Wednesday, November 3, 2010
A Visit from a Circuit Rider
Stoneleigh and her associate Illargi post their blogs at http://theautomaticearth.blogspot.com/. The blog deals with concepts of peak oil, finance, politics and economics . Their blog is a detailed exhaustive look at how the darker aspects of these disciplines could interact and contribute to a depression that would be long, deep and severe. The blog is well organized and contains primers on finance and economics and a variety of other useful informative links, and I would urge the reader to examine it in detail. The single best way to grasp her message is to purchase a professionally produced video from the website entitled "A Century of Challenges." which mirrors her current lecture.
Stoneleigh is currently on a world tour which has aspects of a circuit rider, a Chautauqua and the ride of Paul Revere. She accepts invitations from interested groups and gives her lecture at no charge but is willing to pass the hat at the conclusion of her talks to which the audience is welcome to donate to if they derive value from the presentation.She often stays in the homes of her sponsors to keep her costs down.
I agree and understand most of the concepts and opinions promoted by Stoneleigh which I might attempt to summarize (at my peril!) here for folks not familiar with the website. She and Illargi believe that what we are experiencing worldwide and most particularly here in the US is the early stages of a deflationary depression the root cause of which has been the largest expansion of debt and credit in world history. One of the biggest problems is that this credit has many claimants to the same pie making it impossible to satisfy these multiple claims in a collapse scenario unless of course you have as your ally the political class who is willing to borrow trillions from future generations to attempt to pay off current claims. Stoneleigh contends that the money supply is composed not only of cash in circulation but credit, with credit comprising 95 % of what we call money. Hence when the value of the items financed on credit plummet, credit collapses which has the effect of contracting the money supply which Stoneleigh contends is the very essence of deflation. Although I did not hear Stoneleigh explicitly say this, if she is correct, I would conclude that Federal Chairman Bernanke's feeble last ditch attempts at quantitative easing which amounts to money printing to inflate the money supply with many billions could be foolish and fruitless trying to fight deflation which could be in the many trillions. Another important feature she related is that subsidized fossil energy has fueled this worldwide economic expansion on the way up but it will be the collapse of finance and credit on the downside that will lead to the greatest depression. She also said that hope and greed drive markets on the ascent but fear drives them on the descent. Hope and greed can exist for a long time as markets rise but fear is a far more powerful factor, and fear can destroy markets far faster than greed can build them. The next big dip in the markets could occur with the speed of a New York minute, a gnat's eyelash. It is not surprising that Stoneleigh and Illargi are adamantly opposed to taking on any debt and holding most equities. They stand squarely in the Cash is King crowd and Stoneleigh even believes that the US dollar is the currency of choice to hold in the near term. I'm not sure I would I am totally comfortable with that choice.
One of the most remarkable features of this woman and her financial partner is that they are not Amuricans!! Both hold European passports. Their knowledge of American economic and financial history both current and distant is remarkable.Neither of them in fact has any formal training in finance or economics which probably contributes to their big picture view of the trends driving the sputtering corporate industrial economy.
The final factor which will likely impact this deleveraging deflationary depression is simply a matter of bad timing as the world has hit the peak of cheap oil and in the near future will be riding down the backside of the so called Hubbert Curve in which energy will get ever more scarce and expensive.