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Interest Rates Will Become a Thing of the Past in this Century

Guest Piece by Tom Beck, Senior Editor of Portfolio Wealth Global

It’s true: the U.S. economy is on a roll. Companies are performing very well thanks to low interest rates and because America is still NUMBER-ONE in so many aspects, with technology chief among them.

Trump’s economic policies have brought jobs back, and there’s not a shadow of a doubt that his corporate tax cuts sparked a market boom, but the government CANNOT keep on acting as if deficits don’t matter.

Today, I want to show why central banks around the world are experiencing what I call “PEAK INFLUENCE” and how they stand to have a smaller impact on policy in the 21st century before eventually hanging their jerseys and retiring.

Take a look at this:


Courtesy: Zerohedge.com

A 700-year trend of DECLINING interest rates is very clear. The more our global economy becomes transparent and the risks become evident, the less risk a lender assumes. As a result, we even see loans being made at NEGATIVE rates.

What does President Trump want? Being a daredevil and a pioneer throughout his life, he wants the FED to acknowledge that the Treasury should also issue interest-free debt like Germany, Japan, France, Italy, the Netherlands, Spain, and others are implementing.

Let it sink in: interest rates will become a thing of the past in this century.

The role of fiscal policy, the one that government is in charge of, is much GREATER.

You want to have a man or woman who understands that they hold the magic wand. If the federal deficit can’t reach a sustainable trajectory with ZERO-percent interest rates and in a growth period, what else IS THERE?

Government will have a much more central part in shaping a country’s path than the central bank will. A nation’s economic strategy will be FUNDAMENTAL to its success.

For over 250 years, capitalism, free enterprise, and competition have led the barren North American continent to global supremacy.

This coming election will challenge the resolve of voters to be swayed by socialism, subsidized healthcare, and debt write-offs, but the cost will be GRAVE.

Courtesy: U.S. Global Investors

Gold prices have gone up by 20% since April of last year when the Bank of International Settlements in Basel, Switzerland changed gold into a TIER-1 asset.

Most people don’t understand the importance of it, but what it means is that gold is among the only reserves that banks can’t hold and value at 100% of the open-market price.

In other words, the CENTRAL BANK OF CENTRAL BANKS just told you that they consider precious metals as being the safest assets to hold.

Bigger than that, they’ve also indirectly told the markets that they’re ready to pay up to DOUBLE for their gold compared to before because Tier-3 assets, like gold used to be, were marked down by 50%.

What gold has done since 1971 has been incredible. Back then, had you bought one Eagle coin, you’d part with $35. Today, a bullion dealer would pay you close to $1,550 for that same coin. Had you had put $35 back then in your safe and taken them out in 2020, you’d be shocked to learn that those $35 buy a SIXTH of what they used to.

In other words, $35 in 1971 are $222 in 2020. This is an important data set, because it means that the price of gold has outperformed the rate of inflation!

Where gold stands out DRAMATICALLY is that it has fully retained its monetary role, in the eyes of the world’s largest money managers.

Governments, central banks and large funds already understand its significance, especially when it comes to hedging disruptions in geopolitics, in surprise inflation spikes or in debasement of fiat currencies.

They also understand that serves as a SUPERIOR asset, inversely correlated to their NET-LONG exposure to stocks.

Who owns most of the assets, globally?

The global pie of equity is divided amongst the world’s richest individuals, owning a colossal amount of stocks, real estate and businesses interests, but it is also owned by pension funds, which manage YOUR money.

Baby Boomers, the world over, have a vested interest in seeing stock prices rise, as well as bond prices, because their net worth is reliant upon them.

Therefore, unlike hedge funds and family offices, governments and central banks, which do diversify into gold, most of baby boomers, own NONE.

A downturn is much more risky for the average person, therefore, than to the sophisticated investor.

In case of a market shock, the big players will have gold, as a hedge, while your pension fund or your 401K plan, may not.

If you have IMMEDIATE needs for liquidity, then, as many boomers will, they may sell at a discount, out of stress and pressure.

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Donald Takes a Bow: Gold Stands Ready!

[Note: We have found the work of Lior Gantz from WealthResearchGroup.com to be excellent and interesting, so we’re sharing his articles with you. Hope you enjoy them and find them useful.]

In two weeks, we hand over the keys to this decade to the history books and put 3,650 days in the basement to collect dust, and embark upon a new one. The U.S. administration and the Chinese government have announced that the 18-month long negotiations, which included tariffs and plenty of shenanigans, are not in vain; there’s a deal getting struck.

Many are debating how meaningful this deal really is, how much contribution and productivity it will add and if it is more of a PR stunt to boost confidence and make Trump look better in the eyes of voters than it is a juicy agreement, filled with substance.

Here’s what we know, for a fact: the U.S. is a country that works in a way that generates TREMENDOUS wealth and equity, BUT traps it and delivers it into the hands of the few.

The biggest takeaways from this decade are as follows: the central bank’s policies are ROCKET FUEL for stocks, the government is not INTERESTED in making any difficult austerity measures or budget cuts to balance the budget, the baby boomer generation is DUMPING stocks for bonds, an increasing number of Americans will continue to join the poor, while others become millionaires and the middle-class VAPORIZES, and millennials have their work cut out for them.

Compared with the national debt, the total wealth of households is staggering. In other words, the government could (in theory) close the national debt, if it was to tax/confiscate wealth and deal with the problem head-on. I personally don’t see that as a real threat.

