As a general rule of thumb, we all know that fundamentals are not always reflected in the charts. It mostly takes some time until the price follows fundamentals. For palladium in particular, there is a very high probability that its chart starts reflecting the strong supply/demand fundamentals.
Tag: debt crisis
In the latest Investor’s Digest of Canada, Johny Embry, strategist at Sprott Asset Management, praises one of the latest precious metals book. Obviously, the book he refers to is “The Gold Cartel; Government Intervention in Gold, the Mega-Bubble in Paper and What this Means for your Future” written by Dimitri Speck.
In the era of information overload, people are starving for knowledge. It is one thing to hang on the lips of policy makers of this world, it is another thing to stay unbiased against their words and actions. In that respect, some basic, fundamental questions are too often overlooked (in general, by the mainstream). In that respect, we believe every self respecting individual should at least look for answer on very obvious questions, related to money and policy, like the following ones.
In a week that has been marked by historic mainstream headlines, BFI Capital’s CEO Frank Suess happened to give an outstanding interview about the outlook of global currencies, gold and manipulation in the markets.
Nick Barisheff writes: While there may still be price declines, I feel today’s situation is similar to that of the 1970s, and that we have the second-greatest opportunity to buy gold since 2002. Today many investors are tempted to sell their underperforming precious metal holdings and use the proceeds to purchase U.S. equities. But remember–the old Wall Street saying is “Buy low, sell high” NOT “Sell low, buy high.”
How is gold impacted in this inflation vs deflation war? The key conclusion of the research is that, due to the fractional reserve banking system and the dynamics of the ‘monetary tectonics’, inflationary and deflationary phases will alternate in the foreseeable future. Gold, being a monetary asset in the view of Austrian economics, tends to rise in inflationary periods and decline during times of disinflation. The key take-away for investors is to position themselves accordingly and consider price declines as buying opportunities for the coming inflationary period.
“… the United States had already defaulted on its sovereign debt in April 1933 to domestic and external creditors alike. The abrogation of the gold clause in conjunction with a subsequent 40 percent reduction in the gold content of the U.S. dollar (January 1934) also amounted to a debt haircut amounting to about 16 percent of GDP.”
As we finally arrive in the magic year 2014, in which almost every economic and business cycle is trending down, it seems that the idea of a debt reduction through savings confiscation is gaining traction. If it would have been true that the debt crisis was contained, then there is a huge divergence with what the IMF research lab is producing. In December alone, two working papers appeared in which debt restructuring is mentioned as the most likely way to reduce the untenable debt burden.
With a global competition in currency debasements, with limitless monetary stimulus, with decreasing effects of monetary expansion, with a conscious infringement of the monetary rules, it should be clear that there is hardly a way back for our leaders. Given this outlook, we believe it is a matter of “when,” not “if” the next collapse occurs.
The Irish Times writes today that EU finance ministers have agreed a set of rules that could be used to wind up insolvent banks. In future, banks creditors – including potentially savers – would suffer losses should European financial institutions collapse. That comes after Irish Minister for Finance Michael Noonan said “Bail-in is now the rule” back in June of this year.
In this interview with Dimitri Speck, the gold price suppression scheme of the last 2 decades is discussed. In terms of gold’s outlook, the most likely scenario is one comparable to the current Japan: suppress deflation, stimulate slight inflation while avoiding strong inflation. In this scenario, the velocity of money will increase, savers will step out of the banking system, inflation will occur in asset and consumer prices. Gold is the best hedge in such a scenario.
This is exactly what happens every time when a bubble collapses because the cause of the bubble is bank leverage! When the bubble collapses, the leverage is gone but “it exists in a negative sense”: so much more is owed than ever existed in the first place. This is the black hole of the current economic and monetary system.