I read a number of economic forecasters and investment advisors (Agora Financial, John Mauldin, Richard Russell, James Kunstler) who are fairly unanimous in their opinion that the world, and the USA in particular, is headed for an economic collapse that will make the Great Depression look like a dress rehearsal.

Easy to dismiss, especially with today's optimistic headlines, but I'll point out that the majority and/or mainstream opinion is, almost by definition, nearly always wrong. (Except lately when they hopped on gold... which to me means that a correction in gold is coming).

I am in something of a Hugh Farnham mode of staying glued to the news waiting for the collapse... the only difference being that my fallout shelter is not in as good shape as I would like. I think if Heinlein were around today he'd be doing much the same. We no longer have to fear the imminent nuclear immolation he was vigilant about. But the odds of a global financial collapse in the next 3 years are better than 50-50, I would say. And the preparation is much the same: learn self-sufficiency.

So what do you think? Would Heinlein today turn his focus to economics? What would he think of what his beloved America has done to global finance? What would he counsel as the remedy?

I think Heinlein was always interested and focused on economic and monetary issues, particularly as they pertained to governmental systems and policies. He seemed to have a firm grasp of the theories and principles that underlie modern economies, and associated paradoxes and risks.

I'm not sure what he would counsel as a remedy to today's economic problems, but I feel certain he would have fundamental disagreements with the way government interacts with the private economy. In one area I think his beliefs would be counterintuitive to the popular perception of Heinlein the Libertarian; I don't think Heinlein had any particular philisophical aversion to government running a deficit if necessary to spur economic growth. Others may disagree, but Heinlein understood the reality of how money is created and destroyed in our economic system, and the sometimes abstract theories that underpin it. He also understood the potential fragility of the system if these theories were better understood by more people. Most folks don't grasp how much of our economic system is sustained by pure faith in the government.

Most of life is faith in some majority of our fellow bipedal creatures not being complete idiots.

Once you start down the road of believing that only a minority of humans can tie their shoes without help, you're losing faith in something that has repaid that faith for thousands of years. People are generally good, well-intended, competent and thinking of something larger than themselves. Taking the position - any position, of any political or social stripe - that people as a mass are too dumb to be trusted with the world is myopic arrogance and contrary to all historical experience. The most shrieking and shouting voices we can hear right now (and perhaps in any time) are those who have convinced themselves that they are smarter than every other one of the six billion. They are almost invariably wrong, sometimes by hilarious margins.

Yes, Virginia, there are screwups. There are periods of poor judgment. Evil men do rise to power - thankfully infrequently - but even they can only affect some small part of the world, not its totality. The very worst of them has affected only one country, or one compact region, and for no longer than a third of an average lifetime. The basic resilience and judgment of humanity as a whole contains and limits these cancers, which become self-curing in the end.

Our political, social and economic systems are surprisingly resilient and adapt, largely correctly, to the needs of the generation if not each moment. The odds are that they will continue to do so, bad moments notwithstanding. As much as the rise of globality in economics has produced uncertainty and new problems, it has done at least as much to stabilize world affairs and create a worldwide safety net to help contain and ameliorate local or regional crises.

If you have no faith that this is true, then you have reduced your life's scope to personal survival and comfort at the expense of all else, the comfort of faith in humanity and its future included. You have placed yourself in a self-designated and likely faulty class of those who be smarter than the other six billion, and you are likely somewhere between gently deluded and off yer fraggin' rocker.

As for Heinlein, go reread (or, better, relisten to) "This I Believe," and try to regain some faith in humanity as a whole, and the certainty that some great majority of those who affect more than one life will, in the end, do the correct and right thing when it's needed, and keep this world on something very much like an even keel. The world is, when needed, six billion heroes of a scope from tiny to mighty. The fools and failures simply do not matter in the long run.

Peter, I believe you'll find that your pile of future economics books will fit nicely into the firebox of your wood stove, one at a time. May the act keep you warm both inside and out through the occasional storm that is life.

And through this holiday season in which I believe we can see clear weather after a frightening and not inconsequential, but mercifully brief and deeply instructive storm. May we carry its lessons for a good long useful time.

I do not believe my expectation of economic doom is predicated on some global misanthropy. If it were, then Heinlein's belief in a near certain nuclear holocaust would completely vitiate "This I Believe."

