Inflationary Hubris, the Fed & Gold: Can Inflation Actually Be Good for Everyday Americans?

The word “transitory” has itself proven to suddenly become “transitory” because it has disappeared only to be replaced by, drum roll please…

by Michael Ballanger via Streetwise Reports

I had thought that prior to this week, I had seen pretty much everything when it comes to the financial press shoveling out Wall Street “spin” in order to proper up the markets prior to the end-of-year bonus-calculating period. I was wrong. The most widely watched financial news medium in the world is CNBC, the very place where the phrase “talking heads” found its origin and the place where, during the dotcom boom of the 1990’s, former Trump Presidential Advisor Larry “Strong-Dollar-I-Hate-Gold” Kudlow would huddle with partner in crime Jim Cramer in a constant lovefest praising the second-largest financial bubble in history.

Kudlow, being a Trump supporter, can no longer show his Republican face in public while Jim Cramer recently tweeted out his esteemed opinion that the U.S. military should enforce the, ever-ignorant of the U.S. constitution and of the entire concept of “Freedom of Choice.”

When I stumble across a news article in the CNN business section by a lady named Allison Morrow that says that “inflation can actually be good for everyday Americans and bad for rich people,” I have to do an about-face, neck-snapping one-eighty to try to see the nature of the head injuries that would cause such an asinine opinion to be aired in a publication as widespread as CNN. It falls directly between the categories of “fake news” and “fertilizer” because there is nothing – repeat – NOTHING that is even vaguely positive for the average American (or Venezuelan or Turkish) citizen that relates to the rising cost of living.

What is worse than being subjected to such an insulting piece of “journalism” is the nature and intent of it delivery. We have heard Fed Chairman Powell, a former stock salesman for the “God’s Work Inc.” guys over at Goldman Sachs, tell the working-class rabble for month after month in 2021 since everything from lumber to copper to chicken and heating oil prices exploded out of the gate that inflation was “transitory.” What his message was meant to do is assuage the bond market vigilantes and stock market “dippers” so as to keep a bid under fixed income and the five remaining bullishly configured tech stocks until he got his re-nomination ticket from Joe Biden. Now that he has it, the word “transitory” has itself proven to suddenly become “transitory” because it has disappeared only to be replaced by the NEW narrative that is – (drum roll, please) – that inflation is a savior sent from above to rescue Joe Sixpack.

Gone forever is the “Goldilocks” metaphor where the economy is running not too hot and not too cold but rather “just right” because an economy running “a little hot for awhile” is OK. Well, stand by for a slight change of narratives because now the word we are getting is that “taper” must replace “transitory” and that P/E multiples that were permitted to naturally balloon under a disinflationary umbrella will still be allowed to swell under the protective aura of the inflationary, asset-insulating safety net.

In other words, keep buying stocks.

The great and powerful deity of all financial letter writers was my hero, Richard Russell, and he taught us long, long ago to “Follow the Money” when it comes to markets, politics, the media, foreign policy, and controversy. All one needs to practice in 2021 and beyond is that one simple rule and no better time than right now. We are all under the impression, largely mistaken, that it is the Federal Reserve Board that sets monetary policy and that it is Congress and the Senate that set fiscal policy while all are dressed up with bows and ribbons and perfumed doilies and delivered by the political leaders that claw their way to the podiums in order to gain the recognition that keeps them in office for decade after decade.

However, that is nothing but a load of well-engrained hokum because there is only one group that is in control and it is they that control the currency. As Baron Rothschild so brilliantly opined many, many years ago “Give me control over a nation’s currency and I care not who makes the laws,” so expanding upon that exceedingly simple premise and using Richard Russell as your tour guide, where pray tell, does that trail of breadcrumbs lead?

Why, to Wall Street, of course. It leads to the center of the universe of power that finances not only American commerce but more significantly, American policy. Wall Street and its crony capitalist clients control every media outlet on the planet. It was Marshall McLuhan that concluded that “the medium is the message” as it would pertain to the scale and form of human association and action and it is this manifestation of intent that allows a narrative like “the disinflationary trend of the past twenty years was cause for the greatest stock price advance in history” to be conveniently replaced with the “Inflation is now ok” Trojan Horse.

I am not going to insult my readers by lecturing them with a bullet point explanation of the insidious impact of rising consumer prices upon the average citizen and that means every global citizen. It is an insult to the intelligence of the reader to attempt to force feed such a feeble modification to the current justification for owning stocks at a point where valuations are at stratospheric levels.

This all comes on top of a year in which multiple voting Fed members (including the carnival barker chairman) were chastised for openly trading for their own personal profit and in some cases, dealing in securities being actively bought by the Fed itself. Just as in ancient empires where “all roads lead to Rome,” in the American Empire, “all roads lead to Wall Street.” The intersection of Broad and Wall is at once the intersection of culture, politics, medicine, and national identity and that kind of idolatry can continue unchallenged and unblemished for as long as the masses are kept under control.

