The United States is following the trajectory of the great empires of the past: A rapid rise lead by men of integrity and vision, followed by a period of wealth which encourages a softness of both thinking and character, and finally the inevitable decline caused by a lack of discipline and will. It is a great historical cycle of the birth, life, and death of civilizations.
Our civilization is in the early stages of death. We enjoyed a period of prosperity never before equaled in human history and capped it off with levels of national debt which we can never realistically hope to pay off. The total amount of debt and unfunded liabilities of the US government now amounts to $1,096,989 per taxpayer — and very few taxpayers have a million spare dollars to give to their Uncle Sam. 47% of American households now receive money directly from the government every month. The populace is being kept calm with bread and circuses because our politicians lack the discipline and will to tackle the problems facing the nation.
The founding fathers knew this would happen. Jefferson expected the Constitution to last only forty years. Franklin knew specifically how it would happen. He wrote “When the people find they can vote themselves money, that will herald the end of the republic.” The people figured that out and now we are barreling towards the end of the republic.
Yes, Trump (like Obama before him) is fiddling (actually, golfing) while the United States burns. However, the US government simply isn’t all that important in American life. We all get up in the morning and go to work without the government. A government shutdown would be, for most Americans, a barely noticeable inconvenience. Large-scale macro-economic issues normally play out so slowly that most people adjust for them before they occur. We are a resilient species. We survived WWII and, except for the portions of the globe ruled by socialist governments, recovered almost completely within a decade.
With the most powerful nation ever to exist falling apart, one would expect the price of gold to be skyrocketing — but instead gold prices are in free fall. This is an excellent example of the counter-intuitive reality that long-term macro-economic issues are often the worst thing to consider when planning an investment portfolio.
Consider a couple planning to open a bakery. They might open the bakery at the start of a long recession, operate it successfully for several years, and then be forced to close the business at the beginning of a recovery. Why? It might be because they were only able to operate profitably due to the decreased labor rates made possible by the recession. It might be because a stronger competitor decided to open a competing bakery because the economy was recovering. It could be a combination of dozens of factors — none of which are related to the larger macro economy.
Don’t let the prospect of seeing the end of the world as you know it discourage you from making a better life for yourself and your family within the scope of the macro failure. We humans find ways of surviving economic downturns, and the smartest of us find ways of profiting from these downturns. You can lose money in a rising economy and you can make money in a failing economy — depending upon the quality of your foresight and the strength of your discipline and will. In future articles, we’ll discuss strategies for making money in this failing economy.