Have The Bubbles Begun To Pop?

Written by Chris Marcus of Arcadia Economics

Over the past decade, many in the Austrian Community have warned of the consequences of past Federal Reserve action, only for most to wonder when these events would ever occur.

This week analyst Dave Kranzler was interviewed on the Miles Franklin YouTube channel, and he shed light on some of the dramatic changes that are happening in the financial markets at this very moment.

As well as what’s coming next.

Dave has covered the housing market extensively in his Short-Seller’s Journal, and he continues to adamantly warn about the changing environment in the real estate market. And in the interview, Dave made some of his most pointed comments to date.

“If you’re worried about the price of a house going up or down, then you probably don’t want to buy a house right now.

Because I can tell you right now, and I will guarantee this, prices are going lower. Maybe not right away, but they are going lower. They’ve already rolled over.

The pool of potential home buyers who can qualify for a conforming government sponsored mortgage is shrinking. Considerably. Therefore the demand for housing is shrinking.

Again, it isn’t a random surprise that we have seen the first slowdown in the market at this particular point in time. Because while there have always been many potential triggers to pop the bubbles that the Fed has inflated, rising interest rates have always loomed as one of the more probable ones.

Dave explained many of the signs of slowdown that he’s seeing in the market, as well as why prices will virtually be forced to adjust in the near to medium term future. Especially given the similarities to the environment experienced in 2007-2008, right before Lehman Brothers failed and quantitative easing began.

As for the U.S. treasury market, Dave eloquently boiled it down into simple terms.

I don’t know how the U.S. addresses its debt. It either has to start printing a lot more money. Or just default. 

Either way, the real value of the treasury paper you hold in your hand goes to zero, or approaches zero.

Which is similar to what Russian President Vladimir Putin has expressed publicly as well.

“For Putin I think it was an easy decision to unload his treasuries and re-deploy the capital. And obviously one of the places where he re-deploying it is in gold.”

In regards to China, Dave suggested that China’s recent gold buying spree could be a form of a hedge to their own U.S. treasury exposure.

That’s one of my theories on why China is accumulating so much gold. And why they have accumulated a lot more than has been disclosed to the world. For them it’s a hedge on their treasury position, which is an impossible position for them to liquidate.”

It certainly makes enough sense that China can see the issues facing the U.S. debt markets, and is going to do whatever possible to insure against that risk. Especially with the price of debt so high, and the price of gold and silver still just above what it costs to get them out of the ground.

So while it remains a mystery as to who is going to keep buying all of the U.S. bonds as more countries leave the market, what continues to make a lot of sense is following the same side of the trade as Russia and China, and trading U.S. paper for gold and silver.

–Chris Marcus

To buy or sell gold and silver call Miles Franklin today at (1-800-822-8080).