Possible Financial Spasm on the Way

Possible Financial Spasm on the Way, by Dave from Denver.

In 2008, gold was taken from $1020 to $700 and silver was pounded from $21 to $7 during the period of time that Bear Stearns, Lehman and the U.S. financial system was collapsing. The precious metals were behaving inversely to what would have been expected as the global financial system melted down. Massive Central Bank intervention was at play.

Currently the prices of gold and silver are being dismantled by what appears to be massive hedge fund shorting of Comex paper gold. …

The effort to push down the price of gold is to silence the alarm gold provides to signal global systemic distress. It’s not just the emerging market economies and China. The U.S. economy, based on all the private sector data I dig up an analyze on a daily basis, hit a wall sometime between March and May. …

The bottom line is that the prices of gold and silver are being systematically taken down as a mechanism to help cover up the fact that a large-scale financial crisis is going to hit the global financial system. I don’t know the timing, but I would suggest that the EM currency melt-down that began in South America and has spread to the eastern hemisphere represents a series of earthquakes that are generating a “tsunami.”

If we predict a financial problem often enough, we will eventually be right!

More seriously, there is no sign in western stock market dynamics or manufacturing indices that there is an imminent problem. However the money supply growth in the US and Europe dropped below the critical 5% level a few months ago, which usually signals major problems within the next year. The Turkish and a few other emerging markets have major currency problems because they borrowed US dollars when they were cheaper and the interest rates were lower, but now the US dollar and interest rates are both rising and they are having difficulty managing their loans.  China has a massive debt problem that will erupt and disrupt at some point, perhaps triggered by the trade war that is building. Last night gold and silver prices fell significantly again for no apparent reason, which has been a canary in the coal mine before.

The chances of getting through the next six months without either a financial crash or major intervention from western central banks would seem to be about even. It’s been 10 years since the last recession in the West, thanks to major central bank money “printing” and near-zero interest rates, but we are overdue.