David Collum: Broken Markets, State Capitalism & Eroding Liberty

Annual chronicler Dave Collum sits down with Chris again this year to discuss the major themes of his epic 2013 Year In Review recap.

2013 was a frustrating year for those who believe in cause-and-effect. Markets have been levitated far above what fundamentals would justify. Sovereign debt has increased tremendously, but seemingly without repercussion. Central planners have become more brazen in their belief that intervention is the best way to control both an economy and its citizens to surprising little outcry from the populace:

To me, this year was about civil liberties. It just dominated my field of view.

You can touch upon Snowden, but there were all sorts of breaches of civil liberties this year, all sorts of warning shots that say it's problematic. You can track concerns about the NSA's potential to go to totalitarian to 1975, Senator Frank Church. There have been whistle blowers all along saying these guys are dangerous. And then all of a sudden, somehow Snowden clicked. But he was not the first.

So civil liberty is a huge issue. They've got facial recognition software to make your shopping experience better. Right... I do not want my shopping experience being approved by face recognition software. We're at great risk of going Orwellian here. And this really came through clear this year.

The debt just keeps getting worse; we just keep going bananas on the debt. And these guys, they go on TV. They say we've got to get the consumer consuming. The consumer has no money: it's that simple. The consumer is out of money. Student debt is soaring because the parents are broke. We've got an entire generation that is being damaged daily by opportunities that do not exist that they were promised. And this is scarring.

And then the markets look broken to me. They are so state controlled and anyone that says that is conspiracy theory, then excuse me: What is QE? If the market are rigged, then what is QE? What are zero percent interest rates? What is that?

And so I think broken markets, civil liberties, state capitalism that is the plot.

Meanwhile, because the Dow is up, everyone is partying. But since the numbers are so bogus, we know we are going to get a regression of the mean. History of bear markets show three big legs down. We have only had two. The next one will rip the souls out of investors if it shows up. And the markets, the economy is immuno-compromised. We are fragile. If we get hit with another Lehman-type event, we are going to really crumble this time. We are really going to have a mess on our hands. And I think it could come.

Click the play button below to listen to Chris's interview with David Collum (62m:34s):

This is a companion discussion topic for the original entry at https://peakprosperity.com/david-collum-broken-markets-state-capitalism-eroding-liberty/

Wheat vs Corn?

An untrue story: 

Two Sicilian families dominated the business landscape in the City of Commerce.  One, the Polentas, established control of the corn industry.  The other, the Panos, came to dominate wheat.

A edgy rivalry took on a rough tone when the Polentas don decided to boost profits by imposed a blockade on the Pantino wheat market. He stationed his rough and hostile “intimidators” outside the store in the parking lot.  People would fear for their safety shopping at Pantino stores and soon avoided it.  Sales plummeted.  Corn became very popular in the City of Commerce, restaurant’s came to favor corn based dishes, and the Polentas made serious money.  Wheat prices bottomed far below production costs and farmers made plans to abandon planting wheat next season.

Facing ruin, the Pantino’s changed strategy by marketing to “families” in nearby cities.  The don invited them to his store in caravans with armed escorts who could stare down the Polentas thugs stationed in the parking lot.  Local people also discovered that they could safely get into the store to buy wheat when the out-of-town caravans were in the parking lot. Business resumed.  The Pantino wheat market recovered and came to prosper and croissants reappeared in the City and in peoples homes.  The price of wheat recovered.

So what just happened?

Answer:  Market forces drove wheat prices down.  The numbers of sellers outnumbered the buyers and the price fell.  Later, buyers returned and the price rose.

The “market forces” answer is correct, yet it also obscures understanding of what actually happened.  To accept the “market forces” explanation above, is to miss the deeper story of what is actually going on.  So, in that sense, this explanation, though true, is a deception.

In the gold market, we often see the late night smack down when an entity THAT HAS NO GOLD, “sells” $50 million dollars worth of “gold” in the middle of the night sending the price down.  The explanation for the fall in price is offered: “There were no buyers at that price level.”  Yet this flies in the face of the most avid buying of physical gold ever seen that is now occurring at this very price level.

