Reprinted w permission from www.silverbearcafe.com
Watch the Movie Before it is Filmed
Most people tend to wait for occurrences, then react to them. However, some people choose instead to anticipate possible occurrences, plan for them, and if they have been correct in their predictions, avoid calamity and even prosper.
At the present time, the world is passing through a period of major change. As the Great Unravelling unfolds, contrarians who have, for many years, projected how it will play out, are today attracting a larger audience, as so many of the predictions are coming to pass, more or less as projected.
Although contrarian thinking is uncommon, it is not rocket science. As we have said repeatedly over the years, the future may be fairly accurately predicted by consistently following some simple steps:
- Study the evolution of nations and empires of the past
- Take note of the patterns that political leaders repeatedly follow
- Examine what stage a given country has presently reached in its evolution
- Project future events based on what has not yet transpired in the pattern
This process is particularly useful in predicting political events. But, in addition, it is effective in helping to predict social and economic events, as they are so heavily impacted by political events.
We often refer to the decline and fall of Rome, Spain, England, etc., but there are more current examples. Argentina offers tremendous information to us, as it is several steps ahead of the EU and US in its decline.
But, to my mind, no country in the world is more fascinating at present than Venezuela in offering a "pre-screening" of the movie that is to play out in the EU and US.
Venezuela has had a rather dodgy past, but the reign of Hugo Chávez was particularly instructive. In his presidency, he increased governmental control over his people dramatically, whilst milking them for all they were worth. He did this by being a populist, offering promises that could best be described as an "entitlement Ponzi scheme." The average citizen so wanted to believe that Mister Chávez could continue to deliver ever- more generous largesse from the government coffers that they continued to re-elect him. He was beloved by many, right until his death. When he knew his death was imminent, he set the stage for his understudy, Nicolás Maduro, to take over.
But the stage was already beginning to collapse as Mister Maduro took over. The cost of a massive government, which provided the entitlements, had caused inflation that exceeded 50%. Mister Maduro's popularity sank significantly.
But the Chávez/ Maduro government had an ace in the hole. They had, in the past, repeatedly regained lost popularity by coming down hard on the "greedy capitalists" who owned the factories that produced goods for Venezuela.
Whenever governmental regulatory edicts caused a further rise in the cost of producing goods, the people howled. The government's reaction was a classic Perónist one—to introduce price controls.
Not surprisingly, if a factory finds that it costs more to produce a product than the government will allow it to be sold for, it is no longer worth producing, and this led to the "toilet paper crisis," in which toilet paper and similar goods were under-produced and were becoming less available. Ironically, Mister Maduro first reacted by stating that the economy was so good that the people were eating much more food and therefore needed more toilet paper. However, he soon returned to a more traditional political approach and ordered the takeover of private sector factories to enforce increased production.
It is important to note that, as ridiculous as this solution is seen to be by reasonable people, it was considered a Godsend by the average citizen of Venezuela. They were only interested in receiving more toilet paper; they were not interested in the process by which they received it. Therefore, the majority of Venezuelans praised Mister Maduro.
Of course, as this did not solve the overall inflationary trend, prices rose and the citizenry once again howled. But they now wanted even more. If prices were controllable—if they could be stabilized so easily by their leader—could they not also be driven down? Well… yes, they could. Mister Maduro boldly set prices of goods in stores. The military was called in to take command of the Daka electronics stores. Lower prices were ordered and joyous shoppersran from the stores with flat screen televisions, refrigerators, etc. at prices that were significantly lower than they had been.
Mister Maduro re-gained popularity for this move, as he showed his support for the little man by protecting him from the greedy store owners. "This is for the good of the nation," he said. "Leave nothing on the shelves, nothing in the warehouses… Let nothing remain in stock!"
However, in classical economic terms, this act, like those before it, had the effect of filling the veins of an addict with even more heroin.
Clearly, the legislative process had become so cumbersome that Mister Maduro was unable to react with more heroin as quickly as it was now becoming necessary. It was decided that the solution would be governing by decree. The legislature voted to grant Mister Maduro the ability to govern by decree, without needing to seek parliamentary approval.
Although the world in general has not yet taken note, henceforth, Venezuela will be run by full dictatorship.
Although the above description of events is very simplified, it shows the process by which decline takes place, along with the justifications used at the time. Although no one (save the political leaders themselves) ever sets out to create a dictatorship, destructive governmental largesse that pleased the voters at the time, led to major problems downstream. The government reacted to these problems with knee-jerk "solutions," which only served to increase the problems, followed by more knee-jerk solutions and so on, until the logical outcome of dictatorship was reached.
This is a pattern that has repeated over the millennia. Along the way, there have always been those sensible people who have said, "But surely, they will stop before it gets too bad and will reverse the process."
Unfortunately, no. Once the decline really sets in, almost invariably, the government in question rides the problem into the ground.
Once a government has applied force and the force has failed in its objective, the government almost invariably reacts by applying more force—more of what caused the problem in the first place. The importance of this tendency cannot be overstated. Almost invariably, what does happen is that greater force is applied. Greater, more reckless and more irrational force.
So, what is to be learned from the above?
Those who live in a country that has reached the decline stage may reason, "My country is following a similar pattern to that of Venezuela, so I should face the fact that, soon, I can expect the pattern to complete itself. I should anticipate the price controls, takeover of private sector factories, etc., and finally, governing by decree."
Today, through the internet, we have the wonderful luxury of pre-screening the collapse of the present empire. We can view the movie even before it has been filmed.
When it becomes plain that the road up ahead is washed out, the most irrational decision would be to hope that it magically will repair itself before we reach the washout. Once we understand that the road ahead is indeed washed out, the rational decision would be to look for the nearest off-ramp.
Editor's Note: Internationalization is your ultimate insurance plan. It is a time-tested strategy to diversify the political risk to your savings and yourself of being tied completely to one—potentially desperate—country. You can find Casey Research's A-Z guide on this critically important topic here.
Jeff Thomas is British and resides in the Caribbean. The son of an economist and historian, he learned early to be distrustful of governments as a general principle. Although he spent his career creating and developing businesses, for eight years, he penned a weekly newspaper column on the theme of limiting government.
He began his study of economics around 1990, learning initially from Sir John Templeton, then Harry Schulz and Doug Casey and later others of an Austrian persuasion.