Inflationskonig

Perspectives on how globalisation, technology and those controlling it are rotting away our world.

History teaches us many lessons. If we compare current events with lessons from the past, we might conclude that the era of democracy as the dominant form of global governance is reaching its denouement.

I believe that we’re living through an attack on our democratic states. Whether thats a covert attack, or one that is happening in plain sight is a matter of perspective.

In the 1940’s our population stormed machine gun lined beaches to fight for democracy. Eighty years later, my feeling is that the average person not only would not fight for it, but is actually of the belief that this form of governance no longer serves them.

This essay aims to give a quick history lesson on the power battles that have shaped our last 5,000 years, showing how various forms of authoritarianism have been far more prevalent than democracies. Most of what we value today is a result of the democratic system we’ve been lucky enough to be born into, but the trends suggest that might soon change.

The suggestion that we might be going through a regime change gets labelled a conspiracy theory, a side effect of most humans natural inclination to believe that recent history and the status quo are set in stone. But power battles and regime changes have been a staple element of all recorded history.

The world as we know it will eventually change. The time will come where Western Democracies revert back to the trends of previous eras and gets replaced by some form of authoritarianism. But we shouldn’t let that change happen easily, we need to fight against the trend and hold on to democracy for as long as we possibly can.


Human beings have one distinguishing feature from all other animals — our ability to create what Yuval Noah Harari described as imagined realities.

Fiction has enabled us not merely to imagine things, but to do so collectively. We can weave common myths such as the biblical creation story, the Dreamtime myths of Aboriginal Australians, and the nationalist myths of modern states. Such myths give Sapiens the unprecedented ability to cooperate flexibly in large numbers. Ants and bees can also work together in huge numbers, but they do so in a very rigid manner and only with close relatives. Wolves and chimpanzees cooperate far more flexibly than ants, but they can do so only with small numbers of other individuals that they know intimately. Sapiens can cooperate in extremely flexible ways with countless numbers of strangers.

The story of mankind is a story of power battles. And every one of those power battles has been built around one imagined reality or another.

Nothing has been more constant than change through the last five millennia — countless ideas, ideologies, empires, wars, technologies, innovations. But theres been one constant — human psychology. Because our brain structure and biology is largely fixed, human behaviour has generally followed familiar and identifiable patterns.

It’s the reason why the idea of no heaven or hell below us, nothing to kill or die for and all the people sharing all the world has never existed outside of John Lennon’s imagination. Desire and greed are fundamental emotions that ensure that power battles remain a core tenet of humanity. There is always one person or group who believes they can do a better job of leading than the incumbents and though sometimes that transition is peaceful, it’s nearly always out of the barrel of a gun. No single empire or ideology has ever lasted more than a few hundred years — it’s always been replaced with something better, stronger or some combination of both.

The lengths that humans have gone to in order to either maintain or gain power are extreme. Because our last major attempt at a power shift was 80 years ago, it’s easy to underestimate this point.

During Chairman Mao’s Great Leap Forward in 1958, millions of its own citizens were buried alive or clubbed to death in an attempt to purge the country of its capitalist traits and restore the communist values of the party. Old habits die hard for Mao’s current day CCP, the worlds foremost example of what authoritarianism can do to solve problems, with an estimated one million plus Uyghur’s being held captive in re-education camps still today.

When the British Empire took control of Australian lands from its local indigenous people in the late 18th Century, officers were all too happy to engage in random killings or organised massacres of the Aboriginal people to make sure the locals knew who the new sheriff in town was.

Hitler’s Nazi’s started out by segregating Jew’s from daily activities, a decade later they sent them to concentration camps to be gassed.

Lenin’s Bolshevik Revolution, the movement supposedly representing the Russian proletariats in their fight against the upper class capitalists, had a particular penchant for genocide and torture as a necessary tool to eliminate undesirable social groups.

Atrocities aren’t always just about gaining power, they’re quite often just as important to maintain it. In 1962 the US Department of Defence proposed Operation Northwood to President Kennedy, a plan to engage the CIA to commit acts of domestic terrorism on its own citizens and military. “The desired result from the execution of this plan would be to place the United States in the apparent position of suffering defensible grievances from a rash and irresponsible government of Cuba and to develop an international image of a Cuban threat to peace in the Western Hemisphere.”

As an aside, Kennedy shut the Operation Northwood plan down. Less than 12 months later he was assassinated by the lone gunman Lee Harvey Oswald. When some people questioned this official narrative, the CIA & media came up with a new term to label them & discredit their ideas — the conspiracy theorists.

The point to be made here is that to believe that humans are motivated by power and willing to go to extreme levels to maintain or gain it is not cynical, it’s just reality.


The assertion of power in a group setting with just a handful of people is difficult enough. Once you get to thousands, let alone millions or billions of people, you need very clear systems in place to maintain power. Recorded history goes back around 5,000 years and even then, the world had around seven million inhabitants, so we’ve got no shortage of evidence to learn about the pros and cons of different forms of governance.

From the first Mesopotamian civilisation in 2,500 BC until the early 20th Century, the most common form of governance was one where a small group of people set and enforced the rules of the society. Sometimes these rulers gained power by their divine rights or class (a Monarchy or Aristocracy). Sometimes it was gained by their expertise or ability to yield a sword (Oligarchy or Autocracy).

