A Tale Of Two Markets

Payments Panic And The Ending Of Fiat Currencies

By Alasdair Macleod – Re-Blogged From Gold Money

The unilateral response from governments to the coronavirus is to helicopter money to people and their businesses in unlimited quantities. Their priority is to keep the debt-driven Keynesian show on the road, and policy makers are approaching the task with unseemly gusto.

There was evidence that the credit cycle was already on the turn with the global economy entering its regular period of financial and economic crisis even before the coronavirus hit. Thinking it is only a matter of dealing with the pandemic before returning to normal is therefore a common and fatal mistake. The combination of current events is leading to an infinite problem: central banks, and the Fed in particular, are trying to backstop everything and they will undoubtedly fail.

The central issue is the dawning inability of the Fed, in charge of the world’s reserve currency, to keep financial markets under control. The quantities of money required to rescue the US economy and dollar-centric supply chains abroad are potentially far greater than anyone realises and will destroy not just the dollar, but the whole fiat money system of rigged financial markets upon which debt financing depends. The EU is in a similar but more parochial fix with the addition of a banking system visibly on the verge of collapse.

The timescale for the demise of unsound fiat currencies is likely to be very short, by the end of 2020 – exactly three centuries since a similar fiat currency experiment failed in John Law’s Mississippi bubble.

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The Demise Of The Financial System Is Imminent

By Egon von Greyerz – Re-Blogged From Gold Eagle

“Next five years is not about winning but surviving.” This is the headline of an article I wrote in early August 2019. At that point I was primarily thinking of economic survival. But now the world is facing multiple threats and multiple failures. As I have already stated, the Coronavirus is not the cause of global market crashes but the catalyst.

But even if I have been totally certain that the world will see an economic collapse greater than any crisis for 100s of years, this is the worst catalyst that anyone could have expected. Yes, a global virus was always one of the potential risks but of all triggers, this one was certainly the most unwelcome and horrible.

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Do You Solemnly Swear?

Stay with me on this… the purpose will become clear soon.

Assume (without laughing or crying) that our U.S. senators are honest individuals filled with integrity. Yes, I know, but stay with me…

They voted during the impeachment trial for President Donald Trump. They swore to uphold the following oath:

Do you solemnly swear that in all things appertaining to the trial of the impeachment of Donald John Trump, president of the United States, now pending, you will do impartial justice according to the Constitution and laws, so help you god?”

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Even The Best-Case Scenario Is Pretty Grim

By John Rubino – Re-Blogged From Silver Phoenix

Let’s say President Trump is right about the coronavirus “miraculously” fading away as temperatures rise in the Summer. Will things then go back to the old normal of globalization, free trade and finance-driven “growth”?

Almost certainly not, because the psychological damage has already been done. Over the past couple of weeks the modern globalized economy with its multi-nation supply chains and just-in-time inventory systems has been forced to recognize that such a system only works in a nearly-perfect environment. Take the iPhone: It is designed in the US, its constituent raw materials are mined and processed in numerous other countries and the resulting components are then shipped for assembly to vast Chinese factories.

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Permanently Addicted to Zero

In Fed Chair Jerome Powell’s appearance before Congress on February 11th, formerly known as The Humphrey-Hawkins testimony, he asserted that the U.S. economy was, “In a very good place” and “There’s nothing about this expansion that is unstable or unsustainable.” But compare Powell’s sophomoric declaration to what Charlie Munger, Vice-Chairman of Berkshire Hathaway and Warren Buffett’s longtime right-hand-man, had to say about the market and the economy, “I think there are lots of troubles coming…there’s too much-wretched excess.”

Mr. Powell’s comments rival in ignorance with that of former Fed Chair Bernanke’s claim that the sub-prime mort crisis was contained. That is until the Great Recession wiped out 50% of stock valuations and over 30% of the real estate market. And of course, don’t forget about Fed Chairs Yellen and Powell’s contention that their Quantitative Tightening program would be like watching paint dry and run harmlessly in the background on autopilot. At least that was their belief until the junk bond market disintegrated and stocks went into freefall in the fall of 2018. Therefore, it should not be a surprise at all that the Fed doesn’t recognize the greatest financial bubble in history: the worldwide bond market mania. Perhaps this is because central banks created it in the first place and therefore didn’t want to take ownership of it.

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COVID-19 (Coronavirus) Economic Impact Sweeps Down on Global Economy Like a Fat Black Swan

It is the senseless things of this world that sometimes knock sense into the high and mighty whose hubris causes them to believe they cannot fall. In this case, the tiny COVID-19 virus (coronavirus) is bringing down a global house of cards long perched to fall — locks, stocks, and barrels of oil.

Stock investors thought the over-Fed market’s bull run would prove immortal, but all the overripe market needed was for a fat, black swan to drop down on the market’s head and knock some sense into it. Economic damage worldwide, however, is far from limited to stocks. Some of it seems almost silly or bizarre, but such is the case when the entire global economy is already in ill health, having survived on Fedmed for a decade.