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    The End Of Money

    Prepare for the coming wealth transfer
    by Chris Martenson

    Friday, November 1, 2019, 11:03 PM

Today we live in a two-faced economy: it is boom times for some and bust times for others.

Your personal situation depends largely on how close you fall on the socioeconomic spectrum to the protected elite class, towards which the central banks are directing their money-printing firehoses.

Why should we care about this bifurcation? History.

2,000 years ago, in Plutarch’s time, it was already ‘old wisdom’ that unhealthy wealth imbalances ended badly for society:

Plutarch quote

Even those near the top of the wealth pyramid don’t aspire to live surrounded by an impoverished underclass, forced to live hiding behind their fortifications and guards, hoping the unrest of the masses doesn’t get any worse.

But sadly, the US is not far off from this fate…this is Los Angeles:

LA tent city

The streets of San Francisco, Seattle, and a growing number of other once-proud American cities look very similar.

I care about our social stability which is why I believe in having a strong and vibrant middle class – something the US Federal Reserve is working to destroy with every intervention.  It has been a shameless champion of the entrenched ultra-rich and powerful; at the expense of everyone else.  Because of this, I’ve been a fierce critic of the Fed and its policies.

Money vs Real Wealth

I happen to know a good deal about our current system of money; how it is created, how it functions, its benefits and its darker aspects. I find it critical to remember that it isn’t actually “real”. Rather, it is a concept. Specifically, it’s a social contract.  An agreement. Albeit one enforced at the end of a gun – or, as seen here, an eviction sheriff enforcing the local tax codes:

tax eviction

So while money isn’t “real” in itself, we value it because it is a claim on real things.

Having a lot of it currently entitles you to a great deal of privileges and power, which are a direct outcome of the spending of that money.

Money can be converted into houses. And cars. And massages. Also groceries, electricity, cell phone services and prescription drugs. These and ten billion other things are what money allows you to buy — the things you actually need or want.

So money is the means, but it is not the real wealth.  ‘Real wealth’ is the things that money enables you to acquire.

The Three Types Of Wealth

Going further, we can break real wealth into two discrete forms.  Primary wealth is the wealth of the land and its functioning ecosystems.  It is clear air, fresh water, thick ore bodies, and rich soils:

primary wealth examples

Secondary wealth is a finished form produced from raw materials.  It is primary wealth brought to market.  It is fresh produce on the grocery shelf, cut lumber (or even a fully-constructed building), and rolled steel in giant coils:

secondary wealth examples

Tertiary wealth, on the other hand, is not actually “real”. But most people mistake it as a comprehensive representation of “wealth”.

Similar to money, tertiary wealth is merely a claim on primary and/or secondary wealth.  A share of General Electic a stock-based claim on the company’s means of production.

And debt (and bonds) is a future claim on money. And money, as we know, is a claim on real things.

It’s All About The Amount Of Claims

Why is it relevant to parse these distinctions so carefully?

Because there has to be a balance between the claims and the wealth.

Too many claims and we call that inflation.  Each individual claim is reduced and diluted by every additional new claim brought into being. With every new thin-air unit of money created each existing claim becomes incrementally more worthless.

Deflation is when there’s overproduction, or too much ‘real stuff’ relative to money.  Prices fall, which is a perilous condition for a debt-based money system. There needs to be ever more money to pay off both the principal and interest components of past loans, or else defaults start cascading through the system.

Do you get now why we need to be very concerned with the balance between the claims and the real stuff?

History is full of examples when people first forgot and then violently remembered these truths.  Through history, the balance has swung recklessly — almost chaotically — between inflation and deflation.

Another such phase transition approaches.  These moments are billed as periods of wealth destruction, but they actually aren’t.  Instead, they are periods of wealth transfers from the unaware to the observant.

We’re facing this approaching crisis for two main reasons. One, we’re repeating the forgetfulness and hubris of previous societies. And two, the complexities of our current situation are more challenging than ever before.

Human biology has bestowed a strong preference to push problems into the future.

When problems and predicaments are compounding and exponential in nature, as they currently are, every can-kicking deferment only makes the inevitable pain that much greater when it finally arrives.

And as for the increased complexities, for the first time in our history as a global species, we are waking up to the fact that the world is no longer our infinite treasure basket with an unlimited ability to absorb our waste streams.

Instead, it is finite. And its already groaning under the weight of one unit of global GDP extraction and waste.  The central banks are tirelessly seeking to double the size of the economy, and then double it again.

One can easily make the argument that 1x GDP is already ‘too much’ for the planet.  Disappearing fishes, soil, insects, birds, amphibians, reptiles and large animals all indicate that ‘too much’ was a while ago.

But even for those who believe we haven’t exceed the Earth’s carrying capacity yet, it’s certainly true that there’s some sort of a limit somewhere.  Is it when there’s 1.5 times as much consumption and waste as today?  2 times as much?  3 times?

When is the right time to act as if these limits matter to our future welfare?  Not now! is the rally cry of the Federal Reserve and other central banks.  Their remit begins and ends with fostering more credit growth as fast as possible. Full stop.

It’s all they care about. And if they have to continue to throw a couple of younger generations and the entire middle-upper, middle, and lower classes under their inequality-bus to achieve more growth in credit markets, then you’d better believe that’s what they’ll do.

The Wealth Transfer

With the near-inevitability of MMT (a.k.a “free money for everybody”) the wealth transfer will kick into a higher and more obvious gear when MMT arrives (as Charles Hugh Smith brilliantly summarized for us recently).

The basic problem is that money is not real wealth. But newly printed money has real purchasing power.  What happens when purchasing power is increased but more real wealth is not auto-magically created at the same time?

