Anger Stage

A strange and unexpected opinion piece has just been published in IQ magazine. I've never heard of the magazine before, but it looks like a serious opinion maker for the woke left, with focus on all sorts of woke issues. It's therefore noteworthy to see such a dramatic shift in opinion when it comes to the vaccine.

The unvaccinated are no longer blamed for killing grandma. We are instead being blamed for saying too little. It's our fault that those who shouldn't have taken the vaccine went ahead and took it anyway.

My first thought on reading about this in Zerohedge was that this had to be satire. But that would mean that IQ magazine have readers that are open to this kind of dark satire, and that doesn't seem to be the case.

Another possibility is that a clever troll managed to get this opinion piece published, which would mean that the editors found it sincere sounding. It may then just as well have been written by them themselves.

It's also possible that the magazine is part of a psyop operation to rattle the nerves of the gullible and weak minded.

The woke agenda that the IQ magazine appears to be pushing revolves around the idea that the world we live in is deeply unfair and all this unfairness is the fault of everybody else. This is perfect for the fomentation of anger, which can in turn be directed towards political opponent. It's therefore perfectly possible that the site is such a tool.

The name of the site is also a red flag. Any site that professes to be intelligent, sceptical, or woke is usually the exact opposite.

The timing of the article is interesting because it comes at a time when people are waking up to the reality of what has happened over the past three years. Justin Trudeau was recently booed and chased by an angry mob in Canada. Similar protests are appearing in England. The woke, who've been deep asleep, are about to wake up, and it's therefore important to present them with the proper enemy to target when they come round to the slow moving horror show that their lives have become.

Excess deaths are continuing on their upward trajectory. January looks set to be the worst on record. Hardly a day goes by without some celebrity sportsman dropping dead. Things are getting spooky. Like a true horror story, there are hidden clues that we're supposed to ignore, dark alleys we mustn't explore, and men we must trust with our lives for no good reason at all. What appears to be salvation at the start of the show is revealed to be a trap and all hell breaks loose.

We're seeing people waking up to this fact, and spin-doctors are therefore busy creating the new narrative. We're transitioning from denial to anger. What was but a mild irritation with the unvaccinated a year ago is now turning to rage. But it's not a given that this rage will be directed at the unvaccinated.

The article in IQ magazine seems to have been created for the express purpose of ensuring that their readers turn their anger at their unvaccinated friends and relatives. Similar stories may soon emerge in other outlets, in which case we'll know for sure that the narrative is changing. However, I very much doubt that anyone but the truly gullible will go along with this.

My prediction has been from the start that the final target of the rage that is now brewing will be the censors because they are the people that everyone can point to as the ones behind the mess we're in. Ordinary people can blame the censors, and politicians and journalists can also blame the censors.

Anger may also spill over at politicians and journalists, as seems to be happening in Canada and England. It may also spill over at the unvaccinated. But anger towards the unvaccinated will be hard to foment without some unvaccinated celebrity coming out with a big smug "I told you so" story.

As always in this kind of situations, the answer to our problems is love, the antithesis of which is fear. Things will work out well for the unvaccinated during the upcoming anger stage, provided we refrain from stoking fear and being overly smug about being right.

For those riddled with fear as they wake up to what's going on, we have to give them hope and tell them to have faith in nature, aka God. They made a mistake. They sinned. But if they repent and stop raging against God for what was ultimately their own fault, they will be fine.

As for the further trajectory of the grieving process, we'll see pleading, depression and acceptance. After anger, we'll see a lot of people turn to big pharmaceutical corporations for remedies. Once they realize that no remedy exist, there will be depression, and then finally acceptance. With denial having lasted about a year, we can expect 2023 to be the year of anger. 2024 may become the year of pleading. Depression sets in around 2025, and acceptance kicks in around year 2026.

Important in all of this is how excess deaths will develop as we move forward. If the current experiment goes the same way as previous experiments, we may see fear, rage, depression and apathy develop in parallel. If excess deaths drop off a cliff, the anger stage may pass without much notice. Only time will tell what the future holds.

Notable deaths according to Wikipedia

Hot as Hell in Brazil

My wife told me this morning that it's hot as hell in Brazil. She's following some Brazilians on social media, and they can inform us that temperatures are uncomfortably hot. That makes sense, because it's the middle of summer down there, and heat waves are to be expected.

Anecdotal complaints about hot weather are of course just that. They don't constitute reliable data beyond the local observations that they are. However, the complaints fit nicely in with stories about the Earth becoming hotter by the equivalent of five atomic bombs exploding every second.

