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You're Just Not Prepared For What’s Coming

Not even close
Friday, December 1, 2017, 11:57 PM

I hate to break it to you, but chances are you're just not prepared for what’s coming. Not even close. 

Don't take it personally. I'm simply playing the odds.

After spending more than a decade warning people all over the world about the futility of pursuing infinite exponential economic growth on a finite planet, I can tell you this: very few are even aware of the nature of our predicament.

An even smaller subset is either physically or financially ready for the sort of future barreling down on us. Even fewer are mentally prepared for it. 

And make no mistake: it's the mental and emotional preparation that matters the most. If you can't cope with adversity and uncertainty, you're going to be toast in the coming years.

Those of us intending to persevere need to start by looking unflinchingly at the data, and then allowing time to let it sink in.  Change is coming – which isn't a problem in and of itself. But it's pace is likely to be. Rapid change is difficult for humans to process. 

Those frightened by today's over-inflated asset prices fear how quickly the current bubbles throughout our financial markets will deflate/implode. Who knows when they'll pop?  What will the eventual trigger(s) be? All we know for sure is that every bubble in history inevitably found its pin.

These bubbles – blown by central bankers serially addicted to creating them (and then riding to the rescue to fix them) – are the largest in all of history. That means they're going to be the most destructive in history when they finally let go.

Millions of households will lose trillions of dollars in net worth. Jobs will evaporate, causing the tens of millions of families living paycheck to paycheck serious harm.

These are the kind of painful consequences central bank follies result in. They're particularly regrettable because they could have been completely avoided if only we’d taken our medicine during the last crisis back in 2008.  But we didn't. We let the Federal Reserve --the instiution largely responsible for creating the Great Financial Crisis -- conspire with its brethern central banks to 'paper over' our problems.

So now we are at the apex of the most incredible nest of financial bubbles in all of human history.

One of my favorite charts is below, which shows that even the smartest minds among us (Sir Isaac Newton, in this case) can succumb to the mania of a bubble:

How Newton's Fortune Fell To Earth chart

It's enormously difficult to resist the social pressure to become involved.

But all bubbles burst -- painfully of course. That’s their very nature.

Mathematically, it's impossible for half or more of a bubble's participants to close out their positions for a gain. But in reality, it's even worse. Being generous, maybe 10% manage to get out in time.

That means the remaining 90% don’t. For these bagholders, the losses will range from 'painful' to 'financially fatal'.

Which brings us to the conclusion that a similar proportion of people will be emotionally unprepared for the bursting of these bubbles.  Again, playing the odds, I'm talking about you.    

How Exponentials Work Against You

Bubbles are destructive in the same manner as ocean waves. Their force is not linear, but exponential. 

That means that a wave's energy increases as the square of its height. A 4-foot wave has 16 times the force of a 1-foot wave; something any surfer knows from experience.  A 1-foot wave will nudge you.  A 4-foot wave will smash you, filling your bathing suit and various body orifices with sand and shells.  A 10-foot wave has 100 times more destructive power. It can kill you if it manages to pin you against something solid. 

A small, localized bubble -- such as one only affecting tulip investors in Holland, or a relatively small number of speculators caught up in buying swampland in Florida -- will have a small impact.  Consider those 1-foot waves.

A larger bubble inflating an entire nation’s real estate market will be far more destructive. Like the US in 2007. Or like Australia and Canada today.  Those bubbles were (or will be when they burst) 4-foot waves. 

The current nest of global bubbles in nearly every financial asset (stocks, bonds, real estate, fine art, collectibles, etc) is entirely without precedent. How big are these in wave terms? Are they a series of 8-foot waves? Or more like 12-footers? 

At this magnitude level, it doesn't really matter. They're going to be very, very destructive when they break.

Our focus now needs to be figuring out how to avoid getting pinned to the coral reef below when they do.

Understanding 'Real' Wealth

In order to fully understand this story, we have to start right at the beginning and ask “What is wealth?”

Most would answer this by saying “money”, and then maybe add “stocks and bonds”. But those aren't actually wealth. 

All financial assets are just claims on real wealth, not actually wealth itself.  A pile of money has use and utility because you can buy stuff with it.  But real wealth is the "stuff" -- food, clothes, land, oil, and so forth.  If you couldn't buy anything with your money/stocks/bonds, their worth would revert to the value of the paper they're printed on (if you're lucky enough to hold an actual certificate). It’s that simple. 

Which means that keeping a tight relationship between 'real wealth' and the claims on it should be job #1 of any central bank. But not the Fed, apparently. It's has increased the number of claims by a mind-boggling amount over the past several years. Same with the BoJ, the ECB, and the other major central banks around the world. They've embarked on a very different course, one that has disrupted the long-standing relationship between the markers of wealth and real wealth itself. 

They are aided and abetted by both the media and our educational institutions, which reinforce the idea that the claims on wealth are the same as real wealth itself.  It’s a handy system, of course, as long as everyone believes it. It has proved a great system for keeping the poor people poor and the rich people rich.

But trouble begins when the system gets seriously out of whack. People begin to question why their money has any value at all if the central banks can just print up as much as they want. Any time they want. And hand it out for free in unlimited quantities to the banks. Who have their own mechanism (i.e., fractional reserve banking) for creating even more money out of thin air.

