Insider
by
Chris Martenson
Executive Summary
- The economic data is getting darker fast
- The over-indebtedness of the economy is the worst it's ever been
- Predicting the timing of the next major market correction
- As the risks mount, what should the concerned investor do?
If you have not yet read Part 1: Why The Markets Are Overdue For A Gigantic Bust available free to all readers, please click here to read it first.
The Data Says…Another Downturn Is Upon Us
Our view is that a massive market correction is coming, one that may well rip the financial markets apart, and cause very long-term and long lasting damage, possibly to the point of taking generations to repair in any meaningful sense.
In fact things may never actually recover to the current heights because recovery requires energy and there simply isn’t the net energy per capita that existed in the past.
For now, we see plenty of signs of fundamental economic weakness, and this is not surprising at this stage of the so-called economic expansion. The truth is this expansion has been phony to a large degree, and quite probably should have broken down many times in the past, most recently in early 2016.
But the central banks prevented that and we can all feel thankful at the extra time that has provided us to become more resilient under reasonably calm circumstances.
And yet, the one thing that central banks have never been able to do is…
Get Ready For The Coming Massive Correction
PREVIEW by Chris MartensonExecutive Summary
- The economic data is getting darker fast
- The over-indebtedness of the economy is the worst it's ever been
- Predicting the timing of the next major market correction
- As the risks mount, what should the concerned investor do?
If you have not yet read Part 1: Why The Markets Are Overdue For A Gigantic Bust available free to all readers, please click here to read it first.
The Data Says…Another Downturn Is Upon Us
Our view is that a massive market correction is coming, one that may well rip the financial markets apart, and cause very long-term and long lasting damage, possibly to the point of taking generations to repair in any meaningful sense.
In fact things may never actually recover to the current heights because recovery requires energy and there simply isn’t the net energy per capita that existed in the past.
For now, we see plenty of signs of fundamental economic weakness, and this is not surprising at this stage of the so-called economic expansion. The truth is this expansion has been phony to a large degree, and quite probably should have broken down many times in the past, most recently in early 2016.
But the central banks prevented that and we can all feel thankful at the extra time that has provided us to become more resilient under reasonably calm circumstances.
And yet, the one thing that central banks have never been able to do is…
by
Chris Martenson
Executive Summary
- Why the Fed’s rate hikes are not actual “hikes”
- The new debt issuance directly or indirectly enabled by the Fed is staggeringly large
- Why the Fed’s intervention in the financial markets is creating worrisome instability
- As the risks mount, what should the concerned investor do?
If you have not yet read Part 1: The Federal Reserve Is Destroying America available free to all readers, please click here to read it first.
When Is A Rate Hike Not A Rate Hike?
The Fed keeps talking about raising interest rates, but they really aren’t doing any such thing. In fact they are doing the opposite.
I know that’s a controversial statement, so let me explain. The point of a ‘rate hike’ is not to make the cost of money (interest rates) go up, but to drain excess money from the system. That’s why a rate hike cycle is called a ‘tightening’ cycle; because it is making the amount of money available for lending to shrink, or for conditions to become tighter. The same as if you don’t have quite enough money at the end of the month, things are tight.
This means that the interest rate is the derivative, and the amount of money is the main driver. You don’t set interest rates, you control the amount of money in the system, and the interest rates follow along. They are the result, not the cause.
Or at least that’s how it used to be. But not any longer.
In the past, when the Fed ‘hiked rates’ what it actually did was drain money from the system. Money out = interest rates up.
Now when the Fed hikes rates it removes zero money in the system, and this is why a rate hike is not actually a rate hike at all, but the opposite because it leaves 100% of the money in the system but raises the amount that banks and other financial institutions can charge you for new loans and outstanding credit.
How did we get to this ‘upside down world’ where a rate hike increases money?
