We are at the precipice of war, and this is a call to action. While it might not come tomorrow, the threat does grow by the day as conflict between the largest and most powerful nation states becomes inevitable, driven by the impending implosion of the empire of debt accumulated by Western democracies, and by the yearning of Russia and China (and their surrogates) to escape the constraints of almost 70 years of American hegemony.
I am not talking about another one-sided skirmish in the desert, but rather a real war, where satellites fall from the sky, ships sink, supply chains are disrupted and there is a loss of life not seen since the last century; a war of such a magnitude that few Westerners alive today can comprehend it. Such a war will alter the world as we know it. And, reading the tea leaves, it seems there is little we could do now to stop it. At this stage, all that is missing is the spark that ignites the inferno. It might come tomorrow, it might delay a while longer. We can prepare, but preparation takes years and years, and requires a threshold level of certainty that the threat exists, that it merits attention, that it demands action.
Why do our kids’ novels and movies (“Hunger Games,” “Divergent”) assume a game-changing war, but writers and talking heads on our mainstream news sites and channels serve up mindless banter about the Kardashians, the climate, Twitter trends and gender engineering? Even thinking Americans have traded serious conversation about geopolitics for Facebook page updates, thereby providing every intelligence organization on the planet the opportunity to further profile them. We are sinking further and further into blind ignorance about how the world really works, even as we strengthen the powers threatening us.
Are you still with me? Then read on. You need to reprioritize your life today and start fulfilling the most important obligation you have to your family aside from serving God. It’s not your next vacation, a new car, or a club membership that I am talking about. No. It is the need to protect and provide for your family in a conflict situation where the supply chain no longer works. Do you think your wealth will protect you? Or that ready access to modern aircraft will make a difference? Or maybe you are fortunate enough to own a second home, or even a boat? I am sorry to say that these luxuries will prove all but useless when the coming storm arrives.
If you question my advice, then tell me, why did Mr. Jamie Dimon buy an island? Or why does Hank Paulson actually live on one? Or what about James Cameron, who up and moved to New Zealand? Or the thousands of bankers and hedge fund managers that have sought safety in havens throughout the Caribbean, and in Central and South America? Oh, you didn’t know about that? Or maybe you are having trouble placing those names? Well, Mr. Dimon is the current chairman and CEO of J.P. Morgan/Chase Bank. Mr. Paulson was the chairman of Goldman Sachs, before becoming the U.S. secretary of the Treasury. And Mr. Cameron is the director and creative genius behind the movie “Avatar,” among others – which made him a billion dollars or so. But don’t be envious. Based on my experience building havens, Mr. Dimon and Mr. Cameron overlooked some serious geopolitical threats during their haven selection process, and this is despite their huge resources, connections and intuition about where the world is going. In my opinion, Mr. Paulson made a wiser choice to stay in North America, and so have hundreds of others.
Let me explain further. You see, each of these very smart and successful people understands that the political leadership of our nation, irrespective of party affiliation, are as much in denial regarding the threats we face as they are wholly unprepared and ill-equipped to make the hard financial decisions that are essential to preserving our way of life. They recognize that we are steaming right along, business as usual, such that virtually every governmental action is partisan and is made without restraint or consequence, and that the population remains blissfully ignorant as to how this inability to change direction tightens the proverbial financial noose around our necks. Think about it – how many times have you heard a politician or member of the media comment about the size of our national debt and how our path is unsustainable? Yet nothing changes.
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While it sounds like a joke, ask yourself, what is the difference financially between Greece and the United States? In many ways, very little. Both nations are broke, both are living well beyond their means, and both are hobbled by politicians incapable of making the hard (i.e., right) decision for their citizens. Think about the news lately. If it were not for the Federal Reserve and the ability of the U.S. Treasury to borrow with impunity, our leadership would be begging for loans from creditors, much like Greece is begging its EU creditors (read: Germany), for additional financial help.
