Thanksgiving is now out of the way. We can move on to Christmas. And New Year’s Eve. And then 2014. And 2015. And onward into the future!
But what’s in the future? If only we knew…
Making predictions is tough… especially when we have no idea what to expect.
But wait… Some of the most important things we will see in the future have already happened many times.
Yes, dear reader… your editor is going way, way out on a very solid limb. He has identified three things that WILL happen. No doubt about it. He guarantees it.
I. Interest Rates Will Go Up
Interest rates are not fixed. And the Fed can’t suppress them forever. Nobody has repealed the interest rate cycle.
So, expect rates to go up.
When?
Hey, you want an awful lot from a free publication, don’t you? Isn’t it enough to give you a guaranteed future event?
We can also tell you that when it happens, there will be hell to pay. Here’s Michael Snyder at Global Research:
At this point, we have painted ourselves into a corner by accumulating so much debt. We simply cannot afford to have rates rise significantly.
For example, if the average rate of interest on US government debt rose to just 6% (and it has been much higher than that at various times in the past), we would be paying more than a trillion dollars a year just in interest on the national debt.
But it wouldn’t be just the federal government that would suffer. Just consider what higher rates would do to the real estate market.
About a year ago, the rate on 30-year mortgages was sitting at 3.31%. The monthly payment on a 30-year, $300,000 mortgage at that rate is $1,315.52.
If the 30-year rate rises to 8%, the monthly payment on a 30-year, $300,000 mortgage would be $2,201.29.
Does 8% sound crazy to you?
It shouldn’t. 8% was considered to be normal back in the year 2000.
II. Our Monetary System Will Collapse
No paper money standard has ever survived a complete credit cycle. Certainly not with a central bank on the job!
Higher interest rates, bitcoin, a credit crisis, a central bank miscalculation – something will bring it down. Something always does.
Bitcoin? Maybe. Bitcoin hit the $1,000-per-unit mark on Wednesday, the day before Thanksgiving. My sons followed it over the weekend.
“Hey, I made $1,000 last night,” said one. “Bitcoin went up $100.”
“Yeah, and I’m thinking of cashing out and buying an old car,” said another.
Bitcoin hit $1,230 on Sunday. A bitcoin hedge fund is up 5,000% – which could be the best performance of any hedge fund in history.
Bitcoin will probably bite the dust sometime soon. That’s the trouble with new technology. There’s always newer technology – and maybe a better bitcoin.
Meanwhile, the dollar has been in a gentle decline since July. Someday, the decline won’t be so gentle. It will be brutal. Then investors will suffer huge losses as dollar-denominated assets sink.
Here’s more from Global Research:
The death of the dollar is coming, and it will probably be China that pulls the trigger. […]
As the global economy trembled before the prospect of a US default last month… China’s official Xinhua news agency called for a “de-Americanized” world.
It also urged the creation of a “new international reserve currency… to replace the dominant US dollar”.
So why should the rest of the planet listen to China?
Well, China now accounts for more global trade than anyone else does, including the US.
China is also now the number one importer of oil in the world.
At this point, China is even importing more oil from Saudi Arabia than the US is.
China now has an enormous amount of economic power globally, and the Chinese want the rest of the planet to start using less US dollars and to start using more of their own currency. The following is from a recent article in the Vancouver Sun:
Three years after China allowed the yuan to start trading in Hong Kong’s offshore market, banks and investors around the world are positioning themselves to get involved in what Nomura Holdings Inc. calls the biggest revolution in the $5.3 trillion currency market since the creation of the euro in 1999.
And over the past few years we have seen the global use of the yuan rise dramatically. […]
International use of the yuan is increasing as the world’s second-largest economy opens up its capital markets. In the first nine months of this year, about 17% of China’s global trade was settled in the currency, compared with less than one percent in 2009, according to Deutsche Bank AG.
III. US Empire Will Go the Way of All Empires
The US can still send its ships and bombers to stir up hornets’ nests wherever it pleases. But someday the hornets will develop a deadly sting.
Or maybe the empire will just go broke.
Who knows? Every empire has to find a way to exterminate itself. The US will be no exception.
This last event could be the most exciting. Falling interest rates and collapsing currencies can be fun to watch, provided you’re not standing directly beneath them. But a falling empire? The imperial warriors typically bring down a lot of innocent bystanders along with them.
But don’t worry. Be happy. Hold onto your gold.
Regards,
Bill Bonner
Market Insight:
Bitcoin Fever!
From the desk of Chris Hunter, Editor-in-Chief, Bonner & Partners
Here’s an interesting chart…
It’s of digital currency bitcoin in dollar terms.
As you can see, bitcoin spent much of the year around the $200 mark. In November, it took off like a rocket – hitting the $1,200 mark at one point.
Most commentators have focused on bitcoin as a speculation.
But the real money from bitcoin will be made when Silicon Valley adopts bitcoin… and other digital currency rivals… to build a “friction free” digital global finance industry.
Already, Silicon Valley’s big guns are taking aim at digital currency start-ups. Google recently invested in open-source virtual financial transaction company Ripple. It’s also invested in Buttercoin, a bitcoin exchange.
So, what’s got the folks in Silicon Valley in such a twist?
As the Financial Times put it over the weekend: “a low-cost, standards-based financial system independent of the traditional banking industry.”
Translation: financial transactions that flow as freely and cheaply as email.
Right now, banks charge a 3% tax on most of the world’s payments. And if you want to change one fiat currency to another to facilitate an international transaction, the average charge is 10% of remittances.
A payments system based on digital currencies would wipe out these financial parasites…
Where bitcoin will be versus the dollar in one month’s time is not the question.
The question is how virtual currencies – maybe bitcoin… maybe slicker, better rivals – will transform the racket that is today’s fiat currency system.