Easy: the claims on real stuff become diluted. Every unit of money in circulation has a tiny fragment of purchasing power removed from it when a new unit of purchasing power is created ‘out of nothing.’

You might think “what a flawed plan!,” but that’s exactly wrong. That’s precisely the plan. Coin clipping was the ancient Roman practice of diluting the currency by recalling every coin in circulation (or as many as possible), shaving off a tiny bit from each of them, and then reissuing a larger quantity of newly minted coins that each weighed a tiny bit less than before.

Today it’s far easier to achieve the same outcome.  New electronic digits are spewed out into the world and perhaps 0.1% of the population could even tell you that it’s happening. Perhaps only 0.001% could tell you exactly how.

But the effect is the same as coin clipping. Each new currency digit launched ‘from nothing’ into circulation has immediate purchasing power.  By definition, all of the pre-existing currency in circulation loses a ‘unit-share’ as a consequence.

With trillions upon trillions in circulation, nobody really notices. Again, that’s both the point and by design.

For the US, this chart explains what’s coming in grotesque detail:

Debt vs GDP chart

This is the total debts of the US, which represent future claims on money — which, remember, itself is a future claim on real wealth.

GDP represents, imperfectly, the ‘real stuff’ in this story.  As you can plainly see, the claims (red line) are compunding at a far faster pace than GDP (blue line).

It gets even worse — far, far worse — when we include America’s unfunded liabilities into the mix, seen here expressed as a percentage of GDP:

Total IOUs in the Us as a % of GDP

What possible ways are there to resolve that chart with people’s expectations, hopes and dreams?

Well, we could grow GDP really, really fast for a very long time.  Like 75 or even 100 more years.

By which point the US economy alone will be 5x larger than the entire global economy currently is.  Now remember that already the Earth is screaming “enough!”  We can only imagine what happens if the US alone becomes 5x larger than today’s entire world economy…

However, because such tremendous growth requires energy, a LOT of it, and because no suitable replacement(s) for fossil fuels yet exist, and because fossil fuel supplies are set to decline for reasons related to depletion and geology, that kind of 5x growth isn’t going to materialize. It’s just not possible; the fuel to power it isn’t there.

So what happens when huge claims slam into physical constraints?  The excess claims evaporate.  As they have many times throughout history.

This is where the wealth transfer comes in. And you want to be sure to be prepare for it, and on the correct side of it as it happens.

Time Is Running Out

The end of money approaches.

To quote the famous Austrian economist Ludwig Von Mises:

“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 the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

How many people reading this think that given the choice between dealing with unpleasant consequences now vs. later on (by printing up more money via MMT, more QE, etc.) that there’s even any contest at all?

Of course they’ll opt to print more now.  Now is never a good time to face the music.  There are delicate issues right here and now to balance.  A tough moment in a trade negotiation, an election, and a disturbing weakness in the IPO market, are the sorts of excuses that can always be found in every present moment.

Further, there’s nobody of any consequence who has the requisite vision or leadership to stomach such a period of tough decisions.  There’s no Paul Volker at the Fed; just a bunch of clueless market-following political animals who are afraid of any and every wiggle downwards in stock prices.  They are the market’s lapdogs now; completely unworthy of admiration or respect.

Which is why we predict more printing and borrowing.  Enormous new piles of money and credit will be issued, likely at ever-lower rates of interest.

The world economy is performing sluggishly and appears to be sickening further.  This is due to too much debt. But no matter, the central banker’s response is automatic: The world needs more credit at even cheaper prices!

And, of course, more central bank interventions to keep everything from falling apart. After all, the central bankers are the heroes in this story, right?

It will be something of a miracle if the next US presidential election doesn’t open the MMT floodgates, which would only accelerate the pace of currency debasement.

The pressure is building.  Nobody knows when all of that newly-issued money and credit will have to be ‘trued up’ against the amount of real stuff out there. But it will. It always does.

That moment will be referred to by the press as a period of wealth destruction.

If a deflationary outcome occurs – which we give a 15% chance of happening – 401ks will be shredded, bonds will lose value, defaults will spike, stocks will crater and the dollar will spike as institutions and entire countries scramble to repay their debts from a dwindling pool of money.

If an inflationary outcome does– the remaining 85% probability – money will become worth less and less. But the press will unhelpfully lament the situation as some great mystery, like rain falling from a clear sky.  Of course, understanding inflation is not terribly difficult, but it behooves the power structure to pretend as if it were really just too difficult to comprehend.   Inflation is always a monetary phenomenon.  Too much money chasing too few goods and services.

Either way, the sword will fall. And after the dust settles, there will be clear winners and losers.  Those with the proper framework and agility will prosper.  They will understand that what actually happened was that wealth was transferred from those who thought they owned it (the claimants), to those who actually did (the possessors).

The only remaining questions are whether the wealth transfer comes about in the form of an inflationary destruction, like in Venezuela today, or as a deflationary bust more in the fashion of Greece recently (which lost its ports, roads, and utilities to foreign banks and creditors as a consequence of running up too much debt it couldn’t repay).

Either way, by deflation or inflation, the prudent financial responses remain the same.  Own hard assets.  Have multiple income streams.  Be able to source a percentage of your own food locally and generate your own energy at home (solar, rocket mass heaters, etc.).

For those with money in the markets, we have an experienced financial advisory firm we recommend that can help you navigate your financial capital through these incredibly uncertain times.

We cannot possibly predict when the current Everything Bubble will finally end, but when it does, you at least will not be fooled.  You will have seen it coming and will know its causes.  You will be among the educated and alert who will know that the real wealth has merely been transferred.

