U.S. & World Early Warning Report · get Dun & Bradstreet’s GUIDE TO YOUR INVESTMENTS by Nancy...

Insights from “The 2,500-year old man”

Dear Reader, March 2014

Over the years, I have warned several times that the federal government would eventually get itself into such serious finan-cial trouble that it would resort to confiscating pensions. I’ve suggested that officials would use some type of bond scam as the vehicle.

Obama’s “MyRA” plan introduced in his January 28th State of the Un-ion Message certainly does have the odor of that bond scam. My advice: stay as far from it as you possibly can. I think odds are very high that once you have a big part of your savings invested in My-RA, you will awake one morn-ing to find all this money permanently converted to a 30-year bond you can’t cash or sell.

Obama said outright that “it’s a new savings bond.” The conditions and payouts of sav-ings bonds have often been changed. Good deals just evaporated. The MyRA bonds will undoubtedly have loop-holes big enough to drive a truck through.

Speaking of predictions coming true, I’ve been saying I think geopolitics and military events are moving back to center stage, where they were between 1989 and 2007. Evidence is growing that this is happening. The two military hot spots likely to dominate the news, and the movements of the investment mar-

kets, are the fast-spreading war in the Mideast, and the stand-off be-tween Tokyo and Beijing.

I’ve been cov-ering the Tokyo-Beijing confron-tation since De-cember 2012, and last month gave an exten-sive rundown of the Mideast. Here’s more on the Tokyo-Beijing trouble.

It boils down to this: both are trying to be the alpha male of the East.

In October, Beijing’s offi-cial press agency called for governments to ditch the dollar as the world’s re-serve currency.1 This must have angered US officials. They are going ahead with a new Marine base on Ja-pan’s island of Okinawa. This island is the nearest US outpost to the Senkaku Islands, which are the bull’s-eye of the dispute be-tween Tokyo and Beijing.

Both are proceeding with their military buildups. Ominously, for the first time in its history, Tokyo is forming a marine corps. Ma-rines are not a defensive force; their main

1 ECONOMIST special report, 23 Nov 13, p.4.

U.S. & World

Early Warning Report

® By Richard J. Maybury

In this issue: •The new mega-war, see page 2.

•Update on the revolu-tion, page 3.

• Preparations for adapt-ing to the coming trou-bles, page 4.

• How Europeans made their welfare state work, for a while, page 4.

• Three investments to profit from the currency debasement, page 5.

• Why the Fed’s gradual unwinding can’t work, page 6.

•Monsters from the id, page 7.

• A big payoff from the two laws, page 8.

• And more.

E a s t C h i n a

S e a

Japan

China

Senkaku IslandsOkinawa

S. Korea

N. Korea

Russia

Bungo Strait

Is a cause for war between Tokyo and Beijing secretly being fabri-cated? See pages 2 and 3.

January 1998, page 3

saying, see, taking out asecond mortgage to buystocks was a good ideaafter all, let’s take out athird!

So far, we are replaying1929, when one of themost important banks in Europe, Boden-Kredit-Anstalt, went on the skids. This triggered a globaldomino effect, widely reported. US stock investorsignored it, until they were smashed by it.

History repeats. It may not repeat in its details, butin its broad government-created shipwrecks, therepetition of history is as dependable as the seasons.!

" Be sure to check out Ellen McGirt’s newsletterpage on http://www.stockscape.com. Ellen is one ofmy favorite people, and a fine writer.!

New Investment OpportunitiesBeing “long” means betting an investment’s price

will go up. “Short” means the opposite. Mostinvestors are long because they are amateurs whodon’t know anything about “selling short.”

For 15 years the stock market has been biased long,so millions of amateurs have been looking likegeniuses. They’ve been fish swimming with thecurrent, birds flying with a tailwind.

If I am right that the spreading troubles in theworld’s weaker economies are putting an end to the15-year stock boom, then the market now has adownward bias. The current has reversed, the tailwindhas become a headwind.

This reversal of bias greatly increases the risks ofbeing long, and to the same extent reduces the risks ofselling short.

You can pick a stock you think will go down, shortit, and even if you are wrong in your analysis of thestock itself, possibly still make a killing when thegeneral market drags the stock down.

To learn about short selling, go to a bookstore andget Dun & Bradstreet’s GUIDE TO YOUR INVESTMENTS byNancy Dunnan. The book’s explanations areexcellent, but don’t take the investment advice, it isbiased long.

