Lynette Zang: What else will the Fed Admit to When they have No Choice?


Streamed live on Nov 30, 2021


You know, I don’t often like to say I told you so, but sometimes you just got to do it. I’ve been talking about the reset since 2009, and now everybody’s talking about the reset. I warned you guys. When he said he was going to go to an average inflation rate when he couldn’t even hit the 2%, central bankers, couldn’t even hit that 2% elusive target. And what I say, I said, you watch, we’re going to get some big inflation. And now Jay Powell, admits that Lynette Zang was right and inflation. Well, we better not talk about it as being transitory anymore. All that and ever so much more coming up.

I’m Lynette Zang, Chief Market Analyst here at ITM Trading, a full service physival gold and silver dealer specializing in custom strategies. And if you don’t have one, you need one and you need it now. Miracle of miracles, Jay Powell admits that. They’re just going to take that word transitory right off the table. But you know, we’ve been talking for a long time. Those of you that have been with me, and there have been a lot of things that we’ve talked about. Are they ever going to admit when they’re wrong until they have no choice? It’s kind of like in your face. And they’re saying, according to there was a meeting this morning with Yellen and Powell and front of the Senate banking committee this morning. And it was really, really interesting, but Jay Powell had to admit, yeah, maybe this inflation just isn’t transitory, he’ll need to come up with a different definition, but the markets have seen that. Right? And, and look, markets, go up markets, go down. That is not the point of why I’m showing you bears rural emerging markets as central banks battle new variant. That’s not what I’m talking about. It’s this piece. And we’ve been talking about it for a while now. And the indication is pretty interesting, which I’ll just get to.

Emergency market currency gauge erases this year’s gains despite rate hikes, right? So the biggest tool in the central bank arsenal are interest rates. And in theory, if they want to heat inflation up, they drop interest rates down. So there’s more borrowing and spending. And so if there’s a lot more borrowing and spending and inflation is running faster than central banks wanted to, they raise interest rates up. And then that means that demand slows down. But we’ve been anchored at zero since 2008, 2009. And frankly, now the experiment, every experiment since then has been a big fat fail. We’re going to talk more about that in a second. But the most current experiment in the face of this global inflation are emerging markets, raising interest rates to try and battle it, but it’s not as much a demand problem as it is a supply problem. And so this theory is not working policy tightening from South Korea to Russia and Brazil do little to stem the currency losses, the currency losses. Now they’re just really referring to one currency against the other, but the reality is, is all currencies are losing purchasing power. As central banks just continue to print money like crazy. Let’s play central bank.

See everybody will be forced to stop at some point. It doesn’t always work and it’s not working this time. It just stimulates the inflation. The biggest losers this month are Mexico’s peso, South Africa’s rand, and Hungary’s forint, all currencies from countries that have lifted interest rates in November. So oh, if their theory of rising interest rates to slow that currency destruction doesn’t work, then they truly are out of tools just as I’ve been talking about for quite some time.

And this is what that looks like in the emerging markets. So here you can see currency gauges wipe out, despite the rate hikes, here you go. It’s wiped it all out. Yep, indeed. Now here’s the question really? If it isn’t working over in those other countries, when we make that attempt, do you think that it’s going to be credible and work here? I personally don’t think so. So that means that it’s about to be revealed that central bankers have no clothes and they don’t. They have no tools, an increasing number of emerging markets, central banks start to realize that the question of whether inflation is transitory is or not, is not really relevant at this stage. No kidding. Inflation is high and sticky. Sticky means it’s here to stay. Even if caused mainly by supplies, supplies, side shocks, and can de-anchor inflation expectations. It is not the inflation that they’re so worried about. It is the expectation by the public of higher inflation because that’s when they lose control. That’s when this con game ends. That’s when we enter the hyperinflation in earnest and that’s exactly what’s happening. This con game is falling apart.

