While I have been reading reports and seeing reports of how GDP is going to go up by over 5% in the third quarter of 2023 on the financial game shows, I was rather surprised to see that the St. Louis Fed is reporting that third quarter GDP will be NEGATIVE. As far as I know- that means contracting not expanding. This is double concerning when we understand that GDP calculations include government spending. Just think how fast our economy is actually collapsing when GDP is contracting but our budget deficit has DOUBLED to nearly $2 TRILLION vs. the $1 Trillion guessed at the beginning of the fiscal year. Keep in mind that these are GREATLY massaged numbers anyway with possibly as much being spent off the books as on. I won’t even bring up unfunded liabilities and actual generally accepted accounting principles and the REAL DEFICIT.
We have been in an economic freefall for quite some time and now we appear to be entering a period where, as those “in charge” try to stop the coming meltdown, they are likely to unleash the mother of all inflations. Conjuring up cash out of nowhere to pretend you are solvent just leads to more debt and more conjuring until the SHTF and all confidence is lost in the currency. This has happened hundreds of times in history. It all starts with a sugar high of “free” money and ends in disaster for the currency and those who put their faith in it.
As dire as our current situation appears I believe that there are other places that bear watching that could lead to a black swan event.
Japan is near the top of the list as they have had a lost 30 years. We are following the same path as they did but they are a number of years ahead. They have conjured up so many Yen that it now takes 283,000 Yen to buy one ounce of gold. (Kitco 9-6-2023) Many ask, “what is the Yen worth in dollars?” I always answer that this is a moot point. If you are in Japan this is your currency, and it shows how gold holds its value as the currency being “printed” in seemingly unlimited amounts and with little, if any restraint.
In Europe higher interest rates and surging energy prices are stifling businesses and crashing the real estate market. From an article from the Financial Times:
“Builders are facing the perfect storm of rising interest rates, more expensive construction materials, a dire shortage of skilled workers and a slowing demand for new developments, leading to financing problems across the industry.” The article also stated that, according to the head of the Kiel Institute, “We are at the end of a 10-to-15-year property boom. The financial cycle is now such that every day another property developer is going bust … The old funding models are no longer sustainable.”
This is an article that is about Germany, but you could certainly believe that this is a global phenomenon. If I didn’t mention Germany, I believe you could certainly believe that it is the same case right here. When rates rise meaningfully many projects that were feasible at 2% become an albatross at 7%.
Another flash point could be France.
There have been many coups in Africa recently. Many may wonder why this is of any importance to France. Actually, it is important to the entire Western bloc BUT mostly to France.
In the past 3 years leaders in 8 nations that were puppets of the west have been overthrown including Burkina Faso, Chad, Guinea, Mali, Niger and the latest- Gabon.
Africa, as a region, is waking up to the fact that they have been being pillaged by the west for hundreds of years. Just as an example France was buying uranium from Niger for 80 CENTS per kilo. After the Bazoum regime was overthrown France is now paying a fair price of 200 Euros per kilo. This means that France was paying 250 times below fair value. In addition, the central banks of many African nations were really being run by France.
According to an article by Pepe Escobar, 80% of foreign reserves of African nations have been in operation accounts controlled by the French Treasury since 1961. He also reports that the French Treasury uses African reserves as if they were French capital by pledging these assets for French payments to the EU and ECB. He also states that even though some reforms took place in 2005, 50% of their foreign exchange reserves go to France along with a 20% VAT (Value added tax). The VAT is kind of like the Fed “printing” up money, buying assets and charging us interest.
So, in reality, the Africans have been producing hard assets and receiving pieces of paper in return. Even assets that they have earned over time are pledged by a third party while the countries producing real value are kept in abject poverty.
As they wake up expect FAR higher prices going forward. How much more will French nuclear power cost to produce with the fuel going up 250 times? How long before the rest of Africa realizes it has been duped for centuries?
The whole edifice is being brought down because China and Russia are going to Africa not to conquer and pillage but to become partners in creating wealth that can be shared and enduring over time. In other words- a win-win situation rather than a feudal system.
Those “in charge” have always known that generational wealth has always been transferred with hard assets. The assets of choice have historically been real estate, art, and gold. I also believe that silver and many other hard assets should also be included. The fact of the matter is that paper assets can, and often do, go to zero. While hard assets can fluctuate in perceived value the fact is that they rarely, if ever, go to zero.
This is why the French take hard assets and send back paper promises. This is why central banks inflate prices and then collapse the economy. People get in over their heads, default on their loans (so much for that promise to repay) and then the banks (large banks own the Fed by the way) foreclose and get a LOT of assets for no more than a few clicks of a mouse while regular people who have worked their entire lives get wiped out.
Time is running out …
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