FIAT ENDGAME update...

originally published Tuesday, February 02, 2016

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As we know, Keynesian economics is the economics of the greedy child, whose proponents’ motto is “I want it all, I want it now”. It appeals greatly to politicians because it enables them to deliver maximum benefits to the consumer and voter in the here and now, and thus improve their own appeal and standing in the eyes of the electorate, and to hell with the consequences – someone else can clean up the mess later. The whole idea of it is to bring forward demand and consumption to the maximum extent possible, and put off paying the bill for it all for as long as possible.

A giant stride on the road to delivering maximum benefits to consumers and voters at the expense of future generations was the elimination of the gold standard way back in 1971. This lead to an orgy of deficit spending and fiat generation that has latterly gone parabolic, with the result that the mountain of garbage in the form of quantity of currency in issue, debt and derivatives has built up to levels that are threatening to bury everyone – and they will, that is what is starting to happen now.

Since global debt is now completely out of control, it cannot ever be brought back under control or paid off, or even serviced now that it has reached such gargantuan proportions, and it is now making its presence felt by forcing an economic depression onto the world, that is taking the form of a deflationary implosion. This is obviously very unpleasant for all concerned and Central Banks and politicians will not be able to resist taking the line of least resistance, as usual, that of extend and pretend – they will print ever more money, which has the added advantage of inflating debt away. The problem is that it won’t work, because of the astronomic magnitude of the debt and derivatives mess. So what we will now see is a global blitz of money creation in order to fend off the now extremely powerful deflationary forces which will fail, the failure taking the form of a hyperinflationary depression. Prices will eventually skyrocket, despite increasingly widespread poverty and destitution and massive unemployment. If you want to know what it will be like, a field trial is currently being conducted in Venezuela, where inflation is running at 700% this year.

In this sort of environment, the prices of gold and silver will skyrocket, and the initial big gains in the prices of Precious Metals will likely come when there is a perception shift – the first glimmerings of understanding amongst investors and the masses generally regarding what is really coming through the pipe, and what is coming through the pipe is certainly not the vaunted and mythical economic recovery that the government endlessly talks about.

With respect to this, last week’s revelation by Japan that they are embracing NIRP more and more (Negative Interest Rate Policy) is viewed as a warning flag firstly that the Fed’s supposed rate hikes this year won’t happen, and that secondly they can be expected to reverse course in the direction of NIRP and aggressive QE, in concert with more QE around the world. Once the market gets its head around this the dollar could drop sharply, and it is already showing signs that it is topping out.

Egon Von Greyerz summed up the situation succinctly in his recent article / interview on King World News, entitled Legend Warns Government Are Now Preparing For Total Collapse. Even if Von Greyerz is “talking his own book”, i.e. shepherding people into his gold bullion business, which is outside the banking system and sounds good, I still consider this to be an accurate and balanced assessment of the grim and hopeless situation that the world now finds itself in as it reaps the consequences of decades of Keynesian excess. Collapse is now inevitable and necessary, a “reset” if you will, and a collateral effect of this is likely to be a forced squaring up to the problem of global overpopulation.

With regards to the timing of the “lift off” of the Precious Metals sector, the chart for the Comex Gold Cover Ratio contained in the ZeroHedge article Something Snapped At The Comex suggests that it is close.

End of update.

Posted at 6.20 am EST on 2nd February 16.

The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stockmarket analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.