Knock, knock! Who’s There? Mother of All Bubbles

Central bank liquidity has been a major concern to investors throughout the year. So a concerted effort by central banks to control it was highly anticipated and central banks did not disappoint. As a matter of fact, the percentage of central banks easing monetary policy rates was found to be at the highest level since the 2008 Global Financial Crisis. Unfortunately, instead of actually facilitating the improvement of global economies, central banks saw fit to simply and temporarily placate investor fears, with “much-needed liquidity.” A truly free market inherently displays success and failure. However, while market manipulation such as stock buyback programs, artificially low-interest rates, and other economic gimmicks foster higher corporate profits, high unemployment, and low wages, these activities also permit investors to erroneously believe that an over-heated, over-sold, and over-financed bull market can continue indefinitely.

Meanwhile, New York City raised the minimum wage from $7.25 to $13.50 between 2013 and 2018, then imposed a $15/hr. the minimum wage for tipped workers earlier this year, which many analysts suggested would backfire badly and cause an even more rapid economic slowdown, particularly in the already struggling food service industry. Suggestions were that business owners would be forced to lay off workers, cut hours, accept smaller profits or raise prices. Many industries can reach offshore for labor assistance, but food service obviously requires on-site service. Since the implementation of a $15/hr. minimum wage, a strong expansion of the restaurant industry has resulted in New York City, with no noticeable negative economic effects, no $20 Big Mac’s, and no massive job losses. It’s just an example of what can be done, but it is proactive assistance, not just the pacifying smoke and mirrors our government loves to provide. Without an expanding economy, quantitative easing, in all of its machinations, is doomed to failure.

One size does not fit all and all situations are not equal, but even though prices have increased in New York City, both restaurant revenue and employment are up. It’s also important to realize that employees with more money have a greater ability to spend more money, so the growth continues. The monstrous debt bubble and credit bubble that’s been created is approaching an irreversible level. As it stood at the beginning of 2018, every person in America would need to contribute $61,539 in order to eliminate the national debt. If student loan, credit card, and unfunded liabilities were added, that number becomes completely overwhelming, but it keeps on growing regardless, due to the government and Fed’s head-in-the-sand addiction and attitude that’s been adopted and pushed onto investors.

A day of reckoning for these massive bubbles is coming and one of the best defenses for any portfolio is holding a substantial portion of physical precious metals. Touting a stellar history as a store of value and asset protection, gold and other precious metals should probably be a part of almost any investor’s war chest. Indications currently abound regarding the potential onset of a recession, sometime within the next six to twelve months. Slowing global economies, trade wars, and ineffective global quantitative easing programs, including negative interest rates, are just some of the reasons that savvy investors are looking to physical precious metals for assistance.

Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.