not thousands of case where little short cuts were taken over the centuries and they enabled all kinds of criminal trespass on the constitution.

What if, instead of politicians and judges instead of giving these short cuts a blind eye, they had handled it differently? What if they had said, “I think this is a good idea. I think this is within to domain of proper government power. BUT, it is also outside of the powers granted to the government”? Let’s, as rapidly as is practical, push through a narrowly scoped constitutional amendment to address this “clear cut issue”. This would have at least attempted to prevent the short cut from becoming a superhighway.

But the politicians of the time didn’t see, didn’t care, or wanted the superhighway and neither of those things happened.

The Present

The U.S. government debt is almost $28 trillion with $159 trillion in unfunded liabilities and constantly going up. Had the original intent of the U.S. constitution been adhered to that could not have happened. The superhighway of criminal trespass on the constitution is is a superhighway to disaster.

The criminal trespass on our personal liberties are just as gargantuan as the economic disaster. The First, Second, and Fourth enumerated rights in the Bill of Rights may have the most lanes of the superhighway over them but all of them, with the possible exception of the Third Amendment, have been paved over with at least a bike path clearly marked where there was once a tall fence with no gate and a NO TRESPASSING sign on it.

People who believe the constitution should be respected according to original intent started talking with each other. The Internet made it far easier to connect with others of a similar mindset. They realize, “Not only is the government infringing upon our rights, the courts aren’t coming to our aid.”

The criminals see the Internet chatter and see erosion of their voting base as more people come up to speed on the situation. The criminals shadow ban people. They freeze their accounts for a day or a week. Then they start completely banning people.

This couple was completely banned by Facebook and they have little* to no idea what it was about. A few weeks later they were both banned within minutes of each other from Instagram. All they posted on Instagram were family pictures. No explain was given. No appeal was possible.

Other people have received some clues. And it’s over the tiniest of stuff:

They are making every post of mine with #DontCaliforniaMyTexas as hate speech and deleting it. I got one day in jail for it

In the last week it was the President of the United States who permanently banned from Twitter. Shortly after POTUS moved to Parler, Apple, Google, and Amazon in a matter of just a few days deplatformed their apps and then the entire site. Poof! Gone! The company is possibly permanently destroyed.

Yesterday morning AR15.com was booted from GoDaddy (see also here). They are now back up on AWS Amazon. I wonder how long that will last as AWS Amazon was the host for Parler.

The political left is saying, “It’s time..” and “Cleansing the movement…” is next.

“Maybe they are being hyper sensitive to people of any political persuasion”, you suggest. It doesn’t look like that to me and others:

Big Tech did not remove House Speaker Nancy Pelosi’s accounts when she called for “uprisings” against the Trump administration. Facebook and Twitter did not target Alexandria Ocasio-Cortez when she claimed that allegedly marginalized groups have “no choice but to riot.” These platforms did not act against Kamala Harris when she said the riots “should not” stop.

This week, Joe Biden condemned the Capitol rioters, saying, “What we witnessed yesterday was not dissent, it was not disorder, it was not protest. It was chaos. They weren’t protesters, don’t dare call them protesters. They were a riotous mob, insurrectionists, domestic terrorists. It’s that basic, it’s that simple.”

Yet he refused to speak in those terms when Black Lives Matter and antifa militants were throwing Molotov cocktails at federal buildings, setting up “autonomous zones,” and burning down cities. Instead, he condemned Trump for holding up a Bible at a church — without mentioning the fact that that very church had been set on fire the night before.

What makes you think it will end with social media? What if the political left pulls your Internet connection for some flimsy excuse, or none at all? You think that would be going too far because Internet is essentially a requirement of life these days? Really? You think that would stop them? Do you think I am extrapolating way out into never-never land? “That can’t happen here?”

What if banks refused to do business with you. Wouldn’t that be worse than pulling your Internet connection? Guess what…The Obama administration was telling banks, “If you do business with risky customers, such as gun manufactures or dealers, you will suffer the consequences.” It was called Operation Choke Point.

