I’ve shown you many times that while the Federal Reserve is the leader of the global Quantitative Tightening cycle, in 2019, both Europe and Japan will, most likely, will join the U.S. central bank in this endeavor.

Throughout this past year, the U.S. dollar has performed incredibly well, so much so that had all hedge fund managers gone on a sabbatical and taken 2018 off, their clients would be better off, since “parking” in fiat dollars has been the best decision to make.

In 2019, all the major central banks are deflating their holdings, joining the Federal Reserve System of banks, in a complete reversal of the monetary expansion of the past decade.

Contrary to where we had been in 2006 and 2007, right before 2008 broke everyone’s backs, the level of toxic credit out there, right now, isn’t out of the ordinary.

With so much cash lying around, gold is beginning to power forward, trading above $1,230 again.

It’s important to keep in mind that for the stock market to drop like a hammer, to the tune of what some are forecasting (40%-50%), there must be something bigger than a recession looming that would cause it. There must be an event so stressful that investors would sell everything, no matter what it was, fearing the worst.

As it stands, we’re not at a point of a loss of faith, but I do have a conviction that the Federal Reserve is being isolated, politically, by President Trump, because he understands now that when the next downturn occurs, the American public will be extremely antagonistic towards bailouts or any sign of artificial assistance to corporations.

The public has seen enough of that to last them a lifetime.

This is the chief reason that we see a future with even more government programs, more intervention, and an even more heated-up elections cycle in 2020 than the last one has been.

The government stands to keep getting bigger in size and influence.

Washington, we must remember, creates its annual budgets, almost without any wiggle room to account for recessions, since its EXISTING obligations are already so out of control that before it opens its eyes and says Good Morning, it needs to collect enough tax receipts to pay for all of the social entitlements, defense, education, and interest due on $21.6T of outstanding debt.

In recessions, corporate tax revenue goes down. In bear markets, capital gains tax on profits shrinks as well. Of course, more unemployment means more outgoing payments (unemployment benefits) for Washington and fewer taxpayers to fund it (less people on a payroll).

It’s a vicious cycle, so the U.S. must continue to push for a weak dollar policy, so that the burdens could be inflated.

Wealth Research Group is already seeing tax receipts trending down, on a corporate level. This is a bear market indicator, which has flashed multiple times since the Great Depression of 1929, and in each of these cases, bear markets and recessions have followed.

Again, every time corporate tax receipts shrink, historically, the government has had limited resources to pay its obligations, which worries investors. It causes a bear market to ensue, and forces CEOs to slow down, cut new programs, and freeze hiring.

In 2019, while the ECB and BOJ (European Central Bank and Bank of Japan) normalize their balance sheets and interest rates environment, the Euro’s and Yen’s relative value will, suddenly, appear to be better than the dollar’s.

A cyclical top for the American currency would mark the early signs of a commodities bull market, but even more importantly, it would signal to Washington that they could spend, spend, spend, as the inflated currency is easier to manage.

It would seem counter-intuitive because as savers, if we knew our income would shrink next year, we would be spending less, but for the government, it doesn’t work in quite the same manner.

President Trump is not going to raise taxes, if he wants to get re-elected, so we’re looking at $1.3T annual budget deficits, with a politically crippled Federal Reserve, which can’t be seen meddling in favor of the rich.

Can you think of any scenario that will frighten investors more than knowing that all the risk they’re taking is on them? There is no bailout or propping-up, no Federal Reserve to the rescue.

If China really wants to push the U.S. into a corner, it will convince the ECB to accelerate its rate hikes, so the dollar weakens sharply, not moderately.

The average person can’t handle an inflationary scare right now. Most Americans, half of the country, can hardly scrape together $400 for a medical emergency, so imagine what an increase in food, gasoline, insurance, rents, and education would feel like.

We’re definitely reaching a boiling point. If the U.S. dollar does top-off in the next few months, Wealth Research Group will focus on the silver market in a big way. No other asset is as closely inversely-correlated to the dollar as silver.

Best Regards,

Lior Gantz
President, WealthResearchGroup.com