Macro Update – Gold, Bitcoin and the Gigantic Global Debt Bubble

Today’s the first day in a long time financial markets appear willing to at least consider the reality of the geopolitical situation on the ground for what it is, as opposed to what most people would like it to be. As I’ve noted for months, the “trade war” is just one battle in a much larger, increasingly unstable struggle between the U.S. and China for global power and leverage to shape the next paradigm of world history.

A failure to appreciate how big this really is explains why investors have been so willing to swallow unrealistic happy talk from both sides. The risk that needs to be discounted in the market isn’t a risk of higher tariffs, but the risk of WW3. The U.S. and China were never going to sign a trade deal and blissfully return to the ways things were. That world is over. We now find ourselves in the very early days of a historic struggle to influence the future.

Gold

Back in January, I wrote a twitter thread centered around gold which ended up becoming very popular. It’s been around five months since then, so I want to provide a quick update.

I had outlined four reasons why I had become increasingly bullish.

The first three factors remain in play as far as I’m concerned, but the trading action has been pitiful in 2019 to-date as equities have soared. Nevertheless, I find it quite interesting that despite the S&P500 hitting a new record high a couple of weeks ago, the market in gold terms never really came that close.

As you can see, the SPY/GLD ratio only got as high as around 2.44, or 6% lower than the September peak of 2.60 despite a gigantic snapback rally. This might mean absolutely nothing, but I doubt it.

Let’s now revisit some of my price forecasts.

The price action has been less positive than I thought thus far, but I always maintained 2019 would be a slog. We still have six weeks to clear $1,350-$1,370, so we’ll see. If not, I still expect a breakout in early 2H19 as the reality of the global economic and geopolitical situation becomes impossible to ignore.

Bitcoin

Bitcoin’s been on a tear recently, but I want to highlight something far more important than price action. This past Friday, Rep. Brad Sherman of California uttered something I never expected a sitting politician to publicly admit about the real function of the USD and its central role in U.S. imperialism.

The price soared higher after his comment and I immediately started wondering. Why is he saying this now? Do U.S. banks or the government have indications that sanctioned countries are either buying or using Bitcoin?

As I mentioned in last week’s post, The Old World is Dying, Bitcoin is a transformative asset which allows humans to do stuff they could never do before. Is the old guard finally starting to sweat as they see their archaic, centralized tools of power become increasingly irrelevant? This is just more evidence that the old world in in fact dying.

The Global Debt Bubble

At the core of everything unsustainable and destabilizing about the “old world” we live in, lies the ever expanding global debt bubble. In early 2018, I wrote an opinion piece for The Hill titled, Bitcoin Isn’t the Bubble — the Global Financial System Is, in which I noted:

While we’re on the topic of bubbles, it seems the truly gigantic bubble in the world isn’t bitcoin, but rather the global debt market. This leviathan now stands at around $233 trillion, or 318 percent of global GDP. Even more troubling, an estimated $11 trillion of government debt now trades at negative yields. This means whoever is buying this paper is doing so despite the fact they are guaranteed to lose money on the “investment.” Much of this buying has been propelled by central banks which can print their own currency and buy debt indiscriminately. This is not characteristic of a healthy financial system (particularly so many years into a global recovery), but rather a zombie one that’s been artificially propped up since the financial crisis.

Therein lies the crux of the issue. Bitcoin and the crypto asset ecosystem it spawned seem to be a logical reaction to our zombified financial system, which itself is built upon the shaky foundations of a gigantic debt bubble. The rise of bitcoin foreshadows the emergence of something potent and new in the realm of money and finance, which also happens to be something the world desperately needs.

Since then, global debt has added another $11 trillion to $244 trillion and remains sticky at around 318% of GDP.

While it’s dizzying to think in such terms, it gets even worse when you look under the hood. In a must read article published by Bloomberg last week, we learned that the biggest bubble-pumping entity in America, the Federal Reserve, is publicly starting to worry.

In its Monday report, the Fed said that credit standards seem to have slipped since it issued its last financial stability analysis in November 2018. The central bank added that loans to firms with especially high debt now exceed earlier peaks in 2007 and 2014.

