Something is wrong in Britain and gold

Something is wrong when politicians think that paying people to work less will help in a recession.

And:

Gold has been touching 900 dollars. On a cautious note: I think Gold will fall a lot in the coming weeks. But I won’t short it as the potential inflation in the system is massive, and I have no idea when prices will shoot up. In other words, its to high risk. The trade for me is to buy it low, not to short it on the way down. If it doesn’t fall, but rises to 1000, I will obviously have lost the train, and that’s fine.

What bothers me a bit is that the whole inflation/deflation scenario is getting increasing hard to follow. Private Banks are contracting and the public sector is expanding. I think it’s too hard to say much about what will happen in the short run. But longer term, the world economy will be in a trouble for many years, and we will get massive inflation somewhere down the line. Especially in USD and GBP.

The Decline of the State in 2009

I hope I will be able to write some more here the next couple of months, as I have so many things to say. The world is looking bleak. I’m back in Britain and things are not looking very good. London is a mess economically, and it’s raining. I think Jim Rogers is right on the money:

“The City of London is finished, the financial centre of the world is moving east. All the money is in Asia. Why would it go back to the west? You don’t need London,”

Now, previously I have been thinking about this financial crisis as the beginning of the fall of the American Empire. But more recently I have come to see it as the fall of the Anglo-American world order. When empires fall, all their colonies suffer too, and if America is an Empire, then Britain is its most important colony. Of course what this entails and how long time it will take is unclear. But it will involve massive inflation. The Dollar is mortally ill, and the Pound is awaiting government euthanasia, and with thundering applause it will be put to death. Debt levels in Britain are insane, even compared to the US, and the UK government’s money printing solutions have so far gone unchallenged. Also, my advice about shorting US government bonds still stands, as long as it remains legal. Don't buy any UK Gilts either.

Now the cultural aspect of this is of course a bit sad since it will surely discredit several good political and cultural Anglo-American ideals. Specifically capitalism could get a bad rep (if it already hasn’t), and Hollywood films will be blamed for their negative impact on the world. Even if this was to happen, I think English will remain the global lingua franca for a long time. Just like Latin did after the fall of the Roman Empire. (Still, it’s no bad idea to learn Mandarin)

Also, I think it’s possible that all this follows several of the patterns outlined in Martin van Creveld’s books, and that this is in fact what he would call the "Decline of the State". In fact, a lot of what we are seeing is undermining the very existence of states in their present form. People feel alienated by the mismanagement of distant governments, and at the same time we are seeing the rise of several separatist movements around the world. Some of whom are increasingly successful. Here is the long list. Creveld himself has a very bleak vision of the future, as he predicts the rise of a more brutish form of warfare as civilians will become increasingly regarded as a legitimate target. On this I’m not sure what to think. Still I would recommend everyone who is interested in war: Read his wonderful books “The Transformation of war” and “The Rise and Decline of The State”. His writing style is both lucid and funny. Here is his webpage: http://www.martinvancreveld.com/

PS. My last post about gold reserves in Iran turned out to be misinformation. I think that was a bit strange....