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For the moment, the trend seems
pretty clear. Money from far and wide rushes into the US stock markets
because every other conceivable place to stash money produces no return, no
interest, no increase, at a time when the value of central bank currencies is
slip-slidin' somewhere south of Palookaville. The rush into equities gooses
equities increasing the rush, goosing the goose. Consider, however, that
trends by their nature must last longer than the moment to be trends in the
first place. One thing you can be sure of: the trend will end.
Another region of the trend
concerns the recent peculiar behavior of gold and silver. Fear and greed may
rule the trade in paper instruments, but something else rules the trade in
hard metals: uncertainty. These days the uncertainty is very keen, not so
much about the direction of the trade in paper - because the trend is up, up,
and away - but whether the placeholders for the paper are for real, or
whether you get to keep any of them when the dust settles at every dust-up.
Markets can go wither they will, but it's another matter when the government
slams on capital controls and you can't move your money or redeem it from
your account.
With the precedent of Cyprus now
established (never mind MF Global), you'd think people all over the planet
would be buying gold and silver as stores of value without counterparty risk,
but the price keeps slowly sinking. I don't think it's because of the much
chattered-about threat of confiscation. The US government could not be dumb enough
to try to pull an FDR-style gold grab. This is a different land than it was
in 1933. The people who hold gold are exactly the same people who are very
heavily armed, and just because the Department of Homeland Security
supposedly has been buying up all the ammo on God's green earth, virtually
all the people who are heavily armed are already heavily stocked up on ammo,
too, and have quite enough to start an insurrection if the treasury agents
come calling for their life savings.
Though I'm generally allergic to
conspiracy theories, it smells like someone is engineering the downward
behavior of the metals. The central banks of the US and Europe have a big
incentive for driving the price down: it makes their currencies look stronger
- despite the universal QE policies designed to make them actually weaker.
That is, it gives the appearance that QE is not doing exactly what it is
intended to do: wage currency war by driving down the value of money and
incidentally inflating away the cost of debt denominated in these currencies.
I think the Federal Reserve and
its TBTF cronies will succeed in driving the price of gold down, perhaps as
far as the $1350 range, for a while (a moment, let's say). But by the time it
gets there they will have completely wrecked the economies they pretend to
represent, and driven many citizens into penury. Now, consider that
hyperinflation is always a rather sudden phenomenon. When it comes on, it
comes fast and hard, by the day and then the hour. The Fed and its handmaidens
will not be able to control it when it happens, because it will spring from
all their previous actions, including the concealment of the loss of value of
the dollar via manipulation of the gold and silver markets - and Ben Bernanke
can't pretend that his helicopter is a time machine. There will be no going
back to undo what he's already done. That's the point where you will see the
price of gold very quickly head toward $3,500 or even $10,000 and beyond,
depending on the damage done and the oafishness of the political response. QE
to infinity really translates into dollar wreckage to infinity.
History will record that this
crisis of confidence in money was brought on by men who stupidly refused to
acknowledge that the terms of daily human existence had changed in 2013. We
could save the country and fashion a new economy appropriate to the new era
of contraction, but it wouldn't look much like what you see out there now. It
would be all about empty highways and empty WalMarts and people turning their
energies elsewhere, to their communities, workshops, homesteads, and main
streets. We'll get to that place, but the journey to it will be dark and
lonely since it will be accomplished by individuals bravely venturing where
no politician dares to speak of, and the lonely individuals will receive no
support from their culture or any of the authorities who play at political
leadership.
There could well come a time,
though, when those authorities will be disgraced, dragged down, and trampled,
and I would tremble to be there on that dreadful day. That will be the day
that the ultimate TV reality show debuts. Call it: Waterboarding the Real
Housewives of Beverly Hills. When elites circulate, things get messy.
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