Should I invest in a gold IRA is the question that still many ordinary folks ask themselves. In this post, I will outline the reasons for ordinary folk to invest in a gold IRA account.
Any investment asset has certain risks, some higher and some lower. The idea when investing is to know exactly what the risks of a particular asset are, in order to make the right decision, the decision that suits your needs best and at the same time minimizes your risk. Over the years, we’ve seen many investors lose their fortunes because they just got too greedy.
Many investors should be asking themselves the Should I invest in a gold IRA question more often, this way they will be able to make a better decision regarding their IRA investment.
The same applies to your IRA investment. An IRA invested solely in mainstream assets will put your savings at risk in case of a market crisis.
For example, last year (2020) between February and March the stock market lost 10.000 points. As a result, trillions of dollars invested in stocks bonds, and other mainstream investment products were lost. Many IRA investors had to postpone their actual retirement time, due to low funds in their retirement accounts.
Gold IRA Definition
A gold IRA investment is an individual retirement account, an account that functions the same way as a regular IRA account however, instead of holding paper assets, it holds physical bullion coins or bars.
Gold IRA vs Traditional IRA
A gold IRA is treated by the IRS as any other IRA. The difference between the two is that a mainstream IRA is invested in mainstream assets such as the stock market, government bonds, options, and so on whereas in a gold IRA, the money is invested in gold. The IRS has also allowed IRAs to be invested in other precious metals such as silver, platinum, and palladium. Moreover, Cryptocurrency IRAs are also allowed.
A gold IRA is an asset that holds its value, especially during bad economic times. A gold IRA will secure your savings and offer financial stability to your investment.
A traditional IRA investment (401k, SEP, Thrift, Roth, and so on included) invests in traditional assets, such as the stock market. Although these types of investments can offer great returns, they are subject to large fluctuations during difficult times. That means you could see your money disappearing in a very short time.
Reasons to Invest in a Gold IRA
Diversification. In an investment portfolio putting all eggs into one basket is a big mistake. A prudent investor should include different types of investments just in case things go wrong. Gold is the asset that will diversify your investment portfolio.
Protects your investment from inflation. Inflation rates will rise to high levels thanks to endless money printing by the Fed. High inflation rates are bad news for your dollar. In a high-inflation environment, your purchasing power will drop substantially.
Gold is a tangible asset.
Gold is not a chain in someone else’s liability. eg. Having your money invested in a company’s shares and the company goes bust due to illegal activities or because it took the wrong business decisions.
A gold investment protects your savings from geopolitical uncertainty. If a war breaks in the Middle East, for example, the traditional investment assets will take a downturn (stock market) but not gold and other precious metals.
Increasing demand for gold and silver for industrial use. eg gold is used in computers mobile phones and so on.
Low or negative interest rates. That means your dollar loses value every single day if it is stored at the bank.
The weak dollar is more bad news for your life savings
The stock market bubble. We are witnessing an unprecedented bubble in most assets. The stock market bubble though is the one that once it bursts it will actually cause the biggest problems in the economy because this particular bubble is a huge one.
Rotten Political and Financial System
The newly elected Biden administration is faced with an almost impossible task. First, the social and political divisions of this great country should be addressed. Something must be done to deal with the covid19 virus and then something should be done to change the monetary system.
Most finance experts and market analysts agree that today’s fiat currency monetary system does not work. Since its introduction back in 1971 it has only created disorder and turbulence in the economies and the markets.
Unfortunately, we are faced with irresponsible individuals who do not have the political will and guts to make the right decisions for themselves and for the country. In addition, central bankers are also responsible for this, because they have seen their profits skyrocket, at the expense of you and me, and they do not want that to change.
The Abandoned Gold Standard
In 1971 President Nixon abandoned the gold standard policy. It was a move that surprised the Western world. The US kept cheating the rest of the world by printing cash in order to finance the Vietnam War. There was only one way for the US to get out of this and that was to abandon the gold standard policy.
What President Nixon started in 1971 is now leading to an uncontrollable money-printing bonanza. Nevertheless, money printing has been carried out in the past in most Western economies. Nowadays though the money printing programs that take place right now are enormous. President Trump and the Fed carried out a gigantic 2,5 trillion money printing program. The new Biden administration is willing to add another three billion fake money to the economy.
The Europeans too agreed to raise a 2,1 trillion dollar stimulus package. Their funds will be raised by selling bonds collectively. In addition, similar money-printing and bond-selling programs have been carried out by most Western countries.
Financial Crisis is on the Way
All these money printing and bond selling programs mean more debt for the bond sellers and worthless money flooding for those who choose to print cash. The results from these are likely to be.
Further weakening of national currencies including the American dollar
High inflation levels
A large drop in our purchasing power
Mainstream assets (stock market, etc.) to take a large fall
Gold and other precious metals will see their value increase substantially
Mainstream IRA programs will suffer big losses
Gold IRA Benefits
You may regret if you choose a conventional IRA or 401(k) investment with a bank or brokerage firm. The stock market bubble is expected to decimate traditional investment assets. Stocks, bonds, and so on will see their prices drop substantially. That means your, life savings could perish overnight, and in the end, there won’t be enough savings for you to retire.
