Thursday, May 22, 2014

Meltdown Coming

Frankly this guy is a bit over the top. It's not clear that his "science" is any good. He calls a lot of pretty straightforward science "junk science." So why would he be right. Still there's little doubt that there is a crisis in money coming as debt explodes. So it's worth listening to the speculation. Is he right? Who knows? The scale of the disaster he's predicting seems exorbitant. He's expecting something huge within five years. A total collapse is his thesis.

So what are the signposts? He says 1) financial warfare (scenario one), evidence Russia in the Crimea. Already in a financial war with Iran. Russia a bigger tougher target. Cites NASDAQ hackers as past event. Russian and China etc. maybe taking on the reserve currency. 2) Special Drawing Rights (SDR) everybody has a fiat currency. Price of an SDR is calculated with reference to a basket of currency. It's still fiat money backed by nothing. 80 to 1 Fed leverage. 4 trillion dollar Fed portfolio (well fiat currency). 3) Arrogance of central bankers, unbelievably arrogant. Never leave their models (equilibrium models but it's a complex world). 4) unfolds how? Triggers? Lot's of possibilities. Instability of the system causes it to be easily triggers. Mountain of paper gold, natural disaster, prominent suicide, any number of potential "snowflakes" to trigger the avalanche. Excess of cash. Precautionary savings. Holding cash which can fund them internally for six months. Government sector far worse. 5) U.S. credit decline didn't trigger higher interest rates, due to the one eyed man being king in the kingdom of the blind. Interest rates went down because we're in a depression. Dynamic is instability not just inflation or deflation. The analogy is the collision of tectonic plates. It's going to snap and be ugly for investors. Depends on whether the dollar is the epicenter or not. They may have no place else to go. 6) end of petrodollars could be a problem, Russia looking for a way out of teh dollar, China as well. China accumulating gold (four thousand tons of gold and two trillion in U.S. assets) 7) Emergent properties come out of nowhere. They could trigger the collapse. China does want a strong dollar but they're covering for themselves. Gold from one vault to another. But it disappears into China. 8) What about hope? Won't they just start rebuilding in the event of a crash ... should have happened already but it hasn't. Things should have been allowed to crash so that the correction could take place so instead we're just setting up for a worse crash.  9) Next what do do with your money?  Gold (10-20% no more, buy real gold), 30% in cash (can't rule out deflation and it's liquid), everything U.S. is doing is making the situation worse, should break up the big banks.  I guess we'll find out if we wait around.  In the meantime you might want to at least think about it and try to do what you can to secure yourself.

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