Two years ago, I knew of none of this. I have spent hours a day for the better part of 21 months now tirelessly researching all of this stuff when I fell down the repo black hole in September 2019. One of my first introductions to the YouTube universe of financial personalities was Mike Maloney’s “Hidden Secrets of Money”. Any person who is newer to wanting to understand their money should start with this for the nuts and bolts.
BLUF: Every day, I seek to learn more and get a better understanding. Today, I submit a progress report card to wrap a bow on the deflationists theory – and what may cause all of this. I believe the gaslighting of our world that inflation does not exist is now at a boiling point, and I believe this is what cracks the whole damn thing wide open.
While I have an MBA, there’s no such thing as “gold speak” during your education. Due to moving and my career progressing, I completed my MBA over 3 institutions over a span of 4 years of schooling. Each had a unique flavor – one was more focused on widget production at a local factory (York College of PA). One was more geared towards the high world of finance where all of my professors were Wharton grads (Villanova), and one was geared towards international marketing and finance (UMUC) due to the global nature of the students – where they focused on international marketing. I like to say my emphasis was on management studies, as that’s why I did this to begin with – to elevate my position in IT to learn how to run a department. I succeeded in this.
I bring this up because short of being a Wharton MBA out of Penn, or Harvard MBA, or perhaps top 20 school, most business schools have an MBA which prepares you to be a manager in your particular existing career (Villanova was only top 40, lol). Those top 20 schools or so might give you a better grip on the high world of finance to then work towards wall street. The other 98% of MBA programs seem to mostly focus on how to run your biology lab, IT department, or factory.
This is important to know because there’s a lot of people out there who have taken the economics, finance, accounting, and marketing classes as a primer to speak on a lot of this – using the lenses of their particular primary field of study. No schooling on futures or history of money, unfortunately.
Not one sentence in one class talked about gold or silver. We did discuss commodities in economics. None of my classes talked about share structures in business, but we did go over things like the quick ratio. None of this prepared me for what the hell I’ve been learning the last 2 years or so. My schooling had one day where we discussed the repo market for 30 minutes, which is how I got re-involved in all of this.
In the Maloney piece, you get lots of opinions and personalities brought in. You learn the history of money. Mike had a job also to make people aware of gold so they would buy from him. However, I think his series did an extraordinary job of educating you on the product and NOT being an advertisement to buy from him. I admire someone that is selling their product that loves it so much. It’s not selling the product. It’s bringing people into the world of this great product you discovered so you can share the joy of that product with them. This is what I see with Mike and others in this industry. It’s something that changed their lives and they want to share that experience with you.
During this series, you hear of him talking about a great deflationary event. You see money bombers come out, like B17s and just shelling people with money. This is the stage after helicopter money. I thought perhaps March 2020 was that event. But I was wrong. It’s the debt market. That is where we are going with this.
Helicopter money has been happening since COVID started. The great deflationary event has yet to happen, but the bombers are getting gassed up right now as we speak.
The deflationist camp is growing by the day. Hunter, Johnson, Maloney, St. Angelo, Dent, Rickards, the list is probably 20-30 deep by now. Their theory goes like this….
At some point, stocks will fall and create a great deflationary event. As stocks sell off, people go to cash. This creates demand for the dollar and the DXY shoots up. This takes everything down, including gold/silver and the miners. Perhaps it is margin calls forcing people to sell metals, but perhaps it is the massive rise in the DXY that then has people selling gold paper to rush into the DXY trade as it blows sky high.
The flip side of this is Peter Schiff, who is quick to point out inflation all around us. Schiff is correct. His big thing is, “so what if a deflation happens, all of the deflationist are then predicting inflation afterwards”. To Schiff’s point, he’s also correct if you are in big money. So what if you have $100 million, it deflates over a year to $20 million (but the DXY is 140) and then re-inflates back to $100 million. He says you don’t have to worry about that, and setting up for a deflation event that may not happen can cost you in the long run if you are wrong. Imagine going to all cash where you think a top is, only to then see the stock market double or triple from there. So there IS a risk of following the deflationists.