Since most IRA accounts are invested in traditional assets, and since all these assets move downwards or upwards together, (correlated assets) there must be another asset that does the opposite.
On the other side gold is a non-correlated asset. (an asset whose value isn’t tied to larger fluctuations in the traditional market) In fact, gold always does well in times of crisis. Call it a financial crisis, recession, geopolitical tensions, war, COVID-19, trade war, whatever the case is, gold not only maintains its value but also sees significant gains.
Black Monday1987Iraq-Kuwait War1990Dot Com Crash2001Financial Crisis2008Stock Market Decline-38.9-22.5-27%-34%Gold Price Results+5%+7.5%+1%+5%Gold Outperformed Stocks By Ratio45:131:129:140:1
We have seen the risks involved with a mainstream investment portfolio. Prudent investors do not put all eggs in one basket. This is applicable right now because we are facing an overvalued stock market and the effects of the uncontrollable money printing policy.
An IRA investment should be low-risk or risk-free. That’s because it is made of money that is not in abundance but your own hard-earned savings. In addition, if that money gets lost, then you will have nowhere else to turn to.
Since IRAs are made of hard-earned money, extra care should be taken to make sure the investment is well protected. Considering gold is a safe-haven asset during bad times, a gold IRA will ensure that your life savings will not perish overnight in case of a financial crisis.
Should I Invest in a Gold IRA?
There is no doubt the evidence for investing in a gold IRA is overwhelming. However, when investing your life savings all care should be taken in order to avoid possible traps and mishaps.
Joe Biden, the newly elected US President is just about to face a number of issues that will be almost impossible to tackle. One of them is the financial bubble 2021.
The social and political divisions in the US cannot be cured by optimistic calls for unity. Then there is the moral duty to do something about the COVID-19 pandemic. In addition, sooner rather than later the President will have to deal with the effects of the largest financial bubble ever in the history of the United States of America.
When I say the largest financial bubble ever I am dead serious about it. We are currently living in the largest financial bubble because it includes almost all available assets thanks to the Federal Reserve.
Reasons Behind the Financial Bubble 2021
The Fed’s Irrational Policy
The Fed willingly encouraged investors to buy overpriced assets. Dealing with the Fed’s irrational policy will be a very difficult task. In fact, it will be of the same magnitude as the gold standard exit in the early 70s was, or dealing with the high inflation numbers in the early 80s.
It will take strong political action and a full review of the country’s monetary policy.
The ex-Fed president and now the US secretary of the treasury will not be much of a help. Mrs. Yellen walked the same path set by Allan Greenspan. Unfortunately, it wasn’t just her, all her predecessors did the same.
Alan Greenspan’s recipe during a crisis was to reduce interest rates and thus extend enormously Fed’s balance sheet.
Every time the Fed intervened to “help the economy” by just lowering interest rates, what it actually did was to set up the conditions for the current bubble and consequently the oncoming financial crisis.
Inflation Gradually Accelerates
Nonetheless, this game is now over. Inflation is slowly picking up and personal spending has risen 1,5% more than expected. Certainly, this is not much but in the middle of the covid19 pandemic that number gives us an indication that it will continue to rise.
The truth of the matter is that nobody paid any attention to these figures as everyone followed the GameStop media frenzy.
The Fed’s Money Printing
The Fed prints money nonstop. This way it finances a large chunk of the government deficit. The huge amount of money the Fed has created always finds a way to come out of the banking system. At the same time, there are extensive restrictions in the food chain, processing, manufacturing, and in-services.
Free Money is About to End
The oncoming inflation hike will force the Fed to tighten up its monetary policy. The Fed stretches out moves like that will be slow and take time. However, the markets always react before the Fed, especially in a crisis situation as fear takes over.
No matter which way you turn there are signs of a wild derailment. Most investment and market analysts see it coming, except the bankers. It is expected that most types of investments to lose money over the next years.
The Stock Market Bubble
When it comes to the index that really matters, the index that predicts real returns things do not look good. The US stock market is overpriced in fact, its value is similar to 1929, 2001, and just before the 2008 global financial crisis.
All stock market bubbles tend to keep up with fast credit expansion and the credit expansion we are seeing right now is not the exemption. Business debt compared to GDP has exploded over the last few years. One of the reasons for that was the large GDP drop.
In my mind, the stock market bubble that is on its way will be one of the worst ever. That stock market disaster will be the result of the effects of the financial bubble 2021.
In the past, when the stock market was facing difficulties investors had the opportunity to put their money in government bonds. Nowadays this is not viable. Government bonds in Europe and Japan tend to offer zero or negative interest rates. The return of the US bonds is 1,1% right now, which is poor.
It will also be a bad idea for the investor to buy private company debt. Private company debt is also not worth investing in. Their returns are at all-time historical lows. Even the high-risk bond returns have never been lower.
It looks like there will be a time when investors won’t find a place that offers decent returns to put their money.
The Fed Will Take Swift Action
When investors are about to face a financial crisis, the same goes for the Fed and the White House. The Fed’s duty will be to move carefully because nobody wants the markets to panic. If the markets should panic then, billions of dollars could be lost overnight.
Nevertheless, seeing the oncoming crisis and doing nothing to deal with it is not politically correct. Inflation has a negative impact. It affects the poor more than the rich. A development like that doesn’t do much for social justice, and the politicians will always step up and do something about it. Unfortunately, in most cases what they do doesn’t always work.
