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It has been a disappointing year for profit-seeking precious metal investors, but for those few of us looking to accumulate gold and silver as the ultimate insurance against runaway inflation it has been an unexpected bonus.

After reviewing the current year to gain a perspective for 2022, this article summarises the outlook for the dollar, the euro, and their financial systems. The key issue is the interest rate outlook, and how that will impact financial markets, which are wholly unprepared for the consequences of the massive expansions of currency and credit over the last two years.

We look briefly at geopolitical factors and conclude that Presidents Putin and Xi have assessed President Biden and his administration to be fundamentally weak. Putin is now driving a wedge between the US and the UK on one side and the pusillanimous, disorganised EU nations on the other, using energy supplies and the massing of troops on the Ukrainian border as levers to apply pressure. Either the situation escalates to an invasion of Ukraine (unlikely) or America backs off under pressure from the EU. Meanwhile, China will continue to build its presence in the South China Sea and its global influence through its silk roads. Less appreciated is that China and Russia continue to accumulate gold and are ditching the dollar.

And finally, we look at silver, which is set to become the star performer against fiat currencies, driven by a combination of poor liquidity, ESG-driven industrial demand and investor realisation that its price has much catching up to do compared with lithium, uranium, and copper. The potential for a fiat currency collapse is thrown in for nothing.
2021 — That was the year that was

This year has been disappointing for precious metals investors. Figure 1 shows how gold and silver have performed since 31 December 2020.

…click on the above link to read the rest of the article…

3 Reasons Why 2022 Will Be Unforgettable

December 26, 2021

3 Reasons Why 2022 Will Be Unforgettable

Photo by Milan Seitler

After the crazy year we’ve just had, one good question to ponder for a moment is: What does the U.S. economy look like as we head into next year?

To answer that, this article will examine three sectors by looking at economic activity (including Wall Street), the inflation situation, and of course physical gold.

So brace yourself, because if this plays out the way we fear it might, the economic storm on the horizon is less than one week away.

Here we go…

Economists still can’t come to grips with an astronomically overvalued market

It’s amazing how long a virus can be blamed for “Economic Woes.” But that’s exactly how economists summed up 2021:

U.S. economic activity resurged in 2021 after a year marked by lockdowns and stay-in-place orders, with the rebound fueled by a combination of monetary and fiscal stimulus, as well as firm consumer spending.

However, against this backdrop, the second half of this year especially has seen an economy grappling with supply-side constraints and rising price pressures. Lingering virus concerns have compounded with still-elevated demand to push up inflation.

When the government hands out free stimulus money, and also places a moratorium on mortgage payments, it would be natural to expect increased consumer demand for products and services as a result. (Along with a little market mania for good measure.)

But thinking that these pressures and demand would ease early next year, as those same economists surmised, ended up complicated by Omicron jitters.

From the same article:

Goldman Sachs: The emergence of the Omicron variant increases the risks and uncertainty for the economy anticipates GDP will grow 3.8% on a full-year basis in 2022, or down from the 4.2% clip it saw previously.

…click on the above link to read the rest of the article…

Inflation Is a Policy That Cannot Last

December 26, 2021

Inflation Is a Policy That Cannot Last

Are we heading toward a Fed policy that fixes inflation at a permanent rate of five to six percent?

We could be.

But inflation is a policy that cannot last.

We’re currently experiencing a massive wave of price inflation. This should come as no surprise. The Fed has increased the M2 money supply by around 40% since the end of 2019. The US government showered that newly created money on American consumers in the form of stimulus. Meanwhile, governments effectively shut down the US economy. That led to a big drop in production. This created the perfect inflationary storm. We have more money chasing fewer goods and services.

Prices are rising.

Now the Federal Reserve has a big problem. It needs to tighten monetary policy to take on inflation. But the economy depends on easy money. Economic growth is built on borrowing. Any significant tightening of monetary policy will pop the bubble and the whole house of cards will fall down.

The Fed has finally abandoned the “transitory” inflation narrative and it appears to be getting more serious about addressing the issue. But how will the central bank really play this?

In an article published by the Mises Wire, economist Thorsten Polleit asserts there are basically two scenarios in play.

(1) The Fed means business; it really wants to lower consumer goods price inflation back toward the 2% mark.

(2) The Fed just wants to keep inflation from spiraling out of control, but it does not want to abandon the new regime of increased inflation.

