Category Archives: Financial markets

This Implosion Will Be Fast – Hold On To Your Seats, by Egon von Greyerz

Posted on July 4, 2022 | Leave a comment

Things fall apart much faster than they’re put together, and markets go down much quicker than they go up. From Egon von Greyerz at goldswitzerland.com:

The massive money creation in the 2000s has led to a debt and asset bubble, which is about to burst. Investors will be shocked by the speed of the decline and won’t react before it is too late.

The massive money creation by central and commercial banks in this century has resulted in a growth of global assets from $450 trillion in 2000 to $1,540 trillion in 2020.

DEBT TO GDP GROWTH

As the chart below shows US debt to GDP held well below 25% from 1790 to the 1930s, a period of almost 150 years. The depression with the New Deal followed by WWII pushed debt to GDP up to 125%. Then after the war, the debt  came down to around 30% in the early 1970s.

The closing of the gold window in 1971 ended all fiscal and monetary discipline. Since then, the US and much of the Western world has seen debt to GDP surge to well over 100%. In the US, Public Debt to GDP is now 125%. Back in 2000 it was only 54% but since then we have seen a vote buying system with a money printing bonanza and an exponential increase in debt to 125%.

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A Wartime Economy Coming… Here Are Two Things That Could Happen as a Result, by Chris MacIntosh

Posted on July 1, 2022 | Leave a comment

War is so horrible that most people don’t want to think about it. That’s understandable, but the consequences could be tragic. From Chris MacIntosh at internationalman.com:

Wartime Economy

Things are a tad wonky.

The problem that market participants are not thinking about is this. When combining the most levered global and US economy in the history of our planet, record low interest rates (lowest in recorded history), the greatest disruption to world’s energy supplies as well as direct and indirect attacks on our food networks, not to mention sanctions against Russia and hence Ukraine — two major exporters of food. The consequences of all of this have delivered to us the highest inflation in four decades… oh, and this was BEFORE the Russkies went hunting for biolabs in Ukraine and the attendant fallout.

The result… or at least one result is in the graph below.

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Posted in Business, Collapse, Debt, Economics, Economy, Energy, Financial markets, Geopolitics, Governments, Politics, War

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War Makes for Clarity, by Alasdair Crooke

Posted on June 29, 2022 | Leave a comment

What’s becoming increasingly clear is that the West is losing this war with Russia and China. From Alasdair Crooke at strategic-culture.org:

A NUMBER OF SLL READERS HAVE REPORTED THEY GET ERROR MESSAGES WHEN THEY TRY TO ACCESS STRATEGIC CULTURE LINKS. SLL NORMALLY POSTS EXCERPTS AND THEN LINKS TO THE ARTICLE AT A SITE OF PUBLICATION. FOR STRATEGIC CULTURE ARTICLES WE WILL POST THE ENTIRE ARTICLE ON SLL. HOWEVER, IF YOU DO NOT HAVE A PROBLEM ACCESSING STRATEGIC CULTURE AND YOU ARE GOING TO READ THE ARTICLE, PLEASE GO TO THAT SITE SO THAT THEY GET THE CLICK AND ANY ASSOCIATED ADVERTISING REVENUE. THE STRATEGIC CULTURE LINK WILL BE IN THE SLL OPENING INTRODUCTORY SECTION AS IT ALWAYS HAS BEEN. PLEASE FOLLOW THAT LINK IF YOU CAN ACCESS STRATEGIC CULTURE. IF YOU CAN’T, READ THE ENTIRE ARTICLE HERE AT SLL IF YOU SO CHOOSE. IT’S NOT A PERFECT SOLUTION, BUT IT’S THE BEST SLL CAN COME UP WITH UNDER THE CIRCUMSTANCES.

In America – as in Europe – there is fear and anger at system disintegration, Alastair Crooke writes.

The train wreck has been expected for so long that we have become comfortable living under its shadow. Life went on; markets were sanguine that the market lifestyle subsidy provided by the Central Banks would continue unabated. And not without good reason either: Any trader disappointment at Central Bank action, any dip in markets, brought forth a collective market hissy fit that usually strong-armed the Central Banks into immediate appeasement. We were hard pressed to imagine differently.

Now, however, we’re in a new era, in many ways. The West has entered upon a war with Russia and China. The West, however, did not do its homework first, and now is finding that the ‘war’ is cruelly revealing the structural rigidities and flaws integral to its own economic system, rather than mining the weaknesses of its rivals.

Why is this new era so grave? Firstly, because of what lies ‘beneath the stones’. These structural contradictions have been accumulating over decades, lurking in the dark damp underside to the stones. Kept hidden from sight by the serendipitous (for the U.S.) economic outcome to WW2, and the equally serendipitous combination of factors that kept inflation low (so low that western economists believed they had found the ‘holy grail’ of monetary ‘easing’ – they had banished recessions for ever). So simple, really, just turn on the money-printer!

