Wednesday, January 2, 2013
You Know How This Ends, Right?
In 2006, when Americans were flying high on ever-expanding credit and double-digit real estate growth, hedge fund manager Kyle Bass came to the conclusion that something was very wrong. He and his investors determined that a massive real estate bubble was forming in sub-prime mortgages. But rather than just make a prediction, they put their money where their mouth was, and took a $4 billion gamble that the real estate market was about to detonate.
At the time, many in the industry and within financial circles thought him crazy.
History, however, proves he was right.
When the real estate bubble did finally burst, stock markets plummeted and mortgage-backed securities fell to pennies on the dollar. Bass and his hedge fund made billions in the process.
Bass’s foresight was 20/20, and now he has issued a warning so dire that it, like the real estate crisis and recession that followed, is unimaginable for most Americans.
The United States, Europe and the rest of the world have created more debt than has ever existed in the history of the world. Debt is nothing more than a representation (and expectation) of future earnings — future work. But, as many of us know, there has been so much money borrowed that we can’t possibly ever expect to pay it back. In fact, the only thing we can expect is that we will continue to take on even more debt.
At some point in the (near) future, the plug is going to be pulled and no one is going to lend anyone any more money. We saw this on a small scale in 2008 when credit markets around the world froze up. No one was lending money. There was so much risk that banks not only refused to lend money to individuals and businesses, but they refused to even lend each other money.
Central banks around the world, namely the U.S. Federal Reserve, calmed financial markets by pumping out trillions of dollars in emergency lending. This gave many a perception that things were returning to normal, but as Kyle Bass points out, we are in anything but a normal situation.
Debt has skyrocketed and we’re not going to pay it back — ever.
Like the Mafia does when debts don’t get paid, our creditors are eventually going to resort to ‘breaking some legs.’
But we’re talking about debts of entire sovereign nations here, so the tools used to ‘take care of it’ won’t be crowbars or baseball bats, but rather, soldiers, tanks and intercontinental ballistic missiles.
War is coming — just as it has throughout history.
And the 99% of Americans who believe in a benevolent, all-knowing, all-caring government will be the last ones to get the memo.
Ignore the warnings at your peril.
Excerpts provided by Tekoa Da Silva of Bull Market Thinking Reprinted from SHTF Plan. Mac Slavo [send him mail] is a small business owner and independent investor. Copyright © 2013 Mac Slavo Back To Leeconomics.com
Reprinted from SHTF Plan.
Mac Slavo [send him mail] is a small business owner and independent investor.
Copyright © 2013 Mac Slavo
Back To Leeconomics.com