The End Of The Central Bank Super-Bubble

Summary

• Central bank policy has lost effectiveness.
• China is in decline regardless of official data.
• The deflationary forces in the global economy and financial stability risks are too great.
• Oil remains oversupplied with a risk of increased production either from OPEC or US shale. Price upside and also inflation remain capped.
• Risk assets including gold are overvalued. Treasuries will not provide an adequate hedge. Long USD is the safest place to be.

Eventually, market expectations become so far removed from reality that people are forced to recognize a misconception is involved. A twilight period ensues during which doubt grows but the prevailing trend is sustained by inertia... A point is reached where the trend is reversed and becomes self-reinforcing in the opposite direction.

- George Soros

The prevailing trend is central bank firewalls will always protect markets. The misconception is central banks have the ability to fix deeply ingrained deflationary forces/financial stability issues and that monetary policy ineffectiveness is a non-issue. The exponential rise in central bank balance sheets and subsequent tantrums on withdrawal since 2008 is a sign of this.

It’s become clear financial markets are being held up by central bank support, not global business and economic fundamentals. Markets may cheer this but undoubtedly massive central bank intervention is a symptom of an underlying problem. Therefore, not a reason to be optimistic. Simply put, if a patient is on life support, is that a good thing? The answer is a clear no.

The failure of the Bank of Japan is a perfect example of this. As is the ECB in being unable to generate 2% core inflation in the Euro-area despite massive expansion of the monetary base, large central bank balance sheet assets to GDP ratios, negative rates and unprecedented QE programs. Interestingly the Fed is actually the least accommodative comparatively yet USD bears love to latch onto the story that Federal Reserve QE printing and bond buying is debasing the USD. Yet the USD is still way up on a trade-weighted basis which I will touch on a bit more later.

Source: Robin Brooks, IIF

First off I will quickly start out by saying, if you look at total credit to US private sector in 2020, it has risen which is different from most recessions which makes me believe the K-shape theory. That is, credit is for one mainly being used for relief and replacing lost incomes/revenues, not excess spending or capital investment by the first group. The second, speculative financial activities encouraged by low rates from the other group. Neither of which is a good sign.

Next, China is very likely going into a hard-landing and this is one of the largest unfixable, deflationary problems for central banks. The inherent problem is China's investment, construction and supply-side growth model has run its course and is out of steam. The CCP can turn the factories and steel mills on at will, but the greater output from the industrial sector is pushed, the greater the overcapacity problem, the larger the inventory overhang (which drags on future growth) and also it creates increased diminishing returns to GDP. This is known as the incremental capital output ratio which has soared, meaning it is taking more RMB in fixed asset investment to produce the same amount of GDP growth. There is a large difference between investing in fixed capital assets to earn a sufficient return and investing in fixed capital assets simply to meet a GDP target. This is what it has degenerated to in China.

The answer for China is a consumer rebalancing where credit growth and aggregate demand is shifted onto the demand side of the economy and not the state controlled supply-side economy. The problem with this though, is the bank loans are lent to the old, industrial economy, so there will inevitably be a huge NPL problem because of the over-levered banking system relative to the size of the Chinese economy. I argue China must go through an economic and financial reset where their banking system is recapitalized and loan losses are absorbed by the PBOC, before a return to growth can occur.

Source: Zerohedge

Chinese GDP is around $14 trillion. Bank assets are around 300% the size of their economy conservatively. In 2007, in the United States, bank assets were around 65% of GDP as shown in the chart below, a far-cry from 300% currently in China. U.S. NPLs hit 5% in the financial crisis in 2008. China is arguably already at that non-performing loan ratio despite an official 2% NPL ratio. Most of the bad loans are being deferred by the CCP and PBOC to keep banks solvent for the short-term. So let's say hypothetically China's NPLs go to 5%. That would mean 15% of the Chinese economy is bad debt compared to 3.25% in the United States in '08. The reason is a relatively large banking system amplifies the ratio defaults, NPLs and unserviceable debt to the real economy.

A wave of defaults and 5% NPL ratio would also create a huge capital hole in China's banking system, where the only answer would be for the PBOC to print RMB and bail out their banks. In the above scenario, a reasonable estimate of China's banks' capital shortfall is around 15 trillion RMB given the size of China's economy at approximately 98 trillion RMB, bank assets at 300 trillion RMB and a 5% NPL ratio. This banking system recapitalization would at least triple the size of the PBOC's balance sheet and undeniably lead to downward pressure on the exchange rate and possibly an 8 or even 9 handle on USD/CNY.

