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The Hard Asset Inflation / Paper Asset Deflation Theory

The Hard Asset Inflation / Paper Asset Deflation Theory

All fiat currencies are no more than floating abstractions of value. Society has put its faith in fiat currency issued by governments. These government-issued currencies are not backed by a physical commodity, such as gold or silver, but rather by the promises from the government that issued it. A difficult question investors today face is determining which assets will appreciate most thus rising in value and which form to hold their wealth.The value of fiat money is derived from supply and demand and the stability of the government that issues it. Over the years many promises have been made that simply cannot or will not be honored. History and many real-life examples exist that indicate that promises are easier to make than keep.

It is very possible in the near future we may see a strong bifurcation of the financial system. The Hard Asset Inflation / Paper Asset Deflation Theory laid out below is based on the idea that as wealthy individuals begin to realize the fragility of the current financial system they will shift their investment preferences to items of substance.

This repositioning of wealth in assets could occur rather rapidly during a period of inflation. If such a revamping of how the wealthy invest takes place it could drastically add to any inflationary trends. In short, some investments would fall like a stone while others soar. Imagine real estate doubling in value while pensions are cut and stocks falter. This dovetails with my theory the Fed should be ecstatic so many people have been willing to invest in intangible assets because it has helped to minimize inflation.

…click on the above link to read the rest…

“No Way Out” for Global Markets Trapped in a Doom Loop of Debt

“No Way Out” for Global Markets Trapped in a Doom Loop of Debt

In this compelling conversation with Wealthion founder, Adam Taggart, Matterhorn Asset Management principal, Matthew Piepenburg, addresses the current and vast range of headline market topics, signals and risks. Inflation, deflation, risk assets, bond stress, cryptos, war, bank failures, CBDC’s rise, trapped policy makers and, of course, the topic of precious metals are all carefully and plainly discussed.

Piepenburg’s broader views on current and future financial conditions are bluntly yet realistically presented as a “no way out” scenario for global economies distorted by cornered central bankers. The bottom line is as simple as it is incontrovertible: The global economy is stuck in a doom loop of debt.

Either central banks raise rates to allegedly “kill inflation” by killing the economy and markets, or they resort to more mouse-click money and kill the currency in your wallet.

Historically, all debt-cornered nations spur collapsing markets followed by collapsing currencies and inflation-driven social unrest. Leaders of all eras and stripes (left or right) then address this unrest with tighter, more centralized controls over our economies and lives. CBDC is a classic and modern symptom of this timeless pattern.  So is war. The current era will be no exception, as history (from ancient Rome to Chairman Mao, or Napoleon to the rise of fascist leaders of the 1930’s) offers no exception.

Piepenburg tracks the current evolution of this trend in a Federal Reserve that has tightened too fast and too high, breaking everything in its path in one dis-inflationary debt or banking crisis after the next, which are inevitably “solved” via more inflationary and mouse-clicked dollars. End result? Currency debasement, for which gold is one obvious and historical solution rather than “gold bug” apology.

…click on the above link to read the rest…

Weeks Away from Whole Shithouse Coming Down – Bill Holter

Weeks Away from Whole Shithouse Coming Down – Bill Holter

Precious metals expert and financial writer Bill Holter said in June it was “game over, they’re pulling the plug.”  The Fed went on an aggressive interest rate raising policy and is still raising rates.  Now, the economy is staggering.   Holter explains, “For sure, we are already in a recession.  We are now in the third quarter of negative growth.  I think it is laughable that people  put odds on whether or not we are going to go into a recession because it is obvious–we are already in a recession.  Rates rising have absolutely frozen the real estate market.  If you own a property, who is going to buy it?  Rates have gone from 3.25% to more than 7%.  I am on the record that once we saw a 3% yield on the 10-Year Treasury, you would start to see a tightness in credit.  Now, we are over 4%.  What few people are talking about is what has this already done to the derivatives market? . . . Think about how big the derivatives market is.  Total credit worldwide is $350 trillion, but you have derivatives pushing $2 quadrillion.  I have said this all along, derivatives will blow up.  Warren Buffett has called them financial weapons of mass destruction.  They are far bigger than central banks can fix.”

