1920s Revisited? Or the Great Reset?

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The last week has seen me in reflective mood, 

I read a piece by Bob Bauman, who was reflecting on his studies as a student at Georgetown Universaity, back when most men wore suspenders to hold up their socks, and a side parting was de rigeur, with a neat square finish on the neck-line.

The first World War began as many are aware, when a disgruntled Serb, shot and killed Austro-Hungarian Archduke Franz Ferdinand (and his wife – Sophie)  in June 1914.  This particular Serb, was Serbian nationalist Gavrilo Princip, and this was the spark that ignited the war to end all wars, as it later became known.

His (Bauman’s) fascination with World War I though, went back even further, as his father fought in France after enlisting when he was 18 in Baltimore and serving in the U.S. Army’s 29th Division, made up of National Guard troops from Maryland, Virginia and North Carolina.

The archduke’s assassination took place in that part of Europe, where more recently, our own Paddy Ashdown, helped rebuild that battered ancient principality of Kosovo as NATO fought Serb Nationalism once more, but that was far from where the heavy fighting subsequently occurred in WWI. Few people at the time though expected that incident in Sarajevo to be followed by four years of human butchery and bloody turmoil. Most people expected wiser heads to prevail.

BUT, if history has taught us anything, it is that wiser heads do not always prevail.

Yet, at the same time, history is not necessarily destined to repeat itself either -.at least not exactly.

In the run-up to the 100th anniversary of the outbreak of the war, scholars have ruminated on the obvious historical parallel: Is 2014 another 1914? Are we poised for global conflagration?

In an earlier post, I hinted that maybe we were… Japan and China are firing verbal insults across the South China Seas. Japanese factories were recently attacked by Chinese infuriated by the apparent lack of care taken, when the new Japanese Prime MInister – Shinzo Abe, visited a graveyard to honour the Japanese war dead, and has steadfastly refused to apologise. The Chinese have also attempted to impose rules over previously international waters, about notifying flight plans to Chinese authorities. And the U.S. have been getting drawn into this.  The Chinese criticism of Federal Reserve policies has not helped either.

After all, just like in 1914, there are two superpowers, one in decline and one in ascendancy, contending for economic and political dominance.  There is once again widespread dissatisfaction with the institutions and arrangements governing global affairs, paradoxically and perhaps “delusionally,” combined with a belief that “it can’t happen here.”

There is even a far-off (from the U.S.)  geographical flashpoint — the disputed waters and islands of the East China Sea. There, China faces off against a U.S. “proxy,” Japan.

In 1914, it was Austria-Hungary facing off against Serbia, a Russian proxy.

All this historical speculation, not to mention the economic, financial and political differences sees growing potential for another global conflagration, and that got me thinking. The jury is still out on whether wiser heads will prevail this time — whether the superpowers will move toward a meaningful partnership, as Germany and Britain should have done — or whether the U.S. and China repeat the folly of 1914.

Of course the period after the world war was particularly difficult too, because as I have also previously mentioned the time was a transition from phase one of the Industrial Revolution – The  coal and steam phase, to the oil and petroleum phase.

John Galey, famous Pennsylvania oilman, formerly of Corsicana Oil Development Company, was persuaded to return to Beaumont, Texas to search for oil. On January 10th, 1901 Spindletop oil well in Texas, gushed forth, reaching peak production of 100,000 barrels per day; doubling the US output in a single day, and changed the face of industry in the U.S., and the world.

It took 9 days to bring that particular gusher under control, and the rate of production was such, that it influenced other oil companies to explore, and over the next few years some 1500 oil companies were incorporated. Over 100 oil companies jockeyed for position at the Spindletop reservoir alone.

By 1908, Ford was producing the Model T, and hundreds of other car companies had sprung up all over America, Europe and the world. Skoda even likes to claim it was in business before Ford too.

The Steam train though, would continue in production for 40 more years, and in use into the 1960s and even amongst its devotees to today.

But the 1920s which followed all this innovation and conflagration meant we had 3 million unemployed in Britain, with Jarrow marches for work and 20%+ unemployment in the U.S.  In fact so disturbed by this situation was the outgoing Fed Chairman – Ben Bernanke, he fought tooth and nail to stop the economic malaise that caused this misery to so many, and his answer, may yet furnish us with hyper-inflation, as the Germans and Austrians faced after the war.

The parallels to today though are legion.

We’re at the end of the Personal Computer revolution, and possibly the Industrial Revolution phase too, but like the Steam train, they won’t disappear overnight.

