This is off the Federal Reserve Website - today, Dec. 2, 2020. I saw this, and I had to figure out that 1 million x 1 million is 1 with 12 zeros behind it - so the "6M" number above means "SIX TRILLION DOLLARS" - where a trillion is 1000 billion. (This reminds me of when I worked out the inflation rate in Germany in the early 1920's... the number got so big, you had to use scientific notation, and it was confusing.)

So, the Federal Reserve is buying (has bought) over 6 TRILLION of bonds. This goes on their "balance sheet" as "assets" - except that these assets are purchased with MONEY JUST PULLED INTO BEING BY THIS ORGANIZATION - this is actually beyond what Germany was able to do with it's printing presses back in the early 1920's, when they had their hyper-inflation.

The USA is creating "TRILLIONS" of new dollars and flinging them out to folks, in exchange for their US Treasury Bonds and Bills and such. I think they are also buying other types of securities. The question I am trying to answer, is "Are they buying Stocks on the NYSE?" and I have not been able to confirm or deny this yet.

But what we know for certain - is that the USA Federal Reserve is "monetizing" the US national debt. The Americans - like many other nations on this planet - are paying for their government expenditures with what is basically "printed" money - except it is just digits inside of the computer - the money does not actually even have to be printed anymore. It is just book entries in a computer datebase.

Regardless of ones moral views on this subject, it would seem that there has to be - at some point in the near future - a cost for taking this kind of action. We are witnessing an astonishing monetary experiment - on par with the original "John Law" experiment in France, in the 1700's. Maybe everything will be ok, and all this is fine. Or maybe not. But it damn sure is happening - and the *rate* at which it is happening is *increasing* rapidly.

My sense is that you can only run any machine so fast, before you start to encounter failures and systemic self-damage. I am more and more convinced that the USA is in *really* serious trouble here - but then, so are we all. There will be no gentle unwinding from this. Something else will happen - and my research suggests that IT WILL HAPPEN FAST - much quicker than most policy wonks expect.

As a private investor, not plugged into a government cash-printing scheme, you are at rather exteme risk if the value of your money is degraded by this monetary experiment. My fear here is that these "Assets" are really not assets at all - they are just more paper promises to provide more of the same paper. There are no real underlying "assets" here - like a train-engine, or a ship or a box of rifles or a truck or piece of property with fee-simple land tenure mutually agreed-upon with one's neighbours. There is just a pile of book-entries in a computer. The "bonds" that are held as "assets" are just written promises to pay out more paper. There are no actual hard-assets. This whole thing is a great soft-paper structure, which rests upon little more than the beliefs that reside inside people heads.

The entire monetary system of the USA is a great edifice floating in the clouds, like Stratos. I can't see this not impacting *investment* activity at some point, since if we can't trust the money, then the nature of the investment process becomes much more complex and difficult. It becomes very difficult just to make it work.

Ok, so where did all the money from those "assets" that were purchased by the US Federal Reserve go? Well, it went into the American money supply, and it is circulating, according to this data - compiled by the FRED - the Federal Reserve of St. Louis. This is what we call the proverbial "hockey-stick" chart - well known to traders and speculators. It is an indication of some stuff happening that is gonna change the model, at the very least. Basically, near as we can tell - the good old USA, already in the throes of a serious monetary expansion - has decided to go "all-in" with the stim, and push the pedal to the metal as hard as they can, without reservation or caution of any kind. Pretty f***ing impressive, whatever your moral/political/economic views. I have to give them an "A" for effort and courage.

I strongly advise anyone reading this to get a copy of Janet Gleeson's excellent book called "Millionaire", as it details the history of the John Law "Mississippi" Scheme, in which the first national, widespread use of paper currency took place. John Law was born in Scotland in April of 1671, his father was a goldsmith (which was rather like a banker), and Law became a wildly successful gambler as a result of his detailed study and application of the 'Science of Chance". By 1720, he was the Controller General of Finance for all of France. He was never motivated by greed, but by an honest desire to make the world work better, and in a more scientific and sensible manner. He developed and implemented the first major, national effort to use paper currency instead of gold, silver, brass and copper coins as money.

His scheme crashed in a most spectacular manner, yet it allowed France to avoid payment of most of its national debt, as his scheme successfully inflated most of it away.

The paper money economic structures we use today, are directly a product of the financial system which he invented - just like the AC power grid we use, is a direct result of what Nikolai Tesla invented.

