You're Just Not Prepared for What’s Coming

December 04, 2017

Peak Prosperity

I hate to break it to you, but chances are you're just not prepared for what's coming. Not even close.

Don't take it personally. I'm simply playing the odds.

After spending more than a decade warning people all over the world about the futility of pursuing infinite exponential economic growth on a finite planet, I can tell you this: very few are even aware of the nature of our predicament.

An even smaller subset is either physically or financially ready for the sort of future barreling down on us. Even fewer are mentally prepared for it.

And make no mistake: it's the mental and emotional preparation that matters the most. If you can't cope with adversity and uncertainty, you're going to be toast in the coming years.

Those of us intending to persevere need to start by looking unflinchingly at the data, and then allowing time to let it sink in. Change is coming – which isn't a problem in and of itself. But it's pace is likely to be. Rapid change is difficult for humans to process.

Those frightened by today's over-inflated asset prices fear how quickly the current bubbles throughout our financial markets will deflate/implode. Who knows when they'll pop? What will the eventual trigger(s) be? All we know for sure is that every bubble in history inevitably found its pin.

These bubbles – blown by central bankers serially addicted to creating them (and then riding to the rescue to fix them) – are the largest in all of history. That means they're going to be the most destructive in history when they finally let go.

Millions of households will lose trillions of dollars in net worth. Jobs will evaporate, causing the tens of millions of families living paycheck to paycheck serious harm.

These are the kind of painful consequences central bank follies result in. They're particularly regrettable because they could have been completely avoided if only we'd taken our medicine during the last crisis back in 2008. But we didn't. We let the Federal Reserve --the instiution largely responsible for creating the Great Financial Crisis -- conspire with its brethern central banks to 'paper over' our problems.

So now we are at the apex of the most incredible nest of financial bubbles in all of human history.

One of my favorite charts is below, which shows that even the smartest minds among us (Sir Isaac Newton, in this case) can succumb to the mania of a bubble:

It's enormously difficult to resist the social pressure to become involved.

But all bubbles burst -- painfully of course. That's their very nature.

Mathematically, it's impossible for half or more of a bubble's participants to close out their positions for a gain. But in reality, it's even worse. Being generous, maybe 10% manage to get out in time.

That means the remaining 90% don't. For these bagholders, the losses will range from 'painful' to 'financially fatal'.

Which brings us to the conclusion that a similar proportion of people will be emotionally unprepared for the bursting of these bubbles. Again, playing the odds, I'm talking about you.

How Exponentials Work Against You

Bubbles are destructive in the same manner as ocean waves. Their force is not linear, but exponential.

That means that a wave's energy increases as the square of its height. A 4-foot wave has 16 times the force of a 1-foot wave; something any surfer knows from experience. A 1-foot wave will nudge you. A 4-foot wave will smash you, filling your bathing suit and various body orifices with sand and shells. A 10-foot wave has 100 times more destructive power. It can kill you if it manages to pin you against something solid.

A small, localized bubble -- such as one only affecting tulip investors in Holland, or a relatively small number of speculators caught up in buying swampland in Florida -- will have a small impact. Consider those 1-foot waves.

A larger bubble inflating an entire nation's real estate market will be far more destructive. Like the US in 2007. Or like Australia and Canada today. Those bubbles were (or will be when they burst) 4-foot waves.

The current nest of global bubbles in nearly every financial asset (stocks, bonds, real estate, fine art, collectibles, etc) is entirely without precedent. How big are these in wave terms? Are they a series of 8-foot waves? Or more like 12-footers?

At this magnitude level, it doesn't really matter. They're going to be very, very destructive when they break.

Our focus now needs to be figuring out how to avoid getting pinned to the coral reef below when they do.

Understanding 'Real' Wealth

In order to fully understand this story, we have to start right at the beginning and ask “What is wealth?"

Most would answer this by saying “money", and then maybe add “stocks and bonds". But those aren't actually wealth.

All financial assets are just claims on real wealth, not actually wealth itself. A pile of money has use and utility because you can buy stuff with it. But real wealth is the "stuff" -- food, clothes, land, oil, and so forth. If you couldn't buy anything with your money/stocks/bonds, their worth would revert to the value of the paper they're printed on (if you're lucky enough to hold an actual certificate). It's that simple.

