The lessons of 2020

In 2020, I had the opportunity to put some of my theories about prepping to the test: first, I had covid19, which didn’t kill me by the thinnest of margins, but it took me around six months to recover from lung damage. Then, while I was still in the very early stage of recovery, meaning that I no longer had 39.5°C fever, and the fever would start again if I strained myself at all, the Zagreb earthquake struck, with the epicentre basically under my arse, damaging the condo I’m renting. Then came the corona lockdown, disrupting the economy and the supply chain. Things barely started getting back to normal when the second wave of lockdowns hit, in the late fall and winter, and then the second Earthquake hit Croatia, epicentre 50km from me, much stronger, but less damaging at my location; still, it managed to eject a shovel of concrete and plaster from the walls, just as a way for the 2020 to send us off.

In all of that, we (by which I mean my family and friends) had some utility disruptions, basically the electricity not working for a short while, but it was soon restored. The stores were trashed by the quake, but reopened within days. The lockdown made it more difficult to get supplies, but we could still do it. All in all, the level of disruption to basic services was minor. The disruption to the economy, however, was very hard and it hit some people worse than others.

So, were my precautionary preparations useful? Did I have to tap into my food and water supplies? It’s a complicated question to answer, because physically, no, we didn’t use them, but psychologically, it helped a lot to know that if the stores don’t reopen quickly, we can survive on our food supply for weeks. It would be a boring diet, sure, but we would not be pressured to go looking for food in a potentially dangerous environment, and this isolated us from the sense of panic that was widespread. The most useful thing to have, in terms of disaster preparedness, was money. The fact that I had cash and gold that I could tap into, and trivially go and rent a house, even if the prices were unreasonably high, in case our place was rendered uninhabitable, was a great thing, and the fact that I had a solution at hand at any time, in case I decided to actually go for it, made it possible for me to stay completely calm and approach the situation strategically.

As a result, I had the opportunity to both confirm and revise my assumptions from before. The main revision is that, in a common disaster scenario, having money is the single most important thing. Sure, having some food and water handy that you can eat and drink during the first day of being hit, by either an earthquake or a flood or what not, is very important, but if you don’t have money, your supplies will be quickly exhausted and you will be left with your home potentially uninhabitable, in some tent or a trailer, depending on welfare. However, if you have money, you are several phone calls away from fixing your situation; move to a hotel initially, then find something to rent or buy, move there. Within a few days, problem solved. In order to be able to react quickly, having a stash of local currency is essential, because you will need to pay for transportation, workers, and a place to stay. You need money in order to get out of a bad situation, and you need to have layered access. You need some cash, then you need to have something in the bank, and then you need to have more in a deeper layer, of lesser liquidity but still accessible as soon as you liquidate the investment. Here I mean crypto, stocks, bonds, and of course precious metals. Having a few 1oz gold coins in my pocket and knowing each can buy me more than a month of rent, or serve as a deposit, was a really useful thing, in a sense that I knew I had the option, but now I had to think things through instead of being rushed. The problem with gold coins is that your local coin dealer can be wiped out by the same disaster that wiped you out, and this will make it difficult for you to convert metal into more immediately useful forms of money, with which you can actually buy food and lodgings. This is why you absolutely must have enough cash to be able to pay for the most immediate things in the first couple of days. The banks might work, or they might not. The ATM machines might work, or they might not. You need to have all the options covered. Yes, I know it’s tempting to buy new and fancy gadgets and clothes and what not now, when things are fine, but when shit starts hitting the fan, you will wish you had that money in an envelope at home, so that you can put it in your backpack when you have to evacuate into your car because your house is either collapsing or is on fire or is flooded, and you have nowhere to go. The money buys you a place to go. It removes you from the X, and gives you the option to help others that are likewise affected, perhaps more so than yourself – and that’s actually a very likely scenario, because you are more likely to be a rescuer than a victim. Have money in reserve. Have layered reserves – cash, gold and silver coins, money in the bank, money in some offshore account accessible via debit card, investments you can liquidate if need be. Being poor puts you at the greatest possible risk in any disaster scenario, because it removes all the illusions of things being relatively fine because you have a place to sleep, even if you’re poor, and leaves you with nothing, and with few options. If you’re sick or old, being poor combined with a disaster scenario makes you the most likely person to die in said scenario. Having just enough funds to remove you from the X immediately following the disaster, is the single most important form of disaster preparedness.

