GLOBAL DEBT AND THE HUMAN BUBBLE. By Gregory Mannarino
This is an article I originally wrote and posted on Seeking Alpha in 2015 however, it's premise is even more important today. Since the original publication of this article we have witnessed the unrelenting continued inflating of the global debt bubble by central banks, an explosion in the amount of central bank intervention, and the expansion of cryptocurrencies as a store of wealth as an alternative to debt based units.
Global Debt And The Human Bubble.
The issue of a global population bubble is virtually not spoken of, in fact I may have been one of the first to openly discuss how grave a situation it really is. However this bubble may be about to burst.
When an issue facing an individual or an entire population in this case is so immense, without any solution, it gets blocked involuntarily by the brains inability to cope. When an event is so far out and away from the ability of the average individual to get their head around a self-preservation mode “kicks in,” and subsequently the reality of a given situation gets pushed out of the psyche. The actuality is that the explosion in world population brought directly about by a complete “mismanagement” of the global monetary system via the world’s central banks has inflated a HUMAN BUBBLE. As I have discussed in my book The Politics Of Money and on my business day MarketReport many times, the issue of exploding global debt IS NOT just a monetary issue, it is a problem regarding resources. It’s just that simple. When our politicians allowed Central Banks to implement a fiat monetary system (a debt based economic model), a virtual alternate reality was allowed to manifest itself. This debt based economic model has now evolved into the greatest threat facing mankind with no way out, and there lies the problem. A massive global loss of life is a mathematical certainty. The world’s central banks are responsible for creating a “market” for their product, “currency backed by nothing.” This “arrangement” demands cash be borrowed into existence in perpetuity. This mechanism is a self-feeding one as well, allow me to explain. This debt based system permits and demands an ever increasing debt to be acquired in order to function. Therefore as this fiat currency is borrowed into existence, resources are pulled from the future creating an environment of excess. This has allowed a global population boom and as such the demand for more debt to be borrowed into existence is constantly generated. What must be understood by you the reader is this, without exception all “bubbles” must burst at one point and why is that? Simple, because they rise above a level which can be sustained BY ANY MEANS. The world’s central banks fiat monetary system has allowed a borrowing of monies from the future to live a better now. By pulling monies from the future we have been able to acquire and have access to resources which would normally not have been available. As such we now exist in a “reality” which is not sustainable. A global ever ballooning bubble in debt has directly fueled a population boom, in fact they have risen in tandem. It should be clear to you that the issue of exploding global debt is not sustainable by any means. Therefore, this global HUMAN BUBBLE will burst along with the DEBT BUBBLE simultaneously and tens of millions of people in every continent around the world will die.
Lions... Where Is The Money?
Lions! Thanks to you I was able to reacquire a piece of work I published way back in 2014.
I wanted to share some of this with you.
WHERE IS THE MONEY?
The real question is WHERE IS THE MONEY? If you are at all familiar with my work then you know the answer to that question, of where the money is. But if you are new to me or my work then I will tell you.
All the money on Earth is in the capital markets.
Let’s define capital markets: Markets for buying and selling equity and debt instruments. Without capital markets all economic activity would cease. So in effect a trader like myself, is critical to a functioning economy. There are those who believe that investors and traders produce nothing. Well without us the modern global economy would implode and we would all be back in the Stone Age. You want to know yet another secret? In the history of trading the equity markets or investing, there has never been a better time than now to get involved with this. Opportunity is simply everywhere, and if you’re smart enough, if you’re willing to put in just a little bit of time to learn, if you’re willing to be patient, then the world and everything in it lies just at your fingertips. And it has started for you already. Without any doubt the times we are living in right now is the golden age of trading and investing. And why is that you might ask? Simple: because we have a central bank, the Federal Reserve, which will continue to distort not just the US equity markets, but the global markets as well, and I am not just talking about the stock markets either, all of it, across the board. And that my friends means opportunity, period. Money, wealth, the pursuit of material things, even happiness, (despite what some people may think) is all here right now within your grasp. And all you need to do is reach out and take what is there, and why not? Is something wrong with wanting to become rich or be richer? Well if you think that there is, then you are certainly reading the wrong book. However if you’ve gotten this far my guess is you already know what you want. I personally am proud of you. So here is our plan. I have already told you where the money is, and it’s in the capital markets, the question now is how we get our fair share. This all comes down to learning, and more importantly being able to see where “the money” is going. In the capital markets cash is in constant motion, and this movement occurs in predictable patterns. Understand this. Investors and traders want to put their cash to work where the greatest potential for gains are, by and large this has been the stock market. Allow me tell you another secret. With regard to the stock markets, the bias is ALWAYS to the upside. This one principal is the sole reason why hedge funds exist, and why the ones that fail are usually the ones seeking to capitalize on a downward move in the market. You need to remember that two forces alone drive the capital markets, greed and fear. A bull market is fed by greed and greed alone. Valuations and price/earnings ratios do not matter. In fact during every bull market you will hear every justification imaginable come out of the mouths of investors and traders attempting to justify totally unreasonable and even irrational market dynamics. This includes those of individual stocks as well. It’s always the same story until the inevitable correction or god forbid crash. Understanding these forces, greed and fear, which drive the capital markets is very important. Greed fuels bull markets. Fear fuels bear markets. Greed is fueled by speculation. Fear is fueled by concern. Greed is responsible for inflating asset bubbles. Fear is responsible for the panic selling which occurs as these bubbles burst. By being aware of the above alone we can make accurate predictions as to where we need to be putting our cash to work. If we are in a bull market we need to be owning stocks, better yet derivatives of stocks also known as options. If we are in a bear market we can also take advantage of the downward movement of stocks by these same means. What is very important to note is the action occurring in the bond or debt market.
Fluidity of Money. What most people do not understand is the bond market prices everything, and this is why I always advise people to observe what is occurring in the bond market first, then look at everything else. 99% of traders are looking in the wrong places when it comes to observing the “fluidity of money,” that is they are constantly fixated on the stock market, and 99% of these people will fail at trading. Let’s look at the benchmark US 10yr Treasury note. Any trader who is worth his salt realize that by observing the yield on this note, you can make educated guesses about where equities may be going. Another place to look would be commodities. If on a given day you observe the yield on the 10yr rising, that is a signal that cash is leaving the bond market and will be seeking a place to go, the same is true for commodities, especially gold. Now looking at my “fluidity of money theory” which I alluded to just a bit earlier and is the title of this chapter. If we carefully observe where cash is moving in these markets we can make accurate predictions as to what may happen with stocks, and this is what we want to focus on when it comes to us making money. In an atmosphere of greed the bulls are winning, and we can see if the bulls are gaining control by observing the bond market. If bond yields are rising that means cash is moving away from these assets. The converse is also true. If bond yields are falling then cash is going into bonds. In an environment of fear cash will move away from stocks and into bonds as well as gold/commodities. What you now know from just from reading the last few pages puts you light years ahead of 99% of traders right now. It seems like common sense to watch the “fluidity of money,” but remember this: Most people have no common sense. Why do people want to own stocks? Simple: to make their money grow. A yearly gain of 20% in the S&P 500 should make the average investor very happy. Further, when it comes to yearly stock markets gains, 25-30% are not that unusual.