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Daily Digest 2/17 - Central Banks Will Let The Next Crash Happen, The Return Of Dubai's Ultimate Folly

Saturday, February 17, 2018, 12:35 PM


Central Banks Will Let The Next Crash Happen (thc0655)

When mainstream economists argue that the Federal Reserve could conceivably keep low interest rates and stimulus going for decades if necessary, they often use the example of the Bank of Japan as some kind of qualifier. Of course, what they fail to mention is that yes, the BOJ has spent decades increasing its balance sheet which now sits at around $4.7 trillion (U.S.), but the Fed exploded its balance sheet to around $4.5 trillion in only eight years. That is to say, the Fed inflated a bubble as large if not larger than the Bank of Japan in less than half the time.

Intel chief: Federal debt poses 'dire threat' to national security (hail)

Fiscal hawks have raged against Republican leaders, who they say abandoned their pledge to curb irresponsible federal spending. Trump, House Speaker Paul Ryan (R-Wis.) and Senate Majority Leader Mitch McConnell (R-Ky.) have praised the budget deal for adding billions in what they consider crucial defense spending.

Government sneaks through APRA ‘bail-in’ law, but fuels anti-bank revolt (ezlxq1949)

The passage of this bill was a live demonstration of the incredible power that banking interests wield over Australian politics. (Before it sold out to those banking interests and embraced neoliberal economics, the “old” Labor Party called them the “Money Power”.) This bill is going to backfire on the Money Power, however. In their desperation for a law that confiscates people’s savings to prop up too-big-to-fail (TBTF) banks, they have further fuelled the revolt in the population against banks and the political elites who serve them.

Not the end of The World: the return of Dubai's ultimate folly (blackeagle)

Conceived in 2003, the project was to be an exclusive offshore playground for film stars, royalty and celebrity tycoons: an artificial archipelago of 300 islands set two miles off the coast. Invitations to “Own the World” were sent to a targeted group of 50 potential buyers each year, offering tours of the site by yacht or helicopter, with prices for the islands ranging from $15-50m (£10-36m). Richard Branson posed for photos on little Britain in a Union Jack suit; Karl Lagerfeld launched plans for a fashion-themed island; rumours swirled that Brad Pitt and Angelina Jolie had acquired Ethiopia for their ever-expanding clan of adopted children.

The Dollar and Gold for 2018 (GE Christenson)

Massive debt is a drag on the economy, creates consumer price inflation, and increases income inequality. The debt will be addressed via default (Sorry, we’re not paying! Best of luck with your future investments!). Or more likely, it will be paid with DEPRECIATING dollars that buy far less than in 2017, 2000, 1971, and 1913.

How Schools Stopped Recent Shootings Before They Happened (tmn)

Two days before the shooting at Stoneman Douglas, a student from Michigan City, Indiana, threatened to bring a gun to school and shared a picture of a weapon after getting into an argument on Facebook Messenger. But police identified and arrested a suspect in a matter of hours after the exchange was shared across social media.

Shadowy criminals are prowling the seas and putting food supplies in danger (thc0655)

Scientists warn that, unchecked, overfishing will eradicate whole species, and could within a few decades contribute to a total collapse of the world's fisheries. But fishing grounds from Asia to Africa and beyond are already cleaned out.

Fish are swept away for sale in wealthier, far-away markets, such as China. Beijing helps its fishing fleet — the world's biggest — range far across the globe by giving government subsidies based on boat horsepower, according to risk analysis firm Stratfor and others.

Why Silicon Valley billionaires are prepping for the apocalypse in New Zealand (blackeagle)

In the immediate wake of that Altman revelation, Matt Nippert, a reporter for the New Zealand Herald, began looking into the question of how exactly Thiel had come into possession of this apocalypse retreat, a 477-acre former sheep station in the South Island – the larger, more sparsely populated of the country’s two major landmasses. Foreigners looking to purchase significant amounts of New Zealand land typically have to pass through a stringent government vetting process. 

