Do You Still Ask “When?”

Posted at 6:01 AM (CST) by & filed under Bill Holter.

Over the years, many have continually asked “when”?  When will the system break down?  Well, I have some good news and some bad news for you.  The good news is; you are watching the collapse in real time with your own eyes.  The bad news?  You are watching the collapse in real time with your own eyes!  This will be short and sweet. 

1. Inflation is raging as the continual money printing, expansions of debt, and deficit spending have finally overwhelmed the financial engineering used to hide their dirty work.  Simply, our money was debased as the party raged on. 

2. As a result (response) of the monetary insanity, market interest rates began to rise over a year ago.  As usual, central banks are way behind the curve and are now being forced to tighten. 

3.  While inflation of commodities and everyday goods kicks into full gear, asset inflation is giving way to asset deflation. 

4.  Asset bubbles are bursting all over the world with THE most important rupture being the credit markets.  Over the last year alone, interest rates on average are up well over five fold.  The “foundation”, credit, has cracked and crashed before your very eyes.  Few truly understand this. 

5.  Stock markets are now down significantly from their highs and the average stock has already entered bear markets.  Those viewing their 401K statements for April will be very disheartened. 

6.  Real estate, which had been so hot over the last couple years has turned moribund.  Buyers have been priced out, followed by being shut out due to mortgage rates more than doubling.  Affordability does not exist.  The psychology is about to change as owners will soon understand their asset is becoming a liability. 

7.  A topic all on its own, the rule of law has broken down but a subject for another day.

So where does this leave us?  We had the “good fortune” of living in a virtuous cycle to the upside, unfortunately we will now have to live in a virtuous and self reinforcing down cycle as asset values circle the drain.  Without great explanation, as rates rise, asset values decline, it is simple math.  And here is the problem; think back in time only a couple years ago and you’ll remember how people were spending freely because they felt “rich” (and maybe got some of the stimmy monies?).  Now it is the reverse.  Homeowners are sitting on properties much longer and buyers no longer (have the ability) bid above asking price.  In fact, discounted bids are already becoming the norm.  The average stock portfolio is down well over 20% since the start of the year.  Bluntly, people are beginning to feel “poor” and they will react by reducing spending.  All of the above of course is topped off by the cost of living increases we already know of… 

Again, none of this is rocket science and should not be new to anyone reading this.  The bottom line is this; the wheels are falling off the global debt cart in a world where nothing functions without the use of credit.  Shortages of all sorts are already happening even if you have the cash for purchase.  The greatest fear for central bankers, debt deflation has finally arrived! 

Lastly, please understand and never forget, “markets” have been ruled by financial engineering for three decades.  Derivatives (probably $2 Quadrillion now?) of all sorts will begin to blow up.  Whether it be because of the underlying interest assumptions, over concentration of paper versus deliverable goods (force majeure), or just plain old outright insolvencies …you will witness the exact reverse (in albeit a MUCH shortened timeframe) than the buildup.   

As we warned you for years, “inflation of the things you need, and deflation of the things you have”!  I know, it’s a bad cocktail but exactly what we are faced with … your best position is to be where you cannot be bankrupted while the world around you bankrupts!


Standing watch,

Bill Holter

Holter-Sinclair collaboration