Friday, 20 January 2023 — Albert Park

By Brian Chu Editor, The Daily Reckoning Australia

[7 min read]

Dear Reader,

How will things play out in 2023?

This is the question gripping the financial institutions and the retail investor community alike. Everyone wants to know how they can prosper and avoid losses on their investments.

But 2023 is different, very different.

Most of you who follow us at Fat Tail Investment Research know this for a fact. As contrarians and sceptics of The Establishment, we’ve been at the edge of our seats for a long time waiting for the corrupt system to face its reckoning.

Well, even the name of this publication, The Daily Reckoning Australia, suggests this.

Indeed, it’s been a tiresome process.

We may have gone around telling our family and friends for years about how the financial system will fail, how corrupt individuals and institutions will be exposed and made to face the music, and that ‘honest money’ and cheques and balances will return to society.

No doubt many of you encountered ridicule, more often than not. However, few may’ve not only listened but even come on to our side. It’s these few that make your effort worthwhile. We can only seek to help those who want it.

And I’ve been saying for more than a year that things are turning around to a point where we’re finding out that we’re on the right side of history. After all, the globalists are fast losing control of the narrative when Twitter fell into the hands of Elon Musk last October.

Since then, a furious torrent of releases known as the ‘Twitter Files’ hit the public, revealing a longstanding coordinated campaign by The Establishment to mislead the masses on just about everything.

So where could this lead to?

We are in uncharted territory. One thing that I’m confident about is that The Establishment won’t give up power and control without a fight. And now that their plans and their hypocrisies are out in the open, the globalists are going to rip off their masks and potentially bring it all down.

I believe it’s prudent to expect them to play dirty, using their control of the financial system, which they’ve held for generations.

Market crash? Hyperinflation? Or plain old collapse?

It’s definitely difficult to foresee exactly how things will play out.

You’re talking about a complex system of interrelated financial institutions with millions (possibly even billions) of participants who wear their hearts on their sleeves.

It’s hardly a stable system. Rationality doesn’t rule even at the best of times.

Then there are big players with their thumbs on the scale. Think Wall Street firms, billionaire hedge fund managers, and activist funds that engage in nefarious and self-serving activities to profit for themselves at the expense of everyone else.

I’m sure you’ve had more than a gutful already of hearing about the shenanigans of Sam Bankman-Fried, the disgraced founder of FTX. That’s just one example to give you an idea of what crooks fill the ranks. There are hundreds of them in the history books!

At the head of the pyramid are the central banks and financial regulators, who state for the record that their purpose is to maintain financial stability and ensure fair play.

I don’t know about you, but it seems like the markets are in deeper trouble the more they act. We’ve seen for several years how market participants, big and small, hang onto every word that the US Federal Reserve releases to inform their course of action.

It has rendered our financial markets into a centrally planned system.

An open market? That’s an illusion…plain and simple.

This system is disintegrating before our eyes. But The Establishment’s bullhorn — the corporate media — still has sufficient clout. And it’ll continue to push their wish list until the bitter end.

That’s why you’re reading a lot of gloom and doom about the markets now. They’re priming you for the dump.

So, what type of crash will they try to pull off to follow through with their magnum opus, ‘The Great Reset’?

A deflationary market crash?

A hyperinflationary disintegration of the fiat currency?

Or a good old market implosion where trading activities freeze?

I loathe to hazard a guess on how psychopaths behave when they’re in ‘mutually assured destruction’ mode.

Regardless of what you think, it’s prudent to prepare for a rough ride ahead.

Minimising losses is the winning strategy

Fortunately for you, there’s someone who is more experienced than I about standing firm in a market crash.

Many of you’d know him and hold him in high regard, even if your opinions differ.

I’m talking about Vern Gowdie, editor of the renowned Gowdie Letter and Gowdie Advisory.

In 2016, I signed up for one of his services myself.

I’d been a market sceptic since 2013, after finding out about the massive fraud that is our financial system. From then, I spent a few years trying to learn everything about how the system works and strategies to protect myself.

Reading Vern’s work gave me valuable insight that helped join the dots on how the system is held (very haphazardly) together and where the vulnerabilities are. He also showed how it was possible to even profit in a falling market when most people were taken to the cleaners.

Vern’s reasoning was very convincing and made a lot of sense.

Despite it not happening in 2016–19, that didn’t discredit him in his knowledge and expertise. I certainly didn’t lose respect for him, either.

Rather, the longer the markets didn’t collapse, despite what the central banks had done to pile bandages over the system, convinced me that we’re merely building up to something more catastrophic.

Today, our financial system is groaning under the weight of hundreds of trillions of debts, derivatives, and make-believe financial contracts. Central banks are still stubbornly trying to raise rates and pull liquidity out of a system that needs increasing amounts to survive. Meanwhile, the usual suspects of The Establishment are telling the world to brace for a recession or worse.

What do I read from this?

It seems like they might prime for the financial system to come tumbling down.

I could be wrong, but I certainly won’t be taking my chances. Nor should you.

