Why I See a New Dark Age and Not Merely A Greater Depression

To me, the Dark Ages are "dark" because of the knowledge that was lost, if not intentionally destroyed. In this sense, I do not view the coming new Dark Age as a return to subsistence farming or involving the complete loss of modern technology, but as the fulfillment of Neoliberalism's mission to engineer a "great forgetting" of classical liberalism and other fruits of the Age of Reason. The ideas of people like John Locke and Thomas Jefferson had a power beyond that which even those two intellectual giants could contain, and they must be destroyed in their raw form and viewed onlythrough the Neoliberal prism. (Note: my thesis is that both Locke and Jefferson crafted their ideas with the aim of controlling the masses, not empowering them.)

The sociopathic dogma of Neoliberalism drives narcissistic institutional values that prevent the masses from thinking beyond themselves, encouraging them instead to embrace selfishness, or "self interest, wrongly understood." The purpose of the coming Dark Age is to forget the classical liberal ideas that resulted in self interest, rightly understood, i.e., self interest that recognizes the good of the community as part of self interest. Mix in the "now-opia" (or is that "now-opiate") of the modern consumer culture, and you have a perfect set of conditions for a new closing of the Western mind.

It's Been Awhile, But I'm Still Here

I have started and shelved numerous posts since my last one.  If I ever get around to finishing all of them, I will have a healthy stock of content.

At this point, however, I'm not using this blog so much to communicate what I'm thinking as to record it.  Unfinished posts remain available to me on blogger as vectors indicating the magnitude and direction of my thinking at the time.

I break my silence now because of a recent series of articles posted up over at the Automatic Earth.  This series of posts, which is now in the third installment of four, appeals to me because of the intellectual challenge it poses to understanding the underlying message: the writing is not sugar-coated pablum but hardcore thinking steeped within a context not readily accessible to most and, therefore, subject to contemptuous dismissal.  But for the fact that the posts contravene the dogma of precious metals as money, one person with whom I correspond (who shall remain nameless because he'd likely complain that I was using his name to my own advantage) would argue that I'm a dupe, fooled by my predisposition towards the intellectual (he assumes because of my education, which is incorrect; I was a lousy student after high school and studied no social science, economics or philosophy until recently.  I write the way I think and speak.  If that comes across as intellectual, so be it.).

The game that is being played out right now is much deeper than the vast majority of people suspect.  I've been talking about "managed deflation" for months, and that's still my call.  What this means is cyclical variations in asset values over time with the absolute magnitude of the values being dampened over time such that we revert to a new, downward-sloping mean.  The powers that be can and will make a tremendous amount of money raping the "traders" chasing yield as a hedge against inflation that will never materialize.  Financialism is done.  Toast.  Kaput.  At least for the foreseeable future.  The point now is to maintain the illusion of normalcy while creating new memories of the horror created by the evil State that is but a puppet of larger, more powerful interests that pretend to be victims.

The bottom line is this: vast, multinational corporations have broken the individual v. collective dialectic.  These corporations are collectives masquerading as individuals victimized by the only collective that neoliberalis officially recognize outside of labor unions: the State, which typically is a Banana Republic or Company Town owned and controlled by these corporations.  The whole thing is a tragic farce that will end badly for all concerned.  We're not heading for a repeat of the Great Depression, but of the Dark Ages.

Anyway, after all that, you'll find what the Automatic Earth has to say quite uplifting, if you can manage to pick your way through it.

The Automatic Earth Gets It

In a post entitled "Bill Gross, Master of Monetary Psy-Ops," the Automatic Earth lays it out for all to see:

The systemic fear generated from crumbling markets worldwide will first serve to attract scared capital into the Treasury market, as it still remains the only place to go for people with sums of money that won't fit under any mattress. Besides, the only real difference between the U.S. dollar and short-term Treasury bills or notes is that the latter could potentially give you a fixed income over their duration. The fear will then serve to further justify Treasury asset purchase operations by the Fed, the ongoing sociopolitical destruction in the Middle East be damned. So how does Pimco and Bill Gross fit into all of these deceptive monetary tactics? Well, the fact that TRF currently holds a record 38% of its assets in dollar-denominated cash is a telling one. [5].

