Marc Faber reassures me that we are doomed

It’s mildly reassuring when another analyst is suicidal about the future.  It reassures me that I am not totally alone.

I disagree with Faber on two points however. 

First, it’s unlikely we will see hyperinflation and the “pure” monetisation of the trillions in US debt.  No hyperinflationist thinks through the precise mechanism of monetisation.  To increase the budget deficit by even more, the US govt will have to increase its own debt levels.  Bonds yields will likely spike at some point.  Then the Fed will try to buy the bonds to keep prices up (yields low).  This will allow relatively limited leakage of money to the US govt’s friends, but in no way plug the hole left by the collapse in the housing bubble.  Not only will govt spending not replace the hole left by Peak Credit, govt spending further distorts the economy, resulting in more failed private businesses the further away you get from the US govt’s largesse. 

You’ll end up with millions of debt-slaves sycophantically praying to the bankers and the Fed govt, running around doing the bidding of their Masters, and economic chaos and widespread starvation beyond the tiny green gated communities of bankers and govt employees.

Kabul is a good future model for the major Western economies (especially the US): There are some massive luxury (tasteless!) villas going up in Kabul.  I’ve seen them.  They are the houses for the govt ministers and associated hangers-on from the opium trade.  Nearby are the hotels the UN employees frequent.  Beyond these few blocks, hundreds beg for food from aid agencies and there’s complete chaos.  But within these tiny communities connected close to the corrupt govt, the opulence is incredible.  Govt banquets are frequent, whilst literally right outside the banquet halls, local Afghanis are starving.

That is our future.  Kabul is our future. 

And remember – Kabul is a city now created by the US.  It is what the US govt “wanted” to create (or at least what it did create after taking over). 

So that’s the best the US and UK govts can do today when “creating” a city.  That’s the proof regarding what they are capable of.  Sad, but true.

So that’s what they will continue to produce at home.

“Kabul” does not spell hyperinflation to me.  It spells stag-deflation with a possible sudden depreciation of the US dollar at some point – but not hyperinflation.  So I still think US govt bonds and gold are a better bet than US stocks if I was forced to choose.  Of course, long-term, farmland, security services, and govt jobs will all be highly sort after.  But I wouldn’t be buying canned food just yet.  You don’t want it to go out-of-date before you need to eat it.

Second, there will be war, but it won’t be to distract people from their debt problems.  It will be over the rapidly diminishing supply of food and water and oil.  The malinvestments caused by the decade-long low-density housing boom in the West have actually caused massive environmental destruction as well as financial chaos.  Literally millions of acres of fertile arable land across the US and Australia and other countries has been re-zoned and “redeveloped” (destroyed) for what is euphemistically termed a “more intensive use” (i.e. “for speculative property development”) – just at the time when unprecedented climate change has destroyed many “food basins” around the world (Myanmar, Thailand, Cambodia, Australia, China, Europe and the US have all experienced tsunamis, typhoons, hurricanes or drought in their vital farming areas).

CCD is also a massive threat to our food supply.  It is still a problem that no media organisation wants to talk about.  The cause is unknown (I suspect GM crops, but who knows?).

No one seems to have connected up the housing boom and bust with massive unprecedented and irreversible environmental destruction. 

But they will.  Eventually.

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