Further, you will know that the beneficiaries of that wealth transfer will almost certainly be – surprise! – the banks and other financial elites that the Fed has so carefully enabled and protected.  The winners have been pre-selected, as have the losers.

The danger in that, of course, is if the financial elites haven’t thought their cunning plan all the way through.  They may not like what follows next as an enraged populace finally wakes up to the enormous fraud that has been perpetrated upon it.

We shall see.

More and more people in the US and in other countries are waking up to the ways in which the financial and political elites have gamed and rigged the system in their favor. Angry protestors are increasingly taking to the streets to voice their displeasure.

We predict more of that.  A lot more.

In Part 2: Time Is Growing Scarce, we closely examine the warning signals (some of which the Fed is itself providing!) that the global economy is much weaker than admitted, and that the great wealth transfer is about to ramp into high gear.

Interested in making it through the coming chaos with your wealth — and more important, your integrity — intact? Read on.

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

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22 Comments

  • Sat, Nov 02, 2019 - 6:41am

    #1
    MGRS

    MGRS

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    15% deflation vs 85% inflation odds

    This is the first time I’ve seen a hard number presented by the PP team as to inflation vs deflation odds.  And one so heavily weighted in the direction of inflation.  While I don’t necessarily disagree, I’m curious how you guys arrived at a number so biased toward inflation.

    I’ve thought the Ka-Poop theory of deflation-then-inflation sounds logical.  I’ve also considered the possibility that the Ka might be stiff-armed by interventions, or had already occurred in 2008 or even the tech bubble.  Or that we get a Ka that’s a decade (decades?) long, like a Greater Depression, effectively making the Poom a related but almost separate epoch in a series of new normals.

    I’ve tried to balance my preparations for any of the above scenarios.  But I’m open to new perspectives, and if facts have changed or started showing their hand, perhaps the weighting of my preparations should shift too.

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  • Sat, Nov 02, 2019 - 7:39am

    #2
    mjtrac

    mjtrac

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    "...an enraged populace finally wakes up to the enormous fraud that has been perpetrated upon it"

    We don’t need to wait to see this, and it isn’t the sort of revolution that has happened in the past.

    We’ve seen what an enraged populace looks like.  It puts in a President Obama, who immediately folds to the banks for reasons that are completely understandable, and follows him with a cartoon fascist who separates kids from parents because they are poor, yet maintains the adoration of 40% of the public.  The pool of scapegoats is pretty large and includes Jews, as always, blacks, uppity women, and all recent immigrants.  Strangely-not-strangely, it no longer includes gays, just trans people.  Gays have been revealed as having purchasing power and as existing in even “the best” families.

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  • Sat, Nov 02, 2019 - 8:16am

    #3
    Paul1974

    Paul1974

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    What type of wealth is a business?

    Greetings all, I’m newer here so this may have been covered somewhere before but I did not see it mentioned in the article above. What type of wealth would an existing business be? I realize that the answer may depend on the type of business, but as a general rule where would that fall. I’m thinking somewhere between Primary and Secondary with the more essential the business is the closer to primary it gets. This seems reasonable to me but I may be missing something. Thanks in advance to anyone who responds and great website and article

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  • Sat, Nov 02, 2019 - 9:40am

    Reply to #2
    ao

    ao

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    you forgot one

    One of the most popular scapegoats of the modern era has become white males (with older being appreciably worse than younger).  It seems like this group is responsible for just about everything that ails the world, at least according to the calumny of some.  And least we forget, remember that the sage of Hollywood and queen of the virtue signalers,  Jane Fonda, said climate change is a woman’s issue.  So I presume that males are somehow immune to the effects?  I just knew that Y chromosome was good for something other than donating sperm but it took Jane to bring me to that realization.  But I’m concerned it may exclude me from eligibility to join the narcissistic victimology club.  If so, perhaps the marginalized identity club will grant me membership.  This is all so stressful.  Where’s my Xanax?

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  • Sat, Nov 02, 2019 - 5:45pm

    Reply to #2
    gkcjrrt

    gkcjrrt

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    Odd one out

    and includes Jews, as always, blacks, uppity women, and all recent immigrants.  Strangely-not-strangely, it no longer includes gays, just trans people.”

    Well, 1 of the 6 groups you mention  does not claim to be an oppressed minority.

    As for the other 5,  the chronology (dates are approximate of peak activism) suggests a sequence of some sort

    1950s-60s  – black civil rights movement ;  1970-80s – feminist;  1990-2000s – gay rights;  2010 -onwards – illegals and trans.

    These have been highly organized and highly funded movements by not disinterested groups, and particularly the last 3 over the past 25 years.    You don’t change culture attitudes without the biggest bullhorn – and who has that?  Universities, Hollywood, mainstream media, record producers, book publishers.

    Watch we’ve witnessed over the past 60 years is the controlled destruction of the culture.  Hey, we are are  “liberated” now, but can we get a decent job?  Raise a family?  Be part of a thriving community.  No, we are at each other’s throats.

     

     

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  • Sat, Nov 02, 2019 - 6:47pm

    #4

    David Huang

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    Rocket mass heaters

    It’s great that you noted rocket mass heaters as a way to potentially help mitigate ones personal decline as things play out.  I’ve noticed in the stats on my blog that a fair number of readers from this site have come over to read my blog entry on building my own rocket mass heater.  For those who might be looking to get your own you might also be interested in this newer blog where I share my experiences doing the first annual cleaning of fly ash out of all the tubes.  I’ve never seen any clear “best” way to do this so I tried a few things I’ve read about and share my thoughts on them.  Here’s a link to that blog entry if you are interested.  Being a Chimney Sweep with a Rocket Mass Heater.