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Posted in Currencies, Debt, Eurasian Axis, Financial markets, Foreign Policy, Geopolitics, Governments, History, Military, Politics, Propaganda, War

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The Entire World Order Has Changed, by Raúl Ilargi Meijer

Posted on June 27, 2022 | Leave a comment

Are we seeing the death knell of the West and the emergence of a multi-polar order? From Raúl Ilargi Meijer at theautomaticearth.com:

It was Jim O’Neill, Goldman’s chief economist at the time, who coined the term BRICS in 2001 for Brazil, Russia, India, China, and South Africa. Little did he know. He was talking about emerging economies. 13 years later, they no longer are. They are good for about 40% of the world population, and some 25% of global GDP. The world has not stood still since 2009, and it’s moving faster now.

Ironically, the BRICS countries never looked to be as prominent economically as they are today, they were happy to build up one step at a time. But then NATO decided to move east at a pace that Russia found intolerable, and now the BRICS have taken on a whole new meaning. 25% of global GDP may not seem that much, but the 5 countries hold a much bigger share of -essential- global resources and/or raw materials than that, and China moreover delivers an outsize part of finished products.

And we now know that they won’t be BRICS for much longer. Many countries choose to be affiliated, in one form or another, with the BRICS rather than the “west”. They see that Russia is winning in Ukraine, and they see the damage the sanctions do. It’s just practical considerations. Saudi Arabia and Argentina are interested in joining BRICS. So are Uruguay, Iran, Egypt, Thailand, and a number of post-Soviet States. They see where the real economic power resides.

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Posted in Banking, Business, Currencies, Economics, Economy, Eurasian Axis, Financial markets, Geopolitics, Governments, Politics, Propaganda, War

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Concurrent Deflation and Hyperinflation will Ravage the World, by Egon von Greyerz

Posted on June 24, 2022 | Leave a comment

FLATION is the suffix for the various phenomena that occur in fiat-debt systems. From Egon von Greyerz at goldswitzerland.com:

FLATION will be the keyword in coming years. The world will simultaneously experience inFLATION, deFLATION, stagFLATION and eventually hyperinFLATION.

I have forecasted these FLATIONARY events, which will hit the world in several articles in the past. Here is a link to an article from 2016.

With most asset classes falling rapidly, the world is now approaching calamities of a proportion not seen before in history. So far in 2022, we have seen an implosion of asset prices across the board of around 20%. What few investors realise is that this is the mere beginning. Before this bear market is over, the world will see 75-90% falls of stocks, bonds and other assets.

Since falls of this magnitude have not been seen for more than three generations, the shockwaves will be calamitous.

At the same time as bubble assets deflate, prices of goods and services have started an inflationary cycle of a magnitude that the world as whole has never experienced before.

We have seen hyperinflation in individual countries previously but never on a global scale.

Currently the official inflation rate is around 8% in the US and Europe. But for the average consumer in the West, prices are rising by at least 25% on average for their everyday needs such as food and fuel.

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Doug Casey on Crashing Markets, Commodities, and What Happens Next

Posted on June 22, 2022 | Leave a comment

A quick preview of what happens next: nothing good. From Doug Casey at internationalman.com:

Crashing Markets

International Man: In addition to stocks, it seems that almost every asset class is also crashing.

What’s your take on the markets, and where do you think it’s headed?

Doug Casey: Let’s take them in order of size and importance.

The biggest market is bonds. It’s especially dangerous because it’s the most overpriced. Bonds are a triple threat to your capital. First, because of the inflation risk, which is huge and growing. Second, is the interest rate risk; I expect rates to double, triple, or quadruple from here, going back to or above the levels of the early 80s. The third is the default risk, which applies to everything except US Government debt. AAA corporate debt hardly exists anymore.

Interest rates have skyrocketed in the last year, with mortgage rates going from under 3% to over 6%. 30-year treasury bonds still only yield 3.25%. But with inflation running 10, 12, or 15% and going higher, long-term Treasuries have a lot further to fall. I remain short T-bonds.

Everybody’s paying attention to the stock market because they’re fully invested. The meme stocks, SPACs, and tech stocks have all collapsed. The big ones are down 25%, and many are down 80 or 90%. It’s not over yet. People still feel that they can buy the dips. They’re hurting, but they’ve been paper-trained over a couple of generations to believe the Fed will kiss everything and make it better.

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A Rare Paradigm Shift With Huge Implications… 5 Reasons Why It’s Imminent, by Nick Giambruno

Posted on June 21, 2022 | Leave a comment

Interest rates are going up, and given the long swings in the bond market, they’ll probably be going up for many years. From Nick Giambruno at internationalman.com:

Although many don’t realize it, interest rates are simply the price of money.

