David Stockman: The World Economy Is At An Epochal Pivot

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David Stockman warns that the global economy has reached an "epochal pivot", a moment when the false prosperity created from $trillions in printed money by the world's central banks lurches violently into reverse.

There are few people alive who understand the global economy and its (mis)management better than David Stockman -- former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier -- which is why his perspective is not to be dismissed lightly. He knows intimately how how our political and financial systems work, as well as what their vulnerabilities are.

And Stockman thinks the top for the current asset price bubble era is in -- specificially, he thinks it hit its apex in January 2018. As this "Everything Bubble" prepares to burst, Stockman estimates the risk of economic crisis is as great, if not greater than, the 2008 Great Financial Crisis because of the radical and unsustainable monetary policy expansion the central banks have pursued over the past decade.
 
This has caused the prices of stocks, bonds, real estate and most other assets to appreciate at rates that have no basis in the ongoing income/cash flow of the global economy. In short, they are wildly overvalued. 
 
A key condition that Stockman has been waiting to see, that serves as a signal the bubble's bursting is nigh, is the concentration of speculative capital into fewer and fewer stocks as the "good" options for investors shrink. We now clearly see this in the FAANG complex (a topic covered in detail in our recent report The FAANG-nary In The Coal Mine)
 
Stockman's main warning is that there's no bid underneath this market -- that when perception shifts from greed to fear, the bottom is much farther down than most investors realize. In his words, it's "rigged for implosion".
 
He predicts a Great Reset is imminent. One that, for those who see it coming and take prudent action today, will offer tremendous, perhaps once-in-a-lifetime, investment opportunity once the dust settles.
 
To hear Stockman's specific predictions and warnings, listen to this 16-minute interview:

Those interested in having the opportunity to spend an entire day with David Stockman, where he'll present the specifics of his forecasts as well as address investor Q&A, should consider attending Peak Prosperity's New York City Summit with him on Sep 26, 2018.

It's a good thing this Summit is coming up soon. We very likely do not have much time left before Stockman's predicted Great Reset begins.

As he puts it himself:

You would think by now that the big thinkers and strategists of Wall Street would get the joke. Trump's election was always a dagger aimed squarely at the egregious financial bubbles on Wall Street that have been building for 30 years at the expense of a stagnant main street economy.

And now [America's] no-holds barred pursuit of Trade Wars and Fiscal Debauch have guaranteed that the day of reckoning is at hand.

In fact, it may be only days away. And this chart from the final days of the dotcom bubble may be a pretty serviceable roadmap as to why and when.

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This is a companion discussion topic for the original entry at https://peakprosperity.com/david-stockman-the-world-economy-is-at-an-epochal-pivot/

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A real economy subject to the influences of free commerce should have collapsed years ago. Nevertheless we watch nervously each successive year for the avalanche but somehow seasons pass without crisis.
The governments of the world print endless statistics about CPI, GDP, unemployment and the wall-street junkies post a gallery of charts along with theories about where it will all surge or crash. A wave of information designed more to appease than inform. Meanwhile the central banks are busily manipulating interest rates, propping up the bond markets and the stock markets while the media machine and its cronies reinforce the safe and happy message. The end result is that potential problems seem to dissolve away.
So the real question to be answered is why and how is this disaster of a false economy still ticking. The answer is probably in the fact that everything is pegged against a global fiat currency. A closed system of worthless currencies all devaluing equally against the other. There’s no need to print extra zeros on our global bank notes because their value is not tied to anything.
Without a real standard by which to measure currency, how can it collapse? When a stock market crash or interest rate surge can be papered over with instant credit tied to nothing of value who’s to say there will ever be a crisis at all?
The worst outcome, the most likely one that no-one is talking about is slow starvation. Where the population, the economy just keeps on growing while the toxic byproducts of unsustainable growth slowly poison us all. We all want to believe in collapse but that may simply be false hope for a quick change back to something better. More likely we are on a slow decline back to a third-world existence… a future no-one can truly escape from. A future without the happy ending. A future that looks more like reality and less like Hollywood.