Many of you will disagree with me and there is nothing wrong with that. However, in the next few months, we are about to find out how big is the hole the Fed has created. How much it will damage the markets, the bank itself, the ordinary folk out there, and the US.
Final Words
All data indicates that 2021 will be a very interesting year. The financial bubble 2021 built by the Fed will explode with huge implications for the economy and all investors.
When the world’s largest economy gets in trouble then the global economy suffers too. A US financial crisis will turn into a world financial crisis, with stock markets around the world crashing.
Most assets will suffer great losses except for gold and other precious metals. Many market analysts argue cryptocurrencies could also be a safe place to be during those times. I still think cryptos are too unstable but there is a belief that cryptos might attract funds.
Everybody knows gold is a safe haven during bad times. It always has been and it will always be. Every time there has been a crisis situation gold has been called upon to save the day and never disappointed. It always has been and it will always be.
Gold is a non-correlated asset which means when all other mainstream assets take a downturn gold tends to move the opposite way and it actually sees its value grow.
Traditionally people have considered their retirement 401Ks and IRAs to be like safety nets rather than wealth builders. With a self-directed Gold IRA for Retirement, you need not be satisfied with growth rates in the single digits. Gold IRA for Retirement
Gold IRA for Investment
A gold IRA for retirement investment is an individual retirement account, an account that functions the same way as a regular IRA account however, instead of holding paper assets, it holds physical bullion coins or bars.
Alternative IRA Investment
Although the first priority when investing in an IRA is the safety of your life savings, it is possible to achieve extraordinary growth potential outside of the traditional IRA markets, multiplying your IRA’s value several times without compromising the safety of your savings. Significant growth is not uncommon, within a relatively short period of time.
It will not just happen by itself. You will have to take hold of your retirement portfolio, you also need to put in the time and effort, and also do your own research. The benefits are enormous but only to those willing to take action.
The Stock Market is Overvalued
A clever investor never puts all eggs into one basket. In addition, most investors think twice before they put money into the stock market due to the ups and downs, and are frankly not as confident as they used to be. We’ve seen company shares drop dramatically and investors lose money many times in the past. It actually happened a few years back. To add more, investors and market analysts are concerned with the current levels of the stock market that is considered to be way too high and correction is looming.
Are you concerned that you will not retire in comfort? If you are, the option you have will be to put your IRA money to work for you and, truly diversify your IRA portfolio with alternative investment assets. Your banker and broker will not let you invest in alternative investment assets, because they want total control over your own money. You see your IRA is money that belongs entirely to you. In the meantime, the commissions they earn are out of this world.
Isn’t time that you take control of your own money?
How to Take Control of Your Own Money
You will have to acquire knowledge of alternative investment opportunities that are permissible for your IRA. You see, the IRS has placed strict restrictions on IRA investments, and rightly so. (An alternative IRA could consist of precious metals, cryptocurrencies, real estate, and so on.)
Contacting a Self-Directed IRA expert will be a great idea. That person will help you and direct you toward the right alternative investment asset that covers your needs best.
A firm that offers low annual fees, a spotless track record, and a buyback program will be the best option for you. In addition, a self-directed IRA will put you in the driver’s seat as you will maintain full control at all times.
Provided you satisfy IRS regulations on the type of investments allowed for your self-directed IRA funds (gold is one of many possibilities), you can take charge of your financial future by turning that IRA into a high-earning instrument. The IRS’s guidelines are crystal clear, as defined in their publication “Your IRA should be a separate and distinct entity from yourself“. Whatever investments you make should benefit your IRA, and not you directly. Your self-directed IRA expert will explain all the details and refinements of this IRS publication.
Conclusion
Investing in an alternative or gold IRA is becoming increasingly popular for the modern investor, as real estate, gold, cryptocurrencies, and so on, can offer a number of benefits to the investor. An alternative investment IRA could safeguard your life savings from bad times and at the same time will give you growth on your investment.
I hope my gold IRA for retirement article has got you covered. If you still have any questions feel free to write a comment and I will answer back.
Many people in the community are now wondering whether capitalism is still a healthy system, or whether it has changed for the worse, and whether capitalism faces its biggest crisis ever.
We are living in a world that can not survive without a constant budget deficit, can not survive without cash printing, can not survive without negative interest rates, there is something extremely rotten. In fact, we are living in a world that accumulates government and public debt, a world that gives us a false sense of fulfillment by spreading around worthless currency. Well, this world is not only rotten but also disgusting! Yes, it stinks of lies, deception as well as ethical decadence.
Capitalism Faces its Biggest Crisis Ever
Why does not anyone stand up to warn the community where we are heading? Well, for the straightforward reason that no politician can tell the truth. Since if they did, they wouldn’t be chosen. The principal function of any politician is to buy or obtain votes and as a result, they can never speak the facts.
Additionally, there are so many beneficial interests with endless rewards. The money men who regulate the monetary system have all to obtain, from developing false markets, false money, and false interest rates.
The Reality Never Dies
The Roman philosopher and also statesman Seneca said: “Veritas Nunquam Perit” (The Truth Never Perishes). That could very well hold however it can be suppressed for a very long time as we are seeing now all over the world.
