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Economic Macro Trends Of The Coming Decades And How They Shape My Investment Strategy.

Recently, people have been asking me a lot about what the next 10–20 years will look like.

How inflation will impact the economy and what this means for them personally.

This article describes the general outlook I have for the next one to two decades. I will explain how — in my opinion — inflation and potential deflationary crashes will shape the future and how I as an investor will prepare for this.

Buckle up, it’s gone be a wild ride.

Disclaimer: Please note that the following is a summary of what I believe has a high chance of happening. However, I DO NOT claim that things will exactly play out like this. And as always, this article is intended to educate people. It should not be taken as financial advice.

Going From A Non-Inflationary To An Inflationary World

We are facing difficult times.

After decades of living in a non-inflationary environment (not for all goods and assets, but in general) supported by lots of cheap high-density energy and a globalized economy, we are now facing strong price increases in all areas.

To understand the background of why that is happening, I recommend you to check out this article I wrote. It offers a detailed explanation about why inflation is suddenly picking up, and how this impacts my investment decisions in the short to medium term.

Here is a very short summary: We are running out of cheap high-density energy (fossil fuels) to run everything and grow our economies. Governments try to substitute missing energy by pumping money into the system. But this does not bring back growth and is also contributing to rising prices.

…click on the above link to read the rest…

A historic global bond-market crash threatens liquidation of the world’s most crowded trades, says BofA

September 26, 2022

A historic global bond-market crash threatens liquidation of the world’s most crowded trades, says BofA

‘If the bond market does not function, then no other market functions, really,’ say Ben Emons of Medley Global Advisors

A newspaper headline is shown after the Treaty of Versailles was signed in 1919. Global bonds are in one of their worst bear markets since the treaty went into effect in 1920, establishing the terms for peace at the end of World War I.

SOURCE: UNIVERSITY OF DENVER

Global government-bond markets are stuck in what BofA Securities analysts are calling one of the greatest bear markets ever and this is in turn threatening the ease with which investors will be able to exit from the world’s most-crowded trades, if needed.

Those trades include positions in the dollar, U.S. technology companies and private equity, said BofA strategists Michael Hartnett, Elyas Galou, and Myung-Jee Jung. Bonds are generally regarded as one of the most liquid asset classes available to investors. If liquidity dries up in that market, it’s bad news for just about every other form of investment, other analysts said.

Financial markets have yet to price in the worst-case outcomes for inflation, interest rates, and the economy around the world, despite tumbling global equities along with a selloff of bonds in the U.S. and the U.K. On Friday, the Dow industrials DJIA, -1.62% sank almost 500 points and flirted with a fall into bear-market territory, while the S&P 500 index SPX, -1.72% stopped short of ending the New York session below its June closing low.

U.S. bond yields are at or near multiyear highs. Meanwhile, government-bond yields in the U.K., Germany, and France have risen at the fastest clip since the 1990s, according to BofA Securities.

…click on the above link to read the rest of the article…

Who Is Really Spreading Misinformed Disinformation?

September 20, 2022

Who Is Really Spreading Misinformed Disinformation?

Ne’er has there been more fertile ground that exemplifies how those in charge of the narrative are either (1) grossly incompetent, (2) saying what they need to simply to suit their own agenda, or (3) both – than the topics of Covid, inflation, Trump’s non-existent Russian collusion and Hunter Biden’s laptop.

Because I have written extensively about these issues over the last year, I had been putting aside a collection of quotes from the “authorities” on each topic. I thought this morning I would release all the quotes I had put aside as one giant compendium showing just how important it is to automatically agree with whatever our masters in the mainstream media/government suggest to us.

Given that we now know almost definitively (in my opinion) that Covid came from a lab, that inflation is here to stay, that Trump didn’t collude with Russia and that the laptop was definitely authentic, enjoy this trip down memory lane.

