The news is full of stories about the Coronavirus in China that is quickly spreading around the world.
It appears that, in an attempt to keep everyone clueless and happy, the Chinese government may have shrugged off warnings that this was starting months ago. I guess they thought if you pretend its not happening- it wouldn’t be. They even punished those that tried to make the warnings.
Due to their callousness in the beginning this could be an event that could finally end the most absurd chapter in our financial history. It appears that whether or not this becomes a global pandemic the damage to global supply lines and China’s economy overall are irreversible. The only real question is how long and how deep this will go. We should know better in a week or so as we see how the cases are either growing or (hopefully) contracting.
This is so important because of the massive amounts of record debt that is being carried at every level of society. Personal, business, municipal, state and national governments are all at record level of debts. This at a time when the global economy was weak to start with which makes debt harder to carry if the revenue coming in is lower- which in MANY cases it has been for quite some time now.
Don’t forget that China’s economy is 17% of the world economy. Their debt has risen from around $2 trillion in the year 2000 to over $42 trillion today. That is a large load to be carrying with over 400 million people locked in their homes for who knows how long. China was the driving force behind the “recovery” from the 2008-2009 meltdown and may be signaling at least the beginning of the end of this fake debt-based recovery. We know the day will come but can’t know when or what will be the catalyst. Add one more large possibility.
I am actually fearful that this virus may be THE excuse for what may happen in the “markets” going forward. As Gerald Celente of the Trends Journal has said “When all else fails they take you to war”. I take that to mean that they need an excuse- something other than their monetary mismanagement- to explain why things went so wrong. Maybe instead of war we will have a global pandemic. I hope not but my confidence is low in our “leaders”.
The way the Chinese dealt with this virus is similar to the way the Fed and other central banks have dealt with our economic problems. They just conjure up “money” out of nowhere, pay bills, interest and retire old bonds with this faux cash and pretend that all is well- heck, as a matter of fact, they pretend the economy is BOOMING! This when the labor participation rate in the USA is LESS than it was in 2009. Let that sink in! Less people have a job today than had a job in 2009- at the height of the last meltdown. Booming??? If booming means imploding, I guess I would agree.
Massive layoffs and store closings. Boom!
Shipping rates collapsing, trucking companies going bankrupt, rail cars sitting empty with no loads. Boom!
Headlines all over the place about manufacturing cratering. Boom!
China’s Coronavirus- hey just “print” money- drive stocks and bonds higher and make sure everyone sees that and NOT the debts we are running up or the yield curve inversion (again) or the economic numbers- no just look at what our financial game shows are telling you is important. Oh- and never forget that bad news is always good news because it means the Fed will be conjuring up even more trillions shortly to make your absurdly expensive stocks even more absurdly overvalued than they are now- which is already unprecedented. Boom!
Let’s not forget about the paper games in the metals market so nobody gets the idea to buy some real money. No- leave that to the major banks and central banks who have been buying in record amounts for the last 2 years. Boom!
You can’t cure people with a fake cure and you can’t fix a debt crisis with more debt because that is a fake cure.
Eventually, reality sets in and you finally have to admit to a problem and get to a real cure. In China, it is locking down and quarantining more people than live in the USA. For the central banks it has been putting, according to Wall Street on Parade, giving the banks between $6 Trillion and $7 Trillion since September. To me, this makes it obvious that there are problems they are aware of but want to keep us as clueless and happy as possible. Sound familiar?
There will likely come a day when the SHTF and there will be no option but to let the market do its only job- find price discovery. My guess is that this discovery will shock- and possibly ruin many. Most people are totally unaware of what is happening in the REPO markets, the $60 billion in Treasury note purchases by the Fed every month and the purchasing of securities by banks, central banks, hedge funds, etc. to keep prices artificially elevated. Of course, this is being done with “money” from nowhere. This likely explains the disconnect with the real economy which is struggling at best and the all-time highs in the “markets”. I am also sure that VERY few are aware that 67% of YTD returns in the S&P 500 have come from just 4 stocks. Microsoft, Apple, Amazon and Google. (Data Trek Research) Remember I wrote a few weeks ago that 40% of listed companies in the USA LOST money in 2019- as a few stocks vaulted the indexes higher.
Meanwhile, the central bankers are doing all they can to put lipstick on our economic pig but their actions (QE in Japan, EU and USA, negative interest rates, asset purchases, etc.) give anyone looking the idea that all is NOT well, the economy has major problems and this fake money is just giving the illusion that all is well. Until it doesn’t.
For 5000 years gold has served as money. It is accepted around the world as a form of payment. Even central banks, who can conjure up any amount of fiat currency at virtually no cost, are buying gold in record amounts in 2018 and 2019. I believe it is because they realize to keep this going they will “print” so much fake currency that it will, at some point render it valueless. At that time the gold will come in mighty handy as the system is reset. Many have hypothesized that to get confidence back into the system gold would likely have to play a major role. I agree since history shows that not one fiat money experiment has ended well. There is no reason to believe that this time is any different.
I believe based upon the numbers and coordinated efforts by the central banks that something big is coming. Actually, it is possibly already here but only visible to those behind the curtain. Watch what they do- NOT what they say.
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