To understand let’s be sure we are clear on…
Understanding The Fed’s Endgame Is Key To Protecting Your Wealth
PREVIEW by Chris MartensonExecutive Summary
- Why the Fed’s rate hikes are not actual “hikes”
- The new debt issuance directly or indirectly enabled by the Fed is staggeringly large
- Why the Fed’s intervention in the financial markets is creating worrisome instability
- As the risks mount, what should the concerned investor do?
If you have not yet read Part 1: The Federal Reserve Is Destroying America available free to all readers, please click here to read it first.
When Is A Rate Hike Not A Rate Hike?
The Fed keeps talking about raising interest rates, but they really aren’t doing any such thing. In fact they are doing the opposite.
I know that’s a controversial statement, so let me explain. The point of a ‘rate hike’ is not to make the cost of money (interest rates) go up, but to drain excess money from the system. That’s why a rate hike cycle is called a ‘tightening’ cycle; because it is making the amount of money available for lending to shrink, or for conditions to become tighter. The same as if you don’t have quite enough money at the end of the month, things are tight.
This means that the interest rate is the derivative, and the amount of money is the main driver. You don’t set interest rates, you control the amount of money in the system, and the interest rates follow along. They are the result, not the cause.
Or at least that’s how it used to be. But not any longer.
In the past, when the Fed ‘hiked rates’ what it actually did was drain money from the system. Money out = interest rates up.
Now when the Fed hikes rates it removes zero money in the system, and this is why a rate hike is not actually a rate hike at all, but the opposite because it leaves 100% of the money in the system but raises the amount that banks and other financial institutions can charge you for new loans and outstanding credit.
How did we get to this ‘upside down world’ where a rate hike increases money?
To understand let’s be sure we are clear on…
by
charleshughsmith
Executive Summary
- The repercussions of the Fed's Free Money Machine
- Why debt-funded state control stagnates productivity
- The importance of the 8-year cycle
- What should guide investors' focus and decisions
If you have not yet read Part 1: How Long Can The Great Global Reflation Continue? available free to all readers, please click here to read it first.
In Part 1, we asked these questions: can we just keep doubling and tripling the economy’s debt load every few years? What if household incomes continue declining? Are these trends sustainable?
In the near-term, we asked: is this Great Reflation running out of steam, or is it poised for yet another leg higher? Which is more likely?
Let’s start by looking at the mechanism that funds the government’s deficit spending, i.e. its ability to borrow and spend enormous sums of money year after year.
The Free Money Machine
The state can afford to continue or increase fiscal stimulus (deficit spending) because the central bank (the Federal Reserve) has created what amounts to a free money machine. Here’s how the machine works.
The federal government issues $1 trillion in new bonds to fund another $1 trillion in deficit spending. The central bank (Federal Reserve) creates $1 trillion with a few keystrokes, and buys the $1 trillion in bonds with newly created money.
The Federal Reserve earns interest on the $1 trillion in bonds it now owns, but it returns this income to the Treasury, minus the Federal Reserve’s relatively modest expenses of operation. Let’s say the bonds carry an interest rate of 2.5%. The government pays the Federal Reserve $25 billion in annual interest, and the Federal Reserve returns $20 billion annually, so the net cost of borrowing and spending $1 trillion is an insignificant $5 billion.
If this isn’t entirely free money, it’s extremely close to free money.
So in ten years, the Federal Reserve owns $10 trillion more in federal bonds (assuming the bonds are long-term and didn’t mature).
It's no wonder that some economist propose…
Prepare For The Great Global Contraction
PREVIEW by charleshughsmithExecutive Summary
- The repercussions of the Fed's Free Money Machine
- Why debt-funded state control stagnates productivity
- The importance of the 8-year cycle
- What should guide investors' focus and decisions
If you have not yet read Part 1: How Long Can The Great Global Reflation Continue? available free to all readers, please click here to read it first.
In Part 1, we asked these questions: can we just keep doubling and tripling the economy’s debt load every few years? What if household incomes continue declining? Are these trends sustainable?
