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Here is an excerpt from John Mauldin's "Thoughts From the Frontline" blog entitled Negative Rates Nail Savers:
The next 10 years will see an explosion of government debt and an implosion of the ability of governments to fulfill their promises. Any economic or investment model based on past performance under previous economic conditions will be worthless. As in, just as worthless as the Federal Reserve’s models. We are truly going to have to go outside of the box if we are going to figure out how to get our portfolios from where we are today to the other side of the coming crisis. There is truly no way to predict what our investment portfolios should look like six months or one year or two years or six years from now.
If (big "if", You're On Your Own ) that turns out to be true, what should the small investor do to avoid disaster and have a chance to profit from drastic changes in economic conditions?
The investment conundrum is that discharging debt by currency debasement (inflation) means "Cash is Trash" while discharging debt by default (causing recession) means "Cash is King". Without getting into arcane definitions, for the average small investor the question is, "Will we have inflation or deflation"? Or, stated differently, "Will my money buy more or less of the things I need and want in the future"?
Both inflation and deflation can certainly happen, but not at the same time. Therefore, the sequence of events is extremely important to the investor, maybe more important than the timing of events. The investment choice is whether to spend cash now to buy assets or hold cash to by cheaper assets in the future. It is impossible to do both; the choice is binary.
Thoughts - A Summary
Sense and Nonsense has published articles defining this investment conundrum since its' inception in the late 1990s. The basic problem was outlined in 2001 in an article entitled "The Problem Defined". I believe it is still valid today. The recent election pivoted on the subject of citizenship, immigration and entitlements - the same problems we had at the turn of the century.
My parents and grandparents had a healthy contempt for what they called "Educated Fools". When I went to college, I kept a wary eye out for them. I spotted a few at Texas A&M in the early 1960s, but they were the harmless "absent minded professor" type, recognized as experts and fine teachers in one subject and absolute fools about everything else. It is one thing to make Shakespeare meaningful and quite another to put on shoes that match or remember where the car is parked.
But when I went to Cornell University for graduate school, I found another kind of "Educated Fool" - arrogant, overbearing, loud, out of touch with reality and completely devoid of common sense. (Not wanting to be like them is one reason I don't have PhD after my name) That is the type of "Educated Fool" that dictates global economic policy in the 21st century. They cannot or will not (same net effect) understand that their theories and models are absurd. They have driven America and the world to the brink of disaster.
by Harold Byler
Donald Trump is not a conservative. He is a pragmatist, i.e. someone who is practical and focused on reaching a goal with a straightforward, matter-of-fact approach. When he sees a problem and understands it must be fixed, he doesn't see the problem as liberal or conservative; he sees it only as a problem. That is a quality that should be admired and applauded, not condemned. He does not consider party alliance to be more important than our nation.
Viewing problems from a liberal perspective has resulted in the creation of more problems, more entitlement programs, more victims, more government, more political correctness, and more attacks on the working people at all economic levels.
Viewing problems from the Republican conservative perspective has brought continued spending and denial of what the real problems are, caused by weak, ineffective leadership.
Immigration isn't a conservative problem and it isn't a liberal problem. It’s a problem that threatens the structure of our country. It demands a pragmatic approach, not an approach that is intended to appease one group or another.
The collapse of the economy isn't a liberal or conservative problem, it is an American problem. It will not be fixed until it is viewed as a problem that demands a common sense approach. The Democrat and Republican politicians’ way of fixing things has had no lasting effect.
A Local and National Issue
Either the federal government is limited to the powers enumerated in the Constitution or it is not. If not, then we are no longer governed by the Rule of Law.
When the rule of law fails, we are then governed by the rule of powerful people who ignore contract law, property rights and the dignity of the individual citizen. Those powerful people apply laws selectively to reward their friends and punish their enemies. Selective application of the law is the root of government corruption.
Selective law enforcement can occur at every level of government - from the tiniest school district to towns, cities, counties, and states on up to Washington DC. Corruption destroys the moral authority of government and leads, inevitably, to collapse and chaos.
The only way an American can avoid political discussions in 2016 is to be in a coma. If you are not in a coma, it is going to be difficult to stay sane - that is, to separate Sense from Nonsense.
I believe in Constitutionally limited government and the rule of law (as opposed to the rule of powerful people). Take that into consideration when you visit Sense & Nonsense.
It is a mistake to think the presidential race is the most important political contest, even though it will dominate the news and discussion. Much more important to every individual are the local races for city council, school board, county judge, sheriff and commissioner.
These elected official will determine whether your children are educated and whether you have a safe, pleasant, affordable place to live or not. Who is president will probably not affect your daily life much, but local officials will. Spend your time, effort and money to elect principled people close to home and you will be OK no matter what the president does.
The first obvious thing is that the flow of money and information is: 1) global; and 2) near instantaneous. Those flows have been speeding up for a long time but have now reached the limit of instantaneous. You just can't get any faster than that.
Money has ceased to be a tangible thing. It is just more information to be transferred. Seldom does tangible money change hands any more – just information about who it would belong to if it existed. So, even when we talk about the transfer of money, we are just talking about the transfer of information. We can talk about information and consider money a subset.
The people, institutions and businesses that control information and the flow of it hold tremendous power that trumps military might and wealth. That shifts the power centers of the world from those who have, to those who know. They may be one and the same, but that is far from a forgone conclusion at this point.
From "Money is Intangible in the Information Age", Sense & Nonsense, November 21, 2010
Bitcoin and all currencies, including the US dollar, are just digital entries in a digital ledger. So, what is the difference? The difference is that Bitcoin does its own accounting automatically and instantly without any human input other than the transaction itself.
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