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I believe that we’re heading for another liquidity crisis or financial crisis. That doesn’t mean it’ll happen tomorrow, but there are disturbing signs that it might not be too far off.

It doesn’t mean the world’s going to end. But investors who aren’t prepared could see large portions of their portfolios wiped out. It could take years to rebuild them, and many investors just don’t have the time to recoup those losses.

But how do you prepare? You might want to start by looking at how “old money” preserves its wealth. Today I want to explore that.

On a cool evening in the fall of 2012, I joined a private dinner in Rome with a small group of the world’s wealthiest investors.

We dined at Palazzo Colonna, a private palace that’s been owned by one family for 31 generations or 900 years. My dinner companions were mainly Europeans, some Asians and relatively few from the United States.

Amid marble, gold, paintings and palatial architecture, I mused on the meaning of old money compared with the new money crowd that congregated for cocktails near the Connecticut home in which I lived at the time.

Old Money vs. New Money

Old money has proved they know how to preserve wealth over centuries, while the jury is still out on new money busy buying yachts, jets and exotic vacations.

In the United States, the “old money” is generally about 150 years old with fortunes dating to the mid-19th century. Families in this category include the Vanderbilts, Rockefellers and Carnegies.

Some U.S. family fortunes are almost 200 years old. But most of the great wealth today isn’t old at all.

It comes from success in the past 30–50 years including Mark Zuckerberg, Jeff Bezos and Warren Buffett.

…click on the above link to read the rest of the article…

The Great Growth Hoax

February 6, 2024

The Great Growth Hoax

For several days, ever since the supposedly amazing GDP report from quarter four 2023, we’ve been blasted by the media about how great the economy is doing.

It’s exasperating because these claims do not fit with human experience. Last we heard from the Census Bureau, real income is down, and no one doubts it. Everyone, or at least most average people, has felt strong downgrades in living standards over these last four years.

And yet, no recession has been declared. This is for technical reasons. A recession is supposed to show up in the technical reading of the GDP plus unemployment.

We’ve known for years that the unemployment data is broken. It does not account for labor dropouts or adjust for multiple job holders or otherwise reveal anything about labor participation or remuneration.

Unemployment is technically low, but so what?

As for GDP, it is not a measure of the standard of living or even economic growth. It is a measure of output — stuff going on as measured in dollar terms, whether necessary, productive, society serving, efficient or not at all.

The aggregate was concocted at a time when economists believed that spending was itself productive, whether it flowed from a sustainable capital base or government itself. Anything moving and churning was regarded as good.

We Don’t Need More GDP Reports Like These

When the latest report came out and everyone cheered, I dug around the data a bit but figured I would wait for my favorite analysts to weigh in. Sure enough, Peter St Onge writes it up and it is a doozy:

Fresh GDP numbers came in and it was a blowout. The kind of blowout that only a $2.7 trillion government deficit can buy while the private economy crumbles around it. Another couple blowout GDP reports like this and Americans will be living under an overpass.

…click on the above link to read the rest…

The Polycrisis

November 12, 2023

Back in 2017 when I composed this graphic of overlapping crises, the word polycrisis was not yet in common use. Polycrisis has various definitions, for example: “the simultaneous occurrence of several catastrophic events.”

But this doesn’t explain the truly dangerous dynamic in polycrisis, which is the nonlinear, mutually reinforcing potential of disparate crises to generate effects much larger than the initial causes. This definition is closer to the mark: “Many different problems happening at the same time so that they together have a very big effect.”

Put another way: 1 + 1 + 1 doesn’t generate an effect of 3, it generates an effect of 9.

You’ll notice the crises on my graphic are internal socioeconomic dynamics: state-cartel centralization, demographics, soaring debts, Imperial overreach, technological disruption, disunity in elites and diminishing returns on financial predation.

Many don’t see these as crises; they’re seen as factors, not as potentially catastrophic dynamics. This is the linear analysis: None of these dynamics is actually threatening to the stability of the U.S.

