Executive Global
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Productivity | Strategy | Profitability
The world is in a precarious place. It’s our assertion that we are in the final stages of a debt based financial collapse. Debt is the primary bubble, all else is rebalancing against this fact.
All our financial travails come back to the over-proliferation of new fiat money, borrowed into existence via the debt system, then intermediated through the commercial banking system and controlled by the central banks. The United States are currently adding $1 trillion every hundred days to their debt pile. This is whilst we are not in any official major crisis.
We are told there is no recession in the US, the pandemic and associated fiscal responses appears to be over. Of course, ‘Inflation” is the current story and will likely continue to be: A number of key points about inflation as we have it:
1. Broad general inflation is entirely down to excessive fiat money being borrowed into existence and intermediated through the banking system.
2. Inflation is actively a central banker’s policy, it serves them and it undermines the ‘Man in The Street’
3. Asset heavy billionaire’s/mega-corporates with cheap borrowings are also served by inflation, along with government and statist classes.
4. The middle classes, working & poor classes are devastated by it.
5. Statists have monopoly control over central bank policy, fiscal policy and also have influence over government statistics collation, and official media. For these reasons it is within their interests to understate the true inflation rate, allowing them a mandate to run negative real interest rates.
The level of debt issuance across the global village of debt “lepers”, is now so extreme the system is being prepared for its inevitable ‘controlled demolition’ and subsequent replacement. We called this a set up for a system ‘reset’ a decade or more ago, only to have Klaus Schwab & the World Economic Forum assume a similar phrase.
Here is the situation in the US bond markets. China, the largest trade partner with the US, is no longer purchasing US debt instruments. Worse than this, it is actively selling its existing holdings and buying gold, as well as telling its citizens to purchase gold & silver. Important to note that when bond values go down due to say a big seller or massive amounts of new issuance, due to any lack of scarcity buyers demand higher Yields, in short interest rates go up.
A MAJOR CRISIS LOOMING
Nobody wants to be the fool or bag holder.
1. Debt issuance is escalating at a parabolic rate [anything but a scarce asset]
2. The Inflation rate calculated by the 1980’s measures under Reagan have the CPI rate at, at least double that provided by official sources [see Shadow Stats Currently 7.5%]
3. So Bonds are a guaranteed real terms devaluation asset, in a financial set of circumstances where future supply is in a runaway state.
From these 3 points above, one could conclude the following:
1. The 40-year US bond market bull ended in 2020, as we stated that August 2020. We shorted $TLT an ETF of long-term debt. Pivot callers would be disappointed. They will wait longer and receive very little, only to subsequently see rates a lot higher.
2. In terms of significant moves, it has been our assessment that rates are more likely to spike on an absence of bid on debt instruments, and the FED will have to become “Toxic Bank” and buyer of last resort.
3. This could give the dollar a dominant bid and FX markets will be volatile with pressure coming especially onto emerging FX & the YEN as a short list, as Dollar denominated debt owed by offshore nations, sees them have to rush for USD to make the higher interest payments, caused by the rate increases [bonds sell off].
By our reckoning a 40-year US debt bull market reversal occurred in 2020, on the events around the pandemic. One can focus on the fact that the Dollar will be a wrecking ball on other fiat currencies if you like, through its likely appreciation. But the main story is excessively indebtedness, the adjustment is debt devaluation, with it comes huge spikes in Interest rates.
The risk premium for holding a US government treasury goes from zero, considered a ‘Risk Free’ rate, to one that prices in a potential possible failure in capital valuation, the additional return [yield] required for this deep shift is far higher than many imagine. This is the premise for our Reset and “Interest Rate Spike Theory”, a story of debt devaluation into a collapse.
The solution is gold, silver other physical assets such as land [Unencumbered by debt]. Real estate in the traditional sense will face price plunges due to the degree of ‘financial engineering/leverage’ involved. Productive land unencumbered, that can grow food stuffs or animal husbandry may climb strongly.
