Well that was quick! After a bit of a runup in January, and many believing that 2023 would make up for stock and bond losses in 2022, it appears the victory laps may have been a bit premature. It appears that the bond “market” is signaling that there is trouble in paradise.
It also appears that rates are going to have to go FAR higher than expected because inflation is FAR higher than is being reported and to actually stall inflation rates have to rise higher than REAL inflation- not the fake numbers that are meant to deceive. Keep in mind that as rates rise, the price of existing bonds fall. Keep in mind that, as rates rise the cost of debt and financing goes up for governments, companies and individuals. We are seeing it in massive increases in bankruptcies in companies and individuals to start 2023 and we are likely in the very beginning of this cycle.
Please remember that if a company you invest in goes bankrupt the common stock shareholder is the first to lose. When I say “lose” I mean a 100% loss from which there is no recovery. In a less drastic way higher financing costs eat into profits because of increased amounts needed to service the debt. In some cases this could lead to default. In any case it does not lead to higher profits or higher share prices.
Let’s keep in mind that this entire monetary illusion was based upon “money from nowhere” manipulating prices. The most noteworthy manipulation is still taking place in the debt “markets” as rates cannot be allowed to rise to anywhere near what a willing buyer and willing seller would negotiate or the entire system would likely collapse in minutes.
I do, however, believe that the central banks are engineering a managed implosion of asset prices. It appears they want lower asset values (opposite of the wealth effect) to help tame inflation also. This is in addition to destroying jobs and the economy to tame inflation. Great plan for them- pretty bad for us!
Even with 60% of Americans living paycheck to paycheck and a majority not able to handle a $1000.00 surprise bill without using debt we have Fed Presidents like Neel Kashkari out there telling the public that they are earning too much. This from a guy who is probably a 50x millionaire.
It appears to me that anyone hanging their hopes on most stocks and bonds are about to be greatly disappointed. I also believe that anyone holding encumbered (indebted) real estate is likely to see their debts likely higher than the asset value if the current scenario stays in place.
I imagine many are believing that with rates rising that will also have a major effect on hard assets and in particular gold and silver since they offer no interest. I will attempt to enlighten those who believe this.
Let’s start with the fact that hard assets- gold and silver included are ASSETS and not liabilities. Your cash in the bank is owned by the bank and is OWED back to you (a debt). Don’t believe it? Go to the FDIC.gov and look it up for yourself. In addition, you can look at a dollar in our pocket and notice that it is a Federal Reserve Note. A NOTE is a unit of debt- owed back to it’s creator- the Fed- with INTEREST. Keep in mind this note was printed up out of nowhere and with no actual value backing it up- just a promise from the most indebted nation that has ever existed- to repay.
A bond is nothing more than an instrument that pays interest along the way and promises the return of your capital at the end of the term. As the value of our currency is being destroyed how attractive are long-term bonds? Also keep in mind that the issuer has to have the ABILITY to repay at maturity.
This takes me back to my old saying that, as this illusion is exposed “those assets being artificially propped up are likely to collapse far more than anyone is anticipating”. I also say “those assets being artificially suppressed are likely to explode higher”. Again- far more than anyone is anticipating.
Gold and silver in particular have been suppressed beyond belief. I wrote about this 12 years ago and was admonished up until the time billions in fines were paid for the exact acts I was pointing out.
Let’s first look at a few facts. As interest rates rose in the late 70s and early 80s gold rose from $35.00 per ounce to $800.00 per ounce. This was when rates were so high that money markets were as high as 18% and 5 year CDs were 12%. Obviously, there was something else driving the gold price.
My guess is that as we went off the gold standard people started to lose faith in the dollar. As a matter of fact inflation was rampant and all goods were rising in price. Sound familiar?
Also keep in mind that those STILL manipulating the prices lower are BUYING in record amounts year after year.
I would also like to point out that when the Fed KNEW they were going to explode the money supply they stopped reporting the M2 numbers. What is a better way to hide what you are doing than to stop reporting it? I have heard that a company was hacked that provided information on the COT (Commitment of Traders) report. This is important because these traders, who produce NOTHING and probably wouldn’t know what real gold looked like if they saw it manipulate and set the price for the real asset. As the story goes, because of this, there have been no reports so far in 2023. While this is speculation on my part I believe they may be hiding this information on purpose. Many banks could get wiped out because of their short positions particularly against gold and those positions have to be exited before any major up-move can take place. Could it be they are accomplishing that right now?
Stay Tuned!
Only by raising rates higher than the actual inflation rate was Paul Voelker able to stabilize the dollar and set the stage for the Petrodollar system which appears to be on its last legs right now.
While many like to compare Chairman Powell to Chairman Voelker there can be no comparison. Chairman Powell may be smarter for all I know. The problem is that when Mr. Voelker raised rates to near 20% the country was a VASTLY different place. Our national debt hadn’t yet reached the first TRILLION. We had a strong balance sheet. Today, no matter how sharp you think Mr. Powell may be he can’t even dream of raising rates anywhere near where Mr. Voelker did because the economy would be finished long before he got there. Look at these numbers: (All from US Debtclock.org)
1980 2023
National Debt (Admitted) $867.6 BILLION $31.6 TRILLION
Personal Debt $1.7 TRILLION $24 TRILLION
Credit Card Debt $121 BILLION $1.2 TRILLION
Student Loan Debt Unknown $1.779 TRILLION
Unfunded Liabilities Unknown $181 TRILLION
Keep in mind that cities and states are on the hook for another $3.5 TRILLION and that most cities, states and especially the Federal government are running massive deficits adding to this pile of toxic debt daily.
But don’t worry- we can still “print up” enough to send BILLIONS to Ukraine as we watch our infrastructure crumble and our way of life collapse.
The problem here is that according to these numbers there is NO WAY to pay back all that is promised to be paid without the currency’s value being destroyed. How sure are you that those you are counting on to fund your pension, social security, etc. will be able to pull it off?
You see, when the numbers say you are bankrupt, I don’t care how smart someone may be. There are very few options.
For anyone thinking that another election can fix this- you are being misled. While one person or another may do a better job of handling this next collapse- which I believe has already begun- there are very few options. Keep “printing” and honor your commitment to pay. This will likely destroy the currency and the $100.00 happy meal could be our new reality. Actually, that may seem cheap. The other option is to default. I can’t see any way that happens since we have a debt-based system and a default would mean that we couldn’t issue any more debt- at least for a while.
This is certainly NO TIME for complacency.
Be Prepared!
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