(Zero Hedge)—As Peter Schiff explained in his podcast, that’s a big problem when the entire economy is built on a foundation of cheap money. But most people in the mainstream don’t seem to grasp the gravity of the situation.
They don’t realize that we are at the beginning of the end of this whole phony economy.
In a nutshell, the economy is buried under trillions in debt. The cost of the debt is rising. The economy simply isn’t built to handle an even moderately high interest rate environment.
But here we are.
Every day, we’re getting closer to a major stock market crash, or a financial crisis, or both.”
And he emphasized that the crisis is inevitable. Nothing can derail it in the long run. He said Federal Reserve Chairman Jerome Powell could put off the implosion in the short run by doing something drastic to change the narrative. That would entail at least hinting at interest rate cuts.
Otherwise, this is going to happen. Whether it’s tomorrow, the next day, or the next week is hard to tell. But what seems apparent to me is that we’re about to go over a cliff. I just don’t know how much more distance there is between where we are now and the edge of that cliff. But we’re going there.”
What is going to push us over the edge?
The rise in interest rates as the bond market continues to collapse.
Peter pointed out that he’s been warning about this for years. And he’s not alone. In July, Jim Grant said we could be heading toward a generational bear market in bonds.
Bond yields are now at the highest level since before the 2008 financial crisis with the yield on the 10-year Treasury approaching 5% (currently 4.56%). The last time it was that high was in 2001.
There is one big difference between then and now. In 2001, the national debt was $3.3 trillion. Today, it is over $33 trillion.
We have a lot more debt now than we had back then. So, this is a much bigger problem.”
Peter said the mainstream financial media doesn’t seem to appreciate the fact that they are looking at the beginning of the end of this whole phony economy.
The economy is built on a foundation of cheap money. It’s not just the economy; it’s every facet of it. The government, the deficits, the government budget is built on cheap money. And it’s not just the federal government that’s been gorging on this cheap money. A lot of the state governments, municipalities — they’ve all issued a tremendous amount of debt over the last 15 years.”
This was by design. The central bank wanted to “stimulate” the economy. With that goal in mind, they held interest rates at close to zero for nearly 15 years. People were incentivized to borrow and spend. So, they took advantage of the cheap money and levered up.
And what was I saying for years? This is a mistake. I said just because it’s cheap doesn’t mean you should do it. My analogy was should you do heroin if it’s free? … No! Just because it’s free doesn’t mean you want to inject it into your body. Because eventually it’s going to cause a problem, and that’s exactly what is happening now.”
Now the proverbial chickens are coming home to roost. All of that cheap money is coming back to bite the people who borrowed it because interest rates are going up and the debt is still there.
It is a disaster in the making.”
It’s not just bond yields. All interest rates are rising. Mortgage rates are approaching 8%. The average credit card interest rate is close to 21%. Meanwhile, credit card debt has spiked to well over $1 trillion.
An economy built on borrowing easy money can’t keep chugging along when the easy money is gone. It’s like trying to run an engine without oil.
Meanwhile, the mainstream hasn’t come to grips with the fact that the dynamics have changed.
As yields rose with the Fed’s rate hikes, a lot of people bought bonds thinking that a 4% yield would make them a lot of money when rates quickly fell back toward zero. The easy money of the last decade-plus made everybody believe that was the norm. Peter said it’s not going to work that way this time around.
Peter also pointed out that there are still inversions in the yield curve. Long-term yields remain well below where you would expect given short-term rates. With a 6-month Treasury yielding at 5.5%, a 30-year bond should be over 7%. But it’s currently only at 4.7%.
That’s not how a yield curve works. It’s positively sloped. Usually, at the beginning of a recession, you’ll get an inversion of the yield curve, where the long end will be below the short end. But under normal circumstances, when you’re not in a recession — and everybody claims that there’s no recession, that we’ve got this resilient economy, that maybe a soft landing but not a real recession — if that’s the case, the yield curve needs to normalize.”
The reason long-term bonds come with higher yields is investors are taking on more risk with more time. So, what is the biggest risk?
The real risk is inflation — that your money will be worth a lot less in 30 years.”
And what is the biggest factor driving that inflation risk?
It’s the size of government deficits. Because the bigger the government deficits are, the more inflation the government is likely to create. So, when you have large fiscal deficits, you would expect to have a higher premium on longer-term bonds.”
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