When debt fails:
1. Pensions fail.
2. Banks fail [The debt & fiat Intermediary channels]
3. Bank balances will be lost or unavailable for extended periods.
4. Other business outside of the financial realm fail, without credit access or means to transact.
5. Currencies fail against each other, especially against the dollar, smaller dollar indebted ones first – [read Tales of an Economic Hitman – by Perkins]
6. Physical, intrinsically valued assets climb immensely.
When will it happen, you ask?
It’s already happening, and has been for a while, as Ernest Hemingway said “… Slowly at first, and then suddenly very fast”.
I have two triggers for when the ‘suddenly very fast’ stage is likely to commence.
1. The Yield Curve Inversion renormalising [reverting positive]
2. Gold/Silver Ratio ‘Flag’ break
Yield curve inversion is a leading indicator. The reversion back positive again, is usually when the “Awaiting Name” crisis occurs.
CHARTS REMAIN BULLISH FOR METALS
This is the largest yield curve inversion for an extended period, there is always a crisis associated thereto. My guess is that the next is nearly here and it will be a debt based one, however other geopolitical events may well also be associated to the financial event as a ‘masking agent’ of primary distraction, such as war, climate crisis etc.
As a technical analyst, my expectation is that when the current flagging price behaviour of the XAU/XAG ratio is broken to the downside [Chart NOT Shown see @TheMarketSniper on YouTube & ‘X’], there will be a potential disorderly decline in the gold/silver ratio, this is very bullish for precious metals and silver particularly.
My final most bullish chart for precious metals is gold divided by ‘official’ US CPI stats, for the timeframe since the 1980’s super bullish period, that came out of Nixon’s suspension of the gold exchange window, post the folly of the Vietnam conflict over-spending, apart from moral and other mistakes.
My take is as illustrated by the chart below, with ‘Sub-Prime’ & ‘The Pandemic’ events representing the new excessive debt boom & overspend, that Vietnam represented from 1965-73.
I expect gold over the next decade and a half to rise 7x faster than ‘the official’ CPI stats, and there I expect at minimum one or two years in double digit US inflation.
As a final point in making the case for currency devaluation/stagflation, see the following recent climbs in soft commodities in percentage gains since 2023 October till April 2024 [5 months] Arabica Coffee +61%, Robusta Coffee +97% & Cocoa +247% to name just a few. [charts @themarketsniper].
RATES WILL SPIKE AS DEBT COLLAPSES
This is what currency devaluation looks like, broad base commodity price increases, this general cost increase has been brought about by central bank policy, and with intent. Think of it as a form of ”Planned Obsolescence” of the financial system, allowing the primary orchestrators a bomb fire of the old and a beneficial modernising ‘phoenix’ into a new reset ‘Surveillance Finance’ control structure.
In Summary:
1. Gold is your insurance against debt collapse.
2. Debt collapse is an absolute mathematical certainty, there is no rescuing the situation.
3. The repercussions for interest rates will be similarly immediate with rates spiking as debt is collapsing. It is deeply likely the devaluation will become uncontrollable and disorderly, regardless of central banker talk, at the extreme rates are set by the market not FED heads.
4. Sell all debt assets you may own, bear in mind pensions are stuffed with bonds.
5. All financially leveraged assets will likely unwind badly in asset price, retail homes and Hire purchase cars are one of those in that category.
6. Soft Commodities will rise far further than many imagine, driving basic foodstuffs higher. [Don’t fret, Bug protein awaits in the wings for the poor]
7. Expect counter-party risk failure, this leads to forced selling, even of good positions.
8. Chronic orchestrated geopolitical risks are likely to coincide in a confusing overwhelming cacophony of events. Pre-planning for this eventuality that extends away from just financial matters will serve citizens well.
It is a mental game too. You were chosen to live in these times, recognise things you can’t change, embrace the obstacle course we will be made to run. Win through preparation. The largest polarising event for the Western and likely all the world population is upon us, plan to come out on top. Do something small to this end, every day. EG
