Just The End of Your Way of Life?
Mar 14, 2008
[Craig, we truly appreciate
your taking time to give us your highly-respected and valuable
insights to share with our 321gold readers]
I haven't written anything
for public consumption in a while, because I've been busy living
in what I like to call, "the real world" and making
my living by trading my own money. That's what I do these days.
I'm a fly on the wall with electronic access to the dens of thieves.
If I come out on top then I
transfer those digits for things I need.
Yes I'm still long gold from
$290, and crude from $60 but whatever, I've been doing ok. I've
been doing ok that is, if the money I have was worth what
it used to be, but it isn't. So rather than just slap a label
on what it is when words have already arguably lost their meaning,
let's discuss it.
I am personally more concerned
about quality of life issues than I am about money given the
The last time when I wrote
publicly, I was talking about the decline of the empire and the
end of the pre eminence of the US dollar...war, that sort of
So that's what's going on now,
what I was talking about then.
The US is currently in what
I like to call a period of "decay". It is in a period
of decay in every possible way. If you live in the real world
like I do, it is evident. If you consume a diet of the corporate
media cheerleading squad, then you don't live in the real world
and it could be difficult for us to communicate during the rest
of this essay. We've got people charged with cleaning up the
corrupt broken system going out with an $80,000 hooker bill and
being replaced by a blind man. The current El Presidente is a
wind-up doll for a bunch that should all be in orange
jumpsuits. It would be comical if it weren't so sad to watch
it all go down. It is a modern day tragedy being played out in
real time in the context of a giant government/corporate media
It's amazing to me how people
who are into politics or religion or whatever will violently
oppose some opinions, when people simply report the facts they
see around them. Anyway, again... another subject. Politics and
religion are both the same thing. They are both simply effective
methods to control large masses of people. I just figured that
one out not too long ago when I was into my learning the history
of the world project. It has always been that way and always
So anyway, that's all I do
to make my living. I assimilate the facts I see around me and
invest accordingly. I keep a diary of what I think and why, and
I even publish it. If I'm right I make money and if I'm wrong
I lose money. I like it that way. It keeps me honest.
That's one reason I don't write
a lot publicly these days. It is becoming increasingly difficult
for people who live in the real world to communicate with those
who don't, and there is an increasing number of those who don't
just simply because most people believe what they are told and
the lies they are being told are now monumental. Astronomical
in size. That's one of those universal rules about human beings;
the majority will always go along with whatever you tell them.
That's just the way it always has been and always will be. All
good propagandists know that.
For those who do think for
themselves and live in the real world however, everything that
is happening today has been entirely predictable and even expected.
I mean, the corporate media will say "no one ever saw this"
or "they never saw that" and really the case is they
just choose not to have those people appear. That's a whole subject
in itself however.
I was noting to my subscribers
the other evening that if you take a look at a picture of a pump
price for gas from ten years ago until now, that's around an
18% increase annualized every year for ten years. All the other
prices in the real world have risen at commensurate levels like
healthcare and all the big items people like me in the real world
need to spend money on.
Furthermore, if you plot energy
in the last five years, the numbers are bigger. If you plot the
last two the numbers are bigger yet. The last one, bigger yet.
So what we have here in the real world are prices accelerating
at an ever-increasing double-digit rate. Call that what you want.
We have real wages basically constant and good jobs are harder
to come by. We have a middle class that is going away. We have
the majority of the citizens having their wealth, if they still
have any, confiscated due to the ravages of inflation, or with
toxic financial contact with the healthcare/pharma, legal or
government money machines. So in the "not real world"
big brother and his corporate media outlets wants you to believe
that there really hasn't been much inflation or any significant
changes to the status quoand that lie is so big that you may
even believe it.
So if you do, then you don't
live in the real world and we cannot communicate effectively
because what you think you know is the product of a corporate
boardroom. What I know is the product of living.
