2013 to Be Bad, "God Knows What Will Happen in 2014"

Written By: The WealthCycles Staff

Many people are concerned with the recent extreme divergences between their experience and what the media is reporting—a fifth, supposed, “summer of recovery,” versus the reality of  real income declining 8.1% annualized in Q1 of this year, alongside the looming specter of rising consumer prices.

We think the best way to get a grip on reality is to take a step back, and turn to those who clearly and consistently explain the fundamental drivers of economic cycles—people with a track record of understanding and warning those who will listen BEFORE catastrophe strikes.

Seth Klarman, founder of the Baupost Group and author of Margin of Safety, Risk Averse Investing Strategies for the Thoughtful Investor (which since has become a value-investing classic), mirrors the sentiment of Americans and Europeans today:

Most people seem to viscerally recognize that the absence of an immediate crisis does not mean we will not eventually face one.
They are wary of believing promises by those who failed to predict previous crises in housing and in highly leveraged financial institutions.
They regard with skepticism those who don't accept that we have a debt problem, or insist that inflation will remain under control. (Indeed, they know inflation is not well under control, for they know how far the purchasing power of a dollar has dropped when they go to the supermarket or service station.)
When an economist tells them that growing the nation's debt over the past 12 years from $6 trillion to $16 trillion is not a problem, and that doubling it again will still not be a problem, this simply does not compute.
They know the trajectory we are on.
When politicians claim that this tax increase or that spending cut will generate trillions over the next decade, they are properly skeptical over whether anyone can truly know what will happen next year, let alone a decade or more from now.
They are wary of grand bargains that kick in years down the road, knowing that the failure to make hard decisions is how we got into today's mess.
They remember that one of the basic principles of economics is scarcity, which is a powerful force in their own lives.
They know that a society's wealth is not unlimited, and that if the economy is so fragile that the government cannot allow failure, then we are indeed close to collapse.
For if you must rescue everything, then ultimately you will be able to rescue nothing.

What is Happening, and Why

The “and why” part of this is often harder to understand than simply looking into the data to truly see what is happening.

What is happening is real economic contraction, disguised by vanity metrics.

But the reason why this economic crisis is happening has much more to do with your children losing their freedom and personal liberty (the only type of liberty).

Jim Rogers is another who has had the ability to foresee and simplify what the consequences of our modern power structure mean for freedom on Main Street.

In 2010 he began to promote an eCongress, in which our elected representatives would no longer “go to D.C.,” but would stay in local communities, video conferencing for committee meetings and hearings—thus maintaining accountability to constituents and limiting K-Street lobbying influences.

Rogers also knows the world and its history, and recognizes the same old tricks being retried today. An astute investor, he led the Quantum hedge fund to a 4200% gain in earnings over the course of the 10 years he co-managed it.

Then in 2010, the Mises Institute announced the Gary G. Schlarbaum Prize for a lifetime in defense of liberty would go to James Beeland Rogers:

“Jim Rogers has been a constant media presence for many years, accurately predicted the current boom-bust.
He uses every opportunity to explain his economic rationale by his investment outlook, which is solidly rooted Misesian theory, not only of business cycles but of the costs of the welfare-warfare state.
In his commentary and investment outlook, he illustrates the way in which sound economics can serve as a critical intellectual infrastructure for understanding and interpreting economic events.
He has been guest professor at the Columbia University Graduate School of Business and is author of several important books on finance and investing.
He was raised in Demopolis, Alabama, graduated from Yale and Oxford, co-founded the Quantum Fund in 1970, holds three world records for motorcycle travel (as noted by Guinness), and founded Rogers International Commodity Index in 1998.”

It is no coincidence that it is those individuals with a solid background in free market economics who have accurately predicted and publicly described what was taking place in the global economy, and why.

WealthCycles.com founder Mike Maloney is another of those visionaries, rhetorically asking in September of 2005, “Do we have a housing bubble?

“…No, we’ve got a hyper-bubble.”

The 13-minute embedded video below captures remarks made by Jim Rogers in 2012. Looking into the future, he explains why 2013 will be bad, and why only “God Knows What Will Happen in 2014.”

"After the German election, I would suspect we should all be very, very worried. I'm very worried about 2013 anyway, and 2014, but especially after the German election."

But not until then will things "start to fall apart, [as] Ms. Merkel wants to be re-elected,” explains Rogers

He also says, the "euro as we know it won’t survive," but is careful to say “as we know it,” meaning the euro may survive in the end; this is unknown, as it is a political decision. But the euro’s survival is possible only after the world’s monetary system is restructured. For the euro, a restructuring could mean an infusion of safe assets, such as the gold the nations already own.

Rogers also makes the very poignant observation that there are an average four to six years from slowdown to slowdown, citing 2002, 2007/08, and now 2013/14. Here is what that pattern looks like, plotted against the Chicago Federal Reserve’s National economic Activity Index (CFNAI).

