I’m going to do a video on my channel over this over lunch today if you want a deeper analysis, but for now, I wanted to collect some thoughts here to let you know what the “event” is going to be – in MY opinion.
Bottom Line Up Front for the goldfish and squirrels – I believe the story of inflation has been caged animal that has been very much unknown to the American public, and as this story unfolds, I believe the REAL inflation rates will be discovered and from this, speculative bubbles are about to go bye bye in some cases. To me, the biggest risks out there are tech stocks reliant on a stead stream of cheap money as well as un-backed cryptos. This is closely followed with anything to do with real estate.
I have a LOT of writings the past two months that are setting up a 1 hour+ plus analysis video from me, where I can step you through the case. I believe for MOST people in metals, you understand the BIG picture, but the WHY is revealed as well as I make a case to the person on the street. A LOT of my videos will be geared towards getting the ears of people NOT inside our echo chamber, but I also want to provide fresh analysis of somewhat familiar topics to many of you in the G/S space.
In THIS post, I’d like to focus solely in the pop. This past weekend, I covered 3 different types of crashes, essentially. I encourage you to check out this 15 min video which talks about than than a cliff dive. We are conditioned to ONLY think about the cliff dive.
I asked my twitter feed what they think the catalyst for the next crash would be, and most said some derivation of “interest rates”.
Well, let’s look at how interest rates may rise?
If you look at the 10yr for the past 40 years, you see this going down. Why? Because inflation has been “kept at bay”. This is the misinformation that almost everyone universally accepts as truth with the CPI.
I didn’t realized, until just now, that the 10 year chart over the last 40 years looks a lot like this…telling me we are in for a rise in interest rates soon. By a lot.
What is it you are looking at above? Well, if the 10 year is “risk off” and equities are “risk on”, you are seeing an inverse of the equities over 40 years in what seems to be an inflation adjusted number if we are just using rates.
This would tell me we would be thus seeing a cycle where rates would need to go significantly UP before then tapering off for the next 10, 20, 40 years?
Lyn Alden just did a great piece on inflation here for those that are not very familiar with inflation. Not done reading it yet, but wanted to stop where there was a big point to make. There’s a camp now that says the CPI is way understated and a camp that says it is way overstated.
I believe this is the culmination of what is about to destroy the system. The market cycle above I think over 40 years was crazy. First – the rates got too damn high because inflation ran out of control after we got off of the gold system in 1971. To me, that was then price discovery – everything was trying to re-price in gold, as it appeared gold was undervalued. I believe the SAME is going on today with commodity prices, as it appears the market is signaling gold is severely underpriced and these commodities are front running the re-pricing of gold. As I have laid out, everything is relatively priced in gold, not dollars. Then – it took 40 years to unwind that 20% fed funds rate by juking the inflation rates down.
With shadowstats, they show inflation could be 10% if you are using the 1980 CPI numbers, and perhaps 5% using the 1991 numbers. The Chapwood index measures prices of 500 things everyone uses, and this shows what appears to be 10% in most major cities.
What my thinking is on how this plays out?
- more inflation stories come out
- CPI nudges up. Less and less people believe CPI
- As stories continue, bots and algos lead to selling of bonds, driving rates up and prices down
- Fed is already buying $120b in bonds per month, this puts more pressure
- rates at 2% may destroy the market
- Rates may get 1.8-2%
- Inflation reality hits, with most people accepting a number rounded about 10%
- Realization that putting cash into 2% bonds, losing 8% spending power per year leads to panic selling
- Fed begins lose control of rates, and have to try yield curve control to cap at 2%
- Foreign held debt now getting sold, putting more pressure.
- Fed balance sheet explodes
- DXY goes down, a lot, as more printing needs to be done
- Rates start going over 2% as inflation is now a well known fact
- Feds now only buyer, and rates continue to crash up
- Stock market may have been sliding or sideways until this point – pin pops and down it goes by 10-20%
- Fed tries to backstop markets, printing dollar even lower lows
At this point, there’s a LOT of foreign reserves (60%) held in USD. Additionally, listening to Frank Giustra this morning on palisades radio, he mentions that everyone feels there’s $.50 for every dollar invested sitting on the sidelines ready to pounce on dips.
What all of this is telling me is that if it becomes WIDELY KNOWN that inflation is ACTUALLY 10%, and NOT 2%, my belief is this is going to be a realization that happens slowly, and then suddenly. THIS is THE pin.
Now Maloney points this out in his videos that there may be a point where all of the offshore cash then starts piling in to us. To me, this is what is the antidote to the dollar milkshake of 140. Why? If there’s a form of a crash happening due to CURRENCY and DEBT problems, it’s telling me people want to get out of cash and into anything else.
If treasuries are falling in price, and will continue to fall, people may not want to catch a falling knife with that.
Many are looking at Bank of Japan here as this stagflation model – but the main issue we have here with the USD is that we are the world’s currency. This tells me we have a problem with potentially a LOT of cash coming in to us, and people will want to buy goods and take from our country. Part of me is wondering if THIS is the cause of our commodities prices rising right now. I’m sorry, but I think a lot of the stimmy checks went to rent, food, and stock/crypto speculation – in many cases, replacing lost wages. I also saw recently that the USD in % of reserves went from 65% to 60%.