However, for MOST people, myself included, who are not multimillionaires, it makes sense to try and lever up during the blow off top, get out, and buy back things 80% cheaper. IF this works out, we can 4-10x our portfolio by playing this right.
Lots of danger ahead – and Peter Schiff is right about the inflation here to stay.
I’ve been mostly tracking David Hunter’s thoughts on this. He paints a picture to me that is very close to what I think will happen. He’s talking about a form of blow off top about to happen in the equities. This last leg up in the 40 year equities bull market could be spectacular, perhaps 20% gains in a month or so on the charts, which looks to be starting now as the markets have just carved out all time new highs.
Then, there’s a “global bust” which he says is like a depression in severity, but has the timeline of a recession. He says the DXY will first go to 85 or so, then move up perhaps to 120. Brent Johnson (milkshake guy) calls for perhaps 140. During this period, Hunter says equities could lose 65-80% of their value.
I have used some of his strategy, and of the other 20 or so deflationists, to create an investment strategy based off of this prophecy, so to speak. I am very much into too many damn miner call options right now, but the thinking is, is that I see this vision coming true and I’m trying to maximize what I can on this move up. Get the hell out. Wait for bust. Buy back cheap. If I can get this right, I get a massive pay day. If everything falls down too quickly, I’m out of the options at a loss.
But what is that black swan event? Do we need one?
Personally, I feel the biggest thing to discuss in all of this is inflation. I believe this word will be THE catalyst to everything about to happen.
Talk to 50 different FinTwit people and you get 50 different definitions of inflation.
The scholarly people out there like Rickards want to convince you we are in a deflation now, and inflation is transitory. I think the EXACT opposite. I am about 25% through Rickards’ book, and he is clearly a very well educated man. He sees a certain path based off of his education and experiences. He is RIGHT on the endgame, but wrong how we get there. He talks about how education costs have gone down, but he’s failed to see how they have increased over 40 years something stupid.
I believe strongly that the root cause of what the hell is about to happen is 40 years of the government lying about inflation. As many say, it’s been “boiling the frog slowly”. Most people reading this know the CPI formula has been changed and tinkered with multiple times. Many people also point to John Williams at Shadow stats and also point to the Chapwood index – both of these point out different inflation numbers than the government reports.
With Shadow Stats, they may be using the 1980 formula, but they might also not be properly accounting for technology and productivity gains. The Chapwood index I find very useful because it tracks the prices of the top 500 things people buy in major cities – for the past 5 years. THIS is what the common people are seeing, which I call “dinner table inflation”.
Both of the above measurements show massively higher inflation numbers than are actually reported.
IF you use the CPI, and believe it, you feel that inflation has been 2% or so for the last 40 years. By nature, this is inflationary. The markets are adjusted for this narrative. However, how was this data then used? This data then goes into adjusting cost of living expenses for social security. Perhaps this data is then used for government employee salaries, troop salaries. 25 years ago in my field, I might have gotten a 5-8% raise. For the last 15 years or so, most raises are “cost of living adjustments” at 1-2%. If you want a real raise in my field, you must be promoted to another position or pay yourself by moving to another job. Point is – this 1-2% has been ingrained in employers for a long period of time.
Because of this low inflation, this also allowed the government to then continue to lower rates and refinance the debt. It’s like when you mortgage your house. You buy for maybe 5% at $325k, and then a few years later you can refinance lower, to perhaps 3%, saving hundreds of dollars per month. When you do this, you might finance closing costs in as well. You don’t care. The principal may grow, but your monthly payment is much less.
By juking the inflation rates, this allows my government, and all governments who model their system on ours, to then continuously refinance at lower rates. When they “save” this money, they don’t pay off debt, they then use that “found money” to buy more stuff. Grow. As a libertarian at heart, I like small government and liberty and stay the hell out of my business, and I stay out of yours. My family has been here for over 300 years and many of my relatives fought in the revolutionary war as well as the civil war for the North. My family has a very, very long history of “stay the hell out of my business” and “we will burn it down”, as well as fighting for what is “right”.
