charleshughsmith
Executive Summary
- What are the big systemic trends that will impact our personal prosperity?
- Realizing why the future will have less of everything
- Strategies for thriving with less
- The importance of owning & managing capital
If you have not yet read Part 1: If Everything's Doing So Great, How Come I’m Not? available free to all readers, please click here to read it first.
In Part 1, we asked 30 questions as a means of assessing whether individuals and households are doing better or worse than they were 10 years ago (2007) and 16 years ago (in 2000)—before the dot-com meltdown recession and the Global Financial Meltdown recession of 2008-09.
Identifying Systemic Trends
These questions attempt to sort out generalized decay that affects everyone—declines in purchasing power, quality of goods and services, etc.—from declines in individual/household health, well-being and financial security.
The questions also attempt to sharpen our awareness of systemic trends: are our prospects brightening or dimming? Are government services improving or declining as our taxes increase?
General trends manifest in different ways in each community/region. For example, the city and county of San Francisco is booming, with strong growth of population (866,000 residents), jobs, rents, housing valuations and tax revenues. Yet even as the city and county of San Francisco’s annual budget swells to an incomprehensible $9.6 billion—larger than the budgets of many U.S. state governments, and four times the annual budget of the city and county of Honolulu, with 998,000 residents—the homeless problem in San Francisco becomes ever more intractable, intrusive and disruptive, despite tens of millions of dollars devoted specifically to improving the options available to the homeless.
This is an example of larger trends that manifest in one way or another in the majority of communities: increasing costs and complexity, diminishing returns on money spent, frustration by taxpayers receiving unsatisfactory services as tax revenues increase, and problems that continue to worsen regardless of how much money is thrown at them.
There are many causal factors driving these trends of decay, rising costs and diminishing returns: a state-cartel system of regulatory capture that enforces cartels and limits competition; rising complexity of regulations that result in reduced productivity and higher costs; a “vetocracy” (Francis Fukuyama’s term) in which special interests can veto any measure with their political clout that impinges on their wealth and power; central bank monetary policies that enrich the wealthy and strip interest income from everyone else; and government manipulation of statistics and markets to manage perceptions—in effect, ignore your lying eyes and believe us: everything’s going great!
Then there's the shadowy monster in the room…
The Keys To Prosperity
PREVIEWExecutive Summary
- What are the big systemic trends that will impact our personal prosperity?
- Realizing why the future will have less of everything
- Strategies for thriving with less
- The importance of owning & managing capital
If you have not yet read Part 1: If Everything's Doing So Great, How Come I’m Not? available free to all readers, please click here to read it first.
In Part 1, we asked 30 questions as a means of assessing whether individuals and households are doing better or worse than they were 10 years ago (2007) and 16 years ago (in 2000)—before the dot-com meltdown recession and the Global Financial Meltdown recession of 2008-09.
Identifying Systemic Trends
These questions attempt to sort out generalized decay that affects everyone—declines in purchasing power, quality of goods and services, etc.—from declines in individual/household health, well-being and financial security.
The questions also attempt to sharpen our awareness of systemic trends: are our prospects brightening or dimming? Are government services improving or declining as our taxes increase?
General trends manifest in different ways in each community/region. For example, the city and county of San Francisco is booming, with strong growth of population (866,000 residents), jobs, rents, housing valuations and tax revenues. Yet even as the city and county of San Francisco’s annual budget swells to an incomprehensible $9.6 billion—larger than the budgets of many U.S. state governments, and four times the annual budget of the city and county of Honolulu, with 998,000 residents—the homeless problem in San Francisco becomes ever more intractable, intrusive and disruptive, despite tens of millions of dollars devoted specifically to improving the options available to the homeless.
This is an example of larger trends that manifest in one way or another in the majority of communities: increasing costs and complexity, diminishing returns on money spent, frustration by taxpayers receiving unsatisfactory services as tax revenues increase, and problems that continue to worsen regardless of how much money is thrown at them.
There are many causal factors driving these trends of decay, rising costs and diminishing returns: a state-cartel system of regulatory capture that enforces cartels and limits competition; rising complexity of regulations that result in reduced productivity and higher costs; a “vetocracy” (Francis Fukuyama’s term) in which special interests can veto any measure with their political clout that impinges on their wealth and power; central bank monetary policies that enrich the wealthy and strip interest income from everyone else; and government manipulation of statistics and markets to manage perceptions—in effect, ignore your lying eyes and believe us: everything’s going great!
