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Image | Straight Talk with John Rubino: The Damage Is Already Done
Straight Talk with John Rubino: The Damage Is Already Done
by Chris Martenson

"Straight Talk" features thinking from notable minds that the PeakProsperity.com audience has indicated it wants to learn more about. Readers submit the questions they want addressed and our guests take their best crack at answering. The comments and opinions expressed by our guests are their own.

This week's Straight Talk contributor is John Rubino, publisher of DollarCollapse.com, a popular hub for news impacting the economy. John is the author of several well-received books foretelling (years in advance) the collapse of the housing market and the decline of the US dollar. Before starting his website, John was a featured columnist with theStreet.com, Individual Investor, and a number of other influential financial publications. His perspective on Wall Street and the currency markets is shaped by his past roles as a Eurodollar trader, equity analyst and junk bond analyst in the 1980s.

1. Several times, you’ve published prescient forecasts when it mattered. For example, you and James Turk published The Coming Collapse of the Dollar and How to Profit From It in 2004 – about a year and half before the US Dollar Index dropped from 90 to nearly 70. Similarly, How to Profit From the Coming Real Estate Bust was released in 2003. What led you to accurately predict these major market moves so far in advance?

I’ve been involved, one way or another, with financial bubbles for most of my life.

Straight Talk with John Rubino: The Damage Is Already Done
 by Chris Martenson

"Straight Talk" features thinking from notable minds that the PeakProsperity.com audience has indicated it wants to learn more about. Readers submit the questions they want addressed and our guests take their best crack at answering. The comments and opinions expressed by our guests are their own.

This week's Straight Talk contributor is John Rubino, publisher of DollarCollapse.com, a popular hub for news impacting the economy. John is the author of several well-received books foretelling (years in advance) the collapse of the housing market and the decline of the US dollar. Before starting his website, John was a featured columnist with theStreet.com, Individual Investor, and a number of other influential financial publications. His perspective on Wall Street and the currency markets is shaped by his past roles as a Eurodollar trader, equity analyst and junk bond analyst in the 1980s.

1. Several times, you’ve published prescient forecasts when it mattered. For example, you and James Turk published The Coming Collapse of the Dollar and How to Profit From It in 2004 – about a year and half before the US Dollar Index dropped from 90 to nearly 70. Similarly, How to Profit From the Coming Real Estate Bust was released in 2003. What led you to accurately predict these major market moves so far in advance?

I’ve been involved, one way or another, with financial bubbles for most of my life.

Image | Bud Conrad: Japan Is Forcing Us out of the Eye and into the Storm
Bud Conrad: Japan Is Forcing Us out of the Eye and into the Storm
by Chris Martenson

Bud Conrad, Casey Research's chief economist, believes that our historic paradigm of continuous economic growth has reached an end.  In his view, we have been funding growth in recent decades via first issuing an unsustainable amount of public and private debt, and more recently by runaway money printing. This has led to a temporary sense of calm – which Bud calls the 'eye of the storm' – which he believes we are now emerging from into much more troubled waters.

The tragic developments in Japan are likely to serve as one of (probably several) the catalysts that will trigger market dislocations that will accelerate the collapse. He and Chris are concerned that the global economy is unprepared for the world's third largest economy to quickly shift from being a net exporter of goods and funding to a consumer of them.
Bud Conrad: Japan Is Forcing Us out of the Eye and into the Storm
 by Chris Martenson

Bud Conrad, Casey Research's chief economist, believes that our historic paradigm of continuous economic growth has reached an end.  In his view, we have been funding growth in recent decades via first issuing an unsustainable amount of public and private debt, and more recently by runaway money printing. This has led to a temporary sense of calm – which Bud calls the 'eye of the storm' – which he believes we are now emerging from into much more troubled waters.

The tragic developments in Japan are likely to serve as one of (probably several) the catalysts that will trigger market dislocations that will accelerate the collapse. He and Chris are concerned that the global economy is unprepared for the world's third largest economy to quickly shift from being a net exporter of goods and funding to a consumer of them.
Image | Market Turbulence & When to Buy Silver
Market Turbulence & When to Buy Silver
 PREVIEW
by Chris Martenson

We always knew that this portion of the Great Destruction was never going to be easy. The main effect of any great bear market is to destroy the wealth of as many people as possible.

Simply moving everything to cash is not an option, because cash itself may lose its value more rapidly than it can be converted back into primary and secondary sources of wealth. Owning stocks and bonds is not a viable strategy, especially in a world where their prices are influenced/manipulated by the daily actions of the Fed and certain so-called ‘trading firms’ have turned in four-year win streaks without a single daily loss.

Parking everything in precious metals is probably the safest of the strategies, but that, too, is fraught with peril, as we still cannot be certain if inflation or deflation is going to win the day.

