The Israel Deception

Is the return of Israel in the 20th century truly a work of God, or is it a result of a cosmic chess move to deceive the elect by the adversary?

Showing posts with label stagflation. Show all posts
Showing posts with label stagflation. Show all posts

Saturday, March 18, 2017

Fed manipulation vs. economic stagflation: who will win the future over gold and stocks

Going back to at least 2008, if not further back into the 1990's and the Dot Com bubble, markets have no longer run on fundamentals and technicals, but rather on central bank and sovereign manipulations.  And all one has to do is look at the fact that despite corporate earnings declining for seven straight quarters, and most like an eighth here in 2017 Q1, the Dow has not only surpassed 20,000, but its acceleration to 21,000 was the fastest in history.

And now this breaking of market fundamentals by the central banks through their keeping interest rates down to near zero for 10+ years and infusing Wall Street with tens of trillions of dollars in credit has reached a crisis point, and a place where the Fed no longer has control over economic forces.  For the inflation they strove so hard to create in asset prices has now broken through into every facet of the economy, and has returned a monster from the that required extraordinary means to defeat.

Stagflation.

Image result for stagflation monster

In the late 1970's the economy reacted to the U.S. removing the monetary system from the Gold Standard and instituting a new Oil Standard (Petrodollar) by opening the door to massive inflation thanks in part to Henry Kissinger's agreement with OPEC that allowed for the price of oil to be raised.  And this then also allowed the U.S. monetary base to expand by that same amount and more to supply the world with dollars to be able to purchase energy.

This huge increase in the monetary base coupled with the economic slowdown of the middle to late 70's created the then unknown environment that would be labeled as Stagflation.  Stagflation of course is where you have slowing growth coupled with rising inflation.

To defeat this economic dragon, Federal Reserve President and later Chairman Paul Volker had to raise interest rates first from 9% in 1978, to its final top of around 20% in 1981.  And it was only from this that Stagflation was able to be crushed.

But unfortunately today the Fed has no possibility of doing a repeat of this since they and the U.S. government have pushed themselves into a corner by accumulating extraordinary debt.  In 1981 the national debt was around $500 billion, and the Fed's balance sheet was nary a blip on the radar.  However today the U.S. debt is now just under $20 trillion, and the Fed has debt based holdings of over $4.8 trillion making it impossible for them to raise interest rates of any substance since the interest alone on those obligations would bankrupt the country when they are rolled over at higher borrowing costs.

So what does this mean for the economy, for stock markets, for inflation projections, and perhaps the one asset we have yet to mention in this mirror world of 40 years ago?

When stagflation hit the economy beginning in the middle 1970's the one asset that excelled during that time was gold.  Gold went from $106.43 in 1973 (the year of the Petrodollar agreement) to over $850 at its peak in 1980.  This was a rise of 800% in just seven years.

1980
$594.90
29.61%
1979
$459.00
120.57%
1978
$208.10
29.17%
1977
$161.10
20.43%
1976
$133.77
-3.96%
1975
$139.29
-24.20%
1974
$183.77
72.59%
1973
$106.48
66.79%

Looking back in hindsight, Chairman Volker later lamented that the one thing he wished he done differently during the central bank's battle to fight stagflation was to manipulate the rising price in gold, which had acted as a barometer against the dollar, and was a much better safe haven than investors trusting in U.S. Treasuries.  And it was this lesson that Ben Bernanke, and now under Janet Yellen, that the Fed would not forego during their implementation of monetary policies that would inevitably lead us back into the straits we are in today.

Thus we are now at a crossroads since Stagflation has returned with a vengeance and the Fed has little if any ammunition to counter it.  And it is for this reason alone that the real asset winner going forward will be gold over stocks, and we may have seen this start last Wednesday when the Fed's latest rate hike resulted in not even a pothole that slowed down either inflation, or the strong rise in the gold price.