Pretty slick, right?  Convince everyone that something you literally make in unlimited quantities out of thin air has value. So much so that, if you lack it, you end up living under a bridge, starving. 

Let's express this visually.

“GDP” is a measure of the amount of goods and services available and financial asset prices represent the claims (it's not a very accurate measure of real wealth, but it's the best one we’ve got, so we’ll use it). Look at how divergent asset prices get from GDP as bubbles develop: 

Asset Prices vs GDP chart

(Source)

What we see in the above chart is that the claims on the economy should, quite intuitively, track the economy itself.  Bubbles occurred whenever the claims on the economy, the so-called financial assets (stocks, bonds and derivatives), get too far ahead of the economy itself.

This is a very important point. The claims on the economy are just that: claims.  They are not the economy itself!

Yes the Dot-Com crash hurt.  But that was the equivalent of a 1-foot wave.  Yes, the housing bubble hurt, and that was a 2-foot wave.  The current bubble is vastly larger than the prior two, and is the 4-foot wave in our analogy -- if we’re lucky.  It might turn out to be a 10-footer.

The mystery to me is how people have forgotten the lessons of prior bubbles so rapidly.  How they cannot see the current bubbles even as the data is right there, and so easy to come by.  I suppose the mania of a bubble, the 'high' of easy returns, just makes people blind to reality.

It used to take a generation or longer to forget the painful lessons of a bubble. The victims had to age and die off before a future generation could repeat the mistakes anew. 

But now, we have the same generation repeating the same mistakes three times in less than 20 years. Go figure.

In this story, wishful thinking and self-delusion have harmful consequences. It's no different than taking up a lifelong habit of chain-smoking as a young teen.  Sure, you may be one of the few who lives a long full life in spite of the risks, but the odds are definitely not in your favor.

The inevitable destruction caused by the current froth of bubbles is going to hurt a lot of people, institutions, pensions, industries and countries.  Nobody will be spared when these burst.  The only question left to be answered is: Who’s going to eat the losses?

This is not a future question for a future time; it's one that's being answered daily already.  Pensioners are already taking cuts.  Puerto Rico will not be fully rebuilt.  Shale wells drilled when oil was $100/barrel, but being drained empty at $50/barrel, represent capital already hopelessly betrayed. Young graduates with $100,000 of student debt face lost decades of capital building. The losers are already emerging.

And there’s many more to follow.  This story is much closer to the beginning than the end.

The bubbles have yet to burst. We’re just seeing the water at the shore’s edge beginning to retreat, wondering how large the wave will be when it arrives. Hoping that it’s not a monster tsunami.

The End Is Nigh

History's largest bubbles have had the exact same root cause: an expansion of credit that causes leverage to go up faster than the income available to service it.

Simply put: bubbles exist when asset price inflation rises beyond what incomes can sustain. They are everywhere and always a credit-fueled phenomenon.

S&P 500 price chart

(Source @hussmanjp )

Look at the ridiculous trajectory of the S&P 500, especially since Trump got elected. I don’t know about you, but pretty much everything that has happened in the US over the past year has been either a diplomatic clown show or a financial cruelty to the average citizen. And yet prices have risen at their highest pace in two decades?

My view is that the Trump election was a totally unexpected black swan shock for the global central banking cartel, and it freaked out.  With the Dow down -1,000 points in the late night hours following Trump's surprise win, the central banks dumped gobs and oodles of money into the equity markets to prevent carnage.

All that money calmed investors and sent prices roaring higher over the following months. The resulting 80-degree rocket launch will hurt a lot when it comes back to earth. Good going central banks!

This is all happening when we’re as close as ever to a military (if not nuclear) confrontation with North Korea, Russia is busy beefing up its war machine, Saudi Arabia has pivoted away from the US towards China and Russia, and most of our European allies are inching away from us.

Meanwhile, the FCC is about to rule against the vast majority of the public and allow US corporations to turn the internet into a pay-for-play toll road -- completely undermining the core principle of the most transformative and useful invention of the millennium. By eliminating net neutrality the FCC has ruled 'against' you, and 'for' the continued usurious profits of the cable companies. 

Worse, heath care premiums continue to increase by double-digits each year. They're going up by a horrifying 45% in Florida and 57% in Georgia, to name just two unfortunate states out of many.

And to really rub salt in the wounds of the nation, the DC swamp is busy passing a tax change that will further drive an enormous gap between the 0.1% and everybody else by lowering taxes on corporate profits (already the lowest in the world if you measure both tax on profits and value-added taxes). 

How to pay for the massive cost of this deficit-exploding bill?  Easy, just eliminate deductions for average people (such as the state and local tax deductions) and begin taxing the waived tuition of graduate students. That’s right, the government helped to massively bloat tuition fees via massive lending to students and then wants to squeeze the poorest and hardest-working among them.

I wish I were kidding here. But like a cruel joke re-told at the wrong moment, the GOP is busy destroying the meager and precarious financial situation of our citizens just so it can toss a few more dollars into the already-bloated wallets of the richest people in the country. 

