The Federal Reserve will, as they have always done, do everything in its power to kick the can down the road regardless of the economic consequences.

It happened in 2008. It happened during the pandemic.

And it will happen again.

The problem with this strategy is that this only works for so long before we reach a point of no return. What’s even more concerning is that many of the same factors that led to the 2008 financial crisis are present today.

Inflated home prices, high levels of consumer debt, and a stock market that is ripe for a correction. The difference this time is that the Fed has less ammunition to fight an economic downturn. So, in the wake of this “New Great Recession” here are the five challenges that Americans, and you as an investor, will face over the next year.

1. Crash of all crashes will come soon

To get an idea of why things will get worse, you first have to understand the “Repo Markets.”

The Repo Market is like the pawnshop for major financial institutions. Banks go there to pawn off assets like treasury bonds in exchange for cash to pump into equities or crypto. Unfortunately, the Repo markets have dried up so badly that institutions are now turning to the “Reverse Repo Market.”

Reverse Repos means that banks have too much cash on hand so they buy short-term bonds. Essentially, banks are flush with cash and have nowhere “safe” to invest it right now besides garbage low-yielding bonds. My guess is Reverse Repos are being done to try to slow inflation down as much as possible but it is failing miserably. It’s hilarious, though, because banks can’t buy stocks given the high risk, so they are sitting on piles of worthless cash.

There’s nowhere safe to park your funds right now. People just haven’t realized how fucked we truly are.

2. Crypto needs a complete and utter wipe before we see any chance of upward movement

Can you believe it?

People are still buying Terra Luna and Terra Luna clones after the project went from being top ten in market cap to zero in value.

(If you’re unfamiliar with the Terra Luna disaster check out this article here)

Crypto is a mixture of academics in financial literacy and also braindead people. The amount of “Get rich quick schemes” that investors continue to fall for in cryptocurrency is truly baffling:

• Terra Luna Classic
• Doge Riseup
• Elon Hype Token

Infamous Ponzi scheme expert Bernie Madoff only offered 11.5% on his investments, and even that was unsustainable. This is why crypto is going to need a complete shakedown and why even its strongest supporters see Bitcoin going as low as $8,000.

Personally, I don’t think Bitcoin will go lower than $25,000 without investors slurping the dip; regardless, in the short-term, we’re in for pain. In the long term, the fundamentals of Bitcoin and Ethereum will succeed.

3. Bitcoin Vs Ethereum: Which is a better hold?

Altcoins like Ethereum, Polygon and Cardano have fabulous tech behind them. Really impressive stuff. Bitcoin, however, has a robust community of people who care deeply about monetary history.

This has led to a split in the crypto community with innovation vs. fundamental monetary properties.

In my opinion, both have a place in an investor’s portfolio. But as for this year, especially with the rampant economic uncertainty, I’m accumulating more Bitcoin.

It’s a tough call, but gun to my head and I’m choosing Bitcoin.

And even when it comes to Ethereum, I’m buying more Polygon (Matic) as it’s slowly becoming the best smart contract chain on the market. Here’s an alleged internal email from the Polygon team this week:

4. The ‘black swan’ of housing prices

“As I said about 2008, it is like watching a plane crash,” Michael Burry posted on in a now-deleted tweet on May 24. “It hurts, it is not fun, and I’m not smiling.”

Michael Burry, the notorious investor who predicted the 2008 financial crisis, is, of course, talking about the housing market. It’s not just him either. Mark Cuban has said that the current housing market is in a “bubble.”

The thing is, they’re wrong in this case. The housing market, just like the car market, is recession-proof. Prices are here to stay. Demand for homes is high while the supply is low — and that’s not going to change anytime soon.

That may not be great news for homebuyers, but it does mean home prices are more sustainable than the pre-2008 market. So while the rest of the economy goes up in flames, institutions like BlackRock and Blackstone will continue to buy up houses and price everyone out.

5. Buy the smart side of the dip

Inflation is sky-high.

The solution is for the Fed to raise interest rates, as they’re doing right now, and prevent too much government spending. However, the Fed can’t raise rates too much because the economy would crash because it’s a bubble built entirely on low-interest rates with people leveraged up to their eyeballs.

The real solution is to raise interest rates well beyond 15%, force the government to tighten the balance sheet and encourage Americans to save.

They won’t do this — as we’ve been conditioned toward hyper-growth, hyper-government spending and hyper-consumerism.

So the Fed has two choices: surrender to inflation by not raising interest rates and usher in an era of high inflation, high debt, and zero growth (stagflation) or fight inflation and rug the world economy.

We’re in between a rock and a hard place. The best solution, for you as an investor, is to hold onto cash and slowly dollar-cost average into investments you’ve researched and believe hold long-term value.

Don’t go in recklessly spending on high-risk investments. This is not the time.

Takeaway

Austrian economics — which is the movement of analyzing uncertain and uncontrollable human behavior in regard to an economy and implementing a conservative approach toward it — might be more philosophical than actual application. I can’t imagine a world where a country would let its economy crash in exchange for healthy long-term growth.

As one of my favorite economists, Michael Gayed recently said, “maybe democracy and free-market capitalism can’t coexist.” After all —

Why not make promises to voters to spend more on useless programs?
Why not give out three or four stimulus packages every year?
Why not never pay down the deficit and always let inflation run rampant?

Inflation is a tax on the middle class, and unfortunately, it’s this same populace that will continue to vote for politicians who rob them blind.

I can’t imagine a world not run by despotic psychopaths intent on robbing the middle class. We’ll continue to kick the can down the road until there’s no more can, and no more road.