Wednesday, January 27, 2016

The Next Crash Will Be Worse than 1929 & 2008 Combined......

The Next Crash Will Be Worse than 1929 & 2008 Combined

The next crash will be one for the record books. If you look at any of the economic data coming out, it screams recession. It will be one of the worst recessions since 2008 and 1929,likely worse than both combined. This is a description of a global depression. 

Unfortunately, that's exactly where we are headed. 

It's not just my opinion, It's the view of global markets. China is 45% down. There's a bear market in Europe. There's a bear market in Japan. There is a bear market in most of the United States.

Why is it going to be so historically bad this time around?

In prior recessions, the Federal Reserve was allowed to lower the borrowing costs significantly and dramatically. For instance, the Fed Funds Rate, the interbank lending rate, was 5.25%. Today, it's between .25% and .50%. The Fed is unable to reduce borrowing costs to the consumer. All they can do is take back their measly .25% rate hike that they did in December. So, there is no debt service relief coming from the Federal Reserve. That's number one.

Number two, a normal function of recessions is a surge in the deficit. We saw this in the Great Recession from about $200 billion a year to $1.5 trillion a year. This time, if they skyrocket again . . . who's going to buy that Treasury debt? There's no more QE. China is a huge seller. Japan is a huge seller. So, interest rates are going to rise because sovereigns are insolvent. It's not the banks that are insolvent anymore, although that is still the case to a great degree. Central banks are insolvent, and sovereign governments are insolvent. That's why what is coming is no normal recession.

Is the Fed is going to reverse course and cut rates back to where they were in December. Yes, I think there is a pause or maybe they raise rates one more time in March. The clueless morons that run our central bank are looking at the unemployment rate and are worried about hyperinflation because too many people are producing. If you look at commodity prices, equity prices, junk bond spreads, if you look at actual data coming out, we are in a magnificent manufacturing recession across the globe. . . . Everything is down and slowing dramatically. Yet the idiots at the Fed are worried about inflation.

This will not be your garden variety recession. You have impotent central bankers and impotent sovereign nations. How many more empty cities is China going to build without destroying their currency? . . . . There are going to be global sovereign defaults, and those defaults are going to take the form of defaults through monetization and inflation. That is where we are headed. It's going to be a devastating, metastasizing global depression.

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