Let us initially think about the greatest lie which is cash. For 5,000 years, the only genuine cash has been gold (and sometimes silver). Whenever the financial system has differed from that basic principle, by creating false money, it has finished in disaster for the world, whether that has been done with silver coins full of zinc or copper or by just printing paper money.
Complete Disaster of the Currency System to Follow
Which is where we are heading currently. A tragic course of events was triggered when Nixon closed the gold window on August 15th, 1971. Ever since international debt has taken off and also all money has imploded. Financial obligation, derivatives, and unfunded liabilities have gone from workable amounts in 1971 to over $2 quadrillion today. As well as every single money has shed 97-99% in actual terms.
We are currently at the point when we will certainly not be able to change the training course of either of the two. The environment is figured out by really long cycles that humans have no impact on. Now we just have to allow it to take its course which will be devastating for the whole world.
So why is nobody seeing what is taking place and why is nobody taking on the claim that the Emperor is completely naked?
The truth is unpleasant and painful yet it does never die.
It is an indisputable reality that essentially all the fiat cash that is printed by federal governments, central banks as well as commercial banks is pointless as well as for that reason incorrect.
If a federal government prints cash out of nothing to cover deficit spending, that cash has NO worth given since all the jobs needed to develop it was to push a button on a computer system.
We likewise recognize that the money has no worth because no financial institution or central financial institution is prepared to pay interest in deposit accounts. Instead, because cash is worthless, these bankers desire to be paid to hold the money. There is no reason to pay interest on worthless money.
There is an Abundance of Worthless Money
American Dollars
As well as when a financial institution receives a $1,000 down payment and after that lends out that very same cash 10 times or even more, that cash is likewise worthless, considering that it has set you back $0 to provide the funding.
It is the same with a credit card company or car funding, they all concern counterfeit money developed by the touch of a switch.
For the ones who don’t recognize what this implies, let me describe it. Allow us to begin with the bubble’s possession. When the worldwide stock, property, and also various other bubble asset markets stand out, all these properties will certainly lose a minimum of 95% of their value in actual terms. The best way to calculate real terms is certainly gold because that is the only cash that has actually survived and also preserved its purchasing power for hundreds of years.
And also, if we take a look at the financial obligation bubble, global financial debt goes to the very least $270 trillion. Yet when the financial obligation bubble stands out, so will other liabilities like the $1.5 quadrillion of derivatives. So when the financial obligation bubble pops, basically all that fiat money ends up being entirely useless. No person can repay it as well as no one wants to acquire it.
Global Debt Chart
I recognize that the above two paragraphs are an extremely streamlined description of what will certainly take place over the coming years. However, this is the ugly truth.
These occasions will undoubtedly not take place in one go. They will certainly most probably begin with the securities market very first collapsing, which will certainly put pressure on credit score markets. A lot more QE will certainly adhere to yet that will just have a short-term impact. Even more collisions, even more, cash printing, the rising cost of living, devaluation, credit report defaults, company closures, and also bank defaults.
We had the first clear signals from numerous significant reserve banks, that something was rotten in the worldwide monetary system already in August, when the Fed, ECB, and BOJ all proclaimed that they would do what it required to sustain the system.
Quantitative Easing and Money Printing the Same
In September the Fed launched overnight Repos of $75 billion boosts to $100 billion. They additionally took on two-week Repos of $ 30 billion rising to $60 billion. Adhering to that the Fed has now announced that they will certainly start QE of $60 billion each month. We should not call it QE according to the Fed. So allow us to just call it money printing since that is what it is.
The President of the Minneapolis Fed stated: “This is not about changing the stance of monetary policy. This is about making sure markets are functioning. This is kind of just a plumbing issue.” He is right, it is a plumbing concern. However, the issue is that the economic system is leaking like a filter without the possibility of connecting all the openings.
Between the end of 2017 and also 2019 the Fed reduced its balance sheet by $700 billion from $4.5 trillion to $3.8 trillion. As always, the Fed has no idea whatsoever. The issue is that the system will not make it through with even more cash printing either.
Central Banks Introduced Unprecedented Economic Stimulus
The FED
The world’s largest central banks had no other option to fight the COVID-19-caused crisis than to introduce further economic stimulus amounting to trillions of dollars. It was the Fed and the US government first with the ECB-European commission next, and all the other major western economies and central banks to follow.
Yes, the system is rotten and is currently starting to smell. The activities by the central banks specifically in the last couple of weeks smell of panic. The problem with JP Morgan or the Financial Institution of America, the ECB, or possibly the Fed is supporting the bankrupt Deutsche Financial institution? We will most likely quickly learn where the greatest stress is.
On top of the bank issues, the company’s financial debt is obtaining riskier day by day. The financing of firms like We Work and Merlin, are clear indications of just how hazardous this market has ended up being.
Central banks are already trying to deal with the fires, but most people are not aware these fires exist. There is a concern whether the central banks will be able to contain these fires or whether they will spread like wildfires.
The Decadence Started in 1971
US financial debt back in 1971 was $400 billion versus $26 trillion today, a “plain” 55x boost. US GDP was $1.2 trillion in 1971 versus $26 trillion today. A 55x boost in US financial debt in the last 48 years has just generated a 17x boost in GDP.
