TIME FOR DINNER AND YOU ARE ON THE MENU It's been quite a while since I've written one of these essays but I believe we've reached a significant juncture, or more appropriately a rupture in time where a further one seems warranted. For those of you who have read my previous forecasts of doom and gloom, given current economic circumstances, maybe further ponderance is required before petitioning my immediate transfer to the local "nuthouse". I will be the first to admit that my calls, although completely right, were a year early. Nonetheless the financial landscape has already undergone a paradigm shift these last six months and the primary reason why it's tsunami ripples have not reshaped society is simple..time lag. We always see the lightning first before we feel the earth shaking thunder. Make no mistake, when the rumble reaches the earth's i-pod carrying "sheeple", the shift in the landscape will be nothing short of a geologic grinder. In hindsight, the primary reason why my calls were premature was simple..I completely underestimated the blatant stupidity of the powers that be. Recession, depression, booming economies are all part of the natural economic cycle. Recession and depressions are especially useful "weeding" processes where the weak, sick and inefficient companies, businesses and consumers, that benefitted during the "rising tide lifts all boats" of the boom times are weeded out of the system thereby laying a solid foundation for another boom cycle based on solid fundamentals. Tis has been the way since the beginning of time, that is, before politics, economics and mega business merged into global octopus controlled by people who make Al Pacino's character in Scarface seem like Gandhi. After successfully dumbing down the global populace from our grandfathers hard working, suspicious, enquiring mindsets to our current consumerist fiend status, thereby precipitating a low point in human evolution after just two generations, our ruling elite grew over confident and arrogant. They started to believe in their own power drunk bull***** wherein governments can endlessly print money and hand it over to consumers via asset inflation (house price appreciation) enabling them to spend on products whose manufacturers stock price soars and everyone is happy. The monetary system can only survive as a belief system for so long, thereafter basic physics come into play, just ask Mugabe. Economics are basically an energy balance equation, kilojoules have to be expended on both sides of the equation in order for a trade to occur. The sole source of the few kilojoules that were on the input side of the equation has been the poor toiling in sweatshops predominately in the east. The output is dominated by the western middle class where kilojoule input was near zero, let alone the equal required for the trade to occur. Financial services companies were the biggest beneficiaries from the abomination of rudimentary mathematics as they took the money made out of thin air, and via fractional banking and leverage, generated 100x more money, also out of thin air. This explains the huge jump in inflation we experienced earlier in 2008 where the price of everything literally shot through the roof due to the newly created worthless zillions chasing the same tangible assets. To most, the last three months would seem surreal, wherein the price of oil and most commodities are down in excess of 70%. All of this price action of course is attributed to a resurgent dollar, whose rise in this time frame is nothing short of spectacular. The explanation thereof is far less spectacular. You see, the dollar has been and still is, at least for now, the world's reserve currency. Hence if anyone wants to liquidate investments they will be settled in dollars and given the massive liquidation by risk averse investors scurrying into cash across all sectors, there is currently a huge demand for the dollars required for settlement, which obviously will TEMPORARILY drive up dollar strength. Given the trillions the American government is rapidly printing to rescue the system from collapse on a weekly basis, hence in effect devaluing it, tis only a matter of time (probably months) till China, et al dump their massive dollar holding for a more secure storage of value...probably gold. On the topic of gold, the price currently broke through USD800 today and trading down at USD792. Do me a favour; try and buy physical gold anywhere on planet earth anywhere near this phony price. The price of gold we see flashed on TV screens daily are futures contracts traded predominately in New York and London. These are contracts not physical gold and are basically promissory notes of delivery of the physical gold to the bearer at some future date. To date, they have almost exclusively been traded way before expiry with no one actually exercising the contract i.e. taking delivery of the gold. I suspect that this is imminently about to change and wouldn't be surprised to see Comex go bust together with their phony gold price. Gold is the canary in the mine and a central bankers worst enemy hence there are a myriad of reasons to suppress it's true value. Even though I suspect long term deflation after some initial hyperinflation (due to government injections), I'm convinced that gold is going much much higher going forward. Coming back to ramifications on society at large from the global economic crises, I am sad to say, I sincerely see no way avoiding it. The scary part is I think it's inevitability was "calculated" and planned decades ago. My energy balance equation mentioned above also applies to populations. There are simply far too many of us to live sustainably on the planets finite resources. Those that do not balance their carbon input and contribute to global GDP, will simply have to go to enable the rest to survive..at least this is the way the "powers" that be see it. Few are aware that the world's largest economy (US) was on it's knees in August 2001. But with economic hardship comes social turmoil and the constitution back then was far too liberal to effectively deal with the social backlash from an economic depression. The events of 911 effectively saved the US and global economy by inducing mass patriotism and united people's energy to direct itself against world terrorism, something the military business complex has taken full advantage of. The darker side was that the US constitution was morphed into that of a pseudo police state with the department of homeland security and FEMA given powers that would have never been even imagined a few years earlier. Make no mistake, they know what's coming and are now prepared to effectively deal with it. Wrt South Africa, the social aspect will be of much more concern than the economic one. Yes we will be severely affected by the coming worldwide depression but relative prudent lending standards of our banks will limit the damage. The real problem is that we already have the majority of our population (both legal and illegal) living at or below the bread line. If you think crime is bad with criminals killing for plasma TV's, just imagine how bad it's going to be when millions of otherwise law abiding citizens enter the criminal fraternity not for material gain..but survival. Worldwide this all could have been avoided years ago by not enabling so many "stupid" people to easily get rich and prosper. That wasn't progress but rather the fattening up of the proverbial pig before the slaughter. In summary I seriously plan to enjoy this festive season as I suspect subsequent ones are going to be nowhere near as festive. I wish you all a merry Christmas and festive New Year. Regards
