POITOU, France – Last week, young colleagues at Bonner & Partners HQ in Delray Beach, Florida, put us on the spot.
“What do we stand for as a publishing business?” they asked.
“Who are we? How are we different from anyone else? What do we think that others don’t?”
We are not the only publishers to offer opinions. And not the only ones with alternative points of view.
So, to answer these questions, let’s look first at the range of opinions on offer…
First, there is “the authorities must know what they are doing… besides, I have more important things to think about” camp.
This is by far the largest group: hoi polloi. The masses. The lumpenproletariat.
There may be some grumbling and kvetching. But most people count on the feds to manage the economy, foreign policy, the future, and the government.
They expect mistakes from time to time. But they also believe the system can be trusted to produce an acceptable, although perhaps not always ideal, outcome.
And if not, God help them. Because the difference between the outcome if they bothered to think about it and the outcome if they didn’t is the same. They have no ability to influence public policy… and not much room to maneuver in their private lives.
They get salaries, pensions, Social Security. They need jobs, mortgages, student loans, and medical insurance. They have little capital to invest or protect. They depend so heavily on “the system” that they can’t afford to believe there is something deeply wrong with it. They go along. They get along.
At the other end of the idea spectrum, there are the edgy, malcontent, and extremely marginal opinions.
A man, sitting in his double-wide watching TV can come to hold all sorts of wacky views. There is an entire infotainment industry that provides screwball opinions.
You want to believe Obama is a Muslim? You want to believe the Bilderbergers, the Rothschilds, or the Rockefellers run the world? You want to know about GM’s perpetual-motion engine that – if the secret got out – would put the entire auto industry out of business?
Well, that is a market. But it is not ours. Let others fill that demand.
There used to be a tabloid newspaper called Weekly World News. You would see it at the convenience store, right in front of the checkout with enticing headlines such as: “Garden of Eden Found”… “Obama Adds Himself to Mount Rushmore”… or “150-Year-Old Man Finally Graduates from High School.”
Our favorite was a front-page photo of an airplane crashed on the surface of the moon. “WWII Bomber Found on Moon,” was the headline. “Pilot Error, Say Experts.”
But it is the far-out world of money, economics, and finance that interests us.
We try to figure it out. We try to understand. We try to see what’s coming before it arrives. And we try to be serious about it.
Apart from the mainstream view – that the authorities have things under control – almost all serious analysts see a terminal problem developing.
The current situation (with zero and even negative interest rates… and debt expanding much faster than GDP) can’t go on.
It had a beginning, in the early 1980s. It must also have an end.
Most of the guesswork is now focused on when and how that end comes.
Recently, one of our dear readers summarized the three major points of view, along with one minor one:
Harry Dent is in line with the Austrian Business Cycle Theory: Money printing causes financial bubbles, distorts the economy, and is therefore counterproductive.
Like Bob Prechter (I don’t follow him closely, but his argumentation sounds similar), Dent bets on deflation and depression.
Fighting debt deleveraging and demographics is like putting yourself in front of a tsunami.
In such an environment, the U.S. dollar would gain purchasing power, and gold would underperform significantly. (Harry sees it back to $700 in 2018-19.)
Cash/T-bills/short-term Treasurys are the place to be. Rates will stay low for very long.
Jim Rickards’ thesis – “inflate debt away via a massive issuance of SDRs after China has joined the club” – is also very credible.
World currencies are massively diluted via issuance of SDRs, which serve only the powers that be. Rather than a new gold standard, this is the solution to Triffin’s dilemma (more flexibility for the elite).
[Triffin’s dilemma describes the constant need for the global reserve currency issuer – in this case, the U.S. – to supply the world with reserve currency by way of a long-term trade deficit. Eventually, argued Yale economist Robert Triffin, this would lead to a loss of confidence in the reserve currency.]
Citizens are excluded/not allowed to own SDRs. Their purchasing power shrinks. They don’t know who to blame.
The IMF does not consist of elected officials, and the majority of the population doesn’t even know it plays a role in creating inflation. And they can pretend that they have to save the world, too. (Remember the Greek bailout?)
Shadow Stats’ John Williams is having a really hard time fighting for his ideas. He is right about the “CPI-CP Lie” and the current true state of the economy. But whoever invests along his ideas is running out of capital to stay in the game.
Peter Schiff and Mike Maloney are on a similar line. The problem with them is that they have a conflict of interest with their businesses. But I have no doubt about their integrity: They do/live what they say.
Deflation to Hyperinflation Camp
I recall an interview with Nassim Taleb on Bloomberg TV in 2009 when he said, “We will go from deflation to hyperinflation without seeing inflation.”
Our view is that Taleb will be proved right.
Back in 2009, we predicted “Tokyo… then Buenos Aires” – a Japan-like deflation, followed by Argentine-like hyperinflation.
Most likely, there will be no stop in between for moderate levels of inflation.
Inflation, as economist Milton Friedman observed, is “always and everywhere” a monetary phenomenon. But hyperinflation is a political phenomenon.
It is caused by those same authorities the masses think they can trust. When they are threatened, they will protect themselves by printing money on a scale we haven’t seen since the War Between the States. (Consumer prices in Richmond, Virginia, had risen 6,700% by the end of the war.)
There are times when printing money seems like the best course of action – especially for the people running the printing press. It may not do the common man any good, but it gets the feds out of a jam.