The US economy is in trouble which is not surprising because the never-ending money printing of pointless paper money, can not create real growth and wealth whatsoever. Its only effect on the economy is to create a stock market bubble.
It is not just the US that is in this setting. Since taking away the gold support of the dollar in 1971, offered all countries an incentive to print money and increase credit.
The UK Example
I do keep in mind the beginning of the damage of money. Moving later on to the UK, I saw the pound collapse against the Swiss Franc from CHF 10 in 1972 to Swiss Franc or CHF 1.20 today, an 88% loss of the extra pound.
A period of economic mismanagement and political turmoil in the UK in the 1970s started it all. The annual rising cost of living was 15-17% for 7 years and interest rates got to over 20%.
The economic system was moments from breaking down in 2008 throughout the Great Financial Dilemma. Eleven years later on, worldwide financial debt has doubled and danger has increased greatly.
Central lenders are conscious that the global economic situation is currently standing at a crossroads. The course was laid by them many decades back and now there is no way back.
The US and the Gold Standard
August 2020 remains in many ways comparable to August 1971. America was at that time behind-the-scenes. The country was under pressure after the costly Vietnam battle, as well as the gold standard, which stopped the United States from cheating the system by printing cash. The remainder of the world saw the US’s precarious situation as well as began marketing bucks. To recover their position, Nixon saw no other way than to take the buck off the gold standard, and this was the start of 50 years of global cash printing, and also credit score growth on a humongous scale.
Nixon-Elvis
Nixon’s August 1971 choice has brought about a dilemma of extraordinary proportions. Still, most people can see that we are currently at the point of “a final and also total catastrophe of the currency system included” as von Mises stated.
This August is not one solitary event like in 1971 yet a variety of very clear indicators that all reserve banks are worrying about. Every major reserve bank is currently revealing a level of concern that is extraordinary. They are all telling us that there will certainly be unrestricted money publishing incorporated with no or negative interest rates. This will certainly not clear up half a century of reckless monetary mismanagement.
What Nixon started will now be finished off by current governments as well as main lenders in the most magnificent money printing bonanza, leading to hyperinflation as well as a collapse of the economic system.
Until now, over 40% of worldwide bonds currently generate less than 1% and over $16 trillion well worth of bonds have an unfavorable interest or negative interest.
Negative Interest Policy is Insane
A negative rate of interest prices is of course complete insanity. It will certainly come to be much more intriguing when home loan rates go to minus 25% so after a few years the financial obligation has been paid by the financial institution!
Us Rates to Decline Unless
95% of international bonds are now listed below the Federal Finances price. Since that rate is 2.5%, this is a short-lived scenario. US rates are likely to decline dramatically throughout the autumn to absolutely nothing unless the devastating results of the neverending money printing start to take place. That will cause a lower dollar and greater gold. US stocks will certainly decrease despite lower prices.
Lower rates are no longer seen by securities market financiers as helpful for markets as a sign of financial difficulty in advance.
Powel Trump and the US-China trade war
Fed Chief Powell simply stated that the “Economy is in a beneficial area”. You ask yourself where that area is, considering that there is nothing good regarding the United States economic climate currently. As well as it appears that Powell doesn’t think in his very own words given that in the same breath, he claims that there are “substantial threats”.
So the Tit for Tat video game between the US and also China proceeds and what is specific is that everybody is a loser in a trade battle. Trump won’t give in and neither will China. As they play their video games, the global economy will certainly suffer and so will a breakable global economic situation. Global trade is currently down and I am afraid things could get worse in the autumn.
Trump is most likely to win this video game over Powell. Trump has stated that rates need to drop by 1% now. Hence, we are assured to see a lot lower US rates and a rapidly falling buck throughout the fall.
Investors set to Suffer Big Losses
Regretfully 99% of investors will not understand that they need to be out of stocks and move into gold, till their wealth has been wiped out. All stock investors will believe that central banks will certainly support them once more. But as I have described, this time support will certainly fall short as we begin a secular bear market in stocks, and the global economic crisis will last a very long time as well as lead to massive wide-range destruction.
The End of Money Printing and Neverending Credit
That the global economic situation for the last 100 years was reliant on credit scores as well as printed cash, is not a new miracle paradigm but a sign of a diseased system. The never-ending credit and the constant printing of worthless money are about to end. In a corrupt way, it is virtually paradoxical that the trigger for finishing this sick financial system would certainly be a pandemic disease.
Social Discontent and Anger to Come
Currently, the world remains in a situation where all of those aspects will possibly come to pass. We already have the recession and also we have a condition. There is no significant famine yet however, this is most likely to come. Social discontent and conflict are possible repercussions of these troubles. Starving and angry people will stand against their leaders as well as against the elite. The differences in income, as well as the huge gap that separates the wealthy and the poor, have created an illogical scenario. This is basically without exception just how every change starts.
There is a lot of anger in the community. People aren’t happy at all. They are wondering what on earth is going on with their taxes, they are wondering why the money they earn is never enough, they are wondering why social inequalities have increased, they are wondering where all this abundance of (fake) money is going, and so on.
The Money that does not Exist
Central banks and governments are currently printing limitless amounts of cash to help small and also big organizations as well as individuals. It is a program terrific in that every person gets aid, but no one asks where is the money coming from.
