Today, I’m making a special post to this regular column, outlining my economic predictions for 2019:
JWR’s Economic Predictions for 2019
As we all know, a new Democrat Party-dominated congress will be seated on Thursday January 3, 2019. The actions of the 116th Congress are bound to have a profound effect on the U.S. economy. Given the history of profligate spending and public debt accumulation by both major parties, we can expect more of the same. And, in the event of a credit, bank, or stock market crisis, we can expect a Democrat dominated congress to spend even more.
An Economy in Recession
Here is my economic prediction for 2019 in just one word: Recession. To elaborate: The currently flattened yield curve will very likely soon invert–most likely in January of 2019. In recent decades, yield curve inversion has almost always been the sign of imminent recession. Remember: The “recovery” following the 2007-2008 global credit crisis was not a genuine market cycle recovery. Instead, it was a false recovery that was fueled by central banks setting artificially low interest rates. Therefore, I expect the nascent reversion recession to be deep and long. Plan accordingly.
The Fed: Higher interest rates, Then Lower
Regardless of the spending habits of congress, it is clear that higher interest rates are ahead. Unless there is a severe crisis, there will probably be three more rate increases in 2019.
The Federal Reserve private banking cartel has held carte blanche since 1913. They have manufactured inflation through a debt-based monetary system, in collusion with the U.S. Treasury. (The Treasury also benefits, since inflation is a a hidden form of taxation.) Since 1913, the purchasing power of the U.S. Dollar has declined 97%.
The Fed is presently unwinding their Quantitative Easing (QE) holdings. They’ve been inching interest rates upwards. They will continue to do so, until the Wall Street crowd screams. At some point, higher rates will push the American economy into recession. If the credit market and economy shut down, then the Fed will probably resort again to a Zero Interest Rate Policy (ZIRP). But I suspect that this will be the last time that this ploy will succeed. The Fed will have run out of arrows in their quiver.
Two More Fed Predictions
Despite President Trump’s proclamations, it is still the big banking interests that really control America. So unless there is a mega crash that triggers a currency reset and abandonment of the Federal Reserve central bank system, I can make two more predictions:
1.) There will be no audit of the Federal Reserve in 2019.
2.) There will be no federalization of the Federal Reserve in 2019. It will remain a largely independent private banking cartel. (“It isn’t Federal, and it has no Reserves.” It is no more Federal than Federal Express. In fact their numbers follow each other in most phone books. Neither are up front in the “Government” listings.)
Legislation and congressional hearings
As the 116th Congress gets underway on Thursday, we can expect to hear a lot of noise from the Democrats, namely:
- A raft of new legislation pushing the socialist, statist agenda.
- Calls for Presidential impeachment, even before any committee hearings.
- Numerous and lengthy hearings in various committees, with a parade of histrionic witnesses.
- Stalled budget appropriations, threats of government shut-downs and actual shut-downs.
- Changes to House rules.
- Multiple impeachment votes.
- Another rise in the Federal Debt Ceiling. (Question: Why do they keep calling it a “ceiling”?)
- A wide variety of civilian disarmament legislation.
- Calls for “compromise”, “bipartisanship”, and “common sense legislation.”
- Legislation bundling, to sneak through Democrat agenda items.
- Legislative gridlock, punctuated by terrifying bouts of “compromise.”
- Continuing over-spending (annual budget deficits) and National Debt accumulation.
- A continuation of the debt-based money status quo.
- Further accumulation of power at the Federal level.
- Restrictions on cryptocurrency trading. Federal legislators will only be content once they issue their own (closely tracked) blockchain currency. Meanwhile, all private cryptos will continue to be marginalized, taxed, and regulated out of existence–or at least pushed offshore or underground.
President Trump may have to regularly rely on shutting down the government, to have any hope of furthering his policy goals.
A Continuing, But Targeted trade war
The current trade war is likely to continue. But instead of the outright battle axe strokes that were first seen, it will transition to a death of a thousand cuts. Very precise tariff adjustments will be made by both the U.S. and China. These adjustments will often benefit–or harm–particular companies. I predict that these laws and executive orders will cross the threshold of Bills of Attainder. Without actually naming particular companies, these trade laws will be be so precisely worded that they will in effect signal the health or death of individual mining, manufacturing, import/export, and retail companies. And I wouldn’t be surprised to see Tesla Motors (TSLA) be granted some trade pact or regulatory miracle that saves them from the brink of extinction. They know just how the game is played, in the 21st Century global economy.