PBOC assets, Source: Trading Economics.

And therein lies another problem. China has built up a large USD-denominated debt burden. So when the RMB depreciates against the USD due to a massive banking system recap and large scale printing of RMB, the real burden of that USD debt increases and this would weigh on Chinese corporate sector profitability, equity valuations and employment (which further weakens the consumer rebalancing thesis).

Source: Daniel Lacalle

China can hardly afford a strained corporate sector given they have the 2nd highest corporate debt to GDP ratio in the world at 159%. According to the Nikkei Asian Review:

Nonfinancial corporate debt climbed to 159.1% of GDP in the first quarter from 152.2% a year earlier, according to the Institute of International Finance, which counts 400 banks and financial institutions across the globe as members. The ratio is the world's second highest, behind only Hong Kong. In comparison, the proportion in the U.S. stood at 78.1%, in the euro area at 109.8%, 106.4% in Japan and 96.1% on average across emerging markets.

As for China's 2020 "recovery", I don't believe in it for two reasons. For one, it is more of the same unsustainable and inefficient growth even according to official statistics. Chinese retail sales growth and industrial production have flipped, meaning retail sales are now growing at a slower clip than industrial production, where the opposite was true in 2019 and the last several years before. Though both rates have drastically slowed since pre-Covid, this signals the consumer rebalancing thesis is failing.

Secondly, China has long been suspected of massaging official government economic statistics, though it has become more blatant than ever this year. According to Nick Marro of the Economic Intelligence Unit, based in Hong Kong covering Asian markets and economies:

China's FAI release today (Dec. 15, 2020) indicated further downwards revisions to historic series from Nov 2019 (by Rmb4.68trn), based on historic data from last month. This following the removal of Rmb3.6trn worth of historic investment in October. Without, Jan-Nov FAI would've been -6.4% YoY.

China Beige Book, a very reputable and respected independent surveyor of Chinese business economics has also backed up and confirmed this data. The reason trillions of RMB have gone missing from 2019 data is it lowers the baseline and reduces the hurdle for showing improving growth and economic activity in 2020. Also, the PBOC has "admitted" to revising down 2019 statistics on Wednesday 12/30/20. But as usual with the Chinese statistics, it still does not quite add up. According to Shezhad Qazi of China Beige Book:

Gross domestic product in 2019 was smaller by 435 billion yuan ($67 billion) than the initial estimate released in January, China’s statistics bureau said Wednesday. According to the latest estimate China’s nominal GDP was 98.7 trillion yuan in 2019. The manufacturing sector recorded the largest change — with value-added output reduced by 503.8 billion yuan from an earlier estimate. Yes, you read that correctly: the amount by which value added output was reduced is larger than the total amount by which GDP was reduced. Statistics with Chinese characteristics.

Moving on from China, I will now talk about oil prices, but as a transition I will say given my negative view on the Chinese economy and the fact it is one of the largest demand centers for commodities, I am not optimistic on crude. Inflationary and deflationary episodes rarely happen without a correlating rise or fall in oil prices, so it is an important topic. As I have clearly stated my negative views on global demand, I will generally focus on supply now.

First off, the last OPEC meeting was a total chaos. There is severe disagreement among members and with Russia. In the end, OPEC+ opted to increase production by 500K barrels per day and hold meetings every month to re-analyze and calibrate policy. The market was largely expecting a full output cut extension, so I was surprised not to see oil fall drastically on a let down of a total output cut extension for 3 more months.

So as of January 1, 2021, output cuts will be reduced (supply increased) by +500k bpd. OPEC+ will meet again on January 4 and this time Russia is making its views very clear. According to Bloomberg:

“To restore our output, that we’ve reduced a lot, the price range of $45 to $55 a barrel is the most optimal,” Deputy Prime Minister Alexander Novak told reporters in Moscow. “Otherwise we’ll never restore production, others will restore it.”

Novak makes a good point. There is plenty of supply waiting to come back online whether it be from OPEC+ or elsewhere, but he was specifically referring to the United States shale industry. If OPEC maintains output cuts, North American shale producers will ramp up to fill that void and take market share. This will keep a lid on any price rise. Inventories are still elevated and there is not a shortage imminent by any means. So for those investors thinking we will inflate our way out of this in the short run, I must ask where do you stand on oil supply. There is also a material risk that Saudi Arabia, Russia or the UAE disagree again and engage in a major supply ramp-up price war. Also, Iran is looking to restore production with Biden in office and Libya is restoring output quickly and significantly.

