This Man Predicted EVERYTHING!! What Comes NEXT!?

What's happened to the markets over the Past year has been nothing short of Unprecedented Raising interest rates is supposed to Crash the stock market an inverted yield Curve is supposed to Signal a recession And the amount of liquidity is supposed To affect risk assets well rates are at Multi-decade Highs but the markets keep Rallying the yield curve is seeing a Record inversion but there's no Recession liquidity has declined but Risk assets have been unaffected Everyone has gotten it wrong except for One person a macro strategist who Predicted all this years ago today we're Going to tell you how he predicted Everything and what he says is coming Next The man we'll be talking about today is Russell Napier a financial historian Author academic and macro analyst who Became famous for predicting the Asian Financial crisis in the 1990s Russell has made many predictions since Then and a surprising number of them Have come true here are a few highlights When inflation started rising in 2021 Russell predicted that it would not be Transitory he predicted that inflation Would continue to rise specifically Because of services which had been Artificially suppressed during the Pandemic lockdowns in the summer of 2022

U.S inflation almost hit 10 due to the Increasing prices of services Like almost everyone else Russell Predicted that the FED would raise Interest rates in response to this Inflation In contrast to almost everyone else he Predicted that the stock market would Continue to rally and the economy would Continue to expand despite these rate Hikes this is exactly what happened Not only that but Russell even predicted That the FED would raise interest rates Above five percent and that this Wouldn't affect the stock market or the Economy Now if you watched our recent summary of The fed's press conference you'll know Rates are above 5 and the FED staff are No longer forecasting a recession This is due to another prediction that Russell made and that's that governments Would introduce measures that they claim Will fight inflation but will actually Make it worse The elephant in the room here is the Inflation reduction act in the U.S which Was passed last summer it has been a Form of subtle stimulus Naturally when Russell told people this They asked him where they should invest Russell told them that some foreign Markets were looking attractive namely Japan

Lo and behold the Nikkei index hit its Highest price in decades earlier this Year mostly from foreign inflows Inspired by Warren Buffett When people asked Russell about Chinese Stocks he said that they were looking Unattractive despite being cheap Russell Explained that geopolitical tensions Between China and the US would keep Chinese stocks unattractive we've seen No shortage of investment and trade Restrictions in recent months from our Perspective though Russell's most Impressive prediction was that Financial Liquidity that is money in the markets Would have next to no effect on asset Prices For context liquidity has historically Had a very strong correlation to risk Assets including tech stocks and crypto They rise and fall together It's believed that increased liquidity Is why the markets rallied earlier this Year the thing is that Global liquidity Has been on the decline over the last Couple of months yet tech stocks and Crypto have continued to rally for the Most part I'll remind you that Russell made all These predictions years ago so this begs The question of how Russell managed to Get it right when almost everyone else Got it wrong well the answer is twofold First Russell is an expert in financial

History he's already established three Libraries dedicated to financial history In Scotland India and Switzerland called The library of mistakes The second answer is Russell's macro Framework which he detailed in his book Titled quote the Asian financial crisis Birth of the age of debt Russell has also explained his macro Framework in multiple interviews which Can be found here on YouTube we'll leave A link to a few in the description Now as you might have guessed Russell's Macro framework revolves around the Asian financial crisis of 1997. now the Asian financial crisis is outside the Scope of this video but the tldr is that Asian assets experienced a massive Bubble which popped the result was that Asian assets and currencies completely Collapsed in response the international Monetary fund or IMF swooped in to offer US dollar loans to Asian countries now If you've watched any of our videos About the IMF you'll note that these Loans come with lots of conditions Attached for example more recently in Argentina one of the conditions was Discouraging the use of crypto obviously These Asian countries didn't like these Conditions they realized the only way They could protect themselves from Becoming slaves of the IMF in the future Was to create what Russell calls a moat

