Bill Bonner – Bill Bonner’s Diary (United States) –
MIAMI – Guggenheim investment fund’s global chief investment officer Scott Minerd predicts a 40% decline for the Dow… mostly in 2019. He says the U.S. economy is on a “collision course with disaster.”
He’s right – at least about the “collision course.” It is the smash-up we’ve been exploring this week.
Exactly how and when it will occur, we don’t know.
All we have to go on is the “why”… which tells us that you can’t get rich by borrowing money… especially when you’ve already borrowed too much.
Candied, glazed delusions are always more popular than the raw, uncooked truth. And the delusion that you can get rich by borrowing more and more money has provided direction, false comfort, and phony growth for the last 30 years.
The fantasy economy it created left the two biggest economies of the world playing a cartoonish game – like characters in comic strips or professional wrestling.
On the one side, dressed in red, white, and blue tights, was the American Dreamer, who – since the ’70s – believed he could get rich by issuing fake money.
Remarkably, his sometimes tag-team partner… sometimes blood-feud enemy… believed it, too. The Great Red Hope thought he could get rich by taking America’s fake money in exchange for real products made in his vast new factories.
The Americans spent money they didn’t have. And they were China’s best customer. Fake money went from America to China… and then China lent its earnings back to the U.S.… where it stimulated more borrowing… and more spending!
Then, China built more factories to satisfy the new demand.
Cumulatively, the U.S. trade deficits over the 30 years toted to nearly $20 trillion (in today’s dollars), almost as much as the U.S. debt. And all of it was a debit to the Americans and a credit to the foreigners.
That was the underlying fraud of the 30-year boom. It was based on bad money, not bad trade deals. Without the fake money, none of it could have happened.
Prior to the 1970s, as soon as U.S. consumers spent more than they could afford, dollars would have piled up overseas, which would then have been presented to the Treasury.
Foreign governments would have asked for gold in exchange for their paper dollars – as promised. This would have reduced the U.S. base money supply… forced up interest rates… and put a stop to the whole hullabaloo.
Without the fake-money system, U.S. households, businesses, and the government could never have gone so deeply into debt. China could never have taken so many U.S. jobs. And the U.S. stock market could never have risen from Dow 1,000 in 1982 to Dow 25,000 in 2017.
And guess what? America’s middle/working classes wouldn’t have felt so betrayed… and most likely wouldn’t have elected Donald J. Trump as their champion.
But now, there he is… adding to the Mideast wars, the war on poor people, and the war on drug users… with a war on trade!
Hell in a Cell
But wait, readers will reply that this is just a negotiating technique… It keeps the ratings up… while putting pressure on China for a “better deal.”
In this respect, it’s a little like the maneuvers leading up to the “Hell in a Cell” wraslin’ extravaganza in June 1998 that we described yesterday. Promoters gin up interest with a long warm-up of phony feuds and ersatz confrontations.
You’ll recall that the match in the Pittsburgh Civic Arena pitted The Undertaker against Mankind. But two years before, the build-up began. Mankind (aka Mick Foley) would appear at Undertaker matches – such as the one at “In Your House 8: Beware of Dog,” where he ambushed the Undertaker, costing him the championship title.
Thereafter, the two brawled on stage and off, taking the fight into the stands… and creating the kind of counterfeit conflict that gets the fans eager to see what happens next.
The culmination of this dramatic tension – that is, the cathartic release – was scheduled for the aforementioned match in June 1998.
Fighting in a metal cage, the two stuntmen went at one another, The Undertaker in his familiar black dirge get-up… Mankind with his white shirt hanging down and a tie loosely knotted around his neck. Reaching for an ever-more-intense climax, the fighters climbed on top of the cage to continue the mock combat.
Everything was going according to the … until…
Well, until it didn’t.
That was when Mankind got tossed off the top of the cage, but didn’t go where he was supposed to go. Instead of hitting the table, which was supposed to cushion the fall, he hit the floor.
And he fell onto it so hard that it knocked him out. It was while thus unconscious that a metal chair – which he and the Undertaker had used to batter each other on top of the cage – fell down, hitting him in the face, knocking out one tooth, breaking another, and dislocating his jaw.
Even phony battles can be dangerous.
Things don’t always go where they’re supposed to go.
More to come… why The Donald’s dust-up with China’s Xi Jinping has the potential to blow up badly; more than losing a few teeth, it could blow up the whole claptrappy system of debt financing…
…bankrupting millions of U.S. households and businesses…
…cutting the Dow in half, more or less permanently…
…and forcing the feds into even more lunatic policies…
MARKET INSIGHT: WHEN THE CRYPTO MARKET WILL REBOUND
By Jeff Brown, Editor, The Near Future Report
The cryptocurrency market in general has been experiencing a serious pullback this year.
From a peak of $831 billion in January 2018, the total cryptocurrency market capitalization has fallen to $266 billion today.
For regular readers of Bill’s Diary, this should come as no surprise. I told readers back in December that these pullbacks should be expected. And the one we are experiencing today certainly hasn’t disappointed.
Given this recent drop in the cryptocurrency markets, some of us might be wondering if this pullback is permanent, or just a normal market correction.
I’m here to tell you that by the end of 2018, high-quality cryptocurrencies like bitcoin and ether will be multiples higher from where they are today.
One reason I’m so confident can be summed up by one simple chart:
The chart above shows the total number of cryptocurrency investment funds in existence.
In 2016, there were only 39 funds focused on cryptocurrencies and digital assets. By the end of 2017, there were 206. And by the end of January this year, there were another 20 established, bringing the total to 226.
We will likely see the total number of funds double by the time 2018 comes to an end.
These funds were built to service the hundreds of billions of dollars of institutional money just sitting on the sidelines waiting to get access to the fastest-growing financial asset class: cryptocurrencies and digital assets.
You may be wondering, “Why can’t they get in now?”
Well, institutional funds need several things in order to participate in a new asset class like cryptocurrencies:
- Liquidity – This means they’ll need a market that is in excess of $1 trillion and large daily trading volumes of the most important cryptocurrencies.
- Custodian services – Institutional funds typically have third parties that hold assets on behalf of the institutions. This has been a major problem for institutions; without these custodian services, institutional funds cannot invest. Just last November, Coinbase – one of the world’s largest fiat-to-cryptocurrency exchanges – launched its digital asset custodian services for institutional investors. This was a major industry development in 2017.
- Cryptocurrency derivatives – Derivatives, in the form of futures, are a necessary component to allow institutional funds to hedge their positions in digital assets. 2017 was a turning point in this space as the CME (Chicago Mercantile Exchange) and the CBOE (Chicago Board Options Exchange) launched bitcoin futures in December. Even the Nasdaq is looking to launch bitcoin futures in the second half of 2018. While these derivative products have initially focused on bitcoin, derivatives for other major cryptocurrencies will quickly follow.
- Platform for information and compliance
All of these services are being built out as I write this. When they are fully in place, expect a flood of money to pour into the cryptocurrency market, and the prices of high-quality crypto assets to soar.
Today’s depressed prices should be considered a buying opportunity for sophisticated investors.
– Jeff Brown
P.S. The cryptocurrency market is primed to rebound in 2018. And when it does, savvy investors stand to make 21 times their money. But you don’t need to buy bitcoin to profit. Recently, I uncovered two ways to profit from this crypto explosion without ever having to buy bitcoin or even log onto a cryptocurrency exchange. Here’s how.