Storm Warning! Part II

“Your predictions have become soundly validated, yet that means the dire outcome you feared is arriving,” Chris Martenson remarked in a recent Q&A with Addison Wiggin. “What’s it like for you to be at this time in history?”

Addison answered that question – along with many others – in yesterday’s edition of The Daily Reckoning. Today’s edition features additional insights from Addison in the second and final installment of his Q&A with Chris Martenson.

Addison Wiggin: When you look at monetary history – or even the history of empires as we did in Empire of Debt – every 50, 60, 70 years there’s a major shift in the reserve currency of the world, in the dominant financial structure of the world, and we’re coming up on that now…

So I’ve been suggesting for a long time, and I still think it’s true, that whatever’s going to happen next, it’s not going to happen without even a higher degree of uncertainty than what we’ve seen over the last couple years. And the little skirmishes that we have going on in the Middle East and the two “hot wars” that we’re involved with in Iraq and Afghanistan, I think they’re just precursors to something bigger, which will accompany a shift from the US as the dominant financial player in the world to something else, which will likely be some kind of sharing of financial structures with China, and possibly India.

And it’s probably going to get a lot uglier before we get to anything that resembles peacetime and normalcy.

Chris Martenson: So we have a period of adjustment, somewhere between here and there, we’re going to see some sort of a falloff in living standards, I would guess, if we hold the view that the United States and other advanced economies have essentially been living beyond their means. That means that they have to live below their means for a period of time, and that’s where you see disruption, volatility. Is that fair?

Addison Wiggin: Yeah, I think that’s fair, and I do think a reduction in our expectations of our standard of living is inevitable…People have grown to expect things that even a generation ago just wouldn’t even be considered possible. But those credit cards are starting to run out. So I think we can expect a downward revision of expectations…

Chris Martenson: Many people choose to look at that message and say, “Oh, that’s unpleasant.” But it just happens to be reality to me. With change, there’s always crisis, but there’s always opportunity, lots of opportunities out there… When I look at the future I say, “Oh, here’s what we’re going to stop doing; here’s what we’re going to have to start doing; here’s what we’ll continue doing.” Getting the big sweeps of [these trends] correct, I think, is the best thing to do…

Addison Wiggin: Right, and one of the central tenants of the Agora Financial strategy is that while we identify a lot of the problems that are arising – mass approach to government, mass approach to the auto industry, and other artifacts of the 20th Century – we also identify the resulting opportunities… In a way it’s a positive thing that some of these massive, archaic government structures are crumbling and meeting their demise, because that allows for people to become more nimble, and take advantage of opportunities that would otherwise be swallowed up.

Chris Martenson: Oh, I completely agree. I’ve heard you’re working on another documentary set for release later this year. Does any of this tie in, and can you tell us a little about it?

Addison Wiggin: It does. It ties in, absolutely ties in, because as we were making our documentary, I.O.U.S.A., I kept hearing this mantra, “We’re going to grow our way out of this,” as if there was a one-size-fits-all solution to the fiscal problem… I kept hearing that phrase and it just made me think, “Well who are going to be the people that help us grow our way out of this?” Predominantly, that’s entrepreneurs. Most job creation, most new ideas, most innovation comes from entrepreneurs who are willing to take a risk with their own time, with their own money…

So I wanted to look and see what entrepreneurs were thinking and doing in the post-crisis time, 2008 to 2009. And for a case study, I’m using this company called Odyssey Marine that looks for gold at the bottom of the ocean. I like the metaphor of Greg Stam and his crew going out into the ocean, and using very sophisticated technology that they had to develop themselves, looking for gold at the bottom of the ocean in these shipwrecks. They have to have historians and oceanographers and people that understand how tides work and it’s a very sophisticated enterprise.

And in 2007 they found $500 million worth of silver and gold coins at the bottom of the ocean off the coast of Gibraltar. They were immediately arrested by the Spanish government, hauled into Gibraltar, and now even to this day in court trying to [keep what they found]… They’ve been tied up all this time and in all these kinds of political shenanigans. So to me, the story of Odyssey Marine is a good metaphor for the types of challenges that entrepreneurs across the economy have faced since the housing bubble collapsed and everybody has realized that house prices and stocks don’t go up forever. There has to be something else moving in the economy in order for prosperity to take place.

Chris Martenson: I’ve been thinking on this theme in a slightly different direction which is that if you really want to dig out from a bunch of debt and you want to grow your way out, you need something transformative typically. Railroads at one point, steam engines at one point, maybe the Internet at another, but something. And I’ve just been wondering, where is this technology? I don’t see it right now. We’re doing incremental improvements. iPhone 4 is awesome, but not that much greater than iPhone 3, etc.

So where everybody is poised and ready and waiting for that transformation to come, I don’t know what it is at this stage. It could be in technologies around alternative energy. It could be in transforming our society away from liquid fuels based on petroleum to something else, possibly like you said, a basket of things. But we’re not doing it yet. And so the longer we wait, the more concerned I become that what I think you’re chronicling in this documentary is really just governments sort of leaning on entrepreneurs saying, “Can we squeeze this rock a little harder?”

Addison Wiggin:
Right. One area that is a potential transformative area, we look at the work that Juan Enrique has been doing in turning algae into methane. Juan Enrique is a venture capitalist based out of Boston who helped to put together the financing for decoding of the genome.

And his big idea is that the thing that sort of saved the US economy in the 1990s was the movement from analog into digital. We transformed almost every industry into a digital industry in a very short period of time and it created a lot of jobs. It created a lot of new ways of thinking. It created new areas of innovation and it spurred on an era of enhanced computational abilities, which is now giving us the ability to solve even greater problems at a faster speed. Juan Enrique believes that the next phase that we’re going to see is a transformation from digital to life sciences.

They can now program genetic code and come up with new ways of producing things that are synthetic strands of code. And there are amazing things that they can do. Right now, they’re experimenting with programming the genetic code of algae to produce methane, harvesting the methane and using that as an alternate energy. It’s been advertised widely on Exxon commercials on TV because they dumped a bunch of money in there.

But that’s just one example of the kind of transformative things going on. We have a newsletter called Breakthrough Technology Alert, edited by a gentleman named Patrick Cox, who has been around in these transformative fields for many, many years – looking at companies that are coming up with new and interesting ways of solving basic problems of society. From our perspective, that whole area of transformative technology is potentially the greatest source of new companies and entirely new economies if we’re going to reinvent ourselves once again, it’s likely to come from that area.

And that’s where we’re looking most deeply for investment ideas. But also the knock-on effect would be that the economy might be able to grow and produce the kind of income that we need to address the other issues. Although I have to say that Patrick takes a much more dire look at what we would call the Welfare State. He thinks it can’t sustain itself the way it is and it’s likely just to get destroyed in the next wave of transformative evolution, and that’s a good thing in his opinion. Let’s get rid of that old, archaic way of looking at things and get onto the business of producing new products, new ideas, and innovations that can actually help people.

Chris Martenson: Great! Thanks, Addison.

An Addison Wiggin interview,
for The Daily Reckoning

The Daily Reckoning