What about other services such as FedEx, UPS, USPS, your water, waste disposal, and electricity? They didn’t “censor” you, you can still print a newsletter or hold a sign up on the street corner, right? And as long as it wasn’t a government entity refusing you service it’s entirely legit, right?

It used to be motels, restaurants, gasoline stations, etc. could, and did, refuse service to people based on their own criteria. There was a Federal law passed which prohibited such discrimination when it was based on the grounds of “race, color, religion, or national origin.” But it doesn’t protect you if you happen to be one of those nasty people who believe the constitution means what it says.

Do not be surprised if there aren’t soon “blacklists” that result in a surprising number of restrictions on what we normally consider public services. Don’t think so? Today Senator Chuck Schumer called for authorities to add the Capitol rioters to a national no-fly list.

The net result of this? Individual constitutionalists are, metaphorically, standing on some random street corner holding up homemade signs saying, “Repent! The End is Near!” Thousands of criminals occasionally glance at the “Gun-free zone” sign as they zoom by on the nearby superhighway at 100+ MPH and snicker.

The comparisons to the early days of what is described in Gulag Archipelago are eerie. Have a chat with someone with Venezuela, or East Germany sometime.

The Future

This is where I was/am hoping to get some discussion. How can we regain a limited government and our personal liberties?

An armed rebellion? Maybe. But I’m not seeing that as a high probability path. I could see that bringing down the government. But I don’t see that as necessarily building a consensus for the resurrections of limited government rising from the ashes. And your going to start your own cancel culture with a scoped rifle? And how does that work out? You shoot every politician with a ‘D’ beside their name? Then what? Hold another election with the same people voting (and/or cheating) as last time?

And at what point to you start shooting? Are you justified in shooting if you get booted off Facebook or Twitter? And who would you shoot if you somehow managed to convince yourself it was justified? Who do you shoot if some anonymous bureaucrat told your bank to stop doing business with you?

What’s the path to victory here? I am a details oriented guy and as I dig into the details I’m not seeing a viable path.

There is the Lyle option, as I like to think of it. A (supposed) return to Protestant values. This is, perhaps, due to the Second Coming—this isn’t entirely clear to me. I largely dismiss this, not just because I don’t believe in the existence of god(s) but because if the constitution was originally divinely inspired then why did it go so terrible wrong and how can we expect to be better the second time around?

The best I have been able to come up with is that we are probably headed for a Minsky Moment and/or a currency crisis in the somewhat near future. This could be a worldwide event and it could involve the collapse of our currency and perhaps our government. Perhaps out of the ashes of the collapse a more constrained government will have more appeal and will rise.

I see this second option as more probable of success, but still improbable, because the government size proved to be its own downfall rather than being brought down by individualist rebels. Clear and positive proof of big government failure is probably required to convince a majority of people to try small government again.

What I don’t see is a high probability of success path that can be traversed by a few people on the street corners with their handmade signs.

Please discuss.

* Barron recently told me, “I may have been tagged because I didn’t use the complete spelling of my last name.” Yet I know people who have been using completely, and pretty obviously, fake names for their Facebook accounts for years.

Quote of the day—Egon von Greyerz

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It is quite ominous that 100 years after Weimar, the world is standing on the cusp of a  similar debt and currency collapse with hyperinflation as a consequence.

100 years ago it was primarily the problem of one country whose debt the world could afford to write off. Well they had no choice since it was worthless anyway.

But this time it is a global problem with every country in the same situation. There will be no one to save individual countries or the global financial system. Yes, all major central banks will print endless amounts of money. But that will only exacerbate the situation.

A debt problem can never be solved with more debt. And a dying currency cannot be resurrected.

So the world is in for a major shock in the next few years. The problems will be at all levels – financial, social, political and geopolitical.

