- Published on Tuesday, 09 February 2016 10:12
Anyone watching commodity, currency and stock markets knows something dramatic is happening. Emerging markets, particularly in Asia, are tumbling; commodities (other than gold and precious metals) are tanking while banking stocks, led by Deutsche Bank, are plummeting. Short term rallies are what's known in the trade as "dead cat bounces" or "suckers rallies" tempting the naive and greedy. Predicting the timing of total collapse is nigh on impossible but current gyrations in markets indicate that central banks, which fuelled the boom and manipulated markets, have lost control - there's nothing left in the toolbox. Negative interest rates, recently imposed by the Bank of Japan, will not have the stated, desired impact but will lead to (un)intended consequences while the recent push to abolish cash is setting us up for bank "bail-ins" - further wealth confiscation and enslavement.
“Negative” Interest Rates and the War on Cash by Richard Werner
The talking heads featured on the corporate mainstream media have started to disseminate the idea that cash is a barbarous relic and needs to be abolished. Central bankers have been particularly articulate, such as former IMF staffers Kenneth Rogoff and Peter Bofinger, or current Bank of England spokesman Andrew Haldane.
One commodity is bucking the downward trend: gold but don't be deluded into buying "paper gold" such as ETF's and derivatives - if collapse happens, they will be worthless. Some reports indicate that for every 1oz of gold there are at least 324oz of paper gold instruments. The Fed has been manipulating gold and oil prices to prop up the US dollar but that game is coming to a close.
In the UK, attempts to reflate the economy since the 2008 crisis have led to a boom in house prices on the back of increased borrowing - that is also about to come to a sticky end.
Why Britain’s Housing Crisis Heralds the Next Financial Crash by Steve Rushton
Housing prices in London have risen by 50% in the last five years. If the U.K. property bubble goes boom, it will be proportionally biggerthan the U.S. housing bust at the onset of the financial crisis in 2007
One little discussed (outside of banking and finance,) sector is Private Equity which used to be described as "venture capital". It originated as a mechanism for startup or expanding companies, which couldn't raise money on public stockmarkets, to raise capital. However, it has morphed into a predatory industry, buying out companies or assets on the cheap either because they'd been undervalued by stockmarkets or sold off by governments in the privatisation boom. Private Equity or PE has been the go-go sector for investors since the crash of 2008 but that too has skeletons hidden away. The value of PE funds' assets are determined by the general partners or managers of the funds who are incentivised to inflate the value of the underlying assets - management fees are proportional to the funds under management and the appearance of growing assets attracts new investors, increasing the managers' income. Many of these funds are themselves listed on stockmarkets and these "chickens may be about to come home to roost".
Stock Market Investors Abandon Private Equity, Expect No Profits Overall From Current Deals by Yves Smith
If you had to guess who was closer to being right about how private equity firms value their unsold deals, as in the companies currently in their portfolios, whose estimates would you prefer those of the private equity firms, who have a history of overvaluing them at predictable points in time (around fundraising time, in weak equity markets, and for deals they’ve held a long time) or of public market investors?
If collapse is coming, there is little one can do about the valuation of investments, if you have any. Nor can one avoid the economic fallout in the real economy but we can insulate ourselves from the worst effects of the collapse of the Ponzi economy, by building resilience and self-reliance through collaboration within families and communities. Indeed, it is the only hope for humanity.