22 charts and 52 questions that will make you Buy Gold

by Michal Matovcik, Market Oracle:

Since 2007 I am wondering how can the financial world continue in this insane artificial reality for such a long time. It is shocking how without any relevant systemic changes and resolution of issues from 2007 economic crisis the central banks were able to create the smokescreen of sustainability.

They were able to persuade the majority of the public that one does not need to be productive. We just need to print some more money and prop the markets here and there without consequences and so problems will magically go away. And why not to also double down on the most negative trends that got us into the 2007 economic crisis. How insane is that?

Unfortunately, I didn’t register the laws of nature changed so dramatically that suddenly we can live in a new paradigm of “Free lunch for everybody” for the foreseeable future.

Why the western world still believes we would not end up like Venezuela is beyond my comprehension? Yes, we have bigger guns, can impose sanctions and have major currencies ruling the other world for now. But what is really the difference between the trends in western economies and Venezuela?

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I don't see much more wisdom in western politicians. There is no end in their insatiable need to support every seemingly good or bad idea, only for the purpose of gaining points for their preferred electorate and financiers of their campaigns. They seem to be living in the world with infinite resources and energy. They obviously do not serve people as a whole, but their own local or worldwide political agenda. One can’t spot a grain of humility in the political leaders of today. Media is full of diversion stories, made up stories for brainwashing and the truth is seen only by the accident.

The tragic part is that the majority of people I speak with in developed world have obviously suffered some amnesia or never really spotted that the financial markets are facing an avalanche of problems. Past economic depressions would seem like a nice vacation if history is any guidance for the next few years considering the current state of economic affairs. And I am starting to believe that even my outlook would seem as very optimistic in retrospect when we suddenly enter the cleansing period in financial markets. The are no parallels to the current levels of ignorance.

If you do not believe me, try to ponder next 52 questions and try to find your answers. In the end, it may save you a lot of hard-earned money, pension, secure your family future or at least help you stay sane when others would be discussing how could they all be so blinded by the false promises of central banks printing press.

Central Banks

What if the stock market is in full collapse at a time when central banks decide to unload their balance sheet holdings?

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Why do central banks need to continue buying bonds and stocks when the economy is in recovery? The simple answer is there is no recovery and never was any recovery. There was only the pumping of newly printed money into the markets and making algorithmic trading systems, all other big banks and funds follow their money flows. How can anyone sane talk about any market economies when central banks put at least 10 trillion dollars into the markets in just 10 year period? Did someone explain to people what does it mean for the future value of their currency and savings?

If bonds are really such a trustworthy investment why is there not enough investors lining up for buying government bonds? What would the interest rates look like when people stop believing that governments can continue to finance their enormous programs with printing more money?

Today most of the people that really understood the insanity of these policies got crushed and burned with the market development since 2009. Most of them closed their funds, are closing them or are for the laugh of the others who just went with the central bank flows.

The funny part is that market is today eagerly awaiting central banks to at least start talking about stopping this harmful practice. We cheer them when they only suggest possible changes in stopping the balance sheet expansion. The speeches of central bankers are symphonies of euphemism as every single sign of change in direction can uncover the fragility of belief in their ability to manage this mess. How insane is that? Why are central banks so influential and everyone positions according to their words in a free market economy? Free market economy is one imaginary concept not seen in the western world for the past few decades.

And let the above chart sink in for a while. The BOJ now owns 75% of Japanese ETFs. The Swiss National Bank is now a hedge fund owning $85 billion of US stocks. The ECB is funding M&A deals at zero yields.

How can anyone be talking about the market economy in any major developed country? It was a casino before, but today even the casino owners would be surprised by the skill of governments and central banks.

Or should we all now start to invest in The Swiss National Bank? Price of their shares is up 11 days in a row, soaring 150% in the last two months. Where is the discussion about the risks involved? Is there any clear exit strategy and timeline for putting these assets out of central bank balance sheets? Will the productive economy end up being owned by governments in full as the time goes by? Is sky the limit?

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