What Did You Expect?

"Contagion is running amok. A sovereign default is now being discussed openly. We seem to have crossed that moment when chaos theory takes over."

The above quote comes from Bill Blain, a strategist at a London firm called Newedge Group. He’s being quoted by Bloomberg about further sovereign debt issues coming out of the Euro-zone. This time, it’s about Italy. But really, it could be said about any of the countries in the Euro-zone, or out of it for that matter.

I’ve got an old globe next to my desk at my home office. My wife bought it for me as a birthday present a couple years ago. It’s from the 1980s, so the country borders and names are hopelessly outdated and inaccurate. But ignoring the names of the countries, there’s hardly a place on the globe that I can point to that is outside the influence of sovereign debt problems.

Okay, so most of the globe is covered in water, but most of the land is flooded by debt.

The truly frustrating part of Mr. Blain’s observation is that he poses it as some kind of surprising outcome.

If an individual takes on more debt every year for decades on end, we’re not surprised when interest payments start to catch up with him. We’re not surprised when he needs to be bailed out by his family or friends.

But when a central bank takes on an unsustainable debt load, suddenly everyone is shocked when the banking system starts to break down. So when Greece needs a bailout, it’s shocking.

I don’t know about you, but I wouldn’t call it "chaos theory" when a debt crisis hits a country that has a high level of debt.

That’s what I call a natural consequence. The problem of course is that there’s an entire school of thought known as Keynesian economics that seeks to transform natural consequences into political power. Every crisis becomes yet another well-proven reason to cede control of private enterprise into the hands of the political class.

For instance, the debt ceiling crisis here in the United States has become a reason not to decrease government spending, but to increase taxation!

President Obama recently denied this line of reasoning in his latest speech about bumping up the debt ceiling. He actually said that he thinks we need to raise taxes, but that such a money-grab has nothing to do with "some grand ambition to create a bigger government."

By definition, raising taxes creates more government. If Obama wasn’t part of a scheme to enlarge government, as he says, he would necessarily either want to keep it the same size or to shrink it. It’s these types of bizarre contradictions that are the hallmark of the Keynes-brigade.

In order to get out of debt, we need to go into more debt. In order to increase employment, we need to tax employers. In order to keep peace, we need to make war. In order to help Main Street, we need to give trillions to Wall Street.

These contradictions are not really contradictions of course. They’re lies. They’ve been swallowed by nearly everyone in the mainstream media, and they’ve been believed almost wholesale by the public. They’re not true. Don’t believe them.

Before these debt crises come to their inevitable conclusion (fiat currency default) people like President Obama and Ben Bernanke will use the symptoms of the crisis as ironclad proof that they need to take more freedoms and liberties away from you.

Do what you need to do now to protect yourself. Don’t wait.

By the way, if you’re interested, my colleague Tyler Laundon just finished an excellent report on a unique group of natural gas investments. Take a look at the details of this report by clicking here now.

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