QUESTION: Marty, It seems like the Epoch Times is reporting nonsense. They just posted an article claiming that some analysis I never heard of claims that the Federal Reserve is “likely to reverse course and continue to print substantial amounts of money because doing otherwise would threaten the federal government with insolvency.” With the demand for US debt rising in the face of Europe, I do not understand this reasoning. Would you elaborate?
Thank you, IG
ANSWER: You are correct. This is the typical domestic analysis that only looks at the Fed and everything just inside the USA. The US is nowhere near insolvency at this time. That cannot be said for the rest of the world. The capital inflows are still pointing into the USA. Whenever there is war in Europe, capital flees to the United States. There is no way the USA is in danger of insolvency right now. That will eventually come, but that is post-2024.
This is the problem with the domestic analysis. It is the difference between a domestic fund manager and an international hedge fund manager who MUST be aware of everything taking place EVERYWHERE. The purpose of this blog is to show you that we are ALL connected globally, and what takes place in one region will impact the flow of capital globally.
The bull market into 1929, the 1989 bubble in Tokyo, and the dot.com bubble in 2000 were all created by the concentration of capital globally into that one region. That was the same for the Russian Financial Crisis of 1998. All the hedge funds and banks were buying Russian GKO debt at high rates of interest, assuming the IMF would never allow them to default. When they realized they were wrong and tried to exit, there was NO BID.
Hence, those hedge funds and bankers began to sell all investments everywhere else because they needed cash to make up for the losses from Russia.
This is why academics are ALWAYS wrong. They have never traded and do not comprehend how markets function. They always want to blame some mythical short-seller they have never found since the first investigation of the Panic of 1907.
When you call your broker, and he says there is “NO BID,” you are in the midst of a flash crash. Only a trader understands that.
Our computer has forecasted every such instance. There is no way the US is ready for insolvency. As the capital flows into the USA, the insolvencies are everywhere else such as Lebanon and Sir Lanka, for example.
Look closely at our capital flow map. Note that the capital is fleeing Europe. But also note that the sanctions imposed on private Russians have led to their liquidation of assets in the West, and capital is flowing back into Russia. Hence, as always, our politicians who listen to academics are doing everything precisely opposite of what they should be doing. Our Capital Flow Models, unlike any other tool, have identified that Biden’s sanctions have indeed already destroyed globalization. Even that has come out right on target — 72 years from the birth of globalization in 1950, which has created world peace and broke the back of communism.