Borrowing From The Future is a Recipe For Disaster

Despite gold and silver getting taken down by the usual bullion bank suspects, this was an inflationary risk-on day. In this discussion I point to the rising 10-Yr. Treasury yields directly below and my Inflation/Deflation Watch further down the page.

I will comment more on the rise in Treasury rates above, but first check out the charts. My IDW hit a new 15-year high this week with its close at 170.43. Michael Oliver has been pounding the table for the commodities for some time and now it’s starting to happen. Momentum and price on the Bloom­berg Commodity Index chart have clearly broken out. And fertilizer as typified by the Mosiac Company chart is having a powerful 

upward surge in its share price.  

All this is consistent with the Canadian and Australian dollars. Michael’s momentum indicators have both broken out impressively as you can see below.

As John Ing commented on Nov. 19, 2020 “All in all, with risks of higher taxes, healthcare spending, technology regulation, climate change, and a festering Trumpian Republican party, America’s reputation is taking a battering. Adding to this concern is that while inflation would be welcomed because it helps solve the government’s finances, the U.S. dollar remains at risk. Although a weaker dollar would help U.S. exports, already the combination of a Democrat government together with expectations of mounting twin deficits has weakened the dollar of late and the greenback has actually fallen 10% from its peak. And as the pandemic accelerates around the world, there is a move away from dollars while America’s dollar obligations keep mounting. We believe that the growing risk of more dollar deterioration could trigger an avalanche of foreign outflows that to date have financed America’s current account deficit. Indeed, Michael Oliver’s work put out earlier this month suggested that “if the dollar index touches 91 during 2020, we should expect a downside collapse (the next move, not the final one) to the mid-80s. That’s based on the Dollar Index’s 10-yr. avg. momentum.

Borrowing more from the future is a recipe for disaster and notwithstanding this week’s weakness in gold, the yellow metal is indeed the financial canary in the coal mine. The United States is in decline. COVID-19 is testing the world’s richest healthcare system and has caused a weak economic recovery at a time when there is both income and racial inequality. The long-haul pandemic treatment alone will take up much of President-elect Biden’s first 100 days when there is a need to rebuild trust, restore confidence, tackle the pandemic, and undertake economic recovery.

The U.S. has a serious problem with their growing deficits and overvalued dollar. The cure will be painful especially for people who continue to drink mainstream propaganda and look at weeks like this one when gold, silver, and Bitcoin get trashed. Gold is the world’s financial vaccine.

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.