Egon von Greyerz
December 2020
Gold Vs Bitcoin & The Death Of Money
[Chet and I used to discuss this sort of thing for hours back in the 2009 to 2010 timeframe. It was impossible for us to put a due date on the implosion we imagined we saw coming. One could claim that since it hasn’t happened yet that we were wrong about it happening at all.

Perhaps.

Still, it seems to be impossible that the national debt can ever be paid off. And from a political standpoint I doubt it can even be reduced. And that has to have consequences, doesn’t it? I keep seeing a reset of some sort in the future. And no matter how the reset goes down I see rough times for a lot of people.

We live in interesting times.—Joe]

Quote of the day—Doug Casey

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The government has no alternative but to “do something.” They will—they have to—print more money to keep the rotten house of cards from collapsing on itself.

The Democrats have already said that they want to increase the next stimulus to over $3 trillion. The fact that most of the last round of stimulus was either overtly wasted, went to cronies, or can’t be accounted for, is completely lost on them. They recognize that unless they give a lot of money directly or indirectly to the hoi polloi, there are going to be millions of them on the streets.

Approximately 11 million renters and 4 or 5 million mortgagees are now in forbearance. They’ll be kicked out of their houses and apartments come January 1, barring a huge bailout. Where are those people going to go?

If Obama had made good on his ridiculous promise about shovel-ready projects, there’d be a lot more bridges that they could camp out under. But he didn’t. They have a real problem on their hands. Millions of people have been living above their means and have no savings. At this point, if they let landlords and banks kick all those people out, a number of things will happen. Residential property prices will collapse. Millions of people will be scrambling for somewhere to live. Lots of banks and landlords would go bust.

The longer the government kicks the can down the road, the bigger the inevitable bust will be. The stimulus money will have to continue because Biden doesn’t want it all to come unglued on his watch. The State is not only going to have to pay individuals and business owners that their idiotic policies have busted. They’ll be subsidizing banks, landlords, and utility companies—because you can’t live in a house or an apartment without water and electricity.

It’s worse than that because even if you cover the bare essentials, there’s no money leftover for maintenance. There will be millions of buildings across the country suffering from deferred maintenance. The South Bronx, East St. Louis, and Baltimore will be replicated across the country.

Doug Casey
December 2020
Doug Casey on What Happens When the Suspension on Evictions Ends
[You might also want to watch Fight for the Soul of Seattle and The Worst Economic Collapse Is Starting Now. And this is real:

If someone trespasses by pitching a tent on private property or walks out with a handful groceries from the corner market or steals power tools with the intent of reselling them online in order to pay for a basic need like food or rent, the city of Seattle may be OK with that.

The cities are driving productive people out and inviting the lazy and criminals in. The tax revenue is way down and is responding by raising taxes.

I can’t imagine it improving with their mindset. They are in a death spiral that is likely to pull the entire country, if not the world, into it.

Another data point is that, as a construction guy I know was telling me recently, “No one wants to work anymore. They just want to stay home and collect their checks.”

Free money isn’t free. There will be a price paid. And the one, probably, good thing that may come out of the Biden/Harris administration is that the coming collapse will be easier to place on the heads of the Marxist rather than the free market advocates.

We live in interesting times.—Joe]

Quote of the day—Ida Auken

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Welcome to the year 2030. Welcome to my city – or should I say, “our city”. I don’t own anything. I don’t own a car. I don’t own a house. I don’t own any appliances or any clothes.

It might seem odd to you, but it makes perfect sense for us in this city. Everything you considered a product, has now become a service. We have access to transportation, accommodation, food and all the things we need in our daily lives. One by one all these things became free, so it ended up not making sense for us to own much.

…

All in all, it is a good life. Much better than the path we were on, where it became so clear that we could not continue with the same model of growth. We had all these terrible things happening: lifestyle diseases, climate change, the refugee crisis, environmental degradation, completely congested cities, water pollution, air pollution, social unrest and unemployment. We lost way too many people before we realised that we could do things differently.