Now this is from a recent speech by Richard Clarida who is a vice chair at the fed. And he says new money creation continues at, or at a rate of at least 70 billion per month and have agency mortgage backed securities of at least 35 billion per month. So remember they lowered that, and this is what the taper is. It’s just buying a little bit less. But if you’re looking at the markets on Friday, if you’re looking at the markets today, especially after fed chairs and Yellen, both spoke, then the market’s reacting to them taking away the money Punchbowl. So on the one hand, everybody, well, wall street is saying, take it away, take it away. But on the other hand, they’re not going to let them take it away. This is really fascinating to watch, and we’re going to be watching it all. Further, the federal reserves, ongoing purchases and holdings of securities will continue to foster. Yeah, this is what they use for everything, but it’s never really true, smooth market functioning. In other words, the markets going up and accommodated financial conditions, meaning debt can keep going up, but nothing goes straight up forever. And that’s what we all have to understand. Even the Fed’s balance sheet cannot go straight up forever. And we’ve talked about this in the past, right? This is 2008 and the first quantitative easing, and as they were trying to taper well, that didn’t work very well. The markets had a taper tantrum. And so they tried it again, right? Gave you another round of QE, etcetera. This 2016 is when they attempted to raise rates and then run off the balance sheet. So they’re talking about or fed chair Powell indicated that they may be speeding up the taper to get into a better position to raise rates. Okay, I’m going to put my neck on the line. I’m either going to make an attempt because they have to, for credibility, they have to, but could this new variant potentially give them the cover to not really do anything at all? We’re going to see and even if they do, will it get the results that they’re looking for? They couldn’t stop it before. I mean, think about it. They couldn’t do it before. Insanity is doing the same thing and expecting different results. Do you really think they’re going to be able to do it again? And can they really raise rates into this massive tsunami of debt that has really been piled on since 2008, because that’s when the system died, that’s when it died and then they put it on money, printing, life support, and the patient, the markets have become completely addicted to it. Can they stop? I really don’t think so, but we’re going to see if I’m going to be right again. We’re going to see if they’re ever gonna admit that it’s all their money printing and their loose money policies that have created the problems that we’re in today. And that divide between wealth inequality. Because now the test has begun of their credibility and public confidence.

Let’s see what happens because all of this money printing has led to this global inflation. So here in Germany, wow. Inflation surges above what was expected. 5.5. That’s not even relevant, but look at the massive shift in a very short period of time. Now officially hyperinflation is 50% a month. You know, we’re not a 50% yet, but we’re getting there. And if central bank credibility of public confidence is lost. We’ll get there very, very, very quickly. But Jay Powell is admitting, yeah, inflation is here. It’s longer and stronger than they had anticipated. It’s sticky, but don’t worry because somehow magically sometime in 2022, the rate and speed of the inflation will slow down, but will they be able to claw back the inflation that’s already in the system? Some of it sure. You know, we’ve seen that with lumber. We’ve even seen it at least temporarily with oil, but are they going to claw back wages, the increase in wages that is much, much, much more sticky. So, and other things, you know, I mean, what happens if real estate deflates, right? Cause the opposite, you know, here’s a coin. This side is inflation. That side is deflation. It’s still the same coin. And there’s only one way to fight deflation and that’s with inflation. So market going down is deflationary or real estate going down is deflationary.

And I hope you guys are following Wolf Richter because the man is just a genius. And you guys know I have so much admiration for his work. So the links are below. You can go there and read it. But we got to talk about margin debt. We’ve talked about many other kinds of debt, but margin debt spiked 42% year over year. And according to the recent fed stability report, they’re looking at the new investors. And you remember, I have told you this, well not only have I told you, but history has proven time and time and time again, before the crash, you have the naive public that jumps in and they’re given lots and lots of credit so that they can make very, very, very stupid choices until that’s taken away. And this is just one part of the leverage in the system. I’m going to read this only part of the leverage in the stock market is tracked and disclosed on a monthly basis. Much of the leverage happens in the shadows, including securities based lending. So that is anything that you hold in a margin brokerage account that the brokerage or the banks can now take that and lend out your securities and make money from it. So that is securities based lending that banks may or may not disclose on a quarterly or annual basis leverage at the institutional level, such as hedge funds and 8.5 trillion industry and leverage associated with options and other equity-based derivatives. And you know, a lot of those delivery derivatives are leveraged by design a thousand to one. And the reality is no one really knows the true value that is at risk and they all admit it. The Bank for International Settlements, the International Monetary Fund, the FDIC, everybody, the Bank of England. Everybody admits that nobody really knows cause these are just notional values or the amount of agreed upon contracts. Guess what? I think we’re about to find out the wealth that’s at risk. And I think it’s everything except for that, that held in physical gold and silver, no counterparty risk, none, everything else, complete counter party risk. And frankly you are not getting paid for the risk that you are taking if you are in these markets.

