The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick
Kevin: David, just imagine, if you went to bed one night with your bank deposits intact and the next day you found out that for political reasons, and actually patriotism, you just lost about 10% of your deposits, but you should be happy for it, and pretend also that it wasn’t a decision by the U.S. government that caused that, but by some entity outside of the government that told you, “Oops, you just lost your deposit.”
David: “And you should be happy about participating.” There are number of things that we need to talk about. One is the idea of a wealth tax. The other is the nature of trust and what you are dealing with in terms of market expectations and how critical that is. Another is that the context of these decisions is critical. Understanding the context for any decision is absolutely key, and we will look at that, too.
But what we are revolving around in the conversation today is what happened in Cypress over the weekend, and what does Cypress have to do with anything? It’s a small island in the middle of the Mediterranean. Does it really have any importance to us here in the United States? Or to someone in Shanghai? Or to someone in Spain or Italy, perhaps?
Kevin: I didn’t take a poll on this, but I just wonder how many people, when they heard there was a problem in Cypress, had to go to Google Maps to find out where the heck it was. I mean, it is that small. And that’s the way the news is really trying to portray it. They are really down-talking this breach of trust in the deposit system.
David: From the Great Depression of the 1930s forward, politicians have realized the need to reinforce the idea of bank deposits being safe. Trust broke down in the bank runs of the 1930s when people realized that investment decisions by bankers were not as sound as they originally believed they were, and then when they wanted their money back they found that liquidity was fairly scant. They didn’t have all the money there, it had actually been invested in farmland, it had been invested in mortgages, stuff that didn’t give them immediate access to their funds.
Kevin: And enter the FDIC. The FDIC came to re-instill that trust that was lost.
David: Yes, arguably, the FDIC was nothing more than window dressing for the banking industry, creating that sense of security, and that is very important, because it gives investors a sense of calm in relation to their assets. Depositors need to be feel secure with their deposits in the hands of others. And this is the issue. With the breaking of social trust in the 1930s, they had to have that added assurance that was needed in order to rebuild confidence.
So with time, security becomes an underlying assumption, and that is what we have had from the 1930s forward. Security becomes an underlying assumption amongst depositors. It is something that is never questioned.
Kevin: Right. It is amazing to me, David, I have talked to people who lived during the Depression, for years I have talked to them, and they have regained that sense of security to the point where they trust banks almost too much. It is a strange dichotomy, because they lost their assets the last time. There is story after story of people who lost assets, but the FDIC, and the way the banks have operated up to this point, at least in our lifetimes, have not given us the reason to believe that we would just all of a sudden lose our money.
David: And what is interesting is that Cypress is one thing we will spend some time talking about, but these banks have proprietary trade desks that are essentially gambling with depositor money. Granted, they are doing it on a scale that is not supposed to impair the assets of the bank, everything is supposed to be very safe. The issue of J.P. Morgan and things getting a little out of control with the London whale, okay, it was one event, look at all the other years in which these speculative activities have taken place, and did not impair, in fact, helped the bank grow stronger. There is this sense of, “We’re fine…”
Kevin: Like Goldman-Sachs, they’re doing God’s work. As they’re losing money for their investors, they are doing God’s work.
David: And depositors don’t ask any questions until it appears that something is going wrong, and then they say, “You were doing what with my money?” This is different, because you are talking about externalities. But as you say, even with our clients who lived through the 1930s, history fades. Experience, with that threat of loss, dissipates. Even in 2008, we had the extraordinary measures that ensured maximum deposits. It went from $100,000 to $250,000.
Kevin: Which is still in place.
David: Right. And then they also said, “We’ll give you unlimited coverage as long as it is a non-interest bearing account. So you could have 5 million dollars sitting in a bank, and it would all be insured, as long as you signed off on not receiving any interest income. Then it was all covered.
Well, they rescinded that in December. Many people don’t know that, but the blanket guarantee went away just recently for the FDIC. They still have the $250,000 in place. But again, in the context of 2008, that reassured depositors that their assets were safe in, frankly, the worst financial storm in decades.
Looking at the 1930s, the issue was one of bank solvency, and the concern was market-related. The loss was market-determined, excess lending, increased concentration of loans and illiquid assets, specifically farmland. The issue in Europe is very different. It is the idea of a governmental body stepping in to conscript capital on a non-voluntary basis.
Kevin: Which is theft, Dave.
