Monday , 26 February 2024

Exponential Expansion Based on Deficits, Debts & Fake Money Will NOT End Well!

…It is absolute nonsense to believe that exponential expansion based on deficits, debts and fake money is the beginning of a new era. Anyone studying the economy and history of markets knows that exponential moves indicate the end of an era and not the beginning…History is our best teacher and it is giving us dire warnings that this will not end well!

…We know from statements at historical tops like 1929, 1987 or 2000 that anyone, from politicians to investors at the time, believe that the trend will go on for ever and that the world has made a paradigm shift…but exponential moves always end and so will this one.

Exponential Moves Also Work In Reverse

Just as exponential moves up are spectacular, so are the reversals and, although few people understand it, exponential moves always reverse, at least temporarily. The problem is that the reversal is always faster, more violent and more hair raising than the advance…

World GDP /Capita

Economic growth is totally linked to the availability of oil. The chart below shows that world GDP per capita (from 1968) grows in line with consumption and therefore also to the availability of oil. As oil production is likely to decrease over the long term so will economic growth. This is totally in line with the view I have expressed in many articles and interviews, namely that we are at the end of a major economic cycle of at least 300 years and maybe longer.

Renewable energy is unlikely to replace fossil fuels for a very, very long time even if this is a politically uncomfortable view for the climate control activists. What very few realize is that most renewable energy sources are very costly and also all dependent on fossil fuels whether it is electric cars, wind turbines or solar panels.

The Stock Market

If we look at some more recent exponential moves in the stock market, they have been spectacular but these exponential moves will not end well.

The above moves have grossly exaggerated the effect of new technologies. Once a new invention has been digested, it grows in line with the market as a whole…so the value of new technologies only outperforms the market for a limited period and the above moves will see major corrections of much more than 50%.


If you invested $1,000 in Bitcoin at $0.08 in 2010, you would have had $800 million at the $65,000 peak in April. Today it would be $400 million at $32,500 so easy come and quickly gone.

A commodity with such volatility can obviously never replace money and no central banks would ever permit it. Speculative frenzies can go on for longer than anyone expects.

Bitcoin vs. Gold

Bitcoin has been a spectacular speculative investment and early investors have made massive fortunes. Like all exponential manias it is likely to end in tears but, for the savvy investors who have now diversified into physical gold and some silver, they have managed to get the best of both worlds.

I doubt Bitcoin will continue to outperform gold but, even if it does, this is a binary investment that theoretically could go to $1 million in a continued speculative mania or it could go to zero, which is more likely in my view.

Exponentiality Leads To Finality

As shown above…many markets and financial instruments are now moving exponentially. Exponential moves up almost without exception finish with a move down of the same magnitude so this will end badly.

The Role Of Gold

With debts and deficits now going exponential, gold will continue to reflect the destruction of fiat money just as it has for several millennia. More importantly, gold is the best form of wealth preservation par excellence as history teaches us. [Got Gold?]

Editor’s Note:  The original article has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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