Okay. So let’s take a look out. What that change in margin debt from a year ago actually looks like there you go here. It was from 2008. Can you see how high that margin debt was in 2008 to March of 2009, pretty darn steep decline. This is where we are today since March of 2020, when, as we’ve seen the federal reserve, just injective, I mean trillions and trillions. And so did all the other global central banks. So what goes up must come down margin debt in two years of 66%, this is debt, this is debt. And what happens is on the way up. Yeah. Pushes stocks a lot higher on the way down. It works in reverse and that leverage unwinds. But the reality is, is I think I got a little, oh yeah, there it goes. This is what has really caused all of the markets and the real estate and everything to go up the Fed’s, easy money policy, lots of new money for free. But remember, every time they do that, it devalues the money that’s already out there. And what are they going to do now to keep the market’s inflated? Well, this is, Which, you know, I use this stuff all the time. I don’t know, often agree with him when I hear him talk, but I love his graphs and his charts. And this one I absolutely love. And I’ve shown you this before. This is margin debt versus the Wilshire 5,000. That’s an index of 5,000 stocks. So it’s the broadest base. And there are so many interesting things to look at in this graph. Like this was black Monday, what happened to margin debt and the stock market on black Monday, which looks like nothing. But I was there and I can tell you, it was a darn big deal with the stock brokers, literally under their desks. And what did they do? They created the plunge protection team after that to protect from it. Now, the other point that I want you to see is that the blue line are the stocks and the red line is the margin. And so the margin of to buy stocks was below that until we hit the first derivative implosion long-term management. That’s also when the NASDAQ imploded as well. So there’s all that timing. And you can see as the margin debt dropped. So did the stock markets, and this is the Wilshire 5,000. They’d all look pretty much the same as that, but there’s still a difference between the two until you go to the lead up, because then of course, how do you, how do you take care of one bubble that just popped you created a new one and hence we’ve got the real estate bubble, but you can see how more correlated ever since not 2000 that the margin debt and the stock market were in line. And in this period of time, they were really, really correlated highly with very little room in between. And yet still stocks were kind of above the margin until you get to 2008, 2007. Okay. And since the system died, that’s why putting current, because this ain’t over yet. The great financial crisis is not over. I’ve said it since then. I’ll say it until I think it is over, but that won’t be until we reset into a new system and a new currency. And you can see how margin debt spiked above the stock market, which is where it has held until the most current event. So this was derivative crash number one, this is derivative crash number two, we’ve got derivative crash coming up ahead of us. And this one will be the mother of all crashes. This one. Well, there isn’t really one doubt in my mind, take out the entire system and justify the transition. Now look, it’s inevitable. There’s so much garbage in the system. It has to be burned off. It has to be. The question is what we end up with on the other side of this. And this is where choice still remains. And this is why having wealth outside of the system is so critically important. There is really look at the correlation between margin debt and the Wilshere 5,000 stock index is spot flipping on closer than at any other time in the past. And that my friends is what all this money printing does. That’s what it does. It’s easy money for free. Well, guess what? When something’s easy to get your hands on and it’s abundant, there’s an unlimited amount of it. What’s its value. When you really have to work for it, dig it out of the ground, refine it, mint it. And it’s used across the entire spectrum of the global economy. What’s that worth. Do you think that they want you to know heck no. A rising gold price is an indication of a failing currency. And if you take your money out of these markets, they can’t easily access it. Can they? Because the reality is what goes up, must come down and so welcome to, to melt up. And it’ll be so interesting to see if they, if the federal reserve can actually unwind its balance sheet, forget unwinding it. If they can really stop buying mortgage backed securities treasuries, raise interest rates, this is what they’re talking about doing. Can they do it? Maybe I’m going to be wrong. Maybe Jay Powell might be right this time, but I don’t think so.

