The great rising nations of vast populations
held the fate of the world in their hands but hardly seemed to care
—Roger Cohen 9/15/14
Would you choose to live in a country in which:
The prosperity of the last thirty years is based on a vast expansion of credit, which is straining households and governments to the breaking point?
The credit expansion has relied largely on the shadow banking system which is unregulated and subject to systemic collapse?
The infrastructure-roads, bridges, ports, airports, public transportation systems-is antiquated and decrepit?
Citizens have little say over government policies that favor cronies (corporate and government elites)?
General health has declined over the same period: thirty-four percent of the population is obese and 9% suffer from diabetes?
The demographic headwinds put a terrible damper on growth as the number of people in the workforce declines and the number of retirees, voluntarily or otherwise, balloons?
Don’t want to go there? Tough luck. Every country in the Western world and most, including China, in the East have most if not all of these ills. Singapore appears to be the exception. Have a safe trip.
For the second time in 300 years, the world is in an impossible mess. Nothing in the interim, not even the Great Depression, has been this severe or seemed as intractable. Worse, there’s no reasonable place to hide.
Viewed dispassionately, the civilized world is not fixable, and that is great news.
The house at 4201 Mockingbird Lane in my village was built in the early sixties. Various cosmetic projects were done over the years, but the basic structure remained unchanged and has fallen into disrepair and disuse. It sold for a stupid price during the bubble, and now the bank is finally ready to let it go and write off the loss.
The new buyer is not going to get a fixer-upper. The property is a teardown. It will be taken down to the slab and, as has happened in several other instances in the neighborhood, a beautiful modern new home will go up. The reason? This little village is a pristine jewel, and a joy to live in.
The U.S. is not a fixer-upper either. A community of willing compromisers, interested principally in the common good is required to fix a nation with our ills, and the power to do this resides presently in the hands of corporate, financial and political elites who see no benefit for themselves in this. The country is a teardown, all the way to the foundation.
It will begin with all out asset deflation, as the underpinning debt, beginning with the leverage in the hedge fund industry, craters and brings down stocks, real estate, commodities and, for a while, gold.
Politicians, who get unjust credit for a growing economy, will be properly blamed for the collapse. They will be a big part of the teardown, as will principals in the financial and corporate sectors. The nation’s elites will lose power, as citizens, who have too long been apathetic, storm the halls of Congress demanding change.
The second phase of the bear market that will force the teardown has taken a long time to get started. For various reasons, it looks to be nigh. The first rule in The Rules of Adventure (scroll two essays down from here) is Perceive, believe. We will be living through the teardown, which will last longer than I had thought. With the extension of the “B” wave rally since March of ’09 to the present, we now have to expect that 2016, when three big cycles bottom, will only be the first bottom. Time and price in the Elliott Wave Principle studies now take the most probable bottom out to 2021 plus or minus one year.
Can’t say I’m thrilled about that. I’ll be 82. The plan, then, is to keep myself from getting negative during the bad part, so I can encourage my kids and my grandkids to take advantage of the values when the time comes.
Why? because this country has good bones, as they say in real estate. The renewed nation will be better than ever.