Scenario (1) is not impossible, but it is relatively unlikely. Under the prevailing economic and political doctrine, the Fed is not meant to curb inflation at the expense of triggering another economic and financial crisis…

…click on the above link to read the rest of the article…

The Fed’s Catch-22 Taper Is A Weapon, Not A Policy Error

December 26, 2021

The Fed’s Catch-22 Taper Is A Weapon, Not A Policy Error

Back in 2018 leading up to Christmas the Federal Reserve began publicly flirting with the notion of ending asset purchases, reducing their balance sheet and committing to an all around taper of stimulus. I wrote about it extensively at the time along with my position that the Fed could and would taper, at least for a short period, which would lead to an accelerated crash of stocks. This did in fact happen, but as we all know the Fed reversed course not long after.

This reversal was seen by many as proof that the Fed would “never” actually pursue a full blown taper and that stimulus measures would go on forever. I believed it could be a dry run for a more aggressive taper event down the road. I argued that the fed would continue stimulus until stagflation became evident to the public, and then a careful game of scapegoating would have to be played and another taper would commence.

It is also important to understand that there were many in the economic media that also argued that because the dollar is the preeminent world reserve currency the central bank could print dollars perpetually without inflationary consequences. This notion became a basic fundamental of Modern Monetary Theory (MMT).

Of course, MMT is utter nonsense. There are ALWAYS consequences for overt money creation even for world reserve currencies. It doesn’t matter if you try to price your national currency without comparisons to foreign currencies; under globalism and economic interdependency the velocity of money matters. If a country is printing with wild abandon, those dollars are going to buy less labor, less production and less goods overseas. Nothing defeats the laws of supply and demand, not even strategic debt creation.

…click on the above link to read the rest of the article…

Inflation and Gold: What Gives?

December 23, 2021

Inflation and Gold: What Gives?

In the last Supply and Demand update, we discussed some different theories which attempt to explain what causes the gold and silver prices to move. We mentioned the:

“…attempt to hold up a famous buyer of metal, while ignoring the thousands of not-famous sellers who sold the metal to said famous buyer.”

Since then, Ireland has bought gold for the first time in over a decade. And predictably, most voices in the gold community see this as a bullish sign.

By the way, we did not see any data about the prices paid on what dates, but the articles on December 1 mention a series of buys over a few months. Assuming a few means two, it looks like Ireland may have paid more than the current price.

The Different Theories on What Moves Gold and Silver Prices

Back to the common bullish view of Ireland’s wisdom, what of the opinions of the 64,300 people who sold their gold to Ireland (assuming the average seller sold an ounce)? Surely, these people believed the price will go down?

Famous and Anonymous Price Movers

There are two competing theories for how to interpret the conflicting views when one market participant is famous and the other is a bunch of anonymous people. One is the “famous buyer” theory, and the other is the “incompetent bureaucrat” theory. The latter was used to explain the sale of half of Britain’s gold between 1999 and 2002.

How could we have known that the UK government was foolish to sell back then, and the anonymous 12,699,250 buyers were right? Whereas today, the Irish bureaucrats are right, and the 64,300 sellers are wrong?

This is just a bias towards bullishness.

…click on the above link to read the rest of the article…

Most Splendid Housing Bubbles in Canada, November Update, after Bank of Canada Ended QE and Put Rate Hikes in Sight

December 21, 2021

Most Splendid Housing Bubbles in Canada, November Update, after Bank of Canada Ended QE and Put Rate Hikes in Sight

Home prices spike in a few cities, “pause” in some, drop in others. Vancouver prices are below August levels.

In an amazing development for the Canadian housing market where prices have relentlessly exploded higher – fueled by money printing and interest rate repression that started in March 2020 – prices in November didn’t explode higher in all cities, but only in a few, and “paused” in some, and declined in others. In the most hyped red-hottest housing market of them all, in Vancouver, prices were below the peak in August.

So maybe this is just a seasonal breather in those markets. But last year and for most of this year, there were no seasonal breathers in Vancouver or any of the other major markets, the whole thing just went exponential, fueled by the Bank of Canada that was printing money and repressing interest rates like there’s no tomorrow.

But this is tomorrow.

