2022 - Countdown To Collapse
Beware the Ides of March Shakespeare, Julius Caesar
On March 15th, the Fed decided on a series of rate hikes that will be as consequential to capital markets as the Ides of March was to Julius Caesar in 44BC. The demise of financial markets, however, will not be sudden and unexpected like the assassination of Caesar. The collapse of capitalism will be as protracted and volatile as it is inevitable.
Fed sees March rate hike but no roadmap after that. Reuters, January 31, 2022
In capitalism’s endgame, there is no roadmap. In Betting In The Endgame (2010), I wrote:
Historically, the Ides of March was the deadline when Roman citizens either settled their debts or faced imprisonment. In 2020, hopes of repaying capitalism’s constantly compounding debts of $226 trillion evaporated when global economic activity froze due to Covid-19.
Velocity of M2 money Stock, St. Louis Fed
Had the Fed and other central banks not intervened, the sudden cessation of economic activity would have caused a catastrophic deflationary collapse and an even greater Great Depression. To prevent this, central banks immediately expanded the money supply.
In 2020 alone, the U.S. has created 22% of all the US Dollars issued since the birth of the nation. - bitcoin.com, October 5, 2020
The explosive growth of the global money supply unleashed powerful previously quiescent inflationary forces; and today, prices are rising at rates central bankers may not be able to control.
The Editorial Board, Inflation Is Everywhere, The Wall Street Journal, February 13, 2022
James Bullard, President St. Louis Federal Reserve, February 17, 2022
In February 2022, inflation rose even higher. On March 10th, AP News reported:
Central banks have only one way to combat rising prices, i.e. to raise interest rates. Rising interest rates, however, will cause today’s multi-trillion-dollar bubbles in derivatives, stocks, bonds, real estate, and cryptocurrencies to burst.
Historically, the most frequent catalyst of a bubble-bursting is rising inflation and [rising] interest rates. George Athanassakos, The Globe And Mail, May 26, 2021
George Karpouzis, learn-to-trade.com, May 31,2021
Fed chairman Ben Bernanke’s now-fatal experiment with Milton Friedman’s helicopter drop of money, i.e. quantitative easing + zero percent interest rates, is about to destroy not only capital markets but the helicopters—the central banks—themselves whose newly-printed money inflated the colossal-sized bubbles now about to burst.
Source: HowMuch.net RELATIVE SIZE OF TODAY’S BUBBLES
BERNANKE IN BLUNDERLAND
Tread carefully the road you’re on
The time has come, Bernanke said
To talk of many things
Of crashes – cash – and the lack thereof
Of inflation taking wing
And why a helicopter’s needed
And why credit’s no longer king
But wait a bit, the crowd did cry
We’ve had enough of that
The froth’s too high and everywhere
And the one percent’s too fat
Bernanke, however, was undeterred
Remembering Friedman’s chat
That if a helicopter flew overhead
Dropping money from the sky
Combined, of course, with tax cuts
Then deflation would surely die
But try as they might in the real world
Those theories just don’t fly
But nebbish minions with learned minds
Are not so easily persuaded
To submit to truths and light sublime
When power and fame they’ve wedded
So keep your counsel in these darkest of days
And watch with whom you’re bedded
For the crowd you’re with determines much
Whether to darkness or light you’re drawn
The present world’s passing away
And the coming has yet to dawn
So twixt tomorrow and today
Tread carefully the road you’re on
drschoon, Monetary Liquifaction, Gold and
The Time of the Vulture, April 15, 2016
The year before Wall Street banks collapsed in 2008, a severe liquidity crisis shook global markets. In the spring of 2007, I predicted a crisis would happen that summer.
drschoon, Subprime America Infects Asia and Europe, May 2007
In July 2007, two multi-billion subprime Wall Street hedge funds collapsed and in August, French bank BNP Paribas barred investors from accessing $2.2 billion worth of funds invested in subprime mortgages.
New York Times, BNP Paribas Suspends Funds Because Of Subprime Problems,August 9, 2007
THE COMING COLLAPSE OF CAPITAL MARKETS WILL BE ACCOMPANIED
BY A LIQUIDITY CRISIS OF UNPRECEDENTED PROPORTIONS
AND THE METEORIC RISE OF GOLD AND SILVER
To revive the economy after the collapse of the 2000 dot.com bubble, the Fed cut interest rates to 1%. The 1% rates combined with the sale of subprime mortgages to unqualified buyers not only restored economic growth but created another dangerous bubble in US real estate. To pop the new property bubble, the Fed quintupled interest rates from 1% to 5.5%, triggering a liquidity crisis that led to the collapse of Wall Street investment banks in September 2008.
The damage to the economy by the collapse of two financial bubbles, however, had been done. In 2009, central banks were forced to print even more money to keep economies afloat, hoping against hope that time would provide an answer.
Time, however, didn’t comply. When global economies froze due to Covid-19, central banks, printed yet even more money; and now, once again, we are about to learn that the more money you print, the less its worth, i.e. inflation
The Fed’s last experience with inflation was in the 1970s. In January 1971, inflation was 4.25 % and Fed interest rates were 5.0 %. That year, on August 15th, the US delinked the US dollar from gold. Three years later, in 1974, inflation had tripled to 12.2 % and interest rates were at 13 % to force inflation lower.
In 1976, inflation was 5.8 % and Fed interest rates were 4.75%. The continuing expansion of the money supply, however, caused inflation to again surge. Three years later, inflation more than doubled to 12.2 % and Fed rates were raised to 11.5 %. In January 1980, inflation was 14.2% and, in February, the Fed rates were again raised to 15 %. In March, with inflation skyrocketing upswards, the Fed rates reached a historic high of 20%.
Note: In 1980, I was importing hand knotted wool and silk carpets from China when interest rates on our line of credit surged to 24%.
Today, inflation is again the Fed’s highest priority. With inflation at 7.9 % (the highest since the 1980s), the Fed will be forced to raise interest rates until inflation subsides. In 1980, 20% rates were required to do so.
On March 7th, Michael Pento wrote in A Recession Unlike Any Other:
The Fed is trapped; so are we.
INFLATION, WAR, COLLAPSE, REBIRTH
David Hackett Fisher, author of The Great Wave, Price Revolutions and the Rhythm of History(Oxford University Press, 1996) observed that price-revolutions, i.e. great waves of rising prices, brought about the collapse of the Middle Ages, the Renaissance, the Age of Enlightenment, etc.
Today, a price-revolution of even magnitude greater is about to cause the collapse of the present age, making way for a new and better world, i.e. a new equilibrium. As in each inflationary wave:
Of these times, Professor Fischer wrote:
These are most interesting times. My new website is posted again at www.drschoon.com.
Buy gold, buy silver, have faith,
Darryl Robert Schoon
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