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  • Insider
    Black Swans

    What Happens When War Meets Recession?

    We're currently on track to find out
    by Chris Martenson

    Friday, June 14, 2019, 2:40 PM

    7

    Executive Summary

    • The recent tanker attacks in the Gulf of Oman are both odd and murky
    • Assessing what happens next in and around the Strait of Hormuz
    • Recession watch!  Many more signs of weakening with which to contend
    • When the black swan(s) arrive the bubble(s) will burst
    • Getting the timing right is going to be tricky, of course

    If you have not yet read Part 1: Waiting For The Black Swan, available free to all readers, please click here to read it first.

    There are a huge number of warning signs that a recession is imminent, if not already here, and the price of oil is one of them (more on the others later).

    Right now, with oil inventories climbing despite relatively low global oil output, oil is saying “economic weakness is here.”

    Perhaps the biggest “sour note” in the ongoing stock bull parade is the dramatic inversion of the yield curve, which means shorter maturity government paper is yielding more than longer maturity paper.

    For example, you can get a higher yield on 3-month paper than 5-year paper.    This key indicator has now been inverted for a full quarter, an historically accurate indicator of recession.

    Another is the difference between 6-month and 3-month T-bills.  Again, outside of a recession, we’ve never seen a reading as low as it is right now.

    The reason I track the possibility of a recession so closely is because I don’t think that the vast majority of people will be ready to consider alternatives to the status quo as long as everything ‘seems fine.’  Despite a worsening trade war, despite weakening global trade, despite the many geopolitical risks, US and other equity markets continue to rise and seem impervious to any and all bad news.

    Which is why I don’t think this bubble ends with mom and pop retail investors catching on and ducking out.  It will ends when…

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  • Insider

    Off The Cuff: Into The Abyss

    The Fed's actions are quickly becoming the trigger that will blow up the system
    by Adam Taggart

    Thursday, June 13, 2019, 6:56 PM

    4

    In this week’s Off The Cuff podcast, Chris and John Rubino discuss:

    • The Fed’s Desperation
      • It’s just playing for time at this point
    • Why Lower Rates Will Blow Up The System
      • ZIRP/Negative rates create all sort of perversities
    • Italy Threatens To Revert To The Lira
      • Is the Eurozone about to break up?
    • Bad Corporate Debt Is The Ticking Time Bomb
      • There’s simply way too much of it now

    In this excellent analysis, John does an exceptional job clarifying the unique point in economic history in which we live. The Federal Reserve is truly out of ideas at this point; it is simply playing for time until the system breaks:

    The point in the cycle where we are now is a really unusual time to talk about lowering interest rates. Normally when the labor markets are this tight, and wage inflation is running around 3% which it is right now, the Fed is usually tightening. Wage inflation is a kind of inflation they understand. This is as opposed to stock prices going up, bond prices, or house prices going up. That is inflation, but they do not count it as inflation. When wages go up, they usually start raising interest rates. It is really telling that they are seeing things that lead them to maybe start easing again even with the economy, in theory at least, still growing ten years into the beginning of an expansion.

    I think they are recognizing the fact that the world – not just the US, but the whole global financial system – is so highly leveraged that any kind of downturn becomes systemically risky. In other words, a 20% drop in stock prices which is the definition of a bear market is something that happens all the time at least historically. This time around, it might knock down other dominos in a way that is uncontrollable. This is just because there is so much bad debt out there.

    When you take on huge amounts of debt, by definition a lot of it has to be bad debt. Usually the good credits have already done their borrowing. If you are going to expand that beyond that point, you are going to have to work your way down into the barrel to the bottom of the barrel. That is where we are now. A lot of people who have borrowed money cannot pay it back. They are only hanging on because the economy is growing and because their paychecks are there. If you take that away, then Boom!. The system starts to fall apart.

    These guys know that at the Fed. They are trying to delay the inevitable easing because they know that interest rates are already so low. The European Central Bank and the Bank of Japan never did get to raise interest rates. The Fed only got to raise interest rates a little bit, which means they have no ammo going into the next recession. Normally the Fed will cut interest rates by about 5 percentage points from peak to trough. This is as a way of reinvigorating the economy during a recession. If they were going to do that now, we would be at negative 2 or 3% on the Fed funds rate. It would be more deeply negative for Europe and Japan. That is uncharted territory.

    What the Fed is doing now is using words. They are trying to talk the market up. It works (for now). Whenever they announce the possibility of easing or the cessation of tightening, you get a nice pop in the stock market. They are hoping that they can elevate asset prices until the China trade deal gets signed and until the turmoil in the Middle East has settled. That will also give the markets a pop, and that will keep the economy growing for a while. It will allow them to raise interest rates another couple of percentage points at the short end of the spectrum to give them ammo for the next recession.

