We kicked off our annual Agora Financial Symposium in Vancouver yesterday. As always, debates were heated, drinks were had, and one speaker warned:
“We’re all freaking doomed!”
You guessed it, dear reader. The great and mighty Mogambo made an appearance as the first day of the conference wrapped up.
“And why are we all freaking doomed? INFLATION!” he bellowed, to many a startled conference goer. “The world’s greatest evil.”
So, perhaps the Mogambo is a bit melodramatic, but the points he made were valid. “Monetary inflation leads to price inflation…causing EVERYTHING you buy to cost more: stocks, bonds, houses – even food.
“All excesses of new money and credit drive up prices – but not wages.”
And a lot of what the Mogambo had to say fits in directly with a topic we’ve been writing about in these pages: the Crack-Up Boom.
Ludwig von Mises originally coined the term, describing the Crack-Up Boom as an occurrence that happens when the generally ignorant masses catch on to the “deliberate policy of inflation.” Meaning that while prices of everything in our world go up, up, up…the average consumer looks on blissfully, believing that eventually, prices will drop.
“But then [the masses] become suddenly aware that inflation will go on endlessly. A breakdown occurs. The Crack-Up Boom appears. Everybody is anxious to swap his money against real goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them,” the Mogambo said.
“Gloom and doom ain’t what it used to be,” Bill Bonner began his speech this morning, eliciting a chuckle from the over 700 attendees.
“Back when we had a lot of trouble…the Great Depression…the Cuban missile crisis…people had sense of appreciation for that trouble.
“To put it another way – there is nothing like a long run of good luck to destroy a person.”
Some would argue that this is the major problem in America today – being ill-equipped to deal with rainy days. Like it says in Empire of Debt, Americans believe these delusions: that you can get something for nothing…that this generation can consume and stick the next with the bill…and that house prices will forever go up, just to name a few. “And the big problem with that is: when you don’t appreciate trouble,” continued Bill, “you go looking for it.”
So what do you want at the end of a Crack-Up Boom? Gold. Something tangible…that doesn’t lose value and can’t be created out of thin air – or by flipping a switch on a printing press.
While the yellow metal basically sits on the sidelines doing nothing, when the dollar starts hitting record lows, but your grocery bill…electricity bill…and kids’ tuition is getting higher and higher, these lazy lumps of metal start looking pretty darn good.
“When the Crack-Up Boom cracks up,” Bill finished up his speech, “you’ll find no happier person than the one holding lumps of gold that are doing nothing.”
Markets and Money