Friday, June 28, 2013
Chile: the whole enchi... er, empanada...
I have a entry brewing about what's going with my life today, but I really don't want to step on my Chilean posts, as the lessons I learned played a central role in the decision that put me in the place I am today. With that, I should pick up where I left off, which is the end of my first awe-inspiring day.
I was exhausted from the lack of sleep on the flight, and all the coffee I'd drank had finally worn off. Still, I slept fitfully the first night, not quite able to process all that I'd seen. Note that I did not say what I'd learned. Although seeing these titans of the conservative camp was amazing, life changing, and otherwise nigh-orgasmic, it primarily reinforced what I'd already known. There were chunks of info that were new, and hints of evil deeds to come. Again, taking people's bank deposits in Cyprus had occurred just prior to our arrival. Nevertheless, elation, ill tidings, and abject shock weren't the only reasons for my sleeplessness. The nagging doubt I'd felt at dinner echoed in my mind as I tossed and turned. This was to become a theme. Finally, exhaustion won out over everything else, and I fell asleep.
After breakfast with the dinner crew, we had more from the same speakers, further elaborating on what was said the night before. There was one exception to this. As mentioned in earlier posts, the two speakers I considered the most important were Nigel Farage, and the newest speaker we heard: Jim Rickards.
If any of my readers have heard of Mr. Rickards, it's probably as a result of his best seller: "Currency Wars." I knew of the title, but little else. I did know our host recommended it, but never had the chance to buy it. He's a stock researcher from New York City, and as soon as he was introduced, I started to giggle. I flew 4426 nautical miles to hear two speakers from Stamford, Ct. and Manhattan, while I live in Westchester.
The reasons I considered these two men so important were: 1) Nigel Farage had firsthand knowledge of what a state will do to preserve its power, which is almost anything. That, and divest your Slovenia holdings. 2) Jim Rickards was not only new to me, but his presentation was the most scientific of the main speakers. He employs various research models to explain his predictions, and gave me an approach I hope to never forget, which is as follows: When presented with a complex situation where it is impossible to have all the info needed, concentrate on getting one aspect of the problem as close to 100% correct as possible, and build from there. A simple approach, but massive in its implications. This has made him a billionaire, so perhaps I should take note?
The main thrusts of his presentation were two-fold. The first was a wide ranging and scientific examination on how intermingled everything has become since the repeal of Glass-Steagall. This wasn't news, but he takes the data beyond the crash of 2008. Using visual models, he shows that various sections of the economy (oil, banking, agriculture, housing, etc.) were connected by thin threads prior to 1999, when the law was repealed. Thin is a relative term, and I use it to indicate that if one section of the economy went south, then it wouldn't pull other sections with it. I.e., when the housing market crashed, it took banking with it, which then took investment banking, which killed credit for agriculture, ad nauseum. As the years passed, the lines connecting one part of the economy to the other became thicker, and the individual sectors less distinct. The 1998 slide looked like a hand-drawn rural map, with each part of the economy a town connected by a two-lane road. When 2008's slide was shown, the economy looked like an inkblot. There were distinct shapes, but no real deliberate separation. Most speakers would stop there, but he continued to 2012, which is even more interconnected than before the crash! If one section falls apart, everything goes with it. Should I explain more? Nah, let's let his words speak for themselves.
I was exhausted from the lack of sleep on the flight, and all the coffee I'd drank had finally worn off. Still, I slept fitfully the first night, not quite able to process all that I'd seen. Note that I did not say what I'd learned. Although seeing these titans of the conservative camp was amazing, life changing, and otherwise nigh-orgasmic, it primarily reinforced what I'd already known. There were chunks of info that were new, and hints of evil deeds to come. Again, taking people's bank deposits in Cyprus had occurred just prior to our arrival. Nevertheless, elation, ill tidings, and abject shock weren't the only reasons for my sleeplessness. The nagging doubt I'd felt at dinner echoed in my mind as I tossed and turned. This was to become a theme. Finally, exhaustion won out over everything else, and I fell asleep.
