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Predictions? Or near-certainties?

January 2, 2012
Coyhaique, Northern Patagonia

New Year’s predictions are always a fun exercise. We can bet each other over the price of gold on December 31, 2012, or who will win the White House this year, or even make wild, black swan predictions.

It’s like the Charades of thought experiments… good for laughs at a cocktail party, but ultimately meaningless. Serious personal and financial plans cannot be developed from mere conjecture– it takes significant research, uncovering little-known facts, reviewing historical examples, and looking for ongoing signs that either reinforce or void hypotheses.

I’d like to share a few with you today. In my assessment, these ideas are not so much predictions, but rather mathematical near-certainties that underpin some of my own plans and investments.

Note– the timing for these is loose, not based on some fixed calendar date (Mayan or Gregorian). Some may occur this year, others may not arise for another 3, 4, even 5-years. But with each passing day, the likelihood becomes stronger.

1) Social Security in the US, and public pensions in Western Europe, will be completely restructured.

That which cannot be sustained will not be sustained, and the public pension Ponzi scheme is at the top of the list. This is already happening in the European countries that have had to face the music already, but the rest will soon follow.

Why? Because at a $1.725 trillion cost, the US government spent nearly 75% of all tax revenue on Medicare and Social Security last year. And the situation will only get worse. Tax revenues are falling in a dismal economy, while the retiree demographic and rising healthcare costs are pushing up entitlement spending year in, year out.

Even by the US GAO’s own math, these entitlements constitute a $33 trillion liability. And amazingly enough, it’s even worse in Europe.

Not to mention, public pensions represent a neat little kitty for cash-strapped politicians to raid… and the likelihood of these criminals allowing the funds to end up where they were promised is incredibly low.

Inflating away the debt is certainly the preferred course of action as it is more politically palatable. Inflating away a $33 trillion liability in the available time frame, however, is nearly impossible…not without sparking hyperinflation.

Rather, retirees and prospective retirees are going to be hit squarely between the eyes with a restructuring of what had been promised to them for their entire lives. And most will be completely unprepared.

2) Epic failure: the ‘ah-ha’ moment

At some point, even the most dim-witted American is going to realize that his country is flat broke. Most Europeans are starting to realize it… but Americans have an incredible ability to ignore the obvious and kick the can down the road.

This may arise from some major infrastructure failure, or another epic natural disaster– the mother of all hurricanes, or an ill-located earthquake– that absolutely levels a major city. And it’ll stay that way. The government will be too broke to rebuild, and too uncreditworthy to borrow.

The city will remain an architectural graveyard, an American Pompeii that becomes a monument to insolvency. And it will be the ultimate ‘ah-ha’ moment as people are finally shaken from their apathy and blissful ignorance. This will mark the start of the mania phase for everything ranging from firearm purchases to expatriation.

3) Gun control

With over 129,000 federal background checks registered on Black Friday 2011, the previous single day gun sales record was shattered by 32% according to FBI records. And baby, we ain’t seen nothin’ yet.

From ancient Carthage to Nazi Germany, history is full of examples of how a citizenry is systematically disarmed by its government prior to a major erosion of civil liberties and restructuring of the social contract. The calculus is quite simple– government is interested in maintaining the status quo, i.e. their power at our expense.

Consequently, attempts at gun control become a foregone conclusion in times of social and economic turmoil.

4) Western governments pull a Mubarak

In an effort to stamp out dissent, Western governments begin utilizing Internet and mobile kill switches, censoring web sites, and increasing their authority over telecommunications architecture. Google’s ‘don’t be evil’ mantra becomes the de facto ‘ignorance is strength’ from 1984 as every major service provider becomes a willing accomplice.

Facial recognition technology will become ingrained with public surveillance under the banner of national security. All Internet activity is monitored. Privacy ceases to exist in the developed west.

5) War

In his book Civilization, historian Niall Ferguson pokes a bit of fun at Karl Marx when he refers to nationalism as ‘the cocaine of the Middle Class’. Nothing unites people like a common enemy, and the time-tested trick to get an entire society to forget about their domestic plight is to start a war.

Boogeyman terrorists have done a marvelous job keeping society in check, but in a world of scarce resources and economic decay, a more conventional conflict may ensue. After all, to the victors go the spoils, and many countries won’t be above taking what they need by force: water, farmland, oil, etc.

6) Dollar dominance ends

As I travel around the world, I’m constantly struck by high levels of inflation. From Thailand to Egypt to Sri Lanka to Uruguay, uncomfortably high inflation is prevalent, particularly major categories like fuel, food, and housing. Poor people don’t but iPads.