Having a good flashlight, a good backpack, a battery pack to charge your phone, a good water bottle, a fire starting kit, a knife, blanket and some dry clothes, that’s all fine and you should have a backpack with all those things somewhere, if you need to evacuate immediately, but the most important thing to put in that backpack just before you leave your home is a wad of cash, a tube of gold bullion, a credit/debit card to access your bank account, your ID and your mobile phone. Then, as you sit in your car or at a bench in a park, you can use your phone to find a new place – not necessarily in the same town, if the whole town is a disaster zone – yes, you have the money – and then you can hire a truck to move your things before they are damaged by the elements, to either your new home or to a warehouse you can also hire, as a temporary measure. Don’t waste too much money on “prepping gear” now; if it comes to surviving in the woods by making traps for small animals, you’re fucked, so focus on the things that give you the greatest number of options in the most likely scenarios – and that’s an emergency backpack with the essentials for the first couple of hours, and money, as much as possible, strategically layered in various forms of liquidity. Also, when you start tapping into that money, you need to realize that the clock started ticking and you need to recover your earning ability, because any fixed amount of money can and will eventually be exhausted, and having it just postpones being fucked. Sure, you want to postpone it, but you also want to immediately start working on making more money, so that you replenish what you spent. You need to have plans, and your plans need to have backups, and those backups need to have friends. Also, you need to be ready to ask for help – in the immediate aftermath of a disaster, if you have friends who can help you evacuate your family and things from the disaster zone, that can be the most important thing, even more important than money in the first moments; however, after the first few hours, money starts asserting itself as a crucial asset, and if you don’t have it, you’re fucked. If you have it, the disaster might only actually last those first few hours, or a day.

So, that’s basically what emerged as the most important in the aftermath of 2020. You need to create options for yourself, in form of a store of money you can immediately tap into if you need to pull yourself and your family from a situation that potentially renders you all homeless. Also, I simply assume that you have a car, and you can use it as your temporary headquarters to which you will move the most important stuff that you managed to rescue from your destroyed home. If you don’t have a car, you’re limited to what you can carry in a single backpack, and that’s a super shitty situation to be in. Sure, be prepared for that and have the most important things in that backpack, and mobility is not as important as money, but it’s a close second. A car can carry multiple people and lots of stuff. It extends your options; essentially, it’s an option-multiplier. Also, it can provide heat during winter, and that can literally save your life if you’re sick or elderly. If I had to evacuate from my condo, barely recovered from covid, with slight fever and destroyed lungs, and tried to carry significant weight in that weakened condition, in freezing cold, and I didn’t have a car that can keep me warm and evacuate me to a safe place, I’d be fucked. Those are the lessons I learned; they are few, but they really cut through all the nonsense.

Gold and silver spiking

Gold is at the all-time high in all currencies, including USD. Silver is having the third greatest recorded spike since the 1970s, but as you can see from the graph, its behavior has historically been fundamentally different than that of gold.

What does this tell us?

One thing is certain: both gold and silver had their greatest spikes at the same times, but silver spiked higher, more violently, making it possible for investors to make greater earnings if they were smart, but those spikes turned into suddenly appearing cliffs, the greedy ones fell off of. Basically, everybody who believed silver was going to the Moon got in late, somewhat akin to buying Bitcoin at $18K, they didn’t sell when they should have, and so you still have people who bought silver at $50/oz, and never sold because the loss would have been too painful; BTW, those $50 are not adjusted for inflation, so that would be much more money now. Why am I saying this? Because every time metals do this, and they did something similar in the August last year, some people get hysterical, screaming how silver is going to the Moon, it’s going to be more valuable than gold, everybody should put all their money into silver and never sell it. In September, when silver falls off a cliff, they disappear, and many people who bought into the hype are left feeling deceived. Why am I pouring cold water over hot coals here, despite the fact that I believe that the metals are indeed going to reach fantastic heights? Because, historically, at every single one of those spikes people were hyping the shit out of the situation, saying it’s going to keep rising forever, it’s going to the Moon, up to the very point where everything fell off a cliff. It happens with stock, it happened with Bitcoin, and it happens with metal. Every time there’s a spike, some people make up a rationale about why it’s not a bubble and why it’s not hype. Sure, the spikes happen because something was undervalued, but then hype gets into the picture and the price over-corrects.