The nonlinear analysis is: Considering each one as a discrete dynamic, that’s true. But these are mutually reinforcing crises because the status quo “solutions” to each one become mutually reinforcing problems which generate much larger effects than most believe possible.

Note that external factors such as war and climate change are not shown. These conditions are not entirely controllable by U.S. policy decisions. They affect the entire world, not just one nation-state. That said, external crises add additional nonlinear influences to the polycrisis.

Polycrisis and Supply and Demand

The human mind is not particularly well-adapted to polycrisis: We struggle to adapt to the drought, then the earthquake knocks down the village walls, then the tsunami pounds what was left, followed by the epic flooding, then the hurricane batters the survivors, who witness the volcano erupting and wonder what they did to anger the gods and goddesses so mightily.

…click on the above link to read the rest…

The 10 Rules of Propaganda

March 12, 2023

The 10 Rules of Propaganda

Lord Arthur Ponsonby was a British diplomat and politician, dates 1871–1946.

This keen and cagey fellow pinpointed 10 rules of propaganda. They are these:

1. We don’t want war, we are only defending ourselves.

2. The other guy is solely responsible for this war.

3. Our adversary’s leader is evil and looks evil.

4. We are defending a noble purpose, not special interest.

5. The enemy is purposefully causing atrocities; we only commit mistakes.

6. The enemy is using unlawful weapons.

7. We have very little losses, the enemy is losing big.

8. Intellectuals and artists support our cause.

9. Our cause is sacred.

10. Those who doubt our propaganda are traitors.

Just Look at the News

A daily scan of the newswires calls to mind three or more of these propaganda rules. On some days, six or seven. On others still, all 10.

We refer specifically to the conflict presently arage in the eastern European nation of Ukraine.

Let us now consider these rules. We will not take up each of them since some rules relate closely to others. We will instead weld these together. To proceed…

1. We don’t want war, we are only defending ourselves.

2. The other guy is solely responsible for this war.

On how many occasions have you read or heard condemnations of Mr. Putin’s “unprovoked” act of aggression?

To phrase it differently, when has it not been described as unprovoked?

Yet a man can argue very persuasively that Mr. Putin’s war was indeed provoked.

The Russian autocrat warned on several occasions that NATO expansion into Ukraine was a “red line.”

Russia would not abide the NATO dagger pressing against its vitals (parts of Ukraine actually lie east of Moscow).

Yet the NATO alliance had announced its intentions to incorporate Ukraine — despite Vladimir’s moans and grimaces.

…click on the above link to read the rest…

Rickards: Bad News, I’m Afraid

January 22, 2022

Rickards: Bad News, I’m Afraid

The breakdown of global supply chains is well-known by now. Whether it’s finding groceries in your supermarket, buying a new car or buying appliances like dishwashers and refrigerators, goods are scarce. Also, deliveries take forever and choices are limited.

Many people wonder why the problem isn’t going away. Here’s the answer:

The supply chain is a complex dynamic system. When any complex system collapses, you can look for specific causes but that’s usually a waste of time. Systems collapse internally because they are too large and too interconnected and require too many energy inputs to keep going.

Any specific cause is more likely to be a symptom than a true cause. It’s frustrating, but that’s the answer.

Most Americans’ first encounter with the supply chain meltdown was in the spring of 2020 during the first wave of the coronavirus pandemic. Shoppers noticed that items like hand sanitizer and paper goods at Costco and other big-box stores were cleaned out.

It seemed that Americans who were locked down and quarantined at the time were hoarding these products because they had no idea when they would be allowed to venture out again.

The shortages were real, but were limited to specific products. The other aisles at Costco were stocked and so were all the other stores around (at least those that were allowed to remain open).

Now It’s Everything

But it’s not just Costco this time. It’s every supermarket, convenience store and other retail outlet from coast to coast. And it’s not just cleaning products and paper goods. Your local supermarket might have bare shelves for eggs, peanut butter, milk and other staples.

It’s not a case of being stocked out of all goods all the time. Your store is like a box of Cracker Jack – you never know what’s inside.