The Romans had a form of democracy, though only those from the wealthy class could hold office and eventually the rigmarole of answering to the people led a shift to a centralised imperial authority with its Emperor gaining absolute power.

Governance that relies on absolute power can be an efficient system for decision making, but its weakness is how to deal with a citizen who disagrees with the supreme ruler. The efficient way to deal with it is to simply behead the dissident, which is why most of recorded history is a story of brutal violence. We should remember that the Kings and Emperors of old were biologically the same creatures as us today — the main difference is the democratic form of governance thats become the norm for the past century, which gives the individual enough rights that they can usually keep their head when they disagree with state policies.

Of course, the world still has some countries that retain an authoritarian form of government and the violence against its people is much the same as it was before. We hear most of these stories from its former citizens who fled in search of a life where their individual freedom would be a right, not a privilege. Their chosen destinations are largely a result of a particular document that was signed 250 years ago.

In 1776 the world ushered in a new system of governance, when thirteen independent colonies of America signed the Declaration of Independence.

The language within this document might not seem revolutionary today, but it certainly was for the Kings and Emperors that had ruled the world for the thousands of years before it. The idea that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness would’ve been unfathomable. To give such power to the individual would’ve put their own rule not only at risk, but led to a certain demise.

The Declaration of Independence led to the establishment of the United States Constitution just over a decade later, which to this day remains the oldest surviving government constitution. Beginning with the words we the people, the document provided a major change in the history of governance in that the objective of this government would be to serve its people. A fundamental difference to an autocracy or totalitarian empire, where the people exist to serve the government.

A little over a century went by before the United States of America would become the global hegemony, taking over from the empires of the French, Dutch and British before them. The rate of progress achieved since this new form of governance came into play was perhaps summed up no better than by JFK during his famous speech at Rice University in 1962. Condensing 50,000 years into just 50, he revered that “only last week did we develop penicillin and television and nuclear power, and now if America’s new spacecraft succeeds in reaching Venus, we will have literally reached the stars before midnight tonight.”

Now even the most vocal patriot couldn’t disagree that the United States of America has its fair share of problems. Democratic governance is not without its flaws, of which there are many. It’s just that as Winston Churchill once said, democracy is the worst form of government, except for all the others.

In a democracy, a misfit and troublemaker with no respect for the status quo is Steve Jobs. In an autocracy, it’s Aleksandr Solzhenitsyn or Andrei Sakharov. And they’re just the lucky ones who got out. Others like Sophie Magdalena Scholl had her stories told in memoriam.

The American inspired Western Democratic system lives and dies with the ability of its citizens to express their own individual ideas and beliefs, as much as we might vehemently disagree with what we hear. It allows creativity. It allows divergence of thought. It allows disagreement.

America isn’t easy. America is advanced citizenship. You’ve gotta want it bad, ’cause it’s gonna put up a fight. It’s gonna say, “You want free speech? Let’s see you acknowledge a man whose words make your blood boil, who’s standing center stage and advocating at the top of his lungs that which you would spend a lifetime opposing at the top of yours.” You want to claim this land as the land of the free? Then the symbol of your country cannot just be a flag. The symbol also has to be one of its citizens exercising his right to burn that flag in protest. Now show me that, defend that, celebrate that in your classrooms.

Then you can stand up and sing about the land of the free.

– The American President, 1995

Allowing individualism means that your blood will boil when you hear someone who holds an opposing view to yours. But you must always consider what the situation is when you’re that other person. How do you want the rules to play when you have a view that’s opposed to the majority?

Only in retrospect can we see how important this is. There was a time that the 42 year old Rosa Parks decided to fight for her fringe view that she, a black woman, had the right to sit on any bus seat. Same story for Emmeline Pankhurst, who led a movement that earned women the right to vote in elections. Or more recently, when gay people finally earned the right to get married.

When you’re with the mob, it’s easy to hate individualism. But put yourself in the shoes of someone like the aforementioned for just one second and you realise just how important it is that we protect it at all costs.


I sense that not only are we less willing to fight for Western Democracies, but we’ve slowly lost faith in their value over the past few decades. What I will argue is that it has not actually been the implementation of democratic governance, but rather the slow breakdown of those institutions. When we consider the sheer influence that certain classes have on those institutions, we realise that the Western world has slowly turned into a plutocracy. We should consider the key trends that are influencing this.

At the end of 1989 the Berlin Wall fell. That date marked the point where the world entered a new era of hyper globalisation — the first time in recorded history where we’ve truly had a globally integrated system. Without establishing a position on whether globalisation has been a net positive or negative, nearly all could agree that it’s fundamentally changed the world.

Wealthy asset owners and middle class workers went two separate ways some time around the early ‘90’s. Globalisation has played a big part, but it’s not the only reason. Technology has destroyed the value of labour relative to capital. Easy monetary policy from Central Banks has boosted asset prices with very little influence on real economic growth.

It’s been a simply incredible three decades for billionaires and multinationals. Not so great for the small business owner or proletariats. The charts below tell this story better than what any words can do.

The Cantillon Effect explained the phenomenon that the closer you are to the king, the more you benefitted, and the further away you were, the more you were harmed.