One thing, however, is different now, compared to all the other times, and you can clearly see it on the gold price graph. This spike is much higher, and starting from a much taller “hill” than all others that came before it. This means the fiat currency is in deeper problems than ever before, especially since the spike from the 2012 ended when people were lulled into the false belief that the “quantitative easing” was a limited thing. Now it turns out that it isn’t, and some kind of logic says that if a certain trend was stopped by something, now that we see a similar trend, but it’s not possible for the same thing to stop it again, it’s not unreasonable to assume that this time the storm will be much bigger. Big enough, maybe, for the entire currency system to be fundamentally restructured, and at that point I would like to be 100% in precious metals, because although it might be a great way to make money, any money you might make by selling at some high point might become worthless once the currency system is transformed, and holding metal past that point is the only way to safety that I can see.

 

Access to precious metals might be restricted

I found out today that a major Chinese bank is prohibiting its customers from buying precious metals, citing some bullshit “concerns”. Basically, for the good of their children.

HSBC and JP Morgan are blacklisting Perth mint, citing some bullshit “concerns“. Some children somewhere are suffering and they can’t stand it.

The real reason is that the major banks and the states want all the gold for themselves, at these cheap prices, and if the people are allowed to get into gold too quickly, the prices will rise and the market will dry up. I expect some AML law to be passed restricting or outright outlawing purchases of precious metals by the citizenry, because precious metals are bad things used for money laundering, financing of terrorism, tax evasion and poor children will cry if you buy gold, so only an evil person would have it.

So, basically, buy it while you can, unless you are a complete fool, and if you buy the bullshit the states and banks are telling you, you deserve no better than the fate they have in store for you. If you want to not be a slave, prepare to see yourself as a criminal and a terrorist, because that’s where this is going. You’re either a slave, or a criminal and a terrorist. You’ll be left with no middle ground. Obey their laws and be ruined.

PS.: If you think I’m being paranoid, watch this:

Gold

It will be no news to anyone following me thus far that gold price recently rose to the all-time high in USD, and had long ago passed the all-time high in EUR. Also, if you followed me long enough, you’ll know that I predicted this much before the current corona-crisis and what not; so, you know those things have nothing to do with it, other than exacerbating the shortages of physical metal on the market, compared to the “paper”.

The expected question would be, is it still a good idea to buy, or should we wait for the current spike to subside? If you take a look at the graph, it’s obvious that the growth isn’t linear, and the price goes back a little after each spike, so the question is valid. However, we don’t live in “business as usual” times. There are presently no shortages of gold on the retail market, and the prices are well above those in the corona-peak, premiums and all. My assessment is that the target price of gold is somewhere in between 15000 USD per troy ounce, and 100000 USD per troy ounce, depending on several factors that are difficult to predict, such as the actual volume of fiat currency that will have to be backed by gold, the number of retirement funds, hedge funds and others who might exchange sovereign bonds for gold, the percentage of citizens with savings who might rush to gold in attempt to save their money from inflation, the percentage of holders of speculative and volatile assets who might want to save whatever they can when their respective markets collapse, etc. It’s difficult to predict, but in any case, the predicted end-game price of gold is at least 7.5x of what it is now. This makes long-term decisions easy. Short term, you tell me; I certainly can’t tell. There’s too much short-term chaos, even without people who don’t know what they are doing, and who seem to have taken to trading on their phones during the quarantine. I sense chaos, panic and anxiety in the air (coming from the deep levels of finance), with only a whiff of greed (and that comes from the hipsters who don’t know what they’re doing). What we want to do is do all the buying before the graph turns from linear to geometric, and at that point you’ll look at the gold price somewhere between the AC unit and the roof, projecting from the current graph on your screen.

What about silver? I don’t know. It might blow up, it might do nothing. I don’t know what it will do, and unlike gold, it didn’t do anything logical so far, so I can’t anticipate its behavior in the future. Sorry. I’ll stick mostly to gold, and hold just enough silver to not regret it if it actually does what some silver bugs are predicting.

 

American circus

I’m back from Hvar, and I must admit I’ve been naughty and occasionally went online to check the news, or, to be accurate, to check how the American civil war v.2.0 is going. Honestly, the amount of outright madness I’ve seen was enough for even me to grab my head in “what the actual fuck” moments.