For reference a moat is a business term That means protecting yourself from Competition In the case of these Asian countries the Modes they created was a large amount of Foreign currency reserves put simply They started accumulating large amounts Of foreign currencies so that they could Protect their own currencies in the Future and wouldn't have to rely on the Imf's Dirty Dollar loans now to clarify Protecting their currencies means Preventing them from collapsing in value Countries can do this by buying their National currencies with foreign Currencies In the Years following the crisis Asian Countries accumulated trillions of Dollars of foreign currency reserves Mostly US dollars And if you're wondering where all this Money came from the answer is exports When China for instance sells something To the United States it gets US dollars In return even back then Asia was a huge Exporter In other words Asian countries started Saving the foreign currencies they Received from their exports they then Invested these foreign currencies in Cash-like equivalents which is code for Government debt they bought foreign Government debt because they earned a Yield on this debt like a savings

Account Here's where things get complicated so Pay attention When you buy large amounts of government Debt it causes the interest rate on that Duration of debt to go down this causes The interest rate on other debts with Similar durations to go down because Government debt is the reference rate For instance if the interest rate on Long-term government debt is say three Percent then the interest rates for Other longer term debts in the economy Such as mortgages will be slightly above That level that's because other forms of Debt are riskier so lenders require a Slightly higher interest rate to Compensate a credit risk premium Logically then Asian countries Accumulating trillions of dollars of Mostly Western Government debt caused The interest rates of Western Government Debt and other kinds of debt in those Economies to go down and stay down The effect was Amplified in 2001 when China joined the World Trade Organization the Practical effect of This was artificially low interest rates In Western countries which allowed Individuals and institutions to borrow Massive amounts of money at an Abnormally low interest rate This is what Russell refers to as the Age of debt and he believes that it

Ended around 2012. that's because 2012 Is when geopolitical tensions between The U.S and China started to increase The consequence of this is that China Essentially stopped buying U.S Government debt with all the dollars it Was receiving for its exports instead it Started investing these US Dollars Elsewhere It appears that most of China's extra US Dollars started being poured into the Country's belt and Road initiative which Began in 2013. for those unfamiliar the Belton Road initiative aims to build Infrastructure across much of Asia and The Middle East China also started giving out U.S dollar Loans now if you watched our video about How China is taking over Africa you'll Note that it's effectively been a Competitor to the IMF issuing U.S dollar Loans with their own problematic Conditions this lending activity and China's infrastructure projects have Only increased geopolitical tensions With the US in any case the consequence Of China's decision to reduce its Acquisition of U.S government debt means That the U.S has had to try and find Other buyers to fill the void but the Line is getting shorter logically then This means that interest rates in the U.S and other Western countries will Eventually start to rise in case you

Haven't noticed debt levels in many Western countries are at record highs Both in the public and private sectors If interest rates in these countries Start to rise they could default on Their debts Russell thinks there's only One political solution to this problem Devalue the debt with inflation But guy I hear you say isn't it really The central banks that have been keeping Interest rates low all this time well Yes but only short-term interest rates The interest rate changes that central Banks make only apply to overnight Interest rates these have a knock-on Effect on other short-term interest Rates however longer term interest rates Are mostly determined by the market by The buying and selling of longer-term Government debt the amount of buying and Selling depends on the combination of Factors but primarily expectations about Future inflation levels and Central Bank Interest rates in each country so let's Use the us as an example as you can see Shorter term interest rates are higher Than longer-term interest rates now this Isn't normal but let's set that aside For now This tells us that investors believe That Central Bank interest rates and or Inflation will be high in the short term And lower in the long term But what if these expectations are

Completely incorrect Here's where things get interesting so Continue paying attention if investors Were to suddenly expect that inflation Will stay higher for longer then it Would cause longer-term interest rates To rise That's because interest rates need to be Higher than expected inflation for it to Be worth buying long-term government Debt according to Russell's calculations Over-indebted governments and Corporations need inflation to average Between four and six percent for years Or even decades if they want to devalue Their debts this would translate to Longer-term interest rates of between Say five and seven percent which you'll Recall they cannot afford of course this Assumes that an inflation rate of four To six percent will materialize Russell Happens to believe that over indebted Governments and corporations will do Everything they can to purposely create This inflation because they cannot allow The biggest bubbles of all to pop those Of government and corporate debt now Even if Russell is entirely incorrect There is a very long list of other Reasons why inflation is likely to be Higher than investors currently expect For starters there has been chronic Under investment in energy over the last Few years in large part due to the ESG