Globalisation has created challenges for our existing systems of governance. How does a Western government tax and regulate a locally domiciled multi national corporation who sells goods or services to users in 190 countries, with a supply chain that spans across every continent and a complicated corporate structure thats been created and maintained by a global accounting firm for tens of millions of dollars per annum in order to reduce their legal liabilities & get their effective tax rate to less than 10%?

Or what about Goldman Sachs creating US dollar liabilities by offering currency swaps on a market in Singapore, which Deutsche Bank then relends to Siemens in Berlin, that then gets repoed out to the China Construction Bank so that CIMC in Shenzhen can purchase iron ore futures contracts from BHP Billiton via some other other investment bank out of Hong Kong?

Then there’s the tech giants Facebook & Google, who literally own the digital lives of at least two thirds of the adult population with a range of products that are completely free for the end users. Almost every message we send someone, every piece of news or information we consume, every location we visit is tracked and monitored by these two behemoths.

The answer on how governments control them – they can’t. Power has shifted from democratically elected governments to stateless institutions. That power shift has monumental consequences for the way our world is governed.

Of all the various actors in this global system, the ones whose behaviour is the easiest to predict is the politicians. They’ve got one objective: get elected and stay elected. Maintain this power balance for long enough and you’ll eventually see what we’ve got now — parliaments filled with politicians who do what they’re told and take their orders. Is what we see today a collection of the most impressive leaders in the world, or an utterly unimpressive group of chess pieces?

The single most powerful group in the world today are the key players in this global system, the global elites. They represent no citizens. They have no flag. The best representation we have of this global elite is the World Economic Forum (WEF) — The Klaus Schwab led group who are to the 1%ers what the 1%ers are to the 99%ers. They are the elite of the elite.

The WEF host the annual Davos Event, held in the Swiss Alps that “brings together some 3,000 paying members and selected participants — among which are business leaders, political leaders, economists, celebrities and journalists — for up to five days to discuss global issues across 500 sessions…The Davos Agenda is a pioneering mobilization of global leaders to shape the principles, policies and partnerships needed in this challenging new context.”

World Economic Forum Founder, Klaus Schwab.

In Plato’s The Republic, he puts forth that the ideal form of governance is a system where the ruler is a Philosopher King. A philosopher king is a ruler who possesses a love of wisdom, as well as intelligence, reliability, and a willingness to live a simple life.

If you look at the WEF website, most of their content promotes a positive future. Better care for the environment, more inclusivity, better access to healthcare for the poorest people in the world. Many of these ideas are in line with Plato’s vision for a Philosopher King and it’s easy to think that the world they’re trying to create is a utopian on. But there’s a problem with that and it’s a lesson that history has taught us many times over. Margaret Atwood reminds us that “The Communist regime in Russia and the Nazi takeover of Germany both began as utopian visions” too.

Vladimir Lenin truly believed himself to be a Philosopher King, as did his successor Joseph Stalin. Same story for Adolph Hitler, or more recently for China’s new forever ruler, Xi Jinping. Plato’s idea has proven to be a failed method of governance because even in the very rare event that a King starts out as truly just, they are unable to remain this way because power tends to corrupt and absolute power corrupts absolutely.

A “Defend the Soviet Union” rally in New York, 1920s. | People’s World / Daily Worker archive

Another challenge is how the Philosopher King might be tempted to engage in social engineering in the name of the greater good. If we treat the world like a software program and make cold hard decisions that optimise our outcomes, we can easily come to some very inhumane conclusions. The elderly, the unhealthy, the lesser races, the outcasts, the few billion too many people that are draining food and energy resources — what decisions might be made of them? We know the direction previous Philosopher Kings have taken.

China’s totalitarian CCP leadership provides us a modern insight into how this system works. It relies on absolute power and the leadership controlling one version of the truth — the Great Chinese Firewall. For most citizens, they not only come to love it, but actually live completely unaware that they’re under complete mind control. If a Westerner tells them they are being brainwashed, they will staunchly defend their ruling parties version of the truth. This is what a propaganda department with an estimated $10–20 billion annual budget gets you.

It’s provided Chinese leadership with the ability to do many things. They’ve moved their nation of 1.5 billion people from a nation of poverty to the worlds second largest economy. They’ll continue their march forward with decisions made at the top level for the greater good, like their latest social credit scoring system that ensures its citizens all do the right thing. If Chinese leadership tells its people that they must do or think something, they will do it.

Black Mirror’s Nosedive Episode shows the perils of a social scoring system.

China has got to the position they are in today because of their ability to run a dictatorship. Despite the ideological values of Westerners and certainly those published on the WEF website, we’ve largely turned a blind eye to the humanitarian issues. Yes there’s some posturing and yes there’s some trade wars here and there, but if the Western world was really ready to stand for humanitarian causes then we’d have stopped doing business with China years ago.

The trouble is, when it comes to China, money talks. China’s entry into the global economy has provided a bonanza for globalists. CrossBorder Capital, a research firm that tracks global liquidity, estimates that in 20 years China has gone from being responsible for 6% of total global liquidity to 30% today. Take that liquidity pool out of global markets and it’s not hard to guess what asset prices do. China’s removal from the global economy would do wonders for carbon emissions, human rights and the middle class westerner. It would be a disaster for just about every member of the WEF, however.