Then there's the shadowy monster in the room…
Executive Summary
- Taking Advantage of Subsidies
- The Importance of Adding New Income Streams
- Income-Producing Assets
- Hedges, Cost-Controls & Other Strategies
If you have not yet read Part 1: The Burrito Index: Consumer Prices Have Soared 160% Since 2001, available free to all readers, please click here to read it first.
In Part 1, we compared official rates of inflation with hard data from the real world, and found that it’s not just the cost of burritos that has soared over 100% while inflation has supposedly been trundling along at 1% or 2% per year. The real killer is the soaring cost of big-ticket essentials such as rent, higher education and healthcare.
So what can we do about it? There are only a few strategies that can make a real difference: either qualify for subsidies (i.e. lower household income), own assets and income streams that keep up with real-world inflation, or radically reduce the cost structure of big-ticket household expenses.
Qualify for Subsidies
Though it runs counter to our philosophy of self-reliance, we have to address incentives offered by the system we inhabit. One powerful set of incentives is entitlement subsidies for lower income households: rent subsidies (Section 8), healthcare subsidies (Medicaid and ACA/Obamacare), college tuition waivers, food subsidies (food stamps), free school lunches, and so on.
These programs were designed to aid households that cannot earn more income, but for households on the borderline between paying full freight (no subsidies) and receiving some subsidies, it makes sense to work less, earn less and qualify for substantial subsidies.
I am not recommending gaming the system, I am simply noting that subsidies exist and those who earn just above qualifying incomes are in effect punished for earning a bit too much.
In many cases, we assume subsidies are reserved for “poor people” and we don’t qualify. For entitlements such as food stamps (SNAP), this is generally the case. But other programs offer some subsidies to households with incomes that are substantial…
How To Beat Inflation
PREVIEWExecutive Summary
- Taking Advantage of Subsidies
- The Importance of Adding New Income Streams
- Income-Producing Assets
- Hedges, Cost-Controls & Other Strategies
If you have not yet read Part 1: The Burrito Index: Consumer Prices Have Soared 160% Since 2001, available free to all readers, please click here to read it first.
In Part 1, we compared official rates of inflation with hard data from the real world, and found that it’s not just the cost of burritos that has soared over 100% while inflation has supposedly been trundling along at 1% or 2% per year. The real killer is the soaring cost of big-ticket essentials such as rent, higher education and healthcare.
So what can we do about it? There are only a few strategies that can make a real difference: either qualify for subsidies (i.e. lower household income), own assets and income streams that keep up with real-world inflation, or radically reduce the cost structure of big-ticket household expenses.
Qualify for Subsidies
Though it runs counter to our philosophy of self-reliance, we have to address incentives offered by the system we inhabit. One powerful set of incentives is entitlement subsidies for lower income households: rent subsidies (Section 8), healthcare subsidies (Medicaid and ACA/Obamacare), college tuition waivers, food subsidies (food stamps), free school lunches, and so on.
These programs were designed to aid households that cannot earn more income, but for households on the borderline between paying full freight (no subsidies) and receiving some subsidies, it makes sense to work less, earn less and qualify for substantial subsidies.
I am not recommending gaming the system, I am simply noting that subsidies exist and those who earn just above qualifying incomes are in effect punished for earning a bit too much.
In many cases, we assume subsidies are reserved for “poor people” and we don’t qualify. For entitlements such as food stamps (SNAP), this is generally the case. But other programs offer some subsidies to households with incomes that are substantial…
Executive Summary
- Which coming developments we can predict with certainty
- Why the next crisis won't be like 2008
- Why what worked post-2008 won't work this time
- Where stocks and gold are headed
- Where to find safe haven for your investment capital
If you have not yet read The Great Market Tide Has Now Shifted To Risk-Off Assets, available free to all readers, please click here to read it first.
In Part 1, we reviewed the market’s risk-on, risk-off gyrations and laid out the case for long-term declines in confidence, political stability and profits. What does this new era of uncertainty mean for individual investors?
What’s Predictable?
We can start by asking—is there anything we can predict with any certainty?
I think we can very confidently predict that future central bank monetary policies will fail to generate sustainable growth or fix what’s broken in the global financial system.