The US dollar typically has a negative correlation with WTI. Deflationary episodes and oil price declines rarely occur without an appreciation in the USD in global FX markets. After spiking in March, the USD is down this year, but I believe it is one of the smartest places to be in a heightened risk, weak global growth and disinflationary or deflationary environment. As mentioned above, many emerging market economies have borrowed in USD so there is a great amount of foreign demand. Secondly, with the huge treasury issuance from the US government, primary dealers (mainly large banks) are drawing on USD reserves to absorb the supply of bonds from the United States government. The Federal Reserve through QE and bond purchases is helping to alleviate this but at the recent December meeting, Jerome Powell and the FOMC opted not to increase purchases.

The United States government has recently passed a large stimulus package, this will widen the deficit and government bond issuance even further. This divergence between increased US treasury holdings from Federal Reserve member banks and less USD reserve holdings is depicted below. The Fed missed their chance to ease this December in my opinion. Increased relief or stimulus provides less reason for more monetary policy accommodation to the real US economy unless the Federal Reserve explicitly wants to admit they are trying to control yields and financial markets more so.

I don't think EUR/USD can hit 1.25. We didn't get there in the 2017 synchronized global growth phenomenon when euro fundamentals were a lot more bullish with the ECB talking about raising rates and Eurozone economy outperforming. Currently, European PMIs, inflation and economic data are underperforming the United States, there are greater lockdowns there, and the ECB is more accommodative as measured by central bank assets to GDP and negative rates as well. I think the surge we are seeing in EUR/USD has the ECB ready to act against it as a stronger euro weighs on the export driven economies of Europe.

Lastly, despite my call for weaker inflation and global growth, I am surprisingly not optimistic on US Treasury prices. I will explain why. I anticipate a rise in real (inflation-adjusted) US yields despite a global downturn, meaning I expect global inflation and growth expectations to fall while US government yields still rise as bonds sell off due to an oversupply of issuance and a switch to the USD. This is exactly what happened in March 2020. Higher real rates also increase the appeal of the USD in FX markets as it becomes a higher yielding currency. Many central banks, especially in emerging markets, have more policy room to lower rates in the scenario of a global downturn. These divergent policy paths will narrow yield differentials and weaken carry trades and inflows to EM currencies.

An abrupt backing up in US yields is a large risk to the global economy. This would result in a stronger USD. Many global financial institutions and central banks hold a composition of USD and US treasuries. I believe the fundamentals greatly favor converting the latter into the former if or when real yields begin to rise again. This is a self-reinforcing process because as mentioned if you need USD, the easiest option is to sell US treasuries but in aggregate or mass this pushes up US yields which further causes the USD to appreciate as it becomes higher yielding leading to more forced treasury selling. There is one of the largest short interest from hedge funds and commercial traders on record against the USD. A rise in US yields or an appreciation of the USD could catalyze this process which has spillover effects to risk assets and emerging markets.

Powell specifically said stocks were expensive on a price/earnings ratio basis, but the risk-free government rate is so low it is essentially pushing investors out of the risk-curve. So, if I am right and US yields continue to move upwards (they've already bumped from around 0.50% to 0.90% since September), Powell has now already given the green light for stocks to sell off. Therefore the bond hedge will now work in reverse, in the sense that many believe bonds hedge equity market declines. I argue a bond sell-off and rise in yields will contribute to an equity market decline.

And finally, I will end with a couple of charts just showing the extremeness of speculation and stretched valuations in the US stock market. Thank you for reading.

Source: Crescat Capital

Analyst’s Disclosure: I am/we are long DHT, FRO, STNG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Short: RGLD, VALE

Comments

[katmandu100]

Good data and commentary.

[cat2005]

@Michael Roat

". . . meaning I expect global inflation and growth expectations to fall while US government yields still rise as bonds sell off due to an oversupply of issuance and a switch to the USD. This is exactly what happened in March 2020."

Do you expect it to happen as quickly as it did in March 2020, or do you expect a slower and more gradual unfolding?

[Michael Roat]

Not sure. I'm inclined to say the pace of the deflation theme will happen in between the pace of March and the glacial pace it's been the last several years. Closer toward March speed though maybe unfolding over a course of Months to a year. Short interest in the USD is high so that could accelerate things.

[Michael Roat]

My takeaway from the OPEC+ meeting is, the group is clearly on an untenable path and I think a dissolution is very possible.