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  • Sat, Nov 02, 2019 - 8:14pm

    #5

    Quercus bicolor

    Status Bronze Member (Offline)

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    Quaternary wealth?

    Would there be any value in distinguish financial wealth that depends on tertiary wealth?  Derivatives in particular?

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  • Sat, Nov 02, 2019 - 10:01pm

    #6

    timeandtide

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    Deflation is more likely than inflation

    I also quibble at the 85/15 split between inflationary or deflationary probabilities.

    We live in a world where there appears to be both inflation and deflation. 

    There is massive inflation in “assets” such as bonds, shares and property. Anything that has involved governments such as education and healthcare has also inflated.

    However, many of the items of common consumption – mass produced items that we use every day like household whitegoods, computers and related technology, cars and agricultural products have either deflated or not inflated.

    It could certainly be argued that there is too much “real stuff” relative to real money (by which I mean  that real money is the surplus (or profit) from real enterprise or the surplus (savings) from the payment for wages from labour after paying the cost of living. There is precious little of the latter because whatever surplus there is, is generally used to pay off the mortgage and personal borrowings.

    Much of enterprise in the world today is probably dubiously real because it would never have come into being without easy money. Malinvestment, in other words, is rife.

    The problem with all this “thin air” money is that it barely spreads out to the 90% who need it where it possibly could do some good to the economy. It seems locked up in the closed circle of the 10%. Corporations would rather buy back their own shares than invest in productive enterprise. The financial engineers do not see an economy as a thing that is about human interactions and trade. It has been reduced to an apparent logic of numbers. Marvellously convenient for those in the financial clouds where the side effects to people and the other inhabitants of this beautiful blue-green planet are either not noticed or ignored.

    Always on the lookout for an easy solution, , Modern Monetary Theory springs forth as an answer to this problem of getting the money to whom and where it is likely to be spent and so perhaps kickstart the economy into a growth mode again.

    It probably could work for a while until the side effects kick in but only if it was to be financed by the 10% rather than from “thin air” money. It must be obvious by now that we have tried that and it has not worked. 

    In other words, to tax the 10% heavily if, indeed, that is possible today in a world of tax havens, lobbyists and political expediency. It certainly worked after World War II. Tax rates for the wealthy varied between 90% and 70% during the1950s and 60s which was a period of far greater economic growth than today. 

    However, to be fair to the economic capabilities of today, we have got so good at producing stuff with less energy input that we do not need higher levels of growth to be sufficient for our needs. The only reason that the politicians and the bankers call for more growth is to pay the escalating interest bill for the crazy amount of debt that has been created over the last 20 years.

    That still leaves us with those pesky side effects from MMT’s universal basic wage. The worst would be the dropping of the relationship between work and reward. I believe that would sap human drive and initiative. 

    And, of course, as Dr Martenson points out, the aim of MMT is to drive the economy into a higher growth mode with scant regard for where the energy will come from.

    I don’t think there is any “solution” that will not follow previous historic examples of a bust. The bust is the solution. It will be painful to all and will require those with real wealth, the 10%, to contribute the most to help those who are in no position to avoid terrible hardship. 

    Deflation is surely a much more likely scenario than hyper-inflation. The hyper-inflation of the 1920s was primarily because there were few goods available after the destruction of the First World War matched with the political stupidity of printing too much paper money. That is not the case today. There is no shortage of manufactured goods, raw materials for building or agricultural product. 

    We are not short of stupidity though and it could be that the bankers and politicians will continue to kick the can. Central bankers will continue to try to bluff and manipulate but they are subject to much the same fears as we all are. They are bankers after all and fear of loss must keep them awake at night too. The current round of QE is surely a last ditch effort and now they have to face up to the fact that interest rates in the market are actually rising again (the 10 yr bond price has been falling since late August). Politicians around the world are under extreme pressure from angry citizens. People and politicians have never been so polarised. The anger runs far deeper than fear of global warming – that is just a proxy for a whole load of complaint from those suffering the side effects of complacency.

    Deflation will be crippling for those with large debt but a benefit for those who have no debt, who save, who rent their home, pensioners trying to survive on fixed income and so on. It will make housing affordable again. The virtue of thrift will be recognised again.

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  • Mon, Nov 04, 2019 - 1:55pm

    Reply to #6
    MKI

    MKI

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    timeandtide, that’s a really astute response. Thanks for taking the time. My comments:

    There is massive inflation in “assets” such as bonds, shares and property. Anything that has involved governments such as education and healthcare has also inflated. However, many of the items of common consumption…technology, cars and agricultural products have either deflated or not inflated.

    I agree (minus agricultural products – real food has been inflating). Of course immigration & QE is we have kept “low inflation” allocated into certain sectors, while the poor and young have taken it on the chin.

    The problem with all this “thin air” money is that it barely spreads out to the 90% who need it where it possibly could do some good…locked up in the closed circle of the 10%. Corporations would rather buy back their own shares than invest in productive enterprise.

    I believe they buy back their own stock because there is so little demand as wealth has not trickled down to the customer. IOW, they fear malivestment. You explain this well:

    …we have got so good at producing stuff with less energy input that we do not need higher levels of growth to be sufficient for our needs. The only reason that the politicians and the bankers call for more growth is to pay the escalating interest bill for the crazy amount of debt that has been created over the last 20 years.

    Of course, the debt is merely an effect of the government trying desperately to stimulate demand from the worker, who is broke. The solution: encourage more debt with more QE.

