Category Archives: Collapse

Bubble Fortunes, by Raúl Ilargi Meijer

A lot of bubble fortunes will be no more when the bubble pops. From Raúl Ilargi Meijer at theautomaticearth.com:

A few days ago, former Reagan Budget Director and -apparently- permabear (aka perennial bear) David Stockman did an interview (see below) with Stuart Varney at Fox -a permabull?!-, who started off with ‘the stock rally goes on’ despite a London terror attack and the North Korea missile situation. His first statement to Stockman was something in the vein of “if I had listened to you at any time after the past 2-3 years, I’d have lost a fortune..” Stockman shot back with (paraphrased): “if you’d have listened to me in 2000, 2004, you’d have dodged a bullet”, and at some point later “get out of bonds, get out of stocks, it’s a dangerous casino.” Familiar territory for most of you.

I happen to think Stockman is right, and if anything, he doesn’t go far enough, strong enough. What that makes me I don’t know, what’s deeper and longer than perennial or perma? But it’s Varney’s assumption that he would have lost a fortune that triggered me this time around. Because it’s an assumption built on an assumption, and pretty soon it’s assumptions all the way down.

First, that fortune is not real, unless and until he sells the stocks and bonds he made it with. If he has, that would indicate that he doesn’t believe in the market anymore, which is not very likely for a permabull to do. So Varney probably still has his paper ‘fortune’. I’m using him as an example, of course, of all the permabulls and others who hold such paper.

Presumably, they often also think they have made a fortune, and presumably they also think that means they are smart. But that begs a question: how can it be smart to put one’s money into paper that is ‘worth’ what it is today ONLY because the world’s central banks have been handed the power to save the ailing banks that own them with many trillions of freshly printed QE? And no, there can be no doubt of that.

And there are plenty other data that tell the story. The world’s central banks have blown giant bubbles all over the place. That’s where the bulls’ “fortunes” come from. They are bubble fortunes. It has nothing to do with being smart. And of course, as I’ve said many times before, there are no investors left to begin with, because you can’t be an investor if there are no functioning markets, and for a market to function you need price discovery.

To continue reading: Bubble Fortunes

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Catalan Independence Vote October 1: Why? What’s At Stake? What do the Polls Suggest? by Mike “Miss” Shedlock

The unstoppable forces—devolution and decentralization—continue on their merry way. From Mike “Mish” Shedlock at mishtalk.com:

Unless the central government in Madrid forcibly stops elections, the Catalan Independence Vote will take place on October 1.

Politico covers What Spain has to Lose from Catalan Independence.

Catalonia Percent of Spain

Voting Intentions

Poll Source in Spanish: Centre d’Estudis d’Opinió (CEO) June 2017

2015 Advisory Voting Map

Why?

Please consider Why some Catalans want to break away from Spain.

Research from CEO (above link), as translated by Politico

  • Increased autonomy (26 percent)
  • Belief that Catalonia would improve if it struck out on its own (23 percent)
  • Desire for a new model for running a country (19 percent)

“I want a fair country, a more social and leftist country, and I believe the best way to achieve that is leaving Spain,” said Marc Becat, a 22-year-old who works in sales.

“All the money and all the taxes that flow to the Spanish government will stay in [an independent] Catalonia,” said Ana Martí Benavente, a 78-year-old Barcelona pensioner.

“It’s the Popular Party above all things, I hate them, that’s it,” said Alex Fores, a 21-year-old engineering student. “They’re very right-wing and obviously if you look at what people vote here [in Catalonia] it’s a completely different ideology.”

“What we Catalans find surprising is how the international community doesn’t react to the fact that we’re being prevented from voting” — Marta Alsina, teacher.

March in Barcelona

Pro-Independence Flag Face

Spain Threatens to Arrest Mayors in Favour of Vote

The Express reports Spain Threatens to Arrest Mayors in Favour of Vote.

Aljazeera reports Spain Summons Catalan Mayors Over Independence Vote.

Spain’s state prosecutor has ordered a criminal probe of all 700-plus Catalan mayors who have backed an independence referendum, as Madrid seeks to block the separatist vote it deems illegal.

The country’s prosecutor office on Wednesday ordered the 712 mayors, who have agreed to help stage the October 1 vote, to be summoned to court as official suspects and called for their arrest in case of a refusal to appear for questioning.

Barcelona Mayor Ana Colau, who opposes secession but supports a vote, says she wants to help arrange the referendum but won’t do so without assurances that she and her staff would be acting legally.

To continue reading: Catalan Independence Vote October 1: Why? What’s At Stake? What do the Polls Suggest?

