From John Mauldin:
“For a central banker, deflation is one of the Four Horsemen of the Apocalypse: Death, Famine, Disease, and Deflation. It is helpful to understand that, before a person is allowed to join the staff or board of a central bank, he or she is taken into a back room and given DNA replacement therapy, inserting a gene that is viscerally opposed to deflation.”
Death: There will be many more deaths – think Middle East, Ukraine, Africa, and the next big war.
Famine: A shortage of food, whether inspired by drought, politics or war has been normal throughout history. Today there are food shortages in many countries and there are nearly 50,000,000 people in the U.S. on food stamps (SNAP) – the modern equivalent of “bread lines” and “soup kitchens.”
Disease: Ebola, AIDS and drug resistant TB, staph infections and more.
Deflation: Deflation occurs in some assets while inflation occurs in others. Deflation is often good for the middle class, such as gasoline priced under $3.00 instead of gasoline priced at $5.00. But the political and financial elite want inflation and a larger supply of currency in circulation. There are more profits to skim and the debts are easier to repay under inflationary conditions. Deflation hurts indebted governments (all of them) and Wall Street. Central bankers must fight their enemy – deflation – and create more inflation.
Figuratively speaking, the Four Horsemen are trashing our world. In opposition to the Four Horsemen are the Four Rays of the New Dawn.
Gold: Gold has been money for 5,000 years. It represents a store of value and is effectively eternal. Few unbacked paper currencies have survived more than four decades before they are “printed” into worthlessness. Gold will survive and is NOT dependent upon a government or a banker to print it or determine its value. The dawn of a new age is based on honest money – gold.
Silver: Repeat the gold story for silver but add that silver is used as money in commerce, as well as in hundreds of industrial and medical uses. The dawn of a new age has a silver lining.
Communication: The internet has enabled communication and news dissemination from alternate sources instead of from a few major communication conglomerates that spread the “party line” often interspersed with biased news. The dawn of a new age will be based on freer and decentralized communication – not the sanitized and fictionalized news issued by the financial elite and a centralized government.
Individual Action: The political and financial elite thrive on top-down centralized power and control over people, politics, and financial systems. However, YOU can choose to decentralize and individualize your life, finances, thoughts, education, entertainment, food choices, and savings.
Will the transition be easy, painless, and encouraged? Definitely not! Change is seldom welcomed by “the establishment” since the current system benefits those at the top. But every decade brings substantial change and some of those changes shatter the status quo and our world-views.
What will the world of 2024 look like? I don’t know. Who could imagine the trench warfare of 1917 in the year 1907? Who could have foreseen the rise of Russia and China into the world powers they are today from the perspective of the day the Berlin Wall fell?
What can we expect?
- The US official national debt has increased approximately 9% per year for over 100 years. The increase in official national debt from Sept. 30, 2013 to Sept. 30, 2014 was more than $1.08 Trillion. Expect this trend to continue – too many people ride this “gravy train” to expect it will change.
- Currencies will buy less and central banks will promote their anti-deflation agenda since they print the currency and influence its value. Further, major economies are engaging in a currency war and a “race to debase” their currencies. This trend will probably continue – too many people ride this “gravy train” to expect it will change.
- Gold and silver will continue to be hated and denigrated by western central banks and governments. Asian governments, central banks and individuals will continue to love and accumulate gold and silver. Ask yourself why Asians want gold and Wall Street wants paper.
- People around the world will eventually realize the value of their currency is declining and will increase their purchases of gold and silver. A small stream of buyers will eventually become a mighty river of demand.
- When the line to buy bullion is several blocks long, it might be time to sell instead.
What can you do?
- Be suspicious of the “happy talk” and “fear this” pronouncements from governments, central banks, and Wall Street.
- Be your own bank – more real money, less paper and digital currency.
- Stack your real money in a safe place – preferably a private vault outside the banking system.
- Be aware that digital currency can disappear rapidly, as in a financial reset, derivative crash, confiscation, currency collapse, cyber-attack or whatever. Trust and hope that digital currency will SLOWLY lose it value, but have a backup plan for when a crash actually occurs.
- Be wary of the Four Horsemen of the Apocalypse and the trauma they always bring.
Welcome the New Dawn.
The Deviant Investor