Kiss Your Dollars Goodbye

The Chinese Evergrande Group default is no longer in the news, swept away as if it has been dealt with and cooked into the larger financial crisis the world is dealing with. But the damage from the world's second largest real estate development company is only getting started. It is like watching an iceberg roll over in the sea; it moves slowly, but it doesn't stop; it just keeps going.

On October it was reported in the U.S. that the Evergrande Group had not made their bond payment. It was not reported in China because the news agencies there were told not to. In fact, they were directed to report that Evergrande had successfully made interest payments on the bonds. As the cracks begin to open in the CCP, the government there and the press are attempting to hide that fact from the world and the Chinese people. The Chinese historically have always obscured bad news; they don't like to admit faults.

Countries tied to China through the Belt and Road Initiative – like Turkey and Australia – are also seeing their markets implode. The B&R Initiative was always little more than a bond scheme to channel money into other countries so that they in turn would buy services and products from the Chinese.

This is all following a pattern we have seen before in the early 1930's. The stock market crash in 1929 was not the cause of the Great Depression. It was the bonds failing from October 1932 to May 1933. A bond failure of this magnitude has consequences. The ripple effect from Evergrande has begun and will impact the United States into 2022. If history repeats itself, by May of next year we will reach a point where new bonds will just not be able to be issued. Even government bonds will be suspect if they are issued, and hugely discounted for performance. Any confidence that a bond issue will ever be paid back will have completely eroded.

In fact, there is a huge question right now as to whether previously issued bonds will be honored after the political situation in the U.S. is resolved. Generally speaking, when one government moves in to take over another government because it is deemed illegitimate, previous obligations are not honored. You get a bond repudiation, so that those people that invested in those bonds won't get squat.

Call it what you like, but by mid-2022 we will have entered a new Great Depression by definition. The ultimate cause could be said to be the elimination of the parasitic global elite who will no longer be sucking off the result of our labor, which in and of itself is a good thing. It will be a strange time of chaos as we work our way through it. On the one hand there will be supply chain issues and food shortages, but on the other we will be in this nascent period of the renaissance of production with the application of new technologies and a new financial system.

Inflation can be expected to continue as deflationary hyper-inflation, but it can still be a productive inflation. For a period of time the fiat currencies across the globe will hyper-inflate, just as there are fewer goods to buy with those hyper-inflated currencies... which everyone will perceive as a verifiable indicator of a Depression. People will be trying to get out of fiat currencies unlike any previous time in history... because we've never before had an alternative like we do now with digital currencies.

In 1932, the government forbade individuals from abandoning the federal dollar scheme by confiscating people's gold. Expect that the government will attempt to do this again, but it is so weak now and without the support of the military it will not succeed in its dictate. The value of silver and gold and cryptos, which people will retreat to, will rise in relation to fiat currencies. As they print more and more and more dollars, the dollar will go the way of the Deutsche Mark.

We have begun a period of Unobtanium (from the movie Avatar) in which certain assets are going to disappear – not because they are no longer available – but because people producing them no longer agree to accept fiat currencies in exchange for them. At some point this will extend to property as it too crashes because no one wants to accept dollars anymore. It won't matter whether you offer one dollar or ninety-nine trillion dollars for a house or a roll of toilet paper or a loaf of bread if the seller won't take dollars.

Hyper-inflation of gold and silver and cryptos is just around the corner. It's already happening. Get smart and transition now.