The Bond Market Bubble is being propped up with negative real interest rates promoted by the Fed Reserve Bank (Fed). The Bond Market is rigged.
The Stock Market Bubble is being inflated with artificial liquidity provided by the Fed. New highs are not a result of greater economic output. Banks are being given access to huge funds from the Fed and they are investing in the Stock Market thus pushing the market up.
The Dollar Bubble, the reserve currency of the world, is being propped up with printing and monetizing of debt by the Fed. This is occurring to the tune of $1 Trillion per year now.
What happens when these three bubbles pop? The wealth of stock and bondholders will evaporate. At the same time we will see dramatic inflation across the board. I expect to see a notable rise in import prices which will fuel the inflation. Since the U.S. has sent its manufacturing offshore, it is now an importer of physical goods. I have long suggested that the pursuit of a “service” economy was a mistake. As a former CFO, when profits got squeezed, I always looked at cutting services, never physical inventory. You can’t live without food but you can forego premium cable.
In my opinion, there is no known solution to the current monetary policy other than from Above. Other countries know that the U.S. Dollar is in dire straits and are wanting to depart from its use as a reserve currency. Smaller countries have realized sudden adverse upheavals after vocalizing plans to accept other means of payments other than the U.S. Dollar. It was hazardous to their health. This fiat currency experiment may be on its last leg.
The BRICS countries (Brazil, Russia, India, China, and South Africa) are developing means to settle their own trade among themselves bypassing the U.S. Dollar.
The Fed is price-fixing the Bond price in full view of everyone. However, I believe they are fixing the gold price below $1,750 by using the large banks as agents and allowing them to invest in “naked shorts”, a means to push the price down without any collateral to support the risk of loss. The evidence is hidden in the numbers published by the gold paper market. Those who publicize these actions are demonized by the media as kooks, crazies, and/or extremists. A simple question must be asked however. Look at the following chart:
Who in their right mind would bet against the bull market in gold where the rising prices have consistently outperformed the Dow Jones Industrial Average? Private investors would get wiped out. Institutional money managers would be fired for failing in their fiduciary responsibility. Only someone with an unlimited money supply would bet against this market. I wonder who that could be?
The price of gold stocks have been decimated by short sellers in their stocks. Their price does not equate to the rise in price of gold. Newmont Mining, a senior gold producer, is near its 52 week low and is paying a 4.3% dividend. Go figure! On the other hand, Chevron is at a 52 week high.
The same banks who are being given virtually unlimited funding to suppress the price of gold were the same banks that participated in the LIBOR rate scandal. There is no requirement for transparency at the highest levels. Regulators for whatever reason are not forcing compliance in these markets. Fines are too small to dissuade the lawless to refrain from their acts. It is simply a cost of doing business.
How long can the Fed contain the price of gold? Definitely not forever. What is my best protection when the Perfect Storm of these three bubbles pop?
– Low or no debt
– Lower my monthly obligations
– Simplify my living
– Buy gold as “insurance” against the decline of the U.S. Dollar (if possible)
– Buy silver but note it is intrinsically more volatile than gold and is not for the feint of heart ( I happen to be more of a risk taker) A safe deposit box in a community bank may be sufficiently safe to store physical silver. However, if you have nothing, they can’t take it away.
– Most of all, focus on hearing Our Heavenly Father’s Voice. HE will guide us all through the coming calamity.
– Focus on Our Heavenly Father’s most fundamental characteristic: Love. Whatever economic pain comes, we will need to be ready to minister Love to those who lose their perceived wealth and future. What they placed their faith and trust in will be lost. The illusion created by the current economic environment will be the ultimate bubble to pop.