One of the biggest WTF moments was the realization that the stock prices are in inverse proportion to the state of the economy, basically the worse the economy is doing, the more the stock prices are surging. That’s because the federal reserve bank essentially promised to buy out the failing companies, so the greater likelihood of a bankruptcy, the greater the likelihood of a fed bailout, which is then expected to raise the stock price and people are buying in anticipation. However, that’s the point where America kissed the free market goodbye, essentially transforming their entire economy into something so entirely state-controlled and regulated, that China looks like free market heaven in comparison. Essentially, they broke the fundamental of the free market capitalist economy, which is that stock prices reflect profitability of the company itself. As of now, the stock prices reflect only the expectation of state intervention. However, if everything on the market is broke and requires state intervention, it reminds me of something I’ve already seen before, which is the state of the economy in Yugoslavia before the collapse, where the main points of political contention were the big companies that employed lots of people and couldn’t be allowed to fail, so state money was continually pumped into them to compensate for the losses, and since the state itself was not productive, meaning it couldn’t come up with enough actual money for this process of fixing broken industry instead of being propped up by the productive industry, it resorted to printing money, which caused a devastating hyperinflation that at least contributed to, if not outright caused the collapse of the Yugoslav state. People can point at nationalism as the cause of the breakdown all they want, but, as in the Soviet Union, the surge of nationalism was preceded by a serious economic crisis – currency collapse, shortages and the basic inability to make a living from honest work, because prices were adjusted daily, and salaries were adjusted monthly. After a few years of survival in such a devastated economy, people tend to just throw in the towel and say “fuck it, I’m done with this”, and they want things to change. Basically, the nationalists say that the big federal state is to blame for all this, which is of course true, and promise to make it all better by tearing it all down and reclaiming the statehood on the smaller, national units, which of course is a fallacy but at that point of economic exhaustion the people just aren’t interested in that kind of nuance. They want things to change, and immediately, because their condition is unbearable. Essentially, when you have a situation where the economic condition of the majority of the population is unbearably bad, any sufficiently organized political force that offers some way out might cause complete breakdown and disintegration of a large federally organized state, especially if one part of the federation has reason to believe that the other part is taking advantage of them and causing their problems, so political solutions are no longer possible. In Yugoslavia, Slovenia and Croatia had good reasons to believe that they were being systematically economically degraded by Serbia, which controlled the central government and used their productive economies to prop up unproductive parts of the country, basically bleeding them for money that should have been used to improve their own infrastructure and living conditions. In America, there is a very narrow segment of the population that lives in New York and California, that controls the entirety of the flow of money, and is perceived to bleed the rest of the country dry, creating the impression where work of an investment banker is worth millions of dollars a month, while work of a normal middle-class person is worth a few thousands a month, and the situation is getting even more extreme as a function of time. You can’t convince me that the work those stock market people are doing is actually that much more valuable than work of some engineer that designs sophisticated machinery or electronics; rather, they are the ones in the control room of the financial system and they are exploiting its weaknesses to make most of the money that’s in circulation circulate in dead loops where they bleed this mass for percentage points, and this money never gets to be invested in the actual economy, because that’s seen as “risky” and slow. This makes the entire economy ungrounded, like a tree that’s all branches and no roots, because roots are seen as “unproductive” and the branches are the sole measure of success. Essentially, if your company stock price is seen as the sole measure of value, and your engineers and workers are seen as a liability because they just cost money, you get started on a vicious cycle where you fire your most expensive workers, basically the engineers that design the product, and you hire marketing people to boost sales, and you get loans that are invested not in the actual development and manufacturing, but in buying your own stocks, which will raise the stock price as the sole measure of value. Then you get a company that is an empty shell containing only debt and salespeople, and the problem with this is that every single company on the market has to adopt the same measures in order to keep up with the competition that would otherwise obtain better financial indicators, thus getting preferential access to credit and, thus, a lever that would give them a huge competitive advantage. This also means that the risk-assessment in the banking sector is tuned to prefer the bigger companies, to the point where all the money is sucked into a dark tornado cloud of the biggest companies, while the small and medium sized businesses are seen as “high risk”, because they actually are dealing with the free market and they have free market issues, which the banking system sees as the messy cesspool of risk and non-compliance, so when the government wants to make an infusion of money into businesses, you need to understand what happens. The state does it through the banking system: the central bank prints money and offers a cheap loan to the commercial banks that then resell it to the businesses. Since the bank can’t just set aside its normal risk management and compliance procedures just because the politicians want to help small businesses, what actually happens is that the bank’s risk department does a SQL query on the table of companies asking for loans, sorting them by risk overhead, ascending, and spending all the money on the top 5 or 10 claimants, of 100000. Those 5 are always the bank’s existing clients, and the ones that are the biggest, and with the biggest extant loans. So, that’s why the government can’t even theoretically help the small businesses – the entire mechanism is already rigged to suck all the money into the biggest companies, and it can’t be modified just because someone said so. It’s actually illegal for the banks to go against the recommendations of their risk departments, so, whatever the politicians say about propping up small and medium businesses, for the most part they are either deceiving you or they don’t know what they are talking about, because it technically can’t be done. What can be done is to reduce the taxes, because that’s not done through the banks, but through the revenue service. However, as a rule, the taxes don’t really go down, so such measures are short lived.

