March 6, 2017
Disaster is nearly upon us. This has been a
in these commentaries for several years. Increasingly, however, these
warnings draw reactions of apathy rather than alarm. The fact that our
house-of-cards economies (and societies) have not already unraveled does not
mean that this was a false alarm. It means that disaster has gotten much more
When straight discourse fails to convey a
message, writers typically resort to a metaphor. But which one? The phrase “the
perfect storm” has been popularized in our culture. However, to an audience
which perceives itself to be standing on dry land, that metaphor would likely
A much more illuminating metaphor is the
Readers who are warned that an economic
crash is coming think to themselves, “I’ve seen an economic crash before.” That
would be the Crash of ’08. Call that a once-in-a-generation event. They’ve
heard of the Crash of ’29 and the Great
Depression that followed. Call that a once-in-a-lifetime event.
The average person has a vague
understanding of the Crash of ’08, but that was a very understated dress
rehearsal of what is coming. Except for the most elderly members of our
societies, we have no personal recollection at all of either the Crash of 29 or
the Great Depression. Yet most people reading this will tell themselves they
“understand” what is coming.
Now think about a tidal wave. People living
on islands in the ocean or particularly exposed coastlines will have witnessed
terrible storms – and the magnitude of the waves that such storms generate.
Perhaps once in a generation they will witness a truly horrific storm and
commensurately greater waves. Recorded history may describe once-in-a-century
(or longer) “perfect storms”, supposedly producing the ultimate waves.
Residents of these islands and coastal
areas prepare for terrible storms. Many will prepare for truly horrific storms.
A few may even prepare for the perfect storm. But no one anticipates a tidal
wave, a wave greater than anything that is possible, under normal
circumstances. There is only one way to prepare for a tidal wave: escape to
higher ground before the wave hits.
What evidence is there that an economic tidal wave is approaching – an
event for which there is
We’re saturated with the evidence. We’re
assaulted with the evidence. We’re drowning in the evidence.
There is no historical precedent for the
endemic levels of debt which exist around most of the world, and which reach
their sickening pinnacle in the West. Readers have been warned that a
Many nations now have levels of debt which could never be brought under
control, let alone ever retired. If these nations were corporations they would
have already been forced to declare bankruptcy. Instead, thanks to the fraud of
the fiat-currency printing press, they
those bankruptcies – through flooding our economies with their absolutely
Judging by the apathetic response to
warnings of “Debt Jubilee”, apparently a mistaken impression has been created.
Debt Jubilee: everyone’s debts are wiped clean. A cause for celebration, right?
Before we ever see a Debt Jubilee, we will
see a level of economic pain which few people reading this can imagine. It will
have to be a level of economic pain sufficient to cause our corrupt governments
to collectively emancipate us from our current
Look at Greece. Look at the level of
economic pain which has already been inflicted upon that population.
is greater than 20%. Official youth
unemployment is over 50%. The real numbers are significantly worse. Ninety
percent of the unemployed are paid no unemployment insurance.
The suicide rate in Greece has more than
doubled. At one point, it increased by
in just five months.
Greece and its citizens still have their Debt Slavery. Debt Jubilee is a
necessity, but to get there we will likely have to live through a nightmare
We’ve all seen asset bubbles before, right?
We’ve seen them pop. We understand what that means. Wrong.
The number of asset bubbles which currently
surround us and the magnitude of these bubbles is historically unprecedented.
The rupturing of these bubbles will be an event for which there is
no historical precedent.
Look at our interest
! They have not simply been taken to the lowest levels in the entire
history of our nations. They have been taken to these reckless levels and left
there, permanently. Low interest rates fuel asset bubbles, the definition of
The lowest interest rates in history,
permanently frozen there by the
, are rocket fuel for asset bubbles. What happens when these
rockets run out of fuel – and start plummeting back toward Earth?
We don’t simply have the largest bond
bubbles in history in the Western world. As already noted, all of these
governments are bankrupt. Their bonds are not “overvalued”. They are worthless.
Tens of trillions in supposed “assets” are about to go poof!
Then we have the stock market bubbles.
People look at the bubbles in Western equity markets in absolute terms and
think to themselves: they’re not
In typical stock market bubbles, back when
we had at least semi-legitimate economies and
, valuations would get inflated during economic booms.
That’s not what we have been seeing for the
last eight years. Since the Crash of ’08; Western economies have not “grown”.
They have gotten sicker and sicker and
In Europe, the scorched-earth policy known as
has already reduced many of the Euro zone economies to rubble.
Those economies not already in ruin are
experiencing faux prosperity. Even as
soar, the majorities in luckier nations still think they are “doing
While real wages continue to sink for the
vast majority, their “prosperity” is derived from the illusory wealth contained
in – wait for it – asset bubbles.
Yet for eight years, Western stock markets
have been rising, not falling. In the U.S., markets have been rising rapidly,
and now almost vertically. The reality-gap in our stock markets has never been
greater, especially in the U.S. – greater even than before the Crash of ’29.
There’s a reason why 86-year-old Warren Buffett has got
$85 billion of his vampire-dollars sitting on the sideline.
Many readers will still be clinging to a
false sense of security. They have their homes. For readers living in one of
Canada’s or the U.S.’s extreme bubble-markets, most likely they look at their
homes as being roughly equivalent to the Crown Jewels. Fool’s Gold.
Eight years of the lowest interest rates in
history. Eight years of the easiest money in history. Eight years of the lowest
mortgage rates in history. And many Western real estate markets were already
seriously inflated before that.
Never before have Western
valuations become so wildly inflated. Never before have we seen
populations which were so cash-poor but (supposedly) land-rich. What happens
when millions of these cash-poor people
and become cash-poor to the point of desperation?
They will all try to sell their homes, at
the same time, in markets which were already in free-fall. The real estate
bubbles will burst before the real job losses hit – job losses which will be collateral
damage from all of these asset bubbles simultaneously bursting.
How low is low?
Bubble markets like Vancouver and Toronto
are quadruple any sort of rational valuation. That implies prices falling by
75% in those markets. However, in “crashes” markets always overshoot on the way
90% losses before a
final bottom is in – whenever that might be.
The good news for readers living outside of
the extreme bubble markets is that their land is not nearly as grossly
overvalued. The bad news is that they will not be spared severe pain. The
horrific crashes guaranteed for Toronto, Vancouver, and equivalent cities in
the U.S. will severely depress all markets like a contagious disease. Those
homeowners thinking they will be spared at least a 50% hair-cut are living in a
As all these asset bubbles all start to
implode simultaneously, $10’s of trillions in illusory Western wealth will
evaporate (not counting the $1+ quadrillion in the derivatives market which
will also disintegrate). Any bonds you hold will be worthless. Any stocks you
hold will (with rare exceptions) retain only a small fraction of their current
price. Any real estate you hold will retain only a small fraction of its
Our debts and our asset bubbles are only
some of the economic diseases which are already far worse than at any other
time in our history. Part II will address more of these horrific economic
diseases and then turn to some of the political and social diseases from which
we suffer – which are also far worse than at any other time in our history.
Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers and investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but with a background in economics and law, he soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.
The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.