We Humans Just Can't Help Ourselves

Even if it means repeating financial pain over and over again

Let me explain what is going on, and why you need to pay attention to the financial generational events unfolding before your eyes.

This is a cycle that has repeated many times over the course of many hundreds of years across multiple civilizations.

Generally speaking, it starts with something like this….

1. Money is tied to some physical asset that is scarce, with scarcity being the key attribute:

Gold in the current cycle, although we are possibly in the midst of a transition into a digital asset: crypto (to be determined…)

2. Too much debt is accumulated:

The root cause of this is attributed to politics, with central controlling authorities attempting to stay in power (get re-elected, or avoid riots) by spending money they do not have on “projects”

3. The tie to the physical asset is abolished as there isn’t enough of the physical asset due to excessive spending and debt in #2 - the runway is cleared for even more money printing which leads to even high inflation:

President Nixon did this as part of the “Nixon Shock” in 1971, when the US essentially defaulted because it did not have enough gold reserves to produce when Europe demanded the yellow metal in exchange for the US dollars it held. The 1970s are remembered as an era of stagflation, which is the combination of a recession and inflation.

4. Interest rates become the main tool to control the economy:

In order to “combat” inflation and spark economic activity, the “cost” of money (or how much you would have to pay to borrow money in the form of interest) becomes the main tool for the Federal Reserve: Fed Chiefs Volcker and Greenspan laid this foundational control for the Fed where they would set interest rates to “manage” the economy.

5. Too much debt is accumulated:

We just can’t seem to help ourselves.

6. Quantitative Easing (QE) is initiated:

As debt explodes, we face various financial accidents. The last one (if we don’t include Silicon Valley Bank et. al as that is still in the process of playing out right now) was the 2007/8 housing and mortgage crises. QE results in bubbles, such as the DotCom bubble in 2000, and when they pop, the Fed steps in with ever more money printing schemes.

7. Too much debt is accumulated:

*sigh*

8. Fiscal and monetary authorities gang up to directly pay individuals:

While pandemics are not a financial phenomenon (let’s skip all the baggage about how the pandemic started), the response by both the Fed and the Treasury was the final level of money printing: literally creating it out of thin and stuffing it into people’s pockets directly - hello Stimmy Checks.

9. Too much debt is accumulated:

— —

10. Inflation begins to appear as the effects of endless money printing finally catches up:

Authorities attempted to downplay and “talk away” inflation in 2022 by calling it transitory - this continued for as long as possible until reality, similar to Joe Biden’s mental acuity, caught up and the truth could not be obfuscated any longer.

11. Central banks have no choice but to raise interest rates:

As a response, the Fed has to raise interest rates, and it did so at a record breaking pace after an extended period of “easy money” - unsurprisingly, such a dramatic shift caused unintended consequences such as the Silicon Valley bank implosion and continues to reverberate today. The most recent accident being the Japan Yen Carry Trade unwind, a phenomenon that continues to play out as you read this.

Sidenote: the Fed portrays itself as the hero, swooping in to save the day by lowering interest rates and executing mindless money-printing QE-to-infinity schemes. The truth is, the Fed is like a Fireman who is also the arsonist: yes, they come in to put out the fire, but they were also the arsonist who caused the fire in the first place.

12. Cost to service national debt skyrockets higher due to higher interest rates :

A picture is worth a thousand words…

13. Cost to service national debt becomes too high as % of GDP

Once more, a picture puts things into perspective…

14. Central banks have no choice but to lower interest rates to stop the runaway debt train

We are literally at this step, right here, right now. After the Fed hiked interest rates and kept them high for the past couple of years, we are about to see them lower it for the first time in the next two weeks. Take a wild guess what will happen afterwards…

15. Currency debasement ensues

We have to look no further than Japan, the progenitor of money printing in the modern era. Watch what happens closely with the Yen Carry trade as the Bank of Japan (BOJ) has no options left anymore but to inflate. The BOJ attempted to raise interest rates as the Yen kept crashing and were stung by the worst crash of their Nikkei Stock Exchange forcing them to reverse course immediately. The Emperor has no clothes! A similar story is coming for the United States.

16. Eventually, faith in currency and debt markets wither away and a new regime is created in a “reset” -> go to step #1

Now that we are about to enter step #14 as the Fed lowers interest rates for what may be the final time in this cycle, the red flag will be up for the final steps.

Throughout history, this long term debt cycle has occurred in tandem with geopolitical stress as well as wars. Across hundreds of years, and multiple civilizations. When they occur, they occur rapidly.

Is it really a coincidence that the Russo-Ukraine (NATO) and Iran-Israel conflicts are ratcheting up these days?

Nobody alive on this planet has experienced this cycle and the ending of it - that’s how long the cycle is. 

The point I’m making here is we are near the end of this generational cycle - something that people usually see only once in their lives. 

Given the long time frame, I don’t expect it to complete in one month or one year. However, within five years, there is a much higher likelihood that the reset and the accompanying geopolitical impacts will manifest. 

Prepare yourselves.