Beware the Deflating Superbubble!
Happening now – just as we warned.
The air is coming out of the Federal Reserve’s Superbubbles.
And gold is stirring!
Tom Dyson, with Bonner Private Research, puts it in a nutshell for us: “They blew up a gigantic wealth bubble by suppressing interest rates, printing money, bailing out bad investments, and encouraging speculation. Now that era is over. The days of free money and low consumer price inflation are finished. We’re in a new period of rising interest rates, falling valuations, and inflation volatility. It’s just getting started.”
We’ve written about the popping of the Fed’s bubbles many times in the past. For example, in a piece in called Bubble Spotting, we cited the world’s foremost bubble spotter Jeremy Grantham:
“There will be an enormous negative wealth effect, broader than it has ever been, compared to any other previous bubble breaking. It’s the first time we have bubbled in so many different areas – interest rates, stocks, housing, and non-energy commodities. On the way up, it gave us all a positive wealth effect, and on the way down it will retract, painfully….”
Now we are seeing the effects of bubble retraction not just in the stock and bond markets and cryptocurrencies, but in housing markets as well. The damage is spreading to banks as we learned with Silicon Valley Bank, Signature, Silvergate, Republic, and Credit Suisse.
The next shoe to drop is commercial real estate, with high-rise office buildings across the land in fire sales or foreclosures due in large part to work-at-home policies. That spells more trouble for banks that hold about 45 percent of commercial real estate debt.
Corporate bankruptcies are on the rise too, as the air comes out of the bubbles. Here’s a CNN account:
More companies around the world defaulted on their debts in the first three months of this year than in any quarter since late 2020, when businesses were still hamstrung by restrictions to stop the spread of Covid.
In a report Tuesday, credit rating agency Moody’s said 33 of the corporations it rates defaulted on their debts in the first quarter…
Meanwhile, credit conditions are tightening throughout the economy as banks are under the spotlight:
Not to be overlooked is that the US dollar has been “bubble-ized” by the Fed as well. Now the air is coming out of the global dollar and its companion payment system.
We are witnesses to a historical event, but it is one we wouldn’t wish to have to experience: the popping of a global funny money Superbubble. It can pick up speed at any time, so we urge our friends and clients to make sure they have adequate gold and silver positions to protect their wealth and prosper as the bubbles deflate.