I hope by now you would have realised that we are moving from crisis to crisis and authorities are fighting hard to extend the cycle. The massive injection of liquidity by central banks has dramatically increased the government’s role in the economy and significantly decreased expected returns on bonds and equities. Martin Armstrong writes how to prepare for the coming debt crisis.
The little guy has NEVER materially benefited from the decline in interest rates because the banks never lowered the rates they charge consumers in proportion to the decline in official rates.
The consumer-level actually sets the tone for the big boys. Governments are hopelessly caught in a crisis drowning in debt and there is no possible way we can climb out of this without major problems and structural reforms.
Understanding we have a Sovereign Debt Crisis is the first step in framing your strategy. Stay away from government debt.
Next, understand that the broader trend will be toward higher interest rates. If you are a borrower as in a mortgage, that means you want to lock it in and do not sign up for any floating rates where you have to pay. If you are a lender, then you do not want to lend out at fixed rates.
Understanding there is a debt crisis, this means you need to develop a strategy of moving to the private asset classes.
The big boys will follow consumer trends. The government will try to convince everyone that they have control. This is simply a game of poker where you can bluff and win with a losing hand if you are good enough. That is the trick governments have been playing on everyone.