Attributed to Albert Einstein: “Insanity is doing the same thing and expecting different results.” Possibly another person made the statement.
Regardless, why do governments and individuals persist with stupid or insane actions?
Stupid and insane actions are relative to the observer. Something may appear stupid and insane, but it could make sense to other people with different values and perspectives. Debt-based fiat currency units, out-of-control entitlements and huge expenditures for the military/industrial/security complex are examples of financial insanity. Some disagree.
The military/industrial/security complex spends a $trillion each year on external wars, defense, large armies, hundreds of global military bases, weapons systems, and massive graft, corruption and payoffs.
1. The U.S. has spent mega-bucks on “defense” for decades. This is neither insane nor stupid from the perspective of the many businesses and individuals who have benefited.
2. Congress is unlikely to restrict spending and reduce their payoffs.
3. The results are massive deficits, price inflation, a huge national debt, and an unstoppable spending machine.
4. New dollars are borrowed into existence, existing dollars are devalued, prices for food, energy, rifles, military aircraft and consumer items increase. The out-of-control “spending train” rushes down the track toward financial collapse, a reset and hyperinflation. Creating out-of-control deficits and unpayable debt looks insane and stupid, but not to the many who profit from those expenditures.
5. Popular but ill-advised decisions are difficult to correct.
6. Expect more consumer price inflation, higher costs for food and energy, and much more debt.
7. The military/industrial/security complex and entitlements are runaway spending trains fueled by fiat currency units. Many businesses and individuals profit from their expenditures. They don’t see these debt machines as insane or stupid. But excessive spending and debt will lead to a reset…
Negative Interest Rates. Over $11 trillion of global sovereign debt “pays” negative interest rates. This sounds stupid or insane. Central banks created this anomaly. Borrowers like low interest rates. When interest rates are suppressed for a long time, it is difficult for the market to discover real rates.
The U.S. government is paying over $500 billion per year for interest at multi-generational low rates. What will happen if rates rise to more normal levels? Expect continual government pressure to lower rates.
Many suggest interest rates can never rise. The results are huge mal-investments, excessive debt and leverage, and increased risk of financial collapse. Our economic world is struggling in a low interest rate environment, but politicians are demanding even lower interest rates.
Stock markets and bond markets like lower rates. Corporations love inexpensive debt. Low rates enable individuals to fall deeper into debt. Politicians demand more spending, increased debt, more giveaways, and lots of free stuff. Stupid and insane financial policies enhance the risk of a reset and/or collapse.
Expect more inflation, excessive debt, and an eventual reset. The financial world may collapse from fire (hyperinflation) or ice (deflation). Was this excessive debt nonsense necessary? Certainly not! Even though insane and stupid, politicians and bankers led us down that road for their benefit. Many important people profited from the huge increase in fake money borrowed into existence by the banking cartel.
Fire or ice? Should we hyper-inflate away the value of the currency units or default them into the abyss? Sane individuals avoid the twin tragedies of fire and ice and depend upon gold and silver which have no counterparty risk and will stay valuable.
Got gold? When the next “perfect storm” of war, inflation, monetary devaluation, bankruptcies, counterparty risk, and devaluing currencies arrives, would you prefer to own gold bullion (in your possession) or dodgy pieces of paper “funny money” masquerading as wealth?
What others say:
From Alasdair Macleod: For Those Who Don’t Understand Inflation.
“With the world facing a deepening recession, monetary inflation will accelerate again.”
“This time, the debt is not confined to industry [as in the 1930s]; a debt contraction will hit consumers directly and threaten domino defaults in OTC derivatives as well.”
“We now face a potentially devastating combination of American trade protectionism and a credit cycle which is moving America and the world into a severe downturn.
“Monetary inflation in the world’s reserve currency can only accelerate, because of an escalating budget deficit and the need to support banks which would otherwise fail. … the dollar will lose credibility, first abroad and then domestically.”
“In short, the dynamics that lead to a final currency collapse are now falling into place.”
From Lord Keynes many decades ago:
“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces on the side of destruction and does it in a manner which not one man in a million is able to diagnose.”
From Bill Bonner: “Tilling the Soil in the Garden of Catastrophe”
“And despite having some of the largest oil reserves on the planet, Venezuelans are waiting in line at gas stations for days to fill up their cars.”
[Stupid and insane consequences result from bad policies. Venezuela is only one example. The western world should take notice…]
Bill Bonner’s list of ingredients for catastrophe.
First: Government control of the currency. (check)
Second: Fake money. [fiat debt-based currency units] (check)
Third: Leaders who are ignorant and/or egomaniacal. (check)
Fourth: Big banks, the International Monetary Fund (IMF) and the World Bank loan more than can be repaid. (check)
“Economically and financially, the only sensible choice is to fire the bankers, drain the swamp of bureaucrats, throw the bums out of office, and go back to real money backed by gold. But politically, it is impossible.”
From Bill Holter:
“Financial collapse is not speculation… it is mathematical certainty.”
From John Rubino: “The Fed Can’t Save Us.”
“If central banks cannot stop the next recession, we will find out what happens when this much debt goes bad… The Fed’s biggest fear is that things will spin out of control, and they won’t have the tools to stop it.”
Charles Nenner: “Look Out Below.”
“Gold is going to $2500…”
Steve Saville: “The “true fundamentals” are still in gold’s favour.”
Doug Casey: The Deep State
Christenson: A Tale of Three Cities
Christenson: Silver, Gold and Goldfinger
- Insane and stupid actions proliferate in our financial and political worlds. These actions benefit the political and financial elite and persist because we refuse to understand consequences.
- Deficit spending and borrowing “funny money” into existence lead to price inflation, devalued currencies, and someday… to a catastrophic financial reset or collapse.
- Excessive debt leads to defaults and the collapse of currencies. The U.S. prints the world’s reserve currency, which has sheltered Americans from the consequences of deficit spending, excessive debt, and stupid and insane policies.
- The Fed can’t save us. They can only delay consequences.
- Gold and silver have no counterparty risk. They will survive as wealth and financial insurance. In contrast, hyperinflation destroys currencies and societies. Deflation destroys assets and capital. Both destroy wealth.
Miles Franklin will convert unbacked fiat currencies into gold and silver bullion with no counterparty risk. We need insurance to protect savings and retirements from devaluations and insane policies. Call Miles Franklin at 1-800-822-8080.
The Deviant Investor