The Western elites have their plans for a “Great Reset” but there are others in this world who have their own plans. That is a reality those in Washington, Tokyo, London, and Berlin are just now waking up to and yet they have no plan to deal with the upcoming crisis, offering only temporary solutions for each local problem as they occur.
Unfortunately for the average schmuck, those two conflicting outcomes are going to intersect in 2022 and quite possibly expose that the Roman emperor has no clothes. To what do I refer one might ask?
The US Dollar is in the most vulnerable position it has ever been at in global history since being declared the global reserve currency. Sadly, displacements that I am concerned about only occur during or after a massive global conflict where the strategic map is redefined for decades to come. That particular outcome is something that will be discussed in my next article on December 29th.
If my readers do not believe this statement about the end of a global reserve currency, please let me know how many of you are using the British Pound as issued by the crown in the United Kingdom for transactions inside the US or overseas.
When a “Rome” falls it often seems like a slow process because of the pre-disposed bias that “it can’t happen here” and of course the belief is that it takes centuries like the original Roman empire. In economics it can happen overnight. During the Great Depression the Pound Sterling went from being the primary currency of the globe to a stepchild of the US Dollar begging US bankers for assistance; just as they had during World War I. In reality though the strength of the US Dollar and political interference in the natural outcomes of economic cycles turned a garden variety depression into the “great” one.
Thus once World War II was over, the Pound, the Franc, and other global currencies all submitted dominance to the US Dollar not by choice, but practical necessity.
Enter 2022 and the fallacy of our economic structure. Fraud is now a generally accepted financial principle, be it in trading on Wall Street by judges, Federal Reserve members, CEO’s, or accounting firms. Credit is overextended to unqualified individuals throughout the land with such novel ideas of zero down and low score individuals now able to finance cars for ten years and homes for 30 years. The United States has become a grifter society where success is defined by who you can fleece and how you get away with it, not by the success of building a successful capitalist enterprise. Worse, the US government has decided by using its brute force capabilities to forcibly merge with corporations to get a piece of the action, much like the old Mafia used to do; right Moderna and Pfizer?
Thus when this sucker blows, it’s going to be ugly.
The markets should continue their Santa Clown Rally into the first couple of days into the year but at any moment, even the first day of serious trading on January 3, 2022, there will be some major institutional selling as the sky high valuations do not justify the current equity market levels. The Shiller P/E ration is screaming “sell at the top” for example:
The Fed of course took corrective action in 2020, during the start of the China Virus crisis and discontinued the series of data known as the Trade Weighted in Major Currencies US Dollar Index, which that indeed over the long term the dollar was in a long slow decline:
Whenever the data does not fit the narrative of the bankers, they decide to no longer publicly report on it, sort of like the old M3 monetary data.
What the world is now witnessing is a disconnect by Saudi Arabia, Russia, Latin American countries, and our largest trading partner, China, from trade with each other in US dollars whenever practical and possible. In 2022 this will accelerate as the Fed continues to devalue the currency to sustain a debt based society instead of a production based society which ultimately will end in pain for everyone.
As the supply shortages continue to worsen in the first half of 2022, I look for the phrase “food shortages” become the new “in” search term for the year. For the first time in modern American history there will be isolated regional food shortages which may require government intervention to supplant the diets of Americans both unable to afford nor find supplies on a local basis. Just a friendly reminder, you’ll need lots of hot sauce for the tasteless Soylent Blue folks.
These shortages and generally depressing news will get another body blow when gasoline prices for regular unleaded breach the $5.00 per gallon level on the national average and in many places well north of $7.00 per gallon. This will be the Californication of large swaths of the nation and suppress consumer spending as energy and food prices will cause at least a 10-15 point drop in consumer confidence from current levels.
