Money Under Fire

 

A reminder of the great wealth transfer underway

Today we welcome a cohort of new readers visiting PeakProsperity.com for the first time. This article is to give them our best grounding in the massive wealth transfer underway.

Our hope is that our longtime readers will likely benefit from a revisitation of the fundamentals, as well.

One serious predicament we face is that the current leaders in the halls of monetary and political power do not appear to understand the dimensions of our situation. The mind-boggling part about it is that the situation is easy to understand.

Our collective predicament is simply this: Nothing can grow forever.

Why the U.S. Is the Next Greece: Doug Casey on America’s Economic Problems

 

“With these stupid governments printing trillions and trillions of new currency units,” says investor Doug Casey, “it’s building up to a catastrophe of historic proportions.”

Ron Paul warns of coming stock market chaos as bottom falls out of market

Sharing his wisdom and insight on CNBC’s Futures Now program, Paul chastised the money changers for what he maintains is their endless game of “play[ing] havoc” with the stock market. The Federal Reserve has been in the business of artificially pumping fake fiat currency into the markets for more than a century, it turns out, and such activity is nearing the end of its shelf life.

According to Paul, the Fed’s “fallacy of economic planning” is responsible for all the market “bubbles” that are constantly waning and waxing between “booms” and “busts.” The instability caused by this Keynesian model of economics, he contends, will only end in disaster, whether it culminates in years, months, or even weeks.

Greece is Just the First of MANY Countries That Will Be Going Belly-Up

The first round of interventions (2007-early 2009) was performed in the name of saving the system. The second round (2010-2012) was done because it was generally believed that the first round hadn’t completed the task of getting the world back to recovery.

However, from 2012 onward, everything changed. At that point the Central Banks went “all in” on the Keynesian lunacy that they’d been employing since 2008. We no longer had QE plans with definitive deadlines. Instead phrases like “open-ended” and doing “whatever it takes” began to emanate from Central Bankers’ mouths.

However, the insanity was in fact greater than this. It is one thing to bluff your way through the weakest recovery in 80+ years with empty promises; but it’s another thing entirely to roll the dice on your entire country’s solvency just to see what happens.

How central banks have sown the seeds for the next financial crisis

The notion that governments have somehow got on top of the forces of financial instability is for the birds

Here’s a somewhat scary statistic for those meant to know about these things. After a six-year bull market, the typical stock in America’s S&P 500 shares index is valued on a multiple of more than 18 times estimated forward earnings. This is not just expensive by historic standards, but super-expensive. In fact, according to analysis by Goldman Sachs, it ranks as in the top 98th percentile of historic valuations since 1976, or in other words one of the highest in nearly 40 years. It scarcely needs saying that these peaks tend to signal the top of the cycle, with some kind of bear market or crash just around the corner.

Germans are buying gold at a frantic pace.

It may be a sign they are worried about the future. People tend to buy gold when they fear economic disaster or a spike in prices.

The World Gold Council report released on Thursday said demand for total gold bar and coins spiked by 20% in Germany during the first quarter from the year before.

It’s unusual for gold to be a hot commodity in an economy as strong Germany’s is right now. And growth in Europe has regained momentum in recent months, outpacing even the sluggish pace experienced in the U.S.

The Next Round of the Great Crisis is at Our Doorstep

The next round of the financial crisis is at our doorstep.

Central Bankers bet the financial system that their academic theories would work, despite the countless real-world examples showing that printing money does not generate growth.

Geopolitical Situation Most Dangerous Since WWII – Rothschild

Lord Rothschild characterized the geopolitical situation in the world as the most dangerous since the end of WWII, warning investors about a forthcoming crisis.

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“We are confronted by a geopolitical situation perhaps as dangerous as any we have faced since World War II: chaos and extremism in the Middle East, Russian aggression and expansion, and a weakened Europe threatened by horrendous unemployment, in no small measure caused by a failure to tackle structural reforms in many of the countries which form part of the European Union,” wrote Jacob Rothschild, a British investment banker and a member of the prominent Rothschild family, in an annual Strategic Report of RIT Capital Partners plc (RIT).

As Euro Slides, Strategists Cut Forecasts

Some Investors See Single Currency Falling to Parity With U.S. Dollar

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A day after the European Central Bank unveiled its bond-buying program, the single currency still was in free fall, blowing past analysts’ expectations for how low the euro can go.

Some investors now say the euro could fall to the point where it is on equal footing with the U.S. dollar for the first time since it climbed above the buck in late 2002.

“If you would have asked me a few months ago, I would’ve said that parity could be in the cards in the years ahead. Now, we can’t rule it out anymore even by the end of this year,” said Thomas Kressin, head of European foreign exchange at Pacific Investment Management Co., or Pimco, which has $1.68 trillion under management.