Ideology more about that in the Description Geopolitical tensions between the west And the East are also resulting in De-globalization and the onshoring of Supply chains that is domestic Manufacturing Being unable to leverage cheap Commodities and labor in places like Russia means there's a high likelihood Of higher inflation in the west going Forward now this is more significant Than people think because it means that All the US dollars that were being sent Overseas to exporting countries will Remain in-house so to speak more US Dollars in the U.S economy will Inevitably lead to more inflation the More of something there is the less Valuable it becomes Regardless let's assume for the sake of Argument that inflation will in fact be Higher than investors currently expect Again this will result in longer term Interest rates going higher which Over-indetted entities cannot afford Russell thinks there is only one Solution to this problem Financial Repression now Russell defines Financial Repression as quote stealing money from Old people slowly this involves forcing Financial institutions such as Banks and Pension funds to purchase longer-term Government debt so that longer-term

Interest rates continue to remain Artificially low in the face of high Inflation if this sounds familiar that's Because some countries mainly Japan are Already engaging in financial repression If you watched our video about what the Central banks are planning you'll know That the bank of Japan has been buying Government debt to keep interest rates Artificially low that's because Japan Has the highest debt to GDP ratio of any Country allowing interest rates to rise Would mean immediate bankruptcy to put Things into perspective the bank of Japan has been engaged in this so-called Yield curve control since 2016 but Russell believes the real Financial Repression is still coming This ties into the most important part Of Russell's macro framework and that's That central banks basically won't Matter anymore that's because Governments will start to control Monetary policy directly and indirectly The tools they use to do this will be Various forms of financial repression Funnily enough this is yet another Prediction that's slowly coming true Consider that the US government is Currently in the process of refilling Its bank account at the Federal Reserve It's purposely doing so by selling Short-term debt because it knows that Selling long-term debt will cause

Long-term rates to rise to many macro Analysts this amounts to the US Government influencing interest rates Without the Fed Another example they've pointed out is The US government's plans to buy certain Types of longer term debt sometime next Year as we've learned this will cause Longer term interest rates to full now That said Russell doesn't think that Full-scale Financial repression will Begin in the U.S nor does he think that It will necessarily happen everywhere at Once as was the case during the second World War Rather it'll happen one country at a Time starting with the most indebted Ones Japan the EU and the UK Russell Believes that full-scale Financial Repression in Japan will begin later This year or next year unlike the Financial repression Japan has seen so Far this financial repression will come From the government and it will likely Be a law requiring Banks and Pension Funds to buy large amounts of government Debt this will force Japanese Banks and Pension funds to sell other assets in Order to purchase this debt this relates To Russell's predictions of what will Happen when full-scale Financial Repression begins First he believes that the markets will Continue to Rally until they start to be

Affected by the forced selling Associated with financial repression if Japan is in fact the first in line then It will create a lot of volatility FYI Japanese institutions hold trillions of Dollars of foreign stocks and foreign Government debt Selling the former will lead to a crash In foreign stock markets and selling the Latter will cause interest rates in Foreign countries to rise This could force other countries to Follow Japan's lead in financial Repression even if it doesn't Russell Believes that Japan's Financial Repression will send shock waves through Western markets that's because investors Will realize that governments and Central banks have another way of Keeping interest rates artificially low A way that involves taking money from These investors in Russell's words every Investor in the west will realize quote Oh my God it's coming here This will likely result in some degree Of capital flight money moving from the Country's perceived to be most at risk Of financial repression to those that Are at the least risk of financial Repression These are countries with the lowest Combined public and private debt to GDP You'll have to dyor on that one Now Russell believes that governments

