Anyone with a background in finance and investment should have a solid understanding of expectations. No one invests the valuable proceeds of their labor into something that is going to lose value. And, no sane person will engage in a risky investment with no hope of profit. And, it is this psychology of ‘expectation’ that drives the economy and our financial system.
But, what happens when expectations die?
Lots of things die – hopes, dreams, power …and people.
Believe it or not, but this directly relates to The Most Terrifying Video in the World, that I told you about yesterday – because the collapse of financial expectations always leads to war.
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Why World War III – The Fundamentals
note – to clarify the connection between energy, economy and war, I have attempted to simplify the elements of the discussion to emphasize the connection – and the principle. I hope that I have succeeded. – JL
We live on expectations. We go to work, because we believe the promise that we’ll be paid for our work. We go to school, because we believe the promise that we’ll be better people (or, at least better paid) because we invested our time and effort into an education. We invest in stocks and bonds, because we believe the promise that they will bring us more money in the future.
Promises + Belief = Expectations
When we believe a promise, it creates an expectation. And, for the past 500 years, we have seen so many promises fulfilled that we have become eager to attach belief to any promise being handed to us by society and the media.
When America was discovered, the promise of an untapped future lit up everyone’s imagination, and the invention of the printing press certainly helped to promote that promise.
The future was bright.
Has anything really changed, since then?
The promises might have changed, but not our capacity to attach belief to new promises. Over the course of the last few centuries, the promise of gold to plunder was replaced by land to farm. Later, we replaced good farming with good jobs. And then, we replaced good jobs with… um …war.
Each of these promises that we believed in had something real that they were founded on. There was real gold in South America, so the Spanish and Portuguese conquered South America to get it. There was awesome farmland in North America, so the English invaded and took it. There were real industrial jobs paying real money, in the cities, so we left our farms and got jobs.
But, what were the jobs based on?
Making stuff. And, for the purposes of our discussion, here is the recipe for making stuff:
Workers + Energy + Raw Materials = Stuff
Since I see that your eyes just glazed over, let me put it another way:
Workers use a source of energy – like oil – to turn a raw material – like copper – into stuff – like water pipes that people will want to put in their homes, to fill up their bathtubs. Reduce any one of those parts in that equation, and you will have less stuff (or at least, fewer water pipes).
The Evolution of Stuff
Until we discovered the use of coal and oil, all of our energy came from food, wind or water. It wasn’t much, but it worked. You could feed a horse or an ox, and it would use its energy to help you turn logs into building materials.
But, there was a limit to the amount of stuff that you could make, because there were a limited number of horses and oxen to produce the energy that you wanted.
When we discovered the use of coal for steam engines, that increased the amount of energy that we were able to use. That energy increase meant an increase in the amount of stuff that we could make. And, we started making LOTS of stuff.
When we discovered uses for oil, our stuff got even better, from farther away. And, we started to get more and better raw materials to make stuff with.
Once we realized how good oil was, we tried to get as much of it as we could – even if it meant killing people to get it.
Because, lots of oil means lots of stuff, and we like our stuff.
A funny thing happens, when your stuff keeps getting better and better. You start to think that it will ALWAYS keep getting better. It becomes almost like a law of life:
Stuff always gets better.
Unfortunately, great expectations for more and better stuff only work when you have more energy and more raw materials.
What happens when there is less energy?
Uh oh. Less stuff.
If you can make a hundred copper water pipes with two barrels of oil…
…how many pipes do you make, when you only have one barrel?
What happens when there is less raw material?
The same thing. But, the bigger question is…
What happens to the ten workers that were making the hundred pipes?
Well, since only five workers are working, the other five stay home until you can get enough copper and/or oil.
What are the people without work going to do?
Well, they aren’t going to work, so they’ll sit at home. They won’t make stuff, and they won’t be able to buy stuff. If enough workers aren’t working and not buying, the economy will visibly go down.
Again, what was one of the reasons why there were fewer workers and less stuff being made?
Less oil. (i.e., energy)
Hopefully, my simplified description has shown you that there is a direct relationship between the availability of energy and the health of an economy. But, let’s not stop there, because I want to show the connection to war.
