On the heels of another chaotic trading week in major markets, today one of the top economists in the world sent King World News an incredibly powerful piece warning about pure fantasy and the remarkably desperate crisis the world now faces. Below is the fantastic piece from Michael Pento.
August 15 – (King World News) – The average yield on the 10 year was over 7% between the years starting in 1971 and the start of Great Recession. However, central banks have been pushing down the long end of curve for the last seven years. This has lowered interest rates and made our massive federal debt easier to service and much more readily increased….
Continue reading the Michael Pento piece below…
In fact, the CBO projects annual deficits will rise north of $1 trillion within 10 years, which at that time will equal 4% of GDP. This annual increase of $1 trillion dollars will rapidly pile on top of the already dangerous and unprecedented level of publicly traded debt of $13 trillion.
CBO further projects real GDP will grow by about 3% in 2015 and 2016; and by nearly 2½% throughout the next decade. This rosy scenario does not allow for any economic contraction whatsoever during the next 10 years, though we are already very far along on this current business cycle. In addition, the projected 2.5-3% growth is also above the 2% average GDP growth experienced since 2010.
Pure Fantasy And The Remarkably Desperate Crisis The World Now Faces
Hence, the notion that we will be able grow our way out of this debt load is pure fantasy — especially in light of dysfunctional governments.
This should be proof positive that the Fed’s inflation quest is pure folly. Growth comes from productivity improvements, not from money printing — a lesson that Keynesian central bankers are either blind to or are purposely ignoring in order to supply an excuse for endless debt monetization. But even with massive manipulation of free markets we are on track for an unprecedented spike in Treasury bond yields due to inflation, insolvency and now the lack of foreign demand.
The primary purchasers of US debt have been Japan and China. Yet these nations now face their own domestic economic turmoil and will no longer be able to supply a bid for US debt. In fact, China’s $3.6 trillion in currency reserves may be needed to support a yuan that falls faster than what the People's Bank of China has recently desired. Since China and Japan have become sellers of Treasuries the Fed will have to step up the buying.
However, as previously indicated, our central bank has promised to join in on the hit-the-bid parade starting this year. Ms. Yellen is aware interest rates cannot rise very far from the current levels without bursting the bubbles in equities, real estate, and the economy as a whole.
To combat the next deflationary collapse of the economy, which has already started to engulf the globe, the Federal Reserve will soon have to join the currency debasement derby that is being led by China, Europe and Japan. This means the Fed will not only stay near the zero-bound range on interest rates, but will most likely launch another round of QE in the near future. At that point all central banks will be on a full assault to depreciate fiat currencies.
Next Major Bull Market In Gold & Mining Shares To Be Unleashed On The Upside
Incredibly, gold mining shares are trading at 15-year lows despite record levels of government debt and an unprecedented increase in central bank balance sheets that have exploded for the expressed intent to boost inflation. This has set the stage for the next major bull market in gold mining shares that will be starting from prices not seen since the start of last millennium. ***KWN has now released the extraordinary audio interview with Michael Pento, where he discusses why the fantasy is now coming unraveled, what this will mean for the gold and silver markets and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***KWN has also now released the incredible audio interview with 50-year veteran Art Cashin, where he discusses why the worldwide liquidation scramble could morph into a full-blown 2008-style collapse, the chaos in China, global stock markets, commodity markets, whether the U.S. stock market has finally put in a major top and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Art Cashin Warns Worldwide Liquidation Scramble Could Morph Into Full-Blown 2008-Style Collapse CLICK HERE.
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The audio interviews with Art Cashin, Rick Rule, Gerald Celente, Bill Fleckenstein, Dr. Paul Craig Roberts, Robert Arnott, Eric Sprott, John Mauldin, Stephen Leeb, Egon von Greyerz, Nomi Prins, Andrew Maguire, Michael Pento, David Stockman, Chris Powell, Dr. Philippa Malmgren, Marc Faber, Felix Zulauf and Rick Santelli are available now and you can listen to them by CLICKING HERE.