Q1: Markets are crashing, what’s the cause?
If you’ve read us long enough, you know the answer.
We live in a crony, crooked, hall of mirrors, where central planners control the price of money, the most important price in the entire economy, the stick by which everything else is measured.
They do this with interest rate policy and manipulation of the money supply, creating booms and busts of ever-increasing magnitude. When prices are set by central planning (instead of by individual actors in free markets balancing supply and demand), the result is economic distortions.
We may as well be the Soviet Union.
In this case, they’ve kept interest rates artificially low for nearly 15 years while increasing base money by a factor of eight. This fueled wild speculation in anything that wasn’t tied down (as it always does) — stocks, bonds, crypto, and housing. Proving their level of corruption is matched only by their incompetence — truly staggering — they shut down whole economies, limiting production and destroying supply chains.
As all the freshly printed money began to filter into prices for food, gas, rent, and consumer goods, the Fed had no choice but to try to contain it by tightening monetary conditions.
Predictably, this is popping the bubble. Six months ago, we warned-
Once again in January, three weeks and 4% off the market’s high, we said–
The inflation-genie is out of the bottle. To put her back in, they need to stop the easy-money policies, but that will crash the markets, a cascade of debt-deflation (like 2008) that also torpedoes the real economy. So, which will it be, inflation or depression? It’ll be an epic tug-of-war as they try to thread the needle. They’ll tighten this year until things start to break, then panic and turn the money spigots back on.
Well, things are now starting to break. The Fed is in a giant game of chicken with the markets, like Kevin Bacon in Footloose-
Q2: We opened a custodial account for our child to follow the Ultimate Plan in your Parent’s Guide to Money, Saving & Investing, what now?
Sit tight! We outlined strategies that will whether the storm, allowing you to take advantage of lower prices. Remind your kids (from the Parent-Child contract), this is expected. They are ready-
This could become the best buying opportunities of our lifetime (depending on when Kevin Bacon – err, I mean Jerome Powell – blinks, reverses course, and opens the money spigots).
Q3: This boom-bust cycle, is it covered in your bedtime stories?
Absolutely, it’s the subject of the Big Bad Business Cycle.
In the magical world of Debtopia, President Busy-Body follows the same playbook, creating phony booms that end in economic turmoil for our unsuspecting Debtopians-
Busy-Body promises an economic boom through stimulus to get elected-
Busy-Body opens the money spigots to deliver on his goals-
Debtopians rejoice, upgrading homes, pools, and cars, creating artificial demand, sending distorted signals to entrepreneurs. This creates ‘malinvestment’ (uneconomic projects, doomed to fail)-
Young Debtopians shun work to speculate by trading stocks and options (we wrote and published this book before the GameStop/AMC meme-stock fiasco)-
Inflation arrives, Busy-Body slows the money spigots, markets crash, businesses fail, and recession hits. The recession is not the problem, but a consequence, a necessary cleansing of malinvestment from the artificial boom. It cannot be avoided, only pushed to the future. Each time it gets pushed out, the consequences get more severe until the only choices are depression, or hyperinflation-
Umm, sound familiar?
Q4: What should the government do to fix this?
Nothing, except close down the Fed (along with all the other worthless bureaucracies), shut their pie hole, and get out of our lives.
Government should be stripped of all power not explicitly permitted in the Constitution, effective immediately. Government is coercion, distortion, and control.
Government is the cause of, not solution to, the economic reckoning.
If the bumbling clowns in Washington – Biden, Pelosi, Warren, McConnell, and their gang of clueless, lying hacks – start “doing something” to fix this, like passing laws against “price gouging” (a blame-shifting term for the soulless and morally bankrupt), get ready for complete and total calamity:
Empty shelves, empty gas stations, and broken markets.
If producers cannot charge sufficient prices for food and gas that cover their own costs and incent more production, they will not produce, and they will not invest.
Q5: Is this incompetence or malfeasance?
It may not matter anymore, but incompetence of this magnitude is hard to fathom.
Perhaps the malfeasance is at the hands of the busybodies at the World Economic Forum – Klaus Schwab, Bill Gates, Larry Fink, Mark Benioff, Mark Zuckerberg, and Justin Trudeau, to name a few – and this is their big plan, the one that ends with you owning nothing and eating bugs in the Metaverse.
Or, perhaps it’s mere corruption – the age-old flimflam – a money, power, and resource grab where those who pull the strings tilt the rules more in their favor, a consequence of living in a fiat system.
As we noted in the BadDaddy Manifesto, November 2019 (right before our lives were upended)-
All roads lead to a broken, debt-based fiat money system.
