Chris Martenson
Surviving a Currency Crisis
Wednesday, February 8, 2012
Executive Summary
- Why hope alone is a terrible fiscal strategy
- The false security of shifting baselines
- The key indicators of a currency crisis
- Plan A (and Plan B) for surviving a currency crisis
Part I: Why Our Currency Will Fail
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II: Surviving a Currency Crisis
The Biggest Risk
The biggest risk here is not a sudden collapse of the currency that would catch everyone off guard some Tuesday afternoon in a matter of minutes. The biggest risk is in not believing that the collapse is underway. Most people are going to lose most of their wealth simply because they could not mentally and/or emotionally grasp what was actually happening.
Consider that in Greece the banks are under a tremendous run, losing up to 25% of total deposits. Sounds extreme, but let’s look at it another way: Just what are the 75% of remaining depositors thinking? How could they leave their money in a Greek bank for another minute? What are they thinking? Probably that somehow things will get better, or some other rationalization that supports their decision to hunker down and hope.
In reading When Money Dies, a historical account of the events leading up to and through the Weimar hyperinflation in Germany, one sees anecdote after anecdote of families and individuals impoverished by their own disbelief and inaction. Most just sat numbly by waiting for the currency to come back, or buying government bonds because they were asked to as a matter of patriotism, or just trusting that the government would figure something out, hoping that things would soon turn around.
In Argentina, the same dynamic occurred. We’ve heard in detail on this site from Fernando “FerFAL” Aguirre how those who lost most were the ones who hesitated to acknowledge the reality of what was happening until it was too late.
Surviving a Currency Crisis
PREVIEWSurviving a Currency Crisis
Wednesday, February 8, 2012
Executive Summary
- Why hope alone is a terrible fiscal strategy
- The false security of shifting baselines
- The key indicators of a currency crisis
- Plan A (and Plan B) for surviving a currency crisis
Part I: Why Our Currency Will Fail
If you have not yet read Part I, available free to all readers, please click here to read it first.
Part II: Surviving a Currency Crisis
The Biggest Risk
The biggest risk here is not a sudden collapse of the currency that would catch everyone off guard some Tuesday afternoon in a matter of minutes. The biggest risk is in not believing that the collapse is underway. Most people are going to lose most of their wealth simply because they could not mentally and/or emotionally grasp what was actually happening.
Consider that in Greece the banks are under a tremendous run, losing up to 25% of total deposits. Sounds extreme, but let’s look at it another way: Just what are the 75% of remaining depositors thinking? How could they leave their money in a Greek bank for another minute? What are they thinking? Probably that somehow things will get better, or some other rationalization that supports their decision to hunker down and hope.
In reading When Money Dies, a historical account of the events leading up to and through the Weimar hyperinflation in Germany, one sees anecdote after anecdote of families and individuals impoverished by their own disbelief and inaction. Most just sat numbly by waiting for the currency to come back, or buying government bonds because they were asked to as a matter of patriotism, or just trusting that the government would figure something out, hoping that things would soon turn around.
In Argentina, the same dynamic occurred. We’ve heard in detail on this site from Fernando “FerFAL” Aguirre how those who lost most were the ones who hesitated to acknowledge the reality of what was happening until it was too late.
At this (late) stage of the game, we can expect almost anything and everything in the way of statistical miracles to be used in order to sustain the illusion that everything is fine.
Back in the 1930s, Irving Fisher introduced a concept called the 'debt supercycle.' Simply put, it posits that when there is a buildup of too much debt within an economy, there reaches a point where there simply is no other available solution but to let it rewind.
We are at that point in our economy, as are most other major economies around the world, claims John Maudlin, author of the popular Thoughts from the Frontline newsletter and the recent bestselling book Endgame: The End of the Debt Supercycle and How It Changes Everything.
For the past several decades, excessive and increasing amounts of credit in the system have allowed us to live above our means as both individuals and nations. We've been able to have our cake and eat it, too. Now that the supercycle has ended and the inevitable de-leveraging cycle is staring us in the face, we will be forced to set priorities in a way that has been foreign to our society for over a generation.
John Mauldin: It’s Time to Make the Hard Decisions
Back in the 1930s, Irving Fisher introduced a concept called the 'debt supercycle.' Simply put, it posits that when there is a buildup of too much debt within an economy, there reaches a point where there simply is no other available solution but to let it rewind.
We are at that point in our economy, as are most other major economies around the world, claims John Maudlin, author of the popular Thoughts from the Frontline newsletter and the recent bestselling book Endgame: The End of the Debt Supercycle and How It Changes Everything.
For the past several decades, excessive and increasing amounts of credit in the system have allowed us to live above our means as both individuals and nations. We've been able to have our cake and eat it, too. Now that the supercycle has ended and the inevitable de-leveraging cycle is staring us in the face, we will be forced to set priorities in a way that has been foreign to our society for over a generation.
In this week’s Off the Cuff with Mish & Chris podcast, Chris and Mish set their sights on:
The Fed
- 0% interest rates through 2014 (at least!). There’s not even a pretense left now about whom its policies are really directed at helping.
- Europe
- In the words of Shakespeare, the latest proposals are simply “sound and fury, signifying nothing.” At this point, a deep and prolonged recession is a certainty.
- Japan
- Decades of can-kicking are coming to their limit. 2012 could well be the year Japan topples into crisis.
Recorded on Wednesday, this podcast features Chris and Mish tackling the parade of head-scratching news announced by various governments and central banks this week. It’s almost as if these entities are competing with each other for the Darwin Award.
Off the Cuff: It’s a Mad, Mad World
PREVIEWIn this week’s Off the Cuff with Mish & Chris podcast, Chris and Mish set their sights on:
The Fed
- 0% interest rates through 2014 (at least!). There’s not even a pretense left now about whom its policies are really directed at helping.
- Europe
- In the words of Shakespeare, the latest proposals are simply “sound and fury, signifying nothing.” At this point, a deep and prolonged recession is a certainty.
- Japan
- Decades of can-kicking are coming to their limit. 2012 could well be the year Japan topples into crisis.
Recorded on Wednesday, this podcast features Chris and Mish tackling the parade of head-scratching news announced by various governments and central banks this week. It’s almost as if these entities are competing with each other for the Darwin Award.
FED EXPECTS TO MAINTAIN `HIGHLY ACCOMMODATIVE’ MONETARY POLICY
Total 3292 items
Community
by hgrootveldgmail-com 
Proton Mail
Learn more