Monday, March 7, 2016

German banking association recommending banks stockpile cash for loans to stimulate economy

On March 4, the Bavarian Banking Association recommended to its member banks that they take out all their deposits being held with the European Central Bank (ECB) and stockpile the cash for use as loans in order to stimulate the economy.  This recommendation comes as the ECB prepares for negative interest rates, and the charging of interest to banks under their authority for sequestering cash in their facility.
Like with the Federal Reserve in the U.S., ever since the ECB began its own form of quantitative easing and zero interest rates, banks within the Eurozone have simply borrowed cheap money from the central bank and either bought government bonds or parked it with the ECB where they received a modicum of interest.  This has resulted in a sharp slowdown in the velocity of money, and a massive decrease in lending to businesses and the general economy.

Read more on this article here...

Tuesday, December 22, 2015

Got Karatbars? Fed's raising of interest rates actually beneficial for gold prices

When economists look at the comparison between gold prices and interest rates, most simply take a singular period of time and use that as the basis for their entire argument.  That period of course is the early 1980's when then Fed Chairman Paul Volker raised rates to a whopping 20% at the height of stagflation, and when gold had reached its prior all-time high of around $850 per ounce.

But in the chart below you can see that leading up to the that unprecedented interest rate hike, gold had been moving in relative lock-step with interest rates, and over the course of the 1970's, 90's, and 2000's, gold rose rather than fell when the central bank raised interest rates.


Gold prices vs. interest rates 1970 - 1980


Gold prices vs. interest rates 1995 - 2007

You can see with these comparisons that for the most part, higher interest rates equate to greater moves into gold, and in higher gold prices as savings mechanisms appeal far more to investors than speculative ones like stocks.
It is widely assumed that the gold price must decline when the Federal Reserve is hiking interest rates. An example is given by thisrecent article on Bloomberg, which informs us that SocGen believes “gold will be a casualty of Federal Reserve policy”. Never mind that the assumption that the Fed will now be able to simply embark on a “normal” rate hike cycle is in our opinion utterly absurd. It will only do that if the inflation genie unexpectedly gets out of the bottle, and is guaranteed to remain “behind the curve” if that happens (more on this further below). 
It seems logical enough: gold has no yield, so if competing investment assets such as bonds or savings deposits do offer a yield, gold will presumably be exchanged for those. There is only a slight problem with this idea. The simple assumption “Fed rate hikes equal a falling gold price” is not supported by even a shred of empirical evidence. On the contrary, all that is revealed by the empirical record in this context is that there seems to be absolutely no discernible correlation between gold and FF rate. If anything, gold and the FF rate exhibit a positive correlation rather more frequently than a negative one! 
So the gold price is falling when the Fed hikes rates? Not in the 10 years depicted above, when it did the exact opposite. It rose by 2,350% over the decade, and the vast bulk of the increase happened while the FF rate rose sharply. Gold did however plunge by almost 50% in a mid cycle correction from late 1974 to mid 1976 - while the FF rate actually went down. - Acting-Man.com
Taking all this historical data into account, we must also look at the fact that the Federal Reserve has signaled their intentions to raise rates two to four more times between now and the end of 2016, making the potential for gold to break out of its long-standing doldrums a very strong possibility.  And this can be validated in a recent interview over the weekend by Andrew Maguire who reported that after last week's rate hike, dealers were hit with massive buying in both London and Asia, so much so that a liquidity drain is occurring in all the major gold markets.
Andrew Maguire:  “Eric, now that we have the well-anticipated Fed rate hike out of the way I wanted once more to focus upon the unprecedented, game-changing liquidity drain out of London into Asia. This is evidenced by the increasingly illiquid LBMA fixes. I don’t see this discussed anywhere else and given the pace of this liquidity drain, this will become the catalyst for the inevitable forced cash reset in the highly leveraged unallocated London gold markets… 
Maguire continues:  “The global gold market structure has so radically altered that the physical markets have migrated and continue to migrate away from the LBMA conduit into Asia, leaving massive embedded naked-short mismatched lease obligations on the books of the central banks, which are largely shuffled onto the books of the agent bullion banks, the same insider bullion bank’s that are privileged to have gold accounts with the Bank of England. 
As liquidity drains away from London, fix painting — forcing gold down into the fix at the expense of the captive producers who are forced to sell at market — has become far too visible. Liquidity is draining because producers are increasingly able to access non-predatory alternative non-LBMA financing and selling conduits. The longstanding collusive game of paper market fix painting is unsustainable without an increasing amount of synthetic market supply to offset these liquidity outflows. This is simply no longer available in enough size to keep this game going for much longer. - King World News


