05 Dec, 2020
JERUSALEM WEATHER

“A worldwide economic collapse will happen this summer,” warns Israeli economist Rafi Farber.

The financial journalist spoke candidly with Breaking Israel News explaining why based on his calculations, the dollar will collapse in late August-September 2020 and more importantly, what you can do to minimize the damage it will cause.

Farber begins by explaining that all major market crashes, such as the one that catalyzed the 1929 Depression, were all sparked by panic.  Thus Farber believes that his summer, people will realize that “something is wrong.” And when that happens, “the value of the dollar will collapse and the entire collapse will take a matter of months, maybe a year at most” he explains.

Why the summer? 

Farber points out that all major historic crashes happened during August-September including 1929, 1987 and 2008. The reason he explains is because of the way the economy works. “The money supply (in America) keeps expanding all the time. If it ever stops, prices of bonds go down. The money supply always seems to slow down by August-September every year” Farber said.

Israeli economist and financial journalist Rafi Farber (credit)

When questioned about his experience in predicting financial collapses, Farber quipped “before the 2015 August 24 Black Monday Stock Market crash, I wrote an article about it before it happened and shorted the NASDAQ and longed the VIX. Nine days later, I did very well.”

This isn’t 2008

But Farber highlights the difference between 2008 and the upcoming dollar collapse noting: “What is happening this year, the bubble is not in housing, it’s in the dollar itself. Treasury bonds are at an all-time low. The government admitted that the CPI inflation rate is 2.3% per year. The interest rate paid on treasury bond 1.3%. This means you’re guaranteed to lose money if you buy a 10-year treasury bond in the US. In Europe, it’s even worse.”

So why are banks buying these bonds?

The reason Farber explains is “because they assume that someone else will buy it from them later – That is insanity since the value of the dollar is based on the people’s imagination that debts can be paid…which it can’t.”

The role of coronavirus

“The collapse will start suddenly and take about a year, not 10-15. Just one. The crux of it is this: Most of the dollars you deal with and entrepreneurs and industrialists generally, deal with, are locked up in institutional bank deposits, not consumer bank accounts. Those dollars are being bounced between institutional investors, not being used to bid up goods and services directly. They bid up assets, not consumer goods. But when growth stalls, possibly because of this coronavirus shutting down production, the entire pyramid falls and all those dollars have nowhere to go but the commodities sector. So instead of institutions bidding up the price of bonds and equities, they bid up commodities directly. It’s not consumers bidding up goods and services. It’s institutions that will do it this time. Consumers are left with nothing but debt, and hyperinflation shows up within months instead of taking 10-15 years as it did in Weimar 1914-1923 and Israel from 1970-1985. It will take a year like what happened in Paris 1719-1720, during the John Law Mississippi Bubble” Farber explained.

“But even before the coronavirus happened on Sept 2019, overnight interest rates shot up to 10%. Nobody really understands why. But since then the Fed has been printing about 30-200 billion a day. There’s already a liquidity crisis” he added.

“If production in China is still shut down, we’ll be in negative supply rates by August or September,” Farber warns.

Can it be stopped?

“At this point, there is nothing at all that can deter this, unfortunately. The best thing that could possibly be done, which will not be done, is to massively and draconianly cut spending, like cut the budget right now by 50%, and get rid of the income tax entirely. Then get rid of the Fed and back the dollar with gold reserves and stop printing money entirely. Many would suffer, obviously, banks would collapse, but it would save the dollar and spare the country the worst of what is to come” Farber said.

How will it affect elections in America?

According to Farber, people will blame Trump for the crash. And that could lead to the election of Bernie Sanders. And if that happens, Farber has a dire warning for the Jews of America: “Get out of America!” That’s because when Bernie is president, Americans will blame the Jews.

Farber warns that old people starving to death and mass rioting on the streets is entirely plausible.

What about Israel?

Farber notes that Israel is not anymore safe than America is explaining: “Israel went through hyperinflation from 1984-1985. Since the New shekel is based on the dollar, the shekel will fall too.”

How can we survive the upcoming collapse?

“You can’t come out unscathed” Farber warns. However, he did offer some tips for mitigating the damage calling on Americans to “own hard assets like gold or silver. Then you’ll have some purchasing power so you won’t starve to death. Everyone should have some gold or silver.”

Regarding digital currencies, Farber doesn’t recommend bitcoin as anything other than a risky speculative bet, adding that “it is not safe. If you want safety – gold and silver. Bitcoin is a game. It may work, but it also may just die” he concludes.