Tag: Jeff Thomas

by Jeff Thomas

There can be little doubt that the euro and the dollar are presently on life support and are not responding well. They may soon be dead currencies.

Those who are looking to the future are asking, “Where do I put my wealth in order to keep from losing it? I’m not talking about making money; I’m talking about not losing what I now have.”

Well, for many years, we have been recommending that investors retain their wealth by buying precious metals and real estate, neither of which should be in an afflicted country (the EU, the US, and some other First World countries.)

Those who do take this essential step then often ask, “But what about my cash? I have to have cash to pay for my expenses. I can’t pay for my groceries in Krugerrands.”

Quite so. In order to continue to function normally, it is essential to deal in fiat currency of one form or another. Whilst it makes sense to protect the great majority of your money by exiting those currencies that are riding for a fall, we still need to maintain a minimum amount (three months’ expenses is recommended) in a currency that will allow us to buy the groceries every week.

Those of us who advise on the topic often shy away from this discussion, because, truth be told, there is no ideal answer. But we have now left the eye of the economic hurricane and are entering the ferocious other side. It is high time that we open up the discussion.

Increasingly, we’re being asked, “I’m really getting worried and am planning to dump my dollars if I can, but what currency is safe?”

To be sure, the traditional safe havens, such as the Swiss franc, are looking less likely to continue to perform their traditional role. Some advisors have recommended the Australian and Canadian dollars as being amongst the more stable currencies, but their futures are highly dependent upon the dollar and may, in a crisis, head south also.

In each case, they are backed by nothing, and the capital ratios (the level of central bank assets to the volume of currency units printed) are dangerously low. The US dollar is the hub of the fiat currency wheel, and all the spokes on that wheel may well be on their way out.

Currency Option

Today, no currency is truly “safe.” The closest choice is likely to be the Norwegian krone. First, it is not pegged to the US dollar. Second, Norway has virtually no debt. Third, Norway’s central bank has one of the world’s highest capital ratios.

For these reasons, the krone may be the currency closest to providing an answer for the storage of wealth (whether your wealth is ten thousand or ten million).

Unfortunately, the krone is almost certainly not acceptable to your grocer. Therefore, it cannot be used for regular expenses in the anticipation of a currency collapse, nor is it likely to be usable thereafter. It is therefore primarily useful as a store of wealth during the emergency transition period.

Both before and after the collapse, other currencies must be utilized for daily use. But which ones?

In many countries today, the US dollar acts as a second currency, and should their home currencies collapse, the population can simply switch over to the dollar in order to continue paying their regular expenses each week.

Historically, there has always been an alternate currency that could be turned to when a country debased its currency. In recent times, the US dollar has been the safety net when currencies (the Zimbabwean dollar, the Argentine peso, etc.) headed south.

No Viable Currency Option

Today, there is no alternative that’s internationally tradable if we are to see the demise of the US-based currency.

When a currency crashes, people turn to whatever is the next best thing, and they do it quickly, because they need to buy groceries and gasoline and pay the electric bill. They will do so, even if it is illegal, as it often is, as a result of governments seeking to maintain control.

The next best thing then becomes a black market currency that, even if it is initially banned, eventually ceases to be banned, as even the political leaders need it to pay for their groceries. Again, this has been the historical pattern.

But we have an historical precedent in the making. For the first time, there is no currency that is poised to take over in a crisis. Surely, the krone is not already in use as a significant international currency. (Most likely, your grocer is not even aware of its existence.) Additionally, it does not exist in sufficient quantity that it could do the job worldwide.

And yet, there can be no question that a currency (or currencies) will arise and will do so quickly, following a collapse. Historically, this is always true, as the need for currency will continue to be immediate.

Currency War

So, what are the realistic possibilities? My own projection would be that it would most likely come down to two currencies:

1. An all-new dollar, very possibly in electronic form, issued by the US through the Federal Reserve, most likely not backed by anything other than a promise of its worth.

2. The yuan, which is likely to possess fractional backing in gold.

Both the Americans and the Chinese would then be competing for the coveted position of holding the world’s next default currency.

The US would apply all its power to muscle out the yuan, as China would take over as the economic leader of the world if the US was to lose its present default currency status. (We have already seen the approach the US has taken when some Middle Eastern countries have announced that they planned to cease using the dollar as the currency that they use to trade in oil. Punishment has been swift and devastating.) The US would be ruthless in demanding that only the new dollar be used.

