This report was originally published by Adam Taggart at PeakProsperity.com
Collectively, the world’s major central banks have pumped $1.1 trillion into the markets over the past year.
The result of all this money printing is now well known: massively inflated real estate, stock and bond asset price bubbles, as well as extraordinary wealth and income gaps across society.
Some day all of this insanity will end. But how? Will it unwind in an orderly and polite way, as the world’s central planners hope? Or will be disorderly, resulting in painful portfolio losses and mass layoffs?
Michael Pento, fund manager and author of The Coming Bond Bubble Collapse returns to the podcast this week to offer his prediction that events will most likely take the latter route. In fact, he sees the developing inversion of the yield curve as a dependable precursor to the US economy entering recession as soon as this Fall:
The Fed is now raising rates. They raised rates from 0% up to 2%. They’re supposed to do it again in September/October. And again in December. That will be four hikes this year.
They are also selling assets, aka ‘draining their balance sheet’. I say ‘selling’ because that’s exactly what they have to do. Let’s say the Fed is holding a 10-year note that’s due: if they want to destroy that money, they say “OK, Treasury, give me the principal”. The Treasury doesn’t have any money so it has to go the public and raise money. Well, the Treasury will have to do that to the tune of $50 billion per month come October. Right now it’s $30, it has to go in July to $40 billion a month then it goes to $50 billion. That’s $600 billion a year added to the public supply of Treasurys they have to actually finance at a market rate. That’s on top of the $1.2 trillion debt we’re going to have in fiscal 2019.
So the Fed is tightening. But here’s the problem: the spread between long-term rates and short-term rates is about as narrow as it can be without being inverted.
Right now, as we record this interview the spread between the 2 and 10-year Treasury note is just 34 basis points. That means when the Fed tightens rates in September, which they’ve pretty much promised to do, assuming the 2 and 10-year note stays at that same spread above the Fed funds rate, we’re going to have a yield curve that is almost completely flat. And will be inverted when they go again in December.
Why is that so important? Well, when the yield curve inverts it almost always brings about a recession. In fact, I can say pretty distinctly that in modern times, in this fiat currency regime, given the conditions today, it will definitely cause a recession. The reason is because the fuel for asset bubbles is monetary creation, a boosting booming money supply which we don’t have any more. And the reason why the money supply gets shut off when the yield curve inverts is because banks’ loans are earning less than their liabilities, which are deposits. So when your assets are earning less than your liabilities, you don’t make any more loans. You don’t want any more assets. That’s a great way to make your bank insolvent.
So what happens is that the money supply gets completely shut off. You’re not going to make a loan against a deposit — you don’t even want these deposits anymore. By the way, when there’s a recession and there’s a withdrawal of asset prices, a contraction in those prices usually results in a run on the bank as well. So asset prices get stumped because there’s a run on the bank and these deposits get withdrawn. That is what usually causes causes a recession. And that’s exactly where we are going to be come the fall, and even closer towards the end of this year.
Click the play button below to listen to Chris’ interview with Michael Pento (35m:59s).
Buy some Pento Beans and Rice.
In other news, a paranormal researcher has declared that he has discovered a “time warp” North of Las Vegas. Personally I suspect that it was just Wayne Newton out for a walk. 🙂
Growing up everyones home was 1973, ours was 1945 from the music played (Glenn Miller), haircuts (SHORT), discipline (virtually military).
Alexandria Ocasio-Cortez WANTS TO ABOLISH ICE, HAVE OPEN BORDERS, AND FOMENT A SOCIALIST REVOLUTION IN AMERICA
ITS PLAIN TO SEE THAT ONLY WHITE MEN ARE GENETICALLY CAPABLE OF BUILDING CIVILIZATION
I ONCE THOUGHT NON WHITES AND WOMEN COULD LEARN, BUT THEY CANT. ITS GENETIC, FOLKS. ITS FROM 300000 YEARS OF HUMAN EVOLUTION.
MAKE NO MISTAKE, THEY WILL EXTERMINATE WHITE PEOPLE AND RUIN OUR GREAT CIVILIZATION.
WOMEN AND NON WHITES HAVE NEVER BUILT A CIVILIZED COUNTRY OR INVENTED ANYTHING IN 300000 YEARS. LET THAT SINK IN. THEY DONT KNOW HOW TO FUCKING DO IT!!!!!!!! BLACKS WERE GIVEN SOUTH AFRICA AND ALL THESE ONCE THRIVING WHITE AMERICAN CITIES LIKE DETROIT CLEVELAND CHICAGO MIAMI VIRGINIA AND BALTIMORE. LOOK WHAT THEY DID!!!!!!!!!!!!!!
