Special Alert: IMF Confirms Massive Stimulus Ahead Globally
Atualizado
Although this news is already a week old, it is critical in that it confirms what I and many others have expected: Fiscal and monetary stimulus on steroids is coming, and it’ll be GLOBAL.
The IMF released a video last week in which its Managing Director, Kristalina Georgieva (‘KG’), calls for a “A New Bretton Woods Moment” and a “Global Monetary Renegotiation.” You can watch it on the IMF’s website here: https://www.imf.org/en/News/Articles/2020/10/15/sp101520-a-new-bretton-woods-moment
There’s a lot of information in this video, but I am going to focus on the financial aspects. The remarks that follow are my interpretation of what is being said. Watch the video yourself to make up your own mind.
In it, KG describes the economic fallout from the pandemic and the measures applied globally. She also states that:
“While the global banking system entered the crisis with high capital and liquidity buffers, there is a weak tail of banks in many in emerging markets.”
This indicates the risk of a global banking crisis led first by banks in developing countries. Global banks are all intertwined these days via debt, swaps, and other derivatives. As we saw in the U.S. and around the world in 2008, the risk is ‘the domino effect’: a bank in one country, which has loans and derivatives outstanding with multiple other banks globally, collapses and takes down several of those other banks in the process. Then the domino effect spreads just like a virus and the entire banking system risks collapse. How does the IMF plan to address this?
“We must take measures to prevent the build-up of financial risks over the medium term.”
This doesn’t sound very promising to me. The lack of any detail whatsoever to prevent such a global banking crisis suggests to me that this could happen. If so, who remains standing after the dust settles? Where do we hold our money? At the central banks? Of course, this assumes we have any money left over. The introduction of central bank digital currencies and individual accounts at the Fed and other central banks around the world also suggests where this is going: centralization of all financial transactions of any size in one location, the central bank.
But I digress. Such banking crises are typically synonymous with market meltdowns and recessions or depressions. Think 2008 and the 1930s. Will the central banks ride to the rescue again? Perhaps, perhaps not. If they don’t, the one good thing about this is that you’re unlikely to see bail-ins or bailouts. Your deposits will be transferred to a central bank account, either whole or, worst case, in part—i.e., with a haircut. The downside would be that the central bank would have total control over your deposits and likely your debts too. They can also see anything and everything you earn and spend your money on. You will likely not have to file a tax return ever again. This would also enable digitized universal basic income. The central banks could simply deposit the money in your account with them. In order to boost spending, the money could have a time limit on it and limits on what you can spend it on. You could be required to spend your digital check in the mail within 30 days or lose it, and it can only be spent on A, B, or C. This forces everyone to spend the money they receive and boosts spending dramatically, which in turn boosts nominal GDP and reduces the Debt:GDP ratio of nations and the world at large. Debt doesn’t change, but inflation reduces it in real terms. I have given a hint of how all this applies to precious metals, but I’ll address that further below. Let’s discuss another key aspect of KG’s presentation.
“Today we face a new Bretton Woods ‘moment.’ A pandemic that has already cost more than a million lives. An economic calamity that will make the world economy 4.4 % smaller this year and strip an estimated $11 trillion of output by next year. And untold human desperation in the face of huge disruption and rising poverty for the first time in decades.”
“We have seen global fiscal actions of $12 trillion. Major central banks have expanded balance sheets by $7.5 trillion. These synchronized measures have prevented the destructive macro-financial feedback we saw in previous crises.”
“Support remains essential for some time—withdrawing it too early risks grave and unwarranted economic harm.”
“Strong medium-term frameworks for monetary, fiscal and financial policies, as well as reforms to boost trade, competitiveness and productivity can help create confidence for policy action now while building much-needed resilience for the future.”
(By the way, stating “medium-term” over and over indicates that this is all not coming tomorrow, but it’s not far away in the long-term either.)
“We expect 2021 debt levels to go up significantly—to around 125 percent of GDP in advanced economies, 65 percent of GDP in emerging markets, and 50 percent of GDP in low-income countries.”
(Debt which will have to financed by the central banks.)
“Our research shows that, with the right mix of green investment and higher carbon prices, we can steer toward zero emissions by 2050 and help create millions of new jobs.”
(Which means more spending and more taxes.)
The IMF just confirmed that governments worldwide will be “significantly” increasing debt to fund numerous spending initiatives to address the ongoing economic and health crisis and spur growth in the future. More spending means more debt, which means more money-printing as the central banks step in to buy it and keep bond yields down.
