It’s only January, and commentators are still trotting out their 2010 predictions, but we’ve just read the one we wish we had had, or could have written. It truly is an epic piece, but written in such a concise, easy-to-read style it’s a joy to read and easy to finish.
We are in absolute agreement on the state of the global economy and what 2010 and beyond holds for us all. It’s far from rosy, but the sooner “We” – the world”s people, wake up to the reality of the situation “They” have put us in, the sooner we can start to work on correcting it.
Continuing en-masse to believe their reporting lies, because it’s easier than facing the truth, while their scams continue on ever faster until the system’s ultimate demise, is not what needs to happen at this point.
Anyway over to Ty.
“Hope is not an investment strategy and it certainly is not a good guide to selecting LEADERS.”
To the something-for-nothing personality, hope is like the high from dope, fed by main stream media to the functionally literate (those who can read and write) and the practically illiterate (those who are told what to think rather than taught how to think.)
The world is falling into what ultimately will be an inflationary depression. This will cause the death or near death of the world’s principle reserve currencies: US Dollar, UK Pounds, Euros, Swiss Francs and Yen, and it is unfolding.
Insolvency, both moral and fiscal is unfolding: debt spirals on many levels of the developed world will be resolved ultimately with the printing press, this year, next year and until the rest of the world abandons the current FIAT paper and the ultimate Crack-Up Booms unfold. Opportunities abound for the prepared investor, and in fact they are BIGGER than EVER.
When the broad masses who have bought the hope realize it is a lie, and their hope turns to fear, this QE-induced high will turn into a blind panic as the G7′s safety nets FAIL; many markets will crash and others will soar and the most helpless will turn into angry mobs as they have no skills and their economies no longer produce blue collar jobs that create the middle classes – those jobs have been driven offshore by public serpents, crony capitalists, trade unions and banksters.
There are three quotes from some of the greatest economists in history which summarize the G7 global economy, currency and financial systems and the societies in which they reside. Two by Ludwig Von Mises and one by John Maynard Keynes and they are:
1. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. –Ludwig von Mises
Author’s comment: G7 Central banks and governments are fully committed to restoring the expansion!!! Debt is exploding higher in government as income and revenue are in FREEFALL. It’s no coincidence that the fed and UK central bank asset purchases are larger than the budget deficits. The Fed is purchasing toxic assets, MBS and agency debt and central banks are recycling the money back into another TOXIC asset: US treasuries.
Why you ask? Its because the dollar as the world’s reserve currency is the FOUNDATION of the world monetary systems and is the one currency in the world where both the shorts and longs don’t want it to change in value: the people storing wealth in it don’t want it to go down and those printing it like toilet paper want to exchange it – basically, exchange nothing (fiat currency backed by nothing) for something (goods, services, etc.).
2. Ludwig von Mises describes the “Crack-up Boom” that marks the denouement of all great monetary inflations:
“This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.
“But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The Crack Up Boom appears. Everybody is anxious to swap their money against “real” goods, whether he needs them or not, no matter how much money he has to pay for them. Within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them…. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.”
This is a perfect description of what is unfolding today, people are building up their cash and new mini-bubbles are appearing globally as people exchange fire hoses of hot money for tangibles and assets; and a CRACK-UP BOOM looms, as we can see in asset prices around the world — other than the fatally-inflated MALINVESTMENTS such as real estate.
3. “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.” – John Maynard Keynes, 1920
Look no further than this illustration of the loss of purchasing power by misstated inflation courtesy of John Williams of www.shadowstats.com:
Wow, the dollar has lost 80% of its purchasing power since the printing press was unharnessed at Bretton Woods II in 1971. This is the government and banksters stealing the value out of people’s money, as well as deficit spending and OUT-OF-CONTROL fractional banking without SAVINGS to back them. Counterfeiting/printing money out of THIN AIR! This is the cause of the “something-for-nothing” personality.
The FINAL move from sound money to fiat currency in 1971, when Nixon closed the gold window, set the G7 on the path to where we find ourselves today: On a one-way elevator DOWN since 1971. The middle classes have been CONSUMED by the Banksters and by public serpent debasement of their incomes and that in which they store their wealth – their cash. The middle class in America is just about gone, robbed of their pay and savings by the people in whom they have placed their trust: The government.
Investors will be crushed if not properly prepared; however, If properly prepared this is the greatest opportunity in history. VOLATILITY is set to soar “Up and down” as people scramble to price in and discover the REAL PURCHASING POWER of the Oceans of FAKE money which has been created in the last year.
Economies and markets afloat on a sea of trillions of Dollars, Euros, Swiss Francs, Yen and British Pounds in which price discovery is occurring right now! But one thing we do know it is, and that is LESS:
“Currencies don’t float, they just SINK at different rates” – Clyde Harrison
At no time in my career have so many asset classes been this mispriced. Stocks and bonds are in the ether of overvaluations, and gold and silver are massively undervalued, to name but a few. As bubbles can be seen forming around the globe in selected asset classes. We are in a period which, when completed, will have seen the greatest transfer of wealth from those who hold their wealth in paper to those that don’t.
In Part II of his 2010 Outlook he will be covering BANKS, currencies, interest rates and bonds in the as they are the epicenter of the unfolding maelstrom. PAPER is poison, as you will learn. When they fall the final debacle will be at hand for the powers that be and their something-for-nothing constituents. Don’t miss it.
Ty will be appearing at the Freedom Fest World Economic Summit on January 31 through Feb. 2, 2010 at Atlantis Paradise Island Resort, Bahamas (www.freedomfest.com/wes/ ).
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By Ty Andros
Copyright © 2010 Ty Andros