Back in the Arch Federalist FDR’s day, photos of the Federal Mall showed a near solid line of obviously temporary huts lining both sides of the Mall. These building were erected hastily and sometimes shoddily on purpose….both the occupants and buildings were to be gone after the emergency of a military build-up to fight totalitarianism was over. A solid building would be too tempting and Congress might then make temporary Federal programs, heaven forfend, permanent. Unfortunately these buildings did leave the mall after victory but they were replaced by the stolid Pentagon, a kind of Black Hole of American Founding Principles and Money.

What’s really hilarious is that Congress can go out on the steps of the Capitol and look south to the Lincoln Memorial…a monument celebrating the Executive that made them most irrelevant and then go right back in and vote for but another Military-Security appropriations bill that further erodes their already tenuous relevancy. No wonder “cause and effect” seems to have been banished from the Imperial Realm. With every military appropriations bill should be a standard motherhood language stating “A Bill to Eliminate Congress in the Fullness of Time, or even sooner if possible”

We now have everything crumbling at the same time. One,the bloated worldwide financial system that had been force fed for many years by extremely low interset rates (think Japan in the 90s, then the US after the dot com bust). Two, the industries built up on the back of the wide spread real estate boom (construction and construction materials of course, but also consumer goods and services enabled by equity extraction).

I can’t help thinking of the analogy with the Victorian bushfires. Years and years of build up of flammable materials and the preconditions for fire. The conflagrations starting somehow (lightning, power poles failing, arson) but then sweeping all in front. A wind change, ferocious heat, fighting useless, flight useless, helicoptors useless (are you reading this Ben?).

Are we at the end? No! This fire has hardly started yet!

The money under my management is firmly entrenched in gold and short 30-Year Treasuries. I think this is an essential pair trade since the government has only two options: borrow or print. Borrowing more will drive bond yields higher, and printing will devalue the dollar and hence drive gold higher. My guess is that both will occur, but I want to be ready for both contingencies.

I almost feel ashamed to say this, but I also think it prudent for every gold investor to place a small insurance (short) bet should we be proven wrong within some time frame.

Yours

After the hyperinflation in Hungary
Hungary went through the worst inflation ever between the end of 1945 and July 1946. In 1944, the highest denomination was 1,000 pengő. By the end of 1945, it was 10,000,000 pengő. The highest denomination in mid-1946 was 100,000,000,000,000,000,000 pengő. A special currency the adópengő – or tax pengő – was created for tax and postal payments [1]. The value of the adópengő was adjusted each day, by radio announcement. On January 1, 1946 one adópengő equaled one pengő. By late July, one adópengő equaled 2,000,000,000,000,000,000,000 or 2×1021pengő. When the pengo was replaced in August 1946 by the forint, the total value of all Hungarian banknotes in circulation amounted to one-thousandth of one US dollar. [13] It is the most severe known incident of inflation recorded, peaking at 1.3 × 1016 percent per month (prices double every 15 hours) [14] . The overall impact of hyperinflation: On 18 August, 1946 400,000,000,000,000,000,000,000,000,000 or 4×1029 (four hundred octillion [ short scale ] ) pengő became 1 forint.
One source [2] states that this hyperinflation was purposely started by trained Russian Marxists in order to destroy the Hungarian middle and upper classes. The 1946 currency reform changed the currency to forint. Previously, between 1922 and 1924 inflation in Hungary reached 98%.

Proverb 30

8Remove far from me vanity and lies: give me neither poverty nor riches; feed me with food convenient for me:

9Lest I be full, and deny thee, and say, Who is the LORD? or lest I be poor, and steal, and take the name of my God in vain.