How to Think About the Economy as America Collapses

Hi! How’s everyone? Welcome back old friends, welcome new ones, and here’s little Snowy sending you a big old tiny puppy hug.

Today we’re going to discuss…a lot of things. The economy, democracy, society, the markets, the future, your life, your money, beginning with…

How Trump is making America's wealth disappear. Enjoy looking at your portfolio lately? I didn’t think so. People's life savings are going up in smoke, and it’s not going to stop here.

I’m going to teach you why.

The best explanations are the simplest ones. Think of Einstein’s theory of relativity. I’m going to teach you how to really think about the economy, and why your money is at (so much) risk, and why so many people are losing so much of it, and where it’s all going to go next, plus how it all ends.

(And I’m going to teach you how to talk to your money guys about it, too, for those who need that advice.) 

We’re going to go deep, so take a rest if you need to, but please, learn this from me. You are going to need it.

How Many Rich Autocracies Are There?

Simple question. Not a rhetorical one. Go ahead and think about it.

There are exceedingly few rich autocracies. Barely any. Cross the line into being long-term genuinely wealthy societies.

What does that tell you? Everything you really need to know about economics and money, at least right now, period, full stop.

It’s true there are a tiny handful. Their riches are based on natural resources, like oil. But they won’t stay wealthy until and unless they develop way, way beyond all that. That kind of “rich country” isn’t really one at all, and deep down, we all know that: it’s a temporary illusion, at best, Disneyland.

So what does it tell you that there are basically no wealthy autocracies? Why does that relationship, and the thing you need to really understand is that it is a relationship, exist?

(There Are No Rich Autocracies Because) Autocracy Turns Wealth to Poverty

Autocracy turns wealth into poverty. That is the very simple answer to the very simple question: why are there no rich autocracies over the long term?

Think about it with me.

Would you invest in…North Korea? Obviously not, because there’s nothing to invest in. Would you invest in Russia? Probably not, because who knows what’d happen to your investment, and if you’d ever get it back. Would you have invested in the Soviet Union? Almost definitely not, because they wouldn’t have offered you much of a return, if any at all.

So in autocracies, the following things don’t really exist. The following institutions. They may be said to exist, but they certainly don’t function.

—Basic rights, like property rights, beginning with ownership, as in, do my assets, whether stocks, bonds, cash, or whatever, belong to me, in any real or secure way, or can they just be disappeared
—The rule of law, and without that, there’s no recourse to any real form of security, like, for example, when autocrats decide that they don’t have to obey the courts
—Markets and prices, because the autocrat is always trying to tamper with prices with mechanisms like, say, tariffs
—Entry and exit, meaning that in autocracies, getting your assets into and out of the country gets harder and harder, right down to bodily autonomy itself, like, say, masked agents grabbing people they don’t like off the streets

Is this sounding familiar yet? It should. If it doesn’t, then perhaps a cursory glance at the headlines is in order.

Autocracy turns wealth into poverty for a very simple set of reasons. Basic rights stop existing, and without those, there is nothing to invest with. The rule of law breaks down, and without that, there is nothing to invest for. Markets and prices don’t function, and without those, there is nothing to invest in. Entry and exist become harder, and then impossible, and without those, investment in such a system is irrational and foolish. 

So. We’re not talking about jargon, or abstruse theories of stock prices, but just common sense. Nobody in their right mind invests much in autocracies, because the risk is too great. The risk of losing it all. The risk of having your investment turned to dust by the folly, whim, caprice, or greed of the autocrat and their cronies.

That is why people in autocracies, given the choice, will never invest in them. If you were in Russia, and you didn’t have to hold its currency, would you? If I gave you some North Korean currency, at the “official” exchange rate, would you take it? If I said, hey, here’s a Great Opportunity, in this Totally Awesome Autocratic State, would you really put your money into it? Or walk away laughing at me?

The Value of an Autocracy is Always Shrinking, and it’s Always Less Than a Democracy

This is how to really think about economics and money.

I want to teach it to you, because we don’t teach these things well. And the result is that many of you feel powerless over your lives and choices about these things. But you must not. Not right now. Now you must understand that…

Well…part of you already knows what I’m teaching you, doesn’t it? Hasn’t your gut been telling you all the above, for quite some time now? So you already know this, which is the most sophisticated way to think about economics, finance, and money. But you must listen to yourself, and understand it that way.

Let me now put the lesson to you in its simplest form.

The value of an autocracy is always less than the value of a democracy. Always.

Let me prove it to you again, with a simple thought anyone can follow. 

