If Only Central Bankers Were as Wise as Socrates

Dateline: Kuala Lumpur, Malaysia

2,400 years later, Socrates is still known for having said, “I am the wisest man alive, for I know one thing, and that is that I know nothing.”

If only modern politicians took that to heart.

Albert Edwards is the analyst behind “The Ice Age Thesis” which lamented the loose monetary policy of western central banks long before it was popular.

Normally, that kind of prediction-making against the banking cartel would make media types rather unhappy. And no different is treatment for Edwards, who has been labeled everything from a “perennial pessimist” to “raconteur” for his pessimistic views on the US and European economies.

Of course, we know the folks in the financial media have a vested interest for you to buy the worthless paper their advertisers push, but the stuff Albert Edwards talks about is exactly what we discuss here.

For example, Edwards has suggested that the Japanese yen will go into “free fall”, a prediction shared by trader Tres Knippa on a recent Nomad Capitalist radio show.

(Tres will elaborate on how to profit from it at Passport to Freedom in Cancun).

Edwards has also suggested just as Peter Schiff told our audience in Las Vegas earlier this year…

…that the missed recessions caused by central banking’s brilliant plan of a “Great Moderation” will catch up to us in one big depression that will make 2008 look like a picnic.

Now, Edwards has been named the top analyst in the world by some rather trusted names, but that doesn’t stop the easy money crowd from wanting to see him tar and feathered.

There’s only one problem: the easy money crowd must have never read Socrates.

A few weeks ago, Albert Edwards warned investors to “sell everything and run for your lives”. The market was getting beaten up and was on the verge of a correction.

Wall Street was freaking out because the alleged slowdown in money printing had caused the Dow – as well as European markets – to dive.

They just couldn’t stand the idea that the Federal Reserve wouldn’t keep churning out US dollars to prop up the ridiculous notion that fair value for the Dow is 18,000.

And Wall Street would be all too happy for you to continue to scrape by on 0.1% interest rates if it means they can falsely boost the value of their house of cards.

Of course, that’s just what happened.

After all of the whining from the financial elite, the central bankers regrouped, put their heads together, and decided to stick their hand back where it doesn’t belong.

They decided that the world just couldn’t survive unless stock prices go nowhere but up, even as 1/3 of Dow components face losses.

Such is the modern monetary system, where the cartel throws every man, woman, and child under the bus – and dooms them to eventual poverty – all to protect the interests of an elite group of traders and insiders.

For now, the party for these elitists is going rather nicely.

But Albert Edwards has exactly the right rebuttal to the idea that the stock market reflects any kind of real value. He says, simply, “central banks for all their huffing and puffing cannot eliminate the business cycle.”

At the end of the day, it really is as simple as that.

Today’s central bankers and politicians have taken the endlessly arrogant belief that not only do they KNOW everything, but that their mere presence can alter the realities of the universe.

That if only we leave them and their fancy economics degrees to handle the world financial system, they will make sure that human nature and the laws of economics are held off.

The central bankers take the exact opposite approach as Socrates; they think they know so much that if they just delay the inevitable long enough, the inevitable will never happen. Such a belief defines their very existence.

Anyone with half a brain can determine that the US economy has had no fundamental change that would allow for its equity markets to rebound nearly three-fold. The US government is busy dummying up rigged statistics to make you think more people are working and more people are spending.

In the end, it’s all either fake or a massive credit bubble. The entire system is built on lies.

Just as a gunshot wound won’t magically heal by wishing it away, central bankers can not merely wish their desired version of events into existence. Bad monetary policy has consequences; consequences that played out when equities markets got battered recently.

The bankers were able to step in and “right the ship”, but it won’t stop the ship from taking in water.

As Albert Edwards, Peter Schiff, and others know, stock market valuations are so stratospheric thanks to easy money policies that you don’t even need a REAL recession to trigger a crash and wipe out massive amounts of wealth…

…you just need the idea that a crash is coming.

One doesn’t need to look back to the days of Socrates or the many failed economic empires that have come and gone since.

They must merely look to the 1980s when a similar scenario played out.

Of course, the money manipulators will tell you that they know better than that now. They are the geniuses who have finally cracked the code on how to successfully go up against the laws of economics and win.

They need not study history because they believe they are smarter than thousands of years of history.

Perhaps the central bankers are right and the Dow is headed for 100,000 and the dollar will never be worth less.

In that case, keep your money in your friendly, over-leveraged and insolvent US or European bank. You’ll be just fine.

But if you believe those who think they can defy both history and economics have another thing coming, you’ll need an escape hatch from the coming free fall.