Massive Redistribution of Income

Silver had its largest weekly gain in 40 years! Gold had a massive rally too, gaining 5.58%. And the establishment’s risk off play, U.S. Treasuries, also registered a nice gain of 1.77%, while stocks (S&P 500) fell 0.28%. When gold and Treasuries rise as a flight to safety it’s one thing. But when commodity inflation plays rise dramatically, that’s quite something else. Note that the Rogers Raw Materials Fund also gained a hefty 2.17% on the week. And J Taylor’s Inflation/Deflation Watch (IDW) shown on your left cut through the three-year average like a hot knife through butter.

Meanwhile, Michael Oliver’s work points toward a very vulnerable U.S. Dollar on the dollar index. It closed at 94.435 on July 24, which is below 95.64, which Michael notes is the key level above which the dollar must hold if it is to avoid a significant drop. Looking at the price chart on your left, you start to think in terms of something below 80, which is half its peak during the 1980s when it reached 160. With predictions from the likes of Stephen Roach, Alasdair Macleod, and others for the dollar to soon reach its ultimate destination of the dustbin of history where all fiat currencies ultimately rest, it all seems to be playing out for the bull market of a lifetime for gold and silver. We might say especially for silver because during precious metals bull markets, silver usually outperforms gold dramatically, and despite its big move this week it is still near historical lows, relative to gold. Gold does better than silver in precious metals bear markets but when the really big bull gets roaring, silver tends to be the huge winner.

These are very troubled times. With massive redistribution of income, young people saddled with college debts and very poor prospects with jobs and having been programmed to think of Marxist economics as virtuous, the U.S. is on the verge of a major revolution that will basically destroy all of the traditional values that has made this such a great country.

Not the least of our problems is the enormous gap between the rich and the poor. But there is no prospect for seeing a more prosperous country now or one that is more egalitarian because very few people, including virtually all our national policymakers, understand that the real cause underlying the depression America is facing is fiat money and the reckless manner in which the Fed has continued to print endless trillions of dollars. The middle

class in America began its multi-decade decline when Nixon removed gold from the international monetary system. As the chart on your left shows, that was the ending of wealth creating manufacturing jobs in America. And the chart above right shows 1971 was the start of a massive increase in the top 1% income earners as money could now be allocated not by the markets on the basis of merit measured by the collective wisdom of markets but rather on the basis of being connected to newly created money. Indeed, the main reason we left the gold standard was to fund America’s military escapades internationally to expand the empire for the Military Industrial Complex. And to ensure there was enough dollar liquidity in the world, the U.S. had push for “free trade” that would ensure America cut its tariffs more than foreigners to ensure the chronic trade deficit you see above left would occur. So the middle class was raped by the ruling elite and that has gone on unabated until Donald Trump poked a stick in their eyes. If you want to know why the elite hate Trump, you need look no further than this.

Things were still good for lower income households in 1980 when they had the highest income growth rate. The grey line shows growth rates across income groups in 1980. Now look at income growth rates more recently, that being in 2014. I’m sorry that I don’t have a more recent graphic but does anyone think income distributions have become any more equally distributed since then, especially with COVID-19?

Not only has that resulted in redistribution of income to those closest to the Fed’s money feeding trough, but it has totally screwed up our capital markets—meaning that capital is not being allocated efficiently. So we are in really big trouble. And the Marxist’s solutions Joe Biden is promoting will only lead our nation more rapidly toward permanent depression and personal slavery. Expect massive money printing to paper over poverty. Of course, that can’t work.

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.