QUESTION: Hi Martin,

I have been following you for about 5 years now and have been to 2 WECs. At the beginning of last year, I ventured into the forex markets with limited experience and some speculative money. I’ve have been adding money to my forex accounts over this time and thanks to you and Socrates I have just about doubled my money over this time frame. Now my forex accounts have become more than speculative money for me. I have been really looking forward to riding this dollar rally wave into the monetary crisis cycle into 2021/22 but some for your recent posts regarding the liquidity and European banking crisis brewing has given me pause. I have been planning on taking money out of my forex accounts gradually to at least withdraw all my seed money but naturally, my concern is the safety of the forex markets or brokers in regards to the crises ahead. Do forex brokers have any particular risk in the liquidity and European banking crises?

Thank you for all you do!

JXG

ANSWER: That is hard to answer. It all depends on the broker and where are they — Europe or America. I suspect you are talking about America. It depends upon the firm.

We are in a position where there is a crisis on the horizon and we will see a hard landing outside the USA. The impact of a European banking crisis can send the dollar significantly higher. The risks for accounts will be in Europe, for there are no bailout policies and others will claim that these policies would only bailout out the rich. So politically, Europe would present the far greater risk into 2021.

QUESTION: Hi Martin,

I can understand how JP and EU backed themselves into a corner with negative rates. Happy to give them the benefit of the doubt when this all started 3-4 years ago even though it was obvious this was not going to end well.
However, what I don’t understand is the thought process that reserve banks today need to perpetuate eternal growth when I would think their role should be to smooth out extremes (debatable this is even possible).

RBA is a case in point as while the Australian economy is slowing, it is nowhere near terrible. There is talk that they will now also look to lower rates to near zero and start QE. I get that all reserve banks are looking to maintain lower exchange rates and so they need to keep pace with the rest of the world but one would think they would learn better from mistakes of EU and JP.

My question is, is this a global conspiracy or just plain stupidity?

Thanks for all ….

David

ANSWER: The original theory was to smooth out the business cycle. The political governments turned to the central banks and argued that they were responsible for the money supply. Therefore, it was allegedly their duty to control inflation irrespective of the spending of politicians. This was an inconvenient economic truth.

The problem is that the ONLY theory they have is the Keynesian Model. They really have no other theory to rely on. So they keep lowering rates, hoping to stimulate demand, and are oblivious to the economic reality that the political side is hunting taxes and becoming more aggressive in tax enforcement. The two sides are clashing and the central banks are now TRAPPED with no alternative. They are afraid to raise interest rates for they assume the economy may plunge. Yet, they are also looking at the national debts that governments never pay off. Raise the rates and the government budgets explode and that comes back as a political disaster.

A lot of people have asked me if I would step in and restructure this mess. To even do that you have to have the crisis first. There is no way they will allow anyone to come in and avoid this crisis. They will pray at the foot of their bed before each night that their theory will somehow work. That is not going to happen or prevent anything. We must experience the pain before they would EVER consider any reform.

This is sublime ignorance rather than a conspiracy. It brings the mind those famous last words: Father, forgive them for they know not what they do!

We must understand that municipalities are going broker everywhere in the West. More than 50% of the municipalities in Germany are in trouble. We see the same trend everywhere. The Swedish Kommunivest movement where municipalities banned together to sell their debt which they cannot pay off only illustrates the problem.

We then have states/provinces facing a fiscal crisis. The primary driving force has been the pensions they have been paying themselves. Quebec has been escalating into a fiscal crisis ever since 2007.

This is all coming to a head in the next Monetary Crisis Cycle. This will be a very interesting WEC this year. We tried to make this one a smaller event given we had a large session in Rome. Given the degree of this crisis and the overwhelming requests to attend, we were able to get more space to accommodate more than the 500 limit we had set.

Attendees will receive this special report on the Monetary Crisis Cycle. So buckle-up. Keep your hands and feet inside the vehicle. This will be a rise prone to volatility with a lot of ups and downs.