Holter goes on to say, “The real economy runs on credit.  Everything you look at, everything you touch and everything you do every day has many uses of credit to get to the final product or situation.  So, once credit freezes up, it’s completely game over.  In a past interview, I said they are pulling the plug.  They have to pull the plug because, mathematically, the debt cannot be paid.  The derivatives cannot perform.  So, they have to pull the plug.  They also have to do one other thing, and that is they have to kick the table over…

…click on the above link to read the rest…

Concurrent Deflation and Hyperinflation Will Ravage the World


FLATION will be the keyword in coming years. The world will simultaneously experience inFLATIONdeFLATIONstagFLATION and eventually hyperinFLATION.

I have forecasted these FLATIONARY events, which will hit the world in several articles in the past. Here is a link to an article from 2016.

With most asset classes falling rapidly, the world is now approaching calamities of a proportion not seen before in history. So far in 2022, we have seen an implosion of asset prices across the board of around 20%. What few investors realise is that this is the mere beginning. Before this bear market is over, the world will see 75-90% falls of stocks, bonds and other assets.

Since falls of this magnitude have not been seen for more than three generations, the shockwaves will be calamitous.

At the same time as bubble assets deflate, prices of goods and services have started an inflationary cycle of a magnitude that the world as whole has never experienced before.

We have seen hyperinflation in individual countries previously but never on a global scale.

Currently the official inflation rate is around 8% in the US and Europe. But for the average consumer in the West, prices are rising by at least 25% on average for their everyday needs such as food and fuel.


So the world is now approaching calamities on many fronts.

As always in periods of crisis, everybody is looking for someone to blame. In the West most people blame Putin. Yes, Putin is the villain and it is his fault that food and energy prices are surging. Nobody bothers to analyse what or who prompted Russia to intervene, nor do politicians or main stream media understand the importance of history, which is the key to understanding current events.

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

Will the bullwhip do the Fed’s job on inflation?

Will the bullwhip do the Fed’s job on inflation?

The only thing surprising about the freight market slowdown is the speed at which it’s unfolding. The supply chain “bullwhip effect” is both predictable and expected. The surge of inventories and declining freight costs/capacity imbalances will be deflationary.

The trucking market has slowed. Demand for trucks usually surges during the Spring, but this year, demand for truckload freight has broken out of this typical seasonal pattern.

Outbound Tender Volume Index (OTVI) is an index which measures the volume of truckload order requests in the contract truckload market. The OTVI chart shows year over year activity from 2018 to this year.

The bullwhip effect is something every supply chain 101 student learns about – the idea that upstream providers overproduce in reaction to a one-time demand shock.

What is the bullwhip effect? 

According to the Chartered Institute of Procurement and Supply, the bullwhip effect “is defined as the demand distortion that travels upstream in the supply chain from the retailer through to the wholesaler and manufacturer due to the variance of orders which may be larger than that of sales.”

The best way to think of this in terms of COVID is that in the early part of the cycle, the Federal Reserve was pouring trillions of dollars into the economy to ensure that the market didn’t collapse. Consumers went out and spent all of that money on physical goods. At the same time, production in China and the U.S. was shut down or limited. The combination – stimulating consumption but limiting production – caused the American consumer to burn through almost all inventory.

Retailers ordered more goods based on the inflated demand at that time. Upstream to them, wholesalers and manufacturers did the same. Along that chain some even ordered bumper stock.

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

Chaos and the Triumph of Survival


One of the most horrifying works of art is Bruegel’s “The Triumph of Death” painted in 1562. The painting depicts the end of life on earth.

I sincerely hope that this is not what the world will literally look like in the next decade or two but metaphorically this is not an unlikely depiction of the chaos that could hit us all.

For a detailed description of the grim painting see here

Triumph of death

The Black Death plague of the 14th century, which killed up to half of the world’s population, clearly had a major influence on the painter.

The moral message is that when chaos hits, the destruction will affect everyone, rich and poor, young and old. No one will escape by power or devotion.

The financial, economic and moral devastation which is about to hit the world will for more than 99.5% of the people come out of the blue like a flash from a clear sky.

For most people, coming events will thus be like the definition of the word CHAOS: “A state of total confusion and disorder”.


Talking about disorder, just like the Black Death that inspired Bruegel’s painting, the world is now facing a global pandemic. But rather than the nearer 50% of global population that perished in the mid 1300s, today we are looking at total deaths from the current pandemic of 0.06% of the world population! And even that figure might be overestimated due to the classification rules applied.

