Back in 2011 I made some rash predictions about what would happen in the next ten years compared to 2009. My long term commodity predictions didn’t seem to do so well, but the rest did ok:
Prediction #1: The world will successfully add another $100 trillion debt by the end of 2021
Prediction #2: Gold prices will double in real terms
Prediction #3: Silver prices will do better
Prediction #4: Oil prices will do even better
Prediction #5: Government deficits to rise seven-fold
Prediction #6: Two more wars
Prediction #7: A recession and low interest rates
Prediction #8: More bubbles
Prediction #9: A Great Financial Crisis
Prediction #10: Change we can believe in
Prediction #1: the world will successfully add another $100 trillion debt by the end of 2021
(or “needed credit” according to the World Economic Forum).
Result: Smashed it! ✅
Starting at around $180 trillion in 2011, global debt smashed through the $300 trillion mark at the end of last year. It was a slow start and I was worried the world would fall about $20 trillion short. I should have had faith in our leaders. The global response to the “pandemic” added around $40 trillion, taking us safely into the red.
Prediction #2: Gold prices will double in real terms
Result: total miss ❌
When I made this prediction gold was trading at $1,400. It’s now at $1,816. That’s a 29.7% increase in nominal terms, or 2.6% per year. That’s approximately reported inflation.
The grossly manipulated BLS inflation calculator indicates that with reported inflation gold should have been $1,767 in November. It was. However, based on the calculations at Shadow Stats, the real gold price should be $3,470 (2.5x) to keep up with inflation.
Clearly the money that would have been piling into gold has been chasing Bitcoin and Ether.
Another way to think about what the gold price should be is the increase in US government debt. Back in 2011 it was $14.3 trillion. It hit $28.5 trillion last year — approximately doubling.
In fact, the increase of $14.3 billion is 45% higher than in the previous ten year period when there actually was a crisis. Governments are getting even better at what they do best.
Given the preference for bitcoin and other blockchain options, most of the world has fallen out of love with gold.
Prediction #3: Silver prices will do better than gold
Result: Total miss ❌
Silver prices have actually decreased by 20% since my prediction. Fortunately, my email subscribers (and me) made a bunch of money on the way up to $45.
Commercial uses for silver are still increasing, however it’s less attractive than gold as a storage of value. While many pundits are forecasting a rapid increase in demand due to electric cars and solar panels, the reduction in production will be more interesting.
Prediction #4: Oil prices will more than double
Result: Total miss ❌
Over the past ten years, companies have found new sources of oil in the US and developed lower cost of extraction. Oil prices have fallen by more than half in real terms. Once supply chains sort themselves out and countries come out of lockdown, oil prices should go well over $100 a barrel. We’ll be watching this one.
Prediction #5: Government deficits to rise seven-fold
Result: Sort of ✅
Missed with the 2011 base, although to be fair to myself, deficits did blow out 7-fold from 2008 levels and 15-fold from 2007.
The US disappointed here. The deficit actually fell by a quarter from $1.30 in 2011 to 0.98 trillion in 2019. An annual loss of $1 trillion is still a lot — it’s the entire annual GDP of Mexico. And yet, when asked about going another trillion dollars into debt each year, Americans respond the same was as if they’d been told Mexico had suddenly disappeared: a disinterested shrug.
Fortunately, Mexico didn’t disappear and politicians quickly fought off Covid with an extra $3.6 trillion. American tax payers were happy to be saddled with an extra $25,000 each to postpone a cold for two years.
At the end of the day, deficits only climbed by 113%. This is still a wildly insane amount, but compared to the current insanity prevailing in Washington, it seems fairly mild.
Australia did better though.
Compared to 2008.. well Australia used to have a surplus. Now the deficit is running at around A$161 billion (US$117 billion) which is 8.8% of GDP. That’s a good effort by our heroes in Canberra, but still well behind Washington’s 13.6%.
Prediction #6: Two more wars
Result: Heck yeah! ✅
Easy. But sticking strictly to the wars the US was involved in, we get to five:
- Libya x 2 (The 2011 overthrow of Gaddafi with US help, and the 2014-2019 air strike season)
- Uganda (The 2011 overthrow of Ongwen with US help and subsequent civil war)
- Iraq (Third Iraq war 2013-2017)
- Syria (US air dropped a mass of weapons and ammo on insurgents fighting the al-Assad government and ISIS/ISIL and each other, and the subsequent shit show was a good reason for the US to go in a build some bases)
I know I’m sort of stretching here — the only significant wars were Iraq (pretty big) and Syria (much smaller, but will last ten years). The trouble was that Donald Trump was elected president. What a disgrace that man is. In four years he didn’t start a single war, and actually ended two. No other US president has had such a shameful record of not spreading carrier-launched democracy to the world.
