- I haven't written anything for public consumption in
a while, because I've been busy living in what I like to call, "the
real world" and making my living by trading my own money. That's what
I do these days. I'm a fly on the wall with electronic access to the dens
- If I come out on top then I transfer those digits for
things I need.
- Yes I'm still long gold from $290, and crude from $60
but whatever, I've been doing ok. I've been doing ok that is, if the money
I have was worth what it used to be, but it isn't. So rather than just
slap a label on what it is when words have already arguably lost their
meaning, let's discuss it.
- I am personally more concerned about quality of life
issues than I am about money given the current circumstances.
- The last time when I wrote publicly, I was talking about
the decline of the empire and the end of the pre eminence of the US dollar...war,
that sort of thing.
- So that's what's going on now, what I was talking about
- The US is currently in what I like to call a period of
"decay". It is in a period of decay in every possible way. If
you live in the real world like I do, it is evident. If you consume a diet
of the corporate media cheerleading squad, then you don't live in the real
world and it could be difficult for us to communicate during the rest of
this essay. We've got people charged with cleaning up the corrupt broken
system going out with an $80,000 hooker bill and being replaced by a blind
man. The current El Presidente is a wind-up doll for a bunch that should
all be in orange jumpsuits. It would be comical if it weren't so sad to
watch it all go down. It is a modern day tragedy being played out in real
time in the context of a giant government/corporate media theatre production.
- It's amazing to me how people who are into politics or
religion or whatever will violently oppose some opinions, when people simply
report the facts they see around them. Anyway, again... another subject.
Politics and religion are both the same thing. They are both simply effective
methods to control large masses of people. I just figured that one out
not too long ago when I was into my learning the history of the world project.
It has always been that way and always will be.
- So anyway, that's all I do to make my living. I assimilate
the facts I see around me and invest accordingly. I keep a diary of what
I think and why, and I even publish it. If I'm right I make money and if
I'm wrong I lose money. I like it that way. It keeps me honest.
- That's one reason I don't write a lot publicly these
days. It is becoming increasingly difficult for people who live in the
real world to communicate with those who don't, and there is an increasing
number of those who don't just simply because most people believe what
they are told and the lies they are being told are now monumental. Astronomical
in size. That's one of those universal rules about human beings; the majority
will always go along with whatever you tell them. That's just the way it
always has been and always will be. All good propagandists know that.
- For those who do think for themselves and live in the
real world however, everything that is happening today has been entirely
predictable and even expected. I mean, the corporate media will say "no
one ever saw this" or "they never saw that" and really the
case is they just choose not to have those people appear. That's a whole
subject in itself however.
- I was noting to my subscribers the other evening that
if you take a look at a picture of a pump price for gas from ten years
ago until now, that's around an 18% increase annualized every year for
ten years. All the other prices in the real world have risen at commensurate
levels like healthcare and all the big items people like me in the real
world need to spend money on.
- Furthermore, if you plot energy in the last five years,
the numbers are bigger. If you plot the last two the numbers are bigger
yet. The last one, bigger yet. So what we have here in the real world are
prices accelerating at an ever-increasing double-digit rate. Call that
what you want. We have real wages basically constant and good jobs are
harder to come by. We have a middle class that is going away. We have the
majority of the citizens having their wealth, if they still have any, confiscated
due to the ravages of inflation, or with toxic financial contact with the
healthcare/pharma, legal or government money machines. So in the "not
real world" big brother and his corporate media outlets wants you
to believe that there really hasn't been much inflation or any significant
changes to the status quoand that lie is so big that you may even believe
- So if you do, then you don't live in the real world and
we cannot communicate effectively because what you think you know is the
product of a corporate boardroom. What I know is the product of living.
- The other big thing that has happened since I last wrote
is that the guys on Wall Street figured out how to loan a bunch of money
to people that had no ability or even real desire to repay that money except
for the fact that house prices were sure to go ever higher which is the
definition of a mania. So working through a little bit of that math, with
an estimated 30% of homeowners currently upside down on their mortgages,
that works out to around ten trillion dollars of real estate still to be
walked away from according to simple math and a few basic assumptions I
worked out the other night.
- In the "not real world" they have told you
from the outset that first there was no real estate bubble, then that there
might have been one, then that it would be over quickly and now they aren't
sure when it will be over and the PR firms are busy working on what to
tell you next.
- It's not going to be over any time soon. The big question
in my mind is whether the whole thing is about to go kaput or if we are
just going to witness a continuous decay as the wealth shifts into a very
small percentage of the population... as the middle class flames out. Again,
that is a subject in itself. That is the subject of the Straussian nightmare;
a change in the form of government that is pitched as the same thing as
the old government.
- So on top of this Wall Street genius of loaning money
to people who could not pay, you have the cure for all this mess being
printing more money (creating more debt). So they're going to fix a problem
of too much debt by creating more debt. Perfect. They're even monetizing
it by taking nearly worthless debt for brand new money created with the
push of a button and an organized media campaign to tell you what they
did and why it was good and why it was not monetization or covert nationalization
of the banking system. It is what it is, call it what you want.
- So the idea is that by pushing buttons you can cure these
ills, but the reality is that big pile of new money is diluting the old
money and sending the US dollar into the toilet. I mean, they're pitching
it as all good, and what's left of the free markets are in sharp disagreement
with the party line.
- Now; the only reason the USA has gotten away with the
idea that this balance sheet was compatible with the idea of being the
world's reserve currency was that the USA was the global kingpin, the Mac
daddy... until the empire did what all empires do and that's get too big
for their britches.
- Then they always start going off expanding the empire
into places that are too expensive to maintain, imposing their will on
people who don't want their will imposed on, and then that all gets so
expensive and they start making so many enemies they start going bankrupt.
