A collapse of financial asset prices and the value of currencies against real goods is the inevitable outcome of fiat debt creation without restraint by central banks. Be prepared. From Dr. Joseph Mercola at theburningplatform.com:
Financial experts and insiders have, for well over a decade, warned that a collapse of the U.S. currency is a mathematical inevitability, and this collapse will have global ramifications, as the dollar is the world’s reserve currency
U.S. inflation is currently at 8.6%, but in some markets, it’s in the double digits. Used car sales, for example, have seen an inflation rate of 22.7% in the past 12 months. Globally, food prices increased by 29.8% between April 2021 and April 2022
In 2011, George Soros stated that economic collapse is “foreseen” and that authorities were simply buying time before the inevitable collapse. Now that we’re in the economy’s final death throes, those who have been aware of the trajectory for well over a decade cannot admit it, because then they’d have to explain why they didn’t act to stop it. Admission would also expose the central bank system as the fraud that it is
For quite some time Increasing chaos has been the better favorite here at SLL. From Egan von Greyerz at goldswitzerland.com:
“There is gonna be a new world order out there and we’ve gotta lead it! And we gotta unite the rest of the world in doing it!”
That is what Biden proclaimed in a recent speech.
But since Biden has a tendency to get his speeches wrong, what he meant to say was:
“There is gonna be a new world DIS-order out there and we’ve gotta lead it!
Sadly, as the world has heard in many speeches by the US president, he hasn’t got a clue that his “empire” is collapsing around him.
But regrettably for Biden, the US isn’t an empire at all but a bankrupt nation without leadership. But even worse, the US has just in a final act of desperation not just shot itself in the foot but in the head.
Very few, if any, of today’s world leaders understand the consequences of their actions and clearly not Biden.
As the world is experiencing the end of an economic era, we are getting the leaders that we deserve and thus the appropriate ones to take the world to Armageddon.
We’re headed towards an economic catastrophe that will render the world a completely different place. From Doomberg at doomberg.substack.com:
“One mustn’t look at the abyss, because there is at the bottom an inexpressible charm which attracts us.” – Gustave Flaubert
In 1988, Stephen Hawking published one of the best-selling science books of all time. In A Brief History of Time, Hawking made the impossibly complex topics of astronomy and modern physics accessible to a lay audience, inspiring countless young students (and at least one green chicken) to pursue a career in the sciences. It is estimated that the book has sold an incredible 25 million copies worldwide.
In Chapter 3 of the book, Hawking introduces the reader to the Big Bang Theory and the concept of a gravitational singularity, which Wikipedia describes as “a condition in which gravity is so intense that spacetime itself breaks down catastrophically.” Essentially, since the laws of physics are eviscerated at a singularity, what happened before it is both irrelevant and unknowable, and one could consider such an event as having reset the universe’s clock. Here’s how Hawking describes it in his book (emphasis added throughout):
“This means that even if there were events before the big bang, one could not use them to determine what would happen afterward, because predictability would break down at the big bang. Correspondingly, if, as is the case, we know only what has happened since the big bang, we could not determine what happened beforehand. As far as we are concerned, events before the big bang can have no consequences, so they should not form part of a scientific model of the universe. We should therefore cut them out of the model and say that time had a beginning at the big bang. Many people do not like the idea that time has a beginning, probably because it smacks of divine intervention.”
The simple truth of a singularity applies whether it occurred in the past or will in the future: what transpires on the other side is unknowable from here.
Given the horrific and still-unfolding events of Vladimir Putin’s invasion of Ukraine and the West’s collective response to it, one can’t help but wonder whether we are on the cusp of an economic singularity in which the laws and bedrock beliefs that formed the foundation of international economic order for decades break down. The consequences are similarly unknowable, but we suspect a great reset may indeed be upon us. Even if a ceasefire is announced moments after we publish this piece, shocking damage to the global economic system has undoubtedly already been done and certain genies won’t easily be put back into their bottles.
Surprise! The monetary system is a fraud and a lot of asset values have been carried by the balloon of debt and will plummet when it pops. From Charles Hugh Smith at oftwominds.com:
What seemed so permanent for 13 long years will be revealed as shifting sand and what seemed so real for 13 long years will be revealed as illusion. Magical thinking isn’t optimism, it is folly.
Predictions are hard, especially about the future, but let’s look at what we already know about 2022. Viewed from Earth orbit, 2022 is Year 14 of extend and pretend and too big to fail, too big to jail and Year 2 of global supply chains break and energy shortages.
The essence of extend and pretend is to substitute income earned from increases in productivity–real prosperity–with debt–a simulation of prosperity –that doesn’t solve the real problems, it simply adds a new and fatal problem: since productivity hasn’t expanded across the spectrum, neither has income or prosperity.
All that happened over the past 13 years is that debt–money borrowed against future productivity gains and energy consumption–funded illusions of prosperity in all three sectors: households, enterprise and government.
The explosion of debt and interest due on that debt could not occur if interest rates still topped 10% as they did 40 years ago in the early to mid-1980s. We couldn’t add tens of trillions of dollars, yen, yuan and euros in new debt unless interest rates were pushed down to near-zero (for the government, the wealthy and corporations only, of course–debt-serfs still pay 7%, 10%, 15%, 19%, etc.)
