The Once and Future Calamity

Posted: August 24, 2013 in Behind Phoenix Republic, Current Events
Tags: , ,


Phoenix Republic is a story about average people, sisters, overcoming their reality bias and surviving a titanic shift in the economic underpinnings that make modern life possible.  The story is about what it would be like for a normal person to hold on to their faith, to hold on to their ethics when faced with dramatic change to the very fundamentals of the foundation their lives are based upon.  This blog is about relating the novel to every day events.  This week I was intrigued by something called the “Hindenburg Omen.”  What is it exactly?  Well it is basically a set of technical benchmarks that Keith Fitz-Gerald of  noted, has predicted every major market inflection point since 1985.   If the omen occurs twice in a 30 day period, it’s up to 90% accurate in predicting market selloffs resulting in at least a 5% correction within 45 days.  Currently, this set of metrics has occurred 5 times in the last 8 trading sessions.  I was sufficiently intrigued to see what articles might be available.   Looking at I noticed some interesting data points.

People, corporations, and the government at all levels are carrying more debt than they did in 2007.  The Federal government is in fact carrying 60% more debt than it did in 2007.  Interest rates have risen by 80% in only three months and regardless of the media’s pontification, the economy is obviously still in recession.  Stocks are as overvalued today as they in the “Great Depression” or prior to the housing crash in 2008.  As in Phoenix Republic, not only the United States, but the entire world seems to be hanging in the balance, held together by lies, delusion and false promises.  What might be the result when the music stops?

Like the fictional characters in the novel, most of us have a generally optimistic outlook regarding our future.  That is to say we are more or less optimistic until conditions begin to rapidly deteriorate.  As I read through the headlines over the last couple of weeks, I am captivated by the similarities between our current situation and the reality that the Third Century Romans faced.  For them, corruption, over spending, and security pressures caused arrogant leaders to make mistake after mistake as they sought to maintain their power.

Due to political leaders leveraging Rome to maintain their lifestyles they felt entitled to, and as a result of constant attacks by determined enemies, the financial underpinnings of their civilization became untenable.  The Severan emperors continually dealt with increased budget demands by inventing new taxes, debasing the currency, (quantitative easing…), confiscation of property owned by the rich, (paying their fair share…), and eventually selling imperial assets.  As the strained budgets resulted in declining infrastructure within the empire, the military also suffered as increasingly the cash strapped government was forced to begin relying on lesser quality soldiers from outside the empire, (the Barbarians).  As you might expect productive Romans, especially in the provinces, revolted, further weakening the empire.

It is frightening how familiar the story is to our current paradigm.  As Mr. Bernanke announced an end to quantitative easing, what will be the effect on the markets and thus our lives?  Rising interest rates will hit everything from home and car loans to credit card borrowers to people with leveraged investments.   My thought, is just maybe we should all be wide awake and staying frosty as events unfold.

God bless and good luck!

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