PART II – THE ECONOMIC TIME BOMB
There’s a lot of very good economic news out there. Business confidence is way up, fueling a boom. Unemployment is the lowest it’s been since the Viet Nam War, hovering at just below 4%. The Trump tax cuts have not only brought business back to America from overseas, but has also fed the stock market rally, pushing it into record territory. But all is NOT necessarily well on the economic front. Despite the rosy news, some analysts are predicting a very rocky future. A New York Post headline trumpeted the warning that the “Next crash will be ‘worse than the Great Depression.” In May, Goldman Sachs predicted that the outlook for the economy was “not good.”[i] The dean of future trends forecasters, Gerald Celente, believes we’ll soon be facing an “Economic 9/11.” So are these guys just a bunch of kooks and nay-sayers? Hardly! In the year-and-a-half or so leading up to the economic crisis of 2008, I was blessed enough to be turned on to the work of some of these same people. In that time frame they were bucking the trends and predicting a coming economic disaster – and they were doing it with detail as to causes and timing. This newsletter ran those stories starting about 18 months prior to the crash. Well, now these guys are at it again. Now this is not gospel – but it is informed and it is alarming and something of which we need to be aware.
“When it is evening you say, ‘It will be fair weather, for the sky is red’; and in the morning, ‘It will be foul weather today, for the sky is red and threatening.’ Hypocrites! You know how to discern the face of the sky, but you cannot discern the signs of the times.” (Matthew 16:2-3)
Analysts like Peter Schiff and Gerald Celente are not perfect. Not all of their predictions have come to pass. But some very important ones have. He called the stock market crash of 1987 and the bursting of dot com bubble. He also was warning of the 2008 financial crisis well over a year in advance. So that’s where we’ll start.
Celente calls warns that the coming economic crash will be “the worst in American history.” It is being driven by a “loan bubble” of $250 trillion in global debt – up from about $177 billion that preceded the 2008 crisis. Then add to that the fact that the Federal Reserve is in the process of jacking up interest rates. As they do it is making it harder for the emerging markets to borrow. (After all, if you want to buy oil on the world markets you still need to have dollars to do so.) So what we are already seeing is currencies crashing in places like Turkey, Argentina and India. At the same time there is an upward trend in the price of oil. Even now, it is back to 2014 levels – about $82 a barrel. Hovering over all of this the giant debt bubble – $250 trillion overall.[ii] The IMF loaning $57 billion to Argentina.[iii] That country is such a disaster that its central bank is posting interest rates of over 67%.[iv] Currently Argentina is experiencing about a 34% inflation rate.[v] And that’s just one country. Turkey has been driven to austerity measures as the value of its lira is tanking. There is $63 trillion in debt owed by the emerging markets and it’s killing them. Even China’s Yuan is going down. Though challenging the US in many areas, the Chinese face some daunting challenges. Right now, China holds around $30 trillion in debt, creating a dangerously large debt to GDP ratio. “The debt-to-GDP ratio is the ratio of a country’s public debt to its gross domestic product (GDP). By comparing what a country owes with what it produces, the debt-to-GDP ratio indicates its ability to pay back its debts.”[vi] The US is sporting a historically high ratio of about 104%.[vii] China’s figures dwarf that, coming in at between 250% and 300%.
Jump over to this country and you see corporate insiders, the Big Whigs, selling off shares of their own stock. The last time this was seen was just before the last financial crisis, ten years ago. After looking at the situation, you’ve got JP Morgan, the Société Nationale and Morgan Chase all warning-off their clients from investing in American stocks. The world is losing faith in the American economy. That trend is translating even to the booming real estate market where prices are starting to peak – and in some states, even fall back.
So there is dangerous pressure on the economy right now – but not just in America – but all across the world. Celente looks at the brewing situation in the Middle East and sees another spike in oil just over the horizon. ‘The last three recessions were preceded by a spike in oil prices.’ A conflict in the Middle East, no matter how contained would drive oil over the $100 mark. “The world cannot afford expensive oil.” That could be the straw that collapses the overvalued markets. [Until now they’ve been super-heated by quantitative easing – (essentially, the money printing press) – that has taken them to very artificially high valuations.] So first, higher oil will drive up the cost of gas and heat and food, etc. In reaction stocks will go down. And when markets go down – gold and silver will go up. And remember that the Fed is all the while pushing up interest rates. [Mmmm, it’s just as if they want to tank the economy!] So governments around the world – including the US of A will be paying more interest just as debt is growing. Toss in the global migrant crisis, driven by a lack of employment opportunities – which in turn is driven by failing economies – which in turn is driven by higher cost dollars – which are caused by high interest rates – and you have the recipe for what Gerald Celente calls “the perfect storm.” South Africa is already in recession. Venezuela, Nicaragua, Argentina, Indonesia and even the Eurozone are all in danger of different levels of collapse. What comes next? Civil unrest! It’s already brewing here in the US with the ascendance of Antfa and the looney left. But it’s showing up elsewhere with the emergence of populist movements that are changing the political landscape. Celente sums it up. “. Look at the big hedge funds and the private equity groups that are running this, and look at their debt level. It does not take a genius to figure this out. If you have $250 trillion worth of (global) debt and interest rates are going up, and it’s costing you more to borrow as you are making less, what is going to happen? It’s going to collapse… It’s going to be worse than the Great Depression. When this thing crashes, it is gone.” [viii]
Fellow analyst, Peter Schiff agrees. “I think we are going to have a dollar crisis — you think the Turkish lira looks bad now, wait till you see when the dollar is imploding and we have a sovereign debt crisis in the US.” The US government is going to be given a choice between defaulting on the debt, or else massive runaway inflation.”[ix]
Now if you’ve followed along with this analysis, you can see that it begs the question: Why does the Fed seem to be setting up the next collapse? Are they incompetent? Or is it part of a long-term plan? That’s a subject that we’ll explore in some depth next time. But let me tease this with a bit of the writing of Brandon Smith of Alt Market. He argues that these crises have historically served as a “means to consolidate control over assets, resources and governments while the masses are distracted by their own financial survival.” But this time the stakes may be even higher. This time they could be aiming at establishing a totally new global economic system. Does that sound like the stuff of tin-foil-hat-conspiracy theories? Well add this to the well of evidence. Both Smith and an independent study by Goldman have found that most – if not all – of the modern US recessions have been caused by the actions of the Federal Reserve – to the benefit of the moneyed interests. So chew on that ‘til next time.
[i] Goldman Sachs: The fiscal outlook for the US ‘is not good’, CNBC, May 21, 2018
[ii] Greg Hunter, Economic 9/11 Markets Will Collapse – Gerald Celente, USA Watchdog, September 30, 2018
[iii] Argentina, IMF reach deal to boost financing to $57 billion, Argentina, IMF reach deal to boost financing to $57 billion, ABC / AP,
September 26, 2018
[v] Argentina Inflation Rate, https://tradingeconomics.com/argentina/inflation-cpi, viewed October 2, 2018
[vi] Debt to GDP Ratio, Investopedia, https://www.investopedia.com/terms/d/debtgdpratio.asp, viewed October 2, 2018
[vii] United States Gross Federal Debt to GDP, Trading Economics.com, viewed October 2, 2018
[viii] Greg Hunter, Economic 9/11 Markets Will Collapse – Gerald Celente, USA Watchdog, September 30, 2018
[ix] Next crash will be “worse than the Great Depression”, New York Post, September 22, 2018