Firms that tend to behurt worst in down marketsare those that are interest-rate sensitive, meaningthose selling goods usuallypurchased with borrowedmoney — cars,

refrigerators, heavy machinery, etc.!

" The USG is an enormous mouth to feed, atremendous drag on the economy. This burden hasbeen disguised by the USG collecting less taxes thanare necessary to keep it fed, and borrowing much ofthe shortfall from foreigners. This outside source ofmoney has left more money available for the stockmarket, giving the market an artificial boost.

Now that foreigners are having trouble paying theirdebts, they are likely to sell their US bonds, driving upinterest rates. This would contribute to the downwardbias in stocks, making short selling even less risky.

Why swim against the current when you can turnaround and swim with it? Learn about short selling. Ithink that over the next few years it will be the shortsellers who will be admired for their brilliance.!

" Best short sales are likely to be auto companies.Even in the economic boom they were using only 65%of their production capacity, and they have a hiddenkicker on the downside. They’ve become dependenton their new fad, the high-markup sport utility vehicle,which boasts the same weight and gas mileage as anarmored personnel carrier. When the next big war hitsthe Persian Gulf, these gas guzzlers will hemorrhagered ink. But if you don’t want to do your own shortselling, consider Rydex Ursa Fund (RYURX, 800-820-0888) and Prudent Bear Fund (BEARX, 888-778-2327), they’ll do it for you.!

" Over the next five years, the only stocks I believewill do well in the face of the new global economicshakeout are those that stand to profit from the turmoilin Chaostan. If you want to stay in stocks, MartinTruax and Ron Miller at Smith-Barney in Atlanta havedeveloped their own Chaostan type portfolio. Callthem at 800-425-1071.!

" The 7/97 EWR contains the War Portfolio.Updated annually, this is a list of 51 investmentsexpected to earn big profits from the spreading wars inChaostan. Long included in this list has been topammunition maker Alliant Techsystems. In 1996,another ammunition maker, Primex (PRMX,NASDAQ) was spun off from Olin. Primex has hadproblems but it’s looking healthier now, you mightwant to add it to your War Portfolio.!

Economy, Investment ForecastJanuary is when we investment writers issue our

forecasts for the new year, to set ourselves up for next

My Next Chaostan SpeechesI will be the keynote speaker at the Resource Consultants Wealth Protection

‘98 conference in Phoenix on March 21, and I will be available for questionsand answers afterward. The fee is $99 but I have arranged for subscribers toattend for $69 if you call before February 15. 800-494-4149.

I will also speak at Rick Rule’s “Bottom Fishing” investment conference onMarch 14-15 in San Diego. The fee is $125. Call 410-223-2532.

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•Treasury Bills: American Century Fund, 800-321-8321•Natural resource stocks: Global Resource Investments, 800-477-7853•Precious Metals: Pat Gorman 800-494-4149; Bill Bradford 800-854-6991; RonPaul Co. 800-982-7070; Miles Franklin, Ltd. 800-822-8080.•Gold Stock Accounts: Gerbino & Co., 310-550-6304•Swiss Investments: JML Swiss Investment Counselors, PO Box 4264-M3,6304 Zug, Switzerland; or Miles Franklin, Ltd. 800-822-8080;•Diversified mutual fund: Permanent Portfolio Fund, 800-531-5142•Commodities and commodity options: Sue Rutsen & George Koziol, FoxInvestments, 800-621-0265• Weapons and Security Equipment stocks, Bruce Green, Sheperd FinancialGroup, 800-469-5978• Foreign stocks and bonds: Peter Schiff, Euro-Pacific Capital, 800-727-7922

Henry Madison Research, Inc. Since 1982

EWR Archive, 1991-2007 Page 765 of 1574

March 2014, page 2 January 1998, page 3

























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purpose is to reach out and invade, and if you and I know this, so does Beijing.

Beijing has thrown a “defense identification zone” around the Senkakus, while Tokyo’s prime minister has been cementing ties with the ten regimes of the Association of South-East Asian Nations (ASEAN).

This while the government of South Korea in Seoul appears to be cozying up to Beijing.2

So, on one side of the conflict we appear to have two governments, Beijing and Seoul, lin-ing up against 12 on the other — Tokyo, Wash-ington and ASEAN.

Why? I think two reasons. First, politicians are power seekers. Once

they acquire power they want to use it on someone. This fact is really all that’s required to understand the root cause of any war.

