Derivatives | The Gold Standard 2239

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Dave Deno leads a thought-provoking discussion on liquidity dangers. Liquidity dangers make our government unable to meet its financial obligations. The US, and other major countries, are at significant risk of not being able to pay due debts. As Ken Russo has talked about times throughout this series about our nation’s addiction to debt.

The US Treasury markets are on the verge of grinding to a halt. The US Treasury is the liquidity to the global financial system. Think of the way motor oil provides lubrication to the many moving parts of your car’s engine. If you run out of oil, the engine seizes up and can no longer operate. The global financial system is at risk of grinding to a halt. The money-printing machinery at the Federal Reserve is always ready to print as much money as the US Treasury needs. That’s why many people consider the US Treasuries “risk-free” assets. At least, that’s the idea. Right?

There is a liquidity problem because there is much more supply than demand. In other words, there are more sellers than buyers. The Bank of America analyst warns that rising illiquidity, running out of liquidity, in the $14.8 trillion Us Treasury market could spill over into other financial markets, which would crash everything. A dried-up US Treasury market, think of the seized car engine, poses one of the greatest threats to the stability of world finance. This treasury market crisis would be worse than the housing bubble of 2004 to 2007. The consequences would be more devastating than the Great Financial Crash.

Everything is connected. What happens in one country has a domino effect on other countries. Japan has the highest debt-to-GDP levels at over 250%. Japan, like the US, has been printing money and buying all its debt for a long time. Now, Japan is in a financial free fall. They’re buying US Treasuries to prop up their currency. Japan’s problem is that they’re running out of cash. They may be forced to dump their US Treasury holdings. Good luck finding buyers.

The markets are riskier than they’ve ever been. These are real situations that constantly threaten your life’s savings and investments. Ken Russo focuses on the central question by asking listeners, “What are you doing to help prepare yourself for the upcoming financial crash in the markets and the US dollar?”

Right now, there’s a lot of smoke worldwide due to constant money printing (Quantitative Easing), debt, and the piling up of derivatives, making everything more dangerous and volatile. We saw how disruptive things could get last month when the United Kingdom pension system couldn’t keep its obligations. The Bank of England was forced to pivot and provide the needed liquidity to keep the UK pensioners from getting wiped out.

Like the Bank of Japan and the Bank of England, our Federal Reserve could be forced to inject liquidity back in before markets crash even more. At the same time, the Fed is committed to keeping inflation down by raising interest rates as necessary. The Fed is keeping inflation down but deteriorating marketing functions and frozen credit could force the Fed to intervene.

The Treasury Department needs too much money, and they refuse to reduce spending. Of course not. Our government is never going to cut its spending. The Federal Reserve, with all their money printing mania, can’t keep up.

“Could a market meltdown occur in the US like Great Britain?” That was the burning question asked by Fed researchers to Wall Street experts. The answer they got back was “it probably could.”

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