…click on the above link to read the rest of the article…

The Great Supply Chain Collapse

December 19, 2021

What’s at the root of the supply chain breakdown? That’s a critical question but the answer is almost irrelevant. The supply chain is a complex dynamic system of immense scale. It is of a complexity comparable to the climate as a system.

This means that exact cause and effect cannot be computed because the processing power needed exceeds the combined processing power of every computer in the world.

Most people have some notion of how supply chains work, but few understand how extensive, complex and vulnerable they are. If you go to the store to buy a loaf of bread, you know that the bread did not mystically appear on the shelf.

It was delivered by a local bakery, put on the shelf by a clerk, you carried it home and served it with dinner. That’s a succinct description of a supply chain – from baker to store to home.

Yet that description barely scratches the surface. What about the truck driver who delivered the bread from the bakery to the store? Where did the bakery get the flour, yeast and water needed to make the bread? What about the ovens used to bake the bread? When the bread was baked, it was put in clear or paper wrappers of some sort. Where did those come from?

Even that expanded description of a supply chain is just getting started in terms of a complete chain. The flour used for baking came from wheat. That wheat was grown on a farm and harvested with heavy equipment. The farmer hires labor, uses water and fertilizer and sends his wheat out for processing and packaging before it gets to the bakery.

The manufacturer who built the oven has his own supply chain of steel, tempered glass, semiconductors, electrical circuits and other inputs needed to build the ovens…

…click on the above link to read the rest of the article…

Tyranny

August 20, 2021

Tyranny

I’d like to stop writing about COVID, but I can’t because it has such strong economic implications, which can’t be separated. And I’m afraid policies will be enacted that will only make things worse.

We all know the Delta variant of the COVID virus (SARS-CoV-2) is spreading rapidly in the U.S. and Australia. Major outbreaks have also hit India and Brazil.

What has received less attention is the fact that the Delta variant is now also spreading in China. That’s ironic because the virus started in China at the Wuhan Institute of Virology.

While the virus spread around the world, China quickly eliminated the spread inside China itself. Now, the virus has come full circle and is back in China in a new, more virulent form.

There’s a huge difference in how China approaches the virus from a public health perspective compared to the U.S., Japan or Europe. China’s lockdowns are far more extreme.

Why China Enforces Extreme Lockdowns

China will quickly identify an outbreak and cut off all car, train and air services to the affected area. China will also quickly shut down major ports and distribution centers if even a single case appears.

China knows that the spread of the virus is a threat to the legitimacy of the Chinese Communist Party. China cares more about Party loyalty and Party survival than it does about economic growth.

China is now imposing extreme measures, including canceling many domestic flights, closing ports and restricting vacation travel. China’s economy was already slowing before this new wave of the virus. Given China’s more extreme forms of COVID control, their economy will slow even further.

That’s bad news for China – and bad news for the world. Global growth will slow noticeably in the months ahead, partly because of the extreme nature of China’s lockdown approach.

…click on the above link to read the rest of the article…

Biden’s Crime Against the Economy

June 26, 2021

Biden’s Crime Against the Economy

I try to keep politics out of my economic analyses, and my approach is non-partisan. But sometimes I can’t avoid it because political policies can have significant economic impacts. Today is one of those times.

One of Joe Biden’s first acts as President was to kill construction of the Keystone XL pipeline. This is a pipeline that would bring oil from the tar sands of Alberta, Canada to the Midwest United States. From there it would be moved through other pipelines or refined and distributed to gas stations and industrial users in America.

Biden’s decision was destructive for a long list of reasons.

The immediate impact was to kill about 10,000 high-paying union jobs with benefits in construction, transportation and expert services. The ripple effects were even greater. Once a pipe delivery operation is killed, the trucking company and pipe manufacturer lay off more personnel and those workers stop spending at local restaurants and so on.