So if a crash is not the “stock market”, but the “debt market”, one would think that if you own IBM stock, you would not want to go to cash. IT might be better to hold through a dip. However, if you are a SPAC, and highly risky, perhaps people sell out of them. I would then also contend that if you own crypto, and crypto is only worth what it can fetch in USD, then many will get out of crypto.
See – the Saylors of the world want you to get out of gold and silver and get into bitcoin as the “reserve”. Then, this is a crypto “asset” and not a crypto currency. Perhaps the Saylors of the world then ABSORB all inflation into the price of bitcoin. This allows governments to print forever – it just then has the underlying asset infinitely inflating in nominal terms. This is why many bitcoin people see it going to $1m or the like. If governments continue to print, the thinking is excess liquidity will find its way there.
The problem is that if you are having a currency crisis and debt crisis, and a currency RESET happens, everything over the course of 5,000 years gets reset in the price of gold.
Meaning – GOLD sets prices of other equities. In YOUR model, CASH sets the prices, and bitcoin then adjusts based on cash price. If there is a currency reset, there is no relativity to goods and bitcoin.
This is oil over the last 40 years, as priced in gold grams.
So if the USD drops to nothing tomorrow, any currency that rises from the ashes will have to then find its worth in gold, and then all other items should be set relative to that. Maybe the price of silver then is 1/40th of gold. Maybe it is set to the mean of .575g of gold?
Or copper in gold at .178g?
I think my point here is that most people believe the USD is going to crash and be replaced as a world currency. This would then have everything returning to its relative value in gold. By definition, bitcoin as a store of wealth is a price TAKER, not a price MAKER. This means that for bitcoin to continuously go up in value, it NEEDS FIAT TO KEEP PRINTING. This is NOT fiscal responsibility, it is designing an asset class to be a sponge to soak up government inflation. If you do NOT participate in this asset class, you are then left behind. I believe the bitcoin people NEED to get people involved because MMT will actually make all of their money go up stupid amounts. This is not fiscal responsibility.
I’d contend that the world rebels against inflation NOT by soaking up inflation into asset classes, but by then restricting government spending and restructuring debt. If you really think about it, Saylor IS a SCHILL for MMT. Gold and silver people are thus schills for Austrian economics.
So in the gold vs bitcoin debate, this is actually about limiting government spending and fiscal responsibility vs catering to socialist and MMT principles by just allowing governments to infinitely print.
What all of this is telling me is that THE catalyst for the next crash (no matter which of the three) will be interest rate rises driven by in your face inflation. This will lead ultimately to higher 10yr rates by force. Printing presses will go brrrrrr. DXY goes further down.
Saylor will tell you to buy BTC to capitalize on MMT, and gold and silver people want you to fix the money to restrain spending. In MY world of Austrian economics of sound money, governments are restricted from overspending and creating wars. In Saylor’s world, they write blank checks and anyone that is part of the MMT machine with rampant inflation might be able to increase the value of their bitcoin as governments spend to infinity.
Lastly – by me seeing this MMT versus Austrian, no one really knows who is going to win that beta/vhs battle. I can tell you the BRICS+16 countries are heavily gearing up in gold, and US has 8100 tons. If gold isn’t important, when why do central banks own it?
I think the next great global conflict will be over this battle. MMT versus “gold and silver”. And I can tell you this, any cryptos that are formed now that are backed by gold I believe stand THE best chance of adoption because governments realize that infinite levels of spending is, in fact, mutually assured destruction. Peace is only found in disarmament and taking the power from the governments to wage large wars. Governments have paid for this over millennia by debasement of the currency. Gold and silver standards prevent this. Bitcoin standards not only allow it, but their participants profit from it.
The wildcard in all of this is Mises Regression Theorem. If the paper we print ONLY has value because it can buy gold, and someday you have BRICS+16 no longer accepting USD for goods – and only gold – then I really ask you to consider the value of your crypto-based asset if there’s no value in USD or whatever your paper currency?
What if we get into a resource war in the next 10 years? Meaning, we want copper, rare earths, uranium, and all the countries that have them won’t accept a USD anymore? What about Canada, who has no gold in its vaults, could they buy gold from their companies in CAD or is it possible the miners only sell to countries that have gold backed currencies? In the US, it might say “legal tender”, but the way around that is making the price of something soooooo high that no one actually has the dollars to pay for it. For example, if I wanted to ensure you paid for a starbucks coffee in .2 KAG (Kinesis silver crypto), and NOT USD, I could set the price of that coffee at $1m. Feel free to buy it in USD.
My point here is that a crypto-asset is a REACTIVE asset to FIAT. GOLD and SILVER have things priced relative to THEM over 5,000 years. So if you want SOUND MONEY, you use gold and silver to restrict government spending. If I had to guess, Satoshi Nakamoto was a supporter of MMT, NOT sound money as you are led to believe.
And this is what Saylor might get if he studied gold and silver for 100 hours.
So – unfortunately, gold and silver are not on the same side of bitcoin. Gold and silver are about wealth preservation and backing a restrictive government spending agenda that could prevent war and showering money down on special interests. Bitcoin appears to be the benefactor of MMT and careless and wasteful spending, and can only go up if printing presses continue to operate at light speed. These are NOT the same thing.
Stay tuned – in the next 24 hours, I plan on releasing a video discussing this and diving a little deeper on it.