So, when the communists tell you that this quagmire is evidence that capitalism is a corrupt system, I don’t really know what they are talking about, because true free market capitalism is practiced only by the group that is almost completely excluded from this entire corrupt charade: by the small and medium business owners and freelancers. They are engaged in a no holds barred cage fight with the competition, where they have to struggle through increasingly limiting and pointless “state regulations”, and they can’t get loans from the banks because what they do is “high risk”. The part of the market where all the money is, meaning the feedback loop between the federal reserve bank, the commercial bank, big business and the politicians, is a state-regulated, state-controlled fraud scheme in which companies race to go bankrupt first because then they get to be bailed out by the state, which cleans up their liabilities and toxic assets and makes them all shiny and new, and the bill for this entire thing is of course served to the general public and the next generations, because all those government bonds issued to fund all the money printing are going to mature eventually, although it’s obvious that nobody really takes the option of actually servicing all that debt seriously. Right now, they are printing money like crazy while it’s still perceived to be worth something, they are using it to suck up all the resources from the economy, and when it all collapses they’ll just reset the system. Basically, the entire thing can be seen as a financial equivalent of a thermodynamic system which pumps energy from the coldest part of the system (the poorest part of the population) into the hottest part of the system (the wealthiest part of the population). The game ends when it reaches the point where all the resources have been sucked away from the 99% of the population and the top 1% has all the worthless monopoly money, and of course all the actual resources which they obtained with the said money before it became worthless.

