George Gammon Posts A Black Swan Alert
WARNING: The Economy May Not Survive This
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George Gammon Posts A Black Swan Alert
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FULL VIDEO TRANSCRIPT
we’ve all heard of a Black Swan event
Investopedia defines it as an
unpredictable event that is beyond what
is normally expected of a situation and
has potentially severe consequences now
notice they said
unpredictable but if you look at this
post from Investopedia they give
examples of black SW event such as the
hyperinflation in Zimbabwe the do com
bust the GFC in 2008 so if you actually
think about it these events are
predictable many people predicted the
GFC as an example I’m going to explain
what I think the next Black Swan event
could be something we could see
potentially even in 2024 and why the
economy may not survive and I’m going to
explain this to you in three simple fast
Steps step number one let’s go over the
dollar what it has done lately and think
about this through the lens of dollar
denominated debt I’ve got a chart going
all the way back to well not that far
back July of this year we go to today’s
date on the left we go from 100 up to
107 this is the dxy so a measurement of
the dollar relative to a basket of other
currencies mostly the Euro about 57%
Euro I believe and in July the dxy is
right around C
102.5 it goes up then comes all the way
down to 100 but since let’s just call it
mid July the dollar has gone straight up
to a point just the other day where it
got over 107 to understand why this is
such a big deal we need to use some very
simple technical analysis when you’re
looking at charts they’ve got something
called resistance levels so this is a
level of price where the stock let’s say
or in this case the dxy has gone to in
the past several times and then it comes
back down and it goes back up to that
point to that resistance level so the
technicians the people who study and do
chart analysis for a living would say
once it goes through that resistance
level there’s a high probability that
it’s going to go up to the next
resistance point or it’s going to come
crashing through now this resistance
level becomes somewhat of a floor so
editor let’s go ahead and look at the
dxy but let’s zoom out a little bit and
go back back in time and we see that we
had a resistance level at
105.6 that’s something I’ve been
watching on the rebel capitalist channel
for a long time and we smashed through
that resistance level last week and as
we can see by the chart it went up and
it’s continuing to go up so the next
question becomes okay where’s the next
level of resistance and that comes in
right around 113 and this is key why
George why is that such a big deal
because once we go through that assuming
that we do the next stop is likely
120 and when we get to the 120 level
then the debt really becomes a problem I
mean when we go through the 105 Mark I
would argue we’re already in the no
bueno Zone that’s a a very technical
term that I use and this process of the
dollar going up and up and up against
other foreign currencies is very
negative for the global economy more on
that in just a moment but if we get to
120 or higher I think that’s when the
government is going to have to come in
and take action more on that in Step
number three so to recap we just broke
through the resistance level
105.6 and it looks like the next stop is
going to be 113 if we exceed that the
next place the chartist will tell you we
could head of the highest probability is
going to be 120 and once we get to 120
that’s going to mean big big problems
for not just the global economy but the
US economy so why is the dollar going up
and up and up and up in value such a big
problem okay let’s go to the average yo
it’s not the average Joe no no no it’s
it’s Chinese cousin the average
yo so we’ve got the average yo right
here and you can see he’s uh not really
bummed out not really happy kind of
indifferent to the situation because he
has two doll worth of debt dollar
denominated debt but right now the Yan
represented by this red Y is let’s just
say it parody with the dollar so that
means that one Wan is worth
$1 okay so he’s got these $ two dollar
of debt but this represents his cash
flow so he has two yuan in cash flow
therefore he can easily pay his dollar
denominated debt so above the line
represents his cash flow below the line
represents how many yuan he needs to pay
off his dollar debt okay let’s move on
so now let’s say the dollar appreciates
in value relative to the uan but his
cash flow is still to Yuan but now
because the dollar has appreciated in
order to pay his $2 of debt he needs
three
Yuan you can see where this is going
and let’s just assume for a moment that
the global economy is slowing down or
the Chinese economy is slowing down
which we all know that it is
dramatically so now it really puts the
average yo into a bind and you can tell
how his facial expression is getting
worse and worse and worse because he
still has that $2 of debt but now
because the dollar is appreciated he
needs three Yuan but he doesn’t even
have two yuan in cash flow he only has
one Yuan because the Chinese economy is
slowing down so obviously this quickly
puts him into a position where he cannot
pay his debt okay well one man’s debt is
another entity’s asset and What entity
would hold that debt as an asset on
their balance sheet you guessed it a
bank a bank in the euro dollar system
that is responsible for providing dollar
liquidity to all the other corporations
in the the global economy let’s call it
Corporation XYZ and let’s remember that
those corporations provide the stuff
that you buy at Walmart Target and Home
Depot so if they can’t get the dollar
liquidity they need because the average