We might easily conclude that the global elites at the WEF are guilty of acting in their own self-interest, but the truly concerning issue is the use of language and belief system that is so typical of a Philosopher King. Just a few months into the Covid-19 pandemic, Klaus Schwab released his manifesto The Great Reset. In releasing this manifesto that found its way into the hands of every important decision maker across the globe, Schwab prophesied that “there is an urgent need for global stakeholders to cooperate in simultaneously managing the direct consequences of the COVID-19 crisis. To improve the state of the world, the World Economic Forum is starting The Great Reset initiative.”

This passage from The Spectator sums up the challenges with Schwab’s philosophy:

“One of its symptoms is its constant references to ‘we’: ‘we will’, ‘we should’, ‘we must’. Who are we? I think Schwab and Malleret mean ‘mankind’ but in practice it means ‘Davos Man’, a species of high-status politician, businessman or academic about whom Samuel Huntington wrote:

‘These transnationalists have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing, and see national governments as residues from the past whose only useful function is to facilitate the elite’s global 10.”

Some real life examples of the Davos Man are the Microsoft Founder Bill Gates, Facebook Founder Mark Zuckerberg, BlackRock CEO Larry Fink, Salesforce Founder Mark Benioff, Carlisle Group Co-Founder David Rubinstein and the Central Bankers Mark Carney & Christine Lagarde. These people are certainly intelligent and reliable, though I’m not so sure they satisfy Plato’s final criteria of a willingness to lead a simple life.

I think the truth is that these Western Elites have been watching the Chinese totalitarian experiment and rather than fighting it, they’ve fallen in love with it.


There’s a threat to the globalists — nationalism & democracies. Dani Rodrik formulated a trilemma that states that “it is impossible to attain economic hyper-globalisation, national sovereignty and democracy simultaneously, because only two of these things can be achieved at any one time.”

I would take this theory one step further and suggest that hyper-globalisation cannot exist with either of the bottom two, because national sovereignty without democracy isn’t really national sovereignty at all. Are countries like America, United Kingdom, Canada & Australia actually recognisable on any measure other than name if they’re operating without democratic institutions in place?

Hyper-globalisation isn’t just the idea of open borders and free trade, it’s the idea that we need truly integrated systems for any single thing that’s global in nature. That’s Facebook or Google doing what it does with every single global citizen having access to it’s platform. It is Goldman Sachs having the ability to create a unit of fungible currency in one country and then turning it into thousands of different transactions across borders. It’s Apple building supply chains that span across 43 countries and 6 continents.

But it’s also more than just economics — it’s ideas and other global problems. It is global cooperation to solve climate change. It is solving global poverty by giving global citizens access to a universal basic income. It is solving health inequality by giving universal access to vaccines to solve global health crises.

Try forming a global consensus on climate change, universal basic income or healthcare with 180 nations each representing the best interests of their own local citizens. And there’s the rub, if you’re anti any one of those causes then you are labelled an anti-humanitarian. The Philosopher Kings not only have the level of hubris required to believe that they can solve these problems, but they also know that they can get the masses behind their hyper-globalisation campaigns because anyone against it is an uneducated bigot.

It’s quite fascinating to see what this trend has done for the idea of the left-right political spectrum. The old left were deeply distrusting of governments or institutions and would literally sacrifice their own lives in the system, living off the grid in hippie communes to fight for what they believed were just humanitarian causes. They’ve been replaced today by the virtue signalling middle who are far more interested in conformity for their own self interest than they are for the humanitarian causes they supposedly represent.

Now if we truly are concerned about the state of the planet, we could probably solve any sort of climate change tomorrow by replicating the way indigenous cultures have lived for thousands of years before us. I’m not sure what role Microsoft, Apple, Facebook, Goldman Sachs & the rest of the Philosopher Kings organisations would fare in that world, however.

Yet still, the trilemma shows the problem. The rise of populism in the mid 2010’s gives us an example of how democracy gets in the way of hyper-globalisation. I’m not even going to try and understand the true motives of Donald Trump, but one thing he did do was read the emotions of a fed up American middle class who had caught the short end of the hyper-globalisation stick. The blue collar family from the rust belt with no assets who’s been in and out of work for the better part of a decade isn’t drinking the kool-aid on the benefits of hyper-globalisation. So when a populist leader runs on a campaign that brings back jobs and protects the national interest first and foremost, there’s still enough uneducated bigots that will vote for them.

The question remains, how can the globalists solve the challenges of the trilemma?

The truth is, the globalists have already got most of the world to part with one of sovereignty or democracy. Nearly all of Europe have given up their sovereignty (and they’ve quickly found out democracy too) since they joined together to form the European Union, the regional organisation inspired by the Empire of Charlemagne whose Central Bank is led by the WEF Board Member & convicted fraud, Madame Lagarde.

The WEF have clearly shown they’ll turn a blind eye to things like totalitarianism & human slavery in China, in return for collaboration with President Xi. His speech at the WEF event earlier this year “calls for the world to work together to tackle global challenges, particularly COVID-19 and climate change”.

