Expecting the Worst, Starting in 2012

I remember when I started to get really bearish on the economy in 2007 that it was something I felt in my gut. Sure the data suggested something was wrong, but you could always use the powers of rationalization to ignore it. Well, this is the same sort of feeling I’m getting now; we are headed straight towards the worst crisis of the past century, including the Great Depression, and it is far too late to do anything about it.

The big money in the years ahead will be made in Asia, no doubt about it. The advice for years was “head West young man.” Well now it’s the opposite; if you’re young and talented, you better get the hell out of the U.S. Our government is passing laws in plain sight that are NO DIFFERENT from those passed by oppressive regimes. This isn’t theory, it is fact. If you make money in the U.S., expect to be harassed by a government desperate for revenue.

There is this sense that our institutions are fundamentally different. There’s the “American spirit” or the “American concept of freedom.” Well the same things were said of the Greeks and the Romans. In a matter of years, not generations, Rome went from the glory years to outright dictatorship where all private property rights were destroyed. In fact, in many ways Romans were freer than us. It was documented in the New Testament that the Apostle Paul’s Roman citizenship conferred to him considerable respect. But if you’re a citizen of the United States? Congratulations, you can now be detained indefinitely without trial because Obama said so! Congratulations, any income you earn is the government’s- even if it’s earned fishing in Iceland. Congratulations, you can be monitored if you are suspected of being a terrorist, which apparently a large swath of the American population is.


The smart money (aka the big money) is taking their capital out of the U.S., and this partially explains why the economy is not expanding even with low interest rates. Why would people borrow money and take on risk when the government is so aggressive with their taxation? Why would people expand their business when a massive debt crisis so obviously looms in our future? Why would people take risks when people like Jon Corzine get away with such heinous crimes? Without the rule of law, you have no risk-taking, and hence no economy.

Today the 10-year bond auctioned at below 2% for the first time in history, and I am convinced this is the bubble move that historically always leads to crashes. Everyone is shortening their maturities on our debt, which means when there is no bid, we will have to roll over an obscene amount of debt at higher and higher rates. This is a recipe for disaster for the government in the same way it was for banks. Liquidity crisis, debt crisis, insolvency crisis- whatever you want to call it, that’s where we’re headed.

I personally am redoubling my efforts to prepare for the crisis that is fast approaching. 2012 will be nuts, I am quite sure about that. Volatility will rise and we should see some serious inflation start to percolate. I will go over alternative methods of protecting yourself in my newsletter.

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  • J-Yunnan

    Thanks for doing what you do.  I’ve appreciated reading your blog posts over the past couple of years.  I was wondering what your thoughts are on agricultural land.  It’s easy to move some assets overseas, and not too hard to move yourself,  but if most of your assets are tied into the land that you farm, it’s not so easy.  I think land prices will continue to rise at a very high rate.  So, in that respect, it’s a good investment, but it’s very illiquid, possibly making it an easy target for the government.  What are your thoughts?

    • http://www.expectedreturnsblog.com Moses

      One of the best investments in the intermediate term. If the government were to confiscate land, then we have bigger things to worry about. 

  • http://www.intellitraders.com/ trading online

    If Asian Europe will face decline in currency rates then Asia will also get affected with it. Dollar will catch some grip……

  • http://www.basicsofforex.blogspot.com/ Basicsofforex

    i am new to forex trading , i feel all these economic crisis from big economies are drama , the federal banks of big nations are working jointly and they work as first your turn then my turn ( my personal opinion)

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