Laptops and Desktop PCs still have their uses, The Internet which began life as plain text evolved, and pictures, video, and audio soon followed. The smartphone shrunk the display area and made us all slaves to “Push” technology, as more and more companies – “pushed” their “Apps” (or Mini-Applications) as they were first known. This meant surrendering information so that we couldn’t use facilities anonymously, and the marketing geeks could track our every move to push Ads to us. But it was also in response to people demanding that someone – anyone – solve THEIR problems.

Of course all this logging of IP addresses means the NSA, and GCHQ can follow our every move too.

BUT, the recent trend in Manufacturing which meant out-sourcing manufacturing to lower cost countries in the Far-East, is changing, and looking increasingly likely it will return to western shores.

Like in the early 1900s, America, and possibly the UK too, are undergoing an energy revolution. Fracking – (Hydraulic Fracturing) is changing the game for Americans, as their domestic oil and gas production is making the U.S. one of the cheapest places on the planet for energy . (Perhaps excepting the oil-producing middle-east) and big American corporations are returning home to re-build factories.

Initial estimates were that they would be energy independent by 2017, but it appears they were overly pessimistic. – California alone now produces over 500,000 barrels per day, and the Bakken fields in the North West, the Texas – Eagle Ford shale, and the shale under the Appalachians are making increasingly larger contributions. – Estimates now are that they will be independent by 2015, or earlier..

Of course fracking is not without its critics, and many would not want it going on in their back yard, but when viewed through the prism of the unemployment rate, it might just be worth it. RT has shown video clips of Gas emerging from water pipes in people’s homes, and others have had their silence bought by big checks.

BUT the BIG changes are taking place in Bio-Tech, Metals-Technology, Cyber and Military Hardware, 3D printing and the “Internet of things”.

Whole industries will likely disappear, and as these 3D printers, able to print in a range of materials become commonplace, manufacturing will face an inglorious revolution.

Harry Dent Junior, a major author of books on economics and finance, who calls it “The Great Reset” has written that he expects the demographic timebomb of the West to lower demand for raw materials and expects oil to go to $10, Housing to fall in price perhaps 50% more and precious metals to head lower too as interest rates rise by mid-year causing massive problems for the over-leveraged consumer and manufacturer alike. Since April 2012, the number of Americans retiring reached 10,000 PER DAY…

Europe is also in a similar position, and while Greece had the earliest retirement age in Europe, which is perhaps why they’re in the mess they’re in. He also expects mild inflation first, with a deflation in the middle, and a mild inflation later rather than the hyper-inflation many are predicting. He also feels Gold could fall to circa $750/oz.

However, Inflation is not measured in price terms. If you speak to an monetarist economist it is measured in an increase in the supply of money, over and above the increase in the supply of goods and services. The money supply needs to grow in what is sometimes called the “Goldiocks zone”, but of course, if the amount of money stays the same, the VALUE of money has to change – it goes down when goods are plentiful i.e. a boom (people want more of it), and up when goods are scarce – a bust (people will take less).

Of course, for new industries to emerge, old industries have to disappear, and they don’t always do so in the same places, or with the same people – Joseph Schumpeter called it “Creative Destruction” and it is what drives the world economy.

It also pays for all those expensive politicians and local government workers, military personnel, Police, Fire and Ambulance workers and of course the teachers, hospital workers and road workers who repair the motorways so speedily or not.

It also pays for the huge spending on military hardware, and the nice spy equipment that those nice boys in the NSA and GCHQ get to play with.

So if the money dries up?

The Fed (or BoE, BoJ, PBoC, or ECB) steps in, and pays for it, and you get to pay off the debt with the taxes that you’re going to maybe earn down the road. BUT where does the Fed get it from?.They conjour it up from the printing presses that they own.

Nice work if you can get it.

More on the new industries next time.

If this floats your boat, and you think your friends might like it, don’t forget to let them know, and if you want to drop me a line, you can do so at: WA1Marketing [at] AOL [dot] COM.





The State and the Dollar (Wednesday 6th November)

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So, who’d have thought it? Our very own Guy (Guido) Fawkes being raised as the flag-bearer against oppressive and unjust governments.  In the U.S., people have been wearing the Guy Fawkes mask and adopted it for their Occupy Wall Street protests, against what they see as an oppressive Executive, Congress and Senate that exists merely to serve the interests of the Corporate State – BIG Business and Big Banks…

It is perhaps too easy for Governments, eager to please their political pay-masters, to believe that serving business, serves wider society’s interests too…

It seems so nice and simple.