The biggest hurdle that remains is those card-carrying lovers of freedom and democracy in the United States of America. If they can find a way to get around the United States Constitution, then not only does American Democracy fall but so will the democratic governance of the few remaining advocates like Canada, Australia & the United Kingdom.


We can establish that there’s a new power, the stateless global elite, and we can establish that there’s a hurdle in their way, national sovereignty and democracy.

So just like we’ve seen over the last 5,000 years of recorded history, we simply have a new power battle in front of us. This is nothing new and to think otherwise shows a complete disregard for history. I think the mistake we’re making is to expect this power battle to look like all the other ones. Like WWI or WWII, where the power battle was primarily fought over territory using traditional means like guns and bombs. Why would a sophisticated group use such archaic methods when there’s far more powerful methods like cyber or biological warfare currently available?

Another method is information. This method has been used repeatedly throughout history, but the technology of today gives it powers that Lenin and Hitler could’ve only ever dreamed of.

Power has always hinged on your ability to convince enough followers on the merits of your ideas. The arrival of the printing press in the late 15th Century was a fascinating development for the power structures at the time. Pope Alexander, aware that the printing press could mean the distribution of ideas other than his own, promised excommunication for anyone who printed manuscripts without church approval.

“The art of printing can be of great service in so far as it furthers the circulation of useful and tested books; but it can bring about serious evils if it is permitted to widen the influence of pernicious works. It will, therefore, be necessary to maintain full control over the printers so that they may be prevented from bringing into print writings which are antagonistic to the Catholic faith, or which are likely to cause trouble to believers.” — Pope Alexander VI, 1501.

In 1995 a Washington Pastor by the name of Dr Bob Moorehead published The Paradox of Our Time, an essay often misattributed to the Dalai Lama.

This section regarding the paradox of information abundance seems particularly prescient.

More conveniences, but less time

We have more degrees, but less sense

More knowledge but less judgment

More experts but more problems

Now consider that these words were written almost a decade before the mainstream would start to see “a global computer network providing a variety of information and communication facilities, consisting of interconnected networks using standardized communication protocols” (AKA The Internet).

In the years that followed, Google launched in 1998, the same year that Microsoft released a Windows update that included its first web browser. Facebook launched to the Harvard Community in 2004. Apple released the iPhone in 2007, then added 4G capability in 2010 which enabled the whole world to access this new thing the internet anywhere, everywhere and at all times.

Pope Alexander saw the incredible power of the printing press in the 1500’s and it is no surprise that the global elite saw the power of the internet five centuries later. ICAAN, whose tagline is “One World, One Internet”, are the main group who govern the internet.

The work of the Panel is focused on evolving and globalizing the current Internet governance framework and the necessary mechanisms for doing so…The Panel actually is the result of a partnership with the Annenberg Foundation and the World Economic Forum.”

In a world of abundant information, the desire to find out what is fact and what is fiction becomes ever more challenging. This challenge has been exacerbated over the last 18 months, with the solution we seem to have agreed upon being a series of independent fact checkers.

Type “fact check” into your search browser and you’ll come across this as your first result: FactCheck.org A Project of The Annenberg Public Policy Center.

In addition to the ongoing support from the Annenberg Foundation, the biggest source of funding for FactCheck.org is from Facebook. This is the money they pay to receive the information that informs their in-built fact checker mechanism.

Consider that Facebook has 3.5 billion monthly users across its core platforms (Facebook, Instagram & WhatsApp). That’s almost half of the worlds population relying on these platforms for their ‘truths’ or ‘facts’.

But there’s a problem with that. And it is summed up by none better than the brilliant mind of Friedrich Nietzsche.

So whose interpretations are most of the worlds population relying upon for their facts?

Well it’s the global elite, of course. And propaganda is the executive arm of the invisible government.

The idea of ‘one truth’ or one set of facts and anything that opposes it being labelled misinformation is a truly worrying trend. It’s the tool used by any totalitarian rule because the achilles heel of that style of regime is any independent thought that challenges the official party line. Orwell said that “Intellectual honesty is a crime in any totalitarian country”, which is why his fictional land of Oceania implemented its own Newspeak language that was “designed to diminish the range of thought” by its citizens.

Totalitarian propaganda is not just the big flags and flashy statements that we look at in retrospect and wonder how the people could be so stupid to fall for it. Joseph Goebbels, the man who convinced 60 million regular Germans that the solution to their problems was gassing Jews, put it best when he said that it “works best when those who are being manipulated are confident they are acting on their own free will”.

The Nuremberg Trials showed that there’s one human emotion that you need to evoke if propaganda is going to really work — fear.

“It was very easy, it has nothing to do with Nazism, it has something to do with human nature. You can do it in a Nazi, socialist, communist regime, in a monarchy and even in a democracy. The only thing that needs to be done to enslave people is to scare them. If you manage to find a way to scare people, you can make them do what you want.”


Human history is a story of power battles. A human being with a thirst for power is willing to commit incredible atrocities. There is a global elite class with incredible power. National sovereignty and democracy are a hurdle for hyper-globalisation. The combination of technology and centralisation provides a tool that could be used for unprecedented mind control and propaganda. It is difficult to control a large population without propaganda.