But killing the pipeline accomplishes nothing from an environmental standpoint. The decision to end the pipeline is pointless because the oil still moves out of Alberta. In the absence of a pipeline, the oil moves by railroad tanker cars on rail lines owned by Warren Buffett.

Pipelines Are Better for the Environment

It’s just that the railroad uses more energy and has higher CO2 emissions than a pipeline. If you cared about the environment, you’d favor a pipeline over railroads. But opponents don’t really care about the environment, they just want to shut down the oil and gas industries completely.

Shutting the pipeline is a step in that direction. Claims about local environmental damage and crossing Native American tribal areas were just feel-good red herrings. The goal was always just to kill the pipeline. Mission accomplished. Now, the Biden administration may have done more damage than thought at first.

…click on the above link to read the rest of the article…

The Real Russian Threat

June 24, 2021

The Real Russian Threat

I’ve written for years about different nations’ persistent efforts to dethrone the U.S. dollar as the leading global reserve currency and the main medium of exchange.

At the same time, I’ve said that such processes don’t happen overnight; instead, they happen slowly and incrementally over decades.

The dollar displaced sterling as the leading reserve currency in the twentieth century, but it took thirty years, from 1914 to 1944, to happen. The decline started with the outbreak of World War I and the UK’s liquidation of assets and money printing to finance the war.

It ended with the Bretton Woods agreement in 1944 that cemented the dollar’s link to gold as the new global standard.

Even after the gold link was broken in 1971, the dollar standard remained because there was no good alternative. Then the 1974 deal with Saudi Arabia (along with other OPEC cartel members) to price oil in dollars created increased global demand for the dollar.

Because of the deal, dollars would be deposited with U.S. banks, so they could be loaned to developing economies, who could then buy U.S. manufactured goods and agricultural products.

This would help the global economy and allow the U.S. to maintain price stability. The Saudis would get more customers and a stable dollar, and the U.S. would force the world to accept dollars because everyone would need dollars to buy oil.

By the way, behind this “deal” was a not so subtle threat to invade Saudi Arabia and take the oil by force.

I personally discussed these invasion plans in the White House with Henry Kissinger’s deputy, Helmut Sonnenfeldt, at the time. But the Petro-Dollar plan worked brilliantly, and the invasion never happened.

Despite all this, nearly 50 years later, the erosion of the dollar’s role has begun and is visible in many metrics.

…click on the above link to read the rest of the article…

The Only Way Out of the Death Trap

February 10, 2021

The Only Way Out of the Death Trap

I’ve said the U.S. is caught in a debt death trap. Monetary policy won’t get us out because the velocity of money, the rate at which money changes hands, is dropping.

Printing more money alone will not change that.

Fiscal policy won’t work either because of high debt ratios. At current debt-to-GDP ratios, each additional dollar spent yields less than a dollar of growth. But because it must be borrowed, it does add a dollar to the debt. Debt becomes an actual drag on growth.

The ratio gets higher, and the situation grows more desperate. The economy barely grows at all while the debt mounts. You basically become Japan.

The national debt is $27.8 trillion. A $27.8 trillion debt would not be an issue if we had a $50 trillion economy.

But we don’t have a $50 trillion economy. We have about a $21 trillion economy, which means our debt is bigger than our economy.

The debt-to-GDP ratio is about 130%. Before the pandemic, it was about 105% (the policy response to the pandemic caused the spike).

Already in the Danger Zone

But even a ratio of 105% is in the danger zone.

Economists Ken Rogoff and Carmen Reinhart carried out a long historical survey going back 800 years, looking at individual countries, or empires in some cases, that have gone broke or defaulted on their debt.

They put the danger zone at a debt-to-GDP ratio of 90%. Once it reaches 90%, debt becomes a drag on growth.

Meanwhile, we’re looking at deficits of $1 trillion or more, long after the pandemic subsides.

In basic terms, the United States is going broke. We’re heading for a sovereign debt crisis.

I don’t say that for effect. I’m not looking to scare people or to make a splash. That’s just an honest assessment based on the numbers.