Even if you disagree, there’s no harm in hearing about how the markets could crash, the magnitude of the possible losses you can sustain if it does, and how to protect from it.

And why not listen to someone who helped people get out of dodge back in 2008?

If there’s someone more qualified to insure your portfolio, it’s Vern.

Check out his latest project, ‘Avoiding the Big Loss’, here. And hurry, as it won’t be available for much longer.

God bless,

Brian Chu,
Editor, The Daily Reckoning Australia

By Bill Bonner Editor, The Daily Reckoning Australia

Dear Reader,

‘Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.’

Charles Dickens, from David Copperfield 

All the trains into Paris are cancelled. Why?

Is it because the Western model of democratic socialism is going broke? Because it has allowed its expenses to exceed its income year after year? Is the bankruptcy of the welfare state among the ‘cluster’ of disasters headed our way?

Here’s the story from CNN: ‘France faces widespread protests and “hellish Thursday” as anger at pension reform mounts’:

‘French workers are set to take to the streets Thursday to protest radical reforms to the country’s pension system that, if implemented, will require most people in France to work two years longer before retirement. 

‘Eight of France’s largest unions — covering transportation, education, police, executives and public sectors — called for Thursday to be the “first day of strikes and protests” against the proposed pensions reform.

‘Widespread strikes are expected, and it may be “a hellish Thursday” on public transport networks, Transport Minister Clement Beaune warned French broadcaster France 2 Tuesday. Paris’ transport authority predicts “very disrupted” service on the city’s transport network.’

We’re happy to stay where we are, about two hours west of Paris, in an old farmhouse. Outside, it is raining, snowing, and sleeting — a typical winter in Normandy. But inside, in front of the open fire, ‘the weather outside is frightful…and the fire is so delightful’. (On Monday, we’ll explain what brings us here.)

Public disservice

Meanwhile, the French are on strike. Teachers. Air traffic controllers. Police. Many ‘public sector’ employees…that is, the people paid to provide services to the public, are not doing what they are paid to do.

To put this in perspective…Otto von Bismarck invented the model welfare state for Prussia in the late 19^th century. What a clever fellow. He launched three short and successful wars against Austria, Denmark, and France. He realised that the masses could be rallied behind the flag in wartime.

But most of Ol’ Blood and Iron Bismarck’s efforts were spent on diplomacy, trying to preserve peace. And in peacetime, ‘the people’ had less need for government. If war was the health of the state, as Randolph Bourne suggested, peace must be its sickness. Bismarck’s medicine is described by Kees van Kersbergen and Barbara Vis as follows:

‘…granting social rights to enhance the integration of a hierarchical society, to forge a bond between workers and the state so as to strengthen the latter…’

In sickness and health

The state was strengthened because its new mission allowed the government elite to take more of the nation’s GDP by promising to provide social services in return. It also unified the people behind the government in one shared insurance program, giving citizens a stake in the system itself. They began to see ‘the government’ not just as a nuisance but as a source of security and wealth. After all, it was the government that would support them in their old age. Today, at least 60% of the French and 50% of Americans receive ‘money’ from their governments.

The trouble with this scheme is mathematical. The feds can only give what they take. Logically, the money to pay for pensions still has to come from the people who get the money. And practically, the government is a very poor manager of retirement funds. It wastes much of its revenues (especially in the US, where the ‘defence’ budget dwarfs other spending). And much of it is siphoned off to the deciders themselves. So the actual return on investment for the typical pensioner is low.  

This defect was delayed and disguised for more than a century, thanks to the extraordinary growth of the fossil-fuelled economy…and the big increase in population. As society became richer, with more people to support the government, the feds were able to pay retirees more than they deserved. So, retirees began to expect more. Politicians raised payouts. The costs crept higher…as revenues lagged.

Replacement value

Every white shoe yearns for mud. And every public policy aims for failure. Today, almost everywhere, public pension programs are underfunded. Almost all the world’s governments are deep in debt. GDP growth rates have slowed to a crawl. Productivity — under the weight of so much social welfare regulation — is failing. And populations are peaking out.

In Europe, the fertility rate — the number of children per woman — was three in 1950; now, it’s 1.6, well below replacement level. In the US, too, women are not having enough children to maintain the current population level or its Social Security system. Overall, the fertility rate is 1.7. For white women, it’s about the same as Europe, at 1.6. That is why the elites tend to favour immigration; it helps keep the Social Security systems solvent.

The French are trying to ease the strain by raising the retirement age (along with other measures). But those moves merely make Bismarck’s ‘social contract’ less attractive. And now the young Frenchman, who expects to be taken care of, cradle to grave, is wondering how it’s going to work out. How can a bankrupt government…heavy with debt and legacy obligations and managed by a large class of incompetent, overpaid, overpowerful deciders…make good on its promises?

Won’t it have to ‘inflate’ some of them away? Won’t its central banks and central governments have to back away from their ‘tightening’ policies? And won’t that be a death sentence to their currencies and their fixed-rate bonds?

Yes.

Regards,

Bill Bonner,
For The Daily Reckoning Australia