yo isn’t paying off his debt which is
the bank’s asset so they’re tightening
credit conditions they’re reducing the
dollar liquidity available then that
means that there’s less stuff going into
the United States less stuff to buy and
we know the US economy is 70% con
consumption so this puts the average Joe
into a very difficult position as you
can tell by his facial expressions
because there’s less stuff to buy the US
economy is starting to shrink but
unfortunately it gets worse for the
average Joe because the United States is
definitely definitely a net importer we
run huge trade deficits but we do export
some things and if the global economy is
slowing down if the average yo has less
purchasing power that means less stuff
that he’s buying from the US exports
that we do have so after going through
this thought experiment it becomes
Crystal Clear why the dollar going up
and up and up is not only a problem for
the global economy but also a huge
problem for the US domestic economy and
let’s quickly go back to that definition
of Black Swan event remember it reads an
unpredictable event that is beyond what
is normally expected of a situation and
has potentially severe consequences so
how many of you watching this video
right now have the dollar going up in
value as the next Black Swan event on
your bingo
card I would argue very few of you
believe that the next GFC let’s say will
be a result of the dollar increasing in
value in fact probably most of you have
the opposite that you would say the next
GFC or the next Black Swan event would
be the dollar crashing but maybe just
maybe it’s going to be the dollar
crashing up step number two the value of
the dollar relative to other currencies
doesn’t just impact dollar denominated
debt also impact something that’s
crucial to every single economy around
the world those are Commodities energy
wheat corn
soybeans copper Etc so check out see
what’s happening to commod commodity
prices remember priced in dollars and
think through how this would impact the
average yo in China That’s struggling
right now just to pay off his dollar
denominated debt because of the increase
in the value of the dollar that we
discussed in Step number one first let’s
go to the price of oil and we can see
that just in the last three months it’s
gone higher now it has come down
recently and that’s great news of the
global economy and the US economy I
might add but in the last three months
it’s gone from call it
$73 up
to just under
$85 so if you’re the average yo and you
have to take your Yuan and even if you
settle in Yuan doesn’t even matter if
the price of oil that you’re importing
because you have to have that to survive
and forget the economy now we’re talking
about survival we have to have energy to
survive we have to have Commodities to
survive so if that barrel of oil that’s
coming in is now
$83 instead of let’s say
$73 and the value of your Yuan has been
cut in half let’s just take it to an
extreme so we can all get our head
around this and assume that three months
ago you could buy a barrel of oil for
$1 and let’s say that the Yuan was equal
to $1 they were
parody and now let’s say it cost you
$2 to buy that barrel of oil okay well
what are you going to do you need twice
as much you want where are you going to
get it who knows and what’s happening to
your economy what’s happening to your
dollar denominated debt you can see how
very quickly the global economy can go
from being in a position where they’re
all right they’re paying their expenses
they’re paying their oil Bill they’re
paying their wheat Bill they’re paying
down their dollar denominated debt and
all of a sudden three months later the
dollar goes up in value by 10% and
commodity prices denominated in dollars
increase and all of a sudden they’re in
a position where they’re basically bust
but unfortunately it’s not just the
price of oil let’s go through some other
very important Commodities heating oil
also up in the last three months let’s
look at a fiveyear chart and compare
this to the lows during the surveys of
sickness right around 2020 you can see
it’s per gone up in a straight line back
then 67 cents and now right around
$3 let’s go down to Corn you can see the
exact same Dynamic playing out here in
2020 even in going into 2021 we’re right
around let’s say 350 bucks now that’s at
476 even though it’s come down
dramatically look at soybeans the exact
same thing and if we go over to a chart
of beef we see a massive in increase
we’re talking about an increase from
call it
120 all the way up to
$250 now I know a lot of you right about
now are saying oh George well this isn’t
going to be a problem for that long
because we’ve got the bricks coming out
with their own gold back currency and
pretty soon nobody’s going to settle in
dollars okay well that in this case
really doesn’t matter why because we’re
talking about the dollar price you could
settle in your local currency all you
want the average yo could settle in
Chinese Yuan as an example but that’s
not going to do him any good the dollar
price of oil is going from $73 up to
$85 the fact of the matter especially
while the dollar is going up in value
against the Yuan even if he wants to
settle in the local currency it doesn’t
change the fact that he needs way more
of his local currency to buy the exact
same amount of stuff
and if he can’t afford to buy all those
inputs for his widgets then he goes out
of business the unemployment rate goes
up he defaults on his debt to the euro
dollar banks that reduces dollar
liquidity even further and that’s what
creates this systemic risk that we’re
talking about I.E Black Swan event but
on the topic of the brics gold back
currency and taking market share from
the dollar I want to pull up a chart
that shows the Dollar’s use for intern
