The HYPER-CREDIT BOOM – BUST

Global financial markets are integrated and inter-dependent. The markets look ahead and trade on anticipation. It is now extremely bullish for gold!

Zero% Interest Rate Policy (ZIRP)

Since 2008 (for the first time in the history of the world), 90% of the developed countries have had 0% interest rates and a steady flow of “Quantitative Easing” (QE). A small number of “too-big-to-fail banks” [domestic and foreign] have been able to borrow from the Federal Reserve at or just above 0%. (For seven years, overnight/inter-bank lending was 0% to .25%. On Dec. 16, 2015, the nominal rate was raised to .25%; the maximum rate is now .50%). 

PROSPERITY BY PRINTING PRESS

Credit markets FROZE worldwide on August 9, 2007. In response, the Federal Reserve created many trillions of dollars of credit to bail out failing financial institutions [here and abroad] and “to stimulate” business activity. Economists said the “wealth effect” of rising asset prices would propel the world economy from stall-speed to escape-velocity.

People placed their faith in the wisdom of the central planners. Nations, large corporations, and small businesses mis-diagnosed risk because their perceptions of risk were based on rosy forecasts of “economic recovery.” 

Coordinated central bank interventions created bull markets in stocks from the East to the West. Commodity prices soared as a result of the “credit glut.” Hyper-credit caused distortions in prices for real estate, art, collectibles, and bonds. During the boom, malinvestment led to tremendous over-production.

Artificially low interest rates
cause a boom, and then a bust.

As a consequence of over-production, the over-supply put downward pressure on prices, driving crude oil from $105 (June 2013) to $32 per barrel (Jan. 2016). Today, asset deflation is dragging down the economies of commodity-exporting countries. Exporters to China are suffering. Cratering commodity prices and the drop in the price of oil have been causing “credit events” and violent turmoil in all market sectors. 

Your Guide to Our New Financial Panic

During the boom phase, nations borrowed heavily in cheap dollars. Now, the countries must service huge debts with expensive dollars. They borrowed in anticipation of a strong “recovery;” now those loans are going bad.

Rising Debt

Around the world, debt is rising, bank credit is contracting, and money velocity is SLOWING. Deflation means a sharp slow-down in global production, corporate credit down-grades, diminishing liquidity in bond markets, bankruptcies, defaults. 

THE SOVEREIGN DEBT CRISIS IS SPREADING.

Here at home, the real economy is shrinking. Money velocity is slowing dramatically: people are not spending (and banks are not lending). More Americans are closing businesses than starting businesses (bankruptcy numbers are soaring); 6,000 retail chain-stores will close this year; U.S. manufacturing is collapsing; record numbers of shopping malls are closing; and corporate profits are tanking (the entire S & P 500 index).

RADICAL MONETARY INTERVENTIONS

Zero per cent interest rates are driving world economies toward systemic instability. Since the crash, the world credit system has come close to locking up in Nov. 2011, Oct. 2014, and Aug. 2015. As a result, emergency monetary interventions are becoming increasingly radical (bail-ins, capital controls, negative interest rates). 

Negative Interest Rate Policy (NIRP)

Negative interest rates are a tax on money that began in Europe. In June 2014, Europe began taxing deposit money with negative interest rates; it now costs 0.3% to keep money in Euros.

As a consequence of the weaker Euro (and yen), capital flowed to the U.S.; and the dollar rose 9% to 25% against all other fiat currencies. That is why the price of gold is a bargain in dollars compared to the price of gold in all other currencies.

Government bond yields throughout Europe have gone negative. The European Central Bank (ECB) has suggested it will cut the deposit rate from -.3% to a further negative level (-.5%?). The chief of the Bank of Canada said (Dec. 8) rates could be negative (-.5%) in Canada later in 2016. Federal Reserve Bank officials (including Mrs. Yellen) have suggested negative rates are on the table for the U.S. 

SAVINGS WILL BE TAXED.

One way or another, Americans are going to be taxed on their money. As revenues continue to fall, the government will fix its sights on your retirement funds and savings. Expect more Quantitative Easing (QE4), negative interest rates, and further capital controls.

Precious metals have provided safe-haven from
out-of-control governments
for 1,000s of years.

Click for a larger photo

In all history, there has never been a “supply
glut” in precious metals. Silver and gold are rare.
The Federal Reserve cannot print gold and silver
.

 Submitted by Denise Rhyne

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The golden constant is portfolio insurance: Coins and bars will retain purchasing power during periods of hyper-deflation, hyper-inflation, credit collapse, or war. GOLD IS A PRUDENT INVESTMENT.

In 44 years, the U.S. economy has been fundamentally transformed:   America’s Fundamental Transformation.

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