-- Published: Tuesday, 22 August 2017 | Print | Disqus
By Darryl Robert Schoon
Ten years ago, I was invited by the brilliant monetary theorist, Professor Antal E. Fekete, to give a talk at his Gold Standard University held August 15-31, 2007 in Szombathly, Hungary; and while there, I and others watched intently as a global credit crunch swept through world markets.
2007 / 2008 Credit Crunch Timeline of Events
Credit Crunch begins with the subprime mortgage crisis in the United States
US Credit Crunch goes Global due to the interaction of world banks and Hedge Funds who also have subprime mortgage backed securities
Aug 9: Debt, due to defaults by subprime mortgage payers, results in the European Central Bank injects 95 billion euros into the European banking market.
Aug 10: The United States Federal Reserve (Fed) injects 43 billion US Dollars
The effects of the "credit crunch", when banking companies stopped lending to each other resulting in bankrupt or acquired banks, were so serious that the Bank of England, the European Central Bank and the United States Federal Reserve had to provide 'bail out' packages in order to make substantial injections of capital into financial markets.
In August 2007, those of us gathered in Hungary were watching history, a history that has not yet run its course. The August 2007 global credit contraction was a signal that something was wrong. Fatally wounded by the removal of gold from the international monetary system in 1971, the wheels of the bankers’ powerful juggernaut of credit and debt were beginning to come off.
In 2008, the worst financial crisis since the 1930s occurred, resulting in the bankruptcy and collapse of Wall Street banks and were it not for extreme measures of zero percent interest rates and unprecedented central bank monetary triage, the cataclysmic economic collapse I had predicted in my book, Time of the Vulture (2007) would have happened.
Instead, the bankers’ day of reckoning was delayed. Credit and debt economies were granted a temporary reprieve until the day when an even more severe economic crisis would prick the bankers’ senescent but still growing bubble of unpayable debt, a bubble that is now about to pop.
Capitalism, the bankers’ three hundred year-old ponzi-scheme, is a balancing act between the bankers’ credit and everyone else’s debt. In its optimal state, credit creates sufficient growth to pay society’s constantly compounding debts. When unable to do so, debt is paid by borrowing against future growth and in capitalism’s endgame, aggregate debt exponentially expands until it can no longer be repaid except by exponentially depreciating paper money.
DRSchoon, How It Will End, March 2014
Today, the bankers’ day of reckoning is at hand. On June 9th, Business Insider CEO Henry Blodgett interviewed legendary investor Jim Rogers about his predictions of a coming crash:
Blodget: And how big a crash could we be looking at?
Rogers: It’s going to be the biggest in my lifetime, and I’m older than you. No, it’s going to be serious stuff. …You’re going to see governments fail. You’re going to see countries fail, this time around. Iceland failed last time. Other countries fail. You’re going to see more of that.
You’re going to see parties disappear. You’re going to see institutions that have been around for a long time — Lehman Brothers had been around over 150 years — gone. Not even a memory for most people. You’re going to see a lot more of that next around, whether it’s museums or hospitals or universities or financial firms.
TOTAL MARKET DEBT AS PERCENTAGE OF GDP
When economic warnings increase, those entrusted with the care and feeding of the bankers’ confidence game take extra-steps to reassure victims of capitalism’s credit and debt feeding-frenzy that everything is alright, there is nothing to worry about, that taking out a loan for a vacation, for a home, for a college education, etc. should not be a concern; that tomorrow’s economic expansion will pay back today’s and yesterday’s borrowing, that the economic tooth fairy is real and the metastasized deflationary forces eroding global economic growth are nothing to worry about.
I don’t believe we will see another financial crisis in our lifetime.
Janet Yellen, Fed Chair, June 27, 2017
THE TIME OF THE VULTURE
In 1991, during a prolonged period of meditation, the following words came to me:
In times of expansion, it is to the hare the prizes go. Quick, risk taking and bold, his qualities are exactly suited to the times. In periods of contraction, the tortoise is favored. Slow and conservative, quick only to retract his vulnerable head and neck, his is the wisest bet when the slow and sure is preferable to the quick and easy.