Every investor knows that the best and quickest way to make money is to own something that virtually no one else does, right before it gets hot and takes off towards the moon and the stars. An unexpected end to QE operations will send the dollar soaring, and as mentioned before, all asset markets plunging except for the U.S. Treasury market. Bill Gross may have dumped all of his Treasury exposure for now, but has any other major financial institution or money manager followed his suit? Has the Fed announced any plans to sell its Treasury holdings back into the primary or secondary markets?

Of course not. These institutions are not worried about rates surging outside of their control anytime soon, and will be glad to make a few extra bucks from higher interest payments (paid by taxpayers) before the "rush to safety" really gets underway. I suspect that, by that time, there would have been a significant reversal in the Treasury holdings of TRF and the superficial justifications for the investment decisions of the omniscient Bill Gross. Perhaps he will continue to have minimal exposure to U.S. Treasuries throughout the year, as a partial hedge to his fund's enormous cash holdings, but that certainly should not be taken as an absolute bet against the Treasury market.

We're nowhere near the endgame.  There is no checkmate in sight.  This is managed deflation, with the Fed and its minions acting out a play to manipulate the emotions that the "investing" public believes to be market signals.  The rules of investing were written by the financial elites to fleece everyone else. 

And the fleecing won't stop until everybody stops playing the game.

Charles Hugh Smith: Forgetting about Times Horizons

CHS had a decent essay up today regarding what the Fed has been doing.  You can find it here.

My primary issue with Mr. Smith is that, for all his relatively deep understanding of the dynamics of our financial system, he does not seem to understand the time horizon of the financial elites' strategy.

Bottom line: we are so far away from "checkmate" that it isn't even funny.  We have multiple periodic waves of simulated inflation (i.e. "screwflation") and unmasked deflation to live through before we reach any sort of "checkmate."

Smith's problem, and the problem of pretty much everybody out there, is that his understanding of economics rests upon the lies fed to him by the economic elites.  All economic schools of thought are fundamentally meant to obsfucate the reality of how the world actually works.  The Austrian school, with which Mr. Smith most strongly identifies, is one of the most cynically manipulated schools of economic thought around, to the point that it borders on being a religion.

The Fed fully understands what it is doing and is doing it anyway.  The Fed will succeed in what it is doing because smart people like CHS foolishly believe that the Fed doesn't understand what it is doing.  Bernanke knows what he is doing better than smart people like CHS, who can't fathom how evil Bernanke really is. 

But it is more comforting to blame being evil on hubris or stupidity than to blame it actually being evil.  I fully understand the dynamic and have been guilty of engaging in it myself (more often than I'd like to admit).

Karl Denninger: Seeing What He Wants to See

Actually, it is not fair to single out Karl.  He's late to the game as people like "Tyler Durden" of ZeroHedge and Max Keiser piled onto this story a day or two ago.

What story?  The story that PIMCO is shorting the U.S. dollar, which is based on the fact that PIMCO has recently taken a relatively small short position against U.S. treasuries.  Here is Karl's take on the story.

The problem with the "story" is that it is fiction.  At the same time that PIMCO has taken its $7 billion short position against treasuries, it has almost $80 billion in cash (i.e., the U.S. dollar), making cash the single largest asset class held by the PIMCO fund in question.  Given the 10:1 ratio between cash and the short position in treasuries, one can only view the latter as a hedge against the former bet being wrong.  And what is that bet?  PIMCO is betting on a collapse in the secondary bond and equity markets that will once again make cash king.  And I think PIMCO is right.

I commented on this story over at Max Keiser's place here and here, ending the discussion in both cases. 