“You’re not going to get Covid if you have these vaccinations.” – Joe Biden, July 2021
“Fact: Covid-19 is NOT airborne.” – World Health Organization, March 2020
“Now we know that the vaccines work well enough that the virus stops with every vaccinated person. A vaccinated person gets exposed to the virus, the virus does not infect them, the virus cannot then use that person to go anywhere else,” she added with a shrug. “It cannot use a vaccinated person as a host to go get more people. [Vaccines] will get us to the end of this.” – Rachel Maddow, March 2021
“When people are vaccinated they can feel safe that they won’t get infected, whether they’re outdoors or indoors.” – Dr. Anthony Fauci, May 2021
“From the data we have, it still seems to be rare that an asymptomatic person actually transmits onward to a secondary individual. It’s very rare.” – Maria Van Kerkhove, PhD, head of WHO’s emerging diseases and zoonosis unit, March 2020

…click on the above link to read the rest of the article…

Fed Paper Admits the Central Bank Can’t Control Inflation; Finger-Points at Federal Government

September 1, 2022

Fed Paper Admits the Central Bank Can’t Control Inflation; Finger-Points at Federal Government

It appears somebody at the Federal Reserve has figured out that the central bank can’t tame inflation, so it’s setting up a scapegoat – Uncle Sam.

A paper co-authored by Leonardo Melosi of the Federal Reserve Bank of Chicago and John Hopkins University economist Francesco Bianchi and published by the Kansas City Federal Reserve argues that central bank monetary policy alone can’t control inflation.

The paper’s abstract asserts, “This increase in inflation could not have been averted by simply tightening monetary policy.”

In a nutshell, Melosi and Bianchi argue that the Fed can’t control inflation alone. US government fiscal policy contributes to inflationary pressure and makes it impossible for the Fed to do its job.

Trend inflation is fully controlled by the monetary authority only when public debt can be successfully stabilized by credible future fiscal plans. When the fiscal authority is not perceived as fully responsible for covering the existing fiscal imbalances, the private sector expects that inflation will rise to ensure sustainability of national debt. As a result, a large fiscal imbalance combined with a weakening fiscal credibility may lead trend inflation to drift away from the long-run target chosen by the monetary authority.”

There are a couple of startling admissions in this single paragraph.

First, the authors acknowledge that the federal government uses inflation as a tool to handle its debt. In other words, it acknowledges that we’re all paying an inflation tax.

Peter Schiff talked about this inflation tax in an interview on Rob Schmitt Tonight.

Inflation is a tax. It’s the way government finances deficit spending. Government spends money. It doesn’t collect enough taxes, so it has to run deficits. The Federal Reserve monetizes those deficits – prints money. They call it quantitative easing, but that’s inflation…

…click on the above link to read the rest of the article…

Greyerz – The US Economy Is Crashing But The Global Collapse Will Be Even More Terrifying

August 31, 2022

Greyerz – The US Economy Is Crashing But The Global Collapse Will Be Even More Terrifying

Today the man who has become legendary for his predictions on QE and historic moves in currencies and metals warned King World News that the US economy is crashing but the global collapse will be even more terrifying.

_____

“Everyone wants to live
at the expense of the
state. They forget
that the state wants
to live at the expense
of everyone.”
Frederic Bastiat

August 28 (King World News) – Egon von Greyerz, Founder of Matterhorn Asset Management (based in Switzerland): Contrary to what the wisest men and women in the land have told us, the world has been hit by the most vicious bout of inflation.

The “transitory” heads of the Fed and ECB clearly couldn’t recognise inflation until there was a scapegoat like Putin to blame it all on.

The fact that Powell, Lagarde and their predecessors had laid the perfect foundation not just for a small spell of price increases but for an unstoppable avalanche of global inflation, they were totally oblivious of.

NEITHER COVID NOR PUTIN IS THE CAUSE OF INFLATION
Let’s be very clear.

Covid didn’t create inflation.

Putin didn’t create inflation.

No, inflation is the result of governments’ and central banks’ irresponsible and totally irrational policy of believing that prosperity can be created out of thin air.

They don’t understand or at least choose not to understand that reckless creation of fake money that has zero value CREATES ZERO WEALTH.

Money in itself has ZERO value. Money is just a derivative that derives its value as a medium of exchange through the production of goods and services.

In simple terms, money that has derived value from anything but goods and services has ZERO value.