Second, leaders of both sides need some-thing to divert attention from the results of their economic quackery. Japan’s economy still has not returned to its robust high-water mark of the 1980s, and China’s is debt– 2 ECONOMIST, 25 Jan 14, p.34.

ridden, riddled with malinvestment and threatening to implode.3

Tokyo has also begun courting Moscow.4 These gathering coalitions look more and

more like the run-ups to the two world wars. Alliances are horribly dangerous, they mean that if two regimes go to war, all the other members on both sides are dragged into it, in a domino effect.

In addition to its vague UN commitments, Washington has non-secret alliances with at least 34 other governments.

Washington’s alliance with Tokyo almost certainly aggravates the Asian stand-off. It antagonizes Beijing and emboldens Tokyo.

I wonder what is going on behind the scenes. The situation reminds me of the At-lantic Charter conference on August 9, 1941. Decades after the event, Americans learned

3 “Perils Mount As Debt Costs Swell in China,” WALL ST. JRNL., 11 Feb 14, p.1. 4 “Abe backs Putin…,” Reuters, Yahoo News website, 6 Feb 14.

! Ongoing forecast: A lot more war. History repeats, although never exactly. The world has entered another period of major upheaval.

Chaostan (pronounced chaos-tan) is the land of the Great Chaos. The area from the Arctic Ocean to the Indian Ocean, and Poland to the Pacific, plus north Africa, Chaostan contains thousands of nations, tribes and ethnic groups who have hated and fought each other for centuries. For seven decades the Kremlin sat on Chaostan like a lid on a pressure cooker. In 1989, the lid blew off. Since then, more than 100 wars have erupted, killing over five million, nearly all in Chaostan. Since the 1940s, Washington has meddled in numerous quarrels in!

Chaostan. On 9-11 its enemies began heavy retaliation.

The economic crisis that began in Aug. 2007 distracted attention from Chaostan, but now the carnage is returning to center stage, and will likely affect investments profoundly.

Nearly all countries in Chaostan are artificial, forcibly cobbled together over centuries by the rulers of Europe. Now the Great Uncobbling has begun, as tribe battles tribe in a revival of old feuds, from Morocco to Japan. Like World War II, this new war began slowly, and even now is not fully recognized for what it is. However, awareness is growing, and investors have been fleeing fiat paper currencies for the safety of “real stuff” such as real estate, precious metals and raw!

materials (commodities). Because the extent of this most

important economic trend — war — remains poorly understood, we still have a near ground floor opportunity in many wartime investments.

For instance, at least 70% of all the world’s oil deposits, and many other important raw materials, are in Chaostan. In WWII, raw materials soared 482%.

We cannot be completely certain about this forecast, or any other. But my best guess is, the new mega-war, and the war economy will last years, and at its peak will have this effect on investments: !

ChaostanCHAOSTAN

Chaostan is an original composition copyrightedby Richard Maybury in 1992. EWR is the firstand only publication to specialize in reportingabout it. !

!!

Investments Oil (Brent lt. swt. crude) Gold Silver Platinum Palladium Fidelity Defense [FSDAX} Numismatics Dow-UBS Commodities US real estate

Price Now $108.79 $1,296 $20.32 $1,382 $729 $120.97 129.86

Highest Price in Today’s $ $300 $10,000 $100 $10,000 $5,000 $500 Up at least 1,000% 500 Up at least 200%

!

CL* 8 8 8 8 8 7 8 8 7

!*My present confidence level for this forecast. 10=totally confident. 1=skeptical.!


























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that President Roosevelt had secretly told Churchill he planned to get into the war.5

While covertly sending US warships to in-vade Japanese home waters, Roosevelt cut off Japan’s oil supply. But he did not reveal his plans to the commanders at Pearl Harbor, which made the ships and people there into highly tempting sitting ducks.6

Incidentally, sites of Roosevelt’s encroach-ments included the Bungo Strait. (See map, page 1.) This was comparable to Tokyo send-ing warships up the Mississippi. Yet the day after the bombs fell on Pearl Harbor, Roose-velt called the attack “unprovoked,” and his-torians still quote him as if it were true.

If you think governments will be too wise to fight over a collection of insignificant islands, remember 1914. The supposedly enlightened regimes of Europe launched a world war over the death of one man, and killed an estimated 16 million.

It was one more proof that political power corrupts the morals and the judgment.

In my opinion, Washington should sever all alliances immediately, and never again give anyone the privilege of plunging us into their wars.

Is something big secretly being cooked up now in the East China Sea? Stay tuned.

