IN-DEPTH: TRANSCRIPTION - UnderTheLens - 03-27-24 - APRIL –The Future Is Coming Into Focus!
SLIDE DECK
TRANSCRIPTION
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Thank you for joining me. I'm Gord Long.
A REMINDER BEFORE WE BEGIN: DO NO NOT TRADE FROM ANY OF THESE SLIDES - they are COMMENTARY for educational and discussions purposes ONLY.
Always consult a professional financial advisor before making any investment decisions.
CHART 3 – COVER
As part of the research for a recent Macro Analytics video, I found myself reviewing a number of MATASII Macro Maps going back well over a decade and a half.
It was like looking at a number of Jigsaw puzzle pieces. Each piece was part of a particular element of the bigger picture but without the bigger picture to see where element fits, your puzzle becomes frustratingly impossible to piece together.
However, going back as far as I did the Bigger Picture suddenly began to come into focus. The puzzle pieces began to fall quickly into place.
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I want to share in this session what I realized and the conclusions I have drawn.
As such I would like to take you through the subjects outlined here.
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Before I get into some older, dated slides, let’s start with some current slides and the harsh reality of what we are facing today!
As a society we have been rapidly adapting to exploding new technologies as we quickly evolve, but is the evolution really “advancement”?
There seems to be a pervasive sense, when I talk to people, that many feel something is terribly wrong?
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You are all well aware of the explosion in global debt and specifically government debt growth around the world.
We have approximately 62 trillion dollars in government debt, on a global economy as measured by GDP in 2020, of approximately 84.96 trillion. With the explosion in global government debt reaching $82T in 2022, the GDP is expected to approximate $104T.
That is $20 trillion dollars of new Debt to grow the global economy by the same $20 trillion.
It makes you wonder whether we are growing the economy or just debt??
A Dollar for a Dollar! Remember that number as we will come back to it later.
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What we have witnessing is that every crisis only seems to perpetuate an even higher rate of debt increase.
Government Spending and Deficits are growing geometrically and appear to be possibly going parabolic?
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If the global economy is only growing based on a dollar for dollar basis what are we really achieving?
The answer may be here.
In the US the net worth of the Top 0.1% equals almost exactly the net worth held by the total of the bottom 50% of the population.
What we need to appreciate from the previous slide of the US debt growth, is that it belongs to all taxpayers equally, irrelevant of wealth or income. The rich are getting much richer while the poor are … well … taking it unwittingly in the ear!
The taxpayer gets the debt & interest load liability while the rich have their assets appreciated through RISING INFLATION. The poor have few assets that appreciate (only depreciate) while those between the poor and rich have their primary asset as their home. However it comes with mortgage and property tax payments, utilities, insurance, real estate fees etc etc. An expensive investment which over a life time, the base cost only appreciates by the rate of inflation. Better than renting - but you need shelter. But certainly not the effortless gains that come from appreciating “paper’ investment claims.
The fact is:
- We clearly have major growing financial disparities in the system.
- We have increasingly a two tier system. A system of Haves and the Have-Nots!
With the weight of student loans, housing, cost of living and shrinking real disposable income, the opportunities to get ahead are diminishing for many. The American Dream is disappearing and many feel trapped by debt and are increasingly being forced to live paycheck to paycheck.
Nowhere is that more evident than with the younger generation Millennial’s and Gen Zs.
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A recent world report put out by Oxford University in conjunction with Gallup Polls addressed “Global Happiness” in its’ 158 page research document.
Surprisingly, for the first time ever the US was not in the top 20! In fact for those young Americans age 30 and younger they ranked as#62 in their happiness!
Unhappy 30-year-olds and people in general don’t have kids when they don’t see a future or way of supporting them.
In the US, those aged 30 and younger believe they will be worse off than their parents.
The economy is allegedly booming, but only the asset holders have benefitted. The young don’t have assets – only liabilities.
Young adults are more skeptical of government and pessimistic about the future than any living generation before them. They are the most pessimistic generation in history.
With nearly 72M Millennial and the approximately same number of Gen Z’s they are becoming a major voting force, especially when you consider the 74 M Baby Boomers are dying off or living on Socials Security and Medicare being paid for by these same young discouraged “unhappy” workers who feel “trapped” with generally little hope of realizing the American Dream of old!
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Gen X, Millennials and Gen Z may be the first generations in US history that are not better off than their parents.
Many have given up on the idea they will ever be able to afford a home. They are dominantly stressing over debt!
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So what is really going on here and where are we headed? Let’s now get to some of the historical charts I mentioned.
Because of time I will start with the time frame since the 2007-2008 Financial Crisis when the government debt noticeably really began exploding.
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As you can see by the copyright at the bottom right, I put this roadmap together in 2012.
The “Y” axis represents the movement from Individualism to Collectivism with an overlaying movement from Transparency, through Polarization through restrictive opacity.
The “X” axis represents the increasing level of complexity from simplicity. This has an overlaying movement from of product markets from Independent to Global Brands to Homogeneous.