David: Well, using the assets in question, yes, they are buttressing the sovereign fiscal issue, but they are describing it as a bail-in, not a bailout, a bail-in. You are being asked to participate, invited, in essence, to participate. You get to bail in the bank that you are a depositor with.
Kevin: Let me ask you, though, what is private property, if a government can step in, or a bank can step in and just take your money away?
David: Again, this is a context where everybody has to do their duty. A number of things rub me the wrong way here. One is what you just mentioned, private property. Whose asset is it? When someone takes something from someone else, without permission, that is generally thought of as theft, fairly straightforward. Unless, of course, the idea originates from the government, in which case it is called a tax, it is called a levy, or in this case it is called a bail-in. But remember that sleight of hand is nothing more than a diversion from the truth. What we have here is theft.
Kevin: David, in the past we have recommended a book that is on our website, and you can read it for free. It is Bastiat’s The Law. What Frederic Bastiat said back in 1850 was that when a government does that, it is legal plunder. They are legalizing the plunder of their people. It is still another form of theft.
David: This is the new reality in the European banking system. Again, this may be a Cypriot issue, but it was proposed by the eurozone leadership, and they have shown their cards. Essentially, what they have revealed is their disposition toward private property. “Your assets are yours unless needed for a greater purpose.” Philosophically, this drives me crazy, because it basically says the individual has no value, only the collective has value. You, as part of the greater, certainly contribute something, but you, on your own, are expendable.
The first thing that drives me crazy is that private property is essentially being called into question. Number two, it rubs me the wrong way because the levy was set by a transnational group, actually, a variety of the Eurozone leadership, not the Cypriot government, and the IMF, and it was laid out as a precondition for a 10 billion dollar euro-bailout.
Kevin: So the Cypress citizen never voted. There was no representation. They never voted for anyone in the IMF, they never voted for anyone in the Eurozone, yet they are the ones who are trying to mandate this loss.
David: This is the quid pro quo for external money coming in, and it is not a domestic solution, it wasn’t proposed democratically, but you do have the Cypriot parliament, and we will see how this turns out in terms of approving the measure, denying it, changing the details.
Kevin: David, there are issues here, whether it passes or not, they are already in a bank holiday.
David: Of course. Even if it doesn’t pass a parliamentary vote, six days have passed since the bank holiday began, with depositors seeing the power of the European governing body implementing policy, or at least moving toward it, without prior democratic approval, and it feels, frankly, a lot like what we have had here in the United States, signing statements, executive orders. Essentially, it races past a normal legislative process where voters are represented. And frankly, this is what is most disturbing, it allows for authoritarian dictates to roll over the rights of individuals.
And this raises the third issue, the third thing that really rubs me the wrong way, which is, the rule of law. Whose rule of law is in practice here? Is this a sovereign Cypress? Is this a subjugated Cypress to the Eurozone dictates? The rule of law is an underpinning to a healthy functioning society, to a healthy functioning economy. The rule of law is being replaced with the rule of caprice.
Kevin: What is interesting about this rule of law is, we’ve seen dictatorships and tyrannies come in, fascism. We’ve seen this in the 20th century. We’ve even seen it in the 21st century. But the thing is, the market, in this particular case, is the one that casts the vote. You can come up with as much confiscation as you want in a given country. You can throw away the rule of law. But what have you done to the minds of the people of what they thought was a plain vanilla deposit, and now it is something to be worried about?
David: That is absolutely vital. Just to reiterate, you mentioned The Law by Frederic Bastiat. That book is must-reading. It is essential reading. I don’t care if you are in the 6th grade, I don’t care if you are 65 years old, or 106 years old, that is must-reading. If you haven’t read that, you’ve missed something in terms of political dialogue.
How do politics really function? Through time, what do we see, in terms of the morphing, either with an appreciation for the rule of law, or this sort of negative deterioration, a devolution in the political process, where the law is either abused or ignored completely?
Kevin: And it is a short book. You can read it in less than an hour, and it’s not Democrat or Republican, there is no partisanship. This was written by a Frenchman in the 1850s, observing society.
David: As you said earlier, the market expects bank deposits to be plain vanilla. It expects them to be boring. It expects them to be safe, and it expects them to be available when needed. So if expectations change, and this is the unfortunate thing, so does investor behavior. You can either see, at this point, capital flight, which would be bank runs, the most extreme version of capital flight, or just a realignment, a rearrangement of investor expectations, greater yield on the deposits to compensate for greater risk.