That's what always happens. It always does. That's probably another one
of those human nature things.
- So in the real world right now, we have a situation where
the banks are bankrupt, the government is bankrupt, the people are bankrupt,
and the cure for this is to lower interest rates and create more money
(debt) by pushing a button... diluting the value of the money further and
causing everything we have going on now. It all makes sense here in the
real world. All the pieces to the puzzle fit and none don't.
- So is this stagflation or is this hyperinflation? Well,
I'm not carrying a wheelbarrow around with my money in it yet, but I do
know the prices and costs of everything I need to live are going up at
an ever-increasing rate.
- The shape of that curve is a polynomial consistent with
ever accelerating inflation which some would call hyperinflation. I know
that if I earn a 20% return, then I might be keeping up with the increase
in the costs of everything I need to maintain my personal status quo. If
you can balance a checkbook and multiply, then you know. If you are one
of the ones who believe everything you're told, then you have to not believe
your lying eyes or not be able to balance a checkbook.
- When the cure for all problems can only be to lower interest
rates and dilute the supply of the money by creating more money, then that
is a vicious cycle consistent with acceleration or hyperinflation.
- I really don't like it when people casually compare what
is going on right now to 1929, because in 1929 the cure was basically to
spend less and now the cure is basically to spend more. Even worse, being
the geniuses we are, we figured out a way to amplify spending, called derivatives.
They're based on the real thing but amplifiedlike 100 times. So we've already
been doing the "cure" for so long that maybe the patient is no
- So what we are currently seeing, in both gold and crude
oil is a loss of confidence. It's a loss of confidence that this whole
thing makes any sense.
- It's a loss of confidence in the absurd idea that you
can create wealth by pushing a button. Since this whole thing now relies
solely on confidence and not any intrinsic value, commodities, especially
gold and crude oil, are acting as alternative wealth storage devices to
- If you have a bushel of corn, then you know what that
is. You can eat it, or do a bunch of other stuff with it. With a piece
of paper with a picture and official looking numbers on it, well you aren't
as sure as you were yesterday what you can do with that. There will be
no run on the banks this time around, because the banks can always be refilled
with ever more worthless money. Instead of a run on the banks, there will
be a run on the dollar. A run on the dollar (or run into commodities) is
the modern equivalent to a run on the banks back then, for the reasons
I'll get into shortly.
- So there is a loss of confidence roughly equal to people's
confidence in the government and the banking system. This decreased confidence
is fueled by the fact that they are creating too much money. The idea with
fiat money is that you only grow the amount of it as the total output of
the economy increases otherwise you are diluting it. The thought experiment
for that goes like this. You have one giant pile of stuff, and one giant
pile of money. Right now there is enough money so that one-dollar gets
one pound of stuff. Now, if you double the amount of that money, then it
takes two dollars to equal one pound of that stuff. Unless the pound of
stuff doubles in size, you have just caused 100% price inflation. So, operations
like just zapping a half a trillion or so into existence out of thin air
means just a bigger pile of money going after the same amount of stuff.
So that's what we have going on now. These are financial engineering acts
of desperation to save a system by giving it more of what got it to this
point in the first place... debt. So when regular people like me think
about that, they think, that doesn't make any sense, and they lose confidence.
- That's in the real world. On TV things are still good
though. So if you don't like what you're reading here, then go turn on
the TV. You'll feel better.
- I hate to simplify things too much, but this is the reason
Mr. Greenspan called gold the conscience of the central bankers back in
the 60's before he lost his mind or whatever happened. Maybe he couldn't
resist the power of the ring or something... I don't know. Anyway, it's
their conscience because they can't just zap gold into existence with the
stroke of a pen.
- Guess what? They can zap money into existence now. Poof
- you've got money.
- Any amount you want. That's why this is fundamentally
different from the great depression. This time, they can just increase
the giant pile of money. they can just drop it out of helicopters if they
have to. They even said so... and it isn't going to buy as much stuff.
It doesn't already.
- So you still have the same basic problem from a human
standpoint. That's the really interesting thing. In other words, whether
you have a deflation like in the 30's or an inflation like now, the people
suffer similar effects. It's hard to find a job, you can't make ends meet,
city and government functions and services are understaffed and underfunded,
and you are hungry. They are both a state of decay. Both usually end in
- The last one did. This one is different however in a
lot of ways... and it's much more serious. It is fundamentally different
because it is the end of the world's first experiment in government by
the people and it has been replaced by something new.
- So if you're into labels, then maybe you can find a label
for what to call this. I like to quote Lenin on that:
- "Fascism is capitalism in decay." -Vladimir
- So I really don't want to get into all that implies in
a short essay, but I will condense it all and say the US is in a state
of decay. Political, socioeconomic, leadership, influence, status, any
label you can think of.
- The US is losing power and influence in the world, and
it only has 5% of the world's populationand they're all bankrupt. I like
to think of it like a continuum from the US coming out on top after WWII
to a banana republic run by El Presidente. That's what I call them now,
whoever he or she is, El Presidente because that's what they are. A corporate
spokesman who is put there, bought and paid for by Acme corp.
- The country has lost its way and is increasingly operating
at the whim of the corporate lobbyists and special interests that own the
politicians as the stench of it all starts to smell so foul that even the
corporate media disinformation campaign can't convince your lying eyes.
It is not what it appears to be. It is Rome circa 400's. It has already
bankrupted itself policing an unsustainably large global empire. You have
to live through the decline.
- So that all gets into people living in the real world
versus those who are not. Again, it's safe to say that the world is voting
with its dollars... and the 5% of the world's population are going down
hard on 95% leverage. They aren't going to like it either.
- Tune in next time to hear which states secede first.
- Mar 14, 2008
- Craig Harris