by Simon Black: US
Justice Department Logic: Bernanke Is a Domestic Terrorist
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.
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.
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,
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 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.
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
I may be a
bit early, but I’d much rather be early than thinking through
these implications while I’m packing my bags. After all, things
can ‘feel’ quite normal for a long time. Changes take
place gradually, then faster and faster, until the decay looks like
an upside-down hockey stick.