Less Stuff Means Less Wealth
Now, when we say the word economy, what we are really talking about is the wealth of a nation – or the combined wealth of each person who is in that nation.
Let’s take America. If we stop the growth in the amount of energy available to America, everywhere in America, all at once – which is what happened – the wealth of America stops growing.
Well, remember what we said about energy. If less energy means that we make less stuff. And, more energy means that we make MORE stuff. Then, no change in the amount of energy means that there is no change in the amount of stuff that we make.
To put it another way, if the amount of energy can’t grow, then we can’t increase the amount of stuff that we make.
And, broadly speaking, when it comes to calculating the growth of an economy…
Economy = Stuff
The economy does not grow… if there’s no growth in the production of stuff.
Dollars, Stocks and Bonds
But, wait. I know what you’re thinking. You have dollars in your pocket and your bank account.
That is wealth, too, right?
No, dollars just represent a promise of the ability to buy stuff. Dollars are just a system of promises created by the government to simplify the making, buying and selling of stuff.
What about stocks and bonds?
Good point. But, stocks and bonds are promises too. Companies tell you how wonderful they are and how much stuff that they are making – and how much MORE they are going to make in the future.
Essentially, a stock or bond is a promise to take your dollars, and use them to increase their ability to make more stuff. The implication is that they will be able to make even more dollars because they are making even more stuff.
But, they can only do that if they have more energy to do it with.
Remember that you cannot increase the amount of stuff that you make, if you don’t increase the amount of energy that you have. If the amount of energy doesn’t increase, the amount of stuff that you can make doesn’t increase, either.
This means that – without an increase in the availability of energy – the implied promise in the stock or bond that you hold is empty. It’s an empty promise.
Worse, if the amount of energy available to a company is declining – which it is starting to – the empty promise becomes a loss.
Are you going to give money to a company, if their future is less, and not more?
Right. You won’t.
You aren’t stupid, once you understand that your expectations are false, you will stop investing in those expectations. You will NOT give money to someone if you believe that he will give you less in the future.
What happens when enough people realize this?
Stock and bond markets crash.
People with power get really unhappy when this happens. And, since their power gives them easy access to better information, they have the ability to see what’s happening – certainly better than you and me.
And, what do they do with this somewhat superior ability to predict the future?
Lies Told By Lying Liars
They lie to you.
And, that’s what they did.
One way of ‘lying’ is through dollars. A dollar is just a promise to be able to buy stuff. But, if you already have enough dollars for your country, every additional dollar is just an empty promise. And, an empty promise is just another word for ‘lie’.
Print up enough lies, and people start to see a problem. So, the lying liars cover the problem with another lie – like the ‘hedonics lie’ which says that hamburger is just as good as steak.
When people start catching on to THAT lie, they take all the empty promises that they printed up and exchange them for stocks and bonds. (Which is what they are doing now.)
When THAT stops working, they’ll…
Well, eventually, the lies won’t be enough to keep people from seeing the truth, and that is never a good thing for lying liars.
So, what do elite lying liars do, when they run out of lies?
Well… hypothetically …they could encourage people to find new and better ways to build an economy that uses less energy and raw materials. They could encourage the growth of local communities with local farms, producing food for local consumption. They could even encourage new and better sources of energy.
But, they’re lying liars, so they won’t.
Because that would damage the wealth and power of the lying liars, and they don’t like that.
World War III
So, the only thing left to do is to convince you to go out and kill people – in a place that helps with the energy problem that they have. Wherever the energy is easiest to get, that is where they will send you to kill people.
Unfortunately, the lying liars of other countries will have the same idea. So, more people would need to be killed. And, when you kill enough people, they call it a war.
If the war is big enough, they call it a world war.
We will have one of those.
It will be our third.
Welcome to World War III.
Please, enjoy your stay.
I truly hope that you’ll be ready for this
(That’s a link. There’s not much time left.)
A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished. – Proverbs 22:3
If you find a flaw in my reasoning, have a question, or wish to add your own viewpoint, leave a comment on the website. Your input is truly welcome.
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