With its genesis in the Fed’s quantitative easing measures, inflation has become a major US export, right after Hollywood movies, hip hop music, and worthless debt instruments. America ships dollars overseas, and developing nations literally pay the price.This is unsustainable, and the dollar’s status as the global reserve currency will continue to decline. In the coming years, you can expect to see the US Treasury issuing debt (at much higher yields) denominated in a foreign currency– perhaps Chinese renminbi, or a to-be-determined new monetary reserve unit.

[To be continued tomorrow...]

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • molecool

    Simon number 2 already happened – first at the Trade World Center (which was not rebuilt in a decade) and then in New Orleans. Also, I live in Los Angeles and have you seen the streets over here? In particular here on the wealthy West Side you see a ton of Porsches, Beemers, and Mercedes (or better) navigate an increasing amount of potholes. Some of the streets have not received a new slurry seal for 30 years or more. If you lucky they patch up the holes – up here in the Hills they don’t even bother. Meanwhile home owners are trying to sell their houses for over a Million on those same neglected streets.

    Did you know that a huge number of bridges in this country are below acceptable safety condition? All it takes is one big earthquake or a hurricane out in the Mid West. Local municipalities are beyond broke and Los Angeles has been for several years.

    And to top things off we now had a series of arson attacks in West Hollywood. What mother nature won’t take down I think the angry mob will take care of in the end.

    Happy 2012!

    • steve ward

      agreed, same way in most of the country you have to beat the city over the head just to get the road’s fixed. You wont even need a major disaster in any form, negligent along will end it 

  • Contrarianism

    In your “mathematical near-certainty” predictions, I might add the following …

    Kim Jong-un, Supreme Leader of North Korea, holds a joint press conference with President Obama (following 18 holes of golf and 18 holes in one) where he publicly praises his new best friend for enacting the National Defense Authorization Act thereby doing away with the U.S. Bill of Rights and blurring the distinction between the two countries.

     -  Contrarian

  • Crusader79

    I can’t see number 3 happening anytime soon, there are already hundreds of millions of guns in the U.S., good luck trying to confiscate them.

    • Toothaker

      A law passed by Congress to outlaw guns will conficate them overnight just like in Poland with Hitler.

  • Survival Blogs

    A potentially dark future indeed.  I don’t think it’s 100% certain…except for the cratering of our U.S. dollar.  If / when that happens, I expect to see cascading events of dire circumstances. 

  • Omega Man

    Predictions are stupid.

  • Benjamin Dunphy

    You delete my comment of doubt that the renminbi will replace the dollar b/c of my belief that the Chinese economy will implode…yet keep omega man’s insightful comment? You just lost a reader.

  • WanderingTrader

    Simon what are your thoughts on the recent law signed by government that allows the military to indefinitely detain US citizens.  Anyway to protect ourselves from this? Fly to Canada and travel via the land border?

    • Forrest

      Your going the wrong way.It,s dam cold here!

  • Pchimy

    Americans for years refused to do the menial jobs so approx. 40 million illegals showed up and stayed. When the recession hit , some maxxed out their credit cards, loaded up the truck and left Beverly.Thus, housing crash, credit card crisis etc.Get off the couch, put down that bag of doritos, shut off Survior and go pick potatoes in Alabama.



  • guest

    Dollar dominance ends

  • Drew7892

    They aren’t going to confiscate guns on a large scale although there will be some confined area confiscation (ie
    large cities where crime is high generally), it makes more sense to control the ammunition. I don’t know why no one has written anything on this. Recently a single large company has been buying up all the gun manufactures as well. This company in all likelihood will stop the gun manufacturers from selling to your local gun store, and will also restrict ones ability to get gun repairs from a local gunsmith, because they will be out of business if no gun shops are around to employ them, or send them work!
    Creative thinking is the key, it’s clear that takeovers are the way things are being changed as we speak. Take over the food,(ie through buying the land which is cheap right now as well as corporate takeovers of the food companies themselves)  take over the water utility companies, ( for instance Coca Cola owns a huge amount of water sources worldwide), the take over of the gas and electric utility companies. Even the take over of City Counsels, why City Counsels, well because they can be involved (ie influence and control)  the economics of a city and influence land use and sale as well as utility activities and sales etc, well you get the picture.  The key today is the
    idea that they are “getting control of everything through takeovers.” It’s the 1980′s corporate raiders all over again. Only with a new more deadly twist.

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