Many Europeans and Asians (and even Canadians) who are readers may not understand the American at heart. We just don’t take shit others are dealing. Period. This is also why we own 400 million guns. It’s not to protect us from you, it’s to protect us from our own government and tyranny. One thing you have seen in socialist nations time and time again is confiscation – first of guns, then of wealth, then of your rights and freedoms. If we as citizens stick the landing on the first, we don’t need to worry about the other two.
Over the last 5 years or so, many of us have been muted from our opinions and beliefs – of which I refuse to go into publicly anymore for fear of retribution in my career. If we speak out, we are now censored by tech media and someone can find an obscure passage and take to our employers to try and get us fired.
Vested interests in big telecommunications censor a vast majority of this country now, similar to how people in this country see China censoring their people. What you are seeing in our presses is NOT the consensus of our people, and I’ll leave it at that. My country is filled with people who came here to seek OPPORTUNITY – and came here from all walks of life, backgrounds, and religions. We are a land of people who have had genes passed down for generations that will out-work your ass because if we don’t, we starve. We build each other up, and don’t want your goddamn excuses when it comes time to do you part. We do not see anything more than the color green, and this is what defines your success. What many in like India may not see here is our upper limits in society are endless – IF you are successful. Success is our caste system, not familial relationships. Forces have been working to try and divide us to preach another narrative, and what unites us is opportunity for all. Despite what you hear. Any person in this country, born to any family, if they work hard enough, can become a millionaire or billionaire. You are only limited by how hard you work. Period. That also defines your lower limits as well.
My people are people who fought and bled for things they believed in, and I am descended from 4 grandparents who lived through the Great Depression in this country – 2 of which volunteered to fight in World War 2 to defend other peoples from harm to do the right thing. My libertarian roots also can see the flaws in my great nation, and how they have gone sideways the last 20 years. I write to help my country heal, one person at a time.
And the culmination of all problems in this country right now are rooted in debt. I grew up in a house where my parents fought about money daily, as we didn’t have enough. Items bought on credit card solved today’s issues, but ultimately led to their divorce. Debt is the root of all evil, in my opinion. If you cannot afford something, don’t buy it. OR, find a way to be more productive so you can buy it later with more money.
“Gold is the money of kings, silver is the money of gentlemen, barter is the money of the peasants, and debt is the money of slaves”.
I put this sidebar in to help the reader understand that many in this country want sound money and fiscal responsibility, and base our identity on opportunity for all – not running up credit cards and handing cash out like candy. This debt being rung up could lead us to ruin, and the way back is to remove this debt – and seek a way to spend within our means, even if it means 95% reduction in our spending. That day is coming.
This sidebar also helps illustrate why I’m extremely distressed at learning how the markets are all juked, but the biggest juke of all is the lies about inflation. Which has led us to where we are today. Now you are caught up.
So, I’m biased in this discussion, to a point, but you can see how constantly re-financing debt, in a sense, allows more change to be found in the couch cushion to finance projects, and I’ll leave it at that.
I’m also one of those tin foil hat people who have watched the silver market get artificially suppressed. Many like to say this is a conspiracy, but all you have to do is spend 5 minutes on google and search silver manipulation and banks and you get dozens of results, with fines up to $920 million at a time.
In this article, you also see “treasury market”. Hmmmm. Let’s unpack this part of the fine.
When I started my 2 year foray into this, I had not ever really had a 401k or dealt with stocks. I was a 9-5 guy building a career in IT. I saw the stock market for gambling and was jaded, as I saw a 1987 crash, a 2001 crash, and a 2008 crash – the last two I lost my job as a result of. The next real crash also could see me and many others losing their jobs. Deflationary.
But what I then realized, the more I dug in, is that almost all of these markets now are manipulated. Silver is easy to see and track due to how small it is. But the debt market? Hmmmm. That’s the grand daddy of them all.