The President can have a nice cosy fireside chat with the CEO of one large company or other, and reach a conclusion and both part feeling like they’ve resolved or headed off some crisis or other.

Rather than consult more widely, making laws or giving access to one or other CEO, can help one company at the demise or sufferance of thousands of others who, because they don’t command major public presence on National Newspapers or in National Media Corporations, don’t have their particular problems addressed.

When one company has a large dominant position in the economy, political figures can occasionally appear to bend over backwards trying to protect that business, because headlines that shout “1,000 employees to be laid off” as happened here in the UK by BAe, can drive many people, ignorant of the bigger picture that is being hidden behind the financial news, to seek simplistic solutions.

Charles Mackay’s Book, “The Madness of Crowds” should be required reading for all – especially politicians.

And Banks and Senior Bank Executives and those who ultimately decide the fate of Governments through their control of the Money supply with their claim on your taxes via the national debt is just one more example of this, as people scream: “The government must do something to help”, when quite often the actual long term solution is to do precisely the opposite.

In Britain we the people owe over £1 TRILLION and Central Bank Governor Carney, seems only too keen to add to this.

To use that American Phrase – Economics 101 (meaning the first course of an economics degree at level 1, year 1) teaches us that our income equals our expenditure over our lifetime,  I = E.

The only way we can spend more than we earn is by borrowing, and that borrowed money takes spending power away from the person or institution from whom the money is borrowed. If we borrow at the national debt level, we borrow not from rich people who have the money sitting idle, but we borrow from our children.

And in so doing we impoverish THEM.

THEY will have to work, and pay taxes to pay the Principal plus the Interest (P+I) the principal being the sum borrowed, for those not familiar with the term. The plutocracy (those with immense wealth who influence the political systems from behind the curtains) merely watch their immense wealth grow, as THEY OWN THE BANKS.

The Federal Reserve – set up in 1913, was deliberately so named to avoid the name “Central Bank” and is owned by these plutocrats. Those who were involved were the immensely wealthy Banking families of early 20th Century America, – JP Morgan, the Seif family of Israel, the Warburgs of Switzerland, the Baker, Rockefeller and Rothschild Banking families of Europe.

These powerful interests were whisked off in a private rail-car in the dead of night on November 22nd 1910 and then onto a motor launch to a small Island – Jekyll Island, off-shore Virginia where they could plot their Banking futures – sorry – they could devise a system, and drive the legislation to create the most powerful organisation on the Planet – The Federal Reserve.

At the head of this cabal of Bankers was a politician, Senator Nelson Aldrich who had been tasked with setting up a system to manage the currency of the U.S. by being appointed head of the National Monetary Commission.

A system that had already been decided upon in its founding constitution was to have ONLY GOLD AND SILVER as money, and Certificate’s of Deposit (CODs) and Gold and Silver Certificates as its currency.

BUT, Gold and Silver don’t grow on trees, and these metals merely hinder wealth creation when you don’t control the supply of them – as the Bankers don’t.

So, the goal of the Federal Reserve was to rid the world of monetary metals.


Its true goal was best summed up by George Howard Earle, Jr. of the Real Estate Trust Company.

In 1908 he wrote:

A Central Bank as a Menace to Liberty

The solution of the problem of a central bank, with power to control the currency of the United States, to be at all adequate, must depend upon and be controlled by ultimate political principles.
The same principle that underlies the never-ending conflict between the advocates of a strong centralized government and what are called “states rights,” governs this question.
Taught in the school of experience and adversity, the early English and American patriots learned the salutary lesson that the development of peoples, as well as their happiness, depended more upon liberty – that is, the power to control and govern themselves, rather than to be controlled or governed by anybody else – than upon any other single thing; and they, therefore, in drafting our Constitution, always viewed government as an evil made necessary by the weakness and defects of human nature, and never extended it beyond that necessity.
Under the plan of freedom, of self-reliance, self-dependence, self-government, we have become the greatest, the happiest, the most powerful people of the world.

So without freedom, without liberty,  there is no happiness. (I will return to this in a future post)

But by giving one segment of the population a clear preference, a clear assistance or help, you inevitably steal a little from someone else.

By giving the NSA the power to snoop, into people’s lives, you force people who wish, for whatever reason, to remain private, to use less efficient methods of communication or to be devious in other ways.

And that can only end one way, with the slow strangulation of the economy.

Ultimately, this will end in the demise of the currency as it is currently operated. people will always strive for freedom and liberty.

