E Looks Like We're Headed Back To The 1930's

There's an old and true saying, "Error destroys itself."

Sooner or later the true value of everything is revealed, and every day now we're seeing the true value of stocks, whose prices were based on euphoria, hype, and "free" money made available by the Fed's rate policy. But the bottom 50% of Americans won't be hurt by the stock market's price collapse... because they own no stocks. The top 10%... and especially by the 1%... traded most of the stocks. The 1% may, if they were smart, wouldn't be hurt at all. The almost daily purchases of stocks--with funds made available by the Fed and Treasury--boosted stock prices, and should have been fair warning that the whole artificial thing was headed into implosion. Market insiders, knowing that, should have "cashed out" when prices were at extreme heights. Many no doubt did.

The hurt will fall on Mom & Pop investors... and on insurance companies that had to stay invested in a top-heavy, manipulated market, hoping to come close to the 7% gain needed to keep retirement funds solvent.  Rescuing insurance companies was a big deal in 2008 because of all the hedging done through derivatives issued by gambling banks and corporations making risky bets.  This time, to save the banks, the Fed (and the government) will also have to try to rescue the customers of the banks.  To keep everybody solvent requires the creation of money(out of thin air) like the world has never seen.  The hope is that the world "goes along" with it, just as if the Dollar was still worth something. But there is no guarantee that will happen...as I point out below.

Precious metal prices will be beaten down, by the Fed and Treasury, until people, in a "naked Emperor" moment realize that the Dollar has the value of Monopoly Money, and will--like China did the other day--demand US payment, not in paper or electronic dollars, but in something "real"--some thing of value...and that's where gold and silver come in again.  That's where the true value of precious metal is revealed.  So, if you own precious metal, hold it and keep it safe because the time will come when things such as food will be so valuable that dollars wont buy them.  In demanding something real (such as gold, silver, oil, etc.) we're talking about "commodities."  Dollars are not money.  J.P. Morgan once said, "Gold (silver) is money.  All else is credit."

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Alpha Stockman 5 months ago Member's comment

Interesting take. I hadn't thought about how the stock market crashing will only affect certain people. But while true that the lowest income holders likely own no stocks, many also have no savings and live paycheck to paycheck. Now that they can't work, they will fare far worse than those with savings who can wait until the stock markets rebounds.

Michelle Bell 3 months ago Member's comment

Good points.