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President Trump Has Been Forced onto a Path Leading to War and Economic Collapse
The Dow Jones Industrial Average (DJIA) appears to have settled around the 25,500 mark—give or take a few hundred points. The big hemorrhage of value appears to have settled for the time being. The big stock market crash hasn’t happened and the world appears to be edging away from economic collapse. But appearances are misleading. Not all is well on Wall Street. Indeed, not all is well in Washington and in America now. There is much confusion about what is good and what is bad.
You can blame much of the confusion on two disruptive forces that gained strength in 2017. And they’re about to leave an unpleasant mark in 2018. The two forces are interest rates and cryptocurrencies. Interest rates have stayed low so long that even a modest rise, divided into three or four increases in 2018 as Fed Chair Powell hinted, causes uncertainty.
It’s as if everyone has forgotten how the economy functions when interest rates suddenly make borrowing more expensive. What terrifies the market is the fact that many investors will suddenly discover that borrowing to make money in equities may have seemed a good idea “at the time,” but it no longer makes sense, triggering a sell-off.
New Safe Assets That Aren’t Safe and Policies That Aren’t Great
As for Bitcoin and other cryptocurrencies, these have, rather oddly, become a new “safe asset.” Most people who’ve invested in Bitcoin, even the ones who are using dozens of computers in specially dedicated warehouses to engage in the mysterious activity of Bitcoin mining, have no clue. But, Bitcoin has gained 1,500% in 2017, so it’s good for making—rather ironically—the very dollars, euros, yen, and yuan that cryptocurrencies are supposed to replace.
The problem with these new “products”—let’s call them that for lack of a better term—is that they’re competing against more traditional safe assets like gold or silver. No doubt, as I write this, some clever people are selling stocks on Wall Street, taking a profit and putting these in Bitcoin, thinking it’s an asset “class” that won’t suffer in case interest rates go up.
If I were to paint a composite of the overall investment universe now, it would look like September 1929 (that is, a few weeks before the big 1929 stock market crash) with an intruder, shaped like a Bitcoin encrusted calf, representing a deceiving diversion away from the one true source of (investment) safety: gold. Safety—or better, the flight to safety—will soon become a household concept again.