Chicago Fed National Economic Activity Index Chart 1967 2013

As we get closer to discovering where we are, and why, we turn to the 2008 Schlarbaum Prize honoree, Pascal Salin, who named his lecture for the occasion of the award “Austrian Economics – The Ultimate Achievement of an Intellectual Journey.”

For the recipients of a prize dedicated to the lifetime defense of liberty, this is a very notable lecture title.

Tying in Professor Salin to Jim Rogers, we turn to Austrian economist Jorg Guido Hulsmann.

Hulsmann is the economist who authored possibly the most important essay explaining how the economy works(ed) using money of limited supply, Deflation and Liberty (audio, and in .pdf).

Hulsmann explains Professor Salin’s career, saying, “He has earned great distinctions and gained enthusiastic followers, not least of all because his patent intellectual prowess combines with the elegant civility of a gentleman of the old French school.

“Yet all in all, his output in English is negligible in comparison to the mass and quality of his writings in his native language. Here he displays all the virtues of an author who truly masters his language and excels in nuanced and elegant presentation. Pascal Salin hits the right points and the right tone. In France, this has won him a large readership and the respect of his opponents.”

Rogers is like Salin in that he too excoriates the immorality and economically moronic practice of “taking from the competent, and handing it to the incompetent” (Economic Fascism).

In Deflation and Liberty, Hulsmann makes it clear how and why falling prices improve the standard of living for all, with the poorest standing to gain the most (relative to income).

Hulsmann ties in much of what the old guard believes, in France, and in much of the intellectual financial community: concepts from John Locke, Arouet (Voltaire), Rene Descartes, Frederic Bastiat, John Stuart Mill, Thomas Paine, up to Degaulle’s Jacques Rueff, a student of Ludwig Von Mises.

The supply of money whether inflating or deflating, all directly ties back into one very important point common to our heroes: Liberty.


Liberty: The concept in which an individual has immunity from the arbitrary exercise of authority.

This means we as humans are free, are born free, and as such are not slaves born into a monetary system controlled by the few, for the few.

But without free choice in what to use as money, we are enslaved to those who own the money supply—whenever a portion of our labor is desired, the owners can take it.

There is no representation; it is a secret taxation, not by government directly, but by the private institutions to which they have handed monopoly over the money supply. The solution—simply the freedom to choose to use whatever money or monies one pleases—is prevented by legal tender laws—governments’ interest in preserving monopoly ensures a secondary, albeit illicit, source of “revenue.”

Thomas Paine explained it again (for a second time), like this, to the French when he headed overseas to help out the freedom movement beginning in 1800:

As to the assumed authority of any assembly in making paper money, or paper of any kind, a legal tender, or in other language, a compulsive payment, it is a most presumptuous attempt at arbitrary power. There can be no such power in a republican government: the people have no freedom — and property no security — where this practice can be acted...

The laws of a country ought to be the standard of equity, and calculated to impress on the minds of the people the moral as well as the legal obligations of reciprocal justice.
But tender laws, of any kind, operate to destroy morality, and to dissolve, by the pretense of law, what ought to be the principle of law to support, reciprocal justice between man and man — and the punishment of a member who should move for such a law ought to be death.”

Investment guru Warren Buffet’s father said it more specifically in the title of his appeal to the world:

Human Freedom Rests on Gold Redeemable Money

Warren Buffett does not want to upset the apple cart, acting as if he had no care for his father's dire lesson, but we maintain Warren could come clean as his age takes its final tolls.

If it is still not understood why Warren would shirk his father's lessons in public, at the detriment of humanity, please read the short piece Alan Greenspan wrote in 1966, quoted in part: “If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard…”

So, again, to understand whatis happening and why, Mike Maloney reminds us in The Hidden Secrets of Money – The Difference Between Currency and Money, what Winston Churchill once said, “the farther you look into the past, the further you can look into the future.”

The Hidden Secrets series gives you the tools to make your own crystal ball, as all who have studied real economics seem to possess, allowing you “to make this crisis, the greatest crisis in the history of mankind, into your great opportunity.”

I have always believed a major crash could be coming much sooner than many economists seem to believe. After seeing this interview with Jim Rogers, I am virtually convinced that 2013/2014 could be the great crash that Mike has been warning us about because of his unmatched knowledge of fiat currency throughout history. I pray that the financial decisions I have made in recent years will help me and my family weather the coming economic hurricane.

When you inflate the economy by printing more money to save it, other goods and products, commodities have to go up in price. Whether it be housing, gold or bread, these items have not increased in value but takes more dollars to buy since you increased the slices in the same pie.

Wow, what awesome insight in one article!

I am more worried of the future for the masses due to government austerity which is suicidal to the economy . My brothers have called me names because they think am stupid spending money to acquire financial education and not using my masters to work! I have been wearing them about the impending collapse, I will benefit . People think I talk too much. I know soon they will remember me to regret .

testiomials Without free choice in what to use as money, we are enslaved to those who own the money supply—whenever a portion of our labor is desired, the owners can take it.”

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