“The historically high level of business debt and the recent concentration of debt growth among the riskiest firms could pose a risk to those firms and, potentially, their creditors,” the Fed said.

You know it’s bad when even the Fed admits it. Consider yourselves warned.

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24 thoughts on “Macro Update – Gold, Bitcoin and the Gigantic Global Debt Bubble”

  1. Been hearing a lot of crazy talk from family and various acquaintances about how wonderful the economy is, and nearly all of them are Trump fans. I’ve given up trying to dissuade them over the past two years since the emergence of the QAnon “4D chess” explanation for everything. There’s no arguing with that level of zealotry.

    The most troubling aspect of this is that many of these same people believed we were in grave danger under Obama. So what changed under Trump? They both want ultra low rates, they’re both warmongers, and they seem to be serving roughly the same people. The only thing that changed was the bluster and the addition of tariffs, which are a tax on consumers. The deficits are even larger under Trump.

    People need to admit that their red/blue votes don’t matter. Once they’ve swallowed that bitter pill, they need to admit the global banking system is hopelessly corrupt and will collapse at some point. There will be many more rough trading days to come. I still don’t see things tanking this year, but the big reset is in the mail.

    Reply
  2. M.K. will certainly know, better than most, today’s markets, where price discovery depends on what the market controllers and their computing power makes price. While I own some gold and silver as insurance I don’t expect either to be released from manipulation until it suits the financial system controllers. When these folks have all their ducks in a row is when the next paradigm shift may take place but not until then. If gold has a price increase in the meantime it is because they want it to have an increase.

    To this end the general manager of the BIS gave a speech a short while back calling for a end to cash over the mid term. I had to look mid term up. For the BIS (and the rest of ’em) this is one to six years. These bankers are also interested in cryptos and have floated various schemes for our adoption of them under central banking auspices. My guess is that the bankers have yet to confirm in writing on stone what the transitional medium of exchange will be as they move world markets away from a sell/buy price based system to a new system that will be completely centrally controlled for the entire planet. We can feel its slow encroachment with every new business trend and innovation. While the American govt. may have its knickers in a knot over trade with China the smart money has long ago already by passed this two dimensional level of tension and is getting in line for the opportunities in Asia and Africa.

    All the pyramid cap are on the same page. Even Iran and Venezuela are signed on to all the NWO protocols. These apex elites are the folks that sit at the big table and decide the future. One example: Elaine Chao is married to Mitch McConnell. Ms Chao is also U.S. Sect of Transportation. Her father is a Chinese citizen who is a shipping magnate and sits on the Chinese transportation directorate. Elaine’s sister sits on the BOD of the Chinese Central Bank. The CCB is a stanch member of the BIS as is the Federal Reserve. China’s new Asian Infrastructure Bank (copy of IMF/WB) has interlocking board members with western banking concerns. Are we getting the picture yet? If there is to be a WW III it will be on these folks say so and not Mssr Trump and his cronies, Putin – his or Jinping’s. These folks have full control over nation states and use them as cutouts to advance agenda. They achieve consensus among themselves and from there it gets disseminated. There biggest problem is selling their rule over us to us and have us, by and large unquestioningly accept that rule.

    Reply
    • It was interesting to read your comment/commentary here. Xi Jinping’s surname is not “Jinping”, his surname is Xi. Chinese names are written with the surname before the forename, this same rule extends to all parts of Asia that were dependent upon China for culture (such as Japan).

      Anyway, I guess Liberty Links is on hiatus or perhaps retired. I miss reading all the horror news that MK would find. If Liberty Links is a retired feature, I totally understand. His child comes first.

  3. The globalist bankers are ALWAYS in control. The entire system is rigged, including Bitcoin’s meteoric rise. They are pushing for a digital cashless society, which will be much easier to control. Remember the statements made by Aaron Russo before his death.

    Reply
  4. Can someone please explain to me [and allow me to rebut their subsequent lies] what is the difference between the US dollar [80% plus or minus digital] and bitcoin, what is the difference?