In short, our leadership won’t change the trajectory we are on until they are forced to do so. Don’t listen to what they say, but observe what they do. For example, the Reagan, Bush (41), Clinton, Bush (43) and Obama administrations have each saddled the nation with successively larger and now record amounts of debt (and please, don’t give me any nonsense about Clinton not adding to the debt; he was just a little more clever about trying to market the narrative). We have all seen these numbers before, but, to refresh your memory, they are as follows (approximately):
[if · $18 trillion is the current cumulative budget deficit of the United States;
[if · $2 trillion is the approximate current annual increase in the U.S. budget deficit, if one looks beyond the published numbers and accounts for all federal expenditures;
[if · $200 trillion is a reasonable estimate of the U.S.’ additional unfunded liabilities for existing social programs;
[if · $16.8 trillion is the United States’ current GDP;
[if · $3.1 trillion is the total tax revenue the federal government derived in 2014.
Think about the implications. The federal government is spending $5-$5.5 trillion annually (using GAAP-adjusted accounting) yet taking in approximately $3.1 trillion in annual revenues. We are thus only paying for, roughly, 60 percent of expenditures; the rest is being borrowed. How would that go over in your household?
Yawn, you say, I have heard all this before and we are still here – what makes it different this time? Answer: The Federal Reserve has, in the last year, begun to monetize our national debt, which means we are buying our own debt back with borrowed (or newly created) dollars. So what? Well, this is the sign that sophisticated financial insiders have looked for as the beginning-of-the-end, and this is why they are preparing to flee their metropolitan bases of operation.
Bear with me while I explain: The insiders understand that the monetization of our debt will eventually drive an increase in interest rates, which will in turn increase the cost of the nation’s borrowing (think of it as an increase in the rate on your credit card), thus creating the need to spend more money to pay the increased interest cost to service the national debt, which increases the budget deficit, that in turn increases the need to borrow more money and monetize even more debt, eventually creating a self-fulfilling prophecy of increasing interest rates to attract more and more capital, which in turn increases the cost of servicing the underlying debt etc. etc.; eventually hastening the coming financial collapse insiders fear. Furthermore, they know the Federal Reserve’s current and careful balancing act is susceptible to an upset due to some black swan event that triggers a global financial panic, thereby ripping the legs out from under the debt-supported Western democracies with the United States at the hub of that collapsing wheel. What does this mean? No one is quite sure, but analysts predict a forced bank holiday, (i.e., the banks, including ATMS, close for some indefinite period of time), massive employment layoffs, disruptions of the usual supply chain (i.e., of truck and rail transportation of food, medicine and other staples), non-payment of pensions and social assistance programs (welfare) and the destruction of much of the nation’s paper-based wealth (i.e., your stock portfolio, among other assets), along with the emergence of broad social upheaval to include gangs, mobs, riots and other social disruptions. Remember that following the financial crisis in 2008, Mr. Paulson, as U.S. Treasury secretary, stated that at the time of the $700 billion bailout from the Federal Reserve, we were within 24 hours of the collapse of the global economy. If this information does not create a pit in your stomach, then perhaps this story will.
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While you were preparing to celebrate this past Christmas with your family, in mid-December 2014, hidden away on page 615 of a 1,603-page Continuing Resolution that was passed by Congress and signed by the president, there was a little-known provision that put the American taxpayer on the hook for derivative trading loses by major trading banks. What? Really? What does that mean? Well, our illustrious leaders thought it appropriate for the American taxpayer to guarantee any derivative trading loses the banks suffer, through subsidiaries that are insured by the Federal Deposit Insurance Corp. In other words, the banks can continue to write, sell, and trade these sophisticated financial instruments, and profit from them, and, if they become financially untenable (read: BAD), walk away from them and let the American taxpayer wear the liability. Oh yes, I forgot to tell you the best part: These same banks currently have over $303 trillion of these financial instruments (derivatives) on their books.
Going just a bit deeper, remember (what my fourth-grader knows) that a trillion dollars is a thousand-billion dollars. Further, in 2014, the value of ALL the economic activity in the world, commonly referred to as the global domestic product, or GDP, was $72.6 trillion. So, yes, the guys on Wall Street figured out how to stick the federal government (read: you, the American taxpayer) with a potential further liability of $303 trillion, representing over four times the world’s entire GDP. And you wonder why Jamie Dimon bought an island?
