Never forget, even for an instant, that the one and only reason anybody has for taking your gun away is to make you weaker than he is, so he can do something to you that you wouldn't allow him to do if you were equipped to prevent it. This goes for burglars, muggers, and rapists, and even more so for policemen, bureaucrats, and politicians.
--Alexander Hope

Stuck on Roof for Katrina

Wednesday, August 24, 2011

The Great Collapse Has Officially Begun

Submitted by Phoenix Capital Research ;

I’ve been warning of this for well over two years. My primary warnings were:

1) That 2008 was just a warm-up
2) That the REAL Crisis had yet to unfold
3) That the REAL Crisis would make 2008 look like a picnic

Well, the period I’ve been warning of is now here. What’s happening right now is not just a market crash, bear market, deflation, or any other item related to just one asset class.

Instead, this is a collapse of the entire US monetary and political system and the mentality of spending one’s way to wealth.

For 80+ years, the US has operated under a crony capitalist system in which politicians dole out political and economic favors to the chosen few whose bribes/donations funded their campaigns.

This system was aided and abetted by the US Federal Reserve, which dealt with any and all economic issues by printing more money. Whether it was the Asian Crisis, Long Term Capital Management, or the 2008 Crash, the Fed dealt with the issue by opening the floodgates and flooding the financial system with liquidity.

Aside from making moral hazard (the notion that those large firms who screwed up were never actually allowed to fail) the bedrock of the financial system, the Fed also blew a credit bubble which in turn funded bubbles in virtually every asset class: bonds, stocks, real estate, emerging markets, even some commodities.

Indeed, the vast majority of US economic growth over the last 40 years has been fueled by the Fed’s loose money policies. Bill King, an analyst and investor whom I admire, shared the below chart with me a while back. It charts US GDP growth in nominal terms (the dark blue line), the performance of the Dow Jones Industrial Average (the black line), and REAL GDP growth or growth that accounts for inflation (the light blue line).

As you can see, when we account for inflation, the US economic “miracle” of the last 30 years is in fact not all that miraculous. Take away easy credit and Fed funny money and the US GDP has barely grown at all since the ‘70s.

When your entire financial system is built on debt eventually you hit a brick wall. We did this in 2008. The Fed barely held the system together by going “all in” and funneling over $11 trillion in bailouts, backstopping the major US banks, and transferring north of $2 trillion in garbage debt to the public’s balance sheet (these are just the moves we know about).

This effort has now failed as the world collectively realizes that the Fed cannot hold the system together. This began to become clear when QE 2 spent $600 billion and the US got at most three months’ worth of improved economic data (while inflation exploded throughout the global economy, leading to riots, coups, and more).

In simple terms, we’ve now entered the Real Crisis, the END GAME, for our current monetary system. Before the dust settles on this mess, the US and its political, economic, monetary structure will look very very different.

However, before we get there, we will see riots, civil unrest, possibly martial law, for certain a Government shutdown, bank holidays, a debt default/ restructuring, the re-instatement of the Gold standard or something like it (possibly a basket of commodities), food shortages, and more.

We will also see trade wars, possibly another World War, a temporary backlash against globalization, a de-consolidation or fragmentation of corporate America, and other items.

In plain terms, we’re entering a period in history that will rival the Revolutionary war. This country will be very very different by the time it has ended. Many people will lose everything in this mess. Yes, everything. So if you have yet to take steps to prepare for this, you need to get moving NOW!


  1. People teased me when I sold the too big house I could afford, downsized to half of what I had, paid off all my debt, and paid cash for a realiable truck, guns, reloading supplies and food supplies, power sources and lots of books to read. I may not have much, but I can get by if it gets as bad as I think it will.

  2. HA HA Who's laughing now.And it will get worse.You did the right thing.And by the way I'm glad all turned out well with Barkley.Thanks for stopping by.