These should not be controversial ideas.

The theories that some people (nearly always ‘far right wing QAnon maniacs’) have concluded when connecting these dots are the controversial ones. A lot of those conspiracy theories do miss the mark, but at least they’re starting to ask some of the right questions.

Where the conspiracy theories fall down are the belief that what’s happening in the world right now is a coordinated plan by this entire class of global elites with the media, politicians and multinational corporations all in on it. My view is that not only would it be impossible to coordinate, but it fails to realise that no power battle or war in history occurred this way. A plan can be executed with less than a handful of people in the know, all you need to execute it successfully is to ensure that everyone else is in on the ideology.

The saying that it’s easier to fool someone than it is to convince them they’ve been fooled applies to party members just as much as it applies to a population. The Nazi’s, Soviets & CCP all had good men & women within their ranks who had been fooled by their leaders utopian visions.

Look at www.weforum.org. Look at the major political parties in every country, the media, the biggest corporations, the normal people. Look at the consequences for those who oppose these ideas.

Now ask the question on whether you think that everyone is in on the ideology?

And if everyone is in on the ideology, could a small inner faction be willing to go the distance and commit an atrocity to seize power?

A new system of centralised global governance where nation states & democracies cease to matter is the end game for humanity as we know it. It’s the system of governance envisaged in 1984, Brave New World, The Matrix, V For Vendetta, The Handmaid‘s Tale & just about every other dystopian sci-fi thats ever been made.

In 1961 the English philosopher Aldous Huxley put forward his idea on how we might get there. I’m petrified that he might’ve nailed it.

(Initially published on August 15th 2021)

The Aussie Dream that is our housing market has always been a popular topic and it’s becoming increasingly divisive. Australian real estate is an asset class has a little bit of everything. There’s elements of scarcity that makes it comparable to real assets like gold and a yield that provides a store of wealth with an income, just like what government bonds should be. But concurrently, there’s credit driven speculation that makes it a quintessential asset bubble. This backdrop has created two groups of people — there’s the permabulls who believe that prices only ever go up, or there’s the growing group of alarmist bears predicting prices to crash by 50%+. What if they’re both right, or even that they’ve even both been right for the past decade or more? This is an asset bubble that could pop spectacularly, but we’re more likely to see prices double than we are to see them halve.

The total value of residential real estate in Australia is estimated at over $6 trillion, roughly in line with the annual GDP of Germany. This total market is incredibly nuanced, including everything from community apartment projects in Northern Territory to harbourside mansions in Sydney and everything in between. Price trends on these individual markets will follow a very different trajectory and it doesn’t make sense to make assessments on the market as a whole. This article will focus primarily on premium houses in Melbourne & Sydney, the two markets that have seen the most meteoric price rises over the past decades and therefore where opinions are the most divided.

The 8m+ households who own their own home, albeit with about two thirds of those subject to a mortgage, have often made more money from home equity than they have from working. Boomers who bought prime real estate in the 90’s for the same price as a Millennial might spend on a European holiday are now multimillionaires. The wealthiest ones own several properties, purchased using the BRRRR method of leveraging against equity and aided by favourable tax incentives like negative gearing.

Real Estate, as priced in Australian Dollars (AUD), has risen rapidly in the three decades since the ’91 recession. Factors like immigration have clearly played a role, but undoubtedly the major driver of price appreciation has been credit growth aided by falling interest rates. Even the staunchest of property bulls would not disagree with the fact that prices would not have risen then way they have without mortgage growth.

Interest rates in Australia have followed the global trend of a steady downward increase towards the current zero bound.

If mortgages had been outlawed and people could only pay cash for real estate, the charts above would clearly show a different picture. This might seem obvious, but there’s an important element of this that very few have taken the time to understand. Mortgages allow new Australian Dollars to be created, so without mortgages there would simply be less dollars in the system.

Imagine an extremely simplified scenario where the starting stock of dollars was 100 and there were 10 identical houses. If transactions are done with existing money, then each dollar retains its value and the price of each house should be $10. If we allow for an additional $100 to be included in this system via mortgages, we now have $200 of currency but the same number of houses, so each house is now worth $20. The property speculators and mainstream media will say that prices have doubled, but what’s actually happened is the value of each dollar has halved.

Professor Richard Werner, perhaps the worlds leading expert on banking, dispels many myths in this video where he explains how money is actually created which is contrary to the popular belief that banks take in deposits from some people and loan that same money out to others. The simple takeaway is that money is created, essentially out of thin air, at commercial banks when they issue loans. That loan is accounted for as an asset on the banks balance sheet and a liability of the borrower, known as a mortgage. When a bank issues a new mortgage, there is asset credit creation of new Australian dollars to purchase property.

If you overlay the charts of Australia’s real estate price appreciation with bank assets and broad money supply, it’s clear that this phenomenon explained by Professor Werner has had a major impact on prices. What happens from here is where things get contentious.

Australian bank assets (loans issued) have grown largely in line with nominal property prices.

Whatever your views may be on Bitcoin, one of the most popular valuation methods put forward is the stock-to-flow ratio shown below. This essentially models the supply of a scarce asset and shows that demand (market price) is determined by the level of flow — the less stock added each year, the more valuable a scarce asset may be. This market dynamic can be applied to more than just bitcoin and precious metals, for example you might consider a limited edition collectable sneaker and the impact on market value should a manufacturer release 10 or 10,000 pairs. Clearly the limited release sneaker would attract a higher price on the open market.