There is much to be learned and gained, by studying and understanding the origins of systems. Men seldom do anything really new, and the early successes and failures of various systems can illustrate clearly what the expected outcomes are likely to be, when similar (or exactly the same) systems are brought back into operation. Know this. Profit from it! :)

Covid-19 Death Rate - Data current to Nov. 28, 2020. We are now at the beginning of the predicted "Winter Second Wave", and as anyone can see from the data, the death-rate globally is substantially worse than back in March/April when we had the full lockdowns in several countries. Our view is that we are just at the beginning of this epidemic. Also, the rate of SARS-CoV-2 virus mutation might render the vaccines less than 90% effective in several months. With total deaths worldwide at only 1.5 million, this epidemic is very small by the historical standards of plague and pestilence outbreaks.

The run-up in the North American stock markets, given this expanding health emergency, does not seem to be rational or sustainable.

The two charts below illustrate why the stock market run-up has happened. Stock price levels are a monetary phenomenon. More money (in this case, quite a lot more money) is the primary reason for this current "valuation bubble". Our view is that this represents a level of financial sickness that may well be more damaging ultimately, than the Covid-19 outbreak. When runaway markets eventually collapse (and they always collapse), the loss of private investment capital is typically very destructive. It is for this reason that historically, wise investors grow cautious when financial "bubbles" develop. The bubble-and-crash scenario is built-in to market process, and is necessary, otherwise compound interest would make every family multi-billionaires over time. The markets *must* routinely reset, in order to maintain their operational allocative ability. Please understand this, and be careful. There is great danger ahead, from more than just the Covid-19 virus.

The Northrop "Flying Wing" - an amazing aircraft - but wildly unstable in a spin, or in any sort of aerodynamic stall. It first flew as a prototype jet-engine version in October of 1947, and was a genius design by Jack Northrop. The idea was an engineering leap - you reduce all the parasitic drag and just have a lifting surface with the engines, fuel and cargo all inside the single surface.

It flew ok, unless it got into a flat-spin or a tumble-stall, at which point it was very difficult to regain control. Pilots Daniel Forbes and Glen Edwards were killed June 5th, 1948, during a stall test, as the aircraft is thought to have pivoted violently from stall into a high-speed dive, suffered structural failure, and broke up in flight. Another pilot who did a stall test and almost did not recover, specifically wrote afterwards: "This aircaft is *not* to be stalled." The aircraft was designated the YB-49 by the US Airforce. It was a revolutionary design that eventually became the B2 Stealth Bomber 30 years later, once advanced computer-controlled stability augmentation could be programmed into it's "fly-by-wire" flight controls.

This aircraft's flight characteristics reminds me of what I see in the stock market now, at the end of this crazy year, 2020. I don't see any evidence of market "stability augmentation", and in fact, I see much pro-cyclic systems and strategies that seem to enhance (not dampen) market movement. But maybe I am wrong. Maybe everything is fine. :/

Storm Clouds ahead. I cannot shake the sense that 2020 is teeing up 2021 to be an unwinding. Too much "wealth" exists, and scarcity is generally what Economics and Earth are all about. Economic action typically corrects unwise human behaviour.

Technical Kit from 1927 to 2020. Literally a bunch of technology from almost a 100 year time span is on display here. The big radio on the left is particularly interesting, as it was manufactured in Canada in 1927, and is labelled: "DE FOREST CROSLEY RADIO" with a little brass piece on the front. It is *not* a superhetrodyne - but is in fact a regenerative receiver which uses an on-board powersupply that creates clean DC from noisy AC. It also has a modern-style permanent-magnet speaker, unlike the designs from the 1930's which used coil-magnet speakers.

This old radio works crazy well, but I had to replace the electrolytic capacitors of course (they are wet inside, and over time, dry out and stop working.) The primary powersupply capacitor was a big copper thing, the size of a big beer can. By itself, it is a work of art. The "De Forest Crosley" radios of the late 1920's were expensive, well-made technology, which can still be used (after minor repairs) almost 100 years later.

The strength of the current stock market seriously scares me. I have no direct experience with runaway "wild-boom" markets - other than the dot-com bubble that ended horribly, or the runup to the 1987 meltdown.

But I have to look at the old equipment - the early 20th century technology which was so astonishingly impressive. You can take this well designed equipment - old aircraft, cars, electronics, firearms, architecture - and use it today, and it performs very well.

So, what wiped out the middle of the 20th century? Why the catastrophic collapse and violent military and political disasters? Many answers possible - but one similarity between the 1920's and now - too much debt.