The Bank of Canada announced its first taper decision in October 2020, over a year ahead of the Fed. It let repos and short-term Canadian Treasury bills mature and run off the balance sheet without replacement. It ended other smaller purchase programs. In October 2021, it ended QE altogether, and is no longer adding to its holdings of Government of Canada bonds. And it has put rate hikes on the table.

Throughout this 14-month period since the taper announcement, the BoC has pointed at the excesses in the Canadian housing market that resulted from the BoC’s reckless asset purchases and interest rate repression.

And inflation in Canada has reached the worst levels since 1992, as measured by CPI in November (+4.7% year-over-year).

…click on the above link to read the rest of the article…

China’s Banking Assets Are $52 Trillion, Growing By $40 Trillion Since 2008: “This Is What Hyper MMT Looks Like”

December 13, 2021

China’s Banking Assets Are $52 Trillion, Growing By $40 Trillion Since 2008: “This Is What Hyper MMT Looks Like”

Thermodynamics

“The interaction of inflation-focused monetary policies in the west and China’s mercantilist model created what I call The Refrigeration Mode,” said the CIO, sitting atop his prodigious pile. “The process has been ongoing for twenty years,” he continued. “The inflation-focused policy framework is based on the fallacy that you can model an economy using an equilibrium framework,” he said. “Wicksell was the father of classical equilibrium in economics. He observed that for a pure credit economy – with no external gold backing for money, just credit-backed deposits – there were no clear forces that would drive the system toward equilibrium. To the 19th century Wicksell, a pure credit economy was a fictitious, futuristic concept, but it is effectively what we have today – and it is a path dependent system.”

“What is a path dependent system?” asked the CIO, not waiting for my answer. “Take the male driver when lost. Despite all evidence around him, the male believes he is not lost. He is, of course. And yet has no need for a map. The male is merely taking a different route, maybe a better a route to the same inevitable, incorrect destination. That destination being equilibrium. It’s all taking place in the male’s head. The reality on the road, meanwhile, is rather different. He turned left at the fork in the road when he should have gone right. There is, now, no natural force – other than blind luck and a tactful passenger – which can rescue him. Further wrong turns, and his destiny await. His destination is path dependent.”

…click on the above link to read the rest of the article…

Inflation Soared to 6.8% in November

December 13, 2021

Inflation Soared to 6.8% in November

Inflation is soaring with no end in sight. The Consumer Price Index rose 0.8% in November, marking a 6.8% increase in inflation YoY. According to the Labor Department, this is the fastest pace of inflation since June 1982. In addition, Core-CPI rose 0.5% last month, amounting to a 4.9% annual increase, the quickest advancement since 1991.

Energy prices alone have spiked 33.3% in the past year, and gasoline prices are up 58.1%. Over the past 12 months, food and energy prices rose at the most rapid pace in 13 years. Shelter costs, amounting to one-third of CPI, rose 3.8% on an annual basis. This level has not been seen since the 2007 housing crisis wreaked havoc on the US real estate market.

Despite pay increases of 4.8% this year, real hourly earnings decreased 1.9% over the past 12-months. Service costs rose at the fastest pace since 2007 as well, advancing 3.4% over the past year. Apparel costs are also up by 5% since last November. Everywhere you look, prices are drastically rising.

Overall, the cost of living is astronomical. Basic necessities such as food and shelter price increases have caused more middle-class Americans to begin living paycheck to paycheck. The Federal Reserve claimed it would step in if inflation reached an unsustainable level. A 6.8% increase is unsustainable, inflation is not transitory, and neither the government nor the Fed has made a valid effort to control this growing problem.

Printing and Borrowing Always Ends Badly

December 8, 2021

Printing and Borrowing Always Ends Badly

As more countries copy the Federal Reserve’s monetary policy without the global demand of the US dollar, financing trade and fiscal deficits printing a weakening currency, nations become more dependent on the US dollar.

Neither domestic nor international citizens demand local currency, and governments continue to build large fiscal and trade imbalances believing the magic money tree will solve everything. However, as confidence in their domestic currency collapses, global US dollar-denominated debt soars because very few investors want local currency risk and central banks need to build US dollar reserves to cushion the monetary debasement blow.

Implementing aggressive so-called expansionary policies almost always backfires because the impact on growth of large spending plans is minimal, and the destruction of purchasing power of the currency rises.

Governments always want to believe that they will be able to disguise their imbalances with monetary debasement, but the effect is the opposite.

