DANGER IS HERE: Has the Reset Already Begun?
the imf tells us that dangerous times are here and they want you to look over there but i think that's also a misdirection not that that's not an issue so i'm going to show you where we really need to look because dangerous times are indeed here coming up [Music] i'm lynette zhang chief market analyst here at itm trading a full-service physical gold and silver dealer specializing in strategies to not just help you survive but i don't know how about coming out the other side of this reset in a much better position than you entered it because that's really where the opportunity is and i think we're very very very close i mean i seriously look around i don't think we're we've got that much time left to get prepared so it's critical that you do it so let's see what the imf is talking about because they do say dangerous times are here and you know the question is has that reset already begun maybe in some areas let's take a look because there is a dangerous global debt burden and it requires cooperation because of all of the failures that are coming up and i mean they would not ever admit that all the central banks created all of this global debt and that they were the ones that created this dangerous situation but indeed that is a fact the world faces renewed uncertainty as war comes on top of ever-changing and persistent pandemic now in its third year moreover problems that predated covet 19 have not gone away no and guess what the problems that erupted or became apparent in 2008 those haven't gone away either they have just wallpapered over them but unfortunately they're running out of wallpaper according to the imf's global debt database borrowing jumped by 28 percentage points to 256 percent of gross domestic product in 2020. government accounted for about half this increase which means taxpayers are responsible for that with the remainder from non-financial corporations and households public debt now represents close to 40 percent of the global total the most in almost six decades 60 years going back to wartime and we're well we are we've been in perpetual state of war since 1989 anyway but global debt is rising rapidly led by borrowing and advanced economies and china we the u.s is an advanced economy and look at how that debt has grown and by the way this is non-financial firms these this is household debt and i'll do another one on household debt coming up soon and then this is public debt which means the government debt so you can see how dramatically that's grown more dramatically in china as they've been transitioning into a consumer-led economy the us has been in a consumer-based economy for a long time china's been transitioning in here but there are when you've got rising debt guess what you got rising debt risks it's not rocket science and the poor proportion of countries in debt distress or at high risk of debt distress has doubled to 60 percent from 2015 levels do you think that sounds like an accident waiting to happen so these two areas here are high risk and this is the high risk is in this the golden color and then the red is in debt distress look at this since 2013 there were 21 countries that were at high risk and no countries in debt distress that was because of all the global money printing right but today 2022 and remember we haven't finished the year yet this is only what april right in 2022 there are now 43 countries that are at high risk for debt distress and 13 countries that are in debt distress now what are you going to do about that this is significant and it can topple the whole globe quite easily the initiative okay so what they're talking about is in uh evolving emerging markets right and so what they had to do was put in and suspend debt payments when covet hit and the war in ukraine so they've been suspending debt repayments until it was actually supposed to be december of 2021 but it looks like it may have been extended but here's part of the problem there has been a shift in who's funding this right so right here you see come on that 20 back in 2006 that this debt for emerging markets was 20 of of gdp and now it's at 28 of gdp this is not a big shock that this debt has grown but where it used to be issued by traditional global lenders and these would be like the paris club the world bank the multilateral so the world bank the imf that realm and remember taxpayers are responsible for any debt that the governments take on or take on on behalf of the taxpayer even if it's to bail someone out but the new global lenders that have really come up are china and with the euro bonds with euro so you have a different there's a different attitude about it as well and it puts this debt in greater risk because a lot of this especially in the euro bonds that's private and they have not been able to get the private corporations to to restructure this debt as easily as they could get governments to do it because after all governments are playing with other people's money what do they care let's just restructure it it doesn't it's not that simple really but this is the hidden danger because there's so much of this debt that is off the radar that nobody's even really seeing or accounting for the boom and hidden debts have given way to a rise in the number of unrecorded debt restructuring this is a reset a reset a restructuring is a reset they are changing and resetting the terms of the agreement now remember this is there was a lot that was off the radar and look at this jump right here restructurings with private external creditors which would be bond holders so if you have a mutual fund maybe in your retirement plan or something like that whether you realize it or not you could very well be owning some of this debt and if there's a lot of it in there and one goes bad well i mean actually you're in a sticky wicket right now because if these are interest rates and these and this is the principal value and we are in an interest rate a