Report: Is America Reaching “Advanced Monetary Surrealism”?

June 20, 2017

How is it that markets can continue to reach record highs, when the fundamentals underpinning them are so poor? If you haven’t considered why, it is long overdue to have a closer look.

A new report, issued by Incrementum AG, an independent European investment and asset management company, calls this current market madness “advanced monetary surrealism.”

The message is crystal clear: diversify now before it is too late.

In relation to the S&P 500, the GSCI commodity index is currently trading at its lowest level in 50 years. There might literally never be a better time to enter the market in your lifetime.

The report suggests that, as a nation, we have fallen for the dangerous illusion of a carefree present at the expense of a catastrophic future. The torrent of central bank money and debt we’ve experienced in the U.S.A. has created a veritable monetary tsunami that cannot be sustained.

Clearly, the U.S.A. is caught up for the third time within two decades in an illusionary bubble economy created by money supply inflation. And this bubble comes with an expiration date.

According to Incrementum analysts, recession is coming soon.

The primary warning signs are all in place:

1.Rising interest rates

2.Artificial asset price inflation

3.Consumer debt and slowing credit expansion

4.Stagnating tax revenue

5. Ineffective leadership that brings the government to a halt

While quantitative easing policies are still in full force around the world, the Fed has begun to raise rates, which could be highly premature if it wants to encourage a U.S economic comeback. It isn’t surprising that the Fed’s interest-rate reversal has gotten off to a sluggish start.

DON’T BET YOUR FAMILY’S FUTURE ON A FALSE NARRATIVE

The Fed’s continuing narrative of a recovering U.S. economy, plus the campaign promises of the new American administration, are the foundation for the current bull market in stocks. Real Americans on the ground know that there is little reality to that storyline.

Even worse, unlike the previous two bubbles, market excesses are not limited to certain sectors (tech in 2000, credit in 2008) but are omnipresent and now include bonds and real estate as well.

According to Incrementum, the largest central banks have continued an ongoing liquidity supernova and the true costs of this irresponsible monetary policy are sure to come due soon.

The ratio of total U.S. debt to U.S. GDP has been around 150% in the past 150 years. In 2009, the ratio was 378%, reaching an all-time high. Although some efforts have been made to deleverage, the ratio currently stands at 365%, unhealthy territory.

Debt is skyrocketing and threatens paper-based assets. Sadly, there have been no serious efforts to deleverage or impose austerity.

WHAT IF GOLD WERE NO LONGER NECESSARY?

The Incrementum research team echoes many of the disturbing trends we’ve detailed recently in our market outlook.

One way of looking at it is this: consider what it would be like to live in a world where gold is no longer be necessary:

1.Debt levels are sustainable or credibly reduced

2.Inflation is non-existent

3.Real interest rates are high

4.Confidence in monetary policy is justifiably strong

5.The political environment is stable and predictable

6.There are no geopolitical threats to our national security

Governments have deregulated markets, simplified taxes and have respect for civil liberties

Does that sound like a world that is here now, or even right around the corner?

Not even close.

It’s not only unlikely, it is close to impossible. That is why an increasing number of retirement investors are turning to gold.

DON’T FALL VICTIM TO THE INORDINATE RISKS TAKEN BY AMERICA’S CENTRAL BANK

Investors have been encouraged to take on inordinate risks due to the trillions of dollars being pumped into the system by central banks. BMO Private Bank’s Chief Investment Officer Jack Ablin thinks that if the liquidity spigot goes off, the stock market rally could be over quickly with the lack of any other serious support factors.

Managing Director of TJM Institutional Services Jim Lurio thinks gold is preparing for a long-term uptrend swing. Another factor that may support gold prices over the short term is a new tax on gold in India slated to go into effect at the end of June. Path Trading Partners Bob Iaccino notes that new tax could incent local jewelers and private citizens to purchase gold in bulk before the tax becomes effective.

Frank Holmes, chief executive and chief investment officer of U.S. Global Investors, expects gold prices will end the year over $1,350 an ounce. Specifically, the second half of the year will spur gold gift giving for international festivals such as the holy festival of Ramadan, the wedding season in India and Christmas around the world. Looking a bit further ahead, Holmes says the big surprise for the gold market this year could come from China as it positions itself to be the price maker for gold.

PAST RESULTS: AN INDICATION OF OUR LIKELY FUTURE

Years of zero interest rate policies cannot hide the fact that economic growth in the U.S.A. lacks the underpinning it needs to support the stunningly overinflated values of our stock and housing markets. History has shown us this story again and again.

If your portfolio does not have any physical gold or silver component, you remain dangerously overexposed to the next inevitable financial or geopolitical crisis. Can you afford to bet your financial future that your stocks will survive the bursting of the current asset bubble?

The poison of hyper-partisanship in Washington, D.C. remains potent. There is little or no chance that the president’s bold agenda will get off the ground. Paper-based assets have values determined by central bankers and politicians.

Do you trust them to make the right decisions for you and our loved ones?