Which means that keeping a tight relationship between 'real wealth' and the claims on it should be job #1 of any central bank. But not the Fed, apparently. It's has increased the number of claims by a mind-boggling amount over the past several years. Same with the BoJ, the ECB, and the other major central banks around the world. They've embarked on a very different course, one that has disrupted the long-standing relationship between the markers of wealth and real wealth itself.

They are aided and abetted by both the media and our educational institutions, which reinforce the idea that the claims on wealth are the same as real wealth itself. It's a handy system, of course, as long as everyone believes it. It has proved a great system for keeping the poor people poor and the rich people rich.

But trouble begins when the system gets seriously out of whack. People begin to question why their money has any value at all if the central banks can just print up as much as they want. Any time they want. And hand it out for free in unlimited quantities to the banks. Who have their own mechanism (i.e., fractional reserve banking) for creating even more money out of thin air.

Pretty slick, right? Convince everyone that something you literally make in unlimited quantities out of thin air has value. So much so that, if you lack it, you end up living under a bridge, starving.

Let's express this visually.

“GDP" is a measure of the amount of goods and services available and financial asset prices represent the claims (it's not a very accurate measure of real wealth, but it's the best one we've got, so we'll use it). Look at how divergent asset prices get from GDP as bubbles develop:

(Source)

What we see in the above chart is that the claims on the economy should, quite intuitively, track the economy itself. Bubbles occurred whenever the claims on the economy, the so-called financial assets (stocks, bonds and derivatives), get too far ahead of the economy itself.

This is a very important point. The claims on the economy are just that: claims. They are not the economy itself!

Yes the Dot-Com crash hurt. But that was the equivalent of a 1-foot wave. Yes, the housing bubble hurt, and that was a 2-foot wave. The current bubble is vastly larger than the prior two, and is the 4-foot wave in our analogy -- if we're lucky. It might turn out to be a 10-footer.

The mystery to me is how people have forgotten the lessons of prior bubbles so rapidly. How they cannot see the current bubbles even as the data is right there, and so easy to come by. I suppose the mania of a bubble, the 'high' of easy returns, just makes people blind to reality.

It used to take a generation or longer to forget the painful lessons of a bubble. The victims had to age and die off before a future generation could repeat the mistakes anew.

But now, we have the same generation repeating the same mistakes three times in less than 20 years. Go figure.

In this story, wishful thinking and self-delusion have harmful consequences. It's no different than taking up a lifelong habit of chain-smoking as a young teen. Sure, you may be one of the few who lives a long full life in spite of the risks, but the odds are definitely not in your favor.

The inevitable destruction caused by the current froth of bubbles is going to hurt a lot of people, institutions, pensions, industries and countries. Nobody will be spared when these burst. The only question left to be answered is: Who's going to eat the losses?

This is not a future question for a future time; it's one that's being answered daily already. Pensioners are already taking cuts. Puerto Rico will not be fully rebuilt. Shale wells drilled when oil was $100/barrel, but being drained empty at $50/barrel, represent capital already hopelessly betrayed. Young graduates with $100,000 of student debt face lost decades of capital building. The losers are already emerging.

And there's many more to follow. This story is much closer to the beginning than the end.

The bubbles have yet to burst. We're just seeing the water at the shore's edge beginning to retreat, wondering how large the wave will be when it arrives. Hoping that it's not a monster tsunami.

The End Is Nigh

History's largest bubbles have had the exact same root cause: an expansion of credit that causes leverage to go up faster than the income available to service it.

Simply put: bubbles exist when asset price inflation rises beyond what incomes can sustain. They are everywhere and always a credit-fueled phenomenon.

(Source @hussmanjp )

Look at the ridiculous trajectory of the S&P 500, especially since Trump got elected. I don't know about you, but pretty much everything that has happened in the US over the past year has been either a diplomatic clown show or a financial cruelty to the average citizen. And yet prices have risen at their highest pace in two decades?

