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“How to Calculate the End of the World”
by Bill Bonner
‘You must remember this.
‘A kiss is still a kiss, a sigh is still a sigh.
‘The fundamental things apply
‘As time goes by.’
- Dooley Wilson, As Time Goes By*
“Poor Florence Newton. The young woman was tried as a witch in Youghal, Ireland in 1661. It was alleged that she kissed another woman ‘violently’ and that the victim experienced fits, cramps, and visions. In another instance, she kissed the hand of an imprisoned man who subsequently died. Today, we think of ‘witchcraft’ as hocus-pocus. We deny any cause-and-effect relationship between Ms Newton’s kiss and the prisoner’s death. Myth, in other words.
Myths rule the world: Yes, Dear Reader, we continue to explore how myths rule the world. We have looked at helpful myths: A penny saved is still a penny earned. A fool and his money are still soon parted. And nobody wants to eat at a restaurant with a skinny chef.
But now we turn to the unhelpful sort of myths: ‘fake news’ and lies. Making the world ‘safe for democracy’ was a monumental lie when President Woodrow Wilson used it as an excuse to drag the US into the First World War. Sorcery had no more truth in it than an act of Congress. And stimulating the economy with fake money was a scam from the get-go. Some myths are useful. Others are lies. And today we pose the critical question: How can you tell the difference?
End of the world: This is probably the most important question ever posed: How do we know if a public policy makes the world better…or worse? How do we know if what we are doing is good…or bad? How do we know if our actions will get us to Heaven…or Hell? A question of that magnitude is going to take some time…give us a little more time, please!
In the meantime, we turn to the end of the world. Mr BJ Campbell, writing on an open-source publishing platform called Medium, pens an essay and uses statistical analysis to calculate the odds of a society-altering event like a flood or armed revolution. Illustrating his approach — and keeping in mind that there are relatively few data points – he figures, for example, that the odds of a New Orleans-style flood disaster during the life of a typical 30-year mortgage is about one-in-four. That, of course, will only affect people who live in or near the flooded area.
But what about the kind of upheaval that will affect nearly everyone – a revolution or a civil war, for example? There have been two in the US since it was colonized by Europeans (not to mention Indian wars…fights with the French and Spanish…and even a battle fought between Catholics and Protestants near Annapolis, Maryland in 1655).
Mr Campbell uses 1678 as his start date, avoiding some of this confusion. Calculating the odds based on just two events (the American Revolution and the War Between the States), he concludes that you have about a one-in-three chance of experiencing a major insurrection during your lifetime.
But those odds are probably far too low. Just look around, says Campbell: ‘Since our 1678 benchmark, Russia has had two world wars, a civil war, a revolution, and at least half a dozen uprisings, depending on how you want to count them. Depending on when you start the clock, France had a 30-year war, a 7-year war, a particularly nasty revolution, a counter-revolution, this Napoleon thing, and a couple of world wars tacked on the end. China, North Korea, Vietnam, and basically most of the Pacific Rim has had some flavor of violent revolution in the last 100 years, sometimes more than one.’
But even those ‘facts’ don’t do justice to the risk you face. Campbell goes on: ‘Since the fall of Constantinople in 1453, there have been 465 sovereign nations which no longer exist, and that doesn’t even count colonies, secessionist states, or annexed countries. Even if we presume that half of these nation state transitions were peaceful, which is probably a vast overestimation, that’s still an average of one violent state transition every 2.43 years.
If we just look at raw dialectic alone we reach dismal conclusions. ‘Do you think the United States will exist forever and until the end of time?’ Clearly any reasonable answer must be ‘no.’ So at that point, we’re not talking ‘if,’ but ‘when.”’ Based on his numbers, Mr Campbell believes you should prepare – by stocking, food, water, and firearms.
Vanishing Mist: But the disasters that he imagines are only a small part of the dangers you face. There are also risks of bugs, mutant viruses, crop failures, solar flares, electronic meltdowns, volcanic eruptions, years without summers, and, of course, nuclear wars. Any one of those things could bring chaos, looting, and death. (Imagine West Baltimore when the power goes off.)
But the most likely threat comes from neither rising water, nor war, nor zombie apocalypse. Instead, the main risk is financial. And it too is not a question of ‘if’ but ‘when.’ And here we find our question, laying on the treacherous ground in front of us, like an unexploded bomb in a playground. Sayeth Proverbs 21:6: ‘Wealth created by a lying tongue is a vanishing mist and a deadly trap.’ Why so?