The long rise of the ultra-wealthy is not some mystery.  It arose as a predictable consequence of the financialization of, well…everything that began in the 1980’s:

US Wealth Inequality chart

The above chart speaks to a deeply unfair system that punishes hard working people in order to give more to those who merely shuffle financial instruments around or own financial assets.

This is the system that the Fed is working so hard to preserve. This is the system that Washington DC is working so hard to sustain. 

It’s flat out unfair and punitive.  It both punishes and rewards the wrong folks, respectively.  Debtors are provided relief while savers are punished.  The young are saddled with debts and face impossible costs of living mainly to preserve the illusion of wealth for a little longer for the generation in front of them.

For so many reasons, folks, none of this is sustainable. If the system doesn't crash first under the weight of its excessive debts or the puncturing of its many asset price bubbles, the brewing class and generational wars will boil over if the status quo trajectory continues for much longer.

In Part 2: When The Bubbles Burst... we detail what to expect as the unraveling starts. When these bubbles burst, as they inevitably must, the aftermath is going to be especially ugly.

Understand the likely path the carnage is going to take and position yourself wisely ahead of the crisis -- so that you and those you care about can weather the turmoil as safely as possible.

Remember: the role of bubble markets is to injure as many people as badly as possible when they burst. Don't be one of the victims.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

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22 Comments

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 772
David Stockman's Take

Good article, Chris! David Stockman, who was Reagan's Director of Office of Management and Budget, has lots of experience dealing with federal budgets. His take on the GOP's budget proposal is that it is a con job. The GOP is hungry for a win in the currently stalemated congress and willing to finesse some stinky dealings to get one.

http://davidstockmanscontracorner.com/debt-taxes-growth-and-the-gop-con-job/

There are too many good quotes to select just a few. He likely had to clean his screen of spittle after he wrote this missive. [Note: Stockman's site is now free to everyone. It is no longer behind a pay wall.] He noted in a prior article that the tax cuts on us commoners was due to sunset in 2025 in order to keep the resulting corporate tax cut from triggering 10 year deficit projections that would give Democrats ammunition to kill the bill.

It's another example of kicking the can down the road. Only this time, they're playing with broken legs and on crutches.

Grover

Mark_BC's picture
Mark_BC
Status: Gold Member (Offline)
Joined: Apr 30 2010
Posts: 408
I think this bubble started
I think this bubble started earlier, in 1971 when the petrodollar was created. Back then they were fighting inflation due to deteriorating fundamentals underlying the dollar. Did the new petrodollar change any of those fundamentals? No, they have been getting worse every year since. I think all that inflation that we should have had since 1971 will come flooding back all at once in a massive hyperinflation. 
 
Once Volker and Greenspan et al set us on the current path, I don't think the bankers had another choice besides blowing bubbles. Even in the 90's, if true fundamentals were allowed to manifest themselves the system would have crashed. Since then, it's been getting progressively worse. Gutting of manufacturing, transitioning to a consumer economy. Consumption and financialization are the only things left that keep employment "up". 
 
While I don't think the bankers are dumb, they aren't very bright either. They just don't understand economics because they don't understand energy and ecology and it is impossible to understand economics without this as a basis. They are smart enough to know that without financial bubbles, a return to fundamentals (i.e. with no more phony petrodollar status skewing  the dollar and supporting consumption) would cause unemployment to skyrocket and the system would crash.
 
But they aren't smart enough to understand how to fix the problem. They've blown and blown all these years, they know it's near the end, and now they've given up and are looting the remaining crumbs while they can. 
 
I don't think the bankers are dumb enough to allow this to crash on its own accord. The last thing they will allow is for the truth to be shone on their rat nests. They own the media and it would be easy to start a war to shift blame for a dollar crash on Russian hackers working in collision with Muslim "terrorists". There is a reason they have been conditioning us for all these years with the phony terrorist attacks. They are garnering support for a real war when the time comes. 
 
I don't see how society can continue functioning after the dollar crash. Huge metropolises of millions with economies mostly driven by consumption that will all disappear once the dollar dies. Hardly any "production" occurs in the US anymore. The only thing it will have left is agriculture but that does not employ many anymore, and the jobs it does provide are basically slave labour. All of this consumption, driven by oil. Once the dollar dies, oil availability halves due to the end of the trade deficit. Without financialization to prop up unprofitable shale oil production, it too will tank. America will have to get by on a quarter of the oil it does now, almost overnight. Plus add on any further domestic oil diverted to the military to support the new war. 
 
I suggest that one of the big justifications for the financialization of the economy is that it provides jobs for people who have otherwise lost them over the decades due to 1) outsourcing manufacturing overseas, and 2) automation displacing real people. After the crash, financialization will vanish but numbers 1 and 2 above won't, further increasing unemployment beyond what will already be happening from the end of consumerism. 
 
A hellish scenario. The only thing going for people who live away from major centers will be the difficulty of urbanites to get out due to their new poverty and the lack of oil. They'll probably just die. 
 
With all that positive stuff being said, I'm driving through LA in a few weeks! I guess I should bring lots of jerry cans of gas!!!
 
LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
Joined: Apr 30 2009
Posts: 718
A Global Scramble

It’s going to be a global scramble for what is left.

Any country, region or group of people who have insufficient food, water, energy, or basic necessities, is going to attempt to fill those needs by any means necessary.

