Postcards: I Apologize in Advance

I'm going to try to explain the next financial crisis as simply as I can. You've been warned... ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: I Apologize in Advance]( I'm going to try to explain the next financial crisis as simply as I can. You've been warned... [Garrett {NAME}](floridarepublic) Oct 14 floridarepublic   [READ IN APP](   Editor’s Note: Porter Stansberry is known for making bold predictions that cut against the mainstream, [“approved”]( narrative.   He predicted the 1998 emerging market crisis, the 2007 financial crisis, General Motors' bankruptcy, America’s loss of AAA credit rating, and the recent wave of banking collapses. Now, Porter shares a shocking new prediction [that he considers to be one of the most important of his 25-year career]( It involves the presidential election and the shocking twist that nobody sees coming but could forever reshape the American financial system.   [Check out Porter’s warning here]( you still have time to prepare. --------------------------------------------------------------- Dear Fellow Expat: Well… this has been a day. I went to the Washington Redskins v. Baltimore Ravens game with my father and my six-year-old daughter. It was her first football game - and this sport might be more difficult to explain than baseball. As the Ravens ran the clock out… my father bolted down the stairs to beat traffic. My daughter followed him. And I returned for a second to try to collect Amelia’s “My First Ravens Football Game” certificate and her pin. I left my phone in a cup holder. For the last three hours, I’ve been a fish swimming upstream while sharks swim at me. Trying to get back to the stadium, find parking, curse red lights, and more. I’d planned to send this at 5 pm. We’re well behind - and there’s little time for Republic Speak. Instead… I want to just tell you the most important story on the planet… And why it will cause a major financial panic unless something changes soon. Lessons from 2008 I apologize. This might get dry… but it’s so important to your future. In 2008, Ben Bernanke was the Federal Reserve Chairman. Bernanke had studied the Great Depression his entire life. And if he wasn’t Fed Chair in 2008… the United States would have experienced something even larger than the Great Depression… Unfortunately, the tradeoff to his policies has been that his continued policies (even years after his departure) have created massive levels of inequality, a massive financial bubble, and a continued decline in the U.S. dollar’s purchasing power. I know that I complain about the Fed - a lot - but given the system itself - I’d take what happened over a Greater Depression. That’s controversial… but I’ve studied every major financial calamity since the Roman Empire. Okay… Bernanke believed that a significant problem during the Great Depression was a severe lack of liquidity in the banking system—there wasn’t enough money. This shortage of money supply led to widespread bank failures, credit contraction, deflation (a general decline in prices), and a deep economic downturn. He was correct. During the Great Depression, the Federal Reserve failed to provide enough liquidity (money available for lending) to banks and the financial system. This caused banks to collapse and credit to dry up, worsening the economic crisis. It also caused deflation.… in the monetary system, deflation can be particularly harmful because it encourages people and businesses to delay purchases, expecting prices to fall further. This reduces overall demand, leading to lower production, job losses, and further economic decline—a vicious cycle that's hard to break. Now, I understand deflation, and I don’t fear it. The problem is that most people don’t. It’s complex… pricing spirals. Deflation would impact the things that matter to people - their nominal salary and the value of their homes. They wouldn’t recognize that they’d be able to buy more for less… even if their salaries and homes decline. But that in itself is the problem. It’s a debt-based system. When there isn’t enough “money” to pay off the debts incurred (hello 2008), a liquidity crisis is inevitable. There’s NOT enough money to pay everything off. Some people will argue that we need this “cleansing.” And sure… we probably do. But it could fuel a revolution. It’s that serious. Why Bernanke Owns Inflation Bernanke argued that in a severe economic downturn, the risks posed by deflation are greater than those posed by moderate inflation. Therefore, he was willing to implement policies that might lead to higher inflation if it meant avoiding deflation As Chairman of the Federal Reserve during the 2008 financial crisis, Bernanke applied these principles by: - Lowering Interest Rates: Reducing the federal funds rate to near zero to encourage borrowing and spending. - Quantitative Easing (QE): Purchasing large amounts of government securities and other financial assets to inject money directly into the economy, increasing the money supply. - Forward Guidance: Communicating future policy intentions clearly to manage expectations and encourage economic activity. These actions were designed to increase liquidity, promote lending, and stimulate economic demand. While these policies carried the risk of higher inflation, Bernanke and the Federal Reserve deemed it an acceptable trade-off to prevent the more damaging effects of deflation. The goal was to stabilize the economy and set the stage for recovery, even if it meant tolerating slightly higher inflation for years. Uh Oh It doesn’t matter if you think this is a good or bad economic system. This is how it works. So, my opinion doesn’t matter. Your opinion matters slightly more than mine, but I assure you that the people in charge will ignore us. It’s how it all works. The U.S. Federal Reserve has consistently provided ample support to the banking system when reserves and liquidity fall under certain thresholds. In March 2023, the Fed opened the discount window to regional banks that needed liquidity to prevent bank runs and support the system. Recently, they basically abandoned stress testing banks and said that banks are now only bound to inform the Federal Reserve that they are prepared to take on stimulus and support… It was a signal for a permanent bailout. Here’s the funny thing… no… worrisome thing. China’s central bank, the PBOC, is temporarily going in the opposite direction. China’s financial system is massively influential to the global financial system. The last time that China REALLY sneezed was in 2016 during a similar crisis. Coordination among banks helped push markets higher after a near meltdown (this was also a period of the strongest insider buying levels since the collapse of Lehman Brothers and the start of the Fed’s QE programs). As we watch this current liquidity cycle peak - China is most likely the source of the next major financial crisis globally. This weekend… China decided not to do what I’ve said they needed to do. [Pull out the bazookas and engage in the “Mother of All Stimulus.”]( They aren’t putting new money into their economy or taking action to devalue their currency (which would help their export-based economy). Instead, they’re only using small stimulus programs with existing money. That’s NOT GOING TO WORK. Not in a debt-based system with rates still elevated and deep structural concerns about their housing market and other industries. The U.S. is still engaged in a trade war, with higher tariffs and policies designed to prevent China from accessing certain technologies. China’s economy is still bruised and battered from the last few pandemic-ridden years. They’re facing [a deflationary spiral.]( But instead of going in the direction that most central bankers would advise, they’re pulling money from their economy to strengthen their currency, the Yuan. This lack of action will likely cause [money shortages in China](. And if Chinese companies can’t access capital (which is going in one direction - down), they might turn to borrowing money elsewhere. What will that do? Drive up interest rates abroad while impacting the quality of existing bonds used for financing and collateral. Thus,… hurting global companies. Demand for borrowed capital drives up rates. Not good for U.S. yields. China has been cutting rates… adding some stimulus… and pumping markets since the last negative momentum event in early September. But now… get ready. Commodities are already under pressure this evening, and we can easily point to the disappointment surrounding China’s lack of stimulus. They literally need to create new liquidity and add it to their banking system. They need to stimulate and prevent a debt spiral. And they need to weaken their currency. Until then, the world is on alert. I wouldn’t be shocked to see more volatility and uncertainty, which is good news for the U.S. dollar. All the while, I could see copper falling back to $4.00. Expect more market ups and downs. And remember - whoever wins the election - you need to have a plan. Especially as each administration [attempts to address what’s happening in China](. [I sent you this video last night](. It’s illuminating and gives you a game plan. Stay positive, Garrett {NAME} Secretary of Defense Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.   [Like]( [Comment]( [Restack](   © 2024 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()