♪O mio babbino caro – Elisabeth Schwarzkopf

O mio babbino caro” (“Oh My Beloved Father”) is a soprano aria from the opera Gianni Schicchi (1918) by Giacomo Puccini to a libretto by Giovacchino Forzano. It is sung by Lauretta after tensions between her father Schicchi and the family of Rinuccio, the boy she loves, have reached a breaking point that threatens to separate her from Rinuccio. It provides an interlude expressing lyrical simplicity and single-hearted love in contrast with the atmosphere of hypocrisy, jealousy, double-dealing, and feuding in the medievalFlorence of Puccini’s only comedy.

The aria was first performed at the premiere of Gianni Schicchi on 14 December 1918 at the Metropolitan Opera in New York by the popular Edwardian English soprano Florence Easton. It has been sung subsequently by many sopranos. Dame Joan Hammond won a Gold Record in 1969 for 1 million sold copies of this aria.

Is Erdogan Together with Muslim Brotherhood Trying to Recreate the Turkish Empire?

Wow, I look forward to Putin’s speech at the UN General Assembly next week! Great analysis Lada. 🙂

Futurist Trendcast

In response to my post: Syria Spotlight From the Horse’s Mouth: Syrian President Bashar Assad – Exclusive Interview to the Russian Media,

reader James Cook says

Could we perhaps have your take on the following quote from the last part of Assad’s interview?

President Erdogan belongs intellectually to the Muslim Brotherhood. Consequently, he believes that, if the situation changed in Syria, Egypt, and Iraq, it means the creation of a new sultanate; not an Ottoman sultanate this time, but a sultanate for the Brotherhood extending from the Atlantic to the Mediterranean and ruled by Erdogan.

Lada’s Take

(see more posts in Ask Lada category)

First thing we all have to keep in mind is that Assad and Erdogan are personal enemies. They hate each other for a variety of reasons. They belong to very different branches of Islam. They represent diverging directions of the Middle…

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A Flock of Black Swans

In 1999, the Federal Reserve, under Alan Greenspan, convinced the US Congress to repeal the Glass-Steagall Act, which had been passed in 1932 to eliminate banks’ abilities to offer loans far beyond the actual level of their deposits.

When I learned of this development in 1999, I anticipated that it was put through to allow banks to once again recklessly loan money and that the outcome would be essentially the same as what occurred in 1929 – a depression of major proportions.

Major depressions do not occur overnight. They go in downward waves, interrupted at intervals by false recovery waves. The first major event of what would become the Greater Depression took place in 2007 with the housing crash. A year later, right on cue, came the first of the stock market crashes.

Since then, the US Federal Reserve and the governments and central banks of much of the world have been involved in Band-Aid solutions to postpone further crashes, in spite of the fact that the economy is, in fact, a “dead economy walking.”

The Band-Aids have been many and various and, at some point, one of them will fail. The fact that they are all Band-Aids and not true solutions assures that, when the first one lets go, they will all fail in succession. Only at this point will the average person understand that we have been in the early stages of a depression all along.

What will happen will be a sudden and unseen event – a trigger that suddenly sends the economy downward, followed by another, then another, as the economy tumbles inexorably downward.

Along the way, emergency measures will be utilised to “save” the economy. They will be drastic, including confiscation of bank deposits, plus massive money creation. There will be dramatic inflation and very possibly, hyperinflation.

But the collapse will continue, unstoppably. Like any house of cards, once it begins to actually fall, no further Band-Aids will stop the inevitable.

So, what might that trigger be?

Well, there is literally no one in the world who might predict that with certainty. The reason is that as so many Band-Aids have been used by so many countries in so many areas of the economy, no one can say which one will fail first: which one will be the actual trigger that causes the chain reaction.

I believe that we are now closing in on that time. The house of cards is becoming evermore fragile and we will not need to wait much longer before the event occurs. As we get closer, increasing numbers of people are seeing the writing on the wall and, more and more, I’m being asked the same two questions.

“What Will the Fatal Trigger Be?”

Here’s a brief list of possible triggers:

  • Creditors dump US debt back into the US market
  • Commodity prices spike
  • A crash occurs in the stock or bond market
  • A backlash occurs from countries sanctioned by the US
  • European countries default on their debt
  • The US dollar ends as the petrocurrency (causing a sale in US treasuries)
  • The US or EU introduce significant tariffs, diminishing world trade
  • Interest rates rise, as they did in 1929
  • The paper gold market crashes, when the shortage of physical gold is revealed
  • Banks freeze or confiscate deposits
  • FATCA accelerates the demise of the US dollar as the default currency
  • A credit collapse occurs (followed by dramatic inflation or hyperinflation)

Any of the above is capable of triggering a collapse (and, as stated, this is not by any means an exhaustive list). Therefore, it would be wise to keep an eye out for indicators that one of them may occur. Any one of them that appears to be nearing the point of becoming a reality would suggest that the tipping point may occur soon.

