Despite
October`s large decline in markets, the worst is yet to come, in my opinion. We
will see large swings in stock markets over the next few months, giving bulls
the false hope that a correction is over. I am estimating this coming bear
market to take approximately 18 months, having taken the average duration of
the past bear markets.
A midterm
election, trade tariff discussions, they all seem like reason to celebrate, but
they`re a drop in the bucket when it comes to the macro picture that i`ve been
sketching for you over the past 3 months. The current monetary system is broken
and must be fixed. This can either be done through hyperinflation, through
increasing the price of gold overnight and therefore artificially inflation
balance sheet holdings, or, as some have suggested, another big bailout. This
bailout wouldn`t be for corporations, but for entire governments. The IMF has
the power to create its own currency and can therefore bail out any government.
This would be another “kicking the can down the road” scenario and is currently
only a conspiracy theory.
I would bet
on a worldwide hyperinflationary situation, which essentially allows
governments to press the “reset button” and start anew. This will hurt each and
every one of us, and only the people who hold commodities or other hard assets
will be able to avoid this crisis. One advantage? Stock market valuations would
go to the moon! (measured in then-worthless Dollars)
My
preferred scenario would be a revaluation of gold, where a few zeroes would be
added to its dollar valuation and “magically” government balance sheets would
look much healthier. Because at the end, who does the world owe money to? Itself.
So theoretically we can move the goalposts as much as we want.
Will there be unintended consequences to such a revaluation? Most definitely. How about gold producing nations, would they suddenly become world leaders when it comes to the size of their balance sheets? How about a country like India, that`s known for its citizens hoarding gold, will they benefit the most from such a revaluation?
Will there be unintended consequences to such a revaluation? Most definitely. How about gold producing nations, would they suddenly become world leaders when it comes to the size of their balance sheets? How about a country like India, that`s known for its citizens hoarding gold, will they benefit the most from such a revaluation?
For a project like this to succeed, the largest nations will have to cooperate
and roughly hold the same amount of gold in reserves, to be able to be on equal
footing as their counterparts after the revaluation. Is this scenario feasible?
I`d love to hear your thoughts about it!
Thank you
for reading, and don`t forget to stay positive!
Robbert-John
Sjollema
The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in this publication is that of the publisher and is subject to change without notice. The information in this publication may become outdated and there is no obligation to update any such information.