My view is that the Trump election was a totally unexpected black swan shock for the global central banking cartel, and it freaked out. With the Dow down -1,000 points in the late night hours following Trump's surprise win, the central banks dumped gobs and oodles of money into the equity markets to prevent carnage.

All that money calmed investors and sent prices roaring higher over the following months. The resulting 80-degree rocket launch will hurt a lot when it comes back to earth. Good going central banks!

This is all happening when we're as close as ever to a military (if not nuclear) confrontation with North Korea, Russia is busy beefing up its war machine, Saudi Arabia has pivoted away from the US towards China and Russia, and most of our European allies are inching away from us.

Meanwhile, the FCC is about to rule against the vast majority of the public and allow US corporations to turn the internet into a pay-for-play toll road -- completely undermining the core principle of the most transformative and useful invention of the millennium. By eliminating net neutrality the FCC has ruled 'against' you, and 'for' the continued usurious profits of the cable companies.

Worse, heath care premiums continue to increase by double-digits each year. They're going up by a horrifying 45% in Florida and 57% in Georgia, to name just two unfortunate states out of many.

And to really rub salt in the wounds of the nation, the DC swamp is busy passing a tax change that will further drive an enormous gap between the 0.1% and everybody else by lowering taxes on corporate profits (already the lowest in the world if you measure both tax on profits and value-added taxes).

How to pay for the massive cost of this deficit-exploding bill? Easy, just eliminate deductions for average people (such as the state and local tax deductions) and begin taxing the waived tuition of graduate students. That's right, the government helped to massively bloat tuition fees via massive lending to students and then wants to squeeze the poorest and hardest-working among them.

I wish I were kidding here. But like a cruel joke re-told at the wrong moment, the GOP is busy destroying the meager and precarious financial situation of our citizens just so it can toss a few more dollars into the already-bloated wallets of the richest people in the country.

The long rise of the ultra-wealthy is not some mystery. It arose as a predictable consequence of the financialization of, well…everything that began in the 1980's:

The above chart speaks to a deeply unfair system that punishes hard working people in order to give more to those who merely shuffle financial instruments around or own financial assets.

This is the system that the Fed is working so hard to preserve. This is the system that Washington DC is working so hard to sustain.

It's flat out unfair and punitive. It both punishes and rewards the wrong folks, respectively. Debtors are provided relief while savers are punished. The young are saddled with debts and face impossible costs of living mainly to preserve the illusion of wealth for a little longer for the generation in front of them.

For so many reasons, folks, none of this is sustainable. If the system doesn't crash first under the weight of its excessive debts or the puncturing of its many asset price bubbles, the brewing class and generational wars will boil over if the status quo trajectory continues for much longer.

In Part 2: When The Bubbles Burst... we detail what to expect as the unraveling starts. When these bubbles burst, as they inevitably must, the aftermath is going to be especially ugly.

Understand the likely path the carnage is going to take and position yourself wisely ahead of the crisis -- so that you and those you care about can weather the turmoil as safely as possible.

Remember: the role of bubble markets is to injure as many people as badly as possible when they burst. Don't be one of the victims.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

Washington Post EXPOSED: How Watergate editors almost published a fake Pulitzer Prize-winning story

Episode 6 of Glenn’s new history podcast series The Beck Story releases this Saturday.

This latest installment explores the history of Left-wing bias in mainstream media. Like every episode of this series, episode 6 is jam-packed with historical detail, but you can’t squeeze in every story, so some inevitably get cut from the final version. Part of this episode involves the late Ben Bradlee, who was the legendary editor of the Washington Post. Bradlee is legendary mostly because of the Watergate investigation that was conducted on his watch by two young reporters named Bob Woodward and Carl Bernstein. Bradlee, Woodward, and Bernstein became celebrities after the release of the book and movie based on their investigation called All the President’s Men.

But there is another true story about the Washington Post that you probably won’t see any time soon at a theater near you.

In 1980, Washington Post editor Ben Bradlee wanted to expand the Post’s readership in the black community. The paper made an effort to hire more minority journalists, like Janet Cooke, a black female reporter from Ohio. Cooke was an aggressive reporter and a good writer. She was a fast-rising star on a staff already full of stars. The Post had a very competitive environment and Cooke desperately wanted to win a Pulitzer Prize.