This would suggest that, in the US, the yuan would be forbidden for use. This ban would also extend as far internationally as the US could control.

But the Chinese have been doing their homework. They have already forged agreements amongst the BRICS and the ASEAN nations to use the yuan as the currency of trade. More recently, they have begun to nibble at the tail of the American eagle, with countries such as Australia, New Zealand, and the UK agreeing to trade in the yuan in future.

It may well be that China intends to sew up the world with yuan agreements, with the US as the last man standing, then pull the plug. This they might well be able to do simply by refusing outright to accept any further US debt of any kind. At that point, the US would be isolated and, in order to trade, would be forced to cave to the yuan as the currency of world trade.

If this were to take place, the remaining question would be whether the dollar would remain as the US currency. If so, the US would be in a similar position to countries, such as Argentina, where, today, the government does all it can to force the use of the deteriorating peso, whilst the population would prefer to use the stronger foreign currency.

In effect, the roles would reverse. But, in practical terms, for those who are American, and indeed, for those of us whose national currencies are tied to the dollar in some way, there would be an emergency period following a currency crash during which the immediate currency would be uncertain. Would we find ourselves like the German who, in 1923, took a wheelbarrow full of marks to buy bread and was robbed? (The thief dumped the marks and stole the wheelbarrow.)

Or, would the new US currency be accepted quickly, if only for the sake of practicality, even though it had no more worth than the dollar it had replaced?

Or would we see a rapid acceptance of a previously unacceptable currency (or currencies)?

If the latter, it would not matter that the new currency was unfamiliar. Its feature would be that, if it enjoyed fractional gold backing, it would be more trusted than the alternative.

Whatever the eventual outcome, the fiat currency end-game is now in view. As any stock investor will say, if you are holding a stock that you know is about to tumble, get out of that stock, ASAP. That time, for fiat currencies, is now on the horizon.

by Jeff Thomas

The average person in the First World receives more information than he would if he lived in a Second or Third World country. In many countries of the world, the very idea of twenty-four hour television news coverage would be unthinkable, yet many Westerners feel that, without this constant input, they would be woefully uninformed.

Not surprising, then, that the average First Worlder feels that he understands current events better than those elsewhere in the world. But, as in other things, quality and quantity are not the same.

The average news programme features a commentator who provides “the news,” or at least that portion of events that the network deems worthy to be presented. In addition, it is presented from the political slant of the controllers of the network. But we are reassured that the reporting is “balanced,” in a portion of the programme that features a panel of “experts.”

Customarily, the panel consists of the moderator plus two pundits who share his political slant and a pundit who has an opposing slant. All are paid by the network for their contributions. The moderator will ask a question on a current issue, and an argument will ensue for a few minutes. Generally, no real conclusion is reached—neither side accedes to the other. The moderator then moves on to another question.

So, the network has aired the issues of the day, and we have received a balanced view that may inform our own opinions.

Or have we?

Shortcomings

In actual fact, there are significant shortcomings in this type of presentation:

1. The scope of coverage is extremely narrow. Only select facets of each issue are discussed.

2. Generally, the discussion reveals precious little actual insight and, in fact, only the standard opposing liberal and conservative positions are discussed, implying that the viewer must choose one or the other to adopt as his own opinion.

3. On a programme that is liberally-oriented, the one conservative pundit on the panel is made to look foolish by the three liberal pundits, ensuring that the liberal viewer’s beliefs are reaffirmed. (The reverse is true on a conservative news programme.)

4. Each issue facet that is addressed is repeated many times in the course of the day, then extended for as many days, weeks, or months as the issue remains current. The “message,” therefore, is repeated virtually as often as an advert for a brand of laundry powder.

So, what is the net effect of such news reportage? Has the viewer become well-informed?

In actual fact, not at all. What he has become is well-indoctrinated.

A liberal will be inclined to regularly watch a liberal news channel, which will result in the continual reaffirmation of his liberal views. A conservative will, in turn, regularly watch a conservative news channel, which will result in the continual reaffirmation of his conservative views.

Many viewers will agree that this is so, yet not recognise that, essentially, they are being programmed to simply absorb information. Along the way, their inclination to actually question and think for themselves is being eroded.

Alternate Possibilities

The proof of this is that those who have been programmed, tend to react with anger when they encounter a Nigel Farage or a Ron Paul, who might well challenge them to consider a third option—an interpretation beyond the narrow conservative and liberal views of events. In truth, on any issue, there exists a wide field of alternate possibilities.

