When Will The Next Credit Crisis Occur?

By Alasdair Macleod – Re-Blogged From http://www.Silver-Phoenix500.com

The timing of any credit crisis is set by the rate at which the credit cycle progresses. People don’t think in terms of the credit cycle, wrongly believing it is a business cycle. The distinction is important, because a business cycle by its name suggests it emanates from business. In other words, the cycle of growth and recessions is due to instability in the private sector and this is generally believed by state planners and central bankers.

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Brexit Risks Increase

By Mark O’Byrne – Re-Blogged From http://www.Silver-Phoenix500.com

Brexit uncertainty deepens as UK government in disarray

– BOE warns of earlier and larger rate hikes for Brexit-hit UK

– UK property prices fall second month in row, London property under pressure

– No deal Brexit estimated to cost UK £80bn according to government analysis – Transition period causing major uncertainty for UK and pound – Pound expected to fall as Brexit fears remain into 2018

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Central Banks Start Major Change

By Mark O’Byrne – Re-Blogged From http://www.Gold-Eagle.com

– Bank of England raised interest rates for the first time in ten years
– President Trump announces Jerome Powell as his choice to lead the U.S. Federal Reserve
– Most investors outside the US Dollar and Euro see gold prices climb after busy week of central bank news
– Inflation now at five-year high of 3%
– Inflation, low-interest rate, debt crises and bail-ins still threaten savers and pensioners

This week has been a significant week for central banks. The Bank of England raised interest rates for the first time in ten years, the Federal Reserve indicated that a December rate hike may happen and President Trump named Powell as his choice for leader of the Federal Reserve.

Gold reacted positively to Trump’s announcement as markets see little change ahead with a Powell-led Federal Reserve.

The interest rate decision is arguably the most interesting at present. Announcements on both sides of the pond suggest that the age of easy money is coming to an end, albeit slowly.

Since the financial crisis central banks have flooded markets with easy money, kept interest rates near zero and bought trillions of dollars in government and corporate bonds. Now most central banks (excluding Japan) have indicated that the party must soon stop.

The problem is, no one is sure how economies will cope when the moreish juice of central bank assistance will be taken away. None of the financial centres have managed to meet inflation targets which they were all so vocal about. Instead, they are suddenly aware that the encouraged financial excesses of the last ten years may well lead to another crash and something must be done to curb their enthusiasm.

Adding to the uncertainty is the issue that three of the world’s four most important central bank chiefs are nearing the end of their terms and may be well replaced. The jump in the gold price and fall in the dollar is just the first indication with how markets feel about such changes.

But is the age of easy money really coming to an end and are interest rate hikes a sign that central bankers have confidence in the economic recovery? Yesterday’s drop in the pound suggests markets aren’t buying it. They weren’t helped by Mark Carney’s dovish comments regarding the UK’s post-Brexit future.

All in all, anyone hoping they might finally earn some interest on their savings, see a slowdown in the devaluation of their wealth or a reduction in the counterparty risk their cash is exposed to, needs to think again. The UK along with the rest of the world remain very vulnerable and will take investors along for the ride.

A Whole New World With Little Hope

Here in the UK a whole generation of homeowners are waking up to a world where interest rate rises can really happen. There are 8 million homeowners, many of whom will have bought in the last ten years and as a result have never experienced a rate rise in their adult lives.

Bloomberg explained how much the world has changed since the Bank of England last increased interest rates:

The world was drastically different the last time the Bank of England hiked interest rates: the iPhone was less than a week old; Gordon Brown was Prime Minister; the average price of a home in London was £261,000 (it’s now  £470,632).

In interest rate terms how much has changed? Very little. The rise merely cancels out the cut that happened following the Brexit referendum.

It’s likely the hike in interest rate could do more harm than good. Previously savers, pensioners and investors suffered as a result of (arguably) negative real interest rates. Now the rate hike makes little difference to their current situation but propels debtors into further issues.

Those on variable mortgages will be facing rate hikes whilst the millions who have personal, unsecured loans will also be facing increased payments. All to contend with against a backdrop of rising inflation, pressure on wages and a slowing economy.