So this is, this is still from Wolf Richter’s work when this market, but I thought he just explained it so well, when this market is going down hard enough, it will trigger massive bouts of forced selling as margin calls are going out and leveraged investors have to sell stocks to pay down their margin debt, which then pushes down prices further, which then triggers more for selling. And more fears of for selling as portfolios are being liquidated, thereby accelerating the spoon. But here’s also the reality of it. When you get a margin call. In other words, you got to pay some of that debt or they’re going to sell out your position. You’ve got to come up with money. And maybe what you have to sell is not particularly liquid. I’m going to be showing you that in just a minute. So that means that you sell whatever is liquid. And this is why when there is a major market spoon, you will see spot gold. Those gold contracts go down along with the market because people will have to sell whatever the market will actually buy in order to meet those margin calls. If they don’t meet the margin calls, then the brokerage house will automatically sell the stocks that they’re holding. And they’re not really going to care really what they are, but they are a lot less liquid. And again, we’ll talk about this, but this is why leverage is a risk to financial stability and why the fed keeps talking about leverage and its financial stability reports. So we talked about that last week or two weeks ago, I’m just going to remind you a little bit from their financial stability report. Okay. And in this particular case, because we’ve talked about a lot of other things, then we’re just about the naive public just before the crash. First, younger stock investors tend to have more leveraged household balance sheets. The median leverage ratios of younger retail investors. Let me say, and also less experienced, are more than double those of all investors leaving these investors potentially more vulnerable to large swings in stock prices. As they have a larger debt service burden. Moreover, this vulnerability is amplified as investors are now increasingly using options, which is a derivative which can often boost, leverage and amplify losses. They do. It’s not often they do that’s leverage, right? It is so much cheaper to buy the option than it is actually to buy the stock. And you get more from that leverage in the price move. So you have Robinhood and a lot of other firms now that have jumped on that bandwagon. And they’ve really made stock picking and purchasing and buying and selling a game. But these younger investors really, they haven’t, they didn’t live through 1987. I’m really fortunate that I was there in that moment in time and had that experience. But frankly, since 2008, the markets have just gone up, right? They haven’t really seen a big correction. They don’t know what that looks like. And so they’re making choices because they can because they have these new tools, but they really don’t know what they’re doing. Second, episodes of high heightened risk appetite may continue to evolve with the interaction between social media and retail investors. It may be difficult to predict you think? So now we have this new tool that we didn’t have before, where everybody can talk to each other and get everybody worked up and piling in and also piling out. And that has not been tested. There are so many tests that are going on right now. It’s scary really? But if you don’t know what’s going on, guess what? Ignorance does not make you immune. It just leaves you vulnerable. At least if you’re out of the markets and you’re sitting in physical, silver and gold, you’re not going to be vulnerable to all of this counterparty risk that we’re talking about. Third, the risk management systems of the relevant financial institutions. Let’s say Robinhood may not be calibrated for the increased volatility or financial losses that could result. And what does that mean? Contagion? That’s what that means. That means that a crisis that starts here could easily and most likely will spread through the whole system. And it’s all because of this leverage. So you’ve got to ask yourself what carries no counterparty risk, according to the Bank for International Settlements, this doesn’t carry any counterparty risk either because it’s physical. So it’s physical in your possession. You hold it, you own it. It is not, nobody has a claim on this. And for all intents and purposes, it’s invisible to the system. It’s the only financial asset that can say it, the only one. And by the way, you should know that traders who are really the ones that are controlling this market. And they are really kind of pushing their boundaries to see how far they can go with the fed and the other central banks. But they’re now betting on official negative rates again. Well, yeah, they can’t raise rates. So typically in a crisis on average, they drop a one, five and a half, five and three quarters percent. And we are already anchored at zero that’s negative rates. And that’s what CBDC’s are all about. All about central bank, digital currencies. That is a way for them to break below zero and start to erode your principle or force their policy on you. Because if you don’t go out and spend that money and you just watch it evaporate, you are more likely to take it out and spend it to stimulate the economy. But how about making the owners of all those corporations and assets a whole lot wealthier by transferring your wealth their way you better not say you better not have anything. So what we’re looking at is gold stores value when real yields are low gold stores value period, because it holds your purchasing power intact, but okay, so this is spot gold and there’s the cup. And you can see we’ve broken out of that formation, even though we’ve got this going on because of rising gold price in indication of a falling currency and God forbid, they want you to protect yourself. And then these are where real yields are, which are after you take into account inflation, they’re already negative, but officially they’re not negative yet. So nominally, they aren’t, but traders are betting that that’s where we’re going. And what all of this telling you, and especially with the yield curve super flat right now, it has not inverted, but you might recall that the last time when it did, actually, there was a big inversion. It was spot on right about 18 months when we had that next recession that we went into. So, I mean, we’ll see it’s flattening significantly, which means that if interest rates are coming down and Powell is saying that he’s going to raise them, what does that tell you? Tells you the markets don’t trust them. Doesn’t believe that Powell’s going to have the ability to raise rates. And frankly, I don’t think he has the ability either. So this would be one time when I agree with the traders.