The principle of the masses being wrong in their economic forecasts is called contrarian investing, and it has considerable data to support it, plus a fairly obvious principle. Consider Warren Buffet's axiom of "Buy when others are fearful, sell when others are buying." Buffet doesn't strike me as a jaded cynic either.

Psychological commentary aside, a global collapse need not be propelled by the majority of the population having turned into zombies, merely bad choices by governments. Heinlein's faith in people was shaped in the '20s, and those fine people still ended up with the Depression.

I reiterate my question.

Without claiming any special knowledge of economics (although the economics of publishing speculative books about the economy would be interesting to study), I would conjecture that Heinlein had some portion of his assets in the form of U.S. gold and silver coins - and I would do (and have done) likewise, both historical coins and modern-day government-issue bullion.

Interesting question: Do we have any record of what Heinlein thought about America coming off the gold standard? Alan Greenspan was an Ayn Rand disciple and enthusiastically backed the gold standard until he went turncoat and started printing money like he was dispensing manna from heaven. It's not hard to imagine Heinlein being of a similar frame of mind to Rand on this. There are of course references to gold in The Door into Summer but I reckon there ought to be something on record from Heinlein himself, not just his characters.

Peter, I spent a couple of years in deep, serious survivalist mode, back in the days when the pesky Russkies had their itchy fingers on the button. I took the notion of being prepared etc. very seriously. The outcome of that "collapse" would have dwarfed any economic quake you so deeply worry about.

It did not take much more thinking along the same lines to reach a point of equilibrium in my viewpoint that rendered the "me and my shotgun are gonna survive" viewpoint moot, if not hilarious in retrospect. I have since relied on a general faith in the mass of humanity, which includes any sub-group who may have their fingers on any given trigger, and have been pleasantly surprised at the outcomes of several very dire-seeming situations.

What can I say? Faith manages. Perhaps it's a faith in something driven by natural selection, that a mass of people will collectively make or force the "right" decision no matter how badly some other mass stumbles. Maybe it's blind bliss on the order of a religious zealot. But I stopped looking for trouble a while back, and worked myself out of the notion that I could be Smarter-with-a-capital-S than the mass mind, and have not been disappointed by the overarching movements of world humanity since.

You can work yourself into a panic over a funny-colored bump on your skin. Or a sign in the sky. Or what others have told you is dire, dire evidence-dammit! of imminent doom.

And?

I am pretty sure Robert would have Ginny studying Mandarin.

I used to devote quite a bit of thought to surviving a collapse. I even kept a Mormon food supply in many years.

Now, I've outlived my chosen family and I no longer give a rat's ass.

Bill, I don't think you've written any opinion piece I've agreed with more. Your comment about them being out of practice is subtle, powerful, and thought-provoking.

I was going to start with a flip "Studies show that 50% of the population is dumber than average," but you've raised the bar too high. I need time to think harder.

Isn't this getting a bit off-topic?

Jim, when you assert that the problem space is unknowable then that automatically cuts off discussion about the future by rendering it pointless; the only way to refute the claim is with rigorous statistical evidence lying far outside confidence bands.

Back in 2001 I did indeed get suckered into a derivatives-based scheme/scam and ended up losing money. Before then I might have gone with Madoff. After that I became a more devout follower of the "If it looks too good to be true..." principle. Since 2004 I have been studying contrarian investors who have been advising buying gold and selling stocks since 1999. Gold since then: tripled. Stocks: down. I'm not good at understanding this stuff but I'm giving it my best shot. There seems, f'r'instance, to be useful information in the bond market, but I don't get it yet. The yield curve right now is very steep and this may presage inflation.

You confuse the unwashed masses of commentators with some who are more thoughtful and not so loud. Sure, if you're going to claim that economic forecasters are represented by the likes of Jim Cramer and Abby Joseph Cohen, then you end up with garbage for precisely the reason I stated to begin with: populist predictions in finance are self-unfulfilling prophecies and by definition, wrong. I have seen actual studies showing that the predictions made by most professional advisors are excellent predictors of what has happened in the previous 6 months. They look back because they will lose business if they predict counter to the hoi polloi's prejudices. There's more than a little Heisenberg craziness to this.

The argument that things have always worked out and therefore they always will is a bit lightweight. Due diligence compels closer examination. Besides, things worked out not so well in 1929 and 1932, and we were arguably in better shape as an industrial nation then. My contention is that there's as much reason to fear an economic collapse now as Heinlein had for fearing global nuclear war, with maybe similar levels of consequences, and that I suspect that a modern Heinlein would be warning about that possibility with the same fervor.