For that minuscule percentage the world has now been paralysed for the third year soon.

There are lockdowns, quarantines, compulsory vaccines with unlined boosters, covid passports, closed schools, closed offices, major industries like leisure haemorrhaging, airlines going bankrupt, shortages of labour, components, products, closed borders, and for the few people who dare to and can travel across borders, more bureaucracy, paperwork and tests than in a police state…

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

Peeling The Economic Onion Will Bring On The Tears

Peeling The Economic Onion Will Bring On The Tears

Unless you have the fortitude of a Greek God, peeling back the layers of our current “economic onion” will very likely bring you to tears. Looking back over the last several years could make a person argue that massive stupidity has been a huge factor in keeping the economy afloat. In short, those pulling the strings have constructed a false economy that is unsustainable and will at some point implode.

In most situations that I research it seems that as the investigation takes me deeper and deeper into the numbers I come upon some rather ugly realities that are difficult to face. In the metaphoric sense, the term peeling peel back the onion is an act someone undertakes in order to understand what lurks below. To expose the various layers of something investigators often find they have to peel away falsehoods and misconceptions to discover just how corrupt the message we are told truly is.

The area where most people seldom venture is protected by myths and half-truths. An example of this can be seen in America’s relationship with China. For decades China exported deflation as it gladly traded cheap goods for jobs. That has come to an end, no longer is China’s labor market the cheapest in the world. This is now beginning to show up in the cost China charges those buying its products.

The illusion of a robust economy has been propelled forward by the sheer “quantity” of financial growth and deficit spending rather than anything resembling quality. Poorly crafted and shockingly large spending bills have created a situation encouraging government agencies to spend like drunken sailors. It seems that again Federal agencies as well as state and local governments are flush with cash as the result of another stimulus package.

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


Michael Pento: First Disinflation, Then Deflation, Then Big-Time Inflation

Michael Pento: First Disinflation, Then Deflation, Then Big-Time Inflation

Suddenly investors are panicked that (hyper)inflation is taking over.

But what if they’re mistaken? That could be a costly mistake if they’re betting their portfolio’s future on it. Because there’s a strong case to be made that we’re now actually entering a period of dis-inflation, one that has a high risk of tipping into outright deflation by next year.

To argue this, investment manager Michael Pento, who pulls no punches, joins Wealthion for this video explaining why the Fed and Congress don’t currently have sufficient air cover to continue the same magnitude of stimulus the market is now addicted to — and thus won’t be able to resume it until after the next painful market correction arrives.

Michael then proceeds to explain why the bond market is such a ticking time bomb right now for investors.

And, of course, he shares his views on his favored asset classes for each stage of the upcoming progression he sees:

1. first disinflation, then…

2. outright deflation, and then…

3. a hugely inflationary response from our central planners

Watch the full interview below:

When Inflation is really Deflation

QUESTION: Why is the Fed doing so much Reverse Repo? Do you think it will hit $2 trillion?


ANSWER: I understand that people seem to be talking up the reverse repo activity as doom and gloom. The Federal Reserve has been raising interest rates and boosted the return to fight inflation. The reverse repo facility takes in cash primarily from money-market funds, as well as government-sponsored companies and banks. This facility offered a return of zero percent to eligible users previously, and then the Fed moved it up to 0.05%, while at the same time lifting another rate, called the interest on excess reserves rate to 0.15% from 0.10%. The Fed is actually competing against the US Treasury in taking in cash, which is diverting it from government debt.

What the Fed does not understand because it is beyond their control are the international capital flows. Raising rates to fight domestic inflation is attracting capital from Europe, where banks are charged negative interest rates if they have excess cash. They open a branch in the USA and then send the excess cash to the state, and then they put it at the Fed. In this manner, the Fed has no idea how much money they are actually attracting globally.

I helped the Japanese lower their trade surplus by simply buying gold in New York, taking delivery, shipping it to London, and then selling it and starting all over again constantly. The trade statistics only measure dollars — not goods. You can buy a hot dog and have it delivered in London, and that too would reduce the trade surplus. It’s all a numbers game, and those in government have no ability to figure out the real world.

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

Where Will The Next Deflationary Shock Come From?