My own take on how to respond to this situation is to purchase a small amount of physical gold or silver each month.  And stash it away, long-term, for retirement.   Turn off the TV and avoid the commentary of anyone you do not deeply trust is showing you the very deepest and truest understanding of the forces at work.  And to read Collum’s “Year in Review” again, twice.


What a great interview!  Here is my vote for an in depth podcast discussion on the state of our civil liberties.  If CNBC doesn't want him, we do!
The fiscal side of the situation is a done deal.  David's comments on the Kotlikoff fiscal gap payback amortization schedule sum that up well. Do we want the good news at 50% of all income over 20 years for payback, or the bad news for 80 years?  How about just compromise at 50 years?

So, since this ship really is sinking, I'd love to hear David's thoughts about how to avoid getting locked in the hold and drinking bilge water.  When the passengers realize we are sinking, our fighting chance at surviving comes from being on deck, not down below. He alluded to civil liberties lost in 2013.  Here is a nice discussion on 85 year old Kitty Werthmann's message of loss of freedom under the Nazi's in Austria.


The point to me isn't that we are feeling a great loss of civil liberties now, but that when the ship starts to list and really take on water, the protections of law to prevent the loss of liberties have already largely been removed. I have heard the  point  made that everything that happened in Nazi Germany was legal under German law.  I do not know what percent of that statment is true, but my question is, "Are we willing to live with what is legal under American law right now when the crew of this ship decides finally to sound the alarm that we are going down?"  That is what I would love to hear discussed.

Dear Sand Puppy,
I enjoyed the interview and especially DC's amusing wide ranging classic article, and I believe Hussman's market analysis BUT, 

as a former gold bug , I feel your pain - both of us would not be spending so much time going over the entrails of this 'dead man walking' investment if we had ignored the hyperbole of the gold bug blogosphere and simply had a 'stop' in place - the most simple, basic  chart based trading rule. No doubt those who pick the bottom in the gold price (which is not in sight) may make good money if they apply proper trading discipline - but whatever your investment , 'buy & hold' is not a long term viable strategy unless your a fully paid up member of the crony capitalists club like Buffett or a debt free farmer. Yes the markets appear very irrational, but as Keynes once said, they can remain irrational longer than an individual can remain solvent. Moral indignation is a poor investment tool, particularly when your main opponents are robots (machines & morally bankrupt immensely powerful Wall Streeters)(TBTF)

Only 3 things will push up gold in my opinion - none of which appears likely in the short term (2-3 years).

1.significant inflation (appears less likely, and as Chris & Dave discussed, TPTB are becoming leery of the social divisiveness of inflation & may elect for a deflation),

  1. a currency crisis in the US$ (NOT going to happen anytime soon) - all other currency crisis will lead to the Indian Government response - shutting down the gold market and a further downward pressure on the gold price, and

  2. the Chinese announcing a massive increase in their gold holdings with stated or implicit suggestion that they are trying to discredit the US$ & get their currency reserve status - why the nation that does the most QE and has more impaired banks would wont a gold standard that restricts QE , and why they would declare economic war with the IOUSA and the EU their main markets ? is beyond me - anyway, the Yuan is already an international currency which is being used for direct trade between China and its trading partners, circumventing the need to use US$, which the Chinese have more than enough of anyway.

The only solace for PMS owners is that they will always be worth something, but many gold miners are now worthless and likely to remain so, as bankruptcy is approaching for many. 

Trader Dan's article http://traderdannorcini.blogspot.com.au/2013/12/commitment-of-traders.html is a timely reality check for those who give credence to the 'gold conspiracy' theories about gold's "takedown" "manipulation" etc etc - even if theses things are true they appear to be supported by central banks and not to be illegal (prosecutable) nor is there any real effective opposition (no buyers) - until big buyers appear gold ain't going to rebound, and most punters are not flush - gold needs prosperity to create surplus funds to push the price up - FPIIGS citizens are on the verge of selling the family silver & gold to meet basic needs. His articles subtext could be " beware of conformational bias " ( seeking points of view that reinforce your own beliefs / prejudices , and rejecting the validity of or avoiding opposing views ). 

The following is a comment posted below 'Trader Dan's' article - reality check. It also mentions wheat so that adds extra gravitas to the comment.