I think we can predict that uncertainty will only increase with time rather than decrease. This rise of uncertainty will predictably lower the attractiveness of risk-on assets, other than as short-term speculative bets after some central banker issues yet another “whatever it takes” proclamation.
It’s also a pretty good bet that if central banks and states continue expanding credit/money that isn’t matched by a corresponding expansion of goods and services, the purchasing power of those currencies will decline.
We can very confidently predict that the authorities will continue to do more of what has failed spectacularly until they are removed from power or the system breaks down.
We can predict with some confidence that issuing more debt will provide little productive results.
I also think we can hazard a guess that the next financial crisis will be of a different sort than the 2008-09 Global Financial Meltdown.
Just as generals prepare to fight the last war, with predictably dismal results (unless the exact same war is replayed, which rarely seems to happen), central bankers are fully prepared to stave off a crisis like the one in 2008: a financial crisis that emerges from leveraged bets going bad in money-center investment banks.
My basic presumption is…
Investing For Crisis
PREVIEWExecutive Summary
- Which coming developments we can predict with certainty
- Why the next crisis won't be like 2008
- Why what worked post-2008 won't work this time
- Where stocks and gold are headed
- Where to find safe haven for your investment capital
If you have not yet read The Great Market Tide Has Now Shifted To Risk-Off Assets, available free to all readers, please click here to read it first.
In Part 1, we reviewed the market’s risk-on, risk-off gyrations and laid out the case for long-term declines in confidence, political stability and profits. What does this new era of uncertainty mean for individual investors?
What’s Predictable?
We can start by asking—is there anything we can predict with any certainty?
I think we can very confidently predict that future central bank monetary policies will fail to generate sustainable growth or fix what’s broken in the global financial system.
I think we can predict that uncertainty will only increase with time rather than decrease. This rise of uncertainty will predictably lower the attractiveness of risk-on assets, other than as short-term speculative bets after some central banker issues yet another “whatever it takes” proclamation.
It’s also a pretty good bet that if central banks and states continue expanding credit/money that isn’t matched by a corresponding expansion of goods and services, the purchasing power of those currencies will decline.
We can very confidently predict that the authorities will continue to do more of what has failed spectacularly until they are removed from power or the system breaks down.
We can predict with some confidence that issuing more debt will provide little productive results.
I also think we can hazard a guess that the next financial crisis will be of a different sort than the 2008-09 Global Financial Meltdown.
Just as generals prepare to fight the last war, with predictably dismal results (unless the exact same war is replayed, which rarely seems to happen), central bankers are fully prepared to stave off a crisis like the one in 2008: a financial crisis that emerges from leveraged bets going bad in money-center investment banks.
My basic presumption is…
Executive Summary
- How will increasing capital controls around the world affect demand for cryptocurrencies?
- The big banks and corporations are embracing the blockchain. Will that make it harder to ban cryptocurrencies?
- With far less than 1% of the population holding cryptocurrencies, how large is the remaining updside?
- What the future may hold for bitcoin and its digital brethren
If you have not yet read An Everyman's Guide To Understanding Cryptocurrencies, available free to all readers, please click here to read it first.
In Part 1, we sketched a brief overview of cryptocurrencies and their potential role as a means of transferring and thus preserving capital from depreciating currencies in destabilized economies to more secure currencies/assets elsewhere in the world.
The Rise of Capital Controls Fuels the Use of Cryptocurrencies
As governments actively devalue their currencies (thereby making everyone using the currency poorer), their citizenry with financial capital are forced to seek ways to move their at-risk wealth into other currencies or assets.
China is a prime example of this trend. As the U.S. dollar has soared 20+%, China’s currency has strengthened along with the USD due to the yuan being pegged to the USD. In response, China must devalue its currency to maintain the global competitiveness of its export sector.
Faced with a massive loss of purchasing power, China’s wealthy class has moved their wealth and their families out of China. This flood of capital has pushed up housing prices in favored markets such as Vancouver B.C. and west coast cities in the U.S.
The sums being transferred abroad are non-trivial. Estimates range into the trillions of dollars. Many observers see the rise of capital controls as…
Will Cryptocurrencies Soar as the Global Economy Falters?
PREVIEWExecutive Summary
- How will increasing capital controls around the world affect demand for cryptocurrencies?
- The big banks and corporations are embracing the blockchain. Will that make it harder to ban cryptocurrencies?
