Tel. +44 (0)20 7287 4414
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The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.
The Bruges Group spearheaded the intellectual battle to win a vote to leave the European Union and, above all, against the emergence of a centralised EU state.

Bruges Group Blog

Spearheading the intellectual battle against the EU. And for new thinking in international affairs.

Batten the Hatches!


I have been following a select group of (mostly American) financial commentators since 2007, before the Global Financial Crisis. Their tone is even more sombre now.

Charles Hugh Smith posted 'I Have a Very Bad Feeling About This' a few days ago, following it with 'No, Central Banks Won't Save Us This Time.' He has been warning for years that we should not look to the 'Saviour State' but instead ought to concentrate on building our social networks to survive the coming disruption.

Similarly Karl Denninger is addressing younger people, saying that the Global Financial Crisis did not eradicate the corporate malefactors and that we now face something worse than 2008. He advises them to review their choice of romantic partner with care - 'plenty of people get dragged down the toilet with someone who is hellbent on destroying themselves… this difficult time is likely to last a decade or more and before you scoff do recall that it was not a year or so, it was closer to five years when the late 1970s and early 80s malaise hit.'

James Howard Kunstler has also long foreseen a 'great reset', but not after the model of the loopy WEF. The money system is a distorting illusion but those running society are clinging on to it because they fear letting go. Under the fiction of finance lie the fossil fuels that are becoming scarcer and more expensive. 'Get with reality's program. Start by choosing a place to live that has some prospect of remaining civilized. This probably doesn't include our big cities… Shift your energies into a trade or vocation that makes you useful to other people.' Kunstler's vision is of a transition to something like what small-town America used to be; a 'world made by hand.'

Even if the end is a sort of dull and dusty Eden, the metamorphosis will not be pleasant or sudden. John Michael Greer - former Grand Archdruid and do not laugh, the druids were advisers to kings in ancient days - sees the process as a 'catabolic collapse', like the way a coal fire shifts and resettles as it dies down, each time throwing up sparks. We hope to keep the show on the road with new energy sources and technology - fusion reactors, room temperature superconductors - but Greer thinks they are mirages. Our planning needs to be personal: 'Collapse Now and Avoid the Rush.'

Richard Daughty - the 'Mogambo Guru' - was a veteran sceptic of the mess of modern monetary management and advocated investments in gold, silver and oil stocks as hedges against inflation, which from 1913 to 2007 saw the US dollar to drop in real terms to 'two cents!' The gold price has quadrupled since September 2008. He is sadly no longer with us, but the memory of his indignation at official theft by devaluation remains.

There are other distinguished voices in the chorus of Cassandras. E.g. Michael Panzner's 'Financial Armageddon' (2007) listed four apocalyptic horses:

1. Ballooning public and private debt.

2. A retirement system (pensions and healthcare) that is financially unsustainable.

3. Government guarantees to banking and financial institutions, which have allowed them to take even bigger risks.

4. Derivatives, a vast system of mutual bets, deals and guarantees that interlink so that failure in one part could spread rapidly and disastrously to all parts.

All have become much worse in the intervening years. Global debt has hit $305 trillion; estimates of the size of the derivatives market vary hugely, between 12 trillion and a quadrillion!

Derivatives are, if you like, side bets on investments. They have the potential to provide financial stability - say for a company that wants to avoid having its exports lose money because of movements on the foreign currency exchanges.

But they also have the potential for massive gambling, and 'on margin' - making a big punt with a small down payment. Everything depends on the players at the table not cheating and having the ability to pay up if they lose.

The game really unwinds if the casino starts bailing out favourite players. When Lehman Brothers collapsed in 2008 it triggered a tightening of interbank lending and gave the global financial system a heart attack. The US Treasury Secretary Henry Paulson came to Congress with a demand for $500 billion to bail out banks by purchasing the rotten mortgage packages they had been selling on the exchanges; when Congress refused, it was made to vote again, the right way, for even more money. Ever since then, it seems, it's been up with the bankers and down with the people.

For example, early in 2008 the US financial services company Countrywide had some $2 trillion in mortgages on its book, but was caught out when mortgage-backed securities (MBS) became unfashionable as their hidden contents began to stink. The group was sold to Bank of America (BoA) for a mere $4 billion, thus acquiring mortgages averaging $175,000 for $350 each. A simple-minded person might suppose it would only have been fair to reduce all the mortgages by a similar margin. Instead it looks like a tremendous shift in balance from the ordinary folk to the 'Masters of the Universe.' Even more outrageously, the government gave the 'too big to fail' BoA $20 billion.

Some of us think that nothing is too big to fail.

For a few, there was an opportunity in the GFC to make a fortune out of the mass stupidity. A hedge fund manager called Michael Burry short-sold the US housing market, i.e. placed a bet that it would fall in value. The story is entertainingly told in the film 'The Big Short.' The gamble paid off with a net gain of over two-and-a-half billion dollars.

Now Burry has placed another wager, predicting a crash on the S&P500 and the NASDAQ stock exchanges. It's a very serious punt: reportedly he is staking 90% of his portfolio.

Burry could be wrong, of course. The great speculator Jesse Livermore was at one time one of the world's richest people but died broke. However, the contrarian instincts of the above people turned out to be right in 2008.

Survivalism in the UK is a bit of a pipe dream - we have near 70 million people in a country slightly smaller than Oregon.

But the USA has about five times as much arable land per person as we do. If you take the prophets seriously, you might start to think about learning practical skills via YouTube and hiring a U-Haul to move out of the increasingly lawless urban environment.

Always fancied a straw bale house, myself.

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