Friday, March 12, 2010

Endgame for the government debt crisis?


While all eyes are riveted to the Machiavellian strategies of the Obama Mob to kick Americans' teeth in and shove health care "reform" down their throats — scratch that; Machiavelli was a smart politician — it won't do to forget about the backdrop. Namely, the government debt deluge that in varying degrees threatens to wash away every Western nation's economy.

No one, obviously, knows for sure how it will play out. All you can do is pay attention to a range of opinions, and decide what you tentatively believe and how you plan to protect your life, your honor, and your sacred fortune if the expected scenario goes down.

In that spirit, I offer the views of Christopher Wood, publisher of the newsletter Greed & Fear (which I am not familiar with) and apparently a respected Asia-Pacific financial strategist. (Tip o' the hat: Credit Writedowns.) I am not endorsing his ideas, and even if I were, it would make no difference because I lack qualifications in international finance. But I believe it is important at least to listen to people like him.

In a CNBC interview, he says:

My view is that there is an inevitable endgame as a result of all this massive spending of taxpayer money in the West and Japan to bail out bankrupt banking systems, so in my view unfortunately the end game will be systemic government debt crisis in the western world.

It will probably happen in Europe and will climax in the U.S., and I am expecting on a five year view the collapse of the U.S. dollar paper standard.

He does not appear to be saying the dollar will become virtually worthless, only that it will no longer be the world's "reserve" currency, the international standard of value, as it has been at least since World War II. Not everyone agrees.

Wood thinks the U.S. will be the last man standing … until it, too, can no longer violate the financial laws of gravity.
The key reason why that’s the endgame is that this credit crisis we saw in the west in 2008 and 2009 has simply been deferred, because 95 percent of the so-called government policy solutions to deal with this crisis have simply been to extend government guarantees.

So the problem’s been transferred from the private sector to the public sector. It’s just a matter of time before investors revolt against these sovereign guarantees … . The crisis is going to happen first in Europe. It’s going to climax in the U.S.

It's pretty clear that, so far, all the government bailouts and alleged fixes have not restored the economy, except for banks, who have been happy to take the public coin and use it to reward themselves, not start lending it to get the wheels turning again. Maybe a lending time out is a good thing — after all, madcap borrowing for consumption helped get us into this pit — but many businesses have a legitimate need to borrow for capital spending, and citizens for mortgages.

For investors, Wood advises overweighting Asia and underweighting the U.S. and Europe. But it's probably best not to put too much stock (pun intended) in that suggestion. As the managing director and chief strategist for an Asia-Pacific financial services company, he — like every other investment professional with a strategy — stands to benefit if people heed him. As the expression in the brokerage business goes, he's "talking his book."

Here's the clip from CNBC — I don't know why the screen has so much blank space around it, but scroll down. (Why can't the talking heads doing interviews shut up long enough for their subject to complete a thought? Do the producers and directors think viewers will tune out if there's a second of "dead air"?)



Marcus said...

The dollar's planned decline is well understood and even US-based, non-selling insiders have made it explicit over the last few years. Below is a clip I posted with Jim Rickards (who was lead negotiator for the Iran Hostages, 1979, and a finance consultant to military-industrial complex corps) explaining the conversion to SDR's. I'm an i-banker and can tell you that anyone in the industry except the buffoonish Yankee fan / Jim Cramer types knows this, especially the educated ones in Switzerland and Italy, whom I work with daily.

If this interests you, I STRONGLY suggest you listen to Eric King's brilliant interviews with the world's real financial - AND cultural - commentators and analysts at

Unlike the Bloomberg/CNBC crowd, King interviews people like James Dine, Jim Sinclair and Marc Faber (who's a great guy, btw), who are painfully aware of the new world order movement and take a global, historical view of economics and society. Not number crunchers but thinkers. It's the best commentary I've discovered in years- inspired me to share some videos myself.

All the best, Marcus, the pagan i-banker who reads ancient Greek, may believe the New Physics-Mysticism stuff and hates the Fed.

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Rick Darby said...


I will check out the sources you have provided.

If the New World Order is being advanced, can it be stopped in your view? What do you think the individual should do for self-protection?


I do not trade links.

Marcus said...

I think knowing that most stock market rallies have a strong political component is useful; always following what the Fed is doing and trying to figure out why; taking a genuine global view and investing in Asia in some way, whether through equities or directly (not in RE right now, but even that is better than American RE); having precious metals and following commodities like cooper and uranium; understanding over-population and the demands placed on resources will lead to opportunities in basic things like wheat and water - basically, not being American-centric is probably the best thing anyone can do.

That's my two cents for now...

Rick Darby said...


You must be reading my mind. The rally since March '09 seems at least partly artificial — i.e., politically manipulated to some extent. That doesn't mean one shouldn't take advantage of it, and I have.

But the American economy has a ball and chain that no clandestine or open government intervention can do much about, which is the widespread unemployment and underemployment. People have a bunker mentality and aren't spending like they used to.

Having "globalized" our manufacturing capacity down to a skeleton, except in a few areas such as aerospace and microchips, we can't make up the difference with exports.

I agree with you that the best investments for the near future will be Asia and commodities. They are sure to have their ups and downs, but the risk-reward is in their favor.