It is, therefore, no surprise that most global currencies have depreciated against the US dollar even in a year of high Federal reserve injections and commodity price rises. When a commodity exporting country sees its currency collapse despite rising exports, you know that -again- the myth of modern monetary theory has evaporated.

As the domestic economy and currency in countries like Brazil, Argentina or Turkey get worse, governments turn the blame to the International Monetary Fund.

The relationship of countries with the International Monetary Fund (IMF) always makes the headlines when governments have already spent the money they borrowed and do not want to return it. Interestingly, few seem to criticize the IMF when it rescues governments from their fiscal imbalances, and harsh comments only surface when the money must be paid back.

…click on the above link to read the rest of the article…

Mainstream Economists Struggling to Hide the Incoming Economic Collapse

December 7, 2021

Mainstream Economists Struggling to Hide the Incoming Economic Collapse

Alternative Economists Were Right, The Stagflation Crisis Is Here

Photo by Annie Spratt

For many years now there has been a contingent of alternative economists working diligently within the liberty movement to combat disinformation being spread by the mainstream media regarding America’s true economic condition. Our efforts have focused primarily on the continued devaluation of the dollar and the forced dependence on globalism that has outsourced and eliminated most U.S. manufacturing.

The problems of devaluation and stagflation have been present since 1916 when the Federal Reserve was officially formed and given power, but the true impetus for a currency collapse and the destruction of American buying power began in 2007-2008 when the Financial Crisis was used as an excuse to allow the Fed to create trillions upon trillions in stimulus dollars for well over a decade.

The mainstream media’s claim has always been that the Fed “saved” the U.S. from imminent collapse and that the central bankers are “heroes.” After all, stock markets have mostly skyrocketed since quantitative easing (QE) was introduced during the credit crash, and stock markets are a measure of economic health, right?

The devil’s bargain

Wrong.

Reality isn’t a mainstream media story. The U.S. economy isn’t the stock market.

All the Federal Reserve really accomplished was to forge a devil’s bargain: Trading one manageable deflationary crisis for at least one (possibly more) highly unmanageable inflationary crises down the road. Central banks kicked the can on the collapse, making it far worse in the process.

The U.S. economy in particular is extremely vulnerable now. Money created from thin air by the Fed was used to support failing banks and corporations, not just here in America, but around the world.

Why does it matter where those dollars came from?

…click on the above link to read the rest of the article…

The Fed Will Break the Economy

December 5, 2021

The Fed Will Break the Economy

Last week, the Fed was handed an unexpected gift as first-time jobless claims fell to the lowest level since 1969, which gives the Federal Reserve the green light to continue tapering its $120 billion monthly purchases of U.S. Treasury and mortgage-backed securities. Given the Fed’s dual mandate of maximum employment and stable prices, low unemployment claims along with a low unemployment rate allow the Fed to focus on combating inflation.

To fight inflation, the Fed only has two policy tools. The Fed can raise the federal funds rate, which is currently at 0 percent, and it can taper or reduce the size of its balance sheet. While those two tools are good at fighting monetary inflation, or rising prices associated with money printing, neither are useful for fighting supply-chain inflation.

The Fed isn’t concerned about how inflation manifests itself but only its ability to fight inflation. At the Federal Open Market Committee’s Nov. 3 press conference, Fed Chair Jerome Powell announced the committee has decided it was appropriate to reduce its asset purchases.

Starting in mid-November, the Fed would reduce its purchases of U.S. Treasury and mortgage-backed securities from $120 billion per month to $105 billion per month. In mid-December, the Fed will further reduce its asset purchases to $90 billion per month. Many pundits believe the Fed will increase the pace of its reductions at its Dec. 15 press conference, which will mark the last Federal Open Market Committee meeting for 2021.

For the Fed, the need to slow the rate of inflation is a matter of maintaining credibility. Congress has assigned the role of maintaining stable prices to the Fed, which has determined that 2 percent annualized inflation is a reasonable target. With the Consumer Price Index rising at a rate of 6.2 percent on a seasonally adjusted rate in October, there are serious political ramifications for Congress should the Fed be unable to control inflation.

…click on the above link to read the rest of the article…

The Futility of Central Bank Policy

November 22, 2021

THE FUTILITY OF CENTRAL BANK POLICY

It is only now becoming clear to the investing public that the purchasing power of their currencies is declining at an accelerating rate. There is no doubt that yesterday’s announcement that the US CPI rose by 6.2%, compared with the longstanding 2% target, came as a wake-up call to markets.