China has been steadily accumulating Gold and Silver since the mid 1970s, and they have been producing Gold in increasingly larger quantities for themselves. In 2012, they mined over 300 million ounces of Gold, and imported over 1,000 metric tonnes of the yellow metal in preparation for the currency being internationalised. When that happens, the dollar will be replaced as an international reserve, and the price of all commodities will rise significantly.

People adapt to laws, and people use their ingenuity to sidestep legislation they deem unworkable, unjust or just plain not in their interests. The changes take effect over time as people adapt their behaviours, and it is changes like these that slowly affect the economy then the elastic snaps causing the unemployment we see today. A free currency system that allows people to use the monetary metals as they were intended, will raise all ships. But that will take the people by surprise as politicians and the media hide the realities from the people.

As Mao Tse Tung once cleverly stated – “A journey of a thousand miles, begins with a single step”

The battle between east and west may be bloody, and at its heart will be the value of money. A fiat currency like the dollar? Or one backed by precious metals, as used for upto 5,700years?

Until next time.


PS: You can read more on this topic in my e-book “The Coming Battle”.

Monday Matters… (Weekend musings)

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So, It’s Monday again, the weekend is behind us, fun over for another 5 days of slog…

And after thinking about my week-end, I got to thinking about money, and recent posts I’d made. Thanks too to those now following events here…

As I recently mentioned IBM, I’ll kick off with that.  As I previously mentioned, IBM’s sales in China are down 40% on last year, and that begs the question.., What is happening with the other American Tech behemoths?  

If you’re a stock-market Trader, or Options, CFD’s, or Spread-Trading specialist, this might be the time to do a little digging to see if there are shorting opportunities. (I know this is contentious for some people, but it provides liquidity, and makes prices lower to buy, or sometimes just exposes risks that are not yet so widely known)

Anyway, this whole NSA scandal is making news, as a European Parliament commission headed over to the U.S. last week, for talks with legislators to get answers to questions, and raise concerns of Privacy, Security, and Industrial Espionage – after all, with so much technology in use worldwide, if one country can just skim the internet for traffic, and store that away in some digital bunker, while they sift through it, because they have the technological edge, then the rest of the world might begin to mistrust that country, and that can affect international trade, and also spark developments outside the country, which might in itself lead to the very concerns that led to WW2, in the aftermath of WW1…

We already know that many middle-eastern countries mistrust the U.S., and the Russians, and Chinese have a long standing concern over American dominance, it is not outside the bounds of possibility that if unemployment rises world-wide, through lowering of trade, this will not only affect stock-markets worldwide, but also likely increase QE*, which many already believe is anathema, and lead to digital isolationism, protectionism or worse. 

We have to remember though, that the Americans are becoming just a little paranoid – the Twin Towers attack, was the modern equivalent of the Pearl Harbour attack, and that woke the slumbering beast, with disastrous consequences for the country that did it… (I wouldn’t be surprised to learn that the reason that the Americans dropped the two bombs on Hiroshima, and Nagasaki, was because of feelings of retribution…  Anyway perhaps we shall see in the fullness of time)

Some say that the U.S. isolationism, is at the heart of their problems, because so few Americans travel overseas they lack perspective. I worked there in the Tech-boom, at Dell HQ, in Roundrock, Texas, and to be honest the people I worked with were lovely – especially a certain lady, half of European ancestry, and half Native-American – If you’re out there – I’d love to hear from you btw, but their media, was only interested in the U.S., or if the President ventured overseas. It’s a no wonder George Dubya, struggled with his geography. (amongst other things)

So back to money matters. The U.S. gained prominance on the back of its technology. The DARPA agency  (Defence Advanced Research Projects Agency) began research into the use of computer communication in 1969, which ultimately led to the internet, and to U.S. dominance of the tech-sphere, but it could be coming to an end, as India and China now have space exploration programmes, and their high-tech grads are making serious intellectual improvements – I heard recently that India has a Mars mission planned, so perhaps some research into Indian Space Technology Corporations is in order. (If you get a sniff of any, perhaps you’d let the rest of the followers here know – NO mere plugging though without supporting information)

Anyway, this post has rambled on for far longer than I imagined, so Until next time.





* QE – Quantitative Easing if you’re not already aware – A euphemism for printing more money to dilute the buying power of all existing currency by debasing the currency and thus raising the cost of goods through price inflation. Incidentally, for non-historians – Germany, Zimbabwe, Yugoslavia, Austria, and Argentina, have all tried that to detrimental effect with Hyper-inflation.

(Read my book mentioned below if you want a fuller explanation – mentioned in one of the later chapters)