No Change, Nothing To See Here

A decade of damage by easy monetary policy has caused unforeseen damage which cannot be undone by a few quarter-percent hikes over the next two years.

Low rates have created problems for savers and pensioners around the globe. Pension funds are in trouble with rising levels of unfunded liabilities. Consider the 2016 PWC report that found pension fund deficits have expanded by £100bn over the past year to total £700bn. This gives a “debt” of £26,000 per UK household.

Debt levels continue to rise from unsustainable to even more unsustainable. Here in the UK we are facing a £1 trillion crisis as pension deficits and consumer loans snowball out of control.

And lest we forget how low rates have distorted financial markets and created asset price bubbles in shares, property and investments across markets.

Easy monetary policy came at a time when governments should have been implementing policies that dealt with an ageing population. Instead they have increased inflation and discouraged conservative money management –  creating incentives in totally the wrong direction.

The rise in inflation to 3% today also means that even those who have opted to keep cash in the bank have seen its value slowly eaten away. Those who chose to embrace low rates are inevitably in a debt-hole that is increasingly difficult to climb out from.

No Faith In Post-Brexit Britain

Interest rate hikes are ideally supposed to be an indicator that a central bank has faith in the economy’s recovery but the Bank of England statement yesterday suggested this wasn’t the case for post-Brexit Britain.

Carney expressed his concerns over the strength of the UK’s economic recovery heading into and following our departure from the EU. He is also likely to be considering the risks the weak exchange rate poses to Britain’s ability to finance its current account deficit.

So bleak is Carney et al’s outlook that they are only considering a two further rate rises by the end of 2020. Even this might not be guaranteed. Consider the state of the global financial system and where that could drag the UK.  Last time the BoE increased rates, it was soon forced to cut  them by 4.75 percentage points in the following 18 months as the global financial crisis dragged the UK into a recession.

Little Hope For Savers

The EU has already set the precedent of official negative interest rates, but in truth inflation combined with low rates does mean we are already in negative territory. Now, a 0.25% interest rate hike to 0.5% won’t do much to contend with the forces of excess money supply and falling value of the pound.

Add to this the ongoing threat of bail-ins, courtesy of the EU government. Even if interest rates were hiked up to levels of the early 1990s then savers’ cash is still not safe.

Investors need to be prepared for the ongoing threats that exist in our banking system whether thanks to Brexit or our own governments.

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London House Prices Are Falling

By Mark O’Byrne – Re-Blogged From http://www.Silver-Phoenix500.com

London house prices fall in September: first time in eight years

– High-end London property fell by 3.2% in year

– House sales down by over a very large one-third

– Global Real Estate Bubble Index – see table

– Brexit, rising inflation and political uncertainty causing many buyers to back away from market

– U.K. housing stock worth record £6.8 trillion, almost 1.5 times value of LSE and more than the value of all the gold in world

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Are Central Banks Intentionally Going To Crash The System?

By Graham Summers – Re-Blogged From http://www.Gold-Eagle.com

Since 2007, the world has packed on a truly staggering amount of Debt.  That year (2007) is now commonly referred to as a debt bubble. At that time, global debt was $149 trillion.

Today, 10 years later, it stands at $217 trillion.

Put another way, the world has packed on another $68 trillion in debt since the last debt bubble. In terms of Debt to GDP, the world has risen from 276% in 2007 (an already insane amount) to 327%.

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‘Most Secure Coin In The World’?

By Mark O’Byrne – Re-Blogged From http://www.Gold-Eagle.com

– New pound coin ‘most secure coin in world’? 
– New British £1 coins much harder to counterfeit
– Pound coin uses “secret” cutting edge technology
– Coins uses ‘iSIS’ technology which may involve RFID tags
– Central banks, governments may be able to track coins
– Libertarians and privacy advocates will have concerns
–  “Secure coin” yes but real risk is that savings not secure due to currency debasement
– Now new risk to bank deposits as all digital wealth exposed to hacking and cyber fraud
– Sound as a pound? Safer to stick with true “coin of the realm”

– Gold and silver Sovereigns and Britannias  (VAT and CGT free) are only truly secure coins

The UK launched what is being touted as the “most secure coin in the world” yesterday – the day before Brexit day.

