Recently, a money manager that I otherwise greatly respect, said this rather despairing, if not delusional, statement:
“Ultimately, there may be no such thing as a safe asset anymore and investors may want to take a diversified approach to something as mundane as cash.” [Emphasis added] The Rising Dollar Myth by Axel Merk.
I know what he means, but it reminded me of the fool’s remark you may have heard:
“I don’t believe a word that anyone says…except my words.”
An “asset” either is an asset, that is, it has value, or it isn’t…and doesn’t. So whence comes this danger of assets becoming non-assets? What makes an asset “unsafe”? Can “cash” be a danger? To all appearances, it seems Mr. Merk has lost trust even in his “hard currency” views.
In fact, there are two issues here that are being conflated. The first is the curious deterioration of the value of our money and assets. And the second is the idea of trust and its relationship to investing and society at large. For the first issue, I have provided below links to resources that will help you understand the real cause of our economic woes. However, I first want to address the second and more insidious problem, the idea of saying, “You can trust nothing and no one.”
Let’s face it, when it seems that lying and cheating are the order of the day, even we might be tempted to deny such foundational realities as the necessity of trust. And here I use the word “necessity” in its strict, philosophical sense, that is a condition that must be.
Indeed, trust is so fundamental to society’s well being that it is easy to see that if its opposite were to rule, then society would cease to exist…at least any “society” that we would recognize or that would be worthy of the name, society.
Society-Derived from the Latin word “socius” which means ally or friend.
So is there a growing distrust and, if so, what is its cause? Further, how do we combat it? Or are we damned to live without allies or the ability to make alliances?
To the first query it is obvious that distrust is on the ascendancy. Society is breaking down because we no longer trust the people and institutions we heretofore relied upon. Even more troublesome is that this distrust is justifiable to a point. In other words, we properly trusted, but the powers-that-be gave us ample reason to trust no more.
The causes of this are many, varied and complex. No single, simple answer will suffice, but in the financial world I believe the beginnings of this trouble started with the creation of our dishonest money system. Just as you would have a healthy skepticism of your neighbors after your house was burglarized, it is natural to
have reservations about your government (or banking/financial institutions) when there is an ongoing theft being perpetrated against your production and savings through inflation. [For a full treatment of this scandal, I recommend The Creature From Jekyll Island.]
Similarly, just as your trust in the neighborhood would be resurrected as soon as the burglar was apprehended, I believe we can combat the growing distrust of our societal institutions by ridding ourselves of the dishonest money mechanism, the Federal Reserve.
And for those who would say that this is whacked out, crazy talk, I can only respond that our Constitution says that our Congress has the power “to coin Money [and] regulate the Value thereof…” not some private, banking cartel.
Until that happens (and we should all join the growing movement to make it happen), we must all be on alert. However, we should not fall prey to the temptation to go beyond “alert” and move toward distrusting everything and everyone. For that would be the end of the very thing we truly desire: a peaceful, loving, trustworthy society.
Instead, we must recognize the dangers around us, form plans that take into account the dishonest money system and prosper with allies worthy of the name. We may even be called to create the enterprises into which people may place their trust. Now who can conceive of a more noble mission than that?
Seek out good groups and companies. Work with people you know and trust. Oppose those who have shown themselves untrustworthy. Be honorable in your own business dealings.
In doing this we will maintain the society and the value of the assets we work hard to produce.
Great blog David Thanks
So happy to receive feedback. Thanks for reading!
Salient points on the necessity of trust. Be a good neighbor and live near good neighbors! That could be as important a factor as any.
I’m curious: what is the more dangerous and immediate threat? The collapsing dollar, or the precarious and wildly over-leveraged credit system?
Great question and I am not sure I have anything but a “best guess” answer. Obviously, the two things are interwoven: Our dollar is coming under pressure due to inflation and the over-leveraging is one means that inflation is furthered. If I had to guess which was the “more dangerous and immediate threat,” I would have to go with the leveraging (and the attempt at de-leveraging) that seems ripe for correction. Let’s face it, we have been dealing with the collapsing dollar ever since the Fed was created, but the circumstances we find in the debt and credit markets is really unprecedented. I hope that helps. Thanks for the comment and please pray for our countrymen.
Thank you, and yes, I think I would agree. The entire complex and precarious supply chain depends on this unprecedented leveraging, and that is a frightening thing.
I will be praying for any outcome that doesn’t involve complete social breakdown and famine. But perhaps the correction will be swift and effective enough to get necessary production going quickly again. People can be incredibly resourceful after all.