The end of stimulus? (And the start of the crash?) What the most important chart in the world is predicting.

Chris Liverani/Unsplash

Back in January of 2016 we saw what appeared to be, and in my opinion should have been, the end of the Everything Bubble blown by the word's central banking cartel.

The carnage started in the emerging markets. Highly-leveraged positions and carry trades began to unwind. That's a fancy way of saying that all the big, sophisticated investors -- who were busy borrowing heavily in countries with cheap money (the US, Japan, and Europe) and using that debt to speculate in markets offering higher yields (junk debt, emerging markets, stocks, etc.) -- began to reverse their trades.

It quickly devolved into a “Sell everything!” scramble. We saw the dollar spike and stocks fall -- with emerging markets taking the full brunt of the carnage as their stock markets rapidly fell into bear territory, their currencies fell, and their bonds were destroyed.

Until...

Very early one morning in February of 2016 everything U-turned and rocketed higher. Suddenly and magically, the panic was over. This wasn’t the invisible hand of the market at work; it was the very-visible hand of central bank intervention.

With the benefit of hindsight, we now have a clear picture of what happened. The central banks huddled together, a bold (desperate?) plan was hatched, and key printing presses around the world were sent into overdrive. In the months to follow, the European Central Bank (ECB) and the Bank of Japan (BoJ) went on a record-breaking money printing spree:

(Source)

The red arrows in the charts above mark this moment when the “markets” were saved.

Or, more specifically, when the portfolios the ultra-wealthy were "saved", as the assets within were boosted higher (yet again) by the central banks printing money from thin air:

(Source)

Addicted To Money Printing

So what caused the weakness in early 2016 that spooked the system so much? The central banks themselves.

After many years of force-feeding stimulus into the global economy to create a "recovery", the central banks have become increasingly concerned that asset prices have become too dependent on said stimulus. So in late 2015, the banks took their feet off of their monetary gas pedals for a bit to see what might happen.

They were hoping that the markets could be gradually weaned off of their stimulus dependence with few ill effects. They wanted to engineer a "soft landing", where if priced declined, they'd come down gradually and not too much.

That didn't happen.

Instead, the cheap-money-addicted markets instantly started expressing massive withdrawal complications.

To re-acquaint you with how quickly things were devolving back then, these are news headlines pulled from an article I wrote back in the middle of January 2016:

Sound familiar at all? It should. These sound exactly like the headlines in the news today, here in May of 2018.

We are still paying the price from 2008, when the central banks committed a massive error by not allowing the markets and their bad debts to actually clear. Yes, it would have been acutely painful; but we would have been through the worst within a year or two and in the process restored the system to a much healthier and sustainable state.

Instead, the bad actors were protected (and rewarded!) and the root fundamental problems were literally 'papered over', left to continue to fester unobserved ever since. Similarly in early 2016, the central banks once again committed the same sin by rescuing everything with another wall of fresh, thin-air money.

To drive home how much, below is a chart showing the yearly change in world central bank balance sheets. The relative ‘area under the curve’ of each major period of money printing gives us a sense of the scale. To help you eyeball it, I’ve placed similar-sized orange rectangles in each area. Key to note is that central money printing has been increasing -- not decreasing -- the further out we've gotten from the Great Financial Crisis:

(Source)

If we've been in "recovery" for years now, as the central banks have been touting, then why has 2016-2108 seen the most stimulus ever injected into the system?

History has taught us that we should trust or leaders' actions far more than their words. And their actions at this time indicate panic.

What is it that has them so worried? We should all ponder that question long and hard. I’m convinced that they know as well as we do that, once the over-inflated ““markets”” created by the central banks can no longer be sustained at their current nose-bleed heights, the damage will be extraordinary and unstoppable.

The End Of Stimulus? (And The Start Of The Crash?)

The pain of the 2008 crash will seem like a mere flesh wound compared to the devastation the next deflationary wave will wreak.

Of course, the central banks have no interest in seeing that happen and will, once more, do all they can to "rescue" the markets.

But will they act in time? More to the point, given all of their very public commitments to raising rates and reducing their balance sheets, will they allow a market correction to happen in the near term? (presumably, so they can ride to the rescue soon after as "saviors")

Politically, the prospect of showering even more wealth on the 0.001% is going to be a tough sell. This is especially true in Europe -- in Italy, Greece and Spain where the populace is suffering mightily already and is in no mood to further enrich the ultra-wealthy.

So it would seem that the central banks, at least publicly, have to stick to their stated plans to reduce their levels of money printing/balance sheet expansion.

As of right now, they are on track to end worldwide simulus in early 2019, when their collective net change in assets will dip below $0 for the first time in many years:

(Source)

Given the importance of central bank purchases and market interventions, the above chart is probably the most important one in existence for divining where financial asset prices are headed.

If global monthly stimulus indeed drops to $0, then Watch out below!