Finally, what this means for gold and silver. It is clear to me that global authorities, including central banks, will prove my 2017 prediction correct: We are going to get “fiscal and monetary insanity on steroids.” Massive government spending, universal free money to spend inside a week or month (or lose it), possibly deeply negative interest rates on deposits. What does this do to the currencies of the world as the amount of goods produced and services provided fall? They fall, not against each other, but in real terms. In other words, the risk is hyperstagflation. Tangible assets that are undervalued, such as gold and silver, cannot be printed into oblivion and therefore, as the real value of currencies fall, precious metals will rise against them all, probably in spectacular fashion, just as in the 1970s stagflation. But the dollar will likely suffer the most. Why? Because the dollar is the global reserve currency, and therefore it has the most to lose, specifically its global reserve status. Is that part of this “Bretton Woods Moment”? It could be, whether the U.S. agrees to it or not. An eerily similar scenario is laid out in the ‘fictional’ book, The Mandibles, which I highly recommend you read, especially given the potential consequences for the U.S. and the world.
In conclusion, the short-term outlook for precious metals and miners remain cloudy, but beyond that, the prospects are incredibly favorable for far, far higher prices. The unfortunate part, to put it mildly, is that this is as a result of a global chaos… and what that means for everyone in the future.
The IMF released a video last week in which its Managing Director, Kristalina Georgieva (‘KG’), calls for a “A New Bretton Woods Moment” and a “Global Monetary Renegotiation.” You can watch it on the IMF’s website here: https://www.imf.org/en/News/Articles/2020/10/15/sp101520-a-new-bretton-woods-moment
There’s a lot of information in this video, but I am going to focus on the financial aspects. The remarks that follow are my interpretation of what is being said. Watch the video yourself to make up your own mind.
In it, KG describes the economic fallout from the pandemic and the measures applied globally. She also states that:
“While the global banking system entered the crisis with high capital and liquidity buffers, there is a weak tail of banks in many in emerging markets.”
This indicates the risk of a global banking crisis led first by banks in developing countries. Global banks are all intertwined these days via debt, swaps, and other derivatives. As we saw in the U.S. and around the world in 2008, the risk is ‘the domino effect’: a bank in one country, which has loans and derivatives outstanding with multiple other banks globally, collapses and takes down several of those other banks in the process. Then the domino effect spreads just like a virus and the entire banking system risks collapse. How does the IMF plan to address this?
“We must take measures to prevent the build-up of financial risks over the medium term.”
This doesn’t sound very promising to me. The lack of any detail whatsoever to prevent such a global banking crisis suggests to me that this could happen. If so, who remains standing after the dust settles? Where do we hold our money? At the central banks? Of course, this assumes we have any money left over. The introduction of central bank digital currencies and individual accounts at the Fed and other central banks around the world also suggests where this is going: centralization of all financial transactions of any size in one location, the central bank.
But I digress. Such banking crises are typically synonymous with market meltdowns and recessions or depressions. Think 2008 and the 1930s. Will the central banks ride to the rescue again? Perhaps, perhaps not. If they don’t, the one good thing about this is that you’re unlikely to see bail-ins or bailouts. Your deposits will be transferred to a central bank account, either whole or, worst case, in part—i.e., with a haircut. The downside would be that the central bank would have total control over your deposits and likely your debts too. They can also see anything and everything you earn and spend your money on. You will likely not have to file a tax return ever again. This would also enable digitized universal basic income. The central banks could simply deposit the money in your account with them. In order to boost spending, the money could have a time limit on it and limits on what you can spend it on. You could be required to spend your digital check in the mail within 30 days or lose it, and it can only be spent on A, B, or C. This forces everyone to spend the money they receive and boosts spending dramatically, which in turn boosts nominal GDP and reduces the Debt:GDP ratio of nations and the world at large. Debt doesn’t change, but inflation reduces it in real terms. I have given a hint of how all this applies to precious metals, but I’ll address that further below. Let’s discuss another key aspect of KG’s presentation.
“Today we face a new Bretton Woods ‘moment.’ A pandemic that has already cost more than a million lives. An economic calamity that will make the world economy 4.4 % smaller this year and strip an estimated $11 trillion of output by next year. And untold human desperation in the face of huge disruption and rising poverty for the first time in decades.”
“We have seen global fiscal actions of $12 trillion. Major central banks have expanded balance sheets by $7.5 trillion. These synchronized measures have prevented the destructive macro-financial feedback we saw in previous crises.”
“Support remains essential for some time—withdrawing it too early risks grave and unwarranted economic harm.”
“Strong medium-term frameworks for monetary, fiscal and financial policies, as well as reforms to boost trade, competitiveness and productivity can help create confidence for policy action now while building much-needed resilience for the future.”
(By the way, stating “medium-term” over and over indicates that this is all not coming tomorrow, but it’s not far away in the long-term either.)
“We expect 2021 debt levels to go up significantly—to around 125 percent of GDP in advanced economies, 65 percent of GDP in emerging markets, and 50 percent of GDP in low-income countries.”
(Debt which will have to financed by the central banks.)
