Bubble

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The End Of Stimulus?

 (And The Start Of The Crash?)

Back in January of 2016 we saw what appeared to be, and in my opinion should have been, the end of the Everything Bubble blown by the word's central banking cartel. 

It quickly devolved into a “Sell everything!” scramble. We saw the dollar spike and stocks fall -- with emerging markets taking the full brunt of the carnage as their stock markets rapidly fell into bear territory, their currencies fell, and their bonds were destroyed. 

Until... 

Very early one morning in February of 2016 everything U-turned and rocketed higher. Suddenly and magically, the panic was over. This wasn’t the invisible hand of the market at work; it was the very-visible hand of central bank intervention. 

But we all know that this charade cannot continue forever.  Sooner or later it has to stop.  Given the [renewed] blow-ups we're now seeing in the emerging markets, there’s clearly serious trouble brewing somewhere in the system. 

When today's Everything Bubble bursts, the effect will be nothing short of catastrophic as 50 years of excessive debt accumulation suddenly deflates. 

Given the dangers involved, you should expect the central banks to 'go nuclear' in their deflation-fighting efforts by sending “money to main street” -- 

likely in the form of a universal basic income, or a check from the Treasury refunding your last 3 years of tax payments, or maybe even an electronic deposit directly from the Federal Reserve into your bank account. 

That's when the inevitable fiat currency crisis will begin in earnest.  At that time you’ll need to run, not walk, to buy anything with intrinsic value that can't be inflated away -- before your currency becomes worthless.

 

DYI:  I don’t see the U.S. dollar becoming worthless over a short period of time as the author of this article portends.  However it is more likely after a deflationary smash the Treasury along with the Federal Reserve to come up with some of the income replacement schemes presented creating inflation more along the lines of the 1970’s as opposed to the likes of Brazil or Argentina.  Of course anything is possible but living in the world of what is probable I don’t envision a complete currency collapse.  Despite all of our problems and yes they are huge by American standards the U.S. remains primarily a free enterprise state capable of generating future wealth.

U.S. stocks are massively overvalued greater than the year 2000 despite the Shiller PE¹⁰ being greater then as opposed to now.  In the year 2000 the Shiller PE¹⁰ was “JACKED UP” due to the dot.com high tech stocks.  Today all stocks are at nose bleed levels so when the decline begins all stocks will be hit severely. 

 

Interest rates continue to be significantly below their long term average of 4.57% [since 1871] as measured by the 10 year T-Bond [2.93%].  Could rates go lower?  During an economic deflationary smash not only lower but very possibly go negative as experienced in Europe.  However in the grand scheme it is obvious that the huge majority of the bond bull market of a lifetime is over.  Rates will eventually normalize and highly likely overshoot as markets so readily and eagerly do.  So hang onto your cash and gold better values are ahead.  The only problem is no one knows when! 

DYI