Markets Just Go Up? It Will If China Keeps Pumping...There's nothing stopping this freight train at the moment...
Good morning: Gold prices are now on the verge of $4,000, silver is pressing toward $50, and Bitcoin is now at $125,000. As I’ve said, JPMorgan Chase (JPM) is taking credit for the so-called “Debasement Trade…” concept… the idea that investors are diversifying aggressively away from fiat currency because people want “real assets.” However, this was the core focus of both The Hedge of Tomorrow report, which we wrote in March 2024, and my more recent April price call, “The Next 36 Months.” Markets are undergoing a radical reorganization, with equities surging higher on the back of the AI trade. But it’s that liquidity - the actual multiplier of paper money advancing higher while global debt just keeps burning to record levels. The International Monetary Fund (IMF) stated that global debt reached $338 trillion last week… That’s a lot of fiat debt swirling around. But that’s NOT the important figure. What matters is the Global Liquidity figure released by CrossBorder Capital. That figure, north of $180 trillion, is the actual amount of capital available around the globle to REFINANCE all of that existing debt. So… you’re using about $180 trillion to roll over about $65 trillion a year… which explains why we end up in these short-term financial panics that require looser policy and greater accommodation. As debt spirals higher, the expectation is that liquidity (capital to refinance) must as well. New capital is used largely to refinance existing debt. Michael Howell has suggested that six out of seven new “dollars” created go to refinancing, not financing the underlying economy. This is the financialization of the economy on full display. For many people, this entire concept of debt and refinancing and liquidity is jarring at first. It appears to violate every economics course they ever took - because it just isn’t explained. But the reality is that the global financial system isn’t one where debt is EVER repaid - especially at the sovereign level. It’s simply refinanced, and now the challenge remains that it’s been doing so at higher interest rates. Overall - the rules of the game changed in 2008… and worsened in 2020. Every single downturn is met with accommodation. The question is where the endgame comes. And that’s linked entirely to the debt profile of the United States. When there is no creativity left to refinance debt (the new craze is the stablecoin efforts to make groups like Tether and Circle own short-term Treasuries), and no one else wants U.S. debt… that’s where the real pressure will be on the system. For now… the music is still playing. The markets are still melting higher. And everyone is just trying to stay above the 9% to 11% a year that we lose in a combination of debasement and inflation on our currency units. Let’s get to the market update… Continue reading this post for free in the Substack app
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