I deeply regret that this is the world in which we currently live, but here we are, and our job is to do the best we can.

I have two philosophies about investing.

The first is that I personally hate losses more than I fear missing out on gains. Some people are built exactly the opposite, and that fact helps to make markets the fun, dynamic places we know and love.

Market Turbulence & When to Buy Silver
 PREVIEW by Chris Martenson

We always knew that this portion of the Great Destruction was never going to be easy. The main effect of any great bear market is to destroy the wealth of as many people as possible.

Simply moving everything to cash is not an option, because cash itself may lose its value more rapidly than it can be converted back into primary and secondary sources of wealth. Owning stocks and bonds is not a viable strategy, especially in a world where their prices are influenced/manipulated by the daily actions of the Fed and certain so-called ‘trading firms’ have turned in four-year win streaks without a single daily loss.

Parking everything in precious metals is probably the safest of the strategies, but that, too, is fraught with peril, as we still cannot be certain if inflation or deflation is going to win the day.

I deeply regret that this is the world in which we currently live, but here we are, and our job is to do the best we can.

I have two philosophies about investing.

The first is that I personally hate losses more than I fear missing out on gains. Some people are built exactly the opposite, and that fact helps to make markets the fun, dynamic places we know and love.

Image | Warning Signs From China
Warning Signs From China
 PREVIEW
by Chris Martenson

The economic miracle of China may be about to undergo a crash landing. The potential for social unrest to spread within and across China notwithstanding, China is trying to delicately nip an inflationary surge in the bud, but risks crashing its housing market in the process.

There are signs that it may have already done so.

High inflation is a sure-fire way to ignite the poorer classes of people, with which China remains generously endowed. So China is actively talking about and targeting inflation via its monetary policies:

Warning Signs From China
 PREVIEW by Chris Martenson

The economic miracle of China may be about to undergo a crash landing. The potential for social unrest to spread within and across China notwithstanding, China is trying to delicately nip an inflationary surge in the bud, but risks crashing its housing market in the process.

There are signs that it may have already done so.

High inflation is a sure-fire way to ignite the poorer classes of people, with which China remains generously endowed. So China is actively talking about and targeting inflation via its monetary policies:

Image | The Coming Rout
The Coming Rout
 PREVIEW
by Chris Martenson

The Coming Rout

Tuesday, March 8, 2011

Executive Summary

  • Further evidence that a Fed quantitative easing stoppage in June is likely
  • Implications such a stoppage will have on stocks, commodities, bonds, and precious metals
  • Why this will be more damaging to the economy than the 2008 correction
  • Will the Fed eventually resume quantitative easing?
  • Three alternatives to watch for that could prevent the coming rout
  • How to hedge against the predicted rout

Part I:  Why Things Are About To Get Turned Upside Down

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II:  The Coming Rout

There are a few things that make the prospect of a Fed quantitative easing (QE) stoppage more likely.

The Fed Notices Inflation

Using a flashlight, a map, and both hands, the Fed managed to find something:

Fed Finds Climbing Costs Hit Shoppers 

March 3, 2011

Many manufacturers are passing along higher input costs to their customers, a sign that rising prices for wheat, cotton, iron, and other commodities could increasingly reach consumers in coming months, according to the Federal Reserve’s beige book survey.

The report, a summary of economic conditions across the central bank’s 12 regional districts, said manufacturers “in a number of districts reported having greater ability” to pass through higher costs. “Retailers in some districts mentioned they had implemented price increases or were anticipating such action in the next few months,” the Fed said.

It’s good to see that the Fed is at least dimly aware that price inflation is in the pipe and coming soon to a market near you.  The rest of the world has had no such difficulties in detecting inflation, especially on news like this:

The Coming Rout
 PREVIEW by Chris Martenson

The Coming Rout

Tuesday, March 8, 2011

Executive Summary

  • Further evidence that a Fed quantitative easing stoppage in June is likely
  • Implications such a stoppage will have on stocks, commodities, bonds, and precious metals
  • Why this will be more damaging to the economy than the 2008 correction
  • Will the Fed eventually resume quantitative easing?
  • Three alternatives to watch for that could prevent the coming rout
  • How to hedge against the predicted rout

Part I:  Why Things Are About To Get Turned Upside Down

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II:  The Coming Rout

There are a few things that make the prospect of a Fed quantitative easing (QE) stoppage more likely.

The Fed Notices Inflation

Using a flashlight, a map, and both hands, the Fed managed to find something:

Fed Finds Climbing Costs Hit Shoppers 

March 3, 2011

Many manufacturers are passing along higher input costs to their customers, a sign that rising prices for wheat, cotton, iron, and other commodities could increasingly reach consumers in coming months, according to the Federal Reserve’s beige book survey.