    …MMT’s universal basic wage. The worst would be the dropping of the relationship between work and reward. I believe that would sap human drive and initiative.

    I think the “haves” now think society really doesn’t need human drive and initiative from us bottom 90% anymore. We are sort of like surfs but without anyone needing our labor. Think about it: only the top slice of IQ is useful in our era of machines (AKA “Learn to Code!”. And MMT is about the only thing that makes sense if this is actually true.

    I don’t think there is any “solution” that will not follow previous historic examples of a bust. The bust is the solution. It will be painful to all and will require those with real wealth, the 10%, to contribute the most to help those who are in no position to avoid terrible hardship.  Deflation is surely a much more likely scenario than hyper-inflation. The hyper-inflation of the 1920s was primarily because there were few goods available after the destruction of the First World War matched with the political stupidity of printing too much paper money. That is not the case today. There is no shortage of manufactured goods, raw materials for building or agricultural product.

    I agree with this. However, I think the argument against it you will find here is the belief that energy (in the form of oil at least) is Disappearing Real Fast and this will end the entire game with an inflationary bang. Myself, I don’t agree with the belief plentiful oil is an irreplaceable piece of our modern growth economy (for example, 70% oil consumption due to transportation makes me confident we can cut back without much GDP loss) and thus I fall more into your deflationary camp in the short term. But…

    I don’t think pols will be able to stop the spending rapidly as jobs keep tightening up, and we will end up giving money away to stimulate demand until inflation is seen “on the ground”. The politics will get ugly. I’m thinking free health care. Free education. Free internet. All paid for by the top 10% or massive taxes across the board. But I’ve been wrong before. A lot depends on how tightly the elite can hold on to power and keep populists like Trump or Bernie out of power.

    But excellent comment. Following your thinking, the conservative investment strategy response would seem to be blue-chip dividend paying stocks + rent-generating real estate, adjusted proportionally with treasuries throughout the cycle. Basically, planning for both inflation and deflation cycling. But please let me know what you disagree with regarding my response.

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  • Tue, Nov 05, 2019 - 7:01pm

    #7
    Andrewbradnan

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    Land

    I didn’t really get along with the land developer, but a local guy here in WA bought up 750 acres.  He put up about 15-20 home sites of 5 acres for sale, and the rest of the acres were shared which would be orchard, grazing, farm, etc to which you were entitled to your split of any profit / produce etc..  The daily farmer got a share, and you could put in hours.  There’s 50 ways to figure out the farming part.  I’m sure you know enough people to pull off a much bigger site if you can find the land.  It was a great idea.

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  • Wed, Nov 06, 2019 - 7:06am

    Reply to #7

    Chris Martenson

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    How much land?

    … a local guy here in WA bought up 750 acres.  (…)  I’m sure you know enough people to pull off a much bigger site if you can find the land.

    Well, not out this way.  Very large tracts are almost entirely gone, unless you want the land people have decided not to build on over the past 300 years.

    You know why they didn’t?  Rocks.  And thin soils.  And steep north-facing aspects.

    In other words, poor soils and poor prospects for farming.  So the best and highest use of the big tracts out east remains forests which vary in quality but are typically harvested in 50 to 80 year cycles depending on their quality.

    Roughly speaking.

    So I am hunting as best I can for big tracts, and I’ve limited my search criteria to “100 or more acres” but I can tell you that there are a handful of appropriate places for sale.  Right now.  Maybe that spikes upwards after the next big correction?  I hope so.

    In the meantime I’ve somewhat honed my search process.  It goes like this:

    (1) troll Zillow and Landvest, and Landwatch to find possibly suitable spots.

    (2) scour the pictures for fields, trees in the background and other markers of possible soil quality.  Many properties can be instantly excluded just from the pics.

    (3) Evaluate the structures.  Nearly all realtors take filtered pics and use fish eye lenses so I’ve developed an ability to “defilter” the pics.  If the structures are all in need of immediate attention then these properties sink down the list.  Not entirely excluded, but certainly deprioritized.

    (4)  Now I go to Google Satellite view and really pour over the property and region.  So much can be answered.  What are the neighbors houses and properties like?  How far is this place from various shopping, airport and medical facilities?  Is there a bridge or other natural choke-points to help secure and defend the place if it comes to that?  What kinds of trees are around the property (conifers vs deciduous as  marker for weak/acidic soils vs good soils, potentially)

    (5) if there’s enough interest still, out comes the soil mapping function.  The process here is to get ahold of the property boundary lines and then overlay a soil map on top.

    I’m using the super data rich, but somewhat quirky and unintuitive USDA site found here: https://websoilsurvey.nrcs.usda.gov/app/WebSoilSurvey.aspx

    The boundary lines are sometime offered up by Zillow, and in other cases by the country town offices (if they are using something like the AxisGIS tool, an example of which is deployed here: https://www.axisgis.com/shelburneMA/)

    In any case, here’s a result:

    If you squint, you can see the numbers in there between the orange lines.  Each of those lines is a “soil topographical contour” where instead elevation being the discriminating function, it is soil types.

    In this case, you are seeing numbers like 305B, 305C, 70B and 9A.

    A few descriptors of those are:

    305B – Paxton fine sandy loam, 3 to 8 percent slopes

    305C – Paxton fine sandy loam, 8 to 15 percent slopes

    9A – Birdsall mucky silt loam, 0 to 2 percent slopes

    If you want to grow things, these are the sorts of words you are looking for.  “Loam, Fine, and Sandy” are great.  The lower the slope the flatter and generally better for farming/growing.

    Here’s a description you don’t want.