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Catalyst For Chaos

By Michael Pento – Re-Blogged From http://www.Gold-Eagle.com

Up until very recently, stocks had been humming along without so much as a minor speedbump and volatility was becoming a distant memory. However, it now seems prudent to once again remind investors that this extremely overvalued market is headed for an epic crash. The Cassandras, myself included, have been wrong about this warning for what seems like a long time. Nevertheless, much like those who warned of a housing bubble a few years before the bottom completely fell out, reality is destined to slam into the current triumvirate of asset bubbles, and those sounding the alarm will be proven correct again.

The governments’ massive interest rate manipulation and record amount of new debt accumulation have engendered unprecedented equity, real estate and fixed income bubbles across the globe.

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When Did The Fed Start Buying Equities?

By Gordon Long – Re-Blogged From http://www.Gold-Eagle.com

We see the forensic “finger prints” all over the economic and financial data that the Federal Reserve through a proxy likely Citadel Capital (or the Fed’s CBOE Volume Options Agreement) has highly likely been buying the US equity market since its QE 3 “TAPER” ended in October 2014.  We do know for a fact that the BOJ, SNB, PBOCNorwegian and other central banks have been doing this as matter of normal monetary policy for some time and that 80% of all these central banks said they plan on buying more stocks this year with a significant amount of that buying in US exchange traded equities.   To see the forensic economic evidence more clearly, consider the following US indicators:

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Ireland’s Monetary Gold Reserves: High Level Secrecy vs. Freedom Of Information (Part I)

By Ronan Manly – Re-Blogged From http://www.Gold-Eagle.com

This article and a sequel article together chronicle a long-running investigation that has attempted, with limited success to date, to establish a number of basic details about Ireland’s official monetary gold reserves, basic details such as whether this gold is actually allocated, what type of storage contract the gold is stored under, and supporting documentation in the form of a gold bar weight list. Ireland’s gold reserves are held by the Central Bank of Ireland but are predominantly stored (supposedly) with the Bank of England in London.

At many points along the way, this investigation has been hindered and stymied by lack of cooperation from the Central Bank of Ireland and the Irish Government’s Department of Finance. Freedom of Information requests have been ignored, rejected and refused, and there has also been outright interference from the Bank of England. Many of these obstacles are featured below and in the sequel article.

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The Vexed Question Of The US Dollar

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

There is little doubt that the rapid expansion of both dollar-denominated debt and monetary quantities since the financial crisis will lead us into a currency crisis. We just don’t know when, and the dollar is not alone. All the major paper currencies have been massively inflated in recent years. With the dollar acting as the world’s reserve currency, where the dollar goes, so do all the other fiat monies.

Until that cataclysmic event, we watch currencies behave in increasingly unexpected, seemingly irrational ways. The fundamentals for Japan are not good, yet the yen remains the strongest currency of the big four. The Eurozone risks a systemic collapse, overwhelmed by political and financial headwinds, yet the euro’s exchange rate has proved relatively impervious to this deep uncertainty. The British economy is strongest, yet sterling is the weakest of the four majors.

If nothing else, today’s foreign exchanges are evidence that subjectivity triumphs over macroeconomic thinking. Mackay’s Extraordinary Popular Delusions and the Madness of Crowds beats computer modelling every time. Furthermore, any official attempt to establish a rate for the dollar has to address two separate questions: the value of the dollar relative to other currencies, and its purchasing power for goods and services.

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The Floodgates Begin To Open

By John Rubino – Re-Blogged From Dollar Collapse

It’s now clear that what governments did to counter the Great Recession may have delayed systemic collapse, but did not resurrect the old normal. Growth around the world is anemic – which is to say debt continues to increase faster than the productive capacity to service it – and inflation (the other way to shrink a debt burden) remains below target.