Who know if the future will plays out anything like the projections given above? The central banks have proven weak-kneed at every tiny moment of market wobbliness. To date, they've chosen to print and pent and then print some more at every opportunity where the "“markets”" might have corrected.

But we all know that this charade cannot continue forever. Sooner or later it has to stop. Given the blow-ups we're now seeing in the emerging markets, there’s clearly serious trouble brewing somewhere in the system.

In Part 2: The Breaking Point Is Upon Us we provide plenty of data to support that claim.

The currencies and bonds of five countries are now in the danger zone, and many more teeter on the edge. My analysis is that the central banks will resort to their usual money printing to resolve the issue, but for reasons I explain in Part 2, these efforts will fail at some point in the next year -- and spectacularly so.

When today's Everything Bubble bursts, the effect will be nothing short of catastrophic as 50 years of excessive debt accumulation suddenly deflates.

Given the dangers involved, you should expect the central banks to 'go nuclear' in thier deflation-fighting efforts by sending “money to main street” -- likely in the form of a universal basic income, or a check from the Treasury refunding your last 3 years of tax payments, or maybe even an electronic deposit directly from the Federal Reserve into your bank account.

That's when the inevitable fiat currency crisis will begin in earnest. At that time you’ll need to run, not walk, to buy anything with intrinsic value that can't be inflated away -- before your currency becomes worthless.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

Would Glenn make a better bounty hunter or a Jedi? You'll have to find out in a new episode of the Beltway Banthas Podcast, where Glenn goes deep on Star Wars with host Stephen Kent. In this 45 minute discussion, Stephen and Glenn explore the political themes of the Star Wars franchise, Darth Vader's redemption from Return of the Jedi, Glenn's earliest memories of seeing the films and even debate elements of the latest Star Wars films.

If you enjoy the pop culture and nerdy discussions that Glenn, Pat and Stu get into on the radio show, you'll love this! After you're through, you can also check out Stu Burguiere's appearance on Beltway Banthas to talk Star Wars. You can find that here.


It's never too early to start your Christmas, Hanukah, or Kwanzaa shopping. Or even birthday gift shopping. Especially if that special someone in your life is a Democrat. Because at last count, pretty much all the Democrats are now running for president. And that means there has never been a wider selection of official candidate merchandise to choose from. Whether you're into environmentalism, feminism, classism, socialism, or just plain love, there is a smorgasbord of classy items that you and yours will treasure forever... or at least until the next presidential election.

We have browsed each of the candidates' online stores, so you don't have to (it only took us three months). We have curated only the finest items from each of the Democrats running for president of the United States of America. Without further ado, here is your handy progressive gift guide – or maybe your what-not-to-gift guide.

First, the bargain basement options. Hurry! Time is running out to grab your Beto bandana, or your Delaney pack of golf balls, because at this point Stu has as much of a chance as these guys of getting the nomination.

Tom Steyer, for example – is he still in the race?


https://shop.tomsteyer.com/collections/frontpage/products/tom-2020-pattern-tee


There's way too much Tom here. That shirt's got more Toms than a Caucasian dentists' convention.

For the slightly more moderate Democrat in your life, perhaps they'd like to join the "Yang Gang"…

https://shop.yang2020.com/collections/bumper-stickers/products/yanggang-decal


Andrew Yang is a lock for Math Club president…


https://shop.yang2020.com/collections/apparel/products/math-hat


But for actual president? Well, I wouldn't make plans for how you're going to spend your $1,000-per-month Yang allowance just yet.

If you happen to be shopping for your dog, may I suggest this lovely "Dogs for Delaney" dog collar…


https://store.johndelaney.com/products/dogs-for-delaney-collar


John Delaney's definitely going to secure the canine vote with this kind of outreach. As for any human votes, that's another question entirely.

How 'bout this tastefully understated "Natural Canvas" Michael Bennet tote to remind you he's also still here?...


https://store.michaelbennet.com/michael-bennet-for-america-natural-canvas-tote/


Then again, it's a tote. So, it'll end up on the floor of your closet and you won't have it with you until that one random moment when you're out somewhere and you really need a tote bag. Just like Democrats will really wish they had a moderate when we're in the middle of the socialist nightmare of their creation.

Captain Planet himself, Jay Inslee recently dropped out of the race, but don't let that stop you from picking up what may be the greatest single item sold by anyone in this race…


https://store.jayinslee.com/elvis-the-elves-the-mystery-of-the-melting-snow-by-jay-inslee/


A children's book called Elvis & the Elves: the Mystery of the Melting Snow. Written and illustrated by Governor Jay Inslee. Talk about a whodunnit – how could that snow possibly be melting? Spoiler alert: it's because of evil, white, patriarchal capitalism. And Donald Trump.