By contrast, it is not uncommon for people outside the First World to have better instincts when encountering a news item. If they do not receive the BBC, Fox News, or CNN, they are likely, when learning of a political event, to think through, on their own, what the event means to them.

As they are not pre-programmed to follow one narrow line of reasoning or another, they are open to a broad range of possibilities. Each individual, based upon his personal experience, is likely to draw a different conclusion and, thorough discourse with others, is likely to continue to update his opinion each time he receives a new viewpoint.

As a result, it is not uncommon for those who are not “plugged-in” to be not only more open-minded, but more imaginative in their considerations, even when they are less educated and less “informed” than those in the First World.

Whilst those who do not receive the regular barrage that is the norm in the First World are no more intelligent than their European or American counterparts, their views are more often the result of personal objective reasoning and common sense and are often more insightful.

Those in First World countries often point with pride at the advanced technology that allows them a greater volume of news than the rest of the world customarily receives.

Further, they are likely to take pride in their belief that the two opposing views that are presented indicate that they live in a “free” country, where dissent is encouraged.

Unfortunately, what is encouraged is one of two views—either the liberal view or the conservative view. Other views are discouraged.

The liberal view espouses that a powerful liberal government is necessary to control the greed of capitalists, taxing and regulating them as much as possible to limit their ability to victimise the poorer classes.

The conservative view espouses that a powerful conservative government is needed to control the liberals, who threaten to create chaos and moral collapse through such efforts as gay rights, legalised abortion, etc.

What these two dogmatic concepts have in common is that a powerful government is needed.

Each group, therefore, seeks the increase in the power of its group of legislators to overpower the opposing group. This ensures that, regardless of whether the present government is dominated by liberals of conservatives, the one certainty will be that the government will be powerful.

When seen in this light, if the television viewer were to click the remote back and forth regularly from the liberal channel to the conservative channel, he would begin to see a strong similarity between the two.

It’s easy for any viewer to question the opposition group, to consider them disingenuous—the bearers of false information. It is far more difficult to question the pundits who are on our own “team,” to ask ourselves if they, also, are disingenuous.

This is especially difficult when it’s three to one—when three commentators share our political view and all say the same thing to the odd-man-out on the panel. In such a situation, the hardest task is to question our own team, who are clearly succeeding at beating down the odd-man-out.

Evolution of Indoctrination

In bygone eras, the kings of old would tell their minions what to believe and the minions would then either accept or reject the information received. They would rely on their own experience and reasoning powers to inform them.

Later, a better method evolved: the use of media to indoctrinate the populace with government-generated propaganda (think: Josef Goebbels or Uncle Joe Stalin).

Today, a far more effective method exists—one that retains the repetition of the latter method but helps to eliminate the open-ended field of alternate points of view. It does so by providing a choice between “View A” and “View B.”

In a democracy, there is always an “A” and a “B.” This illusion of choice is infinitely more effective in helping the populace to believe that they have been able to choose their leaders and their points of view.

In the modern method, when voting, regardless of what choice the individual makes, he is voting for an all-powerful government. (Whether it calls itself a conservative one or a liberal one is incidental.)

Likewise, through the modern media, when the viewer absorbs what is presented as discourse, regardless of whether he chooses View A or View B, he is endorsing an all-powerful government.

Two Solutions

One solution to avoid being brainwashed by the dogmatic messaging of the media is to simply avoid watching the news. But this is difficult to do, as our associates and neighbours are watching it every day and will want to discuss with us what they have been taught.

The other choice is to question everything.

To consider that the event that is being discussed may not only be being falsely reported, but that the message being provided by the pundits may be consciously planned for our consumption.

This is difficult to do at first but can eventually become habit. If so, the likelihood of being led down the garden path by the powers-that-be may be greatly diminished. In truth, on any issue, there exists a wide field of alternate possibilities.

Developing your own view may, in the coming years, be vital to your well-being.

by Jeff Thomas / March 10, 2014

As the Great Unravelling progresses, we shall be seeing many negative developments, some of them unprecedented.

Only a year ago, the average person was still hanging on to the belief that the world is in a state of recovery, that, however tentative, the economy was on the mend.

And this is understandable. After all, the media have been doing a bang-up job of explaining the situation in a way that treats recovery as a general assumption. The only point of discussion is the method applied to achieve the recovery, but the recovery itself is treated as a given.