It occurred to me that if you have been suppressing interest rates through CPI and “jawboning” you are then artificially showing lack of inflation, which then reduces rates. When rates go down, the bonds/treasuries cost more, as there is less risk.
What we have folks, is a 40 year basing of artificially low interest rates.
What does this look like to you?
What this is telling me is that we are coming to an end of this 40 year sham. What is the saying – “you can only manipulate markets until you can’t”?
What I’m saying is that the common person has been seeing 5-8% inflation yearly for 40 years. However, only 2% has been reported. What this means is it is a slow drip of getting poorer each year. At first, you do not see it. At 40 years in, the cracks start to show. When you have to then consider UBI and sending stimmy checks out permanently to avoid tent cities, and you look around and realize only the top 5% can buy a house now, the cracks are showing. I did this graph a few months ago to illustrate the deficit families would be seeing over a time period like this….
That red line essentially is the delta between what you earn and your cost of living. Not that you see this decrease over 40 years showing the purchasing power of their dollar decreasing over this time. This has forced people to work side hustles to get more currency units to make up for this.
Inflation is here, and has been here, for quite a long time. However, the narrative and “fed speak” has been able to gaslight enough people into believing the fairy tale.
They then point to lumber as a the shining beacon on transitory inflation. Michael Oliver was on miningstockeducation earlier this week and had an amazing play by play on this – and showed how this was an outlier and unique situation of affluent people moving out of cities.
While other items also had a major uptick temporarily, when they recede, they will have a higher low – and sustain this level of cost. Perhaps the sharp edge of transitory inflation to 5% recedes to 3.5%, but not 2%. Furthermore, once again, we are using the crazy for cocoa puffs CPI, which is a fairy tale number to begin with.
Many of the transitory people want to point to the YoY base effects, but what they are missing in this whole thing is it is awakening the masses to how much more things cost. So…where is my 10% raise at work to cover this increase?
What if this inflation has been there for 40 years. Remember, 8-10% YoY medical insurance costs are not counted in the CPI. Higher food prices. Higher gas prices. This “dinner table inflation” is never tracked, but is an insidious tax on Americans. If you can discount this or that to paint a narrative of 2% inflation, your government can then spend more recklessly than the previous year.
But what if…..
What if that “arab spring” event is coming here. That point of inflection when the fed narrative is overrun by empirical data that cannot be denied?
What if the consumer starts really looking and seeing less money every month in their piggy bank, at an accelerated rate? When these companies shrink a box, but charge the same amount, they don’t then reverse this. They don’t suddenly make boxes bigger and give you more for the same price.
The story of inflation is just starting to unfold. That the “transitory” 5% goes to 4.5%, but consumers see increase after increase – and no paycheck bump to account for these higher costs? Putin and the Saudis destroyed our shale Market last March, and now we may see $100-$150 oil soon enough.
Those holding debt at 1.2% realize that, in reality, inflation is actually 5-10%? They see the stock market lifting into orbit. That moment then dawns on them, that they must sell this debt and chase yields, while they can?
I believe strongly that the event that destroys everything is realization that inflation is actually higher than reported, for a very long time. And once everyone realizes the bonds and debt has been artificially propped up, it will be a mass exodus and run for the door.
To keep the wheels on the whole goddamn thing, the only tool left is to mock those who see inflation and try to continue to gaslight them.
I believe Rickards is wrong on inflation.
I also believe that once the mass exodus happens, THIS is the pin that sends rates sky high. People are talking about 2% on the 10yr. 3% on the 30 year.
Market….psychology. So what happens when the psychology of the masses truly understands and embraces the notion of the Chapwood index?
What if this debt bomb blows when people no longer want to lose money on debt? China then exits all of their treasurys. What you see is a mass panic for the dollar to get out of the debt paper. The artificial inflation narrative implodes.
This is where the deflationists get it right, but I feel this is a “transitory” deflation. You see, the market psychology above? Those rates I believe will skyrocket as belief in our government reporting collapses. This could take rates much, much, much higher.
