OUZILLY, France – “How does this all end?”

It’s a regular subject for guesswork here at the Diary.

It is also the subject of a new book, The Breaking Point, by our old friend and editor of investment advisory Strategic Investment James Dale Davison.

Of course, to see what’s coming, you have to look back on what’s come before.

Jim sent us an advance copy and invited us to write a foreword. Herewith, we share with you an extract from our introduction…

Fantastic Vision

In 1900, a survey was done. “What do you see coming?” asked the pollsters.

All of those people questioned forecast better times ahead. Machines were just making their debut, but already people saw their potential.

You can see some of that optimism on display today in the Paris Metro.

In the Montparnasse station is an illustration from the late 1800s of what the artist imagined for the next century. It is a fantastic vision – of flying vehicles… elevated sidewalks… incredible mechanical devices, all elaborated from the Machine Age technology as it was understood at the time.

There is no sign of hydraulics, jet engines, or electrical devices, for example, just gears and pulleys… and flying machines that flapped their wings like a bird.

But when asked what lay ahead, the most remarkable opinion, at least from our point of view, was that the government would decline in size and power.

Almost everyone thought so. We wouldn’t need so much government, they said. People will all be rich. Wealthy people may engage in fraud and finagling. But they don’t wait in dark allies to bop people over the head and steal their wallets.

They don’t need government pensions or government health care either. Nor do they attack their neighbors.

The Great Illusion

In 1909, British politician Norman Angell published a best-selling book, The Great Illusion, in which he explained why.

Wealth is no longer based on land, Angell argued. Instead, it depended on factories, finance, and delicate relationships between suppliers, manufacturers, and consumers. And as this capitalism made people better off, he said, they wouldn’t want to do anything to interfere with it. It would only make them poorer.

One of his most important readers was Viscount Esher of Britain’s Committee of Imperial Defense. Set up in 1904, its task was to research and coordinate military strategy for the empire. Esher told listeners that “new economic factors clearly prove the inanity of aggressive wars.”

One of the most important components of the wealth of the late 19th century was international commerce. Capitalism flourishes in times of peace, sound money, respect for property rights, and free trade. It was clear that everyone benefitted. Who would want to upset that apple cart?

“War must soon be a thing of the past,” Escher concluded.

He was wrong. In August 1914, the cart fell over anyway.

The Great War began five years after Angell’s book hit the best-seller lists. On the first day of the Battle of the Somme – 100 years ago – there were more than 70,000 casualties.

By the time Americans arrived in 1917, the average soldier at the frontlines had a life expectancy of only 21 days. And by the time of Armistice Day – on the 11th day of the 11th month at 11 a.m. of 1918 – the war had killed 17 million people, wounded another 20 million and knocked off the major ruling families of continental Europe – the Hohenzollerns, the Hapsburgs, and the Romanoffs (the Bourbons and Bonapartes were already gone from France).

The Age of “Isms”

After the Great War came a 30-year spell of trouble.

In keeping with the metaphor of the Machine Age, the disintegration of pre-war institutions broke the tie rods that connected civilized economies to their governments.

Reparations imposed on the Weimar Republic after the war sparked hyperinflation in Germany. America, meanwhile, enjoyed a “Roaring 20s,” as Europeans paid their debts – in gold – to U.S. lenders.

But that joyride came to an end in 1929. Then the feds flooded the carburetor, in their disastrously maladroit efforts to get the motor started again – including the Smoot-Hawley Act, which restricted cross-border trade.

The “isms” – fascism, communism, syndicalism, socialism, anarchism – issued forth, like carbon monoxide.

They offered solutions!

Finally, the brittle rubber of communism (aided by modern democratic capitalism) met the mean streets of fascism, in another six-year bout of government-led violence, World War II.

By the end of this period, the West had had enough. Europe settled down with bourgeois governments of various social-democrat forms.

America went back to business, with order books filled and its factories still intact.

The End of History?

The “isms” held firm in the Soviet Union and moved to the Orient – with further wear and tear on the machinery of warfare in Korea… and later Vietnam.

Finally, in 1979, Chinese leader Deng Xiaoping announced that, although the ruling Communist Party would stay in control, the country would abandon its Marxist-Leninist-Maoist creed.

China joined the world economy with its own version of state-guided capitalism. Then, 10 years later, the Soviet Union gave up even more completely… rejecting both the Communist Party and communism itself.

This was the event hailed in a silly essay by American political scientist Francis Fukuyama, “The End of History?”

Finally, the long battle was won. It was, wrote Fukuyama, the “endpoint of mankind’s ideological evolution and the universalization of western liberal democracy as the final form of human government.”

Coming up tomorrow: Part II of our foreword to Jim’s new book… including how the credit system goes broke… and how the Republican Party chose a New York real estate developer to be their standard-bearer…




Further Reading: For more on that notorious New York real estate developer, be sure to read the following essay from Bill’s friend David Stockman, one of the few Washington and Wall Street insiders.

