Recently by Simon Black: US Justice Department Logic: Bernanke Is a Domestic Terrorist
Yesterday we discussed certain events that, in my view, are nearly mathematical certainties. Things like a restructuring of public pensions and Social Security in Europe and the US. Western governments blocking Internet and mobile networks. War. The US government being forced to issue debt in a foreign currency.
All of these events are underpinned by a simple premise:
1) Public and private debts included, most western nations are insolvent. Big time.
2) History shows that economic growth in such an environment is nearly impossible when such a large percentage of GDP must be allocated solely to interest. Most countries in this position either default or [hyper]inflate. Both have catastrophic consequences.
3) Continued political and monetary intervention in the economy is counterproductive. From ‘Cash for Clunkers’ to negative real interest rates, such intervention only serves to make the problems, and their impacts, much worse.
4) The combined ingredients of sovereign insolvency; a global financial system based on worthless paper currency; and consumptive, import-oriented, public entitlement economies have created conditions for an epic, long-term economic depression.
5) Deteriorating economic conditions drive social unrest. [In fact, there’s a great paper by two European economists which defines an explicit correlation between government budget cuts and things like rising crime rates, riots, and even attempted revolution.]
6) Faced with a marauding population that threatens their own survival, governments will stop at nothing to maintain the status quo: their power, our expense. Again, history shows that police states, boogeyman enemies, a total loss of privacy, capital controls, higher taxes, etc. will all become the norm.
7) None of these delay tactics can prevent human and financial capital from eventually migrating to where they are treated best. This will ultimately force a complete system reset by starving the beast.
8) This is not the first time this has happened, and it won’t be the last. This time is NOT different. Our modern society is not a unique and special snowflake that can ward off the consequences that have plagued empires for millennia.
Everything from the way I invest to how I allocate my time and plan for the future is based on this view. It’s why I’m in Chile, why we purchased a 1,000+ acre farm, and why we plan on sharing it with like-minded people.
