Wednesday, October 16, 2013

Why I stopped worrying and learned to love the currency collapse

For the past 300 years, the historical pattern has been for the era marked by a century to continue into the following century by fourteen or fifteen years.

Let me explain.  Everyone knows that the 19th Century, its uprightness, its optimism and sense of purpose, the halcyon days of British Empire, came to an end with World War I, starting in 1914 and building to a nasty crescendo by 1916.  The 20th Century had arrived, and it had some real horrors in store for us.

Germans before Kraftwerk

But if we return back another hundred years, we notice that the 18th Century ends in 1815 with the final defeat of Napoleon, that final project of the Enlightenment and of the French Revolution.  With the Congress of Vienna in 1814-1815, we have a new Europe along the lines of Metternich's plan, and the 19th Century at last is here.

"Sorry, guys.  My bad."

In 1713 and 1714, we have the Treaties of Utrecht, Baden, and Rastatt, bringing an end to the era of Spain as a major power, and the rise of the Habsburgs.  Louis XIV dies in 1715, after reigning for 72 years.  The Baroque period is over, and we are now firmly in the 18th Century.

War of Spanish Succession

We still live in the 20th Century.  Nothing much significant has changed in our lives in the past twenty years.  Symptoms of a deeper rot are appearing here and there, foreshadowing a larger crisis, but the crisis itself has not arrived yet.  We still live in an era of Pax Americana, the old republic very much a strained and tired Empire now, with the U.S. Dollar as the world's reserve currency.

That is going to change.  

The next task for History is to dismantle the untenable structures and institutions put in place by late Modernity, which have been extended now as far as they can go.  Our debt-based monetary system will collapse, our unbacked fiats will be worthless.  The debts and unmeetable obligations will all default.

There are ironies and great contradictions as the former home and hope of Liberty becomes viciously unfree and increasingly despotic.  Our leaders no longer govern, but try instead to rule us -- they are less legitimate with each passing day, their laws corrupt or worse.  They are nearly finished, and will be swept away with the tide.

Just as in 1914, the internationalist system will break down, dashing the hopes of the would-be first-world nations.  We will probably have a pretty good war as well, or many local ones worldwide.  These transitions tend to involve war.

Deflation first -- it clears the way for the complete loss of faith and hyperinflation that will follow.  The next big wave down in the financial markets is the battering ram.  The U.S. national debt is about faith, so is quantitative easing, and so is the very idea of magical coins that could ever be "worth" a trillion dollars.  When this is faith breaks, in concert with loss of faith in perpetual growth and unlimited cheap energy, then things will move very, very quickly.

There is nothing any of us can do at this point, except navigate the rapids as well as possible, and to stay out of the way of a dying empire, which is still very dangerous in its death throes.  We are actually very privileged to be alive and witnessing this next transition, to what we do not know just yet.  But what an honor to live at this time, not in ignorance but with an existential resolve to come out of it alive and much the wiser.

Ass Americana


Bryan Franco said...

Might we be finishing this thing off right now? I.e. a shrunken version of what you had shown with the final 1 on the 14th, 2 on the 15th, 3 on the 16th, 4 ending today, and 5 beginning today?

Permabear Doomster said...

There has never been hyperinflation for a reserve currency.

There can be no serious inflation why money velocity is chronically low, and still falling.

Whilst govts refuse to print their way out of the debt mountain, and instead, largely chase existing money via taxation, it will be deflation..NOT inflation.

Basic economics, which many are still seemingly ignoring.

*nice pic of the Germans though. It is always useful to be reminded of what they are best at.

Bryan Franco said...

The time taken from the 9/19 high to today is exactly 61.8% of the time taken from the 8/2 high to the 9/19 high.

sooner said...

You made Zerohedge!!



christiangustafson said...

Yay! Hoo-ray! Hoo-ray again!

THANKS, Tylers!

Ken Barrows said...

Am glad the article is on Zerohedge and the timing is exquisite, what with the ZHers furious and spewing angry nonsense.

Inertia rules, until it doesn't.

Permabear Doomster said...


I'll put on my bitchy hat, and snear at your post on ZH ;)

Good to see you appear there. Although I fear the maniacs on there will be in such a pissy mood after today's latest equity gains.

Ed said...

In case it is not too late for truth-telling to save USA.
The Public Be Suckered, here:

mike said...

Anyone who's not in a pissy mood after this latest fraud of governance isn't paying attention, IMO. I read your article on ZH, it is very good, interesting and provides a new perspective concerning end of era at beginning of new century. Nice catch. I agree with your stand back and watch. It is pretty well baked in now. Only timing is unknown. The lack of monetary velocity seems to be pointing in your favor.

Steve From Virginia said...


I don't know whether to feel sorry for you or not ...


Permabear Doomster said...

re: monetary velocity.

I should add, most hyper-inflation is always preceded by a very definite deflation.

Argentina was one of the best recent 1999/2000 or so.

They had deflation of 3-5%...for 3 months or so..before jumping to 100% price rises.

I still don't see 'hyper' for USA. Maybe a doubling..that'd sure spook everyone, and cause all sorts of problems for the 'working poor'.

Anyway, yes..good to see you on ZH..Mr G. As many realise.all exposure is good exposure...not least on one of the worlds most important (if not currently overly doomy) financial sites.

christiangustafson said...

The real and final cause of the HI is loss of the petrodollar convention. Then, poof, back to barter.

Unknown said...

Christian, would love to republish on Learning from Dogs next week. Hope that's OK? Paul H.

christiangustafson said...

Of course! Be my guest.

I agree with Dmitri Orlov that the internet is best used as a flow of shared hypertext.

Forget the streaming video and the endless marketing gimmicks, the internet at its best is what it was when I started using it 25 years ago (via USENET groups etc), it's for communicating and sharing ideas.

Permabear Doomster said...

oh no, not the USENET.

You'll be wanting green screens back next. URghh

Unknown said...

Thanks Christian.

Unknown said...

Nice post CG.

Reverse Engineer said...

"Forget the streaming video and the endless marketing gimmicks"

Streaming Video and Endless Marketing Gimmicks are GREAT!

Wanna Chat on the Collapse Cafe? :D

Publishing this article on the Diner 2moro.


Waw said...

This is about a wild ride through dangerous chaos to a new era. We might more purposefully get to the same place with a Jubilee. This would wipe out all debt, crash the market and bring down all the states, but with some measure of forethought and warning. Why not?

Unknown said...

I would like to know your thoughts on this new "administration" and what you think it's effect will be on the global scale, economically, environmentally, and socially.
Thank you.

christiangustafson said...

We are boisterously pro-Trump here in Deflation Land, Rebecca. I posted my thoughts on the Donald here.

Trump is another Lincoln, faced with a great crisis. I would much rather have him in command during economic and currency collapse than the Bolshevik Democrats.

I don't want to see that crisis with open borders.

I don't want to see that crisis without handy firearms.

Trump has a chance to shore up what is left of the America, to have a thin chance of keeping it all together through the inevitable horrors ahead.

No he's not Reagan. We're all outta growth and animal spirits here.

We're facing the end of the Long Credit cycle, and I'd much rather have Donald Trump, advised by the likes of Steve Bannon, at the helm than some dirigiste totalitarian monster of the Left.