The Coming Global Liquidity Crisis…The Kick Off Of The Post Bubble Contraction

We have seen how the PBC has now begun and is making itself felt around the world starting at the periphery of the global economy, next moving to the senior markets of the world and eventually being transmitted to the core of the financial system. As of now, the US markets do not reflect any impact of the PBC, however, there are signs it is fast approaching.

Tesla- Canary in the coal mine

So far US markets don’t seem to care what is happening in other markets around the world. US Markets seem impervious. A few months ago I pointed out that as long as Tesla stays elevated the US market should remain fine. Call Tesla the canary in the coal mine. Tesla continues to operate for one reason only- easy money. Remove the liquidly spigot and Tesla ceases to exist. This company is so obviously a fraud on stockholders, yet it whistles past the graveyard with each outrageous act of its “nut job” CEO.  Simply put, as long as stockholders suspend reality in Tesla they are willing to believe anything.

Well, seems the end of this game is now upon us. Looks like Tesla has now finished the process of knocking the religious believers out of their trance. What the professional shorts have seen for a while now (Chanos, Einhorn etc.) is now finally being acknowledged by the masses. I regard this process as a derivative of the mass psychology of the market in general. Once Tesla goes the market, in general, can’t be far behind.


The Toxic USD Phase of the PBC

This is what comes next in the PBC. As money rushes towards safety and global debts are serviced in US dollars the US dollar strengthens. This is the end game of a multi-year slow-motion process we have seen playing out. The below chart shows the flaw of the gold bug narrative. As the US ramped up its money printing through QE the US dollar actually began to strengthen which is the opposite of what gold investors thought would happen:


The toxic phase of the US dollar rally starts when the current rally resumes and the USD breaks out of the heavy resistance zone. That’s when things start to blow up and the GLC intensifies.

Gold Silver Ratio– Signaling the crisis is fast approaching

The gold-silver ratio depicts the spread between the two metals. It can be referred to as the metallic credit spread. Like interest rate spreads, it is a leading indicator of stress in the financial system. This is because gold acts as a monetary metal while silver acts primarily as an industrial metal. As industrial activity decreases silver usage declines. Simultaneously as stress in the system increases gold’s monetary usage also becomes more important. In the past, the GSR has reached levels of 80-100 in a crisis. I have stated for years that in the next crisis these levels have the chance of being vastly surpassed perhaps blowing well past 100.

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