Collapse

I like being in the garden, but preferably out of the wind and it’s nice and warm in the car, so the background to this video may look a trifle strange.

As we all know you make your money on investments when you buy.

The trouble is, now is not the time to buy in the West. And that goes for stocks and for real estate.

It doesn’t matter where you look across Europe or North America, the signs are the same, we are coming to the end of the era of profligacy and rampant money printing. The only way out of such a situation is for the local currencies to flop.

It cant have escaped anyone’s notice recently that the West is in serious trouble, both economically, financially and politically, while the Global South seems to be doing very well. Not only that, but the Global South seems keen on peace while the West is hell bent on war. It’s difficult to make money during a war unless you are selling guns. And that is not a very nice way to make money.

The ultimate money is gold and silver. The West doesn’t appear to have much of either. It’s all gone to the East.

Fiat currencies have nothing at all to back them up except debt, and since when did debt become good security for more debt? The ultimate destination for such currencies is total collapse.

What that means is that any investment in countries using such currencies is likely to end in ruin.

Let’s have a look around.

Across the USA we have large communities of people living in the streets. Not only that but there is a polarised population which could easily tip into civil war.

The country is being supported by approximately 16% of the population. They are the only ones paying any meaningful taxes. The rest is coming from money printing and debt. You cant run a country on that basis.

Europe is heading in the same direction.

This is one of the main problems with the modern form of democracy. Once you have an electorate that realises they can vote for the government that will promise them the most money, the country’s finances start to go adrift.

“From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.” Alexander Tytler.

The next problem that quickly follows that is that those who are paying for those who do not contribute, very quickly get fed up with supporting freeloaders. We are seeing that happen across the West as countries are sinking under the cost of, among other things, supporting illegal immigrants, and foreign wars.

In previous blogs I have pointed out that countries running debt to GDP percentages in excess of 90 are in a debt trap where, unless there are drastic changes, the debt cannot be repaid, but just gets worse until the economic system collapses. At figures above 90% a country is borrowing in order to lose more money which is an insane financial model.

Here are some modern examples from the EU:

The USA tops the lot in debt disaster:

Then there is the problem facing countries with burgeoning populations. When robots and AIs are taking jobs in so many sectors, what is going to happen to all those people with a poor education and low talent?

Office workers are being made redundant at an increasing rate. Complete business models are being operated by AIs and blockchains. Even creative jobs are being taken over by AIs. I am currently working with several AIs, and the work they can do is staggering, and the speed with which they can achieve tasks is mind blowing. And they are producing results which are far better than humans.

What the younger generation are going to do in order to survive is difficult to forecast. I am at a loss as to how to advise my grandchildren. They are facing a serious change in how they will henceforth be able to survive. From truck drivers to driving instructors, from shop assistants to civil servants, even from artists and writers, there is a pall of gloom rapidly approaching.

Even where countries are experiencing lower birth rates, that can also work against certain previously wealth producing situations. After all, if you are living in a country where the population is shrinking that means there are less people to buy goods and so the general economy contracts. The effect is particularly onerous in real estate. Less people buying houses leads to falling prices.

Here is a chart showing what will happen to the population level in Portugal if the current birth rate stays the same over the course of the next hundred years (a 30% drop; that will knock one heck of a hole in property prices):

The current birth rate per female in Portugal is 1.35. Replacement level is 2.1.

Here’s a chart showing a few of the figures for the rest of Europe:

Already the home vacancy rates in Lisbon are up to 15% as opposed to 1.3% in Paris and 0.9% in London.

In short, we are entering a rapidly changing social medium in which the whole concept of working for a living is about to take a nasty hit.

In the foreseeable future I think it is perfectly possible that the planet could survive with a workforce only 10% of the current figure. What are the rest going to do? And how is everybody going to pay for their survival?

It looks as though house prices are already too high in most Western countries:

As I said at the beginning of this blog. Now is not the time to buy. I still expect house prices to hold up a little longer in parts of Southern Europe because of the cheaper living costs and the more clement weather, but things are not looking good further north.

I am already finding signs of price reductions in the UK, with my auction index showing price resistance. I expect that resistance to increase. Now may well be a good time to sell and rent.