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The Current Monetary Order is Nearing Its End

• By Claudio Grass

Interview with Dimitri Speck

Given the massive intervention and monetary manipulation experiment by central banks over the last decade, the amount of distortions created in the market, as well as the record debt accumulation at all levels of the economy, have given rise to considerable risks for investors. For a more detailed understanding of these issues and for his outlook, I turned to Dimitri Speck, a renowned expert in the development of trading systems and in seasonal analysis, whose experience and successful career spans over two decades. Mr. Speck, founder and head analyst of Seasonax, also has valuable insights into the history of the gold market, as illustrated in his book "The Gold Cartel". He therefore has a very unique perspective, forged through his experience developing successful trading strategies, combined with his knowledge and deep understanding of economics and the history of our monetary system.

Claudio Grass (CG): After a decade of aggressively expansionist policies by central banks, it would seem we stand at an impasse. Central bankers cannot normalize their policies without risking a market crash and a toxic debt meltdown, while their current overstretched position means they won't have enough ammunition to fight the next crisis. How do you see this playing out?  

Dimitri Speck (DS): In the short term, low interest rates stimulate the economy. In the long run, however, the persistent and aggressive manipulation keeping all interest rates at ultra-low levels since 2008 has led to massive undesirable developments. As the state's interest burden fell, politicians wasted money that could have been used productively somewhere else. In addition, due to this overly accommodative environment, inefficient companies stayed in the market, reducing the resources and employees available to other more promising companies. In theory, the low interest rates could also have been used to repay and reduce debt. In reality, however, they facilitated new borrowing and thus encouraged over-indebtedness. As a result, bubbles developed in the stock and in the real estate markets, which in turn led to further malinvestments.

In a nutshell: The low interest rate policy weakened the real economy and at the same time increased debt. That's the exact opposite effect of what would have been desirable.

Overall, it is typical of the hubris of central bankers who try to plan and control the economy to also try and stimulate it by cutting interest rates. Personally, I even think that it is not the task of the central banks to set interest rates to begin with. However, there is one more tool that remained: the printing press. It will most probably be used heavily and excessively as well.

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