There will be hell to pay

Thanksgiving is now out of the way. We can move on to Christmas. And New Year’s. And then, 2014. And 2015. And onward into the future.

But what’s in the future? If only we knew!

Making predictions is tough… especially when we have no idea what to expect.

But wait… some of the most important things we will see in the future have already happened many times.

Yes, dear, dear reader, your editor is going way, way out on a very solid limb. He has identified three things that will happen. No doubt about it. He guarantees it.

1) Interest rates will go up. Interest rates are not fixed. And they can’t be suppressed forever. Nobody has repealed the interest-rate cycle. So, expect rates to go up. When? Hey, you want an awful lot from a free publication, don’t you? Isn’t it enough to give you a guaranteed future event?

We can also tell you that when it happens: there will be hell to pay. Here’s Michael Snyder at Global Research:

At this point we have painted ourselves into a corner by accumulating so much debt. We simply cannot afford to have rates rise significantly.

For example, if the average rate of interest on U.S. government debt rose to just 6 percent (and it has been much higher than that at various times in the past), we would be paying more than a trillion dollars a year just in interest on the national debt.

But it wouldn’t be just the federal government that would suffer. Just consider what higher rates would do to the real estate market.

About a year ago, the rate on 30 year mortgages was sitting at 3.31 percent. The monthly payment on a 30 year, $300,000 mortgage at that rate is $1315.52.

If the 30 year rate rises to 8 percent, the monthly payment on a 30 year, $300,000 mortgage would be $2201.29.

Does 8 percent sound crazy to you?

It shouldn’t. 8 percent was considered to be normal back in the year 2000.

2) Our monetary system will collapse. No paper money standard has ever survived a complete credit cycle. Certainly, not with a central bank on the job! Higher rates, bitcoin, a credit crisis, a central bank miscalculation. Something will bring it down.

Bitcoin? Maybe. Bitcoin hit a price of over $1,000 on Wednesday, the day before Thanksgiving. My sons followed it over the weekend.

“Hey, I made $1,000 last night,” said one. “Bitcoin went up $100.”

“Yeah, and I’m thinking of cashing out and buying an old car,” said another.

Bitcoin hit $1,230 on Sunday. And a Bitcoin hedge fund is up 5,000% – which could be the best performance of any hedge fund in history.

Bitcoin will probably bite the dust sometime soon. That’s the trouble with new technology. There’s always newer technology, and maybe a better bitcoin.


Bill Bonner on markets, economics & the madness of crowds

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Meanwhile, the dollar has been in a gentle decline since July. Someday, the decline won’t be so gentle. It will be brutal. Then, investors will suffer huge losses as dollar-denominated assets sink.

Here’s more from Global Research:

The death of the dollar is coming, and it will probably be China that pulls the trigger.

…as the global economy trembled before the prospect of a US default last month… China’s official Xinhua news agency called for a “de-Americanised” world.

It also urged the creation of a “new international reserve currency… to replace the dominant US dollar”.

So why should the rest of the planet listen to China?

Well, China now accounts for more global trade than anyone else does, including the United States.

China is also now the number one importer of oil in the world.

At this point, China is even importing more oil from Saudi Arabia than the United States is.

China now has an enormous amount of economic power globally, and the Chinese want the rest of the planet to start using less U.S. dollars and to start using more of their own currency. The following is from a recent article in the Vancouver Sun…

Three years after China allowed the yuan to start trading in Hong Kong’s offshore market, banks and investors around the world are positioning themselves to get involved in what Nomura Holdings Inc. calls the biggest revolution in the $5.3 trillion currency market since the creation of the euro in 1999.

And over the past few years we have seen the global use of the yuan rise dramatically…
International use of the yuan is increasing as the world’s second-largest economy opens up its capital markets. In the first nine months of this year, about 17 percent of China’s global trade was settled in the currency, compared with less than one percent in 2009, according to Deutsche Bank AG.

3) The US Empire will go the way of all empires. The US can still send its ships and bombers to stir up hornets nests wherever it pleases. But someday, the hornets will develop a deadly sting.

Or, maybe the empire will just go broke. Who knows? Every empire has to find a way to exterminate itself. The US will be no exception.

This last event could be the most exciting. Falling interest rates and collapsing currencies can be fun to watch, provided you’re not standing directly beneath them. But a falling empire? The imperial warriors typically bring down a lot of innocent bystanders along with them.

But don’t worry. Be happy. Hold onto your gold.

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One Response

  1. 02/12/2013, invisiblehand wrote

    Bitcoins will be the catalyst

    Watch

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