If we are to take the experts seriously, we're clearly in trouble, and the forecast of a colder than normal winter made in early December must most certainly be null and void. So, let's see what the actual data tells us regarding this winter so far.

What we see is that there's nothing much out of the ordinary going on. The extent of snow cover was for a while higher than normal, but is now about average after having been a little less than normal for a few weeks. The only thing unusual about this winter is that the snow cover is thicker than normal by quite a lot. There's more water locked up in the snow this winter than we've had on average in the years from 1998 to 2011.

This too is no surprise. The late 1990s and early 2000s were warmer and drier than usual, at least in the places I've been monitoring: i.e. Norway and Portugal. A consequence of this is that we're currently in a dip when it comes to the size of glaciers in Norway and other places. For instance, Briksdalsbreen is completely gone. This is due to warm and dry weather some 20 to 30 years ago. But if we keep getting the thick snow covers that we've had recently, the glacier will come back over the next few decades.

Glaciers don't immediately reflect climate changes because they are both slow moving and slow to shrink or grow. The delay is typically between 20 and 30 years, so we can't look at glaciers and tell anything about the climate as it is today. They only tell us about the past. It's the thickness of the snow cover each winter that tells us what the climate is right now, and it indicates that glaciers that have disappeared are about to return.

The coming and going of glaciers is something we've known about ever since the 17th century. The Nigard glacier was all but completely gone at the start of that century. But by the end of it, the glacier had gobbled up a farm located close to the bottom of the valley. Then it retreated at a remarkably brisk pace during the 18th century, and it's now all but gone, some 370 years after it reached its maximum extent.

Consensus science these days is telling us that the CO2 content of the atmosphere, which has gone from 0.035% back in the 18th century to about 0.041% today, is causing our planet to heat up at a rate equivalent to five atomic bombs going off every second. However, consensus science up until some 40 years ago saw things differently. Climate was back then seen as something related to the sun and its cycles.

It has been known since the 17th century that our sun goes through cycles that last some 11 years. These cycles are in turn cyclical, with maximums and minimums that correlate well with the coming and going of glaciers. The consensus was therefore that there is a direct relationship between solar cycles and Earth's climate.

If we stick to this older theory, we must assume that glaciers have now reached their minimum size due to the so called modern maximum, a solar super-cycle that peaked some 20 to 30 years ago. A modern minimum looks to be in the making, with solar cycles having become less intense over the last few decades.

I'm not sure what to make of the five atomic bombs going off every second. It doesn't sound very scientific to me. At the very least, it must be some kind of measuring error. However, I do know that the data currently being collected regarding snow cover is what we should expect according to the older, and now mostly ignored, theory that links climate changes to our sun's cyclical output.

Sun

By DracoLumina17 - Own work, CC BY-SA 4.0, Link

Real vs. Nominal Prices

There's a house for sale in my old neighbourhood in Asker, Norway. The house is pretty much identical to the one I sold back in January 2017, and their asking price is 5.45 million NOK. That's up from the 4.70 million that I got for my house.

This means that the current price for my old house is up about 0.75 million NOK over the six years since I sold it. However, the NOK is down by about 50% against gold over the same period. One gram of gold was a little above 300 NOK back in 2017, and is now a little above 600 NOK.

In terms of gold, house prices in Norway are down by about 40%. My house was sold for the equivalent of almost 16 kg of gold in 2017 while a similar house sells for less than 10 kg today. I'm better off by 6 kg of gold for having sold my house back in 2017 rather than now. If we add the cost of owning a house due to taxes and fees we have to add at least one more kg of gold. The difference between owning gold over those six years relative to owning my old house in Asker is a staggering 7 kg of gold.

This illustrates the deceptive nature of nominal prices measured in fiat currencies. What looks like a decent return is in fact a sizeable loss. However, as I pointed out in this post from September last year, the size of the loss depends on the extent to which the owner used bank credit to pay for the house. If the owner was fully loaded up with debt at a low interest rate, that person would see little to no loss. It's those who finance their purchases debt free that suffer the full loss when bubbles burst, because only they had the means to own gold rather than a house. Their loss is the gold that they could have had instead of the house.

Measured in gold, house prices in Norway are on their way down. However, 10 kg for a small house in Asker is still a bubble. As pointed out in this post, also from September 2022, 2 to 5 kg of gold is a fair price range for modest houses.

