Russia’s gold accumulation signals their belief that a global currency reset is not only inevitable, but also near
At the heart of this need for a global reset is the accelerating growth of debt that has not only become unsustainable and unpayable, but also which is now threatening the entire financial system since central banks are being forced to pull back their credit expansion due to the specter of inflation.
Over the past two months Russia has sold off 85% of their dollar reserves and used the proceeds to primarily buy physical gold. And according to mining guru Keith Neumeyer, they are doing this rapidly because Moscow expects the current global monetary system to change in a reset which will see a return to gold playing a significant part in whatever new system emerges.
Keith Neumeyer, chairman of the board of First Mining Gold, a Vancouver-based development firm, said that the reason for Moscow’s rush to pull out of US T-bills and grow its reserves of gold was obvious. “I’m certain that a global reset will take place when the governments of the world need to rid themselves of debt, and that they will tie everything to the price of gold. That’s why countries like Russia and China are accumulating gold – they know what may happen a few years from now,” he said.- Sputnik News
In the aftermath of the 2008 financial crisis, a global economic recession – possibly the deepest, and most definitely the longest that the world has ever seen – took hold. The billions of taxpayer dollars that had been spent on bailing out the banks, combined with huge amounts of quantitative easing and reducing interest rates to rock-bottom levels, resulted in advanced economies holding the highest public debt-to-GDP ratios that had ever been seen.
To make matters worse, that debt, even now, continues to grow. Currently, global debt has risen to more than $57trn and, according to the management consultancy firm McKinsey & Company, this has subsequently increased the ratio of debt-to-GDP globally by more than 17 percentage points. With global debt at these levels, the compound annual growth rate comes in at 5.3 percent; far exceeding the 3.3 percent global growth predicted by the International Monetary Fund (IMF) in 2015 and the 3.8 percent that the organisation expects the world to achieve by the end of 2016. In short, the world is going to struggle to pay off the interest, let alone make any meaningful dent in the debt itself.
This massive accumulation of debt around the world, combined with the fact that very little has been done to deleverage the global economy both in terms of household or public debt, has led many commentators to contend that the seeds for the next economic crisis have already been sown. Some are even predicting that another global meltdown is imminent. If that is the case, it is important to understand how the world has arrived at this position – and, more importantly, to try and ascertain what will happen when the world eventually buckles under its own debt. – World Finance
Ironically there has been only one industrialized country who has even bothered to pay down their debt since 2008. And that nation is of course Russia, who has not only paid off outstanding debts from the time of the former Soviet Union, but also has gotten their current national debt levels below $500 billion. Which means that when you add this debt to the value of their gold reserves currently on hand, they are now completely solvent and in fact have a permanent surplus and not just an annualized budgetary one.
Little debt, a vast network of energy and agricultural production, and now gold reserves that at least place them in the top 5 in the world point towards the fact that when the next financial crisis comes, and the world defaults into having to perform a full monetary reset, Russia will find themselves as one of the global economic powerhouses and back at their rightful place in overseeing global events.
Source: http://www.thedailyeconomist.com/2018/07/russias-gold-accumulation-signals-their.html
Meanwhile in the Fiat-Dollar U.S.A....
ReplyDeleteBoth Putin and Trump are smarter than most people think, because people are either brainwashed by MSM or blinded by hate. I'm not saying these 2 are good guys, but there is a lot going on behind the scenes, including a global currency reset in the works. The plan is to implement it without crashing anyone's economy, since we are all inter-dependent. Otherwise, the U.S. stands to fall the hardest. We know how bad 2008 was. This could be worse if they don't make some changes fast. Let's intend informed decisions and graceful transitions for all. ~PB
Beware – The Last 7 Times The Yield Curve Inverted The U.S. Economy Was Hit By A Recession
July 27, 2018 | Prepare for Change
Seven times since the 1960s we have seen the yield curve invert, and in each of those seven instances an economic recession in the United States has followed. Will this time be any different? Today, the yield curve is the flattest that it has been in 11 years, and many analysts believe that we will see an inversion before the end of 2018. If an inversion does take place, experts will be all over the mainstream media warning about “an imminent recession”. Unfortunately, most Americans don’t understand these things, and when they hear terms like “yield curve” they tend to quickly tune out. So in this article we are doing to define what a yield curve is, why it is so important, and why another U.S. recession may be rapidly approaching.