The other big thing that has
happened since I last wrote is that the guys on Wall Street figured
out how to loan a bunch of money to people that had no ability
or even real desire to repay that money except for the fact that
house prices were sure to go ever higher which is the definition
of a mania. So working through a little bit of that math, with
an estimated 30% of homeowners currently upside down on their
mortgages, that works out to around ten trillion dollars of real
estate still to be walked away from according to simple math
and a few basic assumptions I worked out the other night.
In the "not real world"
they have told you from the outset that first there was no real
estate bubble, then that there might have been one, then that
it would be over quickly and now they aren't sure when it will
be over and the PR firms are busy working on what to tell you
It's not going to be over any
time soon. The big question in my mind is whether the whole thing
is about to go kaput or if we are just going to witness a continuous
decay as the wealth shifts into a very small percentage
of the population... as the middle class flames out. Again, that
is a subject in itself. That is the subject of the Straussian
nightmare; a change in the form of government that is pitched
as the same thing as the old government.
So on top of this Wall Street
genius of loaning money to people who could not pay, you have
the cure for all this mess being printing more money (creating
more debt). So they're going to fix a problem of too much debt
by creating more debt. Perfect. They're even monetizing it by
taking nearly worthless debt for brand new money created with
the push of a button and an organized media campaign to tell
you what they did and why it was good and why it was not monetization
or covert nationalization of the banking system. It is what it
is, call it what you want.
So the idea is that
by pushing buttons you can cure these ills, but the reality
is that big pile of new money is diluting the old money and
sending the US dollar into the toilet. I mean, they're pitching
it as all good, and what's left of the free markets are in sharp
disagreement with the party line.
Now; the only reason the USA
has gotten away with the idea that this balance sheet was compatible
with the idea of being the world's reserve currency was that
the USA was the global kingpin, the Mac daddy... until the empire
did what all empires do and that's get too big for their britches.
Then they always start going
off expanding the empire into places that are too expensive to
maintain, imposing their will on people who don't want their
will imposed on, and then that all gets so expensive and they
start making so many enemies they start going bankrupt. That's
what always happens. It always does. That's probably another
one of those human nature things.
So in the real world right
now, we have a situation where the banks are bankrupt, the government
is bankrupt, the people are bankrupt, and the cure for this is
to lower interest rates and create more money (debt) by pushing
a button... diluting the value of the money further and causing
everything we have going on now. It all makes sense here in the
real world. All the pieces to the puzzle fit and none don't.
So is this stagflation or is
this hyperinflation? Well, I'm not carrying a wheelbarrow around
with my money in it yet, but I do know the prices and costs of
everything I need to live are going up at an ever-increasing
The shape of that curve is a polynomial consistent with ever
accelerating inflation which some would call hyperinflation.
I know that if I earn a 20% return, then I might be keeping up
with the increase in the costs of everything I need to maintain
my personal status quo. If you can balance a checkbook and multiply,
then you know. If you are one of the ones who believe everything
you're told, then you have to not believe your lying eyes or
not be able to balance a checkbook.
When the cure for all problems
can only be to lower interest rates and dilute the supply of
the money by creating more money, then that is a vicious cycle
consistent with acceleration or hyperinflation.
I really don't like it when
people casually compare what is going on right now to 1929, because
in 1929 the cure was basically to spend less and now the cure
is basically to spend more. Even worse, being the geniuses we
are, we figured out a way to amplify spending, called derivatives.
They're based on the real thing but amplifiedlike 100 times.
So we've already been doing the "cure" for so long
that maybe the patient is no longer responding?
So what we are currently seeing,
in both gold and crude oil is a loss of confidence. It's a loss
of confidence that this whole thing makes any sense.
It's a loss of confidence in
the absurd idea that you can create wealth by pushing a button.
Since this whole thing now relies solely on confidence and not
any intrinsic value, commodities, especially gold and crude oil,
are acting as alternative wealth storage devices to paper currency.