If protectionism worked, which is what Trump wants to do, then the Soviet Union would have been the wealthiest society in human history. It was soprotected, after all, that it had an Iron Curtain. And yet it collapsed. So of course this approach—tariffs, barriers, protectionism—doesn’t work.

And isn’t it curious that Trump is turning America, of all things, Soviet, in this regard, plus many others? 

This is what autocracy really does.

Let’s try another version of that thought. If autocracy worked, then Nazi Germany would have been the wealthiest society in history. People around the world would have been lining up to invest in it. It wouldn’t have needed to start a World War. But of course it did, precisely because nobody in their right minds, even in that long-ago world, wanted to invest in such a system. Where a group of lunatics and crackpots could…simply…turn it all to dust, right down to people’s very existence. So the Nazis, to fulfill their dreams of wealth and power, had to start a World War. Nobody forced them, not in that sense, but in the sense: nobody but good Germans went along with the idea that they should be investing in this Glorious Thousand Year Reich.

Are you getting my point yet? Do you see the link between how autocracy, failing to attract wealth, and I mean that in broad terms, not just money, but people, talent, ideas, skills, creativity—then turns to expansionism instead? How that sows the seeds of violence and brutality? And how, in that process, societies are left impoverished and ruined by autocracy?

This is how and why autocracy turns wealth to dust.

But the point I want to make isn’t abstract. This isn’t some kind of intellectual game we are playing. It is about your life.

Right now, it is turning your wealth to dust.

Millions of People Are Watching Their Money Start to Burn

Right now, millions of Americans are watching in horror, panic, shock, and despair, as everything they’ve worked for is being turned to ashes.

I want you to take a moment now and really understand why. 

We are now in the chickens-coming-home-to-roost phase of this implosion. Before, the idea by finance types was that moral outrage was just that—there was no economic price to be paid for social collapse. How could there not be?

Now, millions of Americans are paying the price, the literal price, for their society turning into an autocracy. That is what is really happening here.

You must, I repeat must, understand this point, if you are to hold on to any of your wealth in the next few years. So let me put it another way.

What Happens Next to the Markets, or, Revaluing America

Why is the stock market sliding? Why is the dollar falling? Why are people losing their life savings? When will it end? Will it end?

Now you should be able to begin to see what is really happening here.

An autocracy is worth less than a democracy. And it is usually worth less and less every day.

So now, every single market in society, and around the world, must now revalue America. Must now revalue America. At a lower value. 

This isn’t about “making money.” It is about creating wealth. The real thing. That isn’t just paper chits or digital bits. It is also about destroying wealth. That you do hold in the form of currency, which represents the destruction of all these basics: rights, freedoms, choices, possibilities, ideas, in the end, of humanity, peace, justice, and progress itself. That is what “money” really is, after all.

Because, like I’ve taught you, in an autocracy, there is too much risk. And all kinds of risk. Risk over basic rights, over ownership, over exit and entry, over what is safe and what isn’t, over what “value” is at all, when autocrats can cook the books, over what sorts of interactions and exchanges are allowed, and by whom, because some people are not really people at all.

That is why stock markets are falling. They don’t know it yet, but they are being forced to revalue the American economy. And they don’t know it yet, but they will have to do so at a much lower value. Tariffs shrink the economy. The absence of the rule of law means your investment will never be safe. And so on.

That is why the dollar is dropping. Now, every institution, and person in society, must revalue America, and they, too, will be forced to assign its economy a much lower value. If the autocrat can declare today that this industry is worth 50% less, and only his best buddy the crony who makes his favorite cars, for example, whoops, I meant to say something else—is the economy itself safe? And if it isn’t, who would want to hold as much of its currency over time?

Every single institution and market, in the world will now be forced to revalue America. At a much lower value. In these deep ways. Many will not know that’s what they’re really doing—they will just fumble at it. That’s why stock markets, for example, will bounce up and down some days. That’s why bond markets won’t quite know what hit them, when there’s finally the debt default that’s already planned.

Every single economic entity in the world—stock markets, bond markets, corporations, governments, countries, pension funds, investment funds, sovereign wealth funds—will now be forced to revalue America, and they will have to assign it a much lower value. 

Please don’t think that there’s a Giant Spreadsheet in the Sky with a row labelled “America,” and a value next to it. That is not what I mean. I mean that humanity’s collective mind, which we call its institutions, must now grapple with the problem of American collapse, and eventually, they must all reach the same decision, no matter how hard or long they fight it: America is worth less, as an autocracy, because in an autocracy, wealth turns to dust, since nobody’s investment is safe, and for that reason, autocracies do not become rich societies.