PEOPLE THINK A CIVIL WAR IS COMING. THAT IS VERY SAD. WARS ARE TERRIBLE. FORMER GENERATIONS WENT TO WAR AND DIED AND KILLED FOR OUR FREEDOM. WE ARE TOO PUSSY TO DO THAT. WE SIT HERE STARING OUR END IN THE FACE AND TALK ABOUT SOME RIDICULOUS REALITY SHOW OR THE LATEST ISLAB OR THE BALL GAME. I DONT WANT TO GO TO WAR. I ALSO DONT WANT TO TELL THE GRANDKIDS I WAS A FUCKING BETA PUSSY COWARD WHO CONSIGNED THEM TO DESTRUCTION CAUSE ITS NOT “NICE” TO TELL THE TRUTH ABOUT GENDER AND SEX.
THE ELITES THINK WE WONT NOTICE WHITE GENOCIDE AS LONG AS WE ARE DISTRACTED WITH BULLSHIT ENTERTAINMENT CULTURE AND MATERIAL THINGS. IT ISNT WORKING.
SHOULD WHITES ACCEPT THEIR DESTRUCTION SILENTLY?
SHOULD WE ACCEPT A WHITE BIRTHRATE BELOW REPLACEMENT LEVELS SO THESE WOMEN CAN HAVE SOME IDIOTIC JOB FILLING OUT FORMS??????
WOMEN MUST STAY HOME AND RAISE WHITE CHILDREN. ANTI DISCRIMINATION LAWS MUST BE REPEALED. WOMEN MUST NOT HAVE THE RIGHT TO VOTE. MEN MUST FIGHT FOR THEIR FREEDOM. SINGLE MOMS MUST BE OSTRACIZED.
Eisenk: This is 2018 and women have been leaving the house and working for over fifty years. What planet are you on? Unless these stay at home breeders marry rich husbands (rare) they gotta eat, pay utilities, car and house pmt, etc. etc. What educated woman with common sense would want to stay home and slack around all day anyway?? Unless she hit the super pay out lottery. Who the H knowing America is trashing, would want to breed anyway?
THANK YOU FOR YOUR LARGE CAP EDITORIAL.
YOU HAVE OUR UNDIVIDED ATTENTION.
BAREFOOT AND PREGNANT. STAY AT HOME AND MAKE COOKIES.
RACE WAR. LOCK AND LOAD.
BLAH BLAH BLAH
SHE’S A PUERTO RICAN SOCIALIST FROM THE BRONX. LOOK AT HER VOTER BASE.
SHOULD COME AS NO SURPRISE SHE GOT ELECTED.
SHE LOVES BERNIE AND SO DO HER VOTERS. THEY WANT FREE SHIT. THEY HATE TRUMP
WE SEE THE SAME SHIT THAT YOU SEE.
WE HAVE MORE BULLETS THAN THEY HAVE ASSHOLES.
WHEN THE 35,000 INDICTMENTS COME OUT, THE COMMIES ARE HISTORY.
PATRIOTS ARE ON THE STRENGTH. THEY CAN’T FUCK WITH US. WATCH.
Asians and Persians invented and had advanced sociaties throughout history you racist nit wit
Well, not nearly as advanced as those of Europe. (Christian) Europe pretty much IS civilization.
Not true , Europeans were still living in caves when Asians and Persians had advanced sociaties
Tim & going distance: Europe has thrown everything away in recent years and sold out to third world invaders, soon to be slaves or worse. Losers and cowards indeed. Their history will be wiped out once the caliphate is formally installed, mass destruction of historical buildings, churches and museums, etc. all will be gone. (voiceofeurope.com)
Eisenkreutz, many of those people who went to war and died for our freedom were baby boomers, and you make it quite clear how detestable they are to you. You amplify how superior whites are and yet you live on an island and I’m guessing you are one of very few white folks. What gives? I, unlike many in here, actually enjoy your input but you’re being a hypocrite now.
Actually the baby boomers were shitting in their cloth diapers. 1930’s to mid 1950’s is the boomer generation? They were the millenials back during the flower power days. Still mostly socialits the ones i know. Love their ponzi socialist insecurity. I only hope it all crashes before they die of old age so they can get their just desserts. Worst generation in modern history.
“ITS PLAIN TO SEE THAT ONLY WHITE MEN ARE GENETICALLY CAPABLE OF BUILDING CIVILIZATION”
It’s also plain to see white men are genetically capable of destroying civilization.
Hiroshima and Nagasaki are evidence of that!
My dick grows to 12 inches by the Fall.
