THE SHIP IS SINKING

QUESTION: What should readers of your blog like myself invest in before this whole government bubble bursts? It seems to me that when it does burst, equities and bonds will crash at the same time.
Thanks and I look forward to hearing back.

RL

ANSWER: Do not put equities in the same boat with bonds. The ship is sinking, but that is concerned with debt – not equity. Keep in mind that the collapse of a financial system has historically unfolded to different degrees. If we are talking about a Dark Age, then you are into the Mad Max situation. Then the only thing that has value is food – not even gold. That was the fall of Rome. People effectively sold themselves as serfs to work the land, retain 20% of the crop in return for protection behind the castle walls. Medieval coinage really appears only in silver and are rarely found more than 20 to 30 miles from where the coins were struck. This illustrated the isolation of city states. Money was not really necessary for there was really no major trade interacting within Europe – hence the Dark Age.

In order for tangible assets like stocks, gold, art, antiquities, etc. to survive, the fundamental infrastructure must survive. That means there must be ample food for gold to have any value whatsoever. So you must stop short of the Mad Max event for anything tangible to have a safe haven value.

German-1925-Rentenmark

The typical scenario painted by the doomsday crowd involves the German hyperinflation. However, that did not wipe out the structure of surrounding countries. This mean all tangible assets retained value because they could still be sold elsewhere. The German government replaced the hyperinflation currency in 1925 with a new currency backed by land. So art, gold, property, and equities survived. Even after the Berlin Wall fell, old claims of ownership in the East resurfaced.

Therefore, if we are only talking about a reset of the world financial system, then tangible assets retain value that becomes translated into the new currency. Hence, equities will survive, government debt and currency will not. Only going all the way to a Mad Max event would everything lose value except food. Not even gold survives for trade comes to an end.

Keep in mind that I do this to hopefully explain that there are degrees to which a system collapses. If everyone understands that we CAN SURVIVE this with society mostly intact ONLY IF WE UNDERSTAND what and how things unfold, then we have options once the crash and burn comes. We can stop short of a Mad Max event by understanding history, which is our road map to the future.

The civil unrest we have beginning today post-Trump is intended to overthrow Trump and Obama has remained in Washington, which NO PRESIDENT has ever done. We have Soros licking his lips on the prospect to altering the USA with his vision of Marxism. We have the same trend emerging in France, Britain, and Netherlands and of course Italy, Spain and Greece.

So we have some actors intent upon creating change that would subjugate all of us because they think Marx was correct after all. Their desire is to live vicariously off of other people’s money and they do not accept that anyone should have things they do not. We have students protesting because they think everything should just be free. Hence, this is a battle shaping up for the future; the final conflict over Marxism, which began with the fall of Communism in 1989. This final battle began 26 years from 1989.95.

light-ahead

Welcome to our world. This is a fight for our future. This not about doom and gloom. I oppose Soros and everything he is trying to accomplish. There is a light at the end of this stairway. We need to understand the rules of this game and position ourselves to win. Adam Smith was correct. The invisible hand is the nature of how things function. It has been humankind that thinks it can change and manage society when it does not even understand how it functions under the laws of the universe – the grand divine design, Soros, Marx, Lenin, or Mao were never capable of replacing the invisible hand with their own schemes. You might as well try to genetically alter humans and give us wings to fly and end global warming by eliminating cars and jets.
Categories: Sovereign Debt Crisis