Because the fundamentals still apply; actions still have consequences. You never know exactly what those consequences will be or when and how they will show up. (This isn’t science!) But when you spend too much money you don’t have…and go too far into debt…you eventually find out.”
“100% Chance of Recession”
“So, so you think you can tell
Heaven from hell…
Blue skies from pain…”
Pink Floyd, ‘Wish You Were Here’
The biggest question in philosophy, hanging from our lips like a cold cigarette, is… How can you tell the difference between good myths and bad ones? We’ll get to that in a minute. But first, we need a warm-up…like Kid Rock playing before the Rolling Stones come on stage.
More of the same: Earlier we looked at risks. What are the odds, we wondered, of a major disaster? Greater than we think, according to mathematician BJ Campbell. But he was only talking about floods and revolutions. Get a bolthole, he suggested, and stock it with food, water, and firearms.
But financial risks are much more imminent. Markets and economies move in cycles. It’s not up…up…up all the time. And the downcycle is always painful.
But when you’ve got $68 trillion in debt (the current US total)…it is also very risky. People have spent their savings. They’ve gambled their retirements. They’ve bought houses…cars…stocks…and college educations – counting on ‘more of the same’. ‘More of the same’ is what you get for a while. Then you get ‘something different’. And then, the people who need ‘more of the same’ just to survive are in big trouble. Here’s an old proverb for you: What goes up must come down.
Important landmark: We’ve just passed an important landmark. The US economy has been going up for 106 months, edging into second place among the longest-lasting expansions of all time. Since 1879, there have been 28 recessions and (obviously) 29 recoveries. The average recovery lasted 41 months. So we’re driving way over the legal limit.
What are the odds of an accident? We’re not a mathematician, but we put them at approximately 100% sometime during the next three years. The economy will go into recession. Jobs will be lost. Cars and houses will be repossessed. Some people will be desperate.
Like the economy, the stock and bond markets are also cyclical…and driving severely impaired. We are now in the tenth year of a bull market that has taken prices higher than we’ve ever seen them. At these levels, according to market folk wisdom, logic, and the studies of Nobel Laureate economist Robert Shiller, the next 10 years will be a bad time to be in stocks. Prices go up and down, say the old timers. When do they go down? After they’ve gone up!
Myth explorer: What are the odds of a major stock market decline sometime in the next three years? Again, we don’t trust numbers, but we put them at about 90% (allowing for a 10% margin because, after all, nobody knows).
How about the bond market? Bonds move in long cycles…about a generation in length. The last time bonds were this high was about when we were born – after World War II. They fell for the next 30-plus years…bottoming in 1980. Since then, it’s been up…up…up. But as Carl Jung – a myth explorer extraordinaire – put it: ‘No tree can grow to heaven’.
Now, after 38 years, it looks as though the tree has reached its maximum height. The cycle has turned. In fact, we believe the top was reached nearly two years ago in July 2016. Since then, yields have been going up (and prices have been going down). Already, the yield on the 10-year US Treasury note has almost doubled.
Remember the old Bible saying that ‘the debtor is slave to the lender’. As long as interest rates are falling, the debtor can refinance…at lower rates. But when rates move up, the lender gets out the chains and the lash. That’s when the going gets tough.
What are the odds that things will get tough in the next three years? We don’t know. But as with death itself, there is no escape. The question is not ‘if’, it is ‘when’ – and only the gods know the answer.
And what kind of disaster do you get when stocks, bonds, and the economy all go down together?We don’t know. But before it is over, we might wish we’d taken Mr. Campbell’s advice. Tomorrow…back to our question: How can you tell useful folk wisdom/myths from convenient lies and claptrap? Stay tuned…
bill bonner is a good writer–has a newsletter that i read but like all of em ,always trying to sell you something…
raburgeson
We already tried that and it seems it will at least be 3.2 billion years before the sun degrades to red expanded enough to cook everything on the planet. However, mankind could destroy biological life on the planet tomorrow.
bill bonner is a good writer–has a newsletter that i read but like all of em ,always trying to sell you something…
We already tried that and it seems it will at least be 3.2 billion years before the sun degrades to red expanded enough to cook everything on the planet. However, mankind could destroy biological life on the planet tomorrow.