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We Are All Lab Rats In The Largest-Ever Monetary Experiment In Human History

And how do things usually work out for the rat?
Friday, August 17, 2018, 7:10 PM

This global flood of freshly-printed 'thin air' money has no parallel in the historical records. All around the world, each of us is part of a grand experiment being conducted without the benefits of either prior experience or controls. Its outcome will be binary: either super-great or spectacularly awful.

If the former, then no worries. We'll just continue to borrow and spend in ever-greater amounts -- forever. Perpetual prosperity for everyone!

But if things hit a breaking point, then you had better be prepared for some truly bad times. » Read more

Podcast

Ronald Stoeferle: Gold Is Dirt Cheap Right Now

And a new bull market for the metal is beginning
Tuesday, June 12, 2018, 11:38 AM

Fresh from releasing his exhaustive 230-page annual report titled In Gold We Trust, Ronald Stoerferle joins us to summarize his forecast for the yellow metal.

Stoerferle, an author of several books on Austrian economics and head of strategy and portofolio management at Incrementum AG, concludes that gold is extremely cheap right now in dollar terms. And he sees a new bull market beginning for the precious metal -- one likely to quickly build momentum as the next (and long overdue) financial market correction arrives. » Read more

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6 Essential Strategies For Prospering Through The Next Crisis

Be one of the few positioned to prosper when crisis hits
Friday, April 6, 2018, 11:32 PM

Executive Summary

  • The trends that have driven the past 10 years are now ending/over. Ride their reversal wisely.
  • Crisis can destroy or magnify your prospects. Your decisions today will control which outcome you experience.
  • In many cases, you need to do the opposite of what the 'herd' is doing
  • The 6 essential strategies for prospering through the next crisis

If you have not yet read Part 1: This Is The Turning Point, available free to all readers, please click here to read it first.

Strategies For Prospering Through The Next Crisis

Those with the open-mindedness, courage and optimism to adapt in time will be far less impacted -- and indeed, will have much better odds of coming through this transition the better for it. Amazing opportunities will arise during this time to increase all aspects of your wealth (yes, money -- but also in all the other important Forms Of Capital, too).

Don’t count on currency “money” retaining its purchasing power. 

States (governments) always follow the same pathway: when financial promises can’t be kept, states debauch/devalue their currencies as a politically expedient short-term solution.

But alas, just like central bank stimulus, the short-term expediency becomes the permanent policy, and the unintended consequences start piling up, for example, a loss of trust in the state’s currency.

I see Venezuela’s destruction of its currency as the canary in the coalmine. The first canaries to drop lifeless from their perch will be non-reserve currencies.  Then the weakest of the reserve currencies will be over-issued (via credit rather than actual money-printing) and then even the mightiest will collapse.

Many people reckon the US dollar (USD) is the weakest, and perhaps they’ll be right, but I think the Chinese yuan (RMB), Japanese yen and EU euro will lose purchasing power first.

The RMB isn’t actually a “real currency,” it’s simply a derivative of the USD via the official peg. As for becoming gold-backed, please examine any chart of Chinese debt issuance (all of which is currency) and then compare that to... » Read more

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Deflation Is Winning – Beware!

Expect the ride to get even rougher
Friday, July 24, 2015, 11:03 AM

Deflation is back on the front burner and it's going to destroy all of the careful central planning and related market manipulation of the past 6 years.

Clear signs from the periphery indicate that a destructive deflationary pulse has been unleashed. Tanking commodity prices are confirming that idea.  » Read more

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The Consequences of a Strengthening US Dollar

It actually creates destabilization
Wednesday, November 12, 2014, 11:21 AM

In early September, I made the case for a rising U.S. dollar. Since then the dollar has continued its advance, and is now breaking out of a downtrend stretching back to 2005—and by some accounts, to 1985.

So what does this mean for the global economy? » Read more

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Why The Strengthening Dollar Is A Sign Of The Next Global Crisis

It causes the weaker parts of the system to fail faster
Wednesday, November 12, 2014, 11:21 AM

Executive Summary

  • Understanding the two different ways money flows into the US dollar
  • How currency crises elsewhere can send the dollar skyrocketing
  • Why yen, yuan and euro printing are not the same as dollar printing
  • How these accelerating money flows are creating the next global crisis

If you have not yet read The Consequences of a Strengthening US Dollar available free to all readers, please click here to read it first.