Dan I am one of those that lost 50% of my account due to following certain prominent gold cheerleaders, and especially one, whom was considered to be the bard in the industry. The $5000 pronouncements were loosely thrown around, and in a most cavlier manner. What an incredibly painful lesson that was. Now I just look at the charts, and with gratitude that I have you to guide me through this process. I wish you and your family a blessed Christmas.

  1. John Andrew Szokolay; I sympathize with your plight - I really do.  I see something similar at times in the grain markets among certain analysts in that sector. They are always wildly bullish, always looking for reasons to be bullish, etc., instead of reading the charts. the problem there is that many farmers listen to their stuff or read it and then refuse to sell portions of their crop or at least get some hedge protection because of all the bullish slants to their analysis. In the meantime the price of the grains continues to move lower and the poor farmers end up selling into a hole. It could have mostly been avoided by being judicious and remaining Objective - something which is perhaps the hardest thing for we human beings to do. Merry Christmas to you and yours as well John.


We need to be less tepid about what is going on.  We are still, in many ways, in the incredulous phase.  Even those of us who are not, in many ways behave as if we are.  Like at other times in history, those who simply couldn't believe what was happening, paid dearly in many ways.
Great podcast by the way, we are getting finally to the meat of the matter.  Everything is being done to keep people in the system, most importantly crushing precious metal prices.  I still believe that when gold and silver price get out of control it will become illegal to hold those metals.

I am not necessarily against being "in the system".  The problem is that our "leaders" do not believe in the people that they are leading or that they can handle the truth.  I am not against making sacrifices for the greater good, but we need to have an adult conversation about what is going on.  At this point that does not seem to be in the cards.  We must transcend the "us vs. them" mentality and dig a little deeper into the nature of "evil" to find the "evil" within ourselves. If we cannot transcend those issues, the foundation that will allow us to survive, community, cannot be built.

We are finally discovering that we are part of this world, our bodies are ecosystems that mirror the places that we live.  That knowledge is starting to transcend our view of the world.  We don't have a financial problem, we have a consciousness problem.  Charles Eisenstein sums it up pretty well in a book that a friend recommended to me recently "Sacred Economics".  

Consciousness is quantized, like the rest of energy in the universe, and can seemingly shift abruptly without apparent cause.  What may seem impossible from a rational point of view, is becoming inevitable. Old wine cannot be poured into new skins, what we may consider safe and secure now may have no meaning in the future.  "Invest" in what you love, no person besides you yourself can tell you what that is.  In these times the most important thing not to miss is yourself.

It is absolutely without any question in my mind that virtually every financial market, and everything with a paper price, is being manipulated, gamed, rigged, and otherwise adulterated for fun and profit by those with deep pockets and deeper connections to Wall Street (as a metaphor for all financial centers across the globe).
If a paper market suddenly arose for houses in my neighborhood and Wall Street gamed it so that my house was "worth" less and less each year, or spiked massively in price, what would change for me personally? Not much unless I wanted to or had to sell.

From my perspective my home is actually becoming more valuable as I improve it and add to the soil fertility and ecosystem richness and abundance.

But to those fully caught in the hologram of illusion being peddled to us daily by virtually every orifice of the state, including especially its lackeys in the mainstream press, price is all that matters.

Once you buy into the idea that money is everything, then price is everything too.

But that's the point of being here at PP.com; we are actively trying to decide for ourselves what is really and truly valuable. Sure money has a role, but it's not the only role. Yes, the powers that be have a very firm hand on the paper markets, and they may continue that way for a while longer, or perhaps even a lot longer.

But 'they' cannot alter reality. They cannot create real wealth out of thin air, that requires real people doing real things.

No, moving electronic digits here and there does not actually create billions and even trillions in real wealth.

No, you cannot print up more bluefin tuna.

No, you cannot reverse ocean acidification by monetizing a nation's deficit expenditures (but you might speed it up).

The efforts to force the world back into the old paradigm of growth are nothing short of stunning, and speaks shrilly of level of unconscious level of denial that passes for modern 'wisdom.'