No one stresses that THERE IS NO CASH. The $ 100s of billions as well as trillions that are being provided to the needy do not exist. They are just produced out of thin air. Because the situation started in the very early autumn of 2019 with the Repos, the Fed’s balance sheet has increased by practically $3 trillion to $6.5 T. Yet this is just the start. The forecast is that it will get to $9T in June as well as possibly $12T a couple of months later on.
What we have to keep in mind is that this situation did not start now, however, in 2006 the Fed’s annual report was $800K. By 2012 it had gone to $3T. In the following few months, the equilibrium sheet will certainly blow up by 3-4x to $12T.
In the present year, the US can quickly get to a shortage in unwanted of $4T, taking the financial debt to $ 28 T. If we just go back 3 months, who would certainly have thought a Fed equilibrium sheet reaching $12T as well as a US financial obligation of $28T? They don’t even do that because if they had, they would have known that the United States financial debt has doubled every 8 years because of 1981.
The United States is likely to have a debt of $40T in 2025 however, that number is most likely a low number. Then we are going to see failings not simply in the economy but also in the financial system. That is the danger the economic system is currently facing as well, as we are currently in a stage when the surprises will be much even worse than anybody can think of.
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Back to the Future
It all began with private lenders taking control of the financial system in 1913 when they established the Fed for their very own benefit. For practically 60 years their power grew slowly however, in 1971 when Nixon closed the gold window, all hell broke shed.
The United States currently begun what is currently 60 years of shortage investing. Every solitary year given that 1960, the United States is running at a loss. (deficit)
Because the main purpose of political leaders is to purchase votes, Nixon had no choice back in 1971. The United States had currently at that point been running a shortage for ten years. With a gold standard, it is necessary to run a sincere economic system without deficits. Or else you lose all your gold as well as the currency breaks down. Given that Nixon had no intent to run excess, he might not have been connected by a gold requirement and consequently abolished the gold backing of the dollar. The consequences were of course tragic as well as the dollar has actually fallen since.
Back then $33 could buy you an ounce of gold nowadays you need well over $1900. This is how much the dollar has depreciated.
Considering that the US began running deficits 60 years ago, total United States debt has actually gone from $800 billion to $26 trillion today. What we are seeing is a fantasy world all built on financial debt, federal, state, customer, home mortgage, car, trainee, and so on. The checklist is limitless just how to produce phony wealth simply based on the financial obligation.
US Debt Chart
The US is currently coming back to reality which will certainly be the biggest shock. The trillions of fake cash and fake assets will now implode and so will certainly the US economy.
What the world has experienced in the last 100 years is fake capitalism. It more looks like Voodoo capitalism. Central bankers, led by the Fed, have successfully taken on Mayer Amschel Rothschild’s philosophy: “Permit me to issue and control the money of a nation, and I care not who makes its laws.”
By doing this, they have placed a spell on the international economic system as well as lumbering it with debt that might never be paid back. They are instrumental in developing a debt-plagued world economic situation as well and then they are the only ones who can come to the rescue and “save” it.
A debt-burdened world can never be saved by even more financial debt. Next, we will certainly see limitless cash printing that squashes money as well as leads to depressionary run-away inflation.
Inflation is on the Way
The reckless money printing by the Fed is expected to bring about an inflation crisis. Analysts are convinced that unprecedented money printing could increase inflation substantially. That means your cash will lose value. For example, if you are planning to take a holiday to an exotic location with your retirement savings, chances are that you will not be able to afford it. You could probably end up at a cheap resort nearby.
Business Collapse and Unemployment.
Market bulls argue the market is already recovering. Shops are opening, factories are back in business, restaurants are opening too, stocks are holding up, and so on.
They are wrong. Unfortunately, unemployment levels are massive and still growing. Several airlines already declared bankruptcy. Some of them are Avianca from Colombia, Virgin Australia, Trans States Airlines from the US, Compass Airlines also from the US, and many others. Rolls Royce announced 9000 job losses in the UK, Nissan shut down its Barcelona plant in Spain with 3000 redundancies, and another 25000 jobs indirectly threatened.
In the US the news is not good either. The country has lost 20,6 million jobs since mid-March, resulting in an unemployment rate of 14,7% a level not seen since the great depression in the 1930s. I am afraid, there will be more business collapse and more unemployed in the following months.
The recession is going to be bigger than the 2008 recession. It will take years for the world economy to recover not months or weeks. The numbers are already massive and still growing. As I just said, the economy is not going to be back to where it was within a year that’s for sure. So why is the stock market still high? What is that’s still driving equity prices? It is the Fed’s liquidity.
Stocks and Bonds Set to Collapse
In genuine terms, all bubble possessions will now collapse. Actual terms indicate secure acquiring power and evaluate against gold. We will see supplies, bonds, and residential or commercial property decline by 90-100% against gold. In nominal terms, stocks may go up at first with hyperinflation. That will just be imaginary gains.
Supplies worldwide dropped initially by around 40% and have currently recouped half of that loss as stock capitalists have been buying the dips in the hope that central banks will certainly save them afterward. Yet they will certainly quickly have their next shock. Markets might begin their next leg down already in the coming week. Or it could take 2-3 weeks. What is clear is that a profane bearish market has begun which has a very long way to go.
