Real Inflation Pushing Forward

James Turk, the founder of Gold Money,  tweeted my IDW graphic last weekend, stating the following: “Measures of #inflation by private sources are more reliable than US gov’t stats. The true impact of #federalreserve money printing is worse than reported in #CPI or #PPI.

“The 15-yr-old inflation index by Jay Taylor of @JayTaylorMedia is at a record high.” Updating it this week once again my IDW hit still another new high at 184.93.

The COVID-19 panic sent the markets and our economy reeling into what looked like the abyss with a March 20, 2020, reading of 131.63. It looked for the world like another dive akin to or worse than the great financial meltdown caused the Fed’s house bubble blowing episode that nearly brought the entire financial system down. But with a lot of experience with financial market arson, the Fed has learned how to put the deflationary fires out by opening the money fire hoses. Its solution is to give us more money, which was the cause of the financial collapse to begin with. And so, the Fed is now blowing the bubble that may very well end all bubbles and set up a return to a precious-metals-based monetary system once again. Indeed, Alasdair Macleod is scheduled to come on my show next Tuesday to explain why a return to honest money, at least for a time, is inevitable. 

But back to my IDW. It closed this week at still another high at 184.93, up 40.5% since last March. The components of my IDW show which areas of the economy rose the most as a result of legalized Federal Reserve counterfeiting. Over the years, the Fed has a pernicious assault against capitalism by denying price discovery of capital. Markets simply can’t know what the true cost of capital is.  By completely suppressing interest rates, all manner of stocks and commodities have risen dramatically since March 20, 2020. Housing prices have been going through the roof, thanks to the lowest interest rates in my 74 years of life in America. Given that oil prices were for a moment during the beginning of the pandemic priced at less than zero, crude oil at the top is a bit of a fluke, but there is no denial that its sharp rise since then was at least in large part related to a reflation of the everything bubble from the Fed. But I think it’s very much worth noting that the third, fourth, and sixth item to rise in my IDW since that March 20 low point was silver, copper, and the Rogers Raw Material Index gaining 111%, 100%, and 61%, respectively.

Meanwhile, longer-dated U.S. Treasuries fell by 12%, meaning interest rates have risen—suggesting happy days are here again with markets and economy restored to good health? Or is the opposite scenario shaping up, namely that the long hibernating bond vigilantes are starting to stir restlessly, sensing that price inflation may be rearing its ugly head for the first time since the double digit 1970s? President Biden and all the Keynesians will continue to give us the rose-colored glasses perspective. But not only because the dollar is down as rates have risen, I’m thinking the not-so-happy scenario may be unfolding.

But it seems rather clear to me that America is in the process of losing its collective sanity. Not only has our country become confused about sexual identity and the cause of civil unrest among minorities and the need for our first and second amendment rights, but we have gone absolutely crazy with regard to market mania, such that Wall Street is starting to resemble the craziness of that long ago tulip mania that occurred in Holland when a single tulip bulb went for the equivalent of $60,000 in today’s money.

Marin Katusa wrote an excellent commentary that you can connect to from, titled, “The World Is Sleeping on Commodities—4 Things to Watch Closely.” 

Here is what he said:  “I’ve had people from all walks of life ask me questions on this sector in the last 2 months. And the number of questions, along with the number of people asking them, is astounding. “Have you bought Bitcoin, Ethereum, Doge, Cardano…?” These are people fixing my hot water tank, that work as elementary school teachers… some I haven’t even talked to in years. Even the barista in the coffee shop below the office is talking crypto currency. And that’s never a good sign. 

Call me old-fashioned, but I like to be able to see and physically hold my stores of value. Apparently, so do China and Turkey. Because China just approved a MAJOR amount for import to the country. And China is importing 5.2 million ounces of gold ($8 billion worth) over the next 2 months. And another thing you should take note of is that just earlier this week, Turkish President Tayyip Erdogan told Turkish citizens to convert foreign currency and gold holdings into Lira. You want what the government wants—real money!

Last week I sent an email to James Turk to thank him for tweeting my IDW out to his followers. I received quite a lot of attention and new followers as a result. I asked Jim if he thought we are getting close to what von Mises referred to as a “crack up boom” when the markets hyper-inflate. He responded by saying, “I think we are close to a crack-up boom, but every time I think that, the goalposts get moved. But given the numbers coming from the feds these days, the growth in debt suggests that the crack-up boom can’t be that far away. In fact, maybe we are already in it, but just the beginning. 

“In Mises’ day, the crack-up boom lasted 6 to 12 months. But there was little if any financial repression back then. Today we have unprecedented financial repression and regimentation to such a high degree as only ever before seen in fascist regimes. And the never-ending propaganda causes most people to take their eye off the ball. So instead of a 6-12 month crack-up boom, it may evolve slowly over a couple of years. 

“To delay the inevitable for as a long as possible, the feds need to keep a lid on precious metal prices to keep the messenger quiet. But inflation nevertheless is being shouted from nearly everything else. So in my view it is only a matter of time before gold, silver and the mining shares take off like a rocket.”

All I can say is that my IDW suggests something unusual is going on now. The exercise of Modern Monetary Theory (MMT), which, as Alasdair Macleod has opined, is a replay of John Law’s Mississippi bubble. That ended in disaster and there is no reason to believe the laws of economics can be defied now just because America, which is in the process of losing its collective mind, thinks this time is different. I had the pleasure of dining with Peter Bookvar, Laura Stein, and my dear wife, Teresa, last evening, and Peter stressed how America is running mostly on emotions now, not on science or logic. These are very dangerous times. I hope and pray we can avert tragedy. If we do, of course it will be only by the grace of God. Meanwhile, in addition to prayer, we need to retain our wits about us when everyone else is buying the modern-day version of $60,000 tulip bulbs. Gold and silver have no rival in terms of assets to own when the fecal matter hits the rotary oscillator. By the way, Peter Bookvar will be a guest on my show on May 4th.  I look forward to this long-time CNBC guest commentator sharing his market wisdom with my listeners.

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.