To illustrate, here are the historic prices of my wife's apartment in Porto:

• 2005 - 12.7 kg
• 2014 - 2.2 kg
• 2017 - 3.3 kg (estimate)
• 2022 - 4.4 kg (estimate)
• 2024 - 4.1 kg (estimate added in 2024)

Similarly for Asker, I now have the following numbers:

• 2004 - 20 kg
• 2017 - 16 kg
• 2022 - 12 kg (estimate)
• 2023 - 10 kg
• 2024 - 6 kg (datapoint added in 2024)

House prices in Norway, measured in gold, appear to be cratering.

Reflection in a soap bubble

By Brocken Inaglory. The image was edited by user:Alvesgaspar - Own work, CC BY-SA 3.0, Link

How to Inflate Away a Debt Bubble

Our current monetary system is based on debt. Currency is borrowed into existence in return for an obligation to pay back the currency with interest. The issuing bank does this by typing the borrowed amount into the borrower's account. In parallel, it issues a debt obligation to the borrower. This obligation is what gives the issued currency value.

When debt is paid back, the opposite happens. The debt obligation is destroyed together with the currency that it was backing.

This system works well as long as all obligations are honoured, which is only the case if investments made by borrowers make returns at or above their debt and interest payments. However, if the return on investment is below the interest rate, we end up with a problem. Currency that should have returned to the bank together with their associated debt obligations are written off as a loss. Obligations are removed but the currency remains in circulation. A portion of the circulating currency is no longer backed by debt obligations, and the currency looses its purchasing power.

Taking this from a personal level to a national level we get that a national economy must grow at least as fast as the interest rate on its collective debt in order for its currency to retain its purchasing power. If the economy grows at a rate below the interest rate, and this is mitigated by issuing more debt, we end up in a vicious cycle where the burden of interest rates becomes ever higher. If the problem is mitigated by setting interest rates lower, the currency issued will be considered cheap relative to other things, and we get price inflation. Either way, we get a weaker currency with less purchasing power.

This derives from the fact that investments are expected to grow over time. The rate at which we expect this to happen is what the interest rate needs to be for a currency to retain its purchasing power. Furthermore, economic growth has to be at or above this natural interest rate, and no amount of meddling by central bankers and financiers can alter this.

The rate at which debt is issued, together with the natural interest rate of that debt, has to mirror economic growth. Otherwise, the currency takes a hit. Issuing more debt, or artificially lowering the interest rate below its natural level, is no alternative. We have to have economic growth at or above the natural interest rate for our current system to persist. However, economic growth is currently well below the rate at which debt is growing, and purchasing power is going to suffer as a consequence.

It should be noted that neither natural interest rates nor economic growth are things that can be objectively measured without a completely free market. GDP and inflation measures are only able to estimate what the natural interest rate might be, or what the economic growth actually is. This is because both these values are based on market consensus, and a group of experts making measurements is a poor alternative to the real thing. It's therefore impossible to say exactly how much the economy is lagging debt creation or what the natural interest rate is. However, price inflation tells us that things are far from perfect.

There's only one way to save the current system without alterations, and that is by dramatically increasing productivity so that economic growth matches debt growth. Anything wasteful will have to be cut. Inefficiencies must be removed. Our entire society will have to undergo a cleansing process in which decades of waste is thrown out. But this is not going to happen. The political will is simply not there.

This means that we'll continue on the current path until things collapse under their own weight. Currencies will lose purchasing power at an accelerating rate as things get increasingly out of hand. Only then will there be political will to save whatever there's left of the system. But by that time, debt will be so enormous that there's no way to grow the economy out of the slump it's in. The only way out of the mess will be through some kind of reset.

One option will be to default on most of the debt, which would mean that the currency created through the issuance of this defaulted upon debt must also go. A new currency will be created with a conversion rate to the old currency where several zeros are removed. There also has to be a promise that the new currency will be managed more soberly than the old one. However, the trust required for this to work may not exist, in which case there needs to be some additional promise made.

The traditional promise made by issuers of currencies is that clients can convert their currency holdings into gold. That's how things worked under the classical gold standard, and there's no need to look any further for a solution to the current problem. However, this isn't going to happen any time soon because a return to a gold standard would require a lot of debt to be defaulted upon. Otherwise, holders of debt certificates will simply rush in to convert them to gold, and currency issuers will find themselves unable to pay.