- With far less than 1% of the population holding cryptocurrencies, how large is the remaining updside?
- What the future may hold for bitcoin and its digital brethren
If you have not yet read An Everyman's Guide To Understanding Cryptocurrencies, available free to all readers, please click here to read it first.
In Part 1, we sketched a brief overview of cryptocurrencies and their potential role as a means of transferring and thus preserving capital from depreciating currencies in destabilized economies to more secure currencies/assets elsewhere in the world.
The Rise of Capital Controls Fuels the Use of Cryptocurrencies
As governments actively devalue their currencies (thereby making everyone using the currency poorer), their citizenry with financial capital are forced to seek ways to move their at-risk wealth into other currencies or assets.
China is a prime example of this trend. As the U.S. dollar has soared 20+%, China’s currency has strengthened along with the USD due to the yuan being pegged to the USD. In response, China must devalue its currency to maintain the global competitiveness of its export sector.
Faced with a massive loss of purchasing power, China’s wealthy class has moved their wealth and their families out of China. This flood of capital has pushed up housing prices in favored markets such as Vancouver B.C. and west coast cities in the U.S.
The sums being transferred abroad are non-trivial. Estimates range into the trillions of dollars. Many observers see the rise of capital controls as…
Executive Summary
- The Sole Superpower
- The Importance of factoring in External Costs
- The Biggest Loser
- Which nations to keep your investments in
If you have not yet read Which Countries Will Be Tomorrow's Winners & Losers?, available free to all readers, please click here to read it first.
In Part 1, we examined the thesis that geography and demographics largely define a nation’s destiny.
In Part 2 here, we add other potentially game-changing factors that don’t necessarily fit neatly into either category.
Oh, No: America, The Sole Superpower?
Many of those who disagree with America’s military-interventionist foreign policy of the past 15 years will naturally be appalled by any analysis that suggests America’s preeminence is only going to become even more dominant as the rest of the world is destabilized by the inter-connected dynamics driving global disorder.
The good news is Zeihan sees America becoming much less interventionist as it withdraws into greater self-sufficiency—a topic I’ve discussed in previous essays on autarky. (What If Nations Were Less Dependent on One Another? The Case for Autarky (January 2014))
In Zeihan’s view, America’s preeminence is based on its unparalleled assets of geography and more favorable demographics than its competitors. Zeihan sees the U.S.A’s energy resources, dual-ocean buffers, lack of contiguous-border competitors/enemies, culture of innovation and impressive pool of domestic and foreign capital as an unbeatable combination that no other aspirant to superpower status can match.
In his analysis, the intrinsic weaknesses of other nations and alliances such as the Eurozone have been papered over by the flood of capital that has saturated the global economy for the past 20 years. The source of this ocean of capital is….
And The Winner Is…
PREVIEWExecutive Summary
- The Sole Superpower
- The Importance of factoring in External Costs
- The Biggest Loser
- Which nations to keep your investments in
If you have not yet read Which Countries Will Be Tomorrow's Winners & Losers?, available free to all readers, please click here to read it first.
In Part 1, we examined the thesis that geography and demographics largely define a nation’s destiny.
In Part 2 here, we add other potentially game-changing factors that don’t necessarily fit neatly into either category.
Oh, No: America, The Sole Superpower?
Many of those who disagree with America’s military-interventionist foreign policy of the past 15 years will naturally be appalled by any analysis that suggests America’s preeminence is only going to become even more dominant as the rest of the world is destabilized by the inter-connected dynamics driving global disorder.
The good news is Zeihan sees America becoming much less interventionist as it withdraws into greater self-sufficiency—a topic I’ve discussed in previous essays on autarky. (What If Nations Were Less Dependent on One Another? The Case for Autarky (January 2014))
In Zeihan’s view, America’s preeminence is based on its unparalleled assets of geography and more favorable demographics than its competitors. Zeihan sees the U.S.A’s energy resources, dual-ocean buffers, lack of contiguous-border competitors/enemies, culture of innovation and impressive pool of domestic and foreign capital as an unbeatable combination that no other aspirant to superpower status can match.
In his analysis, the intrinsic weaknesses of other nations and alliances such as the Eurozone have been papered over by the flood of capital that has saturated the global economy for the past 20 years. The source of this ocean of capital is….
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by blaggers