Russia's oil minister, Novak, publicly supported the deal, but behind closed doors he asked for it not to go through - Bloomberg

Saudi Arabia is subsidizing the whole plan and in the process hurting their own economy and producers by volunteering to cut 1mbpd while everyone else holds steady or increases production. The entire thing was chaotically put together which is a trend with OPEC+ these days.

If this degree of complication is needed to "agree" on output, it is not a good sign. Also, the voluntary Saudi cuts will take effect in February. OPEC+ has already agreed in December to *increase* output by 500k bpd in January which could be the critical timeframe.

The worries of Saudi Arabia are an ominous sign for demand especially when investors are ebulliently long commodities. And lastly, US shale has now been given a window to ramp along with increased production from Libya and potentially Iran.

In reality, there was no agreement.

[Dukebailey]

@Michael Roat My assumption is that virtually no oil producer has a cost advantage, except for geographic location. In other words, if your supply is within a high geographic demand area, you are in the catbird seat. Obviously, there are other factors (quality of crude, depth of wells, etc...), but in general, if your supply is in a relatively low geographic demand area (i.e. OPEC), than you have two options: 1) be the swing provider(s) and accept higher prices and lower volumes until such time as global demand exceeds global supply (either through declining shale output, recovering/growing global demand, or some combination of both), or 2) sell your product at a deep discount to gain market share (ie price war). IMO, the second option would yield unfavorable long term results since the cost of transporting their product to demand areas would put them at a competitive disadvantage. I believe this is the reason that OPEC reacted the way they did (and will continue to) - North American energy independence has changed the dynamics dramatically, essentially weakening OPEC's position.

[timddeb]

I am on the third reading. Phew!

[Eric Neuwirth]

Thanks @Michael Roat Michael Roat for an excellent article.

One of the most interesting pieces of information is actually in your fine print, where you disclose long positions in crude tanker companies DHT, FRO, and STNG. Despite my opposing view on inflation, which I believe will be upon us in the much less distant future, long positions in DHT and FRO account for 29% and 16%, respectively, of my investing portfolio. The thesis is that the crude shippers will simultaneously enjoy several tailwinds in the next 18 months:

a) recovery in global oil demand (independent of oil price, which may remain low due to pent up supply coming back on line),

b) a generally inflationary environment in which companies with significant debt loads will benefit as these USD-denominated liabilities shrink in real terms, and

c) industry-wide scrapping of older VLCCs outpacing newbuild deliveries for reasons discussed in the companies’ earnings calls and in podcasts by SA authors such as @J Mintzmyer (for example, here: seekingalpha.com/...

Your article lays out a different scenario, at least with respect to (b) above — one in which inflation is not to be found — and yet you are bullish on the crude tanker companies. Is it possible that DHT, FRO, and STNG do well regardless of an inflationary or deflationary backdrop?

[Robert 7809591]

@Eric Neuwirth Tankers enjoyed big increases in day rates due to demand as oil storage platforms and have now collapsed. Most of the articles I have read predict tanker rates wont recover until 2022.

[bqdoo]

@Eric Neuwirth

I asked essentially the same and he replied.

[Robert 7809591]

Powell has given the green light for a market sell off?? I guess we watched two different powells where at the last news conference he essentially said he is not worried about stock prices being too high. The fed tried to engineer a market sell off in the fall of 2018 and instead of a soft landing, the bottom fell out. The fed was forced to reverse course lest a bear market cause a recession. Powell has now changed his tune and the Fed will now get into "yield curve management" where if the long end of the yield curve gets too high, the fed will buy more longer dated bonds to bring it down. The housing market is said to be in a bubble right now with mortgages at record lows yet the fed continues to buy mortgage backed securities. Why?? It has to. Otherwise again it risks the housing market taking the economy into a double dip recession. The genie has been let out of the bottle. The little dutch boy is sticking his fingers in all the leaks in the dike attempting to keep it from collapsing. The dollar will continue to weaken because that is all the fed can do. The U.S cant pay back its debt. It cant default. It cant renegotiate it. The only thing left is for the currency to devalue. Back in 2010-2011 the USD fell another 20 percent and I think that is exactly where the dollar is going.

[JHHAlpha]

@Robert 7809591 But the EU and China are even worse off on debt to economy ratios, so the US dollar remains the best horse in the glue factory.

[Robert 7809591]

@JHHAlpha I am not predicting the complete collapse of the dollar, but I believe its best days are behind it and it will only get worse from here. I think commodity prices will continue to rise. In April 2011 Yellen gave a speech in which she said commodity prices had come too far too fast and the fed was prepared to act (with higher interest rates) BUT she thought the inflation was only "transitory", not systemic. That signaled the end of the commodity bull run. I dont think Yellen will be making a similar speech any time soon.

