How conspiracy theorists want to steer us towards the cliff

December 6, 2012

Consumers are feeling optimistic; sales are up; employment hasn’t much improved but neither is it getting worse; Washington is as dysfunctional as ever; and housing is showing significant life. Not the best of times, by any means, but not the worst. Yet, for some, that very calm says a storm is brewing, one of epic and perhaps even biblical proportions. Their opinion may not be a dominant chord, but it is prominent. And it may explain in part why our public debate about fiscal cliffs, taxes and the economic future can verge so quickly into dark, deep and destructive passions.

If you’ve turned on talk radio to pass the time driving from store to store for Christmas shopping, you may have heard an ominous voice jarring you from otherwise anodyne thoughts about the state of economic affairs. “Something bigger and more devastating than the credit crisis of 2008 is about to come our way. … Fail to heed this final warning at your own risk.” This isn’t a public-service message, though it comes with that patina. It is an ad from CritcalWarning6, which has also festooned financial websites with its banners, urging you to click and find out just what lies ahead. So I did.

We are, says Michael Lombardi, the man behind the campaign, headed for a collapse that will make what happened in 2008-09 look like a pallid warmup, plunging the U.S. and the world into a new Great Depression whose long-term effects could be much worse. The U.S. government is bankrupt, says Lombardi, and the Federal Reserve’s policy of “artificially low interest rates” has reached the end of its utility. There are no arrows in the proverbial government quiver, and in conjunction with an imploding euro zone, massive underemployment and far more debt than can be paid off, we are on the precipice, a cliff much more dire than the upcoming fiscal one. Stocks will plunge well below the lows reached in March 2009, and unemployment will make Spain today appear to be a safe haven.

It’s easy to discount these currents as a paranoid fringe, but the lure of bullion and the warnings of financial Armageddon aren’t fringe enough to be harmless. The melodrama of CriticalWarning6 actually shields the degree to which such views are nearly mainstream in the financial community, which has more than a fair share of influential investors who believe that various degrees of implosion are likelier than not. Famed investor James John Paulson* has invested and lost billions in gold this year with a similar, though surely better reasoned, philosophy. Marc Faber, who pens the Doom & Gloom report from his haven in Hong Kong, is of a similar mind. And they are by no means alone.

Such views also undergird the Tea Party fervor that debt must be dealt with NOW! The fiscal cliff is a sideshow, and any delay in dealing with the debt will mean one step closer to the financial collapse that we have been holding back as effectively as that little Dutch boy with his finger in the dyke. Sooner, or later…

Conservative radio especially has been festooned with apocalyptic financial warnings, which often take the form of urging people to invest what assets they have in gold coins and gold bullion. Glenn Beck, the most prominent advocate of this approach, has been a major voice for Goldline, a company that specialized in selling gold coins as a primary investment strategy. Goldline has faced legal scrutiny in California for duping investors and charging egregious fees and commissions, but its success is testament to how easy it is to connect various dots of fear and discontent to end up with an investing philosophy that dictates placing all your liquid assets in Gold American Eagle coins.

This movement is hardly a product of our times alone. Goldline and other “gold bug” companies offering to melt your jewelry down in exchange for bullion are part of a longer legacy. It’s one that began at least with a Franklin Roosevelt executive order in 1933 recalling gold coins, in effect making it illegal for an individual to own certain types of bullion and coin. That lasted until the end of the gold standard in 1974.

Even before that, fears of the central government overreaching and “confiscating” the hard-earned wealth of the people extend back into the 19th century with populist rage and fear, and even further back to the fierce opposition to the Bank of the United States as a tyrannical power grab by the federal government.

Today, those older currents are strengthened by a newer note: that the entire financial system, supported by “fiat” currency detached from gold and backed only by government printing presses churning out dollars, is on the verge of collapse. Hence, CriticalWarning6 and a constant, hushed worry in the financial world that the next black swan is the implosion of the U.S. currency system.

Added to the mix is the generalized paranoia that has always coursed through American society (and indeed most societies). The historian Richard Hofstadter famously wrote of the “paranoid style in American politics,” and for good reason. From “The X-Files” to the current fixation on the Mayan calendar, there has always been a school of thought that says the entire system is a scrim concealing darker forces and disturbing truths. These currents are prominent enough that NASA actually has a page on its site debunking the Mayan myth of a planet called Niburu hurtling toward earth scheduled to collide and end life as we know it on Dec. 21.