Along with the other major central banks, the Fed’s reaction is likely to be to double down on interest rate suppression to keep bond yields low and stock valuations intact. The alternative will lead to a major financial, economic and currency shock sooner rather than later.

This article introduces the reader to some of the basic fallacies behind state currencies. It explains the misconceptions policy planners have over interest rates, and how central banks have become contracyclical lenders, replacing commercial banking’s credit creation for non-financial activities.

In effect, narrow money is being used by the major central banks in a vain attempt to shore up government finances and economic activity. The consequences for currency debasement are likely to be more immediate and profound than cyclical bank credit expansion.

Introduction

It is becoming clear that there has been an unofficial agreement between the US Fed, Bank of England, the ECB and probably the Bank of Japan not to raise interest rates. It is confirmed by remarkably similar statements from the former three in recent days. When, as the cliché has it, they are all singing off the same hymn sheet, those of us not party to agreements between our monetary policy planners are right to suspect they are doubling down on a market rigging exercise encompassing all financial markets.

…click on the above link to read the rest of the article…

Gold-O-Mania is Coming

November 19, 2021

GOLD-O-MANIA IS COMING

The buoyancy of markets in recent years has lulled central bank heads into a false conviction that they had saved the world after the 2006-9 Great Financial Crisis.

But central bankers continue to navigate like drunken sailors between the evil forces of Scylla and Charybdis as in Homer’s Odyssey.

Few of the bankers have understood that printing unlimited and worthless paper money will not allow them a pass the strait of Messina without major, or more likely catastrophic, damage to the world economy.

As exuberance continues to dominate intoxicated stock market investors, they haven’t yet noticed that all is not well on the perilous seas.

Still, most markets continue to respond positively to the printing press rather than to the underlying fundamentals.

Printing presses don’t create real value, instead they create bubbles full of worthless air. But sadly intoxicated investors confuse air, which is free and has no value, with real, intrinsic values.

To take an example, what is the intrinsic value of Bitcoin or BTC? How should BTC be valued?

Does the $60,000 price today reflect the real value or was the 10 cent price 10 years ago more correct?

BITCOINOMANIA

Are we today seeing Bitcoinomania similar to Tulipomania in the 1630s?

If not, can someone tell me at what price Bitcoin is fully and properly valued?

The Bitcoin aficionados will tell us that BTC is modern money and superior to any other currency. Well maybe they are right, but history must prove that. The 11 year history of Bitcoin is hardly sufficient to prove that it will fare better than any other money. We must remember that so far in history no currency has ever survived in its original form except for gold.

And the 5,000 year history of gold as money certainly makes it superior to all fiat currencies as well as cryptocurrencies.

…click on the above link to read the rest of the article…

People Blame the Federal Reserve & Never Politicians

November 15, 2021

People Blame the Federal Reserve & Never Politicians

Every now and again I get those stupid hate emails to blame the federal reserve and central banks for everything while NEVER once do they ever look at the history of central banks and how Congress has been manipulating the law changing the definition of what the Fed was even supposed to be.

There do not even know why there are branches of the Fed. If there was just one interest rate and one policy set in Washington, then why do we even have branches of the Fed if they no longer act independently? For you see, when the Fed was created, the branches were to manage the capital flows. Each branch was independent and they would lower or raise the interest rate in their jurisdiction depend ding on the flow of money.

Even the currency it first began to print was done so by each branch. The Panic of 1907 was instigated by the San Francisco earthquake of 1906 which caused the capital to flow from East to West and that created a shortage of cash in New York and thus banks failed.

It was Roosevelt who usurped all the independence of the Fed and created a Washington monopoly to push his socialist agenda into place. We are hearing the same pitch of equality once again and Biden is going to take over the Fed and install his people. This will be the final alteration of the Fed making it entirely political to usher in this Great Reset. What was once an independent central bank, owned by the bankers to prevent taxpayer money from being used to bail out the banks where today they banks may own the Fed in name only, but the reins of power are political.

…click on the above link to read the rest of the article…

5 Ways Economy’s Worse Than You Think

November 14, 2021

5 Ways Economy’s Worse Than You Think

https://youtu.be/fpbORCUTMq4

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