The Bear And The Government Surprises

Sept. 20 2008 Hans Lysglimt

On Monday I warned you that we would see unexpected actions from the Central Banks and the governments. I did not know what was coming, no one really did, but I knew something was coming.
And that is why I asked you to sell some of your put options early on Monday, early European time before the US markets opened. Put options should be bought when there is smooth sailing, and sold when uncertainty and fear is raging – as they were on Monday.

We still hold put options, but they are now with maturity in January 2010. We are confident that the markets will either collapse or slide downwards considerably before then. But in the meantime this is a game of cat an mouse. Or a game of bear and pray if you like.

The government is doing all kinds of desperate measures in order to shore up markets and keep the calm. They are dependent of this orderly calm for their political mandate to be valid.

In the end this is all a political game. We are prisoners of the modern liberal democracy. This political system has replaced most other systems, even forced out the original Constitutional Republic that the USA was founded as. And now the USA is even using the full force of it’s political power to force this political system on all other countries in the world. They shall have it good and hard. The goal of the USA is to transform the entire Middle East, China, South America, Japan (success), Russia, Eastern Europe (success) and the rest into the modern liberal democracy where the Establishment has full control. There might be two parties, but there really is no choice. It is a power grab by a political elite. This system is viewed as the pivotal system of organizing human kind. And that when this is enforced by nuclear threat on the entire world there will be eternal peace and calm. There will be green pastures and the entire world will look like a well manicured Disney Land where we can all go about our lovely middle class daily lives and go to church on Sunday.

Well, this is all an illusion. The modern liberal democracy has not really been stress tested. It is a very modern invention that we do not really know much about. Greenspan says this now is a once in a decade financial event. Well, the modern liberal democracy is about the same age, more or less. So this is the first real hard test of the system. And it is starting to crackle already.
The modern liberal democracy is built on an idea that you can create confidence by making promises from a entity called “the state” so that people in the rat race will work hard and produce wealth. People believe the state will take care of them, pay them pensions, pay them medicare and make sure their savings are safe.

But the modern liberal democracy is a scam. There simply is not enough wealth to make good all the promises made. There simply is not. So the system is build on preserving the illusion of all this wealth. The illusion has to be kept up at any cost, because the system would crumble if the masses understood that the safety, wealth, savings and everything they believe in is for the most part an illusion. It is not all an illusion, but for the most part it is. Put this way, it is more illusion than reality. Less than 50% of the perceived wealth that people think they have in the future is not real, it will not be delivered upon or it will be inflated away.

An illusion, a lie, a scam can not go on forever. Sooner or later it will crackle and end.
This is what we are seeing now, this is the beginning of the end of the illusion.
Wheat we are seeing now is the initial crackling of the promises illusion of the modern liberal democracy.
It will only get worse, somehow enormous amounts of promises will not be lived up to.
We are in for the biggest disappointment ever.

This will be a gigantic test of our society’s structure.
Promises will be broken en mass.
Massive tax increases.
Massive inflation.
Savings depleted.
Pensions buying nothing.
Medicare pulled back.
The dollars will be paid all right, the amounts and the books will add up.
But the dollars will buy nothing.

A gallon of gas will cost USD 40.
A haircut will cost USD 200.
An ice cream will cost USD 50.
And so on, wealth and the value of promises will all be eaten up by inflation.

The big question is if the modern liberal democracy can even survive in it’s present form.
What scares me is that the establishment will do anything to stay in power.
If a revolution comes about, or a financial meltdown takes place, if the public demands change and revolts.
If this should happen I expect the establishment government to initiate a major crisis, a war, just to stay in power.

For the establishment it is better to nuke Iran or Moscow, declare martial law and seize all powers, than it is to loose control of their grasp of the government system.

They can and will do anything to stay in power. Anything.

Gran Canaria, Spain. Sept 19. 2008 Hans Lysglimt

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