This monetary trick was accomplished by making central banks the linchpin of the entire global economy as central banks created “money” out of thin air and used the currency to buy trillions in government and corporate bonds, artificially creating near-infinite demand which then drove the rate of interest into the ground.
In a massively over-indebted and interconnected world, financial collapse can spread like wildfire. The Chinese property sector may be the beginning of the conflagration. From James Rickard at dailyreckoning.com:
There has been a litany of bad news recently, including the U.S. August humiliation in Afghanistan, China’s aggressive actions against Taiwan and increased tensions with Iran, North Korea and Russia.
It will take the U.S. years, possibly decades, to recover from the debacle of August 2021 and the collapse of American prestige. All of these geopolitical events combine to undermine confidence in U.S. power.
When that happens, a loss of confidence in the U.S. dollar is not far behind.
And, perhaps most importantly of all recent bad news, is a market meltdown and slowing growth in China.
Greatest Ponzi Ever
I’ve long advised my readers that the Chinese wealth management product (WMP) system is the greatest Ponzi in the history of the world. Retail investors are led to believe that WMPs are like bank deposits and are backed by the bank that sells them. They’re not.
They’re actually unsecured units in blind pools that can be invested in anything the pool manager wants.
Most WMP funds have been invested in the real estate sector. This has led to asset bubbles in real estate (at best) and wasted developments that cannot cover their costs (at worst). When investors wanted their money back, the sponsor would simply sell more WMPs and use the money to pay back the redeeming investors.
That’s what gave the product its Ponzi characteristic.
The total amount invested in WMPs is now in the trillions of dollars used to finance thousands of projects sponsored by hundreds of major developers. Chinese investors are all-in with WMPs.
Now the entire edifice is collapsing as I predicted it would.
The largest property developer in China, Evergrande, is quickly headed for bankruptcy. That’s a multibillion-dollar fiasco on its own. Evergrande losses will arise in WMPs, corporate debt, unpaid contractor bills, equity markets and unfinished housing projects.
China’s entire property and financial system is on the verge of a world-historic crack-up. And it won’t remain limited to China.
So far it’s just a few isolated fires here and there, but a massive global financial and economic conflagration is inevitable. From Egon von Greyerz at goldswitzerland.com:
“Everything is on fire” – Heraclitus (535-475 BC)
What Heraclitus meant was that the world is in a constant state of flux. But the big problem in the next few years is that the world will experience a fire of a magnitude never seen before in history.
I have in many articles and interviews pointed out how predictable events are (and people). This is particularly true in the world economy. Empires come and go, economies boom and bust and new currencies come and without fail always go. All this happens with regularity.
A GLOBAL FIRE IS COMING
But at certain times in history, the fire will be cataclysmic. And that is where the world is now.
Explosive fires have started everywhere already. Stock markets are on fire and so are property markets, as well as bond and debt markets. The problem is that fires are initially explosive but always end up implosive.
So right now we are in the explosive phase of the fires with markets all going parabolically exponential or should it be exponentially parabolic!
We are now at the end of a secular bull market in the world economy which on a global level has reached extremes never seen before in history.
Never before has the world seen an explosive fire of this magnitude, fuelled by uber-profligate money printing and credit expansion by central and commercial banks.
We have talked about inflation running wild and it is not just happening in stocks. Property markets are literarily exploding, especially the high end. We see this all over the world and not just in the US. In the UK for example, HSBC stated that March saw the highest number of mortgages EVER issued. In Sweden properties sell for up to 40% above asking price in a frenzied bidding war and second hand leisure boats are in such demand that they cost virtually the same as a new boat. And if you want a new boat, there is none available until 2022. It also seems that people are desperate for company after the lockdowns as prices for puppies in the UK are up to 100% higher than last year.
Yes, everything is really on fire as people are desperate to just spend, spend, spend after a year of lockdowns and restrictions.
nstant gratification is what drives the world and especially investment markets. I often hear complaints that gold is a useless investment since it doesn’t go up fast enough.
We have invested heavily into gold for ourselves and our investors since 2002 when the price was $300. Since then gold is up just under 6X.
Sure it has not been a straight line and there have been major corrections on the way.
STOCKS ARE TODAY A GARGANTUAN RISK
But Bitcoin and Tesla are much more exciting so why should an investor hold gold – an incredibly dull investment for the majority of people.
If I tell investors that it is absolutely critical to hold gold for wealth preservation purposes as the world financial system is the biggest bubble in history, most would ignore or ridicule me.
And if I tell them that the dollar and most currencies are down 97-99% since 1971 against gold and down 85% since 2000, they would yawn. They are only interested in their nominal stock market gains not understanding that they have gained nothing in real terms.
But if I proclaim that gold in 2021 could reach $3,000 some will prick their ears. (More about gold reaching that level, and higher, later in the article.)
