20190414-Trade War at the top of credit cycle

Reluctant Preppers（ Trade War at the top of credit cycle 4.12.19 – Interviewed with Alasdair Macleod, Head of R&D at Goldmoney.com）:

-Teresa May doesn’t want to split from UN.  There is really no negotiation between the British government and the UN.  Macleod thinks May is playing the delayed tactic where the longer she can stall the more possible that Brexit will not happen.  The May (Establishment) regime has its own agenda.

-We have reached the peak of the credit cycle and are ready to go down the other side (11:24) coinciding with trade protectionism.  There was a precedent like this which was the passing of Smoot-Hawley Tariff Act in Oct 1929 in which US raised import duties to protect American businesses and farmers.   When it was passed initially, the stock market crashed but then recovered.  Then the US government started to reduce interest rates and made money more available.  After three years, it was followed by the Great Depression in 1932.

-What is worse is that the Government back then didn’t have the enormous welfare programs like we have now.   The ironic thing is that the welfare programs were created because of the Great Depression.

-How are the US deficits financed?   Up till now, they have been financed by the foreigners by recycling the trade deficits.   But the last two ticks coming out from the US Treasuries have shown a net sellers of the foreigners of 257 billion in Dec 2018, Jan 2019.

-With the rising deficits and sales of treasuries bonds by the foreigners, you will see a much sharper yield curve. (15:35).   US for the first time, instead of being funded by foreigners, now has to fund its own deficits plus the US stocks that foreigners are selling.   So these are going to negatively impact the USD and interest rates.

-There is going one solution that is another QE.   That’s what Trump wants too.

-However, in 1929 – 1932, the US Dollar was backed by gold. (1oz gold =20.67 USD) (17:18).   At that time, the prices were sharply rising and the government tried to fight that by devaluing USD to 1oz gold = 30 USD.

-Nowadays, none of the currencies were backed by gold.  Since the central banks’ mantra is “never, ever, let the prices fall!  And always keep it rising at the target of 2%”, they will have to flood the markets with fiat to ensure the prices won’t fall.

-The final outcome of that will be a complete collapse of purchasing power to these currencies.  However the Russia and China are the exceptions.   They are insulated from this situation because their central banks not tied to the west, especially Russia.

-China has built up and dominates the physical gold bullion market.  Even Chinese people bought 17000 tons of gold since 2002.

-Russia just removed 20% VAT (增值稅) from purchasing bullion by the Russian people.   The significance of that is that Russia is enabling her people to build up their own personal gold reserves and act as money at a future date.

-So the next financial crisis will lead to end of the western fiat system.

-An individual should have gold and silver in particular gold.