Few people realize the coming bargains in all asset markets within the next five years or so. Stocks, bonds, and property will be fractions of current prices. I discussed in last week’s article how I expect stocks and property to decline maybe as much as 90%. Most people will consider this as sensational speculation and impossible but similar falls have happened in history before. And at no previous time in history has there been a credit bubble of a magnitude that the world is facing today. Previously individual countries have experienced depressions, often preceded by hyperinflation. But never before has every single industrialized country had a century of the exponential growth of credit, asset prices and inflation which is likely to lead to a global collapse.
False growth based on fake money
It is, of course, impossible to time the end of a 100-year supercycle bubble. It has already gone on for much longer than many of us thought was possible. But governments, central banks as well as commercial banks have succeeded in pumping endless amounts of money into the system to keep the Ponzi scheme going. Most people do not understand what is happening to their money. They believe that their dollar, pound or euro is worth the same as it was 10 years ago, or 25 years ago. Since the creation of the Fed in the US in 1913, all major currencies have declined in value by 97-99%. This means that savings have been destroyed by the same amount. Savings are essential for an economy to grow soundly. Savings are the basis of investments for growth in all areas of the economy, whether it is manufacturing, housing or infrastructure. To achieve real growth, there must be savings. The growth that the world has experienced in the last few decades, especially since 1971 when the gold backing of the dollar was abolished, has been based on a massive debt expansion. Credit creation leads to currency debasement and in real terms virtually no growth is achieved. This is why real median wages for ordinary workers are not growing in many countries, like the USA or the UK.
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The world will soon experience how false and dangerous global growth has been since it is standing on a foundation of paper money. As this foundation collapses in coming years, the world will realize that all the assets that have been inflated to bubble levels will lose most of their value.
After Trump the flood
Trump will continue the tradition of his predecessors and expand US debt by at least 9% annually (which is the average since 1981) but probably a lot more since he has promised major infrastructure spending. On top of that, he will most probably encounter a major economic downturn combined with problems in the financial system. This is very likely going to lead to money printing of astronomical proportions and hyperinflation.
The painting below was originally featuring Obama and Bernanke who together managed to double US debt. But Trump and Yellen are likely to achieve even more, leading to a deluge or flood of printed money. Après Nous le Deluge (After us the flood) is what Louis the XV’s mistress, Madame de Pompadour, said to the French king after losing a battle against the Prussians in 1757. The subsequent decline of the French economy led to the French Revolution. The coming decline of the US economy could sadly lead to a similar outcome.
The effect of an implosion of the debt and additional massive money printing will give once in a lifetime opportunities to the very few who are now taking the right measures to preserve wealth.