It’s Time to Take Out “Freedom Insurance”, by Nick Giambruno

As things get worse in the US, it’s a good idea to have somewhere to go outside the country. From Nick Giambruno at internationalman.com:

Only a fool tries to survive by acting like a vegetable, staying rooted in one place, when the political and economic climate changes for the worse.

—Doug Casey

Unless you’ve been living under a rock, you know that America is in turmoil. That was on full display recently in Charlottesville, Virginia.

But it’s not just Charlottesville. There have been deadly clashes in Ferguson, Charleston, Dallas, St. Paul, Baltimore, Baton Rouge, and Alexandria.

America is headed for a new kind of civil war.

And when it erupts, you and your family will want “freedom insurance”—the ability to get out fast and set up comfortably in a more stable country.

I recently spoke with my friend and colleague Chris Lowe about this, and I knew I had to pass along our discussion to International Man readers.

Chris is the editor of Bonner & Partners’ Inner Circle. His publication shares insights from Bill Bonner’s personal global network of analysts and investment experts.


Chris Lowe: You’ve been urging folks to diversify internationally. Why is that message so important now?

Nick Giambruno: The US is becoming more and more fragmented, as I’m sure our readers have noticed. I’ve never seen it more polarized.

In fact, I’ve only seen this degree of polarization in countries that have gone through civil wars. It all feels eerily familiar.

I was born in the US, and grew up there. But I used to live in Lebanon, which went through a nasty 15-year civil war. More than 120,000 died. Thousands more lost their homes.

And I currently live in Colombia part of the year. The country has a 50-year history of civil conflict.

To continue reading: It’s Time to Take Out “Freedom Insurance”

Tribalism Marches On! by Patrick J. Buchanan

Devolution and decentralization are forces that will not be stopped. From Patrick J. Buchanan at buchanan.org:

Recently, a columnist-friend, Matt Kenney, sent me a 25-year-old newspaper with his chiding that my column had been given better play.

Both had run in The Orange County Register on June 30, 1991.

“Is there no room for new nations in the New World Order?” was my title, and the column began:

“In turning a stone face toward embattled Slovenia and Croatia, President Bush and Secretary of State James Baker have not only put America’s chips on the wrong horse. They have bet on a losing horse.

“Can the U.S. Government seriously believe that a Yugoslavia of such disparate peoples, all of whom wish greater freedom, most of whose republics wish to be free of Belgrade, is a viable nation?”

The State Department had denounced “these unilateral steps by Croatia and Slovenia” to break free: “As Secretary Baker made clear last Friday, we will neither encourage nor reward secession.”

Croatia and Slovenia are today free and members of NATO.

A month later in 1991, George H. W. Bush, in what Bill Safire dubbed his “Chicken Kiev” speech, warned that Ukraine’s desire to break free of Moscow manifested a “suicidal nationalism.”

Today, Ukraine is independent and the Bush-GOP establishment wants to send weapons to Kiev to fight pro-Russia secessionists.

As nationalism tore apart Yugoslavia and the USSR in the 1990s, and surged to propel British secession from the EU and Donald Trump’s triumph in 2016, that primal force appears on the march again.

Wrote The Wall Street Journal Monday:

“Hungarian Prime Minister Viktor Orban barely mentions his political rivals as he campaigns for a fourth term. Instead, he is targeting the European Union and its biggest members. ‘Our fiercest opponents are not in Hungarian opposition parties,’ Mr. Orban said in a speech last week, ‘They are abroad … Berlin, Brussels.’

“In neighboring Poland,” the Journal goes on, “government rhetoric is even harsher. Politicians have one-upped each other in attacking France and Germany, arguing they are forcing multicultural liberal democracy on more traditional Poles.”

To continue reading: Tribalism Marches On!

 

The Sandcastle, by Jeff Thomas

Democracies deteriorate to repression, tyranny, and dictatorship. From Jeff Thomas at internationalman.com:

The decline from democracy to tyranny is both a natural and inevitable one.

That’s not a pleasant thought to have to consider, but it’s a fact, nonetheless. In every case, a democracy will deteriorate as the result of the electorate accepting the loss of freedom in trade for largesse from their government. This process may be fascism, socialism, communism, or a basket of “isms,” but tyranny is the inevitable endgame of democracy. Like the destruction of a sandcastle by the incoming tide, it requires time to transpire, but in time, the democracy, like the sandcastle, will be washed away in its entirety.

