Depression Unavoidable

March 28, 2011 04:18

Today’s debate over federal spending and taxes is just so much fantasy. We’re like a family arguing about redoing the kitchen while the house burns down. It’s an irrelevant, annoying discussion. ~ Rubino

From Monty Pelerin’s World

John Rubino was recently interviewed by Chris Martenson. Regular readers of this site know these two people are amongst my favorite analysts.

One of the important opinions Mr. Rubino provided is the following:

The sad truth is that there’s no fix for the mess we’ve created — at least nothing on the menu of politically feasible options. The vast majority of the politicians and voters in the US, Europe and Japan don’t yet understand what’s coming.

Readers of this website will not be surprised by such a statement. This has been my position since this blog began. A recent example of that appeared in Quantitative Easing: Our Tiger by The Tail. As stated there, only two endings are possible: Great Depression or a hyperinflation that also ends in a Great Depression. The Great Depression can come now or come bigger and harder after a hyperinflation destroys the economy. In Mr. Rubino’s words:

And even if we did wake up today, the damage is already done. The US total debt (federal, state, local, consumer, business) now comes to nearly $800,000 per family of four. And that’s not counting a similar amount for unfunded Medicare benefits and who knows how much in derivatives liabilities. So a painless fix is no longer possible. Our choices have narrowed to only two: a crash that will dwarf the Great Depression or a hyperinflation that wipes out a whole generation’s savings.

Mr. Rubino provides a wonderful analogy to our situation (emboldening added by me)

Today’s debate over federal spending and taxes is just so much fantasy. We’re like a family arguing about redoing the kitchen while the house burns down. It’s an irrelevant, annoying discussion. The interesting debate will take place after the collapse, when we have to decide what kind of society to rebuild from the rubble. Then we can argue for limited government and individual rights and sound money and all the rest. Politics will be interesting again!

Rubino and Martenson are clear thinkers who understand real economics. Both spotted our financial and economic problems long before others and long before they happened. They are likely to be more correct in their views of what is ahead than those who completely missed what was happening.

Both should be read by anyone concerned about the future and protecting oneself and one’s family.

Read the full interview here and visit Mr. Rubino’s site at

Lest you believe the interview too pessimistic, read the words of renowned investment advisor Harry Schultz:

Roughly speaking, the mess we are in is the worst since the 17th century financial collapse. Comparisons with the 1930’s are ludicrous. We have gone far beyond that. And, alas, the courage & political will to recognize the mess & act wisely to reverse gears, is absent in the U.S. leadership, where the problems were hatched & where the rot is by far the deepest

Mr. Schultz wrote these words in his last newsletter at the age of 86.

We are in truly uncharted territory. Expecting tomorrow to be like yesterday is no longer a proper investment strategy. The world is at an important inflection point, driven by debt levels that cannot be repaid. Welfare states are imploding, sovereign debt and other promises will be defaulted upon and civil unrest is nearly certain. Citizens hungry and without hope will do whatever necessary to save themselves and their families.

Protect yourselves fiscally and physically.

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