rising interest rate environment right so what happens to the principal okay so when the principal is going down and now you have all of these defaults and these restructuring it starts to become apparent to the holders so you go you open up your mutual fund statement and all of a sudden there's a big dip and you're like wait what happened well that's what's happened so the things that were hidden and could be hidden because of a flood of cash and cheap money you know it's like the tide comes in you can't see all the garbage in the bottom of the ocean but when that tide goes out all of that is revealed and that's what's happening with rising rates a lot of garbage that was easy to conceal is now going to become a parent but if you just think it's in emerging markets i don't know what about the us let's take a look at what's going on there because if you're if you live in the u.s this is where you're going to have the greatest impact u.s government bonds we all know this i
hope we all know this if you don't us government bonds are the foundation of the global markets and they've been acting a little wonky because vanishing treasury market liquidity faces a new three trillion dollar test because presumably the federal reserve is going to run off that balance sheet which they tried to do before and you know they were able to do it for a little bit raise rates run off the balance sheet but it ended up in a big fat fail and that became apparent in september of 2019 and then i don't know we lurch from that september 2019 crisis into another crisis that started really became apparent in march of 2020 but this is a huge problem and as interest rates right if they're going to start selling off those bonds and increase interest rates well guess what happens fragile u.s treasury liquidity today may be exacerbated by the supply shift in coming months especially after the fed starts quantitative tightening in other words letting that balance sheet run off personally and we're going to look at that in a little bit personally i don't think they will do it i think they're going to try because they have to for their credibility they're going to try but when the markets start to implode i think they're going to make the opposite choice we've seen them pivot before right they're tightening all of a sudden boom they're loosening right up i don't personally think they can do it maybe i'm wrong frankly i hope i'm wrong thanks to still lofty government deficits and a federal reserve pairing its fat balance sheet not yet though the bank estimates that the private sector is set to absorb 3 trillion of new bond supply over the next two years threatening fresh volatility for the beaten up world of sovereign government debt now let's think about that because the government also needs to issue more debt to fund all of their spending programs so you're going to have the central bank get rid of 3 trillion in debt and the government issue another god knows how many trillions in debt and where who's going to absorb this i mean that's really what the problem is that's why the fed had to step in as lender of last resort and buy all of these treasury bonds as well as all of the mortgage-backed securities which we're not talking about that today but they had to buy all of these because there was no liquidity there wasn't enough buyers in the market faltering market liquidity renews prodding for treasury buybacks because we gotta do something the central bank has to create that liquidity there are not enough buyers of our government debt out there that started in 2002 this is not new it's just been escalating and you can get away with bad behavior for especially if you can create money out of thin air for a lot longer than anybody would think possible but not permanently and i think the shift is definitely it is the shift is definitely on us right now now there's a difference between on the run which are newly issued treasury bonds and there are a whole slate of banks that are part of the system to buy those treasury bonds and then sell them to their clients right but then there's off the run which means that these are treasuries that are already in the market and the demand is not as great for those as there they are for the on the run and remember all the repos and all this stuff that this funds the plumbing of the markets so buying back older notes and bonds right there has been since 2014 an 86 surge in the size of this bond market to around 23 trillion okay i mean that's a substantial increase and there's also been a substantial increase in money to buy these bonds but treasury market flows could be volatile for some time due to the economic risks associated with the fed's inflation problems at home you see i've been telling you this for a long time they're between a rock and a hard place and it doesn't really matter what choice they make they're going to make a mistake doesn't matter you know they're backed into a corner and they have to raise rates and run well they don't have to wrap their balance sheet but they have to raise rates to save face to save their credibility because in a con game confidence is everything it's everything and they have they want you to believe that they can do this so for their credibility they're going to raise rates but at the same time all of that debt that they have encouraged particularly since 2008 well guess what that debt has to be rolled over it has to be serviced or it has to default and that's what we're coming up to right now this surprisingly this is an inopportune time for the market to lose the fed liquidity backstop in other words you can't stop buying these bonds the market will implode this is the foundation of the global markets we are in deep doo-doo so who can replace the fed who can create money out of thin air i don't know i really don't know who can do that well the imf could do that i think but one of the tools that they're going to use to attempt that first is to open the door to risk your players in other words allow financial firms that are smaller weaker greater risk takers riskier entities to start buying up the government bonds and traders were startled as repo shop joins elite wall street bond club yeah the new york fed november 16th cut its minimum so this has been a growing problem this is not a new problem and i didn't put this in there but do you remember you might or you might not remember because they covered it up pretty quickly that the treasury bond market froze in 2014 and so the answer was to allow more players in and in order to do that they had to lower the requirements so that's what we're talking about here the new york fed in november 2016 cut its minimum net regulatory capital in fact i did a whole piece on this edgar maybe i'll pull that out and put the link in to 50 million from 150 million these backstops were put in place in 2008 to prevent another repeat of that crisis yeah well all of the backstops that they put in place other than the bail-in laws for depositors because we're not too big to fail have been reversed pretty much all of them i can't say 100 all of them but most of them if they even got implemented so many were reversed without even getting implemented even you know eight years later so they allow riskier players in and the one that they're particularly talking about is asl capital markets and uh it joined that elite club so there you go they're all about the repos and we know how much that structure has grown over the last couple of years really and and especially the standing repo the reverse repo etc it's all of this financial engineering that is so complicated and the truth is nobody fully understands it because all they're doing is putting their thumb in this dike and that dyke and that dyke and that dyke and that dyke and that dyke and what happens when they run out of out of fingers and they run out of toes they're no more dikes and i think they're running out of fingers and toes i mean i hope i'm wrong but i'm i'm not wrong you can you can see the market action you know that's not really true but for the fed adding primary dealers may help may help avert market dislocations that have cropped up in recent years may help so they're trying to put things in place to keep this con game going just a little bit longer but but it can't go too much longer people always say can't they keep kicking the can down the road they can until they can't so insufficient capital allocated to treasury trading can lead to liquidity crisis it's a product just like anything else the whole world has been turned into one big financial product it is all about corporate profits you know the corporatization of america the corporatization of medicine it has all been turned into one big financial product and that's all treasuries are they're a debt instrument and they need to trade okay liquidity crisis that happened most recently in march 2020 but you could go back to september 2019 and there was another one the onset okay okay the onset of the covet pandemic sparked a global flight to clap to cash that the banking system wasn't able to handle but what happened they just all those central bank presidents just trotted out saying we could just create as much money as you want don't worry about it and they did they created so much cash physical cash because there was a bank run and they don't want you to realize that the emperor's not really wearing any clothes but the emperor is not really wearing any clothes the treasury market has begun to display signs that liquidity is ebbing and that's happening right as qt quantitative tightening which means the cost of that liquidity the cost to take on more debt and create that liquidity keep those stock markets flying keep those derivative markets flying keep the real estate market flying etc investors brace for qt's profound effect on the cost of liquidity this is just the treasuries that they've put on their balance sheet can they run those off can the market absorb them are there enough buyers out there to absorb this the answer is no and what's the effect of that higher interest rates and what's the effect of that lower principal values and what's the effect of that higher interest rate it's a doom loop it's a self-sustaining doom loop and i hope you can see from this how that can impact the entire global monetary system because nobody's immune in this qt is going to have a profound effect on the cost of liquidity and more importantly the cost of transacting business and reallocating assets from one avenue to another avenue it's all about trading it's all about the banks making money it's all about the corporations making money forget the public we are not too big to fail so i ask you do you really think that the federal reserve can stop supporting these markets because when they do or when they lose control or when they choose to lose control this house of cards implodes it is just that simple if they do not keep doing this and buying up all of those assets it all implodes it is a ponzi scheme no doubt about it and it cannot go on forever it never does i mean it's not like it hasn't been tried time and time and time again because the reality is is the fed has lost its credibility do you still trust this because there's virtually no purchasing power left in it and world growth that whole big punch bowl has been built on that cheap debt and so now this happened today they cut their growth their global growth forecast to 3.6 and i betcha think about this right a component of growth is inflation right that's how they can make things look better i know debt to gdp and all that kind of garbage but what this means is that the world is making less money that means it's making less money to service all of the debts that it has we can't use the word stagflation where is inflation and slowing earnings but that's exactly what's been happening and we even talked about this a while ago before anybody else started using the