Gold & Silver

Click to read the PM Daily Market Commentary: 2/16/18

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."


Nate's picture
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CHS podcast with Greg Hunter

Financial writer and book author Charles Hugh Smith has been watching the extreme movements in financial markets closely. Is he nervous?  Smith says, “Oh yeah, it’s definitely destabilizing.  In other words, it’s becoming not just more volatile, the whole underlying structure of our economy is destabilizing.  What I mean by that is it’s becoming more brittle or fragile.  That is fundamentally why we are seeing these wild swings.  People are swinging between . . . keeping the money machine like it is for another nine years, and the other side of the coin says wait a minute, we have already had a weak expansion for nine years.  It’s almost the longest expansion in U.S. history.  A normal business cycle doesn’t run in one direction forever. . . .If you don’t allow your economy to have a business cycle recession, then you are simply making it more fragile by encouraging really marginal and risky investments, and that’s where we are now.”

One very big problem is a dramatic loss in buying power of the U.S. dollar, but it’s not just the dollar. According to Smith, “All these currencies, there is nothing backing the currencies except the government’s force.  That’s the yen, the euro, the dollar and the Chinese yuan.  They are all going to have a catastrophic drop against real assets because they are all based on too much leverage, too much debt, too much money being pumped into the financial system that ends up in unproductive speculation.  You can’t grow your debt at six times the rate of your economy.  In other words, if you are creating $6, $8 or $10 of debt to eke out $1 of low productivity growth, you are dooming your currency, and all currencies are doing the same thing.  All the currencies are going to take a big drop at some point . . . relative to real stuff.  Real stuff is commodities we need:  water, grains, food, oil, natural gas and, of course, precious metals.  Everybody knows they have been money for 5,000 years, and I personally feel there is a role for crypto currencies.”


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Re:Central Banks Will Let The Next Crash Happen

FWIW: I doubt CB's will let markets crash. Consider that CB's are keeping interest rates extremely low and at least some are pumping up the markets by buying stocks (ie Swiss National Bank buying US tech stocks). I think CB's will allow market corrections, but not a full crash. If they were going to let markets crash then they would not have been so accomidating for the past 10 years (QE, low interest rates, Buying stocks, etc).



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Problem > Reaction > Solution

TechGuy's picture
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CHS via Nate Wrote: "“All

CHS via Nate Wrote:

"“All these currencies, there is nothing backing the currencies except the government’s force. That’s the yen, the euro, the dollar and the Chinese yuan. They are all going to have a catastrophic drop against real assets because they are all based on too much leverage"

I don't think so. Gov't coercion is a powerful force, and with so much debt, liquidity is likely more of a problem than real assets. When Liquidity vanishes, assets plunge. Most people don't owe real assets. They use debt to make purchases (home, car, credit cards, etc), and when credit disappears, they lose their jobs and are no longer able to make debt payments. When this happens they try to sell, but everyone else is also selling and no one is buying causing values of real assets to tank and demand for currency to increase. 

Maybe in the distant future people will lose confidence in major currencies (dollar, yuan, euro, etc), but at least for the next 5 to 10 years, debt is the elephant in the room. When major currencies do become stressed, that's when I think Gov'ts will go to war and start WW3. If people were going to lose faith in major currencies, then it would have already happened when all of the major CB's were using Quantitive Easing and dropping rates to near zero. 

My guess is that soon or later consumers and business that have used lower interest rates to borrow and spend more, run out of capacting to borrow more and service their debt. When the spending stops, it will trigger another recession, and the CB's don't have the room to lower interest rates. pre-2008 Consumers & businesses borrowed with interest rate for business/consumer loans in the 6% to 8% range. After the CB's dropped rates, Borrowing rates dropped to 3% to 5%. I am not sure if dropping rates will save the day again. Perhaps if CB's switch to Bernanke Helocopter money it might work. Perhaps Helocopter Money will be limited to Business's and gov't (state, local, federal) to prevent consumers from going on a spending binge.



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Trump Faces Quarter Trillion Bond Market Test as Dollar Sags

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