The younger generations are where my hope now lies because I see that more and more of them understand that we are decidedly on the wrong path in how we are living on this planet. Their understanding goes far deeper than money and so many of them have disconnected from the narrative now being bullied into one last hurrah by the ever feckless boomers who are rapidly cementing a truly dispiriting legacy for themselves.

The 'me generation' was the perfect tag for the boomers and will be a fitting epitaph too I suppose.

So here's to the younger generations.  Decide for yourselves what's truly important and live according to your inner compass which always knows right from wrong.  

Good post Treebeard,. One subject that is notably lacking in Collum's article and interview is the environment.  It mystifies me that someone can write a year-end-review article that touches on such a wide range of topics that are important to our well-being but completely ignore the big kahuna in the closet.  Chris brought up the sorry plight of our oceans and repeated it in his recent post, but Collum failed to follow up on the opening.
To his credit, Chris has mentioned on a number of occasions what our pollution is doing to the oceans, but it is vital to remember that ocean acidification and warming only represent one, albeit a big one, consequence of injecting massive amounts of carbon into the atmosphere.  All the effects of those injections need to become a big part of our consciousness going forward.  Even if we do everything else right, if we continue to crap in our nest, we won't be able to live in it much longer.  Chris is right about us boomers, but it is important to note that boomers brought environmental consciousness to the masses and still lead the movement.  Younger generations are coming along, but fossil fuel interests continue to corrupt the mass media and the gov't with their billions of $.
Climate change, along with our numerous other environmental obscenities, needs to be front and center in all discussions of our and our children's futures on this planet.  Gavin Schmidt has recently been pushing an agenda that climate scientists should be "speaking up and speaking out" about climate change. 
He is of course right, but as consumers of that information, it is our responsibility to ferret it out ourselves.  It's all there, we just have to dig a little and distinguish the flack coming from the denialosphere from solid science.  Then we must act!

Apologies if anything I said in my last post was taken of as a criticism of the PP team or the site.  I have this stream of consciousness writing habit; anything that may come off as an admonishment is often directed more at myself than anybody else.  Kudos to Chris and Adam and all the hard work the do here to raise the level of culture awareness.
Yesterday we had a seed exchange out our house.  Our local transition group has made a decision to move away from an educational role (movies, discussion groups, etc.) to a more apprenticeship approach, where each of us that have something to give reach out to a group that is interested, so that we start creating alternative structures, community connections, and a different way of doing business in real time.

It always feels like things are not quite moving fast enough, that we are months, if not years behind where we need to be.  I guess we are going to need that constant back pressure to keep us moving, and bring those in the "system" out so they too begin to look for alternatives, and those of us half out of the "system" doing the hard daily work of creating and facilitating those alternatives. So much work to do and the time is starting to feel real short. This Podcast was just another reminder of how short the time frame is getting.  Hence that frustration and anxiety it elicited in me.  Sorry if I may of passed some of that along.

Holiday blessing and cheer to the all in the PP family.

Thank you Chris for reminding this!
For those interested in learning more about our oceans, here is a good site:
State of the Ocean.org
Their State of the Ocean Report 2013 is available pdf & videos.
Maybe we should have a “State of the Ocean thread” here at PP.com?
Happy Holidays to all!

The younger generations are where my hope now lies because I see that more and more of them understand that we are decidedly on the wrong path in how we are living on this planet. Their understanding goes far deeper than money and so many of them have disconnected from the narrative now being bullied into one last hurrah by the ever feckless boomers who are rapidly cementing a truly dispiriting legacy for themselves.

The 'me generation' was the perfect tag for the boomers and will be a fitting epitaph too I suppose.

So here's to the younger generations.  Decide for yourselves what's truly important and live according to your inner compass which always knows right from wrong.

I can hope that is true but I am not seeing it! At least the baby boomer generation started off with a vision that was truly revolutionary. Yes, adulthood finally settled in for that generation and they became the Yuppies of the 80's. What I see of the younger generation now is a disillusioned, mostly apathetic, generation where the individual's self worth is measured by the number of "likes" he or she gets on Instagram. Sure there are individuals within the younger generation who can give us hope, and allegedly many of them have sworn off cars and the burbs (that's until they start having children, I suspect), but I don't see any evidence that the younger generation has any vision as a whole. The only cohesive movement, which lasted but a short while, was Occupy and that movement turned into an appeal to Big Daddy Government to save us all.