If you have a bushel of corn,
then you know what that is. You can eat it, or do a bunch of
other stuff with it. With a piece of paper with a picture and
official looking numbers on it, well you aren't as sure as you
were yesterday what you can do with that. There will be no run
on the banks this time around, because the banks can always be
refilled with ever more worthless money. Instead of a run on
the banks, there will be a run on the dollar. A run on the dollar
(or run into commodities) is the modern equivalent to a run on
the banks back then, for the reasons I'll get into shortly.
So there is a loss of confidence
roughly equal to people's confidence in the government and the
banking system. This decreased confidence is fueled by the fact
that they are creating too much money. The idea with fiat money
is that you only grow the amount of it as the total output of
the economy increases otherwise you are diluting it. The thought
experiment for that goes like this. You have one giant pile of
stuff, and one giant pile of money. Right now there is enough
money so that one-dollar gets one pound of stuff. Now, if you
double the amount of that money, then it takes two dollars to
equal one pound of that stuff. Unless the pound of stuff doubles
in size, you have just caused 100% price inflation. So, operations
like just zapping a half a trillion or so into existence out
of thin air means just a bigger pile of money going after the
same amount of stuff. So that's what we have going on now. These
are financial engineering acts of desperation to save a system
by giving it more of what got it to this point in the first place...
debt. So when regular people like me think about that, they think,
that doesn't make any sense, and they lose confidence.
That's in the real world. On
TV things are still good though. So if you don't like what you're
reading here, then go turn on the TV. You'll feel better.
I hate to simplify things too
much, but this is the reason Mr. Greenspan called gold the conscience
of the central bankers back in the 60's before he lost his mind
or whatever happened. Maybe he couldn't resist the power of the
ring or something... I don't know. Anyway, it's their conscience
because they can't just zap gold into existence with the stroke
of a pen.
Guess what? They can zap money
into existence now. Poof - you've got money.
Any amount you want. That's
why this is fundamentally different from the great depression.
This time, they can just increase the giant pile of money. they
can just drop it out of helicopters if they have to. They even
said so... and it isn't going to buy as much stuff. It doesn't
So you still have the same
basic problem from a human standpoint. That's the really interesting
thing. In other words, whether you have a deflation like in the
30's or an inflation like now, the people suffer similar effects.
It's hard to find a job, you can't make ends meet, city and government
functions and services are understaffed and underfunded, and
you are hungry. They are both a state of decay. Both usually
end in war too.
The last one did. This one
is different however in a lot of ways... and it's much more serious.
It is fundamentally different because it is the end of the world's
first experiment in government by the people and it has been
replaced by something new.
So if you're into labels, then
maybe you can find a label for what to call this. I like to quote
Lenin on that:
capitalism in decay."
So I really don't want to get
into all that implies in a short essay, but I will condense it
all and say the US is in a state of decay. Political, socioeconomic,
leadership, influence, status, any label you can think of.
The US is losing power and
influence in the world, and it only has 5% of the world's populationand
they're all bankrupt. I like to think of it like a continuum
from the US coming out on top after WWII to a banana republic
run by El Presidente. That's what I call them now, whoever he
or she is, El Presidente because that's what they are. A corporate
spokesman who is put there, bought and paid for by Acme corp.
The country has lost its
way and is increasingly operating at the whim of the corporate
lobbyists and special interests that own the politicians as the
stench of it all starts to smell so foul that even the corporate
media disinformation campaign can't convince your lying eyes.
It is not what it appears to be. It is Rome circa 400's. It has
already bankrupted itself policing an unsustainably large global
empire. You have to live through the decline.
So that all gets into people
living in the real world versus those who are not. Again,
it's safe to say that the world is voting with its
dollars... and the 5% of the world's population are going down
hard on 95% leverage. They aren't going to like it either.
Tune in next time to hear which
states secede first.
Mar 14, 2008