The damage in the interim is catastrophic. It will produce an IMPLOSION EXPLOSION event. Like a supernova that results when a star runs out of fuel and collapses in on itself, this near infinite quantity of paper printed is does not act as fuel. It does nothing. It’s a drain and drag on the system. And its Implosion is inevitable.
You can see it, feel it, sense it…
You can see it, feel it, sense it…
Submitted by AGXIIK:
We’ve agonized endlessly as to why gold is down 45% from its April 2011 high and silver’s dropped 70% plus from its high. We know these metal prices are rigged, yet despite constant rhetoric about supply issues, the consumption of silver at its total annual production and gold being bought at a rate 100% greater than it’s annual production, the prices have fallen continually.
Why is that?
Why is that?
We have little inflation in commodities. Yes, inflation hits where it hurts in food, rent and medical care, but the essential inflation sought by central banks is not there. They’re desperate for inflation and sufficiently frightened of this deflationary calamity to dive into Negative Interest Rates (NIRP) after nearly a decade of Zero Interest Rates (ZIRP) ZIRP is so last year. NIRP is the new paradigm that’s afflicted nearly half of all bonds and bank accounts. NIRP is the inevitable conclusion of a system that’s gone mad.
It’s exactly the wrong medicine, like bleeding a sick man, thinking that’s the cure, as if overproduction of FIAT will eventually produce the desired inflation The damage in the interim is catastrophic. It will produce an IMPLOSION EXPLOSION. event. Like a supernova that results when a star runs out of fuel and collapses in on itself, this near infinite quantity of paper printed is does not act as fuel. It does nothing. It’s a drain and drag on the system. And its Implosion is inevitable.
QE, FIAT printing and debt has added at least $60 trillion to the world’s monetary supply. It might be more, possibly even $80 trillion, but the over increase is at least 30-50% greater today than the total supply of M; all money in the world in 2009. This deluge of paper should have boosted inflation into double digits, even triple digits. But it has not yet arrived. M is trapped. It’s held in statis in banks doing nothing.
Economies in crisis such as Venezuela, Argentine and Brazil are exceptions, experiencing the woes of hyperinflation, running in some cases at an 800% annual rate and rising. The Venezuelan central bank flew in 27 747 cargo jets full of new currency just a few weeks ago. But their inflation is not as a result of inflated commodity prices. The commodities that boosted their economies are now down 50-75%. Their inflation is as a result of excess debt, QE, lack of consumer products and inability to pay their bills along with attacks by the central banks of the largest economies.
What I’m writing might seem a bit of a stretch, maybe out on a limb in its context, but there is something gnawing at me that tells me why we are not seeing hyperinflation and why we will see an explosion in the price of the least loved of all commodities; gold and silver. (except for those who almost instinctively know we are facing crises after crises in our world and love the precious metals)
There’s been bit of talk about the velocity of money and the fact that it’s very low, somewhere around 1. Actually that figure is probably high and perhaps even meaningless because all money today is paper, DIGIFIAT, electronic currency that’s assumed a life of its own to a certain degree. There is so much of it. M is almost organic in nature. If not alive, it does have its own gravitational fields. It’s also in a very unhealthy state as we will see.
It moves around almost of its own accord. It’s essentially uncontrollable and unobservable as to its effect on inflation. It should have an effect on prices but it doesn’t at this time. It has no perceptible effect on inflation because it is almost without any movement except in the electronic monetary flasks that contain it. It’s sleeping in the vaults of bankers, trapped in NIRP bonds; in illiquid securities that cannot be sold or marked to market for fear of further devaluation. Monetary velocity is like FIAT trapped in amber.
MV = PQ Money Velocity equal Price Quantity
We have many forces at work that are restraining the V of M as noted above
Cash is being demonized in an attempt to keep cash from moving into the economy in an uncontrolled and uncontrollable manner. Cash can whip up inflation. The more cash; the more inflation. See Venezuela and Weimer for those effects Cash is fuel to inflationary flames. It must be controlled to prevent incipient inflation and control the mobs who seek to use it to buy something of value outside the paper currency paradigms. That something could be gold and silver. We’re seeing people buy much greater quantities of precious metals if the demand for government mint coins, 1000 ounce bars and gold coins and bars are any indicator.