    904E – Lyman-Tunbridge association, 15 to 60 percent slopes, extremely stony

    You might not be surprised to discover that a lot of mini-estates with “245 fabulous acres!” are mainly composed of descriptions like the above.

    After decoding all of that, it’s time to actually visit the properties at the top of the list!  As a remark, very few New Hampshire properties made it through this filter process.  There’s a lot of really unsuitable soils in New Hampshire, of course there are good ones too, but waiting for good soils to hit the market is going to be a waiting game.  I think that’s true everywhere…good soils tend to stick in families for a long time.

    Evie and I have been stomping around and I’m becoming more of a soil assessor than I ever intended, and after visiting a growing number of properties, we’re getting pretty good at knowing what we’re going to be seeing before we even get there, which saves time and which allows us to focus on all the things you can’t tell from maps and photos.

    What does it feel like?  How loud is the traffic going by, and how much is there?  How is the sun actually falling upon the land and structures?  Are there any hills or other impediments that would change the solar input?  0 to 8% slopes is a very wide range, so how is the land actually rising and falling?  How hard would it be to have, say, 300 cars park nearby?

    This is something I am putting a bit of efforts towards, and I hope that my researching skills can be translated to help others perform the same routines elsewhere.

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  • Wed, Nov 06, 2019 - 1:49pm

    Reply to #7

    Eannao

    Status Bronze Member (Offline)

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    Posts: 155

    Research skills

    Chris,

    Thanks so much for sharing your research method. It’s great to get some clear, practical advice like that. So helpful.

    E

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  • Wed, Nov 06, 2019 - 2:21pm

    Reply to #7

    sebastian

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    Land search

    Hi Chris, I’m happy to see you are searching for land. It’s was one of our best experiences. FWIW slope and marginal land isn’t necessarily a bad thing if the price is right. Here in the PNW  coast it’s usually hilly, rocky with poor soils and I’ve seen some very ubundant farms. A local multi decade farmer friend commented that slope allows you to manage the water. His property is very flat and often he cannot plant til May as it’s too damp. A great example of an abundant homestead on steep marginal soil is Ben Falks place in New England. He has a lot of overlap with what you have put together in the crash course in this presentation as well as his personal resilient homestead:

     

     

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  • Thu, Nov 07, 2019 - 3:02am

    Reply to #7
    Steve

    Steve

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    Hey Chris, this is a great start and a timely conversation.  Thank you for sharing your process.

    I am currently looking for land in the region reasonably near family roots.  So, it will need to be in the Tennessee/Georgia/Florida/North Carolina/South Carolina region.  I have an older (autographed) copy of Joel Shousen’s Strategic Relocation North American Guide to Safe Places.  Joel’s number one choice for the eastern USA was in the pocket near the Smokey Mountains and as far south as the northern most reaches of Georgia.

    Let’s take a look at your item 4.   “Now I go to Google Satellite view and really pour over the property and region. So much can be answered. What are the neighbors houses and properties like? How far is this place from various shopping, airport and medical facilities.”

    1.  What is your criteria for distance/time from shopping?  How does travel vary with types of shopping?  For example, distance to grocery stores, convenience stores, clothing stores, gas stations, etc?  Distance is impacted by the selection of transportation … EV, petroleum based fuel or a hybrid for travel?

    2.  What is your criteria for distance from airport?  Is this in miles, time or both?  What about mass transportation such as buses, trains, subways and the like.  For example, if one can get to North Atlanta, the airport can be around 40 minutes away by subway/rail.

    3.  What is your criteria for distance from medical facilities?

    Regarding acreage… What are you thoughts around acreage?  For how many families are you planning?  How large for each homestead and how large for a community garden?

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  • Thu, Nov 07, 2019 - 1:25pm

    #8

    AustinAuctioneer

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    Chris,

    I was so glad to see MGRS’s comment at the top of these comments.  I have the exact same question.  Could you take a moment to clarify the 15/85 assertion as it relates to the KaPoom theory?

    Thank you!

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  • Sun, Nov 10, 2019 - 7:26am

    Reply to #6

    timeandtide

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    Posts: 45

    Reply to MKI

    Thank you for your encouraging comments MKI. I agree that food has been getting more expensive at the supermarket outlet but not so much at the farm gate. Farmers have been astonishingly productive over my lifetime (born in 1954).

    There is no doubt that there is a huge incentive to buy back company shares when senior executive pay is tied to revenue/profit per share. That form of financial engineering is at last being questioned by shareholders now and the ways in which executive incentive is structured. Your idea that fear of malinvestment could also be a motive for buybacks rather than investing in jobs and company expansion is not something I had considered. Certainly it is a very good reason for caution in this hyper competitive world. The cynical side of me would say its just a damn good excuse. Part of the problem is the obsession with quarterly reporting. Most good investments take time to be positive for the bottom line. In the short term, any major investment will be very hard on the cost side with little return on the revenue side. So, looking at it from an Elliott Wave/ Robert Prechter type stance, I would say that, yes, fear is a primary driver here for the caution being shown by so many corporations who would rather buy back than invest. Of course, the corporate PR usually claims that there is no better investment than in their own company but that is not the real sort of investment that we are talking about.

    Debt is more than a mere effect of government. The US debt of $23 trillion is a bit more than mere! It is also more than clear that it has failed to created any growth, most of the job creation has been by government and there is widespread anger in the world. The question, as you point out, is why is the worker broke? Again, I think the answer is pretty clear. Too much debt. Housing debt, furniture debt, car debt, student debt – everything seems to be purchased with debt to satisfy the vision of how we are supposed to live. In short, living way beyond our means in a complacent belief that nothing can possibly go wrong. I think we are having multiple ah-ha moments now.

