The Federal Reserve is stuck between a rock and a hard place. If the Fed pushes rates higher, interest payments on our 34 trillion dollar national debt could spin wildly out of control and bank balance sheets will be in even worse condition than they are now. First Republic just bit the dust, and literally thousands of other small and mid-size banks and in serious jeopardy. So it would be suicidal to hike rates at this point. But if the Fed were to reduce rates, that would be like injecting jet fuel into a raging fire. Our ongoing inflation crisis is absolutely crushing working families, and the rising cost of living has risen to the top of the list of things that U.S. voters are concerned about. The Fed seems very hesitant to cut rates, because that would make inflation even worse. So at this point the Fed is essentially caught in a “deer in the headlights” moment because it doesn’t know which way to go.
But staying on the path that we are currently on is only going to end in disaster.
Mark Spitznagel, the chief investment officer of Universa Investments, recently warned that he believes that the “worst market crash since 1929” is ahead of us…
One of Wall Street’s most bearish skeptics told Business Insider last month that he thinks the “worst market crash since 1929” is coming.
For years, our leaders have been “kicking the can down the road”, but according to Spitznagel all of that intervention has set the stage for an absolutely epic collapse…
In an interview with New York Magazine’s Intelligencer last year, Spitznagel likened the Fed’s “constant monetary intervention” to forest fire suppression.
He went on to say “when you suppress it enough, it gets to a point where you can no longer afford to have any fires burn because they would be too big and too intense.”
That’s where the U.S. economy is at, according to the hedge fund manager.
If Spitznagel’s dire market predictions come true, you really don’t want to have all of your eggs in one basket — because that basket could easily go up in flames.
In the months ahead, we will want to keep a very close eye on our banks.
Our banks are the beating heart of our economic system, because without the banks we would not have a functioning economy.
The banks are where we get mortgages to buy homes, auto loans to buy vehicles, and credit cards to go on shopping sprees.
Without the credit they provide, we would be in a world of hurt.
Unfortunately, our banks are in very serious trouble right now.
Higher interest rates have blown a hole that is hundreds of billions of dollars wide in their balance sheets.
And they are sitting on mountains of commercial real estate loans that are going bad because the value of commercial real estate has collapsed all over the nation.
One consulting firm that examined data from approximately 4,000 U.S. banks is warning that hundreds more banks could potentially fail during this crisis…
According to recent reports, hundreds of banks face the potential of failing just like Republic First Bancorp.
Consulting firm Klaros Group analyzed roughly 4,000 U.S. banks and found that the banks face a threat of losses due to “secular changes in social patterns accelerated by the COVID pandemic (such as work-from-home, which has materially impacted demand for office space) and to the impacts of higher interest rates and related inflation.”
“You could see some banks either fail or at least, you know, dip below their minimum capital requirements,” Christopher Wolfe, managing director and head of North American banks at Fitch Ratings told CNBC in an interview.
Meanwhile, we continue to get even more signs that the overall economy is really slowing down.
For example, we just learned that Rue21 is going to be shutting down all 543 of their stores…
Rue21 – the teen fashion chain that is a fixture in malls across America – is to shut all 543 US stores.
Customers will be able to pick up deals while the company clears its stock over the next four to six weeks – but then the 40-year-old chain will be gone forever. At its peak, it had 1,200 shops.
It is expected clearance items will start at 20 to 50 percent off then rise up to as much as 90 percent to clear stock that doesn’t initially sell.
All over America, stores are closing, businesses are fleeing our core urban areas, and once bustling office buildings are standing empty.
At this stage, everyone should be able to see where all of this is heading.
The Chinese certainly understand the direction that things are moving. The following comes from an article entitled “China Is Buying Gold Like There’s No Tomorrow”…
“China is unquestionably driving the price of gold,” said Ross Norman, chief executive of MetalsDaily.com, a precious-metals information platform based in London. “The flow of gold to China has gone from solid to an absolute torrent.”
Gold consumption in the country rose 6 percent in the first quarter from a year earlier, according to the China Gold Association. It came on the heels of a 9 percent increase last year.
Chinese consumers are voraciously buying gold because their own economy is crumbling and they can see what is happening to the global economy as a whole.
At the same time, China’s central bank is gobbling up gold at an unprecedented rate…
Another major buyer of gold in China is the country’s central bank. In March, the People’s Bank of China added to its gold reserves for a 17th straight month. Last year, the bank bought more gold than any other central bank in the world, adding more to its reserves than it had in nearly 50 years.
Beijing is buying up gold to diversify its reserve funds and reduce its dependence on the U.S. dollar, long considered the most important currency to hold in reserve. China has been reducing its U.S. Treasury holdings for more than a decade.
Traditionally, buying gold and other precious metals has been a way to preserve your assets if you think that a major crisis is coming.
And the truth is that a major crisis has already begun.
I have been warning my readers that 2024 would be a very important year, and that has definitely turned out to be the case.
Of course all of this is very bad news for Joe Biden.
He had been hoping that an improving economy would help his chances in November, but instead there has been a dramatic shift in the wrong direction just as we enter the most critical months of campaign season.
Michael’s new book entitled “Chaos” is available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.
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