The World Economy Is Resetting - Are You Prepared?

Wednesday, March 2, 2016

The major global economies have had a staggering debt of $199 trillion as of Q2 of 2014. The most recent figures will be closer to $230 trillion because, after 2014, the ECB, Japan and China have all resorted to ‘massive monetary easing’ programs while the US debt continues to escalate, with every passing second.  The total debt, as a percentage of GDP, stood at 286%; the latest numbers will prove to be much worse.

global stock of debt outstanding

The Wold Economy Reset is how this will begin

All forms of madness must eventually come to an end, and the current economic madness has started with the decline of both base metals and crude oil prices. The Central Banks are not able to prop growth or inflation. I have referred to the world economies resetting in the past as ‘The Global Reset’ and it is currently underway and the equity markets have jumped on the bandwagon along with other asset classes which are plummeting, rapidly.

The 2007 ‘financial crisis’ was due to easy monetary policy by the FED

The FED sowed the seeds of the financial crisis of 2007 by lowering interest rates from 6.5 %, in May of 2000, to 1% in June of 2003. Lower interest rates, as well as easy credit, have encouraged investors to pump money into the housing markets and consequently, prices of houses soared. The banks leveraged their balance sheets to unmanageable levels and continued to extend reckless lending. Lehmann Brothers had a leverage ratio of 31 while Bear Sterns had a leverage ratio of 36, which resulted in their collapses.

The FED sought to solve the problem of high leverage by implementing even higher leverage

Every crisis is an opportunity to correct the unbalanced system, which will lead to years of instability. However, the brilliant minds of those at the FED, sought to solve the problem of ‘high leverage’ by means of implementing even higher leverage. They just transferred the leverage, from the private players, onto their own books, and surprisingly the major global Central Banks followed them, in this madness.

Who has benefitted from the Central Banks actions?

The Central Banks have maintained interest rates near zero %, or in the negative, and have resorted to massive money printing. The wealthy pumped money into various assets. Their holdings became inflated and the rich became even richer. The poor had no money to invest, nor jobs; consequently, they were not extended any loans in order for them to participate in the stock market rally, thus, their struggles continue. Due to this, the U.S. economy did not respond positively and only a few asset classes continued to perform.

The ‘Global Reset’ will continue to last some 5-7 years more

This time, the recovery will take much longer than ‘The Great Recession’ did. These massive Central Bank debts can only be cleared with an extended period of ‘deleveraging’ which will result in an extremely painful outcome. As always, the wealthy will both thrive and survive.  It is the working classes and the impoverished who will incur the hardships due to job losses and rising prices of essential commodities.

Conclusion

There are a number of experts who have conferred with my opinions and who also believe that all of this will end very badly.  However, there is nothing to fear, since adversity can also promote a positive opportunity and a better future outcome. I would like those who follow my work to be well prepared for the ‘crisis’ by adopting and implementing the right strategy. In addition, I would also like to help my followers to profit, and to be ready to embrace and thrive during this Great Financial Reset.

Chris Vermeulen, founder of AlgoTrades Systems, is an internationally recognized Market Technical Analyst and Trader. Involved in the markets since 1997, Chris’ mission is to help his clients boost their investment performance, while reducing market exposure and portfolio volatility. Chris is also the founder of TheGoldAndOilGuy.com, a financial education and investment newsletter service. Chris is responsible for market research and trade alerts for multiple newsletter publications. Through years of research, trading, and helping thousands of individual investors around the world, he designed an automated algorithmic trading software for the S&P500 index, which solves his client’s biggest problem related to investing in the stock market - the ability to profit in both a rising and falling market. He is the author of the popular book Technical Trading Mastery – 7 Steps To Win With Logic. He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe Haven, The Street, Kitco, Financial Sense, Dick Davis Investment Digest, and dozens of other financial websites. 
You can reach Chris at chris@thetechnicaltraders.com.

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