Aloha! No matter our age we are the Empire now and we are the reserve currency and that comes with the privilege of global consumer. America consumes more! So PCE/GDP is now at 68.2% in 2013/Q3, down from 69.1% high.
LINK: http://tinyurl.com/lqwqxxb

We have become a society of "tip analysts". The markets move based on whether the inflation rate for Q3 2013 is 1.4 or 1.6%, yet totally ignores the 97% loss in purchasing power(the part of the inflation iceberg covered unseen by the media) of the USD since the US Fed opened its doors. OFFICIALLY 100 YEARS AGO!!! The market moves if the unemployment rate moves down .2% or up .2% yet ignores the vast majority who no longer participate in seeking work or have just resigned themselves to parttime work hoping they never get seriously injured or ill.

Taper goes down $10BIL due in part to a projected skewed measure of unemployment rates and yet the markets ignore the flatlining real household income and the largely record lows in savings and 47mil Americans who cannot afford to eat without government aid. In one analysis if disability fraud were cut by 10% the official unemployment rate would rise to 9.9%. Some 29 million Americans are on disability. That is like getting off the Qantas flight in Sydney and nobody is working in the entire country. No taxi drivers, no Qantas hosties, no hotel workers, no Sydney Bridge tour guides … nobody. What is that 1-in-11 Americans are disabled? And 1-in-7 can't afford to eat and here on the Big Island, a rural farmland, 1-in-5 can't afford to eat. Why is it that the farmers and the farm employees and rural America has so little wealth while the NYC bankers and DC politicians live in abundance? How did it end up that the producers of the world are so poor in comparison to the index and futures market owners and brokers?

It is a well known fact in the treatment of addiction that denial is key to maintaining the high and in order for an addict to affect that denial they need to distort reality. They need to abuse the system to stay high. We have a country being led by 535 elected power addicts whose main goal in life is to preserve their addiction to power. They love their political and monetary high! So much so that they have no qualms in maintaining the status quo by any means possible. Even if it means selling out the entire Nation and scraping the US Constitution. If they must distort reality and blow market bubbles with the aid of the private central bank cartel then so be it. It is the giant price we pay for their short sighted high. There is no 1% or 99% there is only the 100%! But try to convince a Lloyd Blankfein of that.

After all isn't it all human nature? If you look deep enough you will see that our monetary system is purely based on human nature. Sovereign debt is the blank check mentality. Hand me a blank check and I will make sure I fill it full of as many 9s as possible and I will also make sure only my friends and relatives get some after I do. 

The first sentence in George Orwell's classic book on government sponsored reality distortion is …

"It was a bright cold day in April, and the clocks were striking thirteen." - George Orwell, 1984


To guard retirement savings in 401K couldn't one go to a private IRA with investment assets outside USA and EU?  Say invest in PM, land, and other resources, stocks in cratered markets?

A brief Christmas note.
If we are willing to "see" this building as falling down or collapsing, then we will probably be reasonably comfortable diverting our societies resources to wars and having our emails read "for our own protection." But what if we noticed that it looks a lot like an explosive destruction? If the Prince of Peace is to reign on the earth we will need to see through the deceptions that feed the military industrial complex and its preferred approach to the world–that of perpetual war. I believe that this seeing through is an act of the highest spiritual integrity.

Just for fun this holiday week I read "The Hunger Games" trilogy.  Suzanne Collins has nailed (or should I say 'arrowed')the military industrial paradigm in the head.  I highly suggest reading this teen oriented story. 
First, it is a page turner with political and economic themes for an adult audience. 

Second, I think she has her finger on the pulse of the youth sentiment in our time. 

Third, she presents a well thought out future world with limited resources that are unequally parceled out by a central government that uses a Russian Roulette type of hope to keep the populace in control.

sand_puppy, I think she is 'seeing through' in her fiction. Reading this helped me to become more attuned to the details of what is involved.

