Post emailed to Dinar Recaps
Thoughts From Memphis:
Of the many blogs that I have sent out in recent months only one topic has been given special attention. I felt it important to begin our journey with an entire series devoted to socialism and it's many destructive properties.
I received lots of positive feedback from readers and have never regretted the time spent in that effort as socialism's effects have continued to daily rear their ugly head all across the developed world.
My attempts to share the impossibility for governments to fulfill their promises indefinitely is playing out right before our eyes daily all across the globe. This unraveling of socialism brings with it other manifestations that are following like clock work such as government cutbacks and civil unrest.
Such unrest has been expected tho, and governments have been preparing for some time to handle the problem. Is it coincidence that the UN arms control treaty is to take affect Dec24? Will our president defy the Senate and via E.O. call for this treaty to be enforced in America? Stay tuned.
My aim today is to bring some focus to the subject of banking bail-ins and recognize that it is yet another evidence that as many western nations face the challenges ahead they will react predictably.
We are being told that banking failures going forward will not be covered by government. The tax payer will no longer be handed the bill.
This is not out of a newfound love for the citizens but is more of a function of the debt levels held on government balance sheets which has reached levels that finally require some restraint.
My Nov16 blog on banking bail-ins was in response to the G-20 meeting that week but we need to see past the threats, the surface discussion, and look at the why, the things that are driving such talk.
Martin Armstrong has been stating consistently that this grand system called socialism will ultimately be allowed to crash and burn and that in the end governments will simply default on their obligations. I have shared his opinion and have yet to find any real world evidence to change my position.
The only other option to default would be for the currency supply to be inflated to infinity until it's value plummets in response to the loss of confidence. Such a scenario is not likely tho.
All indicators are that the cycle of decline, of deflation, will rule the day. Today we cheer at the drop in fuel prices and governments predict happy days ahead from the cost savings in all sectors but in it's final stages this cycle of decline will not be our friend and the entire developed world will beg for inflation.
You may have noted here that I have ignored the option of "growing" our way out of debt thru economic expansion. This was not an oversight tho. The best models that I have seen for such a scenario tell us that it is EXTREMELY unlikely and that even in a perfectly static world it would take hundreds of thousands of years to do.
In this follow-up by Martin Armstrong he again sounds the alarm as he gives an important clarification that banking bail-ins are by definition nothing new as banks have always had ownership of any funds left on deposit.
In fact, and this may surprise some, I am not convinced that we will ever see such an event take place on a large scale. I won't bore you with all my reasoning here but it is along the lines of asking why the IMF/G20 have been so public on the matter.
On the heels of "Cyprus" the Dutch representative of the ECB made a very public remark that Cyprus was to be the new model going forward.
Armed with the knowledge that capital moves in anticipation of an event rather than in a reaction to it, I suspect that such public "threats" may simply be a motivator, a driver, to reverse the extremely deflationary trends in the world that are scaring the central bankers.
I would argue (correctly) that their greatest fear is a cycle of deflation. The entire world is sliding into this vortex of decline and the resultant decline in the velocity of money as it seeks safety and goes into hiding run very much contrary to our debt based money system that needs expansion.
Can you name any large corporation that is showing signs of true financial health and making large capital investment to expand their base and grow?
When I watch the financials it is quite the opposite. Companies are buying back their own stock at unprecedented levels.
Forget large retail firms for a moment and look simply at the big banks for evidence! The layoffs have been massive for a full two years now and they continue unabated. These daily reports are all evidence in support of the trend and that trend is not expansion.
So how to prepare? Should we (or can we) prepare?
For the average family with the means to do so I believe we can weather the economic storm without drastic or extreme change. Seeking balance thru some simple diversification we can shield ourselves in many ways along the lines of protecting capital.
I am not an advisor and am not giving advice but simply offer an opinion that protecting capital might be a bigger consideration for most than seeking a return on capital.
Placing money into such places as physical property (land) and various other physical assets that might range from precious metals and jewels on one end of the spectrum to basic barter items such as bullets and whiskey on the other end. (haha, how's that for random?)
I have noted for over a year now that many asset classes such as rare art and collectible cars are showing record increases in pricing. Capital is not moving, it is parking.
Does anyone in your family grow a large garden? Just a thought that is increasing important if we live on or near a large city as any large scale disruption to our "just in time" food inventories would not be pretty sight.
Have you considered placing funds outside of your home country as a hedge of protection against total default? Firms who specialize in this type of service will be quite busy in the days ahead and you'll want to deal with people who truly know their business.
There are little hotspots (of opportunity) appearing all over the globe as nations react to the changing times. This then spells O P P O R T U N I T Y for us if we simply open our eyes.
Earlier today Simon Black released a blog speaking of (all places) Estonia! Who would have thought right? It turns out that the Estonian government has recently introduced an “e-residency” program for foreigners. I am simply opening the door here for readers who want to explore some options. Walk thru it if you wish.
I have typed more words here than planned and so will close with the following from Martin Armstrong. He offered this as an important follow-up for folks to his earlier blog on the same day, Nov16. I believe it has value to us all as we seek a balanced perspective of our world.
[Memphis note: any highlights below are from the author as I am done talking.]
LEGALLY MONEY IN A BANK HAS NEVER BEEN YOUR’S – nothing has changed. What has changed is that government is reneging on the New Deal and Socialism.
The entire reason for creating the FDIC was for the government to regulate banks and thus guarantee them. The money is simply NOT yours and NEVER was once you deposit it into a bank. You become the same as a shareholder possessing merely a claim as an UNSECURED creditor in the case of a bankruptcy.
G20 is recognizing this LEGAL status and simply saying – HEY, there is NO obligation to bail anyone out.
Remember I explained the Constitution is NEGATIVE not POSITIVE and that means there is NO legal obligation upon government to do anything for society but restrain its own actions.
This is part of the DEFLATIONARY warning I have been saying all along and getting a ton of [negative feedback] for. This is NOT going down the road of HYPERINFLATION – this is DEFLATION.
The destruction of capital not the expansion of it. I have warned this is the COLLAPSE of Socialism. That means government walks away from its promises – it will not print money into oblivion.
Governments are walking away from Socialism. That is the ONLY change – nothing else. Nobody stole your bank account because it was NEVER yours to begin with. This is being completely misreported once again. If you do NOT understand the system, how can you make claims about it? People will act in the exact wrong manner with false info.
BEWARE of sophistry here. These statements are NOT true. Money did not die nor did anyone take your account, which was legally NEVER yours to start with.
When you deposit money in a bank, you are agreeing to allow them to lend it out meaning its is not your’s anymore. If you deposit a $20 bill, you do not get the same exact $20 bill when you withdraw.
I do not know how I can explain this any better. They simply reneged on bailing out the banks. The last collapse 2007-2009 has been devastating.
I keep warning liquidity is down 50%, then they are hunting money like crazy stopping global capital flows resulting in higher systemic unemployment with greater volatility on the horizon.
Go ahead and withdraw $20,000 in cash. Then the police will stand right behind you and confiscate it under Civil Asset Forfeiture presuming the MONEY is guilty without having to prove you committed any crime. Reasonable people for not carry $20,000 in cash – you must be a criminal in their view.
This is a serious issue that should NOT be spun to scare people. Come on. These stories can seriously hurt people.