Political Insight

By David Stockman, Editor, Bubble Finance Trader

The U.S. is a nation on the brink of financial ruin. Our purpose at this point, however, is to dispel any illusion that Donald Trump – the man and his platform – offers any semblance of a remedy.

In the great scheme of history, the Donald’s great purpose may be to simply disrupt and paralyze the status quo. And that much he may accomplish whether he is elected or not.

For what is actually happening is meta-political. The bipartisan ruling elites are being Trumped.

Their entire regime of casino capitalism, beltway racketeering, and imperial hegemony is being unmasked. The unwashed masses are catching on to the “rigged” essence of the system, and have already become alienated enough to rally to outlaw politicians – like Bernie and Trump – peddling ersatz socialism and reality-TV populism, respectively.

To be sure, the metaphor of Shock and Awe and the idea of “regime change” have been given a bad name by Bush the Younger and his bloody henchmen. Yet there is no better way to describe Donald Trump’s rise and role than with exactly those terms.

This entire misbegotten regime is now well past its sell-by date; it’s waiting to be monkey-hammered by an unscripted and uninvited disrupter.

For at least that role, Donald Trump is eminently qualified. He represents a raw insurgency of attack, derision, impertinence and repudiation.

He’s the battering ram that is needed to shatter the polite lies and delusions on which the current regime rests. If he had been ordered from central casting for that role, in fact, it would have been difficult for Hollywood to confect anything close to the brash, egomaniacal rabble-rouser that is now heading the GOP ticket.

Unfortunately, Donald Trump appears to be an economic blank slate who can embrace any number of errors and delusions. That’s because his economics are purely glandular. Insofar as it is possible to discern, he has never been troubled by any kind of economic model or coherent philosophy at all.

But, alas, that is also his virtue. What needs to happen when the next recession and stock market plunge unfolds is exactly nothing. “Policy” is what is ruining American capitalism, and the corpulent state is it creating is what is eviscerating political democracy.

If Donald Trump is elected President, there will be no shovel-ready stimulus plan or any other economic policy fix within the first 100 days. Instead, there will be a gong show of such fury and fractiousness as to immobilize the Imperial City indefinitely.

If Hillary Clinton wins, the GOP-controlled House of Representatives will lapse into a partisan killing field for any economic tonics the White House may offer.

Either way, both ends of Pennsylvania avenue will end up in political trench warfare. And either way, the Fed will end up even more paralyzed.

If in the face of recession it attempts negative interest rates, Flyover America will finally erupt with torches and pitchforks.

P.S. Tonight at 7 p.m. ET, I am hosting a free webinar to discuss the coming election’s impact on the U.S. economy… and the opportunities it is creating right now. Find more details here.

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Yesterday’s Diary, about Germans stockpiling food and cash, was a big hit with readers from both sides of the political aisle…

I have never (until now) sent a comment to anyone. HOWEVER, put me in the group that loves Bill’s Diary. I don’t always agree, but always enlightening & entertaining!

– Jim G.


Love your Diary! Keep it up. But I love your mailbag even more! Where do these clowns emerge from? After all the vitriol that Hillary has endured from these Republican turkeys over the years, is it any wonder she is paranoid?

I’m just amazed she would follow the path of General Powell… good for her. Meanwhile, Trump is laughing all the way to the bank! I loved the comparison.

– Gus G.


I think you all need to read Frederick Hayek, The Road to Serfdom. In that book you’ll find out that Nazi Germany was the end result of Socialism/Progressivism, and we’re headed right down that road. I firmly believe the ideology of today’s rabid Progressives is leading us there. In any event, that book will stimulate some good dialog if the parties can maintain civility.

– Paul I.


Keep up the good info. Would not miss it. Makes my day.

– Almet S.


Our recent Weekend Edition, about how environmentalism is crushing Europe, was also a big hit…

Amazing article! Wind and solar is very expensive energy. And it doesn’t always provide consistent power to the public, especially in extreme heat or cold.

– Jim P.


And finally this from a peeved grammarian…

Bill Bonner writes today about learning useful things. Here’s a suggestion for a useful thing to learn: How to formulate and employ the ellipsis correctly.

Bonner is addicted to use, mostly gratuitous, of what I term the “pseudo-ellipsis.” It grates.

“There must be millions of older people who know this routine well… calling the doctor… arranging visits with a nurse to give shots… going to the pharmacy to buy drugs… raising the patient… lowering the patient… preparing the meals… cleaning the house… “

Someone who writes as much as he does owes it to his readers to acquire better mastery of the craft.

– N. Miller

In Case You Missed It…

From time to time, Teeka Tiwari, our trusted colleague and editor of The Palm Beach Letter, publishes “3-Minute Market Minder” videos. His latest is definitely worth watching…

In it, Teeka explains why the world’s central bankers hate gold.