Economic Earthquake Ahead; Inflation Tsunami to Result

pentoport.com  ( Original )
JAN 24, 2018

ORIGINAL SOURCE: Inflation Tsunami Ahead by Micheal Pento of Pento Portfolio Strategies on 1/24/18

How is it that The Fed has printed such a staggering amount of paper money, with nothing behind it, and inflation has remained tame? How much longer can the US get these seeming financial markets freeride despite untenable debt levels that only continue to rise? Not long.

Given the record $21 trillion of U.S. National debt (105% of GDP) and our escalating solvency concerns, the current 2.6% benchmark Treasury yield should already be much higher than the historical average of around 7%. Then, we when you throw in the fact the Fed’s balance sheet reduction increases to $50 billion per month by October. And, when considering the ECB has already halved its QE program, and is predicted to be finished printing money by the end of this year; yields on sovereign debt will soon be rising sharply across the globe.

The setup is clear, yet markets have not so much as blinked yet. When they do, the fallout could unfold shockingly fast and decisively. The likely coming play-by-play:

  • The next recession is long overdue and on its way very soon. The most probable cause will be a global spike in long-term interest rates.
  • Asset prices to plummet and bring about a truncated period of rapid deflation, an inverted yield curve, and economic chaos.
  • The Fed will be in a panic to reflate the massive equity and bond bubbles, but the limitations of only being able to lower the Fed Funds Rate by a relatively small number of basis points and going back to QE isn’t going to work well enough or fast enough to stem the tide of selling.
  • Nearly all of the Fed’s new credit will once again accumulate as excess reserves in the banking system and will not quickly save the public and private pension plans from getting destroyed.