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Letters by a modern St. Ferdinand III about cults

Gab@StFerdinandIII -

Plenty of cults exist - every cult has its 'religious dogma', its idols, its 'prophets', its 'science', its 'proof' and its intolerant liturgy of demands.  Cults everywhere:  Corona, 'The Science' or Scientism, Islam, the State, the cult of Gender Fascism, Marxism, Darwin and Evolution, Globaloneywarming, Changing Climate, Abortion...

Tempus Fugit Memento Mori - Time Flies Remember Death 

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Thursday, July 10, 2014

Cult of bubbles, government distortions and pollyanna's - prices can only go up !

Every 10 years or less there is a bubble and a correction.

by StFerdIII

 The coming asset correction will be just as severe as 2008. Artificially inflated stocks and house prices are the manifestations of government distortions. Historically one can trace asset price bubbles in every decade from the end of the Napoleonic wars. In 1819 house and land prices in the US and Europe had reached absurd levels as new capital, freed and happy from the travails of war, found its way into housing and building projects. Fuelled by 0 interest rates, government and bank money creation, low lending standards and 2nd mortgages to use as downpayments for the 1rst, the real estate market skyrocketed and then plummeted. Not much has changed since 1819. [See 'The panic of 1819' by Murray Rothbard]

Government intervention inspires bubbles and bursts. Since 1815 there have been no fewer than 13 asset bubbles in stocks and real estate all of which have gone 'pop'. Why would anyone believe that this unnaturally occurring cycle is now defunct ? Faber and other 'doomers' have been stating since 2012 that we needed major corrections in real estate and stocks. They are derided by pollyanna's as 'negative'. Yet corrections are healthy and necessary. They impeded bubble formations.

After 1945, recessions not only were more frequent; they were steeper. There were recessions in 1945, 1949, 1953, 1957, and 1960 (1957 having a deeper two-quarter decline than seen in our Great Recession), before finally a nine-year run came sans recessions. But then stagflation came, with double-dip recessions in 1969-70, 1973-75, and 1980-82. Against conventional metrics, it still remains questionable to say that the Great Recession was worse than what hit in 1973-75 and 1980-82.” Forbes

Currently total GDP to market capitalization is near an all time high – a sure sign of a bubble.

Since 1982 there have been 2 large corrections in real estate and 3 in stock values. Since 1990 the average indexed stock market return has been 2 %. Inflation in the real world is today 5% or more. In fact since 1913 and the advent of formalized central banking inflation – as witnessed by a 95 % decline in your currency value – has been 5 % p.a. This means that most people have a negative real return on their stock investments. The same can be said for real estate even including the bubble prices of the last 2 decades.

Fiat currency systems fail and the failure is shown in many ways. Asset bubbles, real currency value declines, massive job-market distortion, extortionate taxation and bizarre policies at all levels of the political-economy are just some of the more obvious expressions of failure. The governmental-debt bubble in which every single advanced nation state – including Communist China – now has 5-8x the size of its economy in real debt levels. This is simply unsustainable and will lead to a debt-bubble bursting. This debt implosion will be far worse than artificially high asset prices bursting.

Add to the asset and debt bubbles, the misery of large Corporations adding a fresh $10 Trillion in new debt in the past 5 years – an all-time record. With only $1.6 Trillion or so in cash these large corporations are poised to suffer from the hubris of excessively piling on debt once interest rates begin tepidly to increase. If interest rates were normalized to account for real-world inflation the corporate world would be in a huge mess.  

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