➥ The situation in the far East is perfectly awful, but there is nothing you or I can do to stop it. We might as well continue earning money from it. Our defense stocks have been doing wonderfully. (You might want to check out “Ethics of Weapons Stocks,” on our web site, under “EWR Fundamentals.”) ♦

Update on the Revolution

As if the IRS persecution of conservatives, the NSA spying on Americans, the botched wars, and the end-less lies flowing from Washington like a river of poi-

5 Source: The chief intelligence officer at Pearl Harbor, Edwin T. Layton, in his book AND I WAS THERE, pub-lished by William Morrow, 1985, p.100. 6 Robert Stinnett, DAY OF DECEIT, Simon & Schuster, 2000, p.10.

sonous sludge were not enough, along comes Obamac-are.

Americans are accustomed to holding their noses and ignoring the sewage that pours from Washington. They are famously adept at just shaking their heads and refusing to let the political insanity disrupt their daily lives. But Obamacare has turned out to be a new kind of tyranny. I believe this Rube Goldberg contraption is generating a level of fear and hatred of the government greater than any since the Civil War.

What’s different about Obamacare is that Ameri-cans cannot ignore it. With all the determination of a jack-booted Nazi storm trooper, Obamacare smashes through their front doors and invades their families.

For many, it degrades the quality of the medical care to their children.7

Harming children is something no one forgives. I think some kind of violent reaction now is a virtual certainty. I wish I knew when. ♦

It was hushed up…

…until the WALL STREET JOURNAL found out about it and ran a story on Feb. 5th.

At 1 a.m. on April 16th last year, someone slipped into an underground telephone vault near Morgan Hill, Calif. and cut cables. Then snipers opened fire on a nearby electrical substation, knocking out 17 of the giant trans-formers that funnel power to Silicon Valley. The attack lasted almost an hour, and the snipers knew which criti-cal components to hit. They got away cleanly, and the damage took 27 days to repair. Big transformers are not mass produced.

Whether it was done by environmentalists, al-Qaeda or someone else, no one knows. But it certainly looks like a dress rehearsal for something big. Rich Lordan of the Electric Power Research Institute told the WSJ the incident “appears to be preparation for an act of war.”

Reportedly, the ammunition was the type used in AK-47s. If true, that’s 7.62x39, which is not famous for dis-tance. I visited the area. Although near a housing tract, it offers lots of spots for very long range rifles. So, the up-close-and-personal AK ammo sends a message: we don’t need unusually vulnerable isolated rural targets and .50 cal. guns. Using light weapons, we can take down any substation.

7 “Health Options Limited For Many,” WALL ST. JRNL., 13 Feb 14, p.1.


























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According to the National Association of Regulatory Utility Commissioners, there are an estimated 15,700 substations in the US.

If each were guarded 24/7 by a squad of ten soldiers trained in counter-sniper tactics, with each squad work-ing 40 hours per week, the entire US Army would not be big enough to protect these stations. And, this is saying nothing about the hundreds of thousands of big transmis-sion towers, plus the dams, generating plants, etc.

In other words, the grid is not defensible. EWR has warned about this before. Knocking out

communications and power lines is a tactic typical of guerrillas who plan to overthrow a government. As the economy breaks down, the population riots.

I wonder what else is going on that we aren’t being told about.

If your stores of food, water and other emergency supplies and equipment are not complete, I suggest you top them up now.

Here are two handy gadgets If you don’t have a generator, you should at least have

emergency lighting. A good type is the Greenlight 3-in-1 Nitelite, made by Greenlight Lighting Corp. It’s a night-light that automatically turns into an emergency light or flashlight in case of power failure. Also consider the Sherpa wind-up flashlight by Freeplay. (Both from Am-azon.)

Another light is used by a man I know who lives in an area where coyotes, mountain lions and other predators are a problem. When he walks the family dog at night, he needs to carry a flashlight and leash, but also have a hand free in case he needs to draw his Glock.

His solution is the Headlamp/Trailblazer XR. This is a hands-free flashlight that fits comfortably on your fore-head like a miner’s lamp. (From the L.L. Bean website.)

If I lived in a city where blackouts and two legged-predators could become a sudden problem, I’d definitely be ready to equip myself as my friend does. ♦ ➥ The era we have apparently entered is likely to be anything but normal. I think the news will be full of the riot du jour. The police will be far too busy to re-spond to 911 calls.

During such times, you really, really don’t want to be driving to work or to the grocery store in a glittering new luxury car.