In keeping with the spirit of collective cynicism in which I take great pride, I find it an alarming paradox that people think that COVID-19 pandemic was a “black swan event,” a “fluke,” a “biolab accident” that is now being gallantly battled by our political and scientific elders in an effort to protect us from the threat of infection. It seems to me that if you follow Richard Russell’s guidance, it forces you back to mid 2019, when Jerome the Barker decided to abandon the much-publicized decision to “normalize” the Fed’s balance sheet, which, I should add, was the oh-so-flippant comeback lobbed by Ben Bernanke at Congress in respect of the “Do you print money?” exchange in 2014.

I recall questioning the decision to establish those REPO cash injections from the Fed into the “banking system” (translation: “member bank accounts”) where the recipients were all publicly traded entities that had significant Wall Street “skin” at risk. This was occurring after the first signs of rising consumer prices were appearing which were exacerbated by the REPO activity (at least optically) and as you will recall, the Master Divining Rod called G-O-L-D immediately sprang to attention with the move from $1,250 to $1,650 by February of 2020.

I find it, shall we say, odd, that within literally weeks of the ascent of gold and the incipient arrival of escalating inflation that a mysterious virus suddenly arrives and has the immediate effect of stifling those rising prices. Gold, copper, and oil as well food prices all fell sharply and that is exactly what gave the Fed the window of opportunity to hit the liquidity-pump gas pedal. The deflationary crash of March 2021 was immediately answered with the inflationary response of the next six months. Eighteen months later: S&P 4,500 – end of story.

Where I find myself staring into the mirror of self-reflection is this: the Fed “people” are not unintelligent; they are many things I would love to label as unflattering but “stupid” they are not. Their weakness lies in the fact that they have been levitated to the position of “rock star” status by a society that has been spoon-fed a mantra that demands it.

When I was growing up in my testosterone-filled 1970s, the last job I wanted to have EVER was in a bank. Bankers were NERDS and sports stars were MEN and because sports got you at least close to “MEN” status, I avoided “banker” status not because I thought it was a bad way to make a living but more so because it was an “unattractive” profession for a guy like me that idolized hockey players.

Fast forward to 2002 – suddenly we have the movies like “Wall Street” that basically glamorizes Michael Douglas and marginalizes Charlie Sheen but what it shows the average kid flipping burgers at the local Golden Arches is that the babes like Daryl Hannah liked the “money guys.”

Today’s societal “rock stars” are now social media gurus that can handle all facets of their lives including money, which allows them to create cult followings and that is where to dovetails right back to the central bank governors. They are resigning now at a feverish pace for two reasons:

  • Number One: there is no longer any money in it (reference Richard Russell rule: “Follow the Money”)
  • Number Two: the odds of a Twitter feed identifying their home location (by season and continent, since they all own many) has increased.

Wall Street created an entire global network of central banking “rock stars,” although the concept lies squarely in the purview of the House of Rothschild, arguably the most secretive of all the power families of the past four hundred years. For this reason, it is imperative that we all invest in a manner that gives them space, but not license, to commit their acts. What I do insist upon is that we refuse to deify these men and women that have passed many an exam but rarely if ever, a payroll. They have never had to meet a margin call nor explain to a spouse why heating bills are going to prevent the summer vacation. Forget the fact that they would not have lasted five minutes in the Malton Public School recess yard or three shifts in a Dixie Beehive training camp, they are not gods. As investors, we must force ourselves to think independently as historians of market behaviors and but not as disciples of market history, because recency bias can be he most insidious of cognitive disfunction.

Where we are today moving out of 2021 and in to 2022 is a state of flux where the earmarks of success enjoyed by investors inattentive to balance sheets and income statements (circa 2009–2021) are going to get crushed while those that can tell you where “depreciation” can be found will once again return to prominence and popularity, Daryl Hannah be damned!

Gold and silver investors, whether old, decrepit Boomers like me or younger Millennial newbies like the Reditt crowd or the Wall Street Silver crowd, are going to be greatly rewarded in 2022. Hubris so prevalent in the new policy-making crowd of 2021 is going to be met with baseball-bat-like resistance in 2022. Those that look to the writings of the soon-to-be-defunct “Silent Generation” (born 1926–1945) whose members fought in the WWII and Korea and built the greatest manufacturing and inventive economy in all of history are going to rise from the oppression of ridicule to the throne of admiration as gold and silver (representing monetary safety) along with “real assets” (that generate cash flow, jobs, and value) replace the garbage that dominates the investing psyche today.

And in the words of a savant genius, “…and that’s all I have to say about that.”

Follow Michael Ballanger on Twitter @MiningJunkie. He is the Editor and Publisher of The GGM Advisory Service and can be contacted at [email protected] for subscription information.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.