Gold is Still Undervalued
For twenty years I have discussed the value of riches conservation in the form of physical gold. Throughout that time gold is up 6-7 times depending on which currency you rate it with. Still, much less than 0.5% of world economic possessions are in gold.
Gold is still exceptionally undervalued regarding the growth of the international cash supply. It is still possible to obtain gold, yet the physical market is under real pressure.
This is an outrageous circumstance that will not last long. Both the Comex and the LBMA are under huge pressure which quickly will lead to substantial distribution problems and also a significant cost squeeze. The home window of opportunity to acquire physical gold at current costs will soon close.
Keep in mind that gold is actual physical wealth in addition to an insurance policy against a monetary system that is unlikely to make it through. Gold can still be bought with miscalculated fiat cash at prices significantly below its genuine value, however, not for too long.
Last week, the stock market suffered its largest weekly loss, it looks like the Coronavirus The Long Overdue Triggers Global Recession, since the 2008 financial crisis amid worries that one of the largest economic expansions in history may be coming to an end. Many analysts blame the coronavirus for the market downturn.
Why The Coronavirus Triggers The Long Overdue Global Recession
In particular, the Dow Jones suffered the largest fall in history in a week, a loss of $12,36%. The US stock market lost $3,58 trillion dollars and the European markets lost $1,5 trillion, all that in a week’s time. Oil dropped 14,35%, from $58,5% to $50,01.
The Federal Reserve is ready to act, as it issued a statement affirming that the central bank would use all its tools and “act as appropriate to support the economy”.
The signs are there, the economic fallout is starting to take hold as retailers importers and home builders are facing delays in shipments from China. It looks like there will be disruptions to the global supply chain. And if this is not enough, people do not go to restaurants, people do not go to the movies, people do not go out, people do not travel, all this, to avoid contracting the virus.
There is no doubt there will be an economic downturn but, we still do not know to what extent. Unfortunately, the favorable scenario, that predicts the virus remains largely confined in China and thus affects Chinese factory production, collapses.
The coronavirus is now present in more than sixty-five countries and almost out of control in China, South Korea, IRAN, and Italy. It is not a Chinese issue, it is a world issue now and its effect on global growth will be devastating. It looks like the coronavirus triggers the long overdue global recession.
Evidence of the Economic Fallout
Toll Brothers, the luxury home builder, said home sales to Chinese buyers had been postponed and shipments of fixtures from China delayed. The shoemaker Steve Madden said some shipments would be delayed for three weeks, as its Chinese factories struggle to operate with fewer workers.
Already there is a drop in tourism, as people are afraid to travel. Singapore, Malaysia, Thailand, and many Asian countries are suffering from a huge drop in tourists from China. With tourism, airlines are suffering heavy losses with many flights running at a loss.
Technology is expected to take a large blow along with car manufacturing. There are many car manufacturers complaining about car part delays from Chinese factories.
Moreover, there are signs that American consumers, they are those who drive the economy, were becoming increasingly uneasy.
A modern economy needs optimism and willingness to spend. But in the last week, investors came to terms with the new economic outlook where corporate profits will stop growing and in many cases will be replaced by losses.
Low-Interest Rates
Many investors expect the Fed to step in and act quickly on interest rates in the face of coronavirus news and market downturns. Even President Trump intervened on Friday and actually said that he hoped the Fed would step in. Soon the Fed issued a statement reassuring investors that is ready to act.
The 2008 Demand Shock
The 2008 Great Recession was largely a “demand shock” as a number of banks collapsed, home prices plunged and trillions of dollars in household wealth were wiped out. People and businesses suddenly had less money to spend, causing the economy to fall into a deep recession.
The 2020 Supply Shock
I am afraid lowering interest rates will not be enough. It is not a coronavirus threat anymore, it is a supply threat.
China the world’s factory struggles to get back to work. Imagine, if every factory and office produced 10% less than it did last year. This is very difficult to fix, even if you put more money into people’s pockets, it will not make up for closed stores and factories that aren’t operating.
All the signs are here, the coronavirus triggers the long overdue global recession.
Nouriel Roubini’s Prediction
Nouriel Roubini, the well-known economist, who predicted the 2008 recession, and head of the Roubini Macro Associates, predicts that the coronavirus will have severe economic repercussions for the global economy. That was a couple of days ago when he was interviewed for a German magazine called “Der Spiegel”.
In particular, he says that the markets have not come to terms with the extent of the effect the coronavirus is going to have on the global economy. According to Roubini, the markets are making three mistakes.
1-This is not an epidemic contained in China, but a pandemic.
2-It will take a long time to contain and the politicians haven’t come to terms with the huge impact it will have.
3-The markets will take a steep dive and it is not certain after that dive a strong recovery will follow.
The Chinese recovery will not be enough to cover the expected 6% growth for this year. Nouriel Roubini expects the Chinese economic growth to be between 2,5% and 4%.
We are Entering the Long Overdue Recession
As I said before people won’t go to the movies, people won’t go to restaurants, people won’t go to live events, people won’t go on holidays, and in the worst case, people won’t go to work. It is already happening in the 10million city of Wuhan in China. In France, the famous Louvre museum is closed and in football-crazy Italy, the derby between Juventus and Inter will take place with no spectators.