[JHHAlpha]

@Robert 7809591 That's a big so what, because it's still the best major currency.

[highlarche]

Gold is undervalued. Gold does better in deflation than inflation. I’m expecting record highs in 2021

[Anarchy99]

You're pissing off Portnoy and the Robinhood gang

[Flashback9]

Good work, Michael.

[Steelhead15]

@Michael Roat Great article that is real meaty. One enters a strange reality when trying to proficize an end game. I do agree that the $ will become very valuable compared to many investment assets. Stocks are certainly entering a bubble. We could really use a solid correction to bring down prices/share. If not, then cash becomes more and more valuable.

[CBR900RR]

Gold is overvalued based on what? Charts? No, fiat currencies are debt laden junk and bitcoin is completely worthless except for the fools who believe it will be used as money on a widespread basis. Gold stands alone, as it has for thousands of years, and the doubters will continue to be proven wrong.

[Michael Roat]

Agree about BTC. Read my comment on the bottom of the page if interested.

[Robert 7809591]

@CBR900RR You sound like someone who was saying bitcoin was worthless when it was ten cents. Its no different than anything else. Demand and supply. The supply is limited while demand keeps going up. When was the last time you used gold as a currency to buy anything?? Bitcoin is seen right now as a store of value just like gold. Its no different than me marveling that I give you this piece of paper that is essentially an IOU and you give me products and services. Its just now we have issued too many IOU's (the money supply) and the value of the dollar must come down accordingly. The U.S is issuing more and dollars as the world needs dollars less and less. I hold gold and silver. I would hold bitcoin but since I dont understand how the block chain works and think bitcoin is currently in another bubble, I dont buy. I think on a relative value basis, gold and silver are a much cheaper way to have a store of value (as of now).

[CBR900RR]

Bitcoin was originally developed as an alternative currency and somehow it morphed into a claimed store of value rivaling gold, but it has no value as money, central governments will always control money. Digital yuan will result in bitcoin dropping significantly

[clrodrick]

Thanks for the article, you make several good points about China

[chrisA23]

China has gained greatly in wealth and trade recent decades while many articles have been written about the problems. The problems are real but the strength of growth of the country has continued to be greater than some expect.

The part of the article that quotes zerohedge is a concern as myself and others consider it a bad source. Quoting Soros is also not so good. I remember some real money losing periods he had.

[navyair]

For anyone who is interested: news.yahoo.com/...

[AlexTheCat3741]

@navyair - What a great addition to Michael Roat's article! Thank you for that. This part of the article said it all:

"The central conceit of Chinese relations with the West has been that while political authority is monopolized by the CCP, China has a free-market economic system, and should be treated as a free-market trading partner. This was always a convenient fiction."

Having had experience with this kind of governance in Chile back in the early 70s, I have cautioned many that Communism and Capitalism are incompatbile over the long haul and eventually any investments made in Communist China would be lost or severely impaired.

Recent changes in dealing with Communist China by clear eyed visionaries should have been a clue to company managements that have staked their business future on manufacturing in that Country, e.g., Apple Computer. Time will tell if they have awoken to the inevitable reality and are willing to save themselves.

[timddeb]

@AlexTheCat3741 I think the Chinese "external threats" started in 1949 when they usurped the uigers. Then Tibet. There have been many armed incursins into Vietnam since the US lost their war there, and China is building unsinkable aircraft carriers on islands the UN has agreed are not China's. I fear their aquisitive policies will cause many wars in the region, which is why Japan and Taiwan are snuggling up the the US. Let's hope Biden has the backbone to support them.

[navyair]

@Michael Roat Good article. As you continue to do your analysis, you may wish to take a look at the geopolitical spectrum as well.

We have entered a very dangerous time in the past year. However, most people are so focused on the virus and how it affects their immediate surroundings and few are focused on events outside their own sphere.

China is graying, and will soon have labor issues based upon its one child policies of old. Additionally, although somewhat of an economic miracle has happened around the country, it is unequal and there remain large pockets of substandard conditions within China. Xi has cracked down severely on internal dissent. The Belt and Road initiative is getting push back, and added to the economic issues you mentioned.

