2022: A year of monetary collapse | investing.com
In this space we have explained that for political and expectations management reasons, the financial and monetary authorities will always be optimistic. For this simple but important reason all his statements should be taken with caution and mistrust. Usually, the best advice is to look at them flatly in the opposite direction to what they advertise to forecast more accurately.
As it is, here we have been warning since last year that mandatory lockdowns were a serious mistake that would cause the destruction of businesses, jobs and supply chains that would take years to recover.
And it is that complete economic sectors can be closed and annihilated by decree, but it is impossible to recover what they stopped producing and rebuild the disappeared companies also through a simple government order.
Unlike the latter, which can afford to steal from citizens legally through taxes, companies live off the flow of money they earn by selling to consumers. If they don't sell – and they couldn't during the months they were forced to close – they can't survive. Spot.
We also said that not only would the massive destruction of wealth caused by politicians, with "stimuli" of monetary injection and gifts shot into taxpayers' accounts, as happened in developed countries, not be resolved. Instead, we anticipated that doing so would aggravate the economic crisis by further corrupting the current fraudulent monetary system, as a serious problem of production cessation aggravated by excess debt, consumption and credit accumulated since the Great Recession of 2008-2009, could not be resolved. with more of the same. You can't put out a fire with gasoline!
In this sense, the monetary “sin” of unbridled money creation – starting with the capital of the system: the US dollar – seriously deepened by the lockdowns, is going to have to be paid for by a severe inflation penance.
In the American Union, the National Consumer Price Index is already at record levels of 40 years, and in Mexico, more than 20 years.
Although central bankers, government officials and specialized analysts have said that inflationary pressures will be short-lived, the reality is very different for the reasons stated above, even if they do not dare to point them out in public. That is why you will hear from them that “there are supply chain problems”, “container shortages”, etc., but you will NOT see them having the courage to say that what caused these damages and bottlenecks was the official lockdowns.
Now, although the Federal Reserve - the central bank of the United States - has just announced last week that it will double the speed of withdrawal of its liquidity injection stimuli to end them in the first quarter of 2022, and that it expects to raise its rates interest rate two to three times in that year, the fact is that yields will still be negative in real terms. Why?
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— AG Karl A. Racine Wed Oct 21 20:18:26 +0000 2020
Since 2015, when the Fed began its last interest rate hike cycle, it has never raised the top of its target range by more than 25 basis points (0.25 percentage points) at a time, and we can expect the same for fear of sending a message of concern if he shoots it any further.
So that range of rates that today is from 0.0 to 0.25 percent, at most, would be reaching (assuming three rate hikes in 2022) a maximum of 1.0 percent. The Fed's own optimistic projections estimate that core inflation next year will be at least 2.7 percent, or what amounts to the same thing: real yields will remain in negative territory.
Terrible news for savers, but excellent good news for holders of physical gold and bitcoin, which to the terror of the authorities cannot reproduce at will!
However, the worst part remains to be discussed: the Fed and all other central banks are at a dead end.
If they raise interest rates as they should (to levels above inflation) they would cause a chain reaction of bankruptcies - of individuals, companies and governments - throughout the entire planet, which is over-indebted. That is the bitter medicine that they are reluctant to take, but that would allow the entire global economy to be rebuilt step by step with solid foundations in the long term!
Since that will not happen, they will prefer to keep real interest rates in negative territory (below inflation), even if the cost is that consumers pay the aforementioned monetary sin, with the highest and most prolonged inflation that we have ever seen, in in the midst of a stagnant economy.
The latter, I reiterate dear readers, will indeed be the wrong option that our central bankers will take, and for this reason, 2022 will be a year of monetary collapse, but it will last for the rest of the decade.
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