During the SARS epidemic, China was only 4% of the world economy. Today, China is 20% of the world economy. In addition, globalization back then was not as deep as it is right now. Furthermore, China’s contribution to world growth back then was 20%. Nowadays, China’s contribution to world growth is 50%.
China has become a key for global supply chains. Firms from around the world are shutting down, they cannot do business because key supplies do not come from China.
It will take time for the coronavirus to ease off. By then, global firms will be out of stock and supplies. China will face a huge task, to resupply the whole world. Some argue It will only take a few weeks for China to resupply the whole world. I do not buy this. According to my calculations, this will take several months.
All made in China or made in PRC product importers will see their warehouses empty and it will take a long time for them to see them full again. At the same time, American and European manufacturers will stop operating because they too will run out of Chinese components necessary for the completion of their products.
Some factories would have to close temporarily and some would have to close permanently. If that happens, then many people would be forced out of work.
It is a common secret that the coronavirus triggered the long-awaited recession. Financial analysts are worried about the overpriced stock market, the low yields, the quantitative easing, the negative interest rates,the global debt bubble, the geopolitical uncertainty.
A few days ago, Citigroup one of the US’s largest banks predicted that gold will hit $1700 per ounce, in the next six and twelve months and $2000in the next 2 to 24 months. Moreover, after last week’s carnage for the stocks, the Fed is expected to intervene and cut interest rates by 50 basis points at the next meeting.
This move will hopefully help boost consumer sentiment weakened by the spreading coronavirus. That means lower yields and negative interest rates. It will also add extra steam to bullish gold.
Following is a chart that shows how gold outperformed stocks during calamities.
Black Monday1987
Iraq-Kuwait War1990
Dot Com Crash2001
Financial Crisis2008
Stock Market Decline
-38.9
-22.5
-27%
-34%
Gold Price Results
+5%
+7.5%
+1%
+5%
Gold Outperformed Stocks By Ratio
45:1
31:1
29:1
40:1
Conclusion
The coronavirus is already causing headaches. As the public comes to terms with the effects of the virus on the global economy, the stock market is tumbling down, with stocks last week taking a beating. The Fed is about to step in and lower interest rates. Will that be enough to stop the coronavirus triggers the long overdue global recession?
No, this is not going to be enough. There is going to be a supply shortage, as China, the world’s factory, won’t be able to keep up with demand after its factories reopen. The world economy is slowing down and the recession is looming. In times of turbulence, investing in precious metals is a must. And the king of precious metals is gold. Yes, The Coronavirus Triggers The Long Overdue Global Recession.
The economic outlook is getting from bad to worse.
The global debt bubble.
The covid-19 effects on the global economy
Gold Consolidates
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In my mind, gold will consolidate for a while as the formal withdrawal of the Hong Kong extradition bill, will remove fear from the global markets. Also, in Britain a bill is about to pass that will forbid a no-deal Brexit. These two events will remove fear from money managers around the world, as they will see fewer risks coming out of Hong Kong and Britain.
As a result, gold will consolidate for a while until the various central bank meetings take place in September. Central banks will continue their monetary policy as it is, we all know that. In fact, Christine Lagarde, the next president of the European Central Bank, already announced the continuation of Mario Draghi’s policies regarding quantitative easing and negative interest rates.
Silver Soars
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Silver soars like there is no tomorrow, surpassing each of our target prices of $18,00 and then $19,00. On top of that, the silver-to-gold ratio has fallen from 90-1 to 79-1 and we expect the ratio to continue to narrow, while gold and silver continue rallying. Remember, it is widely accepted that the gold-to-silver ratio should be at around 60-1.
Recession is Coming
According to Frank Giustra, the chairman of Leagold, we are heading for a recession worse than the one we had back in 2008 and I agree with him.
Global debt has actually doubled since the 2008 crisis. In fact, global debt value was fueled by “cheap” money such as quantitative easing and low-interest rates.
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The overpriced and overvalued Stock Market has also been fueled by massive amounts of easy money. The Stock Market has been moving up for an unusually long time and as a result, people have become accustomed to that type of behavior. They think this will keep going on forever, which is not the case and in the end, they will be hurting themselves. A thirty percent fall in the markets will be normal to see.
No Reason to Sell Gold
We are long overdue for a recession, as this was the longest economic recovery ever. If we take a better look at the recovery we’ve seen, it was a fragile anemic recovery. The growth we’ve seen all these years was nothing more than 2% or 2,5% annual growth, compared to 5% and 7% healthy recoveries in the past.
If the bad scenario takes place, we could see massive unemployment, large corporation collapse, currency war, hyperinflation, and geopolitical uncertainty.
Conclusion
Although, a serious investor should always have some insurance in his portfolio, and the only insurance is gold, nowadays it will be reckless for an investor not to own gold. As the bad news continues coming in, many investors increase the percentage of gold in their investments. The best gold investment for me is to possess physical gold.
Silver too can be handy, as it is undervalued-underpriced and it also has the gold-to-silver ratio distance to cover. Furthermore, silver tends to follow gold as it rises and as it falls. A physical ownership of silver is always a better investment.
There is absolutely no reason to sell gold whatsoever.