Having watched the sequence of events of the collapsing towers from impact of a 747 through the collapse as many times as I can stand, I would say that the collapse was a direct result of the plane impact. It is beyond belief that any explosives were planted to aid a process that began at the impact site. Anyone who has watched the planned demolition of buildings knows that it does not start at the top. It requires the weight of parts overlying the site of the explosives to bring it down.One might argue that it required elements of cooperation with the attackers to permit the attack to succeed  and that such cooperation was nefariously intended to garner support for subsequently planned wars and massive invasions of privacy, but most folks don't buy it. I certainly do not, however I AM appalled at the unconstitutional NSA invasions of privacy.

I'm with you aggrivated! Note my Mockingjay pin. "Welcome to the Hunger Games.  And may the odds be ever in your favor."

Thanks for looking at the information, weighing its implications, and then coming to your own conclusion.  At the end of the day, that is really all I would ask of anyone.  
And you are certainly correct in your observation that most explosive demolitions, particularly the "implosion", charges are fired in the sub basement and basement levels first to establish downward momentum of the building.  The momentum is an integral part of the destructive process.  This also limits the lateral ejection of debris and damage to surrounding buildings.

It turns out that buildings destroyed by fire and buildings destroyed by explosives each have a separate list of distinguishing characteristics.  Armed with this list,  even those of us not experienced in forensic analysis of destroyed buildings can take a pretty good shot at identifying the differences.  I personally thought the list was helpful and summarized a great deal of research from many sources.  (It can be found on the lower right edge of this page.)

And, as always, especially with controversial topics, everyone is entitled (and encouraged) to develop their own opinion.

Unfortunately most as a whole, will throw this into the category of chemtrails, Illuminati or anything else "way out there" as we have most definitely been programmed our whole lives to do. Not to say that any of that subject matter does not exist… probably all of it does. A life of plopping us in front of a cerebral structuring machine (t.v.) for hours on end from the very start of our perceived conception of reality (possibly 2yo and on…) is undoubtedly the plan. That "plan" is working very well.  I still have relatives that are not willing to listen or interject in an adult conversation about any of these issues. Why not?? Why cant we even talk about it?  The "people" that have structured this plan are very well educated, probably far more than most, and have slowly and patiently implemented this social structuring for a very long time. As you can see it has been working autonomously since its inception. We cannot survive as a species in concert with one another by blaming "the boomers", "Gen X" or any other designation, designed as all designations are, to separate. This very pivotal incident above that sand_puppy has most courageously posted here is a perfect example of how something so horrible can be thrown in our faces and next to incontrovertible scientific evidence is overlooked and thrown aside because our "Leaders" say it just is not so. Yeah they fell down all right. Everyone here would like to think they are awake or at least waking up. By the clear non-response to your post it appears to me that this subject is not convenient enough to be touched on. It also proves to me that "they" can and are willing to continue to throw these things in our faces largely because no one is even willing to talk about it. Don't believe in "Chemtrails"? Wake up and look up. "I believe, therefore, that a grand game of chess is being played on a level that we can barely imagine, and we are the pawns. Pawns are valuable only under certain circumstances and are frequently sacrificed to gain an advantage. Anyone who has studied military strategy is familiar with the concept of sacrifice. Those who have seriously studied history have probably discovered the real reason we go to war on a regularly scheduled basis."  - W.C. 

[quote=Stan Robertson]<snip> Anyone who has watched the planned demolition of buildings knows that it does not start at the top. It requires the weight of parts overlying the site of the explosives to bring it down. <snip>
I don't know enough about building demolition to agree or disagree with your statement. Whenever I've seen videos of buildings being demolished, it follows the pattern you describe. That could be because the demolition team gets the most bang for the buck this way. Does that mean this is the only way a controlled demolition can occur? Besides, didn't the Tower collapses originate a number of stories below the top rather than the tippy top?
Is the collapse of this building more in line with your idea of planned demolition? This building wasn't hit by a plane. You can find out more information at http://www.ae911truth.org/

Would the public accept these invasions of privacy if we weren't fighting the "War on Terror"? When did this war begin? Hmmmmm.

[quote]Besides, didn't the Tower collapses originate a number of stories below the top rather than the tippy top?[/quote]As I recall, the twin towers collapsed beginning at the level the planes hit.  I haven't seen a video of Bldg 7.