Why should this be so? Well, as I commented some years ago,

The concept of government is that the people grant to a small group of individuals the ability to establish and maintain controls over them. The inherent flaw in such a concept is that any government will invariably and continually expand upon its controls, resulting in the ever-diminishing freedom of those who granted them the power.

Unfortunately, there will always be those who wish to rule, and there will always be a majority of voters who are complacent enough and naïve enough to allow their freedoms to be slowly removed. This adverb “slowly” is the key by which the removal of freedoms is achieved.

The old adage of “boiling a frog” is that the frog will jump out of the pot if it’s filled with hot water, but if the water is lukewarm and the temperature is slowly raised, he’ll grow accustomed to the temperature change and will inadvertently allow himself to be boiled.

Let’s have a look at Thomas Jefferson’s assessment of this technique:

Even under the best forms of Government, those entrusted with power have, in time, and by slow operations, perverted it into tyranny.

Mister Jefferson was a true visionary. He knew, even as he was penning the Declaration of Independence and portions of the Constitution, that his proclamations, even if they were accepted by his fellow founding fathers, would not last. He recommended repeated revolutions to counter the inevitable tendency by political leaders to continually vie for the removal of the freedoms from their constituents.

To continue reading: The Sandcastle

The Ultimate Weapon, by Robert Gore

The Korean Peninsula at night

Don’t underestimate the light.

Reductio ad absurdum is the argumentative technique, beloved by law school professors, of stretching a premise to its breaking point. North Korea has been much in the news. Nighttime satellite photos of the Korean peninsula show well-lit South Korea and North Korea in darkness. That darkness is the reductio ad absurdum of the premise of modern governance: that those who govern must employ force, fraud, and censorship against those they govern. Articles bemoan our lack of knowledge of North Korea’s closed society, but literally and metaphorically, the darkness tells you all you need to know.

Exhume the graveyard of governments and you’ll find that for most of the unlamented departed, censorship had taken hold. Censorship goes hand in hand with failure; indeed, it’s one of failure’s chief causes. Truth, information, and communication are as essential for human survival as food, shelter, and water. That they illegitimately rule by force and fraud is a truth that governments try to stop from achieving general circulation. Propaganda and patriotism will only take a government so far, though, especially among its more honest and intelligent constituents. There will always be those who recognize the truth.

Information is the blood flow of the body politic. For argument’s sake there is probably some information in the hands of governments that is better left secret. Let’s put the number at .0001, or one ten-thousandth, of 1 percent of what governments actually keep secret. North Korea is the reductio, having drawn tourniquets tightly around its neck and limbs. From the few accounts we have of life there the physical poverty of its citizens is surpassed only by the intellectual poverty of official state mythology, ideology, history, and indoctrination—quintessential absurdum.

A nation that says in unison, “Bless you, Dear Leader!” every time Dear Bloodthirsty, Tyrannical Dictator sneezes has come the closest to the supposed Holy Grail of rulers and would-be rulers everywhere: mind control. We’re not sure how the burble of information, dissemination, communication, truth, lies, experimentation, false starts, creativity, enterprise, failure, and innovation actually leads to progress. The Internet adds another layer of mystery. However, it can be asserted confidently that the heat map of a “controlled” mind looks just like a map of North Korea at night. Progress becomes regress, as it has in the Hermit Kingdom. A controlled mind is a dying mind.

The growth in nation-state governance and power has been so consistent and long-running—since the end of the Middle Ages—that most people assume it will continue forever. It’s the bull market in which everybody is fully invested at the top, confident it will never end. Stock market tops have their telltale signs—market divergences, weakening breadth, an increasingly narrowing list of winners—generally acknowledged only after the top.

The coming top in government has its telltale signs as well. Is there a government on the planet that wants the truth of what it does disclosed to its populace? The US government continues to press its battles against Edward Snowden and Julian Assange. It’s allies in Silicon Valley, the mainstream media, and academia have been enlisted in its fight against disfavored facts and opinions. Europe’s and Australia’s potentates are fighting the same fight. These are the world’s “liberal” states, with varying traditions of protecting civil liberties. In the rest of the world, for the most part, truth is the enemy governments openly oppose. It will only be recognized after the top, but the mounting effort to repress information flows and the truth marks the apex in governments’ long bull market.