However, as thorough a distraction as the media (and the governments of the world) have provided, the average person has begun to recognise that something is fundamentally wrong. He now has a gut feeling that, even if he is not well-versed enough to describe in economic terms what is incorrect in the endless chatter he sees on his television, he now senses that the situation will not end well.

I tend to liken his situation to someone who suddenly finds all the lights off in his house. He stumbles around in the dark, trying to feel his way. Although he can picture in his mind what the layout of his house is, he is having trouble navigating, often bumping into things. This is similar to the attempt to see through the media and government smokescreens during normal times.

But soon, as his government undergoes collapse, he will be getting some bigger surprises. He will find that the furniture has inexplicably been moved around. Objects are not where they are supposed to be, and it is no longer possible to reason his way through the problem of navigating in the dark.

Many of those who observe the daily news reports are beginning to figure out that they are being fed misinformation. Many are beginning to recognise that neither political party truly represents them or, for that matter, is even concerned for their welfare.

These folks are now navigating in the dark.

But the bigger surprises have not yet occurred. There will be a certain amount of lead-up, plus a great deal of confusion, but the actual occurrences will be sudden. No one will be able to predict the dates on which they occur, except those very few people who control the triggers to these events.

Crashes in the Markets

Major bull markets rarely end with a whimper. They end with a major upside spike. And, unfortunately, brokers and investors alike tend to think that, if the market has been up for the last week, the last month, or the last year, it can be expected to be up again tomorrow. This makes them prime pickings for governments who may choose to falsely inflate a given market, creating an upside spike to encourage investors to toss their last few coins into the pot, just before the bottom drops out.

In previous eras, it could take time for people to sell, and even in panic times, the bloodletting was not instantaneous. However, with the Internet, all that is necessary is a major sell-off by one entity—one that goes through the stops of a large number of investors, and in a flash, the market goes though the floor. (Editor’s note: Stops are orders placed with a broker to sell a security when it reaches a certain price.) The average investor wakes in the morning to find that he has been wiped out.

Commitments by Governments

Should there be a currency crash, as is expected in many countries, promises made by governments will be abandoned suddenly, as though they had never existed. Whilst millions of people will find themselves lost, unable to function without their entitlements, governments will evade their guilt through finger-pointing. Tories will blame Labour; Labour will blame the Tories. (The equivalent will take place in other countries.) The net result will be the disappearance of entitlements, either in part or in total. The public will take out its anger through increased hatred of whichever party it is that they already consider to be the evil one. They will fail to understand that collapse was unavoidable.

Assumed National Strengths Will Vanish

International alliances will fall away. Former allies will suddenly not be at the side of the failing nation.

Former friends will sign alliances with the other side.

Trade agreements will suddenly cease.

Wealth, initiative, and favour will flow to the new foremost country and its allies.

All of the above will happen incrementally—not by any means on the same day—but in each case, the actual occurrence will be sudden.

Just as Julius Caesar was at his peak of power when his fellow members of the Senate drew their knives, a powerful nation is coddled right until the time of its fall. In this regard, the US will see the greatest abandonment of loyalties that any nation will experience.

(The greater the empire, the greater the pretence of loyalty to it. And the greater the abandonment when the fall comes.)

When an empire collapses, it dies slowly. Unless it comes to an end through conquest, it deteriorates in a series of sudden jolts. Its leaders grasp at anything that might cause a delay, even if this means a worse outcome in the end. The process may take years and even decades. However, it is in the first few years that the major events occur—the events that create the most significant damage.

This occurs for two reasons. The first is that the leaders of the country, believing in their own power, believe that they can maintain control of their trade, their overseas control, their military, etc. and find that, when the crashes come, the rats desert the ship in every area. The second reason is that any empire builds its strength upon lies and exaggeration as much as it builds on its true attributes. After a crash, these lies and exaggerations fall away, and in a short time, it becomes clear that the empire was, in its latter stages, a house of cards.

The warning signs are already taking place but are not heavily publicised. Even the US’s greatest ally, Britain, has quietly undertaken an agreement with China regarding the yuan as the currency for future trade.

The stage is set, and we are approaching the first major events.

The victims in this play are, unfortunately, the average people, who simply hope to have a decent life. They will be caught unawares and unable to even understand what has occurred, let alone take action to save themselves. Those who have not spent the previous years educating themselves and preparing an alternative life will suffer most greatly.

All who live in a country that is undergoing collapse will be negatively affected. Some will do better than others, but to live on this slim hope is much like being fortunate enough to live on the outskirts of Hiroshima in 1945.

