A Recessionary Entrée, With a Side of Dumb Money, Seasoned With Magic Money

News & Current Events Public News & Current Events
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Originally published at: https://peakprosperity.com/a-recessionary-entree-with-a-side-of-dumb-money-seasoned-with-magic-money/

Executive Summary

In this episode, I dive into some pressing financial topics with Paul Kiker from Kiker Wealth Management. We explore the Federal Reserve’s recent rate hike and QT decisions, the concept of Elon’s “magic money machines,” and the leading indicators that a recession has arrived. We also touch on the intriguing dynamics of the stock market and the role of gold in today’s economy. It’s a packed discussion with insights that could impact your financial outlook and portfolio decisions.

The Federal Reserve’s Hawkish Stance

The Fed recently announced they are holding rates steady, but with a more hawkish outlook for the future. They predict a higher interest rate for 2025, around 4%, compared to their previous estimate of 3.25%. This shift is significant, as normally such a hawkish stance would sink stocks, but not this time.

The market seems to be responding more to the dramatic cut in quantitative tightening, from $25 billion a month to $5 billion, which is a huge reduction. I predict that by the end of this year, we might see a return to quantitative easing.

Magic Money Machines

Elon Musk recently brought up the idea of “magic money machines” within the government, suggesting that there are computers that can issue payments out of thin air. Previously it was thought that only the Federal Reserve had that capability. Did he misspeak? This raises questions about the integrity of our financial system and whether we truly know the denominator in our monetary story. How many dollars are out there in the big wide world? If these machines exist, it could mean there’s more money in circulation than accounted for, which would have significant implications for inflation and trust in our currency.

Recession Watch

We’re on recession watch (which is a more serious level than a warning), with indicators like restaurant and bar sales showing negative growth for the second month in a row. This is a sensitive leading indicator that I watch closely. Additionally, we’re seeing domestic migration patterns shift, with places like Austin, Texas, and parts of Florida experiencing net out-migration. These trends, along with reports of airline ticket sales collapsing, suggest that a recession could already be upon us.

Conclusion

Stay nimble everyone! The potential for a recession, the Fed’s actions, and the mysterious “magic money machines” all point to a need for careful financial planning. Whether it’s considering the role of gold in your portfolio or understanding the broader economic trends, being proactive and informed is key. As always, I’ll be here to help you make sense of it all and provide insights that can guide your financial decisions.

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Ah, you got the watch - warning severity flipped related to storms. Warning is more severe.

Watch - conditions are possible (prepare)

Warning - tornado has been spotted / expected (take shelter)

https://www.weather.gov/safety/tornado-ww

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ScottTucker is correct. An appropriate analogy would be a recession WATCH would be issued when the conditions exists for a recession to occur and a recession WARNING would be when a recession is imminent.

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I just don’t get it. For years we have been told that once FED rates reached 3- to 3.5-percent the US Government would no longer be able to pay the interest on the debt and this clown show would come to an end. The FED rate went to 3.25 percent on September 21, 2022, and we are still here.

Now, FED rate is between 4- and 4.5-percent and we have not seen a sovereign debt default, and the clown show is still on. I just don’t get it.

Also, there’s a Bitcoin Bill coming up that, if passed, will raise the government’s official value of gold from $42.22 to $3,000 resulting in a major devaluation of the USD and possible economic collapse.

Something seems really really wrong.

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Every satoshi is accounted for. Easier to audit than a gold vault.

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A <5 minute read from Kitco by Mohamed El-Erian on what Gold is telling us if we listen. “This should be flashing yellow in Washington…".

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Thanks for the Watch-Warning upgrade. I don’t live in an area where such things happen very often, so what do I know? :slight_smile:

In other news, let’s put the UK on “Watch” as their emergency injections of cash are beginning to blow out their bond market.

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Creak … Pop!

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I’ve never heard that figure before. My own back-of-the-napkin math says that with ~$28 trillion of public debt (the intragovernmental debt is the balance and it is pegged at 3%), and nearly $5 trillion of tax receipts, you’d need a rate close to 15% to consume them.

However, the system would creak to a halt long before then due to interest rates on the entire pile:

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I tried looking that up for you. No luck. These assessments came out back in 2021 and 2022, just as FED rates were rising. Ancient history with the rate of change going on. However, the math was irrefutable and irresistable.

I really want this crap to end. I want to see a budget. We haven’t had one since 2000. When these reports first started coming out. I know 2022 is a long time ago, but there should be something. Again, we are talking about a fully owned, fully manipulated, fully controlled, fully propagandized mainstream media. A tree or a country, or a whole way of life could fall and we wouldn’t hear anything about it. We are really just feeling our way at this point. Well, maybe not you.

I don’t really trust anything coming out of anybody these days. And even that short list is getting shorter. Even you, sometimes. I have to be honest.

In your opinion, at which point will FED rates make it impossible for the US government to even pay the interest on the debt?

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Around 7% things get pretty untenable, and I can’t see the system surviving past 8%. Lots of things would blow up.

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I wish I could find those earlier threads talking about how the whole system was going to collapse when the FED rate rose to 3-percent. I have been going around looking at the world as if it were already dead, a ghost even.

Here’s another theory. It is (to use your definition) “common knowledge” that between 1913 to 2008 the value of the USD had fallen 98-percent. During the GFC of 2008-09 I think the value of the USD fell the remaining 2-percent during the Crash of 2008-09, and since 2010 the value of the USD has been zero. Yes, ZERO.

They talk about the emperor walking around in his new clothes and how it took some precocious kid to point out the emperor was naked. I am not that kid. I do feel like I have been seeing the whole world as a ghost, walking the Earth for no other reason than out of habit.

Looks like the theory of a USD collapse is still potent, even if we are going to have to wait until rates get as high as 7-percent.

Just asking, but where are you getting your information from?

Lately, it seems that I have been making comments and asking questions that manage to even capture your interest. I take that as a high honor (in a scary kind of way).

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Did you once mentioned the VIX is used as a tool of market manipulation? Are you reading into that to predict a market drop?

Grok says this:

“While the VIX itself isn’t a tool for direct manipulation, it can be exploited or influenced in ways that impact market perception and behavior.”

I don’t know if it’s accurate or there is a mechanism for direct manipulation.

Thanks.

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Doordash memes making the rounds on x.

https://x.com/ParikPatelCFA/status/1902843222977867835

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I learned that the UAE let’s other countries dump their US Treasury bonds for gold. It’s one of the ways they’ve been able to peg the Dirham to the USD. I know that Dubai also deals in a lot of gold, but there’s evidently a lot of it moving there from Switzerland, which I found kind of interesting.

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Yes, the mechanism is quite simple. Someone simply ‘slams the VIX.’ They just…sell it. They can dump VIX puts, sell VIX futures, and/or its many leveraged ETF derivatives.

Once you do that the VIX falls, which creates an arbitrage gap for all the computers that run various index futures and options strategies. When the VIX falls they need to go long. Fundamentals and news have absolutely nothing to do with this buying. It is programmatic. When they go long this causes the futures prices for the indexes to rise.

When the futures rise, then the cash market machines are forced to buy.

This is how the VIX tail wags the cash market dog.

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Perfect. Many thanks.

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I want it to end too, but a nested set of complex systems are simply beyond accurate forecasting (at least in terms of timing). I know what’s going to happen and so do you (in the broad strokes, anyway). I’m content to keep preparing and enjoying things like running hot water while I still can. And I didn’t have to shoot any marauders today.

“Happy Hunger Games! And may the odds be ever in your favor.”

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