My wife and I drive nice vehicles, but we are al-ways ready to blend into the crowd unnoticed. We keep a dirty old beat up farm truck in top mechanical condition, and have a supply of worn work clothes ready to wear. If we need to, we can quickly look like a couple of poverty-stricken hillbillies.♦

How Europeans made socialism work, for a while

Ever since the 1960s, no one in the US has been al-lowed to be a card-carrying intellectual without being in favor of expanding the welfare state. The European ex-ample has been held up as the correct model.

The Roman Empire was a welfare state, and the sys-tem was revived by German Chancellor Otto von Bis-marck in the 1880s. Bismarck introduced taxpayer-supported old age pensions, accident insurance, medical care and unemployment insurance.

Voters liked being taken care of by the nanny state, and so welfare statism eventually spread wide and deep across all of Europe. Today a European cannot have an itch without a dozen overpaid bureaucrats rushing to help him scratch it.

Obamacare and various other US welfare schemes are attempts to “catch up” with Europe.

The European welfare state is bankrupt and dying now, but a big mystery is, how were Europeans able to finance this Everest of socialist largess for so long?

Estimated World Velocity of the US Dollar

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Stage 1 Stage 2 Stage 3

Estimated US Velocity of the US Dollar

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Stage 1 Stage 2 Stage 3

I still see no evidence for changing our current veloci-

ty estimate. There is no visible risk at the moment of get-ting into stage 2, much less stage 3.

As a reminder of what to expect when stage 2 does ar-rive, remember the tech boom of the 1990s. Velocity in the tech stocks must have been nearing stage 3. Lots of companies were proud of their “burn rates,” which meant the rate at which they were consuming their capital.

In other words, when people think they are going to get rich, they go insane. Manias are a characteristic of stage 3.

This kind of madness will come around again, I’m sure, and fortunes will be made by those who bail out be-fore the inevitable crash. For an explanation of velocity, see richardmaybury.com, “EWR Fundamentals.”


























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One reason can be seen in Europe’s socialization of medical care. It appeared to work because, unlike Obamacare, most of it was eased in gradually and early, beginning in mid-20th century when medicine was not highly developed. Until the advent of “miracle cures,” such as penicillin in the 1940s, a doctor couldn’t do much for you other than sit by your bed, hold your hand and watch you die.

Socializing a technology — that is, putting its produc-tion and distribution into the hands of politicians and bu-reaucrats — isn’t so hard to make successful when the technology is barely ahead of stone knives and bearskins. But walk around a large metropolitan hospital today and try to imagine using something as crude and slow as poli-tics to guide the production and distribution of every nut, bolt, wire, computer chip, bedspring, faucet, plastic tube and janitor’s mop in the place. Only free markets can do this effectively, through the literally incredible complexi-ty of pricing signals, which change every second of every day.

In short, socialized medicine worked, sort of, when all of a doctor’s tools fit in his little black bag.

When is the last time you saw a little black bag? The other reason Europe’s welfare state…

…appeared to work is military defense. Little known to the typical American is the fact that Nato has become a paper tiger. Were it not for their nukes, no 21st century European power would have a prayer of beating their own forces of World War II.

For instance, in WWII, British rulers had 36 large “fleet” aircraft carriers, plus scores of smaller ones. To-day they have only one. It’s too dinky to launch jet fighters, and they plan to mothball it.

Why have Europeans made themselves nearly de-fenseless? Because Washington has promised to protect them. US military spending is equal to the combined military spending of France, Britain, Russia, Italy, Ger-many, Japan, China, South Korea, Brazil, India and Sau-di Arabia.8

With their defense paid for by the US taxpayer, Euro-pean regimes have had plenty of cash to spend on their elaborate welfare state.

That’s right, dear fellow taxpayer; Europeans have been able to afford their solid gold socialist heaven be-cause you and I are not only paying for the US welfare state, we’re financing the European one, too.

Difficult though it may be to believe, Europe’s wel-fare state is even bigger and more rotten than that of the 8 ECONOMIST special report, 23 Nov 13, p.9.

US, and the two are so intertwined I think both are going down together. This brings me to the subject of…

…investments

Put no faith in the financial system. Use it to the extent you must, as we all do. But remember that it has long been under attack by government in hundreds of ways, and has no ability to defend itself other than to buy politicians, and thereby become as corrupt as they are. It’s straight out of Ayn Rand’s prophetic 1957 novel ATLAS SHRUGGED.

