Trillions of dollars of debt will be written down or written off. False wealth will disappear. The voters, already agitated, will sharpen the guillotine.
“This is how our republic ends. Not with a debate, but with a jeremiad between two candidates competing to demonstrate how unqualified one or the other is to lead us.” – Comment found on the Internet.
We connect the dots. We look for patterns.
Sometimes we are right. Sometimes wrong. But we are always questioning.
And always with a jovial attitude. Which is probably easier to do abroad than at home. “Laugh and know”, said the Roman philosopher Martial. We don’t always know, but we can always laugh.
Words cannot describe the farce of the US presidential debate that took place last week. This is why God gave us laughter. We laughed at Trump. We laughed at Biden. The two old hands exchanged their long-repeated lies, like blind tennis players who only hit the ball occasionally and only by accident.
And then we laughed at the journalists. At least they understood that the debates had no substance and so focused on Biden’s “hoarse voice.”
Did either candidate mention the enormous dark cloud hanging over the American economy? The American monetary experience was to show that governments and central bankers are perfectly capable of managing a monetary system. We don’t need gold to make money honest, said Milton Friedman. Last night we saw two reasons why he was wrong.
Inherent value
This is not the first time that the experiment has been carried out. Always and everywhere, the results have been the same: “paper” money always returns to its intrinsic value… zero. Because the people who run governments and their central banks are only human beings, all too human. Inevitably, many of them will be morons.
But as we all know, we are so much smarter today. Past experiments with paper money (not backed by gold) have failed. But this time it will be different, Richard Nixon’s financial advisors said. We now have PhDs!
And since the dollar was the currency of choice for the entire world, and doctors attended the same universities and studied the writings of the same misguided economists, their errors spread everywhere.
Today, the Japanese yen hit a 38-year low against the U.S. dollar. The last time the yen was this cheap against the dollar was in 1986. Japanese savers have realized that the government is not going to protect the real value of their yen-denominated savings. They are panicking.
The big picture is simple. We are in the early stages of an epic government debt crisis. They have spent, promised, printed and bailed out more than they can ever repay. The government is the largest creditor. But unlike a hedge fund, a bank or a large corporation, no one is backing the government to bail it out when it gets into trouble.
However, a gigantic payment default is looming on the horizon. The run on Japanese currency is only a first symptom.
But the pattern doesn’t end there. The yen may be falling against the dollar. But the dollar is falling too. Since 1986, it has lost – based on official inflation figures – 65% of its value. Against gold, the loss is 84%.
Our hypothesis is that after 1971, fake money and fake interest rates led to a fuzzy and fictitious GDP and fictitious asset values. Debt (encouraged by Fed interest rates below zero, in real terms, for almost the entire period, from 2007 to 2022) has increased to the point that much of it can never be repaid. In the United States, total debt is approaching $100 trillion. Globally, it is over $300 trillion.
In the next recession, already underway, trillions of dollars of this debt will be written down or written off. In other words, this false wealth will disappear…and voters, already agitated, will sharpen the guillotine and look for necks.
Did Biden and Trump talk about it?
We didn’t think so.