    We humans will no longer be human if we do not employ our drive and initiative collectively. Those human traits do not disappear. If they are not used for the common good of humanity they will most likely be used in a destructive way out of and sheer frustration.

    You are right that we can potentially cut back on our energy use which will give us more time to find an energy solution. Widespread use of solar is fantastic in that it delivers energy to a household without the loss that happens over miles of high voltage pylons and wires but the sun goes down every day. Batteries have a limited lifespan and are expensive. I think we will always need some form of base load power which, at the moment, is probably nuclear if we are set on removing coal as the energy source. Coal will run out at some point anyway so we should be looking for long term alternatives regardless of those who deny global warming.

    The whole idea of stimulating demand does not make sense to me. The demand is there already for food, shelter, water and energy. We have already proven that we can meet it. The problem is essentially meeting the interest bill. That is really what the banker demand for more growth is about. Politicians want inflation to pay off their government’s debts and they love to make promises about improving the lives of their constituents.

    The natural world gets by on about 1.6% or thereabouts and it has been doing it for a very long time. Survival of the fittest is quite brutal of course and I am not suggesting that is the road we should choose. However, if we do not address our problems in an intelligent way then we humans tend to revert to nature’s more cut and dried methods.

    There is no doubt that the world has the resources but trying to overcome our current lack of growth by pretending that those resources can be magically conjured out of nothing is beyond absurd. As Dr Martenson has explained so well, money is just a claim. The real resources are our drive and initiative to grow food, deliver water and fertiliser and to turn raw materials into things that we really need.  it would also be helpful to create products  that last a bit longer than so much of what we buy today. Built in obsolescence is so cynical and wasteful. We are in dreamland if we think that every person needs a car or every family needs an energy intensive McMansion. If it was not for the extraordinary expansion of credit over the last 30 years, the crazy over-consumption would not be happening. When I say over-consumption, I mean huge SUVs that mostly carry just one person to work, houses that are way bigger than they need to be, wasteful wardrobes of clothes supplied by people who are exploited in Bangladesh and elsewhere, dollar shops of pure rubbish and an incredible amount of geewhiz technology that really does little more than a pencil and paper has managed to do rather well for a very long time.

    Even taxing the extremely wealthy is not going to pay for MMT. A universal wage will either be wasted or just used to pay off the mortgage so the bankers get off  scot-free to start the whole cycle all over again. Wealth has certainly become far too concentrated but the best people to redeploy that wealth are probably those wealthy people that made it in the first place. People like Bill Gates for example. The question is how do governments persuade or cajole the elite into doing that?

    If they don’t or the wealthy don’t come to that realisation themselves, we are in for a mountain of trouble.

    I am very wary of anything that is free because the truth is that nothing is for free. Anything for free has no meaning. A pay packet has meaning because you earned it. How can you have respect for yourself if everything comes with no outlay on your own part? How can a government have respect for the people it governs when all of them take a universal wage? The moral hazard here is huge. This is bread and circuses on a grand scale. Cynicism gone ballistic. An economy is not about numbers or, in the case of MMT, just paying people to keep quiet. An economy that works is really about ways and means of providing a system in which at least 95% of the people are standing on their own feet or surviving meaningfully and with dignity. Very few are experiencing that now because we live in an age of peonage while being persuaded that we are rich. It is a lie and most ordinary people in my experience know this.

    I think the anger we see across our societies, the political polarisation everywhere and the lack of trust in institutions and our leaders are all symptoms of the increasing discomfort about the lies being told to us and the lies we tell ourselves.

    As far as a personal financial plan for the future, I don’t really have one other than to lose as little as I can inadvertently and to invest (in the broadest sense) in what I know best, which is my own business, my family and friends by using my abilities as best I can.

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  • Sun, Nov 10, 2019 - 7:56am

    Reply to #8

    Chris Martenson

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    Inflation vs. Deflation Probabilities Explained

    Chris,

    I was so glad to see MGRS’s comment at the top of these comments.  I have the exact same question.  Could you take a moment to clarify the 15/85 assertion as it relates to the KaPoom theory?

    Thank you!

    Yes.  Of course.  I’d be happy to.

    First, my views are constantly shifting.  I never see the future as a given, but rather as a set of probabilities that have yet to solidify.

    As time goes on and events transpire, those probabilities begin to shift, and some areas gather more weight to them, and others lighten up.  Later on those might reverse based on new events.  Or strengthen further.

    “Reality” only condenses and collapses here in the now.  Until “now” arrives everything remains a set of probabilities.  This is important because until things become “100%” nothing is certain.  Even if I said “there’s a 99% chance of…” there’s still a 1% chance that it won’t happen.

    Would you buy lottery tickets with a 1% chance of winning?  Of course you would (as long as the payout was 100:1 or better) because 1% is pretty good odds.  Just ask the people in those 500:1 flood zones how improbable 500:1 is.

    With that background, when I first began all this back in 2008 I weighed the odds of deflation vs. inflation at 50/50.

    Now it’s much more heavily weighted to inflation at the 85% mark.  Why?  Because events have transpired.  Events like daily interventions by central banks to print money and manage expectations via jawboning.  Because the markets have become “””markets””” controlled via computer systems that I am 99.44% sure “they” have figured out how to rig and game to prevent declines and nudge things ever higher.

    Also because the central banks have indicated in both word and deed that they are desperately afraid of deflation.  And because the various market participants have not rebelled even in the slightest to the overt monetization of debt or the massive increases in money supply.