You've summarized my position very closely: I do believe it is a problem space with unknowable characteristics. While you can define and analyze all reasonable factors using any tools at hand (including guts and hunches), the irrefutable historical fact is that no one can correctly guess the outcome of the cusp events. No one. Amidst the vast spectrum of opinion, there are always a few who come up "right" on the outcome, but it's rare to find a pundit or expert who's right more than a few times out of many.

Major finance is a simple, sensible, numbers-driven field that is unfortunately bound to chaotic controls: whim, panic, the concerted effort of a madman here or there (Hunt brothers, anyone?) I think it's the almost literally kitchen-math end of it that lures people into believing it is somehow controllable, foreseeable, predictable... but the inextricably linked other end is ruled by gods and monsters and I know of no one, rich or poor, media celeb or obscure academic who has successfully interpreted the future much beyond the realm of educated guess and correlate luck.

You made a nod to Buffett a few posts back; keep in mind that Warren B. could lose 95% of his holdings and still be one of the wealthiest persons on earth. He does not play the same game you and I do. Theoreticians in high ivory towers are no better; the world they analyze is not real to them and a wrong guess merely invalidates a publication here or there - which no one will remember when they next brilliantly outguess some move in metals or oil or derivatives. It's much like those who claim paranormal abilities - the many failures are forgotten in the shine of occasional bursts of luck.

Since you do not have any inside information on global finance (as far as I know...) you are working by choosing your experts, choosing your pundits, and then attempting to apply their lessons to the end-user public data you have access to. If it were that easy, there would be many more millionaires and very few failed investors. You can never predict accurately without the deep knowledge held only by a few - and a wide sweep of such knowledge held by many different "fews." As far as I can tell, for example, the only people on earth who had the slightest ill thought about Madoff were some obscure investigators in the SEC. Yet when his scheme unraveled, it shook the foundations of global finance.

It may be possible to grasp and understand global finance - dimly - on a macro level. But I believe it is historically obvious that individuals and small groups on the end of the financial chain can only make guesses - guesses about which expert to listen to, guesses about which data to evaluate, guesses about which factors will be significant and which will not, etc. - with respect to their immediate dollars-and-cents well-being. Choose your path, roll those dice... and never fall into the gambler's fallacy. I believe the only way an individual can manage personal wealth is to devise a strategy that protects needed wealth while gambling only what can be spared if it is completely lost - and accepting that, no matter how many Morningstar reports or authoratitive books one reads, every step is a gamble.

If you are truly fearful of an imminent crash, then you should take steps that would protect you and your family in that crash. The problem here is that you can't hedge that bet - you can't continue to live a normal life andbrace for a period of massive instability. That's the survivalist's problem - he can't be Joe Chevrolet with a 9 to 5 in a suburban house and be ready for some form of doomsday. It's your choice, and if that's how you read the tea leaves I wouldn't say you were wrong to do so. But in the end you have to choose between belief and fear, between obvious stability and possibly life-saving bracing. I don't believe there is much middle ground... and when you do choose, you have to choose the correct bracing, because being braced for one sort of calamity may actually be detrimental should another one hit.

So you can call my faith in the mass of individuals each doing the right thing simplistic or naive if you like. I think it is more towards pragmatic and realistic. Study history instead of finance: people screw up, factions screw up, nations screw up. But year in and year out, the world is composed of people who value their lives and comfort as much as you do, and the tendency is of the system to correct itself, locally, nationally and globally. Not always easily, not always without casualties and not always perfect - but always.

Here is an idea regarding this

http://www.huffingtonpost.com/arianna-h ... 06022.html


What money is in B pf A, citi, etc.? Could this possibly work? Is the money they have there because of people's savings accounts or is it in mutual funds, etc where most people would not realize it is is part of their IRAs or 401ks?

I received this tip today from a friend who is following this particular issue. Thought I'd share, even though it might be a little late for anyone to catch the broadcast.

And just what is a gaggle of economic forecasters, anyway? A murder? or a Suicide?

Thanks for the info about the discussion on the Heinlein Nexus - I'll
definitely look into it probably at the beginning of this upcoming
week (I'm working through the weekend building a new computer and
repairing my laser printer in preparation for my upcoming rewrites on
"Night Passage" and likely a 2nd project in January).