“How Will I Know in Advance?”

Whatever advance warning you may have will be based on how closely you’re following the indicators that any of the possible triggers may be nearing fruition. Some, like the overbought stock market or the rise in commodity prices could kick in at any time.

Others, such as a bank freeze on deposits, or the collapse of the ETF market in gold, could happen quite suddenly and without any warning at all.

In discussing the above condition with investors, they often say, “Well, if it’s inevitable and I can’t time the event, there’s no use thinking about it. We’re all going to go down with the ship, so why bother?”

Quite frankly, I’m astonished that so many investors are so complacent that they’re prepared to shrug their shoulders and accept their own economic demise, yet this assumption is very common.

The enemy is not the coming events; the enemy is complacency toward those events.

The investor therefore has two viable choices: to either get blindsided by events and become an economic casualty, or be prepared (as much as possible) for the crashes, regardless of what the trigger might turn out to be.

Creating an Escape Plan

There can be no perfect solution – one which allows you to retain your present life, exactly as it is, within the system, whilst the system around you is in a state of collapse.

What can be done, however, is to remove your wealth and yourself from the system as much as possible, so that the impact of the collapse is minimised.

As a basic set of assumptions, you might consider one or more of the following actions:

  • Remove all cash from exposure to bank freezes and confiscations by placing your money (other than three months of expenses) in banks in countries where no confiscation laws exist (i.e., outside of the EU, US and Canada).
  • Convert a major portion of your cash into precious metals, to be stored in a minimum-risk jurisdiction, such as Singapore, Hong Kong or the Cayman Islands.
  • If you’re a citizen and resident of a major country that is likely to be a casualty, create a place of legal domicile in an alternate country.
  • Invest in land and/or built property in that country, or similar jurisdiction (property is the most difficult asset for any government to confiscate). Choose a country that has no annual property tax, if possible.

This is only the most basic of formats, but it works well, either in its entirety, or in part.

Many readers may say, “But I’m not wealthy. I can’t do any of those things.”

Again, this is complacency talking.

Anyone with $1,000 can create a foreign bank account. Anyone who additionally has the price of an ounce of gold can begin to remove his wealth, no matter how small, from risk.

Anyone with a skill can secure employment in a country where the damage is likely to be lesser than in his home country.

The cloud on the horizon is a flock of black swans. No one can predict when they might land. What can be said for certain is that, at some point, they most certainly will.

Editor’s Note: A big part of any strategy to reduce your political risk is to place some of your savings outside the immediate reach of the thieving bureaucrats in your home country. Obtaining an offshore bank account is a convenient way to do just that.

That way, your savings cannot be easily confiscated, frozen, or devalued at the drop of a hat or with a couple of taps on the keyboard. In the event that capital controls are imposed, an offshore bank account will ensure that you have access to your money when you need it the most.

In short, your savings in an offshore bank will largely be safe from any madness in your home country.

Despite what you may hear, offshore banking is completely legal and is not about tax evasion or other illegal activities. It’s simply about legally diversifying your political risk by putting your liquid savings in sound, well-capitalized institutions where they’re treated the best.

Deflation on the Horizon

Deflation on the Horizon

For years, a rather pointless argument has been ongoing amongst economists – that of inflation versus deflation.

The principle countries of the world have amassed a greater level of debt than the world has ever seen and, of course, this can only end badly. But will it end in inflation or deflation? To me, this discussion is akin to arguing whether the sun will rise in the morning or set in the evening.

Those who predicted inflation and those who predicted deflation will both get to be right. This will be an equal-opportunity disaster.

Certainly, whenever there’s an increase in the currency in circulation, there will be inflation. Yet we don’t seem to be witnessing significant inflation. But, then, the massive money printing that’s occurred hasn’t been widely circulated. It has, instead, been pumped into the banks, where most of it has stayed.

Also, there has been inflation in the world in general, but less so in the U.S., as the U.S. dollar is rising against most currencies. As a result of these factors, the traditional inflation before a crash has been limited.

The next major event in the row of dominoes falling is likely to be a crash in markets. Whilst it’s obvious to anyone who studies economics that the bond and stock markets are in a bubble of historical proportions, the majority of people (those who rely upon the media for their financial guidance) are vainly hoping that political leaders will come up with an economic aspirin of some sort that will make the debt problem go away, eliminating the possibility of market crashes.