But here in lies the rub and the big key, because gold is even not in a crisis circumstance, more liquid than all of these other flight to safe Haven. So T-bills, Euro/Sterling. So that’s currencies the 1-3 year treasuries, the Euro/yen, which is a carry trade, the Dow Jones. So the only market that is currently more liquid is the S&P 500. And guess what happens when there’s a stock market route? It’s not so liquid, but gold, gold will still be liquid. Why? Because it has the broadest base of buyer. So sometimes it could go, I mean, in real life, in physical life, sometimes it can go up. Sometimes it can go down as demand, real demand, rises or falls, but we’re coming to a place where all of these financial innovations and new mechanisms and new tools and new products and new all of this. Well just before the crash, that is when the general public starts to participate. Now we’re seeing major insiders at Microsoft at, I mean, a lot of the other large corporations that are selling massive holdings, insiders are getting out institutions aren’t rushing in, but the public is, but I hope it’s not any of the public that’s watching. And if you know, somebody in the public that is watching, you might want to share this with them because unfortunately we are at the end, we are at the end of this game. And for those that are sitting in fiat products, the end will not look pretty.

So at the minimum, diversify your portfolio and you need more than g silver for what we’re headed into a hyper inflationary depression we’re seeing globally. And you’re probably seeing it. Now, when you go to the grocery store, food prices are escalating and inflating really rapidly. It’s not transitory. And food is the single biggest issue for people. Now, when we go through these now, Silver’s going to help you continue to buy the food, but really you want the whole mantra, food, water, energy, security, barterability, wealth, preservation, community, and shelter. If you lived in Texas last year, last winter, and you’re in Southern California over the holidays, then you know what it is to lose your electric. What are you going to do to make sure that when that happens, when there are blackouts, when there are brown outs that you are personally not impacted by that there are lots of things that you can do. What are you going to do about the food? I mean, there are many, many things that you can do, but you don’t have much time left.

I’m putting my neck on the line and I’m either going to be right, or I’m going to be wrong. I mean, you know, I have access to the same information that you have access to. I’ve just been doing it for a whole lot longer. And the reality is we are at the end and I do believe, and I hate saying this, but I do believe that we are at the very start of the hyperinflation. And when he said that they were going to average that, well, he also said that basically to raise rates, all the requirements have been met. Can he do it? Can he taper by a little bit less bonds? He should be able to buy a little bit less, but markets are alike in it today. Anyway, we’ll see.

So if you like this, please give us a thumbs up and make sure that you share, share, share, leave us a comment. And if you want to see the behind the scenes from my urban farm, just follow me on Instagram @lynettezang or for other updates and some of the articles that I don’t get a chance to talk about, but I want you to be aware of check out my Twitter @ITMtrading_Zang. And lastly, if you have not started your gold and silver strategy yet, then you need to just click that Calendly link below and set up a time. You got to have a plan because if you don’t have a plan, you are planning to fail. They have a plan and they have very deep pockets and they have a lot more control. What do you have control over? What you do? You know, I say there’s only one promise I can give you. And that is that I will show up and I will do the work. Well, that’s a promise that you need to make for yourself too, because if not me who, and if not now, when? I am so grateful that I’ve been working on this for as long as I have, but I want you guys to work on it too.

So on Thursday, barring unforeseen circumstances, I’m planning on doing part two of the 25 ounces of gold in the city block. And I’m going to be working with three other countries. I’m almost done with it, but we’ll see, we’ll see, I got a shot. We got a shot. I was a little busy last week. And until next time though, you know, it is a hundred percent time, a gazillion percent time to cover your assets. And here at ITM, we do it with the wealth shield and the foundation is in good money in your possession, no counter party risk. And according to the bank for international settlements held at home. Gold does not run any political risks. Get yourself out of risk, get into physical gold and silver. And until next time, please be safe out there. Bye bye.


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