A Night of Watching
by Parker Eales. February 6, 2005
Nothing has so changed history or so transformed the life of a people than a profound financial chaos. At its core, it represents the most dangerous near-term threat to world leadership, and thus collaterally to U.S. security. A profound financial crisis in the United States would represent a true disaster to the economic prosperity of the U.S. and financial health of other nations, their international security, and their political stability.
No invading army, no bomb dropped from the sky, no natural disaster, and no catastrophe can match the level of human suffering generated by a true financial chaos. The horror of a true financial chaos cannot be fully appreciated by most Americans. It simply has not been experienced by this generation of Americans.
Even the most expert economists very poorly understand the causes and the effects of the tumultuous recent financial market events in the world. Financial engineering and new financial products have become so astronomically complex that the very complexity itself threatens the stability of the entire world financial community. It has become clear that the entire world's financial system is extremely fragile and subject to financial breakdowns to due enormous, complex, and poorly understood linkages that can collapse an entire chained structure creating shocks that cause enormous contagion from one economy to another and creating accelerations of fear and panic that further complicate and bring about enormous destructive forces. Financial liberalization has led to an enormous creation of credit that has literally gotten out of control. Nations, corporations, and individuals are so debt ridden that it represents a profound fragileness in and of itself. The enormous amounts of money borrowed by nations, corporations, and individuals over the last nine years have in and of itself created an enormous boom that has created an artificial bubble that will burst into a banking crisis and recession of monstrous proportions.
Almost everyone realizes that the world economy is going through a difficult and dangerous period. There is tremendous uncertainty about if and when other emerging economies will suffer the contagion of a financial meltdown. It wasn't long ago that we saw Asian countries begin melting down one after another followed by Russia and Argentina. Dealing with crises in these emerging economies is, therefore, a very urgent matter and is also the source of extremely heated debates among the economists of the world. Reading the financial press and the tremendous blame that is placed upon various parties creates a very profound confusion to casual observers. The reality is that knowledge about these crises is very, very small and what knowledge there is has proven inadequate for any true analysis.
The United States has also created a historic current-account deficit and has essentially become the world's greatest debtor nation. Even though the dire consequences predicted by some analysts have not materialized, it is a question of how long the United States can continue to service its growing international indebtedness without a sharp increase in U.S. interest rates and a rapid depreciation of the American dollar, or some other kind of severe economic disruption.
Even international monetary developments in recent years, demonstrate that there are extremely powerful economic forces challenging all of the nations financial institutions. The financial system has globalized and yet there are not consistent economic policies and standards and legal structure to support this profound liberalization that has invaded the entire world. This in and of itself has created a fragileness that is subject to great exploitation and speculation.
Corruption around the world has become painfully obvious, but the causes and scope of corruption are truly poorly understood as far as their impact on creating vulnerability and fragileness in the world's economic system. Even though corruption is not a new phenomenon, the increase in financial liberalism and astounding flows of capital investment into emerging markets has created an environment in which corruption has become much more obvious and its impact more profound. When corruption is widespread and contaminates the actions of leadership in the world's economies, it is much more clear that the magnitude of damage that it brings to economies and democracies is dramatic.
Capitalism itself has spread throughout the world's economies and is expressing great competition and market power. Great sophistication involving market power is being brought to bear in very naïve environments and among very unsophisticated financial systems. Unconstrained market power is leading to disasters by governments who poorly understand the enormity of the forces that are being brought to bear on their domestic institutions and leadership. International speculators exploit these situations and we see the results in countries that are thrown into absolute turmoil and confusion.
The risk of a new and unprecedented great world super-depression is greater now than at any time in history. The deeper causes of this possibility are rooted in the economic systems that prevail in most countries today and the related global network that increasingly embraces the constellation of tragic vulnerabilities.
I am writing this article precisely because I am convinced that this danger has become extremely certain and that the worst of all possible financial chaos and crises lies ahead. A "Ten-Sigma Event" is on the way.
I have been astounded and amazed at the lack of public discussion or knowledge or appreciation of the issues. There seems to be an amazing unawareness and denial that has fallen over the minds of our nation with a resultant profound blindness to the gathering evidence of a serious disaster.
When we do have the Ten-Sigma Event, our world and culture will be transformed by a financial holocaust. The unthinkable doesn't happen, until it happens.
I hope that all of you will realize that foresight in this matter is profoundly difficult, but somehow I believe that one must recognize the signs of the times and take some prudent measures rather than simply remain in denial. Whether we like it or not, our economic systems create either justice and peace and the opportunity for harmony or they bring about terrible circumstances and devouring events strong enough to turn people into extremists and lay waste the world as we know it. Thus, if we construct overly complex, fragile, and vulnerable economic systems throughout the world, huge blunders and accidents can destroy human life and peace.
We laugh at the alchemists who tried to turn base metal into gold. However, today a new army of alchemists have truly discovered how to turn paper into gold through the chemistry of complex financial architecture. The problem with this is "unintended consequences". The paper into gold Frankenstein has yet to reveal its true nature. Derivatives, debt, and globalism are like birds in a cage – once they are released they never return home again.
The problem is that what is occurring in terms of birth pangs is not fully appreciated. At some point Americans will realize what has happened to them and their financial system.
So here is the executive summary:
- The perversity of money and the financial system to do the very opposite of what all reason indicates should not deceive us from understanding reality. The fact that so many people do not see the tremendous peril we are in does not change reality. Over time people have touch with the great truths of economic life. The consequence of this insensitivity to these truths is to be unperturbed, irrational, and indifferent to signs of imminent disaster.
- We are blind to enemy identification. We cannot see clear and present danger. We have true enemies who are work to destroy the U.S. and the dollar.
- The new financial alchemy has created a complexity and a fragileness, which exceeds what is humanly manageable.
- A single event (such as a terror attack) could cripple our economic life and collapse our financial system. The fact that we cannot protect our borders and ourselves should lead us to realize that it is only a matter of time.
- The Ten Sigma Event is like the ten plagues of Egypt. The plagues are happening again in a different form but the message is the same. The truth will be set free. I think we are at the stage of "tomorrow about this time I will cause it to rain a very heavy and dreadful fall of hail." Those who got their servants and livestock into houses and shelters were not destroyed. Some ignored the message and did not believe it and they lost everything. It is hard to hear a message of counterculture financial warning about a perfect storm.
- Money has become so complex that it has been confusing. So many new forms and extensions of money have flooded our lives. Debt has been confused as wealth.
- The greatest of all financial analysts that ever lived said, "And I tell you, make friends for yourselves by means of money, so that when it fails, those you have favored may welcome you." Notice it says, "when it fails".
- There is a reason that gold is called "precious" metal.
As the financial plagues unfold may I suggest you "urgently ask for gold and silver". It also won't hurt to make a few friends as we make the painful journey out of the false economy that has held us in bondage. We are in a night of watching.
© 2005 Parker Eales
Parker Eales | Raleigh, NC | E-mail