As we’ve mentioned before we’re apolitical here at GoldSurvivalGuide. We agree with Doug Casey that voting just encourages them! But with an election coming up the following is a useful read. We agree that many of the troubles today are born about by the vast majority of people believing government can solve all problems, rather than digging a bit and realising that government is in fact the cause (however indirect) of most of them. Look around at the policies and listen to the debates (if you can stomach them) and you soon realise neither side offers much. Labour says increase the age for National Superannuation because it’s unaffordable on one hand and then announces a whole host of extensions to various social welfare policies. Meanwhile National says no to raising the retirement age but that Labours policies are unaffordable. Meanwhile they continue to borrow too and expect we will grow our way out. We think a lower standard of living is almost inevitable. Wages will continue to stagnate compared to the cost of living and taxes will at some stage likely rise. The point of this political diatribe from us is that if you read on you will discover 4 points to consider in helping you prepare for a worsening of the economy at the hands of the globes government’s…
By David Galland, The Casey Report
While I haven’t made a scientific study of the topic, I suspect the leading genre for popular entertainment – and for popular delusions of crowds, for that matter – revolves around magical worlds. As illustration, the Harry Potter series will serve.
The problem is that there is no such thing as magic, at least not in the mystical sense (versus sleight-of-hand variety). Rather, the physical world, and even the metaphysical world constructed by humans in their ancient and long-running quest for protection from the physical world, operates within the boundaries of certain irrefutable truths.
In the first instance, the laws of physics are only rarely found wanting; in the second, basic principles of economies are inviolate, or should be if you actually want an economy to succeed for any length of time.
This unblinking faith in an all-caring, omnipotent “Godvernment” is terrifyingly misplaced: it not only runs contrary to many of those truths but runs contrary to nearly every important lesson history has to teach. Look no further than the debts and deficits of Godvernments around the world to see the consequences of trying to keep this myth alive.
That this faith is on the increase, versus the opposite, should be very concerning… both to those who believe in the rights of individuals and to those trying to build and maintain a reasonable standard of living in this age of deep uncertainty.
Especially in that most, if not all, of that uncertainty, as well as active threats to the general well-being, emanates from the very Godvernments people look to for salvation and sustenance. The graphic shown here demonstrates this point vis à vis US security policies soberingly well.
Now, I am sure that some of you view these remarks as just another libertarian tirade, and I guess to some degree, they are.
Yet, I think there is an important underlying point that requires serious reflection. Namely, with people the world over trapped in a delusional and self-destructive cycle of believing that the Godvernments can solve all that ails – even though almost all that ails is caused or made worse by those very same institutions – then things can only get worse from here.
It’s like all but the tiniest minority of the world’s population have been brainwashed into joining a dangerous cult. A cult whose leaders are unscrupulous about stripping their followers of their wealth, their dignity (see cartoon above) and their sense of individuality, while rewarding their most ardent supporters with pensions, tax breaks, a leg up over competitors and, if push comes to shove, hard cash in the form of bailouts.
Viewed through this lens, the thinking individual – you, for instance – should see the need to take certain self-protective measures. And since few things are as useful as a high net worth when it comes to protecting your independence, there are opportunities to chase down as well.
Some suggestions, a number of which you may have heard before.
What do you think will happen when the Super Committee fails with deficit reduction and S&P follows through with its promise for another debt downgrade? Probably not that much, as the last time it didn’t wreck the markets, but if rates rise, it would not be a good call to be long stocks.
We have had good auctions from the Treasury until a very bad acceptance today that drove the 10-year Treasury to 2.4%. When I wrote my recommendation at the end of September confirming that rates were too low (for the October edition of The Casey Report), the rate was only 1.8%. This kind of move up would normally take months, not days. Here is the pretty dramatic chart:
Rising US interest rates will be a stake through the heart of the US economy. Even just a return to more normal historical averages will skyrocket the costs of servicing the US Godvernment’s mountain of debt, wreak havoc in the bond markets, and simultaneously smash any prospect of recovery in the hugely important housing sector. The key point is that this is big, important stuff you have to be preparing for.
Is there personal or business risk that you can take steps to mitigate now, while you still can? Especially if you are on the wrong side of the populist mantras now being heard in the temples of Washington, you can’t afford to be complacent.
For example, if you or your business are involved in or reliant upon the financial services, you might want to consider developing some new lines of business. On that front, we haven’t even begun to understand the implications and effects of the Dodd-Frank Act, other than that it was written by career politicians with zero business experience in a period of hysteria following the 2008 crash, and that it is veryambitious.
Think Patriot Act for financial services – there will be consequences, and I doubt many of them will be good. Investors should consider doing some short-selling or using options strategies in betting on another big leg down for the banks and the financial-services sector. (In The Casey Report, we’re using a simple options strategy to bet on the failure of a massively overindebted regional bank.)
If you don’t have a respectable net worth at this point, then learn useful skills – such as how to speculate in investment markets. Or how to program computers. Apparently, the youth of today like to use the stuff but aren’t so hot on actually learning how to program – they prefer liberal arts educations. Given that many of the iconic successes in the computing industries (Gates, Jobs, Ellison) never graduated college, it would be a mistake to consider that a prerequisite. There are many more directions you might go in, including internationally, the important point being that it’s time to get going.
Likewise, the mob is not going to stop demanding that the Godvernment provide succor and sustenance, and so deficit spending and debt has to continue to rise, leading to currency debasement. Buy tangibles, but especially gold and silver, on any setbacks.
Those are just a couple of ideas for front-running the mob, but if you put on your thinking cap, I’m sure you’ll come up with many more.
Wrapping up, I’ll repeat my basic position on all of this… in the form of an excerpt from a lightly edited response to a reader who took offense at a recent article of mine.
The left and the right both have it wrong, as far as I am concerned. Both share equal responsibility for the big dislocations that have proven so damaging to the economy and society.
Thus, I can only conclude that who is in charge is far less important than what those who are charge are actually allowed to do. The size and scope of government, in my view, has to be very specifically spelled out and very limited so that the next gang to take control can’t just willy-nilly play to the prevailing mob sentiments.
That’s how we got here in the first place. Put another way, are many of Obama’s policies counterproductive and damaging to the economy? Of course. But so were those of Baby Bush. And, before him, Clinton (who allowed the government to grab Social Security funds so that he could claim a balanced budget). And before him, Bush senior… and before him… and so forth and so on.
Unless and until we stop the madness – stop the meddling – the path the world takes will remain perilous and, fortunately for us speculators, somewhat predictable.[Will you be well positioned to survive when your Godvernment’s time runs out? The Casey Report tells you what to expect and how to protect yourself. In the current issue, read investment legend Doug Casey’s outlook for 2012 – on the stock market, the US economy, the euro, gold and silver, the Middle East, China, and much more. Also in this edition: An in-depth analysis of the Fed’s battle for low interest rates, and how to add gold to your IRA and save taxes. For just a few days, you can get The Casey Report for only $98 per year… a staggering 72% off the regular price. Start your subscription today.]