Everyone everywhere - governments, businesses and private persons - all have way, way too much debt. There are these extreme and increasingly desperate attempts around the world, to engineer inflations. But people are not as stupid as they used to be. They flee crap-currency which is junk-rigged by central-bank scam artists to destroy purchasing power.

So, the global economy rests on the shoulders of the US dollar - the only currency that seems to work over time.

But the USA debt levels are extreme and outlandish. And ours in Canada, at the government level, is worse.

It won't likely ever be paid back. But debt-cancellation schemes will impoverish those who hold the paper. There is a risk that the basic linkages between savings and investment might be broken in the advanced economies, in similar ways that they are almost always wrecked in the southern and eastern "junk-money" economies.

China is the one country that seems to have done things right, and of course, the world is beginning to hate them for that.

If the attempts to create inflation (to reduce/eliminate debt) are successful, then a lot of people will be hurt. If the inflation is not created, and folks (and Governments!) are required to fund and repay their debts, then folks will be hurt - maybe even more. This is why the attempts to create serious inflation are being undertaken by American and European central banks. They *need* the inflation. And they judge - probably correctly - that debt-repayment with devalued and/or inflated currency, will cause less harm that wealth-erasing outright default.

What will markets do? They may well end up swinging wildly - which they are *not* doing now.

As Mr. Talib points out correctly, the markets live in "Extremeistan". And with the amazing technological leaps that occurred in the 1920's, after the awful (yet successful on many levels First World War), we have a pretty good idea what this kind of market extreme-reactive-response looks like. You get a big run up, followed by a big crash. You need something real to get the market run started. This typically is happens because of significantly improved technical-transformation capability. New tech makes real economic magic possible.

Most folks don't realize how wildly significant some basic technological gains were that happened in the 1920's. One example is thorium-doped tungsten filaments in vacuum-tubes. Vacuum-tube electronic amplification - which was already the magic behind radio and long-distance telecommunication - became thousands of times more efficient. The technology was discovered by trial-and-error and by accident (thorium was not even supposed to be tested - it was included in the tests by accident)). A lot of technical stuff came together to give wild, many-hundred percent gains in our "technical transformation" co-efficients. The markets priced-in these amazing technological improvements - autos, aircraft, radio, cinema, A/C-power-grid, medical-technology improvements (ie. X-ray imaging), and so on. The market gains made sense.

And everyone wanted to get on board the new-technology gain-train. But the massive debt-levels had made the resulting economy very fragile - and a minor interest rate rise from 4 percent to 6 percent (not so minor, really, since it represented an in-year 50% cost-price increase for folks in debt) wiped out the US stock market, since debt was fueling both the business expansion and the speculative investment accounts, puffed up by lax margin requirements as low as only 10%. The market re-trace just erased a lot of wealth. And what few people ever stop to consider - if the USA had done a debt-funded stimulus program to prevent the 1930's "Depression" - would they have had the financial ability to fight the Second World War? All the Keynsians are critical of Roosevelt balancing the budget in 1936 - but it meant that America was actually in pretty good financial shape by the time Pearl Harbour was engineered. The USA was able to ramp-up borrowing, fund a big war, and even create science-fiction-grade "Atomic Energy" and related weapons and so become the "Arsenal for Democracy". But the Great Depression was a direct result of the debt-fueled Great Run-up of the 1920's.

Can this all happen again, now? I don't see why not. We are all deeply in debt everywhere, and also crazy over-valued by traditional measures of valuation in the markets.

The S&P earnings multiple is estimated to be around 37 times, as of right now, here in December 2020. Last year, December 2019, it was around 22 times. The markets are floating on foam. But lots of foam is being made by the Fed. And by the ECB, the Bank of Japan, China, and many others. So for now, whoo-hoo, hey ho and up she rises! The trees are growing up into the sky.

But the debt levels have reached levels that are seriously extreme. (See next image...) And markets know how to be just as extreme. They may fix this problem for us, with a reset. Like they always have in our past history. Everyday, this becomes more likely.

I found this MSM piece about global debt levels *after* I wrote the above "Technical Kit from 1927" piece. The IIF has banks as it's members, typically. They are concerned about this "tsunami" of debt. Debt everywhere is at insane levels now, and will likely not ever really be paid down. It probably just won't happen.

