VR’ing With Yellen, Bernanke, Al and Volcker

“Four former Fed chairmen in one room sharing their philosophy!” noted one witty onlooker. “It’s like the Nuremberg trials of central banking… only without the prosecutors.”

The scene: A monetary policy forum at the International House in New York yesterday.

The players: The four living fed heads together on one stage: Yellen, Bernanke, Greenspan and Volcker.

All were interviewed by CNN’s Fareed Zakaria. He made sure to lob all questions underhand.

“Are we in a bubble?” Zakaria asked, with his best straight face…

“I certainly wouldn’t describe this as a bubble economy,” Yellen answered. “This is an economy on a solid course.” Volcker saw some “overextended” prices, but confirmed.

“Is unemployment higher than the 5% you’ve been citing?” Zakaria followed up…

“Five percent is the most commonly used number,” replied Janet. “There are broader measures of unemployment… but by any metric, the labor market has drastically improved.”

“The domestic U.S. economy is moving forward,” Bernanke added. “I don’t see any particular reason to believe a recession is any more likely in 2016 than it was in 2015 or 2014.”

Greenspan copped out and babbled about “low productivity rates” for a while.

There was no mention of the squeeze they put on savers… the bubbles they blew… the windfalls they’ve given to speculators… or the fact that they were blindsided by the biggest economic crises of their time.

Call It the “Oculus Rift Economy…”

… named after the new virtual reality headsets. (Check ’em out on the faces of our esteemed chairmen atop today’s issue.)

If you watched the Fed broadcast, you got the impression that an economic recovery is in play… most people who want work are getting it… and the stock market is rising because everything’s dandy. This world exists, but only virtually, in the minds of Janet, Ben, Alan and Paul.

Jim Rickards has helped us make the case that leading economists, policymakers and pundits all operate under the same flawed “paradigm” or worldview. It’s a kind of virtual reality. They see the economy as a machine that can be changed according to government’s orders. Unlimited credit is the fuel that greases the wheels.

There is an whole system that thrives on this shared fantasy. Corporations, banks, academia, the military, bureaucracies, people on welfare, foreign governments, Wall Street, the media, our health care system — all of them have a financial stake in keeping this fantasy going. All thrive on government regulation and cheap credit.

It’s tough to know if the people operating under this paradigm actually believe in their virtual reality… or if they just quietly play along because calling it bogus would be too damning to their way of life. Like burning down your own house.

We figure they have to know how silly it all is… but it doesn’t really matter…

Paradigms have a shelf life. And this one’s reached its limits. The amount of growth generated by manipulating people and money has diminished too much. Today, it takes $3.71 in debt to generate $1 of growth. That math doesn’t make sense. And it can’t continue forever. The system is going to collapse under its own weight.

The Only Way to Get a Paradigm Shift Is to Go Through It…

For the past four years, we’ve been wondering: How is it we can have an impending currency crisis and have new technological breakthroughs that could improve quality of life at the same time?

We’ve called this turbulent shift the “Tale of Two Americas.” Slow growth… the Trump and Sanders phenomena…banking corruption… wealth inequality… terrorism… even social breakdowns like the riots here in Baltimore or in Ferguson, Missouri, are symptoms of this breaking point.

Technological innovations exacerbate these flare-ups. They destroy existing jobs, shift money to the people who control the technology and amplify uncertainty about the future. So doing, it leads to something better — especially for those have the foresight to anticipate it.

The latest technology on our radar is virtual reality. And not just for the novelty of it. Massive political and economic implications flow from it…

Killing the Nation-State

As the current system collapses, government and those who benefit the most from it will revolt… and try to tighten their grip as much as they can.

This why there is a war on cash… negative interest rates… and the use of the Panama Papers to try to bring offshore funds under the control of the tax man. Governments are walling in their citizens and their money so they have a honey pot to keep their racket going.

But information technology like the Internet, encryption technology, 3-D printing, private currencies, and now virtual reality will offer a way for you to circumvent this lockdown.

“The real issue is control,” wrote Grateful Dead lyricist John Perry Barlow. “The Internet is too widespread to be easily dominated by any single government. By creating a seamless global economic zone, anti-sovereign and unregulatable,” in a few words, technology like virtual reality “calls into the question the very idea of a nation-state.”

Paul Suderman at Reason.com reports:

On the one hand, [virtual reality] could make physical borders seem less relevant than ever. On the other hand, it might provide fuel to restrictionists who argue that physical borders and border controls should be strengthened even as virtual borders disappear. At the same time, it’s likely to complicate workplace rules and regulations in all sorts of ways, as previously unknown jurisdictional issues arise…

All of this technology is still in early stages, of course, and it’s always difficult to figure out what widespread adoption will actually look like until it happens. Maybe a hundred years from now, knowledge work will still consist primarily of sitting in front of flat screens, tapping on keyboards and guiding pointers with mice, while scrolling through text on hand-held touch screens.

But I doubt it. and if VR does take off, then it’s going to raise these sorts of possibilities and questions about work and borders and immigration and what it means to be a nation, defined in physical, geographic terms, when digital technology has all but erased the concept of distance.

The Best Tech Trend of This Decade?

Virtual reality is the first innings of a long-term trend. Understand it… embrace it… and invest while it develops, so you can grow financially as well as personally.

Our ace technology analyst Ray Blanco says “Virtual reality is set to become the tech investment story of 2016 — maybe even the decade.” He’s identified three ways to be an early-bird investor and bag the chance at big gains. Ray breaks down the trend and separates the wheat from the chaff, right here


Peter Coyne
Publisher, The Daily Reckoning

P.S. Be sure to sign up for The Daily Reckoning — a free and entertaining look at the world of finance and politics. The articles you find here on our website are only a snippet of what you receive in The Daily Reckoning email edition. Click here now to sign up for FREE to see what you’re missing.

The Daily Reckoning