Next Up For Our Chaotic World

What will happen in our increasingly chaotic financial world?  For sensible analysis, seek the most intelligent, least biased and experienced people…central bankers, most economists and all politicians are, of course, not eligible.

From Mish regarding the opinions of Stanley Druckenmiller:

• “Gold is the superior asset in present part of cycle
• Fed is lost – totally lost and nothing they say match their action
• Negative interest is worst policy mistake ever
• Debt is and remains the elephant in the room”

“Stanley Druckenmiller warned on Wednesday that the Federal Reserve’s low-rate policy is creating vast long-run risks for the US economy.” 

“…most of the debt today has been used for financial engineering in the form of stock buybacks and other methods that provide a boon to corporate profits…” 

“I have argued that the myopic policy makers have no endgame, billionaire Stanley Druckenmiller said towards the end of a scathing twenty minute romp through all the world’s economic problems.”

From The Telegraph regarding global economies:

“The patient is in a critical condition.  The International Monetary Fund is concerned that the global economic recovery has taken too long.  Kaushik Basu, chief economist of the World Bank, says the financial crisis has left a ‘festering wound’ that is ‘refusing to heal.’  Growth is too weak, resulting in the equivalent of a compromised immune system that has left the economy vulnerable to fresh diseases. 

“The question now facing the global economy’s physicians:  is the ailment chronic or acute?” 

“Answer:  [Darryl Robert Schoon]  It’s fatal, a prognosis no one wants to hear or accept.”

IT IS ALL ABOUT DEBT…

From Michael Lewitt at SureMoney:

“Debt drains away vital resources from economic growth.  Fighting a debt crisis with more debt is doomed to failure, yet that is not only what global central banks did during the crisis, but long after markets stabilized (though the crisis never truly ended, just slowed).  This was an epic policy failure that continues today.”

Economic growth chugs along at a percent or two while debt races ahead at 9% or so each and every year.  Debt rising far more rapidly than the underlying economy which must support the debt is unsustainable.  If something can’t continue, it will end ….

From David Stockman:

“That’s because the Bubble Finance status quo as we know it is on its last legs. …  That means a big market dive is coming soon.” 

“In fact, a recession, a market crash, an explosion of deficit projections and, for good measure, double digit increases in next year’s health insurance premiums and copays will be hitting the headlines before the final Hillary/Donald debate duals of the fall campaign.”

Repeat – What Comes Next?  Thank you David Stockman!

• A recession, happening now, or soon
• A stock market crash or severe correction
• Higher deficits – practically guaranteed in the coming recession
• Health Insurance increases – the data and history suggest this is likely

What Comes Next?  More Possibilities:

• “Helicopter Money” or per Bill Gross the “Universal Basic Income” or UBI
• Negative interest rates, like a viral infection, could spread to the U.S.
• Emergency stimulus or more QE under a different name
• A war to serve as a scapegoat and distraction
• More “bread and circuses”

From Albert Edwards:  Summary from “Let me tell you how this ends” 

• Investors can pretend no longer – profits slide into a recession.
• Deep bear market in equities
• Corporate bond spreads explode with widespread corporate bankruptcies.
• Social unrest and huge budget deficits.
• Investors lose faith in the Fed.
• Negative interest rates, currency and trade wars, helicopter money, and inflation.
• It ends BADLY!

From John Rubino:

“Where do we go from here?  Probably into a crisis in which the world stops trusting markets, and financial assets are devalued accordingly.”

Our debt based economic future looks grim for the next several years, unless, as Druckenmiller suggests, we move out of financial assets and move into gold (and silver) – real physical gold (and silver) – not the paper versions.

Gold and silver are not the answer to all of our economic problems, but they are better answers than more debt, QE, war, and lies.

Gary Christenson

The Deviant Investor