(While it is humorous is a perverse way, the driver of the powerboat in the video and several passengers suffered some real injuries. Among them a ruptured disc, broken back, a couple of shattered eye sockets, a broken leg, and a broken wrist. It could have been much worse.)
Your pension fund is fine. Your IRA or 401/403 is way up from 2008. And despite the naysayers and doom doctors, the stock market has managed to show remarkable gains during a time of a very sluggish economy.
That’s what we want to believe. And the trends have been solid—even when bad news about the economy comes out, the markets climb to another high. If this isn’t bull market, what is it?
A bubble, to be precise. Bull markets are based upon strong economies. Not economies floating along on printed money and dirt-cheap interest rates. Sure, trends are great. Until they aren’t.
Bubbles are not the product of markets, but of bankers, governments and printing presses. Think of the real estate market in 2008.
If you are old enough to have seen your investments in the stock market plod along since the mid-90’s or earlier, you also are old enough to have watched them lose half their value. The bubbles popped. Several times.
But what’s a guy from Main Street supposed to do to survive in a game run by Wall Street? The interest rates are so low, well below the cost of living, that saving money is simply guaranteeing that it will lose its purchasing power.
The game is rigged. Governments use plunge protection teams to step in and support downward moves in the market. The big banks have been caught red-handed manipulating the currency, commodities, and stock markets. Without any serious consequences of course.
So we all know the markets are anything but free. And, anything but regulated by laws that mean anything. But what else can we do?
Our employers generally offer plans that are good at one thing only—enriching the investment firms that run them. They get paid regardless of how the investments perform. And if the employer is offering any sort of a matching investment, it seems foolish to turn it down. And if it was so risky, why is the employer offering me free money to invest?
Recent investigations have caught the major banks red-handed committing fraud in the money, stocks, and commodities market. Consequences? If any, only some fines that made their crime very profitable. Heads don’t roll, anymore, except for the little ones.
Financial data put out by the government and dutifully reported by the presstitutes, says that unemployment keeps getting better, inflation is negligible, and the cost-of-living is doing just fine, thank you. Of course, they change the rules by which they arrive at the figures, as needed. And nobody notices the revisions they post a year later, completing negating or reversing their prior figures.
There is comfort in believing the delusion. Everything is awesome! And if not exactly awesome, its going to be OK. And if not OK, rest assured that we’ve got it all under control.
Trust your government? The same government that refused to stop spending more than it takes in and has driven up the national debt to levels not seen since WWII? Trust the same government that has lied about everything from Obamacare to Benghazi? A Congress that passes secretive bills that their constituents are clearly against? A Congress and DOJ that, even if it investigates, never prosecutes?
But most of us do. If we don’t exactly trust, we have hope. Hope that someone in that monstrosity of bureaucrats and regulations is looking out for us.
It’s in our nature to expect things to continue as is. To not expect really bad things to happen. Regardless of the chance of a very bad year of weather, farmers continue to plant. Regardless of the high level of divorce, couples still get married. Regardless of the chances that we might not get a job with a degree, we choose to go to college. To do otherwise would be to simply give up on life.
And that’s why most of us are woefully unprepared when things go wrong. It’s not in our nature to expect, and therefore, prepare for the inevitable avalanche after a long period of snow. For good or bad, right or wrong, it’s who we are.
That’s why we don’t like to think about or anticipate what is coming in the markets. It’s going to be different this time.
Like it or not, we are all occupants in that Falcon 38 powerboat cruising way too fast for the conditions. Our government and bankers are at the helm, telling us by their words and actions that things are fine. Print money? No problem–hey, nothing has happened so far. And if we see a wake ahead, will just throw the throttle all the way down and print some more! Enjoy the ride and hope for the best.
Or be smart and take seat and grab the rails.
It brings to mind my own hard lesson in the top hatch of an armored personnel carrier. Along for a guest ride, I took the position in the top hatch, behind the machine gun mount. The driver set off on a course of sharp turns, mowing over trees, jumping across low spots and otherwise obliterating anything in the way. I soon learned that no matter how firmly one grasped the rails, the human body gets turned into a loose cannon. Thankfully, all that I suffered was a bruises and feeling like the ready fool that I was.
Our economy cannot continue on its speedy course of rapid debt accumulation, easy money, and a corrupt government that refuses to hold criminal bankers and corporations accountable. Debt never evaporates.
The economy, as we now know it, no longer has anything to do with capital—the use of saved money to invest in and grow business and create jobs. It is now based on credit. You and I buy much of what we need on credit. And everyone up the chain does the same. It’s the J. Wellington Wimpy economy of “I’ll gladly pay you Tuesday for a hamburger, today.”
A credit-based economy is not normal. That’s why the Popeye character Wimpy’s proposition to eat today and pay you tomorrow was so funny–back then. The idea of extending credit for something other than an absolute necessity wasn’t common amongst past generations. Today we just don’t get the humor. It’s our way of life.
Credit is based on faith—believing that the person you issued the credit to will be good to pay the money back. Never in history has there been an unbroken run of faith. Eventually, somebody decides to pull their stuff out of the fire, because only those who leave the burning building first, make it out with their money.
Who is going to pull out first? And when will it happen? Nobody can say. The bigger concern is not when or why, but do you want to have your future riding on the outcome?
If history tells us that debt never evaporates but must and will be accounted for, it also tells us other things that are prone to happen when markets collapse. Governments that are broke raise taxes. That pension you are counting on will be smaller than you think, due to taxes. After all, when people aren’t employed or making enough money to tax, it has to come from somewhere else. Pensions are ripe plums to politicians.
That IRA or 401/403 account that you have is owned by the government, thanks to the fact that it contains deferred taxes. You’ll find out who really owns it when they try to fiddle with the contents. Either through taxes or by regulating in what you can invest in the future. Like government bonds, when nobody else is willing to buy them. In the worse case, they have the power to roll over your tax-deferred savings in the touted Guaranteed Government Savings Account, a vehicle some have propose to provide the money needed to bail out the Social Security system, which is fast going broke.
And if Europe is an example, we can count on laws that will legalize banks raiding part of your deposits to cover their losses. A bail-in. After all, we will be assured, they are too big to fail. Our dear politicians will rob us for our own good.
Doom and gloom? Paranoia? I hope so; it would be good to be wrong, or at least not experience what is likely coming in my lifetime. But is it wise to gamble the only savings we have for our future by betting on the integrity and abilities of a governments that have proven they are incapable of and unwilling to balance their checkbooks? To trust politicians who will be long gone before the consequences of the laws they pass come to fruition?
One morning we are all going to wake up to a different world. Life is like that. Perhaps the worst collapses will come suddenly. Or they may play out gradually over a longer period of time. But history is clear on this—a system based on credit and debt doesn’t last. Not for individuals or governments. Maybe we should pull our irons out of the fire before it does.