It’s fair to say that last weekend’s POTUS Tweetfest was unhelpful to a rapidly deteriorating Global Economy.

For those who missed it, here’s a summary below, courtesy of Zerohedge:

“Jerome Powell’s Jackson Hole speech was supposed to be the most important event of an otherwise sleepy, August day, after which traders could quietly exit for the rest of the day and commence drinking. It did not quite work out that way.
Not only did Powell’s speech barely make the top 3 most important events, but Friday ended up being an exercise in surreal market news flow, and one of the biggest drops of 2019 to boot.
With a few hours left before Jackson Hole, as traders were getting ready to trade Powell’s Jackson Hole speech which was a big dud, and did not reveal anything new (as even Trump figured out when he blasted the Fed chief slamming “As usual, the Fed did NOTHING!” and asking “who is our bigger enemy, Jay Powell or Chairman Xi?”), China shocked the market by unveiling that it would retaliate by slapping 10% tariffs on another $75BN in US imports, which sent stocks sharply lower at first. Then, Powell’s remarks managed to somewhat stabilize sentiment, and the S&P almost regained all losses… before all hell broke loose and in a vicious tirade, Trump first slammed Powell, effectively calling him an enemy of the state”, and then warned he would retaliate to China soon, while ordering US companies (can a US president dictate to companies what they can and can not do?) to find an “alternative” to China.
The result was a violent slam lower in risk assets, with the S&P tumbling over 70 points, the Dow plunging over 500 point, its 3rd such drop in the month of August, which has emerged as the worst month for stocks since December 2018…”

Did you get all that? Trump slams “The Fed” via his usual twit medium for not bringing down rates fast enough (even though he’s presided over the “best ever” economy) then calls Fed chair an “Enemy of the State“, piling on more trade war stuff. 

Are you not entertained?

Enjoy it while you can, for the times they are a-changing. The trade war is a side show – they all start out that way.

For investors, the continued pace of economic deterioration will not come as a surprise to readers of these notations, however, it now seems the mainstream may be waking up to the potential effects of 0 and negative interest rates.

Even in Australia, why is talk of “money printing” QE rearing its head more often than a month ago?

Recently reading “economist” Jason Murphy’s little news.com.au piece on what the RBA does when it’s out of interest rate bullets, we realised that the “how quantitative easing might look in Australia” discussion has already began.

This inevitability is something investors need to be ready for. The only thing that quelled our initial currency anxiety was the fact that most countries may be doing the same thing soon.

The AUD devaluation against gold this year has been a sight to behold and a lesson to all, to look out below.

The gold price rise isn’t so much about gold going up – it’s about the value of your “paper” claim going down.

We’ve consistently communicated to clients the value of stable “physical” asset prices in the face of 0 and negative interest rates on so-called “safe haven” paper claims.

Meanwhile, GFC 2 builds.

Smart guys telling you the inverted yield curve story is nothing haven’t seen this below, from the “entire universe”!!! We love that! Like, Miss Universe? Grey are recessions.

Inversions matter.

Inversions matter, part 2.

In simplistic terms, the inverted yield curve story starts when long term rates fall below short term ones, specifically, the cash rate.

The result is usually short term rates have to drop, it’s the bond market calling the shots, again.

So, if you’re confused about the direction of rates, don’t be. Down they go, for now.

The big question is… down to what? 

The chart below tells a tale of what’s happened since Nixon closed the gold window.

The falling interest rate story actually starts from the 1980’s peak, after which interest rates started to fall from their multi-decade highs, and they’ve been falling ever since. A 35 year bull market!!!!

Gold loves this negative interest rate stuff.

If this “negative rate” thing continues, what might you think will happen?

Our concern is not positioning for this to continue, it is around a bigger, systemic issue, helped along by the “can-kicking” authorities since 2008.

When this current global bubble bursts, it will be triggered by one specific event, even if that wasn’t the actual reason but rather the catalyst. For example, the fall of Lehman in 2008 was such an event although it wasn’t the reason for the 2007-9 financial crisis. 

The underlying reason for the current bubble will, of course, be the $250 trillion debt plus the $1.5+ quadrillion derivatives and global unfunded liabilities of at least $250 trillion. So a neat little sum of more than $2 quadrillion. Imagine the money printing required to stop that bubble rupture. Monetary policy tools are soon to be exhausted. Lower rates and more liquidity only weaken the economy and inflate larger bubbles. And yet the central banks continue to bet on lower rates...