Thursday, June 4, 2015

Gold at $25,000? Sure. But From What Level?

And what will $25,000 buy at that point in time?

We live in the Twilight Zone and given the myriad head fakes it's abundantly clear that the greater power has decided that few should remain intact. Economically at least.
So while we wait, I updated the Deflationary process flow diagram since it's been six years from the bottom, and we have learned a tremendous amount in the meantime. Back in 2007, who would have believed that money printing (debt monetization) would be a commonly accepted practice on a global basis? It's ludicrous. In addition, the debt ceiling has been raised multiple times, the U.S. debt was downgraded, and yet Treasuries rallied the whole time. Totally unthinkable just seven years ago...

As always the blue path is, in my humble opinion, most likely. I think that outright default will be avoided at all cost.

Given what we've learned, it appears ever more likely that the old age home will turn to printing and distributing currency as a last resort. Which will generate the long-awaited hyperinflation. The political impetus to do so however, will only occur AFTER the collapse. At least that's my assumption. To date, the money printing to monetize debt has benefited the government warfare state, corporate welfare queens and billionaires. It has wholly bypassed the real economy and by raising commodity costs (albeit temporarily), it was a net detriment to the greater public. However, with enough "turmoil", the dunces in power will likely turn to currency destruction as a last resort, to temporarily placate the masses.

This is why the post-2008 reflation has failed:
Because bailing out lenders by giving borrowers more cheap money was a strategy reserved for the dumbest fucking society in human history:

Post-collapse, the deflationary collapse hypothesis predicts that the much maligned and debased dollar will rise in value as the money supply (aka. debt/credit) collapses. Therefore, the time to buy gold will be post collapse. In the meantime, the game plan is to remain as "liquid" as possible with near-cash alternatives (t-bills, insured deposits etc.).

Gold and the dollar
Trade inversely to one another...

As always, ammunition is the best currency, because it's constantly being used up, and never loses value.