The stock to flow model used to show why bitcoin, silver and gold are so valuable.

A stock to flow model for real estate might consider the current stock of housing and calculate the flow as being new homes that are built each year. So if there’s 1.8 million houses in Melbourne and there’s 100 thousand new homes built in a greenfield development, then the stock (1.8 million) can be divided by the flow (100 thousand) to determine this ratio. You can do this same calculation for global real estate (total existing homes divided by new homes built), or even for dwellings within a suburb where you might see a house demolished and replaced by multiple townhouses or apartments.

At this point, the property bulls are screaming. They’ll correctly make the case that new stock of land, particularly land in prime suburbs, is actually zero. There is no new stock of land in Brighton, Toorak, Bondi or Vaucluse and there never will be. Real estate flow can be new properties that can substitute existing — say for example the future of work is entirely remote, then a house in a run down estate 50km from the Melbourne CBD but easily be substituted by a new house built in a different state. But as long as people believe the aforementioned suburbs to be desirable, then they will always remain valuable under any stock to flow model.

The strongest bull case for real estate is that at its core, it is undoubtedly a valuable asset. Australia is one of the worlds most desirable places to live — we have a western democratic political system, good climate, friendly people, low density and well developed amenities. Unless you can make a case for a mass exodus of people leaving the country, there will always be demand for houses in the prime locations around our capital cities. I can’t imagine a scenario where a portion of the worlds almost 8 billion inhabitants wouldn’t want to live in a 4 bedroom house with beach proximity in Albert Park. Another important factor for Australians is that given our location, we’re not particularly transient. A Melbournian is less likely to move cities than say someone in Berlin moving to Paris, or a San Franciscan moving to Los Angeles.

Melbourne is without doubt one of the most desirable cities in the world to live in.

As Warren Buffett famously says, “price is what you pay; value is what you get”, meaning that just because something is a good asset doesn’t mean that it is a good investment. Assets may be high quality, but still heavily overpriced and capable of a collapse. Australian real estate bears will point to our household debt levels to show that we’re a nation of people, fuelled by credit, who are paying too much for property.

https://rogermontgomery.com/australia-leads-the-way-on-household-debt/

The bear case for Aussie real estate is pretty simple and you don’t have to look too far to find a multitude of articles explaining why prices are set the collapse. The focus of this article is not to dispute these factors, which in most cases are very hard to argue against. We’ve had a 30 year run up in debt creating an asset bubble that now has to contend with a calamitous economic shock from Covid-19, stagnant wages and higher unemployment, falling immigration and rising tensions with our Chinese golden goose that are only set to get worse.

It’s clear that over the next few years, the Australian real estate market is going to be faced with challenges we’ve never seen before. This set of scenarios is very different to any other time in history, primarily because of the global backdrop of a monetary regimes which look to be reaching their tipping points.

So how exactly will this play out? My starting contention is that we’re measuring the whole thing the wrong way. Everyone always talks about house prices in terms of Australian dollars, but given that we’ve been creating new AUDs out of thin air to purchase real estate, its questionable logic to get so caught up in the price against those dollars. The hypothetical scenario discussed earlier with 10 houses has already shown what happens when the supply of money increase. We see the exact same phenomenon with median house prices in Melbourne and Sydney, as long as we calculate them in nominal terms. That is that the numerator is AUDs and the denominator is Australian houses — AUDs divided by the median house equals 793,548 in Melbourne and 1,002,107 in Sydney.

Melbourne houses, as priced in AUDs.

Sydney houses, as priced in AUDs.

But what if we change the numerator? In order to choose an appropriate numerator, we need to find an asset whose price cannot be influenced by money printing. In a world of increasingly extreme fiat monetary policies, such assets are hard to find.

Up until 1971, gold was the official measure of currency. That changed with the removal of the gold standard and what that’s done to prices in the 50 years since is summed up perfectly in the charts on this website. The role of gold hasn’t changed since 1971, but the role of money has. The purest reserve asset or currency that exists is gold, for reasons I’ve outlined in this article, so we can get a more accurate measure of Australian real estate by including gold as the numerator.

How many ounces of gold do you need to buy a median house in Melbourne?

How many ounces of gold do you need to buy a median house in Sydney?

It’s incredible what happens to prices when you remove the allure of fiat money as the numerator. If the charts above were what was reported in the media, the headlines would be much different. The bulls would be saying that after 20 years of price declines, we’re about to see the bottom and now is the time to buy. The bears would point to a classic ‘head and shoulders’ technical chart pattern and show that prices still have much further to go.

Head and shoulders chart patterns, which look eerily similar to median house prices in Australia.

There was once a time where Venezuelans or Argentinians primary concern was valuations in their home currencies, but that sentiment can quickly change when the currency becomes worthless. However for the moment, most Australians live their lives in AUD terms and are more interested in what’s going to happen with house prices in their local currency.

