August 2011 featured a Treasury funding crisis. August 2015 featured a Yuan devaluation. This August features both, for maximum deflation...
Under the current "system", the hardest working people get paid the least, while robber barons sit around getting monetary bailouts. Asset bubbles create permanent liabilities offset by temporary asset prices, leading to what used to be called "indentured servitude", before this generation of locusts took control. Meaning that globalized capitalism destroys more wealth than it creates - now wholly dependent upon ever-greater central bank bailouts to keep from imploding. Until policy-makers put more purchasing power in the hands of the middle class, the battle is lost. Contrary to ubiquitous belief, sugar high asset crashes are not "reflationary":
Under the current "system", the hardest working people get paid the least, while robber barons sit around getting monetary bailouts. Asset bubbles create permanent liabilities offset by temporary asset prices, leading to what used to be called "indentured servitude", before this generation of locusts took control. Meaning that globalized capitalism destroys more wealth than it creates - now wholly dependent upon ever-greater central bank bailouts to keep from imploding. Until policy-makers put more purchasing power in the hands of the middle class, the battle is lost. Contrary to ubiquitous belief, sugar high asset crashes are not "reflationary":
Post-2008, global central banks coordinated liquidity to boost asset prices, creating the all-important trickle down fake wealth effect. The early holders of Bitcoins, pot stocks, venture IPOs, and corporate insiders were the beneficiaries, leaving the latecomers holding the bag. Late in the cycle, Trump's tax cut went straight to the Cayman Islands.
Now, they are out of ammo:
"If ever the U.S. economy could use a strong tax cut tail wind, it could use one now as conditions weaken around the world.
But the tail wind isn’t there."
Increased demand was itself limited by the fact that so much of the tax cut proceeds went to higher-income households with lower propensity to spend."
Borrowed tax cuts for rich people are highly deflationary, as we saw this week. The death of the U.S. Treasury market, predicted by almost everyone on the planet - including the master deflationist himself, Robert Prechter - has been greatly exaggerated.
And has greatly annihilated anyone who bet against Treasuries:
Enter Peter Schiff - master inflationist - to spin record deflation into record inflation. His shiny gold investment that is about to go "ballistic" by coincidence happens to be the only thing he ever owns.
A few facts followed by his usual non sequitur conclusion:
‘This is going to be the inflationary recession, there’s no way out and it’s a political disaster for Trump because the recession is going to start before he finishes this term, which means he won’t have a second term.’
I 100% agree. It's the timing, that is going to be "tricky". Because between now and "inflation" stands asset crash and rioting, neither of which will be reflationary.
This is where it gets interesting, because the 2011 analog is still 100% in play. Way back in August 2011, the U.S. Congress FAILED to raise the debt ceiling, which caused a technical default in the Treasury market. Contrary to popular belief at the time, Treasury bonds skyrocketed as yields and stocks collapsed. Gold had been rallying into the event and continued rallying into August, and then collapsed around the third week.
Here below we see that gold is now the most overbought it has been since the peak 2011 (RSI, top pane).
"Peter Schiff can't always be wrong"
Since 2009, each round of quantitative easing (bond buying) paradoxically has led to LOWER Treasury bond prices, higher yields and higher stock prices. Because it was reflationary. Likewise, Trump's deficit-driven quantitative tightening is now leading to lower bond yields and lower risk asset prices. Because it's deflationary.
"U.S. dollar liquidity is deteriorating and “is reaching a point where it may require drastic action if measures aren’t taken to address it soon,” warned Gaurav Saroliya, director of macro strategy at Oxford Economics, in a note on Wednesday."
"U.S. dollar liquidity is deteriorating and “is reaching a point where it may require drastic action if measures aren’t taken to address it soon,” warned Gaurav Saroliya, director of macro strategy at Oxford Economics, in a note on Wednesday."
Until policy-makers decide to bail-out the middle class, I suggest that margin calls will be the order of the day for gamblers front-running central banks, on the assumption that they are still in control of deflation:
