Financial Deflation Before Inflation?

The abbreviated market this week took on a mild “risk-off” complexion. As such, my IDW registered a weekly decline for the first time in two months. 

While I’m convinced the dollar’s days are numbered so that measured in dollars we are going to see massively higher prices in the months and years to come, there could very well be a massive gut-wrenching financial deflation first. As Lyn Alden reminded my listeners this week, when credit markets head into reverse, the dollar gets stronger as everything that can be sold is sold to buy dollars to repay the “margin clerk.” This has me thinking seriously that my own portfolio, which has a mere 1.59% in cash, should perhaps get considerably more liquid quickly. I have recently kept very low cash balances and used them to build up my gold holdings through OUNZ because gold is rising relative to the dollar and OUNZ is sufficiently liquid for me to use it to buy gold and silver exploration shares when I like. Likewise, I loaded up on Sprott Silver (PSLV), which I reasoned may also be used as a cash account, realizing of course that with silver being much more volatile than gold, I take on a lot more risk. And indeed, if we are faced with another credit crunch, silver figures to get slammed much harder than gold, as will most of the junior exploration stocks. The good thing now, however, is that most junior companies are cashed up pretty well so that they would have time to survive in a hibernated state. I’m not saying I expect a 2008-09 credit meltdown, because I think central bankers are scared to death of that possibility and so far what we have seen is that, unlike 2008, they are always a step or two ahead of a disastrous credit implosion.

Still, our ruling elite are not the omniscient gods they pretend to be. History suggests they are about as adept at knowing how much money to put in to or take out of the economy as Dr. Fauci is at knowing how to contain COVID-19. A tweet from Wim Grommen along with the chart displayed on your left suggested that with corporate profits plunging at the same time the S&P 500 is at all-time highs may be setting the table for just the kind of financial market implosion that central bankers are powerless to stop. Indeed, a transfer of power to the Democrats at a time of such great economic and geopolitical uncertainty would seem to add considerable risk. And while my preference for the longer-term good of our country is for Republicans to retain control of the Senate, if that happens, will there be any kind of massive fiscal monetary transfusion to keep 2021 from starting out on a footing worse than the Great Depression? The government is about to run out of money and the $2,000 checks that President Trump wants to send out, as do Democrats, seem unlikely to take place with Republicans still controlling the Senate during this term.

The $600-per-American transfer seemed to be about to take place this past week until it became known just how evil our lawmakers are in transferring wealth to those who fund their election campaigns. Now it looks like there will be nothing until the new government takes over. If the Democrats take control of the Senate, I think the smoldering revolution could take place very quickly. There will be no end of fiscal stimulus and a cessation of civil liberties that made America special. And if you are familiar with the work of Alasdair Macleod and the ideas expressed this past week by Lyn Alden, you may share Michael Oliver’s views that the dollar may enter the dustbin of history much sooner than later, sending gold to $10,000 or so by the middle of 2022. That would likely happen when all confidence is lost, not just by us gold bugs but by all those who have not understood the level of hubris that has been fed to us over many years by the elite-serving mainstream propaganda machine. 

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.