The Everything Bubble, perhaps the biggest debt-fueled bubble in history, has been propping up the global economy for several years, but began to waver dramatically at the end of 2018, as the Federal Reserve tightened liquidity conditions into economic weakness (just as they did in 1929 and in the early 1930’s as the Great Depression took hold).
In that article, I warned: “If the global economy is not on the verge of collapse, then why did central banks keep propping it up for the past ten years? And if central banks have been propping up the system, how much longer do you think they can do this? How much longer do you think they want to do it? What if one day they decide to let the entire house of cards tumble? What if such an event actually benefits them?”
An important factor to this discussion is the idea that the central banks are “ignorant” to the damage they do. This claim is everywhere in the alternative media these days, and it is simply wrong. The banking elites are well aware of the damage they do, and often it benefits their bigger agenda of one world centralization.
In fact, Jerome Powell openly admitted in the minutes of the October 2012 Fed meeting exactly what would happen if the Fed took actions to tighten cash flows while markets were addicted to stimulus. Then, as soon as he became the head of the central bank, he implemented that exact policy.
Almost nothing in finance and economics happens without being “managed”, or at least deliberately triggered by central banks. Economic crisis events are a form of massive leverage against the public. They are designed to siphon tangible wealth for pennies on the dollar from the middle class while also setting up social crisis conditions which allow the elites to manipulate the population into accepting less freedom and more globalism.
In the past, I have noted that the central banks have clearly been waiting for something or stalling the crash in preparation for a specific window of time. They needed an event that could be used as cover for the crash that they had been engineering. This event could come in many forms: The trade war was a perfect start, along with war tensions with Iran, but there was really no way of telling what the trigger would be. Well, now we know.
The COVID-19 pandemic is a perfect cover event. It is a virus with a strangely long incubation period coupled with being highly transmissible and just deadly enough (3% to 5% death rate) to cause fear within the population. This novel virus is not going to go away for a while; it will most likely stick to the global populace like glue for the rest of the year, and like the Spanish Flu which was active for around two years, the longer it circulates the more deaths accumulate.
But the virus is not the cause of the economic collapse; it is only a prime scapegoat, along with the very slow response times of many governments and the World Health Organization to encourage a shutdown in international travel from hot zones, which allowed the virus to spread unhindered. The collapse was taking place before the pandemic ever became a factor.
We are seeing this clearly now in the Fed repo market situation, which has continued to escalate as corporate beggars demand more and more liquidity that the Fed is either not able or not willing to supply.
And by liquidity, I’m talking about tens-of-trillions; I’m talking about TARP level or greater fiat injections. I’m talking about direct purchases of stocks and other assets beyond bonds. The investment world wants the Fed to make it rain cash, and while it seems like that is what the Fed is doing… they are not even close yet.
Of course, the next question is, Will it even matter if the Fed initiated full blown helicopter Weimar-style inflation? The answer is no. If the Fed wanted to stall the crash, they would have introduced such measures over the course of the last year. Instead, they did the bare minimum to make it look like they cared about saving markets, which they do not.
The Weimar model, which some financial analysts out there foolishly used as a reason for predicting an endless stock market rally to Dow 40,000 and beyond, does not work because it never worked for Weimar. German stocks still collapsed in 1924, and then again after 1927; there is no precedent in which hyperinflation ensured increased stock profits or higher prices for very long, so don’t expect helicopter money from the Federal Reserve to help either.
Anyone with any sense can see that the prevailing factor of stock market performance has long been corporate stock buybacks, which have now conveniently dropped off the face of the Earth as the COVID-19 pandemic spreads. If you want to know why Fed intervention is doing nothing to reverse the damages in equities, the end of stock buybacks are a good starting point, along with the vast debts among corporations and consumers.
The black hole of debt that has been looming over the global economy has been set in motion, creating a negative feedback loop that makes any intervention useless, beyond a complete “economic reset”, which is exactly what globalists have been wanting and planning for years.
