It is a function of needing to raise currency to repay debts being called in in said currency. If I have a debt in dollars and someone says I have to post more margin or pay off the debt suddenly,I need to sell everything including metals in order to repay said debt. The whole episode is deflationary and that Is why the metals got crushed. They would get crushed again in the same scenario, it is just an issue of demand for currency to pay debt, which we have a lot of. The metals would rise in conjunction with policy response made to attempt to reflate. The metals have stopped rising because the massive amount of debt is acting as an anchor to inflation as the normal channels of money creation have stopped functioning as no one can afford to take out a loan, even at the low interest rates. Therefore, we have no new monies entering the system and thus no wage growth. Outside Money is stuck in reserves and only that spent on deficit spending is entering the economy, which can't keep up with loans going bad and destroying currency. The metals are stuck because the normal channels of inflation have not panned out because in a modern system, banks cannot and do not lend reserves, so this money just piles up. The metals are maintaining a bid because they are unsure of wheat the next step steps are in the policy arena and they fear they may invent something that is truly inflationary. So we wait and see.
great post,agreed 100%
the truly inflationary thing you mention might be the coming ECB QE and unconventional measures...
Draghi cannnot hold much longer with these low inflation numbers,way below his targets...
“...They would get crushed again in the same scenario, it is just an issue of demand for currency to pay debt, which we have a lot of. ...”
Currency (fiat) to repay debt)? Hmmm!
That’s why Alexander Hamilton, who was responsible for having our currency declared as legal tender, was such a devious individual. He knew that the government and private first Bank of the United States would eventually create fiat “money”. Otherwise we would still be on a true gold standard. You’ll have to arrive at why this is true where gaps in the story can’t be included due to character limitations; and because Yahoo doesn’t allow links to expert opinions unless they are “white listed” (Yahoo approved).
Aaron Burr did us all a great favor before Hamilton could eventually have done even more damage; although there is no indication Burr had that in mind. It was purely personal. How Hamilton was able to convince George Washington of the wisdom of his views on currency and banking is VERY puzzling. Without besmirching the character of George Washington, maybe others have the answers that have a better grasp of the historical record.
The point is that the designs of Hamilton have to be undone so fiat “money” can NEVER again be termed “legal tender” to be replaced by a TRUE gold standard backed by strict enforcement. That means some portions of the Coinage Act of 1792 should be used that require the death penalty to any who violate it, rather than the assassination of POTUSs who have, in the past, attempted to reverse Hamilton’s damage.
Hamilton, as many historians have noted, was a Rothschild agent that also brought about the concept of a private central bank called the Bank of the United States. Notice how even then the banksters tried to give the impression that the bank was solely a federal government operation, just like currently with the Federal Reserve System, which is NOT federal. It is PRIVATE and only is concerned with ITS bottom line for ITS elitist owners.
Because everyone decided to just cut and run, but this time into debt. The same mentality played out in 1929 as well, but PM issues led the way back until 1933 at any rate.
Dale I think the market moved into Bonds and dollars in the 2008 / 2009 market decline. As interest rates are very low now and are likely to only move up going into bonds now would be a money loser as the bonds with a fixed rate would move lower as interest rates rise, money may seek out land, houses and the PMs rather than stay in the stock market , the houses may decline in value, but less than the market - - would generate income as well. Also the dollar may very well be derated against other currencies this time around, in 2008 / 2009 the Dollar moved up against the other currencies and everything of value declined in dollar terms. Some likely hood the stock market will move up along with everything else of value from beans to the PMs. Deflation is the chance the dollar has to go up in value , they have printed / borrowed into existence so many dollar deflation seem unlikely, but maybe just less inflation would burst the bubbles, who knows ? Add to the discussion if someone sees something I ' m missing or am wrong about !
Taxes, insurance and upkeep would make houses a losing proposition and there's even more possible downside.
I think the air is coming out of the macro balloon and only subsistence/creature comforts and the things you'd need to keep them have a chance to gain going forward.
Frankly speaking, Humpty Dumpty needs to go ahead and fall off the damned wall.