Ida Auken
November 11, 2016
Here’s how life could change in my city by the year 2030
[Auken also says:

Author’s note: Some people have read this blog as my utopia or dream of the future. It is not. It is a scenario showing where we could be heading – for better and for worse. I wrote this piece to start a discussion about some of the pros and cons of the current technological development. When we are dealing with the future, it is not enough to work with reports. We should start discussions in many new ways. This is the intention with this piece.

The “devil’s in the details” as they say. If you think about it just a little bit you realize it isn’t even possible. A few examples:

  • Auken’s statements are self contradictory. Everything is free? Then what is “employment” about then? They claim, “It is more like thinking-time, creation-time and development-time.” Do they get paid for this or not? If yes, then who are the consumers and do they pay for the products and/or services? If they don’t get paid, then what is their motivation to product a product and/or service someone is interesting in using?
  • They don’t explicitly say this but it’s implied that all the services are supplied by artificial-intelligence/robots. So what of crime control? Even if one were to concede there was no physical need for sustenance, shelter, entertainment, etc. there will be still be crimes of violence. Conflicts over relationships, insults, broken agreements, etc. Who pays for the cops, lawyers, judges, and prisons? Keep in mind that in a place where everything is free fines are meaningless.
  • Accommodations are not all equal. Who gets the penthouse overlooking the ocean and who gets the street view of the recycling center? They’re both free you know.
  • They don’t own anything, really? Not even clothes they say. Yet, I just demonstrated that a claim on quality of accommodations is going to occur. What about the dress they were married in? Or the food they ordered which just arrived from the robot pizza joint down the street? And what of the food they made themselves? Or the photographs they took, the art object they made, the diary they kept, or the book they wrote?

There will always be markets with sellers and buyers of property. They may be black markets in a time and place where thugs attempt to create a utopian world of free everything and equality for all, but markets will always exist.

Auken vision is not one of “for better or worse”. It’s one of reality or delusion.—Joe]

Quote of the day—Cliff Mass

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Take a walk around downtown Seattle.  You will be shocked by a shuttered, dystopian city and made angry by the inaction and ineptness of its political leadership.   It is simply beyond words.

…

I swung by the infamous McDonalds* on Third Ave– infamous for both drug dealing and violence, and I could not believe what I saw:  an obvious drug deal going down right in front of me.

…

What didn’t I see on my two-hour walk? Not a single police officer.  Not one police car.
A boarded up central core of a major U.S. city was being left to the homeless, drug dealers, and security guards.  Even the most notorious, crime-ridden corner of the city had no police.  The streets of the city had become a fearful abandoned place.

Cliff Mass
August 5, 2020
Seattle: A City in Fear Can Be Restored
[Mass concludes with some suggestions and hope that Seattle can recover. I’m not so certain.

This morning I spent most of an hour talking with daughter Jaime about the death spiral of Seattle and other major cities. We’re not so sure Seattle can be saved. A significant part of the success of cities the last 200 years has been because most of the best jobs were in cities. Part of the response to the pandemic, many workers being able to work from home, has proven that reason is no longer valid. And just the existence of the pandemic is a deterrent to city life. Another attraction of city life was the restaurants and nightlife opportunities. Those were among the first casualties of the pandemic. So, why should people stay in the cities?

Many have already left. The people staying are those who contribute the least, if not a net drain, to the tax base. In New York Governor  Andrew Cuomo has been begging rich people to return to New York City from their second-home retreats so they can pay taxes to help offset the state’s growing coronavirus-related revenue shortfall. The people the politicians want to come back are those most sensitive to the loss of police protection for their property. So what is their motivation to return?

Add violence and property destruction to the ability to be prosperous and safe outside the mega cities and we may have a death spiral for Seattle, New York City, Chicago, Los Angeles, and other large cities. Those cities have been accepting and even encouraging the terrorists who have been making the cities less desirable. So what are the plausible outcomes?

Add mega cities to the list of causalities of 2020..—Joe]

* This is ground zero of Mugme Street.

