Economic Crisis May Be Right Around the Corner

Quantitative Easing Number 4 As reckless as the policies of quantitative easings were during the last financial crisis (there were three QEs between 2008 and 2012) the one that occurred in response to Covid made the other QEs look tame by comparison.

The Fed was attempting to avert a major collapse. While they were “successful” in avoiding the collapse they have created bubble after bubble. The QE came at your (the taxpayers) expense. Some of the asset bubbles we’re seeing right now dwarfs what we saw leading up to the 2007-08 financial crisis. The home flipping mania is back and in some parts of America, property prices have more than doubled from a year ago.

Governments around the world have acted in unison in their efforts to stave off a collapse since the Covid pandemic began.

If anything the biggest beneficiaries of QE were the big businesses as their stock prices and asset prices have soared to all-time highs. What QE has done is delay the inevitable and made things much worse. Unfortunately it is YOU who is going to suffer not them. The government and the FED does not care much for you the little guy. They are rescuing their big connected financial buddies at YOUR expense.

Deflation By looking at the below chart there is no question that the biggest concern for the Fed is NOT inflation but DEFLATION.

Federal funds effective rate since 1980. Currently it is at zero percent:

10-year Treasury rates since 1980. Today it is near zero percent:

Few people out there expect this scenario to happen. The entire media (mainstream and alternative) has been focusing on inflation, which is a distraction. The gold and silver business is run by the Jews FYI. That is why they have created all this fearmongering of inflation and dollar collapse. That hyperinflation scenario is not going to happen anytime soon. For the last 40 years the trend has been a gradual weakening of inflationary pressures. The 1980s and 90s were a time of disinflation after the inflationary 1970s. The latter two decades were a time of low rates of inflation, though there has been major inflation in asset prices.

Personal Savings Rate

On a positive note, personal savings rate have been in a steady uptrend since the last financial crisis fifteen years ago. The mid-2000s produced all-time record low savings rate and it had been going down for 30 years prior to 2005. I expect the savings rate to continue going up. The 33 percent spike in 2020 was a Covid induced anomaly.

Personal savings rate is generally correlated to fear. The higher the savings rate, the more apprehensive people are and vice versa. What is interesting is that the savings rate has been going up despite historically low interest rates.

Yield Curve One thing to keep an eye on is something called the “yield curve.” The yield curve compares the rates between the long-term treasuries (usually the 10 year note) versus the shorter-term treasuries (usually the 2 year bill). When this curve becomes inverted (long term rates become lower than short term rates) it has always predicted recession. It has correctly forecasted every recessions since the end of WWII. Do not ignore the yield curve. The last time the curve inverted was the fall of 2019, which predicted the recession we had in spring 2020. The curve appears headed back towards the zero line, so watch out.

Whenever the line goes below zero the yield is inverted. The shaded grey represents recession.

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