    This hasn’t seemed to bother them in the least:

    See also:  100 year Argentinian bonds 3x oversubscribed, Greek debt trading below US debt, too many Unicorns to count, NFLX trading at a 93 p/e, etc., etc., etc.

    Nobody cares.  The central banks can do whatever they want and the “””market””” players are going to dance right along.

    So…given all that, which boils down to the ability to print as much as they like and not have the “””markets””” do anything but cheer, what do you think the odds are of an inflationary outcome?

    Back in 2007 the Fed could *not* have done any of the things it has done over the past 2 months.  There would have been shock and horror.  Now?  Nothing but higher stock prices.  No wiggles to the dollar, no gold spikes (the opposite, not-so-coincidentally), no commodity or bond market insurrections.  Nothing but higher stock prices.

    Can you imagine?

    Well, that’s what 12 years of conditioning the players will get you.

    Now, all of that said, I still think there’s a chance that deflation wins.  Something happens that gets away from them.  Maybe a war.  Maybe a major bank failure.  Maybe a huge spike int he oil price that cannot be papered over.

    Something happens.

    And then everybody cares, trillions upon trillions US dollar denominated debt suddenly scrambles for dollars, money supply shanks downward, credit aggregates go in reverse, and the financial system freezes up.

    It’s Armageddon for the infinite-growth-in-debt-forever model.

    But even then, what do you think happens next?  If given the choice between such institutional failure if not death, and the brilliant idea of MMT-ing $100k into ever bank account…what are the odds of those Fed wire transfers *not* happening?

    The “ka” portion is likely to get smaller and smaller in both probability and in its lifespan if it does come to pass.

    Of course, it could all still ‘get away’ from them, or a Volker-like figure could somehow emerge, but the odds doth shrink.

     

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  • Tue, Nov 12, 2019 - 3:17pm

    #9

    AustinAuctioneer

    Status Member (Offline)

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    Posts: 8

    Chris,

    Thank you so much for the detailed reply!  I’ve followed your work for a decade and have made lots of big life decisions based on it, so having your up-to-date take on things is important for me (and for lots of others, obviously).  I’ve still been operating from the 50/50 probability model, so this is big news!  A couple things arise from this new information.

     

    First, I haven’t seen this 85/15 notion on PeakProsperity.com yet.  It’s very possible that I’ve just missed it, but if this is news, I encourage you to share this via an article.

     

    Second, how does this affect your take on real estate?  Seems to me that if we’re 85% likely to inflate, real estate would be a good investment, no?

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  • Tue, Nov 12, 2019 - 5:52pm

    Reply to #9

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4796

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    I'm currently moving on real estate...

    Second, how does this affect your take on real estate?  Seems to me that if we’re 85% likely to inflate, real estate would be a good investment, no?

    Indeed it is.  I am currently very actively investigating real estate and have put an offer on a piece of land.  I won’t say more because it’s not a done deal and I am superstitious.

    There’s a deeper set of reasons for “why now” besides the possibility of an inflationary melt-up or outcome.

    One of the biggest is this question; “what happens when 1% of the rich people living in cities decide to get a place in the country?”

    It’s not just price that will be moved…the best land is always hard to acquire (crappy land is everywhere, but you don’t want that).  But when there’s a small flood of rich folks and their agents scouring the countryside?   I think it becomes much, much harder.

    It’s probably ‘too early’ yet, that’s one of my core strengths (being early), but as I always say, I’d rather be a year (or two) early than a day late.

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  • Tue, Nov 12, 2019 - 7:42pm

    Reply to #9

    Oliveoilguy

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    Good move Chris!

    In my humble opinion it is never too early to move to the country. It’s the right thing to do whether the world crashes or whether it stumbles on for another 20 years.

    When we come back to our property after a city run for supplies it is like entering a magical world. I always breath deeply and feel like a burden has been lifted. Sometimes I just stare at the trees. Then the animals come into focus….no greater joy than being approached by a horse who actually likes my company, or watching deer who have figured out that our property is relatively safe.

    Then I drive on in and see projects done and not done…things to be proud of and other things to find a solution for. It never ends. Seasonal cycles…there is always more work than we can do, but it’s okay. It’s ours to care for and make better and eventually pass on.

    What an honor to be stewards of a tiny speck of God’s creation.

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  • Fri, Nov 15, 2019 - 5:55am

    #10
    Steve

    Steve

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    Ray Dalio's explanation of the market cycles - this is complicated but comprehensive and good.

    Ray Dalio’s explanation of the market cycles – this is complicated but comprehensive and good.  He doesn’t bring all three “E’s” into the explanation but does a good job of discussing one of them, Economy, absent of considerations from Energy and Environment.  They only complicate the situation further.  This video is worth the watch.

     

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  • Fri, Nov 15, 2019 - 10:17am

    #11
    MKI

    MKI

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    Steve, I thought that video was excellent, and one of the best simplifications I’ve seen. Thanks for posting.

    Back in 2008-2009 I had the same thinking, and it hasn’t changed any. We either take the deflationary hit what I was prepared/hoping for) or continue the FED engineered everything bubble. I was especially impressed with how clearly he explains the trap the FED is in, that they can’t stop QE or raise interest rates due to debt levels (corporate, government, personal). The Pareto principle applies: 80% of what’s happening here is due to just a few factors, and all the deep dive into data just confuses things.

    One of the problems with “data-driven” analysis regarding the 3-Es you mentioned is even if one gets the science totally right (which is itself total hubris in a world of 3-body problems & Black swans) many irrational things humans create can go on for a very, very long time. Look at the USSR as a good example – an irrational and failed system can hang on for well beyond a single lifetime.

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