Now “anemic” is becoming “non-existent.” In the US, mini-credit-bubbles like auto loans, home mortgages and student loans are sputtering, leading economists to dial back their rosy scenarios for 2016. The Atlanta Fed’s GDPNow forecast for Q3 growth, for instance, was a robust 3.8% in August but is now less than 2% — and still falling.

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How Not To Manage A Currency

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

Make no mistake, sterling’s collapse is a very serious development, and has serious consequences for sterling interest rates. While it is becoming apparent that interest rates are going to have to rise possibly for all currencies on a one-year view, sterling’s problems are the consequence of bad judgement, and perhaps intellectual arrogance on the part of the Bank of England’s Monetary Policy Committee. The MPC in turn is not and cannot be independent from the influence of Mark Carney, the Bank’s Governor, who made the expensive error of intervening in the Remain campaign.

Many commentators are saying that sterling was over-valued, and the fall will stimulate exports. But value is wholly subjective, and not formulaic, as the ivory-tower economists would have us believe. The idea of stimulating exports through lower currency rates overlooks the depressing effect of the transfer of wealth it triggers from ninety per cent plus of the population, in favour of foreigners and owners of export businesses. That is the point about stagflation.

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Fed’s Interest Rate Conundrum

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

Two weeks ago I pointed out that the Fed is seemingly unaware of early signs of price inflation (see On being an FOMC member). The Fed is clearly ignoring the coincidental rise in USD LIBOR and the growth in bank lending, and is still prevaricating over interest rates, despite its full employment and price inflation conditions more or less being met.

My earlier article was an economic analysis. The purpose of this article is to point out other factors that impede a return to interest rate and monetary normality, and it concludes that a rise in US interest rates would probably be accompanied by more quantitative easing, perhaps on a discretionary basis.

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Bank Of England Restarts The Clock On The Fed’s Inevitable QE Relaunch

By Andrew Hoffman – Re-Bllogged From http://www.Gold-Eagle.com

There’s much to discuss, starting with the “powers that be” utter desperation – particularly, the gold Cartel – to stave off “Economic Mother Nature” and the “unstoppable tsunami of reality” as the end game plays out right of its eyes.  For example, just two days after the Monte Paschi “bailout” – that in actuality, won’t occur until year-end, if it can raise €5 billion of equity, and sell €9 billion of bad loans – European stocks are dramatically lower; including Unicredit, Italy’s largest bank, which has plunged nearly 20%; and Deutsche Bank, the “world’s most systematically dangerous institution” – which touched its all-time low stock price yesterday morning, before the PPT pushed it oh so slightly higher (and as I write, it’s plunging towards said “death level” of $12.50/share anew).  In my view, we are at most a few weeks before the real panic sets in.

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Central Banks “All In” Attempting To Halt The Looming Global Recession

By Gordon T Long – Re-Blogged From http://www.Gold-Eagle.com

Central Bankers Fighting An Unprecedented Global Slowdown  

The mainstream news sources seem determined to ignore the extent of the global slowdown in trade. Whether exports, imports, industrial production or whatever your preferred metric, the facts are undeniable. Nevertheless, the mainstream media chooses to refuse to cover it. It begs an obvious question of – why?

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It’s The US Dollar, Stupid!

By Ed Bugos – Re-Blogged From http://www.Gold-Eagle.com

Don’t let the bull-tards tell you the stock market over here is falling because of China’s problems, or Grexit, or fear of the nebulous Fed rate hike. We’ll just see about that last one now anyway!

The US asset bubble is the biggest one on the planet today, and it just went pop. The currency too has rallied over the past few years on the fairy tale that everyone else is inflating while the US is about to tighten, which may have been more plausible if they just started telling it now, and the dollar had not yet gained 65% on the Yen, 35% on the CAD, 30% on the Euro or 25% against a basket of trade weighted currencies -on exactly that story. They have been talking that game for a long time in fact. The worst part about it is that it hasn’t been true, at least not until now. The Fed has expanded money the most in the post 2008 environment -more than the ECB, more than the BOC, BOE, SNB, RBA, and probably more than the BOJ if my suspicions are correct.

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