Perhaps the most toxic part of the entire problem is that the system collapses with some regularity, and with each cycle the politicians claim that it collapsed because there wasn’t enough state regulation, so they introduce additional layers of regulation, which is of course muddy water in which the biggest players navigate most easily because they can afford whole legal departments to deal with it, while the small businesses are increasingly crippled by the need to deal with all this unproductive administrative junk, and this also means that the banks are less likely to give them loans, because of the stringent risk and compliance procedures. This means that with each cycle of regulation, the system is increasingly more rigged to favour the biggest players and to extinguish the free market capitalist part of the economy. In turn, this means that every cycle makes it more profitable to play with money and regulations than to do anything actually productive, which basically means that the regulations that are intended to make the system less corrupt in fact make it more corrupt. You can’t explain that to the common people, who think that state regulations exist to save them from the evil capitalists who “want to break the law and thus cause the market crashes”. In fact, the feedback loop between the state, the banks and the biggest companies is the problem, and the laws and regulations are a toy for the stupid masses. Basically, what the stupid masses believe is that a private doctor needs to be “regulated” in order for them to be safer. In fact, when a private doctor is “regulated”, it means he has to spend most of his time filling forms to comply with regulations, which makes him spend less time with patients and charge them more money for it to be able to pay for the government-imposed overhead, which makes the quality of his service less valuable and more expensive, essentially making people the opposite of safe. A doctor that fills forms instead of dealing with sick patients does not improve patient health and safety. Replace “doctor” with any occupation and you’ll get the same result; the regulations degrade the quality of service across the board, making things cost more and be worth less, but they are almost impossible to remove once they are in place because people are stupid and they have been made to believe that all those evil capitalists are out there to get them, and the thick book of regulations and the government imposing them are the only thing that saves them from doom. Also, there is a huge difference between what certain laws and regulations are in their essence, and how they are marketed to and perceived by the general public. Anti-money-laundering laws, for instance, are perceived as something that is meant to prevent the mafia from using money that originated from various forms of crime, in order to finance “clean” investments. That’s how it was marketed to the general public. What it’s actually about is the state wanting to assure that it can raise taxes as much as it wants, and you can’t move the money to an offshore company where the taxes are normal, in order to avoid being robbed by a state that ran out of money due to its fiscally imprudent practices and demagoguery (basically buying voters with tax money), and decided to introduce a demagoguery law stating that the evil kulaks took and hid all the money which is why people are poor, and the good state now needs to find and bleed all the kulaks and then everything will be great. That’s what it’s actually about, and the term “money laundering” is there just to convince the stupid general public that it’s about “dirty money”. No, dirty money is the only thing that is explicitly not the target of such laws and regulations, because such money is easily dealt with by other laws – for instance, if the money was actually a result of criminal enterprise, this criminal enterprise would be broken up by the police, crime would be proven in the court of law, and the money resulting from crime would be confiscated. No, what all those laws against “money laundering” and “financing terrorism” are about, is preventing Julian Assange to get funding for his project of revealing government crimes, and for preventing “kulaks” from “hiding wheat in the attic”. It’s a Stalinist overreach in state power, designed to do all the dirty work extrajudicially, basically delegating all the spying and evil to the banks and financial institutions, so that the cases never even go to court, because then it would be obvious that the entire thing is completely baseless and a violation of someone’s rights. This way, the state and the banks conspire to rob you of your rights in such a way that you never get your day in court against them and they can basically do whatever they want, while the people in general see the name of those laws and think it’s all for the good, because money laundering and financing terrorism are baaad (in sheep voice). When the problem becomes so bad that even the general population start taking notice, it’s already too late in the game of totalitarianism for anyone to be able to do anything about it. It’s like the Nazi Germany – why do you object to citizens being routinely stopped at checkpoints and asked for papers? Only criminals would have a problem with that. The problem is, the state’s idea about what is “criminal” might differ wildly from yours. You think a criminal is a murderer, a thief or a rapist. They think a criminal is a journalist who found out and released truthful information about government crimes to the general public. Just watch the Assange case. They invented false charges against him to deceive the general public, and when those were dropped, they invented other false charges, and what is the truth? The truth is that the American state and its entire government system is profoundly corrupt and inherently criminal, and he revealed the facts that showed this quite plainly to the general public, thus spoiling the corrupt government’s public image and making its job of controlling the population harder.

The situation with the recent police violence is similar – usually, the police can hide its criminality behind a fig leaf of some actual crime they were fighting, but when they murdered a few people in broad daylight, for minor infractions, and were recorded doing it, for all to see, it became very difficult for the general public to maintain the illusion of police only doing good work against hardened criminals and having to use violence because, well, they are being forced to. The facts of the matter are different: the police was trained to be extremely violent and arrogant, to use maximum force against minor provocations and for minor offences, and they are increasingly treating the people of America the way American military is treating foreigners in hostile countries – it’s police safety first, not serve and protect the citizens.

Of course, then we get to the point where a mob of black thugs and white communists starts robbing stores to “liberate” all those Nike shoes from the stores of white capitalist oppression, and people start wondering whether police might actually have a point, and it is truly difficult to see either side as good.

In any case, the calls to defund the police can easily be understood for what they are: government power needs to be scaled down because it went too far, but of course that never happens, because once the government gets power, it keeps it until the entire state structure is torn down, and sometimes even that only changes the flag and the name.

The apparently racial background of the issue is completely fake and is the result of deep racism of the American black community – I recently watched a video where a white guy describes his experiences with the police in the recent decades, and those experiences are as violently abusive as anything a black American could point at. However, he rightly notices that the problem is the militarization of the police force and a major change in its attitude, where police started actively looking for trouble and acting violently without any good reason, while a black person would immediately point to race as the cause. Why, because American blacks are the most racist people on Earth, who hide all their own failures behind the veil of imagined racism, while it is a fact that other blacks are the main problem a black person needs to overcome if he wants his life not to suck.