Thousands of years ago during the late Bronze Age– most likely between 1100 and 1200 BC, two ancient civilizations were exhausted after nearly a decade of warfare.
On one side was the ancient Achaean peoples led by the Mycenaean king Agamemnon. On the other was a legendary Hittite city that had already been in existence for more than 2,000 years.
Back then the city was called Wilusa. Today we know it as Troy.
The general consensus among historians today is that, most likely, the war did take place. But it obviously lacked the drama and intrigue of Homer’s epic tale, the Iliad.
We all know the story: after nine grueling years of war, Odysseus hatched a plan to sneak through the impenetrable gates of Troy. Guided by Athena, the goddess of wisdom and warfare, the Greeks built a hollow statue of a horse and hid their soldiers inside.
The horse was left as a gift for the Trojans with an inscription of goodwill and peace. And, according to Homer’s legend, the Trojans took the bait.
But there were a few people who predicted severe consequences, including a Trojan priest named Laocoon, who famously warned, “Timeo Danaos et dona ferentes.”
Translation: “Beware of Greeks bearing gifts.”
This was a time in human history in which oracles and prophets were a normal part of life. People in the ancient world regularly sought counsel from ‘seers’ who claimed to have some special power to predict the future.
And frankly this addiction to prophesy lasted for thousands of years. Even famous historical leaders into the 19th and 20th centuries like Napoleon, Joseph Stalin, and Adolf Hitler reportedly took advice from fortune tellers and astrologers.
But if we really analyze Laocoon’s legendary warning about the Trojan Horse, he wasn’t making a prediction about the future. He was just looking at obvious facts and exercising good judgment and common sense.
That’s what good ‘predictions’ are anyhow. No one has a crystal ball to see the future like some prophetic oracle from ancient mythology.
And I wanted to be clear about this point… because when we write about future financial consequences, like a debt crisis down the road, or the US dollar losing its reserve status, etc., we’re not making ‘predictions’.
Rather, we’re looking at obvious facts and trends, then exercising good judgment and common sense. And the facts are very clear.
We don’t peer into a crystal ball when we say that the US national debt is set to increase by $20 trillion over the next decade. This is publicly available information pulled directly from the Congressional Budget Office’s own forecast.
It’s not some magical prophesy when we say that Social Security’s trust funds will run out of money in a decade. This information comes directly from the official report of the Social Security Board of Trustees.
Nor are we exercising any special powers when we say that the Federal Reserve is completely insolvent. We’re just looking at the Fed’s own quarterly financial statements which show an unbelievable $1.3 TRILLION in unrealized losses.
You get the idea. There’s nothing mystical about the ‘predictions’ we’re making; we’re simply citing official reports and connecting the dots that almost everyone in the ‘expert class’ chooses to ignore.
Sure, we think that an insolvent Federal Reserve, plus $20 trillion in new debt, plus Social Security’s bankruptcy, will probably have consequences. But we’re also careful to acknowledge where we might be wrong.
I’ve written several times that the US government still has a very narrow window of opportunity to get its house in order. Sadly, they are not taking advantage of that window.
It’s also possible that an AI-led economic boom could dramatically increase productivity and tax revenue in the US, similar to the Internet boom in the 1990s.
But given that there are so many prominent figures in both government and within the AI community itself, trying to restrain AI’s growth, I’m skeptical that an economic boom will happen in time to forestall the most severe consequences of America’s gargantuan debt.
This is why we feel that our analysis is on very solid ground. And that leads me to solutions.
There’s an old Danish proverb (frequently mis-attributed to Mark Twain) which translates as “Predictions are hard. Especially about the future.”
But sometimes they’re not. Or better yet, I’d say that predictions are hard… except when you’re not actually making predictions.
Again, we’re looking at clear and obvious facts.
Social Security, for example, states that the program will “become depleted and unable to pay scheduled benefits” within 10-12 years. That’s not a ‘prediction’. That’s arithmetic.
For rational, thinking people, however, this should not be a cause for panic. Instead, it should a reason to take action and solve the problem on an individual basis… rather than wait for Inspired Idiots in the government to fix it.
And there are plenty of options. Setting up a more robust retirement structure like a solo 401(k), for instance, allows you to contribute a lot more money for retirement, plus it provides a wider range of investment options like real estate, crypto, and more.
And even if the Inspired Idiots miraculously come together to solve the Social Security problem, you won’t be worse off for having set aside more money for retirement.
Ditto for other risks we discuss.
Real assets, for example, generally tend to perform very well during inflationary periods. Yet many real asset producers are currently trading at historic lows.
There are highly profitable, debt-free, dividend-paying companies out there whose share prices are extremely cheap. And if the future inflation scenario we’ve outlined takes hold, those types of companies typically experience extreme gains.
But if we turn out to be wrong, it’s hard to imagine being worse off buying shares of a successful, dividend-paying business at historic lows.
This is a great way to think about a Plan B: consider solutions that make sense regardless of what happens (or doesn’t happen) next.