Whew…we were distracted last week by the collapse of the elite’s 20-year fraud in Afghanistan.
Alert readers noticed that it caused us to amend our outlook…our forecast for coming events. Let’s take a look at it, so we’re all on the same page.
Here it is in shorthand:
Yes, we’re only in the boom stage now…
But it’s a fake boom…like the fake ‘stability’ in Afghanistan that disappeared in a matter of hours last weekend.
The Washington Post reported on Friday that:
‘With prices creeping up, more Americans are turning to dollar stores.’
What kind of boom forces people to cut corners?
A fake one. One where only some people profit and most people struggle. One that skews wealth towards the rich. The Institute for Policy Studies elaborates:
‘The world’s billionaires have seen their wealth surge by over $5.5 trillion since the beginning of the pandemic in March 2020, a gain of over 68 percent. The world’s 2,690 global billionaires saw their combined wealth rise from $8 trillion on March 18, 2020 to $13.5 trillion as of July 31, 2021, drawing on data from Forbes.
‘Global billionaire total wealth has increased more over the past 17 months of the pandemic than it did in the 15 years prior to the pandemic. Between 2006 and 2020, global billionaire wealth increased from $2.65 trillion to $8 trillion, a gain of $5.35 trillion.
‘Billionaires have reaped an unseemly windfall at a time when millions have lost their lives and livelihoods. The pandemic has supercharged existing global inequalities, with the wealthy profiteering from the shuttering of the main street economies around the world.’
The boom is phony. It doesn’t make things better, it makes them worse — more bad investments…more inequality…more zombies…bigger deficits…more debt…more lies…
What next? Choose one of two possibilities:
1) The economy strengthens, and the Federal Reserve thinks it’s safe to stop printing money…
2) The economy weakens, and the Federal Reserve keeps the presses rolling.
In either case, the stock market’s reaction is probably the same: a sell-off or a crash.
In the first scenario, it sells off in anticipation of tighter credit. In the second, it sells off because the last round of easy credit clearly didn’t work.
But you never know what will set it off. Or when. It doesn’t have to be a direct financial crisis. It could be something that demoralises investors for other reasons. The fall of Kabul, for example.
It is now clear to everyone that the US empire is not what it used to be. By every measure — money, power, prestige, life expectancy, you name it — the US has declined since 1999.
And trusting the US elite is clearly not always a prudent move.
Donald Trump promised to reverse the slide with his ‘Make America Great Again’ slogan. That failed spectacularly.
Then, Biden offered another slogan: ‘America Is Back’.
But like gangrene working its way up an infected leg, the rot continues to spread.
The next crisis point comes when the stock market falls. Then comes the bust.
Left alone, it would do what all busts do — eliminate the bad debt…wipe out the zombies…correct mistakes and separate fools from their money.
The nation would normally enter a bad recession/depression…and then get back on its feet, on firmer, more solid ground.
One final fling
But that won’t happen.
Instead, the next financial crisis will bring on the same flimflam response as the last three — a new ‘surge’ of spending, stimmy, and debt…
Fools and their money will get a chance for a final fling together.
Yes…that’s the re-boom ahead. Prices will rise…the stock market may hit more new highs as the feds promise huge budget deficits and boondoggles for everybody.
But rising prices will not be confined to capital markets. They’ll rise in the dollar stores, too. People will have more money to spend…but prices will rise faster than incomes.
This new souped-up ‘stimulus’ program will have no better success than the previous ones. More zombified than ever, by fake money and real debt, the economy will slow.
And this ‘stagflation’ will bring more discontent…more spending…and more inflation.
Now, we will be ready for the climax — ka-boom!…a mess of rising prices, crashes, bankruptcies, taxes, strikes, and crime…think Venezuela.
The Fed will try desperately to hold their fake economy together. But they will not dare to do the one thing that might re-establish its integrity — stop the money printing.
By then, everything will depend on more money. Prices will be rising fast, people will need more and more cash to keep up with them. ATMs will run out.
Clerks will have to mark up prices every month…then every week.
Stock prices will gyrate wildly, but they too will have a hard time keeping up with the declining value of the dollar.
Bonds will be wiped out.
Politicians will promise more bailouts…more solutions…more scapegoats…as civil society gets the heebie-jeebies.
Extremists, left and right, will come up with ‘solutions’ — and gain big followings.
By then, everybody will see the problem…but nobody will be able to stop it.
The elite said we could spend, spend, spend until inflation showed up. But then, it will be too late to change course.
The police and the soldiers will need to be paid. Businesses will need to be subsidised.
Old people will need pensions, poor people will need food, and sick people will need medicines.
What kind of hard-hearted sourpuss could turn off the printing presses when so many people need more money?
Waiting for consumer prices to rise sharply is like counting on the fire alarm to tell you when dinner is ready. By the time you turn off the printing press, the economy is burnt to a cinder.
Chaos. Corruption. Crime.
In the final stage, we reach — Kabul!
And those who trusted the US government for their safety and prosperity will be ruined.
For The Rum Rebellion
PS: The Rum Rebellion is a fantastic place to start your investment journey. We talk about the big trends driving the Australian Economy. Learn all about it here.