Readers were hooked. And outraged.

When Cooke was asked to work on a story about the D.C. area’s growing heroin problem, she saw her chance to win that Pulitzer. As she interviewed people in black neighborhoods that were hardest hit by the heroin epidemic, she was appalled to learn that even some children were heroin addicts. When she learned about an eight-year-old heroin addict named Jimmy, she knew she had her hook. His heartbreaking story would surely be her ticket to a Pulitzer.

Cooke wrote her feature story, titling it, “Jimmy’s World.” It blew away her editors at the Post, including Bob Woodward, who by then was Assistant Managing Editor. “Jimmy’s World” would be a front-page story:

'Jimmy is 8 years old and a third-generation heroin addict,' Cooke’s story began, 'a precocious little boy with sandy hair, velvety brown eyes and needle marks freckling the baby-smooth skin of his thin brown arms. He nestles in a large, beige reclining chair in the living room of his comfortably furnished home in Southeast Washington. There is an almost cherubic expression on his small, round face as he talks about life – clothes, money, the Baltimore Orioles and heroin. He has been an addict since the age of 5.'

Readers were hooked. And outraged. The mayor’s office instructed the police to immediately search for Jimmy and get him medical treatment. But no one was able to locate Jimmy. Cooke wasn’t surprised. She told her editors at the Post that she had only been able to interview Jimmy and his mother by promising them anonymity. She also revealed that the mother’s boyfriend had threatened Cooke’s life if the police discovered Jimmy’s whereabouts.

A few months later, Cooke’s hard work paid off and her dream came true – her story was awarded the Pulitzer Prize for feature writing. Cooke had to submit some autobiographical information to the Prize committee, but there was a slight snag. The committee contacted the Post when they couldn’t verify that Cooke had graduated magna cum laude from Vassar College. Turns out she only attended Vassar her freshman year. She actually graduated from the University of Toledo with a B.A. degree, not with a master’s degree as she told the Pulitzer committee.

Cooke’s editors summoned her for an explanation. Unfortunately for Cooke and the Washington Post, her resume flubs were the least of her lies. After hours of grilling, Cooke finally confessed that “Jimmy’s World” was entirely made up. Jimmy did not exist.

The Pulitzer committee withdrew its prize and Cooke resigned in shame. The Washington Post, the paper that uncovered Watergate – the biggest political scandal in American history – failed to even vet Cooke’s resume. Then it published a front-page, Pulitzer Prize-winning feature story that was 100 percent made up.

Remarkably, neither Ben Bradlee nor Bob Woodward resigned over the incident. It was a different time, but also, the halo of All the President’s Men probably saved them.

Don’t miss the first five episodes of The Beck Story, which are available now. And look for Episode 6 this Saturday, wherever you get your podcasts.

UPDATED: 5 Democrats who have endorsed Kamala (and one who hasn't)

Zach Gibson / Stringer, Brandon Bell / Staff | Getty Images

With Biden removed from the 2024 election and only a month to find a replacement before the DNC, Democrats continue to fall in line and back Vice President Kamala Harris to headline the party's ticket. Her proximity and familiarity with the Biden campaign along with an endorsement from Biden sets Harris up to step into Biden's shoes and preserve the momentum from his campaign.

Glenn doesn't think Kamala Harris is likely to survive as the assumed Democratic nominee, and once the DNC starts, anything could happen. Plenty of powerful and important Democrats have rallied around Harris over the last few days, but there have been some crucial exemptions. Here are five democrats that have thrown their name behind Harris, and two SHOCKING names that didn't...

Sen. Dick Durbin: ENDORSED

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High-ranking Senate Democrat Dick Durbin officially put in his support for Harris in a statement that came out the day after Biden stepped down: “I’m proud to endorse my former Senate colleague and good friend, Vice President Kamala Harris . . . our nation needs to continue moving forward with unity and not MAGA chaos. Vice President Harris was a critical partner in building the Biden record over the past four years . . . Count me in with Kamala Harris for President.”