President Biden will supplant almost all of Jimmy Carter’s worse economic numbers but the large shock will happen in mid to late spring 2022 when inflation via the CPI-U will top the magic 10% mark, but in real terms it will be well north of 30% for all goods and services as measured in 1980 methodology and those who are living it. It will be a nightmare which impacts Wall Street like a tanker truck full of gasoline hitting a burning Tesla.
The upcoming circumstances which will happen to trigger the sell off will be a circus side show compared to geopolitical events unwinding in markets around the world. WTI-Crude will easily top $120 per barrel by June if I am correct; sooner if the Fed continues to coddle the doves in the first quarter and refuse to attack the inflation monster head on. Gold should bottom by June of 2022 and rally into year end closing well above $2200 per ounce dragging its stepsister Silver across the $50 per ounce finish line despite lagging industrial demand.
In my world, the way I see the economy unraveling, it doesn’t take anything but logic to understand the inflationary scenario leading to a crash. It has already begun in certain housing markets and will eventually spread to the auto industry, RV’s, boats, and of course employee pay. As inflation accelerates faster on a shorter time line, much like the equity markets, eventually everything that drives the consumer economy will become too expensive for the majority of people to afford, either with cash and/or credit. Employee pay can not possibly keep pace with this acceleration hence the first thing to get cut will be spending on discretionary goods. It comes down to the average soul deciding between buying a month of Netflix or two gallons of gas to get to work at the most basic of levels. Once that inflationary top is attained, everything will roll over harder, including the US dollar as the full faith and ability of our nation to sustain this will be brought into doubt; especially after March of 2022.
This bring this discussion to the equity market. It is a bubble. Any moron who was around in 1999 can see that and that applies to cryptocurrencies, SPACs, and of course my favorite scheme, NFT’s:
NFT influencers in shambles rn pic.twitter.com/KNhXwADvLU— TikTok Investors (@TikTokInvestors) December 10, 2021
Neo kills the NFT market in one fifteen second clip. After all, he is “the one.”
But they’re not the same? You mean like a Nikola scheme is not similar to a bad Pets.com twenty something years ago?
It only gets worse from here folks as once people can’t afford basic necessities, those fat, juicy profits in their equity, crypto, NFT, and yes 401K holdings suddenly look good as inflation scares people into buy now fix now instead of praying that the government will save them under President Senior Moment.
The stock market is facing a nightmarish scenario of the end of retail speculation, the smart money bailing out already (see CNBC’s article: CEOs and insiders sell a record $69 billion of their stock, and the year isn’t over yet) and remember, this doesn’t include politicians and large banks selling in the dark pools which one does not see nor know about in the general public.
The set up is there, the nightmare politically is there, the inflation is there thus leaving one ultimate conclusion for equities:
Yes Virginia, bear markets happen.
It will be declared the end of the world by all involved, but the Federal Reserve’s policy mistake is now in place. Their failure to attack inflation will result in an ad hoc approach in 2022 resulting in a market crash of historic levels creating a financial crisis heading into the 2022 midterm elections. The consequences of what happens geopolitically along with a deflationary end into 2022 will terrify everyone into safe havens thus making consumer staples, medical stocks, and selected resource sectors as the only place to create a rally in the S&P 500 into year end. Apple stock could easily collapse into the mid-40’s price range before recovering as overseas investors become terrified to hold any US asset and bail out on the US economy.
The anarchy this will create however, does not happen in a vacuum and blame will be assigned to overseas players increasing the instability and global hostility expected to accelerated in the early spring of 2022.
That is just a snippet of what I think the economy will do in 2022 and not an endorsement to buy, sell or hold anything other than precious metals, food, and ammunition. With the wild cards of war, pandemic, and China on the table, there is no telling if it could get worse. A close below S&P 1,000 would be indicative of a total economic collapse and start of a new Greater Depression in addition to a global reset outside of the planned actions by the freak show in Davos. Stay nimble, and watch out for 10-14% single day moves in equities to both the upside and downside as all scenarios are now in play.
And those scenarios do not have happy endings with the two circus clown parties currently in charge of our nation.