With continued volatility in global markets, today one of the top economists in the world sent King World News an incredibly powerful piece warning that radical policies are about to be implemented as chaos erupts across the globe. Below is the fantastic piece from Michael Pento.
The richest one percent of this country owns half our country’s wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It’s bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own.
We make the rules, pal. The news, war, peace, famine, upheaval, the price per
paper clip. We pick that rabbit out of the hat while everybody sits out there wondering
how the hell we did it. Now you’re not naive enough to think we’re living in a democracy,
are you buddy? It’s the free market. And you’re a part of it. You’ve got that killer instinct.
Stick around pal, I’ve still got a lot to teach you. — Gordon Gekko (Wall Street)
Those who place their faith in a sustainable economic recovery emanating through government fiat will soon be shocked. Colossal central bank counterfeiting and gargantuan government deficit spending has caused the major averages to climb back to unchanged on the year. Zero interest rate and negative interest rate policies, along with unprecedented interest rate manipulations, have levitated global stock markets. But sustainable and robust GDP growth has been remarkably absent for the past 8 years…
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Equity prices have now become massively disconnected from underlying economic activity, and the recession in corporate revenue and earnings growth is exacerbating this overvalued condition. Throw in the fact that earnings have been manipulated higher by Wall Street’s recent prowess in the art of financial engineering, and you get an extremely combustible cocktail.
The Coming Chaos
I have been on record saying this will end in chaos and here is how I think it will unfold:
Global central banks have universally adopted inflation targets, yet claim those goals have yet to be met. This is because of the inaccurate way governments measure consumer price inflation. Nevertheless, most of the new money created has been pushed directly into real estate, equities and bonds by financial institutions; thus primarily inflating the asset prices of the rich and increasing the wealth gap. And since these economic leaders equate growth with inflation, the inability to achieve inflation targets is viewed also as the primary reason why growth has remained so elusive.
To bring inflation sustainably above the stated goals of 2% the private banking system would have to be able to push credit directly onto debt disabled consumers, which is impossible unless real income growth, after decades of falling, suddenly begins to surge; and/or consumer debt levels were dramatically pared down.
Therefore, central banks would need to inject credit directly into consumers’ bank accounts while pushing deposit rates sharply into negative territory. In order for that to be truly effective they would also have to ban physical currency. To date no central bank has dared to use these drastic measures to meet their inflation targets…although if they did, intractable inflation would be guaranteed.
Governments have failed to reach their stated inflation and growth targets through the current “conventional” strategies of currency depreciation and manipulating the yield curve to record lows. The salient issue being that chronically low nominal GDP growth rates are resulting in an insufficient tax base to handle the sharply mounting global deficits and debt.
Enormous increases in government debt have historically caused sovereign debt yields to spike, causing debt service payments to become unmanageable. The recent European debt crisis is a perfect example of this:
Back in 2012, creditors grew wary of the countries referred to as PIIGs (Portugal, Ireland, Italy and Greece); and their ability to pay back the massive amount of outstanding debt they had accumulated. Consequently, creditors drove interest rates dramatically higher to reflect the added risk of potential defaults. For example, in Portugal the Ten-year note went from 5% to 18%, as government debt to GDP soared from 70%, before the crisis, to where it sits today at 130%. But thanks to their European Central Bank’s (ECB) policy of buying ever-increasing amounts of Portuguese debt, that yield today stands at just 2.7%.
Inflate Or Die
The ECB, the Bank of Japan (BOJ) and the People’s Bank of China (PBOC) have already promised the markets to artificially hold borrowing costs at record lows as they try to inflate their way out of a debt crisis. This is why ECB head Mario Draghi felt compelled to “do whatever it takes” to keep bond yields quiescent. This commitment of government to usurp control over the entire sovereign debt market is spreading across the globe.
The Federal Reserve is about to join these other central banks once the incipient U.S. recession manifests, even to the eyes of an economically-blind member of the FOMC. This dilating epiphany will occur as annual deficits vault once again over $1 trillion dollars and pile onto the $18.6 trillion debt. It will be at that point all major global central banks will be in a position of permanently monetizing most, if not all, of the massive sovereign debt issuances.
The mandatory strategy of allowing deflation to rebalance debt levels and return asset prices to a sustainable equilibrium has become anathema to global leaders because the temporary depression that would result is politically untenable. Instead, government leaders are 100% committed to the flawed and baneful strategy of trying to create viable GDP growth through prodigious currency depreciation, interest rate domination and inflation.
In order to facilitate this inflation scheme, central banks, in full cooperation with governments, are swiftly moving to the strategy of circumventing the banking system and directly monetizing sovereign debt. The bottom line is intractable inflation has been the inevitable and tragic fate of all insolvent governments.
The main thing about money, Bud, is that it makes you do things you don’t
want to do. — Lou Mannheim (Wall Street)
Desperate Times Call For Desperate Measures
But this scenario of central bank overreach is not just the ramblings of some Cassandra. The new Economic Counselor for the International Monetary Fund (IMF), Maurice Obstfeld, called for unconventional intervention in an interview ahead of the annual IMF research conference. This economic leader of the New World Order said the following:
“I worry about deflation globally…It may be time to start thinking outside the box…at the zero lower bound, our options are much more limited…In order to bring inflation expectations firmly back to 2% in the advanced countries, where we’d like to see it, it’s probably going
to be necessary to have some overshooting of the 2% level…”
And if that wasn’t telling enough, here is a striking excerpt from a paper prepared by Adair Turner, who is a member of the Bank of England’s Financial Policy Committee, which supports my contention that central banks are exploring the option to directly finance government spending. From the Wall Street Journal:
“One option is for central bankers to overtly finance increased budget stimulus with permanent increases in the money supply. Japan will be forced to use such ‘monetary financing’
within the next five years and the policy should become a normal central bank tool
for all economies facing stagnation.”
We now have the all conditions in place for an unprecedented breakout of worldwide stagflation; secular economic stagnation, insolvent governments, and central banks that are willing to enable a humongous increase in deficit spending by permanently monetizing that debt. Sadly, the fiscal and monetary conditions for global economic chaos have now been set in stone. It’s only a matter of time. And unfortunately, that time is short. ***KWN has now released the powerful audio interview with Nomi Prins, the keynote speaker who recently addressed the Fed, IMF and World Bank, where she discusses the coming financial destruction that is in front of us, what is going to put an end to the manipulation of major markets, including gold and silver, what investors can do to protect themselves and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: China Advances Master Plan To Crush The West And Dominate The World CLICK HERE.
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