In Part 1, we surveyed the key dynamic that is playing out across the globe: the problems revealed by the Global Financial Meltdown of 2008-2009 were not addressed; they were in effect shifted into the foreign exchange (FX) market. Now the risk bubble is in the FX market.

The complexity of the feedbacks into the FX market is nothing short of mind-boggling, and rather than attempt a comprehensive survey, I’m highlighting the dynamics that hold the greatest risks of triggering instability, not just in finance but in geopolitics, trade and commodities.

Two Kinds of Dollar Flows

Let’s start by differentiating between the two kinds of money flows into the dollar:

  1. Money converted from periphery currencies into dollars to pay back loans denominated in dollars
     
  2. Money flowing out of periphery economies and into dollar-denominated assets such as stocks, bonds, real estate and dollar-denominated bank accounts.

Broadly speaking, both of these capital flows are “risk-off,” but they have different effects.

In the first case, money borrowed on the cheap in dollars and invested in high-yield periphery bonds earned a tidy profit as the dollar weakened. The trader picked up a double profit: the arbitrage on the interest rates (borrow at .25% and earn 4+%) and the FX profit from the rise of the periphery currency and the decline of the dollar.

This currency-arbitrage profit reverses when the dollar starts rising, and it quickly wipes out the entire interest-rate profit as it leaps higher.

The carry trade is “risk-on” because money is being borrowed to speculate in interest-rate arbitrage. Deleveraging this trade is “risk-off” because the only way to stem the potential losses as the dollar strengthens is to... » Read more

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What Will Happen When Japan Breaks

Mapping the contagion risk to world markets
Thursday, November 6, 2014, 9:36 AM

Executive Summary

  • The data that proves Japan is a ticking time bomb
  • Why the yen may still fall a lot further from here
  • How Japan's contagion can threaten world markets (and yes, the US)
  • Why the contagion is now underway, and what you should do about it

If you have not yet read Central Planners Are In A State of Panic available free to all readers, please click here to read it first.

Japan, By The Numbers

I completely understand why the Japanese authorities are freaking out and taking enormous risks.  It's because they have no good choices left.  More fundamentally (and worse) they are in charge of a system that is destined to fail.

Exponential money systems have to eventually fail because all paper money is just a marker for real wealth, it is not real wealth itself, and therefore ever-increasing exponential paper claims being stacked up  against a world of real wealth that is growing much less quickly (and someday reversing entirely) is a mathematical formula for a monetary accident.

But it's quite bizarre that Japan, of all places, cannot see through to this math predicament given their very publicly and often discussed demographic decline.

Having peaked at 128 million in 2005, Japan now has 127 million inhabitants and is on its way to 90 million by 2050, and 45 million by ~2100.

(Source)

This means that.. » Read more

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Why The Dollar Is Gaining Strength

Warning us of another impending financial crisis?
Monday, September 8, 2014, 8:30 PM

Recently, the US dollar has gained at lot of territory compared to the yen, pound, euro, ruble, and pretty much every other currency you can think of. The dollar is now at a 14-month high and has been on a real tear.

The reasons why are not that hard to understand, and it's important that we do. » Read more

Insider

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Japan's Economy Is Shattering

Abenomics is fast proving to be a costly failure
Monday, April 28, 2014, 11:09 AM

When you are a fully-industrialized island nation that makes its living in the world by importing raw materials, fashioning them into useful exports, and collecting the difference as your profits, then you simply have to run a trade surplus for the model to work.

Which means Japan is in big trouble: » Read more

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Off the Cuff: Capital Is Sloshing Recklessly Around the World

Moving prices out of whack more than anything else
Thursday, February 27, 2014, 3:38 PM

In this week's Off the Cuff podcast, Chris and Brian discuss:

  • The Sloshing Tsunami of Global Capital
    • It's pushing prices around more than any other factor
  • Concerning Correlations
    • Markets are too correlated for their own safety righ tnow
  • The Wisdom of Playing it Safe
    • At its most valuable when it's hardest to practices
  • How The Next Market Break May Differ From 2008
    • Not enough suckers left?