The paper printers send their paper product to the paper mongers who hoard it by buying paper securities with no yield or negative yield, furthering the damage to the real money that’s needed to create jobs, build businesses and strengthen economies. Businesses and consumers reduce or eliminate purchases, thus we see extreme excesses in paper money as a negative to healthy growth today because of the apparent negative toxic life force contained within Paper is toxic because it’s like a cancerous growth on the economy, dragging down the GDP. NIRP and debt exacerbates the drain to our life force. The whole world is all about NIRP and debt, the antithesis to economic health and financial well being.
NIRP tries to reduce monetary velocity but essentially ends up whipping a dead mule. The mule is capital. It should be working, as capital works, to build businesses and energize the consumer economy. But the world of business and the consumer is flaccid and declining. NIRP feeds on this and creates even more damage to the economy while stealing the thrift of savers and building mal investments. It does nothing to stir the animal spirits. It’s a poison to the system. It creates fear and attracts fearful capital, neither of which do anything to improve our economies, jobs or businesses.
It could be said that NIRP causes the V of M to go to zero or even less than zero. It’s a relatively slow drain today, no more than 50 to 75 basis points. But if it does not work its intended magic then it’s quite easy to increase the negative yield. The silent theft thus makes the V of M worse by degrees. More flogging the dying mule. Flogging will continue until morale improves.
It’s my opinion that the declining prices of gold and silver are the indirect result of NIRP and ZIRP, started in earnest 8 years ago. That whipped the price of silver to $50 an ounce based on the fear trade that QE would produce massive inflation. PM prices crashed as a direct result of manipulation by those who were tasking with printing QE to infinity and maintaining and increasing the world of NIRP and ZIRP
In this action the people directly responsible for these effects sowed the seeds of their own destruction. NIRP will create the Implosion Explosion of negative energy; fed by enormous amounts of rapidly decreasing FIAT buying power and value; fed by fear of losses that cannot be stemmed and final loss of all things of paper value. The result is a very rapid explosion of money into the hands of those who fear losing to the system, the machine that eats their funds, eats their very lives And they will seek that which has historically retained great intrinsic value.
I think that for all the force applied to damaging the value of precious metals in a time of massive commodity deflation this force will produce exactly the opposite result. As paper currency entropy goes fully negative in implosions reflected in the crash of bonds, stocks and other paper assets, the instinctive and immediate reaction of billions of people will be the same as what happened dozens if not hundreds of times in the past.
In the case of MV=PQ, they must remain in balance. But when MV moves up sharply as a direct result of people distrust of paper money as they flee the FIAT paradigm MV will kick PQ hard in the butt and shoot up prices beyond any of our expectations.
It’s starting now. The degree of force needed to suppress a rally in precious metals prices is larger and larger and produces less and less of a result.
You can see it, feel it, sense it. The price break higher is coming closer as all the other experiments and attempts to control the system fail by the numbers.
My surmise is that NIRP and ZIRP were planned years ago, along with the planned collapse of 2007-09 done at the behest of those who’s paychecks are one order of magnitude above JPM’s DImon or Bernanke and their predecessors.
Those people move the chess board in decades-long tranches of time. Planned financial destruction with NIRP and ZIRP as the WMD of choice today, while relatively new concepts in monetary destruction wars, cannot move forward without gold and silver kicked to the curb
Every advance of these monetary and fiscal juggernauts eventually runs afoul of precious metals as the ultimate stopper. Their hubris is like our eventual acceptance of assymetrical warfare as we once again embrace gold and silver as our shields against the forces of evil.
Like democracy, these people will make every bad choice until they are forced to make the last and right good choice and precious metals are welcomed bank into the family. Precious metals force their hands like the second string arm wrestler who makes his comeback at the last minute, winning the bout.
We are at the precipice of the final sets of bad choices. The power that be and those who control them are throwing every tool in the tool box into their plans and the tools are not working. Gold and silver, like I noted, are poised to move back into the front tier of monetary instruments. China, India, Russia and other PM friendly countries are acutely aware of this phenomenon and add daily to their stacks, often in the kilo ton range. The west as it stands is pretty much a Johnny Come Lately to the PM party. These three countries are old hands at this game.
MV will break high and PQ much higher as paper dollars chase precious metal prices upwards.
For us stackers; we got our gold and silver. Everything else is BS.