It's long overdue to acknowledge we face a future absent net growth and likely a future with fewer consumers, fewer homebuyers, fewer taxpayers, fewer employees. We face a battle where higher productivity leads to ever more being done by ever fewer people... and if we aren't thoughtful, honest, and creative in how we adapt to this new reality... terrible consequences could await us.
Trump recently said, “We will no longer surrender this country, or its people, to the false song of globalism.” In our view, there’s only one way Trump could fight the global elites and their SDR plan: return the dollar to some sort of gold backing.
John Connally, President Nixon’s Secretary of the Treasury, once remarked to the consternation of Europe’s financial elites over America’s inflationary monetary policy, that the dollar “is our currency, but your problem.” Times have certainly changed and it now appears that the dollar has become an American problem.
Less than two days before Donald Trump is inaugurated as the 45th president of the United States, Fed chair Janet Yellen takes to the stage at the Commonwealth Club of San Francisco to explain (after all these years), what "the goals of monetary policy are... and how we pursue them." We can't wait to hear how increasing asset prices to untenable levels, depriving savers of income, and driving the largest wedge between rich and poor since the great depression have been part of the solution...
If an individual is “literally” burying cash in their backyard, then the discussion of the loss of purchasing power is appropriate. However, if cash is a “tactical” holding to avoid short-term destruction of capital, then the protection afforded outweighs the loss of purchasing power in the distant future.
We're accustomed to "rotation," the nice little game where bonds can be sold and the capital invested in real estate or stocks, or vice versa. We're less accustomed to all the conventional asset classes toppling like dominoes. Where do the fleeing trillions go when stocks, bonds and real estate are all going down in a chaotic sell-off?
The history of previous civilizations rising and eventually collapsing is well documented. Our current economy seems to be following a similar pattern... Our fundamental problem is the fact that neither high nor low energy prices are now able to keep the world economy operating as we would like it to operate.
"I remember the first time I ever saw a $100 bill. I was dumbfounded. It was more money than I had ever seen in my young life.... $100 could practically pay the rent in a lot of places back in the 80s. That’s obviously no longer the case...$100 simply isn’t the awe-inspiring symbol of wealth that it used to be. And that’s because of inflation."
In October, the International Monetary Fund (IMF) committed a blunder when it issued a forecast for Venezuela’s end-of-year annual inflation rate. An inflation forecast in a country that is toying with hyperinflation is a mug’s game.
The price of Bitcoin seems to have briefly exceeded the price of gold for the first time this week; however, this comparison is completely arbitrary. Gold remains the only true global money with a size and volatility comparable to that of fiat currency.
The bedrock assumption of the Bull market is that corporate profits will keep rising indefinitely. Hiccups are allowed, but current stock market valuations are implicitly based on profits expanding. The fly in the ointment here is corporate profits have been stagnating since 2014.
"For 105 years, the Federal Reserve has exercised almost absolute and unquestioned authority over America’s monetary policy. The result has been a boom-and-bust business cycle, growth in government, increasing income inequality, and a loss of over 90% of the dollar’s purchasing power. No wonder almost 80% of Americans support Audit the Fed!"
While mortgage applications tumbled across the two-week holiday period - even seasonally-adjusted - it was the complete collapse in the refinancings that is most notable. Down over 60% since August, the refi index crashed over 22% over the xmas/new year period to its lowest since the post-Lehman collapse in Oct 2008.
It took a while, but the world are slowly coming to grips with the simple fact the Chinese miracle is built on a pile of debt with only an unconstrained printing press to support it. The danger is obviously that the political establishment in China will be in dire need to distract the hordes of angry masses that are about to lose their life savings.