2/ This type on inflation is hyperinflation, which is a currency event, not an economic demand phenomenon.
Confidence in fiat, similar to the early stages of the Weimar experience, is eroding. Gold and to a lesser degree stocks are beginning to reflect the accelerating loss of confidence.
It was the devaluation of the Mark (fiat) and the erosion of confidence entrusted to the custodians of it that forced Germans to seek protection in stocks and gold despite putrid business conditions. Money seeking refuge from the devaluation flowed into stocks and even more so gold. Those that failed to recognize the trend (and their drivers) were financially ruined. These capital flows are illustrated in the following chart:
Weimar Hyperinflation Experience:
Markets Make A Definitive Statements
Equity markets sharply lower. Euro sharply lower. Commodities under significant pressure. Gold opens lower and recovers $16 from the low to be up on the day.
1/ The type on inflation being discounted by Gold requires business activity to be putrid.
2/ This type on inflation is hyperinflation, which is a currency event, not an economic demand phenomenon.
3/ Rather than a singular currency loss of confidence igniting hyperinflation, it will be all Western currencies moving against each other with intolerable, to business, volatility.
4/ All Western governments will practice QE to infinity, as we return to credit market problems. The statement of the G 20 and Prince Charles cutting down on caterers is all smoke and MOPE.
5/ Gold is NOT a commodity.
6/ Gold is a currency
7/ Gold is the currency of choice.
8/ Gold is going to becoming the reserve asset of choice by central banks
9/ Ownership of gold means you are your own central bank.
Conclusion:
The arguments between inflation and deflation revealed itself today to be purely semantical.
Gold is headed in this move to $1650 with its normal drama.
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