 

Courtesy: Zerohedge.com

The deflationists, the promotors of the “Demographic Cliff” that theorizes that the baby boomers’ liquidation of stocks should have caused the deepest bear market in history were proven wrong – they didn’t factor in the ability of corporations to buy back shares.

In the past 40 years, through 4 decades of both Republican and Democratic presidents, with interest rates ranging from nearly 18% to 0%, and with wars happening all over the globe, stocks have FLOURISHED.

Corporations are worth investing in, but what has transpired in the process is that the VALUE moved from the level of the worker to the level of the decision-making management.

In other words, corporations have become true wealth generators, on a consistent basis, but the profits don’t trickle to most of the employees.

 

Courtesy: U.S. Global Investors

In the developed world, but especially in the U.S., the 21st century has been brutal for those that don’t keep pace with what’s going on. As a country, they’re growing slowly at 2%-3%, but that is the AVERAGE. Most people are not in the middle, but are at the polar extremes of this 2% world. The S&P 500 has delivered a 15%/year gain in the past decade and real estate prices have gone parabolic as well.

On the flip side, half of the workforce earns $30K/year, so the majority of the taxpayers are not happy campers.

Look at poverty rates and trends; to me, it seems that each SLOWDOWN will create more PERMANENTLY poor families. Said differently, once you’re poor, you will remain that way.

Courtesy: Zerohedge.com

In his presidency, Donald Trump has mastered the strategy that boosts corporate returns, but now he has given investors assurance and confidence to ease their concerns, add risk to their portfolios and EMBRACE growth.

This, as we see it, might be the end of the global strength trade for the dollar, especially since it coincided with Brexit, which adds to the certainty in Europe, now that everyone knows where everything stands.

Now, with all this good news behind us, investors need to look closely at their portfolio and figure out if inflation doesn’t pose a sudden risk.

As we see it, dollar weakness and low rates are back. In other words, the 2009-2011 era is upon us and reflation will do wonders for resource stocks!

 

 

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Investors, Beware: Prepare For the Coming Decade

[Note: We have found the work of Lior Gantz from WealthResearchGroup.com to be excellent and interesting, so we’re sharing his articles with you. Hope you enjoy them and find them useful.]

Today, there is over $17T invested in bonds that guarantee a loss. Think of the madness: You invest $101 today and in 2030 you will receive back $100. While the rate of inflation has been around 1.5% and GDP growth has been 2%-2.5%, owning bonds hasn’t been a bad choice or a lousy decision.

Many bond investors own the bond because of its liquidity and due to the fact that they’ve been able to flip it, selling it to another institution for a profit, so the yield wasn’t a determining factor.

For example, when the U.S. government’s 10-yr bond yields 2.3% and you lend Washington $10,000, the return on the coupon is $230. If six months later, the newly-issued bond yields 1.8%, you’d have to lend the government $12,777, so investors flipping their previously-bought bonds from six months ago just made a stunning 27.77% return.

But who in their right mind bets on lower rates, when the world’s interest-rate policies are already this artificially low? Who can be so CERTAIN that rates won’t rise, that central banks will be able to continue on their path of suppressing inflation? WHO BUYS BONDS AT NEGATIVE RATES?

The level of madness, lunacy and criminality goes to another echelon when you learn that 97% of these government-issued bonds are actually owned by the CENTRAL BANKS and the institutions that facilitate fractional reserve banking in the first place!

President Trump may be calling on Powell via Twitter to lower rates to zero, because BOTH OF THEM are fully aware that in this decade (2020-2029) the compounded growth of the unfunded liabilities and the interest payments on the current national debt will become PUBLIC KNOWLEDGE and part of the debate. Thus far this has been swept under the rug, but the FED is already helping Washington prolong this economic expansion that is financed by ever-growing deficits.

The Federal Reserve is rudderless. It really has no idea what to do next, so it is coming up with all sorts of fantasy schemes, like “letting inflation run higher to make up for lost time” – this is STUPIDITY on the grandest scale.

I’ve never understood this imaginary, totally bizarre target of 2%, which is just a made-up figure that they HAVE NEVER been able to meet.

The Federal Reserve, along with all other central banks, is a financial mafia in $3,000 suits.

Their entire reason for existence is based on a false premise that bank runs won’t occur under their watch and that they know how to keep employment levels steady and inflation in check.

Nothing could be MORE absurd than those claims.

The dollar will continue to be King of Fiat, since the other currencies are now in banana republic mode. The Euro, Yen and Sterling are jokes.

So long as this boom in stocks prevails, we won’t see any inflationary mania, but distrust in institutions is back to WW2 levels. In America, the world’s biggest, most dominant and important market, DISUNITY is at a record high.

Every day, watching from afar, I am astounded at some of these notions brought up by AMATEUR politicians, who have ZERO real-world experience: outlawing billionaires, making healthcare 100% government-subsidized or making college 100% funded by taxpayers.

If there is a downturn in 2020, Trump will most likely lose the presidency to a Democrat. If that happens, the U.S. will begin to resemble Europe and have a quasi-socialistic regime. If Trump wins, he will cut taxes for the middle class and BALLOON the national debt, making the endgame much scarier.

The planet is operating in the wake of a global revolution that’s due to come. GDP growth is now a matter of debt, not productivity.

Gold may be underperforming stocks in 2019 and mining stocks may be underperforming for 3 years, but the paradigm shift will be so quick and the re-pricing so DRAMATIC that being early and looking like a fool for a while is a small price to pay in order to MAKE obscene, life-changing profits on the other side.

Don’t cover your ears. Don’t bury your head in the sand in these wild times we live in. Be a force to be reckoned with!

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