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While I haven't made a scientific study of the topic, I
suspect the leading genre for popular entertainment – and for popular
delusions of crowds, for that matter – revolves around magical worlds.
As illustration, the Harry Potter series will serve.
The problem is that there is no such thing as magic, at
least not in the mystical sense (versus sleight-of-hand variety). Rather, the
physical world, and even the metaphysical world constructed by humans in
their ancient and long-running quest for protection from the physical world,
operates within the boundaries of certain irrefutable truths.
In the first instance, the laws of physics are only
rarely found wanting; in the second, basic principles of economies are
inviolate, or should be if you actually want an economy to succeed for any
length of time.
This unblinking faith in an all-caring, omnipotent
"Godvernment" is terrifyingly misplaced:
it not only runs contrary to many of those truths but runs contrary to nearly
every important lesson history has to teach. Look no further than the debts
and deficits of Godvernments around the world to
see the consequences of trying to keep this myth alive.
That this faith is on the increase, versus the
opposite, should be very concerning… both to those who believe in the
rights of individuals and to those trying to build and maintain a reasonable
standard of living in this age of deep uncertainty.
Especially in that most, if not all, of that
uncertainty, as well as active threats to the general well-being, emanates
from the very Godvernments people look to for
salvation and sustenance. The graphic shown here demonstrates this point vis à vis
US security policies soberingly well.
Now, I am sure that some of you view these remarks as
just another libertarian tirade, and I guess to some degree, they are.
Yet, I think there is an important underlying point that
requires serious reflection. Namely, with people the world over trapped in a
delusional and self-destructive cycle of believing that the Godvernments can solve all that ails – even though
almost all that ails is caused or made worse by those very same institutions
– then things can only get worse from here.
It's like all but the tiniest minority of the world's
population have been brainwashed into joining a dangerous cult. A cult whose
leaders are unscrupulous about stripping their followers of their wealth,
their dignity (see cartoon above) and their sense of individuality, while
rewarding their most ardent supporters with pensions, tax breaks, a leg up
over competitors and, if push comes to shove, hard cash in the form of
bailouts.
Viewed through this lens, the thinking individual
– you, for instance – should see the need to take certain
self-protective measures. And since few things are as useful as a high net
worth when it comes to protecting your independence, there are opportunities
to chase down as well.
Some suggestions, a number of which you may have heard
before.
- Expect the latest eurozone
patch-up job to come unglued. When you have the heads of the eurozone's
largest countries talking about levering up bailout funds or ringing up
the Chinese to ask for money, you know the latest "solution"
to the eurozone's intractable problems is
little more than a hastily concocted plan to kick the wine bottle just a
bit further down the road. The problem is that nothing suggested begins
to resolve the structural problems of the eurozone
– because nothing can be done to resolve those problems.
Thus, a heads-up speculator will look for ways of betting on failure and
place those bets during brief flare-ups of euro-optimism.
- Likewise, expect the US government's new Super
Committee to fail. Sure,
they may come up with some optics in an attempt to mask the dire nature
of the situation (for instance, by pushing the impact of any proposed
measures out for five or more years – time enough to ignore them),
but the fundamental truth in this case is that the Godvernment
is hopelessly broke, at the same time the population expects it to do
ever more.
On the prospects for the Super Committee, and how the bond markets are
likely to react if it fails, Casey Research Chief Economist Bud Conrad
sent me an email:
David,
What do you
think will happen when the Super Committee fails with deficit reduction and
S&P follows through with its promise for another debt downgrade? Probably not that much, as the last time it didn't wreck the
markets, but if rates rise, it would not be a good call to be long
stocks.
We have had
good auctions from the Treasury until a very bad acceptance today that drove
the 10-year Treasury to 2.4%. When I wrote my recommendation at the end of
September confirming that rates were too low (for the October edition of The Casey Report), the rate was only 1.8%. This
kind of move up would normally take months, not days. Here is the pretty
dramatic chart:
Rising US interest rates will be a stake through the
heart of the US economy. Even just a return to more normal historical averages
will skyrocket the costs of servicing the US Godvernment's
mountain of debt, wreak havoc in the bond markets, and simultaneously smash
any prospect of recovery in the hugely important housing sector. The key
point is that this is big, important stuff you have to be preparing
for.
- Reassess the risks to you or your business. Given the sense of extreme
empowerment felt by the high priests of the Godvernment,
you need to keep a very close eye on your personal vulnerabilities.
A cautionary example are the Alabama farmers who failed to anticipate
the tough new anti-immigrant legislation their meddling state government
passed, and who now face sure ruin due to the lack of trained workers
willing to do the back-breaking work of bringing in the crops or planting
new crops for next spring.
