I have been concerned about this moment since 2009, when I realized the Federal Reserve and the government would not hold to capitalism and tip the scales to accommodation. Back in 2007 the Federal Reserve owned about 850 billion in assets, now its 8.5 Trillion. Talk about accommodation! In the last 8 months the US government ran through 8 Trillion dollars, mind you this money was all approved under Trump. The Biden administration has yet to pass any spending, and I have to imagine they will try to beat previous administration in deficit spending.
But can they? We have seen the consequences of free money at the wrong time. The actions of world governments during a pandemic has disrupted the just in time production. Between US fracking going bankrupt in 2020, crippling US oil production and China decided to punish Australia by stop buying coal, kicking off a ripple effect of a fuel shortage across the globe.
Energy prices are soaring, and in the US natural gas prices are soaring due to rising natural gas prices jumping 30% (so far!). Higher energy means higher costs on food, good, and services, at a time that US consumer debt has shot up the quickest in history after free money checks ended.
At this point, there is no way to stabilize the system, the participants just want an excuse to blame 'someone else' for the largest debt collapse in history. China is fighting for the pole position as the largest real estate ponzi scheme in history collapses.
Oddly, their troubles are causing a shortage of US dollars, and the only way to fix that is to pass very large debt spending bills in the US, and the Republicans are fighting it. With a US dollar shortage it threatens to create a dollar rising triggering a cascade of company failures to repay debt in US dollars back across the world.
Interest rates are near all time lows, with 30 year rates below 2%! When this thing blows, we may see a collapse that makes 2008 look like an opening act. The trouble is what to put your assets in? Pure cash is best unless the Federal Reserve, in a panic, makes a policy error trying to staff off this collapse spooking the world on the dollar as a reserve.
For me, I may dump a portion of my bitcoin between 80-85k, and sit in cash or look for scaling in, yet again, short positions. That didn't work out so well for me the last time I tried that, I was of course a bit early. And that's the trouble, we can see the market go 100% higher from here, some sort of epic crack up boom like the world has never seen. Then something happens and its crack down like the world has never seen.
For me, my core will remain Bitcoin. Some physical gold is good too. Good luck with riding the market up, and down, just let me know what floor is best to get off. I cannot tell until everyone sees it.
To truly understand how distorted US assets are read this post. IMO The stock market will crack 50-75% lower and the US may have a 5-15 year depression. The only exception of that can be if a new, even more massive intervention occurs. I believe that will be AFTER the collapse giving the excuse for the Federal Reserve and world banks issuing their own crypto currency. With it, they can control you money with every move, and even expire it, the final attempt at ultimate central control to 'fix things'.
WARNING: If US federal bonds gain meaningful momentum for rising rates, its game over for the dollar. As people dump their US bonds for dollars, we will see a tsunami of dollars unleashed and a rapid rise in borrowing costs causing the entire system to unwind. I think this is VERY LOW probability of happening in the next 5 years. But it does highlight how the FED cannot meaningful raise rates as it could trigger the end of their reign.
For now, party like its 1929, for we are in the middle of the fourth turning, enjoy it before the long winter sets in.