    Reply
    • David, the dollar is centrally controlled. Bitcoin is decentralized, or at least it looks like it is decentralized.

      Centralized vs decentralized is the only meaningful difference, and it’s a biggie. If a cryptocurrency is not decentralized, then there is no meaningful difference to fiat.

      Enlighten me with your rebuttal.

    • David, Okay I’ll bite. Not because I’m looking to be called a liar but because I would like to read your thoughts. So first off there is no USD, other than the few minted by the U.S. Govt. and other USG coins. The Federal Reserve Note is easier to create if we compare it to Bitcoin.. Beyond that both operate, or can, in the digital realm but those realms are different. The FRN has strict accounting over its creation by a central controller which is also its creator and owner. Bitcoin on the other hand works on a block chain system and there is no central controller that I know of…..so take it away David…..

    • Thanks Abreedapart and Brad , both straight and honest, but “Centralized vs decentralized” and “strict accounting over its creation by a central controller ” do not eliminate USD equals Bitcoin. However, if you do insist, how can you ignore the possibility that Bitcoin is a creation of the IMF?
      They want a One World Currency and may be leading us into the same.
      It grew bigly, then collapsed, now up again, it isn’t going away, let us all await the announcement.

  5. The mountains of debt would only be catastrophic if they were meant to be repaid. But they are not. All money in existence are debt. That´s how money are made. There only problem here is of ideological nature; one may dislike the monetary mechanism behind it, a mechanism that let financial institutions print money while everybody else must pay rent on them. It is like a broad private taxation system.

    Bitcoin on the other hand has no monetary mechanism behind itself, and has therefore never functioned as money. It is a decentralized transactional database, and can be used as a tool for (costly, but anonymous) transfer of money. And ofcourse it can be used for pure speculation, a feature popular among kids.

    I believe no government allows private currency systems. That would take away the profit and control privilege of the current money masters and their allies in governments. Although no cryptocurrency has so far made it to be anything close to money one may never know if this will happen, and I believe this possibility is the reason they want to have a ban.

    Reply
  6. For me, it appears that folk only use Bitcoin to “buy it, sell it or hold it”. They are not using it yet to purchase Tacos, Nikes, or Vodka. I would like to see it in much wider use. I am often in rural or tropical countries with no available connectivity, but I can use silver. The last place I was in, I used knives as currency, and as an aside, they had never heard of Donald Trump. Multiple currency options seem to be a solution, at least in the short term.

    Reply
    • Yes, I have read and heard, often in very detailed accounts (Lynette Zang), of how Bitcoin can be tied back to the international financial institutions. The trouble with BC is in valuing a unit to represent its corresponding to the current money as debt world debt system. Too many of the hoi polloi would become fabulously wealthy if a direct connection were to be made. I see BC as a trial run for something that will enter the financial pipeline under either an accept the new offering or face total financial collapse and foreclosure style dialectic.. When it comes down to where the rubber meets the road the ownership of natural resources important to the human economy, and the means of enforcing that ownership is the prime directive that the pyramid cap understands in their bones. Under capitalism, money buys and is sold for and price is determined in terms of money. Get rid of capitalism and its variants like communism, and institute a system without money or price but rather a data/digital energy unit driven system and total control of the human economy, without any recourse to opposition, becomes feasible if data collection can be manifested at the required level. Enter Strong AI, quantum computing and the internet of all things (IoT).

  7. “institute a system without money or price but rather a data/digital energy unit driven system and total control of the human economy, without any recourse to opposition”.

    That is more than a little Orwellian, Brad.

    Reply
    • Genaro ask yourself what the controllers on going goal is? Is it not to extend their control by centralizing that control, often called globalism? They now control nation states as cutouts. They control all these state’s currencies. At some point would they not wish to control a one world currency not related to any nation state? From there its a hop, skip and a jump to ending money and issuing credits as technology allows.

      Tell me, when your telecommunication company wanted to install fiber optics if you thought it was for your benefit or theirs?