There are real structural issues we face, but there is a difference between challenges we must confront and impending collapse. Challenges can energize and mobilize our creativity and ambition to solve and meet them; fear of collapse has a paralyzing effect, or worse ‑ it leads to a “burn, baby, burn” nihilism that knows no compromise and dismisses measured responses as meek and useless. It fuels radicalism of the most unhelpful sort rather than energizing a collective response to shared issues. And regrettably, this kind of thing is likely to be part of the mix even after Dec. 21 comes and go with nary a dent to the planet.

*CORRECTION: This piece originally misidentified John Paulson’s first name.



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The problem isn’t paranoia, it is the total refusal to see what we have done and what it mathematically must lead to. The “doomsayers” of today are the same ones that were warning that the housing bubble had to collapse and bring the economy down but were drowned out by the Federal Reserve, Fannie, Freddie and all the “powers that be”. They were written off as feeble minded Cassandras that should be ignored. And they were. And they were right.

We are currently $16.2 Trillion in Federal debt and $59 Trillion in total debt. The Federal government alone has unfunded liabilities on TOP of that of over $80 Trillion. This much debt can’t be paid off. It amounts to almost $706 Thousand for every family in the United States and it is climbing at a rate of over $2.2 Trillion per year (over $26,000 per family). If we don’t deal with it NOW, when will we? When the government is finally forced to destroy the dollar to pay it off or when it simply defaults? Our problem is that we aren’t paranoid enough!

Posted by JimT46 | Report as abusive

A conspiracy of conspiracy theorists? Hmm.

Posted by USHistoryMan | Report as abusive

you have no right to put logic in print and try and take away my god given right to believe in whatever wacky and downright ruinous belief system i can fixate on. i sure don’t need facts to believe when i can use good old faith based logic that requires no such shackling limitations.

Posted by jcfl | Report as abusive

Feds sitting on somewhere in the neighborhood of 2.5T in treasuries (the Fed carrying a negative balance is pretty unprecedented) and is going to be adding 85B or so a month to that indefinitely, government is expected to be paying nearly 1T a year in interest by 2020, 600T global derivatives market floating around out there that has no basis in reality, just derivatives of reality… the financial situation is just ludicrous at the moment. Maybe it’ll all be fine. Then again, maybe it won’t. A derivative bubble would freeze global liquidity, the feds ever increasing balance sheet could spell runaway inflation, and the governments debt is already projected to be unsustainable.

Fortunately, as long as people believe everything is fine, they generally are in economics. Panic could bring down the whole house of cards. Gotta manage perceptions. Gotta have faith.

Posted by Jameson4Lunch | Report as abusive

Lets see, nearly $16.4 trillion in federal debt and growing at over $1 Trillion per year, $59 Trillion in total debt ($706,000 per household), over $80 Trillion in Federal unfunded liabilities, Social security now running in the red, Medicare living on borrowed money, yeah, I don’t see a problem here. Those Casandras should just keep quiet. They are simply scaring people. There is no need to do anything now. Our government will tell us when it becomes a problem. We have lots of time.

Posted by JimT46 | Report as abusive

What price did we pay for a barrel of oil in 1998 when times were good? TEN DOLLARS
Today it’s ten times more 100 DOLLARS, an increase of 1000%. Heard much about this during the presidential debate, even though it’s the energy blood of the economy? No.
In the absence of corporate media whitewash of the facts we are left to analyze how we are doing personally and I can tell you my life has taken a dramatic hit. No longer a home owner, reduced wages, paying more for everything, my doomsday is already here.

Posted by UScitizentoo | Report as abusive

It is all a matter of time frame.
I think that “conspiracy” is a big word, that sounds exactly like what you are writing against
Things do not look – in general – like if everything was going to improve on the long term.
On the short term, yes we could see a short lived bounce if – and no matter how – something is done by Washington.

On the longer term, some see I dismantling of the economy.
I would say that we will start living in a different type of economy, and as long as wee try to save the old one, things won’t go better.

There will always be people who will have more success then others, there will always be people who will be more sick then others, but if the differences between riches and poor to low middle class stay as extreme as they are now, for sure, something will crack.

Posted by garilou | Report as abusive

The crack will come when there isn’t much left for the 99%, just about now, and the 1% begin killing each other over the spoils, they already are.
Welcome to the 21st century, or is it the 1st century.