Our assessment at the time was we were headed towards increasing levels of central control and planning by governments, increasing crony capitalism living off government contracts, Financial Repression to control rising debt levels and what could best be described as increasing “Statism” or bigger government.
All this had the potential of leading to governments possibly becoming more “Totalitarian” in their operation.
In fact by 2015 it was becoming so evident that I co-founded the Financial Repression Authority which is still, operational today.
This chart proved quite prescient as I wrote about the stages as they unfolded.
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In 2012 I also put this chart together addressing what I separately saw developing within the area of Monetary Policy and the potential fall-out in the financial markets.
I labeled it Monetary Malpractice with a sub -caption of “Moral Malady”.
The progression of developments I saw unfolding more or less occurred leaving us with Dysfunctional Markets resting on Mal-Investments and operating in a state of Delusional valuations.
Frankly, it pretty well describes the current situation!
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During this period we also witnessed the massive emergence of a quadrillion dollars of derivative structures come into existence. The broad complex impacted (and to an increasing level began to control) all levels of the global financial markets - many with no oversight, OTC, little visibility and were the primary domain of the largest global banks.
We believed this was a recipe for potential banking & financial:
- Manipulation,
- Control and
- Malfeasance
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Together these all lead to potential market bubbles, instability and mismanagement of risk.
I have discussed this chart and …
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… this chart in previous newsletters, interviews and videos all posted on the MATASII web site.
This chart illustrates that the Magnificent Seven now exercise domination over the markets not seen even during the Nifty 50 era and Dotcom Era – both leading to historic market re-adjustments.
What we have seen so far is that we have potentially destabilized the financial markets in an unprecedented fashion.
Risk is being systemically mispriced.
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So far our discussion has been primarily oriented towards the financial sphere. Let’s now consider developments in the area of Geo-Politics and advancing Social Change.
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The best way to do that might be by looking at the evolution of the MATASII Annual Thesis papers over the years.
We don’t just pick an idea each year for our research on a specific subject but rather have it picked for us through a methodology called the Process of Abstraction.
We track over 40 ever changing major developments which we abstract into groups then synthesis the groups into underlying driver. From here we arrive at a particular emerging focus for the annual thesis research efforts.
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We started publicly publishing our research in 2010 when we focused on the US government’s increasing approach to not solving problems but rather allowing them to become a crisis before taking any action. The approach best described as “Extend & Pretend”.
Voters during the inevitable crisis were more willing to accept a government solution – almost any solution – rather than allowing the crisis to worsen.
As Barack Obama’s Chief of Staff, Rahm Emanuel would advise: “Never let a Crisis go Unused!”
In the chaos of the crisis large amounts of money were immediately spent with little disregard to dissenting factions.
We also wrote extensively about the Sultans of Swaps operating behind the ~600T global currency and interest swaps.
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From 2013 through 2016 our papers lead us to explore a changing world and issues around increasing Globalization, Financialization and Mercantilism.
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From 2017 through 2020 our papers lead us towards areas that were fundamentally systemic flaws in how the world’s financial system was evolving. The increasing size of debt in a world of fiat currencies was stretching and distorting global regional imbalances to the point of causing increasing global conflict.
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Of particular note was our work in understanding that Global growth, as represented by GDP or the Gross Domestic Product, was flawed in an era of fiat currencies and trade imbalances being settled in instruments of credit allowing the growth of unsustainable country debt burdens?
Misrepresentation of Inflation thought statistical games of Hedonics, Imputation, Substitution and more were distorting the “Deflator” so critical to the viability of the usage of the GDP.
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Since then that distortion and the increasing levels of debt have become so blatant that GDP no longer even approximates the GDI (Gross Domestic Income). This basic double accounting system requires that total economic expenditures match total economic income.
We have reached the point where the financial system has become an illusion for effectively massive wealth transfer.
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Over the last four years our Process of Abstraction led us into the areas of the consequences of all these changes and what they appear to be forcing upon us:
- Social Suppression,
- Concerns about matters about Sustainability,
- A Potential Stagflationary Debt Crisis
- The emerging of Regulatory States.
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Social Suppression increasingly began taking the form of censorship of ideas that are in conflict with government dictates; mandates; lock downs and executive orders.
All of these eroding core values and beliefs of Personal and Economic Freedom.
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Sustainability issues taking the form of Climate Change and Green Energy spending initiatives measured in the trillions of dollars.
10’s of Trillions of dollars globally that must again be borrowed pushing the debt growth towards an unsustainable parabolic rise.
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Obviously there must be a consequence of this which led to our 2023 paper on a coming economic stagnation as debt burdens sap economic growth. Slowing grows and consequential inflation leading to Stagflation and over the next Beta Drought Decade to an eventual debt crisis.
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As a consequence the end of the 40 year Great Moderation has occurred.
With it an era of much higher financial rates, higher market volatility, increased risk premiums for both equities and debt and inflation surges driven by wage price spirals and increasing shortages of energy & food supplies.
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To keep the system stable we are seeing increasing dictates coming from the government as we are forced more and more towards a Regulatory State which we outlined in this year’s thesis paper.