In the near-term, we asked: is this Great Reflation running out of steam, or is it poised for yet another leg higher? Which is more likely?
Let’s start by looking at the mechanism that funds the government’s deficit spending, i.e. its ability to borrow and spend enormous sums of money year after year.
The Free Money Machine
The state can afford to continue or increase fiscal stimulus (deficit spending) because the central bank (the Federal Reserve) has created what amounts to a free money machine. Here’s how the machine works.
The federal government issues $1 trillion in new bonds to fund another $1 trillion in deficit spending. The central bank (Federal Reserve) creates $1 trillion with a few keystrokes, and buys the $1 trillion in bonds with newly created money.
The Federal Reserve earns interest on the $1 trillion in bonds it now owns, but it returns this income to the Treasury, minus the Federal Reserve’s relatively modest expenses of operation. Let’s say the bonds carry an interest rate of 2.5%. The government pays the Federal Reserve $25 billion in annual interest, and the Federal Reserve returns $20 billion annually, so the net cost of borrowing and spending $1 trillion is an insignificant $5 billion.
If this isn’t entirely free money, it’s extremely close to free money.
So in ten years, the Federal Reserve owns $10 trillion more in federal bonds (assuming the bonds are long-term and didn’t mature).
It's no wonder that some economist propose…
by
Chris Martenson
Executive Summary
- Understanding The Ego & How It Can Be Manipulated
- Shifting Our Own Minds
- Creating A World Worth Inheriting
- Becoming The Change We Wish To See
If you have not yet read Part 1: The Way To Save Ourselves available free to all readers, please click here to read it first.
In beginning to tackle this big topic, first, let's take a closer look at the ego.
The Ego
Humans are indeed set apart from the other sentient species on the planet such as dogs, elephants, whales, and dolphins. But what makes us 'special’ is not the use of language or tools. Plenty of other animals make use of both. Humans seem to be unique in having an ego.
The ego is the part of the mind we interact with (almost) entirely each day. It mediates between the conscious and unconscious parts of ourselves, and is how we interact with the world. It forms our sense of personal identity. For most people it's a fair statement to say they are their ego. They identify with it fully, just as I did with mine until not that long ago.
The ego thinks, assumes, that it is everything about you.
One feature of the ego is that it is always, and forever, in a state of wanting. It needs more and more and MORE all the time. The ego sets goals and attains them, but is rarely if ever satisfied by reaching a goal. If it obtains one, it immediately sets a new one. Therefore it remains in a perpetual state of wanting as it strives towards each new goal.
Ekhart Tolle, who has had a huge impact on my thinking, puts it this way…
How To Be
PREVIEW by Chris MartensonExecutive Summary
- Understanding The Ego & How It Can Be Manipulated
- Shifting Our Own Minds
- Creating A World Worth Inheriting
- Becoming The Change We Wish To See
If you have not yet read Part 1: The Way To Save Ourselves available free to all readers, please click here to read it first.
In beginning to tackle this big topic, first, let's take a closer look at the ego.
The Ego
Humans are indeed set apart from the other sentient species on the planet such as dogs, elephants, whales, and dolphins. But what makes us 'special’ is not the use of language or tools. Plenty of other animals make use of both. Humans seem to be unique in having an ego.
The ego is the part of the mind we interact with (almost) entirely each day. It mediates between the conscious and unconscious parts of ourselves, and is how we interact with the world. It forms our sense of personal identity. For most people it's a fair statement to say they are their ego. They identify with it fully, just as I did with mine until not that long ago.
The ego thinks, assumes, that it is everything about you.
One feature of the ego is that it is always, and forever, in a state of wanting. It needs more and more and MORE all the time. The ego sets goals and attains them, but is rarely if ever satisfied by reaching a goal. If it obtains one, it immediately sets a new one. Therefore it remains in a perpetual state of wanting as it strives towards each new goal.
Ekhart Tolle, who has had a huge impact on my thinking, puts it this way…
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