Gold and What Moves it.

... I don’t know what it is about human nature, but people see the future in broad terms, and they will defend that point of view in the face of all evidence. So you have the “Great Depression” crowd that has been predicting a stock market collapse for years now. People always assume I think stocks are going to crash because I’m a bear, but regular readers know I’ve said stocks are going to explode, as they have. These stock market bears fail to account for the change in our monetary system from a gold standard to the floating exchange rate system. They fail to account for our good friend Helicopter Ben who has been balancing out the natural deflation that occurred in real estate with new money. From a social perspective, people in general don’t account for the fact that all these entitlements are a product of the Great Depression- they did not precede it. So in terms of civil unrest, it will be a lot worse than the Great Depression because if people are promised something and don’t get it, they get pissed off.

 

The “we will grow our way out of this crowd” is arguably worse. Debt at this point is interconnected, and since banks are getting nationalized, the situation will ironically get worse. Basically all the failed investments that went on in the private sector ends up on the government balance sheet. The whole point of getting interest on a bond is to hedge against the risk that the bond will default. If the government makes everyone whole, bankers are the only ones celebrating. The average person is the one who suffers under the weight of higher taxes and austerity. So trust me, if you talk to anyone in the investment community, they will have blinders on, especially if they are a low-level employee (people my age). The people who actually investment successfully in all environments understand a lot better how things are interconnected, and they will just ride whatever wave the government creates.

 

Debt is also growing globally at a much faster rate than revenue ...