    They really do not want to start cutting right now. From here, they really do not have much room to cut. I think it is highly unlikely that they are going to get what they want. In other words, it is an economy that grows for the next three years and allows them to raise the Fed funds rate to 5 or 6%. That is really, really unlikely in the scheme of things. They are going to be forced in the recession that is probably imminent just because the expansion has been going on for way longer than a normal expansion. It is going to run out of steam pretty soon. They are going to be forced to cut interest rates to zero and beyond.

    That is why Powell was talking about that. Now he is talking about the effective lower bound of interest rates which is below 0%, we found out in this last cycle. We do not know how far below zero it is. That is what we are going to find out this time around. In other words, how negative can you make interest rates before it becomes the problem rather than the solution? From an economic theory standpoint, that is fascinating. That is the kind of experiment you never expect to see in the real world. We are going to do it this time.

    We are going to find out what the absolute lowest level interest rates can go to before it blows up the system. I do not use the words “blow up” lightly. That is what could really happen when interest rates get down to that point, and it turns out they do not work. Then it is game over.

    Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com’s other premium content.

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  • Insider

    Important Consequences Of Expatriation

    Critical details you need to be aware of
    by Adam Taggart

    Friday, June 7, 2019, 5:15 PM

    2

    Executive Summary

    • The nuts and bolts of expatriation, including the legal process of expatriation
    • The tax consequences of expatriation
    • The immigration consequences of expatriation
    • The pros and cons of U.S. investments once you expatriate
    • The tax consequences should you choose to spend more than a few months each year in the United States after expatriation

    If you have not yet read Part 1: A Primer For Those Considering Expatriation, available free to all readers, please click here to read it first.

    Expatriation: The Basics

    Once you’ve obtained a second passport and qualified for residence in another country, you can begin the legal process of expatriation.

    To do so, you must make an appointment with a U.S. consulate. You generally cannot expatriate within the territorial boundaries of the United States. The consular officer will explain the consequences of expatriation and have you sign some forms.

    Two or more appointments may be necessary to complete the process. At the end of whatever sequence of visits applies at the consulate you choose, you’ll then hand in your U.S. passport. Anywhere from several weeks to several months later, you’ll receive an official document called a “Certificate of Loss of Nationality” (CLN). With the receipt of this document, you will have officially relinquished your U.S. nationality.

    Income Tax Consequences of Expatriation

    Once you give up your U.S. citizenship and passport, you have no further obligation to pay U.S. tax on your worldwide income. However, U.S. law imposes an…

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  • Insider

    Off The Cuff: The Earth’s Lament

    We pollute & deplete, but for no real gain
    by Adam Taggart

    Thursday, June 6, 2019, 8:12 AM

    10

    In this week’s Off The Cuff podcast, Chris discusses:

    • We’re Polluting & Depleting, For No Real Gain
    • Why Shale Oil Reflects Our Wrongheadedness
    • Time Is Fast Running Out Before The Real Consequences Arrive
    • But There Are Many Ways To Do Things Better

    This week Chris looks at the big picture: the planet’s resources and humanity’s mad dash to consume them. We are depleting millions-year-old treasures — which will never renew in our species’ future — while leaving poison and pollution behind in the effort.

    Even if we only prioritize the well-being of those currently alive (screw those pesky future generations!), time is running out on us. Our current trajectory is having increasing negative repercussions, which will only intensify over the coming decades.

    The silver lining to this is that we *can* be doing things better. We already have plenty of models for living regernatively. We just need to embrace them. But will we?

    Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com’s other premium content.

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  • Insider
    Downturn

    Why The Next U.S. Recession Will Be Exceptionally Painful

    Our enormous & unserviceable debts are going to crush us
    by Chris Martenson

    Monday, June 3, 2019, 2:29 PM

    16

    We all know another recession is coming at some point.

    Economies are cyclical. Bust always follows boom in the same way the moon follows the sun.

    We very nearly had a recession in early 2016. I remain impressed how it was averted then by the application of tremendous amounts of newly-printed-from-thin-air money.  It took several trillions of dollars globally, but it worked (if we can call enabling the global economy to take on additional $trillions in debt that will never be repaid ‘working’)

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  • Insider

    Preparing For The Reckoning

    Stop expecting the future to resemble to past
    by Chris Martenson

    Friday, May 31, 2019, 6:24 PM

    35

    Executive Summary

    • The government is NOT riding to our rescue here. So don’t count on it.
    • Our decisions today will determine our destiny tomorrow
    • The most important single insight to base your future plans on
    • How to focus the time you have now

    If you have not yet read Part 1: These Are ‘The Good Old Days’, available free to all readers, please click here to read it first.

    There’s no Plan B in the works.  I’ve not read a single national strategy that incorporates the ideas of Peak Oil, Peak Net Energy, or how to transition from our current system of money and credit that’s based on exponential expansion to one that does not require endless growth to function.