Some sort of *reset* event is almost certain to occur. Or, a hyper-inflation - in mostly US dollars - will be required to create the illusion of a paydown. Such paydown could then occur with almost worthless USDs. There is just no way that in the next few years, the world will generate an extra 300+ trillion US dollars in wealth. This global debt has already been *rolled-over* many times since the 1970's. That was when this current economic sh**storm was initiated, by virtue of US President Nixon pulling the final plug on the old USA "gold standard". He had to do that, in order just to service the debt that resulted from the costs associated with Vietnam War. It was just not possible to pay for the costs of that war, with any sort of "gold-backed" currency. Nixon had no choice. By the late 1970's, inflation in Canada and the USA was running at close to 20% - especially in wage-settlements for public-sector workers. It took Paul Volker's 20%+ interest-rates, a business-destroying brutal recession and the election of Ron Reagan in 1980, to stabilize the broken North American economy. But Reagan funded the US military, the USA Federal Government, and a big tax cut with borrowed money. He did this, because he could. Every President since has continued to follow this playbook. And the World then copied the USA "free money" model.

Why has it all worked so far? Because the *really* broken part of the world running "communism", gave up on being stupid and poor, and decided to enter the commercial world. Lifting China and Russia out of their tragic "Marxist" economic hells, has made their people - and the rest of the world - much more wealthy. Commercial economic models, where economic freedom is available to private citizens, allows for mass prosperity - as long as the basic economic rules are followed.

But History always catches up with us. Debt is now growing faster than GDP, and it is being actively "monetized" by Central Bank "asset" purchases. This is just money-printing. And everyone is now doing it. All this hyper-debt runup has happened in less than one human lifetime. It's an amazing economic experiment, and we are now moving into the ending phase of this particular process, I suspect. Really. I am concerned it is going to get just a bit ugly.

Why the concern? Because unlimited government debt growth can poison economic process. Governments try to enact rules to limit debt-growth - but then they *always* break the rules. Debt grows until it cannot grow any more. It always does and always has. When the costs of the debt grows to extreme, there are these debt-implosions that just wipe out wealth. This has occurred often in the past. It will occur again, in the future.

We are not the first generation to blow up our economy - but perhaps we may be the first to see a global, co-ordinated "failure-to-pay" meltdown. This time - literally - everyone is up to their eyeballs in debt they will not likely be able to ever pay.

(We have no debt. But that does not mean we will be protected from this, as our governments at *every* level are carrying what looks like unsustainable debt-loads. How will they pay? Think about it.)

Secret Histories - I once sat in a bookstore (Indigo in Toronto's Eaton Centre) and read all of Procopius' "Secret History". Later, I read another - from Victorian England times, and then I read "My Secret History" by Paul Theroux. These were interesting because unlike most material, they tried to tell the truth. The Victorian one was really amusing and a bit scary - it detailed the "romantic" exploits of the protagonist...

Key fact here is that we are immersed and embedding in deception and disinfo, mostly. Often times, truth is obscured or buried for obvious, and clear reasons.

This is particularly true whenever money is involved.

And the investment process - and the market for paper (or now "digital") securities - is of course, profoundly insecure. It has to be, if you think for a little bit about what is really happening.

Investments mostly *must* erase wealth - especially since we now understand compound growth - and it's diabolical twin, "compound interest".

If you want to understand something - try the Edward de Bono trick (the famous author of "Creative Thinking") of inverting meaning and semantical constructions, to seek new insight. View the markets not as a wealth-making thing, but as a wealth-destroying thing. View the financial press - with all it's numbers - not as a truth-diseminating device, but as a deception-diseminating device. And suddenly, things become rather clear, perhaps?

The markets are doing their job, if they carefully operate ***counter*** to the process of basic wealth-generation via compound interest. If one can capture a yield of say, 5%, then basic math shows that $10,000 invested for 50 years becomes 11.467 x 10000 = $114,674, which is not bad. But invest for 150 years, and your $10,000 becomes 1.05 to the exponent 150 => 1507.977 x 10000 = $15,079,775. And if you can run this process for 300 years, then your $10,000 investment can be grown to 2,273,996 x $10,000 = 2.273996 x 10 to the exponent 10, which is: $22,739,960,000. That number is over 22 billion dollars. (Here, we take 1 billion to mean 1000 million.)

If investments worked over long-term time spans, then every family could be multi-billionaires.

But investments do *not* work over long-term, trans-generational time-spans, and people know this. And what this means in practice, is that investment markets *must* crash on a ***regular*** basis, if they are to do their job. But they also - and this is very critical to the process - they must, using all neural/motivational methods - create the ***illusion*** that great gain is actually possible. This is the absolute and critical component in the investment process - this fabrication of the ***illusion*** of gain, is required to get cautious, careful people to throw away their caution, and "buy the story", and pay real money for the paper "assets".