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Let’s start with a really basic definition of a yield curve. This one comes from Investopedia…
ReplyDeleteA yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates, and it is also used to predict changes in economic output and growth.
But most of the time, the experts that are talking about “the yield curve” are talking about the difference between interest rates on two-year and ten-year U.S. Treasury bonds. The following comes from CNBC…
Start with a government issued two-year Treasury bond and a 10-year Treasury bond. They both pay interest. Typically, the 10-year pays a higher interest rate than the two-year to compensate buyers for the time difference. The difference between the interest rates in these two bonds is called the “spread”. If the spread is greater than zero, it means the two-year interest rate is lower than the 10-year, and that is normally the case.
A normal spread for these two bonds will take the appearance of a rising chart — an upward sloping yield curve. But when the spread goes negative, the yield curve “inverts” giving the appearance of a negative yield curve.
An “inverted yield curve” strikes fear among investors because it makes lending unprofitable.
ReplyDeleteAs a USA Today article recently explained, our banks borrow at short-term rates and lend that money out at long-term rates…
Banks borrow at short-term rates, lend long term and profit from the difference. So the gap between long and short rates predicts future loan profitability. The bigger the gap, the more eager banks are to lend. The yield curve is a great predictive proxy for future lending.
Lending matters because loans allow for economically expansive activities. Sally deposits $10,000 at Community Banks-R-Us, which can keep $1,000 in reserve and lend out $9,000 to Jim’s Widgets. Jim uses that to grow his business. Hence lending can fuel growth. So, steeper yield curves spur economic activity. Flatter curves render less.
Our economy is fueled by debt, and an inverted yield curve tends to greatly discourage lending. When banks cut back on lending, that has the effect of “choking off” the economy, and that usually leads to an economic contraction…
In this interest-rate environment, banks would lose money by making loans. Not necessarily on all loans, but it does make some loans unfeasible and some less profitable, forcing banks to cut back on making loans; thereby choking off the access to credit markets that businesses need to grow. When it becomes harder for businesses to borrow, many businesses cancel or delay projects and hiring. Weaker businesses go out of business because they lose access to credit, which in turn causes layoffs. When this happens, it takes about a year, on average, for the U.S. economy to slip into a recession.
The yield curve inverted prior to the recession of 2008, and lending started to get a lot tighter. The resulting recession was a surprise to many Americans, but it should not have been. It was simply the logical conclusion of basic economic forces at work.
ReplyDeleteIn fact, an inverted yield curve has preceded every single recession since the 1960s, but Federal Reserve Chair Jerome Powell doesn’t seem concerned that it is about to happen again…
Asked whether “a dramatic change in the shape of the yield curve in any way influence the trajectory you guys are on with respect to normalizing interest rates and the balance sheet,” Powell stated “no,” adding that “what really matters is what the neutral rate of interest is.”
That’s the interest rate level that neither stimulates growth or slows it down — something that changes over time and which Fed officials try hard to gauge.
Interestingly, yield curves are about to “invert” in Japan, Germany and China too.
But it should be noted that there are some experts that insist that we are focusing on the wrong things. One of those experts is Ken Fisher…
Almost everyone everywhere misses that the total global yield curve matters much more than America’s. And it’s doing just fine, thank you. Today’s global financial system is super interconnected. Behemoth banks can borrow in low-rate countries such as Germany, transfer funds here, hedge for currency risk and lend to Jim’s Widgets in mere seconds.
The global yield curve combines every developed country’s curve, weighted by the size of each economy. You get Britain’s 0.88 percent 10-year/three-month spread, Canada’s 0.69 percent gap, Germany’s 0.92 percent, France’s 1.23 percent, Japan’s 0.18 percent and the rest. Mash them all together based on GDP weighting, and that gets you a 0.9 percent global spread that’s bouncing along, going nowhere fast. Current U.S. yield curve fears miss this.
In the end, Fisher may be right.
Without a doubt, the global financial system is more interconnected today than ever before, and we may find a way to muddle through even if the yield curve inverts in the United States.
But I wouldn’t count on it. An inverted yield curve has accurately predicted a recession every single time since the 1960s, and it is not likely to be wrong this time around either.
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Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.
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https://prepareforchange.net/2018/07/27/beware-the-last-7-times-the-yield-curve-inverted-the-u-s-economy-was-hit-by-a-recession/