Miles Franklin sponsored this
article by Gary Christenson. The
opinions are his.
Attributed to Albert Einstein: “Insanity is doing the same thing and
expecting different results.” Possibly another person made the
statement.
Regardless, why do governments and individuals persist with stupid or
insane actions?
Stupid and insane actions are relative to the observer. Something may
appear stupid and insane, but it could make sense to other people with
different values and perspectives. Debt-based fiat currency units,
out-of-control entitlements and huge expenditures for the military/industrial/security
complex are examples of financial insanity. Some disagree.
The military/industrial/security complex spends a
$trillion each year on external wars, defense, large armies, hundreds of
global military bases, weapons systems, and massive graft, corruption and
payoffs.
1. The U.S. has spent mega-bucks on “defense” for decades. This is neither
insane nor stupid from the perspective of the many businesses and individuals
who have benefited.
2. Congress is unlikely to restrict spending and reduce their payoffs.
3. The results are massive deficits, price inflation, a huge national
debt, and an unstoppable spending machine.
4. New dollars are borrowed into existence, existing dollars are devalued,
prices for food, energy, rifles, military aircraft and consumer items
increase. The out-of-control “spending train” rushes down the track toward
financial collapse, a reset and hyperinflation. Creating out-of-control
deficits and unpayable debt looks insane and stupid, but not to the many who
profit from those expenditures.
5. Popular but ill-advised decisions are difficult to correct.
6. Expect more consumer price inflation, higher costs for food and energy,
and much more debt.
7. The military/industrial/security complex and entitlements are runaway
spending trains fueled by fiat currency units. Many businesses and
individuals profit from their expenditures. They don’t see these debt
machines as insane or stupid. But excessive spending and debt will lead to a
reset…
Negative Interest Rates. Over $11 trillion of global
sovereign debt “pays” negative interest rates. This sounds stupid or insane.
Central banks created this anomaly. Borrowers like low interest rates. When
interest rates are suppressed for a long time, it is difficult for the market
to discover real rates.
The U.S. government is paying over $500 billion per year for interest at
multi-generational low rates. What will happen if rates rise to more normal
levels? Expect continual government pressure to lower rates.
Many suggest interest rates can never rise. The results are huge
mal-investments, excessive debt and leverage, and increased risk of financial
collapse. Our economic world is struggling in a low interest rate
environment, but politicians are demanding even lower interest rates.
Stock markets and bond markets like lower rates. Corporations love
inexpensive debt. Low rates enable individuals to fall deeper into debt.
Politicians demand more spending, increased debt, more giveaways, and lots of
free stuff. Stupid and insane financial policies enhance the risk of a reset
and/or collapse.
Expect more inflation, excessive debt, and an eventual reset. The
financial world may collapse from fire (hyperinflation) or ice (deflation).
Was this excessive debt nonsense necessary? Certainly not! Even
though insane and stupid, politicians and bankers led us down that road for
their benefit. Many important people profited from the huge increase
in fake money borrowed into existence by the banking cartel.
Fire or ice? Should we hyper-inflate away the value of
the currency units or default them into the abyss? Sane individuals avoid the
twin tragedies of fire and ice and depend upon gold and silver which have no
counterparty risk and will stay valuable.
Got gold? When the next “perfect storm” of war,
inflation, monetary devaluation, bankruptcies, counterparty risk, and
devaluing currencies arrives, would you prefer to own gold bullion (in your
possession) or dodgy pieces of paper “funny money” masquerading as wealth?
What others say:
From Alasdair Macleod: For
Those Who Don’t Understand Inflation.
“With the world facing a deepening recession, monetary inflation
will accelerate again.”
“This time, the debt is not confined to industry [as in the 1930s]; a
debt contraction will hit consumers directly and threaten domino defaults in
OTC derivatives as well.”
“We now face a potentially devastating combination of American trade
protectionism and a credit cycle which is moving America and the world into a
severe downturn.
“Monetary inflation in the world’s reserve currency can only
accelerate, because of an escalating budget deficit and the need to support
banks which would otherwise fail. … the dollar will lose credibility, first
abroad and then domestically.”
“In short, the dynamics that lead to a final currency collapse are
now falling into place.”
From Lord Keynes many decades ago:
“There is no subtler, no surer means of overturning the existing basis
of society than to debauch the currency. The process engages all the hidden
forces on the side of destruction and does it in a manner which not one man
in a million is able to diagnose.”
From Bill Bonner: “Tilling
the Soil in the Garden of Catastrophe”
“And despite having some of the largest oil reserves on the planet,
Venezuelans are waiting in line at gas stations for days to fill up their
cars.”
[Stupid and insane consequences result from bad policies. Venezuela is
only one example. The western world should take notice…]
Bill Bonner’s list of ingredients for catastrophe.
First: Government control of the currency. (check)
Second: Fake money. [fiat debt-based currency units] (check)
Third: Leaders who are ignorant and/or egomaniacal. (check)
Fourth: Big banks, the International Monetary Fund (IMF) and the World
Bank loan more than can be repaid. (check)
HIS SOLUTION:
“Economically and financially, the only sensible choice is to fire
the bankers, drain the swamp of bureaucrats, throw the bums out of office,
and go back to real money backed by gold. But politically, it is impossible.”
From Bill Holter:
“Financial collapse is not speculation… it is mathematical certainty.”
From John Rubino: “The
Fed Can’t Save Us.”
“If central banks cannot stop the next recession, we will find out
what happens when this much debt goes bad… The Fed’s biggest fear is that
things will spin out of control, and they won’t have the tools to stop it.”
Charles Nenner: “Look Out
Below.”
“Gold is going to $2500…”
Steve Saville: “The
“true fundamentals” are still in gold’s favour.”
Additional Reading:
Doug Casey: The
Deep State
Christenson: A Tale of Three
Cities
Christenson: Silver, Gold
and Goldfinger
CONCLUSIONS:
- Insane and stupid actions proliferate in our financial
and political worlds. These actions benefit the political and financial
elite and persist because we refuse to understand consequences.
- Deficit spending and borrowing “funny money” into
existence lead to price inflation, devalued currencies, and someday… to
a catastrophic financial reset or collapse.
- Excessive debt leads to defaults and the
collapse of currencies. The U.S. prints the world’s reserve
currency, which has sheltered Americans from the consequences of deficit
spending, excessive debt, and stupid and insane policies.
- The Fed can’t save us. They can only delay consequences.
- Gold and silver have no counterparty risk.
They will survive as wealth and financial insurance. In contrast,
hyperinflation destroys currencies and societies. Deflation destroys
assets and capital. Both destroy wealth.
Miles Franklin will convert
unbacked fiat currencies into gold and silver bullion with no counterparty
risk. We need insurance to protect savings and retirements from devaluations
and insane policies. Call Miles Franklin at 1-800-822-8080.
Gary Christenson
The Deviant Investor