It’s not about today’s Dollar & Treasury markets safe haven bid, it’s about tomorrow’s confidence in our monetary system.
Are you confident?
Gold remains by far the best performing asset class of the entire new millennium. This is an undisputable categorical fact, and there clearly is a well established completely understood reason for this. Monumentally excessive irreversible debt loads can no longer be discharged without necessitating the devaluation of the currency. Due to this certitude, throughout this millennium we have experienced an extended period of extraordinary monetary accommodation which is unprecedented in the modern central banking era.
These remarkably irregular measures have allowed governments to issue debt at artificially lower synthetically engineered rates of interest. The crucial and essential time value of money has been aborted, utterly eviscerated. A deliberately lowered nominal interest rate reduces debt servicing costs, while negative real interest rates actually erode the principal value of the government debt. This is the very essence of financial repression, it liquidates debts when accompanied by inflation and can be considered a form of taxation, or alternatively a form of debasement.
This explicit trend is systemic in nature and will invariably continue, as all other remedies to satisfy the insurmountable debt obligations are no longer within reach nor achievable. We quite simply can not grow our way out from under this pile of toxic debt. Currency devaluation is the only applicable and singularly available path forward to liquidate the imposing outstanding debt owed.
Make no mistake, the most esteemed of economic thinkers are well aware of this ominous predicament. On the other side of the coin, the mainstream financial industry protagonists and pundits have a paramount vested interest in denying this self-evident truth.
Notably, current policy makers lack historically substantiated evidence to validate the stated and intended objectives of the extreme policy measures they have initiated, nor can they accurately ascertain the unintended consequences of the distorting market interventions they have performed. These are the known unknowns. Physical Gold, a long standing historically proven store of value which provides wealth protection with unencumbered counterparty risk, is clearly a judicious and prudent hedge for all investors facing these macro economic realities and policy measure uncertainties.
Precious Metals are inherently the most viable asset class which outperforms all other assets against currency debasement and the ensuing inflation that invariably follows periods of excessive monetary accommodation. Moreover, a 70% consumption based economy which routinely and heedlessly runs massive trade deficits will pay dearly for the inevitable devaluation of the means of exchange. You can only print and party for so long before others catch on.
Furthermore, you can be assured that the deliberate debasement will most certainly bring with it higher interest rates, as all creditors will demand higher returns to compensate for the programmed systematic debasement of their holdings. I know, I know, you will all point to the 10 year treasury yield below 2% and precariously rest your case. However, In my view, the need jerk reaction at the speed of light of massive capital flows desperately seeking a suspect flight to safety actually highlights the acute instability of global finance today. Liquidity simply for the sake of liquidity has no intrinsic value in it of itself.
Sound money flows to real veritable value. It’s simply a matter of time now, and the trigger that sets off the monetary cataclysm is always a function of the perceived confidence in the financial authorities and their monetary system. Deep down inside, are you confident in what they have done?
Definitive evidence throughout 5,000 years of mankind’s monetary history overwhelmingly confirms all which has been stated above. Same as it ever was. Olivia Newton John had it right; Get physical or get gang debased!
The StealthFlation Blog at the Macro Shop