Preservation of Wealth during the Impending Market Crash Until October 2021
The US federal government debt is unbearable and has become “too big to fail” itself. It is highly unlikely that the government can pay back let alone the debt interest if the interest rates were to go higher. The economic growth is weak and the labor participation, ever declining. During the few next few years, neither the federal government nor the Federal Reserve has the ability anymore to control and contain the effects of forthcoming deflation and depression. The proof is that they could not prevent the market crashes of grand depression of 1929 (when the dollar was then backed by gold) nor the market crashes of 2002 and 2008. They cannot prevent the impending market crash either because they are even more vulnerable than the previous market crashes. The federal government has four options.
The US government declares bankruptcy and seeks an agreement with its creditors for a partial repayment of their loans. This would be the easiest option because it would still allow the federal government to continue remaining somehow in control. The consequences would be a crash of the world’s trust in the US government, a crash of US dollar, a massive deflation, and depression. The US dollar will also lose its status as the world reserve currency. This privilege alone allowed the US to become the world’s largest consumer country for such an extended period. The foreign central banks would bear a significant part of costs of default, but also foreign countries whose currencies are pegged to the dollar, foreign institutions, and foreign citizens who are either the US government creditors or savers in dollar denominated assets. In the end, the US federal debt could become manageable again, and the US could start from ashes to produce and save again, the very basis of any sound economy. Obviously, this would have major political, social, and institutional consequences for the US and the world. This may also result in smaller and less powerful governments and smaller central banks.
It decides to increase taxes and reduce spending or a combination of both. These will be courageous political decisions. However, the governments tend to do everything to avoid taking courageous measures in this direction. Either way, increasing taxes and reducing spending, are both unpopular with voters. This is because the governments know that with such measures, they could easily lose the next round of democratic elections.
It continues to print money. This would most likely be one of favorite options for the federal government and the Fed to get the US out of trouble. They may know, however, that by pursuing such a policy, they are creating inflation. Ultimately, the consequences of printing money would be an increasingly weaker US dollar against other currencies, higher inflation, higher interest rates, loss of trust in the US dollar, and massive devaluation. Finally, the dollar would lose its status as the world reserve currency and become a worthless paper.
The US government resets the world financial and monetary system by surprisingly backing the USD by gold. This can though happen only with participation of all rich countries.
How would it work? Well we know that currently there is an equivalent of some $26 trillion of bank notes in circulation in the world. At the same time, we know that there is some one billion ounce of gold in the world. Now let us assume that the world richest countries all come together in a Breton Wood kind of meeting and decide all to back their currencies by 40% gold again in their central banks. What would this then mean for the price of gold? Well, the computation is quite simple: (26 trillion x 40%) / 1 billion ounce of gold = $10,400 per ounce of gold. This then means that central banks would have to agree to be buyer of gold at 10,350 and seller, at 10,450. Even with a 20% gold backing, the price of gold would then jump to $5,200. Such agreement would then induce an immediate inflation of over 700% and transfers the buying power of currencies to the central banks over a week end. This would then solve the governments’ struggle for creation of artificial inflation and enable them to manage their debt again. Should this prediction materialize, a hyperinflation would occur overnight and the owners of gold and commodities, in particular gold and silver, would be the biggest winners of the game. However, non-tangible financial assets such as bond market and many banks would most likely have to go bankrupt. Implementation of option number four would most likely be the politicians’ favorite. Implementation of any of preceding options will have significant political, economic, financial, social, and institutional consequences for the US and the world. It will affect the world because it is linked to the US, among others, through the US dollar as the world’s reserve currency.
Preservation of Wealth
Although Money Printing Strategy book focuses mainly on trend prediction of financial markets, trading and investing, preservation of assets is going to become a growing challenge over time. Diversification will be the ultimate remedy. The following steps should help you preserve and grow your wealth during the next few years:
To preserve wealth, you may wish to invest in safer assets, which are mainly commodities such as gold and agricultural land. Diversification will also require the opening of bank accounts in foreign countries, with stable political systems, and in foreign currencies. Singapore, Canada, Australia, Switzerland, and Norway are a few examples.
You should store your physical gold in other countries. This would ensure the preservation of your wealth in case the US government outlaws the possession of gold like in 1933. Money Printing Strategy is equally applicable for trading gold.
MPS and many experts forecast a substantial devaluation of currencies that have participated in some kind of Quantitative Easing operations in the recent years. Major western currencies like the US dollar, the Euro, the Japanese Yen, and the British Pound will suffer substantial devaluations.
To escape the risks of higher taxes or double taxation, the US citizen may wish to apply for dual citizenship.
During the early phases of wave E, you may wish to sell Short the stock markets. The price of gold should also go down due to the screaming deflation. After that, the DJ-30 should continue its decline while gold should start its uptrend. By applying MPS, you should be able to predict the gold support level in a timely manner. You may also wish to refer to chapter 17, gold section.
If you persist and insist on pursuing the buy-and-hold strategy during the upcoming years, you must liquidate your financial assets as soon as DJ-30 achieves its historical top, then keep cash until the gold finds its support price. Buy-and-hold investors in stock markets are going to suffer the deepest losses but also the bondholders and the real estate owners. For investors who wish to surf both sides of waves, the forthcoming wave E provides a once-in-a-lifetime opportunity to become immensely wealthy.
In summary, the US citizens may wish to start moving assets to other countries, other currencies, buying Gold and Silver and storing them outside of the US. They may potentially also opt for obtaining a second citizenship to escape the risk of excessive taxation when living in foreign countries. At the end of wave E and the Grand Super Cycle degree wave 4, a new age of bull market will emerge for a very long duration. Therefore, Investors and Traders’ strategy should consist of growing and preserving wealth during the forthcoming highly troubled period until the end of Grand Super Cycle degree wave 4. Thereafter, available cash, as well as gold and silver, should buy you the surviving blue chip stocks for pennies.
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