But that is a long story… and one for the future.
We’re still in a Japan-like long, slow slump. And it looks as though we’re going to be there a while longer.
Tomorrow, we’ll look at China – and more reasons why we are in a deflationary trend right now. So stay tuned…
Further Reading: While you’re waiting for tomorrow’s Diaryabout China, be sure to catch up on what colleague Keith Fitz-Gerald said about The Middle Kingdom in Saturday’s Weekend Edition.
Keith – an expert on Asian markets – believes China is NOT a failing economy. Quite the opposite. He sees China becoming more balanced. And he’s got some investment advice for how to make sure your money will be “at the table” and not “on the menu.”
[Editor’s Note: We’ll soon be launching a new investment advisory, Exponential Tech Investor, to help you profit from game-changing innovations. Below, editor Jeff Brown identifies an exciting area of breakthrough technology.]
Imagine standing on Fifth Avenue in New York City. Then imagine what it looked like it 1930.
If you could overlay the new image on top of the old one, you could see all the changes that have taken place during the last 85 years.
The breakthrough technology that allows you to do this is called augmented reality or “AR.” It differs from its cousin, virtual reality (VR), in that it doesn’t create a whole new digital world. Instead, it adds new information, images, or video into the real world.
You may have seen or heard of Google Glass. It was an awkward-looking piece of eyewear with one side containing a clear, block-like projection lens. The lens acts like a mini “heads-up display.” It also had the ability to take pictures and record video.
Google Glass was discontinued earlier this year. But the next generation of this kind of augmented-reality technology is about to hit the market on a large scale.
By 2020, annual revenues from augmented reality are forecast to hit $120 billion. They are growing exponentially. And over the next five years, AR will be far more widespread than VR.
Imagine having a recipe projected in front of you while you are cooking. Or how about instructions on how to repair your broken computer. Imagine how much fun learning will be when you can actually see dinosaurs standing in front of you while you are hearing a lecture about them.
One exciting company in this space is Magic Leap. While it has not yet launched a product, it has developed technology that beams light (images) into your eyes with a tiny projector embedded in its eyewear. The light from this technology blends extremely well with the natural light from the real world, creating an extraordinary overlay of images in your normal field of view.
This is game-changing stuff.
P.S. To be among the first to learn about my top picks for breakthrough tech stocks on the verge of huge gains, follow this link.
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I have canceled my subscription to your services. Your continued defense of the Koch brothers is proof that I made a good decision.
It is not that putting money to work for a cause cannot be a good thing. Buffet and Gates have shown the way of using their money to benefit society.
Everything the Koch brothers do is not to benefit anybody but themselves and their wealthy buddies. Their positions on climate change, national parks, and financial abuse of all the rest of us are some of the items where they are not only wrong, but totally contrary to all that is decent in a democratic society.
Greed and our new oligarchy, created with the Citizens United Ruling, by the radical right, are both very ugly elements of our 1% society. Sounds like you are truly a dedicated member of that 1% who thinks the only ones who are entitled are the financial elite.
– Don A.
You still don’t get it, do you? We’re not talking about the guy/gal in the voting booth; we’re talking about the guy (Koch) with gobs of money to spend on lobbyists to influence the 425 congresspersons who are passing laws and giving their rich donors “perks” that only apply to them and is not good for the general population.
Example: I live in Florida, the Sunshine State, it only makes sense that people would want solar energy to power almost everything. The rich power companies like Duke Energy “bribe” our lawmakers to pass laws that say we can’t have solar energy. That is undue influence just like the Koch brothers get for their money.
Republican lawmakers want this dirty money, so we, the people, get screwed by Duke’s undue influence. There are laws, here in Florida and supposedly elsewhere, that are being ignored because of undue influence, Duke Energy, and the Koch brothers.
– Ronald P.
Amazing the amount of negative feedback on Charles Koch. Some familiarity with their company over 40 years gave me a very positive view long before their entry into the political arena.
If you had expounded on Soros, for example, and shown his donations, who to and subsequent favored treatment, it might temper some of the ranting (but not all). The Kochs are at least open about their donations and their desire for a more conservative (and less costly) government.
I agree with B&P.
– Rich F.
Thank you for standing firm to your point of view. Wrong as it is.
Can we at least agree that American democracy is dysfunctional at best? Can we also agree that financially successful folk are amazingly creative in justifying their means of getting their money? Can we also agree that Cynics (the original Greek fellows) spoke cynically, not truthfully, because someone PAID them to do so?
I understand Koch’s behavior is very logical, even ethical, to him. It just doesn’t get my vote of approval. Quite the contrary.
– Mo R.
You have many long-term friends who support you in your defense of Koch. No need for any self-doubt. All the very best wishes, Bill.
– Tom H.
I don’t really have any money to invest, but I love reading Bill Bonner’s newsletter. I especially like this and wish I could post it on Facebook. It is spot-on about government. Thanks again.
– Steven H.
And finally, one non-Koch-related note…
Your Diary from 10/30 references the collapse in the Baltic Dry Index. Don’t you realize that is an antiquated system to measure commerce?
Just think of how many iPhones can be put in a single shipping container or the lack of needing any ship or delivery method, other than Al Gore’s gift to humanity that delivers me loads of “products” via Netflix, Amazon Prime Video, etc.
Please get with the times and realize things have never been better in the global economy!
– David L.