Sunday, January 2, 2011

The Extinction Event

Hello all!

I haven't posted in my blog in months, for the reason that I have been completely occupied on a major project for a South Korean theater company. I just completed a libretto of a new musical for them. Now that the holidays are over, I'd like to look forward to 2011 and, if I can, warn people about what may be on the horizon.

Do you have the same sinking feeling that I do that something very fundamental has changed in the Western (ostensibly) capitalist nations? Reading the newspapers, following politics, listening to the news, do you not feel an increased sense that things are... phony? We are being lied to. I don't really have any doubt anymore. And I think the reason for the lies is that the lies are actually necessary to stave off disaster. We are being lied to by our governments because, if we knew what was really going on, it would actually create the crisis. What we are facing is an economic meltdown-- and keeping us in the dark and happily spending and going into debt is one of the mechanisms that is staving off the inevitable.

Now, I don't usually blog on financial issues. Hell, I'm a broke playwright. What do I know? But I do have some history to share. I used to be a stockbroker a long time ago, and I parlayed that into a job at Morgan Stanley as an executive assistant. I rose very fast and found myself as E.A. to all the top executives. I worked with the CFO, the CEO, the Presidents, the Chief Legal Officer-- all the top guys. I got to (literally) rub shoulders with major bigwigs. Here's me and Bill Clinton:

And I had a unique vantage point from which to watch the events of 2007-2008.

What did I see?

I saw fear. I saw scrambling. I saw a panic. I scheduled a lot of emergency meetings. I printed up a lot of handouts. I organized folders crammed full of confidential information. And I made a lot of mental notes: I decided I wanted to understand Credit Default Swaps and Mortgage Backed Securities and the like-- I decided I wanted to learn the specifics of the financial collapse. I didn't set out to learn finance or banking-- hell, I can't balance a checkbook. But I did set out to understand-- just from simple curiosity-- what in the world I had seen and lived through.

After Morgan Stanley fired me (and a lot of other people) I found I had plenty of time to research.

At first, I thought I would write a play about what I'd seen. So I started reading books like "Too Big To Fail"-- delighted when I found names and faces I knew and had worked with: Colm Kelleher, Walid Chammah, John Mack-- or men I had scheduled meetings with like Paulson and Geithner and Dick Fuld. It is an interesting cast of characters.

But I really didn't grasp a lot of what I was reading, and I lost interest.

Until Fall of 2009 when I started to glimpse some new questions. The Obama administration began piling on stimulus and deficit financing. I had started to play stocks to make spending cash, and I started to follow stories like the CIT bankruptcy-- started to try and understand credit markets and the like. I followed federal seizures of banks for a while. I started to realize just how bad of a state the economy was in. I started to research how various markets were being manipulated.

I called my mom in November 09 with a warning: "I think you should buy silver. All you can. The silver market is being manipulated and has a larger upside than gold. I'm scared that something bad is going to go down."

She, of course, scoffed. And, after silver dropped from 17.50 in November down to as low as $14/oz by March '10, she was saying thank the lord she hadn't listened to me. And I shut up making recommendations.

But I continued to follow stories and do research. This past Summer I heard a commentator mention "quantitative easing" being on the horizon. So I started looking into that-- the Federal Reserve would be announcing a $500billion+ scheme to buy treasuries by printing money. When? The day after the election.

All my hairs stood on end. The timing was so suspicious-- I had to understand. Silver had crept back up to $21 or so. I called mom again-- "Look, silver is going up and I think it might explode after this QE thing is announced." she didn't listen, but I put my little cash in mining stocks.

And since November, Silver has shot up to over $30 an ounce.

But why? What is going on?

Guys-- I don't want to sound like an alarmist, but we are facing something like an extinction event. This is like what the asteroid did to the dinosaurs.

I feel I have to warn any readers of this blog (all two of you) that a currency crisis is imminent. Commodities are shooting up even as house prices are going down. Treasury yields had an unusual spike in the past month. And the administration is spending like mad-- as if to rape the treasury while there's still a treasury there to be raped. The Pentagon is wargaming civil unrest and economic collapse. Also, bill after bill has been passed-- establishing control of food, finances, practically everything including the air we breathe. With an incoming Republican congress, there will be a convenient scapegoat on whom to blame the collapse-- "those greedy Republicans who insisted on their tax cuts for the wealthy" will be the fall guys. I think that's the only reason Obama went uncharacteristically over to the GOPs side.

The fuse is lit, and the big day is coming.

I don't know about timing, but what we need to watch is the treasury markets. A sell-off in treasuries, either domestic or international, will likely precipitate a panicked rush into commodities. It will catch everyone unawares, it will crash the stock market, and it will cost America the reserve currency status that has made our consumption (not production) society possible.

I will blog further about the pending collapse, its aftermath as I imagine it, and my attempts to convince my mom to get out of securities and bonds and into more hard assets. If this situation is new to you, let me recommend an article that lays the case out better than I can.

How Hyperinflation Will Happen

All best. Be smart. And take care of yourselves.


  1. I think that the PIIGS are in deep strife in 2011.
    Alot of people think we are doomed, but there are still great ways to make money.

    I subscribe to the FFT newsletter at that guy is calling for a bigger event to come in the next few months. His oil calls are insane, and I have been making good money with that.

    Start stocking up on gold people!! Do it yesterday.

  2. The problem is that the dollar is a national currency being used as a global currency. The dollar as a medium of exchange, gives the dollar holder the right to exchange it for goods, services, and/or assets any where in the global economy.

    The Federal Reserve decides how many dollars should be circulated in the global economy; the end result is that foreign dollar holders: central banks, investors, institutions, etc; are the ones holding excess dollars.

    And because the foreign dollar holders are the black hole of the excess dollar supply our economy has not experienced economic dislocations caused by too much currency circulating in the system.

    For the last fifty some years our policy wonks have been able to issue currency to buy the goods, services and/or assets needed to keep the economy going. Debt was the main mechanism for circulating new currency into the global currency system.

    But the gig is up, the only questions remaining: how will the global economy replace the national currency system with a fair, global currency system? Who will take the biggest losses once the dollar reverts back to a national currency?

    And you are right: people are using their excess dollars to buy gold and silver. Much to the dismay of our policy wonks, who want foreign dollar holders to use their excess dollar supply to buy US goods and services?

    Most Americans are like your mother, bless her soul, not understanding our material prosperity is the result of our right to use currency to buy the goods and services we need to keep our economy functioning effectively.

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