Kevin: Sure, interest rates rising. We’ve been talking about that for a long time. Even though the risk has been rising, they have been keeping interest rates low.
David: If there is no expectation of loss, then you can get away with paying absolutely nothing on the deposit. But now if there is 10% in play, if there is 3% in play, or 5% potential loss, there has to be adequate compensation. Otherwise, guess what happens? Risk and reward don’t remain in balance and this is what they awoke to. Depositors awoke on Saturday to the reality of risk to their assets, a risk they had never considered before, and for some, this is going to drive money into the mattress. For others, it is going to drive the expectation, as we mentioned, of higher rates to justify assets remaining on deposit.
Kevin: Well, what do you say to the person, though, who says, “Look, Cypress, this is just a banking country? It was built to bank, and you have Russian mafia money in there.” What do you say to the person on financial TV who says, “Hey, Cypress is unique? It’s a one-off type of thing.”
David: Well, okay, Cypress is a unique one. No other country in Europe has as distorted a banking sector relative to the total size of its economy. That, in itself, makes Cypress unique. Pundits will argue that you won’t see this repeated in the Eurozone, or in other peripheral European countries, because you are dealing with different facts, different variables, different needs. All of that is true. But for the average depositor, you’ve just negatively impacted the belief that deposits are always, and everywhere, sacred and untouchable. That is what you have done. The damage done is not that we expect to see the Eurozone start to roll over on bank depositors all throughout Europe. That’s not going to happen.
Kevin: The doubt is cast.
David: The doubt is cast. It doesn’t matter that it would not happen elsewhere, given different banking variables and different fiscal concerns. The depositor now has in mind a possibility that hitherto was not possible and when the impossible becomes possible, that is where recalibration occurs. It is in their minds.
It’s like trying to remove the idea of a dancing pink elephant from your mind. It may not have been in your mind a moment ago, but try as you may, once it’s there, it’s like a virus. Try not to think about it. That pink, dancing elephant is there. And this is made worse by the sensitivities created over the last five years of crisis in the global economy, an acute European crisis over the last two to three years. Context is key.
Kevin: Yes, David, you are absolutely right, context is key. You still have people arguing about whether we are going into a recovery, or whether this is a continuation of the banking crisis of 2008, 2009, 2007, but now, for the first time ever, actually in our lifetimes, we are hearing that the banking system could just go ahead and take money away when they need to.
David: And with that issue of context being critical, you already exist in a frail context, which exaggerates the consequences of all decisions. You can look at this in a very dispassionate way and say that this is just not a big deal, this will blow over. In fact, if they don’t implement anything, it will go away tomorrow. Once we are beyond the knee-jerk reaction, the markets are in recovery and we can go back to normal, everything’s going to be fine.
But again, the context exaggerates the consequences of all decisions. Let me illustrate this in two ways. If you assume that jumbo jets never malfunction and crash, killing everyone on board, one instance is unnerving. That happens, and everyone says, “Wow, I thought we were beyond that. Technology has improved.” But what if this was a regular occurrence, one a day, every day, 365 days a year?
Kevin: I don’t think anybody would fly, Dave.
David: You end up with 100,000 dead people. When all the bags are stacked you have 100,000 dead people because of these flights falling out of the sky. Now, how do you feel about flying in that context?
Kevin: I can’t see it. I can’t see anyone flying.
David: You are generally more twitchy, whether you are traveling to see family or going cross country on business. Now, let’s switch subjects, but remember that the 747s are dropping out of the sky. How do you feel about getting sick and going to the hospital?
Kevin: Well, isn’t that where you go when you get sick?
David: According to the World Economic Forum, they have about an 80-page report called the 2013 Risk Assessment. Untreatable bacterial infections are a real and growing threat. 100,000 people die each year in the U.S. from antibiotic-resistant bacterial infections that they contract in the hospital.
Kevin: So you go in sick, you come out dead.
David: It changes the emotional context of your hospital stay, doesn’t it? Again, this is the equivalent of a jumbo jet dropping out of the sky, one per day, 365 days a year. You can read the report in the World Economic Forum 2013 Risk Assessment. Remember, this isn’t a public health seminar. We aren’t talking about the number of people who are dying from antibiotic-resistant bacterial infections, but the Eurozone is already on edge, and the simple idea of a levy on deposits is not really a simple levy on deposits. It is pressure on a group of people already preconditioned to be concerned.