…click on the above link to read the rest of the article…

How Gold Is Manipulated

February 27, 2020

How Gold Is Manipulated

Is there gold price manipulation going on? Absolutely. There’s no question about it. That’s not just an opinion.

There is hard statistical evidence to make the case, in addition to anecdotal evidence and forensic evidence. The evidence is very clear, in fact.

I’ve spoken to members of Congress. I’ve spoken to people in the intelligence community, in the defense community, very senior people at the IMF. I don’t believe in making strong claims without strong evidence, and the evidence is all there.

I spoke to a PhD statistician who works for one of the biggest hedge funds in the world. I can’t mention the fund’s name but it’s a household name. You’ve probably heard of it. He looked at COMEX (the primary market for gold) opening prices and COMEX closing prices for a 10-year period.

He was dumbfounded.

He said it was is the most blatant case of manipulation he’d ever seen. He said if you went into the aftermarket, bought after the close and sold before the opening every day, you would make risk-free profits.

He said statistically that’s impossible unless there’s manipulation occurring.

I also spoke to Professor Rosa Abrantes-Metz at the New York University Stern School of Business. She is the leading expert on globe price manipulation. She has actually testified in gold manipulation cases.

She wrote a report reaching the same conclusions. It’s not just an opinion, it’s not just a deep, dark conspiracy theory. Here’s a PhD statistician and a prominent market expert lawyer, expert witness in litigation qualified by the courts, who independently reached the same conclusion.

How do these manipulations occur?

…click on the above link to read the rest of the article…

“1984” Has Come to China

February 25, 2020

“1984” Has Come to China

You’re probably familiar with George Orwell’s classic dystopian novel Nineteen Eighty-Four; (it’s often published as 1984). It was written in 1948; the title comes from reversing the last two digits in 1948.

The novel describes a world of three global empires, Oceania, Eurasia and Eastasia, in a constant state of war.

Orwell created an original vocabulary for his book, much of which is in common, if sardonic, usage today. Terms such as Thought Police, Big Brother, doublethink, Newspeak and memory hole all come from Nineteen Eight-Four.

Orwell intended it as a warning about how certain countries might evolve in the aftermath of World War II and the beginning of the Cold War. He was certainly concerned about Stalinism, but his warnings applied to Western democracies also.

When the calendar year 1984 came and went, many breathed a sigh of relief that Orwell’s prophesy had not come true. But that sigh of relief was premature. Orwell’s nightmare society is here today in the form of Communist China…

China has most of the apparatus of the totalitarian societies described in Orwell’s book. China uses facial recognition software and ubiquitous digital surveillance to keep track of its citizens. The internet is censored and monitored. Real-life thought police will arrest you for expressing opinions opposed to the government or its policies.

Millions of Chinese have been arrested and sent to “reeducation” camps for brainwashing (the lucky ones) or involuntary organ removal without anesthetic (the unlucky ones who die in excruciating pain and are swiftly cremated as a result).

While these atrocities are not going to happen in the U.S. or what passes for the West these days, the less extreme aspects of China’s surveillance state could well be. And while you might not be arrested for expressing unpopular opinions or challenging prevailing dogmas (at least not yet), you could face other sanctions. You could even lose your job and find it nearly impossible to find another.

…click on the above link to read the rest of the article…

Contagion!

January 28, 2020

Contagion!

The world is confronting the effects of the “coronavirus.” It likely originated in Wuhan, China, where it jumped from animals to humans at a local food market. It has since spread to other parts of China and beyond.

So far, there are 2,886 confirmed total cases of the coronavirus. All but 61 of them are in mainland China. The death toll so far is 81.

But cases have also been found in France, the U.S., Canada, Australia, Japan, South Korea and elsewhere. That list includes the world’s three largest economies (the U.S., China and Japan).

For many, it recalls the SARS outbreak of 2003, which also originated in China. It ultimately killed 774 people and infected more than 8,000 in different parts of the world.

Not surprisingly, global markets are on edge over fears of the “coronavirus” contagion spreading. And the U.S. stock market sold off today.