Pension funds are loaded up with debt papers, and they will not be pleased if someone was to issue a decree to the effect of making all this debt null and void. A partial default is therefore more likely. Instead of defaulting on the debt, currency issuers can declare their currency linked to gold at a revised price. Instead of $1,900 per ounce, they can say that their currency is convertible to gold at $20,000 per ounce. That would prevent holders of debt papers from rushing in to convert their debt to gold. But it would also make a lot of gold owners very rich. This is therefore unlikely to happen, even if it would in fact solve the problem.

The more likely route forward is that the market will move towards the solution that policy makers are refusing to embrace voluntarily. Gold will rise towards levels where its price matches the excess debt in society. At this point, policy makers are likely to take the hint and do what they should have done anyway, namely link their currency to gold at a much higher price than what we have today, and in that way make the debt bubble go away.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link

Disappearing Investment-grade Gold

Gold coins, gold wafers and bars are becoming increasingly hard to find. My local bank used to have two pages of such gold products on display in their online store, with a total of at least thirty different products. That was some six years ago. Today, they're down to seven gold product, and with the exception of a ten gram wafer, none of them look very interesting.

This doesn't mean that the bigger, more interesting wafers and bars are unavailable. They can probably be ordered, but that would require a visit to the bank, and some patient waiting for delivery.

Local goldsmiths appear to be equally short on investment gold. They used to have coins and wafers on display together with regular jewellery, but not anymore. Only jewellery is on display.

This comes after three disappointing months for gold investors. Support at the $1670 level was broken back in September. The price fell to about $1620, where it bounced a total of three times over the next two months before coming back up above $1900 where gold is currently trading.

In dollar terms, gold has gone nowhere since early 2020. However, gold is trading at all times high in Norwegian Kroner, and gold looks again poised for a major break out to the upside. There will be fierce resistance at the $2000 and $2100 levels for sure, but there're correspondingly strong supports at the $1700 and $1600 levels.

We're stuck in a relatively narrow trading range which we will eventually escape. With physical gold apparently in short supply and the world economy a mess, the odds favour a major break out to the upside rather than to the downside.

The giant cup and handle formation that has formed in the gold chart since 2011 suggests that any breakout to the upside will send gold to about $3000.

Monthly gold chart captured January 24 2023

Forecasting Errors

Homebuilders in the US are seeing record number of cancelations, and this is happening while there's a record number of new units being built. Clearly, a lot of homebuilders got their forecasting wrong.

This is at first glance odd because it was easy to see that demand for houses would go down as a consequence of what policy makers have thrown at us lately. The decision to turn off the economy, and the prospect of surplus deaths extending for years into the future are but two red flags. So, what triggered the homebuilders to continue full steam ahead despite such icebergs floating around everywhere?

The answer to this is central bank intervention. When the politicians turned off the economy in order to save granny, central banks came in with cheap credit to make sure people kept investing as if nothing had happened. There were also stimulus checks sent out to households for people to spend and invest during the lockdowns.

This worked. People went on an investment binge, and houses were high on people's wish list. Instead of a drop in demand due to the lockdowns, there was an increase in demand due to cheap credit. Homebuilders who were initially scaling down their activities due to real world forecasts responded to the cheap credit issued by central banks by increasing their activities instead.

The central bankers saw this as proof that they had saved the economy, and policy makers saw this as proof that they can do all sorts of things without consequence because central banks can always back them up with cheap credit. They concluded that the system works as intended. Any hardship hoisted onto the public can be mitigated by central bank interventions.

Having saved the economy, central bankers could return to their regular tasks, and focus on such things as price inflation and employment. With high activity in the economy, their only issue was with price inflation which had started to take off due to an abundance of cheap credit. The solution to this minor problem would be to raise interest rates, which was exactly what they did.

But by raising interest rates, houses quickly went from affordable to unaffordable, and people started to cancel the contracts they had signed during the years of central bank induced low interest rates.

It turns out that nothing was saved. The mess that was averted by cheap credit during the virus scare is back with a vengeance. Things are far worse than they were back at the start of the virus scare because investments were made that now have to be unwound. There are malinvestments everywhere, and they all have to be flushed out in order to get the economy back on track.

But few people will understand why this is so. The homebuilders will instead be blamed for the mess in the housing industry, and the same will happen to entrepreneurs in other businesses where this same mechanism played out. Hardly anyone will point their fingers at central bankers. The mechanism employed by them is simply too complex for most people to follow.

One argument used to demonizing entrepreneurs when central bank induced malinvestment bubbles bust is that entrepreneurs should have had the good sense to steer clear of the bubble. Entrepreneurs are professionals. Their job is to look into the future and make investments based on what they see. Why then did they miss something as obvious as a massive housing bubble?

