Recently, there has been a parade of central bankers along with their lackeys on Wall Street coming on the financial news networks and desperately trying to convince investors that there are no bubbles extant in the world today. Indeed, the Fed sees no economic or market imbalances anywhere that should give perma-bulls cause for concern. You can listen to Jerome Powell’s upbeat assessment of the situation in his own words during the latest FOMC press conference here. The Fed Chair did, however, manage to acknowledge that corporate debt levels are in fact a bit on the high side. But he added that “we have been monitoring it carefully and taken appropriate steps.” By taking appropriate steps to reduce debt levels Powell must mean slashing interest rates and going back into QE. The problem with that strategy being that is exactly what caused the debt binge and overleveraged condition of corporations in the first place.
In our view, gold investors should settle back with some popcorn and enjoy the coming fireworks, which will include the best gold bull market ever, with all the volatility that implies. We see new all-time highs just around the corner. The challenge is to take a position and stay the course. Central banks are about to pay for decades of bad policy and gold will reap the dividends.
Let’s be clear about one thing: the global economy is falling into a deep recession but it is NOT due to the U.S.-China trade war, and a resolution of that war, no matter what it is, will not avoid the inevitable. Inverted yield curves and an historic collapse in bond yields are the clearest message that markets can send on the economic outlook. The trade war does not explain why Europe and Japan have been on the brink of recession for more than a year. Nor will central bank easing prevent a recession when monetary conditions are already the loosest in 25 years. Central bank monetary policy is part of the problem, not the solution. In our view, the economy and the stock market are not going to be saved by trade deals and monetary policy.
Last week we wrote about how global central banks have created an economic time machine by forcing $17 trillion worth of bond yields below zero percent, which is now 30% of the entire developed world’s supply. Now it’s time to explain how the time machine they have built has broken down.
In parts of the developed world, individuals are now being incentivized to consume their savings today rather than being rewarded for deferring consumption tomorrow. In effect, time has been flipped upside down. These same central bankers then broke that time machine by guaranteeing investors they will never cease printing money until inflation has been firmly and permanently inculcated into the economy.
They have printed $22 trillion worth of new credit in search of this goal since 2008. This figure is still growing by the day. But by doing so, they have destroyed Capitalism. Freedom is dying; not by some Red Army but by central banks.
Like living in quiet desperation, holding on with our fingertips, scared we are losing our grip on the slippery mountain, on reality, on what little control we possess… central banks and governments are desperate.
Some are doing well, unless they worry the Jeffery Epstein fiasco will implicate them. But for many, it’s desperation, insecurity and debts.
Central bankers, governments and stock markets are worried, even desperate.
In the unending blowing of the most epic financial market bubbles of all time, Germany may have just announced “peak crazy”. Overnight they issued 30-year bonds that had a NEGATIVE yield. With all of the financial shenanigans going on it is not even a surprise that they did it.
The real surprise is that the “authorities” were surprised when people didn’t line up for the honor of losing money financing their profligate debt. According to Zerohedge, the German government issued $2 billion of these bonds and the Bundesbank (German Central Bank) was forced to buy 58% of the offering.
What this really should tell everyone is that those who actually earn their money rather than conjure it up out of nowhere actually care what type of return they are going to get for the risk that is being taken. Of course, when money is conjured up out of nowhere and at virtually no cost to the “printers” any return of capital is more than they started with. There could also be a few hedge funds out there speculating that rates will go even lower and lead to a short-term profit. (If there are any buyers at an even more negative rate).
By John Rubino – Re-Blogged From Dollar Collapse
A quick recap of the past couple of months:
The politicians, bureaucrats and bankers who depend on artificially-elevated financial asset prices start to panic.
The Fed announces that maybe it won’t have to raise interest rates any more, and the president announces a truce in the trade war with China.