All Is Hunky Dory Now

So now that Pfizer has given us a vaccine, the market thinks everything is hunky dory. I wish it were true but there is one little problem: America is financially destitute! How America’s day of reckoning will be resolved remains to be seen, but Lyn Alden on my radio show next Tuesday should have some answers on that. One thing I’m sure of is that it will be an inflationary outcome, at least if you define inflation as an increase in the money supply. I recall years ago walking in to a dinner event in Vancouver next to James Turk and he made a point that sealed the deal on the inflationary side for me. James said the only money that will gain purchasing power will be gold. As measured by an ounce of gold everything will decrease in value. The opposite will inevitably be true for the dollar over the longer term because both Democrats and Republicans will engage in massive fiscal stimulus in the years to come. Only when the system finally collapses will we have a chance of returning to a sound monetary system. And the only reason that would happen is that it would be required to restore confidence after it collapses under the fires of hyperinflation.

And who knows? As we prepare for President Biden rather than Donald Trump to be the unfortunate occupant of the White House to be labeled the next “Herbert Hoover,” a very rare species of economist, gold standard advocate Judy Shelton is expected to be confirmed by the Senate to the Federal Reserve as early as next week. If she is approved it will be amazing because she supports a return to the gold standard.

Of course, at this point in time a return to honest money seems almost certain not to happen. After all, the announcement by Pfizer on Monday caused U.S. stocks to hyperventilate, suggesting that Wall Street
is ingesting some foreign substance that doesn’t allow it to recognize the reality that America is financially destitute and our economy is ready to bite the dust. When confidence in our currency needs to be restored it will be good to have Judy as a voice at the Fed, which out of necessity may finally be heard by the mainstream, not because that is what it will want but because it will be the only means of restoring confidence in our financial system.

This week was tough for gold because of the belief that all will be well once COVID is over. That is simply not true. So I remain as bullish on gold and gold shares as ever, though I do think if Republicans hold the Senate, less fiscal stimulus is likely to get passed, leaving all the heavy lifting to the Fed, which in turn will mean still more upside for financial markets as well as gold. If we were to get massive fiscal stimulus, I believe we would get consumer inflation, which would start to lead to higher interest rates and weakness in the equity markets and even more rabid monetary stimulus. That would be the most bullish scenario for gold in my view. These are issues I want to talk to Lyn Alden about on my show next week. I would add that Michael Oliver’s momentum work on the dollar shows that it will be “curtains” for the dollar if it declines below 91 this year or below 92.50 anytime in 2021. That would surely put some wind at the back of gold.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.