I have written many times that we have likely been in a depression (forget recession) since 2008 and possibly since the year 2000. My thesis has been that with all of the “printing and buying” schemes by central banks, banks and hedge funds, this has masked the underlying weakness in the economy since then.
Lower interest rates and bailouts have emboldened “investors” to take more risk and pay higher prices for riskier assets. Many have no clue how risky their “assets” really are.
The “printing and buying” is just the tip of the iceberg as governments at all levels were empowered to spend like drunken sailors to keep their economies propped up with transfer payments (SNAP, Section 8, unemployment, etc.) This money gets spent numerous times through the system and has made the economic numbers look far better than they actually would have been without all of the games.
I have also written about how the numbers have to get exponentially bigger to get the same results. We are here!
Back in September the Fed said we needed some short-term funding and was offering overnight repos up to $50 billion “temporarily”. Note that this was months before we ever heard of COVID 19 but 12-18 months after we noticed the economy slowing at an alarming rate.
Fast forward to yesterday and the Fed has announced “UNLIMITED LIQUIDITY”. That is quite a statement for an entity that can do a computer click and “create” a trillion dollars at virtually no cost and with virtually no labor. My opinion is that this “money” is now on its way to its intrinsic value of zero. Anything that can be created out of thin air, in any amount and without effort is screaming “I am worthless” to me.
So, the US government wants to send checks to the American people. $1-$2 TRILLION. The Fed conjures it up- the Treasury sends out the checks, people are happy to get it and we are all in debt another $1-$2 Trillion on top of the debt mountain we are already on long after the two-week hiatus is over and the “stimulus” is spent.
I am looking at yesterday’s actions as similar to Nixon taking us off of the gold standard in 1971. That allowed this gargantuan debt bubble to be foisted upon our backs and to grow exponentially since then.
It is similar in that the Fed and most other central banks have dropped any pretense of fiscal responsibility and have announced that there is NO amount too large to conjure up out of nowhere to continue pretending we are solvent. Obviously, with a trillion dollars a day being sent around the world and stock markets still tumbling even a trillion dollars a day can’t keep this debt monstrosity moving.
That trillion is being sent to foreign central banks and I believe is in addition to the $60 billion per month in treasuries, etc.
(Greg Mannarino, The Fed, Wall Street on Parade as sources)
It is truly amazing how TRILLION rolls off of our lips these days. It must be similar to Zimbabwe when everyone got their wish to be a billionaire only to find that 3 eggs cost a trillion Zimbabwe dollars.
Anyone who believes economic laws only apply elsewhere I believe you are in for the most rude awakening you can imagine.
It appears to me that we have entered the greatest depression. It also appears to me that the majority of people expect things to return to normal in a couple of months. As much as I wish that were true the damage done by the shuttering of the global economy has already been done.
On a slightly more sinister not I believe that this was a planned event. I had thought that after hearing about the Pandemic conference run 6 weeks before this virus broke out by The Bill and Melinda Gates Foundation and others, but am more sure than ever since Fed President James Bullard admitted on national TV that this WAS a planned event.
Why would they do that? According to Gregory Mannarino this was the plan all along for the central banks to be the buyer and lender of last resort and for the central banks to own EVERYTHING. In Japan, with a 20-year head start you can see that they are well on their way to owning Japanese companies (Top 10 shareholder in the Nikkei 225 Index) by clicking a button and creating hundreds of trillions of Yen- and buying everything in sight. I reported last week that the BOJ balance sheet was over 550 TRILLION YEN and we are supposed to believe, according to them, that they just didn’t do enough!
Already, they have bought ALL JAPANESE government debt for the last 3 years and own over 70% of all Japanese ETFs.
The USA appears to be going there. The Fed has announced that they will buy $4.5 trillion in corporate bonds, continue buying treasuries, will buy stocks and conjure up whatever is necessary to send out a couple of trillion to appease we peons as they bail out companies with more trillions yet again.
To me, buying mortgage-backed securities allows the Fed to own a huge amount of real estate when the collapsing economy produces an inordinate amount of defaults and foreclosures. At that time the Fed will have their masters at the banks foreclose and will likely own a majority of the USA realty market- with a click of a button! We become a nation of renters to our new unelected “leaders”.
As the economic damage done to small and large businesses alike because of this virus and continued economic lockdown, small businesses will be offered loans and if they can’t pay them back the Fed or their minions will foreclose and those businesses will no longer exist or be taken over by Fed friends.
The biggest thing I see is the corporate debt market where $4.5 trillion is earmarked here. As large companies fail it is likely that stockholders will be 100% wiped out. It is no secret that most of our large iconic companies are drowning in debt after years of borrowing to buy back stock and even pay dividends. This crisis will likely expose all those swimming naked as Warren Buffet likes to say. This will likely be a nude beach. The ones that are fiscally responsible (clothed) will be the odd ones.
The way our system works is that the stockholders are last to get paid in a bankruptcy and generally get wiped out 100%. In a reorganization, the secured bondholders get paid first. Generally, the bond (debt) holders become shareholders in a debt for equity swap and inherit a company that has no debt going forward. Convenient when all hell is breaking loose that there is no amount too large “help us out”.
I believe they are taking over our industry, our real estate and indeed destroying what’s left of mom and pop businesses across this once-great land.
There may not be much that we can do about this at this time. The only thing I can suggest is to be as self-sufficient as possible, make sure that you have your pantry full because prices may rise in a way you haven’t ever seen here in the USA. I also believe having cash and silver to barter with is a good idea.
Personally, I believe that if the US dollar loses too much value we may actually get a new currency- as has happened many times in world history- particularly in Latin America and other places where their currencies were “printed up” like this. In this case I believe gold is the best asset for this purpose as I expect to get a lot more of whatever it is we are using with gold than a green piece of paper or a computer blip at the bank.
Like I have said- artificially propped up assets will likely fall hard (you are seeing that right now) and those assets being held down (and hoarded by central banks, major banks, hedge funds and billionaires- those in the know) like gold and silver will likely rise far more than you can imagine.
Are you ready?
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