As I pointed out last month, the super wealthy have recognized that the financial system is rickety, which is why they are packing warehouses to the rafters with metals of all kinds — copper, aluminum, gold, silver, platinum, palladium, nickel, zinc, and so on. They know these elements have been valuable for centuries, and have much better real long-term prospects than anything in today’s politicized financial system can.

I have long believed that everyone’s first line of de-fense should be to own gold, silver, platinum and pal-ladium bullion coins, such as the gold and platinum American Eagles, the pre-1965 “junk” US silver coins, and Canada’s palladium Maple Leafs. These pack a lot of value into a small, portable and widely traded pack-age. As Doug Casey points out, they are also the only financial assets that are not someone else’s liability as, for instance, stocks and bonds are.

To the extent you own these coins, you are outside the financial system. When the federal experiment with socialist central planning dies, you will still have these real coins in your hand.

Putting 10% to 20% of your financial net worth into them is good insurance. I believe that when the bal-loon goes up, the global stampede into them will drive the prices high enough to more than offset whatever losses you suffer in anything else.

If you have all the physical metal you want, but you’d also like to own more that can be easily traded for speculative purposes, I recommend Sprott Glob-al’s three funds, gold, silver, and platinum and pal-ladium. Just Google “Sprott Global precious metals.” I like platinum and palladium best right now, so at “Sprott Global Platinum & Palladium Trust,” be sure to look at “Reasons to Own Platinum & Palladium” and “Info Graphic.” ♦ ➥ The Nov. 2012 EWR forecasted that the stock market would boom in 2013. In the March 2013 issue


























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I and suggested 14 stocks. Since then, the four lower risk ones in the “No Brainer Strategy,” are up an aver-age 10.71%, and the other ten higher risk ones are up an average 52.60%.

As a precaution, you may want to take some profits, but as long term buy-and-hold speculations, I’m still optimistic about them all. ♦ ➥ Judging by the reaction from readers, my 7-page February 2012 article about the Megacaust was one of my best ever.

I ended it with my belief that a revolution is on the way, and offered a “Revolution Strategy” of 15 in-vestments to profit from it.

It looks like that portfolio has begun to perform. The 15 are up an average 43.45%.

However, that’s misleading. Due to the weightings I gave the precious metals, which have not yet done well since then, the portfolio as a whole is flat. But I think this is only temporary. When the metals begin to follow the lead of the defense stocks and general stock market, I believe the portfolio as a whole will be stel-lar. ♦ ➥ On August 17, 2007, the Bernanke Fed cut the dis-count rate, signaling it would sacrifice the dollar in an attempt to counter the oncoming economic disaster. I regard that day as the beginning of the Great Monetary Calamity. Between then and January 31, 2014, when Bernanke left the Fed, gold rose 92%, silver 65%, plat-inum 12% and palladium 111%. Bernanke is rightly regarded as an inflationist, but he is reportedly a piker compared to his replacement Janet Yellen, so I think the precious metals have a long, long way yet to go.♦ ➥ The Fed claims that if their vast inflation of the money supply leads to a sharp rise in consumer prices, they will suck the money back out of the economy in a “gradual unwinding.” But this was tried in the 1920s. The Fed’s chief designer of policy, Benjamin Strong, said, “A gradual unwinding of the situation [inflation-ary policies] is quite possible and the best bet.” He said this Aug. 8th, 1928. The Fed tried it, and triggered 1929’s enormous stock market crash and the Great De-pression.

Once the new malinvestment has been created, the injections must continue, to support it. I think if the present gradual unwinding becomes a zero increase in the money supply, this will lead to a crash in the stock and real estate markets. Therefore, the Fed won’t stop printing dollars. They might continue slowing down for a while, but they won’t stop. For more about un-

winding leading to a crash, see “Malinvestment” under “EWR Fundamentals” on our website. ♦ ➥ Events have become so frightening that I think a lot of people can’t take it any more and they’ve be-come mental drop outs.

Thrusting one’s head into sand is the most danger-ous thing to do. Now more than ever, everyone needs the best possible analysis and advice.

EWR strives to be the world’s best at the Big Pic-ture, especially geopolitics, economics and military events. For those of you who also want detailed nuts-and-bolts investment advice that dovetails with our Big Picture, I know of no one better than Jim Powell of GLOBAL CHANGES AND OPPORTUNITIES REPORT. powellreport.com, 866-967-4267.