“Whenever I hear numbers like this, I look back to my childhood growing up in Hungary, where…[the] value of money meant nothing. I’m very worried this is an unstoppable situation because the longer the Fed waits, the more they will have to raise rates. So, we’re basically painting ourselves into a box, and I don’t see how we’re going to get out of it.
– Thomas Peterffy, chairman and founder of Interactive



It seems as though wherever one looks, soaring prices are in the news. Everything from the rising price of lumber to oil, to housing, to food is dominating headlines. This week, key inflation data was released, and let’s just say it wasn’t pretty. The Consumer Price Index (CPI), which measures a basket of goods as well as energy and housing costs, rose 4.2% year-over-year, surpassing expectations from a Dow Jones survey that anticipated a 3.6% increase. The month-to-month gain was also much higher than expected – at 0.8% versus 0.2%. Additionally, the Producer Price Index (PPI) – another key inflation indicator – spiked 6.2% for the 12 months ended in April, which marked the largest increase since the Bureau of Labor Statistics started tracking the data in 2010. The PPI rose 0.6% month-over-month, which was twice the rate expected in a FactSet survey.

Markets were rattled by the data – as nearly everything sold off on Wednesday after CPI data was published. Markets gained back some of the losses on Thursday morning, before selling off slightly mid-day when PPI data was released. Despite these key inflation indicators signaling trouble ahead, economists and policy makers have attempted to quench fears by signaling that the rising prices are “transitory.” Federal Reserve Atlanta Fed President Raphael Bostic said Wednesday that he expects bouts of inflation volatility through September…

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

Relation Between Inflation and Deflation

For most commentators inflation is about persistent increases in the prices of goods and services. However, is this the case?  For example, the definition of human action is not that people are engaged in all sorts of activities as such, but that they are engaged in purposeful activities–purpose gives rise to an action.

Similarly, the essence of inflation is not a general rise in prices as such but an increase in the supply of money, which in turn sets in motion a general increase in the prices of goods and services in terms of money.

Consider the case of a fixed stock of money. Whenever people increase their demand for some goods and services, money is going to be allocated towards these goods and services. In response, the prices of these goods and services are likely to increase– more money will be spent on them.

Since we have here an unchanged stock of money, less of it can be now allocated towards other goods and services. Given that the price of a good is the amount of money spent on the good this means that the prices of other goods will decline i.e., less money will be spent on them.

In order for there to be a general rise in prices, there must be an increase in the money stock. With more money and no change in the money demand, people can now allocate a greater amount of money for all goods and services.

According to Mises,

Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check…

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

Too Busy Frontrunning Inflation, Nobody Sees the Deflationary Tsunami

Too Busy Frontrunning Inflation, Nobody Sees the Deflationary Tsunami

Those looking up from their “free fish!” frolicking will see the tsunami too late to save themselves.

It’s an amazing sight to see the water recede from the bay, and watch the crowd frolic in the shallows, scooping up the flopping fish. In this case, the crowd doing the “so easy to catch, why not grab as much as we can?” scooping is frontrunning inflation, the universally expected result of the Great Reflation Trade.

You know the Great Reflation Trade: the world has saved up trillions, governments are spending trillions, it’s going to be the greatest boom since the stone masons partied at the Great Pyramid in Giza. It’s so obvious that everyone has jumped in the water to scoop up all the free fish (i.e. stock market gains). Only an idiot would hesitate to frontrun the Great Reflation’s guaranteed inflation.

Unless, of course, what we really have is a tale of reflation, told by an idiot, full of sound and fury, signifying nothing. Everyone frolicking in the shallows scooping up the obvious, easy, guaranteed gains is so busy frontrunning inflation that nobody sees the tsunami rushing in to extinguish the short-sighted frolickers. ( When Does This Travesty of a Mockery of a Sham Finally Implode? 3/3/21)

Gordon Long and I discuss The Deflationary Tsunami racing toward the frolickers in a new video program. It’s not that there aren’t inflationary dynamics in play; there are. The issue is that not all the dynamics in play are inflationary, and the deflationary dynamics have been building for the past two decades.

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


Deflation: Friend or Foe?