And they are the most important prices in all of capitalism.

They have an enormous impact on banks, the real estate market, and the auto industry. It’s hard to think of a business that interest rates don’t affect in some meaningful way.

Today, we are on the cusp of a rare paradigm shift in interest rates. Such changes take decades—or even generations—to occur. But when they do, the financial implications are profound.

Interest rates rise and fall through decades-long cycles, as seen in the chart below.

That makes sense, as debt is naturally cyclical. It allows people to consume more than they produce now. But it also forces them to produce more than they consume later to pay it off.

Interest rates last peaked in 1981 at over 15%. Then, they fell for 39 years and bottomed in July 2020 at around 0.62%.

The red line marks the long-term average of 5.6%.

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Posted in Debt, Economics, Economy, Financial markets, Governments, History, Investing

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Politicized Money and the Death of Capitalism, by Matthew Piepenburg

Posted on June 20, 2022 | Leave a comment

Technically speaking, money (“Real Money“) cannot be politicized; only debt can be politicized. From Matthew Piepenburg at goldswitzerland.com:

As far as we are concerned, it is no great secret nor any great surprise that our faith in fiat money (in general) and the central bankers who have debased it (in particular) and precipitated the death of capitalism is anything but robust.

To the contrary, our astonishment with the open mismanagement of global currencies as a whole, and the world reserve currency (i.e., the USD in particular), grows daily.

In fact, to fully un-pack the long series of comical errors and the failed experiment of politicized central bankers seeking to solve a debt crisis ($300T and rising) with more debt, which is then monetized by mouse-click money, would take an entire book rather than single article to address.

Hence our recent release of Gold Matters.

Learn more about the death of capitalism in Gold Matters, now available on Amazon.

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A perfect storm in banking is brewing, by Alasdair Macleod

Posted on June 17, 2022 | Leave a comment

There will be a global banking crisis and the probability that it originates in Europe is about 95 percent. If you’re going to pick one economist to whom you pay attention, it should be Alasdair Macleod. From Macleod at goldmoney.com:

Now that interest rates are rising with much further to go, the global banking system faces a crisis on a scale like no other in history. Central banks loaded with financial securities acquired through QE face growing losses, and their balance sheet liabilities are now significantly greater than their assets — a condition which in the private sector is termed bankruptcy. They will need to be recapitalised urgently to retain credibility.

Furthermore, banking regulators have made a prodigious error in their oversight of the commercial banking system by focusing almost solely on bank balance sheet liquidity as the principal determinant of risk exposure. And on the few occasions in the past when they have demanded banks increase their own capital, it has always been through the creation of preference shares and pseudo-equities to avoid diluting the true shareholders. The consequence is that the level of leverage for common equity shareholders in the global systemically important banks has risen to stratospheric levels.

The regulators may be comfortable with their liquidity approach, but they have ignored the periodic certainty of a contraction in bank credit and the consequences for banks’ equity interests. Meanwhile, G-SIBs have asset to common equity ratios often more than fifty times, with some in the eurozone over seventy. It is hardly surprising that most G-SIBs are valued in the equity markets at substantial discounts to book value.

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Could Retail “Bagholders” Spark a Rally “Smart Money” Will Be Forced to Chase? By Charles Hugh Smith

Posted on June 15, 2022 | Leave a comment

One of the things that make financial markets so fun is their sheer unpredictability. From Charles Hugh Smith at oftwominds.com:

There would be some deliciously karmic justice in the “dumb money” driving a rally that forced the “smart money” to cover their shorts and chase the rally that shouldn’t even be happening.

Being cursed with contrarianism, as soon as a trade gets crowded and the consensus is one way, I start looking for whatever is considered so unlikely that it’s essentially “impossible.” Sorry, I can’t help myself.

The crowded trades are 1) long the Commodity Super-Cycle and 2) long hurricane-force recession for all the persuasive reasons we all know: global scarcities, geopolitical tensions, soaring US dollar and interest rates, de-risking, crazy-stupid levels of debt and speculation, etc.

The consensus holds that “Smart Money” rotated out of tech stocks and other over-valued equities into oil and commodities. That was a smart move, indeed, and the earlier one rotated out of equities and into commodities, the smarter the trade.

In this scenario, retail owners of equities are the “Bagholders,” those who continue owning the losers all the way to the bottom (Been there and done that). It’s a market truism that Bull cycles only end when retail drinks the speculative Kool-Aid of the moment and buys into the final gasp of the rally, allowing “Smart Money” to distribute their shares to the retail chumps, who go down with the ship when the market finally rolls over.

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