This argument makes superficial sense. It should've been clear to homebuilders that the increased demand for houses wasn't going to last. In fact, they saw this danger early on. They were scaling down their activities. Why then did they change their minds? Were they blinded by greed?

It can be further argued that any homebuilder who ignored the lockdown bubble and scaled down their activities regardless would now be in a position of advantage. These sensible homebuilders would now be awarded by their patience and good sense at a relatively low cost of two years of missed profits.

But if every homebuilder but one did the sensible thing and scaled down their activities in light of real world constraints, the one homebuilder expanding its business would have made enormous profits during the two years of lockdown mania. Central banks would have seen that the economy still had room to grow, and the low interest policy would have been continued. What lasted only two years may have lasted a decade. That's far longer than any business can stay partly dismantled before it goes out of business.

The point is that central banks lowered their interest rates for the express purpose of stimulating activity. The policy would have continued however long it would have been required in order to meet their goals. Instead of homebuilders making decisions based on real world constraints, central bankers decided to overrule their foresight by creating artificial demand.

Once the demand for houses came in at whatever level the central bankers found correct, they changed their focus, and reality came back into the market. Artificial demand vanished, and homebuilders are now stuck with inventory and projects that no-one is interested in.

Had central banks done nothing, homebuilders would've scaled down their activities during the lockdowns, which would've made it obvious to everyone that the economy had been hit hard by political meddling. However, now that central bankers have injected a few years of delay into the equation, we see the economy tank at a time when things are supposedly back to normal. The link between cause and effect has been obscured. Policy makers can therefore say that they saved us all with their lockdowns, and central bankers can say that they saved the economy. They can then turn around and point at the entrepreneurs as the culprits for the current mess.

Unfortunately for us, central banking is too complex for most people to understand, and it's therefore unlikely to be among the first institutions to be dismantled as we move out of the progressive era. We'll see a lot more damage going forward before it's clear to everyone that central banking is a scourge that has to be dismantled. In the meantime, we are best advised to keep as far away from anything related to their debt and currency creation.

Reflection in a soap bubble

By Brocken Inaglory. The image was edited by user:Alvesgaspar - Own work, CC BY-SA 3.0, Link

Gold Backed Currencies

No national currency is currently linked directly to gold. We're not on a gold standard. However, many currencies are nevertheless backed by gold. We may not be able to go into a bank and exchange our currency for gold, but we can go to a gold smith, a coin store or a bank to buy gold. Our currency is therefore backed by gold through the gold market.

Some countries may demand sales tax on gold purchases, in which case the gold market can be considered to be restricted. But as long as gold can be bought with local currency, that currency is backed by gold.

This means that the world is not all that different from when currencies were officially linked to gold. The gold backing of the dollar is still there even if Nixon declared the gold window closed back in his days.

Prudent savers used to demand gold from their banks whenever they had more currency than they felt comfortable with. Everybody knew that currency was credit, and only fools trust credit as much as real assets.

This wisdom has somehow been lost during the progressive era. The belief that government issued credit is as good as gold has been embraced despite the fact that all currencies are down more than 95% relative to gold over the past century. However, the belief in the benevolence and wisdom of government has been shattered, and a consequence of this will be that old wisdoms related to money will re-emerge.

It will again become common practice to exchange currency for gold and silver as part of a prudent savings plan, and this will happen regardless of what governments say or do. Only if they outright ban ownership of gold and silver will they be able to avoid the trend reversal. But such a ban will only serve to diminish the value of that currency in the eyes of international finance, and a ban on gold ownership is therefore an unlikely path going forward.

Gold and silver will become more common in investment portfolios, and this development will lead to an increased awareness of the dangers of credit and credit related investments. People will wake up to the fact that gold and silver are free of counterpart risk. It can also be used as an alternative to going into debt when making costly purchases.

A consequence of this will be an increased reluctance to invest into anything credit related. People will choose gold and silver over government bonds and currency saved in banks. They will increasingly save in gold and silver, and they will increasingly pay for houses and cars with savings rather than debt.

This will in turn crush anything built on the assumption that credit will be for ever expanded into the future. The appetite for debt won't be there, and no amount of credit issuance will change this. Attempts to reignite credit bubbles will merely result in gold and silver prices going up.

This won't happen over night. It will take decades to unfold. But the net effect will be that people once again will live largely debt-free lives.

Liberty