I remind you of the adage of MI-5, the British Internal Security service: Western civilization is only four meals away from anarchy.
People like Dimon, Paulson and thousands of other members of the banking and financial communities recognize that during the financial crisis of 2008, our leadership did not make the hard decisions necessary to fix the system, but merely applied a $700 billion Band-Aid. By kicking the proverbial can down the path, they simply delayed and laid the groundwork for an even larger and broader crisis in the future. Hence the reason that so many have established havens where they can ride out the coming financial tsunami that will envelop the world; while others have killed themselves, with some 60 odd bankers/financiers dying either by their own hand or under mysterious circumstances in the last couple years.
So this is the lens through which many in the financial and banking industry look. They know the system is untenable, yet they know they have been provided a once-in-a-generation opportunity to legally make obscene sums of money. (Note: Many won’t admit this fact; they just think they are (were) much smarter than everyone else.) Yet they know that it is mathematically and financially impossible for the United States, much less all the other Western democracies, to repay the mountains and mountains of debt they have borrowed to finance our lifestyles. They have resigned themselves that a collapse is inevitable. They don’t yet know the date, the time, or the ferocity of that collapse, but they intend to use their wealth to insulate themselves as best they can, e.g., by buying an island in the South Pacific, stocking it well and hiring a bunch of Navy SEALs for protection.
What I believe most people overlook is that politicians will always be politicians, and there is no way they will ever allow themselves to be blamed for the excesses of the last 30-odd years. Think about it. If a collapse were to take place, the politicians would need to hide from the citizens who lose everything. Literally. What would you do if, in a matter of days, you lost almost everything you had worked for during your entire life, including your pension, IRA, Social Security benefits, insurance benefits, etc.?
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Interestingly, the government has done much to protect itself. Or might I rephrase that statement to say that our government leaders have done a great deal to protect themselves and their families. Over the course of the last two decades alone, the federal government spent hundreds of billions of dollars designing, building and refining an elaborate Continuity of Government Plan (COG) that consists of over 100 classified facilities designed to protect the leadership of the nation during crisis – any crisis, of any magnitude and any duration.
Oh, you say, you have not received the briefing necessary, nor been issued the credentials by FEMA or DOD, to access one of these facilities? Well, don’t feel bad, you are in the same situation as most Americans … unprepared and suffering from Normalcy Bias. All the while the Russians have built the most formidable offensive (nuclear) rocket force in the history of mankind and have increased their investments in their impenetrable Yamantau mountain complex that is rumored to be over 400 square miles in size. (Yes, miles). The Chinese have made similar investments in offensive nuclear capability, including the construction of 3,000 miles of underground tunnels to protect their populace. In the meantime, and particularly under the current administration, the United States accelerates its voluntary disarmament.
So where am I going with this? Where we started, or should I say, where it ends. War. Unfortunately, this is the only way that no one group can be held accountable for decades of poor decision making and the financial calamity that is upon us. Whether they be bankers, politicians, or their advisers, they are all culpable. They are, however, way too connected and way too smart to take any blame for the coming financial collapse.
Other players are emerging on the world stage who have their own agenda and will likely facilitate, or at the very least, take advantage of, the financial crisis that looms over the West. Most Americans are ill-equipped to recognize such threats, much less foresee their logical outcome. In follow-on articles, I hope to explore specific geopolitical threats the United States faces and why our cultural blinders prevent us from acknowledging or preparing for them.
“The Dead Man’s Curve” is an expression used by helicopter pilots to describe a particular flight profile where the aircraft is flown so low and slow that, if the engine were to quit, the pilot would surely die, as there would be insufficient altitude to complete an autorotation.
Due to the monetary house-of-cards outlined here, and the confluence of growing geopolitical threats, political impotence and pressing cultural change, the United States and most other Western democracies are operating well within “The Deadman’s Curve.”
You have been warned. Recalibrate your mindset. Now prepare.