    And yet, we continue to consume the world’s resources at an ever-increasing pace:

    Notice the exponential ‘hockey stick’ shape.

    World population has more than doubled since 1950. And more than three-quarters of all the fossil fuels ever burned in human history have been consumed over that same time frame.  Half of all the oil ever burned, has been burned in just the past 22 years.

    Now consider how this is a very temporary condition, but one that we humans have happily assumed is permanent.

    An intelligent response would be to immediately begin fashioning our lives and lifestyles around the energy reality.  Work, eat, live, and play in a more localized fashion.  Don’t build out and depend on 30,000+ mile supply chains.

    The smart path forward for each of us becomes clear when you…

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  • Insider
    Shutterstock.com

    Off The Cuff: Why Currency Crisis Is The Real Risk Here

    In China, and perhaps eventually here in the US as well
    by Adam Taggart

    Thursday, May 30, 2019, 9:30 AM

    0

    In this week’s Off The Cuff podcast, Chris and Wolf Richter discuss:

    • Tesla’s Woes
      • A harbinger of what’s coming for many other overvalued companies
    • How Bad Could A Trade War With China Get?
      • There will be lots of unintended consequences
    • Why The Smart Bet Is On Currency Devaluation
      • Governments will print forever to prevent catastrophic losses from happening
    • Recession Ahead!
      • The global macro data continues to look worse and worse

    In this excellent discussion, Chris mentions “It feels like we’re so far down the state intervention pathway that I’m not sure that there is a way back to free and fair markets at this point in time. And it would take something fairly cataclysmic I think to upend that, something like an out of control currency accident for China, taking it out of their hands, for instance. ”

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  • Insider

    Off The Cuff: The Party’s Over

    Terrible data is finally ending our hopium addiction
    by Adam Taggart

    Monday, May 20, 2019, 10:15 AM

    5

    In this week’s Off The Cuff podcast, Chris and Mish Shedlock discuss:

    • Next Up: A Currency War With China?
    • Recession Warning
    • A War With Iran, Too?
    • More Cracks In Europe

    The self-delusional “Everything is awesome and getting better!” narrative that has pushed markets ever higher for the past years is suddenly unravelling. The current China tariffs will undo any remaining salubrious impact of the Trump tax cuts, a global recession appears underway, and — seriously — are we about to go to war with Iran??

    Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio as well as all of PeakProsperity.com’s other premium content.

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  • Insider

    Creating A World Worth Inheriting

    These opportunities excite me the most right now
    by Chris Martenson

    Friday, May 17, 2019, 6:14 PM

    37

    Executive Summary

    • Changing your fate requires action today
    • Here’s the action/opportunity I’m most focused on today in my own life
    • How to step into an “elder” role, if you have the courage
    • How to create a world worth inheriting

    If you have not yet read Part 1: The Path From Survival To Significance, available free to all readers, please click here to read it first.

    Our mission at Peak Prosperity is to “Create a world worth inheriting”. Every single day we feel like we’re doing everything we can to move towards this goal. But some days, it feels like our efforts may not be nearly enough to get the job done.

    But while our own actions may be insufficient, they are necessary. And paired with the steps you take, and those of the hundreds of thousands of other PeakProsperity.com readers, our odds for success exponentially improve.

    I’d like to slip out of ‘convincing mode’ for this piece. Because so many people still seem to be unaware of our many predicaments, I often find myself leaning towards lining up all the evidence, in the hope that I can open a few more eyes.

    But not today. We all know the score. We’re collectively on a terribly unsustainable course. The data is overwhelming at this point.

    All of this then, leads to the idea that to create a world worth inheriting we have to first admit that our society is not on track to do that.

    It’s up to us to plan accordingly, based on what our own eyes, ears and hearts are telling us is true.

    Mine tell me that there’s a better way, one that does not involve squabbling like primitive monkeys over key resources.

    And then we must be willing to change on a very deep level. Both internally so we can be proper elders and compatriots to those around us, and externally as we move into a life of consuming less.

    I look around and I see people using their big brains to work with nature, create abundance, and believe in ourselves as creative forces for good.

    The opportunities that are capturing my personal attention most and are inspiring me into new action in my own life are…

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  • Insider
    It's Time To Respond

    Straight Up – It’s Time to Respond

    Introducing our new podcast series exclusively for Insiders!
    by Chris Martenson

    Thursday, May 16, 2019, 12:49 PM

    12

    After listening to our tribe who have strongly expressed their appreciation for our audio podcasts.  We get it;  listening fits into many people’s active lives more easily than reading.

    Because of this we’re a new way to engage with our published material.

    We’ve got our Off The Cuff podcast for our insiders where each week your host Dr. Chris Martenson will speak with a guest about whatever is current or on their minds that week.

    We’re now introducing a third offering which is Straight Up! – a podcast where Chris reads his latest works.

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