As for any economic collapse, thought I'd pass on what's coming up
this evening on the Coast to Coast radio show at 10:00 p.m. on KFI 640
AM - they're actually going to do a show I suggested (via email) some
months ago where they put a number of their best economic forecasters
together in a single 4 hour show and just let them go with their
predictions for the upcoming year and beyond - here's the blurb for
the show from the Coast to Coast website:

Coast to Coast, KFI 640 AM, Saturday, January 2, 2010, 10 p.m.:

Hosted by Ian Punnett

Guest(s): Gerald Celente, Joe Meyer, Catherine Fitts, Robert Chapman

Ian Punnett welcomes experts in finance and the economy including
Gerald Celente, Joseph Meyer, Catherine Austin Fitts, and Robert
Chapman to discuss the outlook in 2010 for markets, commodities, and
the U.S. dollar.

Bios

Gerald Celente: As the founder of the Trends Research Institute,
Gerald Celente is well respected for his track record of picking
business, consumer, political, and economic trends before they come to
pass. It is his job to see the future and understand how the issues
and events of today will determine the trends of tomorrow.

Joseph Meyer, a 30 year veteran of the securities industry, has worked
as an arbitrator and mediator for the NASD and NYSE. He has a weekly
radio program to spread what he considers to be vital information.
Meyer answers questions on financial and arbitration/mediation issues
every Tuesday at 5pm Eastern on WELE-1380AM Radio. Meyer & Associates
is a Florida-based investment and consulting firm which specializes in
arbitration, mediation, business acquisitions, and capital for
emerging growth companies.

Catherine Austin Fitts is the Founder and President of Solari. She
served as Managing Director and Member of the Board of Directors of
the Wall Street investment bank, Dillon, Read & Co., Inc. She also
served as Assistant Secretary of Housing/Federal Housing Commissioner
at HUD in the first Bush Administration and was the President and
Founder of Hamilton Securities Group, Inc. Catherine has a BA from
the University of Pennsylvania, an MBA from the Wharton School, and
studied Chinese at the Chinese University of Hong Kong. Catherine
serves on the board of the Gold Anti-Trust Action Committee and
publishes a column, Mapping the Real Deal, in Scoop Media in New
Zealand.

Robert Chapman is the editor and publisher of the International
Forecaster, a publication that covers business, finance, economics,
and social and political issues all over the world. Mr. Chapman has
spent 45 years in the finance and investment business, 28 of which
were as a stockbroker, specializing in gold and silver shares. For a
number of years he owned his own brokerage firm. Mr. Chapman attended
Northeastern University and spent several years in counterintelligence
with the US government. He has made a number of very important
predictions and is probably one of the most unpopular people in
Washington, DC, as he spares no one in government who is not doing
what they should be doing.

This chart of the US monetary base shows the kind of disturbing trend I am talking about:

.

(Jim, if you want to move this to th Speakeasy, go ahead. I think it's time.)

I'd just point out that sensible economic principles have been confounded since 1971 (and arguably 1913) due to excessive central bank meddling. That, however, does not invalidate the principles, just means the clarity of their application has been temporarily obscured. You can obscure the law of gravity with enough juggling, but eventually it is all going to come crashing down. The more that governments try to game the system, the more unstable the system becomes. There is evidence that the system is right now oscillating exponentially out of control. I do not think the current fiscal legerdermain can be sustained much longer. And the most likely time for a collapse is when the conventional wisdom is that things are on the mend. If that were true, insider selling would not be outpacing buying by an order of magnitude (as it is currently).

No Comments ?? Another one you ought to look at is Arthur Kitson

http://yamaguchy.netfirms.com/7897401/k ... index.html

Relatively speaking, we made out like bandits on "the housing crisis" by selling a house in Elk Grove in the summer of 2004 (feel free to google "Elk Grove, CA" and "housing crisis" --pretty much ground zero; indeed we found court records where the people we sold the house to sold the house to fraudsters) and buying one in Minnesota in 2005.

Our retirement accounts are up 100% from the summer of 2007 to early 2010. We actively managed, and apparently well. From thoughtful management based on data available to all, we missed most of the down and hit most of the up.

Maybe this makes us "class enemies". It worked out well for us, and I'll live with any oprium from it.

I do feel bad for humanity as a whole. Shit is moving too fast the last fifty years --much too fast for Darwinian processes to deal with it.

If you haven't been appalled by the increasing lack of competence over the last few decades, then you haven't been paying attention.

I don't put it down to Asimovian decline of the race, however. But rather to biological processes being inable to deal with the accelaration of societal demands.