The Dow lost 454 points. The S&P and Nasdaq also had awful days. But gold has a good day, up over $10 to $1,582, as investors looked for safety.

But let’s discuss the word “contagion,” because it applies to both human populations and financial markets — and in more ways than you may expect.

There’s a reason why financial experts and risk managers use the word “contagion” to describe a financial panic.

Obviously, the word contagion refers to an epidemic or pandemic. In the public health field, a disease can be transmitted from human to human through coughing, shared needles, shared food or contact involving bodily fluids.

An initial carrier of a disease (“patient zero”) may have many contacts before the disease even appears.

Some diseases have a latency period of weeks or longer, which means patient zero can infect hundreds before health professionals are even aware of the disease. Then those hundreds can infect thousands or even millions before they are identified as carriers.

…click on the above link to read the rest of the article…

Don’t Mess With the U.S. (Financially)

January 25, 2020

Don’t Mess With the U.S. (Financially)

I’ve been documenting financial warfare in my articles for years, but it still doesn’t get the mainstream attention it deserves.

Because as you’ll see below, it can directly impact your wealth.

Financial warfare tools include account seizures and freezes, expulsion from global payment systems, secondary fines and penalties on banks that do business with targeted entities, embargoes, tariffs and many other impositions.

These tools are amplified by the unique role of the U.S. dollar, which is the currency behind 60% of global reserves, 80% of global payments and almost 100% of transactions in oil.

The U.S. controls the banks and payments systems that process dollar transactions. This leaves the U.S. well positioned to impose dollar-related sanctions.

Much has been made of the recent killing of Iranian terrorist mastermind Qasem Soleimani. Many say it was an act of war. But guess what, folks?

We’ve been in a full-scale war with Iran for two years now. It’s just that most people don’t realize it.

It’s not a kinetic war with troops, missiles and ships (except Iran’s use of terrorist bombs and the U.S.’ use of drones). And it’s severely damaged the Iranian economy, which has led to protests against the regime.

From the U.S. side, it’s a financial war. People need to stop thinking about financial sanctions as an extension of trade policy, for example.

This is warfare. It’s just a different form of warfare.

It’s critical to understand that financial war is not a sideshow. It may actually be the main event in today’s deeply connected and computerized world.

North Korea is also the current target of a U.S. “maximum pressure” campaign, where harsh sanctions are applied to a wide range of banks, companies and individuals.

…click on the above link to read the rest of the article…

The Fed Will Not Give up “Dark Money”

August 25, 2018

The Fed Will Not Give up “Dark Money”

When it comes to second quarter U.S. economic growth figures, interpretation is everything.

On one hand, the projection of 4.1% second quarter growth is a sign of a surging economy set to grow for years to come.

But on the other hand, it is seen as temporary sugar rush created by tax cuts and debt. It’s unsustainable in the light of higher tariffs, an escalating trade war that could impact large portions of the economy, and rising federal deficits that put America even deeper in debt.

Another data point to determine which of these two camps is most accurate for predicting the future of the U.S. economy is job’s figures. July’s jobs report came in with fewer than expected jobs, a gain of 157,000 jobs vs. a forecast of 190,000.

While that miss in itself may not mean much, since the overall jobless rate dropped to 3.9%, the fact that wages are growing slowly remains a concern.

Also concerning is the record amount of household debt. Consumers are using it to spend and that is partially responsible for that 4.1% GDP growth, as I noted on Fox Business recently. But it’s not sustainable.

Add it all up and there’s considerable reason to believe that the 4.1% growth rate is only temporary.

It will not represent the full GDP growth figure over all of 2018, nor will it be the growth figure in 2019 or 2020. Even the Fed admits growth will slacken over the next couple of years.

I don’t often agree with the Fed. But on this point, I agree with the Fed’s forecast for slower growth to come. That outlook presents options for the Fed to create more credit, or what I call dark money to support the markets, to confront inevitable periods of volatility ahead.

…click on the above link to read the rest of the article…

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