Finally after all these years I heard one of the in house CNBC analysts use Jim Sinclair’s term of “QE to infinity.” He said he was shown a chart of commodities and the correlation to the various QE’s and it finally dawned on him that QE cannot be stopped nor even slowed without a collapse of asset prices occurring. Well DUH? Imagine that? What we have known for years is just now dawning on the brightest bulb on CNBC (other than Rick Santelli who understands the game and speaks the truth as he sees it)?
I know that this is old news to many of you but it is so important that it deserves repeating. Gold does well during inflationary times but it does far better during deflation. Policy response is currently “inflationary” with the outright monetizing by The Fed of Treasury debt and MBS. They cannot stop, slow their policy or even keep it at present levels. They absolutely MUST increase their creation of money (currency) and credit at an increasing rate and this “rate of increase” must increase or the Ponzi system will begin to collapse.
If there is not an increasing rate (that continually increases to the point of exponentiality), the specter of deflation will enter the picture. But here is the problem, we can’t really have a monetary deflation where “the money becomes more valuable” (Dollars) because in an outright banking and financial collapse, the Dollar will become as worthless as their sibling Treasury bonds. The ONLY thing (other than food and necessities) that will increase in relative (and of course nominal) value will be Gold and Silver because they ARE money.
This is a monetary event that is coming. It will be viewed as a hyperinflation because people “think” in terms of Dollars. In reality, it will be a deflation. But wait, in a fiat regime, deflation is theoretically impossible, right? Yes… but, in terms of Gold, in terms of REAL money, what is going to occur is a deflation where “the money” becomes relatively MORE valuable vs. other goods because there is simply “not enough money” (Gold).
OK, a lot to take in all at once but I want to dispel another myth. “There just isn’t enough Gold in the world to go on a Gold standard.” Well, yes and no. At THE CURRENT PRICES there is not enough Gold. And since you cannot “magically” create more Gold because it takes real capital, labor and equipment… the only answer is to pull a “Roosevelt” and revalue Gold higher, It really is simple, “reset” EVERYTHING… but it is painful and will absolutely wipe out everyone and everything living in the “paper arena”.
“Infinity” is a big number, very big and in both theory and practice, unattainable. Once it is understood that “infinity” is unattainable and that the effort to get there has destroyed (is destroying) the Dollar, the game of hot potato will begin. Currently the velocity of the Dollar both inside and outside of the US is very low, once people understand the economics of holding and saving in Dollars is suicidal the velocity will explode. Velocity (or the rate at which money moves and changes hands) will begin to move higher and finally explode when people realize that “stuff,” any kind of “stuff” is a better store of value than holding Dollars. You would be better off buying a warehouse of lightbulbs or even cans of spam (perish the thought) rather than holding Dollars under your mattress or in an account that pays you virtually no interest. Of course, holding Gold and Silver are your best bet even though they don’t pay any interest. They have never paid interest because they never needed to and never will. They ARE money and what is coming is a severe shortage of money. Make sure you have some before the guy in the street figures all of this out!