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How about a chart of S&P in Oct 2007 also…?
Also in the chart above how about throwing on some indicators too???
Okay I’ll do it for you… cool
Monthly time frame seems more fitting for non-crypto markets.
See the Standard Bearish Divergence on the RSI in 2000 and 2007, the thing is the price can continune upwards for quite some time whilst the Relative Strength continues to decrease to go below 70%, thats the thing about the last of FOMO chasing the price ever higher.
What’s that quote “the market can stay irrational longer than you can stay solvent” Something similar anyway, so take care loading those shorts just yet… I wonder if there’s any other similar TSLA style privatisation calls to propel other hyped stocks higher still.
Another thing to observe about the RSI, it often bounces off 50% to start another bull run, see 2016…

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If what you say is true, that the finacial engineers will not permit a crash, then what happened in 2000 and 2008? Why would this not happen again?
I am concerned that “they” continually refine and expand their criminal powers to manipulate, and I’m dumbfounded this bubble has grown for 10 years! Employiing the same chicanery with impunity!
But at some point it seems confidence will be lost. I’m not sure how the machines of HFT will interperate this human foible, but I’m getting tempted to put on some shorts. We are now witnessing some of these preposterously over-priced stocks hit air pockets of scarce bids and down she goes. I may follow Mr. Taggart and tentatively short the rigged casino.
The high complexity of the system is not robust with built-in redundancies: it is fragile, indeed bankrupt.

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If what you say is true, that the finacial engineers will not permit a crash, then what happened in 2000 and 2008? Why would this not happen again?
I am concerned that “they” continually refine and expand their criminal powers to manipulate, and I’m dumbfounded this bubble has grown for 10 years! Employiing the same chicanery with impunity!
But at some point it seems confidence will be lost. I’m not sure how the machines of HFT will interperate this human foible, but I’m getting tempted to put on some shorts. We are now witnessing some of these preposterously over-priced stocks hit air pockets of scarce bids and down she goes. I may follow Mr. Taggart and tentatively short the rigged casino.
The high complexity of the system is not robust with built-in redundancies: it is fragile, indeed bankrupt.

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Because the world is running out of gold. This thing is going out with a bang, not a whimper. We can analyze all the charts we’d like and they do provide insight, but ultimately the crashes happen when those at the top decide they will.
Back many years ago the Rothschilds told us there would be a new global currency in 2018, on the cover of the economist. Things look to be leading up to that. My bet is on September. Why? Because 9/11 happened in September and it’s as good a guess as any in depth analysis is going to provide. The elites time these things based on superstition and have historically maintained a 7 year cycle. This last cycle was missed, but we did get a 7 year, 7 month, 7 week, 7 day interval with the mini crash after brexit.
If we do go beyond 2018 without a reset then that will be a very significant clue that the plans of the elites to dominate the world are not on track.

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My best guess is the 11minute of the11hour of the11dayof the11month of 2018. Why it is the day ww1 ended,this when the crash will come,it is as good as any?

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… I am going to posit that is IS a real economy; and the proof that it is a real economy is the fact that you don’t understand it.
Look, when we play stategy board games, we sometimes play with cheaters, legally permissible lying, backstabbing… but it’s just a game. I asked my brother Joe how he’d deal with that. His reply was “these games aren’t played in isolation”.
It is just the same with your gold market, your stock market: that game isn’t played in isolation; and you don’t even have a clue as to what some of the games are; other games you do have a clue, but it doesn’t entirely make sense.
Now, for the earth shaker comment:
If you were able to understand it, not only would it not be a real economy; but within months it would be broken and cease to have any import.
As always, I suspect your models are wrong. Mine too.

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Some say that there are two types of people: Ones who don’t know and others who don’t realise that they don’t know.
Hence we live in a world with just probabilities. If you can work out the rough probabilities beforehand, remain disciplined and solvent in the short term, you should win in the long term.