…click on the above link to read the rest of the article…

#235. The affordability crisis

July 22, 2022

#235. The affordability crisis

WHAT’S REALLY HAPPENING

What might be called the ‘consensus narrative of the moment’ is that our near-term economic prospects depend on the ability of central banks to tame inflation without tipping the economy into a severe recession. There are numerous complications, of course, but this is the gist of the story.

What these officials need to find, we’re told, are Goldilocks interest rates (‘not too hot, not too cold’), and all will be well if they succeed. If they err too far in one direction, inflation will run higher, and for longer, than is comfortable. If they lean too far the other way, a serious (though, by definition, a time-limited) recession will ensue.

Inflation itself, the narrative runs, has been the product of bad luck. First came the pandemic crisis, which impaired production capacity and severed supply-chains. Before we’d finished dealing with this, along came the war in Ukraine, disrupting supplies of energy, food and other commodities. There are some who add, sotto voce, that we might have overdone pandemic-era stimulus somewhat.

Our hardships, then, can be put down to a run of bad luck. Those in charge know what they’re doing.

It’s conceded, in some quarters, that we might face some sort of crisis if these challenges aren’t managed adroitly. This, though, shouldn’t be as bad as the GFC of 2008-09, and certainly won’t be existential.

We’re navigating choppy waters, then – not going over Niagara in a barrel.

The affordability reality

There is some truth in each of these propositions, but explanation in none.

What we’re really encountering now is an affordability crisis. The aim here is to explain this, without going into too much detail, and with data confined to two sets of SEEDS-derived charts at the end of this discussion.

…click on the above link to read the rest of the article…

As Fuel Prices Poised to TRIPLE, EU Mulls Rationing Gas Across Bloc Monday

July 20, 2022

As Fuel Prices Poised to TRIPLE, EU Mulls Rationing Gas Across Bloc Monday

The European Union (EU) is going down in flames as its fuel taps from Russia run dry.

Issues related to the war in Ukraine have resulted in no more gas flowing through the Nord Stream 1 (NS1) pipeline and soon-to-be tripled gas prices across Europe.

To avoid what will inevitably become a widespread catastrophe for the European economy, EU officials are reportedly discussing fuel rationing as the next step in their standoff against Russian President Vladimir Putin, who quite frankly appears to be winning on every front.

Should the NS1 pipeline never get turned back on due to issues with a key engine turbine component that is still stuck in Canada due to sanctions, Western Europe faces a total loss of energy in the coming months.

Up until now, the public was simply hearing about these problems on the news. Now, however, the consequences of failed political leadership are turning into sky-high gas prices and now the potential for forced rationing.

A recent poll found that more than 60 percent of German citizens fear there will not be enough gas to go around this winter, especially since some people will be stocking up and hoarding what they can before prices triple come 2023.

Germans are starting “to sweat” as they realize there will be no gas available for heat this winter

Draft EU measures propose limiting the heating of public and commercial buildings to 19 degrees Celsius, or around 66 degrees Fahrenheit, which is cold enough to require the use of extra layers of clothing indoors.

Private households are also being encouraged to lower their thermostats by one degree, a proposal that was also made back in February right after Russia invaded Ukraine.

…click on the above link to read the rest of the article…

Concurrent Deflation and Hyperinflation Will Ravage the World

June 24, 2022

CONCURRENT DEFLATION AND HYPERINFLATION WILL RAVAGE THE WORLD

FLATION will be the keyword in coming years. The world will simultaneously experience inFLATION, deFLATION, stagFLATION and eventually hyperinFLATION.

I have forecasted these FLATIONARY events, which will hit the world in several articles in the past. Here is a link to an article from 2016.

With most asset classes falling rapidly, the world is now approaching calamities of a proportion not seen before in history. So far in 2022, we have seen an implosion of asset prices across the board of around 20%. What few investors realise is that this is the mere beginning. Before this bear market is over, the world will see 75-90% falls of stocks, bonds and other assets.

Since falls of this magnitude have not been seen for more than three generations, the shockwaves will be calamitous.

At the same time as bubble assets deflate, prices of goods and services have started an inflationary cycle of a magnitude that the world as whole has never experienced before.

We have seen hyperinflation in individual countries previously but never on a global scale.

