The US is anything but weak…
And therein lies the problem.
The US controls much of the world, but that control. like England’s in the early 20th century, is waning. It’s waning because what caused it, worldwide balance sheet expansion in US dollars is ending.
Below is a very simplified balance sheet for a business.
Assets:
– Cash
– Accounts Receivable
Liabilities:
– Accounts payable
– Current portion of the long term debt.
Cash is easy, as is the current portion of long-term debt. But Accounts receivable and accounts payable represent money you are owed by your customers and owe your vendors. In essence they are non-interest bearing, non-contractual loans. And make no mistake, they represent a huge number worldwide.
Consider these equations.
Distance = Point B minus point A
Circumference: C = 2 Pi R
Area: A = Pi R Squared (Circle)
Area: A = 4.3 Pi R cubed. (Sphere)
S;poiler alert: the world is a sphere.
To expand globally is to expand exponentially.
Imagine this model but all numbers are in dollar equivalents. In other words, a company in India is doing business in rupees. But he is selling in dollars, so his rupees are actually dollar equivalents because they can be immediately converted at a bank or with a credit card.
This is the economic model postulated in free trade. And like any expanding system, it has limits. These limits are things such as resource supply, politics, trade disputes and 1,000 other things.
Remember above, as trade increased, balance sheets did also, exponentially. It is the MOTHER of all asset bubbles.
But like any system, once it reaches it limits, it cannot expand.
This expansion started in 1997.
This was the date that Bill Clinton and Al Gore handed the US economy, lock, stock and barrel to the banks.
Once it got it’s land legs it took off expanding a rate of… well… 4/3 Pi R cubed. This expansion had several things moving it forward… Free trade, US wage rates, US budget deficits that created trillions in short term debt that became bank reserves and MASSIVE 3rd world demand. (Among other things.)
Our advantage is that no one believes this will ever end.
Knowing something someone else doesn’t know is valuable.
That said, this model will not die easily and it’s unlikely that it will happen in a flash, but bank bailouts are becoming more frequent and more difficult.
Our strategy hasn’t changed since last year.
Put your money in gold, gold mine options (insanely cheap) and 80-90% in very short duration treasuries.
That and wait.
