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Investing Made Hard

The User's Profile Chris Martenson June 16, 2010
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Note:  Below is an article that I was asked to submit to Financial World for their July/August issue.  The editor heard me speak at the CSFI gig in London in January.  I am posting this so that you can read it early, but it is not to be distributed outside of this enrolled-member firewall in any way until after publication. 

I chuckle to think that I now get to put such an “off the reservation” message out to a very wide audience of financial professionals.  Enjoy, and let me know if you have any feedback or advice on how to improve it.  (Note that this is just a couple of words shy of the 1,800 word limit so there’s not a lot of room to add more without subtracting).

Best,
Chris


Investing Made Hard

There are enormous structural changes related to oil-based energy and other natural resources that could completely upend everything we think we know about investing and how it works.   In this article I will present the view that a historical shift is upon us.   The prudent investor or financial professional needs to consider the possibility that a period of disappointing financial returns, if not profound disruptions to our ‘way of life,’ will be the new normal for the next several decades.

Money

The story begins with an understanding of our peculiar monetary system.  Without addressing all of the nuances, the critical fact is this:  All money is loaned into existence.  All of it.  Everywhere.  Every last unit.  No matter what color your money is or what sorts of colorful pictures it has on it, in order to belong to the international community, your banking system creates money and debt at the same time.  This is neither good nor bad; it simply happens to be the system we’ve got.   Knowing this provides some key insights to what the future may hold.

Because money is loaned into existence (with interest, of course), something emerges that deserves our attention:  At any given moment in time, there is always more debt in the system than money.  This is provable in theory, but for those who prefer hard evidence, consider that in the US there is currently some $52 trillion in total credit market debt with perhaps $13 trillion in money, while in the UK a roughly similar ratio of debt to money applies.

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Top Comment

As always - you are the hammer hitting the nail on the head. Thanks for the help in building a house not made of cards!...
Anonymous Author by endgameplayer
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