The precious metals are lynch pins. They are nagging and persistent counter-parties to money printing gone wild.
It’s been this way for as long as commerce was semi-civilized. (Though given the amount of financial fraud, violence, and chaos in the world, the term “civilized” might need to be reconsidered)…
When prices begin to fly, the point of no return will be long since have passed.
I believe we are living in limbo at the moment. We’ve passed the point of return, but have yet to move into the next (collective) phase.
If you look at conservative (academic) standards and assessments of hyperinflation, money velocity is the only variable left; the last variable needed to push us over the dividing edge between a failed currency and outright collapse.
We have Debt GDP well north of 100%. That’s always a part of each hyperinflation.
Real (GAAP-derived) accounting puts ($6 Trillion) deficits at least five times tax revenue in the U.S.
Most modern hyperinflations started with only 2x deficit revenue.
We have falling real gross national product (and GDP). (GNP is more accurate.)
Jobs, energy use, and real inflation are major (misery) indicators that we are in massive decline.
The only variable left to ignite is money velocity.
While it appears to be in massive decline – it’s actually tough to gauge, given the decline in participation across the economy. In other words, money velocity has an underground component that cannot accurately be measured.
Hyperinflation is a process. It can play out over years. Based on the above, we are probably in it now, though the final collapse will happen overnight.
If we go back to 1980′s methodology, inflation is well north of 8%.
Compound that figure over a few years, and we’re talking about scary numbers – boiling water.
Everyone can see energy and food inflation.
Maybe college tuition and health care costs don’t cut across a large enough cross section, but they are significant.
And of course, the Fed is now the major buyer of U.S. debt…
Not a week goes by without another nail in the dollar reserve coffin. Anywhere from 20 to 100 sovereign are officially moving away from the US Dollar.
And the drum-beats of war continue to echo an underlying currency conflict and race to debase.
I remember having a conversation with a very wealthy patient of mine sometime late last year.
He is/was a well-respected investor. Very much accustomed to people asking him for his opinion of economic/financial matters.
Most people want to know about stocks…
I never ask directly. I kind of know the answer.
Nonetheless, I am always probing, testing. I’m not supposed to know what the heck is going on.
He launched into an unsolicited mini-lecture about how everywhere you go in the world people still look up to the U.S.
They want to be just like us. They would rather move here than stay where they are.
I get what he is saying. And it may be true – to a degree.
But it’s changing. It has been changing. Most people are too distracted to see it.
He can’t see it, because his world is better.
And the fact that it came from a person like him, at a time like now – with such confidence and conviction.
I remember thinking, “Wow. That’s sobering.”
One wonders: Could really be it?