Again, you look at that hospital stay and you say, “Wow, knowing that, I don’t think I want to go to the hospital. I don’t think I want to get sick. I think I want to focus on super-immunity! I’m not taking enough vitamin C! In other words, I’m a little agitated thinking about whether or not I have to do the hospital. In fact, we may have a home birth if we have a fourth child. (laughter) You just think about it and you say, “Wow, I’m concerned, and I wasn’t before.”
Now knowing those facts, now experiencing the last 2 to 3 years of what we have experienced in the Eurozone, this is not a benign event.
Kevin: David, when a person goes into the bank, it is a relationship. Go back to the movie, It’s a Wonderful Life, and think of Jimmy Stewart explaining the relationship he has with each person. That money is in Martha’s house. These people know their banker.
Here is what is interesting. We have all had relationships where doubt enters at some point, and it is so hard to regain that relationship.
David: All of us know couples who have had affairs, been through affairs, and they are trying to mend their bonds of trust. Friends of the family, whatever. But now, with that context being there, wandering eyes, a lingering conversation with a person of the opposite sex, issues that are not another affair, but they are exaggerated by the past frailties that linger and create doubt. That’s an exaggerated sensitivity given the context.
Kevin: Based on doubt from the past.
David: That’s what we have in Europe today. You can be dismissive on this, but what you are really looking for is whether or not this was this era’s Creditanstalt moment, something that you can say is insignificant, it’s irrelevant, but you are already in a frail context.
Kevin: Well, talk about insignificant. It was very significant in 1931, but the problem is, people didn’t have the Internet back then to look up this bank in Austria. What difference does an Austrian bank make to the rest of the world’s banks in 1931? Yet we know that the Creditanstalt moment was the moment that the shoe dropped and the banking failure which lasted all the way through 1933 covered the whole world.
David: It went global following Creditanstalt. This is the issue. There may be no actual threat to the Italian, the Spanish, or the Portuguese depositors, but already going through austerity, nerves are a little sensitive. The psychological reality may be more important than the actual reality. The depositor behavior may trend toward the mattress and away from the brick and mortar institutions.
Kevin: David, for obvious reasons, nobody is wanting to incite a panic, and so when you watch financial TV, they have different ideas about this. Wall Street is saying, “Well, it’s not really an issue,” and then other people, like you, are saying, “Wait a second, this is a big issue.”
David: Look at Bear Stearns, look at AIG and Wall Street, and the mass media were very dismissive for 3 months, 6 months, even a year. Remember, Goldman was asking AIG for more collateral, and it was a year before there were really problems, but you had the canary in coalmine. And then, things began to unwind from there. J.P. Morgan had this to say: “We would expect future crises to be exacerbated by more extreme deposit flight. This would likely mean the ECB would have to increase its presence as liquidity provider of last resort, which, under normal circumstances, would lead to increased asset encumbrance, and lower recoveries for senior debt.
The issue here is, this may not be a trigger event for any of those other peripheral European countries, but as and when there are concerns, you are going to see people hit the exits first before they even ask a question, because again, we are on edge.
This tends to, and again I think this is the move away from the brick and mortar, and this move toward cash, taking money out of the system, this is where your fiscal problems begin to be exacerbated, begin to be multiplied. It tends to drive fiscal damage deeper, because cash transactions the world over go largely unreported.
What I am saying is, basically, if I’m forced, because of the pressure I feel in the banking system, because I feel like I am going to be at jeopardy with my deposits, and thus, forced to take my money out. I’m sitting there in cash, I’ve done nothing wrong, I’m just sitting on cash, maybe it’s $2000, maybe it’s $10,000, maybe it’s $200,000 in cash, and now I’m conducting business in cash instead of using credit cards. I’m essentially outside of the banking system. And it is the people at the receiving end of that cash transaction who have a very practical choice.
And I can tell you from experience watching vendors in Europe, there are two different tills. If you are paying with credit card, it goes through one till, but if you are paying with cash everything gets added up on a calculator. Why? Because they’re not paying taxes on anything that comes in as cash.
If they screw this up they are going to drive money into the cash market and ultimately VAT and sales tax, which is a huge component in terms of their revenue, simply goes away. If you drive depositors away from the banking system, you inadvertently drive them into the cash-based economy, where VAT, sales tax, business transactions, go largely unaccounted for. That is a fiscal disaster, in which revenues, all of a sudden, come to a grinding halt.
