Dreams and Delusions

This article was sponsored by Miles Franklin.

Economic delusions are like dreams while sleeping.

From Matthew Walker, Ph.D., founder and director of the University of California Berkeley’s Center for Human Sleep Science:

What Happens During Dream Sleep?

“Dreaming is essentially a time when we all become flagrantly psychotic,” Walker says. The reasons for this rather extreme-sounding diagnosis are fivefold:

1. “When dreaming, you see things that aren’t there, so you’re basically hallucinating.
2.  
3. While in the dream, you believe things that cannot possibly be true, which means you’re delusional.
4.  
5. While dreaming, you are confused about time, place and the identity of the people involved, so you’re suffering from disorientation.
6.  
7. Emotions fluctuate wildly while dreaming, a condition known as being affectively labile.
8.  
9. Lastly, upon waking, you forget most if not all of your dream experience, so you’re suffering from amnesia.

Any one of these, if experienced while awake, would be cause to seek psychiatric treatment.”

Dr. Walker wrote about sleep, but he could have used the same terms to describe our delusional financial system. Consider the similarities between dreams and financial delusions.

1. “You see things that aren’t there.”A few examples:

Enron profits: They weren’t there. Enron is gone.

Madoff investment returns: They didn’t exist. A Ponzi scheme, whether private or run by the government, ends in tears. Sovereign debt, Social Security, Madoff and more…

Argentina’s 100 year bonds: Investors deluded themselves by seeing safety. Those bonds have fallen hard and were issued one year ago. How much less will they be worth in five years? (Argentina has devalued by over ten trillion to one against the dollar since WWII.)

“You believe things that cannot possibly be true.” Examples:

Ever-increasing national debt: Official national debt has increased from $3 billion in 1913 to over $21 trillion in 2018, an exponential increase of 8.8% per year for 105 years. At that rate the official national debt will exceed $1,000 trillion by the year 2064. I doubt it.

Guaranteed jobs, a Universal Basic Income (UBI), free health insurance, free college tuition, and annual gifts from the Easter Bunny. I doubt them.

“Official” U.S. unemployment is 3.8 percent, and inflation is about 2 percent. I doubt both claims.

“You are confused about time, place and identity.” Examples:

Stock markets rise and fall, based on a century of market history. But like in 2000 and 2008, Wall Street and the media encourage us to believe this time is different.

In the 9-11 story: British press supposedly reported that Building 7 had fallen BEFORE it collapsed at “free-fall” speed. Did BBC have advance information, but confused the time? (No jet hit building 7.)

“Emotions fluctuate wildly while dreaming.” Artificially supported markets also fluctuate wildly.

October 16, 1987. The Dow closed at 2,246. But one trading day later it closed at 1,738, down 22%.

The NASDAQ 100 closed on March 27, 2000 at 4,704. But 14 trading days later it closed at 3,208, down 32%.

Silver closed at $48.58 on Friday, April 29, 2011. One week later on May 6, 2011 it closed at $35.29, down 27%.

Crude oil closed on July 14, 2008 at $145.78. But 5 months later it closed on December 24, 2008 at $35.35, down 76%.

“You forget most if not all of your dream experience, so you’re suffering from amnesia.”

Benjamin Bernanke (May 17, 2007): “We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.” However, an over-leveraged debt crisis is seldom contained. Amnesia?

They say real estate always goes up in price. What about the housing crash in California in the late 1990s? What about the Florida real estate crash in the 1920s? Americans often suffer from amnesia regarding housing and real estate prices.

Harry Dent thinks gold will drop under $500. Many people suffer from amnesia regarding the history, production costs and value of gold.

SO WHAT?

It is delusional to believe national debt can grow exponentially for another century without major and disruptive consequences including a dollar devalued to near zero. $21 trillion growing at 8.8% per year for 100 years is $97,000 trillion. I doubt it.

It is delusional to believe High-Frequency-Trading and Federal Reserve policies have eliminated crashes. They delayed the inevitable correction/crash, but did not prevent it.

It is delusional to believe more debt and leverage cured the imbalances that created the 2008 crisis, which were caused by excess debt and leverage.

It is delusional to believe ex-students will repay over $1.5 trillion in student loan debt (increasing rapidly). Over 100 individuals owe over $1,000,000 in student loan debt. Over 2.5 million individuals owe over $100,000.

Gold and silver have risen exponentially, along with debt and currency in circulation, for over a century. Examine the bullish price implications of two log-scale charts for silver.

CONCLUSIONS:

Debt cannot increase forever. A reset will occur. That debt is someone’s asset. A debt reset will reduce asset valuations and paper wealth. Look out below!

Paper assets, such as corporate bonds, stocks, student loan debt, sub-prime auto loans and sovereign debt will correct and reduce purchasing power of fiat currencies.

Silver and gold have no counter-party risk. When debt based assets reset, silver and gold prices will climb higher. Think safety!

Gold and silver—you know the drill! They are real. Debt based assets are much less real.

Call Miles Franklin at 1-800-822-8080 for silver and gold.

Gary Christenson