Currently the official inflation rate is around 8% in the US and Europe. But for the average consumer in the West, prices are rising by at least 25% on average for their everyday needs such as food and fuel.

A CALAMITOUS WORLD

So the world is now approaching calamities on many fronts.

As always in periods of crisis, everybody is looking for someone to blame. In the West most people blame Putin. Yes, Putin is the villain and it is his fault that food and energy prices are surging. Nobody bothers to analyse what or who prompted Russia to intervene, nor do politicians or main stream media understand the importance of history, which is the key to understanding current events.

…click on the above link to read the rest of the article…

The Handbook for Debt-Soaked Nations: Lie, Print, Inflate & Finger-Point

June 3, 2022

The Handbook for Debt-Soaked Nations: Lie, Print, Inflate & Finger-Point

Below we consider the classic (and oh-so predictable) tactics of debt-soaked nations facing a showdown (corner) between tanking markets and ripping inflation.

Ultimately, I see a stagflationary end-game in which both occur, but for the near-term, prepare for more inflation, as it’s the option all debt-soaked sovereigns are eternally forced to take.

The Cruelest Month

T.S. Elliot famously described April as the cruelest month, but the recent (and ever-unfolding) events of May seem far crueler.

As we have warned from the very onset of this otherwise avoidable war in Ukraine, the backfiring of Western sanctions against Putin (de-dollarization, inflationary tailwinds and increasingly discredited central banks) were not only plain to foresee, but placed the West in an almost comical (yet tragic) scenario in which nations like Germany find themselves sending weapons to the Ukraine while simultaneously sending Rubles to Putin.

How did the world become so hypocritical, dishonest, cornered and silly?

(Cold) Economic Realism vs. (Empty) Moral Posturing

As George Washington observed in a 1770’s moment of Realpolitik candor: “Nations have no permanent friends nor permanent enemies, just permanent interests.”

Turning to 2022, the self-interested reality of Western reliance on Russian energy has made their front-page virtue signaling a bit less virtuous…

Such cold realism explains why Italian Prime Minster Draghi realistically confessed as early as May 11 that EU companies could pay for Russian gas in Rubles in the very same week German Chancellor Olaf Scholz realistically opposed any immediate halting of oil imports from Russia.

Meanwhile, by May 12, the headlines revealed that Russian oil revenues had increased YoY by 50% despite the Western “boycott.”

An equally realistic Japan, like Germany, will take its time to phase-out its dependence on Russian energy, as it, like Germany, recognizes that an immediate G-7 boycott of Russian oil and gas amounts to little more than an energy suicide pact.

…click on the above link to read the rest of the article…

Gold As Cheap Today As In 1971 At $35

May 19, 2022

GOLD AS CHEAP TODAY AS IN 1971 AT $35

“Specie (gold and silver coin) is the most perfect medium because it will preserve its own level, because having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war.” – Thomas Jefferson

Since no current President or Prime Minister nor any Central Bank Chairman understands what money is or the relevance of gold, we turn above back to history and Thomas Jefferson, America’s third president for a proper definition.

Jefferson also understood that “Paper is Poverty, It is only the Ghost of Money, and not Money itself.”

As the world economy goes towards an inflationary depression exacerbated not only by epic debts and deficits but now also by war, the significance of gold takes on a whole different dimension.

So let’s dissect Jefferson’s statement:

“(GOLD) Will preserve its own level”

Gold is Constant Purchasing Power. As such, gold doesn’t go up in real terms. An ounce of gold today buys a good suit for a man just like it did in Roman times.

The graph below shows gold as constant purchasing power at the 100 line whilst all the currencies are crashing to the bottom.

All currencies are continuing to lose value against real money although it never takes place in a straight line. With higher interest rates & inflation, higher deficits & debts, poverty, cost of wars and increasing pressures in the financial system, the currency debasement will now accelerate.

Gold is not an investment. Gold is eternal money. As such gold maintains its REAL value whereas paper money loses all its value over time. For 5000 years gold has outlived all other forms of money including paper money.

