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Changing Times

Richard Russell snippet
Dow Theory Letters
Posted Apr 16, 2013

"Many years ago I resolved never to bother with New Year's resolutions, and I've stuck with it ever since." Dave Beard


April 12, 2013 -- Yesterday I had a most interesting and educational visit from Chris Martenson and friends. Chris has written a book titled, The Crash Course, The Unsustainable Future of our Economy. Chris has material on the Net that should not be missed.

Chris talks about our economic systems, and makes the case that somewhere ahead our economic system will come crashing down. Wait, I shouldn't say crashing. Chris sees the system either going into high inflation or hyperinflation and default. I agree with Chris, and if you read his book you'll see that his logic is unassailable.

My own thinking is that the Fed's program of avoiding economic collapse is fatally flawed. My opinion is that it's not a matter of whether the Fed's plans will fail -- but it's a matter of when.

Right now we are seeing the stock market "melting up" on an ocean of Fed-created liquidity. The Fed's policy of buying $85 billion of bonds a month is unsustainable, since within a year or two we will see the M-2 money supply climb into the multi-trillions of dollars. This will usher in unacceptable inflation or even hyperinflation. At that time I would expect to see the Fed back off on its open-spigot money-creating program. When that happens, I expect a market crash. However, I expect word to seep out prior to a Fed easing off, and this will cause the stock market to reverse and head down in a series of descending steps.

But back to Chris Martenson. Chris expects the next 20 years to be like nothing we've ever seen before. Not only does he expect an economic super-storm, but he expects the world to run out of energy, and thus he expects the very environment to change. This goes along with my own prediction that goes as follows -- if I had to bet on one thing in economics -- my bet would be that the American standard of living is heading down and it is accelerating to the downside.

I can see it already. When I was a kid of 16 years of age, my father brought home all the money we needed to live a good life in Manhattan. My mom stayed home with the kids. We had a maid and a cook, and we went out to a restaurant every Sunday. In contrast, today it takes a man and his mate both working full time to live the same way. A typical family can't send their younger child to a private school, and they can't afford to send their older child to a private university. A family can't afford to have a maid to do the housework, and a cook certainly isn't in the budget. Believe me, the American standard of living has declined since I was 16. Furthermore, in "the old days," families usually were able to save. Today, few families have much in the way of savings, if, indeed, they have any savings at all. Finally, when I was 16 our family didn't have any debt. Everything we possessed was paid for in cash. We had a small summer vacation home in Connecticut paid for in cash -- no mortgage. Today everybody with a home has a mortgage. In the old days, when somebody paid off his mortgage, they would have mortgage parties to celebrate that rare event. During the 1930s and 40s, debt was a dirty word.

Well there's no sense going on forever with this exercise. My point is that living standards have declined since I was a boy of 16. And my prediction is that living standards will accelerate to the downside in coming years.

This is in the face of zero interest rates, huge government entitlements, and both members of a family bringing home the much-needed bacon. On top of everything else, families today have little in the way of savings and a lot in the way of debt.

Debt, sad to say, is the modern family's way of keeping up their standard of living. People today think nothing of putting the good times on their credit cards.

The Bernanke Fed believes that by spurring the stock market and keeping interest rates near zero and by flooding the system with liquidity, the Fed will restore good times -- or at the very least hold off a recession.

In the process, we are lied to about inflation and the economy. Today, with zero interest rates, savers have nowhere to go with their money. Thus, the workingman receives nothing on his savings, and he is squeezed by inflation. It is now so expensive to bring up a child that the US birth rate is declining. If it was not for immigration, our population would be declining.

In the "good old days," parents who were down on their luck moved in with their children. Today kids who can't find a job move back with their parents.

So with all my chatter above, what I'm trying to say is that the American standard of living is accelerating downward. And this in the face of relatively good times. What happens, I ask myself, when the stock market tops out, or if we have a bond crash (as interest rates rise)?

You see, one advantage of my advanced age is that I can see the radical CHANGES over decades and even over half centuries.

My son, Ryan, is building a sustainable farm in Anderson Valley a few hundred miles north of San Francisco. Ryan grows tons of vegetables and fruit. Yesterday I called him and I said, "Ry, don't laugh -- but the way things are going and from what I see, we may be coming up to live with you one of these days." Ryan laughed and answered, “Well, I've got plenty of room." I think Ryan believed that I was kidding. The truth -- I wasn't kidding.

Gold -- which way will the triangle break? Today gold got whacked. The anti-gold chorus gets louder and louder. Today it's unlawful to pay your bills with gold. Today you can pay your bills with fiat money created out of a Federal Reserve computer. As Mayer Rothschild said, "Give me control of a nation's money and I care not who makes the laws."

Russell opinion -- It's immoral to create money without working or assuming risk. Real, moral money is a call on someone's labor. The current monetary system is immoral and an outrage. As such, it's year's are numbered.

(Click on image to enlarge)


Richard Russell
website: Dow Theory Letters
email: Dow Theory Letters

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