But, now, we’re beginning to close in on the first crash. It’s within view and is finally giving pause even to the many who had maintained that it would somehow not come to pass. It’s beginning to look more real to the average person.

The bellwether has been a significant drop in the stock market. This drop does not constitute a crash, but neither is it an anomaly. It’s merely the first downward leg in the overall decline. There will be a correction to the upside, then another downward lurch, and so on.

Plan on Deflation Following the Crash

Deflation always follows a crash. The dollar won’t go down right away. That will happen in the inflation period (more about that below).

Investors tend to muse that, if a market begins to decline, they will view the situation carefully and decide whether to sell some stocks and which ones to sell. Unfortunately, in a crash, it’s very unlikely to turn out that way. In a crash, the price is heading south rapidly and there’s little time to ponder the situation. The investor is likely to find that his broker has made the decision for him.

When the equity in a brokerage account falls below the maintenance margin, the brokerage issues a margin call that forces the investor to either pony up more cash, or have his portfolio sold off to make up the loss. This may come as an unwelcome and badly-timed shock, but there’s worse to come. The greater downside is that the broker is not obliged to contact the investor prior to the sell-off. The broker may decide to sell any of the stocks he chooses in order to save himself. So, not surprisingly, he may well choose to sell those stocks that are notheaded south, as it will be easier to find buyers for them.

Plan on a Drop in the Gold Price

Many investors maintain in their portfolio a percentage of precious metals stocks “just in case.” They consider this to be a diversification, an insurance policy. If the stock market heads south in a significant way, there’s every likelihood that this will drive up the price of precious metals. But, of course, in a crash, even a moderate one, this position will be the easiest one for the broker to sell. The investor may discover that, overnight, both his more conventional stocks and his insurance policy have diminished or disappeared.

In addition to the above, those who hold physical gold as an insurance policy against stocks may find that, if they depend upon the stocks for income, they cannot afford to pay their bills if stock earnings suddenly disappear. Something will have to go. Maybe it will be the family boat, or that beloved Harley in the garage. Maybe it will be the precious metals.

For these reasons, even the most adamant of goldbugs should be prepared for a downward spike in precious metals following a significant crash. And, if the overall crash is a series of downward thrusts interspersed with smaller upward corrections, it shouldn’t be surprising if the gold price follows a similar path.

So, does that mean that gold and silver are not a safe haven against stormy economic periods?

Not at all.

It merely means that, in addition to the major cleanout of the gamblers and traders from the gold market from 2011 to 2015, there will be a final (and possibly very sudden) cleanout after a fall in the market. In my estimation, it will reflect the crash – the more severe the crash, the greater the downward spike in metals.

However, the reverse will be true in terms of its duration. The deeper the crash, the quicker those investors who still have cash will jump onto the gold truck. Therefore, the spike could be very brief and pronounced.

For those who have been prudent enough to exit the market prior to the crash and still be holding money in their hands, that would be an excellent time to buy gold. In fact, it may be the very best opportunity, because, at that point, it’s likely that gold will have reached its bottom and will be poised for a historic rise.

Plan on Inflation, in Addition to Deflation

At this time, or relatively soon thereafter, the central banks can be expected to fulfill their oft-repeated promise that they will fight deflation with money printing.

In all likelihood, we will see quantitative easing like never before.

Central banks will print as much as they feel is necessary to counteract deflation. However, this will have a more dramatic effect on increasing the cost of commodities than to relieve the fear of purchasing assets. (The average person will readily buy food and fuel, but will not buy the boat or Harley that’s for sale in the driveway down the block.)

Historically, when this happens, wages never keep pace with the rising prices of commodities, so the situation will worsen – deflation in asset prices with inflation in costs.

Again, historically, this is a recipe for dramatic inflation that becomeshyperinflation. To my mind, this is the only uncertainty. Whilst the other dominoes described above are almost certain to fall, each in their turn, hyperinflation is the wild card. Hyperinflation occurs when the people of a country lose faith in the political/economic governance of the system. If it occurs, no government has ever succeeded in reversing it. It plays out until full economic collapse occurs.

If and when this happens, precious metals will most certainly retain their lustre and may provide a soft landing for those who have held their metals position during the doubtful times.

One caution: Since most of the traders and gamblers are already out of the gold market and most gold is now held by those who are long, the window of opportunity will be brief if a spike does occur. Whatever precious metals are on offer will be gobbled up quickly.