The Financial System is Broken! Here’s Proof…

In 2006, Mike Larson and I repeatedly warned that the U.S. housing market was going to collapse; and one year later, it did.

In late November, 2007, we warned that Bear Stearns was going to fail; and 101 days later it did.

Then on March 17, 2008, we wrote that Lehman Brothers would be the next to bite the dust; and 182 days later, that’s exactly what it did.

Days later, we wrote that the Lehman failure would be the Big Bang of the financial crisis, setting off a chain reaction of uncontrollable events; and it was.

Indeed, it was on that fateful day, Sept. 15, 2008, that the financial system broke.

What we did not predict is what happened next: The U.S. Federal Reserve and every major central bank on the planet embarked on the biggest, longest, wildest money-printing binge in the history of mankind.

No matter how many times we say it and no matter what words we use, it’s still hard to believe, isn’t it?

But it’s true. It’s thoroughly documented, obvious to everyone, with the proof at your fingertips.

Consider this chart, for example. You can pull it right off of any Bloomberg terminal. Anytime from anywhere.

It shows the U.S. monetary base, the widely accepted measure of Fed money-printing.

It shows exactly when the Fed began the madness — on Sept. 15, 2008, the day Lehman died.

It continued year after year.

There has been zero progress so far in reversing it.

And it’s exhibit No. 1 of a broken financial system.

In all of history, the Fed never even came close to printing this much money

The second chart (below) shows the logical consequence of the Fed’s unprecedented behavior, the natural corollary to the prior chart:

Never before in all history did the Fed keep interest rates this low for this long!

This broken system is obviously unsustainable, and yet the authorities have perpetuated it for over nine years.

It’s Just a Matter of Time

This broken system could crack at almost any time. And yet, so far, it has not.

What will shatter the magic spell? When will the primary stakeholders — owners of U.S. Treasuries, U.S. dollars and trillions in other assets — rebel?

The quick answer could be: As soon as today, when they see what the new Fed chairman has done with interest rates and hear what he says about his next steps still to come.

The more thoughtful answer, however, is to recognize it’s just a matter of time.

It takes time for mega-trends of this great magnitude to lose momentum ... come to a complete stop ... shift gears ... turn around ... and then take off in an entirely different direction.

But it will happen. That’s just the nature of the beast, the pattern of the cycle. It will happen.

As we get closer to that fateful turning point, we’ll tell you more about what to expect, how to respond and even how to use the change as a major wealth-building opportunity.

For now, just be sure to play it safer. Avoid overinvesting in high-risk investments. Continue to build cash reserves. Then wait for our next update.

Best wishes,

Martin and Mike