Every so often, however, there comes a time when neither the hare nor the tortoise is the victor. This is when both the bear and the bull have been vanquished, when the pastures upon which the bull once grazed are long gone and the bear’s lair itself lies buried deep beneath the rubble of economic collapse.
This is the time of the vulture, for the vulture feeds neither upon the pastures of the bull nor the stored up wealth of the bear. The vulture feeds instead upon the blind ignorance and denial of the ostrich. The time of the vulture is at hand.
In 1991, those words appeared implausible and far-fetched. Today, they are eerily prescient. Jim Rogers’ prediction of the collapse of governments and countries as well as the disappearance of such ubiquitous institutions as [political] parties, museums or hospitals or universities or financial firms coincides with what I wrote in 2011:
Humanity is in the midst of a momentous paradigm shift. Governments will fall, natural disasters will increase and the present world will pass away, paving the way for the better world that is to come.
DRSchoon, Silver, the Canary in the Gold Mine, April 12, 2011
Today, humanity is in the midst of a paradigm shift of historic proportions. It is not just capital markets that will change. Today’s paradigm shift involves the rebalancing of universal polarities, e.g. yin and yang, male and female, east and west, light and dark, etc. and while resistance to the new paradigm is evident, e.g. the election of Donald Trump, the GOP war on women, the rise of the alt-right/alt-white movement, i.e. Steve Bannon’s “rootless white males” (his description), etc; such resistance is as futile as it is dangerous.
The current dysfunction of the US presidency and the inability of the two-party system to govern effectively are indications of the widespread institutional failures that occur during deep change, i.e. paradigm shifts. We are in such a period today.
The world is always changing—but not always in the same way. We..find empirical evidence of distinct “change-regimes” in the past [that] were often highly dynamic, but stable in their dynamism. Sooner or later, even the strongest of these change-regimes broke down in moments of what might be called “deep change”.
In periods of deep change, understanding lags behind the movement of events. The world changes faster than our thoughts about it. For example, in the late 1990s, central bankers in many countries continued to think of themselves as inflation-fighters in a new era when greater dangers rose from disinflation or even deflation. Economists in the 1990s (monetarists especially) predicted that large increases in the money supply would cause inflation to pick up again, as would have happened a generation ago. But other factors have been more powerful.
In the United States problems of economic understanding have been compounded by the effect of economic prosperity. The Japanese in WWII spoke ruefully of “shoribyo”or “victory disease”. The Greeks called it hubris and thought it always ended in the intervention of the goddess Nemesis. That lady makes her appearance when wave-riders begin to believe that they are wave-makers, at the moment when the great wave breaks and begins to gather its energy again.
David Hackett Fisher, The Great Wave, Price Revolutions and the Rhythm of History, Oxford University Press, 1996
Our inability to understand deep change is exacerbated by our lack of an experiential context; and the more radical and profound the change, the less we are able to understand and/or accept it. Deep change, however, occurs irrespective of our understanding, acceptance or resistance.
THE CONTEXT OF DEEP CHANGE
My observations of deep change and history did not begin in Hungary in 2007. It began fifty years ago, in 1967, in San Francisco’s Haight-Ashbury district. Ignited by a covert CIA mind control experiment using LSD, see Project MKUltra, the results were not what the CIA intended or expected.
Instead of LSD being used to breakdown Russian agents, it liberated America’s youth from the collective straight-jacket of social repression and cultural control, much to the chagrin of their economic overlords and cultural controllers.
One year before, in 1966, I was a student at Hastings College of the Law in San Francisco studying torts, procedure and criminal law. One year later, I was living on Haight Street and working at the Family Dog’s Avalon Ballroom, the storied venue that hosted the Grateful Dead, Janis Joplin and Big Brother and the Holding Company, Country Joe and the Fish, etc.
That I, a hippie, would fifty years later be writing about credit and debt, the global economy, fiat money and gold was then inconceivable. So, too, is what may happen to the Earth and all those on it.
My current youtube offering, 2017: The Mother of All Paradigm Shifts, a talk I gave August 13th, puts the accelerating crisis in a very different context than the prevailing zeitgeist. Take it for what it’s worth.
Buy gold, buy silver, have faith.
Darryl Robert Schoon
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-- Published: Tuesday, 22 August 2017 | E-Mail | Print | Source: GoldSeek.com