Kevin: David, we aren’t the only ones saying this, either. The people in Cypress right now are asking the question, and this was on the news. “Are we the Guinea pigs? Are we just the small country out there that is being tested right now?” We all know that Italy right now is actually the bigger issue. If they wouldn’t have done this Cypress thing this week, Italy would absolutely be in our face right now, as far as the political turmoil there.
David: Right, exactly, because we still have an unresolved election. Who is going to run the country, who is going to be in charge of the budget? There is a lot that is in limbo, and obviously, there is a little bit more attention being focused on Cypress. It’s not the details that matter on this issue of Cypress, nor at this point, does it matter if any suggested measures are actually implemented. We are just basically saying that the bell has been rung and you can’t unring it.
Kevin: Yes, the bell has been rung. In other words, they have basically said, “Look, I might steal from you some day.”
David: Right, so depositors have in their minds, for the first time in generations, that their deposits are at risk. Argentina created this fear in 2001, and then they collapsed their banking system, their currency, and the economy. So for the suggestion to come from the Eurozone ministers, the ECB and the IMF, what you have now is depositors facing a new set of facts.
It is not just Argentinian bureaucrats that see private property as a useful resource for public needs, but from the heart of the Eurozone comes the same acknowledgement. “Individuals are expendable. Serve a greater good.” That’s right. Beyond property rights, there is the statement made that the collective is more important than the individual.
Philosophically, we reject that utterly. The whole, in our opinion, derives its value as a sum of the parts. Each part is just as valuable, and that’s really not what is being said. That’s not so in the collectivist Europe of today.
Kevin: Let’s face it. That’s Karl Marx versus our system. That’s that thinking. Karl Marx believed, and Lenin, and Stalin, and the communists, that the whole is more important than the parts, and we don’t believe that.
David: No. At its core, this is an action that illustrates a philosophy, which is why I am even more opposed to a progressive solution.
Kevin: Which is also Karl Marx.
David: Right. Like a progressive tax that bites harder at the top of the food chain, rich and poor alike are endowed by their creator with dignity, and frankly, social class and standing should play no part in policy application. When it does, you have a subtle form of discrimination, and usually that is justified in the hearts and minds of others by some sort of warped sense of social justice, or fairness, or equality. You may even be able to boil it down simply to envy.
The most likely outcome now in Europe is that an even more progressive levy is implemented, with small accounts being exempted, with large ones paying the difference, a larger amount, and if that is the case, it shouldn’t come as a surprise when the deposits that remain simply choose to find a different jurisdiction. “If you’re going to take 10-15% out, fine, don’t expect me to be a paying customer from this point forward. I can go somewhere else with my business.”
And this is the nature, where you really have a tenuous situation in Cypress, because two-thirds of the deposits in the banking system are from foreigners, one-third of those are from Russia, and then the rest of the world has decided that they want a little bit of money in Cypress, too, so two-thirds of the banking system says, “This isn’t our home turf anyway. If you’re going to put the screws to us, guess where we’re going? Home, or elsewhere.” And that’s really the issue here.
Kevin: So what you are saying is, if they press too hard, they’re just going to collapse the whole banking system, and therefore, also, the country.
David: Right. Why should any depositor just stung with 6.75%, 9.9%, 12%, or some higher figure, have faith that a one-time event is, in fact, a one-time event? I’m sure we can all think of instances where the exception to the rule ultimately became the rule. And this is what has us primarily concerned. You are basically saying, “Wealth taxes? That’s fine. If and when we need to, we will. We can assess the value of your property. We can get the county assessor to say, “This is what your house is worth, this is what your land is worth. Now, 2% please, or else.” And what is the or else? “Well, we own now 2% of your property. If you can’t pay because you’re not liquid, that’s fine. We’ll take 2% of the property. We’re now a land-owner right alongside you.”
What we are opening up is a Pandora’s box in terms of how we appreciate wealth, how we appreciate private property, how we appreciate the individual’s right, and whether or not those are respected, or can we just cast those aside for the collective?
Kevin: And think how tempting that is, though, Dave. How often have you heard about tax levels? They’re going to tax at a $500,000 level, or a million-dollar level, or a 10 million-dollar level, different rates. It’s tempting. Even when you believe in this individual equality that is based on constitutional thought, it is still tempting to say, “Whew, dodged that bullet. It doesn’t affect me so let them go ahead and vote how they want.”
