Just this morning Fed President James Bullard came out on CNBC and said the Fed should get going on tapering. Of course, this led to stocks getting hit and the 10-year yield rising a bit.
Keep in mind that NOTHING has changed, but the “markets” move when mere words are uttered that the ridiculous amount of “money” being created out of nowhere and purchasing assets to keep prices elevated may be being reduced or -heaven forbid- eliminated.
It is shocking to me that so many are taken in by this charade. Of course, the algorithms can’t think- they just read the headlines and trade on the news. Keep in mind that Bloomberg supplies the terminals for the algos and ALSO creates many of the headlines. No surprise in this incestuous “market”.
The Fed COULD taper, and they may stop asset purchases, but if that were to happen ask yourself this EXTREMELY important question. Who would buy the trillions of dollars needed to keep pretending that our economy is not in freefall? Who would actually step up to the plate and fill the $3 TRILLION spending deficit that we are running right now?
My answer is NOBODY. Particularly if rates are not WAY higher. Another question: With our national debt skyrocketing and personal, corporate, municipal and state debts also at all-time highs at what interest rate does the entire edifice collapse under its own weight?
How many zombie companies would be exposed and bankrupted by higher rates? Keep in mind these “zombie” companies don’t produce enough revenue to carry their existing debt and count on continued cheap financing to pay current debts with newly added debts. At some point this will end terribly anyway but an increase in rates would speed up that timeline substantially. Don’t forget that in a default the first to get wiped out will be the stockholders. It appears that ONLY secured bondholders would likely get anything. This is how paper assets can go to ZERO with no way to recover.
What would happen to real estate prices if mortgage rates moved to anywhere near normal? Many are finding housing unaffordable with rates at all-time lows.
If interest rates were to rise substantially what would happen to the balance sheets of pensions, insurance companies and anyone else who counts on the stability of those bonds to remain solvent?
Keep in mind that as interest rates rise the value of bonds fall. The longer-term they are the harder they fall.
Get the picture? If they stop there is no one else that can keep this fake “market” afloat.
There are hundreds of episodes throughout history that show human nature takes the easiest way out. The easiest way out is to keep “printing” for as long as you can and hope that the ultimate collapse can be avoided on your watch. To stop the support would guarantee that the collapse would not only happen on your watch BUT also at a breathtaking pace. The way things are today it would be stunningly fast in my opinion. Who would ever choose that option?
This also gives the banks, who are trying to keep gold and silver suppressed, some help in doing so. Higher interest rates are perceived to be bad particularly for gold. Of course, this is not really accurate since the last time rates were at 15% gold rose from $35.00 to near $800.00. This is because inflation was HIGHER than the interest rate, so the actual interest rate was negative. What really matters is not the actual rate of interest but the net interest after inflation is figured in.
If we had real reporting of inflation (and just about all other manufactured reporting) we would likely see that our interest rates are FAR more negative now than they have ever been in our lifetimes. We are not supposed to know that.
I was around in the 70s when inflation was rampant. Even though I was a kid I remember the price controls that led to no inventory of things like cheese. I remember going to the store and my mom wanted American cheese. The store owner said “They say we can only charge $2.00 for cheese but it costs me $3.00 to buy it- so we have no cheese”. Even a kid can understand that- too bad the politicians can’t.
I believe that the Fed- and all developed nation central banks are relying on the masses being baffled by their BS to keep the charade alive. The fact of the matter is that most of these nations can NEVER pay what they owe- regardless of the interest rate. When the masses wake up to this fact- watch out.
I don’t believe for one second that they will stop “printing and buying” until the masses rise up and put an end to it because their “paper promises” will not buy the goods necessary for the masses to survive.
Over 10 years ago I wrote that once you go down this road there is NO WAY to stop without a total system collapse. It is now obvious to many that this is where we find ourselves today.
It is PAINFULLY obvious that we, and most other nations, are bankrupt. The only thing masking it is the ability to conjure up “money” out of nowhere and pretend that it was created with labor or an asset.
To me, the sad part is that we are likely only seeing the tip of the iceberg here. $140 TRILLION not accounted for at the Dept of Defense and HUD according to Dr. Mark Skidmore, banks trading in their own “dark pools” where there is no record of their trades until days later-many trading their own stocks with NO oversight by anyone.
I, for the life of me, can’t understand how anyone can have any faith in our “leaders” or in our real masters- the central banks as it is totally clear to me that they are interested in one thing- control.
They already have a monopoly on the “money”. It appears that now they want it all. Major banks are allowed to get away with actions that would put us peons behind bars for decades but for them they just pay a fine and move on manipulating virtually all assets for their own benefit.
The most telling story to me is that as JP Morgan has ADMITTED to 5 felonies since 2014 their CEO Jamie Dimon has had massive increases in pay during that time. It gives the appearance that the board condones criminal activity- and I guess- why not? There don’t appear to be any consequences for the insiders.
These actions are enriching a VERY few at the expense of all the rest of us. It is only a matter of time until the SHTF. Anyone who is counting on these people’s paper promises are likely to be massively disappointed.
I am taking advantage of the recent pullback not only in gold and silver but the miners and commodity producers overall. The way I see it, if they do taper or stop asset purchases MANY assets will fall to zero- something that doesn’t happen to hard assets. They can fluctuate wildly but they have always had value.
In addition, many of the balance sheets I see are FAR stronger than many of the household names that many buy. I also believe that the companies that mine the metals are grossly undervalued based upon earnings and my belief that they will print most, if not all, fiat currencies to infinity.
Remember- price is what you pay- value is what you get. What value is there in a promise that cannot be kept?
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