But the government cannot afford that, as they would default. So at first, out comes the Fed to buy all of that debt at 2% for the 10 yr. However, this starts expanding their balance sheet and they begin taking on water. A lot of it. It is entirely possible that at one point our Fed owns all of the debt, or a super majority of it.
Why would you want a 2% 10 year if inflation is 10% every year? This is where the gaslighting and jedi mind tricks then no longer work.
This crisis hit us in the 1970s. And, to stop it, they needed to have interest rates higher than the rate of inflation. The difference was, back then, the government debt was 100 times smaller. We are near $30T now, and I believe in the late 1970s it was $300B. That is 100x smaller.
I believe that the deflation to come is that march up the market cycle, but inverted. Think about it. The value of these are inverse to the rates. We plan on seeing higher rates, so we must start at the mid cycle above to show what the inverse looks like
- Complacency – rates can’t go up past x. The government will default.
- Anxiety – did you see the 10 year just hit 2.25%? I thought it couldn’t go past 2.
- Denial – 10 year at 2.5%? It HAS to go back down. Don’t fight the fed. This is a correction.
- Panic – 10 year at 3.25%. Nations now selling US debt to get out and get to cash. Dollar at 120.
- Anger – 10 year at 4%. Why did the government not buy all of this debt to keep it from going up?
This, above, is how you blow up the stock market by 80%. None of these companies will grow in an environment to expand it will cost you a ton more in interest. These significantly higher rates wipe out the real estate market as we know it. Mass unemployment starts, due to all of these companies laying off people. No one lends. Your house value goes down by 50% because rates are so much higher, no one can afford the monthly payment. Many people are out of work, and a glut of housing hits the markets, further putting downward price pressure on housing. Only those in cash can buy houses, and they are getting deals of the century. Blackrock starts buying up like crazy.
It is also temporary, as all of those people above who got out of stocks and bonds – and real estate – are now sitting on piles of cash on the sidelines. Due to this deflationary event, your cash has some real buying power…for now.
But the amount of cash on the sidelines is trillions. Much of it overseas.
The bottom is in.
Attack. Bidding wars are on. The richest of the rich are buying blue chip stocks at pennies on the dollar. Precious metals are the first to inflate, as everyone realizes, simultaneously, that the cash on the sidelines is about to be deployed into everything and anything. Interest rates at 6% now catch a bid, as they are buying low.
During this deflationary event, the fed printed more and more cash to prevent tent cities. All of this cash now gets spent. People are raiding grocery stores and buying as much food as they can. Supply cannot keep up, as vendors can no longer get credit to get supplies to make products. Store shelves go empty, just like they do in all hyper inflations.
The dollar is now in a free fall, as everyone is getting into “things”. This is where Hunter’s vision of a $300 silver and $10,000 gold takes effect, perhaps as early as 2025/2026. IF this is a hyper inflation scenario, you then start to get crazy with the $40,000 gold and $1,000 silver narratives by the end of the decade by some.
All of this happened when the story of inflation was seen by the masses, and you cannot gaslight a mob into believing a fairy tale when they see their grocery bills double.
And that is your transitory deflation. It is the global bust, as David Hunter calls it. It is a period of time where the debt bomb blows up when no one trusts the government CPI numbers anymore. THAT is the catalyst. Trust in government numbers erode, and the people vote with their money. Get out of debt vehicles and take that cash out while you can.
The way this ends is when real inflation is recognized and a free market for bonds is established once again. This would mean a complete re-work of the CPI and many people waking up to the Chapwood index and Shadow stats. Alternate media like Zero Hedge explode in popularity, as they appear to be the only sites telling the truth.
As you can imagine, this event severely corrects the stock market and re-adjusts the dow/gold ratio as PMs break free from their manipulation chains.
This is not transitory inflation. It is inflation being recognized by the masses and this will lead to a period of transitory deflation as the debt market blows up and the transitory deflation ends when the bond market bottoms.