It's Not If But When (first published on zerohedge.com September 2015)
Since the 2008 crash there has been much talk about how the fundamentals have not been dealt with and the fact that the can has only been kicked down the road. Political mavericks and commentators such as Ron Paul have frequently pointed out that nothing has really changed and that we are heading for even bigger disasters ahead if we continue to play ostrich.
Likewise, the economic doom and gloom pundits – such as Peter Schiff, Marc Faber and Gerald Celente have been banging the drum for an unprecedented collapse that will make the 1929 western economic slump look like a tea party. First it was to be 2010, 2012, then 2013 and so on, but here we are still, in the tail end of 2015 and the dreaded collapse has still failed to materialise.
So, I’m sure that some people are probably wondering if these people are just carpet baggers, making a swift buck out of fear of an economic downturn. The truth is that we never left the economic downturn – we are currently in a period of manipulation that’s sole purpose is to mask the fact that there has not been a boom (or recovery if you like) to trigger the next bust.
The world economy is largely sustained by confidence and belief that pieces of paper (or digital records) have some inherent value relative to each other and relative to the physical realities of the world. In truth a paper note is worthless if people do not recognise its symbolic value or believe that the relationship between its value and the value of real-world objects (e.g. commodities) has been perverted or destroyed.
Of course, a carrot takes a similar amount of soil, water, sunlight and care to grow in California as it does in China or anywhere else, but in our insane financial system the relative value of the same carrot is vastly different in different places. Furthermore, if carrots are traded virtually on exchanges around the world the value of carrots becomes further removed again from its original value as a food items that requires a finite amount of resources to produce.
As with my ridiculous example, the value attributed to almost everything does not actually bear scrutiny, as the relationship between things and their value seems to be entirely arbitrary at this moment in time. Because this is the case, few people recognise the fact that the value of virtually everything is manipulated by both corporations and by governments. The idea that there is such a thing as a Free Market, that the laws of supply and demand dictate the value of items is now nonsense. While economists still spout the usual crap that they were taught at university and everyone in the corporate and governmental sectors play lip-service to established economic norms, the truth is that interventions are constant, albeit mostly covert.
While it is possible to manipulate the stock markets, the value of commodities and the value of currencies, then it will continue until it is no longer possible. This manipulation was always possible, but back in the days of stand-alone computer systems and trading tickets this was more difficult to achieve. Since the micro-processor revolution of the 1980’s financial markets have become computerised and now, thanks to open systems technology, everything can be connected to everything else. The technological revolution in finance has enabled the number of transactions to expand across the globe, but it has also vastly expanded the capacity for cheating – manipulation of prices.
All of the financial systems around the world are run by software, this may collect data feeds and present them in a coherent form, but software also enables data to be changed, sometimes explicitly through statistical analysis or by downright cheating. Obviously neither corporations or governments wish to admit to fixing figures, to precipitating rises or falls in currency, interest rates etc. through cheating – but in truth this is exactly what happens.
Even when they openly make adjustments (e.g. raising interest rates) the data used to justify such actions has been cooked up to fit the decision, rather than the decision being a reflection of underlying trends in the data. Data is statistically manipulated – through exclusion of unwanted inputs, skewing of the data, adjustment by a multitude of factors (e.g. seasonal) all of which is really a legitimised form of cheating.
Most people have no understanding of financial matters and even less understanding of how statistics can be used to change a data set to make the data say what you want, rather than interpreting it without bias. As a result of constant manipulation, both governments and corporations manage to convince themselves and the public at large that everything is ok, or very shortly will be ok.
So, in short, despite the fact that the world economy is really doing badly, we are not going to hear the truth until things are so bad that a statistical genius is unable to hide it. While confidence can be maintained the game will continue, with the average man in the street blissfully unaware that it is only trickery that prevents a total economic landslide.
The financial commentators I mentioned earlier are all aware of how the game works, however their predictions have been inaccurate so far because they failed to see the depth of the manipulation in play. It’s obvious that markets will eventually collapse, that economies will spin out of control, but in the meantime both governments and corporations will do everything they can to make everyone believe that the Emperor is indeed wearing clothes.
I’m not going to predict when a collapse is coming. I can see a gearing up for deeper financial, political and possibly military war between USA/EU against the BRICS nations, which could be the straw that breaks the camel’s back. However, like everyone else, who is not party to advance knowledge of the trigger mechanism, I’m just going to have to wait it out and prepare for the worst.
A crash could be started deliberately, as has happened before, which will be preceded by quick exit of the smart money into physical assets (including carrots perhaps). I’d say that this scenario is highly likely, but that does not mean that some kind of perfect storm event will not blindside the movers and shakers and precipitate a crash despite everyone’s best efforts to maintain confidence.
As I said at the beginning, none of the fundamentals have improved. If anything the financial, environmental and social fundamentals of human society seem to have deteriorated further since 2008. All the evidence available, if interpreted honestly, points towards another deeper recession in the future. I have stopped listening to the doom and gloomers – I get on with my life without being fearful. However, I have made steps and continue to make further steps to ensure that when the inevitable crash does come its impact on my life will be as small as possible. I would advise anyone else who has not begun this process to begin immediately as it really is a case of - how long do we have left?