ational payments and compare this to the
euro and let’s say we started talking
about the brics gold back currency in Q4
of
2021 and therefore since that time
everyone has been getting rid of their
dollars well at least that’s the
narrative if you look at the chart we
can see that the dollar usage for
international payments has actually gone
up as an overall percentage and look at
what has happened especially recently to
the percentage of Euros that are being
used it’s just falling off a cliff so if
you want to make an argument that the
gold back currency or the bricks
currencies are becoming more and more
popular that may be true but they’re not
stealing market share from the dollar
we’re stealing market share from the
Euro so when we’re talking about the
next Black Swan event we’re not talking
about something that’s going to happen
in 10 years or 15 years we’re talking
about something that will happen in the
next year or maybe the next two years in
which case we can easily assume that the
majority of global settlement is still
going to happen in dollars and
commodities will still be priced in
dollars whoa timeout I know a lot of you
right about now are probably scratching
your head and saying okay George well
why do you think the dollar is going to
continue to go up and up and up I get
what you’re talking about with the
technical analysis and whatnot but from
a fundamental
standpoint why would the dollar continue
to go higher why won’t it immediately
crash well it’s a great question I
assume that most of you watching this
video believe or your base case is that
the probability is very high that the
global economy slows down if the global
economy slows down that means these
Global businesses are making less money
and we talk about evergrand or Country
Garden as classic examples of this
playing out right in front of our eyes
with these real estate companies in
China let’s get right back to the
Whiteboard and when you look at the
balance sheets and this process it
becomes very easy to understand why
there’s a very high probability that the
dollar goes straight up through these
technical levels that we discussed
before so the average yo as we said
earlier has his dollar denominated debt
and he does have cash flow coming in to
pay that debt but it’s becoming more and
more of a burden because the dollar is
going up in value and his cash flow is
decreasing well the very last thing that
he wants to do is default on his debt to
the euro dollar bank so he’s going to
try to kick the can down the road as far
as he can well how’s he going to do this
well he’s actually going to look at his
balance sheet assets and say okay well I
do have some savings but all my savings
is denominated in Yuan so we’ve got
assets on the left liabilities on the
right of course those liabilities dollar
denominated debt so what the average yo
is going to do is he’s going to take the
assets that he has and he’s going to
sell them in an effort to Kick the Can
down the road to make these payments
until he can maybe improve his business
or the global economy starts to improve
and then or the dollar comes down and
then he has enough Yan cash flow to go
ahead and start making those payments
again okay well let’s think this through
if he’s taking Yuan off of his balance
sheet and selling them to buy dollars to
pay off his debt well that is increasing
the supply of Yuan circulating in the
global economy in the FX Market relative
to the amount of dollars so what do that
due to the value of the dollar relative
to the
Yuan it makes it go straight up
so the bottom line is if you believe we
are headed for a global economic
slowdown then you also have to believe
that the highest probability is on the
side of the dollar continuing to go up
on the dxy against other
currencies oh wait a minute George now
there’s one thing that you have not
thought through what if the average yo
has dollarss on his balance sheet and
he’s going to start transacting in his
local currency or the new brics goldback
currency we’re talking about that
earlier okay well that’s a very valid
point let’s think that through so if the
average yo says you know what I don’t
want these dollars anymore we’re going
to just transact in Rubles or the Indian
rupe or whatever they choose okay fine
what’s going to happen well those
dollars are going to go off his balance
sheet go into the global economy but
they’re going to recirculate to do what
pay off dollar denominated debt and if
they don’t want those dollars then
they’re not going to roll over that
dollar denominated debt they’re going to
roll that over into a different currency
and therefore the debt is going to be
extinguished okay but how were the
dollars created to begin with they were
created by lending them into existence
so let’s just assume for a moment that
all of these countries drop the dollar
well that’s fine what’s going to happen
is the dollar denominated debt is going
to
decrease and if the dollar denominated
debt decreases then what happens to the
amount of
dollars they decrease at the exact same
rate so the ratio between debt and
dollars doesn’t change at all regardless
of how many average Yos are dumping the
dollar the problem still
exists step number three okay so let’s
assume for moment that we have this
dollar Black Swan event what are the
central planners going to do well you
guys know the answer they’re going to
come out with their solutions that turn
out to be far worse than the problem
itself so this would not be the first
time the dollar has gone parabolic and
become a very big problem for the global
economy creating this dollar wrecking
ball if you will it also happened in the
mid
1980s so let’s go to Wikipedia really
quick and see what happened well you
guys probably know exactly what they did
and this was the plaza Accord so the