Is there personal or business risk that you can take steps to mitigate
now, while you still can? Especially if you are on the wrong side of the
populist mantras now being heard in the temples of Washington, you can't
afford to be complacent.
For example, if you or your business are
involved in or reliant upon the financial services, you might want to
consider developing some new lines of business. On that front, we
haven't even begun to understand the implications and effects of the
Dodd-Frank Act, other than that it was written by career politicians
with zero business experience in a period of hysteria following the 2008
crash, and that it is very ambitious.
Think Patriot Act for financial services – there will be
consequences, and I doubt many of them will be good. Investors should
consider doing some short-selling or using options strategies in betting
on another big leg down for the banks and the financial-services sector.
(In The
Casey Report, we're using a simple options strategy to bet
on the failure of a massively overindebted
regional bank.)
- Don't expect anyone to help you. Actually, with the growing meme
to soak the "rich," namely anyone who pays more than a modest
amount of taxes, you need to wake up to the reality that you are on your
own.
Put another way, if you have assets, you have a target on your back.
Laugh at the OWS folks if you want (and it's hard not to), but it is their
world we'll be living in going forward, not the ones our parents or we
made (and, truth be told, screwed up pretty badly). If you think you're
going to be able to afford to retire on your Social Security, think
again. If you're lucky, it will buy you a hot cup of coffee to enjoy
while you and your buddies stand around the burning oil drum on a cold
winter's night.
If you don't have a respectable net worth at this point, then learn
useful skills – such as how to speculate in investment markets. Or
how to program computers. Apparently, the youth of today like to use the
stuff but aren't so hot on actually learning how to program – they
prefer liberal arts educations. Given that many of the iconic successes
in the computing industries (Gates, Jobs, Ellison) never graduated
college, it would be a mistake to consider that a prerequisite. There
are many more directions you might go in, including internationally, the
important point being that it's time to get going.
- Internationalize. With the biggest threat to your wealth and maybe
even well-being coming from your own government, it's essential that you
spread your wealth into other political jurisdictions. Don't do it
hastily, but do it nonetheless. InternationalMan.com,
a new site that picks up where Doug Casey's best-selling book International Man left off, may be of some
help. Remember, once exchange controls are implemented (almost a
certainty), your wealth is trapped and the government will be able to
have its way with your assets.
- Front-run the mob. For example, with the mob against all currently
viable forms of baseload energy production
– and they are – careful bets on rising energy prices are,
over a period of time, a sure thing.
Let me say that again because it seems self-destructive madness to me,
but a large chunk of the mob as well as the priesthood of Godvernment are actually dead set against all
currently viable forms of baseload energy. You
know, the stuff that keeps the lights on at
night. Coal, oil, nuclear and now, thanks to the trumped-up fracking controversy, even natural gas! While the
mob hasn't yet overrun the barriers of sanity and pulled the energy plug
– though many would do so in a heartbeat – they have been
very effective at slowing exploration and development of energy
resources to a crawl. Actions have consequences, in this case, higher
energy prices. That's what I call an opportunity… don't miss it.
Likewise, the mob is not going to stop demanding that the Godvernment provide succor and sustenance, and so
deficit spending and debt has to continue to rise, leading to currency
debasement. Buy tangibles, but especially gold and silver, on any
setbacks.
Those are just a couple of ideas for front-running the mob, but if you
put on your thinking cap, I'm sure you'll come up with many more.
Wrapping up, I'll repeat my basic position on all of
this… in the form of an excerpt from a lightly edited response to a
reader who took offense at a recent article of mine.
The left and
the right both have it wrong, as far as I am concerned. Both share equal responsibility
for the big dislocations that have proven so damaging to the economy and
society.
Thus, I can only conclude that who is in charge is far less important than
what those who are charge are actually allowed to do. The size and scope of
government, in my view, has to be very specifically spelled out and very
limited so that the next gang to take control can't just willy-nilly play to
the prevailing mob sentiments.
That's how we
got here in the first place. Put another way, are
many of Obama's policies counterproductive and damaging to the economy? Of
course. But so were those of Baby Bush. And, before him, Clinton (who allowed
the government to grab Social Security funds so that he could claim a
balanced budget). And before him, Bush senior... and before him... and so
forth and so on.
Unless and until we stop the madness – stop the
meddling – the path the world takes will remain perilous and,
fortunately for us speculators, somewhat predictable.
[Will you be well positioned to survive when your Godvernment's time runs out? The Casey Report
tells you what to expect and how to protect yourself. In the current issue,
read investment legend Doug Casey's outlook for 2012 – on the stock
market, the US economy, the euro, gold and silver, the Middle East, China,
and much more. Also in this edition: An in-depth analysis of the Fed's battle
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