Posted by EthicsIntl | Report as abusive

Lets imagine it. The absolute worst. The US government and financial system implodes overnight. Next morning the Sun will rise again and people will find away to transact, trade and to work. The country would go backwards a bit, but like Germany after the War, it will rebound within two or three, decades to being even better. However, if you are part of the 1% you will lose everything with no chance of regaining it. Part of me actually WANTS it to crash despite knowing I will personally suffer. Call it schadenfreude if you must, or a longing to go back to basics.

Posted by BidnisMan | Report as abusive

Fear = Opportunity

These guys know that, and they know that most people don’t know that.

Posted by possibilianP | Report as abusive

These “conspiracy theorists” (of which I am one for the reasons you barely touched on above), are simply reading the handwriting on the wall and coming to a logical conclusion … then taking the opportunity to make money from it.

Isn’t that the good old American way — to make money from human tragedy?

An investment tip, for which I take no responsibility at all, is that I think next year is going to be a bonanza year for vultures.

Posted by Gordon2352 | Report as abusive

I don’t think it is fair to say that the vigilantes are the conspiracy theorists and that they are using the opportunity to make money.

The vigilantes simply see the facts together with their reasoning and analytical ability, they think! And they sound the warning. In many cases, we have to scream out the warning because people ignore us and call us crazy.

Many of the vigilantes are not the vultures as this article tries to make out. We don’t do it because we gain money out of it. I for one, even put much of my retirement money into betting AGAINST a doomsday scenario!

Posted by trevorh | Report as abusive

This is so completely wrong-headed and factually incorrect that there’s no point in even pointing out that Hofstadter was also an idiot.

Posted by REMant | Report as abusive

Hi, there. Nice try. Conspiracy what? Theory ? How about some Reuter’s WTC7 collapse prediction in 9/11/2001. Was that fact or theory?

Posted by vinanymous | Report as abusive

WOW, this is great stuff! No one has yet mentioned the chaos that will develop once the Fed can no longer artificially hold interest rates down and rates jump up along with inflation and the government is paying half a trillion dollars a month in interest on the national debt and China and Russia and Japan are demanding semiannual multi-trillion dollar interest payments on the trillions of dollars in U.S. Treasury debt that they own. Like Germany in the early thirties, stores will be raising prices hourly to keep up with inflation and workers will be getting paid daily and running to stores to buy food before the next price increase. I need a new pair of running shoes. This is going to be fun!

Posted by VoveoPacis | Report as abusive

Everything seems fine here.

I think there may be a planet, out there, somewhere, with your name on it.

Posted by Laster | Report as abusive

@ BidnisMan —

You state “Lets imagine it. The absolute worst. The US government and financial system implodes overnight. Next morning the Sun will rise again and people will find away to transact, trade and to work. The country would go backwards a bit, but like Germany after the War, it will rebound within two or three, decades to being even better. However, if you are part of the 1% you will lose everything with no chance of regaining it. Part of me actually WANTS it to crash despite knowing I will personally suffer. Call it schadenfreude if you must, or a longing to go back to basics.


Your version of history is a bit skewed from mine.

The “absolute worst” is NOT what you describe, but the fact that the German government collapsed, thus allowing Adolph Hitler to gain power — which he would not have had the opportunity to do with an intact German government after WWI.

This was caused ENTIRELY by the wealthy classes who insisted Germany be blamed 100% for WWI, and thus must bear the total cost of the war in the Treaty of Versailles. This caught Germany by complete surprise, since they had not been notified of this change ahead of the scheduled signing. However, Germany had no choice but to sign the treaty.

The REAL reason was NOT that Germany had caused WWI, but that the wealthy classes had pursued the war — financed by the wealthy class in the US — far longer than anyone thought possible.

Thus, when it was over, the bill for the war was astronomical and no single government could afford to pay their war debt, so they all decided to stick Germany with the bill.

Then they proceeded to force Germany to pay the bill, which is what caused the German government to collapse, and the German people to react against the wealthy by electing Adolph Hitler.

The point is, when you assume (as you did) nothing bad will really happen, it often turns out the the worst is what actually happens.

IF we pursue the same line of reasoning now — forcing ordinary people to pay for what the wealthy have done, which is already happening in Europe, and will begin in the US in 2013 — we could be setting ourselves up for economic collapse and war.