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PGP said,

Without a real standard by which to measure currency, how can it collapse? When a stock market crash or interest rate surge can be papered over with instant credit tied to nothing of value who's to say there will ever be a crisis at all?
How can it collapse? Slowly at first, and then all at once I suspect. While the financial engineers in charge of the ever expanding, highly fungible, global debt-based currency regime have done an extraordinary job of keeping the ever mounting inflation (aka growth of digital currency) contained into preferred asset classes like real estate, stocks, and corp. or gov't bonds, while simultaneously suppressing those assets historically thought of as able to signal inflation like Gold and Silver, I believe I have identified a new canary; certain of the PGM's (Platinum group metals). Our story starts with the means by which price is discovered for the more common precious metals - in the futures market. If you don't already realize that something is fishy if the primary means of price discovery for a market as big as that for Gold and Silver is futures.. then you might be named DaveFairtex... but I digress. The chart below is the, "tell" that something is fishy... of the approximately 70 commodities that are actively traded (https://en.wikipedia.org/wiki/List_of_traded_commodities) the four that display the most short leverage relative to supply just happen to be those metals that have historically been available as gov't minted money, aka coins - coincidence I am sure.

The Platinum group of precious metals is comprised of Pt, Pd, Ir, Os, Rh, and Ru. As you will see from the next chart, these comprise the bulk of the most rarified elements found in and on our planet. Aside from Osmium, all of these elements have multiple and growing utility for various high tech applications, meaning that demand is increasing. In just the semiconductor market, Ruthenium is finding new applications at the top protective layer on next gen. EUV lithography masks, fine conductor lines for 3nm node leading edge chips, and as a layer in the MRAM stack for future nonvolatile memory.
At the same time, supply is decreasing and will probably continue to do so as South Africa, the largest single source of PGM’s, devolves into the next Zimbabwe.

So, against this background of increasing demand and decreasing supply, what has happened to price? Well, in a surprising sign that some actual supply vs. demand priced markets do exist, the PGMs which are both industrially useful and NOT subject to futures market manipulation end up being an asset class of their own… a simple chart will tell that story;

 Metal            June '17 $/oz.     Aug. 9 2018 $/oz    ~ one year price increase

  Pt               920                    830                         - 10%
  Ir                970                   1420                           46%
  Os              400                    400                             0%
 Rh               650                   2345                          261%
 Ru                 42                    255                           507 %
 Pd               900                    912                           ~ 0 %

So… what the heck? All of these save for Os are really useful, yet Pt and Pd (along with Gold and Silver) remain constrained. My contention is that inflation is breaking through… it’s taking more of the ever more diluted currency to buy these metals, and there is literally no force, other than maybe a large industrial recession, that will stop them from moving higher. Since a large recession/depression is looming… my recommendation is to keep some tinder dry for the deflationary phase of the coming crash and get thee some Ruthenium if you can. Or get it now and beat the rush;
https://www.rwmmint.com/products/ruthenium

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Interesting market/investing concept: rare earth metals that don’t have futures markets. I get the concept and see the value of being independent of the futures markets, but my knowledge base is starting from zero. In a quick look around I found:

  1. (At your RWMM link) A one ounce serialized ingot of Ruthenium for $330 on a spot price of $255 (a 23% premium). They don’t say they buy their products back and therefore don’t list bid/ask prices. I’ll ask my local coin dealer if he’d buy any Ruthenium or Rhodium ingots I had to sell.
  2. A brief internet search came up with a handful of sources that buy and sell, in a variety of forms (Ruthenium in powder form for instance, not as pretty as the polished ingot with the serial number). For instance, Kitco will buy a Baird & Co. one ounce Rhodium bar for $2,140 and sell it for $2,390 (on sale!) on a spot price of $2,345. That looks good to me.
  3. I looked at price charts and found them not particularly correlated with anything (except maybe each other). Do you know why Ruthenium and Rhodium crashed in 2007 and 2008? Did industrial demand plummet during The Great Warmup Recession? Can we expect that again during The Great Reset? Rhodium and Ruthenium both look like they have room to run, but Irridium looks like it is peaking.