A Weaker Dollar
Ironically, Dollar weakness will not come as a wish granted to Trump, but rather from a cold, hard realization by our trading partners that America’s ever-expanding debt (now roughly 31% of global debt) is not sustainable. With the U.S. National Debt now accumulating at just over $1 trillion USD per year, this game cannot go on much longer. Servicing this debt is presently just barely manageable. Just paying the interest on the debt is close to the cost of National Defense. But what will happen when interest rates restore to their historic norm? I see absolute doom ahead, for the U.S. Dollar Perhaps it won’t come in 2019, but it is almost bound to happen sometime in the decade of the 2020s. This will give new meaning to the phrase 20/20 hindsight.”
Real Estate, Stocks, and Auto Makers
With a recession now looming and interest rates climbing, I expect the real estate market to drop at least 15% in most markets. The steepest house price declines will be in resort areas, where folks will be dumping their vacation homes. In Idaho, for instance, the overall market may drop 10%, but Sun Valley, Sandpoint, McCall, and Ketchum may see a 20% or more decline.
I expect the recent decline in the stock market to continue. Be forewarned that this may not be an “orderly decline”. Very few companies will prove themselves to be recession-proof. In the short term, expect to see some quiet Plunge Protection stock buys from the banksters and some much-heralded corporate stock buy-backs. If there are stock market rallies, they will most likely be Suckers’ Rallies. The smart money quietly exited months ago.
Meanwhile, stairstepping interest rates will really hurt sales of new cars. By the time the Fed reverses course and lowers rates, it will probably be too late for Detroit auto makers to pull out of their dive. This may be the last nail in the coffin of Tesla Motors (TSLA). However, given their amazing political connections, don’t be surprised in they end up with more U.S. taxpayer Dollars, this time in the form of a bailout.
Recession of course means corporate belt-tightening. Look for layoffs to begin early in 2019, staring with investment banks, mortgage lenders, and car manufacturers. By the way: The risk of a layoff is just one more reason to have a at least one year of storage food for your family! Nobody wants to have to choose between heating and eating.
Forex and Cryptocurrencies
I won’t venture many guesses on the Forex market. In a genuine global crisis, the U.S. Dollar may gain, but more out of familiarity than cold, hard mathematics. The sad truth is that more than 33% of global debt is held by the United States (public and private), and it is nigh-on mathematically impossible for that to be re-paid without a hefty cut in the value of the Dollar.
I expect the private crypto market to continue to be very volatile, and generally trend down The Bear Path in 2019–although punctuated by some dramatic rallies. The world’s governments and bankers hate private cryptos. In fact they hate all opaque markets that they cannot effectively tax. They will only be happy when they create their own “approved” transparent cryptos that they can track 100 percent and tax what ever percent they think that they can get way with.
Stronger Precious Metals
Precious metals have long been considered a safe haven. But a run-up in metals prices will have to wait for a genuine crisis. Just consider the current low prices of silver, gold, and platinum good buying opportunities. When the U.S. Dollar’s ongoing winning streak on the Forex ends, watch for silver and gold to jump in price. Silver, in particular has the best prospect of gaining versus the Dollar. Remember: You aren’t buying precious metals as an investment. Rather, you are buying them as insurance. They are fire insurance on the U.S. Dollar.
I will close my economic predictions for 2019 with this suggestion: If you haven’t already hedged your investment portfolio into tangibles, then you will probably get steamrollered, in the next few years. You need to limit your exposure to all Dollar-denominated investments. When a currency unit itself is at risk, then all investments denominated in that currency is at risk.
It will be things like silver, productive farm land, guns, and full capacity magazines that will shelter your nestegg, in the next decade. As always: buy low, and sell high. Today is the low, folks. But beware of what currency you accept, when you do eventually cash out. Perhaps it is best if you only take other tangibles in trade.
Mark my words: The day may soon come when trading a $1,000 face value bag of pre-1965 quarters and a couple of AR-15s will buy you a very nice suburban home or a rural farm.
I’m praying that you will all be safe, prosperous, and well in 2019. May God bless you! – JWR