Many investments of course are quite reasonable and viable. And significant technological change really, honestly can (and does) produce great gains in real wealth and prosperity - for both individuals and for nations and for the planetary human community at large. Three examples - the A/C power grid, the germ-theory of disease (and the behavioural changes to induce personal and urban cleaning), and the "green revolution" (the massive crop-yield improvements that have occurred since the 1950's) - each of these has produced a massive and significant payoff. You can see this payoff in the global growth of human population.

So, in some sense, the growth process is working. Science+Industry is creating real gains, and the results of these gains are compounding. Each of us - with access to modern pharamceuticals, high-quality food, refrigeration and nuclear-generated A/C power in our homes - each of us is actually wealthier than any King or Prince was before 1850. So, in one sense, we actually are all "billionaires".

But not in the financial sense. Very few are super-rich, and even fewer are super-rich because of multi-generational successful family investment strategies. The Aga Khan comes to mind, and yes, there is evidence that his family business has been multi-generationally successful. But successfully investing across generations - even across mere decades - is profoundly difficult, as the risks are myriad.

And this is how it has to be.

One could argue that the primary purpose of the "financial markets" is to ensure that periodic reset-events are generated - sufficient to ensure that trans-generational wealth created using compound-growth, is specifically *not* available to most people. The old aphorism I recall my father using was: "Overalls to overalls in three generations." [A poor farmer and a working-man, wears overalls, as his work is manual and typically dirty and difficult. A rich man - gentleman farmer or businesss owner - wears a suit or other expensive mufti.]

The general familial experience described is as follows: The first generation is poor but ambitious and has good health (as the weak ones all died in childhood). The first generation in North America were typically immigrants, risking all to seek a better life here. They worked hard, studied hard, and took careful risks to make gains. Many were successful, and those who became wealthy passed the wealth to their children. The second generation typically would build upon the legacy, and expand and enhance the business, and become - in many cases - quite wealthy. But the third-generation, born into significant wealth and knowing no other picture-of-the-world, behaves badly. Typically, they make bad, high-risk investments, and/or are not careful or prudent. They squander the wealth, and the family is reduced again to poverty. And their children wear overalls to work. So this story goes.

But life-risks being what they are, many families do not even make it to the "second generation" wealth-advancing stage. Their business efforts fail, or their abilities and skills are weak, and they squander any surplus they managed to obtain. This is common, and explains the world of "salary-men" (and now, "salary women", as the nuclear family seems to have been nuked also..)

But in a larger context, we can see that the entire world - living well and living large off the scientific and technological gains of the last 150 years - is acting like the spoiled rich kids of the "Third Generation", and is perhaps "pissing-away" the legacy they have been handed at no cost to them.

Every old guy probably feels this to be true: "Goddamn kids are no good now! They're just being lazy, stupid and spoiled and want to get everything for free!" (I think some ancient Greek fellow in 3rd century BC Athens is quoted as saying something like this...)

But what is pretty clear - is that the markets have to run these "reset events" at least once per generation - say every 25 years or so - just to ensure that not *everyone* in every family ends up as a billionaire. The financial markets give the illusion of working well, to a create compounding investment opportunities. They work well - until then don't. And then, they reset (ie. crash).

So remember this if and when your time comes to purchase "financial assets". Chances are that the fellow who is selling these "assets" to you, knows more about their true value, than you do, and that he is happy to have your cash-money instead of the paper (or "digital"!) assets in question.

If you wish to invest successfully, then you need to understand scarcity, human nature, the power that is made available by technological methods and be expert at rational analytic process. You need to get good, clean data, and accurate descriptive and contextual information, and know something that the mass of investors do not yet recognize. And you must embrace and manage risk, and make it your friend. You must buy when most others want to sell, and sell, when most others want to buy. This describes something that is very, very difficult to do.

But you need to try to do it. The alternative is that you cannot pay your bills, and you do not eat! You will be reduced to again selling your labour-effort to someone else. Successful investment confers freedom upon the investor, if he can generate a reasonable income stream from the investments. Just be careful to ensure that your *income stream* is not just a return of your investment capital, but labelled as something else!

On balance, I suspect that over the long-term, stock markets probably destroy more wealth than they create. It is so very difficult to see the "graveyards" of failed investments, in history. At any point in time, when we look backwards - all we see are the successful outcomes. This is called "survivorship bias", and explains the "long-term investment gains" that academic economists identify in equity market investments. These folks argue that market gains are between 4 to 7 percent, over the "long term". To that, I can only say: "Nonsense." Or maybe, in the word of an old Physics professor I knew long ago: "Bunk."