plaza Accord was a joint agreement
signed in September 22 1985 at the Plaza
Hotel in New York City between France
West Germany Japan United Kingdom and
the states specifically to depreciate
the US
dollar so the US dollar was way too high
in fact let’s go to a chart on the dxy
and look at just how high the dollar was
it was at
150
150 and that’s when the central planners
came in now keep in mind back then we
had a lot less dollar denominated debt
globally so I don’t think they could get
up to 150 again that’s why I think the
magic number is probably around 120 130
like we discussed in Step number one but
what they did is they came out and
artificially dropped the value of the
dollar they had to they didn’t have a
choice and I’d also like to point out
that the result of Plaza Accord 1.0 was
the dollar going down by roughly 50%
okay well let’s fast forward to today
and remember we’re at
106.5 so we get that resistance level at
112 we break through that and the next
level we’re most likely going to is 120
so let’s just assume for a moment that
the central planners and the
authoritarians at 120 wav the white flag
and they say no no no we’ve got to do a
plaza Accord
2.0 we have to depreciate the value of
the dollar relative to other currencies
problem solved right well it depends if
you’re outside the United States then
yes this does solve the problem but if
you’re inside the United States this
could make the problem much much worse
let me explain let’s go over to a chart
of the United States CPI and as you guys
know this is just the inflation number
that they’re willing to admit to the
real inflation number is much much
higher but back in
2020 the end of 2020 the US CPI was
right around let’s say
1% and then starting in 2021 it started
to go much higher I’m sure you guys
remember this well and it peaked out in
July of 2022 year-over-year at about 9%
okay well why is this a big deal let’s
go back to the chart of the dollar and
look at the exact same time frame right
around the beginning of 2021 to July of
2022 and we can see that the dollar went
from 89 or 90 all the way up to almost
108 okay well remember all of the stuff
that you buy at Walmart Target Home
Depot is coming from another country so
if the value of the dollar is going up
up that means the prices that you’re
paying for that stuff is going down well
the prices were going down relative to
where they otherwise would be but we
still had 9% Consumer Price inflation so
what would US inflation have looked like
if the dollar instead of going from 90
up to 108 went from 90 all the way down
to
45 that 9% year-over-year inflation
would have been closer to probably 20 or
25% Consumer Price inflation so my point
is if the dollar goes up to 120 and they
come out the plait Accord 2.0 to quote
unquote solve the problem that means
that the dollar if history is a teacher
goes down by 50% so we go from 120 all
the way down to 60 okay well if we’re
importing the majority of the stuff that
we buy at Home Depot Target and Walmart
and what’s going to happen to Consumer
Price es in the United States at a time
when the US consumer is already being
squeezed because their wages have not
kept up with the price increases that we
have seen over the last few years while
the dollar was going up in value and you
might be saying to yourself okay George
well that’s definitely a domestic
inflation problem that will crush the
poor and middle class but it might not
be a Black Swan event the central
planners by implementing this Plaza
according
2.0 might avoid the worst case
scenario okay well let’s go over to a
recent article from The Wall Street
Journal and I want to point out that
small business bankruptcies are rising
at the worst Pace since the seresa
sickness and why are they rising and
keep in mind the amount of bankruptcies
only represent about
10% of the businesses that are actually
going bust let’s dive dive into the
article so we can understand why all
these small businesses are filing
bankruptcies Wall Street Journal gives
the example of an Orlando Florida
trucking company they paid high prices
for a lot of these trucks as the cost of
new and used vehicles climbed in
response to the surveys of sickness or
the government’s response the surveys of
sickness let’s be very clear the company
believed demand would remain strong
Patrick Pinto said but shipping rates
have fallen by roughly 50% in fuel and
insurance costs have
climbed so you see what’s happening here
guys a lot of people say well the we
shouldn’t worry about businesses going
bust because if they have higher input
costs well they can just pass that cost
onto the consumer no no no no no that’s
only if the consumer’s income is
increasing if the consumer’s income is
decreasing in real terms they have less
purchasing power therefore these
businesses cannot increase prices
because they’re seeing demand PL it
they’re seeing their revenue go down how
do you raise prices in that environment
so what ends up happening is their input
costs go higher and higher and higher
their margins will lower and lower and
lower until a point where they go out of
business so if the United States comes
out with let’s say a plaa Accord 2.0 and
that drops the value of the dollar down
by 50% they may solve the problem the
global economy but that’s going to crush
the US economy it’s going to crush small
and midsized businesses here that can’t
pass on that additional cost to the
consumer and therefore they’re going to
close their doors and that’s going to
increase the unemployment rate
dramatically which many might put into
the category of an economic depression
as opposed to a Black Swan event for the
average American I don’t think it makes
any difference at all the net result is
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