David: Right, so at a popular level, the more progressive, the better. The 1% pay more, not only in nominal terms, but in percentage terms, and somehow that’s justified. Well, in principle, how is that justified? Is one individual deserving of preferential treatment over another? Apparently, there is an assumption that someone in the upper class owes more, but on what basis? Ability to pay can be applied to someone with a $20,000 deposit, when set next to someone with a $2,000 deposit.
We are really talking about a relative comparison of who is wealthy compared to whom? Right? So who really determines where you draw the line and why? Who determines the quantitative thresholds for who can afford to pay more? This is there, not only does it show that it is completely arbitrary, but it’s not based on principle, it’s based on the practical application of abusing a democracy. We will take advantage of the minority in order to satiate the appetites, or the voting penchant, of the majority. If we cannot get away with pressing into the 50%, 60%, 20%, whatever it is, of smaller deposits at the bank, fine, we’ll leave them alone, and we’ll hit the top ones.
But again, this is government trying to get away with as much as they can. Where are the controls on government? Where are dictates, where is the rule of law which they have to be subject to in order for us to have a normal functioning society, and a normal functioning and health economy?
Kevin: Well, I’ll tell you, Dave, I think in this particular case, the rule of law will be the natural rule of the markets at some point. You said something when we heard about this Cypress thing. You said, “Do you realize the insecurity that has just been introduced into the financial markets?”
And I thought of that and I thought, you know what? That’s really what we are talking about here. The government can try to do as much as they want, progressively, until they collapse. We’ve seen in the history of societies, when they get to a point where they are absolutely leeching off of the people who are actually paying the tax bill, the system ultimately collapses.
Unfortunately, it often ends in war, it ends in bloodshed, it ends in things that we have talked about before, going from the financial to the economic, to the political, to ultimately, the geopolitical. But in this particular case, if this fire starts going, it’s going to be like a forest fire, and it doesn’t matter what the government wants to do, they will lose control.
David: Can’t unring the bell. In our opinion, trust is gone, and that was a commodity you could not afford to lose. We just squandered a very valuable resource on the road to recovery.
It is interesting, when you look back at the last 100 years, and certainly, you could look at several thousand years, and you would find the same record, you tend to see people focused on paper assets when there is a tremendous amount of trust in the system, and when trust dissipates, they grasp for as much control as possible. Not only do they privatize their wealth, as in take control and make it very quiet, but they try to get it out of the system.
And we are seeing that move happen, we have over the last ten years, and we think that we are moving toward that final phase of people saying, “Why should I trust a counter-party? Why should I trust the system? Why should I trust the Treasury market? Why should I trust stocks and bonds? Why should I trust anything other than an asset in my hot little hand?” For the super-wealthy, that is going to be a Gustav Klimt. That’s going to be a Picasso. That’s going to be cases of wine that cost tens of thousands of dollars. For the less well off, but still well off, that’s going to be tangible assets, like diamonds, perhaps.
We are seeing this move happen right now in China, where the largest diamond wholesalers in the world are moving their headquarters to Shanghai. Why? Because there is a lot of wealth that says the system here is changing and what made our money is now going to take our money, and we need to move, we need to get out, we need to get private, we need to get quiet. And that is the nature of real assets, particularly concentrated real assets: Gold, silver, diamonds, things that are transportable, things that have enduring value. That is the trend as trust is broken.
Kevin: David, we have been talking about this consolidation in gold that has gone on now about 17-18 months, and it has gone relatively sideways, but you said something to the group here just a few minutes ago before we came in. You said, “Do you realize, also, that you will probably never see gold below $1600 again in your lifetime? In the next few weeks, months, whatever it is, we are probably witnessing the lowest price that we will ever see in gold in our lifetime, based on the things that are occurring.”
David: It’s quite possible that we’ve just made the psychological shift into that final phase where people want more control of their resources, and don’t trust the system, and it is very important that investors think in terms of the context being frail, and somewhat disconnected events being triggers for bigger and even worse things. The Archduke being assassinated – that didn’t seem to have a real tie-in to World War I, but the context was already set. We have a frail context. Frankly, it doesn’t matter what takes us into the next phase, but we will have something, if we haven’t already.