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Stockman’s timing is in alignmet with Brandon Smith’s global currency reset hypothesis. Yes, the same situation as 2008 - a stock market crash. But the cause of this crash is engineered. Interest rates have been raised for the past year, just like in 1928 and many other stock market crashes. The Federal Reserve isn’t raising interest rates because it’s in the best interests of the US, but because it’s in the best interests of a global entity, which would bail out the upcoming crash with an IMF currency. The US dollar could not be accepted to bail out a crash as it did in 2008, because it has lost trust because of it’s massive debt level. So only a strong currency like the IMF’s Special Drawing Rights currency would be acceptable to keep the global economy liquid after a crash. The SDR is a basket of five national currencies - one of which is China’s huan, which could become gold-backed or partially gold-backed to build the trust that the US$ does’t have.
Following a bailout to keep the economy liquid, the new SDR currency would become the default global reserve currency, replacing the US$, and that would pave the way for the dollar to drop in value over the next few years so that the US economy would become one with great austerity (no military?) similar to Greece, within the Euro currency. That would enable those controlling the global currency to use other forms of control over the world - military, etc…
To me that is the most logical outcome of this situation. There isn’t another plausible explanation for why interest rates were raised, which is the historical cause of stock market crashes or corrections. The only other explanation I’ve heard for raising interest rates is “to give more bullets for lowering interest rates if there is a crash”. That makes no sense, since raising rates CAUSES crashes… But it does make sense according to a global currency reset hypothesis.

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Like I say some bearish divergences can take time to play out, look above at 1999-2000 as an example… 12% would take us over the 3000 mark, imagine the psychological impact and FOMO that could create… DJT MAGA? :wink:
https://www.investopedia.com/news/sp-500-could-gain-more-12-dec-31-canac…

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Interesting tweet from Rickards a few days ago.
Heading to Norfolk Naval Base tomorrow for a guest lecture on financial warfare with China. This one has a “hurry up” feel to it, and involves a joint logistical command. Something must be up.

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Look over at the south side of the Norfolk Naval Base. There, by the Jordan (toll) bridge. See that little concrete plant by pier 8? That’s ours. I work there, but not at the concrete plant. Drive as if you’re going to get on the Jordan, but miss it to the right just before the onramp… it’ll swing you around to Burtons Point Road. Now take a right, go across a bunch of bumpy gravel spilled on the road, and there at the little blonde office, is where I work.
We build bridges.
We built the pieces for the Jordan, too. I was first a field engineer for the Jordan, and then project manager.

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The following is my lecture on a fiancial “war” with China.
“Folks there aint no financial war with China. Get that idea out of your heads. That war ended a long time ago. You are sitting here in underwear made in China and you think you are engaged in a war with them? The coffee is out in the hall go smell it and wake up.
If this were the Alamo. you would not only be surrounded by Santa Anna and all his men they would be in there with you loading your guns for you, cooking your food and nursing your wounded. Now you can try to be a hero and resist and end up dead or you can wave a white flag and learn Mandarin
I’ll take my check now because it may not be good tomorrow”
Easiest money I will have ever made. All I had to do was state the obvious

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… that Jim Rickards’ talk may well have been “hurry up” as he said, or it could have been just one of the events surrrounding the USS Eisenhower Change of Command ceremony, in which Capt. Hitchcock moved up and on, handing over the ship to Capt. Kohler.
Point being, sometimes these things are part of “the best we can do for the guys”, but still driven by things that are completely incidental.

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Let’s just posit that everything is harder to come by (peak everything), and population is rising.
Let’s also posit that prices have been, on average, rising five percent per year.
Now, if you turn around and decide to set the money supply such that prices must stagnate, then wages will crash, because – everything is harder to get, remember?
So if wages crash, then people can’t make their loan payments, and then all kinds of debt unwinds, resulting in a liquidity crisis, which causes the economy to falter even more…
Well, in 2000 the US fed DID reduce the nominal inflation rate from a constant five percent, down to zero, to keep their prices basket at 0% growth – and the 2008 crash resulted.
So I get how lowering the interest rate can cause a crash.
But as long as whatever rate you set is closer to the “correct” rate as defined by the change in difficulty of obtaining physical assets, I don’t see how raising rates can cause a crash. Raising rates will rather help stabilize the processes of obtaining assets, and result in economic growth, not a crash.
So then the question for me is, how much harder is it each year to get assets? Well, the population growth rate is about 1.2% per year worldwide, 0.75% in the US. But we also know that a wise government sets aside assets for future crises and development provides for a common defense, and so on. Therefore, I would think that even a putative inflation rate of 2% or 4%, combined with a continual confiscation of assets that was equal to the difference, would be stabilizing, not destabilizing.
Stabilization will result in growth, not a crash.
So if someone wants to explain to me how raising interest rates can cause a crash, I’d be willing to listen.