Yep, “buy gold/silver”, “prep,prep.prep”, “Obama will be arrested”, “there will be an EMP attack”, “submarine nukes: watch out!!!!!!”, “suitcase nukes: watch out!!!!!!!!”, “fags will run through the streets and sodomise chickens!!!!!!!!!!!!!!!!”. Give it a rest.
The timing of kicking out the barely supportive termite infested legs under the economy is not accidental.
Not likely to happen until after the midterms. That gives TRUMP and the retards time for a reset to clear the hubris and justifies new policies to invigorate the economy, using the need for better INFRASTRUCTURE to pump government spending, prior to 2020.
It’s as clear to me as the nose on the end of my face. 🙂
Why wouldn’t they rock the boat, crash the economy to influence the Mid Term Elections?
Who is “they” ??? The bankers ??? Not likely, they just had their regulations reduced by TRUMP, their multinational clients are making mo money than ever under TRUMP’S tax cut, and there is no reason to put Socialists in power to undermine TRUMP, as the LEFT has moved to the FAR LEFT …. Venezuela Left ….. nationalize the banks left. See ???
No the bankers are going to ride the TRUMP TRAIN all the way to the uh …… BANK !!! In fact the bankers may delay the CRASH until after the end of the year so that their GINORMOUS BONUS’ are not affected. We’ll see. 🙂
The Bilderberg Group, Globalists, MIC, CFR, Trilateral Commission….those that collectively pushed the “Free Trade” agreements, wars for multi nationalist corporations global omnipotent control.
With the best use of improper language. Them be the they.
Bankers Rule !!! That’s what my T-shirt says anyway. 🙂
Bankers may indeed rule…..awakened people know that they shouldn’t……that they have plunged this planet and it’s people into untold misery.
So…..when I see you on the street, wearing your “Banker’s Rule” t-shirt, I will give you two options.
1) Go home and add to the bottom of the t-shirt “to the detriment of Humanity”
2) I take you aside and beat the phucking shit out of you for not siding with your fellow human beings.
Your choice…….by the way…….Bankers will swing from the end of a rope……given time……so you better figure out what to do with that t-shirt son.
I’m shaking in my boots. 🙂
Dont matter none… wasn’t gonna do anything anyhow so now my agenda will have something to do. Lol wonder if Walmart gonna survive cus they gonna be paying huge tariffs on the Chinese crap they sell. Only 2 good things i purchased that came from china was the norinco steel core 7.62×39 ammo and sks’s. And norinco ak47’s they’re good too. But like sks better…
Maybe I’m just on the downhill side of stupid.. but this statement from the article makes zero sense to me. “So when your assets are earning less than your liabilities, you don’t make any more loans. You don’t want any more assets.”
Sounds like a crock to me.. assets are good.. liabilities are bad. You always want more assets and always want less liabilities. The difference between assets and liabilities would normally be called profit.
But like I said, I’m likely on the downhill side of stupid.. so I’ll just keep my assets high and my liabilities low and let Mr. Pento say and do as he pleases.
“So when your assets are earning less than your liabilities, you don’t make any more loans. You don’t want any more assets.”
He is a describing a negative cash flow situation which cannot be sustained by any bank, business, or individual. Not even Buffet or Gates.
“The difference between assets and liabilities would normally be called profit.”
Wrong. Profit (or lack thereof) is the remainder between income and expenses on the Income Statement. The difference between assets and liabilities would be called NET WORTH (or the lack thereof) on the Balance Sheet.
Not the same thing. Apples & Oranges. Hope this helps to clarify it for you. 🙂
The economy is an energy construct, not a monetary one. Heat provides the industrial growth economy: fuels must be consumed to sustain it and provide continuing employment to make things that are ultimately thrown away in order to consume more to enable the debts to be carried forward. The system of rolling debt requires increasing amounts of energy input.
The industrial economy relies on one thing…converting explosive force into rotary motion. Internal combustion engines run the economy, from vehicles to electric turbines fired by gas or coal. Only hydrocarbons can supply the sufficient amount of fuel to keep things rolling along.
The problem is the world burns 25 billion barrels of oil a year (2016). New global discoveries amounted to only 2.4 billion barrels (2016). The seed corn is now being eaten. As existing oil fields deplete and few new cheap and easy to access oil fields are discovered the economy will sputter and slow to a halt.
The financial system will implode since without surplus energy to fuel growth (debt) it seizes up and global trade stops.
The world is running on old legacy oil. Oil wells cannot be refilled by votes, prayers, or money. The apocalypse is just over the horizon (it always is).