Money is the social contract. When its issuance is fraudulent – small cabals that create it from nothing in favored service to the well-connected – what festers socially is rot. Trust in the system, our institutions, culture, our values, and ethics, they begin to crumble, like once-proud factories in Detroit-
Gains in productivity from technology, ingenuity, and hard work that under a gold standard filter to the working and middle class — the fruit of our labor — are siphoned to the top. A towering edifice of debt – phantom, paper wealth – metastasizes.
Periodic waves of deflationary collapse ripple through the system as the credit cycle matures, like the 1930’s, 2000, and 2008, and will once again (like, now).
It dies slowly, then suddenly, a long whimper then sharp bang, usually by way of inflation that gives way to currency collapse.
Until then, like living in a hall of mirrors, everything is distorted. There is no reliable, consistent measuring stick for the value of anything.
Call it incompetence, call it malfeasance, but no matter: the jig is up.
Q6: This mechanism, where productivity gains are siphoned to the top, is that explained in the books?
Of course! The debt-based fiat money system – the Big Green Blob – has to keep growing, or else it’s collapsing (as it’s threatening today). And it only grows by issuing new debt, which is why your kids and mine will be poked, prodded, begged, budged, and cajoled to borrow money-
The poor and middle class get caught in the consumptive debt-trap paying 5-25% interest rates for homes, cars, education, and consumer goods, while the American Dream slips further away.
The super wealthy access capital at lower rates – the Fed’s near-zero percent — to buy up land, real estate, and productive businesses, inflating away their debts. When the music stops, they own everything.
Look, I don’t blame them. I do it myself. It’s the broken, rigged, crooked system that’s the problem.
Q7: Has the bubble burst for good?
Predictions are tough, especially about the future. I do believe the Fed will blink and drive their tractor into the embankment before Kevin Bacon flinches, turning the printing presses back on — markets will therefore turn back up after a bit more (15%?) pain — to hell with price inflation.
No one at the Federal Reserve is strong, fast, or fresh from the fight (not since Paul Volcker retired 35 years ago). They are weak, slow and sheltered.
The whole thing needs a monetary reset, which they’ll try to do with Central Bank Digital Currency (and totalitiarianism). Here was our take on how that plays out.
In summary, things are not going to get easier for most, not in the short term, but they can get much better in the long run if we reject collectivism in favor of individual liberty, small government, and self-reliance.
Teach your kids well, they are the future.
Q8: Has capitalism failed?
Hell no. Central planning has failed, yet again. Fiat money has failed, yet again.
Do you want government to improve your life? Welcome to the DMV, chump. Now take a number, then take a seat. It’s going to be a while.
Q9: Do you still believe in Bitcoin?
Absolutely, but it is not a substitute for gold and silver. It’s a nice compliment, with huge potential. But it’s still a speculation.
Bitcoin is a beautiful story, but as we warned, there is a ton of leverage and garbage in the crypto space, and that all needs to be resolved-
Don’t confuse Bitcoin with other cryptos. The crypto universe is a cesspool of junk with a tiny-few winners, and the violent shakeout of junk will create extreme volatility, even in Bitcoin.
Q10: What should we do next?
Grab our free Ultimate Guide (email download below) if you don’t have it yet.
And Better Bedtime Stories for your kids – what are you waiting for? You get one chance with these little buggers, don’t send them off to get chewed up and spit out by a fraudulent, broken, predatory system.
Can’t afford them? Apply for a COVID scholarship edition (just tell us, sincerely, why you want one, and that you’re going through hard times).
We’ve got to watch out for each other, right?
We’re in for massive change – the jig is up, and the ruling class are as incompetent as they are corrupt – but short of nuclear Holocaust, the human spirit through individual liberty will prevail.
Those of us in-the-know will have the wind at our backs. So, keep your head about you, and set an example for your kids. They are always watching. Here’s an old favorite poem you can share with them…
“If-”, by Rudyard Kipling-
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:
If you can dream—and not make dreams your master;
If you can think—and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools;
If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: ‘Hold on!’
If you can talk with crowds and keep your virtue,
Or walk with Kings—nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And—which is more—you’ll be a Man, my son!
Want to raise empowered kids who see the code in the matrix, who know how the money system works, and how to use it? Kids who understand fiat, debt, the business cycle, Bitcoin, and the risk in groupthink?
Our line of Better Bedtime Stories does that. Join the Alliance and receive all of our books, three months apart, 40% off, in just the right order.
You’ll love them (so will your kids), or we’ll refund 100% of your money, and you can keep the first one anyway. No risk, and nothing to send back.
Download our Ultimate Parent's Guide to Money, Saving & Investing (free today)
And receive our monthly commentary, timeless and timely, right to your In-Box.
Want more like this? Try Capitalism vs Socialism, Part I.