“Don’t wait for the storm to pass – Learn to dance in the rain! This is very important advice to survive the coming virtually non-stop storms that the world will experience in the next few years. But sadly most people will not learn to dance to cope with the coming storms. The abrupt downturn in the global economy, triggered but not caused by coronavirus, came as a lightning bolt out of the blue. Thus, most people are paralysed and will fall helplessly as the world unwinds 100 years of mismanagement and excesses, caused primarily by bankers, both central and commercial.
2006-9 WAS JUST A REHEARSAL
2006-9 WAS JUST A REHEARSAL
I have for years warned about the enormous risks in the financial system that inevitably would lead to a collapse. As the bubble continued to grow for over ten years since the 2006-9 crisis, very few understood that the last crisis was just a rehearsal with none of the underlying problems resolved. By printing and lending $140 trillion since 2006, the problem and risks weren’t just kicked down the road but made exponentially greater.
So here we are in the spring of 2020 with debts, unfunded liabilities and derivatives of around $2.5 quadrillion. This is a sum that is impossible to fathom, but if we say that it is almost 30x global GDP, it gives us an idea of what the world and central banks will have to grapple with in the next few years.
THERE WILL BE NO V OR U RECOVERY
No one should believe for one moment that once CV is gone we will experience a V shaped recovery. There will be no V, there will be no U and nor will we see a hockey stick recovery. What few people understand, including the so called experts, is that there will be no recovery at all. An extremely rapid decline of the world economy has just started and will be devastating in the next 6-12 months, whether CV ends soon or not.
CORONAVIRUS CASES EXPONENTIALLY HIGHER THAN RECORDED
There always had to be a catalyst to trigger the inevitable end to the biggest economic bubble in history. Catalysts are normally a financial event like a default of a financial institution. But this time the world could not have been hit by a worse event than Coronavirus. In just over one month the disease has spread like wildfire all around the world. Currently there are 600,000 identified cases.
The problem is that the number of cases are only a function of how many have been tested. Since most countries only have a limited number of test kits, the real figure of infected people is most probably exponentially higher than 600,000. CV was discovered in Wuhan back in November 2019. The disease probably spread a lot faster around the world than anyone realised since no one was tested for a long time and still today very few are tested.
LOCKDOWN WILL BE DEVASTATING
LOCKDOWN WILL BE DEVASTATING
The effects of CV have been to shut the world down for an unknown period. With schools, shops, hotels, airlines and factories, etc, closed, most countries are not producing anything currently. This total lockdown will not only be devastating for the world economically. It could lead to more people suffering due to hardship, famine and health problems with lack of essential items like medicines and food. I pointed this out already 3 weeks ago, but politically and humanely this solution has not been considered acceptable.
What the world is now encountering is the perfect storm. That the debt infested global economy would one day come to an abrupt halt has been clear for a while as I have written in many articles. But instead of a gradual downturn, the world economy is now going to experience a fast and devastating collapse which will lead to a decline in real terms of most assets like stocks, property and debt by more than 90%. Real terms means measured in constant purchasing power like gold.
In the Dow for example, we have just seen on the quarterly chart a downturn in the MACD indicator from a very high level. This is a very important trending signal which indicates that we are likely to see at least 10 years downtrend in stock markets. The alternative is that we will see a very rapid decline in the next 6-24 months and then the index going along the bottom for a decade or more.
UNLIMITED MONEY PRINTING HAS STARTED
Central banks around the world have so far committed $12 trillion of direct support via money printing. In addition global fiscal stimulus or tax reductions of $5 trillion have been committed by governments. But these amounts are just a drop in the ocean. Just take a company like Volkswagen. They are now experiencing a cash drain of $2.2 billion per week. If we multiply that by factories and businesses around the world plus assistance to individuals, we will soon see liquidity requirements of $10s followed by $100s of trillions as the financial system implodes.
If we take the Fed as an example, it has cut rates to zero and already expanded its balance sheet by $700 billion to $5.5 trillion since September 2019. Another $2 trillion have been committed but that is just the start. Just to remind ourselves, during the 2006-9 crisis the Fed’s balance sheet only grew by $1.2 trillion to $2 trillion in 2009. We will most likely see the balance sheet grow by $ trillions in the next few weeks.
- Source, King World News, read more here