In the meantime, there has been a flight to safety – but what assets are safe? On the surface it looks like almost everything except the U.S. dollar is plunging in value – but looks can be deceiving. As I noted earlier this month in ‘Physical Gold Will Soon Break Free From The Paper Market In Spectacular Fashion’, reports are coming in that purchases of precious metals have skyrocketed, and currently silver rounds are selling for as much as $6 to $10 over the spot price, while gold rounds are selling for at least $50 over spot. The physical market is officially decoupling from the paper market.
At this point, we are seeing unprecedented events beyond even the 2008 credit crash. We must ask, What is our timeline? Looking at China, the first nation to be hit by the pandemic, their economy is still essentially shut down. Initial estimates were that Chinese manufacturing was going to restart on March 20, but reports from China and the Wall Street Journal indicate that this is not going to happen. Every sector of China’s economy has plunged, and it does not look like the supply chain on their side will be restarted in the near term.
This makes sense when you consider the possibility that China has been lying the whole time about the extent of the damage done by the virus. Italy, with a far lower population, has already surpassed China’s death count with half as many confirmed infections. How does a country with a billion people (many of them older), packed together in cities like sardines, maintain a death rate of only 2%, while Italy, a country with only 60 million people, has a death rate of around 6%? China has much to answer for, but I don’t think we’ll ever get the whole story.
COVID-19 is not likely to burn out in the spring as many are hoping, and going by China’s manufacturing shutdown, we have at least three solid months of crisis in the U.S. and Europe before there is a chance of remission. But even if the virus does hit a wall, the economy will already be sunk beyond repair. This is the kind of collapse that takes years to recover from, and the global elites want to be the people that take charge of the recovery.
My biggest concern right now besides the supply chain issue is the potential for a liquidity crisis and credit crisis leading to a “bank holiday” – a widespread banking shutdown. I believe this will happen, and probably sooner than we might expect. Already the mainstream media is telling people NOT to remove any cash from their bank accounts, which is a bad sign. Usually when the MSM is telling you not to do something, it is time to do the opposite.
I am not necessarily encouraging people to make a run on the banks, but I will say that you better have some cash on hand through this crisis, because chances are good that you will wake up one morning and discover the banks locked and the ATMs unplugged.
Understand that this is not a short-term crisis that will correct itself. This is a long-term disaster. If you are not prepared accordingly, you must do so NOW. Time has almost run out.
Not counting the rise of Hitler and Nazism, the 1923 hyperinflation is arguably the most significant failure of the Weimar Republic. For several months in 1923, Germans battled price inflation so rapid that it created ridiculous situations – along with considerable misery and suffering.
In early 1923, German workers embarked on a prolonged general strike as a protest against the occupation of the Ruhr by French troops. Despite its parlous economic condition, the Weimar government decided to support this strike by continuing to pay striking workers. It did so by increasing print runs of banknotes, a policy the government had been using intermittently since 1921.
Government economists understood the dangers of flooding the economy with paper money, so the policy was intended to be temporary. But as the Ruhrkampf continued into the summer and autumn of 1923, no alternative way could be found to address the crisis. Paper money was continually pumped into the German economy, leading to devaluation and hyperinflation.
As more banknotes went into circulation, the buying power of each Reichsmark decreased, prompting sellers to raise prices. In 1918, a loaf of bread cost one-quarter of a Reichsmark; by 1922 this had increased to three Reichsmarks.
In 1923 the market price for bread spiralled, reaching 700 Reichsmarks (January), 1200 (May), 100,000 (July), two million (September), 670 million (October) and then 80 billion Reichsmarks (November).
One dozen eggs cost a half-Reichsmark in 1918 and three Reichsmarks in 1921. In 1923, the market price increased to 500 (January) then 30 million (September) and four billion Reichsmarks (October).
The Weimar government was not strong enough to fix wages or prices, so its only response was to issue more paper money. This cycle of inflation and currency releases spiralled through 1923. The denomination of banknotes increased, the largest note with a face value of 100,000,000,000,000 (100 trillion) Reichsmarks. The face value of postage stamps also skyrocketed. By 1923, the largest-priced stamp cost five billion Reichsmarks – but even this was not enough to post an ordinary letter.