History does NOT support your thesis.

In this case “going back to the basics” may be a whole lot worse than you think.

Posted by Gordon2352 | Report as abusive

Note: neither Democrats nor Republicans is even considering slashing military spending in any proposed “compromise”. If we do not go over the cliff, no wars will end, no huge Pentagon projects will halt, invasion planning, invasions we are planning to commit, not defend from, will continue. No bases will be cut. The only way any of these things will happen id involuntarily.

Note: neither side is seriously talking about increasing the tax burden of the richest 2% of our residents in a fashion which cannot be easily dodged. A tax that is easy to avoid is not a “tax increase”. The wealthy will not pay more taxes unless we go over the “cliff”. All we will get is political theater, well funded, as usual, by the wealthy at tax-deductible rates.

Note: neither side is talking about avoiding “entitlement” reform other than entitlements responsible for the well being, and the tax bills, of the lower 98% of the population. No other entitlements are on the block — stocks, bonds, real estate, other “property” held by virtue of an “entitlement” from the US Government.

There is no rational alternative to going over the cliff for the 98% of Americans in the lower economic segment, with an exception for those in the military or military industries. The costs will not be spread in proportion to the benefits received from the Government.

Posted by usagadfly | Report as abusive

Just because it’s called a conspiracy doesn’t mean it didn’t or wont happen. JFK, Marilyn, Diana, the moon landing, aliens.. etc. Disinformation is a wonderful tool that is used in wars. If you tell someone a bigger lie, they are more likely to believe it. Fear is great, it makes people go out and spend more money. IMHO, i think that we have come to a point in the world where the majority (middle and low classes) are fed up being ripped off, and we all WISH the system would crash so we can start again. Problem is that if everyone is thinking like that, we will probably usher it in. Much like the religious extremists or radicals who can’t wait for judgement day, just so they can say.. we told you so. You know? My psyche tells me 95% of things I worry about will never happen, and the 5% that does is out of my control anyhow, so stop worrying. So i ask my grandad, who is in his 90’s now, hey grandad, is it just me or do you think the world is heading down into the abyss? He looked at me, smiled and laughed a little and said, it’s always been like that and always will be. Being the eternal optimist i am, thanks to the years of therapy i have undergone for being a total worrier most of my life and totally a stress freak, i usually ignore the warnings and enable the thinking.. don’t worry, be happy. Will there be an almighty crash? maybe. Will a comet slam into the planet? maybe. Will there be a war to end all wars? maybe. The key is to stop worrying, because sometimes the amount of time worrying over something can often be worse then the event itself. Man has always messed with each other and the world and i don’t think that is going to change. So yes be prepared for any kind of disaster. I mean after all it could be a natural disaster that annihilates the planet.. something simple like a massive volcano or tech-tonic plate shift, so my advise to everyone is always have an emergency plan you go through with your family and keep a grab-and-go bag handy with survival tools, passport, USD/Gold, food, etc and be prepared to go bush for at least 3 months to 1 year. Go camping with your family often and learn about what tools you are missing. A volcano big enough could send the world into darkness. Be prepared for anything, but not alarmed i say. It does say in the bible the meek shall inherit the earth. It also says the kings of the east shall arise and hold the world to ransom. You should be prepared for any disaster in the world. When you are prepared you sleep better at night. I am a thousand miles from the nearest city, high up in the hills 1 mile above sea level, off-the-grid and have enough food and survival gear to last a year. I see a dynamic planet that changes and is going through changes, weather etc. That is what i would be concerned about the most, nature itself, the planet and it’s powerful elements. Peace.

Posted by iAussie | Report as abusive

Nice article Zack. Now you can stick your head back in the sand since you have explained so convincingly the link between extremists and there unsupported gaga, and the serious concerns of millions of Americans about a very real impending economic implosion.

Posted by jerico911 | Report as abusive


in 2011, on this planet 135 million people were born and 57 million people died… increase of 78 million, according to Wikipedia.

supply and demand, …… the time those 78 million people grow up, labor will be worth less, and food will cost more.

we are enamored of businesses that replace jobs with technology……..even, jobs that require expensive educations.

we are enamored with finance, and borrowing………..even to the point, where the Fed will create inflation, just to keep over-leveraged assets, from crashing in value………

……..why do you need a ‘conspiracy’ ?……traditional incompetence will work fine.

Posted by Robertla | Report as abusive