Common Sense Living

MOAB: Mother Of All Bubbles!

War in the Middle East? Possibly nuclear war? Not a big deal. Just keep buying stocks! Impeachment? Nothing to see here! It’s just politics as usual. Longest bull market and economic expansion in history? Don’t worry, the Fed has our backs. They won’t let it fall. 2nd highest valuations EVER on the S&P 500 index? Just keep shoveling your hard earned paycheck into those 401(k)s! Buy for the long haul! The credit markets at FIVE THOUSAND year highs (aka: interest rates at 5000 year lows, even going negative)? It’s okay. It’ll work itself out over time. You gotta jump on this while it lasts!

I have been warning for almost 2 years now that a financial bubble like nothing we have seen in AT LEAST 300 YEARS is forming, and now the euphoria is to the point where ALL reason and sense of risk is completely discarded. As you can see on the chart with this post, we are in the Mother of All Bubbles!

In the 1990s, the “tech bubble” formed. The S&P 500 index, while considerably overpriced, did not itself reach levels considered to be completely stupid. That prize went instead to the NASDAQ index, which is heavily weighted in the technology sector. At the top of the bubble, I heard all the same reasons to buy I am hearing today. As to be expected of all bubbles, the S&P 500 index eventually crashed by 50%, and the NASDAQ index fell by over 75%. Everyone’s 401(k), mostly invested in the “safe” index funds, was wiped out.

After the tech bust, the masses swore off stocks, and in the early 2000’s they moved on to the next sure thing, real estate! That’s where it’s at! With low interest rates, you can’t go wrong. Everybody gets easy loans, and you don’t need your own cash. You can borrow your way to wealth. After all, that’s how the rich people do it, right? If you weren’t flipping houses, condos, and buying prime parcels on the coasts of California, Florida, or in the Hamptons, you were a nobody!

Like all bubbles do, the real estate bubble crashed too! Unfortunately, because the banks were willful participants in the debacle, and also falsely believed it would go on forever, they took the entire economy down with them as they cut off credit, even from conservative qualified borrowers.

Instead of letting the corrupt, stupid banking businesses fail, which is what SHOULD happen in a capitalist system, the Federal Reserve central bank (a private corporation by the way) began rescuing those corrupt banks in 2009 with cheap unlimited credit. The credit has become so cheap, banks now PAY BORROWERS to borrow money via negative interest rates, at least in Europe & Japan.

The central banks have distorted the financial system beyond anything seen in history….ever! They have created the Mother of All Bubbles! It’s not just tech. It’s not just stocks. It’s not just real estate. It’s the EVERYTHING bubble! It is a bubble system that is NOT SUSTAINABLE. It is false prosperity.

This MOAB bubble, like all others before it, will pop. Because it has blown up to be the largest ever, and now involves ALL financial asset classes, the damage will not be contained, and will be devastating on the average family.

In response, the Federal Reserve will drop interest rates into negative territory as has been done in Europe & Japan. The Federal Government budget deficits will explode, and the money printing machine will print so much currency the dollar will nearly, if not completely, collapse. For sure, the dollar will lose its standing as the world’s reserve currency. It is in fact already losing said status as only 62% of foreign currency reserves today are the US Dollar, down from 70% just a few years ago, and down from 90% in 1971. The trend away from the dollar is accelerating.

You don’t need to be a victim of Federal Reserve central banking corruption or stupidity. All you need to do is stop pretending the dollar has value. Stop spending and stop saving dollars, which are rapidly losing value. Have you noticed it takes more of those dollars to buy a Big Mac meal than ever before? It’s because the dollar is worth less…..and soon to be worthless.

Instead of the dollar, use the currencies that have a proven track record for millennia. Use gold. Use silver. If I am selling something, and someone wants to offer me gold or silver American Eagle coins instead of dollars, I will be more than happy to accept the real stuff, the real money! The fake Federal Reserve monopoly money we call dollars is not where it’s at, and its demise is the root cause of MOAB. As famed banker JP Morgan once said, “Gold is money. All else is credit.”

At this late stage of the MOAB dollar-demise bubble, there are only two ways the authorities can mask and prolong the inevitable dollar collapse: inflation and war. This past week, it’s looking like we may get both! Either way, gold and silver win!

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