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"There are disturbing trends: huge
imbalances, disequilibria, risks... Altogether the circumstances seem to me as
dangerous and intractable as any I can remember, and I can remember quite a
lot." - Paul Volker, former Fed chairman, 2005
A phenomenon began in America under the
administration of Ronald Reagan: it was under the watch of this much
eulogized fiscal conservative that the U.S. inflationary debt curve hit the
afterburners and began a nearly vertical climb.
Now that the U.S. is functionally bankrupt,
if judged by the same accepted accounting practices that are routinely applied
to business, we must pose the following, hopefully, non-rhetorical question:
Is The World About to Come to an End?
(financially speaking, that is)
In 1990 economist Dr. Ravi Batra wrote
The Great Depression of 1990. The book was panned by the pundits and the
foretold financial apocalypse never occurred. But that's the problem with books
like this: they often get the facts right, but the timing is all wrong. And it
doesn't help that editors want to put the current or next year on the front
cover in large print to alarm the lumpenvestoriat and sell books.
In 1995 an economist by the name of Harry Figgie wrote a book titled
Bankruptcy 1995: The Coming Collapse of America and How to Stop It.
Again, the hoots, howls and chuckled emanated from Wall Street and the world did
not end, financially speaking that is.
In 2000 Dr. Batra was back with
The Crash of the Millennium: Surviving the Coming Inflationary Depression'.
But still no apocalypse, financially speaking that is.
Lately, the following alarming books have appeared on the scene to hoist aloft
once again the economic warning flags:
Full Faith & Credit: A Novel About Financial Collapse by James Cook
The Coming Collapse of the Dollar and How to Profit from It by James
Turk
Empire of Debt: The Rise of an Epic Financial Crisis by William Bonner
and Addison Wiggin
The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel
by Glen Strathy, Stephen Leeb
The Great Bust Ahead: The Greatest Depression in American and UK History is Just
Several Short Years Away by Daniel A. Arnold
The Demise of the Dollar And Why It's Great For Your Investments by
Addison Wiggin
WARNING: Read this stuff and you'll need more than a stiff dose of
Lunesta to get a good night's rest.
Who Knows? Maybe the World Really Is
Coming to an End This Time
(financially speaking, that is)
 For
confirmation let us turn to the master himself, perhaps the greatest economist
of the 20th century, a Russian by the name of Nikolai Kondratiev, and also one
of the greatest exposers of why socialist welfare states (such as exists today
in the U.S.) and centrally managed economies (ditto) always fail.
No doubt you heard about him in government,
er, public school. But you can always
learn more here.
In 1925 Nikolai Kondratiev wrote an essay
titled Long Economic Cycles in which he examined long-term, historical
economic trends in various nations and concluded that these waves last between
48 and 60 years. He was rewarded for his efforts with a stint in a gulag for
exposing the inevitable future failure of the Soviet economic system.
Kontratiev is now honored by economic cognoscenti everywhere as one of
the greatest and most prescient economists who ever lived.
His cycles can generally be broken down
into the following four major phases, likened to the seasons of the year:
Kontratiev Spring
This is the inflationary growth phase which starts with a depressed economic
base and expands upwards in a spiral of rising employment, wages and
productivity, with prices being relatively stable. During this period everyone
is optimistic and buoyant. Talking heads on TV financial shows will be seen
smiling and nodding a lot.
Kontratiev Summer
This represents a period where growth during the previous period of
affluence has caused a shortage of resources. Unemployment rises rapidly and
there is likely a recession. Everyone is still optimistic about the future, but
many talking heads will be seen occasionally (if thoughtfully) biting their
lower lips.
Kontratiev Autumn
The economy is in a consumption phase with rapid increases in debt and
speculation, the quest for individual wealth expanding rapidly. The talking
heads everywhere are telling everyone who will listen to buy, diversify and
never look back.
Kontratiev Winter
Here the economy is cleansed of credit excesses as previous debt is purged
and a base for future growth is established. A recession or even a full-blown
depression is usually the elixir that gets the job done. People suffer terribly,
pensions disappear, food lines form, etc. Now the talking heads engage in
furious debate over which of them predicted this first.
Given the recent and ongoing massive
increase in the paper money supply ('liquidity') by a Federal Reserve determined
to fight deflation by whatever means necessary, it is likely that we are
entering Kontratiev Winter at this time.
Commodity prices which have already started
rising substantially are likely to go sky high, given that most commodities are
priced in weakening dollars.
Expect oil, gold, silver, uranium and other
metals to skyrocket in price as it takes increasing numbers of government paper
coupons ('dollars') to purchase them.
Nikolai Kontratiev revealed that it is central bankers who create alternating
periods of boom and bust. 'Boom' periods of credit excess during which massive
debt is created are followed by 'bust' periods of debt liquidation. It is really
not all that different from the healing crisis the human body generates to purge
itself of sugar excesses and other acts of over indulgence.
When the U.S. decoupled the dollar from
gold under Richard Nixon in 1971 all restraints were removed on fractional
reserve banking. This allowed the government under the leadership of Ronald
Reagan to embark on an unprecedented spending binge and massive run up of debt,
the likes of which has never been duplicated in world history, and one that will
not end until the wheels come off of the U.S. economy.
It should also be noted that freedom and
liberty usually recede significantly during these periods, which are usually
accompanied by war. Wars are always 'good for the economy' since they require
massive capital spending and manufacturing build up and provide jobs for
millions, while serving to keep a depressed public's attention focused on the
conflict (could this be why these period are called a 'depression'?).
For more information on Nikolai Kontratiev, read
The
Currency of Last Resort and the Kondratiev Cycle, where Ursel Doran lays
it on the line.
Also, be sure to read
The Kondratiev
Winter where Ian Gordon, editor of The Long Wave Analyst gives it
to us with both barrels.
What To Do About All This?
Run away and join the Peace Corps? Hide in
a bunker with your .22, some MRE's and a metal detector (so you can find that
buried gold no matter how much Vodka you've got left)?
Actually, the answer is easy:
• Get out of debt.
• Secure the roof over your head with no mortgage.
• And yes, buy gold and silver (burial optional).
• And above all, keep educating yourself.
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