After breakfast with the dinner crew, we had more from the same speakers, further elaborating on what was said the night before. There was one exception to this. As mentioned in earlier posts, the two speakers I considered the most important were Nigel Farage, and the newest speaker we heard: Jim Rickards.
If any of my readers have heard of Mr. Rickards, it's probably as a result of his best seller: "Currency Wars." I knew of the title, but little else. I did know our host recommended it, but never had the chance to buy it. He's a stock researcher from New York City, and as soon as he was introduced, I started to giggle. I flew 4426 nautical miles to hear two speakers from Stamford, Ct. and Manhattan, while I live in Westchester.
The reasons I considered these two men so important were: 1) Nigel Farage had firsthand knowledge of what a state will do to preserve its power, which is almost anything. That, and divest your Slovenia holdings. 2) Jim Rickards was not only new to me, but his presentation was the most scientific of the main speakers. He employs various research models to explain his predictions, and gave me an approach I hope to never forget, which is as follows: When presented with a complex situation where it is impossible to have all the info needed, concentrate on getting one aspect of the problem as close to 100% correct as possible, and build from there. A simple approach, but massive in its implications. This has made him a billionaire, so perhaps I should take note?
The main thrusts of his presentation were two-fold. The first was a wide ranging and scientific examination on how intermingled everything has become since the repeal of Glass-Steagall. This wasn't news, but he takes the data beyond the crash of 2008. Using visual models, he shows that various sections of the economy (oil, banking, agriculture, housing, etc.) were connected by thin threads prior to 1999, when the law was repealed. Thin is a relative term, and I use it to indicate that if one section of the economy went south, then it wouldn't pull other sections with it. I.e., when the housing market crashed, it took banking with it, which then took investment banking, which killed credit for agriculture, ad nauseum. As the years passed, the lines connecting one part of the economy to the other became thicker, and the individual sectors less distinct. The 1998 slide looked like a hand-drawn rural map, with each part of the economy a town connected by a two-lane road. When 2008's slide was shown, the economy looked like an inkblot. There were distinct shapes, but no real deliberate separation. Most speakers would stop there, but he continued to 2012, which is even more interconnected than before the crash! If one section falls apart, everything goes with it. Should I explain more? Nah, let's let his words speak for themselves.
That was one part, what about the second? He speculated what would replace the American dollar as the world reserve currency (WRC). Using his presentation as a basis for action requires a leap of faith that the dollar will be usurped in this role, if not a matter of if but when, since all world currencies have fallen, otherwise we'd be using the ancient Greek Drachma. As empires fall, so do their currencies. The American economic empire cannot last because no empires last. This was as true in 1913 when the Federal Reserve was created as it is today, so this historical truism may not have any real, practical value. Nevertheless, it's much closer than is was 25 years ago. Special drawing rights (SDR) is one alternative floated about, but this would require a world bank, so please God no. I doubt the USA would even participate, which is a small (actually a HUGE) mercy. Another is the return to the gold standard in some capacity, which could keep the greenback as the WRC but prevent the creation of money by fiat. Another would be a basket of currencies, including the American Dollar, Euro, Yuan, Canadian Dollar, Yen, etc. This would mirror the SDR solution without a world bank. Another would be to use just the Euro or the Yuan, but with Euro likely to go bust, and the Chinese economic data completely fabricated, neither is going to happen. People need stories and copy, so the speculation refuses to die. The final solution given would be not not have WRC period, though he said it was unlikely.
All of these actions have one aim: prevent the USA from printing imaginary money the rest of the world has to use. In other words, we could no longer export inflation. This would send the trillions we're forcing other nations to absorb to our shores, and our stores. If/when this happens, prepare for $10 a gallon gasoline, $8 loaves of bread, and riots in the streets. This served as a nice segue into the rest of the conference. Without mincing words, the USA is going broke sooner or later, and civic life will follow suit. Well, what to do about it? That was the aim for the rest of the workshop: safe haven countries and off-shore asset protection.