Its started already, with migrations of needy people and national hoarding, at levels that most are able to ignore, or blame on something else.  But it’s going to get worse.

Meanwhile US MSM can’t focus on much of anything but race, gender and political issues.

Hotrod's picture
Hotrod
Status: Silver Member (Offline)
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Posts: 175
Wars

Mark,

I think a real turning point was when the Predator Class found out they could wage war for free. In my historical research I am amazed at the campaigns conducted to convince, cajole, beg, and belittle people into buying war bonds to finance our adventures.  No longer necessary, just run a black budget and print up what you need for endless military spending, with little to no benefit for most of us plebians. Problem solved!

vesperto's picture
vesperto
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Joined: Jul 15 2008
Posts: 6
Bubbles

The financial bubbles aren't what worry me.  As William Rees pointed out in his interview a couple of weeks ago, humans, together with our pets and domesticated animals now comprise 98.5% of the total biomass of all mammals on earth.  That leaves just 1.5% for the thousands of other mammals with which we share this planet.  Meanwhile, the human population continues to increase at the rate of 1.2% per year.  1.5%/1.2% = !  Now THAT is a bubble that is going to burst, and soon.  When it does, the consequence won't be the loss of millions of jobs, but the loss of billions of lives.  Rearranging your investment portfolio won't help much with this one.

Atreat's picture
Atreat
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Joined: Dec 4 2011
Posts: 32
Keeping up your message

Chris,

If what you're doing helps just a handful of people it is worth it.  It has helped me and continues to help me.  I suspect that it's important for you to speak honestly about your own perceptions.  At any rate, it's my sentiment that you keep it up.  

My primary work is explicitly spiritual (not religious) in a way that correlates roughly to the non-dualist traditions (and involves no proselytizing).  Essentially, the idea that form is fundamentally illusory and that reality is unaffected by illusion..  The reasons that your work has been helpful to me is that in seeking  "truth", an essential habit I cultivate is to be truthful.(Yasahiko Kimura) It is essential to be honest with myself about the nature of the world and I hope to be prepared so I am able to continue my work  in the midst of chaos. 

Thanks again  for your work.

Alan

 

 

richcabot's picture
richcabot
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Joined: Apr 5 2011
Posts: 127
Quibbling on Terminology

A function of the form X^2 as you use in your example is a geometric increase, not exponential.  To be an exponential the variate needs to be the exponent.  2^X would be an exponential relationship.

richcabot's picture
richcabot
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Posts: 127
The coming war
Mark_BC wrote:
The last thing they will allow is for the truth to be shone on their rat nests. They own the media and it would be easy to start a war to shift blame for a dollar crash on Russian hackers working in collision with Muslim "terrorists". There is a reason they have been conditioning us for all these years with the phony terrorist attacks. They are garnering support for a real war when the time comes. 
 
 
I think the demonization of Russia is another element of the war distraction plan.  
 
Unfortunately, I'm not sure the average American would be opposed to starting a war in order to steal Middle Eastern (or Russian) oil when it becomes clear to them that the US way of life has imploded.  When faced with the need to give up "driving to Walmart" (as Jim Kuntsler puts it), stealing what others have won't require much of a sales job by the elites.  A trivial fig leaf excuse will be all they need to stifle whatever moral issues that might still exist.
SagerXX's picture
SagerXX
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Posts: 2213
richcabot
richcabot wrote:
 
Unfortunately, I'm not sure the average American would be opposed to starting a war in order to steal Middle Eastern (or Russian) oil when it becomes clear to them that the US way of life has imploded.  When faced with the need to give up "driving to Walmart" (as Jim Kuntsler puts it), stealing what others have won't require much of a sales job by the elites.  A trivial fig leaf excuse will be all they need to stifle whatever moral issues that might still exist.

Why go all the way to the ME to steal oil when we can just shimmy a short distance south to Venezuela, which is already is total chaos.  The US Mil can pacify that country in about 28 minutes flat (once we get there).  Then the US oil companies can move in.  OK, we'll throw BP a bone, too.  

One job classification IMO which is going to see staggering growth is the oil rig/oil field worker willing to live and work overseas.  Not that they'll make crazy good money (I bet the oil industry gets quasi-nationalized/militarized "for national security"), but they'll have a good/decent-paying job and plenty of job security.  Of course, you'll have to live in the oil fields in the Orinoco Belt for 9 months at a time (and then home for 3 months off).  Bechtel, KBR and Halliburton can build the barracks and serve the oil "troops" needs, DynCorp and Aegis will patrol the perimeter and keep angry locals/indigenous from ruining anybody's day or interrupting the flow, and the patriotic driving public back home can keep their F-250s and Nissan Armadas running back and forth to WalMart.

For another 20+ years, anyway.  

chipshot's picture
chipshot
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Posts: 35
One More Unmentioned Crisis in the Making

As if the issues mentioned by Chris weren't horrifying enough, there is the multi-faceted environmental/greenhouse gas disaster that grows worse by the day.  Loss of species, habitat and the ability to grow food, state of the oceans, increasingly financially-crippling weather disasters, disappearing aquifers...that's a partial picture.

