murphy metal monday

With interest rates on the rise and the economy teetering on the edge, markets across the board cratered today. Some say we are already in a recession and the potential for a long and painful down cycle has become very real. As my last email indicated, now is the time for wealth preservation. The Ukraine invasion has exacerbated the supply chain shortfalls and the situation is expected to worsen this summer. Stagflation is here to stay. For stocks, bonds and even real estate, this is just the beginning. Day to day, predicting price action is impossible, but since owning hard tangible assets makes more sense than anything these days, it is strongly recommended to take advantage of any price dips in physical gold and silver.

Alasdair Macleod see’s things in similar fashion and has the following to say, “CPI inflation is likely to approach 10% in the coming months. Either interest rates have much further to rise, or alternatively prices will rise even faster, not because of demand being maintained but because purchasing powers for fiat currencies will decline at an even greater rate. This is poorly understood by central bankers and investors, who think simplistically that a recession will reduce demand and therefore prices will stop rising. They believe in deflation and inflation being divorced from variations in currency and credit. In the West mainstream media tells us of the dire economic conditions in Russia, the facts suggest otherwise. While media focuses on the visible side of the conflict in Ukraine, the economic aspects are what really matter. It is the West that is collapsing under the burden of its own sanctions against Russia, and not Russia, which is enjoying record balance of payment surpluses. Russia has, in effect, tied the ruble to commodity prices, particularly energy. And this is the bit the central banking and investment establishment have yet to understand ….”

“A combination of currency and credit expansion in recent years is undermining the purchasing power of all Western fiat currencies. It is that which is driving rising prices, the various crises — covid, supply chains, Russian sanctions are merely catalysts. The long-term trend of declining interest rates is now over, and market prices of financial assets, which act as collateral at the major banks, are extremely vulnerable. By being tied to commodities, the ruble is indicating not just its own strength but the weakness of Western currencies. And because over time commodities priced in gold units are stable, the ruble’s strength tells us that the gold price should also be rising.”

“As past big buyers of gold, China and Russia certainly anticipated the dilemma’s of today. The sanctions on Russia will only prove to speed up the shortages and the dollar’s debasement can only accelerate. Clearly, Russia (which happens to be the world’s largest exporter of energy, commodities and raw materials) and China (who is the supplier of semi-manufactored and consumer goods to the world) are upping their urgency to distance themselves from the West’s impending currency, banking and financial asset crisis.”

Are You Still Asking “When”?

By Bill Holter

Over the years, many have continually asked “when”? When will the system break down? Well, I have some good news and some bad news for you. The good news is; you are watching the collapse in real time with your own eyes. The bad news? You are watching the collapse in real time with your own eyes! This will be short and sweet.

  1. Inflation is raging as the continual money printing, expansions of debt, and deficit spending have finally overwhelmed the financial engineering used to hide their dirty work. Simply, our money was debased as the party raged on.
  1. As a result (response) of the monetary insanity, market interest rates began to rise over a year ago. As usual, central banks are way behind the curve and are now being forced to tighten.
  1. While inflation of commodities and everyday goods kicks into full gear, asset inflation is giving way to asset deflation.
  1. Asset bubbles are bursting all over the world with THE most important rupture being the credit markets. Over the last year alone, interest rates on average are up well over five-fold. The “foundation”, credit, has cracked and crashed before your very eyes. Few truly understand this.
  1. Stock markets are now down significantly from their highs and the average stock has already entered bear markets. Those viewing their 401K statements for April will be very disheartened.
  1. Real estate, which had been so hot over the last couple years has turned moribund. Buyers have been priced out, followed by being shut out due to mortgage rates more than doubling. Affordability does not exist. The psychology is about to change as owners will soon understand their asset is becoming a liability.

So where does this leave us? We had the “good fortune” of living in a virtuous cycle to the upside, unfortunately we will now have to live in a virtuous and self-reinforcing down cycle as asset values circle the drain. Without great explanation, as rates rise, asset values decline, it is simple math. And here is the problem; think back in time only a couple years ago and you’ll remember how people were spending freely because they felt “rich” (and maybe got some of the stimmy monies?). Now it is the reverse. Homeowners are sitting on properties much longer and buyers no longer (have the ability) bid above asking price. In fact, discounted bids are already becoming the norm. The average stock portfolio is down well over 20% since the start of the year. Bluntly, people are beginning to feel “poor” and they will react by reducing spending. All of the above of course is topped off by the cost of living increases we already know of…

Again, none of this is rocket science and should not be new to anyone reading this. The bottom line is this; the wheels are falling off the global debt cart in a world where nothing functions without the use of credit. Shortages of all sorts are already happening even if you have the cash for purchase. The greatest fear for central bankers, debt deflation has finally arrived!

Lastly, please understand and never forget, “markets” have been ruled by financial engineering for three decades. Derivatives (probably $2 Quadrillion now?) of all sorts will begin to blow up. Whether it be because of the underlying interest assumptions, over concentration of paper versus deliverable goods (force majeure), or just plain old outright insolvencies …you will witness the exact reverse (in albeit a MUCH shortened timeframe) than the buildup.

As we warned you for years, “inflation of the things you need, and deflation of the things you have”! I know, it’s a bad cocktail but exactly what we are faced with … your best position is to be where you cannot be bankrupted while the world around you bankrupts!

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