Historic

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A few minutes ago the price of gold reached a new high in relation to the U.S. dollar. Or, one could be equally accurate to say that the U.S. dollar reached a new low relative to gold. Click for a higher resolution version:

GoldHistory

In the mid to late 1990’s gold was selling for $300/ounce. I was making more money than I am now (contracting work for Microsoft with unlimited amounts of overtime allowed at 1.5X base rate) and bought a few ounces. But most of my money went into paying down the house mortgage and putting a new roof on it. And then half of that, which wasn’t very much to begin with, went to my ex-wife in the divorce. I wish I had bought more now. It would be worth a lot more than what the house appreciation was.

Gold surging is generally an indicator of troubling times which certainly describes 2020. But what is interesting now is that vaccine trials are looking pretty good and the economy is doing okay considering the circumstances. But yet, the price of gold continues to climb. I suspect the huge surge in the “printing” of money is a major contributor.

We live in interesting times. This year will be one for the history books.

Quote of the day—Glaeser and Shleifer

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By differentially taxing different groups of voters, the incumbent leader can encourage emigration of one of the groups, and maximize the share of the voters who support him. While benefiting the incumbent, these taxes may actually impoverish the area and make both groups worse off.

Edward L. Glaeser and Andrei Shleifer
2013
JLEO, V21 N1 1T he Curley Effect: The Economics of Shaping the Electorate
[Via a comment by Richard in regard to Cascading failures in policing where he said:

Look up the Curley Effect. This was perfected by Coleman Young, mayor of, you guessed it, Detroit

I haven’t read the whole paper yet. The Appendix looks particularly interesting. It starts with:

ProofsOfPropositions

I was going to make a big blog post after reading this paper and several others on the topic address the current situation in Seattle, Portland, and other cities, then extrapolate the concepts to corporate cultures. I didn’t get around to it because I worked late on some work stuff then one of my daughters called and we talked for quite a while. Maybe tomorrow.—Joe]

Cascading failures in policing

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I recently had an opportunity to play a card I had been holding for a few weeks. I waited until a former Seattle police officer I know grumbled* again about his current job. So I asked, “I’ll bet you really wish you still had your old job back at the Seattle Police department.

This triggered a five minute monologue which began with “Absolutely not!” on the consequences of the political situation in regards to police in general and Seattle and surrounding areas in specific. He described it as “cascading failures”. Here is a synopsis of what he told me:

As of a couple years ago there were about 1350 people in SPD which was considered significantly understaffed. This number included support staff and rookies patrol officers up through to the captain level.

SPD is currently losing hundreds of people via retirement and them finding different jobs. Officers that have 20+ years on the job can’t take their pensions yet (I think he said they have to be 53 years old before they can do that) but they can quit and still get their full pension when they do cross the age threshold. Replacements are nearly impossible to get. Not because of defunding, but because no one wants those jobs. Detectives and other high skill areas are especially hard hit because those are the people most likely to have 20+ years on the job.

Some skill areas have mutual aid packs with surrounding areas. But while the surrounding areas have not had as severe political stress as SPD they have been affected. The mutual aid packs increase the stress on the surrounding areas and is causing people to leave their law enforcement positions there as well. It’s a cascading system of failure that affects the entire area.

Even some rural counties are pushing people out of law enforcement. One such country recently removed all U.S. flags from their patrol cars. This was to avoid offending anyone.**

SPD is rapidly approaching the situation where when you call 911 the only time someone will show up is if there is a life and death situation.

I’m now extrapolating from his observations.

If the police only show up for life and death situations and detectives are among the skills sets hardest hit by personal shortages then law enforcement protection of property is going to asymptotically approach zero. If a cold body with no obvious signs of foul play and/or no hot leads is found it will essentially ignored. Even clear murder cases will have low closure rates. Assault and battery will be ignored. Without justice for the victims of violent crimes and reduced odds of being punished self administered “justice” will become common.

These cascading law enforcement failures will trigger other cascading failures. This is city killer type stuff. Seattle is highly dependent upon high tech money. Most of those jobs can be performed by people 100s of miles away as easily as they can be performed by people within commuting distance. People and companies will leave the immediate area in droves. The property values, and all tax bases will crash. City services of all types will suffer. This could create Detroit like conditions within a few years.

* I think, overall, he actually likes his job. He just likes to grumble about things.

** I expect the people insisting the flags be removed are bewildered as to how the police could have a “real” issue with this. This probably extends to at least some of my readers.

A significant number police are former, and even current reserve, military. The U.S. flag is more than a piece of red, white, and blue colored cloth to members of the U.S. military. I have never been in the military and I only sort of understood this. A former Army Ranger described the depth of that meaning when he told me that if he were on the jury of someone accused of murdering a person who was burning a U.S. flag he would not vote to convict even if there numerous witnesses and video of the event, fingerprints in the neck bruises, and matching shoe prints in the blood. He wouldn’t kill someone burning a U.S. flag. But he could understand why someone would.

Quote of the day—Got Doubt @GotDoubt

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Capitalism is all about inequity. Communism is about equity. By its nature, capitalism is racist, sexist, discriminatory vs religion, creed and behavior other than greed. It’s easily observed that race and wealth are linked. Capitalism abuses the minority.

Got Doubt @GotDoubt
Tweeted on July 10, 2020
[If we ran the numbers I wouldn’t be surprised if communism actually does achieve a closer approximation to equality of outcome. Hundreds of millions of people are equally dead because of communism.

It is far better that there exist a few hundred billionaires and 10s of thousands of homeless people than 100 million are murdered by their own government each century.

That should be more than sufficient but that’s not the only issue I have with socialism/communism. There is a more fundamental issue I have.

That equality of outcome is presumed as a desirable goal should be challenged whenever it raises its ugly head. Does anyone seriously believe someone who consistently makes extremely poor life choices and ends up homeless, a drug addict, and gravely ill should have the same standard of living as someone who consistently makes good life choices? If so, then I have serious doubts about having sufficient things in common with such a person to enable meaningful communication. They would literally be living in an alternate reality from me.—Joe]

Quote of the day—Carl "Bear" Bussjaeger

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Heinlein’s Crazy Years got nuthin’ on us. His pastors ate clay sandwiches. We’ve got the crazocracy. His fictional society recovered and achieved space flight. We won’t have the education, technology, or resources to redevelop the automobile because they’re all “racist.”

Our future will look a lot more like Anthem than RAH’s “future history.”

Carl “Bear” Bussjaeger
June 24, 2020
HEINLEIN WAS AN OPTIMIST
[Both Heinlein and Rand references in one great quote. Few will fully understand and they will puzzle at it’s meaning until they spend many hours reading the books. Sorry about that.

I post this anyway, knowing that only 25%, at best, will fully appreciate it with additional effort. But the enthusiasm of those the get it on the first pass will be awesome.—Joe]

Quote of the day—Don Kilmer @donkilmer

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Obama might have started out as a likable, naïve socialist.


But he became the inevitable state-worshiping fascist that is always necessary to sustain socialism in the face of its inevitable failure and devastation.

Don Kilmer @donkilmer
Tweeted on May 21, 2020
[This may be giving Obama more benefit of the doubt than he deserves, but that doesn’t change the correctness of the conclusion.

As my friend Eric E. once described it, “Socialism is like a piece of candy which, years later, causes terminal cancer.”—Joe]

Quote of the day—Charles Hugh Smith

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Dogmas collapse first in the minds of believers, when they slowly awaken to the reality that the dogma no longer serves them, it only serves to prop up the wealth, power and prestige of their increasingly fanatic leaders. Propping up a failed system doesn’t actually fix what’s broken; it only guarantees the banquet of consequences will include shackles: the option to escape the consequences will no longer exist.

So sorry, but your karma ran over your dogma.

Charles Hugh Smith
September 29, 2019
So Sorry, Your Karma Ran Over Your Dogma
[He has a point there.—Joe]