…click on the above link to read the rest of the article…

Inflation and soaring gas prices have forced a North Carolina logging company to shut down after 37 years in business

May 17, 2022

Inflation and soaring gas prices have forced a North Carolina logging company to shut down after 37 years in business

As of Monday, gasoline cost $4.491 per gallon, per the US Energy Information Administration.Johner Images/Getty Images

A logging business in North Carolina is shutting down over accelerating inflation and soaring gas prices.
“I haven’t talked to a logger in the last few years that is actually making money,” its owner said.

A family-run logging business in North Carolina is shutting down after being unable to cope with accelerating inflation and soaring gas prices.

Bobby Goodson, who set up Goodson’s All Terrain Logging 37 years ago, said that he couldn’t find a way to keep the business running.

“I haven’t talked to a logger in the last few years that is actually making money,” Goodson said in a video posted on his YouTube channel on May 10, where he announced that he was closing his business.

Goodson said that he was going to start selling off his equipment. “I can’t park the stuff for six, eight months, a year waiting for the economy to turn around,” he said.

Fuel prices have been soaring in the US as a result of post-pandemic demand and the conflict in Ukraine. As of Monday, regular gasoline cost $4.491 per gallon on average, up $1.463 from the same time a year ago, per the US Energy Information Administration, an increase of nearly 50%. Though crude oil prices have eased recently, oil refiners have become a bottleneck in the energy market, pushing up gas prices.

“When you got a fleet of trucks, and you’re running probably 700 to 800 miles a day, a truck is going to get five miles to the gallon,” Goodson told News Channel 12, an ABC-affiliated network. “That fuel increase kills you. And so I didn’t see any way out.”

…click on the above link to read the rest of the article…

David Stockman on the Coming Stock Market Crash of Biblical Proportions

April 8, 2022

David Stockman on the Coming Stock Market Crash of Biblical Proportions

International Man: Whether we like it or not, the reality is, the Federal Reserve has an enormous influence over the dollar and the stock market.

And right now, the Fed has an urgent and fateful decision to make.

It can keep printing trillions of dollars, let inflation skyrocket or tighten monetary policy, and watch the stock market crash.

In other words, it can sacrifice the stock market or the dollar.

David, what do you think the Fed will do, and what are the implications?

David Stockman: Well, I think whether it wants to or not, the Fed will crash the stock market. The Fed has painted itself into a hellacious corner because it’s made such a fetish out of its 2% inflation target, especially since January 2012, when it officially adopted this quantitative target.

In fact, most of the massive money printing, which has occurred since 2012, when the economy was pretty much recovered from the Great Recession anyway, has been justified by an inflation shortfall, which wasn’t true, but that was the justification.

They were trying to raise inflation and therefore felt that they could keep quantitative easing at these huge rates, including $120 billion per month, until recently. And as a result, we’re now in a world in which inflation is heading towards double digits.

I think they’re going to have no choice but to throw on the brakes much harder than the market is expecting, much harder than they would like to do, or maybe even intend at the moment, but there’s no choice.

Now, when you have double-digit inflation, number one and second, you’re going into what’s going to be a nasty election season in which the Republicans will finally see hope for their salvation in a horrendous battle on the inflation front blaming the Democrats and Biden.

…click on the above link to read the rest of the article…

The Ins and Outs of Whose Money is it Anyway?

March 14, 2022

The Ins and Outs of Whose Money is it Anyway?

“Inside, Outside…. Leave me alone!
Inside, Outside … Nowhere is home!
Inside, Outside … Where have I been?
Out of my brain on the 5:15…”
— The Who

There’s been a massive reaction to Credit Suisse analyst Zoltan Poszar’s note about the birth of a new Bretton Woods agreement.

Every investor in the world should read it. Zerohedge posted (behind their paywall) a lengthy analysis of Poszar’s musing along with some reactions from Wall St. It is well worth your time.

The people most freaked out about this note are the Keynesians who worship at the altar of what Poszar calls Inside Money — money that only exists inside the financial system, bonds, credit, dollars, euros, etc.

Austrians, like myself, have always understood that eventually Inside Money fails because it is ultimately nothing more than a Ponzi Scheme built on top of Outside Money — money that exists outside the financial system, like commodities and bitcoin.