Aside from the wars the US was directly involved in, there were a few more that the US only supported covertly through the CIA: South Sudan, Mali (US had troops on the ground there), Congo, Central African Republic, Crimea, Myanmar, Azerbaijan, Ethiopia, etc.
Prediction #7: A recession and low interest rates
Result: You bet! ✅
The Fed raised interest rates to a whopping 2.4% in 2019, but slammed them to the floor as Covid spread through the world. Rates were 0.05% in April 2020. The Fed’s funds rate is still 0.08% and it seems more likely that the Fed will raise its inflation target than raise interest rates.
Meanwhile, reported GDP remained strong at 3-4% annually before going into recession in 2020. Actual GDP growth may have been a lot lower, according to Shadow Stats, who suggest that the US economy never really recovered from the 2008 recession.
Interestingly, Australia never went into recession until 2020. This was the first recession since 1991
Prediction #8: More bubbles
Result: Yup, a whole bath ✅
I could go through dozens, but let’s stick to just four:
- Housing
- Stock Market
- Carbon trading
- Bonds
Housing prices doubled
Remember that housing price bubble that burst in 2008? Since then, housing prices have more than doubled.
The stock market is up 5-17x
That’s nothing compared to the stock market. The relatively staid Dow Jones Industrial Average (“the Dow”) is up 5x since 2009 — 2.5x as fast as the housing bubble
Tech stocks have done three times better than the Dow. The Nasdaq 100 is up more than 14-fold since 2009 — outperforming houses by a whopping 7-fold.
Then of course there is that great thing called carbon credits.
Carbon credits — a climate change bubble
These are created when someone builds a hydroelectric plant, wind farm, plants trees, or agrees not to cut down a forest. Enterprising environmentalists create and purchase the associated carbon credits from bemused land owners, package them up, and sell them to other environmentalists on Wall Street, who stuff them into an ETF and trade them.
There are end users out there somewhere who are also in the market for carbon tax offsets and are being outbid by the Wall Street environmentalists. Result: a bubble. Check out KraneShares Global Carbon ETF (KRBN) up 150% in 18 months
Finally, the most basic of all, US treasury bonds.
Long treasury bond yields hit even more historic lows
The 30-year treasury bonds are usually least affected by short term interest rates because of their longevity. However, since 2008 the Fed has become most proficient at managing interest rates all along the yield curve. Back in 2010, you could still get a 4% yield on these things — the safest asset in the world of Uncle Sam. Now you are lucky to get 2%.
I’ve inverted the chart to help see the bubble.
What is shows is that for the same interest payments, the US Treasury can sell 2.5x as much long term debt as it could in 2008. How could politicians resist this? They didn’t.
Prediction #9: A Great Financial Crisis
Result: A Great Economic Crisis ✅
Back in 2008 we had a financial crisis. The US government borrowed $2 trillion in two years and the Federal Reserve created $1.3 trillion to normalize the banking system.
Back then, the government hadn’t done anything to create the crisis, other than just leave interest rates at 3-4%. This time around, the Fed has maintained almost zero and the government stepped in and deliberately created the current economic catastrophe.
These guys are champions.
So far, it hasn’t resulted in a financial crisis because the US government spent an extra $4 trillion in two years and the Fed monetized $4.6 trillion. Other governments have been equally fast to borrow and spend to normalize the crisis they created.
It will take decades for the economy to recover from our clever politicians. Shutting down multiple industries for two years is having very obvious and predictable results:
- Supply chain bottlenecks won’t be cleared for at least a year, and in some cases several years.
- A loss of skilled workers who will take 5+ years to replace
- The collapse of well run small businesses that will take years to replace
- An economy that is so badly skewed that many industries will have to shrink, further extending the crisis
On top of this, governments around the world are kicking qualified experienced workers out of jobs through vaccine mandates, further exacerbating the problems.
Prediction #10: Change we can believe in
Result: Absolutely ✅
Back in 2011, we had Obama and Biden in the White House delivering Change We Can Believe In. After a short stint of Donald Trump ending wars, securing borders, stepping back from globalist agendas, and other changes we couldn’t believe in, Biden is back to Build Back Better.
And that’s it. Let’s just say that governments around the world have way exceeded my high expectations.
Peter.