Will try and stop this Capital flight That's why he's bearish on bitcoin and Any other decentralized cryptos that Could facilitate said Capital flight It's also why he's bullish on stable Coins they are centrally controlled and Backed by government debt perfect for Financial repression note that we Believe these crypto predictions could Prove to be incorrect or rather the Inverse governments don't see Decentralized cryptos like Bitcoin as a Store of value or a form of money Conversely governments do see stable Coins as a form of money and a threat to Their National currencies never mind the Fact that Japan is reportedly embracing Crypto this wouldn't be happening if it Was seen as a tool for Capital flight in A country that supposedly first in line For financial repression on that note Russell believes that the Euro will Collapse because of the eu's financial Repression The euro is already considered to be Unstable because the European Central Bank sets the same interest rate for Multiple different countries and Economies this instability will be Amplified when governments Take the Wheel in the interim Russell believes That Financial repression will lead to a Massive misallocation of capital That's because governments will start to

Have a hand in who gets access to cheap Financing because the government will be In charge most of this financing will Relate to political things like climate Change This will eventually result in Stagflation because Capital will be Allocated to things that it shouldn't be This means a decline in productivity and A continued increase in inflation For what it's worth Russell said that it Will feel like a quote warm bath at First with wages rising and interest Rates remaining low sound familiar Now this begs the obvious question of How you can protect your portfolio or Even profit in the financially repressed World that Russell envisions I'll start by saying that none of this Is financial advice it's also not our Answer for the most part this is how Russell thinks you can hedge yourself First you should consider gold which is A no-brainer in an inflationary Environment where interest rates can't Reflect reality and the government is Constantly manipulating credit gold will Be one of the best hedges this assumes That governments won't find an excuse to Ban gold which has happened in the past Second value stocks particularly in Countries that are not at risk of Financial repression Russell's focus on Value stocks is why he was so bullish on

Japan its stock indices are made up of Value stocks expect to see the same Phenomenon among value stocks elsewhere Japan may not be good anymore Third buy selected tech stocks Russell Admitted in an interview that some tech Stocks will be good Hedges against Financial repression but cautioned that It's going to be difficult to identify Which ones Focusing on those that are on the Receiving end of government spending Could be one approach given this Selection cryptocurrency is probably a Hedge too BTC is analogous to digital Gold and eth is analogous to digital oil At an even more basic level the only Sectors that have outpaced inflation Over the years are technology and Finance crypto is a combination of both And therefore the best hedge in our Opinion that is Now believe it or not but Russell Believes that the US dollar could be one Of the best currencies to hold in this Environment that's because the US will Probably be the last Western Country to Engage in financial repression Until it clamps down to Capital could Flow into the US dollar and U.S assets And this underscores the most important Element in all of this and that's time Russell's premises are arguably correct Governments and corporations have

Enormous debts that they can't possibly Pay back as we've seen though they seem To be proficient in kicking the can ever Further down the road Russell's remaining predictions could Take years if not decades to come true And a lot could happen between now and Then for instance AI could result in an Exponential productivity boom that will Make it possible for governments and Corporations to grow their way out of Debt instead of inflating it away Even so this productivity boom would Likewise take years to come about Between now and then we could in fact See higher levels of inflation Governments may not be causing this Inflation directly in every case but It's increasingly evident that they're Not exactly incentivized to stop this Inflation either It's also important to highlight the Fact that this financial repression Phenomenon won't happen in every country There are many that won't have to resort To these measures even in places like Europe these countries could see Incredible economic growth because of Flows from financially repressed Countries not life advice but I would Seriously consider looking into these Countries especially if you live in a Country that's at risk of being Financially repressed if Russell's

Predictions come true then the best Hedge will be to move sooner rather than Later but as my friend Ben Karen says Time is on your side Foreign And that's all for today's video folks If you found it as fascinating as I did Smash that like button to let me know if You want to get more fascinating content Subscribe to the channel and ping that Notification Bell if you want others to Think that you're fascinating take a Second to share this video with them and If you're already hedging yourself from Financial repression with crypto make Sure you're storing your coins and Tokens securely and acquiring them on an Exchange you can trust and afford The coin Bureau deals page has exactly What you need discounts on Hardware Wallets and up to 40 Grand of bonuses And airdrops on exchanges the link to That is in the description thank you all For watching and I'll see you next time This is guy over and out [Music]


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