Demystifying all of the complex financial news going on right now: brace for impact.

I have a huge personal weakness which is also one of my greatest personal assets.  When presented with something new and complex, it takes me far longer than other people of my lifetime achievement level to get a handle on it.  I've figured out why that usually is: my intrinsic noise filtering is poor for the environment I live in.  When inundated by hundreds of "important" facts, my brain tries to go reconcile each of them and to categorize and prioritize them so that they can be viewed from a higher level of abstraction that is actually actionable.  Other people seem to gloss over these details more easily.  Of course, once I do get a handle on things I find that most other people really never were able to get a good grasp even though they appeared to have done so to my then uneducated eye.

Case in point is Mish's latest post on the growing crisis in Euroland.  Juxtaposition that post against the other big news today, also reported on by Mish (and everyone else) which is the SNB dumping its Euro peg.  A third article from Mish talks about how Finland is no longer interested in talking about loan forgiveness to deadbeat borrowers.   In just these three articles, many tens of facts are presented.  I guess some people think that is good but if I were new to what is going on (and a lot of people will wake up soon and find it looming large in their faces) I would be lost as to what it all means.  Not what the sentences mean, not what the individual facts mean.  I'm not an idiot after all.  I'm referring to meaning that is actionable.  In other words, OK, I hear all of this noise but what the F does it mean, why the F should I care, and what the F should I do about it?

Being an engineer I don't give up easily.  So I work on it for a long time and then suddenly the epiphany hits me: the unifying theory for whatever it is that all the facts are about.  In the case of the global economy I had this epiphany a long time ago, much longer than I've been writing this blog.  I've concluded that all of this seemingly important economic data is just noise once the right level of abstraction is grasped and that is that the US is running a global debt Ponzi.  This is not some conspiracy theory.  This is the proper technical actionable abstraction of all of the facts.

One of the major sub aspects of this is that France and Germany are running a vendor finance scam, same as General Electric.  As long as their customers can get loans in order to buy their goods, business is booming.  But once the loans cannot be rolled over and added to or forgiven, it's all going to collapse quickly.  Why?  Because that's what Ponzis do!  I don't know when it will happen but I do know that it is unavoidable and that everyone will claim that they never saw it coming.  Why?  Again, basic characteristics of a Ponzi scheme do not change from one implementation to the next.  There is no saving it and as soon as the players begin to stop trying, that is, as soon as they lose confidence in the ability of the Ponzi operators to continue extending the game, that is when the con game ends.  Thus, those are the important signs to watch for.

It's that simple.  Writing endless article after article about it past that is simply keeping score.  In other words, it's useful for entertainment and perhaps maybe a bit of market timing help but I already get that from the wave count in a more reliable fashion.

In defense of Mish, he sometimes does abstract things to the proper level as he did in this article where he wrote:

Today I offer three speculative possibilities

1. Gold generally does very poorly in disinflation (falling rates of inflation), and that's when other asset classes perform best. The period from 1980 to 2000 is a perfect example.  In contrast, gold has historically done well in deflation, stagflation, and rising credit risk in the senior currency (in this case, the US dollar). The great depression is a perfect example. 
2. Belief in central banks' ability to control things forever is finally coming into question, as well it should.
3. Gold does well when the soundness of the global financial system comes into question.  

While he calls this his speculation, Mish rarely speculates.  He has data and experience to back up all of his views (he's an ex-software engineer so he really can't help himself in this regard....).  Items 1, 2, and 3 are not mutually exclusive, they are all true right here, right now.

Folks, there is no real money in circulation the world anymore (except the US nickel which actually contains at least 5 cents worth of nickel + copper.  I initially wrote about it here when commodities were much higher but now in early 2015 it seems that a nickel is actually worth 5 cents because that's the value of the metals that it contains).  Gresham's law essentially says that if people are willing to accept fraudulent money as if it were real money, people remove real money from the economy and use the fraudulent stuff.  At least until it explodes in their faces of course and then it's back to using real money (gold and silver).  This is why you will never see a nation which has a capable military EVER pay ANY debts in gold.  Why should they when they can print fake paper to satisfy the debt.  Only conquered nations can be forced to pay in gold and even then it is really tough to get them to pay.  Somehow the gold evaporates into the cracks before any of it is ever used to satisfy any debts.


Gold and silver will not be re-monified because the con men desired to remonify it but rather because at some point there becomes no choice but to shut the con down. I expect to see this happen in the coming years which is why zero of my retirement is stored in fake money and all of it is in gold and silver coins.  At some point gold and silver will be remonitized.  The signs are beginning to show up.  I mean, folks, do you have any idea how big a deal it was that the Swiss Franc moved 30% in one day?  This is historic in nature, to say the least.  It shows that the fundamental value of fiat currency is unknown and unknowable.  This is very bad for business and for Swiss banks who loaned Francs to people who get paid in Euros.  The SNB knows this. They know it will kill exports yet they are doing it anyway.  They are losing confidence in the con.  Good luck to us all in the coming years...