Protecting Yourself From Autocracy Turning Your Wealth to Dust

So what do you do about all this? 

I have taught you the most powerful way to think about economics, finance, and money that there is. If I’ve done it well, you see the links between what is happening to America, and what is happening in its stock, bond, and currency markets, and why they are all beginning to sink.

So now understand the implications.

They will keep on sinking.

That is the process of revaluing America at a lower value that I described above. It isn’t a sudden single number changing in a Spreadsheet in the Sky. It’s millions of decisions, across hundreds of thousands of institutions, all of which must converge on the single simple fact that autocracy is worth less than more sophisticated, modern forms of social organization, like democracy.

That process will take time. It will be bumpy, and there will be ups and downs. Some days will be this way, some days, that way. 

That is what is happening right now.

Do you understand?

That is what is happening right now. That is what all the world’s markets, and all its institutions, are really doing, from stock markets around the globe, to bond markets, to mega-investors, to giant corporations, and so on, though many don't grasp that conceptually. This process is why the stock market is baffled, jumpy, jittery, it’s why corporations are like deer in the headlights, it’s why your money manager tells you it’ll all be fine, but you both know it won’t.

This process of revaluation is what is happening right now. It will take months and years to fully “happen.” Some will fight against it, like many of your money managers. Some will just be baffled by it, like the stock market on many days. Some will be panicked by it, like the stock market on other days, and boardrooms most days.

None of that matters, because in the end, there is only one conclusion that can or will be reached, by all these institutions, which is that America is going to be worth less than it was before. A lot less.

The question is how much of your wealth you will lose along the way. If you leave it all too late. The choices that have to be made. Do you understand what I am trying to teach you? 

How to Talk to Your Money Managers, or Maybe Even Just Yourself

Now I want to give you some practical advice. 

It is much worse than the fact that your money managers do not understand the above. They do not understand that they do not understand the above. That means: they don’t grasp the first bit of what I’ve told you. They don’t get that the entire American economy must be revalued now, permanently, by the institutions of the world, by all the money in it, and that value can only end up being less.

That’s not because they’re dumb, not because they’re mean, not because they’re bad. It’s just because nobody taught them what I am teaching you. They have never encountered this ways of thinking, and that might seem strange to you, but it isn’t, really. They know how to move money around between stocks and bonds and so forth, and that's about it.

They do not know how to think about economics, usually, very much, and almost definitely not in the elegant, sophisticated, and powerful way I have taught it to you above. That is because I learned it from the best minds in the generations above me, and I cared about it, too. I was lucky to be taught by them. Perhaps we should just consider your money guys unlucky, and a little unmotivated.

You must talk to them in a different way now. Or maybe even beginning with just yourself. Yesterday’s perception of the world is done now. That world is over. The America that could be valued as something like a sophisticated, modern form of social organization, such as a democracy, cannot be valued that way anymore. At least for the time being, and quite possibly, longer than many care to imagine. What is before us now is something more like an autocracy, but they do not understand the consequences of that grave choice, which is that it cannot be valued at the level it was before.

The rest will go like this. The world’s better money managers will understand this first, only already too late, and maybe in a year or two. By then, their clients will already have lost a ton of money. Mediocre ones will fight it, and it’ll take them three to four years to get it, and by then, they’ll have lost their guys even more money. And the poor ones will fight it to the end, and they will lose those who depend on them everything.

Ask yourself how much you’ve lost over the last month. 2%? 5%? 10%? We’re two months in. What does a year of 2, 5, 10% losses add up to? How about five years? What do you have left? Maybe you understand my practical point.

You are going to need to be tough with them. Because they do not even understand that they do not understand. That the old world is now over. You already understand: the new world is here. It’s an ugly one, in which there is an autocracy before you. But you must also acknowledge now what your gut knows, which is that what is now an autocracy cannot—cannot, in any way, shape, or form—possibly be worth what it was yesterday, when it wasn’t one.

I hope that you understand what what I have taught you. I do it with respect, humility, love, and care. I do it because my teachers taught me all this, and in this tradition, which we call human civilization, the great teachings must endure, no matter how dark the ages are. 

Now you must make your decisions. If I have taught you well, you will make wise ones. That is my hope. If you need advice, you’re always welcome to reach out.

Lots of love,

Umair (and Snowy!)

❤️ Don't forget...

📣 Share The Issue on your Twitter, Facebook, or LinkedIn.

💵 If you like our newsletter, drop some love in our tip jar.

📫 Forward this to a friend and tell them all all about it.

👂 Anything else? Send us feedback or say hello!