Bottom line: deflation is inevitable (indeed, we're already undergoing deflation, but that fact is being masked through stupid accounting and finance tricks); all that is happening right now is the Fed and other central banks are managing a soft landing for the financial elites at the expense of everybody else.  At heart, the banksters are illusionists who use sleight-of-hand to work their "miracles."  Everything that we are seeing, including central bank policies across the board, is meant to herd people into risky bets to fleece them. 

Making a Living REQUIRES Being Distracted from Reality

I view the last two years as an intense, eye-opening journey into places I did not think existed and would not have entered voluntarily had I known they did.

Life is sordid in some corners.  I'm not talking about the people who are trying to eke out a living but about the masters of the universe, the financialists who are trying to make a living off the suffering of others.  (And, no, I'm not speaking of everyone who works in the FIRE sector, the vast majority of whom are clueless about the roll they are playing in the destruction of Western civilization and the civil society that classical liberalism forged.)

I would never have realized what is truly happening in the world without the break I gave myself from "making a living," which even now I really don't have to do.  I pursued my new gig because of the challenges it presents and the opportunity to help others figure out how to care less about what happens at work and more about what happens in the world at large.  Much of the false left-right dichotomy melts away when you stop caring about what is subjectively fair (as in what happens to you at work) and start caring about what is objectively fair (as in what happens in the world generally).  The trick is defining fairness in a way that avoids the false dichotomy, which is actually pretty easy to do.

But now I find myself back in the "fight."  I'm being well-compensated (some might say obscenely so, if the equity pays off) for solving problems that truly don't matter on the global stage but are vital to approximately 3,500 people and their families around the globe. 

Helping these people matters a great deal to me, so much so that it is quickly become almost all-consuming.

And then it hit me: "making a living" necessarily distracts us from what really matters.  I've come to accept the fact that I'm a competitive, ambitious person, although I don't think of myself that way (really, I don't, which is probably a personality flaw of mine).  One thing I have no problem accepting is the fact that competition focuses the attention and the will in a singular way.  Within the neoliberal paradigm, "making a living" means competing, at least for the bottom 95% of the population (in developed countries; more like the bot bottom 99.9% for undeveloped countries).

Over the last three weeks, I've found that my new "job" (I really view it as an exciting challenge, not a chore) has torn my attention away from things that a month ago I was unable to do without. Clearly, I am not immune to the distraction of making a living.  Not by a longshot.  Winning is all-important in our culture, and the zealous pursuit of the win forgives all sorts of sins.  (Which perhaps explains the bank bailouts.)

So, what's the point of this post?  Simply: awakening people to reality requires focusing them on what really matters by pulling them away from the "competition" that drives most of what we do while distracting us from what matters most.

Sorry, Jesse, but Stagflation IS Deflation

"Jesse" of Jesse's Cafe Americain is one of my favorite bloggers out there.  He's quite insightful and a bit more left of center than I along some dimensions.  Generally, I stand somewhere between Jesse and Charles Hugh Smith on the political belief spectrum.

Today's links at the Cafe Americain include this one to an interview of Jesse over at Chris Martenson's site.  The quote that prompted this post is front-and-center at the beginning of the interview:

Stagflation has been my forecast for quite some time, as the most likely outcome, with a real protracted deflation or hyperinflation as lesser probabilities.

The dead horse I beat constantly is that there is no monetary-based inflation in "stagflation," that the price inflation is caused by the diversion of credit into speculative excess in staple commodities, not by wage inflation, which neoliberals argued to be the cause of the1970s stagflation. 

Stagflation is actually screwflation, which is the financial terrorists' solution to deflation, i.e., a contracting economy from a money supply standpoint.  But credit diverted into pure speculation does not spur employment because it shifts aggregate demand into staples and, thus, increases unemployment in non-staple industries even while driving down margins in staple industries (because of increased input costs), which, in turn, drives increased unemployment in staple industries.

We're in a spiral to a deflationary bottom.  "Stagflation" is merely a strategy for managing the landing to the benefit of the financial terrorists.