There is little comfort in being one of the least injured. Better to have been in another country altogether—both during the actual event and during the terrible time that is sure to follow.

Will the Sun Rise in the Morning, or Will it Set in the Evening?

 

By Jeff Thomas /  January 20, 2014

A feature of the recent Liberty Forum Conference in St. Kitts was a debate over whether the world is headed toward deflation or inflation. The debate proved to be quite a lively one, with the two speakers conceding very little ground to each other. The first speaker made a strong argument in favour of a deflationary depression (including a drop in the value of precious metals), whilst the other made an equally strong argument for an inflationary depression (with a significant rise in the value of precious metals).

Both speakers were well-known to the attendees and both are contrarians, yet they took diametrically opposing views on this contentious topic.

I tend to see this discussion as being akin to, “Will the sun rise in the morning, or will it set in the evening?” As I have presented previously in International Man articles, I believe we will almost certainly see both deflation and inflation. In addition, we will experience stagflation and very possibly hyperinflation.

The Sun Will Rise in the Morning

The argument for deflation centres on the fact that, historically, when a crash occurs (such as a crash in either the bond or stock market, as we anticipate), deflation is a predictable knock-on effect. This is understandable as, with a crash, people instinctively pull in their horns through fear and diminish their spending, especially on big ticket items. Additionally, a crash shifts wealth out of the hands of the average person, limiting even those who would otherwise continue to spend. As a result, demand for (and therefore prices of) assets such as stocks and houses fall. It would not be surprising to see the price of gold fall, as people in trouble tend to sell anything they can to stay afloat.

The Sun Will Set in the Evening

The argument for inflation centres on the fact that the US Federal Reserve has stated, repeatedly and unequivocally, that they consider deflation to be the greatest threat to the economy, and should deflation occur even to a minor extent, they will step in quickly to inflate the deflation away. Fed Chairman Ben Bernanke famously stated in 2002 that, if necessary, in order to get currency into the system, he would drop money from helicopters.

Mister Bernanke’s “solution” is the one most often taken by governments that face deflation. Commonly, in doing so, governments over-inflate, and the inflation takes on a life of its own. Consumers, not wishing to hold a devaluing currency, tend to rid themselves of it, leading to hyperinflation. A concurrent dramatic rise occurs in the price of gold, creating a mania, as it is revealed as being a safe haven for wealth.

The Sun Will Both Rise and Set

Both of the above arguments are soundly reasoned. The trouble in debating them, however, is that each is taken in isolation. As we have previously predicted, both can occur. Here is what I consider to be the most likely combination:

A crash occurs. Deflation is an immediate result. The Fed steps in quickly to counter the deflation, but regulating the balance is not a simple matter. It takes time to reverse the downward trend, and it is difficult to maintain control of the rise. Hence, dramatic inflation then occurs.

Further, it is entirely possible that we shall see inflation and deflation at the same time. We may well see deflation in the value of assets, such as real estate, whilst seeing commodity prices, such as fuel and food, rising—the worst possible combination of deflation with inflation, yet one that I consider not only possible but likely. (Typically, wages do not rise to keep up with the rising cost of essential goods, and the standard of living drops for most people.)

There is no particular danger in projecting the likelihood of either inflation, deflation, or, indeed, both. The danger is in creating the impression that only one or the other can occur.

The Larger View

So, why do we see two contrarian “experts” taking such opposing positions? In discussing the question after the debate with Doug Casey, he commented, “People like certainty. It’s a black and white, headline world.”

Quite so. To be sure, in those countries where the people are continually inundated by the media, it seems to be increasingly difficult for the average person to look at the Big Picture. The attention span becomes short and requires quick, definitive answers to even the most uncertain of situations. The mind has been trained to gravitate only to those “answers” that are simplistic, and the sound-bite becomes central to reaching any personal opinion.

Further, the mind ceases to deal well with uncertainty. We need to be spoon-fed the answer to any given question—to put it to rest, so that it ceases to vex us.

Unfortunately, this trend is exactly counter to what is beneficial to us, as we enter a period of change that will prove unprecedented in its magnitude.

More than at any time previously, we will need to train our minds to be open to possibilities. Indeed, at such a time, it will be important to accept that we actually know very little; that most of what we perceive, we either think or believe.

This principle may well be the deciding factor as to whether we do well or badly in the coming years, as we see the level of change increase dramatically. Our ability to juggle—to keep the conceptual balls in the air—to actually avoid certainty on many questions—will define our ability to flex and even reverse our position quickly when necessary.