Then there's the candidate who thinks you're a moron that can't pronounce his last name: Steve Bullock...


https://shop.stevebullock.com/collections/apparel/products/emoji-t-shirt


Get it? Bull. Lock. Oh, so that's how you say the name that sounds exactly how it's spelled.

There's another candidate who also thinks you need help pronouncing his last name…


https://store.peteforamerica.com/collections/apparel/products/boot-edge-edge-t-shirt


And he is definitely right about that. So, thank you, Pete "Boot Edge Edge." That helps.

Just outside the bargain bin section, but just barely, are candidates like Julian Castro and his "El Presidente" t-shirt…


https://store.julianforthefuture.com/julian-castro-loteria-card-white-tee/


When your last name's Castro, do you really want to go with a weird drawing of yourself as if you're a classic Latin American dictator on a postage stamp?

If you prefer a little "dark psychic forces" battling in your candidates, you'll love Marianne Williamson's "Turn Love Into a Political Force" rally sign…


https://store.marianne2020.com/collections/signs/products/love-rally-sign


"Turn Love Into a Political Force" would be an even better title for a Marianne Williamson album of 80s cover songs. And if you think I'm joking, then you haven't heard Bernie Sanders' classic 1987 folk album, We Shall Overcome. That's not a joke. Well, it is a joke, but it's also a very real thing.

Now, just a quick pause to consider the peculiar baby-wear that way too many candidates are selling…

…including Elizabeth Warren's trans-pride flag onesie. Let me get this straight – we can't force any gender on a child, because that's just cruel. But we can force a political advertisement on a baby? How do we know that baby is actually a Biden or Warren fan? The child may not even be a Democrat or a Socialist at all. That baby might self-identify as a Libertarian, or Republican, or even worse – a moderate Democrat.

Now to the premium items from the premium candidates. Elizabeth Warren – the candidate with the most honesty in her advertising…


https://shop.elizabethwarren.com/collections/apparel/products/impolite-arrogant-women-make-history-unisex-t-shirt

-AND-

https://shop.elizabethwarren.com/collections/drinkware/products/strong-american-unions-mug


Warren's merchandise reflects the woman herself – cold and humorless (watch her "This isn't funny" clip from the last debate here at the 4:27 mark). I'm sure she's really fun once you get to know her. Then again, maybe not.

Speaking of serious women, Kamala Harris wants to be president very badly for you, the people, as you can tell from her "For the People" poster…


https://store.kamalaharris.org/poster-for-the-people/


At $29.99 though, she's sure not charging "people's" prices. Of course, she might be having to pay royalties to a certain someone for riffing on their poster. Just saying.

For the race's number one socialist, there's a whole lot of capitalism going on in Bernie Sanders' campaign. He sells so many delightful items that it's hard to choose. But we did anyway. The most random item is this hundred-dollar, black, "Art of a Political Revolution – Artists for Bernie Sanders Coaches Jacket"…


https://store.berniesanders.com/collections/apparel/products/artists-for-bernie-coaches-jacket


Coaches across the land will be clamoring for this one. You know, since coaches are such a strong Bernie-socialist demographic.

If that's a little over your budget you might consider a "Feel the Bern" fanny pack, to help store all those government freebies you'll get from Bernie…


https://store.berniesanders.com/collections/apparel/products/feel-the-bern-fanny-pack


This is the only context in which you'll ever want to hear "feel the burn" and "fanny" in the same sentence.

And finally, from front-runner Joe Biden, we have this fine "Women's Fitted Biden Polo." Which is just about the best polo description ever…


https://store.joebiden.com/collections/apparel/products/biden-polo-womens-fit


It promises the kind of snug approach that Biden loves to provide women. Even when they don't ask.

This was one of the first homesteads in the area in the 1880's and was just begging to be brought back to its original glory — with a touch of modern. When we first purchased the property, it was full of old stuff without any running water, central heat or AC, so needless to say, we had a huge project ahead of us. It took some vision and a whole lot of trust, but the mess we started with seven years ago is now a place we hope the original owners would be proud of.

To restore something like this is really does take a village. It doesn't take much money to make it cozy inside, if like me you are willing to take time and gather things here and there from thrift shops and little antique shops in the middle of nowhere.

But finding the right craftsman is a different story.

Matt Jensen and his assistant Rob did this entire job from sketches I made. Because he built this in his off hours it took just over a year, but so worth the wait. It wasn't easy as it was 18"out of square. He had to build around that as the entire thing we felt would collapse. Matt just reinforced the structure and we love its imperfections.

Here are a few pictures of the process and the transformation from where we started to where we are now:

​How it was

It doesn't look like much yet, but just you wait and see!

By request a photo tour of the restored cabin. I start doing the interior design in earnest tomorrow after the show, but all of the construction guys are now done. So I mopped the floors, washed the sheets, some friends helped by washing the windows. And now the unofficial / official tour.

The Property

The views are absolutely stunning and completely peaceful.