The cause can also be attributed to fuel with a lower EROEI. Industry in the last 150 years was built on coal with an EROEI of 50:1 and oil with an EROEI of about 100:1. Cheap surplus energy that created industrial infrastructure and enabled the current affluent lifestyle that no longer can be maintained with oil that now only returns around 20:1 EROEI and falling. It takes more energy to bring a barrel of oil to market than ever before. Wind and solar can not supply sufficient energy to replace oil.
When the explosive force no longer keeps the wheels turning, everything stops. The JIT delivery system seizes up and you stop eating. Hungry people overwhelm those who have prepared. Billions will be liquidated in the Mad Max collapse. Try not to be one of them. Get your sand rail and assless chaps ready now.
Glad I got that off my chest.
That was pretty good.
Most people do not understand oil very well.
LMAO! ~ They have been making that EXACT same prediction every year since 2009!
Oil is drying up? Maybe that is why Trump is bring back coal, and “they” are starting to complain about it. Seen the latest video? Saw on Facebook where Arnold posted it, but here it is on youtube.
BTW – Arnold is looking oldddddddd…..
There is a tremendous supply of coal on the planet. When petroleum is gone or too expensive, it can be a substitute for many things. BUT it will never deliver the “bang for the buck” oil does.
The guy seems to take a macro economics point of view, is wrong about some things.
“The Treasury doesn’t have any money so it has to go the public and raise money.” They already do that.
I invest in Tbills as they pay better interest than a CD.
Interest rates are set by auction not by the Fed.
Institutional investor buy Tbonds regularly. I believe they are also auctioned.
There is a large secondary market for treasuries, so if you need your money right NOW you can get it. People always pay taxes and by law Treasuries get paid first.
Fed runs the banking system, but other than a credit card when is the last time you got a loan from a bank? They don’t pay anything in interest on savings, They are making lots of money. So why do you, the consumer need to care about the banks?
I do business with credit unions only and only keep a minimal amount in them to avoid fees.
I expect a depression.
Unless we lose a significant part of the population, people are going to work, pay taxes, and engage in the various activities needed to survive. Life will go on.
These “financial anal-ists are becoming a repulsive joke.
This fal then next spring then next winter.
Taggart asked, ” Will it unwind in an orderly and polite way, as the world’s central planners hope?”
You don’t strengthen the weak and weaken the strong, in the name of politeness and order.
Pike said, “we shall unleash the nihilists and atheists.”
Judging by the comment section on alot of these articles it seems like people are starting to wake up to the bullshit this website pushes.
I would agree with this guy. the interest rate raises and monetary tightening are predicted by many financial people to be causing a recession in 2019 or 2020, but those guys are not paying attention to the facts that most people have no savings, have record credit card debts and cannot afford to buy houses even at these still record low rates.
just the slight increases we are having will have great affects on the economy and will throw it into a recession before the fed can finish its rate rises and monetary tightening.
I predict a recession starting late this year that will cause the fed to have to reverse its plans and start reducing the measly rises it has made in 2019 or have a recession lasting until they do that, the American consumer just cannot handle anything more than record low rates.
Michael Pento makes his living in the markets. He is pretty good at it. He is also not given to hyperbole. He is correct about the Yield Curve.
My own thought on the 2-10 yield curve is that you’re going to see them invert within roughly the same window where DB and its derivatives book blow up. The September-October window looks most likely. When this does happen, you’ll see a whole host of other events start happening rapid-fire.
One of them will be Iran jumping from the Euro to the RMB on its oil sales. This one event would push the RMB share of global oil contracts to at least 33%. Venezuela quickly follows suit and RMB has majority of global oil contract market.
That equals kill shot on the dollar. You’d have an inverted yield curve in the US being followed by holders of dollars dumping Treasuries because they would no longer need to hold them as trade settlement paper for contracts. JPM would then step in as clearing house for ESF to settle this bounced trade settlement paper in silver. Guess where silver price goes?
What happens to interest rates? They’ll spike, just like we’re seeing in Argentina. And this is before you factor in all the Treasuries held by US companies in offshore jurisdictions like Ireland. US companies settle their contracts for goods and services sold abroad in Treasuries, then park them in places like Ireland for tax purposes. Look no further than the cash and cash equivalents line item in the financials of companies like Apple. In such a scenario, said companies are going to be looking to get out from under those Treasuries. They’re going to want bullion metal.
Everyone is going to be looking to get out of Treasuries right when you have an inverted yield curve. That’s going to make the US the next Argentina. Bond prices will go into the toilet. Bullion metal prices will explode upward. Asset prices, like real estate, will drop like a rock. There simply is not enough bullion metal out there at current market prices to settle all of the financial toxic waste floating around. The amount of physical assets that will need to be given up in return for a single ounce of bullion metal is going to be staggering.