When you add this into the equation, you can see the reasons behind China's beligerance against its neighbors, and its push for "patriotism" for its youth (recent programs)...you've seen similar moves by pre-WW II Germany, and Stalinist/Leninist Russia/USSR...Chairman Xi sees his window to dominate shrinking...he no longer has decades to accomplish his aims, but perhaps years or less. As internal dissent rises due to economic slowdowns, he will try to focus China on some "external threat". Most likely it will be an attempt to re-take Taiwan, but could be some other area like a fight with India over disputed territories. This window will start closing as Western (and other Eastern) economies start to recover from Covid disruptions.

The West has a lot of interesting challenges ahead to avoid war, but yet maintain its own best interests.

[drftr]

The one child restriction is no more.

drftr

[navyair]

@drftr Hence the part: "policies of old. "

You don't recover from several generations of a policy like that quickly. My understanding is that like the West, a lot of people who've gained the Middle Class don't want more children and the expense they entale.

[drftr]

Agreed. Happens in almost all developing countries.

Maybe the West should have made 2 children mandatory 2 decades ago to keep the machine rolling... ;-)

drftr

[terryongarland]

Interesting views..but the overall premise of the article on the Dollar,debt etc..is debatable indeed. I am sure the author will get lots of pushback..but its good to hear debatable arguments

[cgougeon]

Truly contrarian! Thank you for this. I had my comment already planned before I finished reading your bullet points: "thanks for the fresh perspective, I disagree". I see that others have already responded in that vein already. However, after reading the content of your article, I have to re-think my opinions. I found the China commentary most surprising and will have to look into that further. The TLT/USD dynamic was fascinating to me as a newb. I will be sharing that and the oil outlook was very interesting, living as I do in Alberta. Hopefully I get the opportunity to share that too with my circle.

[ds141414]

The dollar? Are you serious? We have devalued the currency at a rate unseen since the Weimar Republic. That is where we are to hide from the approaching storm? Precious metals and Bitcoin might end up being the measuring stick by which we stitch together a new system of finance once this house of cards finally finished collapsing. Why do you think Central Banks have been reclaiming their sovereign gold and buying more with both hands? And, as Americans, we have the most. That is reason enough politically to establish a backed system of world currency after the storm.

[teller12]

Not enough gold to do that and powers that be don't want; not to mention oncoming two generations can't even spell gold. Gold is historical; an artifact. Gotta change with the times or be left behind, regardless of the sense of it. I know the pain, being almost 59. It sucks. But tech and crypto and some sort of global CURRENCY (likely digital-only) will soon dominate in a cashless and less free society. Sucks? You bet. Fight it from the basement? Nope. Just show me what to do. This is the part that bugs can't grasp. I know, as I used to be one.

[Dukebailey]

@ds141414 I have not witnessed or experienced this devalued dollar you write about. Can you provide specifics? Yes, there are pockets of inflation - medical, education, etc..., but virtually everything else has gotten cheaper in relative terms, primarily due to advancements in technology. The currency is really irrelevant - inflation will occur if there is more demand for goods and services than there is supply. The central banks are simply trying to reduce volatility in financial markets - without this stabilizing force, there would be global chaos. BTW, it is not the Fed that is irresponsible, it is the Federal government(s) that does not operate on a balanced budget, resulting in a need to issue more debt. And no, BTC is not a solution for anything, other than criminals wanting to conduct private transactions.

[Gunnlin]

if prices should have gone down 50% due to technological efficiency, but due to currency debasement they are only down 25%, that is still 50% inflation

[alfagt]

Gold is OVERVALUED ? Are you kidding ? US $ is trashed by all US governments since Clinton . China RMB has gained 10% in 9 months on the $ . China offers zero % Govt Bonds fully subscribed . Anything else than $ is worth its true value . $ is morphed into a shadow currency . All traders-bankers are shorting the $ . What do you hold yourself ? RGOLD ...

[teller12]

Dollar prettiest girl in an ugly girl dance...as has been explained to bugs SOooo many times, as they continue to be enraged and beffudled by "that dollar, that dollar." If money printing goes through the roof, U.S. stocks the way to go. If it hits the fan? The USD, the good ole dollar for the foreseeable future...as galling and undeserving as it is. It IS YOUR reserve currency, sir. If you fight it, like I did WITH GOLD years ago (before I bailed lucky to break even after six years [gold long, not trading], it will eat your lunch, in tandem with a gold hostile fed and G.)

[1counselor]

Almost didn't read because I'm leery of any article that begins with a quote by soros . I really didn't see any suggestions just prophecy and more or less an inference to sell stocks/bonds and stuff your cash into the mattress or buy currency that is artificially propped up- hobson's choice.