How did it happen?
What happens when higher debt levels hit higher interest rates? Asset prices fall. Combine that with stifled trade... and mass deportations... and we could be asking for a major depression.
Friday, November 22nd, 2024
Bill Bonner, writing today from Baltimore, Maryland
Sometime in the post-apocalyptic future...
Surviving historians will brush off the dust... tidy up the graves... and try to make sense of it. Gathered around an open fire in a discarded oil drum, they will warm their hands and ask:
What? How? Huh?
We’ve looked at the best case... and some ‘worse cases.’ Now we focus on the worst-case scenario — an apocalyptic combination of inflation, depression... and war.
Inflation is the only way the feds can finance their big deficits. It is still running above 3% — the longest period of more than 3% core inflation in thirty years. Transportation rose more than 8% over the last year... and auto insurance is up more than 50% over the last three years.
Meanwhile, long-term interest rates are rising, even as the Fed cuts short-term rates. It’s been two months since the Fed began its rate cutting cycle... and the 10-year Treasury note yield has gone up 76 basis points (three-quarters of a percent). What happens when higher debt levels hit higher interest rates? Asset prices fall. Combine that with stifled trade... and mass deportations... and we could be asking for a major depression.
And then, there is the last refuge of scoundrels... war -- the worst-case scenario of all. Yes, people go mad from time to time... so do whole societies. It seems unpredictable... almost random. And yet, there are signs, trends, and patterns.
So, we look ahead and wonder what it might be like...if the world had been at war for almost ten years... maybe twenty years. West vs. East... one side clustered around NATO... the other around the BRICS.
On one side had the most ‘lethal’ military in the world. But on the other was the fighting experience of the Russians, who had been at war on their European flank for many years... combined with the technological innovations and manufacturing prowess of the Chinese.
The ‘rule of law’ has been abandoned entirely. It’s the rule of the jungle, now. The strong do what they will; the weak suffer what they must.
Whole cities have been destroyed in tit for tat nuclear exchanges. But the elites have no death wishes. Moscow, Beijing, London and Washington have been, so far, spared.
Along the borderlands... the Eastern front in the Ukraine... and the Near Eastern kill zone... the destruction has been almost unbelievable. New weapons flatten whole neighborhoods. AI-enhanced firepower leaves nothing alive.
By now, much of the Mideast resembles Gaza in 2025. Backed by the Trump team, Israel tried to ‘finish the job’ by seizing the West bank, wiping out Hezbollah in Southern Lebanon, and striking at the ‘heart of evil,’ Iran.
But the more people the Israelis killed, the more there were who wanted to kill them. Thousands of orphans grew up with one goal — to take revenge. Israel then had no choice... but to continue bombing; after all, it had a right to defend itself.
Ten years later, the bombing, shelling, and sniping continues.
In the Ukraine theater, too, the war got hotter. One escalation led to another. Fox News:
Biden authorizes Ukraine to use US long-range missiles to strike inside Russia
Moscow Times:
Russia Fired ICBM for First Time in War, Ukraine’s Military Claims
One step at a time. Until the nukes got to work. Fortunately, nuclear strikes were limited. But they were effective. Each side took big losses... and kept on fighting... with millions of deaths and millions more refugees... some fleeing West... some East.
It was in Southeast Asia that the nightmare brought a real surprise. No one knows what set it off... but when the US fleet got into a shooting war with the Chinese, it didn’t take long before a swarm of drones... in the air, on the surface of the water, and under it... had sunk most of America’s military assets in the area.
Of course, stocks crashed a long time ago... in 2025... and they never recovered. Not in real terms. Prices went up like a rocket... assets as well as consumer products. Inflation reached 50% per year.
It was an ‘inflationary depression,’ they said. With so little trade, and so much of the GDP spent on war, most people — at least those not associated with the government or the firepower industry — got poor. For those in the ‘hot’ zones, however, it was much worse. They lost everything... their jobs, their houses... and often, their lives.
And then... finally, the fever broke... and after years of death, poverty, and pain, came the questions.
How did it happen? Why?
More on Monday.
Regards,
Bill Bonner
Sometimes, reading Bill, you want to throw up your hands and say, “Oh God!”
Is the man a depressive. With all these chateaus, estates, farms and ranches and a schedule of Epicurean travel delights, does the man enjoy anything?
Recently, writing, I was endowed with a new perspective. You like to believe everything has meaning that there is evolution in the works of man. We are always looking for the promised land.
If we had done everything right, would everything be perfect. When I look around, I am astounded at the progress, the wonders of human ingenuity and effort. The other day, I contemplated the technology at our disposal and was amazed at the future we could have if economic freedom reigned.
But, if we were completely omniscient, completely moral, what would it all look like. It would be decidedly different; would we even like it.
I love life, the challenge. Nothing comes easy. The joys are exquisite.
It dawned on me… all this bullshit is unimportant. Life is individual, you do the best you can, you get rewarded.
Life is an individual test. You either pass or fail, are in The Kingdom of God or not; have “The peace the world cannot give” or not.
You need a little peace, Bill; something is missing, you hate everything.
Worst case indeed. Back in the Cold War, we still had many in the congress and government who were veterans of WWII and the Korean War, and they knew how awful and senseless it could be. Now even the Vietnam vets are retired or close to it, and the people calling the shots have no personal experience with how bad it could get, even for them personally. Thus, they seem willing to escalate conflicts that they should be doing all in their power to cool down, apparently under the impression that no one would ever really dare to stand up to the US, or that if they did, that we might actually lose. They seem to be ignorant of history, and proud of their ignorance!