How long can cake walk last?
Remember the old cake walk game. A bunch of people walk around some chairs, one chair less than the number of participants. Everyone walked until the music stopped and then the players scrambled for a seat. This continued until there were only two participants circling a single chair. The winner walked away with a cake.
Well just like that game the music has to stop in the financial markets, and the number of viable economies are becoming noticeably fewer. The question is which country will remain standing when the music stops?
Based upon their purchase of barbaric relic gold, the Chinese who produced the first fiat currency debacle under Kublai Khan in the 13th century will be able to have their cake and eat it too. They remember their history.
By contrast, Americans can’t even remember five years back. Off today’s market action the cake walk is over. The Dow Industrials fell a couple hundred points. But the real news is not the Dow, that is mere effect to the cause of a falling dollar. Indeed the dollar index breached critical support of 81.80 today. And in turn 10-year bond rates moved higher. The Dow heading in the same direction as interest rates, reminds this writer of the Dow in 1987. If Americans can’t remember back to 2008, they certainly won’t recall 1987—except to say this time its different. It never is, but that’s what the “experts” say.
GDP was corrected down to 1.8 percent from 2.4 percent. But then Wednesday they revised the number again to 1.1 percent. Pretty clearly if the government’s statisticians used more honest numbers for inflation, there wouldn’t have been any growth at all. Therefore the divergence between the stock market and main street is pretty stark. But the market has really just been propped up by Ben’s money printing. Federal Reserve Socialism for the 1 percent, since they own most of the stocks and bonds.
Why did the market tank now? The central bank t0o central banks, the Bank of International Settlement has let it be known that tightening is on its way. After all the buffoons at the Fed printing up $85 billion each and every month for 1.1 percent growth is pretty pathetic. Basically it is signaling that all the money printing is more of a hindrance than a help. The BIS extended the introduction of stiff capital requirements for banks and less leverage till 2018, but the die is cast (in my humble opinion) because the banksters would rather save their fiat money franchise.
If they continue to print the dollar is going to collapse. So if it is a choice between their business and sacrificing main street, they’re going to 86 the schmoes. The only rational way of fixing the debt conundrum is to allow the defaults, bankruptcies, and liquidations to clear the financial system. There is simply too much debt and too little real income. The conundrum is that the Fed has added so much to the monetary base, that inflation is also probably baked into our cake.
So like the forgettable 1970s there is going to be stagflation. I’m breaking out my old WIN button now to pin to my shirt. It’s also why gold is beginning to move up again and is disappearing into private storage.
The problem isn’t gold; it’s the lack of discipline on the part of central banksters. They have never met a problem that couldn’t be fixed by throwing more fiat currency at it. And then they have the temerity to say they don’t know why real wages have stagnated for 40 years and not topped their highs of the mid ‘70s?
Per chance could it not be that fiat currency was divorced from gold in 1971, allowing our Kublai Khan wannabes the power of unlimited credit creation?