More QE, ZIRP, Bail-Ins, Pension Plunder

The fiat money system should be branded a “crime against humanity” because of what its unbridled excesses must inevitably lead to – chaos, destitution and war – which is what we are clearly heading towards.

Over the past year or so, the Fed let the idea take hold that it was going to gingerly start a rate rise cycle, which helped to fuel a big rise in the dollar. The ruse worked and the Fed got a lot of bang for no buck. However when push came to shove and the time arrived a few weeks back when they had to “put up or shut up”, they backed down, and it became apparent that the whole thing was a hoax. They do actually want to start a rate rise cycle, in order to start trying to undo the enormous damage caused by their profligacy of recent years, and because they are gravely concerned about their own bloated balance sheet, but it is apparent to all and especially them that if they try it they will crash already very fragile stockmarkets and burst various asset bubbles simultaneously, like the Real Estate bubble, not to mention the towering derivatives overhang.

The conditions that already exist are widely perceived to be a state of deflation, but in fact they are those of recession verging on depression. At the same time most prices for normal goods are continuing to rise – the cost of living is continuing to rise whilst wages are stagnant, so people are getting poorer. Government statistics on this are of course a lie designed to make their policies look better and enable them to avoid making cost of living increases to pensioners etc. So what we have here is a state that may be described as an inflationary depression, and it’s getting worse. The inflation is caused by all the QE up to now, and any further QE will exacerbate the situation, and this applies not just in the US but around the world. The depression is caused the $500 trillion debt overhang which is strangling the world economy.

So let’s stop and think about this. We are heading into a situation where we have high inflation caused by endless competitive devaluation of currencies fuelled by rounds of QE, and interest rates that look set to stay either stay around zero or drop into negative territory. What asset class would perform best in such an environment? – gold, of course (and silver). Overall, gold will always rise in price to compensate for a drop in value of currencies caused by their reckless inflation, and further, in a negative interest rate environment, not only is there no opportunity cost loss in holding gold, there is an opportunity cost advantage, because you are not paying for the privilege of holding it (other than nominal storage costs).

What all this implies then is that gold is either at or very close to a major bottom here, and furthermore if this is the case, then the Precious Metals sector, which is now extraordinarily undervalued relative to gold, has huge upside potential from its current dismally low levels. This is a reason that we went for the sector on Thursday when it was hard down on an important support level affording a low risk entry setup, and we will be devoting more and more attention to it on the site going forward.

Originally published October 4th, 2015

Reprinted with permission from CliveMaund.com.