No great genius has ever existed without some touch of madness.
Aristotle
End Of Cash
Central bankers worldwide have embraced negative rates with a gusto that is akin to crack addict being given a new dose of super crack. The consequences of these actions will be dire for the masses that are always unprepared and the first to scream when they lose everything. History does not change, only the outfits change, but the con is always the same and the ones left holding the empty bag are the sheep (otherwise known as the masses). The Fed is trying to put on a brave act, but you can already see them backtracking from the strong stance they took last year. Now they are stating that all is not well, and the economic outlook is weaker than expected. They will have no option but to join the rat pack; in this instance, resistance is futile.
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The Fed raised rates to give the masses the feeling that the markets are free, when in fact, they are not. The markets are totally controlled and manipulated; every boom and bust cycle was planned in advance of the event.
When an economy is booming, the velocity of money increases and as you can see from the chart below, the velocity of money has been dropping and quite precariously we might add. Hence, the only thing supporting this market is hot money. Take away the hot money and this illusory economic recovery crumbles.
The chart topped out in 2000 and after that It has been nothing but downhill ride; we did get a momentary dose of relief from 200-2009, but the chart put in a bearish lower high and from there things took a turn for the worse.
While the money supply has increased, this money is not making its way to the masses; this is a nefarious trick the Fed employed to coral the effects of inflation and it’s working so far. This is why we stated that if the Fed really wants to create a monstrous bubble, they need to put this money into the hands of the masses. They seem to be testing this with the auto market as we have subprime bubble waiting to pop there. The next forage will be to find a way to put this money into the hands of the masses for various general expenditures, like opening a new business or better yet, creating the next housing bubble. The demand for housing is rising, but most people cannot qualify for a mortgage. Imagine what would happen if they suddenly made it easier to get a loan. The slogan would be “buy now and cut your rent” and for a time, this slogan would be true as its far costlier to rent than own a home today in most parts of America.
If the recovery were real, interest rates would not be held low for so long, and the Fed would need to support the stock market. After it stopped the corporate world stepped in via the illegal usage of Stock buybacks. Now instead of trying to improve the bottom line, they focus on simply buying back more shares and in doing so artificially boosting the EPS. It’s a perfect scam, no work and big pay; and as interest rates are low, the incentive to borrow large sums of money to do these dirty deeds is larger than ever. Hence expect stock buybacks to surge to levels that will appear insane one day.
A game plan to counter central bankers declaring war on cash or End Of Cash Era
The negative rate wars have just begun, and it’s a matter of time before our central bankers take the same path. This ultra-low rate environment created the perfect backdrop for speculation. Individuals and corporations looking for better returns were forced to speculate. However, the corporate world took things a step further; they went on share buyback binge, and this binge is not showing any signs of letting up.
It allows corporations to borrow money for next to nothing and then use these funds to buy back massive amounts of shares and in doing boost the EPS (Earnings per share). Negative interest rates will be akin to offering a crack addict, super crack; do you think he is going to refuse this offer? Negative rates will provide rocket fuel to the share buyback programs. Individuals should expect corporate debt to hit insane levels before a top is in; while today’s debt levels might appear insane, they will look sane in comparison to corporate debt in the near future.
Thus, all strong corrections should be viewed as buying opportunities. From a mass psychology perspective, this is still the most hated bull market in history and until the masses embrace, it is destined to run a lot higher than most envision.
Even Buffet seems to agree that Central bankers are declaring war on cash
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