The report, a summary of economic conditions across the central bank’s 12 regional districts, said manufacturers “in a number of districts reported having greater ability” to pass through higher costs. “Retailers in some districts mentioned they had implemented price increases or were anticipating such action in the next few months,” the Fed said.

It’s good to see that the Fed is at least dimly aware that price inflation is in the pipe and coming soon to a market near you.  The rest of the world has had no such difficulties in detecting inflation, especially on news like this:

Image | The Hyperinflation Risk
The Hyperinflation Risk
 PREVIEW
by Chris Martenson

Despite the weak and increasingly ignored protestations of the Fed to the contrary, the world is in the grips of a pretty significant inflationary event. A little bit of inflation is a containable event. A hyperinflationary event is not.

In our most recent podcast, John Williams told us that he considers hyperinflation to be a serious risk for the US by the end of 2011. In order to understand this risk, we need to understand just a few terms and then link them to a couple of ideas.

The first set of terms was brought up in a recent question by a member:

I’m having trouble connecting the dots regarding the US dollars as reserve currency and related issues. The part that I’m having trouble understanding is around repatriation of the dollar by foreign countries. How does this actually happen?

~ jnlyons55

Good question. There are many ways, but the mechanisms are roughly the same, so here’s one.

The Hyperinflation Risk
 PREVIEW by Chris Martenson

Despite the weak and increasingly ignored protestations of the Fed to the contrary, the world is in the grips of a pretty significant inflationary event. A little bit of inflation is a containable event. A hyperinflationary event is not.

In our most recent podcast, John Williams told us that he considers hyperinflation to be a serious risk for the US by the end of 2011. In order to understand this risk, we need to understand just a few terms and then link them to a couple of ideas.

The first set of terms was brought up in a recent question by a member:

I’m having trouble connecting the dots regarding the US dollars as reserve currency and related issues. The part that I’m having trouble understanding is around repatriation of the dollar by foreign countries. How does this actually happen?

~ jnlyons55

Good question. There are many ways, but the mechanisms are roughly the same, so here’s one.

Image | Part 2 of the John Williams Interview: Hyperinflation Ahead
Part 2 of the John Williams Interview: Hyperinflation Ahead
 PREVIEW
by Chris Martenson

The second part of Chris’ interview with John Williams, noted guru on government statics, is reserved below for you, our enrolled members.

If you’ve not yet listened to Part 1, click here to do so.

Part 2 of the interview delves deeply into the specific risks our economy faces and why John concludes high inflation is the sad but certain outcome. And why he has substantially moved up his date for the onset of hyperinflation given the Fed’s recent actions.

Among other details, John provides his outlook on the expected signs hyperinflation is manifesting itself and what individuals can do to protect themselves against it.

Part 2 of the John Williams Interview: Hyperinflation Ahead
 PREVIEW by Chris Martenson

The second part of Chris’ interview with John Williams, noted guru on government statics, is reserved below for you, our enrolled members.

If you’ve not yet listened to Part 1, click here to do so.

Part 2 of the interview delves deeply into the specific risks our economy faces and why John concludes high inflation is the sad but certain outcome. And why he has substantially moved up his date for the onset of hyperinflation given the Fed’s recent actions.

Among other details, John provides his outlook on the expected signs hyperinflation is manifesting itself and what individuals can do to protect themselves against it.

Image | ShadowStats’ John Williams Explains Why It’s All Been Downhill Since 1973
ShadowStats’ John Williams Explains Why It’s All Been Downhill Since 1973
by Chris Martenson

"If you look at the government’s latest statistics – the poverty survey of 2009, which is the most recent release, with average and median household income adjusted for inflation (and they use a really gimmick low inflation rate with that one) – it shows that not only has household income been falling the last year or two, but it’s below its near-term peak before the 2001 recession. Household income has not recovered above that, and if you use the CPI-U (the usual inflation rate to deflate that by instead of the gimmick one) it shows that household income today is below where it was in 1973. Again, the average household has not been able to keep up here. If income growth is not keeping ahead of inflation, very simply you can’t have consumption growing faster than inflation on a sustainable basis."