Poszar makes his early case and then goes through the mechanics of what is happening in the financial plumbing of the world economy right now to prove the stresses are real and building quickly towards an implosion of Inside Money and an explosion of Outside Money.

Again, anyone with a passing acquaintance with Austrian business cycle theory and Mises’ Theory of Money and Credit always knew this day was coming.

Today’s “Inside Money” standard, known colloquially as the Dollar Reserve standard, is actually what I like to call “Milton Friedman’s Nightmare.” It is nothing more than a system of competitively devalued and inflated debt-based scrips running around drinking each other’s milkshakes until everyone’s glass is empty.

FYI, there are a lot of empty glasses around the world right now and more are being created everyday as the financial system turned predatory after the Lehman Bros. collapse in 2008.

…click on the above link to read the rest of the article…

The Inflation Blame Game

March 9, 2022

The Inflation Blame Game

Now inflation is Russia’s fault. Or is it greedy businesses pushing up prices? Maybe a combination of the two.

It seems that government officials and central bankers are looking everywhere for a place to pin the blame for inflation except the one place they need to look — in the mirror.

I’m already seeing headlines about how Russia’s invasion of Ukraine is causing inflation. CBS broadcast this storyline on the first day of the invasion. As Peter Schiff put it in a recent podcast, Russia is the latest “excuse variant” for inflation.

It is true that the Russian invasion and economic sanctions have caused some prices to spike. Oil was over $130 a barrel over the weekend. Copper hit record highs. The price of wheat surged. But this is not necessarily inflationary. Inflation causes a general rise in prices across the board. In this situation, some prices will rise while others fall. As consumers spend more on food and energy, they will cut spending on other goods and services. Ostensibly, those prices will drop.

Inflation — an increase in the money supply — causes prices to rise more generally. It’s the result of more dollars chasing the same number of (or fewer) goods and services. As Peter explained, the culprit is the central bank.

What makes the prices go up is when the central bank responds to rising energy prices or rising food prices by printing more money, which is what they are going to do. Because as consumers have to tighten their belts because food is so expensive, because home heating oil and gasoline are so expensive, and they cut back spending on everything else, that causes a recession. And that results in the Fed printing more money, and that’s what’s inflationary.”

…click on the above link to read the rest of the article…

UK Households Struggle As Inflation Hits 30-Year High, New Taxes Kick In

February 23, 2022

UK Households Struggle As Inflation Hits 30-Year High, New Taxes Kick In

Millions of Britons who previously found themselves financially ‘comfortable’ are feeling the heat over accelerating inflation, record energy bills, and tax increases which kick in this year.

*A food bank for military veterans in Newcastle-under-Lyme, England. The Food Foundation survey found that 16% of people surveyed cut back on food to afford other essentials © Nathan Stirk/Getty*

According to the Bank of England, scorching inflation will result in the largest drop in disposable income in 30 years when adjusted for inflation.

In April, UK energy bills are due to jump 54% to around 2,000 pounds ($2,723) a year per household. While some of it will be offset by emergency government support – and social security will also increase, it will be against the backdrop of rising interest rates according to Reuters.

“There’s just too much going up at once,” said 38-yaer-old care worker Nicola Frape, who huddles under blankets with her 14-year-old daughter to conserve heat, and have limited roadtrips due to the price of gas. “The pressure is just going to be even worse in April,” she added.

With economies around the world rebounding from coronavirus lockdowns, prices for everything from food and clothes to haircuts and rent, as well as energy are going up, fuelled by resurgent demand and shortages due to supply chain disruptions.

Accurate national comparisons of changes in living standards are hard to make but concerns about inflation are emerging as a big factor in elections including France’s presidential race in April and U.S. midterm elections in November. -Reuters

A February survey found that the number of people experiencing food insecurity was 20% higher in January than the previous six months, according to FT.

The decline in living standards for much of the UK population prompted chancellor Rishi Sunak last week to announce a £9bn package to help struggling households.

…click on the above link to read the rest of the article…

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A newspaper headline is shown after the Treaty of Versailles was signed in 1919. Global bonds are in one of their worst bear markets since the treaty went into effect in 1920, establishing the terms for peace at the end of World War I.

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