These situations don't threaten just our economy, standard of living and quality of life like those discussed in the article do, they threaten our ability to survive.  And we're probably not talking 2050 or 2100, as in when most of us are gone.  No, we could be dealing with life threatening consequences within a decade or two.  We are going to run out of time to do anything about it, if we haven't already.

Enjoy life while you can!

 

PS  I respect Chris and Adam for their endless efforts to get people to prepare, but I think things will end up deteriorating so much so fast, with so many people so unprepared no amount of preparation will protect against the despair and chaos almost certain to reign.

thatchmo's picture
thatchmo
Status: Gold Member (Offline)
Joined: Dec 14 2008
Posts: 422
US Oil companies?

Hmmm.  I doubt there is any major corporation extant that could be considered "US", as in obligated to, or beholden to, the interests of the American people or the American system.  And perhaps we (Americans) don't even deserve such.  Not that they wouldn't use their "US-ness" to commandeer our military and our youth to further their profitability......Corporations will follow the money, people be damned.  Citizens United, uber alles!  Aloha, Steve.

stevejermy's picture
stevejermy
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Posts: 46
SO WHAT NEXT ...

Hi Chris,

Great article, raising for me you're key question - the bubble deflates catastrophically, so what next: but in two areas, government policy and the financial-communications system. What will governments do? Will the financial-internet system survive?

The first feels easier to predict than the second.

My guess is that governments - well, G20 governments - will engage in more money printing - quite what form: helicopter money, QE on steroids, is difficult to say - and perhaps debt jubilee (which could also be money printing). There might also be the use of special drawing rights, as James Rickards has predicted. At best, this might stave off matters for months or a couple of years. During those couple of years, oil supply is likely still to fall precipitously - you can't print more oil - so one way or another, a global recession leading into a global depression is on the cards.

But what about the financial-communications system? Will we still be able to use it, in particular for financial transactions? Will those of us who've placed our money in highly conservative banks and/or gold be able to get access to this money and/or gold. Or should we have it located physically in our community area? This is the one I find most difficult to answer and it matters in terms of preparations.

Answers on a post-card ...

Steve

 

brushhog's picture
brushhog
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Posts: 23
Net neutrality is NOT your friend.

  Net neutrality came about through Obama's attempt to censor and control the internet. When it was about to be passed, he claimed, LITERALLY, that the internet was the "wild west" and needed to be regulated by government. Net neutrality was created for the purpose of allowing the government to censor and control the internet and they have used it exactly for that purpose. They can funnel traffic away from certain sites and toward others or completely shut traffic down to a site that they disapprove of.

The internet has thrived exactly BECAUSE it is an uncensored, unregulated place where freedom and innovation ( two sides of the same coin ) can grow unchecked. We definitely do NOT want the government involved in the internet. The claims that its going to make it more expensive are pure BS. Government involvement NEVER makes anything cheaper. Look at healthcare, look at college tuition the government got involved in each of these things with the same story.....to provide affordable access to everyone. And it has NEVER worked that way. College tuitions have gone to the moon and universities have been taken over by extreme leftists. The healthcare industry...well, I dont even need to get into it, the results of government involvement are obvious to everyone.

cmartenson's picture
cmartenson
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Posts: 5468
A wider view is helpful...
brushhog wrote:

  Net neutrality came about through Obama's attempt to censor and control the internet. When it was about to be passed, he claimed, LITERALLY, that the internet was the "wild west" and needed to be regulated by government. Net neutrality was created for the purpose of allowing the government to censor and control the internet and they have used it exactly for that purpose. They can funnel traffic away from certain sites and toward others or completely shut traffic down to a site that they disapprove of.

The internet has thrived exactly BECAUSE it is an uncensored, unregulated place where freedom and innovation ( two sides of the same coin ) can grow unchecked. We definitely do NOT want the government involved in the internet. The claims that its going to make it more expensive are pure BS. Government involvement NEVER makes anything cheaper. Look at healthcare, look at college tuition the government got involved in each of these things with the same story.....to provide affordable access to everyone. And it has NEVER worked that way. College tuitions have gone to the moon and universities have been taken over by extreme leftists. The healthcare industry...well, I dont even need to get into it, the results of government involvement are obvious to everyone.

That would be true in this case if the government weren't already helping to enforce monopoly positions for internet/cable companies.

If you create massive barriers to entry so that there's only one provider, or possibly two or three in cahoots like insulin makers are (and all companies are incentivized to operate this way), and then allow these same companies to charge/bill however they want,  the result is entirely predictable; the consumer is going to get brutalized.

So here's my prediction for internet prices over the coming years, thanks to the corporate/lobbyist win over at the FCC, courtesy of the stooge Ajit Pai that Trump installed.

(Yes there are two "free market" companies "competing" for market share in that chart)

Net neutrality is actually a very important idea, and one that does not, in the real world, comport with your strictly "free market" thought experiment.  There are no free markets, for starters, there is an unholy corporate-state alliance that uses regulations and "laws" to restrict competition.

As soon as the internet providers are able to start segmenting based on traffic, they will then segment based on their advertisers wishes, and then anybody that prints anything that runs counter to the wonderful world of Monsanto, for example, will find that their blog runs like it's on old-school dial up.

Pay-for-play does not align with the "wild west of ideas" that has made the internet the amazing and fantastic thing that it is.