    • And in the not-too-distant future, Lagarde or her successor, will announce that bitcoin is and always has been a creation of the IMF. For your convenience, your bank account will be converted to bitcoin. Bring in any cash and it will be converted to Bitcoin [for your convenience] limits will apply. Also bring in your gold and silver for convenient conversion, [limits apply] This will happen when the world is Comfortably Numb.

      [NOTE: I am not one of high intelligence as the posters here are, just a common man who can see this event coming like a train, while standing on the rails.]

    • You are probably not far from the truth as common sense would tell us this is the direction that is being taken. I’m no doctorate of letters either but it doesn’t take a university degree to read the writing that is constantly being posted AT business conferences or pushed at the U.N..

  8. David, that’s the beauty of peer to peer.

    If TPTB co-opted Bitcoin, another crypto-currency pops up to replace it.

    Look no further than what happened to the major record labels in the music industry selling and controlling music sales/distribution via physical CD’s.

    How many record stores do you see anymore? How many people do you know who buy and own their music in CD format anymore, as opposed to Mpeg’s and/or streaming services?

    Just 20 years ago in 1999 if you had told the upper level Execs at Warner and Sony Music that by 2019 this would be the norm, they would have laughed in your face and told you that you were completely crazy.

    Reply
  9. Brad, re: “From there its a hop, skip and a jump to ending money and issuing credits as technology allows”.

    Are you familiar with the 3rd world? Most of the people on the planet live in third world countries without the “as technology allows” aspect.

    So that is a long long way from a “hop, skip, and a jump” to a “one world currency”.

    Most of the people on this planet are still concerned with having fresh water, food, and shelter, on a daily basis. Which in and of itself is why decentralization versus centralization (globalism) is the key.

    Reply
    • Genaro, Yes India is one such jurisdiction that has massive poverty and that is headed in the cashless direction. The poor, and everyone else in India, have had to grab bank accounts as welfare has gone digital with direct deposit. Approximately 30% of the world does not bank and bankers would like to see this market accessed. Once this has been accomplished….

      You may also be aware that Space X (and whatever it truly represents) is set to start a 5G satellite launch program next month (June) with the intent to cover every inch of the planet and connect it to the grid. Initial number of satellites is 4,400 plus, with a grand total of 12,000 eventually. Other corporations have similar plans but with smaller numbers. Currently all satellites and other man made objects orbiting number about 2,000 objects….so it will be rather crowded up there.

      Things are moving quickly. Time is running out and you like most people don’t see what is coming…..Did you go for the fiber optics when it was offered?

    • Addendum: Genaro as a side bar it might be of interest to take a look at Jim Lee’s Climate Viewer web site. Lee has been tracking weather and other planetary modification for some time. Lee is well respected by govt and other scientific agency scientists when he attends their conferences. The US national head of HARRP recently wrote Jim a letter saying let’s talk shop. If you have a look, take the tutorial for Lee’s world maps. They are a thing of wonder as he has plotted every weather/space weather modification site known and you can zoom in and have a look at each site via google. Recent space modification efforts were recently just captured on video for a first time over northern Norway. The locals thought it might be a space invasion beginning but it was just ‘chem trails’ in the mesosphere or higher.

      You seen to have stayed focused on that which was. Lee’s site may show you that things are not what you knew. Science is far advanced beyond what you think it is. There’s talk of vacuuming the Van Allen belt away. They have discovered two vortex in the earth’s magnetic field that is opening up incredible theories for use.

      If some people do not end up with an ‘earth account’ they will be on their own and will not even be acknowledged as existing when the financial system switches over. And while the majority won’t give a flying fig the U.N. (which does not love you) has just called for a one billion human population as max.

      You are aware that Goldman and other banks connived very and extremely illegally to get their way onto the futures market, where they are not allowed to be (only end users) and then bid up the price of food staples. This must have been about a decade or so ago. You may remember some nations stating they would not be exporting any rice at that time. It was guesstimated that about 100 million people, the poorest of the poor in the poorest nations on the planet died within 18 months from starvation and related causes. Kinda puts Hitler,Stalin and Mao in the amateur class while bonuses were large and plentiful in the banking houses that year.

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