I watched a great video last night by Mike Maloney. In it, he explained what I have been saying for years but in a way that was right to the point and easy to understand. I have said many times that as the central banks conjure up money from nowhere it creates NOTHING. No food, no energy- NOTHING.
What Mr. Maloney said was the exact same thing but he also took it one step further and said that as people get their UBI (Universal Basic Income) , they would be receiving a unit of measurement rather than anything of value. In other words, cash was created as a unit of account to measure the value of labor, services and other tangible assets. It is the ultimate derivative (it derives its value from something other than itself).
When “cash” can be conjured up in unlimited amounts and with virtually no cost what could the actual value be? Heck, they don’t even bother printing it anymore. Most new cash is nothing but a computer blip.
It only has value when spent for a real asset like food, energy, etc.
Taking it a step further, if someone is sitting around watching TV there is no production of anything taking place. As we speak, we are reading articles about supply chains breaking down, dairy farmers dumping milk and other farmers giving away their crops so they don’t go bad. All economic reports are collapsing even more than they were prior to the virus scare. Substantially!
The main question that I have to ask is if those in charge are paying people to not work who is actually going to produce the necessities of life?
The answer I gave myself is that this will likely lead to a shortage of not only consumer staples but of EVERYTHING. This, in addition to “UNLIMITED” currency creation will lead to FAR higher prices and may just lead to a hyperinflation. (Lots of “cash” chasing fewer and fewer goods) Supply and demand.
We are only a few weeks into this nightmare and look at the carnage in the economy. Look at the store shelves and the stock in the grocery stores- already not at all what we have become accustomed to and all of the news points to a deepening crisis going forward. How many businesses will NOT reopen and how many jobs have been permanently lost already? My guess is that with each passing day more people will be unable to keep small businesses open and that will lead to even more massive job losses than are currently anticipated.
Let’s also not forget about the unusually bad global harvest that just took place in 2019 or the shuttering of large plants that produce meats and other products.
Thus, the need for more Universal Basic Income, More computer blip cash, less production , higher prices across the board and less variety of things to buy.
This still could lead to higher asset prices also as trillions of dollars, euros, yen, yuan, etc. are being created out of nowhere and most paper assets are being bought and artificially inflated. This will likely ultimately end in a thud- much like Japan but there may be sharp rallies along the way.
Gold, silver and hard assets should substantially outperform paper assets- as they have since the turn of the century by an even wider margin going forward as more and more people realize what is actually taking place. MANY are starting to get the picture I have been painting for the last 7 or so years when I called the markets fake. It is right in our face now and the curtain has been pulled back.
When the economy stalls to a crawl and profits are expected to drop 70% overall (JP Morgan) in the quarter and the “markets” rally- it is FAKE.
ALL THOSE WHO FAIL TO LEARN HISTORY ARE DOOMED TO REPEAT IT.
Let’s go back to the USSR in the 1980s. Their economy was collapsing but all of the “official” reports were of a booming economy. I remember seeing articles about crops rotting in the fields as people were starving because people weren’t getting paid to harvest the crops. Alcoholism and drug addiction went to record levels. By the end of the 1980s the economy was so bad that it just collapsed.
Does any of that sound familiar to what we are seeing right here and right now?
I believe that the USA and indeed the world was just about at that point in September of 2019 when the Fed started pumping the $12 trillion that has been sent to the banks so far (that we know of)1 and all of the alphabet soup of bailout acronyms started taking shape.
There were severe problems in the economy and in financial markets FAR before COVID 19 was a “thing”.
It is obviously a real virus with real consequences but I can’t help but believe it was unleashed rather than from someone eating a bat. Like FDR said “Nothing in politics happens by accident- it is all planned”. I believe the same can be said for our central banks and those who run them- the major banks.
I also believe that the draconian response was and continues to be far overdone and it is being used as a method of control rather than a real answer to stopping the spread of the disease.
I see many people scared to death and I also see numbers that are likely inflated for many reasons and STILL do not seem to warrant anything like what has been done to economies and lives.
I also believe more and more people are starting to get that picture too. Only the ones who do nothing but watch mainstream media are still brainwashed by numbers that appear big but when you run them and do math the response does not appear to equal the threat.
Let’s get back to work America!
- Wall Street On Parade
Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.
Precious Metals, including gold, are subject to special risks including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.
Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.