Will they, or won’t they? Many have been expecting rate cuts from the Fed for quite some time now.

I have often said that I do not believe they can lower rates when they have to issue nearly $14 TRILLION in debt just this year to retire maturing debt, pay interest expenses and cover the incessant spending and deficits of our government.

The central bank CAN lower the overnight rates by decree. However, if they want to lower interest rates past that they have to actually conjure up cash out of nowhere and buy the bonds to lower the yields. They have no magic wand that automatically reduces rates.

I have to admit that I believe I was wrong about them not being able to reduce rates. The reason I was wrong is that even though no formal announcement has been made they are already intervening in the debt “markets” in what has to be the most flagrant manipulation I have ever seen. They HAVE to be managing the rates lower already. Why do I say that?

When bonds are sold more than are bought rates rise. (More supply than demand). When bonds are bought more than sold rates fall (more demand than supply). With countries around the world dumping our Treasuries in record amounts if there was not a buyer that could buy bonds in unlimited amounts interest rates would skyrocket. We all know Russia and China are dumping our bonds but many other countries- including allies like Japan are selling massive amounts of our debt to try and defend their collapsing Yen. Interesting note- it takes over 373,000 Yen to buy one ounce of gold- this is not gold going up but the Yen collapsing and gold doing its job of retaining its purchasing power- despite the massive manipulation taking place to suppress the price.

It is likely costing the Fed hundreds of billions in money from nowhere, probably weekly, to keep the rates suppressed. This is MASSIVELY inflationary. This is another reason I do not see inflation going anywhere but UP.

Other reasons for my take on inflation:

  • Continuing jobless claims rose to 1.839 MILLION- the highest since November of 2021. Less income means less taxes and higher deficits. This leads to higher interest expenses and a fast-track to our debt hyper-ballooning. (Jobless claims info- Bloomberg)
  • Core durable goods orders cratered in May and shipments have plunged also. Durable goods orders are down 1.2% year over year. Keep in mind that INFLATION is not counted in these numbers, so it is worse than it appears. Non- defense spending dropped .5% in May.
  • Declining productivity and lack of manufacturing along with massive money “printing” is the classic example of how inflation takes hold and eventually becomes a national nightmare.

How bad is our current inflation?

While it is hard to tell how bad inflation actually is because of so many moving parts we can be sure that it is far worse than reported. How can we tell that?

  • CPI, which is the most often used does not include interest costs on ANYTHING. Recently Larry Summers- former Treasury Secretary under Bill Clinton wrote a paper that said if interest rates WERE included it would add 6% to the inflation rate. CPI also does not include TAXES, house, and car insurance, shrinkflation, decline in quality and substitutions of cheaper goods to offset the rising prices of what we originally bought. A decent analogy is if a steak goes up 50% then substitute hamburger and the price stays roughly the same. SEE- no inflation!
  • Most of the numbers- while real- are manipulated beyond our imagination. A fellow named John Williams of Shadowstats reports the numbers as they used to be reported prior to all the manipulations and his research shows that inflation peaked at 17% and has been in double digits for the past 2 years.
  • Let’s also keep in mind that when we are seeing retail sales be flat, we are seeing a mirage. If we have 15% REAL inflation and spending is flat, we are seeing a contraction in goods purchased even though the numbers are similar. Let’s say a new outfit cost $100.00 a year earlier but now costs $115.00. The spending went up 15% but the same amount of goods changed hands. This hides an economic collapse that has been taking place since at least 2008.

Why are inflation rates important to get right? The rule of 72. If inflation really were 3% as reported our expenditures would double in 24 years. Not great but likely manageable for most. If, however real inflation is 12% our expenditures would double in just 6 years- likely not manageable for many- if not most.

Currently, we are conjuring up cash in record amounts officially but unofficially is likely FAR worse than we are allowed to know. We are “printing” to give the illusion that our production can pay our bills. The holes that are being filled with money from nowhere- with more interest attached to each dollar created from nowhere include tax shortfalls for Social Security and Medicare, $2 Trillion or so in deficit spending (admitted to- doesn’t include off balance sheet expenditures like wars, etc.), over $1 TRILLION AND CLIMBING in interest expenses and retiring maturing debt with new debt.

This is a classic example of how a currency is debased and ultimately destroyed. It is imperative that you know that prices do not just go up- it is your currency losing its only VALUE- its purchasing power.

Since those “in the know” like central banks, their owners- the major banks, countries and billionaires are selling debt-based promises and buying hard assets- mainly gold, silver, oil, food, etc. it appears to me that they all know what is coming and are preparing for a massive paradigm shift from CONfidence in the system to a realization that we are most likely in the world’s largest Ponzi scheme.

A couple of apropos quotes:

From Max Keiser: “You can’t taper a Ponzi scheme”

From Michael Saylor: “The road to serfdom consists of working exponentially harder to earn currency that is growing exponentially weaker.” (Maybe why so many are feeling disenfranchised).

And the one that says it all from Ludwig von Mises.

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

If you understand this, you can get prepared for what will likely be the largest bust in human history. This is likely because we have the largest bubble in recorded history that has been built upon sand- actually fiat currency and debt which is not even sand.

Be Prepared!

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