Here is perhaps an open-field run in the one yard and a cloud of dust game the Korean stand-off has become. Offer Kim Jong-un what he has long sought: cessation of the annual joint South Korean-US military exercises. In return, Kim must allow 25,000 of North Korea’s best and brightest young people to visit the US, South Korea, Japan, China, and Russia for at least a year, without minders or surveillance, all expenses paid by the hosts. (For anyone worried about the cost: how much would a war cost?) Kim would most likely refuse, demonstrating for all the world that truth, not hostile foreign powers, is his regime’s ultimate enemy. On the oft chance he accepted (he’s supposedly crazy, after all), the contrasts the hosts—which admittedly have their problems—offer to North Korea would induce acute cognitive dissonance.

A mind on fire is worth at least ten thousand that are not. Send the guests back to North Korea and see what happens. No matter how dutiful their ostensible obsequience, those 25,000 minds would be a fifth column. How do you go back to a rice bowl and sliver of pork after dining at Tokyo’s noodle shops or Los Angeles’s taco stands? Barren, state-run commissaries after shopping at grocery store and shopping mall cornucopias? Urban deserts with a few antiquated autos versus cities where taxis or Ubers whisk you along crowded and exciting avenues? Repeat the guest program until the returnees’ minds on fire reach the critical mass necessary to ignite internal combustion and change.

Truth—it’s power to inspire the imagination or fan the flames of righteous indignation as the case may be—is the ultimate weapon. Recognized or not, stated or not, it always wins. Survey the current scene and there are ample reasons for pessimism. SLL has pointed out its share of clouds. That the truth always wins is a reason for ultimate optimism, and even the current scene has its silver linings.

The Internet—trashy, polluted, and corrupted by governments and the technology giants as some parts of it may be—still yields troves of instantly accessible information, analysis, and subversive entertainment and commentary that were unimaginable a few decades ago. Revolution has not yet come, but to the extent the old order is being undermined, the Internet is leading the way. Neither Brexit nor Trump would have happened without it. Yes, there are still plenty of mainstream blue pill junkies, but the Internet has created a significant and growing red pill subculture that agrees on at least one thing: they’re not getting the truth from the mainstream. Governments can to some extent control it or shut it down, but only at great cost to the information economies on which they depend.

When the Supervolcano arrives, it will be, as much as anything, an eruption of long suppressed truth and logic. Whoever is left will embrace them not out of philosophical insight, but as a matter of survival. In a chaotic world in which mere subsistence becomes problematic, delusion will be unaffordable mental frippery. Believe all you want that governments or gods will drop manna in your lap, but don’t starve yourself waiting for them. You’ll grow too weak to plant, tend, and harvest the crops.

TRUTH IS GREAT, AND EVEN BETTER WHEN IT’S GREAT READING!


AMAZON

KINDLE

NOOK

The Trouble with Asset Bubbles: If You Stop Pumping, They Pop, by Charles Hugh Smith

The world’s monetary authorities have put themselves in an impossible situation. From Charles Hugh Smith at oftwominds.com:

The idea that authorities can massage their pumping to keep asset bubbles inflated at a permanently high plateau is currently being tested.

The trouble with inflating asset bubbles is that you have to keep inflating them or they pop. Unfortunately for the bubble-blowing central banks, asset bubbles are a double-bind: you cannot inflate assets forever. At some unpredictable point, the risk and moral hazard that are part and parcel of all asset bubbles trigger an avalanche of selling that pops the bubble.
This is another facet of The Fed’s Double-Bind: if you stop pumping asset bubbles, they pop as participants realize the music has stopped, and if you keep pumping them, they expand to super-nova criticality and implode.
There are several dynamics at play in this double-bind.
1. The process of inflating a bubble (for example, the current bubbles in stocks and real estate) requires pushing investors and speculators alike into risky asset classes. This puts the market at increasing risk as everyone is pushed to one side of the boat.
2. Those on the other side of the boat (i.e. shorts) are slowly but surely eradicated as the pumping keeps inflating the bubble. When the bubble finally bursts, there are no shorts left to cover, i.e. buy stocks at lower prices to reap their profits.
3. As the bubble continues to expand, the money available to enter the market and keep prices rising declines. The very success of the pumping process strips the markets of new sources of new money, leading to a point where normal selling exceeds new-money buying and the bubble collapses.
4. Money pumping by central banks and governments follows a curve of diminishing return. One analogy is insulin insensitivity: as the systemic distortions build, markets become increasingly insensitive to money pumping. Authorities respond to this intrinsic process of increasing insensitivity by pumping even more money into the system.
But as with insulin insensitivity, at some point the system loses all sensitivity to money pumping: no matter how much money central authorities inject, the markets refuse to go higher. At this point, the stick-slip nature of bubbles manifests and modest selling triggers a collapse as participants all rush for the exits. Buyers have vanished and there is no longer a bid at any price.