Government statistics guru John Williams believes the most important economic indicators used by our political leaders in their decison-making – the Consumer Price Index, the unemployment rate, the Gross Domestic Product – are deeply flawed in how they're calculated. Whether these flaws result from letting theory trump reality or by machinating politicians, the result is the same: we are fooling ourselves at our peril. We have been understating the risks we face – which is why we are working harder for less today than the previous generation, and why our economy is not only not in "recovery" – but on the precipice of crisis.
ShadowStats’ John Williams Explains Why It’s All Been Downhill Since 1973
 by Chris Martenson

"If you look at the government’s latest statistics – the poverty survey of 2009, which is the most recent release, with average and median household income adjusted for inflation (and they use a really gimmick low inflation rate with that one) – it shows that not only has household income been falling the last year or two, but it’s below its near-term peak before the 2001 recession. Household income has not recovered above that, and if you use the CPI-U (the usual inflation rate to deflate that by instead of the gimmick one) it shows that household income today is below where it was in 1973. Again, the average household has not been able to keep up here. If income growth is not keeping ahead of inflation, very simply you can’t have consumption growing faster than inflation on a sustainable basis."

Government statistics guru John Williams believes the most important economic indicators used by our political leaders in their decison-making – the Consumer Price Index, the unemployment rate, the Gross Domestic Product – are deeply flawed in how they're calculated. Whether these flaws result from letting theory trump reality or by machinating politicians, the result is the same: we are fooling ourselves at our peril. We have been understating the risks we face – which is why we are working harder for less today than the previous generation, and why our economy is not only not in "recovery" – but on the precipice of crisis.
Image | Mapping The Fugly Future with David Collum
Mapping The Fugly Future with David Collum
by David Collum

In the course of his info-scouting, Chris has conversations with many different thinkers. Some are well-known to you; others perhaps less so. An important objective of our podcast interview series is to expose our listeners to the variety of voices and points of view that Chris considers when developing the perspective that he brings to his reporting.

David Collum may be a new voice to many of you. Like Chris, David came to the field of macroeconomic study from a scientific background. Again like Chris, his published observations and predictions have begun to amass a readership built on respect for his emprical approach to projecting the future. For those of you unfamilar with David's work, we think you'll enjoy having this insider's ear to his recent recorded discussion with Chris, which covers a wide range of topics.

In short, David sees a world where market risk has been removed (through misguided government intervention), leading to perverse behavior. In many ways, we are repeating the sins of past empires – and he warns us that history has a much higher incident rate of soverign insolvency than we may want to believe.
Mapping The Fugly Future with David Collum
 by David Collum

In the course of his info-scouting, Chris has conversations with many different thinkers. Some are well-known to you; others perhaps less so. An important objective of our podcast interview series is to expose our listeners to the variety of voices and points of view that Chris considers when developing the perspective that he brings to his reporting.

David Collum may be a new voice to many of you. Like Chris, David came to the field of macroeconomic study from a scientific background. Again like Chris, his published observations and predictions have begun to amass a readership built on respect for his emprical approach to projecting the future. For those of you unfamilar with David's work, we think you'll enjoy having this insider's ear to his recent recorded discussion with Chris, which covers a wide range of topics.

In short, David sees a world where market risk has been removed (through misguided government intervention), leading to perverse behavior. In many ways, we are repeating the sins of past empires – and he warns us that history has a much higher incident rate of soverign insolvency than we may want to believe.
Image | Silver Shortage Looming?
Silver Shortage Looming?
 PREVIEW
by Chris Martenson

The silver market continues to send urgent signals that supplies are very tight, an often bullish condition sometimes associated with rapid price rises.

For those not up on the lingo of the futures market, there are two ways to describe the prices of commodities in the future as compared to today. One describes a condition where commodities cost more in the future than they do today, and it is rather non-intuitively termed contango. If a commodity is “in contango,” it is priced higher for delivery in future months than it is for delivery today. Oil is an easy example, as it is nearly always in contango, and for perfectly intuitive reasons: There are carrying costs associated with storing oil (such as interest, storage fees and insurance) and those costs assure that future oil is almost always more expensive than present oil.

The other term describes the situation where the future price is less than today’s price, a rare condition for practically every commodity, and it is called backwardation. A commodity that is “in backwardation” is priced lower for delivery in future months than it is for delivery today.

Silver is in backwardation and has been for a while now.

Silver Shortage Looming?
 PREVIEW by Chris Martenson

The silver market continues to send urgent signals that supplies are very tight, an often bullish condition sometimes associated with rapid price rises.

For those not up on the lingo of the futures market, there are two ways to describe the prices of commodities in the future as compared to today. One describes a condition where commodities cost more in the future than they do today, and it is rather non-intuitively termed contango. If a commodity is “in contango,” it is priced higher for delivery in future months than it is for delivery today. Oil is an easy example, as it is nearly always in contango, and for perfectly intuitive reasons: There are carrying costs associated with storing oil (such as interest, storage fees and insurance) and those costs assure that future oil is almost always more expensive than present oil.

The other term describes the situation where the future price is less than today’s price, a rare condition for practically every commodity, and it is called backwardation. A commodity that is “in backwardation” is priced lower for delivery in future months than it is for delivery today.

Silver is in backwardation and has been for a while now.

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