With a 30 year price bubble now hit with its first recession, the rubber is about to meet the road with house prices. Something is going to give, the question is whether it’s the numerator or the denominator. If properties are about to collapse against the AUD, then the doomsayer prophecy will come true and median prices in Melbourne and Sydney will fall below A$500,000. My opinion: the chances of this happening are close to 0%, instead the pressure valve will be in the currency.

We’ve come too far for this to be unwound. Something has to give, thats clear. But whether it’s the nominal house prices or the currency ultimately comes down to policy decisions taken by government. The government has been playing poker with their cards face up on the table and using poker parlance, if you haven’t worked out the hands they’re playing then you’re the patsy.

Sure there’s been policies aimed at taking some heat out of the market, but no sitting government is going to be the one that pops the asset bubble — its political suicide. This is the same playbook for every government on earth who controls their own currency and it’s been hyper-charged since the GFC. The S&P 500 is just one such example and you can look at the Central Bank response in 2018 when they tried to hike rates to take some heat out of the bubble.

You’ll notice from the chart earlier that the most indebted nations relative to GDP are all countries who control their own currency. Why is this the case? Because debt and currency printing works like wallpaper over the cracks and can kick the can further down the road so that it’s a future governments problem. You can see house prices in Spain as an example of what happens when a government can’t use their Central Bank to employ monetary policies that bail out the local market. Clearly, the Spanish government didn’t get the all clear from the French Chaired ECB to issue local banks a line of credit similar to what we’ve seen in Australia this year.

Spanish housing prices since 2000.

The Australian Federal Government have shown us their hand. There’s no way they’re letting this property bubble burst, so there should be no surprises at the policy announced last week that loosens restrictions on bank lending. The bears waiting for the crash were up in arms about this announcement, How could they keep propping up this bubble?, but that’s because they’re not paying enough attention to the game that’s being played.

Is it the right policy move? Maybe, maybe not, but I’m not here to make policy recommendations but rather make observations on what’s happening. Of course I can understand why they’re making these decisions though, because a sustained collapse in nominal terms can only be a result of forced selling. The only ones that can really cause forced selling are the banks and the government, who not surprisingly are also the ones who have the most to lose in this scenario. So how could anyone in their right mind think that a government with a four year term is going to implement a set of policy moves that causes their own demise? Changing course now makes little sense and unless I see clear evidence otherwise, I am going to assume that the government will do all that it can to keep the property market propped up. The pressure valve is not going to be nominal house prices, but instead it will be our currency.

Currencies collapse when governments push the boat out too far with unproductive debt that props up the short term interests of its people. There’s been a rapid increase in these instances since 1971, as shown in the chart below.

Currency crashes aren’t restricted to 3rd world countries. Argentina and Venezuela are popular examples, but countries like South Africa and Turkey are in the midst of seeing this play out right now. A currency collapse evokes the image of a person taking a wheelbarrow of cash to buy a loaf of bread, but a chart of the currency vs gold as you see with the Argentinian Peso is just as stark.

Any Australian that thinks our currency is immune to a collapse needs to get out of their bubble and get a better sense of reality. All currencies are collapsing vs gold, the question really is at what relative speed to each other.

This is why the bears that are calling for 50% price drops are missing the point. If you’re calling for nominal price drops, then in essence your position is short property and long AUD. But I’m yet to hear a real estate doomsayer whose thesis makes any sort of bull case for the AUD. Of course macro investors might want to position for a bigger payoff and be long gold or other currencies and short property, but the average Australian doesn’t position themselves like this. The question for the average Aussie is one of relativity — do you want to be long Australian real estate, or long Australian government bonds and cash?

This is the question now and even more so the question when a hyperinflation scenario plays out. If you read about Argentina you’ll find articles about the property market collapse, but it’s not prices that have collapsed but rather the volume of sales. With mortgage rates at 50% and a currency that depreciates every day, no one is selling their homes as real estate is the safest form of savings.

Property prices & mortgage rates in Argentina over the past decade of hyperinflation.

My prediction on what the next decade looks like? I think the Aussie Dollar breaks, maybe in the next 12 months or maybe we push it out another few years. If you’re sitting on the sidelines with cash savings waiting for the crash, stop holding your breath. That is unless you see a marked, but unexpected, change in government policies. I think property prices will remain choppy in the short-medium term — there’s not going to be enough demand to drive prices higher, but that will be offset by a continuation of policies that ease any selling pressures and stops prices falling. When the currency breaks is when we’ll see the real action in nominal prices, but it will be a doubling rather than a halving. There will likely be far better assets to be invested in offshore, but locally in this scenario I’ll want to be short AUD (eg you own fixed rate mortgage debt) and long real estate. The Argentinians or Zimbabweans that fixed their mortgages at low rates quickly paid off their mortgages once rates hit upwards of 50%. The same thing happened with German Industrialists in the 1920’s who borrowed subsequently worthless marks to buy fixed assets.

These wont be fun times. The middle class are wiped out, savings are decimated, the price of essential goods and services skyrockets. We’ll get through it, just as all the other States have over the past few millennia who got themselves into the exact same position. But when you keep kicking the can down the road with more debt, it eventually catches up with you.

Children playing with paper planes made of worthless currency in the Weimar Republic during the 1920’s hyperinflation.

(Originally published on September 29 2020)

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