No one knows for sure why the Fed has chosen to raise rates at a time when the economy as a whole is in a deflationary rather than inflationary period, but it appears likely that this is now being done to save the credibility of a central bank that has been jawboning recovery and a strong economy for more than four years.  And if the course has now been set for higher interest rates for the foreseeable future, how can you best protect your wealth and profit from the historical trend that forecasts a rise in gold prices?

You can do this with a company called Karatbars



Buying gold through Karatbars is one of the easiest things on the net.  In fact, the business model of Karatbars is to sell gold in affordable quantities, such as 1, 2.5, and 5 gram increments, and allow customers to get into the metal without having to shell out $1200+ for a single ounce coin.

And as added perks to signing up with Karatbars, as a customer or affiliate, Karatbars is working on a new e-wallet system that functions just like an offshore bank account, and is outside the authority of the banking system.  From there, you can take your fiat currency in any denomination... dollars, euros, yen, etc... and purchase physical gold which can either be delivered directly to you, or stored for free at one of Karatbar's vaults.

Additionally, any gold that you buy can easily be sold back to Karatbars, or any metals dealer, and if with Karatbars it is then exchanged for currency that is uploaded to you through a pre-loaded debit Mastercard which is connected directly to your e-wallet.  And as we know, MasterCard is recognized in nearly every country around the world, and usable in any currency that accepts it.

But perhaps the best feature with Karatbars is their affiliate program, where you can earn money off commissions from getting others to sign up and become a customer or affiliate.  Not only do you receive commissions from their purchasing of physical gold, but you also earn commissions from anyone who buys a commission package, with that money going directly into your debit MasterCard when you have enough units to cycle.

Imagine the ability to earn the money in which to buy your gold savings simply by purchasing a commission affiliate package one time, and then getting others to sign up and do the same thing.

How many businesses or entrepreneurs can build an infinite business with spending less than $400 of their own money?  And there is never a mandatory requirement to buy beyond what you desire, on your own schedule.  And there is nothing to lose, because you're using money (paper dollars) to buy gold (physical money) and in the end you don't lose a thing.


The global financial system, along with dozens of respected economists, are telling us that now is the time for the end of our current form of money, and the beginning of the transition into a new monetary system that is expected to be backed by gold.  And with banks, governments, and even Harvard professors mandating that central banks have no choice but to eliminate cash from usage by the people to stave off collapse, will you wait until it is too late to make a decision on how you will protect your wealth, and be able to function within the coming new monetary system?

To learn more about Karatbars, you can contact the individual who sent you this article, and click on their referral link to open a free account and begin buying, or building your own gold savings or business with the company of the future.

Tuesday, August 18, 2015

Eight years later, the Housing bubble morphs into Rent bubble

Prior to the bursting of the artificially created Housing bubble in 2007, home prices had skyrocketed due to cheap money, low interest rates, and government policies that mandated banks lend to people who couldn’t afford it.  And with many families remaining cautious or unable to purchase a home after millions of Americans had lost theirs during the run of foreclosures following 2008, renting in the U.S. has never been higher since the 1960’s.
But with so much property once again being overpriced thanks to the Fed’s saturation of money coupled with historically low interest rates, the rise of a new bubble has taken shape, only this time it is not in regards to home ownership, but instead it is in the cost of rents.
Welcome to the new rent bubble, and the re-emergence of the Rentier Class.

Read more on this article here...