Ever since the Aug. 2007 beginning of the Great Monetary Calamity, Jim has been doing an amazing job helping his readers adapt to the political and eco-nomic insanity. He seems to have a natural talent for coping with chaos. I’m proud to say I believe EWR and GCOR together make an unbeatable team.♦ ➥ Reader R.T.L. says many well known advisors are telling their clients to get entirely out of the financial system, have dual citizenship, and hold land and pre-cious metals offshore. He asks if I agree.

Yes. If you have the wealth to become a true out-side-the-system international person, you should do it. When the socialist paradigm explodes, the more low profile and international you are, the more options you will have to avoid the fallout.

But bear in mind, the socialist crisis is global. There is nothing and no place we can be sure will es-cape big trouble. So, the more options you have the better. Diversify, diversify, diversify as much as you can, in physical location as well as everything else. ♦

Monsters from the id

Our minds are from the 21st century but our brains and bodies are from the Paleolithic. This goes not only for us ordinary mortals but for presidents, kings, prime minis-ters, senators, Supreme Court justices and bureaucrats.

We all have a deep-seated urge to attack mastodons. This urge is housed in what Freud called the id, which is the center of primitive and potent desires and behaviors.

A fine old movie about the ancient urge to attack those who have not harmed anyone is the 1956 sci-fi classic FORBIDDEN PLANET. The movie refers to “mon-sters from the id.” It’s one of the few films ever to con-


























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EWR Archive, 1991-2007 65 of 1574


























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demn political power outright. It argues that not even a superbeing can be trusted with it.

To give someone political power is to trust his id, the reptile portion of his brain.

The principles of the old Common Law were a con-straint on such urges, but real Common Law is gone now, buried by the global socialist experiment of the 20th century. (See my Uncle Eric book WHATEVER HAP-PENED TO JUSTICE?) Consequently, I believe, we have entered an era in which monsters from the id are running wild.

Presently this is most visible in DC. Regulators run-ning amok, Obamacare, aid to Mideast tyrants, and the willingness to help Tokyo fight Beijing over the trifling Senkaku Islands are just a few of the indications that monsters from the id are on the loose.

Watch the movie, it’s a good one. And remember its breathtaking image of the primitive monster attacking the highly advanced space ship. This is a great visual for what’s driving events in DC and elsewhere.♦ One of the deep, dark secrets…

…economics students and investors are not told is that Keynesianism is taught in virtually all colleges, including those from which high government officials have gradu-ated (Harvard, Yale, etc.) not because it works but be-cause it doesn’t.

When I was in college in the 1960s, the economics profession was completing its switch to Keynesianism. In the study of economic history, instructors went to great lengths to convince us that no one knew why the Great Depression happened. Allegedly, no form of eco-nomics, including the Keynesian, could uncover the cause.

Therefore, we were taught, the only thing anyone could do to prevent another depression was ask for poli-ticians to regulate the “commanding heights” of the economy, meaning the large companies and the rich.

The economists of the “Austrian” school, led by Mis-es and Hayek, did know the cause — the federal gov-ernment’s tariffs, wage controls and monetary tomfool-ery. The process was explained in Mises’ 1912 master-piece THE THEORY OF MONEY AND CREDIT.

The Austrian prescription was to return to the system of liberty.

This would mean a vast shrinkage of the govern-ment’s power, and the loss of the jobs and prestige of most of the politicians and bureaucrats.

Washington ignored the Austrian school and still does.

They went Keynesian, which teaches that when we don’t know what happened, we must give our rulers more power to do whatever they thinks necessary. Music to the ears of the political elite. The less they know, the more power they are allowed to use on us.

Keynesianism prescribed even more bureaucracies and powers, over interest rates, money supply, invest-ment markets and practically anything else, until today government meddles not only in the commanding heights but in nearly every aspect of our lives. Under Obamac-are, bureaucrats even control the kind of ointment a doc-tor chooses for a patient’s foot fungus.

For investors, one reason this choice of a model that cannot explain the Great Depression is important is that Keynesian economics is used as the basis of the invest-ment recommendations made by big-name brokers, bankers and other “household-name” financial firms. Like the colleges, the big firms use it because the gov-ernment does.

