Time to prepare for an ice-old winter?
Under a fractional-FIAT monetary system the “standard procedure” of solving any credit contraction is to expand the money supply to bail out miss-managed banks and inject massive amount of money into the system to counter effect the reduced velocity of money. That is to move the cost of incompetent bankers and over expanded businesses to the government, basically privatize the profits and socialize the losses. The massive credit expansion was not the result of free market forces, supply and demand driven economy; it was likely the result of a non-optimal monetary system that over a long time period of gave the illusion of stability, and still gives illusion of stability.
The massive amount of quantitative easing that have taken place by a several central banks and that still are taking place will more likely than not result in massive side effects down the road. The question is when, timing is everything, and I do not know when, but can try to do a "qualified" guess. I would not be surprised if the current world reserve currency USD could come under attack over the next 6 months, so will also other currencies. Personally I expect increased instability in the FX markets at some point over the next 6 months. Increased volatility will probably not come gradually, but more like a panic wave down the road.
The reduced velocity of money keeps inflation down and makes it looks like FED and other central banks are in control of the situation. Trying to resolve the problems of a credit contraction by pumping in massive amount of fresh money into the system and hoping all will be well is like walking a thin wire between two large towers. You can easily fall down, the line can break. To walk the line without any accident you need a lot of luck or a lot of practice from similar situations. No central banker have a lot of real life experience from similar situations. To read books, studying data or even being a professor about walking a thin wire between two towers could help you understand how difficult it is. Theory will however unlikely make you a specialist in walking a thin wire. All you can know is that it will be a very dangerous operation.
Unemployment seems to be increasing rather than decreasing. Businesses are closing down. And for sure we know the money supply has increased, only the low velocity of money keeps inflation down, and falsely make it looks like the money supply is under control. Massive amounts of quantitative easing are unlikely to come without massive side effects.
I could naturally be mistaken about the whole situation. But as someone that wants to protect my most valuables it is always cheaper to invest in a warm hat in the summer than to wait until you potentially are in the middle of a tail event ice-cold winter. Few people demand warm hats in the summer, most people wait for the ice cold winter, and no one can know for sure how cold the winter will be, it could be mild, it could be ice-cold, but with a warm hat it will likely be mild no matter how cold.
This is the time to protect yourself from a potential second wave from the monetary system crisis. Many economists and talking heads claims the central bankers now have crossed the thin wire and now are on safe ground, but the picture is very foggy. Fog means uncertainty about where you are and about the terrain where you are moving. And even if they have been able to cross the thin wire between the two towers and they now again feel on safe ground it could be that the tower suddenly collapses under their feet. Lets hope for the best but plan for the worst. Warm hats are now cheap, but the fall is soon here and the prices could soon be increasing, it was not hard to bargain on the price of a warm winter hat while still in the summer.
