While stability is a major talking point of the Federal Reserve and US government officials, those who are in the know understand that the economy is teetering on complete and utter disaster. Job losses continue to mount, stocks are swinging wildly and foreign creditors have begun divesting themselves of U.S. dollar-denominated assets.
All of this has put such pressure on the system as a whole that it is set to collapse under its own weight. As global strategist and New York Times best selling author Marin Katusa explains it, the deflationary forces are so powerful and the divestiture of US debt by foreign creditors so significant, that major money managers are spooked as they rapidly scramble to prepare for the next leg down. What’s worse, the Federal Reserve, which has thus far been perceived as being in control through quantitative easing and zero interest-rate policy, is powerless to stop it.
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If you use game theory the best game plan for Janet Yellen and the Fed is not to do anything…
I got heckled and booed at my own conference when I said look at all these deflationary forces… The reality here is that we are an interconnected world… what happens in China affects us here and vice versa. So the reality here is that we are in a deflationary environment. You’ve got some of the smartest guys that I pay attention to saying the same thing.
What does this all mean?
One of the nine who voted against the [interest rate] raise said that by the end of 2016 we’ll have a negative rate. That is something that has never happened before… That was a nine to one vote…
Do you think they’re going to raise it in the next meeting?
Nine [of the Federal Reserve board members] are saying we’re not going to raise rates here. They can’t just do a 180… and the world is not going to solve itself in the next two months.
They’re going to have to put more financial heroin in the markets and just like any drug addiction you need more drugs for less of a high and that’s what we’re going to get into in these markets.
So the Federal Reserve has been left with one option and one option only. Either continue on the same path and print trillions more dollars and infuse them into the system, or the whole things crashes right here and now.
But whatever they do, the long term prospects for the US economy and monetary system look ominous because the trajectory can no longer be altered and actions of the Federal Reserve and US government are nothing but temporary stop-gaps.
Eventually the whole thing comes unglued. In fact, according to Katusa, the end game is already in sight for those willing to see it:
What is China going to do? That’s really the question.
Remember, one-third of all U.S. Treasury notes are owned by China. They’ve sold 12% of their holdings.
The Chinese are not stupid. How come no one is talking about this?
… You’re looking for what the guys managing money are thinking. And that’s what I’m thinking. I’m thinking, “Holy crap!”
If somebody blew out 15% of a position and they own one-third of the stock, you want to pay attention, right?
So why is it any different if the Chinese own one-third and they’ve sold a little over 12% of their U.S. dollars and it didn’t even make a headline in the Wall Street Journal. It’s not in Forbes. It’s not on NBC. It wasn’t even mentioned in the GOP debate.
There are some serious changes going on…
The Chinese are going to continue to ease their currency… They have to. We are in a currency war and these are deflationary pressures.
The mathematics of a deflation is… everybody loses… The key is that he who has cash loses the least.
And is gold cash? If you believe gold is cash, which for the last 5,000 years gold has been the most stable form of cash, you want to start thinking about how to position yourself to gold.
Scores of the world’s top money managers are echoing Katusa’s warnings and strategies.
The fundamental problems that crashed the global economy in 2008 have not been resolved and have only gotten worse. The cracks are now beginning to show.
As Katusa notes, you can prepare by owning assets that are actually worth something – assets like gold, silver and other commodities.
For some that may require diversifying retirement and investment portfolios into resource-based assets. For others, that may mean stocking up on the physical commodities in anticipation of supply shortages, rising prices and disruptions to the normal flow of commerce.
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