Still most people prefer to stay in stocks totally unaware that the majority of stock investors are going to ride the stock market all the way to the bottom. And this time it won’t be a V bottom like March 23, 2020 but an L bottom lasting at least a decade or longer.
Both fundamentally and technically a stock market crash of massive proportions is guaranteed. Whether it starts tomorrow or we first see a final meltup is unimportant. Regardlessly, THE RISK IS GARGANTUAN!
CASSANDRA WAS ALWAYS RIGHT BUT ……
I can hear voices calling me a Cassandra and a doom sayer. For the ones who don’t remember Greek mythology, Cassandra was the daughter of king Priam and was given the gift of prophecy by Apollo. But as Cassandra did not respond to Apollo’s approaches, he gave her a curse that although all her “dark” prophecies were accurate, nobody would believe her.
I am not a Cassandra predicting doom and gloom but just someone who has spent his life analysing and understanding risk.
That’s why for example in 1999 I told my partner in an e-commerce business that we must sell the company at the then ridiculous valuation of 10X sales with no profit. The buyer was a Nasdaq company which went bankrupt a few years later after an acquisition spree paying grossly inflated prices.
It’s going to end badly, and here’s a blow-by-blow from Charles Hugh Smith at oftwominds.com:
The over-indebted, overcapacity global economy an only generate speculative asset bubbles that will implode, destroying the latest round of phantom collateral.
For those seeking a summary, here is the global financial endgame in fourteen points:
1. In the initial “boost phase” of credit expansion, credit-based capital ( i.e. debt-money) pours into expanding production and increasing productivity: new production facilities are built, new machine and software tools are purchased, etc. These investments greatly boost production of goods and services and are thus initially highly profitable.
2. As credit continues to expand, competitors can easily borrow the capital needed to push into every profitable sector. Expanding production leads to overcapacity, falling profit margins and stagnant wages across the entire economy.
Resources (oil, copper, etc.) may command higher prices, raising the input costs of production and the price the consumer pays. These higher prices are negative in that they reduce disposable income while creating no added value.
3. As investing in material production yields diminishing returns, capital flows into financial speculation, i.e. financialization, which generates profits from rapidly expanding credit and leverage that is backed by either phantom collateral or claims against risky counterparties or future productivity.
In other words, financialization is untethered from the real economy of producing goods and services.
There’s no way Americans are going to allow themselves to be herded into The Great Reset. So says James Howard Kunstler at kunstler.com:
Chalk up a fatal blow to The Patriarchy. That avatar of toxic masculinity, Mr. Potato Head has been dumped into the same humid chamber of perdition where the ghosts of Nathan Bedford Forrest, Theodore Bilbo, and Phyllis Schlafly howl and squirm — liberating the billions of potatoes world-wide from the mental prison of binary sexuality. The move by Hasbro (bro? really??) may yet disappoint the legions in Wokesterdom as a-bridge-not-far-enough while they await the debut of Transitioning Potato Head, complete with play hormone syringe and play scalpel, so that the under-six crowd can begin to map out their own gender reassignments without the meddling of Adult 1 and Adult 2, formerly known as Mommy and Daddy.
Was it mere coincidence that the action in Toyland happened the same week that one Rachel Levine was grilled in hir Senate confirmation hearing for the post as Assistant Secretary for Health in the Department of Health and Human Services? The hearing tilted toward transphobia when Senator Rand Paul (R-KY) asked zie, a little too aggressively, if they were in favor of pubescent children opting for sexual reassignment in opposition to xyr parents. The nominee, who hirself transitioned from “male” to “female” in 2011, answered that transgender medical issues are “complex and nuanced.” True (perhaps). And probably more than a Senator who transitioned from ophthalmologist to politician might appreciate.
Things always look best at the top. From Charles Hugh Smith at oftwominds.com:
Extremes become more extreme right up until they reverse, a reversal no one believes possible here in the waning days of 2020.
The absolutely last thing anyone expects is a collapse of all the asset bubbles, i.e. a deflation of assets that reverses the full 20 years of bubble-utopia since 2000. The consensus is universal: assets will continue to loft ever higher, forever and ever, because the Fed has our back, i.e. central banks will create trillions out of thin air without any consequence other than assets lofting ever higher.
“Measured by deviations in a benchmark economic statistic, the real natural rate of interest, these responses indicate that pandemics are followed by sustained periods–over multiple decades–with depressed investment opportunities, possibly due to excess capital per unit of surviving labor, and/or heightened desires to save, possibly due to an increase in precautionary saving or a rebuilding of depleted wealth. Either way, if the trends play out similarly in the wake of COVID-19 then the global economic trajectory will be very different than was expected only a few months ago.”
Allow me to translate: wars launch 20-year booms of rebuilding, pandemics launch 20 years of deflation. Oops! Not only do wars destroy physical assets that must be rebuilt, they also tend to kill off a consequential percentage of the labor force, generating a labor shortage that pushes up wages.
So capital wins funding the rebuilding and labor wins because workers are scarce and in demand: win-win baby! Pandemics are considerably less warm and fuzzy, especially Covid-19. Pandemics are like neutron bombs, they leave the built environment intact so there’s no impetus to invest.
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