Deflation is the most feared economic phenomenon of our time. The reason behind this a priori irrational fear (why should we be afraid of prices going down?) is the Great Depression. The most severe economic crisis of the 20th century was accompanied by a massive deflationary spiral that pushed prices down by 25% between 1929 and 1932 (this is equivalent to an annualized inflation rate of minus 7% over that period). Given the impact that the Great Depression had on the social imaginary of the American and European societies, it isn’t surprising that people tend to associate deflation with crises and economic hardship.

Fears of deflation have even led monetary authorities all over the world to set positive inflation targets. The ECB, for instance, defines price stability as an annual inflation rate of “below, but close to, 2%” even though, strictly speaking, price stability should imply that an annual increase in the price level of 0%.  Similarly, the Federal Reserve aims at an inflation rate of 2% over the long run, whereas the Reserve Bank of Australia has an inflation target of between 2 and 3%.

Despite the bad press deflations gets, the historical evidence suggests that deflation isn’t as bad as people may think. Using a sample of 38 countries over the period 1870-2013, four economists from the Bank for International Settlements find that, on average, countries experienced economic growth during deflation years. In fact, if we look only at the postwar era, data reveals that per capita growth has been higher during deflation years as opposed to inflation years.

This isn’t the only piece of evidence that supports the idea that deflation isn’t necessarily detrimental to economic growth. A 2004 paper covering 17 countries show that the Great Depression is the only period in the 19th and 20th centuries in which there is a strong link between deflation and depression…

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

The End Game

The End Game

Dear Investors:

Markets are cyclical. Today, stocks trade at record high valuations while commodities are historically undervalued in relation. The setup is in place for a macro pivot in the relative performance of these two asset classes. Comparable conditions were present with the 1972 Nifty Fifty and 2000 Dotcom bubbles as we show in the chart below.

As capital seeks to redeploy towards the highest growth and lowest valuation opportunities, we expect analytically minded investors will soon be rotating, if not stampeding, out of expensive deflation-era growth equities and fixed income securities and into cheap hard assets, creating a reversal in the 30-year declining trend of money velocity.

Today’s Modern Monetary Theory world with its double barreled fiscal and monetary stimulus is crashing head on with an accumulation of years of declining investment in the basic industries such as materials, energy, and agriculture. In our analysis, the “end game” for the Fed’s twin asset bubbles in stocks and bonds is inflation. We can already see it developing on the commodity front.

The scarcity of jobs and abundance of debt were factors preventing the economy from reaching its full growth potential even before Covid-19. Such have been the concepts underlying the output gap, the theoretical paradox that is thought to have held inflation in check over the course of the last business cycle. But based on comparable historic periods, the macro setup for inflation is more likely to be kicked off by an input gap, i.e., shortages in the primary resources needed for both a strong reserve currency and economic growth at the same time as policy makers pull out their biggest bazookas yet to boost aggregate demand. We expect a new wave of rising commodity prices, set up by past underinvestment in basic resources, to soon ripple through the global supply chain creating a headwind for real living standards. Welcome to the Great Reset.

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

Ben Hunt: Inflation Ahead!

Ben Hunt — highly respected fund manager, author, and former professor/entrepreneur/venture capitalist — says that to be successful in managing your wealth, there’s only one question that matters:

Are we entering a deflationary future, or an inflationary one?

The strategies and appropriate investment targets for each are extremely different, so you’d better answer correctly.

Though Hunt says as long as you identify the trend “roughly” right, you should do fine. You don’t have to be brilliant with the exact investments you put your capital into. As long as they benefit from the secular trend, its massive scale and momentum will do the heavy lifting.

So which kind of future are we entering?

Hunt thinks we’re at a very important inflection point. That after decades of deflation (e.g., chronically declining interest rates), we’re now transitioning into an era of secular inflation.

The $trillions in monetary and fiscal stimulus so far, and the near-certainty of much more to come, are certainly a big step in that direction.

And with asset prices completely distorted from reality, a struggling global economy, and an inflationary outlook, Hunt thinks the coming years will be extremely rocky for investors. Lots of cross-currents, with the only guarantee being that the majority of investment predicts will be foiled — as there remain very few active investors alive who have any experience managing capital in an inflationary environment.

Which is why Hunt is emphatic that now, more than ever, is the time to partner with a financial advisor who understands the risks in play, can craft an appropriate portfolio strategy for you given your needs, and apply sound risk management protection where appropriate:

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

Olduvai IV: Courage
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Olduvai II: Exodus
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