Loading ...Adding to Biko99’s comments – From Carl
One of the threats to the U.S. economic boom is the collapse of various currencies and the possible collapse of banks in countries that are relatively large. The 3 most visible problems that are in the headlines are Argentina, Turkey, and Venezuela. A fourth that is emerging is Italy. What do all of these have in common? They have elected populist governments that are either on the left or right side of the political spectrum. Why is this important to the U.S.? Trump is a populist who ran a campaign centering on anti-immigration, economic protectionism and tearing down government institutions designed to protect individuals against organizations interested only in profits at any cost. Other countries have also elected similar leadership including Hungary and Poland. Russia and China of course have a history of strong armed leadership but the leaders of those nations are really not populists since they have control of the mechanisms that allow them to be in power. They may have started out as populists however. Now Putin is a quasi dictator and the leader of China is a reformed Communist with his own brand of Capitalism designed to keep the party of Mao in power.
The real estate crisis and attacks on the banking system began showing their first signs of emerging in 2005 to 2006. They originated in the U.S. but by the end of 2008 the banking crisis in the U.S. had spread around the world, liquidity everywhere was being challenged as everything was for sale, and only the quick financial moves of Hank Paulson and Ben Bernanke prevented the complete collapse of the U.S. banking system and the economy. The next crisis maybe emerging outside of the United States. Just one bad apple in the world economy would not be a threat to the U.S. economy–but many bad apples can lead to a panic and the associated liquidity problems.
When the markets are making new highs it is like drinking the kool aid of self indulgence and creates a sense of false security. People choose not to pay attention to what is wrong or showing signs of being wrong. Complacency becomes the dominating force. Carl
Your comments are both plausible and frightening.
Spain may be another domino in the row, and a bigger one. I understand they are the largest holder of Turkish government debt. Those Turkish interest rates must have been attractive.
Carl, Well said. I agree with you. Bob Hoye a financial historian used to write about Roman empire, bad wind begin in distance land and soon reached the Romans. I have to find his correct quote some day.
Isn’t this the scenario that Armstrong speaks of? Big money will run to the U.S. from the peripheral areas just like they did in Roman times, the centre will be the last to collapse, this flood of money kills the currencies and rockets all tangible goods including U.S stocks. The USD is the last to die, but not before it is run up to insane levels, thus being blamed for the collapse. The rise is caused by two factors, shrinking FED balance sheet decreasing liquidity and the increased demand of USD to buy stocks and assets……..after a meeting with a swift deflationary collapse right around the corner, after this deflationary smack down gold will rise and not until, this is a dead cat bounce IMHO.
The U.S. debt (20T) is a pittance compared to world debt (210T), who is it holding the bag? Emerging markets? Europe?
Good recap of Armstrong Randy. I think Plunger would also agree. This scenario makes sense to me.
Makes total sense to me as well.
However, I have to take issue with this point …
“only the quick financial moves of Hank Paulson and Ben Bernanke prevented the complete collapse of the U.S. banking system and the economy.”
I don’t give Hank or Ben one IOTA of credit here. They only prevented the IMMEDIATE collapse of the US and global banking system. (Ie, kicked the can, and now its even bigger.) But those two and their predecessors were DIRECTLY responsible for taking us to that point in the first place!!!!! Just read The Creature from Jekyll Island .. and add up all the serial bubbles the Fed has created since 1970: PennCentral, Continental IL, Latin American debt, Local Banks, Mexico, another round of EM credit (1998), Tech, Housing, Greece/PIIGS, and now EVERYTHING but gold. (And yes, I expect Rogers is correct … gold’s time commeth.) Basically, absent the discipline of gold, there’s a Fed put that protects DEBT HOLDERS (including banks) at the expense of the general public (via Control P of fiat to buy the bonds). Nothing gets fixed until there’s a JUBILEE so creditors face the music. And that fix will be exceedingly painful for all but there’s no other way across the chasm of perpetual monetary policy failure.
Here is some one wrote recently on the subject:
Reason two is that since the 1990s the Fed has responded to every crisis anywhere in the world by bailing out the US banking system, and everyone has concluded that that’s just how the world works. Trouble starts, the Fed cuts rates, and stocks, bonds and houses go up, problem solved. Without the slightest doubt, the Fed will respond that way again should the current EM crisis start to metastasize unacceptably. But will it work this time, with global debt roughly double what it was the last time the world was bailed out by its central banks? And how big will the financial market crisis have to be to shift the Fed and ECB from tightening to next-gen QE?”
Strike one 1998 Longterm Capital
Strike two Bear and stern 2008 bail out
Strike three and you are out??
Maybe strike three will be from a curve ball!
Correct… What you are describing is the course of the post bubble contraction. The only thing I would add is that US Stocks are definitely NOT tangible assets they are paper financial assets, but they are being bulled due to money flows towards the center. Commodities likely will decline due to less economic activity on the periphery and eventually the core. Interesting times.
At the end of the day, despite the endless speculation about what should or shouldn’t happen…. the why or when or where or how….
The US stock market is going up (bull market) — and gold is going down (bear market.)
Until that changes, I will continue to “drink the kool aide.”
The trend is your friend.
Everything else is noise.
very well said all – South Africa and India are lining up to face troubles also
Great comments, I’ll let Carl know.
And here is one of his latest posts:
http://www.usdebtclock.org/
George W Bush double the debt after 8 years to $11T
Obama double the debt to $21T in 8 years.
Why not debt does not matter DJT is expected to double the debt in 2 terms to $42 T.
A sincere way to Rule a nation is to change ones position when you are in power. When Republicans are in power deficit and debt do not matter but when they are not it matters like hell???? HAHAA
Got gold!!
And then what happens when rates begin to rise in secular order? Which at some point they will. That’s when a nation finally pays for the debts they have accumulated. How will the payment be made? The payment will be made through its currency. A devaluation equal to the amount of debt outstanding. The chief means of protection will be in owning tangible assets.