On one day alone, October 25th 1923, the Weimar government released banknotes with a face value of 120,000,000,000,000 (120,000 trillion) Reichsmarks – while announcing plans to triple its daily output. By November, the Treasury reported there were 400,338,236,350,700,000,000 (400.3 billion trillion) Reichsmarks in circulation across Germany.
The rapid devaluation of paper money caused ludicrous scenes. The value of paper money disappeared so quickly that some companies paid employees in the morning so they could rush off and spend their wages at lunchtime. Wives waited at their husbands’ factories on payday so they could hurry to the stores. One man reported ordering a coffee but found its price had doubled by the time it arrived at his table.
By September 1923, as the hyperinflation crisis neared its worst, Germans needed enormous amounts of paper money for even basic commodities. It was not uncommon to see shoppers hauling buckets, bags, even wheelbarrows full of banknotes. One Munich woman dragged a suitcase of banknotes to her local grocery store; when she left it outside briefly, someone stole the suitcase but emptied the money onto the street.
Children played with worthless banknotes as toys; their mothers used them to light stoves and boilers, line cake tins, even as wallpaper. Many Germans abandoned money altogether and began bartering as a means of obtaining what they needed.
The hyperinflation crisis also made foreign exchange almost impossible. Before World War I, one US dollar had purchased about four Reichsmarks. By the end of 1920, this had increased to 70 Reichsmarks; a year later it was 180.
As a consequence, German corporations found it impossible to do business or trade abroad. Unable to acquire gold or foreign currency, the Weimar government had no capacity for meeting reparations instalments. Some claimed the government had deliberately sabotaged the German economy as a protest against Allied reparations, though there is no direct evidence of this.
There were winners and losers from the 1923 hyperinflation. The worst affected were the Mittelstand (middle class) who relied on investments, savings or incomes from pensions or rents. In 1921, a family with 100,000 marks in savings would have been considered wealthy – but within two years, this would not be enough for a cup of coffee. Public servants also suffered because increases in their wages failed to keep pace with the private sector.
Among those who fared better were farmers, business owners or producers who manufactured and sold important commodities. While the value of money fluctuated, the real value of these goods did not; those who sold them could do so on their own terms.
Germans with large debts also benefited from hyperinflation, since they could be easily repaid. Some clever businessmen borrowed early in the inflationary cycle to buy property, then repaid the loan weeks or months later for next to nothing.
The 1923 hyperinflation forced the Weimar government to confront its own extinction. There was open talk that the government might be removed by a popular revolution or a military putsch. An attempted coup in Munich, launched by Adolf Hitler and the National Socialists (NSDAP) in early November 1923, seemed a sign of what might come.
The crisis forced the collapse of two cabinets as ministers bickered about the best way to end the crisis. It was newly appointed finance minister Hans Luther who produced the eventual solution.
In October, Luther ordered the formation of a new reserve bank (Rentenbank) and a new currency (the Rentenmark). The value of the Rentenmark was indexed to the value of gold – though it could not be redeemed in gold because the government had no gold reserves.
One Rentenmark was initially valued at one billion ‘old’ Reichsmarks while foreign exchange was pegged at 4.2 Rentenmarks to one US dollar. Eager to bid farewell to hyperinflation, the German public embraced the new currency. This allowed prices and wages to gradually normalise.
1. The hyperinflation crisis of 1922-23 was caused in large part by the Weimar government printing banknotes to pay striking workers in the occupied Ruhr.
2. By
mid-1923, the printing of these banknotes, which were not backed by gold, was
causing a rapid increase in both prices and wages.
3.
This hyperinflation led to farcical scenes, such as extraordinary prices and
Germans pushing wheelbarrows of cash to buy simple items.
4.
Hyperinflation also eroded the cash savings of the middle class and caused foreign
exchange rates to skyrocket, disrupting commercial activity.
5. The
hyperinflation crisis was eventually ended with the formation of a new reserve
bank and the issue of a new national currency called the Rentenmark.