 

thc0655's picture
thc0655
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Posts: 1482
30 years of prepping for disaster down the drain

In the prepper community, it is often suggested that people plan to use "unused" federal land as their bug out locations and where they bury caches of food, supplies and equipment for the day when TSHTF.  A hard-working, enterprising prepper in Utah did just that over the last 30 years where he built several small cabins and cached food, equipment and ammunition.  Unfortunately, his prescient but illegal preparations were discovered when a couple of his cabins burned down and some of his ammunition cooked off in the flames of the "Brian Head Fire" and it was all discovered by firefighters.

http://www.sltrib.com/news/2017/11/30/brian-head-fire-led-officials-to-uncover-several-explosive-filled-bunkers-hidden-under-make-shift-cabins/

Oooops! surprise  Time for Plan C.

sand_puppy's picture
sand_puppy
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Posts: 1688
Eco-apocalypse movie: The Reliant

I met a friend of a friend at a wedding last night.  He is a young actor who told us of his latest role in an Eco-apocalypse / financial crash movie that has been completed, but has not yet been released.  It is an Indie production.  He plays a young man marrying a woman from a "prepper" family in a fly-over state when the financial crash hits.  They must escape into the woods and survive after raiders attack their home and kill the parents.  They wrestle with the morality of what they are doing to survive.

The Reliant

Looks like it was based on (?) the book of the same name.

Dimitri Orlov has warned several times

when you notice that my message has gone mainstream, it’s time to grab the duffel bag of spam, gold bullion and shotgun shells, gas up the pickup truck and head for the hills.

Here is one trailer.

 

I interpret this trend as an indicator that more people are considering the possibility of a true collapse, not just a down turn, but a full on collapse.  Since much of what happens is "herd movement," having more people considering moving a certain way means that it is closer than before.

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Doug
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Western forests

It's probably a bad idea to build in western forests due to changes wrought by pine bark beetles and climate change.

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Shamba
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don't stop spreading the word, Chris

Some of us still need to be reminded about it and refresh our stock of preps. Also, as things deteriorate more people will be looking for information.

You all are a valuable resource and help us be as prepared as we can be.

Thanks , Shamba

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TimothyPMadden
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On liability bubbles

Hi: I wrote this last summer but it seems appropriate to Chris' article. It is called The Great Kited Liability Bubble. It is specifically about the credit/charge-card business but it also applies to banking generally.

____

Preamble

 

The bankers are not equity-lenders - they are legal-debt reinsurance underwriters and liability-kiters who almost never actually pay anyone but only ever agree that they owe them by issuing credits that do not cost them anything of substance to produce - or what the Canadian judiciary refers to as “substitutes for currency”. The appeal Court, below, directly addresses the system employed by the chartered banks and the Alberta Treasury Branches, but which applies equally in theory and practice to all (circa 135) members of the Canadian Payments Association (CPA):

 

The chartered banks in Canada issue obligations, namely, deposit liabilities, which are generally accepted as means of payment in Canada although they do not have the status of legal tender. In like manner the treasury branches create deposit liabilities. These deposit liabilities are a form of book debt owing by the bank to the customer and in most cases, including the treasury branches, are subject to transfer by cheque. These payments by cheque provide the means of settlement of a large percentage of the transactions of Canada. Likewise, the treasury branches' deposit liabilities furnish their customers with a similar means of making settlement of transactions by orders drawn on the treasury branches because the treasury branches have been able to persuade the public to regard their deposit liabilities or promises to pay as the equivalent of legal tender by undertaking to convert them into legal tender on demand. These deposit liabilities are used by the customers of the bank or treasury branch which created them as a substitute for currency. (Breckinridge Speedway v. R [The Crown] (1967) 63 W.W.R. 257)

 

The banks/bankers globally endlessly kite their liabilities while re-setting our financial perception calibration by a factor of 1,000 roughly every ten years to accommodate the massive ballooning of their aggregate liabilities. In the 1960’s we were accustomed to dealing with substantial (richest-family-based) wealth in the hundreds of millions. Then in the early seventies we were introduced to the words billion and billionaire. In the 1980’s we were introduced to the words trillion and trillionaire. Then toward the end of the 1990’s and early 2000’s we were introduced to the word quadrillion. In just my adult lifetime we have gone from a measurement standard calibrated in millions to one that is calibrated in million-billions (a quadrillion is a million billion). If a million is one inch, then a quadrillion is15,700 miles.

 

 

The Great Kited-Liability Bubble

 

Kiting means to keep (financial) paper in the air.

 

The aggregate existing global credit/charge-card business (about 50% controlled by visa and mastercard banks), especially, is a delivery mechanism/gateway for a massive ever-expanding liability bubble or ponzi scheme or what the Criminal Code (of Canada for example) calls a money increment scheme. Although to be more cognitively accurate it is a kited-liability-scheme.

 

Assume that I am your payment agent and that you spend $60,000 from your salary ($5,000 per month) over the course of a year at various merchant establishments via a card that I give you for that purpose. Over the course of the year you also repay or reimburse me in cash/equity from your earned-income or monthly paycheques for that $5,000 per month or $60,000 total that I have paid out to merchants on your behalf. 