ECB launches bigger-than-expected QE program

 

European Central Bank (ECB) President Mario Draghi has announced the launch of an expanded monthly 60 billion euro ($70 billion) private and public bond-buying program that will last until at least September 2016.

The long-anticipated asset-purchasing program—touted as the euro zone’s answer to the U.S. Federal Reserve’s quantitative easing (QE) programs—will start this March, Draghi told reporters at his regular media conference on Thursday.

A Tidal Wave of Gold Repatriations Could be Unleashed

 

 

A tidal wave of gold repatriations may have begun. As speculated in my last post, I raised a concern that should be shared with all western Central bankers…a widespread flood of countries demanding their gold back to their home soils.

This notion sounds logical to any sane individual, but to a central banker who is gold negative, this is their worst nightmare. To understand why, you need to step back and see the big picture, which shows the stark reality of how rare gold truly is and how little of it remains in western vaults, despite what the mainstream media would have you believe.

First it was Germany, then it was the Dutch. Soon it could be Switzerland depending on the results of their gold repatriation referendum, which central bankers are nervously awaiting the results. Now, there is France.

ECB Will Turn On Its Money Printing Machine To Fuel Needed Inflation

Sunday, a top European Central Bank policymaker described how the bank will approach an asset purchase plan to tackle low inflation in the single currency bloc, saying that such a program “would not be about quantity, but about price.”

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The ECB acknowledged after its policy meeting in early April that it is open to turning on its money-printing presses to keep inflation from staying too low, though it has not yet shown any public signals of starting quantitative easing (QE) yet.

World risks deflationary shock as BRICS puncture credit bubbles

The world is one financial downturn, one major terrorist attack or one regional war away from collapse. 9/11 happened when the U.S. was on the brink of another economic bubble whereas the downturn of 2008 was a bubble created during the Clinton years in which it was only a matter of time before it popped.

As matters stand, the next recession will push the Western economic system over the edge into deflation

Half the world economy is one accident away from a deflation trap. The International Monetary Fund says the probability may now be as high as 20pc.

It is a remarkable state of affairs that the G2 monetary superpowers – the US and China – should both be tightening into such a 20pc risk, though no doubt they have concluded that asset bubbles are becoming an even bigger danger.

MARC FABER: We’re In A Gigantic Financial Asset Bubble That Could Burst Any Day

In an interview with Bloomberg TV, he says we are in a “gigantic financial asset bubble.” He also thinks the bubble could burst at any moment.

“I think we are in a gigantic financial asset bubble. But it is interesting that that despite of all the money printing, bond yields didn’t go down. They bottomed out on July 25, 2012 at 1.43% on the 10-years. We went to over 3.0%. We’re now at 2.85% or something thereabout. But we’re up substantially. Now, this hasn’t had an impact on stocks yet. In fact, it pushed money into the stock market out of the bond market. But if the 10-years goes to say 3.5% to 4.0%, then the 30-year goes to close to 5.0%, the mortgage rates go to 6.0%. That will hit the economy very hard.”

Ned Goodman:The dollar is about to be dethroned as the world’s de facto currency (Video)

The Fed will very likely never ‘taper’.  If so, there will be a bond sell off which would quickly spiral out of control. Quantitative easing, or QE, will be permanent until it eventually causes a collapse.

The Fed not tapering is also supported by Egon von Greyerz, the founder of Matterhorn Asset Management in Switzerland, in an interview just two days ago.

The ‘day of reckoning’ is indeed coming. The question is not if, but when.

On Sept. 15, Canadian billionaire Ned Goodman spoke at the Cambridge House regarding the U.S. dollar, and the state of the Western economies. In his nearly eight minute speech, the 75 year old CEO of Dundee Capital Markets and Chancellor of Brock University painted a picture of the upcoming change in reserve currency control by the U.S., and how the dollar will soon be replaced as nations around the world rush to get rid of their currency reserves.

Ned Goodman: In my view, the dollar is about to become dethroned as the world’s de facto currency. I’ll tell you how I came to that conclusion so quickly… the new President of China, Xi Jinping, his first visit on the day of his becoming President, was at his request to meet with Mr. Putin. And he immediately made a deal with Mr. Putin to get all the oil that he needs, which he can buy in Renminbi.

We’re headed to a period of stagflation, maybe serious inflation, but stagflation for sure, and the United States will be losing the privilege to print at its will, the world’s reserve currency. A period that’s going to be very inflationary, and I can tell you that before that happens, it is likely that it is going to get quite ugly. – Ned Goodman, Cambridge House