Central Banker 'Experimentation' Has "Created Conditions For The Mother Of All Crises"
It is the silver and gold lining of the dismal and imploding economy.
The longer that central banks force negative interest rates – and wipe out the value of savings, pensions, and insurance accounts by denying them return on investment – the more attractive gold and other commodities become as a safe haven for maintaining flexibility.
Moreover, the closer the system comes to unraveling altogether, gold and silver remain attractive as a means of holding onto money with ready, liquid exchange value.
If hyperinflation were to make the dollar virtually worthless overnight, or if cash controls were imposed to limit people to a paltry daily allowance from ATMs and prevent bank runs, physical commodities can still be used.
John Rubino, who was a former Wall Street analyst, says negative interest rates will be good for gold and silver. Rubino explains, “It used to be that if you were going to buy gold and store it in a vault, you would have to pay maybe 1% a year. You wouldn’t generate any cash flow from it.
Meanwhile, a portfolio of Treasury bonds might yield you 6% a year. So, there was a big gap in cash flow between financial assets and real assets. That’s gone now in a world of negative interest rates. It actually costs you money to own Japanese or German bonds, whereas gold is still what it always was. It sits there and retains its value while your bond portfolio actually loses value.You pay rather than receive interest.
So, this is a phenomenally good environment for precious metals, and that ought to play out over time. In other words, money ought to flow into those sectors, gold and silver, as the next few years progress. They are tiny little sectors compared to financial assets, in general. If just 1% of investable assets flowed into precious metals, it would send them through the roof. There is so much more paper out there than gold and silver.”
While the system flirts with total disaster, there is actually opportunity for gold and other commodities. Storage fees are now cheap compared with the loss of funds that negative rates are costing financial market investors.
John Rubino sums it up this way:
“The money bubble is basically the big bubble, the one from which all other bubbles have come and gone. And the money bubble is about money, and government debt and financial instruments in general. It’s a global bubble that’s bigger than anyone before it, and that’s part of the reason that it has gone on so long, because everybody is participating; every central bank is armed with an unlimited printing press and it allows them to fool people by manipulating interest rates and lately buying equities and unlimited numbers of bonds. And that fools people into thinking the world is basically normal, when it’s not normal because debt is soaring, and financial leverage in every other aspect is going through the roof.”
“We’re creating conditions, really, for the mother of all crises. It has taken longer than it seemed a few years ago, but it is starting to happen. The QE programs of the last few years, which were wildly experimental and really shocking to economists and everyone else, turned out not to work…. The system is either getting ready to breakdown shortly, or to go on to a new level of experiments that are going to be even more dangerous and set the stage for an even bigger crisis in the future. So that’s the question, when does this blow up? Either way, the current system is toast.
The investment thesis of getting into precious metals and other real assets, rather than financial assets, stands. And it’s going to work eventually.”
While huge tectonic movements are in fateful action, and central banks are printing us into a nightmare, individuals can hold relatively steady by simply being prepared, and taking advantage of the foresight they have gained by paying attention.
Prepare enough food, supplies, medical equipment and self-defense measures to ensure your physical survival, and consider commodities and alternate currencies in that strategy.
Consider how much you want to hedge in precious metals, and how you plan to store it, and access it in the event of a collapse or other crisis. Small units may be more tradable; silver holds that advantage, but will take up more space, and is a heavier currency to carry.
The future of currency and central banks is uncertain at best, and likely yields an eventual precipice from which we cannot return, but which we can easily fall over into the abyss. Stay vigilant!