“Our research shows that, with the right mix of green investment and higher carbon prices, we can steer toward zero emissions by 2050 and help create millions of new jobs.”
(Which means more spending and more taxes.)
The IMF just confirmed that governments worldwide will be “significantly” increasing debt to fund numerous spending initiatives to address the ongoing economic and health crisis and spur growth in the future. More spending means more debt, which means more money-printing as the central banks step in to buy it and keep bond yields down.
Finally, what this means for gold and silver. It is clear to me that global authorities, including central banks, will prove my 2017 prediction correct: We are going to get “fiscal and monetary insanity on steroids.” Massive government spending, universal free money to spend inside a week or month (or lose it), possibly deeply negative interest rates on deposits. What does this do to the currencies of the world as the amount of goods produced and services provided fall? They fall, not against each other, but in real terms. In other words, the risk is hyperstagflation. Tangible assets that are undervalued, such as gold and silver, cannot be printed into oblivion and therefore, as the real value of currencies fall, precious metals will rise against them all, probably in spectacular fashion, just as in the 1970s stagflation. But the dollar will likely suffer the most. Why? Because the dollar is the global reserve currency, and therefore it has the most to lose, specifically its global reserve status. Is that part of this “Bretton Woods Moment”? It could be, whether the U.S. agrees to it or not. An eerily similar scenario is laid out in the ‘fictional’ book, The Mandibles, which I highly recommend you read, especially given the potential consequences for the U.S. and the world.
In conclusion, the short-term outlook for precious metals and miners remain cloudy, but beyond that, the prospects are incredibly favorable for far, far higher prices. The unfortunate part, to put it mildly, is that this is as a result of a global chaos… and what that means for everyone in the future.
Nota
Volatility will stay high and go higher. Entropy means a “system” has constant potential energy. It may look stable from the outside, but on the inside energy will shift and ultimately our system will release energy in the form of political upsets, unpredictable rule changes, increased regulation (when government extends lending, favours, or support it will always comes with condition. Condition = regulation) and a less certain future. Change the rules of the game and you get volatility.Nota
I don't recommend fighting any of the moves we're seeing right now given that we won't get new stimulus until after the elections; rising volatility into elections to add to the downside risk; stops being executed all over the place right now. Just wait for THE TURN.Nota
Consider this... Is it any wonder that the new TINA assets: physical precious metals and miners, are being hammered ahead of massive fiscal and monetary stimulus to come in the next few weeks, months, at the same time as CBDCs and retail CB accounts go live? BTFD! IMHO.Nota
What is puzzling to me given the inevitability of massive stimulus in the form of MMT via digital currency UBI in everyone’s Fed accounts and the hyperstagflation that ensues is why still so few ppl own physical Gold and Silver. Especially at these levels even if lower lows yet.Nota
Remember what I said back in July... when seemingly everyone starts to throw in the towel on metals and miners: Buy! IMHOWe’re on the verge of lower lows. i.e. We’re close to that point.
Nota
Anyone who is panicking about missing $100 on this rally is a complete idiot. We still have 5-8 thousand dollars to go in this market. We are just getting started... But scary pullback ahead to reset euphoric sentiment first. - Gary SavageNota
The risk to this recent rally in metals and miners is that either Trump wins or it's such a close contest that it'll take weeks to determine the actual winner and this rally is erased and then some. We have to wait for late tonight, more likely tomorrow, to know either way.Nota
Trump team getting ready to send in attorneys, contest remaining states. He wont concede w these numbers, they are telling FoxBusiness. Good chance we wont know president for another month. Still odds are long for Trump winning.Nota
There will be no clear winner, no stimulus, for quite some time, and yet stocks soar? Meanwhile bond yields dump and precious metals and miners, which should be soaring and may yet, are flat to down. Uncertainty? Absolutely. Not good for markets imho.Nota
History back to 1980 shows that the initial move in the equity market after a national election proves to be the wrong move. In 2000 during the contested election SPX dropped 23% from post election peak before end of that year.Nota
Unless something changes to Biden's hold on the Presidency, it sure looks like the dollar is in freefall, and metals and miners have bottomed. A little overdone in the ST.Nota
Until or unless we break support, the trend of higher highs and higher lows remains our friend and the trend is clearly up.Nota
If you want to get long precious metals and miners, I'd recommend you place a stop below 1910, former resistance in Gold, now support. We break back below that and bears take charge. Silver - 26 remains key resistance. Through there and a test of ~30 next. Fail and anything is possible. Still waiting for Silver to clear and close >26.
Publicações relacionadas
Aviso legal
As informações e publicações não devem ser e não constituem conselhos ou recomendações financeiras, de investimento, de negociação ou de qualquer outro tipo, fornecidas ou endossadas pela TradingView. Leia mais em Termos de uso.