Michigan Gov. Whitmer: ENDORSED

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The Monday after Biden stepped down from the presidential VP hopeful, Gretchen Whitmer released the following statement on X: “Today, I am fired up to endorse Kamala Harris for president of the United States [...] In Vice President Harris, Michigan voters have a presidential candidate they can count on to focus on lowering their costs, restoring their freedoms, bringing jobs and supply chains back home from overseas, and building an economy that works for working people.”

Rep. Alexandria Ocasio-Cortez: ENDORSED

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Mere hours after Joe Biden made his announcement, AOC hopped on X and made the following post showing her support: "Kamala Harris will be the next President of the United States. I pledge my full support to ensure her victory in November. Now more than ever, it is crucial that our party and country swiftly unite to defeat Donald Trump and the threat to American democracy. Let’s get to work."

Rep. Nancy Pelosi: ENDORSED

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Former Speaker Nancy Pelosi, who is arguably one of the most influential democrats, backed Harris's campaign with the following statement given the day after Biden's decision: “I have full confidence she will lead us to victory in November . . . My enthusiastic support for Kamala Harris for President is official, personal, and political.”

Sen. Elizabeth Warren: ENDORSED

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Massasschesets Senator Elizabeth Warren was quick to endorse Kamala, releasing the following statement shortly after Harris placed her presidential bid: "I endorse Kamala Harris for President. She is a proven fighter who has been a national leader in safeguarding consumers and protecting access to abortion. As a former prosecutor, she can press a forceful case against allowing Donald Trump to regain the White House. We have many talented people in our party, but Vice President Harris is the person who was chosen by the voters to succeed Joe Biden if needed. She can unite our party, take on Donald Trump, and win in November."

UPDATED: Former President Barack Obama: ENDORSED

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Former President Barack Obama wasted no time releasing the following statement which glaringly omits any support for Harris or any other candidate. Instead, he suggests someone will be chosen at the DNC in August: "We will be navigating uncharted waters in the days ahead. But I have extraordinary confidence that the leaders of our party will be able to create a process from which an outstanding nominee emerges. I believe that Joe Biden's vision of a generous, prosperous, and united America that provides opportunity for everyone will be on full display at the Democratic Convention in August. And I expect that every single one of us are prepared to carry that message of hope and progress forward into November and beyond."

UPDATED: On Friday, July 26th Barack and Michelle Obama officially threw their support behind Harris over a phone call with the current VP:

“We called to say, Michelle and I couldn’t be prouder to endorse you and do everything we can to get you through this election and into the Oval Office.”

The fact that it took nearly a week for the former president to endorse Kamala, along with his original statement, gives the endorsement a begrudging tone.

Prominent Democratic Donor John Morgan: DID NOT ENDORSE

AP Photo/John Raoux

Prominent and wealthy Florida lawyer and democrat donor John Morgan was clearly very pessimistic about Kamala's odds aginst Trump when he gave the following statement: “You have to be enthusiastic or hoping for a political appointment to be asking friends for money. I am neither. It’s others turn now . . . The donors holding the 90 million can release those funds in the morning. It’s all yours. You can keep my million. And good luck . . . [Harris] would not be my first choice, but it’s a done deal.”

How did Trump's would-be assassin get past Secret Service?

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Editor's Note: This article was originally published on TheBlaze.com.

Former President Donald Trump on Saturday was targeted in an assassination attempt during a campaign rally in Pennsylvania. It occurred just after 6:10 p.m. while Trump was delivering his speech.

Here are the details of the “official” story. The shooter was Thomas Matthew Crooks. He was 20 years old from Bethel Park, Pennsylvania. He used an AR-15 rifle and managed to reach the rooftop of a nearby building unnoticed. The Secret Service's counter-response team responded swiftly, according to "the facts," killing Crooks and preventing further harm.

Did it though? That’s what the official story says, so far, but calling this a mere lapse in security by Secret Service doesn't add up. There are some glaring questions that need to be answered.

If Trump had been killed on Saturday, we would be in a civil war today. We would have seen for the first time the president's brains splattered on live television, and because of the details of this, I have a hard time thinking it wouldn't have been viewed as JFK 2.0.

How does someone sneak a rifle onto the rally grounds? How does someone even know that that building is there? How is it that Thomas Matthew Crooks was acting so weird and pacing in front of the metal detectors, and no one seemed to notice? People tried to follow him, but, oops, he got away.

