Many years ago, I was writing about how the hedge funds had been underperforming. I made the comment that I didn’t think that all of a sudden, these guys forgot how to “invest”. What I hypothesized at the time is that these guys were never all that sharp to start with but were able to make trades that were so large that they could move the “market”. I also hypothesized (correctly I believe) that there was a new sheriff in town that could make larger (virtually unlimited) trades that rendered the manipulations by the hedge funds moot. Central Banks.

I believe that, eventually, those fellows realized what was happening and decided to join them since they couldn’t beat them. For years, the unholy alliance has been wonderful for the 1% and has been a nightmare for most of the rest of us.

At this point, they have bought most of the country out with money conjured up from nowhere. Doctors are not doctors anymore but profit centers for the owners who have bought the hospital chains and rules and regulations have made having a private practice a rarity these days. Dentists are being bought out by conglomerates. Railroads and trucking companies have been bought out by entities that don’t know anything about railroading or trucking but closely monitor their bottom line profits. There are few “grocery stores” left- only food chains. Even our homes that our kids and grandkids should be buying are being snapped up by Wall Street (Blackrock and Blackstone are good examples).

These massive money-changers are also getting majority ownership of giant energy producers like Exxon Mobil (Blackrock again) and forcing their way onto the boards. They are actually getting companies like these to cancel future projects and decrease exploration – because we need to go green. How is that working out for you?

The reason I say that they could “print up” “virtually” unlimited amounts is that, actually, there is no such thing as UNLIMITED in a world that has limits. There is a limit to virtually all things that we need to survive. When you THINK you can “print up” unlimited amounts it often seems that way for a period of time and then … WHAM- reality sets in and you get a serious lesson. I believe that the lesson we are seeing now is that you can conjure up trillions of fiat currency but if you “print” too much the value plummets. In addition, since that “money” was conjured up with no value created- other than purchasing power (created NOTHING- no food, water, energy, etc.) it is only a matter of time before you use up all of your accumulated assets and the reality of the situation sets in. The reality is that we have used up our surpluses and now the world is all at once concerned about future supplies.

Many are blaming supply-chain disruptions, Russia, etc. when in reality we have been emptying our storehouses for decades by conjuring up cash, buying things while not replacing them with real goods. We are now at a point where those “in charge” are looking for any reason they can give other than the truth- THEY DID THIS.

The reality that we are all facing now is that rising prices are causing major problems not just in places like third-world countries but also Europe and right here in the USA. Those economically weaker countries are seeing inflation skyrocketing and supplies dwindling. Many are seeing massive demonstrations like in Iran, Sri Lanka and many other places. Turkey, Germany and many other Eurozone countries are seeing massive inflation. Of course, Zimbabwe and Venezuela have already seen hyperinflation and have not yet recovered in a decade.

For anyone who still thinks we may be immune here in the USA take a look at the growing tent cities across the country, the warnings of food and energy shortages coming and the inflation that is higher than any time in our lifetimes and think again. Our cities are resembling third-world countries.

If our country had values and respect for one another as we had in the past we would have a lot easier time getting through whatever may come our way but unfortunately the disregard that most have for each other is far too evident.

Since the central banks have engineered the prices of most assets to where they sit today I believe that it is imperative to ask what happens when they have to reverse course. If it had not been for central bank buying there would NEVER have been negative interest rates. How many people do you know that would make a deposit KNOWING they would be receiving less in the future than what they put in? Who would dream of investing big money into an enterprise that is nothing more than a whim or a dream?

The fact of the matter is that virtually all prices have been manipulated- some propped up and others hammered down for the benefit of the few at the expense of the many.

Right now, as the chasm between the haves and the have-nots is getting larger and larger many at the lower rungs are already suffering. Some may have to start deciding whether to put gas in the car or food on the table. Many have been getting by with increased debt on credit cards but there is certainly a limit to that.

Personally, I believe that our greatest challenge will be prices rising FAR faster than any of us can imagine. I am not talking about years from now but in the coming weeks and months. This could lead to social and societal unrest both here and abroad.

I believe that the only way central banks could meaningfully help reduce inflation would be to raise interest rates to levels that would bankrupt many entities like individuals, companies, cities and states. I don’t think they would get anywhere near that level before a full economic implosion would take place. Therefore, I am not expecting that.

The one thing that I believe WILL come from this is a realization that “money” is not everything. As a matter of fact we may learn that “money” isn’t anything. Real assets are hard goods that we need to survive and it doesn’t matter how many currency units you have if there is nothing to buy. Ask the Zimbabwan billionaire who can’t afford a dozen eggs for a trillion Zimbabwe dollars. Ask the Venezuelan who saw a daily cup of coffee rise from 2 Bolivars to over 3 MILLION bolivars a decade later.

The sad part is that we are taking the exact same actions that led to their circumstances. They “printed” money to pretend that they were still wealthy and solvent as their revenues dried up (Venezuela mainly oil and Zimbabwe mainly agriculture). Another key here is that in Venezuela they kicked out the oil companies and put cronies in charge with no thought put into if they could actually do the job. In Zimbabwe white farmers were kicked out and their expertise went with them. Our country is now doing the same types of things where we are worrying about the color of skin or gender when we really should be asking “WHO CAN DO THE JOB THE BEST” regardless of any of that. So, we have even more in common with the failed states that I have mentioned.

I believe that the EAEU (Eurasia Economic Union), which is in the midst of setting up a trading bloc that will trade in their own currencies and be backed by the commodities they produce is likely a blueprint for a future that is not dominated by “money” but by those that have real VALUE and produce real value. In this type of setup there will be a lot more equity for producers and, hopefully, those manipulating prices and skimming profits without creating ANYTHING will be shut out.

In a scenario like this it is obvious to me that owning hard assets will likely be FAR more lucrative than financial assets going forward.

Remember- hard ASSETS ARE ASSETS and not liabilities. A liability implies that you need someone else to repay you. CAN THEY?

What is the VALUE of a promise that cannot be kept?
Be Prepared!

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.

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