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I am not going to delve into the key elements driving the Regulatory state like:
- The Cloward-Piven Strategy for social engineering,
- The Chevron Doctrine for regulatory control.
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But leave you to read the 221 page of supporting developments in this emerging centralized control direction.
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Instead I want to go back to this 2012 roadmap I showed earlier.
The chart was drawn in two dimensions. What has become clearer over time is that it should have been drawn in three dimensions, as shown to the right.
The third dimension is “Dependence” as measured by personal and economic freedoms being given up due to the forces of Collectivism and Complexity.
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We are witnessed an ever increasing encroachment on our personal and economic freedoms.
It has taken many forms recently as:
- Government Mandates,
- Executive Orders funding over $700B without congressional spending approval,
- Broad based Regulatory state regulations coming out of all cabinet areas without congressional approval and many being forced to the supreme court before being found unconstitutional. The most recent the unilateral forgiveness by the administration of Student Loans
- The use of national guard for domestic police needs
.. new examples appear almost daily.
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We used to represent this encroachment with this two dimensional representation of Personal and Economic Liberty versus Economic & Personal Security
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These developments are changing how we think about ourselves, our ambitions, our goals.
Charles Hugh Smith recently put out a video entitled “Today’s Self Reliance” that begins to delve into this subject.
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We followed it up with second entitled: “Self Reliance & the Importance of Protecting Choice”
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All can be found on the MATASII web site.
We are working on the next one entitled: “How Inflation Becomes Restrictive to Self Reliance” or “The Collapse of the American Dream: Financial Nihilism and Inflation”.
This series is aimed at exploring how we are unwittingly surrendering our freedoms (that make us who we want to be) to ever expanding central control.
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There are a lot of conclusions that can be distilled from these slides which I encourage you to carefully think about.
A number of them I will be discussing in upcoming newsletters. However, at this time I want to highlight what I truly believe to be paramount and resonate with me.
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They may sound like platitudes but never have they been more important than they are right now! If we don’t focus on the importance of them and protect them – all the others will only be that much worse.
- What Made America Great was the Self Reliance and Independence of its’ People.
- Without it Innovation, Capitalism and Risk Taking Will disappear.
- It must be embraced and protected at all cost. It is Under Attack!
- The Founders intended a Limited Federal Government with power at the State and Local levels
- They envisaged a distributed network not a centralized one,
- Power was to rest with “We the People”. - Not a central state.
- The government works for the people. Not the people doing what the government mandates.
- We are a country of Laws. The Law is not a political weapon. It for the protection of the individual - not to potentially enslave them.
- Debt is the easiest way to enslave a people.
- Debt created by a Federal Government is financial enslavement
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No to leave you hanging here are some of the things I will talking about in upcoming newsletters:
- Our Current Path is Unsustainable and it will end with a Global Debt Crisis
- Growth is Debt based in Paper Claims on Real Wealth
- Wealth however is Real, Unencumbered, Titled Collateral
- Debt will increasingly be harder to get because of Collateral Shortage
- We have major risk exposure with Issue of Rehypothecation, Collateral Transformations and Encumbered Collateral
- The Crisis Will Occur When Debt Growth No Longer Produces Growth
- Globally it has already eroded to $1 Debt for a $1 of Growth
- In the US It Takes as much as $2.50 of New Debt to produce the $1 of Growth
- In the US It Takes as much as $1.50 of Deficit Growth to produce the $1 of Growth
- Velocity of Money must be sustainably larger than Money Supply or GDP shrinks.
- The Crisis Will Be the Implosion of the Derivative Security Complex
- An Unprecedented “Super Cycle” degree Collapse,
- Collateral Underpins All Derivatives
- Collateral Will Be Swept Up On A Vast Scale.
- The “Great Reset” will involve:
- Government Treasuries Will Begin the Usage of Contingent Liability Guarantees
- The “Great Taking” – which is a Collateral Confiscation Scheme, will be executed. It involves terminologies such as:
- “Security Entitlement” & the “Protected Class”
- Dematerialization, “Secured Class” and “Safe Harbor “Global Provisions.
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As I always remind you in these videos, remember politicians and Central Banks will print the money to solve any and all problems, until such time as no one will take the money or it is of no value.
That day is still in the future so take advantage of the opportunities as they currently exist.
Investing is always easier when you know with relative certainty how the powers to be will react. Your chances of success go up dramatically.
The powers to be are now effectively trapped by policies of fiat currencies, unsound money, political polarization and global policy paralysis.
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I would like take a moment as a reminder
DO NO NOT TRADE FROM ANY OF THESE SLIDES - they are for educational and discussions purposes ONLY.
As negative as these comments often are, there has seldom been a better time for investing. However, it requires careful analysis and not following what have traditionally been the true and tried approaches.
Do your reading and make sure you have a knowledgeable and well informed financial advisor.
So until we talk again, may 2024 turn out to be an outstanding investment year for you and your family.
I sincerely thank you for listening!
