- Gary Christenson, The Deviant Investor

We can face reality by swallowing the “red pill” (from the movie “The Matrix). This choice is uncomfortable because it opposes the propaganda from mainstream media, government statisticians, and Wall Street cheerleaders.

The “red pill” road is difficult and sometimes lonely. Gold is a “red pill” choice.

The “blue pill” path is easier and reassuring. Other “blue pill” advocates will applaud your choices. The herd approves this delusional path. Think debt-based fiat currencies.

The “blue pill” is best swallowed with a healthy slug of whisky, anti-depressant drugs, a few hits from now-legal “weed,” and platitudes from the evening news.

BLUE PILL REALITIES:

• U.S. government debt: Congress, in their wisdom, will approve appropriations larger than revenues, borrow the deficit, and accept “donations” from interested parties. It’s all good… except the U.S. government is in debt over $22 trillion and has unfunded commitments for $100 – $200 trillion more. Their only plan for addressing massive debt is to increase borrowing and hope.
• Even a few “blue pill” advocates understand this Ponzi scheme will end in tears.
• Interest Rates: Interest rates are near multi-generational lows. The annual debt service paid by insolvent governments and indebted “zombie” corporations is high, even though they enjoy abnormally low rates. The “blue pill” advocates cling to the idea that interest rates will forever stay low or fall negative because they must, without destroying the currency. Another word for this belief is “CRAZY.”
• FASB mark to myth: After the 2008 crisis the FASB allowed a dodgy rule change. Banks valued certain assets with considerable latitude instead of using market value. This policy perpetuates the illusion of “extend and pretend” because it “marks to myth” or “marks to model.” Another word for this practice is “DESPERATE.”
• GOLD: The “blue pill” story claims gold in unimportant, T-Bills and other pieces of debt-based paper are valuable, and gold is a useless relic in a central bank created debt-paper world. “The powers-that-be” empty western vaults, ship the gold to Switzerland, recast it into one-kilo bars and export the gold to Asia. Why?
• “Blue pill” people can’t explain why central banks are buying more gold, or why China, India and Russia want gold, not digital dollars.

RED PILL REALITIES:

• GOLD: Gold has retained value for thousands of years. Gold is respected and recognized everywhere. But politicians and bankers can’t resist printing more unbacked paper and digital units from “thin air” to create the illusion of wealth. All unbacked currency systems have failed. Human greed is unlikely to change.
• If the intrinsic value of the currency (dollars, euros, pounds etc.) is zero, it is NOT money, but only a currency unit, a “blue pill” delusion that devalues as governments and the banking cartel strip value from currency units.
• DEBT: Global debt exceeds $250 trillion, not counting unfunded liabilities, dangerous derivatives, and other contingent liabilities. Even “blue pill” economists realize the debt can never be paid with currency units of present value. The debt must increase, be “rolled over” with inflated or hyper-inflated currency units or defaulted.
• Inflation is the politically sensible choice, as demonstrated by several thousand years of history. Default is “unthinkable.” If debtors default on $ trillions, then $ trillions in counter-party assets become worthless. TRAUMA! Inflation and devaluation are easier and more likely.

CRAZY IS CRAZY, EVEN IF POLITICALLY CORRECT:

• There is so much “crazy” in the world, it almost looks normal.
• The banking cartel creates trillions of dollars in debt every year. Other trillions are “repaid” by borrowing more. Total debt increases. Or… borrow on one credit card to pay minimum payments on another credit card, and then apply for a new card. Repeat forever…
• Public and private pension plans are under-funded by many $ trillions. Some, perhaps many will fail. Expect demands upon congress to create several trillion dollars and bail out devastated voters when their pension income disappears.
• Quantitative Easing or QE or monetizing debt. Global central banks have created over $20 trillion in “thin air” currency units and bought sovereign bonds, stocks, ETFs and gold. “Blue pill” advocates assure us QE is necessary and okay. “Red pill” realists know consequences will bring misery to everyone but the political and financial elite.
• Trillions of euros “yield” negative interest rates. Why pay a fee to an insolvent government that borrows your euros knowing they will repay with devalued euros? Another word for this practice is “CRAZY.”
• The U.S. government runs trillion-dollar deficits during a period of economic expansion, low interest rates, and low official unemployment. Deficits, already far too large, will double and triple in the upcoming recession. Other words for this practice are INSOLVENT and UNSUSTAINABLE.

BLUE PILL SCENARIOS:

• President Trump wants to win reelection in 2020, which requires a strong economy and low unemployment. Hence interest rates will stay low, banks will loan dollars, and the Fed will create more QE to “stimulate” the economy.
• Expect the Fed to engage in extraordinary “stimulus” including outright purchase of stocks to support the market.
• President Trump hopes QE will delay the inevitable recession until a month after the 2020 election. However, his enemies will encourage an early recession to prevent his reelection.

RED PILL SCENARIOS:

• There is a limit to the amount of debt an economy can support, even with low interest rates. The U.S. economy hit debt saturation in 2008 and will again—soon.
• The Fed issued trillions in debt, guarantees, swaps and loans in 2008 to “fix” an excessive debt problem. Some would claim the program was successful. When the next crisis hits, and it will, expect more of the same. It might work again, but at what cost?
• President Trump has intense opposition. But if President Trump and the Fed cannot keep the economy and stock market levitated until election day in 2020, expect a recession, spiking unemployment and a Democratic sweep in 2020. The incoming socialists could remake the economy, an echo of FDR’s New Deal.
• The Fed’s QE and easy money policies levitated the stock market, bond market and real estate markets. Those markets are vulnerable when the debt bubble pops.

From David Stockman:

“The single greatest threat to capitalist prosperity in America today is the insidious, in-grown Keynesian groupthink of the monetary central planners who run the Fed and dictate its policy narratives to the echo chamber via Bubblevision.”

“It’s all wrong, this Keynesian model for central banking – completely, irrevocably, abysmally wrong.”

From Alasdair Macleod: (Pay attention!)

“The next credit crisis could change everything.”

“The starting-gun for the next credit crisis has already been fired. A reversal of expanding cross-border trade is in full swing.”

“Russia and China have distanced themselves from the west’s financial system, so it can collapse without taking them down.”

“They [politicians] will struggle to extricate themselves with the only means at their disposal. More money. More socialism. More raping the productive economy by accelerating wealth transfer through monetary debasement. They know nothing else.”

Read: Bill Holter: China’s “Weight”

CONCLUSIONS:

Swallow the “blue pill,” chase it with alcohol, take several hits from your favorite reality-modifying drug and listen to promises from a smooth politician who tells everyone what they want to hear. Trust the financial and political elite will take care of you, dollars will always be valuable, and double-down on your belief that “it’s all good.”

OR

Swallow the “red pill,” realize that crazy policies and massive debt will produce unhappy results, gold will remain valuable long after unbacked debt-based fiat currencies have been ground into dust, and that silver is a great choice in 2019.

Ayn Rand: “We can ignore reality, but we cannot ignore the consequences of ignoring reality.”

The “red pill” road is discouraged in the U.S. and gold and silver are unpopular. That will change, perhaps soon. A risk-reward analysis points toward gold and silver instead of stocks and bonds.

Miles Franklin (1-800-822-8080) distributes neither red nor blue pills, but they will sell golden and silvery coins and bars. Call them, take your personal red pill, and protect the purchasing power of your assets and retirement funds.

Gary Christenson

The Deviant Investor

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 -- Published: Thursday, 13 June 2019 | E-Mail  | Print  | Source: GoldSeek.com

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