How could the kid possibly even think that the highest ground at the venue wouldn't be watched? If I were Crooks, my first guess would be, "That’s the one place I shouldn't crawl up to with a rifle because there's most definitely going to be Secret Service there." Why wasn't anyone there? Why wasn't anyone watching it? Nobody except the shooter decided that the highest ground with the best view of the rally would be the greatest vulnerability to Trump’s safety.

Moreover, a handy ladder just happened to be there. Are we supposed to believe that nobody in the Secret Service, none of the drones, none of the things we pay millions of dollars for caught him? How did he get a ladder there? If the ladder was there, was it always there? Why was the ladder there? Secret Service welds manhole covers closed when a president drives down a road. How was there a ladder sitting around, ready to climb up to the highest ground at the venue, and the Secret Service failed to take it away?

There is plenty of video of eyewitnesses yelling that there was a guy with a rifle climbing up on a ladder to the roof for at least 120 seconds before the first shot was fired. Why were the police looking for him while Secret Service wasn't? Why did the sniper have him in his sights for over a minute before he took a shot? Why did a cop climb up the ladder to look around? When Thomas Matthew Cooks pointed a gun at him, he then ducked and came down off the ladder. Did he call anyone to warn that this young man had a rifle within range of the president?

How is it the Secret Service has a female bodyguard who doesn't even reach Trump's nipples? How was she going to guard the president's body with hers? How is it another female Secret Service agent pulled her gun out a good four minutes too late, then looked around, apparently not knowing what to do? She then couldn't even get the pistol back into the holster because she's a Melissa McCarthy body double. I don't think it's a good idea to have Melissa McCarthy guarding the president.

Here’s the critical question now: Who trusts the FBI with the shooter’s computer? Will his hard drive get filed with the Nashville manifesto? How is it that the Secret Service almost didn't have snipers at all but decided to supply them only one day before the rally because all the local resources were going to be put on Jill Biden? I want Jill Biden safe, of course. I want Jill Biden to have what the first lady should have for security, but you can’t hire a few extra guys to make sure our candidates are safe?

How is it that we have a Secret Service director, Kimberly Cheatle, whose experience is literally guarding two liters of Squirt and spicy Doritos? Did you know that's her background? She's in charge of the United States Secret Service, and her last job was as the head of security for Pepsi.

This is a game, and that's what makes this sick. This is a joke. There are people in our country who thought it was OK to post themselves screaming about the shooter’s incompetence: “How do you miss that shot?” Do you realize how close we came to another JFK? If the president hadn't turned his head at the exact moment he did, it would have gone into the center of his head, and we would be a different country today.

Now, Joe Biden is also saying that we shouldn't make assumptions about the motive of the shooter. Well, I think we can assume one thing: He wanted to kill the Republican presidential candidate. Can we agree on that at least? Can we assume that much?

How can the media even think of blaming Trump for the rhetoric when the Democrats and the media constantly call him literally worse than Hitler who must be stopped at all costs?

These questions need to be answered if we want to know the truth behind what could have been one of the most consequential days in U.S. history. Yet, the FBI has its hands clasped on all the sources that could point to the truth. There must be an independent investigation to get to the bottom of these glaring “mistakes.”

POLL: Do you think Trump is going to win the election?

Kevin Dietsch / Staff, Chip Somodevilla / Staff, Kevin Dietsch / Staff | Getty Image

It feels like all of the tension that has been building over the last four years has finally burst to the surface over the past month. Many predicted 2024 was going to be one of the most important and tumultuous elections in our lifetimes, but the last two weeks will go down in the history books. And it's not over yet.

The Democratic National Convention is in August, and while Kamala seems to be the likely candidate to replace Biden, anything could happen in Chicago. And if Biden is too old to campaign, isn't he too old to be president? Glenn doesn't think he'll make it as President through January, but who knows?

There is a lot of uncertainty that surrounds the current political landscape. Trump came out of the attempted assassination, and the RNC is looking stronger than ever, but who knows what tricks the Democrats have up their sleeves? Let us know your predictions in the poll below:

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