The future is here, we just don't know it yet

Lawrence Tout
Mar 7, 2008
Botswana

I just don't get it. Maybe it's because I am all the way over here in Botswana. The skies are very clear at night. They help one to think clearly. I ask myself if no one really sees what is presently unfolding in the US and Euro financial zones? Some of us get it and see that the Emperor has no clothes whilst the majority of the population are admiring his Armani. But there again, I am only 300 miles from the Zimbabwe border - I am a little closer to an alternate reality and its cause for concern.

We are witnessing in real time, the implosion of the largest economy on the globe. The Euro zones and others will ultimately fall like dominoes. It's like watching a horrifically fast car smash in slow motion that allows us to see every explicit detail as the drama unfolds. Although we don't really need to go into details do we? Just look at the economic structure of the USA as a whole. You have the Fed and your politicians to thank for that. Those of us outside of America only hope the American financial collapse wont topple our own dominoes.

Why USA?

Well they have the unenviable honor of a head start to the slide down into their own pit latrine. The system is corrupt; it smells bad. The system is fundamentally flawed, irrevocably broken. Bankrupt.

Warren Buffet [Buffett] called derivatives the 'Financial weapons of mass destruction'. What he forgot to add was that the derivative bomb is already ticking and that there's no deactivation mechanism. It will be the log that smashes the camel's back. And just like any standard bomb you can [be] sure of two things:

1. You will not have to be told when it's gone off as it will make a hell of a loud noise - one that is heard around the world, and

2. Like all bombs it will also make one hell of a bad mess

We could start telling fairly tales like that the dollar is at an all time low. That gold and silver have put their gloves on and can smell blood in the air. Commodities are at all time highs across the board. Commodity stockpiles are at all time lows. Oil is at an all time high with the supply-demand gap approaching par. That the USA imports i.e. has to buy 70% of its oil. All the social-Medicare money has been looted just like Fort Knox. (Aw come on, is it still there? Get real.) Unsold housing inventories are at dangerous highs. Bond yields are falling. The attractiveness of the dollar as an investment is fading. The credit markets are frozen. Volatility is increasing. Fear is on the rise. The lamentable list is documented each week. A commodity bubble of epic proportions has just begun. What is incredible is that it has not even got started yet. What we see today is still microscopic only because the last remnants of control still exist over the financial system.

We don't know exactly when the bomb will go off. When it does, the resulting landslide will be fast, heavy and unstoppable. The train wreck analogy I have heard some analysts use could not be more appropriate to describe the event. We are all globally connected. More importantly we are all connected not by the Internet, although it is essential for the process, but we are connected by money. Money makes the world go around. Someone has seen to that. When money moves fast it can also stop fast. The distrust in the financial markets caused by the credit crunch is essentially the halt of money movement. I exaggerate for effect but it's only a question of time. It's a self-feeding cycle.

When things are no longer needed, their value falls. When standard items become luxuries, people will no longer 'need' them. They may want them but they don't really need them. Money is tight. Toxicity eats up the derivative markets. Their values plummet as adverse leverage kicks in. There is zero demand. Wealth won't just be lost; it will evaporate into thin air in the blink of an eye just like the banks. You think you will have time to cash your equities into gold bullion. We need to give this more consideration perhaps. All sectors of the economy will be affected. Many jobs will be lost. Unemployment will rise. Nothing can be afforded. The economy will slow to a crawl. Food will be hard to come by. The natives will become restless. An authoritarian government will rule. The corruption of a nation is complete. Zimbabwe is there already. How close is your country? Where do you picture yourself being when you hear the bang?

Lawrence Tout
Investor
Botswana
email: law.tout@gmail.com

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