 

Now assume that you discover that I have not in fact paid any of the said merchants, but have only agreed that I owe them, such that I have also retained or pocketed your $60,000 of cash (equity) reimbursement. 

 

Does that make a difference?

 

It makes all the difference in the world.

 

In terms of procedure, approximately one billion card-users globally went to work an average of 25 days per month last year to earn at least an aggregate of $7 trillion (USD-equivalent) cash money/equity that they then paid to aggregate credit/charge-card companies (visa and mastercard banks alone) as what they believed to be reimbursement, while the said companies/banks have merely increased or kited their aggregate liabilities to the same merchants (and their assigns) by nearly $7 trillion while pocketing the $7 trillion of cash/equity.

 

It works out to about 10% of global GDP (i.e., just through the credit/charge-card system alone).

 

Do you think that that has some substantial effect on human socioeconomic relationships as opposed to a world where the aggregate card-issuers are required to actually pay the merchants instead of merely kiting/ever-inflating their liabilities?

 

I was a high-school junior/freshman in the early1970’s when Howard Hughes purportedly became the world’s first billionaire. And although undoubtedly a great entrepreneur in his own right, his greater fortune had been given an immense head-start by, among other things, his inheritance of the Hughes Tool Company from his father.

 

So at that time we basically first needed the number “one billion” or 1,000,000,000 to account for the inter-generationally-accumulated fortune of the world’s purportedly richest man.

 

And also at that time I would estimate in good faith that the majority of my classmates and the public generally would have had some trouble identifying the precise concept of a trillion. We had only just been introduced to only very occasional references to a billion and the word trillion would normally have been used as merely a general or generic reference to an astronomically large number. 

 

Then as I lived my life through the 1980’s and 1990’s the term billion and multiple billions came into increasingly common use, especially in reference to the major financial fortunes won on the world’s stock markets. 

 

Then the word trillion was increasingly needed to describe the aggregate fortunes of relatively small groupings of what were called dot-com billionaires. Notwithstanding that a billion is a thousand millions and a trillion is a thousand billions or a million millions

 

Then as we passed into the first decade of the 21st century we were introduced to the term quadrillion (1,000,000,000,000,000) or one thousand trillions or one million billions to describe the nominal exposure of what is called the derivative markets (and which only exists to account for the money/liability itself). 

 

So for all of human history to about the middle of the 20th century the concepts of million and multiple millions were sufficient to account for the inter-generationally-accumulated fortunes of the world’s richest man/men/families. But once then introduced and educated to appreciate what a billion is, at least we could have reasonably expected not to have to make the same adjustment again in our lifetimes or even our great-grandchildren’s lifetimes.

 

I also recall the major breakthrough of the late 1970’s when we achieved the great pre-tax $5 per hour for wages on entry-level jobs. Forty years later $10 per hour is about the minimum wage in practice. So based on that criteria we ought to be now speaking in terms of about two billion to describe the same top-of-the-pile that we needed one billion to describe in the 1970’s. And certainly no more than about ten billion.

 

But after the last fifty years of the global credit/charge-card system, if we pause and look back, we see that globally we have collectively earned the USD-equivalent of at least $100 trillion or $100,000,000,000,000, and that we have paid that amount to the aggregate banks as cash/equity reimbursement for the same amount that the banks have ostensibly paid to broadly-defined merchants on our behalf over the same 50-year period. (Less about $3 trillion in concealed interest/credit charges called “merchant discounts” - but that is a different fraud).

 

But then we look a little more closely to discover that the banks/bankers collectively still owe the world’s merchants (and their assigns) the same $100 trillion and that they have never paid them at all, but instead endlessly kite their liabilities while taking our cash/equity to wager in the financial markets, to buy up most everything else, and to pay themselves ever larger dividends, salaries and bonuses

 

The Big Five private banks in Canada, for example, had about $32 billion of total assets balanced by $32 billion of liabilities (i.e., they owed about $1,600 per Canadian times 20 million Canadians) in 1968 when the visa credit card system was introduced into Canada. Almost fifty years later the same five banks have over $4 trillion of assets balanced/off-set by $4 trillion of liabilities (they owe about $120,000 per Canadian times 35 million Canadians). The near $4 trillion or $4,000 billion difference is a function of endlessly-kited liabilities. We keep feeding them our cash earnings from labour and other forms of production, and they keep pocketing the cash and kiting their liabilities to anyone and everyone.

 

The bank(s) merely agree that they owe the merchants by issuing them deposit account credits (“substitutes for currency”) that do not cost the banks anything material to produce. The merchant then writes cheques to its employees, suppliers and other service providers. Now the bank(s) agree that they owe the entities to whom the cheques have been written instead of the original merchant(s). But except in about 2% of cases the banks never actually pay anyone. 

 

Economists are trained to say that banks may create credit for free, but also that the same credit is destroyed when it is repaid, so it is not really as bad as it appears. But that is only half the equation and they essentially deal with the other half by ignoring it. 

 

The bank’s credit asset is indeed destroyed when it is repaid in cash/equity, but the bank continues to hold and own the cash repayment as a much more valuable replacement for it. By process the loan asset was created by the mirror-image creation of an off-setting liability to the vendor or merchant, and that liability persists long after the credit asset has been re-paid or converted to the debtor’s former equity (mostly from labour). In fact it persists forever or until the scheme collapses.