In short, they all build upward from a model that was adopted because it is a failure.♦ ➥ I could fill an entire EWR about the health benefits

Photo of Richard Maybury by Bryce Richardson. Neither Richard J. Maybury nor Henry Madison Research receives kickbacks, commissions or fees of any kind for recommending investments, brokers, dealers or publications. EWR usually arrives by the 15th of the month. Published ten times per year. Copyright © 2014 by Henry Madison Research, Inc., PO Box 84908, Phoenix, AZ 85071. Phone 800-509-5400 or 602-870-9329. Fax 602-943-2363. $300.00 per year. Back issues, $15.00 each. Previous 12 issues, $99.00. Check, money order, Visa and MasterCard accepted. If you have a problem that cannot be solved by our Phoenix office, write Marilyn Williams at the Phoenix address, and mark it “Personal, Confidential.” Early Warning Report is sold to you only on the condition that it will not be reproduced in whole or in part by any means without written permission from the publisher. Information and analysis in Henry Madison Re-search publications is compiled from sources believed to be reliable but its accuracy or profitability cannot be guaranteed. Henry Madison Research, its officers, owners and writers may, from time to time, have positions or interests in invest-ments referred to in these publications. Each HMR publica-tion is intended solely for information purposes and is not to be deemed a prospectus or solicitation of orders, nor does it purport to provide legal, tax or individual investment or busi-ness advice. It does not purport to be a complete study of the national or international business, economic or invest-ment situation or individual markets therein. Readers should consult with expert legal, tax, business and financial counsel before taking any action. All new ideas, concepts, data, in-formation, procedures and techniques, and all rights thereto, are strictly reserved. Letters to the editor are the property of the publisher and may be published in whole or in part; the names of the writers are kept confidential.


























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my wife and I have received from the advice of Dr. Jonathan Wright. We’ve been following Dr. Wright’s advice for roughly two decades, and most people seem to judge our ages as a lot younger than we are. We attribute a great deal of this to his BHRT (bio-identical hormone replacement therapy), as well as his guidance for taking vitamins and minerals. I hope you will give Dr. Wright’s newsletter a try. NUTRITION AND HEAL-ING, wrightnewsletter.com, 888-233-3402.♦ Big payoff from the two laws

One thing that was common knowledge before the 20th century but was then erased by the socialist do-gooders is this: civilization is a result of correct behav-ior; when correct behavior goes away, so does civiliza-tion.

I often write about the two ancient laws that make civilization possible — do all you have agreed to do (the basis of contract law) and, do not encroach on oth-er persons or their property, (the basis of tort law and some criminal law). These are taught by all religions, and were the basis of the Common Law.

My book WHATEVER HAPPENED TO JUSTICE? ex-plains that to the degree these two laws are obeyed by everyone, especially persons in government, civiliza-tion advances, and we have greater peace, security, freedom and abundance.

To the degree these laws are not obeyed, civiliza-tion becomes chaotic and moves backward, which is apparently the direction the whole world is headed to-day. Socialist central planning cannot exist without extensive encroachment as, for instance, the medical professions are now discovering.

In the 1800s, under the influence of America’s 1776 revolution, many governments were moving in the di-rection of the two laws, which produced the fastest ad-vancement in all of world history. The most dramatic example was England under William Gladstone.

But during the great socialist experiment of the 20th century, every government gave itself permission to violate the two laws. Today they’ve all gone renegade, violating the laws wholesale.

In this “Big Picture” view, the two laws are crucial-ly important, but they are equally so…

…in the day-to-day life of the individual In both cases, I consider them foundational. Last year I gave a speech in which I suggested a

practical application of the two laws. It enables a per-

son to begin improving his or her daily life immediate-ly.

The audience loved it, so I’m passing it along to my subscribers. Here it is.

Take out a piece of paper, and draw a line down the middle. At the top of one column write “want,” and at the top of the other, write “don’t want.”

Now begin thinking about all the people in your life — friends, neighbors, co-workers, family members, employers, employees, acquaintances, everyone.

Those who consistently break their agreements with you, or encroach on you, put in the “don’t want” col-umn.

Those who keep their agreements and do not en-croach on you, put in the “want” column.

You never know what’s going on inside another person’s head. But you do know three things about the don’t wants: they do not respect you, they probably need to grow up, and if they are in your life they will drag you down with them.

After you have your two lists, start adjusting your life accordingly.

As you expand the distance between you and the don’t wants, and narrow the distance between you and the wants, your life will grow better, and you will be happier, I promise.

I wouldn’t be surprised if you begin feeling this new happiness right now as you make your two lists.

Let me point out that if you ever doubted that the two laws are genuine, this want-and-don’t-want proce-dure will give you plenty of evidence that they are real. As your personal life runs more smoothly and pleasur-ably, you will see and feel the truth that the more peo-ple who obey the two laws, including in government, the more quickly we will reverse the decline of civili-zation and return to the near miraculous rate of pro-gress triggered by the revolution of 1776. ♦

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