term stagflation it's a big problem we had stagflation in the 70s and what else do we have in the 70s oh yeah we changed the monetary system from a goal back one two purely i mean it wasn't real clean when it happened but officially we went from a gold back system to a debt back system yeah yeah the same kind of switch is going to have to get happen again but this time they want to take us from a debt back system keep us on a debt back system but just take it digital gives them more control helps them create that liquidity because they'll push those rates low you'll see your principal evaporate and boy i'm telling you you're going to go spend it i think it's a much wiser idea to choose what you put your wealth into because if you don't choose this while you have the opportunity there's only so much of this out there period anything real anything physical there's a finite amount there's an unlimited amount if it's just digital or you know funny money they can create at well easy peasy so these dark lines were january's forecast these lighter blue lines are the forecast that they just came out with you can see they've been cut pretty dramatically yeah i think so now we have to deal with this debt binge now we have to deal with it and i don't know how we're going to deal with it reset all of it because i'm going to strongly encourage you to become your own central banker and hold hold the cure for all of this debt which is savings if you have enough savings and you run into a little problem doesn't really matter you can weather that storm if you have no savings and you run into a problem most americans can't come up with 400 400 in an emergency wages going up inflation's going up faster than wages so how do you get ahead what you do is you put your wealth into something that's undervalued severely undervalued because what we know is a rising gold price is an indication of a failing currency and the other thing that we know is when they reset a currency they reset something that has no intrinsic value this garbage against something that's all intrinsic value but we're talking about liquidity today so let's take a look at the liquidity pyramid because this is really important the system does not collapse but evaporates well i think it's probably going to do quite a bit of both to be honest with you and it starts from the least liquid at the top the broadest base which i mean the derivatives when i counted them before they changed the method for accounting it was 1.4 quadrillion in notional value quadrillion nobody knows the true value at risk but it is the largest part so once the derivative markets employ that's it it's game over that overwhelms everything it's a tsunami so you better not you better hope that that doesn't happen but it's going to happen because those are just leveraged bets on underlying assets derivatives derived from that is the biggest danger that we face there's the broad currency illusion the bonds that we've been talking about the sovereign bonds that's what we've been talking about that is just an illusion we have been trained to think that there's the safest thing that you can do but i would say that they are the least safest well and they're not the least safest thing that you can do but pretty darn close because a trillion times zero is zero so they can print all of this money to repay you and that money you can't go and you can't buy a cup of coffee you can't there's no place for you to spend it you need real money although your coffee you're gonna buy with silver then of course there's currency is the power currency illusion but the single most liquid is your physical gold and silver and that's power money that's real wealth because it has the broadest base of functionality it is used across the entire spectrum of the global economy so there's always demand maybe more maybe less but there's always demand that's why it's never gone to zero the same cannot be said for any of these pieces that they've created because they're all made up and they have the narrowest base of buyer so that's why when you see the fed reducing the qualifications to participate in the bond market because liquidity is drying up and they need to expand that market you don't need to do that with gold or silver you already have that and frankly this is what you need in this economic storm because my friends if we're playing hot potato i'm telling you the game is ending the punch bowl is empty you better get to safety food water energy security barter ability wealth preservation community and shelter get it done if you haven't set up a strategy already there's a calendly link below just click that make an appointment talk to one of our consultants get your strategy in place start with your goals and get it done execute that strategy please do yourself a favor it is critical we are running out of time can you see it because it's been obvious to me for a long time and these are the things that we're going to talk about if you come and join me at the graham waialea on maui on june 11th it's just a very small in fact i don't think we have too many seats left but it's a very small group so we can have lots and lots of one-on-one and conversation and i'm not on air which means i could talk about anything i can talk about everything and believe me my friends and i wish this weren't the case because we're supposed to live in a world where we have freedom of speech but there are a number of things that i really want to talk about and i'll be able to do that there so watch my interview with jerry castner from house of prep on the beyond gold and silver channel that video is out now and make sure that you listen to us we're on all the plot the uh major podcast platforms so make sure you listen and if you like this give us a thumbs up leave a comment and share share share share this video this is really important people need to understand it and until next we meet please be careful out there bye bye
2022-04-21 09:53
