A Sick Cycle of Money Printing

In America, money grows on trees. Actually, it doesn’t: In America, money grows from computer keystrokes! So, party on! Wall Street celebrated this week—sort of—though there are growing concerns even among Keynesians that inflationary pressures may be about to get out of hand. Oil was a big weaker this week, but base metals soared and gold and silver found their footing and rose a bit. But the big kicker in my view was a surge in interest rates, evidenced by the decline in the long bond (TLT). Also, my IDW hit yet a new high this week, rising from 181.7 last week to 183.25 as of March 12, 2021.

As Michael Lebowitz, CFA, tweeted out last week, “if the Fed prints friendly gradual inflation, it has a numbing effect. It impoverishes the middle class, 

but enriches those who are already filthy rich.” But, regarding the $1.9 trillion vote-buying “COVID relief package” funds being pumped into the economy Lebowitz stated, “Stimulus today and the masses cheer. The price comes due tomorrow and the masses riot. A truly sick cycle the government and Fed have us in.” As the illustration on your right reveals, now a very small fraction of 1% of our population garners nearly 100% of the new wealth created. One wonders just how much longer before the dam breaks and Democrats no longer even pretend to revere our Constitution.  

Another person I follow on Twitter is Luke Gromen. This week he tweeted: “When gold stops going down with TLT = Game On.” Now it’s true that we can’t take too much out of one week of market activity. But regarding my Key Market Metrics above, note that this past week U.S. Treasuries went down while gold went up. You might think that Treasuries rose because of money going back into stocks. No doubt that was part of it. 

Luke also tweeted this week, “In a world where western sovereigns cannot afford to pay a risk-free rate of interest set by market forces, traditional asset valuation models are marginally useful (at best.)” Of course, interest rates have been manipulated lower by the Fed now for decades. Ever since gold was detached from money, a cancerous growth of money distorted price discovery for capital. And as I have always said, you can’t have capital if you don’t have price discovery of capital. And now with Marxists knocking on our door, there is no end of the amount of your wealth and mine they may attempt to take from us.

Clearly the markets will respond to the government intervention. We own gold simply because by doing so we are protecting ourselves against monetary and economic pathology created by massive excessive spending by our government and the funding of it by the Fed via computer keystrokes. This will one day come to an end. With President Biden, Nancy Pelosi, and Chuck Schumer vowing to buy votes by sending countless trillions of dollars to individuals or to go the way of wholesale vote-buying by sending countless billions to defense contractors and other economic fascist connections, and with no buyers other than the Fed to buy U.S. debt, one wonders if the strong rise in U.S. interest rates may not be sending an early signal that the end of massive spending beyond insane recklessness may be very, very near the end. If so, tighten your seat belts. Things are going to get very rough.

But as Michael Oliver knows very well, markets will always adjust and ultimately markets are more powerful than political dictators, though they can wreak havoc on humanity for much longer than one would think a loving God would allow. I bring up Michael’s name because there is an excellent one-hour interview with Michael that I strongly suggest you watch here: https://tinyurl.com/yhx29ofh. Michael shows a number of charts relating to stocks, bonds, gold, and gold shares. Very much worth watching!

As I listen to Michael, he still thinks we will see another rally in Treasuries, meaning rates will decline, mostly because he thinks stocks are going to finally head south. So, he does not buy the idea that interest rates are now heading north without any declines. He does think in the near future we will be seeing a very major bear market in bonds, meaning rates will continue to get out of the Fed’s grasp.

About Jay Taylor