 

Taking today (the current 24 hours) as a snap-shot-in-time, the banks globally (through visa and mastercard alone) will collectively kite another $20 billion or $20,000,000,000 in new liabilities to merchants. Seven trillion dollars per year in gross throughput works out to about $20 billion per day and that is the current expansion rate of the gross credit/charge-card liability-kiting bubble.

 

As at early 2017 there have been a number of articles in the media about who from the current crop of mega-billionaires will become the world’s first genuine trillionaire. So we see that over the past 50 years the measurement standard for the world’s single richest human has increased by an approaching 1,000-fold (from $1 billion to $1 trillion), while the minimum wage in practice for the little people has only doubled or tripled. In practice it would appear that the vaunted level playing field has an actual slope of about 500-to-1 in favour of the entrenched money power.

 

Any bleeping moron could rule the world with the benefit of rules like that. Bankers are not financial geniuses. The only reason they own and/or control everything is because their great-grandfathers accidentally discovered the great stupid-ray that keeps the rest of us believing whatever they tell us regardless of how obviously and profoundly stupid. 

 

We only need to keep in mind one thing to grasp/comprehend the fraud and scam that is banking, and that is that the global banking system essentially still owes to someone every last dollar that it has ever allegedly loaned/advanced to anyone. At the very end the bankers will both own everything and owe everything.

 

In 2007 the High Court of (the Province of) Gujurat in India made the following decision in a dispute involving two banking companies where one had sold/assigned its nominal portfolio of bad debts to the other: (Assignment of Debts (Appeal no. 156 of 2007) in KOTAK MAHINDRA BANK LTD. versus O.L. of M/S APS STAR IND LTD. (emphasis added):

 

24. In fact the concept of trading in debts is, by its very nature, abhorrent to the concept of banking in any form, either the form of primary business of banking or the additional activities

48. (n). [T]he entire [sale or assignment] transaction is based on a speculative form of activity which can never be a permissible mode of activities as part of, or in addition to, or incidental to or conducive to the promotion for advancement of the business of a banking company;

So why would the judges of the Court say that? What is it that these judges know that the global public generally do not? 

There are a number of independent reasons or routes by which the Court/judges would arrive at the same conclusion, but the short answer here is that equity dominates law (in this case the law of the contract) and the original merchants and/or their assigns have a superior equity title to the assets of the defaulting debtor(s) (who are the financial creditors-in-fact but that is another issue). 

The merchandise provided by the original merchants is what created the legal-debts and the merchant(s) have still not been paid (i.e., the debts have been discharged (passed on or assigned to someone else) but not paid). The original bank has still not paid the merchants but only agreed that it owes them, and so that bank has an inferior claim to the money owing by the defaulting card-users. The nominal selling bank cannot sell the debts to another party because that original bank has itself still not paid for them. Is that clear?

This decision may well turn out to be one of the first cracks in the global system of control by the entrenched-money-power. If you think that the financial system is crooked at the front-end, it is breathtakingly and scandalously criminal at the back-end. Global nominal debt-collection and deemed-debtor-management practices would make Al Capone or even Attilla the Hun blush.

From a different perspective, the kiting of liabilities is also how and why Bernie Madoff, for example, was able to run a flagrant ponzi scheme in broad daylight for 25-plus years. It is all one massive on-going ponzi scheme and Mr. Madoff wasn’t doing anything that would cause anyone to point and say “Hey he shouldn’t be doing that!”. He wasn’t running a ponzi scheme on the back of an honest system - he was running a ponzi scheme nested and disguised within a larger ponzi scheme.

 

The larger system/arrangement is contrary to every rule of law and equity and is in fact utterly ridiculous but the bankers and the entrenched-money-power generally have employed the power of language to fraudulently induce the rest of us to believe that that is the way things ought to be. 

 

It now becomes clear regardless as to the real purpose of the massive global movement to nominally eliminate cash. It is not the cash that the private bankers want to eliminate so much as cash convertibility of their liabilities

 

Eliminating cash convertibility is functionally indistinguishable from printing a global aggregate of the USD-equivalent of about $200 trillion (or $200,000 billion) and making a gift of it to the private banking system. Over the past 50 years they have collectively kited $200 trillion of liabilities and now they are going to effectively/constructively cancel (default on) their debts for the common good.

 

But in both law and equity the nominal anti-cash movement defines the private global banking system as an absconding debtor whose goal is to avoid and evade their lawful and legal debts.

 

Another false premise in the systemized delusion here is that the socioeconomic damages created by pyramid/ponzi/kiting schemes occur when they collapse. The truly massive socioeconomic damages (misdirection and misuse of resources) occur while the schemes are working and not when they collapse.

 

Hope it helps. Tim.

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newsbuoy
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Paging Dr. Johnston, please pick-up the white courtesy phone

The three R's, Resilience-Reliance-Rifles, played out in the cinematic euphorbia of a born-again Biblical argument for mass murder.

Cool!

But you might want to watch this too:

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Afridev
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Alternative view on Venezuela

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newsbuoy
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Slaughter Bots Rising

Small localized EMP devise would probably do the trick. Say, that covers an area of about 50 meters?

 

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